Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 3 – STOCK-BASED COMPENSATION

At September 30, 2011, PremierWest Bancorp had one active equity incentive plan – the 2011 Stock Incentive Plan ("2011 Plan"). Upon the recommendation of the Compensation Committee, the Board of Directors adopted the PremierWest Bancorp 2011 Plan effective February 24, 2011, subject to shareholder approval which was approved at the Annual Shareholder Meeting on May 26, 2011. The 2011 Plan authorizes the issuance of up to 500,000 shares of stock, all of which were available for issuance at September 30, 2011. With the adoption of the 2011 Plan, no further grants will be made under the 2002 Plan. At September 30, 2011 there were unexercised grants totaling 76,760 shares, all of which had been made under the 1992 Plan or the 2002 Plan.

The 2011 Plan allows for stock options to be granted at an exercise price of not less than the fair value of PremierWest Bancorp stock on the date of issuance, for a term not to exceed ten years. The Compensation Committee establishes the vesting schedule for each grant; historically the Committee has utilized graded vesting schedules over two, five and seven year periods. Upon exercise of stock options or issuance of restricted stock grants, it is the Company's policy to issue new shares of common stock.

During the nine month period ended September 30, 2011, stock option activity was as follows:

	Number of Shares			Weighted  Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Stock options outstanding, 12/31/2010		85,376		$	91.72
Issued		—			—
Forfeited		(8,616	)		96.57
Stock options outstanding, 9/30/2011		76,760			91.67		4.08	$	—
Stock options exercisable, 9/30/2011		57,529		$	89.94		3.33	$	—

PremierWest Bancorp follows accounting for "Share-Based Payment". This standard requires companies to measure and recognize as compensation expense the grant date fair market value for all share-based awards. That portion of the grant date fair market value that is ultimately expected to vest is recognized as expense over the requisite service period, typically the vesting period, utilizing the straight-line attribution method. This standard requires companies to estimate the fair market value of stock-based payment awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model to value its stock options. The Black-Scholes model requires the use of assumptions regarding the historical volatility of the Company's stock price, its expected dividend yield, the risk-free interest rate and the weighted average expected life of the options.

There were no stock options granted or restricted stock grants during the third quarter of 2011 or 2010.

As of September 30, 2011, there were 1,250 restricted stock grants outstanding, all expected to fully vest between 2016 and 2018.

Accounting for "Share-Based Payment" requires that the cash flows from the tax benefits resulting from tax deductions in excess of the compensation expense recognized for stock options (excess tax benefits) be reported as financing cash flows. There were no excess tax benefits classified as financing cash inflows for the nine months ended September 30, 2011, and September 30, 2010, respectively.

Stock-based compensation expense recognized under the standard was $36,000 with a related tax benefit of $14,400 for the three months ended September 30, 2011, compared to stock-based compensation expense of $96,000, with a related tax benefit of $38,400, for the three months ended September 30, 2010.

Stock-based compensation expense recognized under the standard was $108,000 with a related tax benefit of $43,200 for the nine months ended September 30, 2011, compared to stock-based compensation expense of $296,000, with a related tax benefit of $118,400, for the nine months ended September 30, 2010.

At September 30, 2011, unrecognized stock-based compensation expense totaled $360,000 and will be expensed over a weighted-average period of approximately 2.4 years.