AGREEMENT AND PLAN OF REORGANIZATION

EXHIBIT 2.1

AGREEMENT AND PLAN OF REORGANIZATION

 by and among

PremierWest Bancorp,

PremierWest Bank,

Stockmans Financial Group

and

Stockmans Bank

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Exhibit C – Form of Director Voting, Non-Competition and Non-Solicitation Agreements

Exhibit E – Example of Calculation of Company Measuring Price

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AGREEMENT AND PLAN OF REORGANIZATION

This Agreement and Plan of Reorganization is entered into effective this 19 ^th day of October, 2007 (this “Agreement”), by and among PremierWest Bancorp (“Company”), PremierWest Bank (“Bank”), Stockmans Financial Group (“Stockmans”) and Stockmans Bank (“Stockmans Bank”).

      A. Company is an Oregon corporation, and registered bank holding company, with its executive offices at 503 Airport Road, Medford, Oregon.

      B. Bank is an Oregon state-chartered bank, and a wholly owned subsidiary of Company, with its principal office at 503 Airport Road, Medford, Oregon.

      C. Stockmans is a California corporation, and registered bank holding company, with its executive offices at 9340 East Stockton Blvd., Elk Grove, California.

      D. Stockmans Bank is a California state-chartered bank, and a wholly owned subsidiary of Stockmans, with its principal office at 9340 East Stockton Blvd., Elk Grove, California.

      E. The parties desire to enter into a strategic business combination pursuant to the terms of this Agreement.

      F. The respective boards of directors of each of Company, Bank, Stockmans and Stockmans Bank have determined that it is in the best interests of their respective corporations and shareholders to consummate the applicable Mergers and the other transactions contemplated by this Agreement.

     G. Section 8.13(a) of the Stockmans Disclosure Schedule lists those individuals who have entered into amended and restated employment, consulting or other agreements in connection with the transactions contemplated hereby.

      H. Each director of Stockmans and Stockmans Bank has, simultaneously with the execution and delivery hereof, executed and delivered to Company a Voting, Non-Competition and Non-Solicitation Agreement substantially in the appropriate form of such agreement attached hereto as Exhibit C and each director and executive officer of Stockmans has, simultaneously with the execution and delivery hereof, executed and delivered a Rule 145 Affiliate Letter substantially in the form of Exhibit D attached hereto.

      In consideration of the mutual premises, and of the representations and warranties, covenants and agreements herein contained, the parties hereby enter into this Agreement and agree as follows:

1.    Definitions.   For purposes of this Agreement, the following terms shall have the definitions given:

          (a)            “ADA” has the meaning set forth in Section 4.18.

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          (b)            “Aggregate Consideration” has the meaning set forth in Section 2.1.5.

          (c)          “Agreement” has the meaning set forth in the Preamble.

          (d)          “Alternative Acquisition Transaction” means any event or series of events pursuant to which a party or its board of directors enters into an agreement or recommends to its shareholders any agreement (other than this Agreement) pursuant to which any Person would (i) merge or consolidate with such party, with the result that the shareholders of such party hold less than 50% of the stock or voting power of the surviving entity, (ii) acquire 50% or more of the assets or liabilities of such party or any of its subsidiaries, or (iii) purchase or otherwise acquire (including by merger, consolidation, share exchange or any similar transaction) stock or other securities representing or convertible into 50% or more of the stock or voting power of such party or any one or more of its subsidiaries.

          (e)          “Bank” has the meaning set forth in the Preamble.

          (f)            “Bank Merger” means the merger of Stockmans Bank with and into Bank in accordance with the Bank Plan of Merger .

          (g)            “Bank Plan of Merger” means the Plan of Merger to be executed by Bank and Stockmans Bank and delivered to the Oregon Director and California Secretary of State for filing substantially in the form attached hereto as Exhibit B .

          (h)            “Benefits Integration” has the meaning set forth in Section 7.9.

          (i)             “California DFI” means the California Department of Financial Institutions .

          (j)             “Call Reports” means the final quarterly reports of condition and income filed by such bank with the FFIEC pursuant to the Federal Deposit Insurance Act.

          (k)            “Cash Election Shares” has the meaning set forth in Section 2.2.2.

          (l)             “CGCL” means the California General Corporation Law.

          (m)            “COBRA” has the meaning set forth in Section 4.22(f) .

          (n)            “Code” means the Internal Revenue Code of 1986, as amended.

          (o)            “Company” has the meaning set forth in the Preamble.

          (p)            “Company Common Stock” means shares of common stock, no par value, of Company.

          (q)            “Company Disclosure Schedule” has the meaning set forth in Section 5.

          (r)            “Company Measuring Period” has the meaning set forth in Section 11.1(e).

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          (s)            “Company Measuring Price” has the meaning set forth in Section 11.1(e) .

          (t)            “Company Property” has the meaning set forth in Section 5.9.

          (u)            “Company Public Reports” means the reports and other information required to be filed by Company with the SEC pursuant to the Exchange Act, together with the reports to shareholders required to be delivered by Company to its shareholders pursuant to Exchange Act Rule 14a-3, in each case from and after January 1, 2004.

          (v)           “Company Subsidiary” means, with respect to Company and Bank, any entity in which Company or Bank owns, directly or indirectly, more than 50% of the voting securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions, other than in such party’s capacity as a fiduciary or a secured party.

          (w)           “Confidentiality Agreement” means the letter agreement, dated as of August 28, 2007, by and between Company and Stockmans.

           (x)            “Contract” means any agreement, contract, undertaking, obligation, instrument, note, power of attorney, evidence of indebtedness, purchase order, quotation, license or other commitment to which any Party or to which any of the assets of such Party is subject, whether oral or written, express or implied, except that the term “Contracts” shall not include Loans made in the ordinary course of business consistent with past practices and the notes or other instruments or agreements that evidence such loans or provide security therefore.

           (y)            “Core Deposits” means all deposits other than (i) brokered deposits, (ii) time deposits greater than $100,000, (iii) public deposits, and (iv) deposits subject to off balance sheet deposit sweep programs.

          (z)            “Costs” has the meaning set forth in Section 7.10(a) .

        (aa)            “Decline Adjustment” has the meaning set forth in Section 11.1(e) .

        (bb)            “Dissenters’ Shares” has the meaning set forth in Section 2.1.6.

        (cc)            “Dissenting Shareholder” means any holder of Dissenters’ Shares.

        (dd)            “Effective Date” is the date on which the Articles of Merger for the Holding Company Merger are filed with the Oregon Secretary of State.

        (ee)            “Effective Time” is the time set forth in the Holding Company Plan of Merger at which the Holding Company Merger is effective.

        (ff)             “Election Deadline” has the meaning as set forth in Section 2.2.2.

        (gg)            “Election Statement” has the meaning as set forth in Section 2.2.1.  

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      (hh) “Employee Benefit Plans” means all benefit and compensation plans, Contracts, policies or arrangements covering current or former employees of Stockmans or Stockmans Bank and current or former directors of Stockmans or Stockmans Bank including, but not limited to, “employee benefit plans” as defined by Section 3(3) of ERISA, the Stockmans Employee Phantom Share Plan (“ STEPS ”), and all deferred compensation, severance, stock option, stock purchase, stock appreciation rights, stock based, restricted stock, incentive, salary continuation, supplemental executive retirement and bonus plans.

      (ii) “Environmental Law” has the meaning set forth in Section 4.11.

      (jj) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.   

     (kk) “ERISA Affiliate” has the meaning set forth in Section 4.22.

     (ll) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and, to the extent the context requires, the rules promulgated thereunder.

     (mm) “Exchange Agent” has the meaning set forth in Section 2.3.1.

     (nn) “Exchangeable Shares” has the meaning set forth in Section 2.1.5.

     (oo) “FDIC” means the Federal Deposit Insurance Corporation.

     (pp) “FDICIA” means the Federal Deposit Insurance Corporation Improvement Act of 1991.

     (qq) “FFIEC” means the Federal Financial Institutions Examination Council.

     (rr) “FHA” means the Federal Housing Administration.

     (ss) “FHLMC” means the Federal Home Loan Mortgage Corporation.

     (tt) “FNMA” means the Federal National Mortgage Association.

     (uu) “FRB” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of San Francisco, as the context requires.

     (vv) “GAAP” has the meaning set forth in Section 4.3.

     (ww) “GNMA” means the Government National Mortgage Association.

     (xx) “Hazardous Material” has the meaning set forth in Section 4.11.

     (yy) “Holding Company Merger” means the merger of Stockmans with and into Company at the Effective Time in accordance with the Holding Company Plan of Merger.

      (zz) “Holding Company Plan of Merger” means the Plan of Merger to be executed by Company and Stockmans and delivered together with Articles of Merger to the

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Oregon Secretary of State and California Secretary of State for filing on the Effective Date substantially in the form attached hereto as Exhibit A .

      (aaa)            “Indemnified Parties” has the meaning set forth in Section 7.10(a) .

      (bbb)           “Intellectual Property” means trademarks, service marks, brand names, certification marks, trade dress and other indications of origin, the goodwill associated with the foregoing and registrations and applications to register the foregoing; inventions, discoveries and ideas; patents and applications for patents; nonpublic information, trade secrets and confidential information and rights to limit the use or disclosure thereof by any person; writings and other works, whether copyrightable or not; and registrations or applications for registration of copyrights; and any similar intellectual property or proprietary rights.

      (ccc)           “Insurance Cap” has the meaning set forth in Section 7.10(d) .

      (ddd)         “Knowledge” means, as to a party, the knowledge of an Officer of such party and Officers of such party’s subsidiaries, and includes a fact or other matter of which an individual is actually aware of or a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or matter.

       (eee)           “Lien” means liens, pledges, charges and security interests and similar encumbrances.

       (fff)             “Loan” means a written or oral agreement, note or borrowing arrangement (including leases, credit enhancements, commitments, guarantees and interest-bearing assets) payable to Stockmans or Stockmans Bank or to Company or Bank, as the case may be.

      (ggg)           “Loan Loss Requirement” means $2,500,000.

      (hhh)           “Local Barriers Acts” has the meaning set forth in Section 4.18.

      (iii)              “Material Adverse Effect” has the meaning set forth in Section 12.17.

      (jjj)             “Material Contracts” has the meaning set forth in Section 4.21.

      (kkk)          “Mergers” means the Holding Company Merger and the Bank Merger.

      (lll)              “Mixed Cash Shares” has the meaning set forth in Section 2.2.2.

      (mmm)         “Mixed Election Shares” has the meaning set forth in Section 2.2.2.

      (nnn)           “Mixed Stock Shares” has the meaning set forth in Section 2.2.2.

      (ooo)           “New Certificate” has the meaning set forth in Section 2.3.2.

      (ppp)            “No Election Shares” has the meaning set forth in Section 2.2.2 .

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      (qqq)          “Officer” means the individuals listed on Section 8.13(b) of the Stockmans Disclosure Schedule with respect to Stockmans and the individuals listed on Section 8.13(b) of the Company Disclosure Schedule who are officers of such Party.

      (rrr)            “Old Certificate” has the meaning set forth in Section 2.3.2.

      (sss)           “Order” has the meaning set forth in Section 8.2.

      (ttt)            “Oregon Bank Act” means Chapters 706 through 716 of the Oregon Revised Statutes.

       (uuu)          “Oregon Director” means the Director of the Oregon Department of Consumer and Business Services acting by and through the Administration of the Division of Finance and Corporate Securities.

      (vvv)          “OSHA” has the meaning set forth in Section 4.18.

      (www)       “PBGC” means the Pension Benefit Guaranty Corporation.

      (xxx)          “Pension Benefit Plan” has the meaning set forth in Section 4.22(d) .

      (yyy)          “Per Share Cash Consideration” has the meaning set forth in Section 2.1.4.

      (zzz)           “Per Share Consideration” has the meaning set forth in Section 2.1.5.

     (aaaa)         “Per Share Stock Consideration” has the meaning set forth in Section 2.1.5.

     (bbbb)         “Permitted Liens” has the meaning set forth in Section 4.18.

     (cccc)         “Person” means any natural person or any other entity, person, or group . For purposes of this definition, the meaning of the term “group” shall be determined in accordance with Section 13(d)(3) of the Exchange Act.

      (dddd)        “Plans of Merger” means the Bank Plan of Merger and the Holding Company Plan of Merger.

     (eeee)         “Price Adjustment” has the meaning set forth in Section 11.

     (ffff)           “Proxy Statement” has the meaning set forth in Section 6.8.

     (gggg)       “Record Date” has the meaning set forth in Section 2.2.1.

     (hhhh)        “Rule 145 Affiliate Letter” means the letter agreement to be executed by   each “affiliate” (as defined in Rule 144 promulgated by the SEC pursuant to the Securities Act) of Stockmans substantially in the form attached hereto as Exhibit D.

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      (iiii)          “SBA” means the Small Business Administration of the Department of Commerce.

     (jjjj)         “SEC” means the Securities and Exchange Commission.

     (kkkk)     “Securities Act” means the Securities Act of 1933, as amended, and to the extent the context requires, the rules promulgated thereunder.

     (llll)           “S-4 Registration Statement” has the meaning set forth in Section 6.8.

     (mmmm)   “Stock Election Shares” has the meaning set forth in Section 2.2.2.

     (nnnn)       “Stock Percentage” has the meaning set forth in Section 2.2.2.

     (oooo)       “Stockmans” has the meaning set forth in the Preamble.

     (pppp)       “Stockmans Bank” has the meaning set forth in the Preamble.

     (qqqq)       “Stockmans Common Stock” means the shares of common stock, without par value, of Stockmans .

     (rrrr)          “Stockmans Disclosure Schedule” has the meaning set forth in Section 4.

     (ssss)         “Stockmans Leased Properties” has the meaning set forth in Section 4.18.

     (tttt)           “Stockmans Property” has the meaning set forth in Section 4.18.

     (uuuu)        “Stockmans Real Property” has the meaning set forth in Section 4.18.

     (vvvv)        “Stockmans Subsidiary” means, with respect to Stockmans and Stockmans Bank, any entity in which Stockmans or Stockmans Bank owns, directly or indirectly, more than 50% of the voting securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions, other than in such party’s capacity as a fiduciary or a secured party.

      (wwww)    “Tangible Equity Capital” means common stock, paid-in capital and retained earnings, minus the amount necessary to increase Stockmans consolidated loan loss reserve to the Loan Loss Requirement immediately prior to the Effective Time, minus goodwill and any other intangible assets.

     (xxxx)         “Tangible Equity Capital Target” has the meaning set forth in Section 8.15.2.

     (yyyy)        “Tax” or “Taxes” means (i) any and all federal, state, local, and foreign income, excise, gross receipts, gross income, ad valorem, profits, gains, property, capital, sales, transfer, use, payroll, employment, severance, withholding, duties, intangibles, franchise, backup withholding, and other taxes, charges, levies or like assessments together with all penalties and additions to tax and interest thereon and (ii) any liability for any items described in clause (i), as successor or transferee, by contract or otherwise.

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     (zzzz)         “Transaction Expenses” has the meaning set forth in Section 8.15.3.

     (aaaaa)       “Total Cash Amount” has the meaning set forth in Section 2.1.5.

     (bbbbb)      “Total Stock Amount” has the meaning set forth in Section 2.1.5.

     (ccccc)      “Total Stock Consideration” has the meaning set forth in Section 2.1.5.

     (ddddd)      “VA” means the Veterans Administration.

     (eeeee)       “Welfare Benefit Plan” has the meaning set forth in Section 4.22(b).

2. Mergers.

     2.1 Transactions Pursuant to the Holding Company Plan of Merger. Subject to the terms and conditions set forth in this Agreement, on the Effective Date:

          2.1.1 Stockmans shall be merged with and into Company under Oregon law on the terms and conditions set forth in the Holding Company Plan of Merger. The Holding Company Plan of Merger and the Holding Company Articles of Merger shall be filed with the Secretary of State of the State of Oregon to effect the Holding Company Merger and the Secretary of State of the State of California as required under California law.

          2.1.2 Company shall be the surviving corporation in the Holding Company Merger. Company’s Articles of Incorporation and Bylaws shall be the articles of incorporation and bylaws of the surviving corporation.

           2.1.3 As of the Effective Time, each share of Company capital stock outstanding immediately prior to the Holding Company Merger shall remain outstanding and shall be deemed to be one share of the capital stock of the surviving corporation.

           2.1.4 As of the Effective Time, each outstanding share of Stockmans Common Stock shall, by virtue of the Holding Company Merger, automatically and without any action on the part of the holder of such share, be converted into the right to receive, at the election of the holder thereof as provided in and subject to the provisions of Section 2.2, either: (i) a number of shares of Company Common Stock equal to the Per Share Stock Consideration, or (ii) cash in an amount equal to the Per Share Consideration (the “ Per Share Cash Consideration ”). Notwithstanding any other provision of this Agreement, no fractional shares of Company Common Stock will be issued and any holder of shares of Stockmans Common Stock entitled to receive a fractional share of Company Common Stock shall be entitled to receive a cash payment in lieu thereof, which payment shall be calculated by the Exchange Agent and shall represent such holder’s proportionate interest in a share of Company Common Stock based on the Company Measuring Price.

          2.1.5 For purposes of this Agreement :

          “ Aggregate Consideration ” shall mean the sum of (x) the Total Stock Consideration and (y) the Total Cash Amount.

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           “ Exchangeable Shares ” means the aggregate number of shares of Stockmans Common Stock issued and outstanding immediately prior to the Effective Time, which shall equal 903,534.09 shares.

          “ Per Share Consideration ” shall mean the quotient, rounded to the nearest ten-thousandth, obtained by dividing the Aggregate Consideration by the Exchangeable Shares.

           “ Per Share Stock Consideration ” shall mean the quotient, rounded to the nearest ten-thousandth, obtained by dividing the Per Share Consideration by the Company Measuring Price.

           “ Total Cash Amount ” shall mean $22,769,059.07.

          “ Total Stock Amount ” shall mean 5,357,426 shares of Company Common Stock.

          “ Total Stock Consideration ” shall mean the product obtained by multiplying (x) the Total Stock Amount and (y) the Company Measuring Price.

           2.1.6 All shares of Stockmans Common Stock that are “dissenting shares” within the meaning of CGCL § 1300 and have perfected dissenter appraisal rights under California law (“ Dissenters’ Shares ”) shall not be converted into or represent a right to receive Company Common Stock or cash unless and until such shares have lost their status as dissenting shares under CGCL § 1300, at which time such shares shall be converted into Company Common Stock or cash pursuant to Section 2.1.4.

     2.2 Election and Proration Procedures .

          2.2.1 An election statement permitting each holder of Stockmans Common Stock the ability to elect consideration pursuant to Section 2.2.2 and subject to 2.2.5 (the “ Election Statement ”) shall be mailed within five days following the later of the end of the Company Measuring Period or the Stockmans Meeting.

          2.2.2 Each Election Statement shall permit the holder to (a) elect to receive (i) the Per Share Stock Consideration in respect of all of such holder’s Stockmans Common Stock (“ Stock Election Shares ”); (ii) the Per Share Cash Consideration in respect of all of such holder’s Stockmans Common Stock (“ Cash Election Shares ”); or (iii) a combination of the Per Share Stock Consideration in respect of that portion of such holder’s shares of Stockmans Common Stock equal to the Stock Percentage, rounded to the nearest whole share (the “ Mixed Stock Shares ”), and the Per Share Cash Consideration in respect of that portion of such holder’s shares of Stockmans Common Stock equal to the Cash Percentage, rounded to the nearest whole share (the “ Mixed Cash Shares ,” and together with the Mixed Stock Shares, the “ Mixed Election Shares ”); or (b) to make no election with respect to such holder’s Stockmans Common Stock (“ No Election Shares ”). Any Stockmans Common Stock with respect to which the Exchange Agent has not received an effective, properly completed Election Statement on or before 5:00 p.m., Pacific Time, on the thirtieth day following the Effective Date or such other time and date as Company and Stockmans may mutually agree (the “ Election Deadline ”) shall also be deemed to be “ No Election Shares .” “ Cash Percentage ” shall mean the quotient, rounded to the nearest thousandth, obtained by dividing (x) the quotient obtained by dividing the Total Cash Amount by the Per Share Consideration, by (y) the total number of shares of Stockmans Common Stock outstanding as of the close of business on the Effective Date.

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      “ Stock Percentage ” shall mean the amount equal to one (1) minus the Cash Percentage.

     2.2.3 Company shall make available one or more Election Statements as may reasonably be requested from time to time by all persons who become holders (or beneficial owners) of Stockmans Common Stock between the record date for the Stockmans Meeting (the “ Record Date ”) and the close of business on the business day prior to the Election Deadline, and Stockmans shall provide to the Exchange Agent all information reasonably necessary for it to perform its functions as specified herein.

     2.2.4 Any such election shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Statement by the Election Deadline. Any Election Statement may be revoked or changed by the person submitting such Election Statement at or prior to the Election Deadline. Subject to the terms of this Agreement and of the Election Statement, the Exchange Agent shall have reasonable discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial defects in the Election Statements, and any good faith decisions of Company regarding such matters shall be binding and conclusive. Neither Company nor the Exchange Agent shall be under any obligation to notify any person of any defect in an Election Statement. To the extent the holder of Dissenters’ Shares submits an Election Statement, such holder’s election shall have no effect if the holder of such shares has made (and not withdrawn) demand pursuant to CGCL § 1301, the Exchange Agent will disregard such Election Statement, and the Dissenters’ Shares shall be converted in accordance with Section 2.5.

     2.2.5 Within ten business days after the Election Deadline, unless the Effective Date has not yet occurred, in which case as soon thereafter as practicable, Company shall cause the Exchange Agent to effect the allocation among the holders of Stockmans Common Stock of rights to receive Company Common Stock or cash in the Holding Company Merger in accordance with the Election Statements as follows:

          (1) Cash Election Shares, Dissenters’ Shares and Mixed Cash Shares More Than Total Cash Amount. If the aggregate cash amount that would be paid upon the conversion in the Holding Company Merger of the Cash Election Shares, Dissenters’ Shares and the Mixed Cash Shares is greater than the Total Cash Amount, then:

               (i) all Mixed Stock Shares, Stock Election Shares and No Election Shares shall be converted into the right to receive the Per Share Stock Consideration;

               (ii) all Dissenters’ Shares shall be deemed, for the purposes of Section 2.2.5(1) only, to be converted into the right to receive the Per Share Cash Consideration;

               (iii) the Exchange Agent shall then select from among the Mixed Cash Shares and the Cash Election Shares, by a pro rata selection process, a sufficient number of shares (“ Cash Designated Shares ”) such that the aggregate cash amount that will be paid in the Holding Company Merger equals as closely as practicable the Total Cash Amount, and all Cash Designated Shares shall be converted into the right to receive the Per Share Cash Consideration; and

               (iv) the Mixed Cash Shares and the Cash Election Shares that are not Cash Designated Shares will be converted into the right to receive the Per Share Stock Consideration.

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           (2) Cash Election Shares, Dissenters’ Shares and Mixed Cash Shares Less Than Total Cash Amount. If the aggregate cash amount that would be paid upon conversion in the Merger of the Cash Election Shares, Dissenters’ Shares and the Mixed Cash Shares is less than the Total Cash Amount, then:

                (i) all Cash Election Shares and Mixed Cash Shares shall be converted into the right to receive the Per Share Cash Consideration;

               (ii) all Dissenters’ Shares shall be deemed, for the purposes of Section 2.2.5(2) only, to be converted into the right to receive the Per Share Cash Consideration;

                (iii) the Exchange Agent shall then select first from among the No Election Shares and then (if necessary) from among the Stock Election Shares, by a pro rata selection process, a sufficient number of shares (“ Designated Shares ”) to be converted into the right to receive the Per Share Cash Consideration such that the aggregate cash amount that will be paid in the Holding Company Merger equals as closely as practicable the Total Cash Amount; and

               (iv) the Stock Election Shares and the No Election Shares that are not Designated Shares and all Mixed Stock Shares shall be converted into the right to receive the Per Share Stock Consideration.

          (3) Cash Election Shares, Dissenters’ Shares and Mixed Cash Shares Equal to Total Cash Amount. If the aggregate cash amount that would be paid upon conversion in the Holding Company Merger of the Cash Election Shares, proposed Dissenters’ Shares and the Mixed Cash Shares is equal or nearly equal (as determined by the Exchange Agent) to the Total Cash Amount, then subparagraphs (1) and (2) above shall not apply, and all Cash Election Shares and Mixed Cash Shares shall be converted into the right to receive the Per Share Cash Consideration, and all Stock Election Shares, Mixed Stock Shares, and No Election Shares shall be converted into the right to receive the Per Share Stock Consideration and all Dissenters’ Shares shall be converted in accordance with Section 2.5.

     2.2.6 The pro rata selection process to be used by the Exchange Agent shall consist of such equitable pro ration processes as shall be determined by Company and reasonably satisfactory to Stockmans.

   2.3 Exchange Procedures.

     2.3.1 Prior to the Effective Date, Company shall appoint an exchange agent approved by Stockmans, which approval shall not be unreasonably withheld or delayed, for the purpose of exchanging certificates representing shares of Stockmans Common Stock (other than Dissenters’ Shares) for Company Common Stock and/or cash as required by Section 2.1 (the “ Exchange Agent ”). On or before the Effective Date, Company will issue and deliver to the Exchange Agent certificates representing a sufficient number of shares of Company Common Stock issuable in the Holding Company Merger and an estimate of the cash required to make cash payable in lieu of fractional shares and cash to be paid pursuant to Section 2.1.

      2.3.2 Promptly after the Election Deadline, Company shall cause the Exchange Agent to mail to each holder of record of shares (other than holders of Dissenters’ Shares) who submitted an Election Statement, a notice advising such holders of the effectiveness of the Holding Company Merger, including appropriate transmittal materials specifying that delivery shall be effected, and risk of loss and title to certificates for shares of Stockmans Common Stock

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(“ Old Certificates ”) shall pass, only upon delivery of the Old Certificates (or affidavits of loss in lieu thereof, as provided in Section 2.3.5) and instructions for surrendering the Old Certificates (or affidavits of loss in lieu thereof) to the Exchange Agent. Upon surrender for cancellation to the Exchange Agent of one or more Old Certificates, accompanied by a duly executed letter of transmittal in proper form, the Exchange Agent shall deliver to each holder of such surrendered Old Certificates, new certificates representing the appropriate number of shares of Company Common Stock (“ New Certificates ”), together with checks for payment of cash consideration and cash in lieu of fractional shares to be issued in respect of the Old Certificates and any dividends or other distributions that such holder has the right to receive pursuant to the provisions of this Agreement, less any taxes required to be withheld with respect thereto.

      2.3.3 Until Old Certificates have been surrendered and exchanged for New Certificates or cash as herein provided, each outstanding Old Certificate shall be deemed, for all corporate purposes of Company, to represent the number of shares of Company Common Stock and the amount of cash into which the shares of Stockmans Common Stock were exchanged pursuant to Section 2.1.5. All shares of Company Common Stock to be issued pursuant to the Holding Company Merger shall be deemed issued and outstanding as of the Effective Time and whenever a dividend or other distribution is declared by Company in respect of the Company Common Stock, the record date for which is at or after the Effective Time, that declaration shall include dividends or other distributions in respect of all shares issuable pursuant to this Agreement. No dividends or other distributions that are declared on Company Common Stock into which shares of Stockmans Common Stock have been converted after the Effective Date will be paid to persons otherwise entitled to receive the same until the Old Certificates have been surrendered in exchange for New Certificates in the manner herein provided. In no event shall the persons entitled to receive such dividends or other distributions be entitled to receive interest on such dividends or other distributions. In the event of a transfer of ownership of shares of Stockmans Common Stock that is not registered in the transfer records of Stockmans, a New Certificate, together with a check for any cash to be paid upon due surrender of the Old Certificate and any other dividends or distributions in respect thereof, may be issued and/or paid to such a transferee if the Old Certificate formerly representing such shares is presented to the Exchange Agent, accompanied by all documents required by Company and the Exchange Agent to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable.

      2.3.4 Any Company Common Stock or cash delivered to the Exchange Agent (together with any interest or dividends thereon) and not issued pursuant to this Section 2.3 at the end of twelve months from the Effective Date shall be returned to Company, in which event the persons entitled thereto shall look only to Company for payment thereof.

      2.3.5 Notwithstanding anything to the contrary set forth in this Agreement, if any holder of Stockmans Common Stock shall be unable to surrender his or her Old Certificates because such certificates have been lost or destroyed, such holder may deliver in lieu thereof a lost stock certificate affidavit and, unless waived, at the sole option of Company or the Exchange Agent, an indemnity bond in customary amount together with a surety, each in a form and substance reasonably satisfactory to Company or the Exchange Agent.

      2.3.6 The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of Company Common Stock or Stockmans Common Stock held by it from time to time hereunder, except that it shall receive and hold all dividends or other

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distributions paid or distributed with respect to such shares of Company Common Stock for the account of the persons entitled thereto.

    2.4 Transactions Pursuant to the Bank Plan of Merger . Subject to the terms and conditions set forth in this Agreement, promptly following the Effective Time:

     2.4.1 Stockmans Bank will be merged with and into Bank in accordance with the provisions of the Oregon Bank Act. The Bank Plan of Merger shall be filed with the Oregon Director for purposes of obtaining a Certificate of Merger.

      2.4.2 As of the date set forth in the Certificate of Merger, Stockmans Bank will merge with Bank, with Bank being the resulting bank and having its head office in Medford, Oregon.

      2.4.3 Bank’s Articles of Incorporation, Bylaws and banking charter in effect immediately before the date set forth on the Certificate of Merger shall be the articles of incorporation, bylaws and banking charter of the resulting bank.

      2.4.4 Upon effectiveness of the Bank Merger, each outstanding share of Bank common stock shall remain outstanding as shares of the resulting bank, the holders of such shares shall retain their rights with respect to such shares as in effect prior to the Bank Merger, and each outstanding share of Stockmans Bank held by Stockmans will be cancelled.

    2.5 Dissenters’ Shares . Any Dissenting Shareholder who shall be entitled to be paid the fair market value of such shareholder’s shares of Stockmans Common Stock, as provided in Section 1300 of the CGCL, shall not be entitled to shares of Company Common Stock or cash consideration pursuant to Section 2.1.5 in respect thereof, and shall be entitled to receive only the payment provided for by Section 1300 et seq of the CGCL with respect to such Dissenters’ Shares.

    2.6 Anti-Dilution Provision . If Company changes or proposes to change the number of shares of Company Common Stock issued and outstanding prior to the Effective Date as a result of a stock split, stock dividend or similar transaction with respect to the outstanding Company Common Stock, or exchanges Company Common Stock for a different number or kind of shares or securities or is involved in any transaction resulting in any of the foregoing, and the record date therefor shall be prior to the Effective Date, the Total Stock Amount shall be proportionately adjusted.

      At or promptly after the Effective Date, Stockmans Chief Executive Officer Gary Wright (“ Wright ”) shall be appointed to the Company and Bank boards of directors. At the 2008 annual meeting of the Company’s shareholders, subject to eligibility and Company’s directors’ fiduciary duties, Wright will be nominated to serve and recommended for election by the Company’s Board of Directors in Company’s proxy statement for the 2008 annual meeting. For up to one year following the Effective Date, or as long as Company deems appropriate, Company will operate a “Stockmans Bank” division of the Bank and during such period retain the Stockmans logo and brand name.

4. Representations and Warranties of Stockmans and Stockmans Bank.

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      Except as disclosed in one or more schedules to this Agreement delivered to Company prior to execution of this Agreement (the “Stockmans Disclosure Schedule”), Stockmans and Stockmans Bank represent and warrant to Company as follows:

   4.1 Organization, Existence, and Authority . Stockmans is a corporation duly organized and validly existing under the laws of the State of California and has all requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business in the manner now being conducted. Stockmans Bank is a state-chartered bank, duly organized, validly existing, and in good standing under the laws of the State of California and has all requisite corporate power and authority to own, lease, and operate its properties and assets and carry on its business in the manner now being conducted. Each of Stockmans and Stockmans Bank is qualified to do business and is in good standing in every jurisdiction in which such qualification is required except where the failure to so qualify or be in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Stockmans. Stockmans Financial Trust I is a statutory trust duly formed, validly existing and in good standing under Delaware law and its activities do not require it to be qualified to do business in any jurisdiction other than Delaware. Stockmans Financial Trust I has the requisite statutory trust power to own or lease its properties and assets and to carry on its business as it is now being conducted.

    4.2 Authorized and Outstanding Stock, Options, and Other Rights . The authorized capital stock of Stockmans consists of 10,000,000 shares of common stock, without par value, of which 903,534.09 shares were outstanding as of the close of business on September 30, 2007, all of which are validly issued, fully paid and nonassessable. All outstanding shares of capital stock of Stockmans Bank are validly issued, fully paid and nonassessable and held by Stockmans. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which Stockmans shareholders may vote are issued or outstanding. No subscriptions, options, warrants, convertible securities, shares of preferred stock, or other rights or commitments that would enable the holder to acquire any shares of capital stock or other investment securities of Stockmans or Stockmans Bank, or which enable or require Stockmans or Stockmans Bank to acquire shares of its capital stock or of investments issued by Stockmans or Stockmans Bank from any holder, are authorized, issued, granted, or outstanding. All prior grants of options to acquire Stockmans Common Stock were properly approved by Stockmans board of directors or a committee duly authorized by Stockmans board of directors and were validly issued in accordance with a shareholder approved stock option plan. No grant of an option to purchase Stockmans Common Stock involved any backdating. All previously granted options were fully exercised or terminated in accordance with their terms on or before December 31, 2006.

   4.3 Public Reports; Financial Statements .

        (a) Since January 1, 2004, Stockmans and Stockmans Bank have timely filed with the FRB, FDIC and the California DFI all reports, registrations and statements, together with any amendments required to be made thereto, including, without limitation, Call Reports, required to be so filed (the “ Stockmans Public Reports ”), and Stockmans and Stockmans Bank have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by the FRB, FDIC or California DFI (collectively, the “ Stockmans Regulatory Agencies ”) in the ordinary course of the business of Stockmans and its Stockmans

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Subsidiaries, no Stockmans Regulatory Agency or other governmental entity has initiated since January 1, 2004 or has pending or has notified Stockmans or any Stockmans Subsidiary of any proceeding, enforcement action or, to the knowledge of Stockmans, investigation into the business, disclosures or operations of Stockmans or any Stockmans Subsidiary. Since January 1, 2004, no Stockmans Regulatory Agency or other governmental entity has resolved any proceeding, enforcement action or, to the knowledge of Stockmans, investigation into the business, disclosures or operations of Stockmans or any Stockmans Subsidiary. There is no unresolved violation or exception by any Stockmans Regulatory Agency or other governmental entity with respect to any report or statement relating to any examinations or inspections of Stockmans or any Stockmans Subsidiary. Except for normal examinations conducted by a Stockmans Regulatory Agency in the ordinary course of the business of Stockmans and Stockmans Bank, since January 1, 2004, there has been no formal or informal inquiries by, or disagreements or disputes with, any Stockmans Regulatory Agency or other governmental entity with respect to the business, operations, policies or procedures of Stockmans or any Stockmans Subsidiary. Neither Stockmans nor any Stockmans Subsidiary is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been a recipient of any supervisory letter from, or has been ordered to pay any civil money penalty by, or has adopted any policies, procedures or board resolutions at the request or suggestion of, any Stockmans Regulatory Agency or other governmental entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management or its business, other than those of general application that apply to similarly situated bank holding companies or their subsidiaries (each, a “ Stockmans Regulatory Agreement ”), nor has Stockmans or any Stockmans Subsidiary been advised since January 1, 2004 by any Stockmans Regulatory Agency or other governmental entity that it is considering issuing, initiating, ordering, or requesting any such Stockmans Regulatory Agreement.

        (b) Section 4.3(b) of the Stockmans Disclosure Schedule contains true and correct copies of (i) the audited consolidated balance sheets of Stockmans as of December 31, 2006 (the “ Stockmans Balance Sheet ”) and December 31, 2005, and the related audited consolidated statements of income, changes in shareholders’ equity and cash flows for the fiscal years ended December 31, 2006, December 31, 2005 and December 31, 2004, and (ii) the unaudited consolidated balance sheets of Stockmans as of June 30, 2007 (the “ Unaudited Stockmans Balance Sheet ”) and June 30, 2006, and the related unaudited consolidated statements of income, changes in shareholders’ equity and cash flows for the three months and six months ended June 30, 2007 and June 30, 2006 (including the related notes, where applicable) (all such balance sheets and financial statements and related notes, the “ Stockmans Financial Statements ”). The Stockmans Financial Statements (i) fairly present in all material respects the consolidated results of operations, cash flows, changes in shareholders’ equity and consolidated financial position of Stockmans and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and amount), and (ii) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto.

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         (c) Except as disclosed in Section 4.3(c) of the Stockmans Disclosure Schedule, as of their respective dates, all Stockmans Public Reports complied in all material respects with all requirements applicable to such filing. As of their respective dates, none of the Stockmans Public Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

        (d) Section 4.3 of the Stockmans Disclosure Schedule lists, and Stockmans has delivered to Company true and correct copies of the documentation creating or governing, all securitization transactions and “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC) effected by Stockmans or any Stockmans Subsidiary from January 1, 2004 through the date hereof.

        (e) Perry-Smith LLP has not resigned or been dismissed as independent public accountants of Stockmans as a result of or in connection with any disagreements with Stockmans on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

        (f) The records, systems, controls, data and information of Stockmans and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Stockmans or its Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a Material Adverse Effect on Stockmans. Stockmans maintains accounting records which fairly and accurately reflect, in all material respects, its transactions, and Stockmans has devised and maintains accounting controls sufficient to provide reasonable assurances that such transactions are (i) executed in accordance with management’s general or specific authorization, and (ii) recorded as necessary to permit the preparation of financial statements in accordance with GAAP. To the knowledge of Stockmans, there is no fact or circumstance that would indicate that Stockmans will not be able to comply with the audit, recordkeeping and review of internal controls requirements of FDICIA as of September 30, 2007.

         (g) Since December 31, 2006, (i) through the date hereof, neither Stockmans nor any of its Subsidiaries nor, to the knowledge of the officers of Stockmans, any director, officer, employee, auditor, accountant or representative of Stockmans or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Stockmans or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that Stockmans or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing Stockmans or any of its Subsidiaries, whether or not employed by Stockmans or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Stockmans or any of its officers, directors, employees or agents to the Board of Directors of Stockmans or any committee thereof or to any director or officer of Stockmans.

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      4.4 Articles of Incorporation, Bylaws, Minutes . The copies of Stockmans’ Articles of Incorporation, Stockmans’ Bylaws, Stockmans Bank’s Articles of Incorporation and Stockmans Bank’s Bylaws delivered to Company are true and correct copies of such documents, each as amended and restated as of the date hereof. Stockmans is not in violation of any provision of its Articles of Incorporation or Bylaws. Stockmans Bank is not in violation of any provision of its Articles of Incorporation or Bylaws. The minute books of Stockmans and Stockmans Bank contain minutes of all meetings and all consents evidencing actions taken without a meeting by its respective Board of Directors (and any committees thereof) and shareholders and such minutes and consents are accurate in all material respects. Stockmans has delivered to Company true, correct and complete copies of the minute books of Stockmans and Stockmans Bank from January 1, 2004, through the date hereof. Notwithstanding the foregoing, minutes of executive sessions conducted by the boards and committees of Stockmans and Stockmans Bank will not be provided to Company, and minutes provided will be redacted to eliminate confidential strategic discussions.

      4.5 No Holding Company, Joint Venture, or Other Subsidiaries . Other than as to Stockmans with respect to Stockmans Bank, no corporation, individual or other entity is registered or, to the Knowledge of Stockmans or Stockmans Bank, is required to be registered as a bank holding company under the Bank Holding Company Act of 1956, as amended, because of ownership or control of Stockmans or Stockmans Bank. Except for Stockmans with respect to Stockmans Bank and Stockmans Financial Trust I neither Stockmans nor Stockmans Bank, directly or indirectly, beneficially owns (within the meaning of Section 13 of the Exchange Act and the rules and regulations of the SEC thereunder) any shares of capital stock of any other corporation or entity, other than shares held in a fiduciary or custodial capacity in the ordinary course of business, and shares representing less than five percent of the outstanding shares of such corporation acquired in partial or full satisfaction of debts previously contracted. None of Stockmans or Stockmans Bank is a part of or has any ownership interest in any joint venture, limited liability company, trust, general or limited partnership, or a member of any unincorporated association.

      4.6 Shareholder Reports . Stockmans has delivered to Company true and correct copies of all of Stockmans’ reports, written communications and documents provided or made available to Stockmans’ shareholders or prospective investors in Stockmans since January 1, 2005, including all proxy statements and notices of shareholder meetings. No such Stockmans communication, at the time filed, furnished or communicated, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances in which they were made, not misleading, except that information as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date.

      4.7 Books and Records . The books and records of Stockmans and Stockmans Bank accurately reflect in all material respects the transactions and obligations to which it is a party or by which it or its properties are bound or subject and reflect only actual transactions. Such books and records comply and have been and are being maintained in all material respects in accordance with applicable legal, regulatory and accounting requirements and in accordance with GAAP.

      4.8 Legal Proceedings . Section 4.8 of the Stockmans Disclosure Schedule lists, as of the date hereof, all actions, suits, proceedings, claims or governmental investigations pending or,

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to the Knowledge of Stockmans, threatened against or affecting Stockmans or any Stockmans Subsidiary before any court, administrative officer or agency, other governmental body, or arbitrator. Except for regulatory examinations conducted in the normal course of regulation of Stockmans and Stockmans Bank, there are no actions, suits, proceedings, claims or governmental investigations pending or, to the Knowledge of Stockmans, threatened against or affecting Stockmans or any Stockmans Subsidiary before any court, administrative officer or agency, other governmental body, or arbitrator that, if determined adversely to Stockmans or any Stockmans Subsidiary, would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Stockmans or to materially hinder or delay the consummation of the transactions contemplated by this Agreement.

      4.9 Compliance with Laws and Regulations; Loan Portfolio . Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Stockmans:

        (a) The conduct by each of Stockmans and Stockmans Bank of its respective business and, except for matters covered by Section 4.18, the operation of the properties or other assets owned or leased by it does not violate or infringe any domestic laws, statutes, ordinances, rules or regulations or, to the Knowledge of Stockmans, any foreign laws, statutes, ordinances, rules or regulations, including, but without limitation, every local, state or federal law or ordinance, and any regulation or order issued thereunder, now in effect and applicable to it governing or pertaining to fair housing, anti-redlining, equal credit opportunity, truth-in-lending, real estate settlement procedures, fair credit reporting and every other prohibition against unlawful discrimination in residential lending, or governing consumer credit, including, but not limited to, the Community Reinvestment Act, the Consumer Credit Protection Act, Fair Credit Reporting Act, Home Mortgage Disclosure Act, Truth-in-Lending Act, Regulation Z promulgated by the FRB, and the Real Estate Settlement Procedures Act of 1974.

         (b) Except as disclosed in Section 4.9(b) of the Stockmans Disclosure Schedule, all loans, leases, contracts and accounts receivable (billed and unbilled), security agreements, guarantees and recourse agreements, of Stockmans or Stockmans Bank, as held in their respective portfolios or as sold with recourse into the secondary market since January 1, 2004, represent and are valid and binding obligations of their respective parties and debtors, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. Each of them has been executed and delivered in compliance, in form and substance, with any and all federal, state or local laws applicable to Stockmans or Stockmans Bank, or to the other party or parties to the contract(s) or commitment(s), including without limitation the Truth-in-Lending Act, Regulations Z and U of the FRB, laws and regulations providing for nondiscriminatory practices in the granting of loans or credit, applicable usury laws, and laws imposing lending limits; and all such contracts or commitments have been administered in compliance with all applicable federal, state or local laws or regulations.

        (c) All Uniform Commercial Code filings, or filings of trust deeds or mortgages, or of Liens or other security interest documentation that are required by any applicable federal, state or local governmental laws and regulations to perfect the security interests referred to in any and all of such documents or other security agreements have been made, and all security interests under such deeds, documents or security agreements have been

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perfected, and all contracts related to such filings and documents have been entered into or assumed in full compliance with all applicable material legal or regulatory requirements.

        (d) Each Loan of Stockmans and Stockmans Bank (i) is evidenced by notes, agreements or other written evidence of indebtedness which are true, genuine and what they purport to be and (ii) to the extent secured, has been secured by valid Liens and security interests which have been perfected. Except as disclosed in Section 4.9(d) of the Stockmans Disclosure Schedule, all Loan files of Stockmans Bank are complete and accurate in all material respects and have been maintained in accordance with good banking practice.

        (e) All notices of default, foreclosure proceedings or repossession proceedings against any real or personal property collateral have been issued, initiated and conducted by Stockmans Bank in material formal and substantive compliance with all applicable federal, state or local laws and regulations, and no loss or impairment of any material security interest, or exposure to meritorious lawsuits or other proceedings against Stockmans or Stockmans Bank with respect to any such material security interest, has been or will be suffered or incurred by Stockmans or Stockmans Bank.

         (f) Neither Stockmans nor Stockmans Bank is in material violation of any applicable services or any other requirements of the FHA, VA, FNMA, GNMA, FHLMC, SBA or any private mortgage insurer which insured or guaranteed any loans owned by Stockmans or Stockmans Bank or as to which either has sold to other investors, and with respect to such loans neither Stockmans or Stockmans Bank has done or failed to do, or caused to be done or omitted to be done, any act the effect of which act or omission impairs or invalidates (i) any FHA insurance or commitments of the FHA to insure, (ii) any VA guarantee or commitment of the VA to guarantee, (iii) any SBA guarantees or commitments of the SBA to guarantee, (iv) any private mortgage insurance or commitment of any private mortgage insurer to insure, (v) any title insurance policy, (vi) any hazard insurance policy, or (vii) any flood insurance policy required by the National Flood Insurance Act of 1968, as amended.

         (g) Neither Stockmans nor Stockmans Bank has knowingly engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock.

         (h) The deposit accounts of Stockmans Bank are insured by the FDIC through the Deposit Insurance Fund to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due.

         (i) Stockmans Bank has at least a “satisfactory” rating under the U.S. Community Reinvestment Act.

         (j) Stockmans Bank is, and there has not been any event or occurrence since January 1, 2004, that could reasonably be expected to result in a determination that Stockmans Bank is not, “well capitalized” as a matter of United States federal banking law.

         (k) Section 4.9(k) of the Stockmans Disclosure Schedule lists all Nonperforming Assets as of September 30, 2007. The sum of the aggregate amount of all Nonperforming Assets and all troubled debt restructurings (as defined under GAAP) on the books of Stockmans as of the date of this Agreement does not exceed 1.25% of total Stockmans loans at the date hereof. “ Nonperforming Assets ” means (i) all loans and leases (A) that are contractually past due 90 days or more in the payment of principal and/or interest, (B) that are on

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nonaccrual status, (C) where a reasonable doubt exists, in the reasonable judgment of Stockmans, as to the timely future collectibility of principal and/or interest, whether or not interest is still accruing or the loan is less than 90 days past due, (D) where the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower’s ability to pay in accordance with such initial terms, (E) where a specific reserve allocation exists in connection therewith, or (F) that have been classified “Doubtful,” “Loss” or the equivalent thereof by any regulatory authority, and (ii) all assets classified as real estate owned (“ REO ”) and other assets acquired through foreclosure or repossession. Other than as set forth in Section 4.9(k) of the Stockmans Disclosure Schedule, Stockmans has no Nonperforming Assets as defined herein.

      4.10 Commitments . Section 4.10 of the Stockmans Disclosure Schedule sets forth a list of each outstanding commitment, including outstanding letters of credit, repurchase agreements and unfunded agreements to lend of Stockmans Bank, as of September 30, 2007, in an amount of $500,000.00 or more.

      4.11 Environmental Matters . To the Knowledge of Stockmans, and except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Stockmans, neither Stockmans nor Stockmans Bank, nor any other person having an interest in any property which Stockmans or Stockmans Bank owns or leases, or has owned or leased, or in which either holds any security interest, mortgage, or other Liens or interest including but not limited to as beneficiary of a deed of trust (“ Stockmans Property ”), has engaged in the generation, use, manufacture, treatment, transportation, storage (in tanks or otherwise), or disposal of Hazardous Material on or from such Stockmans Property except as allowable by and in accordance with Environmental Laws. To the Knowledge of Stockmans, and except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Stockmans, there has been no: (i) presence, use, generation, handling, treatment, storage, release, threatened release, migration or disposal of Hazardous Material on an Stockmans Property; (ii) condition that could result in any use, ownership or transfer restriction; or (iii) condition of nuisance on or from such Stockmans Property. During the past six years, neither Stockmans nor Stockmans Bank has received any written notice of a condition that could reasonably be expected to give rise to any private or governmental suit, claim, action, proceeding or investigation against Stockmans, Stockmans Bank, any such other person or such Stockmans Property as a result of any of the foregoing events or has Knowledge of any condition that could reasonably be expected to give rise to any such material private or governmental suit, claim, action, proceeding or investigation. “Hazardous Material” means any substance that is (A) listed, classified or regulated pursuant to any Environmental Law; (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive material or radon; and (C) any other substance which may be the subject of regulatory action by any government entity in connection with any Environmental Law. “Environmental Law” means any federal, state, local or foreign statute, law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, health, safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Material or (C) noise, odor, indoor air, employee exposure, wetlands, pollution, contamination or any injury or threat of injury to persons or property relating to any Hazardous Material.

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      4.12 Contingent and Other Liabilities . Section 4.12 of the Stockmans Disclosure Schedule is a list, to the Knowledge of Stockmans and as of the date hereof, of each contingent and other liability, which individually or, when aggregated with a group of related contingent or other liabilities, could reasonably expected to be in excess of $100,000 which are not set forth or reflected in other sections of the Stockmans Disclosure Schedule or in the Stockmans Financial Statements. Neither Stockmans nor any Stockmans Subsidiary has any material obligations or liabilities of any nature (whether accrued, absolute, contingent or otherwise and whether due or to become due) except for those liabilities that are reflected or reserved against on the Unaudited Stockmans’ Balance Sheet and for liabilities incurred in the ordinary course of business consistent with past practice since June 30, 2007, or in connection with this Agreement and the transactions contemplated hereby.

      4.13 No Material Adverse Effects . Since December 31, 2006 through the date hereof, (a) there has been no event or occurrence that would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect with respect to Stockmans; (b) no cash, stock or other dividends, or other distributions with respect to capital stock, have been declared or paid by Stockmans or Stockmans Bank other than regular $1.00 per share quarterly cash dividends consistent with past practice, nor has Stockmans or Stockmans Bank purchased or redeemed any of its shares or shares of any Stockmans Subsidiary or other affiliate; and (c) there has not been any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any asset material to Stockmans or Stockmans Bank. Since June 30, 2007 through the date hereof, neither Stockmans nor Stockmans Bank have sold any investment securities at a gain except as necessary to provide liquidity, consistent with past practices.

      4.14 Regulatory Approvals Required . The nature of the business and operations of Stockmans and Stockmans Bank does not require any approval, authorization, consent, license, clearance or order of, any declaration or notification to, or any filing or registration with, any governmental or regulatory authority in order to permit any of them to perform their obligations under this Agreement, or to prevent the termination of any material right, privilege, license or agreement of Stockmans or Stockmans Bank, or any material loss or disadvantage to their business, as a result of consummation of the Holding Company Merger or Bank Merger, except for:

         (a) approval from, or waiver of jurisdiction by, the Oregon Director, FDIC, FRB and California DFI of the Bank Merger;

         (b) approval from, or waiver of jurisdiction by, the FRB of the Holding Company Merger;

         (c) filing of the Holding Company Plan of Merger and Articles of Merger with the Oregon Secretary of State and California Secretary of State; and

        (d) filing and effectiveness of the S-4 Registration Statement, of which the Proxy Statement is a part, under the Securities Act.

      As of the date hereof, Stockmans has no Knowledge of any reason why the approvals set forth in this Section 4.14 and in Section 8.4 will not be received without the imposition of a condition, restriction or requirement of the type described in Section 8.4. Stockmans has taken all necessary action to exempt the Mergers and this Agreement from (i) all

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applicable California state law anti-takeover provisions, if any, and (ii) any takeover related provisions of its articles of incorporation, bylaws or agreement among its shareholders.

      4.15 Corporate and Shareholder Approval of Agreement, Binding Obligations . Stockmans and Stockmans Bank each has all requisite corporate power to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement, and the transactions contemplated hereby, have been duly authorized and unanimously approved by the Board of Directors of each of Stockmans and Stockmans Bank. No other corporate action on the part of Stockmans or Stockmans Bank other than shareholder approval is required to authorize this Agreement or the Holding Company Plan of Merger or Bank Plan of Merger or the consummation of the transactions contemplated thereby. This Agreement has been duly executed and delivered by Stockmans and Stockmans Bank, and assuming the accuracy of Company’s representations and warranties, constitutes the legal, valid and binding obligation of each of them enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

      4.16 No Defaults from Transaction . Neither the execution, delivery and performance of this Agreement, the Holding Company Plan of Merger or the Bank Plan of Merger by Stockmans or Stockmans Bank, as the case may be, nor the consummation of the transactions contemplated thereby will conflict with, result in any material breach or violation of, or result in any default or any acceleration of performance under, or will result in the declaration or imposition of any Lien, charge or encumbrance upon any of the assets of Stockmans or Stockmans Bank under, any of the terms, conditions or provisions of (a) Stockmans’ or Stockmans Bank’s Articles of Incorporation or Bylaws, (b) any statute, regulation or existing order, writ, injunction or decree of any court or governmental agency, or (c) any contract, agreement or instrument to which any of Stockmans or Stockmans Bank is a party or by which any of Stockmans or Stockmans Bank is bound, except in the case of clauses (b) and (c) as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Stockmans or to materially hinder or delay the consummation of the transactions contemplated by this Agreement.

     4.17 Taxes and Tax Returns.

        (a) Stockmans has delivered to Company true and correct copies of Stockmans’ and Stockmans Bank’s unconsolidated or uncombined federal and state income or franchise tax returns for the years 2004, 2005 and 2006. Except as disclosed in Section 4.17 of the Stockmans Disclosure Schedule, Stockmans and each Stockmans Subsidiary have filed all federal, state and other income, franchise or other tax returns, required to be filed by them; each such return is complete and accurate in all material respects; and all Taxes and related interest and liabilities to be paid in connection therewith have been paid or adequate reserve has been established for the timely payment thereof.

        (b) There have been no audits or examinations of any income tax returns of Stockmans or Stockmans Bank. Stockmans and Stockmans Bank have timely and accurately filed all material required information returns and reports, including without limitation Forms 1099, and to Stockmans’ Knowledge, Stockmans and Stockmans Bank have timely and accurately filed all material currency transaction reports required by the Bank Secrecy Act, as

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amended. Stockmans has not received notice of any federal, state or other income, franchise or other tax assessment or notice of a deficiency to date which has not been paid or for which adequate reserve has not been provided, and to Stockmans’ Knowledge there are no pending or threatened (in writing) audit or investigation of Stockmans or Stockmans Bank with respect to any Tax liabilities.

          (c) There are currently no agreements in effect with respect to Stockmans or Stockmans Bank to extend the period of limitations for assessment or collection of any Tax, and, except as required by law among Stockmans and the Stockmans Subsidiaries, neither Stockmans or Stockmans Bank is a party to any tax sharing, allocation or indemnification agreement or arrangement or is liable for any Tax imposed on any other Person other than Stockmans or Stockmans Bank.

         (d) Except as disclosed in Section 4.17 of the Stockmans Disclosure Schedule, all Taxes that Stockmans or Stockmans Bank is required to withhold from amounts owing or paid to any employee or director, shareholder, former employee or director, shareholder, creditor or third party have been properly withheld and, to the extent payable, timely paid.

         (e) During the period commencing May 14, 1999 and ending on the close of business on the Effective Date (the “S Period”), Stockmans has been an “S corporation” within the meaning of Section 1361(a) of the Code, and a valid election under Section 1362 of the Code has been in effect with respect to Stockmans at all times for the S Period. A valid S-election or similar election has been in effect with respect to Stockmans during the S Period in all relevant state and local jurisdictions in which Stockman is subject to Tax and in which such election is required. Each of Stockman’s stockholders has been a Person described in Section 1361(b)(1)(B) of the Code at all times that such Person held shares of Stockmans Common Stock during the S Period, and at no time during the S Period was any stockholder of Stockmans a non-resident alien.

         (f) During the period commencing May 14, 1999, and ending on the day before the Effective Date, each Stockmans Subsidiary was a qualified subchapter S subsidiary (“QSub”), and a valid election under Section 1361(b)(3)(B) of the Code has been in effect with respect to each Stockmans Subsidiary at all times for such period. A valid QSub election or similar election has been in effect with respect to each Stockmans Subsidiary during such period in all relevant state and local jurisdictions in which Stockmans is subject to Tax and in which such election is required.

         (g) Stockmans will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period ending after the Effective Time as a result of any (i) change, made on or prior to the Closing Date, in the method of accounting for a tax period ending on or prior to the Closing Date, (ii) “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of state, local or foreign law) executed on or prior to the Closing Date, (iii) intercompany transactions or any excess loss account described in the regulations under Section 1502 of the Code (or any similar provision of state, local or foreign law) occurring or existing before the Closing Date, (iv) installment sale or open transaction disposition made on or prior to the Closing Date, and (v) if an election under Section 338(h)(10) of the Code is not made with respect to the Holding Company Merger, prepaid amounts which in the aggregate exceed $20,000 received on or prior to the Closing Date.

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       (h) Stockmans has no potential liability for any tax under Code §1374. Neither Stockmans nor any Stockmans Subsidiary has, in the past 10 years, (i) acquired assets from another corporation in a transaction in which Stockmans tax basis for the required assets was determined, in whole or in part, by reference to the tax basis of the acquired assets (or any other property) in the hands of the transferor or (ii) acquired the stock of any corporation that is a QSub.

    4.18 Real Property, Leased Personal Property .

        (a) Section 4.18 of the Stockmans Disclosure Schedule includes a list of all the real property owned or leased by Stockmans or any Stockmans Subsidiary and all real property held by Stockmans or any Stockmans Subsidiary as of the date hereof as other real estate owned (the “ Stockmans Real Property ”). Except for disposition of other real estate owned in the ordinary course of business and except as disclosed in Section 4.18 of the Stockmans Disclosure Schedule, Stockmans or a Stockmans Subsidiary will own or have a valid leasehold interest in all of the Stockmans Real Property on the Effective Date. All Stockmans Real Property (i) reflected as being owned in the latest audited Stockmans Financial Statements or acquired after the date thereof (“ Stockmans’ Owned Properties ”) and (ii) all leasehold estates wherein Stockmans or Stockmans Bank is lessee reflected in the latest audited balance sheet included in the Stockmans Financial Statements or leased after the date hereof (“ Stockmans Leased Properties ”), are included in Section 4.18 of the Stockmans Disclosure Schedule.

              (b) The leases pursuant to which Stockmans or a Stockmans Subsidiary leases Stockmans Leased Properties and material personal property, true and correct copies of which have been delivered to Company, are the legal, valid and binding obligation of Stockmans or a Stockmans Subsidiary, enforceable against such entity in accordance with its terms, and, to the Knowledge of Stockmans, are the legal, valid and binding obligation of the other party thereto, enforceable against such entity in accordance with its terms, in each case subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles valid, and neither Stockmans nor a Stockmans Subsidiary nor, to the Knowledge of Stockmans, the other party thereto is in material default, and no event has occurred that would, with the giving of notice, lapse of time or both, constitute a material default under such leases. No material waiver or indulgence has been granted by any landlord under any leases for Stockmans Leased Properties.

              (c) All Stockmans Owned Properties and material personal property owned by Stockmans or any Stockmans Subsidiary is free of any adverse claims, except for (1) statutory liens not yet delinquent that are being contested in good faith by appropriate proceedings, and liens for taxes not yet due, for which Stockmans maintains reserves as required by GAAP consistently applied with the Stockmans Financial Statements, (2) pledges of assets in the ordinary course of business to secure public deposits, (3) defects and irregularities of title and encumbrances that do not materially impair the use thereof for the purposes for which they are held, (4) mechanics’, materialmen’s, workmen’s, repairmen’s, warehousemen’s, carriers’ and other similar liens, for sums not yet delinquent or that are being contested in good faith by appropriate proceedings, arising in the ordinary course of business for which Stockmans maintains reserves as required by GAAP consistently applied and (5) adverse claims with respect to properties and assets the loss of which would not reasonably be expected to have, individually

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or in the aggregate, have a Material Adverse Effect with respect to Stockmans (“ Permitted Liens ”).

         (d) All buildings and structures on the Stockmans Real Property, the equipment located thereon, and the personal property leased by Stockmans or a Stockmans Subsidiary, are in good operating condition and in a good state of repair (ordinary wear and tear excepted). To the Knowledge of Stockmans, the Stockmans Real Property is in material compliance with all applicable zoning laws and building codes. There are no pending or, to the Knowledge of Stockmans, threatened condemnation proceedings against the Stockmans Real Property. To the Knowledge of Stockmans, the Stockmans Real Property and the buildings, structures and improvements thereon are in compliance with all applicable health and safety related requirements for the Stockmans Real Property, including without limitation those under the Americans with Disabilities Act of 1990 (“ ADA ”), Title 24 of the California Code of Regulations, California Building Standard Code and all similarly motivated state and local laws (“ Local Barriers Acts ”) and the Occupational Health and Safety Act of 1970 (“ OSHA ”), all regulations issued under the ADA, Local Barriers Acts and OSHA, and any Accessibility Guidelines for Buildings and Facilities issued pursuant to the ADA and Local Barriers Acts. To Stockmans’ Knowledge, since January 1, 2005, neither Stockmans nor any Stockmans Subsidiary has received any written notices alleging violations of the ADA, Local Barriers Acts or OSHA, any notices of claims made or threatened in writing regarding noncompliance with ADA or Local Barriers Acts or any written notices of any governmental or regulatory actions or investigations instituted or threatened regarding noncompliance with ADA or Local Barriers Acts. Stockmans and Stockmans Subsidiaries have good and marketable title to all of the Stockmans Owned Properties and all personal property owned by Stockmans or a Stockmans Subsidiary, subject to no mortgages, pledges, encumbrances, Liens or charges of any kind, except for Permitted Liens.

      4.19 Insurance . For each of the past three calendar years and continuing through the date hereof and the Effective Date, Stockmans and each Stockmans Subsidiary have insured their business and real and personal property against all risks of a character usually insured against, including but not limited to financial institution bond, directors and officers liability, property and casualty and commercial liability insurance, with customary amounts of coverage, deductibles and exclusions by reputable insurers authorized to transact insurance in the State of California and such other jurisdictions where they do business or own or lease property. Stockmans and each Stockmans Subsidiary are in material compliance with all existing insurance policies and have not failed to give timely notice of, or present properly, any material claim thereunder of which Stockmans has Knowledge. Section 4.19 of the Stockmans Disclosure Schedule includes a list of all insurance policies in force as of the date hereof with respect to Stockmans’ and Stockmans Bank’s business and real and personal property. No insurer has advised Stockmans or any Stockmans Subsidiary that it intends to materially reduce coverage or materially increase any premium under any such policy or that coverage is not available (or that it will contest coverage) for any material claim made against Stockmans or any Stockmans Subsidiary.

      4.20 Intellectual Property . Stockmans and Stockmans Subsidiaries own or have valid licenses to use all Intellectual Property that is material to their business taken as a whole, and have not received written notice of infringement or violation of any Intellectual Property which

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would reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect with respect to Stockmans.

      4.21 Contracts and Agreements . Section 4.21 of the Stockmans Disclosure Schedule is a list of each Contract (i)