SOURCE: PremierWest Bancorp

PremierWest Bancorp

April 21, 2011 09:30 ET

PremierWest Bancorp Announces First Quarter Results

MEDFORD, OR--(Marketwire - Apr 21, 2011) - PremierWest Bancorp (NASDAQ: PRWT) announced results for the first quarter ending March 31, 2011, as follows:

  • Net loss applicable to common shareholders of $7.4 million, or $0.74 per common share, compared to a net loss applicable to common shareholders of $705,000, or $0.07 per common share for the quarter ended December 31, 2010. This compares to a net loss applicable to common shareholders of $3.3 million, or $1.02 per common share, for the quarter ended March 31, 2010.
  • Non-performing loans decreased by $19.8 million, or 15.3 percent, to $109.8 million or 11.9 percent of gross loans compared to $129.6 million or 13.3 percent of gross loans at December 31, 2010. Approximately $33.2 million, or 30.2 percent, of non-performing loans at March 31, 2011 are current as to payment of principal and interest despite being on non-accrual status.
  • Net interest margin was 3.83 percent, up from 3.78 percent for the quarter ended December 31, 2010, but down from 4.27 percent for the three months ended March 31, 2010.
  • Non-interest bearing demand deposits increased to $252.6 million, or 20.4 percent of total deposits, up from $242.6 million, or 19.2 percent of total deposits at the preceding quarter-end. Total deposits of $1.23 billion were down $32.4 million from December 31, 2010, reflecting the Company's efforts to reduce the amount of higher-cost deposits.
  • Other real estate owned (OREO) and foreclosed assets totaled $29.8 million a decrease of $2.3 million from December 31, 2010. Sales for the current quarter were $4.4 million, resulting in a net gain on sale of $656,000.
  • Loan loss reserve was $33.4 million or 3.62 percent of gross loans at March 31, 2011, compared to $35.6 million or 3.64 percent at December 31, 2010.
  • Total risk-based capital ratio for PremierWest Bank was 12.51 percent, down from 12.59 percent at December 31, 2010, but up compared to 11.01 percent at March 31, 2010.
  • Charge-offs, net of recoveries of $4.0 million, increased to $8.5 million for the quarter ended March 31, 2011, compared to $6.5 million in charge-offs net of recoveries of $1.3 million in the previous quarter.
  • A provision for loan losses of $6.3 million was recorded in the current quarter versus none for the fourth quarter of 2010, and $6.1 million for the quarter ended March 31, 2010, due to recent declines in real estate values on impaired loans.
  • Cash and unencumbered securities totaled $259.4 million at March 31, 2011, providing a strong liquidity position.

James M. Ford, PremierWest's President & Chief Executive Officer, commented, "The first quarter of 2011 was a period of positive trends and hard-fought results. This is despite the loss experienced for the quarter as a result of increased provision for loan loss expense related to declines in real estate values associated with collateral-dependent loans. Non-performing loans decreased by 15 percent, with a number of problem loans either paying down, written-off or transferred to other real estate owned (OREO) for orderly disposal. Concurrently, we are steadily liquidating OREO, with over $4 million in sales closed this quarter. In addition, commercial real estate (CRE) and acquisition, development and construction (ADC) loan balances continue to decline. During the first quarter of 2011, we also experienced a continued reduction in classified loans.

"During this period of sluggish economic growth, we have been able to increase our net interest margin by growing our non-interest bearing deposits and reducing our higher-cost certificates of deposits," explained Ford. "With lackluster loan demand in our marketplace, we have continued to manage our balance sheet primarily by building our investment portfolio. We are structuring the portfolio in such a way to position the Bank for a rising rate environment which we anticipate to begin by the end of this year.

"We appreciate your support of our efforts to manage your Company through these challenging economic times. In addition, we believe that the efforts expended over the past two years have resulted in a lower cost deposit structure, more efficient operations, and enhanced credit quality, thus setting the stage for a return to sustained profitability."

CREDIT QUALITY

Non-performing assets were $139.6 million at March 31, 2011, down $22.0 million from the balance at December 31, 2010. OREO declined from $32.0 million to $29.8 million during the quarter which included an addition of $4.3 million in foreclosed property, offset by sales of $4.4 million and impairment charges of $2.1 million. Non-performing loans decreased to $109.8 million at March 31, 2011, including $3.7 million placed on non-accrual during this quarterly period. This compares to non-performing loans of $129.6 million, including $33.9 million in loans placed on non-accrual, as of the quarterly period ending December 31, 2010. Our allowance for loan losses declined $2.2 million from December 31, 2010, with the reserve as a percentage of gross loans at 3.62 percent at March 31, 2011, as compared to 3.64 percent at the end of the preceding quarter. Charge-offs, net of recoveries, for the quarter ending March 31, 2011, were $8.5 million, up $2.0 million from the preceding quarter due to the write down of real estate values associated with collateral-dependent loans. Offsetting the reductions in the allowance for loan losses due to net charge-offs was a $6.3 million provision expense versus no provision expense incurred in the previous quarter.

Bill Yarbenet, Executive Vice President and Chief Credit Officer, stated, "It was gratifying to see the decrease in non-performing loans and OREO this past quarter, even with the increase in charge-offs during this period. Additions to OREO during this quarter totaled $4.3 million and we expect additional transfers of non-performing loans to OREO as legal actions filed against non-paying borrowers come to a conclusion. While the rate of decline appears to be moderating, reductions in real estate values continue to impact the valuations of our collateral-dependent loans, resulting in the need to increase our loan loss provision expense for this quarter. Approximately $11.7 million of the charge-offs incurred during the quarter were related to impairments of collateral-dependent loans."

Yarbenet continued, "OREO sales equaled $4.4 million in the first quarter and are expected to accelerate during the remainder of 2011. Our net gain on sale of OREO of $656,000 during this quarter validates our ability to prudently value and dispose of these assets. It is important to note that gains or losses on those sales are predicated on market conditions, availability of competing real estate product and investor sentiment regarding the economy in general."

LOANS AND DEPOSITS

Gross loans, net of deferred loan fees, as of March 31, 2011, were $921.0 million, down $55.8 million or 5.7 percent from December 31, 2010, as the weak economy continues to suppress the demand for borrowing. The decline in gross loans during this quarter reflects $38.9 million in loan pay offs net of loan originations. This reduction also includes $12.6 million in gross loan charge-offs and $4.3 million transferred to OREO.

Deposits at March 31, 2011 were $1.23 billion, decreasing by $32.4 million or 2.6 percent from the December 31, 2010 total. Non-interest bearing deposits increased by $9.9 million to $252.5 million, or 20.4 percent of total deposits, as compared to $242.6 million, or 19.2 percent as of the prior quarter-end.

Joe Danelson, Executive Vice President & Chief Banking Officer, declared, "We continue to grow our non-interest bearing deposit base throughout our market place and deemphasize higher-cost deposit accounts. This has enabled us to successfully reduce our cost of funds. New customer acquisition continues throughout our territory, as demonstrated by our growth in non-interest bearing deposit relationships. This gives us an expanded opportunity to broaden the scope of our products and services to more and more individuals, families and businesses throughout our market place.

"While CRE loan demand continues to be weak, we have been generating an increased volume of consumer and small business loans. We are also desirous of expanding our agribusiness and government guaranteed lending during 2011."

Danelson continued, "These recent economic challenges have given us an opportunity to demonstrate our commitment to 'People Doing Business with People'. Our customers have rewarded that commitment with their business."

NET INTEREST INCOME

Net interest income of $12.2 million declined $464,000, or 3.7 percent, for the quarter ended March 31, 2011 versus the quarter ended December 31, 2010. However, the net interest margin increased by 5 basis points to 3.83 percent compared to 3.78 percent in the previous quarter. This increase was despite interest income reversals of $65,000 during the current quarter, which reduced the net interest margin by 2 basis points. This compares to a 17 basis point reduction in net interest margin from $560,000 in interest reversals during the preceding quarter. Net interest margin for the quarter ended March 31, 2011 declined 44 basis points from the net interest margin of 4.27 percent for the same period in 2010, in which 38 basis points of the decline is attributed to deposit accretion earned for twelve months after the purchase of two branches in July 2009.

The yield on earning assets was 4.71 percent, down 4 basis points from the preceding quarter ending December 31, 2010. Loan portfolio yields were 5.77 percent, up 9 basis points from the previous quarter due to declines in interest reversals noted above. Investment securities yields were 1.73 percent, down 9 basis points from the previous quarter as a result of some restructuring of the portfolio to mitigate the impact of anticipated increases in interest rates. The cost of interest bearing liabilities decreased 11 basis points to 1.11 percent in the most recent quarter. These changes resulted in a net interest spread of 3.60 percent during the current quarter ended March 31, 2011, up 7 basis points from 3.53 percent recorded during the preceding quarter. Net interest spread for the quarter ended March 31, 2011 declined 47 basis points from the net interest spread of 4.07 percent for the same period in 2010, which was similarly impacted by the deposit accretion referenced above.

Doug Biddle, Executive Vice President & Chief Financial Officer, commented, "Our net interest margin expanded during the first quarter as compared to the previous quarter despite the decline in net interest income versus the prior period. Loan yields were up, despite a $53.0 million decline in average loan balances during the quarter, due in part to the decrease in reversals of interest income from non-accrual loans. The reduction in higher-yielding loan assets was partially offset by a $17.3 million increase in the average balance of lower-yielding investment securities, including Fed Funds.

"In addition, the rates paid on higher-costing interest bearing deposits were reduced during this period, resulting in a 10 percent reduction in the overall cost of interest bearing deposits," explained Biddle. "With rates continuing at historic lows, there is interest rate risk in extending investment maturities to compensate for the yield lost to declining loan volume. The liquidity and short duration of our investment portfolio will enable us to take advantage of more favorable reinvestment opportunities toward the end of 2011 when we anticipate that interest rates will begin to rise."

NON-INTEREST INCOME

During the first quarter of 2011, PremierWest had non-interest income of $3.2 million, a decrease of $236,000 or 7.0 percent from the preceding quarter. The decrease was primarily a result of a decline of $227,000 in the gain on death benefit from bank-owned life insurance recorded this quarter versus the gain recorded in the previous quarter. This was offset partially by an increase in mortgage banking fee income of $31,000 as compared to the prior quarter.

NON-INTEREST EXPENSE

Non-interest expense for the quarter ending March 31, 2011 was $15.8 million, a decrease of $168,000 or 1.1 percent when compared to the preceding quarter. The decrease was primarily a result of a $365,000 decrease in net cost of OREO and other foreclosed assets. This was partially offset by a $146,000 increase in salaries and employee benefits and a $102,000 increase in professional fees associated with loan collection activities as compared to the prior quarter.

CAPITAL

PremierWest Bank has met the quantitative thresholds to be considered "Well-Capitalized" under published regulatory standards for total risk-based capital and Tier 1 risk-based capital at March 31, 2011, with ratios of 12.51 percent and 11.24 percent, respectively. However, we continue to be subject to the terms of the Consent Order with the FDIC and have not yet reached the 10.00 percent leverage ratio required. As such, we are not considered "Well-Capitalized" for all regulatory ratios.

                                                 Regulatory    Regulatory
                                                 Minimum to    Minimum to
                                                     be            be
           March 31,  December 31,   March 31,  "Adequately      "Well-
             2011         2010         2010     Capitalized"  Capitalized"
           ---------  -------------  ---------  ------------  ------------
                                                greater than  greater than
                                                or equal to   or equal to

Total
 risk-based
 capital
 ratio      12.51%        12.59%      11.01%         8.00%        10.00%
Tier 1
 risk-based
 capital
 ratio      11.24%        11.31%       9.73%         4.00%         6.00%
Leverage
 ratio       8.59%         8.85%       8.21%         4.00%         5.00%

ABOUT PREMIERWEST BANCORP

PremierWest Bancorp (NASDAQ: PRWT) is a bank holding company headquartered in Medford, Oregon, and operates primarily through its subsidiary, PremierWest Bank. PremierWest Bank offers expanded banking-related services through two subsidiaries, Premier Finance Company and PremierWest Investment Services, Inc.

PremierWest Bank was created following the merger of the Bank of Southern Oregon and Douglas National Bank in May 2000. In April 2001, PremierWest Bancorp acquired Timberline Bancshares, Inc. and its wholly-owned subsidiary, Timberline Community Bank, with eight branch offices located in Siskiyou County in northern California. In January 2004, PremierWest acquired Mid Valley Bank with five branch offices located in the northern California counties of Shasta, Tehama and Butte. In January 2008, PremierWest acquired Stockmans Financial Group, and its wholly-owned subsidiary, Stockmans Bank, with five full service banking offices in the Sacramento, California area. During the last several years, PremierWest expanded into Klamath Falls and the Central Oregon communities of Bend and Redmond, and into Nevada, Yolo and Butte counties in California.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This press release includes forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to certain risk factors, including those set forth from time to time in PremierWest's filings with the SEC, and risks that we are unable to increase capital levels as planned or effectively implement asset reduction and credit quality improvement strategies, unable to comply with regulatory agreements and the risk that market conditions deteriorate. You should not place undue reliance on forward-looking statements and we undertake no obligation to update any such statements. We make forward-looking statements in this press release about future profitability of the Company, net interest margin, regulatory compliance, loan demand, interest rate changes, loan upgrades, loan migration, the prospects for earnings growth, deposit and loan growth, capital levels, the effective management of our credit quality, the collectability of identified non-performing loans, real estate market conditions and the adequacy of our Allowance for Loan Losses.

PREMIERWEST BANCORP
FINANCIAL HIGHLIGHTS
(All amounts in 000's, except per share data)
(unaudited)


STATEMENT OF OPERATIONS AND
 LOSS PER COMMON SHARE DATA
                            March 31,   March 31,
For the Three Months Ended     2011        2010       Change     % Change
                            ----------  ----------  ----------  ----------

Interest income             $   15,032  $   18,187  $   (3,155)      -17.3%
Interest expense                 2,831       3,351        (520)      -15.5%
                            ----------  ----------  ----------
Net interest income             12,201      14,836      (2,635)      -17.8%
Loan loss provision              6,300       6,100         200         3.3%
Non-interest income              3,159       2,708         451        16.7%
Non-interest expense            15,798      14,135       1,663        11.8%
                            ----------  ----------  ----------
Pre-tax income (loss)           (6,738)     (2,691)     (4,047)     -150.4%
Provision for income taxes          16           -          16          nm
                            ----------  ----------  ----------

Net loss                    $   (6,754) $   (2,691) $   (4,063)     -151.0%
                            ----------  ----------  ----------
Less preferred dividend and
 discount accretion                656         611          45         7.4%
                            ----------  ----------  ----------
Net loss applicable to
 common shareholders        $   (7,410) $   (3,302) $   (4,108)     -124.4%
                            ==========  ==========  ==========

Basic loss per common
 share (1)                  $    (0.74) $    (1.02) $     0.28        27.5%
                            ==========  ==========  ==========
Diluted loss per common
 share (1)                  $    (0.74) $    (1.02) $     0.28        27.5%
                            ==========  ==========  ==========

Average common shares
 outstanding--basic (1)     10,034,642   3,229,200   6,805,442       210.7%
Average common shares
 outstanding--diluted (1)   10,034,642   3,229,200   6,805,442       210.7%



                           December 31,
For the Three Months Ended     2010       Change     % Change
                            ----------  ----------  ----------

Interest income             $   15,924  $     (892)       -5.6%
Interest expense                 3,259        (428)      -13.1%
                            ----------  ----------
Net interest income             12,665        (464)       -3.7%
Loan loss provision                  -       6,300          nm
Non-interest income              3,395        (236)       -7.0%
Non-interest expense            15,966        (168)       -1.1%
                            ----------  ----------
Pre-tax income (loss)               94      (6,832)    -7268.1%
Provision for income taxes         134        (118)      -88.1%
                            ----------  ----------

Net loss                    $      (40) $   (6,714)   -16785.0%
                            ----------  ----------
Less preferred dividend and
 discount accretion                665          (9)       -1.4%
                            ----------  ----------
Net loss applicable to
 common shareholders        $     (705) $   (6,705)     -951.1%
                            ==========  ==========

Basic loss per common
 share (1)                  $    (0.07) $    (0.67)     -957.1%
                            ==========  ==========
Diluted loss per common
 share (1)                  $    (0.07) $    (0.67)     -957.1%
                            ==========  ==========

Average common shares
 outstanding--basic (1)     10,034,830        (188)        0.0%
Average common shares
 outstanding--diluted (1)   10,034,830        (188)        0.0%

 (1) As of March 31, 2011, December 31, 2010, and March 31, 2010, 1,090,385
 common shares related to the potential exercise of the warrant issued to
 the U.S. Treasury, pursuant to the Troubled Asset Relief Program (TARP)
 Capital Purchase Program were not included in the computation of diluted
 earnings per share as their inclusion would have been anti-dilutive.

nm = not meaningful




SELECTED FINANCIAL RATIOS
(annualized) (unaudited)



For the Three       March 31,  March 31,            December 31,
 Months ended         2011       2010      Change       2010       Change
                    ---------  ---------  --------  ------------  --------

Yield on average
 gross loans (1)         5.77%      6.01%    (0.24)         5.68%     0.09
Yield on average
 investments (1)         1.73%      2.01%    (0.28)         1.82%    (0.09)
Total yield on
 average earning
 assets (1)              4.71%      5.23%    (0.52)         4.75%    (0.04)
Cost of average
 interest bearing
 deposits                1.08%      1.03%     0.05          1.20%    (0.12)
Cost of average
 borrowings              2.13%      5.98%    (3.85)         1.86%     0.27
Cost of average
 total deposits and
 borrowings              0.89%      0.96%    (0.07)         0.99%    (0.10)
Cost of average
 interest bearing
 liabilities             1.11%      1.16%    (0.05)         1.22%    (0.11)
Net interest spread      3.60%      4.07%    (0.47)         3.53%     0.07
Net interest margin (1)  3.83%      4.27%    (0.44)         3.78%     0.05

Net charge-offs to
 average gross
 loans (3)               0.89%      0.48%     0.41          0.65%     0.24
Allowance for loan
 losses to gross loans   3.62%      4.16%    (0.54)         3.64%    (0.02)
Allowance for loan
 losses to non-
 performing loans       30.38%     44.57%   (14.19)        27.45%     2.93
Non-performing
 loans to gross loans   11.90%      9.33%     2.57         13.25%    (1.35)
Non-performing
 assets to total
 assets                 10.17%      8.37%     1.80         11.45%    (1.28)

Return on average
 common equity         -52.87%    -37.36%   (15.51)        -4.66%   (48.21)
Return on average
 assets                 -2.15%     -0.89%    (1.26)        -0.20%    (1.95)

Efficiency ratio (2)   102.80%     80.53%    22.27         99.38%     3.42

(1)  Tax equivalent
(2)  Non-interest expense divided by net interest income plus non-interest
     income
(3)  Not annualized



Reconciliation of Non-GAAP Measure:
Tax Equivalent Net Interest Income

For the Three       March 31,  March 31,            December 31,
 Months ended         2011       2010                   2010
                    ---------  ---------            ------------

Net interest income $  12,201  $  14,836            $     12,665
Tax equivalent
 adjustment for
 municipal loan
 interest                  45         47                      45
Tax equivalent
 adjustment for
 municipal bond
 interest                  30         34                      31
                    ---------  ---------            ------------
Tax equivalent net
 interest income    $  12,276  $  14,917            $     12,741
                    =========  =========            ============

Non-GAAP financial measures have inherent limitations, are not required to
be uniformly applied, and are not audited.
Management believes that presentation of this non-GAAP financial measure
provides useful information frequently used by shareholders in the
evaluation of a company.
Non-GAAP financial measures have limitations as analytical tools should not
be considered in isolation or as a substitute for analyses of results as
reported under GAAP.




PREMIERWEST BANCORP
FINANCIAL HIGHLIGHTS
(All amounts in 000's, except per share data)
(unaudited)


BALANCE SHEET

                         March 31,    March 31,
                            2011         2010       Change       % Change
                        -----------  -----------  -----------  -----------
Fed funds sold and
 investments            $   352,040  $   271,170  $    80,870         29.8%
                        -----------  -----------  -----------
Gross loans, net of
 deferred fees              921,018    1,118,214     (197,196)       -17.6%
Allowance for loan
 losses                     (33,366)     (46,518)      13,152        -28.3%
                        -----------  -----------  -----------
Net loans                   887,652    1,071,696     (184,044)       -17.2%
Other assets                133,034      161,712      (28,678)       -17.7%
                        -----------  -----------  -----------
Total assets            $ 1,372,726  $ 1,504,578  $  (131,852)        -8.8%
                        ===========  ===========  ===========

Non-interest-bearing
 deposits               $   252,562  $   247,256  $     5,306          2.1%
Interest-bearing
 deposits                   981,319    1,114,685     (133,366)       -12.0%
                        -----------  -----------  -----------
Total deposits            1,233,881    1,361,941     (128,060)        -9.4%
Borrowings                   32,842       30,955        1,887          6.1%
Other liabilities            17,461       13,737        3,724         27.1%
Stockholders' equity         88,542       97,945       (9,403)        -9.6%
                        -----------  -----------  -----------
Total liabilities and
 stockholders' equity   $ 1,372,726  $ 1,504,578  $  (131,852)        -8.8%
                        ===========  ===========  ===========

Period end common
 shares outstanding      10,034,491    8,107,735    1,926,756         23.8%
Book value per common
 share (1)              $      4.83  $      7.19  $     (2.36)       -32.8%
Tangible book value per
 common share (2)       $      4.60  $      6.79  $     (2.19)       -32.3%

Non-performing assets:
   Loans on nonaccrual
    status              $   109,753  $   103,541  $     6,212          6.0%
   90-days past due and
    accruing                     91          831         (740)       -89.0%
                        -----------  -----------  -----------
Total non-performing
 loans                      109,844      104,372        5,472          5.2%
   Other real estate
    owned and
    foreclosed assets        29,757       21,517        8,240         38.3%
                        -----------  -----------  -----------
Total non-performing
 assets                 $   139,601  $   125,889  $    13,712         10.9%
                        ===========  ===========  ===========



                        December 31,
                            2010       Change       % Change
                        -----------  -----------  -----------
Fed funds sold and
 investments            $   337,048  $    14,992          4.4%
                        -----------  -----------
Gross loans, net of
 deferred fees              976,795      (55,777)        -5.7%
Allowance for loan
 losses                     (35,582)       2,216         -6.2%
                        -----------  -----------
Net loans                   941,213      (53,561)        -5.7%
Other assets                132,959           75          0.1%
                        -----------  -----------
Total assets            $ 1,411,220  $   (38,494)        -2.7%
                        ===========  ===========

Non-interest-bearing
 deposits               $   242,631  $     9,931          4.1%
Interest-bearing
 deposits                 1,023,618      (42,299)        -4.1%
                        -----------  -----------
Total deposits            1,266,249      (32,368)        -2.6%
Borrowings                   30,950        1,892          6.1%
Other liabilities            17,013          448          2.6%
Stockholders' equity         97,008       (8,466)        -8.7%
                        -----------  -----------
Total liabilities and
 stockholders' equity   $ 1,411,220  $   (38,494)        -2.7%
                        ===========  ===========

Period end common
 shares outstanding      10,034,830         (339)         0.0%
Book value per common
 share (1)              $      5.69  $     (0.86)       -15.1%
Tangible book value per
 common share (2)       $      5.44  $     (0.84)       -15.4%

Non-performing assets:
   Loans on nonaccrual
    status              $   129,493  $   (19,740)       -15.2%
   90-days past due and
    accruing                    123          (32)       -26.0%
                        -----------  -----------
Total non-performing
 loans                      129,616      (19,772)       -15.3%
   Other real estate
    owned and
    foreclosed assets        32,009       (2,252)        -7.0%
                        -----------  -----------
Total non-performing
 assets                 $   161,625  $   (22,024)       -13.6%
                        ===========  ===========

(1) Book value is calculated as the total common equity (less preferred
    stock and the discount on preferred stock) divided by the period
    ending number of common shares outstanding.
(2) Tangible book value is calculated as the total common equity (less
    preferred stock and the discount on preferred stock) less core deposit
    intangibles divided by the period ending number of common shares
    outstanding.



QUARTERLY ACTIVITY

                         March 31,    March 31,
                            2011         2010       Change       % Change
                        -----------  -----------  -----------  -----------
Allowance for loan
 losses:
    Balance beginning
     of period          $    35,582  $    45,903  $   (10,321)       -22.5%
       Provision for
        loan losses           6,300        6,100          200          3.3%
       Net (charge-offs)
        recoveries           (8,516)      (5,485)       3,031        -55.3%
                        -----------  -----------
    Balance end of
     period             $    33,366  $    46,518  $   (13,152)       -28.3%
                        ===========  ===========


Other real estate owned
 (OREO) and foreclosed
 assets, beginning of
 period                 $    32,009  $    24,748  $     7,261         29.3%
     Transfers from
      outstanding loans       4,251        2,376        1,875         78.9%
     Improvements and
      other additions            10          249         (239)       -96.0%
     Sales                   (4,437)      (5,310)        (873)        16.4%
     Impairment charges      (2,076)        (546)       1,530       -280.2%
                        -----------  -----------
Total OREO and
 foreclosed assets,
 end of period          $    29,757  $    21,517  $     8,240         38.3%
                        ===========  ===========



                        December 31,
                            2010       Change       % Change
                        -----------  -----------  -----------
Allowance for loan
 losses:
    Balance beginning
     of period          $    42,120  $    (6,538)       -15.5%
       Provision for
        loan losses               -        6,300           nm
       Net (charge-offs)
        recoveries           (6,538)       1,978        -30.3%
                        -----------
    Balance end of
     period             $    35,582  $    (2,216)        -6.2%
                        ===========


Other real estate owned
 (OREO) and foreclosed
 assets, beginning of
 period                 $    29,902  $     2,107          7.0%
     Transfers from
      outstanding loans       8,251       (4,000)       -48.5%
     Improvements and
      other additions            46          (36)       -78.3%
     Sales                   (4,667)        (230)         4.9%
     Impairment charges      (1,523)         553        -36.3%
                        -----------
Total OREO and
 foreclosed assets,
 end of period          $    32,009  $    (2,252)        -7.0%
                        ===========


QUARTERLY AVERAGES

                         March 31,    March 31,
                            2011         2010       Change       % Change
                        -----------  -----------  -----------  -----------

Average fed funds sold
 and investments        $   338,927  $   278,181  $    60,746         21.8%
Average gross loans     $   960,326  $ 1,138,058  $  (177,732)       -15.6%
Average mortgages held
 for sale               $       722  $       704  $        18          2.6%
Average total assets    $ 1,397,755  $ 1,509,351  $  (111,596)        -7.4%
Average
 non-interest-bearing
 deposits               $   253,926  $   253,645  $       281          0.1%
Average
 interest-bearing
 deposits               $   997,633  $ 1,135,816  $  (138,183)       -12.2%
Average total deposits  $ 1,251,558  $ 1,389,461  $  (137,903)        -9.9%
Average total
 borrowings             $    31,766  $    30,955  $       811          2.6%
Average stockholders'
 equity                 $    96,836  $    75,458  $    21,378         28.3%
Average common equity   $    56,836  $    35,843  $    20,993         58.6%



                        December 31,
                            2010       Change       % Change
                        -----------  -----------  -----------

Average fed funds sold
 and investments        $   321,558  $    17,369          5.4%
Average gross loans     $ 1,013,339  $   (53,013)        -5.2%
Average mortgages held
 for sale               $       623  $        99         15.9%
Average total assets    $ 1,429,602  $   (31,847)        -2.2%
Average
 non-interest-bearing
 deposits               $   252,028  $     1,898          0.8%
Average
 interest-bearing
 deposits               $ 1,029,168  $   (31,535)        -3.1%
Average total deposits  $ 1,281,196  $   (29,638)        -2.3%
Average total
 borrowings             $    30,950  $       816          2.6%
Average stockholders'
 equity                 $    99,911  $    (3,075)        -3.1%
Average common equity   $    60,007  $    (3,171)        -5.3%




LOANS BY CATEGORY
(All amounts in 000's)
(unaudited)


                   3/31/2011 12/31/2010  9/30/2010   6/30/2010   3/31/2010
                   --------- ---------- ----------- ----------- -----------
Agricultural/Farm  $  23,359 $   37,194 $    41,309 $    38,984 $    36,573
Commercial and
 Industrial          145,907    157,281     168,217     192,119     204,227
Commercial Real
 Estate - Owner
 Occupied            224,821    230,156     240,880     249,642     246,419
Commercial Real
 Estate -
 Non-Owner
 Occupied            422,835    443,058     471,426     496,539     510,585
Consumer/Other       104,096    109,106     112,726     113,599     120,410
                   --------- ---------- ----------- ----------- -----------
Gross loans, net
 of deferred fees  $ 921,018 $  976,795 $ 1,034,558 $ 1,090,883 $ 1,118,214
                   ========= ========== =========== =========== ===========

Commercial Real
 Estate
Owner Occupied
Commercial Term    $ 221,067 $  224,646 $   232,437 $   240,952 $   238,675
Commercial
 Construction          1,972      2,595       5,047       5,343       4,597
Single Family
 Residential
 Construction
    Oregon                 -        999         821         758         538
    California         1,782      1,916       2,575       2,589       2,609
                   --------- ---------- ----------- ----------- -----------
Total Owner
 Occupied          $ 224,821 $  230,156 $   240,880 $   249,642 $   246,419
                   ========= ========== =========== =========== ===========

Non-Owner Occupied
Commercial Term    $ 311,857 $  324,982 $   341,429 $   326,882 $   328,070
Commercial
 Construction          3,156      5,321       5,967      27,411      26,125
Single Family
 Residential
 Construction
    Oregon
      Pre-Sold             -          -           -         172          95
      Speculative        280        281         599       1,719       1,543
      Builder
       Inventory       5,147      6,828       7,106       7,058       8,397
                   --------- ---------- ----------- ----------- -----------
    Total Oregon       5,427      7,109       7,705       8,949      10,035
                   --------- ---------- ----------- ----------- -----------

    California
      Pre-Sold             -          -           -         433         448
      Speculative          -        258         269       1,982       1,986
      Builder
       Inventory       6,880      7,395       9,976       8,872       9,013
                   --------- ---------- ----------- ----------- -----------
    Total California   6,880      7,653      10,245      11,287      11,447
                   --------- ---------- ----------- ----------- -----------

Commercial - Land
 Acquisition and
 Development           6,992      8,650       9,824      15,582      23,769
Commercial - Land
 Only                 60,777     62,783      65,162      70,633      68,612
Residential - Land
 Acquisition and
 Development          27,746     26,560      31,094      35,795      42,527
                   --------- ---------- ----------- ----------- -----------
Total Non-Owner
 Occupied          $ 422,835 $  443,058 $   471,426 $   496,539 $   510,585
                   ========= ========== =========== =========== ===========




NONPERFORMING ASSETS BY REGION AND TYPE
(All amounts in 000's)
(unaudited)

Other Real Estate Owned
 and Foreclosed Assets
By Geographic Region    3/31/2011 12/31/2010 9/30/2010 6/30/2010 3/31/2010
                        --------- ---------- --------- --------- ----------

Mid-Central Oregon      $   6,295 $    6,044 $   4,484 $   5,264 $    4,917
Southern Oregon            13,276     15,715    13,058     6,804      9,629
Northern California         5,082      5,447     5,475     1,346      5,219
Greater Sacramento          4,919      3,487     3,519     1,046      1,095
Other                         185      1,316     3,366       624        657
                        --------- ---------- --------- --------- ----------
Total Other Real Estate
 Owned and Foreclosed
 Assets                 $  29,757 $   32,009 $  29,902 $  15,084 $   21,517
                        ========= ========== ========= ========= ==========



Non Performing Loans
By Geographic Region    3/31/2011 12/31/2010 9/30/2010 6/30/2010  3/31/2010
                        --------- ---------- --------- --------- ----------

Mid-Central Oregon      $  20,789 $   31,734 $  21,673 $  24,594 $   24,971
Southern Oregon            54,624     58,084    54,293    62,097     39,950
Northern California        10,436     13,582    12,887    16,196     16,043
Greater Sacramento         23,995     26,216    26,250    26,816     23,407
                        --------- ---------- --------- --------- ----------
Total Nonperforming
 Loans                  $ 109,844 $  129,616 $ 115,103 $ 129,703 $  104,371
                        ========= ========== ========= ========= ==========

By Loan Type
Agricultural/Farm       $   2,538 $    2,538 $     434 $     297 $    2,491
Commercial and
 Industrial                 3,164      8,550     5,480     7,006      6,117
Commercial Real Estate
 - Owner Occupied
  Single Family
   Residential
   Construction
     California             1,612      1,673     1,983     2,108      2,108
  Other                    12,347     14,768    10,004    10,701      6,967
Commercial Real Estate
 - Non-Owner Occupied
  Oregon                   18,970     18,163    22,846    23,480     25,079
  California                6,106      7,270     6,465     3,037      1,074
  Single Family
   Residential
   Construction
    Oregon                  2,429     12,829     6,690     9,388      8,951
    California             13,278      4,813    12,990    14,455     16,184
  Commercial - Land
   Acquisition and
   Development              4,985      6,646     3,272     8,796      9,947
  Commercial - Land Only   32,092     32,727    34,883    35,616     12,321
  Residential - Land
   Acquisition and
   Development              5,858     10,518     4,596     4,987      6,281
  Commercial
   Construction -
   Multiplex (5+)               -        911       313       313          -
  Other                     5,359      7,052     4,095     8,416      6,074
Consumer/Other              1,106      1,158     1,052     1,103        777
                        --------- ---------- --------- --------- ----------
Total Nonperforming
 Loans                  $ 109,844 $  129,616 $ 115,103 $ 129,703 $  104,371
                        ========= ========== ========= ========= ==========