PremierWest Bancorp's first-quarter earnings rose 2.5 percent to $3.37 million compared to $3.29 million in the corresponding period of 2006, but fell shy of the previous quarter's performance.

The Medford-based parent company of PremierWest Bank said Tuesday that per-share earnings amounted to 19 cents, unchanged from the first quarter in 2006. Net income for the quarter ending March 31, however, declined $492,000, or 3 cents per share, from the fourth quarter of 2006 when PremierWest's profit was $3.86 million.

Tom Anderson, executive vice president and chief financial officer noted the net income decline was the result of a shorter quarter, affecting net interest income, and higher operating costs due to expansion.

PremierWest Bancorp reported net interest income for the quarter totaled $13.3 million, up 2.8 percent to $366,000 and down 3.9 percent from the $537,000 recorded in the final quarter of 2006.

About $300,000 of the decline was attributed to the number of business days in the quarter. The remainder was tied to a relatively flat yield on total earning assets and an increase in the cost of average interest-bearing deposits.

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"At 5.94 percent, our net interest margin continues to be at the high end of our peer group and substantially higher than the industry average," said Anderson, adding the decline was anticipated.

Non-interest income for the quarter rose 6 percent to $2 million, an increase of $113,000 compared to the preceding quarter when non-interest income totaled $1.9 million. Investment brokerage commissions jumped 26.6 percent, service charges on deposit accounts grew 4.1 percent and miscellaneous income rose 8.5 percent. Those increases offset a 19.9 percent drop in real estate brokerage fees.

The company reported total deposits of $883 million on March 31, a 14.3 percent increase from the first quarter of 2006. Gross loans outstanding as of March 31 totaled $927.7 million, a 12 percent increase to $99.3 million. Gross loans grew at an annualized rate of 3.1 percent to $7.1 million.

"It is important to note that while the $7.1 million increase in gross loans this quarter is substantially less than the $32.9 million increase achieved during the fourth quarter of 2006," said Jim Ford, president. "We continue to see strong loan activity in all of our major markets and have a stronger pipeline of new loans than we did at this time last year."

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