PremierWest trims losses

PremierWest Bancorp narrowed its losses in the second quarter, reporting a $2.7 million setback on Tuesday for the three months ending June 30.

The Medford-based parent company of PremierWest Bank continued reducing the bad loans that knocked the once aggressive financial institution on its heels following the credit crunch of 2008.

PremierWest's per-share loss of 27 cents followed on the heels of a first-quarter loss of $7.4 million, or 74 cents per share.

President and Chief Executive Officer Jim Ford said PremierWest has achieved meaningful reductions in problem loans. As a result, the recurring appraisals on real-estate loans that have gone sour are slowing to a point where PremierWest can jump off the down escalator sometime later this year.

"I'm very encouraged by the last three quarters of work we've done here," Ford said. "Now we have the luxury of controlling some of our credit costs that have controlled us over the last few years. Future appraisals on these things are less likely to hurt earnings. It's been a cost to us beyond people not paying on their loans. Looking out at the next couple of quarters, I'm very encouraged about the prospect of earnings."

Ford said PremierWest's credit quality is better, the result of improved loan risk ratings, repayments and upgrades. He said commercial real estate and acquisition, development and construction loan balances continue to decline. At the same time, the bank added to its customer base and was able to reduce its higher-cost certificates of deposit.

Ford said the company has redeployed its investment portfolio into higher yielding, high-quality federal government agency and municipal securities to improve earnings.

During the quarter, PremierWest reduced its bad loan portfolio by $19.5 million, or 14 percent, to $120.1 million. That is 9.1 percent of the bank's total assets. At the end of the first quarter, PremierWest's bad loans of $139.6 million accounted for 10.2 percent of total assets.

Loans past due between 30 and 89 days of $2.8 million, or 0.32 percent of total loans, dropped from $7.1 million, or 0.77 percent, during the quarter.

PremierWest said it has reduced construction, land and development, commercial real estate and higher risk commercial and industrial loans. As a result, the institution's loans totaled $880.9 million at the end of the quarter, down $40.2 million, or 4.4 percent from the first quarter. It also marks a reduction of $210 million, 19.3 percent, from its level on June 30, 2010.

While problem loans have overshadowed otherwise solid day-to-day operations, Ford said he expects see quantifiable results in the near future.

"If we could deduct impairment costs and loan-provision expense, we would show we are profitable," Ford said. "Of course, you can't do that."

He said global issues affecting European banks don't affect PremierWest as much as domestic decisions.

"Community banks are much more influenced by what they do in Washington, D.C.," Ford said. "How many new regulations can you tack on to community banks in hopes there will never be another financial meltdown as seen in 2007-08? It wasn't community banks that caused the meltdown."

PremierWest Bancorp shares on the Nasdaq dropped 25 cents Tuesday, closing at $1.54.

Reach reporter Greg Stiles at 541-776-4463 or email business@mailtribune.com.

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