SOURCE: PremierWest Bancorp

July 26, 2011 09:30 ET

PremierWest Bancorp Announces Second Quarter Results

MEDFORD, OR--(Marketwire - Jul 26, 2011) - PremierWest Bancorp (NASDAQ: PRWT) announced results for the second quarter ending June 30, 2011, as follows:

--  Net loss of $2.7 million, or $0.27 per share, after no loan loss
    provision and net OREO and foreclosed asset expenses of $4.4 million.
    This compares to a net loss of $7.4 million, or $0.74 per share, after
    $6.3 million in loan loss provision and net OREO and foreclosed asset
    expenses of $2.1 million for first quarter 2011.
--  Reduction of non-performing assets by $19.5 million, or 14.0 percent,
    to $120.1 million or 9.1 percent of total assets compared to $139.6
    million or 10.2% of total assets at March 31, 2011.
--  Decrease in net charge-offs to $4.9 million, compared to $8.5 million
    at March 31, 2011.
--  Reduction in adversely classified loans by $42.4 million, or 17.0% to
    $207.0 million, compared to $249.5 million at March 31, 2011.
--  Drop in loans past due 30 - 89 days to $2.8 million or 0.32% of total
    loans, down from $7.1 million or 0.77% at March 31, 2011.
--  No provision for loan losses recorded in the current quarter versus
    $6.3 million for the first quarter 2011, due to improvement in credit
    metrics. Loan loss reserve was $28.4 million, or 3.22% of gross loans,
    compared to $33.4 million, or 3.62%, at March 31, 2011.

Management continued to execute strategies that have resulted in strengthening of the Company's performance, including:

--  Improvement in the Bank's total risk-based and leverage capital ratios
    to 12.65% and 8.71%, respectively, at June 30, 2011, up from 12.51% and
    8.59% at March 31, 2011.
--  Expansion of net interest margin to 3.99% (after excluding one-time
    receipt of $0.6 million in default interest), up from 3.83% for the
    quarter ended March 31, 2011.
--  Growth in non-interest bearing demand deposits by $8.4 million to
    $260.9 million, or 22.2% of total deposits, up from $252.6 million, or
    20.5% of total deposits at the preceding quarter-end.

James M. Ford, PremierWest's President & Chief Executive Officer, observed, "Despite the continued economic difficulties, I am pleased with the progress made in second quarter 2011. We narrowed our loss for the quarter and continued to achieve meaningful reductions in nonperforming and adversely classified assets. The quarter represents the fourth consecutive period of declines in adversely-classified loans. It was gratifying to see that a good portion of this progress in credit quality was a result of risk rating improvements, repayments or upgrades to performing status for a number of loan relationships. In addition, commercial real estate (CRE) and acquisition, development and construction (ADC) loan balances continue to decline.

"We increased our net interest margin in part by growing our non-interest bearing deposits through new customer acquisition and expansion of existing client relationships while reducing our higher-cost certificates of deposits," remarked Ford. "With sluggish loan demand in our marketplace, we have continued to manage our balance sheet primarily by building our investment portfolio. We are structuring the portfolio to have the liquidity needed to respond when loan demand improves, while redeploying our investment portfolio into higher-yielding, high quality federal government agency and municipal securities to improve earnings."

Ford closed by saying, "We are grateful for to the shareholders for their patience as we guide the Company through these trying economic times. While we still have much work to do, I appreciate the hard efforts of our employees over the recent years which have resulted in the improvements displayed in this quarter's results."

CREDIT QUALITY

At June 30, 2011, the Company had $207.0 million in adversely classified loans. This compares favorably to $249.5 million and $316.2 million at March 31, 2011 and June 30, 2010, respectively. Adversely classified loans have declined for four consecutive quarters and were down 17.0% from March 31, 2011 and 34.5% from June 30, 2010.

Included in adversely classified loans at June 30, 2011, were nonperforming loans of $92.5 million, or 10.5% of gross loans, compared to $109.8 million, or 11.9% of gross loans, at March 31, 2011, and $129.7 million, or 11.9% of gross loans, at June 30, 2010. Nonperforming loans have declined for four consecutive quarters and were down 15.8% from March 31, 2011 and 28.7% from June 30, 2010. Reductions in nonperforming loans occurred primarily in the construction, land and land development and commercial real estate loan categories. Of those loans currently designated as nonperforming, approximately $24.2 million, or 26.2% are current as to payment of principal and interest.

The Company monitors delinquencies, defined as loans on accruing status 30-89 days past due, as an indicator of future nonperforming assets. Total delinquencies were $2.8 million, or 0.32% of total loans, at June 30, 2011, down from $7.1 million, or 0.77%, at March 31, 2011, and a reduction from $10.7 million, or 0.98%, at June 30, 2010.

For the quarter ended June 30, 2011, total net loan charge-offs were $4.9 million compared to $8.5 million in the quarter ended March 31, 2011 and $5.0 million in the quarter ended June 30, 2010. The net charge-offs in the current period were concentrated in the construction and land development and non-owner occupied commercial real estate loan categories. The ratio of net loan charge-offs to average gross loans (annualized) for the current quarter was down 39.4% from the previous quarter. The current quarter net loan charge-offs to average gross loans ratio was up 22.5% as compared to the same quarter in 2010, even though net loan charge offs in dollars were virtually the same. Average gross loans in the current period were 18.6% lower as compared to the same quarter in 2010.

The Company's allowance for credit losses was $28.4 million, or 3.22% of gross loans, at June 30, 2011. This compares to an allowance for credit losses of $33.4 million, or 3.62% of total loans, at March 31, 2011 and $43.9 million, or 4.02% of gross loans, at June 30, 2010. At June 30, 2011, the allowance for credit losses was 30.7% of nonperforming loans, as compared to 30.4% at March 31, 2011 and 33.9% at June 30, 2010.

At June 30, 2011, other real estate owned (OREO) consisted of 90 properties totaling $27.6 million, compared to 93 properties totaling $29.8 million at March 31, 2011, and 54 properties totaling $15.1 million a year ago. OREO balances have declined for two consecutive quarters, down 7.3% from March 31, 2011, and 13.8% from the $32.0 million in OREO as of December 31, 2010. During the second quarter of 2011 the Company disposed of $1.6 million in OREO property. Write-downs of OREO during the second quarter 2011 comprised 15.9% of the balance at the beginning of the period. Additions to OREO in second quarter 2011 were primarily attributed to two separate relationships of $2.2 million and $1.2 million, which are commercial real estate and construction land development properties, respectively. The largest balances in the OREO portfolio at June 30, 2011, were attributable to land development projects and commercial real estate properties, all of which are located within regions we operate.

LOANS AND DEPOSITS

The Company's total gross loans, net of deferred fees, totaled $880.9 million at June 30, 2011, down $40.2 million, or 4.4%, from March 31, 2011 and down $210.0 million, or 19.3% from June 30, 2010. This is a result of the Company's decision to reduce its level of construction, land and development, commercial real estate and higher risk commercial and industrial loans. The reduction in these loan types comprised 90.7% and 86.0% of the reduction in gross loan balances during these comparative periods. The decline in gross loans during this quarter reflects $12.1 million in originations, $41.6 million in pay offs, $6.6 million in gross loan charge-offs and $4.1 million transferred to OREO.

Total deposits as of June 30, 2011 were $1.18 billion, a decrease of 4.5% or $56.0 million from March 31, 2011 and a decrease of $135.7 million from June 30, 2010. This decline was mainly due to a purposeful reduction by management of higher-cost time and public entity deposits balances and emphasis on the acquisition of non-interest bearing demand deposit relationships. In keeping with this strategy, non-interest bearing demand deposits grew 3.3%, or $8.4 million, during the second quarter of 2011 and 6.8%, or $16.6 million, since June 30, 2010. As such, the Company's non-interest bearing and time deposits now comprise 22.2% and 41.6% of total deposits, respectively, as of June 30, 2011, as compared to 18.6% and 44.7% of total deposits, respectively, as of June 30, 2010. The Company had less than $1 million in brokered deposits as of June 30, 2011, all of which were reciprocal in nature.

NET INTEREST INCOME

Second quarter 2011 net interest income was $13.1 million, an increase of $0.9 million versus first quarter 2011 and a decrease of $1.7 million as compared to second quarter of 2010. Average earning assets decreased $38.3 million, or 2.9%, from first quarter 2011 and $151.6 million, or 10.7% from June 30, 2010. Higher yielding average gross loans, as a percentage of average interest earning assets, declined from 78.8% as of June 30, 2010 to 71.9% as of June 30, 2011. Correspondingly, lower yielding average fed funds sold and investment securities, as a percentage of average interest earning assets, increased to 28.1% as of June 30, 2011 from 21.1% as of June 30, 2010. In addition to these changes in the earning asset mix, average non-interest bearing deposits grew as a proportion of total deposits.

The second quarter 2011 net interest margin of 4.19% increased 36 basis points from first quarter 2011. This was due in part to higher yields from loans, which grew to 6.18%, an increase of 41 basis points. Approximately 28 basis points of the increase in loan yields was due to the collection during the quarter of $0.6 million in default interest from one borrower. This one-time event increased net interest margin by 20 basis points, from 3.99% to 4.19%, for the period. In addition, the redeployment during the current quarter of a portion of fed funds sold balances into higher yielding U.S. government agency and investment grade municipal obligations resulted in an increase in investment portfolio yields of 27 basis points to 2.00%. The changes in the deposit mix noted above resulted in a 7 basis point, or 6.3%, decrease in the cost of average interest-bearing liabilities.

The second quarter 2011 net interest margin of 4.19% decreased 4 basis points from second quarter 2010, including the collection of $0.6 million in default interest previously noted. This was due in part to the higher proportion of earning assets in loans during the second quarter 2010. The current period loan portfolio yield of 5.90%, after adjustment as explained above, was down from the second quarter 2010 loan yield of 5.99%, after an adjustment of $0.3 million in interest reversed due to loans being placed in nonaccrual status during that period. By comparison, only a nominal amount of interest was reversed in second quarter 2011. In addition, a higher proportion of the Company's liquidity was retained in lower yielding fed funds sold balances during the second quarter of 2010, resulting in investment portfolio yields that were 27 basis points below those of second quarter 2011. Also, the cost of interest-bearing liabilities in second quarter 2010 was reduced by a $1.1 million accretion of a negative certificate of deposit purchase premium as a result of the purchase of two Wachovia Bank branches in July 2009. The negative deposit purchase premium was fully accreted as of June 30, 2010, which lowered the cost of interest-bearing deposits by 39 basis points during second quarter 2010. This, along with changes in the deposit mix noted above, resulted in no change in the cost of interest-bearing liabilities when comparing the two periods.

NON-INTEREST INCOME and EXPENSE

Total noninterest income of $2.9 million for the quarter ended June 30, 2011, declined $0.3 million, or 9.3%, from $3.2 million in the first quarter of 2011. This was primarily due to a $0.3 million decrease in gain on death benefit from bank-owned life insurance and declines in investment and mortgage brokerage fee income. This decrease was partially offset by an increase of $0.2 million in gain on sale of investment securities. Noninterest income for the current quarter increased $0.4 million, or 17.4%, from $2.5 million in second quarter 2010. This was primarily due to a $0.5 million increase in gain on sale of investment securities and investment and mortgage brokerage fee income. This increase was partially offset by a decrease of $0.1 million in deposit account service charge fee income. This is a result of the continued trend of banking customers incurring fewer non-sufficient funds (NSF) items, thus reducing fee income in this area.

Noninterest expense for the three months ended June 30, 2011, was $18.0 million, an increase of $2.2 million compared to $15.8 million in first quarter 2011. Salaries and employee benefits expense was virtually unchanged between the periods. Costs related to OREO and foreclosed assets increased, primarily reflecting a $2.7 million increase in impairment charges associated with these assets. The increase in noninterest expenses was partially offset by a $0.3 million decrease in FDIC insurance premiums associated with the recent change in assessment methodology. Noninterest expense for the current quarter increased $1.7 million compared to $16.4 million in second quarter 2010. Salaries and employee benefits expense increased $0.2 million between the periods. Costs related to OREO and foreclosed assets increased $2.0 million over second quarter 2010, primarily reflecting a $2.2 million increase in impairment charges associated with these assets. The increase in noninterest expenses was partially offset by a $0.4 million decrease in FDIC insurance premiums associated with the recent change in assessment methodology and a $0.2 million reduction in occupancy and equipment expense.

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 June 30, 2011, with ratios of 12.65 percent and 11.38 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 by the Consent Order. As such, we are not considered "Well-Capitalized" for all regulatory ratios.



                                                 Regulatory     Regulatory
                                                Minimum to be   Minimum to
              June 30,  December 31,  June 30,  "Adequately     be "Well
                2011        2010        2010    Capitalized"   Capitalized"
              --------  ------------  --------  -------------  -----------
                                                greater than     greater
                                                or equal to      than or
                                                                 equal to

Total
 risk-based
 capital
 ratio           12.65%        12.59%    11.65%          8.00%       10.00%
Tier 1
 risk-based
 capital
 ratio           11.38%        11.31%    10.37%          4.00%        6.00%
Leverage
 ratio            8.71%         8.85%     8.43%          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

                                 June 30,    June 30,
For the Three Months Ended         2011        2010      Change   % Change
                                ----------  ----------  --------  --------

Interest income                 $   15,697  $   17,662  $ (1,965)    -11.1%
Interest expense                     2,571       2,828      (257)     -9.1%
                                ----------  ----------  --------
Net interest income                 13,126      14,834    (1,708)    -11.5%
Loan loss provision                      -       2,350    (2,350)   -100.0%
Non-interest income                  2,865       2,440       425      17.4%
Non-interest expense                18,044      16,351     1,693      10.4%
                                ----------  ----------  --------
Pre-tax loss                        (2,053)     (1,427)     (626)    -43.9%
Provision for income taxes               5           -         5        nm
                                ----------  ----------  --------
Net loss                        $   (2,058) $   (1,427) $   (631)    -44.2%
                                ----------  ----------  --------
Less preferred dividend and
 discount accretion                    613         636       (23)     -3.6%
                                ----------  ----------  --------
Net loss applicable to common
 shareholders                   $   (2,671) $   (2,063) $   (608)    -29.5%
                                ==========  ==========  ========

Basic loss per common share (1) $    (0.27) $    (0.21) $  (0.06)    -28.6%
                                ==========  ==========  ========
Diluted loss per common share
 (1)                            $    (0.27) $    (0.21) $  (0.06)    -28.6%
                                ==========  ==========  ========

Average common shares
 outstanding--basic (1)         10,034,516   9,879,654   154,862       1.6%
Average common shares
 outstanding--diluted (1)       10,034,516   9,879,654   154,862       1.6%


                                March 31,
For the Three Months Ended         2011      Change   % Change
                                ----------  --------  --------

Interest income                 $   15,032  $    665       4.4%
Interest expense                     2,831      (260)     -9.2%
                                ----------  --------
Net interest income                 12,201       925       7.6%
Loan loss provision                  6,300    (6,300)   -100.0%
Non-interest income                  3,159      (294)     -9.3%
Non-interest expense                15,798     2,246      14.2%
                                ----------  --------
Pre-tax loss                        (6,738)    4,685      69.5%
Provision for income taxes              16       (11)    -68.8%
                                ----------  --------
Net loss                        $   (6,754) $  4,696      69.5%
                                ----------  --------
Less preferred dividend and
 discount accretion                    656       (43)     -6.6%
                                ----------  --------
Net loss applicable to common
 shareholders                   $   (7,410) $  4,739      64.0%
                                ==========  ========

Basic loss per common share (1) $    (0.74) $   0.47      63.5%
                                ==========  ========
Diluted loss per common share
 (1)                            $    (0.74) $   0.47      63.5%
                                ==========  ========

Average common shares
 outstanding--basic (1)         10,034,642      (126)      0.0%
Average common shares
 outstanding--diluted (1)       10,034,642      (126)      0.0%


                               June 30,    June 30,
For the Six Months Ended         2011        2010       Change    % Change
                              ----------  ----------  ----------  --------

Interest income               $   30,729  $   35,849  $   (5,120)    -14.3%
Interest expense                   5,402       6,179        (777)    -12.6%
                              ----------  ----------  ----------
Net interest income               25,327      29,670      (4,343)    -14.6%
Loan loss provision                6,300       8,450      (2,150)    -25.4%
Non-interest income                6,024       5,148         876      17.0%
Non-interest expense              33,842      30,486       3,356      11.0%
                              ----------  ----------  ----------
Pre-tax loss                      (8,791)     (4,118)     (4,673)   -113.5%
Provision for income taxes            21           -          21        nm
                              ----------  ----------  ----------
Net loss                      $   (8,812) $   (4,118) $   (4,694)   -114.0%
                              ----------  ----------  ----------
Less preferred dividend and
 discount accretion                1,269       1,247          22       1.8%
                              ----------  ----------  ----------
Net loss applicable to common
 shareholders                 $  (10,081) $   (5,365) $   (4,716)    -87.9%
                              ==========  ==========  ==========

Basic loss per common share
 (1)                          $    (1.00) $    (0.82) $    (0.18)    -22.0%
                              ==========  ==========  ==========
Diluted loss per common share
 (1)                          $    (1.00) $    (0.82) $    (0.18)    -22.0%
                              ==========  ==========  ==========

Average common shares
 outstanding--basic (1)       10,034,681   6,572,798   3,461,883      52.7%
Average common shares
 outstanding--diluted (1)     10,034,681   6,572,798   3,461,883      52.7%

(1) As of June 30, 2011, March 31, 2011, and June 30, 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



PREMIERWEST BANCORP
FINANCIAL HIGHLIGHTS
SELECTED FINANCIAL RATIOS
(annualized) (unaudited)

                             June 30,  June 30,          March 31,
For the Three Months ended     2011      2010    Change    2011     Change
                             --------  --------  ------  ---------  ------

Yield on average gross loans
 (1)                             6.18%     5.91%   0.27       5.77%   0.41
Yield on average investments
 (1)                             2.00%     1.78%   0.22       1.73%   0.27
Total yield on average
 earning assets (1)              5.01%     5.04%  (0.03)      4.71%   0.30
Cost of average interest
 bearing deposits                1.02%     0.95%   0.07       1.08%  (0.06)
Cost of average borrowings       1.73%     4.06%  (2.33)      2.13%  (0.40)
Cost of average total
 deposits and borrowings         0.83%     0.85%  (0.02)      0.89%  (0.06)
Cost of average interest
 bearing liabilities             1.04%     1.04%   0.00       1.11%  (0.07)
Net interest spread              3.97%     4.00%  (0.03)      3.60%   0.37
Net interest margin (1)          4.19%     4.23%  (0.04)      3.83%   0.36

Net charge-offs to average
 gross loans                     2.18%     1.78%   0.40       3.60%  (1.42)
Allowance for loan losses to
 gross loans                     3.22%     4.02%  (0.80)      3.62%  (0.40)
Allowance for loan losses to
 non-performing loans           30.74%    33.86%  (3.12)     30.38%   0.36
Loans 30-89 days past due
 and still accruing as a
 percent of gross loans          0.32%     0.98%  (0.66)      0.77%  (0.45)
Non-performing loans to
 gross loans                    10.48%    11.88%  (1.40)     11.90%  (1.42)
Non-performing assets to
 total assets                    9.08%     9.91%  (0.83)     10.17%  (1.09)

Return on average common
 equity                        -21.35%   -13.59%  (7.76)    -52.87%  31.52
Return on average assets        -0.79%    -0.55%  (0.24)     -2.15%   1.36

Efficiency ratio (2)           112.84%    94.66%  18.18     102.80%  10.04


                             June 30,  June 30,
For the Six Months ended       2011      2010    Change
                             --------  --------  ------

Yield on average gross loans
 (1)                             5.97%     5.96%   0.01
Yield on average investments
 (1)                             1.87%     1.89%  (0.02)
Total yield on average
 earning assets (1)              4.86%     5.13%  (0.27)
Cost of average interest
 bearing deposits                1.05%     0.99%   0.06
Cost of average borrowings       1.92%     5.02%  (3.10)
Cost of average total
 deposits and borrowings         0.86%     0.90%  (0.04)
Cost of average interest
 bearing liabilities             1.08%     1.07%   0.01
Net interest spread              3.78%     4.06%  (0.28)
Net interest margin (1)          4.01%     4.25%  (0.24)

Net charge-offs to average
 gross loans                     2.91%     1.87%   1.04
Allowance for loan losses to
 gross loans                     3.22%     4.02%  (0.80)
Allowance for loan losses to
 non-performing loans           30.74%    33.86%  (3.12)
Non-performing loans to
 gross loans                    10.48%    11.88%  (1.40)
Non-performing assets to
 total assets                    9.08%     9.91%  (0.83)

Return on average common
 equity                        -38.01%   -22.34% (15.67)
Return on average assets        -1.48%    -0.72%  (0.76)

Efficiency ratio (2)           107.95%    87.56%  20.39

(1) Tax equivalent
(2) Non-interest expense divided by net interest income plus non-interest
    income



PREMIERWEST BANCORP
FINANCIAL HIGHLIGHTS
(unaudited)
Reconciliation of Non-GAAP Measure:
Tax Equivalent Net Loss Applicable to Common Shareholders
(Dollars in 000's)

For the three months ended                    June 30, 2011  June 30, 2010
                                              -------------  -------------

Net interest income                           $      13,126  $      14,834
Tax equivalent adjustment for municipal loan
 interest                                                45             47
Tax equivalent adjustment for municipal bond
 interest                                                17             34
                                              -------------  -------------
Tax equivalent net interest income                   13,188         14,915
Provision for loan losses                                 -          2,350
Noninterest income                                    2,865          2,440
Noninterest expense                                  18,044         16,351
Provision for income taxes                                5              -
                                              -------------  -------------
Tax equivalent net loss                              (1,996)        (1,346)
Preferred stock dividends and discount
 accretion                                              613            636
                                              -------------  -------------
Tax equivalent net loss applicable to common
 shareholders                                 $      (2,609) $      (1,982)
                                              =============  =============


For the six months ended                      June 30, 2011  June 30, 2010
                                              -------------  -------------

Net interest income                           $      25,327  $      29,670
Tax equivalent adjustment for municipal loan
 interest                                                89             95
Tax equivalent adjustment for municipal bond
 interest                                                47             68
                                              -------------  -------------
Tax equivalent net interest income                   25,463         29,833
Provision for loan losses                             6,300          8,450
Noninterest income                                    6,024          5,148
Noninterest expense                                  33,842         30,486
Provision for income taxes                               21              -
                                              -------------  -------------
Tax equivalent net loss                              (8,676)        (3,955)
Preferred stock dividends and discount
 accretion                                            1,269          1,247
                                              -------------  -------------
Tax equivalent net loss applicable to common
 shareholders                                 $      (9,945) $      (5,202)
                                              =============  =============

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

                             June 30,     June 30,
                               2011         2010       Change    % Change
                           -----------  -----------  ----------  ---------
Fed funds sold and
 investments               $   333,784  $   281,745  $   52,039       18.5%
                           -----------  -----------  ----------
Gross loans, net of
 deferred fees                 880,853    1,090,883    (210,030)     -19.3%
Allowance for loan losses      (28,433)     (43,917)     15,484      -35.3%
                           -----------  -----------  ----------
Net loans                      852,420    1,046,966    (194,546)     -18.6%
Other assets                   135,835      132,182       3,653        2.8%
                           -----------  -----------  ----------
Total assets               $ 1,322,039  $ 1,460,893  $ (138,854)      -9.5%
                           ===========  ===========  ==========

Non-interest-bearing
 deposits                  $   260,940  $   244,315  $   16,625        6.8%
Interest-bearing deposits      916,899    1,069,186    (152,287)     -14.2%
                           -----------  -----------  ----------
Total deposits               1,177,839    1,313,501    (135,662)     -10.3%
Borrowings                      37,833       30,953       6,880       22.2%
Other liabilities               17,962       15,279       2,683       17.6%
Stockholders' equity            88,405      101,160     (12,755)     -12.6%
                           -----------  -----------  ----------
Total liabilities and
 stockholders' equity      $ 1,322,039  $ 1,460,893  $ (138,854)      -9.5%
                           ===========  ===========  ==========

Period end common shares
 outstanding                10,034,491   10,034,830        (339)       0.0%
Book value per common
 share (1)                 $      4.81  $      6.12  $    (1.31)     -21.4%
Tangible book value per
 common share (2)          $      4.59  $      5.82  $    (1.23)     -21.1%

Adversely classified loans
  Rated substandard or
   worse                   $   114,565  $   186,472  $  (71,907)     -38.6%
  Impaired                      92,505      129,703     (37,198)     -28.7%
                           -----------  -----------  ----------
Total adversely classified
 loans (3)                 $   207,070  $   316,175  $ (109,105)     -34.5%
                           ===========  ===========  ==========

Loans 30-89 days past due
 and still accruing        $     2,781  $    10,669  $   (7,888)     -73.9%

Non-performing assets:
  Loans on nonaccrual
   status                  $    92,266  $   129,458  $  (37,192)     -28.7%
  90-days past due and
   accruing                        239          245          (6)      -2.4%
                           -----------  -----------  ----------
Total non-performing loans      92,505      129,703     (37,198)     -28.7%
  Other real estate owned
   and foreclosed assets        27,579       15,084      12,495       82.8%
                           -----------  -----------  ----------
Total non-performing
 assets                    $   120,084  $   144,787  $  (24,703)     -17.1%
                           ===========  ===========  ==========

Troubled debt
 restructurings:
  On accrual status        $     1,827  $         -  $    1,827         nm
  On nonaccrual status          43,375       10,033      33,342      332.3%
                           -----------  -----------  ----------
Total troubled-debt
 restructurings            $    45,202  $    10,033  $   35,169      350.5%
                           ===========  ===========  ==========



                            March 31,
                               2011       Change    % Change
                           -----------  ----------  ---------
Fed funds sold and
 investments               $   352,040  $  (18,256)      -5.2%
                           -----------  ----------
Gross loans, net of
 deferred fees                 921,018     (40,165)      -4.4%
Allowance for loan losses      (33,366)      4,933      -14.8%
                           -----------  ----------
Net loans                      887,652     (35,232)      -4.0%
Other assets                   133,034       2,801        2.1%
                           -----------  ----------
Total assets               $ 1,372,726  $  (50,687)      -3.7%
                           ===========  ==========

Non-interest-bearing
 deposits                  $   252,562  $    8,378        3.3%
Interest-bearing deposits      981,319     (64,420)      -6.6%
                           -----------  ----------
Total deposits               1,233,881     (56,042)      -4.5%
Borrowings                      32,842       4,991       15.2%
Other liabilities               17,461         501        2.9%
Stockholders' equity            88,542        (137)      -0.2%
                           -----------  ----------
Total liabilities and
 stockholders' equity      $ 1,372,726  $  (50,687)      -3.7%
                           ===========  ==========

Period end common shares
 outstanding                10,034,491           -        0.0%
Book value per common
 share (1)                 $      4.83  $    (0.02)      -0.4%
Tangible book value per
 common share (2)          $      4.60  $    (0.01)      -0.2%

Adversely classified loans
  Rated substandard or
   worse                   $   139,638  $  (25,073)     -18.0%
  Impaired                     109,844     (17,339)     -15.8%
                           -----------  ----------
Total adversely classified
 loans (3)                 $   249,482  $  (42,412)     -17.0%
                           ===========  ==========

Loans 30-89 days past due
 and still accruing        $     7,127  $   (4,346)     -61.0%

Non-performing assets:
  Loans on nonaccrual
   status                  $   109,753  $  (17,487)     -15.9%
  90-days past due and
   accruing                         91         148      162.6%
                           -----------  ----------
Total non-performing loans     109,844     (17,339)     -15.8%
  Other real estate owned
   and foreclosed assets        29,757      (2,178)      -7.3%
                           -----------  ----------
Total non-performing
 assets                    $   139,601  $  (19,517)     -14.0%
                           ===========  ==========

Troubled debt
 restructurings:
  On accrual status        $       223  $    1,604      719.3%
  On nonaccrual status          47,462      (4,087)      -8.6%
                           -----------  ----------
Total troubled-debt
 restructurings            $    47,685  $   (2,483)      -5.2%
                           ===========  ==========

(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.
(3) Includes non-performing loans shown in total below

nm = not meaningful



QUARTERLY ACTIVITY

                                June 30,   June 30,
                                  2011       2010       Change   % Change
                                ---------  ---------  ---------  ---------
Allowance for loan losses:
  Balance beginning of period   $  33,366  $  46,518  $ (13,152)     -28.3%
    Provision for loan
     losses                             -      2,350     (2,350)    -100.0%
    Net (charge-offs)
     recoveries                    (4,933)    (4,951)       (18)       0.4%
                                ---------  ---------
  Balance end of period         $  28,433  $  43,917  $ (15,484)     -35.3%
                                =========  =========

Nonperforming loans:
Balance beginning of period     $ 109,844  $ 104,372  $   5,472        5.2%
  Transfers from performing
   loans                            4,760     38,895    (34,135)     -87.8%
  Loans returned to
   performing status               (4,428)      (235)    (4,193)   -1784.3%
  Transfers to OREO                (4,122)    (2,733)    (1,389)     -50.8%
  Principal reduction from
   payment                         (6,933)    (2,031)    (4,902)    -241.4%
  Principal reduction from
   charge-off                      (6,616)    (8,565)     1,949       22.8%
                                ---------  ---------
Total nonperforming loans       $  92,505  $ 129,703  $ (37,198)     -28.7%
                                =========  =========

Other real estate owned (OREO)
 and foreclosed assets,
 beginning of period             $ 29,757  $  21,517  $   8,240       38.3%
  Transfers from outstanding
   loans                            4,122      2,733      1,389       50.8%
  Improvements and other
   additions                            -         75        (75)    -100.0%
  Sales                            (1,566)    (6,692)    (5,126)     -76.6%
  Impairment charges               (4,734)    (2,549)     2,185      -85.7%
                                ---------  ---------
Total OREO and foreclosed
 assets, end of period          $  27,579  $  15,084  $  12,495       82.8%
                                =========  =========


                                March 31,
                                  2011       Change   % Change
                                ---------  ---------  ---------
Allowance for loan losses:
  Balance beginning of period   $  35,582  $  (2,216)      -6.2%
    Provision for loan
     losses                         6,300     (6,300)    -100.0%
    Net (charge-offs)
     recoveries                    (8,516)    (3,583)      42.1%
                                ---------
  Balance end of period         $  33,366  $  (4,933)     -14.8%
                                =========

Nonperforming loans:
Balance beginning of period     $ 129,616  $ (19,772)     -15.3%
  Transfers from performing
   loans                            2,723     (2,037)      74.8%
  Loans returned to
   performing status                    -      4,428         nm
  Transfers to OREO                (4,251)      (129)       3.0%
  Principal reduction from
   payment                         (5,694)     1,239      -21.8%
  Principal reduction from
   charge-off                     (12,550)    (5,934)      47.3%
                                ---------
Total nonperforming loans       $ 109,844  $ (17,339)     -15.8%
                                =========

Other real estate owned (OREO)
 and foreclosed assets,
 beginning of period            $  32,009  $  (2,252)      -7.0%
  Transfers from outstanding
   loans                            4,251       (129)      -3.0%
  Improvements and other
   additions                           10        (10)    -100.0%
  Sales                            (4,437)    (2,871)     -64.7%
  Impairment charges               (2,076)     2,658     -128.0%
                                ---------
Total OREO and foreclosed
 assets, end of period          $  29,757  $  (2,178)      -7.3%
                                =========


QUARTERLY AVERAGES

                             June 30,    June 30,
                               2011        2010       Change     % Change
                            ----------- ----------- ----------  ----------

Average fed funds sold and
 investments                $   353,971 $   298,640 $   55,331        18.5%
Average gross loans         $   907,056 $ 1,114,045 $ (206,989)      -18.6%
Average mortgages held for
 sale                       $       603 $       509 $       94        18.5%
Average interest earning
 assets                     $ 1,261,630 $ 1,413,194 $ (151,564)      -10.7%
Average total assets        $ 1,357,844 $ 1,495,966 $ (138,122)       -9.2%
Average
 non-interest-bearing
 deposits                   $   259,668 $   250,566 $    9,102         3.6%
Average interest-bearing
 deposits                   $   953,536 $ 1,098,089 $ (144,553)      -13.2%
Average total deposits      $ 1,213,204 $ 1,348,655 $ (135,451)      -10.0%
Average total borrowings    $    36,443 $    30,953 $    5,490        17.7%
Average stockholders'
 equity                     $    90,269 $   100,585 $  (10,316)      -10.3%
Average common equity       $    50,173 $    60,873 $  (10,700)      -17.6%


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

Average fed funds sold and
 investments                $   338,927 $   15,044         4.4%
Average gross loans         $   960,326 $  (53,270)       -5.5%
Average mortgages held for
 sale                       $       722 $     (119)      -16.5%
Average interest earning
 assets                     $ 1,299,975 $  (38,345)       -2.9%
Average total assets        $ 1,397,755 $  (39,911)       -2.9%
Average
 non-interest-bearing
 deposits                   $   253,926 $    5,742         2.3%
Average interest-bearing
 deposits                   $   997,633 $  (44,097)       -4.4%
Average total deposits      $ 1,251,559 $  (38,355)       -3.1%
Average total borrowings    $    31,766 $    4,677        14.7%
Average stockholders'
 equity                     $    96,836 $   (6,567)       -6.8%
Average common equity       $    56,836 $   (6,663)      -11.7%



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

YEAR-TO-DATE ACTIVITY

                          June 30,     June 30,
                            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        8,450       (2,150)       -25.4%
    Net (charge-offs)
     recoveries             (13,449)     (10,436)       3,013        -28.9%
                        -----------  -----------
  Balance end of
   period               $    28,433  $    43,917  $   (15,484)       -35.3%
                        ===========  ===========

Nonperforming loans:
Balance beginning of
 period                 $   129,616  $   103,917  $    25,699         24.7%
  Transfers from
   performing loans           7,483       63,110      (55,627)       -88.1%
  Loans returned to
   performing status         (4,428)      (8,276)       3,848         46.5%
  Transfers to OREO          (8,372)      (5,109)      (3,263)       -63.9%
  Principal reduction
   from payment             (12,627)      (8,973)      (3,654)       -40.7%
  Principal reduction
   from charge-off          (19,167)     (14,966)      (4,201)       -28.1%
                        -----------  -----------
Total nonperforming
 loans                  $    92,505  $   129,703  $   (37,198)       -28.7%
                        ===========  ===========

Other real estate owned
 (OREO) and foreclosed
 assets, beginning of
 period                 $    32,009  $    24,748  $     7,261         29.3%
  Transfers from
   outstanding loans          8,372        5,109        3,263         63.9%
  Improvements and
   other additions               10          324         (314)       -96.9%
  Sales                      (6,002)     (12,002)      (6,000)       -50.0%
  Impairment charges         (6,810)      (3,095)       3,715       -120.0%
                        -----------  -----------
Total OREO and
 foreclosed assets, end
 of period              $    27,579  $    15,084  $    12,495         82.8%
                        ===========  ===========


YEAR-TO-DATE AVERAGES

                           June 30,     June 30,
                             2011         2010      Change       % Change
                        -----------  -----------  -----------  -----------

Average fed funds sold
 and investments        $   346,490  $   288,467  $    58,023         20.1%
Average gross loans     $   933,544  $ 1,125,985  $  (192,441)       -17.1%
Average mortgages held
 for sale               $       662  $       606  $        56          9.2%
Average interest
 earning assets         $ 1,280,696  $ 1,415,058  $  (134,362)        -9.5%
Average total assets    $ 1,377,689  $ 1,502,622  $  (124,933)        -8.3%
Average
 non-interest-bearing
 deposits               $   256,813  $   252,097  $     4,716          1.9%
Average
 interest-bearing
 deposits               $   975,463  $ 1,116,848  $  (141,385)       -12.7%
Average total deposits  $ 1,232,276  $ 1,368,945  $  (136,669)       -10.0%
Average total
 borrowings             $    34,117  $    30,954  $     3,163         10.2%
Average stockholders'
 equity                 $    93,534  $    88,091  $     5,443          6.2%
Average common equity   $    53,486  $    48,427  $     5,059         10.4%



PREMIERWEST BANCORP
FINANCIAL HIGHLIGHTS
(unaudited)
Loans by category

                           June 30,   March 31,  December 31,    June 30,
  (Dollars in 000's)         2011       2011         2010          2010
                          ----------  ---------  ------------  -----------

  Construction, Land Dev
   & Other Land           $   52,153  $  55,533  $     62,666  $   109,930
  Commercial & Industrial     98,086    109,836       119,077      149,418
  Commercial Real Estate
   Loans                     585,340    606,616       626,387      656,235
  Secured Multifamily
   Residential                22,791     23,156        24,227       24,933
  Other Commercial Loans
   Secured by RE              50,641     55,518        59,284       61,322
  Loans to Individuals,
   Family & Personal
   Expense                    12,203     12,240        12,472       13,309
  Consumer/Finance            35,561     36,244        36,859       37,573
  Other Loans                 25,525     23,359        37,255       38,984
  Overdrafts                     353        309           319          156
                          ----------  ---------  ------------  -----------
    Gross loans              882,653    922,811       978,546    1,091,860
      Less:  allowance
       for loan losses       (28,433)   (33,366)      (35,582)     (43,917)
      Less:  deferred
       fees and
       restructed loan
       concessions            (1,800)    (1,793)       (1,751)        (977)
                          ----------  ---------  ------------  -----------

    Loans, net            $  852,420  $ 887,652  $    941,213  $ 1,046,966
                          ==========  =========  ============  ===========



Nonperforming loans by category

                           June 30,   March 31,  December 31,    June 30,
  (Dollars in 000's)            2011       2011          2010         2010
                          ----------  ---------  ------------  -----------

  Construction, Land Dev
   & Other Land           $   20,015  $  24,207  $     32,584  $    41,996
  Commercial & Industrial      1,107      2,026         2,709        3,020
  Commercial Real Estate
   Loans                      64,256     72,287        80,604       77,828
  Secured Multifamily
   Residential                   144          -           307          313
  Other Commercial Loans
   Secured by RE               4,337      8,673        10,725        6,190
  Loans to Individuals,
   Family & Personal
   Expense                        20         23            26            -
  Consumer/Finance               139         91           123           59
  Other Loans                  2,487      2,537         2,538          297
                          ----------  ---------  ------------  -----------
    Total non-performing
     loans                $   92,505  $ 109,844  $    129,616  $   129,703
                          ==========  =========  ============  ===========



PREMIERWEST BANCORP
FINANCIAL HIGHLIGHTS
(unaudited)

(Dollars in 000's)

For the three
 months ended
Non-interest   June 30, June 30,           %     March 31,            %
 income          2011     2010   Change  Change    2011     Change  Change
               -------- -------- ------  ------  ---------- ------  ------
Service
 charges on
 deposit
 accounts      $    921 $  1,060 $ (139)  -13.1% $      955 $  (34)   -3.6%
Other
 commissions
 and fees           671      727    (56)   -7.7%        645     26     4.0%
Investment
 brokerage and
 annuity fees       426      359     67    18.7%        500    (74)  -14.8%
Mortgage
 banking fees        84       50     34    68.0%        125    (41)  -32.8%
Other
 non-interest
 income:
  Gains on
   sales of
   securities       596       52    544  1046.2%        406    190    46.8%
  Other income        7        8     (1)  -12.5%        324   (317)  -97.8%
  Increase in
   value of
   BOLI             135      142     (7)   -4.9%        122     13    10.7%
  Other
   non-interest
   income            25       42    (17)  -40.5%         82    (57)  -69.5%
               -------- --------                 ----------
Total
 non-interest
 income        $  2,865 $  2,440 $  425    17.4% $    3,159 $ (294)   -9.3%
               ======== ========                 ==========

Non-interest
 expense
Salaries and
 employee
 benefits      $  7,113 $  6,942 $  171     2.5% $    7,026 $   87     1.2%
Net cost of
 OREO and
 foreclosed
 assets           4,406    2,373  2,033    85.7%      2,124  2,282   107.4%
Net occupancy
 and equipment    1,845    2,021   (176)   -8.7%      1,878    (33)   -1.8%
FDIC and state
 assessments        798    1,152   (354)  -30.7%      1,123   (325)  -28.9%
Professional
 fees               757      589    168    28.5%        876   (119)  -13.6%
Communications      480      498    (18)   -3.6%        475      5     1.1%
Advertising         207      222    (15)   -6.8%        245    (38)  -15.5%
Other
 non-interest
 expense:
  Bank
   insurance        175      224    (49)  -21.9%        226    (51)  -22.6%
  Third-party
   loan costs       431      392     39     9.9%        296    135    45.6%
  Problem loan
   expense          102      108     (6)   -5.6%         88     14    15.9%
  Director
   fees             100      101     (1)   -1.0%        101     (1)   -1.0%
  Internet
   costs            114       74     40    54.1%        112      2     1.8%
  ATM debit
   card costs       187      152     35    23.0%        119     68    57.1%
  Business
   development       90      104    (14)  -13.5%         84      6     7.1%
  Amortization      116      240   (124)  -51.7%        151    (35)  -23.2%
  Supplies          117      157    (40)  -25.5%        149    (32)  -21.5%
  Other
   non-interest
   expense        1,006    1,002      4     0.4%        725    281    38.8%
               -------- --------                 ----------
Total
 non-interest
 expense       $ 18,044 $ 16,351 $1,693    10.4%   $ 15,798 $ 2,246   14.2%
               ======== ========                 ==========

For the six
 months ended
Non-interest   June 30, June 30,
 income          2011    2010    Change  % Change
               -------- -------- ------  --------
Service
 charges on
 deposit
 accounts      $  1,876 $  2,095 $ (219)   -10.5%
Other
 commissions
 and fees         1,316    1,440   (124)    -8.6%
Investment
 brokerage and
 annuity fees       926      707    219     31.0%
Mortgage
 banking fees       209      181     28     15.5%
Other
 non-interest
 income:
  Gains on
   sales of
   securities     1,002      330    672    203.6%
  Other income      331       11    320   2909.1%
  Increase in
   value of
   BOLI             257      270    (13)    -4.8%
  Other
   non-interest
   income           107      114     (7)    -6.1%
               -------- --------
Total
 non-interest
 income        $  6,024 $  5,148 $  876     17.0%
               ======== ========

Non-interest
 expense
Salaries and
 employee
 benefits      $ 14,139 $ 13,962 $  177      1.3%
Net cost of
 OREO and
 foreclosed
 assets           6,530    2,965  3,565    120.2%
Net occupancy
 and equipment    3,723    3,925   (202)    -5.1%
FDIC and state
 assessments      1,921    2,364   (443)   -18.7%
Professional
 fees             1,633    1,330    303     22.8%
Communications      955    1,019    (64)    -6.3%
Advertising         452      396     56     14.1%
Other
 non-interest
 expense:
  Bank
   insurance        401      384     17      4.4%
  Third-party
   loan costs       727      684     43      6.3%
  Problem loan
   expense          190      232    (42)   -18.1%
  Director
   fees             201      201      -      0.0%
  Internet
   costs            226      180     46     25.6%
  ATM debit
   card costs       306      282     24      8.5%
  Business
   development      174      204    (30)   -14.7%
  Amortization      267      479   (212)   -44.3%
  Supplies          266      314    (48)   -15.3%
  Other
   non-interest
   expense        1,731    1,565    166     10.6%
               -------- --------
Total
 non-interest
 expense       $ 33,842 $ 30,486 $3,356     11.0%
               ======== ========