2011 Annual Report - SNL · 3 PremierWest Bancorp | Annual Report 2011 PremierWest Bancorp | Annual Report 2011 4 “ Day in and day out, great customer service ” Sincerely, is

PremierWest Bancorp 2011 Annual Report

1 PremierWest Bancorp | Annual Report 2011 PremierWest Bancorp | Annual Report 2011 2

Our Customers, First & ForemostOne to one.

in Our Communitiesin to help our communities

Our customers, communities, shareholders, andCommitted to Strength & Soundness

The Year in Review 3-4

Premier Territory 5-6

Customer Profiles 7-12

Community Involvement 13-14

Managing Committee 15

Board of Directors 16

Financial Services 17

PremierWest Locations 18

Table of Contents

of loyalty and long-term relationships cannot be overstated.

be prosperous and better places to live and work.

employees count on us, and we deliver on our promises.

People doing business with people is at the heart of our culture...

Face to face.The value

We dig to

We’re Here for

We Believe

We’re


“ ” Day in and day out, great customer service is job one for every PremierWest employee.

~ James M. Ford

2011 2010 2009Total Assets $1,266,047 $1,411,220 $1,536,314 Gross Loans $797,878 $978,546 $1,149,027 Total Cash & Cash Equivalents and Investments $392,264 $358,814 $319,729 Total Deposits $1,127,749 $1,266,249 $1,420,762 Core Deposits $1,085,274 $1,208,778 $1,154,556 Net Income Applicable to Common Shareholders $(17,616) $(7,492) $(148,643)Tier 1 Leverage Capital 8.01% 8.66% 5.38%Fully Diluted EPS $(1.76) $(0.90) $(60.07)Allowance for Loan Losses to Gross Loans 2.84% 3.64% 3.99%Net Loan Charge-Offs to Average Gross Loans 3.06% 1.88% 4.85%

Financial Highlights At or for the Year Ended December 31 (Dollars in thousands, except per share data)

Dear Shareholders:

The Year in Review

On behalf of the Board of Directors and the management team, we want to extend our sincere appreciation for your continued support of PremierWest Bancorp. 2011 marked an extension of the difficulties facing our local communities and our nation. In addition, our industry faced unprecedented new legislation, continued regulatory pressure, and further declines in real estate values.

Our bank has experienced significant challenges in this economy, but 2011 marked a turning point in many of the key indicators of our future performance. We made great strides in improving our risk profile, removing non-performing assets from our balance sheet, and continuing to build on a strong foundation for long-term financial health. There is no question there are still challenges ahead, but we are moving forward and believe our future will be bright.

Management and the Board are encouraged by the 2011 progress made in the following areas:

• Weoriginatedover$76millioninnewloans.

• Wegrewouraveragenon-interestdepositsto22%ofaveragetotaldeposits, up from 19% at the end of 2010.

• Wereducedourcostofdepositsandborrowingto.78%,an18basispoint improvement over 2010.

• WeachievedalltherequirementsunderourConsentOrder,exceptmeeting the 10% Bank Tier 1 Leverage Capital Ratio. At year-end our Bank Leverage Ratio was 8.72%.

• AdverselyClassifiedLoansdecreased$105.9million,or40%,overyear end 2010, due to the diligent efforts of our loan teams.

• Loanstransferringfromperformingtonon-performingin2011were$22.3 million vs. $99.1 million in 2010. Payments made on these non-performing loans increased from $7.8 million in 2010 to $20.9 million in 2011.

• Inthefourthquarterwereachedasettlementwithourlargestnon-performing loan relationship leading to a significant reduction in non-performing loans, which were transferred to OREO in January 2012.

• We announced the consolidation of 11 branches in an effort toreduce overhead expense.

2012 plans include further reductions in problem loans and the high costs associated with those problem assets. While we are cautiously optimistic that we are seeing a slowing in the rate of real estate valuation declines, we will continue to be dependent on those valuations until we have resolved the remaining problem assets on our balance sheet. We are confident that our strategy will prove successful as we move forward. We appreciate your continued support.

In this annual report you will find many examples of our committment to our customers and the communities in which we live. We encourage you to visit our website, www.PremierWestBank.com, where you can review detailed press releases and our required Securities and Exchange Commission filings.

Sincerely,

President & CEOPremierWest Bancorp & PremierWest Bank

Chairman of the BoardPremierWest Bancorp

John A. Duke - Chairman of the BoardPremierWest Bancorp

James M. Ford - President & CEOPremierWest Bancorp & PremierWest Bank


We’re Here for Our Customers, First & Foremost PremierWest is proud

We are obsessed

creativity, and

They thrive in part and friends at

determination have stood the test of time.to serve our remarkable customers, go-getters whose diligence, with customer service.

because they hold fast to a basic principle shared by their bankers PremierWest: great customer service is at the heart of business success.

“ ”~ Tammy Thompson Executive Director

Twin Lakes Food Bank

PREMIERWEST IS ACTIVE IN OUR COMMUNITY BEYOND WHAT I HAVE SEEN ELSEWHERE.


California Future Farmers of America Galt, California

Growing Relationships, One by One ...

Building for the Future ...Kidney & Hypertension CenterRoseburg, Oregon

Dr. Neil Kumar has seen his medical practice grow dramatically over the years, particularly involving complications of diabetes and hypertension. And, he felt his patients would be better served with a world class dialysis center just steps away. It became clear that a new office, with the Davita Dialysis Center in an adjacent space, was needed.

After planning for five years, Dr. Kumar and his wife Sumi searched for a bank to handle the construction financing of their new medical facility. PremierWest rose to the top with concise and accurate documentation and reporting before and after the loan transaction. “PremierWest made the paperwork so easy”, says Dr. Kumar. Making it easy for our customers is what PremierWest is all about.

The mission of the FFA is “to make a positive difference in the lives of students by developing their potential for premier leadership, personal growth, and career success through agricultural education.” The California Association of FFA serves over 70,000 students through their state headquarters in Galt. The curriculum delves into every aspect of agricultural life from animal husbandry to welding, to agriculture, mechanics, and horticulture.

Over the years the FFA’s relationship with PremierWest has been marked by friendship, loyalty and trust. Each staff person in our Galt branch has been with the bank over eight years. They know the FFA team by name and genuinely care about each and every one. “In the past, we’ve worked with different banks, but we know the people at PremierWest,” says Katie Otto, Finance Director of the California Association of FFA. “If I have questions, I know that a real person, one who knows me, will answer the phone.”

The Association funds their scholarship program in part with interest earned on deposits. With deposit rates nationally at historic lows in 2011, the ability to fund scholarships was hampered. “We needed to do something more” Katie said. “PremierWest stepped up and donated to our scholarship fund. With another bank, that wouldn’t have happened. They share our passion.” “ ”~ Dr. Neil Kumar

Kidney & Hypertension Center

PremierWest made the paperwork so easy.


For three generations, the Hays family has been providing the fuel and lubricants that keep Southern Oregon moving. Hays Oil Company has been a customer and partner of PremierWest for more than a decade. Now run by Steven and Michael Hays, Hays Oil appreciates that even during tough times, PremierWest has been there for them.

“Ours is a cyclical business,” says Steven Hays. “PremierWest understands those cycles and has stayed the course with us, helping us to keep going and growing.” Steve and Mike’s dad Bob says “unlike other banks in the early days that wouldn’t give us the time of day to acquire the land we needed, PremierWest’s management said, ‘You bet we can help you.’” That spirit continues today, as Elizabeth Baker of PremierWest takes the time to understand the uniqueness of Hays Oil. That’s loyalty - and it cuts both ways.

Hays Oil CompanyMedford, Oregon

Enduring Loyalty from Day One ...

Twin Lakes Food BankFolsom, California

“Neighbors helping neighbors.” For 25 years, neighbors in the California towns of Folsom, El Dorado Hills, Granite Bay and Orangevale have helped each other through the services of the Twin Lakes Food Bank. With the tough times in recent years, Twin Lakes Food Bank has seen the needs of the community explode. In 2011 they’ve seen the number of people they serve increase by 50%. Despite bursting at the seams, they continue to give people not a hand out but a hand up, treating their neighbors with dignity.

When it comes to neighbors helping neighbors, Twin Lakes Executive Director Tammy Thompson recognizes the community spirit of PremierWest. “PremierWest Bank is active in our community beyond what I’ve seen elsewhere,” says Tammy. “And, their customer service exceeds excellence. Integrity, honesty and friendship define our relationship with PremierWest.”

Relationships Marked By Integrity ...

“ ” Integrity, Honesty, and friendship define our relationship with PremierWest.

~ Tammy Thompson Executive Director - Twin Lakes Food Bank

“ ”~ Steven Hays President- Hays Oil

PremierWest has stood behind us and fought for us when we’ve had rough times.


Mid Valley Providers / Premier Solutions Lake Shasta City, California

Debbie Larmour and Patti Moore are relationship people. They like to know who they work with and it shows in the path they have forged over 20 years in providing services and life skills training for people with disabilities. In 2001, they opened Mid Valley Providers, a residential facility in Redding CA with just four clients. Today, they have over 35 residential clients, five residence homes, and employ over 100 people.

They then started Premier Solutions, a nonprofit organization dedicated to providing work skills to foster their clients’ integration into the community. At their remarkable facility in Lake Shasta City, clients get a chance to choose a career and learn the work and life skills necessary in a hands-on work training environment.

Debbie and Patti have been with PremierWest Bank since its inception. “Everyone at the branch knows our name, and they know our staff too,” says Debbie. “We’re not just a number like we would be at so many other banks.”

People Helping People. That’s Community...

Dutch Bros. Coffee is a story of phenomenal growth the old fashioned way: organically. Founded as a family business in Grants Pass Oregon in 1992, Dutch Bros. now has over 170 locations with franchisees located in seven western states. Their growth has come from within; franchisees need to have worked for the company prior to owning a franchise. “It sets us apart,” says Travis Boersma, Co-Founder of Dutch Bros.

Dutch Bros. employees volunteer a substantial amount of time in their communities, and the company is incredibly generous. One percent of the company’s gross annual revenue, an amount exceeding $1,000,000 per year, is given back. When communities and organizations need a hand, Dutch Bros. is there.

In 2011, Dutch Bros. chose PremierWest as their banking partner after considering proposals from a number of financial institutions. Why PremierWest? Dutch Bros. was impressed with the service, relationships, and the community spirit of PremierWest. Said Travis: “We like doing business face to face. Working with people who value relationships is paramount. From the bank’s management to our day to day contacts, those relationships run deep. That brings tremendous value to us.”

Dutch Bros. CoffeeGrants Pass, Oregon

Personal Service at its Best...


United Way Day of Caring - jackson County, OR Extreme Makeover: Home Edition - Jackson County, OR Think Pink - Redding, CA Relay for Life - Redding, CA

Drive Through Window Wash - Winston, OR

We Believe in Our Communities Our Employees Volunteered Over

13,000 hours in 2011

Community ConnectionsPremierwest Bank has a long history of giving back to our communities. Year after year, regardless of the economic climate, when something needs doing in the community you’ll see PremierWest employees with their sleeves rolled up. Whether the need is in the form of donations, event sponsorships, financial training, volunteer hours, or community development lending, we know what building vital communities is all about.

LendingCommunity Development Loans (CDL) are part of the mission of a community bank, and in 2011 PremierWest did its share to help with loans and lines of credit throughout our territory. CDL’s typically support activities that promote economic development, provide services to low to moderate income individuals, provide affordable housing, or revitalize low to moderate income geographies.

VolunteerismIn 2011, at a time when many businesses cut back on community participation, PremierWest stepped up. Our employees donated over 13,000 hours of service. That’s an average of over 28 hours for each and every PremierWest employee in 2011, a staggering number that serves as a tribute to our staff and a beacon to our neighborhoods.

Donations & SponsorshipsWe provided financial support via donations and sponsorships to over 300 organizations and nonprofit events throughout our territory in 2011. Our philanthropy focused on five broad areas: Health and Human Services, Community Development, Education, Youth Sports, and Arts and Culture.

Corning Volunteer Firefighters - Corning, CA

At a time when other banks have pulled back on their community support, PremierWest has increased ours through volunteerism, lending, sponsorships, and awareness campaigns for our non-profit customers.

Why do we do it? Because we’re neighbors helping neighbors, friends lending a hand. Not only during the work week, but on nights and weekends as well, we’re there. Where we live and how we live matters, and we believe that PremierWest should be at the heart of each community we serve.

We don’t do it for the recognition, although once again in 2011 recognition has come our way. As just one example, in 2011 PremierWest was honored by being only the 7th recipient of the prestigious Lifetime Award from Access – the Community Action Agency of Jackson County Oregon. We accepted the honor with pride, and then rolled up our sleeves yet again.

Donations & Sponsorships

Health/ Human Services 37%

Community Development 29%

Education 22%

Youth Sports 7%

Arts/Culture 5%Big Brothers/Big Sisters - Grass Valley, CA

Lending a Helping Hand


Steve Erb - Executive Vice President, Head of Community Banking Steve Erb serves as Executive Vice President and Head of Community Banking for PremierWest Bank. During his 26 year banking career, Mr. Erb has served in a variety of managerial, operational, line and administrative roles. Mr. Erb holds a Bachelor of Science degree from the University of Oregon in Economics,and is a graduate of the Pacific Coast Banking School at the University of Washington.

Doug Biddle - Executive Vice President, Chief Financial OfficerDuring his 33 year career, Doug Biddle has served in various capacities in the Northern California community banking industry including stints as Chief Financial Officer, Chief Operating Officer, and President & Chief Executive Officer. He has also worked as a National Bank Examiner with the Office of the Comptroller of the Currency. Doug earned a BA in Political Science from University of California - Davis, an MBA from UCLA, and is a Certified Management Accountant.

Jim Ford - President and Chief Executive OfficerJim Ford serves as President and Chief Executive Officer for PremierWest Bancorp and its subsidiary PremierWest Bank. Jim’s career spans over 30 years in the financial services industry including roles as Executive Vice President of Planning and Development and Executive Vice President & Chief Operating Officer. Among other duties, he serves on the Board of Directors of the Oregon Bankers Association. Jim is a graduate of the University of Oregon and of the Pacific Coast Banking School at University of Washington.

Joe Danelson - Executive Vice President, Chief Credit OfficerJoe Danelson’s banking experience extends over 28 years including serving as President of the Oregon Valley Coast Region for a major national bank. Joe has earned degrees from Montana State, Washington State, and the Pacific Coast Banking School at University of Washington. He also earned an MBA from Colorado State University.

Ken Wells - Executive Vice President, Chief Marketing Officer Ken Wells has over 30 years of increasingly senior leadership roles in marketing, brand management, and community relations with major multinational brands. Ken is a graduate of The American University, Washington, D.C., with a BA in Government Administration.

Tom Anderson - Executive Vice President, Chief Administrative OfficerTom Anderson serves as Executive Vice President & Chief Administrative Officer and Corporate Secretary for PremierWest Bancorp and its subsidiary PremierWest Bank. Tom’s career spans 39 years in the banking industry. During the last 35 years he has held various senior executive positions, including Chief Operating Officer and Chief Financial Officer with two Southern Oregon headquartered community banks.

Managing Committee (pictured above from left to right)

Board of DirectorsWe’re Committed to Strength & Soundness

Patrick G. HuyckeVice Chairman of the BoardPremierWest Bancorp & PremierWest Bank

Richard R.Hieb

John B. Dickerson

DennisHoffbuhr

ThomasBecker

James M.FordPresident & Chief Executive Officer

John A. DukeChairman of the BoardPremierWest Bancorp

Georges C. St. Laurent Jr.

Rickar D. Watkins

John L. AnhornChairman of the BoardPremierWest Bank

BrianPargeter

James L. Patterson

MaryCarryer “ ”

The deep experience and dedication of our management team leads the way for a culture of excellence.

~ John A. Duke Chairman of the Board PremierWest Bancorp


PremierWest LocationsPremierWest Financial Services

In many of our communities, the local PremierWest Bank branch is the only place that customers need to visit, not only for customary banking services, but for investment and mortgage products.

Many of our offices also include PremierWest Investment Services, PremierWest Mortgage Division and Premier Finance Company offices. Our Premier Finance Company also operates out of independent

offices in some communities. These well-established subsidiaries round out our product and service offerings.

Premier Finance Company has been providing customers in Oregon and Northern California with superior service. Premier Finance provides loans, retail financing, and other credit-related products, including dealer financing.

We are a full service lender with loans structured to accommodate a broad spectrum of the consumer credit market. Our financial associates provide the flexibility and customer service needed to assist our customers one by one.

We make the process of buying a home simple and convenient whether you’re a first time buyer or an old hand at purchasing real estate. At PremierWest, your home loan decision is just minutes away.

We offer one of the easiest, fastest processes anywhere. Our online system can process your information in six simple steps that only take a few minutes. Call any time, or chat with a mortgage specialist online.

Since 2001, PremierWest Investment Services has offered professional investment advice and wealth management to customers of the bank throughout the entire branch network.

We offer a wide array of products including mutual funds, stocks, bonds, annuities and insurance products for individuals and the business owners as well as services such as wealth management and trust, advisory services, financial planning, and retirement planning.

Corporate Administration503 Airport Rd.Medford, OR 97504541-618-5973

Oregon RegionOR Region Administration1459 E. McAndrews Rd., Bldg. BMedford, OR 97504541-282-5249

McAndrews BusinessBanking Center1455 E. McAndrews Rd.Medford, OR 97504541-776-7480

Mid-Oregon Business Banking Center555 S.E. Kane St.Roseburg, OR 97470 541-440-2601

Airport Road Business Banking Center503 Airport Rd.Medford, OR 97504541-282-5200

Ashland Branch2235 Highway 66Ashland, OR 97520541-482-1822

Bend-Tuscan Square Branch2155 N.E. Highway 20Bend, OR 97701541-330-8806

Black Oak Branch2600 E. Barnett Rd.Medford, OR 97504541-857-2676 * Mortgage Division

Central Point Branch300 E. Pine St.Central Point, OR 97502 541-665-8004

Crater Lake Plaza Branch3369 Crater Lake Hwy.Medford, OR 97504 541-618-8258

Downtown Medford Branch300 E. Main St.Medford, OR 97501 541-245-4650

Eagle Point Branch44 W. Linn Rd.Eagle Point, OR 97524541-826-0580

Garden Valley Branch350 N.E. Garden Valley Blvd.Roseburg, OR 97470 541-440-2651

Kane Street Branch555 S.E. Kane St.Roseburg, OR 97470 541-440-2600 * Mortgage Division

Klamath Falls Branch 421 S. 7th St.Klamath Falls, OR 97601 541-883-4980

Linus Oakes Branch2665 N.W. Van Pelt Blvd.Roseburg, OR 97470 541-440-2634

McAndrews Branch1455 E. McAndrews Rd.Medford, OR 97504 541-776-7480

North Grants Pass Branch 1409 N.E. 7th St.Grants Pass, OR 97526 541-956-6450

Redmond-Nolan Town Center Branch875 S.W. Rimrock Way, Ste. 100Redmond, OR 97756541-923-3483

Rogue Valley Manor Branch1200 Mira Mar Ave.Medford, OR 97504 541-857-7040

South Grants Pass Branch 1689 Williams Hwy.Grants Pass, OR 97527 541-955-4589

Sutherlin Branch731 W. Central Ave.Sutherlin, OR 97479 541-459-2246

Winston Branch40 N.W. Glenhart Ave.Winston, OR 97496 541-440-2655

California RegionCA Region Administration890 Cypress Ave.Redding, CA 96001530-242-9174

Northern California BusinessBanking Center890 Cypress Ave.Redding, CA 96001530-242-9174

Sacramento Business Banking Center9340 E. Stockton Blvd.Elk Grove, CA 95624916-714-2227

Government Guaranteed Lending Center701 E. Bidwell St.Folsom, CA 95630916-714-2234

Anderson Branch2590 North St.Anderson, CA 96007530-365-6821

Corning Branch1201 Solano St.Corning, CA 96021530-824-4605

Cypress Branch880 Cypress Ave.Redding, CA 96001530-245-1004

Davis Branch333 A-F St.Davis, CA 95616530-758-6250

Elk Grove Branch9340 E. Stockton Blvd.Elk Grove, CA 95624916-685-6546

Folsom Branch701 E. Bidwell St.Folsom, CA 95630916-984-8880

Galt Branch701 C St.Galt, CA 95632209-745-7000

Grass Valley Branch115 West McKnight WayGrass Valley, CA 95949530-272-4286

Greenview Branch6701 N. Highway 3Greenview, CA 96037 530-468-5363

Mangrove Branch1834 Mangrove Ave., Ste. 1Chico, CA 95926530-895-5200

Mt. Shasta Branch312 Maple St.Mt. Shasta, CA 96067 530-926-1680

Red Bluff Branch950 Main St.Red Bluff, CA 96080530-527-7610

Rocklin Branch4875 Granite Dr.Rocklin, CA 95677916-632-7900

Woodland Branch1100 Main St., Ste. 170Woodland, CA 95695 530-406-2060

Yreka Branch123 N. Main St.Yreka, CA 96097 530-842-6191

Premier Finance Co. Cypress Office890 Cypress Ave.Redding, CA 96001530-339-4122

Eugene Office1020 Green Acres Rd., Ste. 1AEugene, OR 97408541-284-5009

Garden Valley Office350 N.E. Garden Valley Blvd.Roseburg, OR 97470 541-440-2602

Klamath Falls Office 701 Plum Ave. Klamath Falls, OR 97601541-884-7783

Medford Office1463 E. McAndrews, Bldg. AMedford, OR 97504541-842-2485

North Grants Pass Office1409 N.E. 7th St., Ste. AGrants Pass, OR 97526541-472-3200

Portland Office10415 S.E. Stark St., Ste. FPortland, OR 97216503-262-9880

Redmond Office875 S.W. Rimrock Way, Ste. 101Redmond, OR 97756541-633-2785

PremierWest Investment Services, Inc. Black Oak Office2600 E. Barnett Rd.Medford, OR 97504541-618-5923

Corning Office 1201 Solano St.Corning, CA 96021530-824-7814

Crater Lake Plaza Office3369 Crater Lake Hwy.Medford, OR 97504541-618-8262

Davis Office333 A-F St.Davis, CA 95616530-758-6250

Elk Grove Office9340 E. Stockton Blvd.Elk Grove, CA 95624916-714-2216

Grass Valley Branch115 West McKnight WayGrass Valley, CA 95949530-271-1581

Kane Street Office555 S.E. Kane St.Roseburg, OR 97470541-440-2627

McAndrews Office1463 E. McAndrews Rd., Bldg. AMedford, OR 97504 541-618-8245

Red Bluff Office950 Main St. Red Bluff, CA 96080530-527-8585

503 Airport Road • Medford, OR www.PremierWestBank.com • 1-800-708-4378

People Doing Business with People

Documents

2011 Annual Report - SNL · 3 PremierWest Bancorp | Annual Report 2011 PremierWest Bancorp | Annual Report 2011 4 “ Day in and day out, great customer service ” Sincerely, is