While bad loans are slowly disappearing from PremierWest's books, problem loans continue to thwart profitability.

While bad loans are slowly disappearing from PremierWest's books, problem loans continue to thwart profitability.

The bank's parent company, Medford-based PremierWest Bancorp, Tuesday reported a $4.1 million loss for the fourth quarter of 2011. The company lost $706,000 in the fourth quarter of 2010.

For all of 2011, PremierWest lost $17.4 million compared with a loss of $7.2 million in 2010.

PremierWest's President and Chief Executive Officer Jim Ford said the bank has reduced its nonperforming and adversely classified loans. In some cases, he said, loans have been repaid, and some problem loans have returned to "performing status."

During 2011, the bank's total nonperforming loans dropped to $76.2 million from $129.6 million in 2010. However, loan-loss provisions of $3 million and foreclosure-related expenses contributed $1.4 million against PremierWest Bank's bottom line in 2011.

"We've made steady improvements for the last five quarters," Ford said. "We continue to be working through the problem loans. When the expenses related to problem loans are gone we can become fundamentally profitable."

PremierWest disclosed a Jan. 3 settlement concerning its largest nonperforming loan, which totaled $28.7 million. The settlement resulted in a charge-off of $6.2 million, including a partial write-down of a remaining nonperforming loan and a cash settlement in exchange for deeds in lieu of a foreclosure and a dismissal of lawsuits. The impact on operations was reflected in fourth-quarter results, while PremierWest obtained possession of real property and other collateral on Jan. 11.

"We took all the writedowns and expenses in the fourth quarter and moved the property (the bank's real-estate portfolio)," Ford said. "We sell all the real estate as soon as we can. You can't take losses twice, so once they are behind you, they are behind you."

While the banks' assets fell to $1.27 billion from $1.4 billion during the year, Ford said, that is not a big concern.

"Just getting bigger is not necessarily the best thing," Ford said. "What is most important is how much money we make relative to our assets. We're ... reducing the size of our balance sheets and trying to generate more profit for every dollar of assets."

Earlier this month, PremierWest said it was closing five Oregon and six California branches, leaving it with 33 offices. The Shady Cove location and a branch near the Medford airport were among those slated to close in April.

"Running those branches at a loss was not something we could continue to do," Ford said.

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