UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) 
of the Securities Exchange Act of 1934



|for the quarterly period endedSeptember 30, 2008
|------------------------------------------------



|Commission File Number:000-50332
|--------------------------------



PREMIERWEST BANCORP(Exact name of registrant as specified in its charter)

|Oregon 
     (State or other jurisdiction of 
     incorporation or organization) |  | 93-1282171 
     (I.R.S. Employer 
     Identification No.)
|--------------------------------------------------------------------------------- |  | -----------------------------------------------------------

503 Airport Road  Suite 101 
Medford, Oregon 97504(Address of principal executive offices) (Zip Code)

(541) 618-6020(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes  [ X ]   No  [    ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.Large accelerated filer  [    ]                                                   Accelerated filer  [ X ]                                           Non-accelerated filer  [    ]
                                              Smaller Reporting Company  [    ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
                                                                                         Yes  [    ]   No [ X ]

The number of shares outstanding of Registrant's common stock as of October 27, 2008 was 22,402,886.

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|           |  | Form 10-Q                                                                             |  |   
|---------- |  | ------------------------------------------------------------------------------------- |  | --
|           |  | Table of Contents                                                                     |  |   
|          
|Part I     |  | FINANCIAL INFORMATION                                                                 |  |   
|Item 1.    |  | Financial Statements                                                                  |  | 3 
|Item 2.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 16
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 23
|Item 4.    |  | Controls and Procedures                                                               |  | 23
|Part II    |  | OTHER INFORMATION                                                                     |  |   
|Item 1.    |  | Legal Proceedings                                                                     |  | 23
|Item 1A.   |  | Risk Factors                                                                          |  | 23
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 25
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 25
|Item 4.    |  | Submission of Matters to a Vote of Securities Holders                                 |  | 25
|Item 5.    |  | Other Information                                                                     |  | 25
|Item 6.    |  | Exhibits                                                                              |  | 25
|SIGNATURES |  | 26                                                                                   

2

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|PART I. FINANCIAL INFORMATION                                  |  |                         |  |                |  |                |  |              
|-------------------------------------------------------------- |  | ----------------------- |  | -------------- |  | -------------- |  | -------------
|ITEM 1. FINANCIAL STATEMENTS                                   |  |                         |  |                |  |                |  |              
|                                                              
|PREMIERWEST BANCORP AND SUBSIDIARY                            
|CONSOLIDATED BALANCE SHEETS                                   
|(Dollars in 000s)                                            
|(UNAUDITED)                                                   
|                                                              
|ASSETS                                                        
|                                                               |  |                         |  | September 30,  |  | December 31,   |  | September 30,
|                                                               |  |                         |  | 2008           |  | 2007           |  | 2007         
|                                                               |  |                         |  |                |  |                |  |              
|Cash and cash equivalents:                                     |  |                         |  |                |  |                |  |              
|Cash and due from banks                                        |  | $       22,753          |  | $       38,281 |  | $       28,846
|Federal funds sold                                             |  |                         |  | 4,995          |  | 10,350         |  | -            
|Interest-bearing deposits with Federal Home Loan Bank          |  |                         |  | 129            |  | 41             |  | 38           
|                                                               |  |                         |  |                |  |                |  |              
|Total cash and cash equivalents                                |  |                         |  | 27,877         |  | 48,672         |  | 28,884       
|                                                               |  |                         |  |                |  |                |  |              
|                                                              
|Interest-bearing CD's (greater than 90 days)                   |  |                         |  | 198            |  | -              |  | -            
|                                                               |  |                         |  |                |  |                |  |              
|Investments:                                                   |  |                         |  |                |  |                |  |              
|Investment securities available-for-sale, at fair market value |  |                         |  | 204            |  | 222            |  | 229          
|Investment securities held-to-maturity, at amortized cost      |  |                         |  | 30,537         |  | 6,098          |  | 6,057        
|(fair value of $30,507 at 9/30/08, $6,072 at 12/31/07,         |  |                         |  |                |  |                |  |              
|and $6,017 at 9/30/07)                                         |  |                         |  |                |  |                |  |              
|Investment securities - CRA's                                  |  |                         |  | 4,000          |  | -              |  | -            
|Restricted equity securities                                   |  |                         |  | 3,628          |  | 1,865          |  | 1,865        
|                                                               |  |                         |  |                |  |                |  |              
|Total investments                                              |  |                         |  | 38,369         |  | 8,185          |  | 8,151        
|                                                               |  |                         |  |                |  |                |  |              
|                                                              
|Mortgage loans held-for-sale                                   |  |                         |  | 658            |  | 569            |  | 354          
|Gross loans                                                    |  |                         |  | 1,269,368      |  | 1,025,329      |  | 1,003,833    
|Allowance for loan losses                                      |  |                         |  | (20,960)       |  | (11,450)       |  | (11,387)     
|Deferred loan fees                                             |  |                         |  | (1,490)        |  | (1,610)        |  | (1,746)      
|                                                               |  |                         |  |                |  |                |  |              
|                                                              
|Net loans                                                      |  |                         |  | 1,247,576      |  | 1,012,838      |  | 991,054      
|                                                               |  |                         |  |                |  |                |  |              
|                                                              
|Premises and equipment, net of accumulated depreciation        |  |                         |  | 48,425         |  | 38,795         |  | 38,089       
|Core deposit intangibles, net of accumulated amortization      |  |                         |  | 2,632          |  | 1,516          |  | 1,640        
|Goodwill                                                       |  |                         |  | 75,204         |  | 20,942         |  | 20,942       
|Accrued interest and other assets                              |  |                         |  | 32,938         |  | 27,013         |  | 26,153       
|                                                               |  |                         |  |                |  |                |  |              
|TOTAL ASSETS                                                   |  |                         |  | $ 1,473,219    |  | $ 1,157,961    |  | $ 1,114,913  
|                                                               |  |                         |  |                |  |                |  |              
|                                                              
|LIABILITIES AND SHAREHOLDERS' EQUITY                          
|LIABILITIES                                                    |  |                         |  |                |  |                |  |              
|Deposits:                                                      |  |                         |  |                |  |                |  |              
|Demand                                                         |  | $  230,619              |  | $  199,941     |  | $  193,666    
|Interest-bearing demand and savings                            |  |                         |  | 414,764        |  | 375,001        |  | 376,729      
|Time                                                           |  |                         |  | 580,535        |  | 360,373        |  | 356,006      
|                                                               |  |                         |  |                |  |                |  |              
|Total deposits                                                 |  |                         |  | 1,225,918      |  | 935,315        |  | 926,401      
|                                                              
|Federal funds purchased                                        |  |                         |  | 13,305         |  | 54,019         |  | 23,470       
|Federal Home Loan Bank borrowings                              |  |                         |  | 48             |  | 14,008         |  | 13,164       
|Junior subordinated debentures                                 |  |                         |  | 30,928         |  | 15,464         |  | 15,464       
|Accrued interest and other liabilities                         |  |                         |  | 14,730         |  | 11,480         |  | 11,266       
|                                                               |  |                         |  |                |  |                |  |              
|Total liabilities                                              |  |                         |  | 1,284,929      |  | 1,030,286      |  | 989,765      
|                                                               |  |                         |  |                |  |                |  |              
|                                                              
|COMMITMENTS AND CONTINGENCIES (Note 9)                         |  |                         |  |                |  |                |  |              
|SHAREHOLDERS' EQUITY                                           |  |                         |  |                |  |                |  |              
|Series A Preferred Stock, no par value, 1,000,000 shares       |  |                         |  |                |  |                |  |              
|authorized, 11,000 shares issued and outstanding               |  |                         |  | 9,590          |  | 9,590          |  | 9,590        
|Common stock - no par value; 50,000,000 shares authorized;     |  |                         |  |                |  |                |  |              
|22,402,886 shares issued and outstanding                       |  |                         |  |                |  |                |  |              
|(16,987,496 shares at 12/31/07; 16,994,363 shares at 9/30/07)  |  | 158,403                 |  | 97,266         |  | 97,269        
|Retained earnings                                              |  |                         |  | 20,256         |  | 20,759         |  | 18,223       
|Accumulated other comprehensive income                         |  |                         |  | 41             |  | 60             |  | 66           
|                                                               |  |                         |  |                |  |                |  |              
|Total shareholders' equity                                     |  |                         |  | 188,290        |  | 127,675        |  | 125,148      
|                                                               |  |                         |  |                |  |                |  |              
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                     |  |                         |  | $ 1,473,219    |  | $ 1,157,961    |  | $ 1,114,913  
|                                                               |  |                         |  |                |  |                |  |              
|                                                              
|                                                              
|                                                               |  | See accompanying notes. |  |                |  |                |  |              

3

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|PREMIERWEST BANCORP AND SUBSIDIARY                    
|------------------------------------------------------
|CONSOLIDATED STATEMENTS OF INCOME                     
|(Dollars in 000s, Except for Earnings per Share Data)
|(UNAUDITED)                                           
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|INTEREST AND DIVIDEND INCOME                          
|Interest and fees on loans                            
|Interest on investments:                              
|Taxable                                               
|Nontaxable                                            
|Interest on federal funds sold                        
|Other interest and dividends                          
|                                                      
|                                                      
|Total interest and dividend income                    
|                                                      
|                                                      
|INTEREST EXPENSE                                      
|Deposits:                                             
|Interest-bearing demand and savings                   
|Time                                                  
|Federal funds purchased                               
|Federal Home Loan Bank advances                       
|Junior subordinated debentures                        
|                                                      
|                                                      
|Total interest expense                                
|                                                      
|                                                      
|Net interest income                                   
|                                                      
|LOAN LOSS PROVISION                                   
|                                                      
|                                                      
|Net interest income after loan loss provision         
|                                                      
|                                                      
|NON-INTEREST INCOME                                   
|Service charges on deposits accounts                  
|Mortgage banking fees                                 
|Investment brokerage and annuity fees                 
|Other commissions and fees                            
|Other non-interest income                             
|                                                      
|                                                      
|Total non-interest income                             
|                                                      
|                                                      
|NON-INTEREST EXPENSE                                  
|Salaries and employee benefits                        
|Net occupancy and equipment                           
|Communications                                        
|Professional fees                                     
|Advertising                                           
|Other                                                 
|                                                      
|                                                      
|Total non-interest expense                            
|                                                      
|                                                      
|INCOME BEFORE PROVISION FOR INCOME TAXES              
|                                                      
|PROVISION FOR INCOME TAXES                            
|                                                      
|                                                      
|NET INCOME                                            
|                                                      
|                                                      
|EARNINGS PER COMMON SHARE:                            
|BASIC                                                 
|                                                      
|DILUTED                                               
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      

4

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|PREMIERWEST BANCORP AND SUBSIDIARY                        
|----------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|(Dollars in 000s)                                        
|(UNAUDITED)                                               
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|BALANCE - DECEMBER 31, 2006                               
|Comprehensive income:                                     
|Net income                                                
|Other comprehensive income                               
|Amortization of unrealized gains                          
|for investment securities                                 
|transferred to held-to-maturity                           
|Unrealized gains on investment                            
|securities available-for-sale                             
|                                                          
|Comprehensive income                                      
|                                                          
|Adjustment for change in accounting                       
|principle related to EITF 06-04                           
|Preferred stock dividend declared                         
|Common stock cash dividend declared                       
|Stock-based compensation expense                          
|Repurchase of common stock                                
|5% stock dividend                                         
|Cash paid for fractional shares                           
|Stock options exercised                                   
|Income tax benefit of stock options                       
|exercised                                                 
|                                                          
|                                                          
|BALANCE - JANUARY 1, 2008                                 
|Comprehensive income:                                     
|Net income                                                
|Other comprehensive income-                               
|Unrealized losses on investment                           
|securities available-for-sale                             
|                                                          
|Comprehensive income                                      
|                                                          
|Preferred stock dividend declared                         
|Common stock cash dividend declared                       
|Stock-based compensation expense                          
|Repurchase of common stock                                
|Stockmans Bank Acquisition                                
|Stock options exercised                                   
|Stock options exercised (Note 4)                          
|Shares exchanged in payment of                            
|option exercise consideration (Note 4)                    
|Income tax benefit of stock options                       
|exercised                                                 
|                                                          
|BALANCE - September 30, 2008                              
|                                                          



|See accompanying notes.
|-----------------------

5

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|PREMIERWEST BANCORP AND SUBSIDIARY                                          
|----------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                       
|(Dollars in 000s)                                                          
|(UNAUDITED)                                                                 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       
|                                                                            
|Net income                                                                  
|Adjustments to reconcile net income to net cash                             
|from operating activities:                                                  
|Depreciation and amortization                                               
|Loan loss provision                                                         
|Deferred income taxes                                                       
|Amortization of premiums and accretion of discounts                         
|on investment securities, net                                               
|Funding of loans held-for-sale                                              
|Sale of loans held-for-sale                                                 
|Gain on sale of loans held-for-sale                                         
|Gain on sale of other real estate                                           
|Stock-based compensation expense                                            
|Excess tax benefit from stock options exercised                             
|Gain on sales of premises and equipment                                     
|Write down of low income housing tax credit investment                      
|Changes in accrued interest receivable/payable and other                    
|assets/liabilities                                                          
|                                                                            
|Net cash provided by operating activities                                   
|                                                                            
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       
|Proceeds from maturities and calls of investment                            
|securities available-for-sale                                               
|Purchase of investment securities held-to-maturity                          
|Proceeds from maturities and calls of investment                            
|securities held-to-maturity                                                 
|Proceeds from redemption of Federal Home Loan Bank stock                    
|Purchase of Community Reinvestment Act investments                          
|Increase in interest-bearing deposits with Federal Home Loan Bank           
|Purchase of low income housing tax credit investment                        
|Proceeds from sale of other real estate                                     
|Loan originations, net                                                      
|Purchase of premises and equipment, net                                     
|Purchase of consumer loan finance business                                  
|Cash received, net of cash paid for acquisition of Stockmans                
|Financial Group                                                             
|                                                                            
|Net cash provided by (used in) investing activities                         
|                                                                            
|CASH FLOWS FROM FINANCING ACTIVITIES:                                       
|Net increase (decrease) in deposits                                         
|Net increase (decrease) in Federal Home Loan Bank borrowings                
|Net increase (decrease) in Federal Funds purchased                          
|Dividends paid on common stock                                              
|Repurchase of common stock                                                  
|Stock options exercised                                                     
|Excess tax benefit from stock options exercised                             
|Cash paid for fractional shares relating to stock dividend                  
|                                                                            
|Net cash provided by (used in) financing activities                         
|                                                                            
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                   
|CASH AND CASH EQUIVALENTS - Beginning of the period                         
|                                                                            
|CASH AND CASH EQUIVALENTS - End of the period                               
|                                                                            
|                                                                            
|SUPPLEMENTAL DISCOSURE OF CASH FLOW INFORMATION                             
|Cash paid for interest                                                      
|                                                                            
|Cash paid for taxes                                                         
|                                                                            
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND                            
|FINANCING ACTIVITIES:                                                       
|Transfers of loans to other real estate owned                               
|                                                                            
|Income tax benefit of stock options exercised                               
|                                                                            
|Increase in goodwill resulting from acquisition of Stockmans Financial Group
|                                                                            
|Cash dividend declared but not yet paid                                     
|                                                                            
|Preferred stock dividend declared                                           
|                                                                            
|Stock issued for acquisition of Stockmans Financial Group                   
|                                                                            
|                                                                            
|See accompanying notes.                                                     

6

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NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization- The accompanying consolidated financial statements include the accounts of
PremierWest Bancorp and its wholly-owned subsidiary PremierWest Bank (collectively, PremierWest, the Company or the Bank). PremierWest Banks wholly-owned subsidiaries include PremierWest Investment Services,
Inc., Premier Finance Company and Blue Star Properties, Inc.

The Bank conducts a general commercial banking business operating in Jackson, Josephine, Douglas and Klamath counties of southern Oregon, Deschutes County in central Oregon and
Sacramento, Siskiyou, Shasta, Tehama, Butte, Placer and Yolo counties of northern California. Its activities include the usual lending and deposit functions of a commercial bank, including commercial, real estate, installment and mortgage loans;
checking, money market, savings and time deposit accounts; mortgage loan services; automated teller machines (ATMs); and safe deposit facilities.

PremierWest Banks two principal operating subsidiaries, Premier Finance Company and PremierWest Investment Services, Inc., provide financial services that compliment and support
the traditional commercial banking operations of the Bank. Premier Finance Company is engaged in the business of consumer lending and operates from independent office locations or from within PremierWest Bank branch offices in the Banks major
market areas as well as from offices located in Portland, Eugene and Coos Bay, Oregon. PremierWest Investment Services, Inc. functions under an arrangement with Linsco/Private Ledger, an independent broker/dealer. Operating throughout the
Banks market area, PremierWest Investment Services, Inc. offers financial and investment products including stocks, bonds, mutual funds, annuities and insurance.

Basis of presentationThe consolidated financial statements include the accounts of PremierWest Bancorp and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

The interim consolidated financial statements are not audited, but include all adjustments that Management considers necessary for a fair presentation of consolidated financial
condition and results of operations for the interim periods presented.

The balance sheet data as of December 31, 2007 was derived from audited financial statements and does not include all disclosures contained in the 2007 Annual Report to Shareholders.
The interim consolidated financial statements should be read in conjunction with the Company's 2007 consolidated financial statements, including the notes thereto, included in the 2007 Annual Report to Shareholders as filed with the Securities and
Exchange Commission under Form 10-K. The reader should keep in mind that the results of operations for the interim periods shown in the accompanying consolidated financial statements are not necessarily indicative of results for any future interim
periods or the entire fiscal year.

Method of accounting and use of estimates- The Company prepares its consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America and prevailing practices within the banking industry. The Company utilizes the accrual method of accounting, which recognizes income when earned
and expenses when incurred.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.

Elements of our accounting policies are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, Management has identified
certain policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of our consolidated financial statements. These policies relate primarily to the determination of our allowance for
loan losses and the valuation of goodwill and intangible assets.

There are other complex accounting standards that require the Company to employ significant judgment in interpreting and applying certain of the principles prescribed by those
standards. These judgments include the determination of whether a financial instrument or other contract meets the definition of a derivative and qualifies for accounting in accordance with Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities. These judgments also include significant estimates and assumptions necessary to determine the disclosure requirements of Statement of Financial Accounting Standards No. 123R,
Share Based Payments. These policies and judgments, estimates and assumptions are described in greater detail in the notes to the consolidated financial statements included in our 2007 Annual Report on Form 10-K. We believe that the
judgments, estimates and assumptions used in the preparation of our consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of our consolidated financial statements to these
critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in our results of operations or financial condition.

Stock dividends Share and per share data in the accompanying consolidated financial
statements have been retroactively restated to reflect the 5% stock dividend paid on June 29, 2007. As of September 30, 2008, no new stock dividends have been declared.

Cash dividends On August 29, 2008, the Company declared a $0.06 per share cash dividend
payable on October 17, 2008, to shareholders of record September 26, 2008.

7

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NOTE 2  ACQUISITION OF STOCKMANS BANK

On January 26, 2008, PremierWest Bank acquired Stockmans Bank, consisting of five branches in the greater Sacramento, California area. As of the acquisition date, these offices and
their employees commenced operating as branch offices of PremierWest Bank. The transaction was accounted for as a purchase for 5,357,404 shares of PremierWest common stock, cash of $22,769,309 and transaction costs of $2.0 million, for total
purchase price consideration of $85.8 million.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

|(Dollars in 000's)                  |  |                 
|----------------------------------- |  | ----------------
|                                   
|Assets acquired:                    |  | January 26, 2008
|                                    |  |                 
|Cash and cash equivalents           |  | $ 56,688        
|Investment securities               |  | 32,008          
|Fed funds sold                      |  | 58,925          
|Loans, net                          |  | 203,381         
|Premises and equipment, net         |  | 9,567           
|Core deposit intangibles            |  | 1,635           
|Other assets                        |  | 6,537           
|                                    |  |                 
|Total assets acquired               |  | $ 368,741       
|                                   
|Liabilities assumed:                |  |                 
|Deposits                            |  | $ 296,051       
|Borrowed funds                      |  | 18,618          
|Junior subordinated debentures      |  | 15,464          
|Other liabilities                   |  | 7,110           
|                                    |  |                 
|Total liabilities assumed           |  | $ 337,243       
|                                    |  |                 
|                                   
|Net Assets Acquired                 |  | $ 31,498        
|                                    |  |                 
|Shares of PremierWest common stock  |  | $ 60,968        
|Cash paid to common shareholders of |  |                 
|Stockmans Bank                      |  | 22,769          
|Transaction costs                   |  | 2,023           
|                                    |  |                 
|Total                               |  | 85,760          
|                                    |  |                 
|Goodwill                            |  | $ 54,262        
|                                    |  |                 

Additional adjustments to the purchase price allocation may be required, specifically related to fixed assets, taxes and compensation adjustments.

The core deposit intangible asset represents the value ascribed to the long-term deposit relationships acquired. This intangible asset is being amortized on a straight-line basis over
a weighted average estimated useful life of 7 years. The core deposit intangible asset is not estimated to have a significant residual value. Goodwill represents the excess of the total purchase price paid for Stockmans Bank over the fair values of
the assets acquired, net of the fair value of the liabilities assumed. Goodwill is not amortized, but is evaluated for possible impairment at least annually and more frequently if events and circumstances indicate that the asset might be impaired.
No impairment losses were recognized in connection with core deposit intangible or goodwill assets during the period from acquisition to September 30, 2008.

The following table represents unaudited pro forma results of operations for the nine months ended September 30, 2008 and 2007, as if the acquisition of Stockmans Bank had occurred at
the beginning of the earliest period presented. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred at the
beginning of the earliest period presented. Management of the Company anticipates that cost savings and operational synergies will be realized after the operations of Stockmans Bank are fully integrated in 2008.

|                                    |  | Nine Months Ended September 30,
|----------------------------------- |  | -------------------------------
|                                    |  | 2008                           
|                                    |  |                                
|Net interest income                 |  | $ 46,870                       
|Provision for loan losses           |  | (13,050)                       
|Non-interest income                 |  | 7,433                          
|Non-interest expense                |  | (35,388)                       
|                                    |  |                                
|Income before income taxes          |  | 5,865                          
|                                    |  |                                
|Provision for income taxes          |  | (1,994)                        
|                                    |  |                                
|Net income                          |  | $ 3,871                        
|                                    |  |                                
|                                   
|Earnings per share                  |  |                                
|Basic                               |  | $ 0.17                         
|Diluted                             |  | $ 0.17                         
|                                   
|Weighted average shares outstanding |  |                                
|Basic                               |  | 22,394,254                     
|Diluted                             |  | 22,437,402                     

8

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NOTE 3  FAIR VALUE MEASUREMENTS

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be
measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or
liability. In support of this principle, SFAS 157 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 inputs Unadjusted quoted prices in active markets for identical assets or
liabilities that the entity has the ability to access at the measurement date.

Level 2 inputs Inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability, such as interest rates
and yield curves that are observable at commonly quoted intervals.

Level 3 inputs Unobservable inputs for determining the fair values of assets or liabilities
that reflect an entitys own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Available-for-sale securities is the only balance sheet category the Company accounts for at fair value on a recurring basis. The following table presents information about the
Companys assets measured at fair value on a recurring basis as of September 30, 2008, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

|(Dollars in 000's)                  |  |            |  | Fair Value Measurements |  |                        
|----------------------------------- |  | ---------- |  | ----------------------- |  | -----------------------
|                                    |  |            |  | At 9/30/08 Using        |  |                        
|                                    |  |           
|                                    |  |            |  | Quoted Prices in        |  |                        
|                                    |  |            |  | Active Markets for      |  |                        
|                                    |  | Fair Value |  | Identical Assets        |  | Other Observable Inputs
|Description                         |  | 9/30/2008  |  | (Level 1)               |  | (Level 2)              
|                                    |  |           
|Available-for-sale securities       |  | 204        |  | -                       |  | 204                    
|                                    |  |           
|Total Assets Measured at Fair Value |  | 204        |  | -                       |  | 204                    
|                                    |  |           

Securities available-for-sale Securities classified as available for sale are reported at
fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash
flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bonds terms and conditions, among other things.

Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as loans measured for impairment. The following table presents the
fair value measurement of assets on a nonrecurring basis as of September 30, 2008, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

|(Dollars in 000's)                           |  |            |  | Fair Value Measurements |  |                        
|-------------------------------------------- |  | ---------- |  | ----------------------- |  | -----------------------
|                                             |  |            |  | At 9/30/08 Using        |  |                        
|                                             |  |           
|                                             |  |            |  | Quoted Prices in        |  |                        
|                                             |  |            |  | Active Markets for      |  |                        
|                                             |  | Fair Value |  | Identical Assets        |  | Other Observable Inputs
|Description                                  |  | 9/30/2008  |  | (Level 1)               |  | (Level 2)              
|                                             |  |           
|Loans measured for impairment                |  | 56,411     |  | -                       |  | -                      
|Specific reserves                            |  | (7,470)    |  | -                       |  | -                      
|                                             |  |           
|Total Impaired Assets Measured at Fair Value |  | 48,941     |  | -                       |  | -                      
|                                             |  |           

Impaired loans A loan is considered to be impaired when, based on current information and
events, it is probable that the Company will be unable to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement. Impaired loans are measured as a practical expedient, at the loans
observable market price or the fair market value of the collateral if the loan is collateral dependent. In addition to the specific reserves of $7.5 million, the Bank also had $1.1 million of charge-offs related to the $56.4 million of
loans measured for impairment.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial
Liabilities. This Statement permits entities to choose to measure financial instruments and certain other financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been
elected will be reported in earnings. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the FASBs

9

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long-term measurement objectives for accounting for financial instruments. This Statement was effective for fiscal years beginning after November 15, 2007. Management has not elected
the fair value option for any financial assets or liabilities at September 30, 2008, other than for available-for-sale securities.

NOTE 4  STOCK-BASED COMPENSATION

At September 30, 2008, PremierWest Bancorp had one active equity incentive plan  the 2002 Stock Incentive Plan (2002 Plan). The 2002 Plan was initially established
in May 2002 and approved by shareholders. The plan was amended and restated in May 2005 to allow for the issuance of restricted stock grants in addition to stock options. The plan was also amended and restated in May 2007 to increase the number of
shares available for issuance under the plan by 1,000,000 shares. Both amendments were approved by shareholders. The amended and restated 2002 Plan presently authorizes the issuance of up to 2,025,481 shares of stock, of which 1,009,565 shares were
available for issuance at September 30, 2008. As of September 30, 2008, there were no restricted stock grants outstanding.

The amended and restated 2002 Plan allows for stock options to be granted at an exercise price of not less than the fair market 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, 2008, stock option activity was as follows:

|                                    |  |           |  |                  |  | Weighted Average |  | Aggregate       |  | 
|----------------------------------- |  | --------- |  | ---------------- |  | ---------------- |  | --------------- |  | 
|                                    |  | Number    |  | Weighted Average |  | Remaining        |  | Intrinsic Value
|                                    |  | of Shares |  | Exercise Price   |  | Contractual Term |  | (in thousands) 
|                                    |  |           |  |                  |  |                  |  |                
|Stock options outstanding, 12/31/07 |  | 987,246   |  | $      8.68      |  |                  |  |                 |  | 
|Granted                             |  | 280,575   |  | $      9.65      |  |                  |  |                 |  | 
|Exercised                           |  | (201,385) |  | $      5.86      |  |                  |  | $       975    
|                                    |  |           |  |                  |  |                  |  |                
|Forfeited                           |  | (49,524)  |  | $    11.44       |  |                  |  |                 |  | 
|Expired                             |  | (996)     |  | $      5.06      |  |                  |  |                 |  | 
|                                    |  |           |  |                  |  |                  |  |                 |  | 
|Stock options outstanding, 9/30/08  |  | 1,015,916 |  | $      9.42      |  | 6.90             |  | $           -  
|                                    |  |           |  |                  |  |                  |  |                
|Stock options exercisable, 9/30/08  |  | 441,457   |  | $      7.89      |  | 4.94             |  | $           -  
|                                    |  |           |  |                  |  |                  |  |                

PremierWest Bancorp follows Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R 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. SFAS 123R requires companies to estimate the fair market value of stock-based payment awards on the date of grant using an option-pricing model. We use the
Black-Scholes option-pricing model to value our stock options. The Black-Scholes model requires the use of assumptions regarding the historical volatility of our stock price, our expected dividend yield, the risk-free interest rate and the weighted
average expected life of the options. The following schedule reflects the weighted-average assumptions included in this model as it relates to the valuation of options granted for the periods indicated:

|                         |  | Three months ended September 30, |  | Nine months ended September 30,
|------------------------ |  | -------------------------------- |  | -------------------------------
|                         |  | 2008                             |  | 2007                           
|                         |  |                                  | 
|                        
|Risk-free interest rate  |  | 3.4%                             |  | 4.6%                           
|Expected dividend        |  | 2.54%                            |  | 0.94%                          
|Expected lives, in years |  | 7.0                              |  | 7.0                            
|Expected volatility      |  | 29%                              |  | 29%                            

The weighted-average grant date fair value of options granted during the three and nine month periods ending September 30, 2008 were$2.12 and $2.54, respectively.

SFAS 123R 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. Excess tax benefits classified as financing cash inflows for the nine months ended September 30, 2008 and 2007 were $4,400 and $69,000, respectively.

Stock-based compensation expense recognized under SFAS 123R was $102,000 for the quarter ended September 30, 2008 with a related tax benefit of $39,000, and $75,000 for
the quarter ended September 30, 2007 with a related tax benefit of $28,700. For the year-to-date period ending September 30, 2008, stock-based compensation expense totaled $360,000 with a related tax benefit of $138,000. For the
year-to-date period ending September 30, 2007, stock-based compensation expense totaled $218,000 with a related tax benefit of $83,000. At September 30, 2008, unrecognized stock-based compensation expense totaled $1,631,371 and will be
expensed over a period of approximately 7 years.

In March 2008, the Companys Board of Directors approved a transaction involving the exchange of shares of the Companys common stock in partial payment of the option
exercise consideration paid by two officers to exercise vested options. On March 3, 2008, the two officers exercised 189,958 outstanding options using an aggregate of $7,000 of cash and 102,599 shares of common stock. The shares exchanged as
option exercise consideration were priced at the market closing price of the Companys common stock on that day.

10

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|NOTE 5 - INVESTMENT SECURITIES                                                                |  |             |  |                    |  |             |  |              |  |      
|--------------------------------------------------------------------------------------------- |  | ----------- |  | ------------------ |  | ----------- |  | ------------ |  | -----
|                                                                                             
|Investment securities at September 30, 2008 and December 31, 2007 consisted of the following: |  |             |  |                    |  |            
|                                                                                             
|(Dollars in 000's)                                                                            |  |             |  |                    |  |             |  |              |  |      
|                                                                                              |  |             |  | September 30, 2008 |  |             |  |             
|                                                                                              |  |            
|                                                                                              |  |             |  | Gross              |  | Gross       |  | Estimated   
|                                                                                              |  | Amortized   |  | unrealized         |  | unrealized  |  | fair        
|                                                                                              |  | cost        |  | gains              |  | losses      |  | value       
|                                                                                              |  |             |  |                    |  |             |  |             
|Available-for-sale:                                                                           |  |             |  |                    |  |             |  |              |  |      
|Mortgage-backed securities and collateralized                                                 |  |             |  |                    |  |             |  |              |  |      
|mortgage obligations                                                                          |  | 203         |  | 3                  |  | (2)         |  |              |  | 204  
|                                                                                              |  |             |  |                    |  |             |  |             
|Total                                                                                         |  | $       203 |  | $          3       |  | $      (2)  |  | $      204  
|                                                                                              |  |             |  |                    |  |             |  |             
|                                                                                             
|                                                                                             
|Held-to-maturity:                                                                             |  |             |  |                    |  |             |  |              |  |      
|Mortgage-backed securities and collateralized                                                 |  |             |  |                    |  |             |  |              |  |      
|mortgage obligations                                                                          |  | $   1,903   |  | $        17        |  | $         - |  | $    1,920  
|U.S. Government and agency securities                                                         |  | 25,709      |  | 16                 |  | (51)        |  | 25,674      
|Obligations of states and political subdivisions                                              |  | 2,925       |  | 10                 |  | (23)        |  |              |  | 2,912
|                                                                                              |  |             |  |                    |  |             |  |             
|                                                                                              |  | $  30,537   |  | $        43        |  | $     (74)  |  | $   30,506  
|                                                                                              |  |             |  |                    |  |             |  |             
|                                                                                             
|CRA Securities                                                                                |  | $   4,000   |  | $          -       |  | $         - |  | $   4,000   
|                                                                                              |  |             |  |                    |  |             |  |             
|                                                                                             
|Restricted equity securities                                                                  |  | $   3,628   |  | $          -       |  | $         - |  | $   3,628   
|                                                                                              |  |             |  |                    |  |             |  |             
|                                                                                             
|                                                                                             
|                                                                                              |  |             |  | December 31, 2007  |  |             |  |             
|                                                                                              |  |            
|                                                                                              |  |             |  | Gross              |  | Gross       |  | Estimated   
|                                                                                              |  | Amortized   |  | unrealized         |  | unrealized  |  | fair        
|                                                                                              |  | cost        |  | gains              |  | losses      |  | value       
|                                                                                              |  |             |  |                    |  |             |  |             
|Available-for-sale:                                                                           |  |             |  |                    |  |             |  |              |  |      
|Mortgage-backed securities and collateralized                                                 |  |             |  |                    |  |             |  |              |  |      
|mortgage obligations                                                                          |  | 222         |  | 2                  |  | (2)         |  |              |  | 222  
|                                                                                              |  |             |  |                    |  |             |  |             
|Total                                                                                         |  | $     222   |  | $        2         |  | $       (2) |  | $       222 
|                                                                                              |  |             |  |                    |  |             |  |             
|                                                                                             
|                                                                                             
|Held-to-maturity:                                                                             |  |             |  |                    |  |             |  |              |  |      
|U.S. Government and agency securities                                                         |  | $   1,484   |  | $         -        |  | $         - |  | $      1,484
|Obligations of states and political subdivisions                                              |  | 4,614       |  | 8                  |  | (34)        |  |              |  | 4,588
|                                                                                              |  |             |  |                    |  |             |  |             
|                                                                                              |  | $   6,098   |  | $         8        |  | $     (34)  |  | $     6,072 
|                                                                                              |  |             |  |                    |  |             |  |             
|                                                                                             
|Restricted equity securities                                                                  |  | $   1,865   |  | $         -        |  | $         - |  | $    1,865  
|                                                                                              |  |             |  |                    |  |             |  |             

All unrealized losses reflected above have been the result of changes in interest rates subsequent to the purchase of the securities. Because the decline in fair value is attributable
to changes in interest rates and not credit quality, and because the Bank has the ability and intent to hold these investments until a market price recovery is realized, or to maturity, the unrealized losses on these investments are not considered
other-than-temporarily impaired.

At September 30, 2008, investment securities with an estimated fair market value of $30.4 million were pledged to secure public deposits, certain nonpublic deposits and
borrowings.

11

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|NOTE 6LOANS, NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES                |  |            
|-------------------------------------------------------------------------------- |  | -----------
|                                                                                
|Loans as of September 30, 2008 and December 31, 2007 consisted of the following: |  |            
|(Dollars in 000's)                                                               |  | 2008       
|                                                                                 |  |            
|Real estate-commercial                                                           |  | $ 575,270  
|Real estate-construction                                                         |  | 328,265    
|Real estate-residential                                                          |  | 21,033     
|Commercial                                                                       |  | 208,390    
|Agricultural                                                                     |  | 47,473     
|Consumer                                                                         |  | 82,899     
|Overdrafts                                                                       |  | 3,128      
|Other                                                                            |  | 2,910      
|                                                                                 |  |            
|Total loans                                                                      |  | 1,269,368  
|Less: deferred loan fees                                                         |  | (1,490)    
|Less: allowance for loan losses                                                  |  | (20,960)   
|                                                                                 |  |            
|Loans, net                                                                       |  | $ 1,246,918
|                                                                                 |  |            

Transactions in the allowance for loan losses for the nine months ended September 30, 2008 and September 30, 2007 were as follows:

|(Dollars in 000's)                                                                                                           |  | 2008     |  | 2007    
|---------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | --------
|                                                                                                                             |  |          |  |         
|BALANCE, beginning of the period                                                                                             |  | $ 11,450 |  | $ 10,877
|Balance Sheet reclassification (1)                                                                                           |  | -        |  | (255)   
|Stockmans Bank purchase (2)                                                                                                  |  | 9,112    |  | -       
|Finance portfolio purchased                                                                                                  |  | -        |  | 436     
|Loans charged-off                                                                                                            |  | (13,355) |  | (573)   
|Loan recoveries                                                                                                              |  | 703      |  | 402     
|Loan loss provision                                                                                                          |  | 13,050   |  | 500     
|                                                                                                                             |  |          |  |         
|BALANCE, end of the period                                                                                                   |  | $ 20,960 |  | $ 11,387
|                                                                                                                             |  |          |  |         
|(1) The September 30, 2007 balance includes a balance sheet reclassification adjustment (decrease of $255,000) from the      |  |         
|allowance for loan losses to other liabilities in accordance with Financial Accounting Standard No. 5. The amount            |  |         
|reclassified represents the off-balance sheet credit exposure related to unfunded commitments to lend and letters of credit. |  |         
|(2) Amount resulting from the acquisition of Stockmans Bank - refer to Note 2.                                               |  |          |  |         

The following table summarizes non-performing assets as of September 30, 2008 and December 31, 2007:

|(Dollars in 000's)                                                |  | 2008     |  | 2007   
|----------------------------------------------------------------- |  | -------- |  | -------
|                                                                  |  |          |  |        
|Loans on non-accrual status                                       |  | $ 55,864 |  | $ 8,221
|Loans past due greater than 90 days but not on non-accrual status |  | 2,948    |  | 147    
|                                                                  |  |          |  |        
|Total non-performing loans                                        |  | 58,812   |  | 8,368  
|Other real estate owned                                           |  | 2,669    |  | -      
|                                                                  |  |          |  |        
|Total non-performing assets                                       |  | $ 61,481 |  | $ 8,368
|                                                                  |  |          |  |        
|Percentage of non-performing loans to total loans                 |  | 4.63%    |  | 0.82%  
|                                                                  |  |          |  |        
|Percentage of non-performing assets to total assets               |  | 4.17%    |  | 0.72%  
|                                                                  |  |          |  |        

NOTE 7 - LINE OF CREDIT AND OTHER BORROWINGS

The Bank had outstanding borrowings with the Federal Home Loan Bank (FHLB) totaling $48,000 and $14.0 million as of September 30, 2008 and December 31, 2007, respectively. In
addition, as of September 30, 2008, the Bank had $10.1 million outstanding under letters of credit used to support its public funds pledging requirements. Letters of credit do not increase the Banks outstanding borrowings; however, they
reduce the Banks borrowing availability. The Bank makes monthly principal and interest payments on long-term borrowings and monthly payments of interest only on short-term borrowings under the FHLBs Cash Management Advance (CMA)
program.

Of the total outstanding advances at September 30, 2008 and December 31, 2007, the Company had long-term borrowings of $48,000 and $508,000, respectively. Of the $48,000
outstanding at September 30, 2008, $11,000 will fully amortize to maturity in 2009; and $37,000 will fully amortize to maturity in 2014. Presently, monthly payments of $1,700 plus interest are being made against these long-term advances
with a weighted average annual interest rate of 6.76% .

The Bank also utilizes FHLBs CMA program for short-term borrowing needs. Advances taken under this program mature in less than one year. As of September 30, 2008, the Company
had no outstanding CMA advances; as of December 31, 2007, the company had $13.5 million in outstanding CMA advances.

12

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All outstanding borrowings with the FHLB are collateralized as provided for under the Advances, Security and Deposit Agreement between the Bank and the FHLB and include the
Banks FHLB stock and any funds or investment securities held by the FHLB that are not otherwise pledged for the benefit of others. In addition, certain qualifying loans were pledged to support the Banks outstanding advances and provided
for immediate available borrowing capacity, after subtracting existing borrowings and outstanding letters of credit, of approximately $37.1 million and $245,000 as of September 30, 2008 and December 31, 2007, respectively.

As an additional source of liquidity, the Bank maintains unsecured federal funds lines with multiple correspondent banks. Federal funds purchased generally mature within one to four
days from the transaction date. As of September 30, 2008, the Company had $125.0 million in aggregate available borrowing capacity through correspondent banks. Outstanding balances under these commitments at September 30, 2008 and December 31,
2007 were $13.3 million and $54.0 million, respectively.

NOTE 8  JUNIOR SUBORDINATED DEBENTURES

On December 30, 2004, the Company established two wholly-owned statutory business trusts (PremierWest Statutory Trust I and II) that were formed to issue junior subordinated
debentures and related common securities. On August 25, 2005, Stockmans Financial Group established a wholly-owned statutory business trust (Stockmans Financial Trust I) to issue junior subordinated debentures and related common securities.
Following the acquisition of Stockmans Financial Group, the Company became the successor in interest to Stockmans Financial Trust I. Common stock issued by each of the Trusts and held as an investment by the Company is recorded in other assets in
the consolidated balance sheets. Following are the terms of the junior subordinated debentures as of September 30, 2008.

|                                                                                                                          |  |            |  | Issued       |  |          |  | Maturity  |  | Redemption
|------------------------------------------------------------------------------------------------------------------------- |  | ---------- |  | ------------ |  | -------- |  | --------- |  | ----------
|Trust Name                                                                                                                |  | Issue Date |  | Amount       |  | Rate     |  | Date      |  | Date      
|                                                                                                                          |  |            |  |              |  |          |  |           |  |           
|                                                                                                                         
|PremierWest Statutory                                                                                                     |  | December   |  | $ 7,732,000  |  | 5.65%(1) |  | December  |  | December  
|Trust I                                                                                                                   |  | 2004       |  |              |  |          |  | 2034      |  | 2009      
|                                                                                                                         
|PremierWest Statutory                                                                                                     |  | December   |  | 7,732,000    |  | 5.65%(2) |  | March     |  | March     
|Trust II                                                                                                                  |  | 2004       |  |              |  |          |  | 2035      |  | 2010      
|                                                                                                                         
|Stockmans Financial                                                                                                       |  | August     |  | 15,464,000   |  | 5.93%(3) |  | September |  | September 
|Trust I                                                                                                                   |  | 2005       |  |              |  |          |  | 2035      |  | 2010      
|                                                                                                                          |  |            |  |              |  |          |  |           |  |           
|                                                                                                                          |  |            |  | $ 30,928,000 |  |          |  |           |  |           
|                                                                                                                          |  |            |  |              |  |          |  |           |  |           
|                                                                                                                         
|                                                                                                                         
|(1) PremierWest Statutory Trust I bears interest at the fixed rate of 5.65% until December 2009 at which time it converts |  |           
|to the variable rate of LIBOR + 1.75%, adjusted quarterly, through the final maturity date in December 2034.              |  |           
|(2) PremierWest Statutory Trust II bears interest at the fixed rate of 5.65% until March 2010 at which time it converts   |  |           
|to the variable rate of LIBOR + 1.79%, adjusted quarterly, through the final maturity date in March 2035.                 |  |           
|(3) Stockmans Financial Trust I bears interest at the fixed rate of 5.93% until September 2010 at which time it converts  |  |           
|to the variable rate of LIBOR + 1.42%, adjusted quarterly, through the final maturity date in September 2035.             |  |           

NOTE 9 - COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments
include commitments to extend credit and standby letters of credit. These instruments involve various levels and elements of credit and interest rate risk in excess of the amount recognized in the accompanying consolidated financial statements. The
contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. As of September 30, 2008, the Company had $150.6 million of commitments to extend credit to
customers and $25.5 million of standby letters of credit.

In the ordinary course of business, the Bank may become involved in various litigation arising from normal banking activities. In the opinion of Management, the ultimate disposition
of current actions will not have a material adverse effect on the Companys consolidated financial position or results of operations.

13

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NOTE 10 - EARNINGS PER SHARE

The Company's basic earnings per common share is computed by dividing net income available to common shareholders (net income less dividends declared on preferred stock) by the
weighted average number of common shares outstanding during the period, after giving retroactive effect to stock dividends and splits. The Company's diluted earnings per common share is computed similar to basic earnings per common share except that
the numerator is equal to net income and the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. Included in the denominator is the dilutive
effect of stock options computed under the treasury stock method. Excluded from the denominator is the conversion of the Companys preferred stock, as its inclusion would have been antidilutive for the 2008 periods presented. The following
table summarizes the weighted average shares outstanding for computation of basic and diluted shares for the three and nine months ended September 30, 2008 and 2007:

|Three-months ended September 30:          |  | 2008       |  | 2007      
|----------------------------------------- |  | ---------- |  | ----------
|                                          |  |            |  |           
|Weighted average number of common shares: |  |            |  |           
|Average shares outstanding-basic          |  | 22,398,418 |  | 17,007,857
|Average shares outstanding-diluted        |  | 22,424,008 |  | 18,449,381
|                                         
|Nine-months ended September 30:           |  | 2008       |  | 2007      
|                                          |  |            |  |           
|Weighted average number of common shares: |  |            |  |           
|Average shares outstanding-basic          |  | 21,905,440 |  | 17,022,356
|Average shares outstanding-diluted        |  | 21,948,588 |  | 18,512,521

Stock-based awards of approximately 3,500 and 136,575, respectively, for the three months and nine months ended September 30, 2007, as well as 11,500 and 280,575, respectively, for
the three months and nine months ended September 30, 2008, were not included in the computation of diluted earnings per share, as their inclusion would be antidilutive.

NOTE 11 - RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141R (revised 2007), Business Combinations (SFAS 141R), which replaces SFAS
No. 141. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the
goodwill acquired. The statement also establishes disclosure requirements that will enable users to evaluate the nature and financial effects of the business combination. SFAS 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (on or after June 28, 2009 of fiscal 2010). Early adoption is not permitted. After the effective date, the Company will apply
the requirements of SFAS 141R to any future business combinations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No.
51 (SFAS 160). SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a
noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parents equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net
income on the face of the income statement. SFAS 160 clarifies that changes in a parents ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest.
In addition, this statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation
date. SFAS 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Earlier adoption is prohibited. The Company is currently evaluating the impact the adoption of SFAS 160 will have on its consolidated financial statements.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161).
SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entitys financial position, financial
performance and cash flows. The provisions of SFAS 161 are effective for any quarter ending after February 28, 2009. The Company is currently evaluating the impact the adoption of SFAS 161 will have on its consolidated financial
statements.

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In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS
162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are presented in conformity with generally accepted accounting
principles (GAAP) in the United States (the GAAP hierarchy). The adoption of SFAS 162 will be effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company is currently evaluating the impact the adoption of SFAS 162 will have on its consolidated financial statements.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 163, Accounting for Financial Guarantee Insurance Contractsan interpretation of FASB Statement
No. 60 (SFAS 163). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. This statement
clarifies how SFAS 60 applies to financial guarantee insurance contracts by insurance enterprises. This statement also requires expanded disclosures about financial guarantee insurance contracts. The adoption of SFAS 163 will be effective for
financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for some disclosures about the insurance enterprises risk-management activities. The Company is currently
evaluating the impact the adoption of SFAS 163 will have on its consolidated financial statements.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

This report includes forward-looking statements about PremierWest. Forward-looking statements generally include financial projections; descriptions of plans or objectives
of management for future operations, products or services; forecasts of future economic performance; adequacy of loan loss reserves and descriptions of assumptions underlying or relating to any of the foregoing. Forward-looking statements discuss
matters that are not facts, and often include the word believe, expect, anticipate, intend, plan, estimate, project, target, will,
can, would, should, could or may. You should not unduly rely on forward-looking statements. Forward-looking statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. They give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we do not undertake to update them to reflect changes that occur
after the date they are made.

There are a number of factors that could cause results to differ significantly from our expectations, including competition; deterioration in credit quality, or in the value of the
collateral securing our loans, due to higher interest rates, increased unemployment, further or continued disruptions in the credit markets, or other economic factors; customer acceptance of new products and services; economic conditions and events
that disproportionately affect our business due to regional concentration; general business and economic conditions, including the residential and commercial real estate markets; interest rate changes; regulatory and legislative changes; changes in
the demand for loans and changes in consumer spending, borrowing and savings habits; and changes in accounting policies. Our periodic reports filed with the SEC including our annual report on Form 10-K for the year ended December 31, 2007 and our
current quarterly reports on Form 10-Q describe additional factors.

This report includes information about our historical financial performance, and this information should not be considered as an indication or projection of future results.

OVERVIEW -The following includes Managements discussion of the financial condition and
results of operations for PremierWest Bancorp and its wholly owned subsidiary, PremierWest Bank including the Banks wholly owned subsidiaries, Premier Finance Company and PremierWest Investment Services, Inc., for the three and nine month
periods ending September 30, 2008. This discussion should be read in conjunction with the consolidated financial statements and accompanying notes contained in this report as well as the Companys Form 10-K for the year ended December 31, 2007.
For discussion purposes, Management has made comparisons, as it deems appropriate, to comparable interim periods in 2007 and the fiscal year period ended December 31, 2007.

HIGHLIGHTS -For the third quarter ending September 30, 2008, the Company earned $1.3 million
or $0.05 per fully diluted share, a decrease from earnings of $4.0 million or $0.22 per fully diluted share for the quarter ended September 30, 2007. Annualized return on average shareholders equity was 2.70% and annualized return
on average assets was 0.34% for the quarter ended September 30, 2008, as compared to an annualized return on average shareholders equity and return on average assets of 12.84% and 1.46%, respectively, for the quarter ended September 30, 2007.
For the nine month period ending September 30, 2008, the annualized return on average shareholders equity and on average assets was 2.70% and 0.34%, respectively, compared to 12.46% and 1.44%, respectively, for the comparable nine months of
2007.

PremierWests overall earnings declined over the three month period ending September 30, 2008, in comparison to the same period a year ago, resulting principally from a charge to
earnings in the current quarter of $4.8 million in loan loss provision compared to a $225,000 charge during the quarter ended September 30, 2007. Also contributing to the decline was an 18.36% decline in net interest margin from 5.72% during
the quarter ending September 30, 2007 to 4.67% during the quarter ending September 30, 2008. On a sequential quarter basis, net interest margin, on a taxable equivalent basis, declined from 4.88% for the quarter ending June 30, 2008 to 4.67% for the
most recent quarter.

At September 30, 2008, our allowance for loan losses totaled $21.0 million, representing 1.65% of total loans net of deferred loan fees. The $3.5 million decrease in our
allowance from June 30, 2008, was comprised of an $8.6 million decrease from charge-offs during the quarter partially offset by both a $4.7 million increase from the provision charge against earnings and a $364,000 increase from
recoveries of previously charged-off loans.

At September 30, 2008 and December 31, 2007, gross loans (loans net of deferred loan fees but before deducting the allowance for loan losses), totaled $1.27 billion and $1.00
billion, respectively, an increase of $244.2 million or 23.85% since year-end, which includes the January 26, 2008 acquisition of Stockmans Financial Groups $212.6 million portfolio of loans. Deposits totaled $1.22 billion at
September 30, 2008, compared to $935.3 million at December 31, 2007, an increase of $290.6 million or a 31.07% increase since year-end, again including acquired deposits as of January 26, 2008 of $296.1 million.

Non-performing assets (defined as loans on non-accrual status, loans 90 days or more past due and other real estate owned) totaled $61.5 million at September 30, 2008, an increase
of $19.6 million from the balance for the quarter ended June 30, 2008, and an increase of $53.1 million when compared to $8.4 million in non-performing assets at December 31, 2007. The increase in non-performing loans this quarter is a
result of various credit relationships being placed on nonaccrual status, as discussed further below in Financial Condition.

The Banks net interest income during the most recent quarter decreased from $15.7 million in the quarter ended June 30, 2008 to $15.6 million. Our tax adjusted net
interest margin for the quarter ended September 30, 2008, also decreased to 4.67 percent, compared to 4.88 percent for the quarter ended June 30, 2008. Interest income was adversely affected by the impact of non-performing assets during the current
quarter with interest reversals on loans being placed on non-accrual status reducing interest income by $593,000 and interest lost on non-performing loans from the date they became non-accruing through the end of the quarter further reducing the
quarters interest income by an additional $216,000.

The Banks loan-to-deposit ratio continues to exceed 100% because, within our marketplace, we continue to experience greater loan demand than our ability to gather local core
deposits as a funding source. Our loan-to-deposit ratio, based on net loans (loans net of

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deferred loan fees and the allowance for loan losses) was 101.77%, 108.29% and 106.98% as of September 30, 2008, December 31, 2007 and September 30, 2007, respectively.

Core deposits are our lowest cost and preferred source of funds. When our loan volume exceeds our level of core deposits we must rely on higher cost borrowings and/or brokered
deposits as a secondary source of funding to bridge the gap between deposit and loan volumes. Historically our funding gap has been supported by short-term borrowings; however, during 2007 the Bank began utilizing brokered certificates of deposit as
a funding source. Brokered deposits comprised $133.2 million of our total deposits at September 30, 2008, an increase of $40.4 million over the previous quarter ending June 30, 2008. Of the total brokered deposits, $30.8 million or 23.09
% consisted of reciprocal brokered deposits. This arrangement allows the Bank to maintain these deposits and enables the customers funds to be separated into FDIC-insured increments, providing both principal and interest protection to certain
depositors. Brokered deposits are a higher cost source of funding compared to core deposits, but when used in conjunction with short-term borrowings, provide a cost effective source of funding and an additional source of liquidity. Management will
continue to incorporate brokered deposits as part of the Banks overall funding strategy in order to support its liquidity needs.

Management continues to implement relationship-oriented strategies for attracting core deposits to reduce our reliance on higher cost borrowings and brokered deposits in order to
maximize interest rate margins within the constraints of our highly competitive marketplace. While the competitive environment for attracting deposits remains keen, PremierWest has been successful over time at growing its core deposit base and
continues to aggressively seek local deposits. At the same time, PremierWest has historically operated within a geographic market with a robust and growing economy that presents the opportunity to grow our loan portfolio while maintaining
consistency in credit quality. While the current economic slowdown has affected loan demand, credit quality and deposit growth, Management anticipates that the Bank will continue to capture credit worthy loan volume at a faster rate than our ability
to fully fund these loans solely from core deposits.

The Banks year-over-year loan growth and an ongoing pipeline of new loan production is in line with Managements internal growth expectations at September 30, 2008, in
light of current credit quality and general economic considerations. Managements broader business plan and growth strategy continues to be focused on driving maturation of business at existing de novo branch locations.

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FINANCIAL HIGHLIGHTS

The following table presents information regarding yields on interest-earning assets, rates paid on interest-bearing liabilities, net interest spreads, net yields on average
interest-earning assets, returns on average assets and returns on average equity for the periods indicated.

|(Dollars in 000's)                                      |  |           |  |           |  | Increase   |  |         
|------------------------------------------------------- |  | --------- |  | --------- |  | ---------- |  | --------
|Analysis for the three-month period ended September 30: |  | 2008      |  | 2007      |  | (Decrease) |  | % Change
|                                                        |  |           |  |           |  |            |  |         
|Average fed funds sold and investments                  |  | $ 44,074  |  | $ 9,319   |  | $ 34,755   |  | 372.95% 
|Average gross loans                                     |  | 1,284,678 |  | 990,231   |  | 294,447    |  | 29.74%  
|Average interest-earning assets                         |  | 1,328,752 |  | 999,550   |  | 329,202    |  | 32.94%  
|Average interest-bearing liabilities                    |  | 1,054,541 |  | 767,647   |  | 286,894    |  | 37.37%  
|Average total assets                                    |  | 1,495,529 |  | 1,102,091 |  | 393,438    |  | 35.70%  
|Average equity                                          |  | 189,952   |  | 124,962   |  | 64,990     |  | 52.01%  
|Average yield earned (1)                                |  | 6.81%     |  | 8.60%     |  | (1.79)     |  | -20.81% 
|Average rate paid                                       |  | 2.70%     |  | 3.75%     |  | (1.05)     |  | -28.00% 
|Net interest spread                                     |  | 4.11%     |  | 4.85%     |  | (0.74)     |  | -15.26% 
|Net interest income to average                          |  |           |  |           |  |            |  |         
|interest-earning assets (net interest margin) (1)       |  | 4.67%     |  | 5.72%     |  | (1.05)     |  | -18.36% 
|Annualized return on average assets                     |  | 0.34%     |  | 1.46%     |  | (1.12)     |  | -76.71% 
|Annualized return on average equity                     |  | 2.70%     |  | 12.84%    |  | (10.14)    |  | -78.97% 
|Efficiency ratio (2)                                    |  | 63.13%    |  | 59.21%    |  | 3.92       |  | 6.62%   
|                                                       
|(Dollars in 000's)                                      |  |           |  |           |  | Increase   |  |         
|Analysis for the nine-month period ended September 30:  |  | 2008      |  | 2007      |  | (Decrease) |  | % Change
|                                                        |  |           |  |           |  |            |  |         
|Average fed funds sold and investments                  |  | $ 38,434  |  | $ 10,412  |  | $ 28,022   |  | 269.13% 
|Average gross loans                                     |  | 1,250,709 |  | 945,424   |  | 305,285    |  | 32.29%  
|Average interest-earning assets                         |  | 1,289,143 |  | 955,836   |  | 333,307    |  | 34.87%  
|Average interest-bearing liabilities                    |  | 1,012,253 |  | 729,677   |  | 282,576    |  | 38.73%  
|Average total assets                                    |  | 1,449,040 |  | 1,056,148 |  | 392,892    |  | 37.20%  
|Average equity                                          |  | 184,909   |  | 121,852   |  | 63,057     |  | 51.75%  
|Average yield earned (1)                                |  | 7.11%     |  | 8.60%     |  | (1.49)     |  | -17.33% 
|Average rate paid                                       |  | 2.90%     |  | 3.63%     |  | (0.83)     |  | -22.87% 
|Net interest spread                                     |  | 4.21%     |  | 4.97%     |  | (0.22)     |  | -4.43%  
|Net interest income to average                          |  |           |  |           |  |            |  |         
|interest-earning assets (net interest                   |  |           |  |           |  |            |  |         
|margin) (1)                                             |  | 4.83%     |  | 5.83%     |  | (1.00)     |  | -17.15% 
|Annualized return on average assets                     |  | 0.34%     |  | 1.44%     |  | (1.10)     |  | -76.39% 
|Annualized return on average equity                     |  | 2.70%     |  | 12.46%    |  | (9.76)     |  | -78.33% 
|Efficiency ratio (2)                                    |  | 65.21%    |  | 60.71%    |  | 4.50       |  | 7.41%   



|Notes:
|------

|(1) | Tax equivalent                                                              
|--- | ----------------------------------------------------------------------------
|(2) | Non-interest expense divided by net interest income plus non-interest income
|   

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|RESULTS OF OPERATIONSQUARTER ENDED SEPTEMBER 30, 2008
|-----------------------------------------------------

NET INTEREST INCOME Net interest income, our primary source of revenue, is the difference
between the interest income generated from our earning assets (loans and investments) and the interest expense paid on our interest-bearing liabilities (interest-bearing deposits and borrowed funds). During the third quarter of 2008, our interest
income increased $1.2 million while our interest expense decreased $100,000, resulting in our net interest income increasing $1.3 million, or 8.85% compared to the same period a year ago. Net interest income for the three months ending
September 30, 2008 decreased $185,000 or 1.18% over the preceding quarter ended June 30, 2008, from $15.7 million in the quarter ended June 30, 2008 to $15.6 million.

A key metric of our profitability is our net interest margin (net interest income divided by average interest-earning assets), which provides a measure of the relative strength of our
net interest income over time, all other things being equal. Both our net interest income and net interest margin are affected by variables such as the volume and mix of our earning assets; the volume and mix of our interest-bearing liabilities; the
credit quality of our loan portfolio; and the general movement in the market rates of interest.

The Banks tax adjusted net interest margin for the quarter ended September 30, 2008 decreased to 4.67 %, compared to 4.88 percent for the quarter ended June 30, 2008. The
decline in the net interest margin is attributable to an increase in interest reversals of approximately $593,000 related to loans moved to non-accrual status during the quarter and an increase of $216,000 in interest income that would have
otherwise been recorded on loans that were on non-accrual status during the quarter. These factors accounted for a 25 basis point decrease in what we otherwise would have reported. The balance of the decline in net interest income occurred primarily
as a result of the yield on our investment portfolio declining due to maturities of higher yielding securities during the quarter.

LOAN LOSS PROVISION Charges made to the provision for loan losses that translate to
increases in our allowance for loan losses were $4.8 million and $225,000 for the three month periods ended September 30, 2008 and September 30, 2007, respectively. Net charges-offs, that reduce our allowance for loan losses, were $8.2
million during the third quarter of 2008 compared to net charge-offs of approximately $90,000 for the corresponding period in 2007.

NON-INTEREST INCOME Non-interest income represents service charges, fees, commissions and
other income derived principally from general banking services, residential mortgage activity, sales of investment and insurance products, and gains from the sale of other assets. Total non-interest income increased approximately $228,000 or
9.88% for the three months ending September 30, 2008, as compared to the corresponding period in 2007. Growth in non-interest income during the third quarter of 2008 included increases of $261,000 from various account service charges and fees and
$95,000 from credit card interchange fees. These increases were partially offset by a sharp reduction in real estate mortgage broker referral fees that dropped by $51,000 as well as mortgage origination fees that have fallen $40,000 from
the same quarter of 2007. In comparison with the second quarter of 2008, non-interest income during the quarter ended September 30, 2008 decreased by $63,000 with deposit services charges and fees increasing $144,000
offset by mortgage origination fees decreasing $121,000 and real estate mortgage
broker referral fees and other income and fees decreasing by $86,000.

NON-INTEREST EXPENSE Non-interest expense increased approximately $1.6 million or 16.20%
for the three months ended September 30, 2008, as compared to the corresponding period in 2007. On a summary basis, the increase over the three month period was a result of $818,000 increase in salary and benefit expenses; a $350,000
increase in occupancy and equipment expenses; and a $424,000 increase in other non-interest expenses. Prominent among the changes in other non-interest expense were increases of $235,000 in FDIC assessments and $302,000 in advertising and
business development. The increases in non-interest expenses are largely the result of the acquisition of Stockmans Financial Group and the year-over-year impact of new office openings in 2007. Management believes that the Stockmans acquisition and
the new offices that further expand the Banks footprint will drive future earnings growth.

EFFICIENCY RATIO- The Company's efficiency ratio was 63.13% during the third quarter of 2008, a
392 basis point deterioration compared to 59.21% for the third quarter of 2007, and a 315 basis point improvement from the immediately preceding quarter ending June 30, 2008. Management believes that a ratio in the high 50% to low 60% range is a
reasonable and sustainable target given the Banks strategies for both growth and customer service and is pursuing cost-saving initiatives to bring the efficiency ratio back to its target range.

NINE MONTHS ENDED SEPTEMBER 30, 2008

NET INTEREST INCOME For the nine months ended September 30, 2008 net interest income
increased $4.9 million, or 11.88% compared to the same period in 2007. During the first nine months of 2008, our interest income increased $7.1 million while our interest expense increased $2.2 million. The increase occurred exclusively
as a consequence of increased earning assets as our net interest margin declined from 5.83% for the nine months ended September 30, 2007 to 4.83% during the most recently completed nine month period ended September 30, 2008. The year-over-year
increase in earning assets totaled $333.3 million, or 34.87%, and was largely related to the merger with Stockmans.

The year-over-year decline in net interest margin is particularly attributable to margin contraction related to the Banks asset sensitive asset-liability positioning and the
dramatic decrease in short-term interest rates that occurred early in 2008. Compared to the third quarter of 2007, when our net interest margin was 5.72%, our net interest margin for the four successive quarters following September 30, 2007, was
5.41%, 4.99%, 4.88% and 4.67%, respectively.

A key metric of our profitability is our net interest margin (net interest income divided by average interest-earning assets), which provides a measure of the relative strength of our
net interest income over time, all other things being equal. Both our net interest income and net interest margin are affected by variables such as the volume and mix of our earning assets; the volume and mix of our interest-bearing liabilities; the
credit quality of our loan portfolio; and the general movement in the market rates of interest.

LOAN LOSS PROVISION Charges made to the provision for loan losses were $13.1 million
and $500,000 for the nine month periods ended September 30, 2008 and September 30, 2007, respectively. The Company had net charge-offs of $12.7 million during the first nine months of 2008 compared to net charge-offs of $171,000 for the
corresponding period in 2007. In addition to the increase in the

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allowance for loan losses from provision and the reduction from net charge-offs, the reserve was also increased by $9.1 million as a result of the Stockmans merger. Management
believes that the September 30, 2008 balance in the allowance for loan losses was reasonable and appropriate to support inherent probable losses in the Companys loan portfolio. It is important to note that general economic conditions remain
uncertain, and real estate valuations continue to reflect volatility.

NON-INTEREST INCOMETotal non-interest income increased approximately $776,000 or 11.7%
for the nine months ending September 30, 2008, as compared to the corresponding period in 2007. Growth in non-interest income during the first nine months of 2008 was sourced to increases of $827,000 in account service charges and fees
$318,000 from other commissions and fees. Offsetting the non-interest income increases were decreases of $211,000, or 90.84%, in real estate mortgage broker referral fees as a result of the elimination of a referral program in July 2007, and
$158,000 in other non-interest income.

NON-INTEREST EXPENSE Non-interest expense increased approximately $5.9 million or 20.1%
for the nine months ended September 30, 2008, as compared to the corresponding period in 2007. On a summary basis, the increase over the nine month period was a result of $2.4 million increase in salary and benefit expenses; a $1.1 million
increase in occupancy and equipment expenses; and a $2.3 million increase in other non-interest expenses. Prominent among changes in other non-interest expense were increases of $620,000 in FDIC assessments, $287,000 in legal expenses,
$134,000 in telephone expense and $156,000 in advertising and business development. The increases in non-interest expenses are largely the result of the acquisition of Stockmans Financial Group and the year-over-year impact of offices opened
during 2007.

EFFICIENCY RATIO The Company's efficiency ratio was 65.21% during the first nine months of
2008, a 449 basis point deterioration compared to 60.72% for the first nine months of 2007. Management believes that a ratio in the high 50% to low 60% range is a reasonable and sustainable target given the Banks strategies for both growth and
customer service and is implementing actions to bring the efficiency ratio back to its target range. A plan for reducing the efficiency ratio has been implemented.

FINANCIAL CONDITION Total assets of $1.47 billion at September 30, 2008, decreased
$16.7 million or 1.12% compared to total assets of $1.49 billion at June 30 2008. From June 30 to September 30, 2008, gross loans decreased $5.1 million; the allowance for loan losses decreased $3.5 million; other earning assets
increased $20,000; premises and equipment decreased $147,000; goodwill and core deposit intangibles decreased $231,000; and other assets including accrued interest and Other Real Estate Owned increased $1.7 million.

Net loans accounted for 84.68% of total assets at September 30, 2008 compared to 83.85% at June 30, 2008. As of September 30, 2008, the allowance for loan losses increased to
$21.0 million from $11.5 million at December 31, 2007. The allowance for loan losses was enhanced with $13.1 million in provision charged against earnings and decreased by $12.7 million in net charge-offs. Additionally, $9.1
million in allowance for loan losses was acquired with Stockmans. The Company's ratio of allowance for loan losses to total loans was 1.65% at September 30, 2008, as compared to 1.92% at June 30, 2008, 1.12% at December 31, 2007 and 1.14% at
September 30, 2007.

Our Special Assets team is successfully working through various non-performing credit relationships as evidenced by the progress achieved this quarter in the resolution of a number of
previously reported non-performing assets and one large relationship described in more detail below. With the receipt of new appraisals and in recognition of the current real estate values, $8.6 million in previously identified non-performing
loans were charged off this quarter. After the charge-offs, our reserve for loan and lease losses remains strong at $21.0 million or 1.65 percent of total loans.

Total non-performing assets were $61.5 million at September 30, 2008, up from $41.9 million at June 30, 2008. Non-performing assets are concentrated in 11 relationships
comprising $53.7 million or 87.3 percent of the total. Management continues to take a conservative, proactive approach in evaluating the current portfolio of loans, particularly in view of the ongoing volatility in real estate valuations.
Consistent with our June 30, 2008 release, we provide below an updated summary addressing the status of previously reported non-performing assets and additions that occurred during the quarter.

The first previously reported relationship consists of multiple loans secured by real estate in northern California that totaled $14.1 million as of June 30, 2008. The largest
loan in this relationship is now at $6.4 million as the result of a $1.0 million paydown and our decision to charge off $5.0 million during the quarter. Two additional loans totaling $1.7 million with separate sources of repayment
were restored to accrual status and remain current. Foreclosure by another lender against our guarantor on an adjacent property during the second quarter and the borrower filing personal bankruptcy during the third quarter led to the actions we have
taken. We intend to continue to work through foreclosure of the real estate and to ensure any bankruptcy proceeds available are properly applied to this relationship. A specific reserve for impairment on the remaining credit relationship had been
previously established in the amount of $931,000.

The second previously reported non-performing relationship is comprised of two purchased participation loans: the first is secured with approved residential lots and the second with
unimproved land also in northern California. We purchased a minority position from two separate financial institutions, each with a national presence. The borrower is a well-known local real estate development company that was impacted by the
decline in real estate activity in late 2007. One of the guarantors has since filed for personal bankruptcy. The $5.0 million credit was reported as non-performing with the December 31, 2007 earnings release. The related $7.3 million credit
was placed on non-accrual status during the first quarter of 2008, at which time a new appraisal was obtained from the lead bank. As these two properties are in close proximity, a reserve for impairment was established in the second quarter of 2008
for both credits. During the third quarter, foreclosure was completed on the $5.0 million participation loan and, as a result of actions by the lead lender $1.3 million was booked as Other Real Estate Owned with the balance being charged
against the loan loss reserve. We are working with the lead bank on marketing this property. The second participation is in the final stages of foreclosure with a resolution expected during the fourth quarter.

The third previously reported relationship consists of two loans originally totaling $6.8 million that were acquired at the time of our merger with Stockmans in January of this
year. The relationship was secured with undeveloped property in central and northern California and was identified and discussed in detail during our pre-merger due diligence of Stockmans. The northern California property, comprising $2.3
million of the total, was foreclosed on in the second quarter with a charge-off of $1.3 million and the remaining $1.0 million balance included as Other Real Estate Owned. During the third quarter, we have been actively marketing this
property with interest expressed by several parties. The second credit consists of a $4.5 million credit secured by undeveloped real estate with a significant loan from a third-party investor group in second position behind our lien. The
borrower continues to keep this loan

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current while both parties negotiate a workout. We had previously established a specific reserve for impairment of $3.1 million on this credit, which Management believes is
sufficient given the value of the property as well as guarantor support.

The fourth previously reported relationship consisted of a $3.1 million credit secured with Class A commercial office space in the Portland, Oregon area. This credit was paid in
full during the quarter with no loss sustained by the Bank.

The fifth previously reported relationship totaling $3.0 million is comprised of multiple loans secured by approved residential building lots and by completed and partially
completed residential units, all situated in central Oregon. During this quarter, negotiations continued with the borrower to obtain the collateral and to restructure the remaining debt with a goal of avoiding any further loss. Once the Bank obtains
the underlying collateral, it will be marketed and any deficiency pursued. A specific reserve for impairment in the amount of $598,000 has been established for this credit.

The sixth previously reported credit consists of notes totaling $2.8 million. The loans were for property acquisition and development as well as residential unit construction in
central Oregon. Based on updated appraisals and cross collateral/cross default provisions, we do not anticipate any significant loss when we obtain the underlying collateral through foreclosure or restructuring of the debt. We have been working with
the borrower to bring this relationship to a positive conclusion.

A number of credit relationships totaling $30.8 million were moved to non-performing status during the most recent quarter. The first of these credit relationships consists of
multiple notes totaling $10.7 million, all secured by commercial property including an assisted living facility, commercially zoned land and a non-owner occupied commercial building. Two of the properties are in Oregon and one in Northern
California. The borrower has experienced severe cash flow difficulties and is attempting to sell assets. We have obtained updated appraisals on the properties and, as a result, have established a specific reserve for impairment of $480,000.
Negotiations with the borrower are on-going and legal actions have been initiated.

The second relationship consists of two notes totaling $6.3 million. This relationship is secured by two residential developments in Central Oregon. Based on updated appraisals, a
specific reserve for impairment has been established for these credits in the amount of $360,000, and negotiations with the borrower continue.

The third relationship consists of multiple notes totaling $6.3 million. This borrower has been impacted by a real estate related business that failed with the downturn of the
mortgage lending industry. He has been working with all of his creditors to establish an orderly plan to sell assets. Our collateral consists of residential development lots, a utility system infrastructure and other commercial property in Southern
Oregon. We have agreed to a restructure of this credit and will be monitoring it closely for performance. Based on current collateral values, we anticipate no loss at this time.

The fourth credit relationship moved to non-performing status during the quarter consists of notes totaling $4.8 million. The notes are secured by residential lots or bare land in
Central Oregon. Updated appraisals have been ordered and a specific reserve for impairment has been established in the amount of $477,000, based on Managements evaluation of the collateral value.

The last of the new credit relationships moved to non-performing status this quarter is comprised of loans totaling $2.7 million. The collateral includes two commercial buildings
and two completed spec homes in Southern Oregon. A restructure plan was in place during the third quarter; however, due to delays in the sale of collateral securing one of the loans, the relationship went past due over 90 days as of quarter end. We
are working with the borrower on the restructure plan and anticipate a reduction of the debt during the fourth quarter. Based on appraised values of the remaining collateral, we anticipate no loss on this relationship.

As reported last quarter, the bank strengthened its concentration of resources directed at dealing with non-performing assets in late 2007 to provide a proactive, centralized and
focused approach to expediting potential collections, recoveries, workouts and liquidations of criticized assets. The continuing results from these actions were evident during the most recent quarter with foreclosure actions commenced and
liquidations scheduled or initiated. More importantly, this team is working closely with borrowers that are motivated to resolve their financial issues through properly collateralized restructures and workouts. In addition, the team is proactive in
contacting distressed asset investors in anticipation of soliciting interest in acquiring notes or foreclosed property. The holding costs of certain other real estate owned are being reviewed as current volatile market conditions may warrant holding
some foreclosed assets for future gains. With shareholder value in mind, our team will continue to evaluate these assets and act accordingly.

Total deposits increased to $1.23 billion at September 30, 2008, a $5.1 million or 0.4% increase when compared to the deposit total as of June 30, 2008. During 2007, the Bank
began utilizing brokered certificates of deposits as part of its funding strategy in order to support the Banks overall liquidity needs. Deposits at September 30, 2008, include $133.2 million in brokered certificates of deposit as compared
to $59.3 million in brokered deposits at December 31, 2007.

Net loan volume continues to exceed our level of deposits. As of September 30, 2008, our loan-to-deposit ratio of 101.8% compared to a ratio of 108.3% as of December 31, 2007, and
107.0% as of September 30, 2007. Overall demand for loans has been steady and as anticipated, deposit growth, particularly in our newest market areas, has lagged behind loan production. The Banks deposit mix remained stable, consisting of
18.8% non-interest bearing demand. Core deposits, consisting of non-interest bearing demand, interest-bearing demand and regular savings deposits represented 52.6%, while time deposits (excluding brokered deposits) comprised 36.5% of total deposits,
with brokered deposits providing an additional 10.9% of total deposits.

Management closely monitors the Banks liquidity needs and maintains the ability to borrow from the Federal Home Loan Bank of Seattle and other correspondent banks, as well as to
source deposits through the brokered CD market. For more information about liquidity refer to the Liquidity and Capital Resources section below.

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The table below sets forth certain summary balance sheet information for September 30, 2008, and December 31, 2007:

|                              |  |               |  |              |  | Increase (Decrease)
|----------------------------- |  | ------------- |  | ------------ |  | -------------------
|                              |  | September 30, |  | December 31, |  |                    
|                              |  | 2008          |  | 2007         |  | 9/30/08  12/31/07 
|                              |  |               |  |              |  |                    
|(Dollars in 000's)            |  |               |  |              |  |                    
|                             
|ASSETS                        |  |               |  |              |  |                    
|Federal funds sold            |  | $ 4,995       |  | $ 10,350     |  | $ (5,355)          
|Securities available for sale |  | 204           |  | 222          |  | (18)               
|Securities held to maturity   |  | 30,537        |  | 6,098        |  | 24,439             
|Securities - CRA's            |  | 4,000         |  | -            |  | 4,000              
|Restricted equity investments |  | 3,628         |  | 1,865        |  | 1,763              
|Loans, net                    |  | 1,247,576     |  | 1,012,838    |  | 234,738            
|Other assets (1)              |  | 182,279       |  | 126,588      |  | 55,691             
|                              |  |               |  |              |  |                    
|                             
|Total assets                  |  | $ 1,473,219   |  | $ 1,157,961  |  | $ 315,258          
|                              |  |               |  |              |  |                    
|                             
|LIABILITIES                   |  |               |  |              |  |                    
|Non-interest-bearing          |  |               |  |              |  |                    
|deposits                      |  | $ 230,619     |  | $ 199,941    |  | $ 30,678           
|Interest-bearing              |  |               |  |              |  |                    
|deposits                      |  | 995,299       |  | 735,374      |  | 259,925            
|                              |  |               |  |              |  |                    
|                             
|Total deposits                |  | 1,225,918     |  | 935,315      |  | 290,603            
|                             
|Other liabilities (2)         |  | 59,011        |  | 94,971       |  | (35,960)           
|                              |  |               |  |              |  |                    
|                             
|Total liabilities             |  | 1,284,929     |  | 1,030,286    |  | 254,643            
|                             
|SHAREHOLDERS                 |  |               |  |              |  |                    
|EQUITY                        |  | 188,290       |  | 127,675      |  | 60,615             
|                              |  |               |  |              |  |                    
|                             
|Total liabilities             |  |               |  |              |  |                    
|and share-                    |  |               |  |              |  |                    
|holders equity               |  | $ 1,473,219   |  | $ 1,157,961  |  | $ 315,258          
|                              |  |               |  |              |  |                    

|(1) | Includes cash and due from banks, other equity investments, premises and equipment, goodwill, core deposit intangible, accrued interest receivable and bank-owned life
insurance.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes borrowings, accrued interest payable and other liabilities.                                                                                                             
|   

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY Liquidity enables the Company to fund loan commitments and meet customer
withdrawals of deposits. The Company maintains its liquidity position through maintenance of cash resources, the stability of and growth in our core deposit base and through our ability to borrow funds from committed sources of credit and/or to
source brokered deposits.

As of September 30, 2008, the Companys overall liquidity position remained relatively stable when compared to December 31, 2007. The Banks loan volume continues to exceed
deposits as reflected in its loan-to-deposit ratio at September 30, 2008, June 30, 2008, and December 31, 2007 of 101.8%, 102.3% and 108.3%, respectively. Liquidity in the form of excess cash and funds invested on a short-term basis as federal funds
sold and interest-earning deposits with the FHLB decreased approximately $5.3 million while borrowed funds in the form of federal funds purchased and FHLB advances decreased $54.7 million as of September 30, 2008, when compared to December
31, 2007. Investment securities either held-to-maturity or available-for-sale increased by a net $24.4 million primarily as a result of securities acquired in the Stockmans merger. All of the Companys investment securities are pledged for
collateralization of public funds on deposit and, therefore, are not available for purposes of liquidity. Historically, our pledging requirements have been met through the use of our securities portfolio and more recently supplemented by our
borrowing capacity through the use of letters of credit to meet pledging requirements. As of September 30, 2008, in addition to the full use of our securities portfolio, the Bank was using letters of credit totaling $10.1 million to satisfy its
pledging requirements.

Management maintains contingency plans for addressing the Companys ongoing liquidity needs and presently believes the Banks stable core deposit base provides for
flexibility and opportunity should Management decide to attract deposits more aggressively by increasing the rate of interest offered on certain depositsparticularly certificates of deposit. Further, should loan demand outpace our ability to
gather sufficient deposits or maintain adequate funding from other borrowings, the Company could slow its loan growth through various policy changes including increased pricing. The Company maintains a secured line-of-credit with the FHLB. As of
September 30, 2008, the Bank had $48,000 of borrowings advanced from the FHLB and an aggregate of $10.1 million in letters of credit issued by the FHLB on behalf of the Company to meet its public funds deposit pledging requirements. The
Company also had an immediate availability to borrow an additional $37.1 million under the Company's credit line with FHLB. The Company has unsecured federal funds credit lines for up to $125.0 million available from various correspondent
banks as of September 30, 2008, pursuant to which $13.3 million was outstanding.

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At September 30, 2008, the Company had approximately $150.6 million in outstanding commitments to extend credit for approved loans and construction projects. Under the terms of
construction project commitments, completion of specified project benchmarks must be certified before funds may be drawn. Additionally, we anticipate that a portion of these commitments will expire or terminate without funding. Management believes
that the Company's available resources will be sufficient to fund these commitments in the normal course of business.

As disclosed in the Consolidated Statements of Cash Flows, net cash provided by operating activities totaled $14.5 million during the nine months ended September 30, 2008 and was
provided primarily by net income supplemented with non-cash operating expenses such as provision for loan losses. Net cash of $48.8 million provided from investing activities was derived principally from $90.6 million in cash acquired
pursuant to the Stockmans Financial Group merger offset by $41.2 million in loan originations during the first nine months of 2008. Cash used in financing activities, totaling $84.1 million, was principally comprised of a $32.6 million
paydown of Federal Home Loan Bank borrowings, a $40.7 million reduction in Fed Funds purchased, and a $6.4 million decline in deposits.

CAPITAL RESOURCES Federal banking regulators require the measurement of various capital
ratios, including risk-based capital measurements. Risk-weighted ratios require an analysis that weights balance sheet and off-balance sheet items for their inherent risk. It requires minimum standards for risk-based capital by capital tier. As a
minimum requirement for banks, the total risk-based capital ratio should be at least 10.00%, the Tier 1 capital ratio should be at least 6.00%, and the leverage capital ratio should be at least 5.00% . At September 30, 2008, the Banks
regulatory capital ratios were as follows: total risk-based capital ratio was 11.36%, Tier 1 capital ratio was 10.10% and the leverage capital ratio was 9.87% . Regulatory capital ratios for the Company as a whole at September 30, 2008 were total
risk-based capital of 11.47%, Tier 1 capital ratio was 10.21% and leverage capital ratio of 9.98% . If the Company achieved only minimum regulatory capital levels, further growth could be restricted to the level attainable through generation and
retention of net income or the Company might find it necessary to seek additional capital from outside sources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and rates. The Company's market risk arises principally from interest rate risk in its lending, deposit and
borrowing activities. Management actively monitors and manages its interest rate risk exposure. Although the Company manages other risks, such as credit quality and liquidity risk, in the normal course of business, Management considers interest rate
risk to be a significant market risk, which could have the largest material effect on the Company's financial condition and results of operations. Other types of market risks, such as foreign currency exchange rate risk and commodity price risk, do
not arise in the normal course of the Company's business activities. The Company did not experience a significant change in market risk at September 30, 2008, as compared to December 31, 2007.

As stated in the annual report on Form 10-K for 2007, the Company attempts to monitor interest rate risk from the perspective of changes in the economic value of equity, also referred
to as net portfolio value (NPV), and changes in net interest income. Changes to the NPV and net interest income are simulated using instant and permanent rate shocks of plus and minus 200 basis points, in increments of 50 basis points. It is the
Companys policy to manage interest rate risk to maximize long-term profitability under the range of likely interest-rate scenarios. For additional information, refer to Managements Discussion and Analysis of Financial Condition and
Results of Operations referenced in the Companys annual report on Form 10-K for the year ended December 31, 2007.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and
principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, our principal executive officer
and principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by the company in reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms. There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGSFrom time to time, in the normal course of business, PremierWest may become party to various legal actions. Management is unaware of any existing legal actions against the Company or its subsidiaries that Management believes will
have a materially adverse impact on our business, financial condition or results of operations.

ITEM 1A. RISK FACTORS Other than as discussed below, there were no material changes in the
risk factors disclosure as presented in the Companys 2007 Form 10-K for the fiscal year ended December 31, 2007.

Collateral Valuation RiskDramatic fluctuations in real estate collateral values could adversely affect our operating results in the event widespread foreclosure activity occurs related to loans we have extended to our customers. Real estate values reflected extreme volatility during the past nine months that was sometimes evident, but frequently undetermined or uncertain. Since a portion of our loan portfolio is
comprised of loans that rely in varying degrees on the collateral value of real estate to provide assurance of recovery of principal and interest due from the borrower, this volatility in real estate values creates collateral risk that has not
previously been a significant risk factor, at least in recent years. Our lending policies provide for loan to value ratios that are intended to assure that adequate collateral exists in any economic environment. Additionally, personal guarantees
from borrowers are required. However, extreme real estate volatility has proven problematic due to the decline of collateral values as well as reduced guarantor liquidity, since many of these categories of borrowers have liquidity that is tied to
marketability of other real estate holdings also subject to volatile valuations. The foregoing factors have generally increased the potential for losses from the sale of collateral following foreclosure

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actions. While we attempt to mitigate any losses of this nature by rigorously following our internal policies to minimize collateral dependent loans and by arranging sales of any
foreclosed property in an orderly manner to maximize the net proceeds available to the bank, we can provide no assurances that such losses will not occur in the future.

Impairment Risk  A significant decline in the Companys market value could result in an impairment of the goodwill we have recorded in connection with
acquisitions. At September 30, 2008, we had approximately $75.2 million of goodwill on our balance sheet. Goodwill is not amortized but rather evaluated for impairment
on an annual basis or more frequently if events or circumstances indicate that a potential impairment exists. Such evaluation is based upon a variety of factors, including the quoted market price of our common stock, market prices of common stocks
of other banking organizations, common stock trading multiples, discounted cash flows and data from comparable acquisitions. Recently, the market price of our common stock has been trading at below book value, including goodwill and other intangible
assets. If impairment of goodwill is deemed to exist, we may be required to write down our assets, resulting in a charge to earnings.

There can be no assurance that recently enacted legislation authorizing the U.S. Treasury to purchase equity interests in financial institutions and purchase assets from
financial institutions will help stabilize the financial system.On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008 (the
EESA). The legislation was the result of a proposal by Treasury Secretary Henry Paulson to the U.S. Congress on September 20, 2008 in response to the financial crises affecting the banking system and financial markets and going concern
threats to investment banks and other financial institutions. There can be no assurance as to the actual impact that the EESA will have on the financial markets, including the extreme levels of volatility and limited credit availability currently
being experienced. The failure of the EESA to help stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect our business, financial condition, results of operations,
access to credit or the trading price of our common stock.

Difficult market conditions have adversely affected the financial services industry.The capital
and credit markets have been experiencing unprecedented volatility and disruption for more than twelve months. In recent months, the volatility and disruption has reached unprecedented levels. Dramatic declines in the housing market over the past
year, with falling home prices and increasing foreclosures and unemployment have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs of asset values by financial institutions, including
government-sponsored entities and major commercial and investment banks. These write-downs have caused many financial institutions to seek additional capital, to merge with other institutions and, in some cases, to fail. Reflecting concern about the
stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have reduced or ceased providing funding to borrowers, including to other financial institutions. This market turmoil and
tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity generally. The resulting economic pressure on
consumers and lack of confidence in the financial markets has adversely affected the Banks business, financial condition and results of operations. The Company does not expect that the difficult conditions in the financial markets are likely
to improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on the Bank and others in the financial institutions industry. In particular, the Bank may face the
following risks in connection with these events:

- Increased regulation of our industry, including as a result of the Emergency Economic Stabilization Act of 2008. Compliance with such regulation may increase the Banks costs and limit its ability to pursue business opportunities.
- The Banks ability to assess the creditworthiness of our customers may be impaired if the models and approaches the Bank uses to select, manage, and underwrite its customers become less predictive of future behaviors.
- The process the Bank uses to estimate losses inherent in its credit exposure requires difficult, subjective, and complex judgments, including forecasts of economic conditions and how these economic predictions might impair the ability of the Banks borrowers to repay their
loans, which may no longer be capable of accurate estimation which may, in turn, impact the reliability of the process.
- The Bank may be required to pay significantly higher Federal Deposit Insurance Corporation premiums because market developments have significantly depleted the insurance fund of the FDIC and reduced the ratio of reserves to insured deposits.
- There may be downward pressure on the Companys stock price.
- The Banks ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions and government sponsored entities.
- The Bank may face increased competition due to intensified consolidation of the financial services industry.

If current levels of market disruption and volatility continue or worsen, there can be no assurance that the Company will not experience an adverse effect, which may be material, on
its ability to access capital and on its business, financial condition and results of operations.

Conditions in the financial markets may limit our access to additional funding to meet our liquidity needs.Liquidity is essential to the Banks business. An inability to raise funds through deposits, borrowings, the sale or pledging as collateral of loans and other assets could have a substantial negative effect on the Banks
liquidity. The Banks access to funding sources in amounts adequate to finance its activities could be impaired by factors that affect the Bank specifically or the financial services industry in general. Factors that could detrimentally impact
the Banks access to liquidity sources include a decrease in the level of business activity due to a market down turn or adverse regulatory action against the Bank. The Banks ability to borrow could also be impaired by factors that are
nonspecific to the Bank, such as severe disruption of the financial markets or negative use and expectations about the prospects for the financial services industry as a whole as evidenced by recent turmoil in the domestic and worldwide credit
markets.

The Banks wholesale funding sources may prove insufficient to replace deposits at maturity and support our future growth.The Bank must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of its liquidity management, the Bank uses a number of funding sources in addition to core
deposit growth and repayments and maturities of loans and investments. As the

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Bank continues to grow, it is likely to become more dependent on these sources, which include Federal Home Loan Bank advances, proceeds from the sale of loans and liquidity resources
at the Company. At September 30, 2008, the Bank had approximately $13.3 million of fed funds outstanding. The Companys financial flexibility will be severely constrained if the Bank is unable to maintain access to funding or if adequate
financing is not available to accommodate future growth at acceptable interest rates. If the Bank is required to rely more heavily on more expensive funding sources to support future growth, revenues may not increase proportionately to cover costs,
and profitability would be adversely affected.

Federal and state governments could pass legislation responsive to current credit conditions.The
Bank could experience higher credit losses because of federal or state legislation or regulatory action that reduces the amount the Bank's borrowers are otherwise contractually required to pay under existing loan contracts. Also, the Bank could
experience higher credit losses because of federal or state legislation or regulatory action that limits the Bank's ability to foreclose on property or other collateral or makes foreclosure less economically feasible.

Changes in accounting standards may impact how we report our financial condition and results of operations.Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time the Financial Accounting Standards Board (FASB) changes the financial
accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations. In some
cases, we could be required to apply a new or revised standard retroactively, resulting in a restatement of prior period financial statements.

The value of securities in our investment securities portfolio may be negatively affected by continued disruptions in securities markets.The market for some of the investment securities held in our portfolio has become extremely volatile over the past twelve months. Volatile market conditions may detrimentally affect the value of
these securities, such as through reduced valuations due to the perception of heightened credit and liquidity risks. There can be no assurance that the declines in market value associated with these disruptions will not result in other than
temporary impairments of these assets, which would lead to accounting charges that could have a material adverse effect on our net income and capital levels.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

|(a) | [Not applicable.]
|--- | -----------------
|(b) | [Not applicable.]
|(c) | [Not applicable.]



|ITEM 3. DEFAULTS UPON SENIOR SECURITIES
|---------------------------------------

|(a) | [Not applicable.]
|--- | -----------------
|(b) | [Not applicable.]

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

[None.]



|ITEM 5. OTHER INFORMATION[None.]
|--------------------------------



|ITEM 6. EXHIBITS
|----------------

|(a) | Exhibits
|--- | --------
|   
|    | 3.1     
|    | 3.2     
|    | 31.1    
|    | 31.2    
|    | 32.1    
|    | 32.2    
|   

25

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SIGNATURES: Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.



| | DATED: November 10, 2008PREMIERWEST BANCORP/s/ John L. Anhorn
John L. Anhorn, Chief Executive Officer
/s/ Michael D. Fowler
Michael D. Fowler, Chief Financial Officer and Principal Accounting Officer
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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