Medford-based PremierWest Bank, which has branches in Bend and Redmond, has agreed to merge with AmericanWest Bank of Spokane, Wash., the banks have announced.

Shareholders of PremierWest Bancorp, the parent company, are expected to receive about $16.6 million, in aggregate, after the merger, according to a news release issued jointly by the banks.

The agreement, announced Tuesday, also includes a provision to repay the U.S. Treasury Department $41.4 million in PremierWest’s Troubled Asset Relief Program funds, according to the merger agreement and a document filed with the Securities and Exchange Commission.

The merger still needs approval from banking regulators and shareholders. It is expected to be completed in the first half of next year, according to the news release.

AmericanWest, with total assets of $2.4 billion as of July 2, has 75 branches in Washington, California, Idaho and Utah, according to the news release, so taking over PremierWest will bring it into the Oregon banking market.

PremierWest, which reported total assets of $1.2 billion as of Sept. 30, has 32 locations in Oregon and Northern California.

The economic crisis and resulting real estate crash left PremierWest with bad loans and losses. In 2009, it entered into a consent decree, operating under the supervision of federal and state regulators.

The parent company posted annual losses each year from 2008-11, with last year’s loss totaling $15.5 million, according to its 2011 annual report filed with the SEC.

Earlier this year, PremierWest announced it would cut jobs, leave others unfilled, close nine branches and sell two others.

While cutting costs and improving efficiency helped, company officials realized the bank would need additional capital to continue, Jim Ford, president and CEO of PremierWest Bank, said in the news release.

“After studying many options, we decided to merge with AmericanWest Bank as the best course of action for our employees, shareholders and communities,” he said in the news release.