UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-Q

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

for the quarterly period endedMarch 31, 2009

Commission File Number:000-50332



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

|                                |                                                      |                    
|------------------------------- | ---------------------------------------------------- | -------------------
|Oregon                          |                                                      | 93-1282171         
|(State or other jurisdiction of |                                                      | (I.R.S. Employer   
|incorporation or organization)  |                                                      | Identification No.)
|                               
|                                | 503 Airport Road  Suite 101                         |                    
|                                | Medford, Oregon 97504                                |                    
|                                | (Address of principal executive offices) (Zip Code)  |                    
|                               
|                                | (541) 618-6003                                       |                    
|                                | (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 registrantwas required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yesx No ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes ̈ 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 xNon-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  ̈Nox

The number of shares outstanding of Registrant's common stock as of May 1, 2009 was 24,766,928.

1

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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 | 18
| |            |                                                                                       |   
| | Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                            | 25
| |            |                                                                                       |   
| | Item 4.    | Controls and Procedures                                                               | 25
| |            |                                                                                       |   
| | Part II    | OTHER INFORMATION                                                                     |   
| |            |                                                                                       |   
| | Item 1.    | Legal Proceedings                                                                     | 26
| |            |                                                                                       |   
| | Item 1A.   | Risk Factors                                                                          | 26
| |            |                                                                                       |   
| | Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                           | 26
| |            |                                                                                       |   
| | Item 3.    | Defaults Upon Senior Securities                                                       | 26
| |            |                                                                                       |   
| | Item 4.    | Submission of Matters to a Vote of Securities Holders                                 | 26
| |            |                                                                                       |   
| | Item 5.    | Other Information                                                                     | 26
| |            |                                                                                       |   
| | Item 6.    | Exhibits                                                                              | 27
| |            |                                                                                       |   
| | SIGNATURES | 27                                                                                   

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                                                        
|                                                               |   | March 31, |   |  |   | December 31, |   |  |   | March 31, |  
|                                                               |   | 2009      |   |  |   | 2008         |   |  |   | 2008      |  
|Cash and cash equivalents:                                     |   |           |   |  |   |              |   |  |   |           |  
|Cash and due from banks                                        | $ | 28,602    |   |  | $ | 38,421       |   |  | $ | 35,231    |  
|Federal funds sold                                             |   | 36,045    |   |  |   | 165          |   |  |   | 2,810     |  
|Interest-bearing deposits with Federal Home Loan Bank          |   | 161       |   |  |   | 166          |   |  |   | 57        |  
|Interest-bearing CD's (less than 90 days)                      |   | -         |   |  |   | -            |   |  |   | 496       |  
|Total cash and cash equivalents                                |   | 64,808    |   |  |   | 38,752       |   |  |   | 38,594    |  
|                                                              
|Interest-bearing CD's (greater than 90 days)                   |   | 198       |   |  |   | 198          |   |  |   | 398       |  
|                                                               |   | 198       |   |  |   | 198          |   |  |   | 398       |  
|Investments:                                                   |   |           |   |  |   |              |   |  |   |           |  
|Investment securities available-for-sale, at fair market value |   | 182       |   |  |   | 188          |   |  |   | 236       |  
|Investment securities held-to-maturity, at amortized cost      |   |           |   |  |   |              |   |  |   |           |  
|(fair value of $35,154 at 3/31/09, $32,686 at 12/31/08,        |   |           |   |  |   |              |   |  |   |           |  
|and $30,451 at 3/31/08)                                        |   | 34,808    |   |  |   | 32,216       |   |  |   | 30,729    |  
|Investment securities - CRA                                    |   | 4,000     |   |  |   | 4,000        |   |  |   | -         |  
|Restricted equity securities                                   |   | 3,643     |   |  |   | 3,643        |   |  |   | 3,946     |  
|Total investments                                              |   | 42,633    |   |  |   | 40,047       |   |  |   | 34,911    |  
|                                                              
|Mortgage loans held-for-sale                                   |   | 1,769     |   |  |   | 308          |   |  |   | 940       |  
|Loans, net of deferred loan fees                               |   | 1,237,518 |   |  |   | 1,246,573    |   |  |   | 1,260,674 |  
|Allowance for loan losses                                      |   | (25,659   | ) |  |   | (17,157      | ) |  |   | (20,264   | )
|Total loans                                                    |   | 1,213,628 |   |  |   | 1,229,724    |   |  |   | 1,241,350 |  
|                                                              
|Premises and equipment, net of accumulated                     |   |           |   |  |   |              |   |  |   |           |  
|depreciation and amortization                                  |   | 47,446    |   |  |   | 48,146       |   |  |   | 48,500    |  
|Core deposit intangibles, net of amortization                  |   | 2,274     |   |  |   | 2,453        |   |  |   | 2,991     |  
|Goodwill                                                       |   | 70,437    |   |  |   | 70,400       |   |  |   | 71,835    |  
|Other real estate owned                                        |   | 9,362     |   |  |   | 4,423        |   |  |   | -         |  
|Accrued interest and other assets                              |   | 45,985    |   |  |   | 41,811       |   |  |   | 30,453    |  
|TOTAL ASSETS                                                   | $ | 1,496,771 |   |  | $ | 1,475,954    |   |  | $ | 1,469,032 |  
|                                                              
|LIABILITIES AND SHAREHOLDERS' EQUITY                          
|LIABILITIES                                                    |   |           |   |  |   |              |   |  |   |           |  
|Deposits:                                                      |   |           |   |  |   |              |   |  |   |           |  
|Demand                                                         | $ | 233,447   |   |  | $ | 228,788      |   |  | $ | 235,293   |  
|Interest-bearing demand and savings                            |   | 432,269   |   |  |   | 416,636      |   |  |   | 456,015   |  
|Time                                                           |   | 573,596   |   |  |   | 565,845      |   |  |   | 538,836   |  
|Total deposits                                                 |   | 1,239,312 |   |  |   | 1,211,269    |   |  |   | 1,230,144 |  
|                                                              
|Federal funds purchased                                        |   | -         |   |  |   | 25,003       |   |  |   | -         |  
|Federal Home Loan Bank borrowings                              |   | 37        |   |  |   | 20,042       |   |  |   | 353       |  
|Junior subordinated debentures                                 |   | 30,928    |   |  |   | 30,928       |   |  |   | 30,928    |  
|Accrued interest and other liabilities                         |   | 12,079    |   |  |   | 11,728       |   |  |   | 18,631    |  
|Total liabilities                                              |   | 1,282,356 |   |  |   | 1,298,970    |   |  |   | 1,280,056 |  
|COMMITMENTS AND CONTINGENCIES (Note 10)                        |   |           |   |  |   |              |   |  |   |           |  
|SHAREHOLDERS' EQUITY                                           |   |           |   |  |   |              |   |  |   |           |  
|                                                              
|Series A Preferred Stock, no par value, 1,000,000 shares       |   |           |   |  |   |              |   |  |   |           |  
|authorized, no shares issued and outstanding                   |   | -         |   |  |   | -            |   |  |   | 9,590     |  
|(no shares in 12/31/08, 11,000 shares in 3/31/08)              |   |           |   |  |   |              |   |  |   |           |  
|Series B Preferred Stock,
     no par value, 41,400 shares     |   |           |   |  |   |              |   |  |   |           |  
|authorized and outstanding                                     |   | 39,317    |   |  |   | -            |   |  |   | -         |  
|(no shares in 12/31/08 and 3/31/08)                            |   |           |   |  |   |              |   |  |   |           |  
|Warrant
     to purchase common stock                          |   | 2,179     |   |  |   | -            |   |  |   | -         |  
|Common stock - no par value; 50,000,000 shares authorized;     |   |           |   |  |   |              |   |  |   |           |  
|24,767,627 shares issued and outstanding                       |   |           |   |  |   |              |   |  |   |           |  
|(23,574,351 in 12/31/08 and 22,392,476 in 3/31/08)             |   | 172,938   |   |  |   | 168,032      |   |  |   | 158,129   |  
|Retained earnings (deficit)                                    |   | (47       | ) |  |   | 8,913        |   |  |   | 21,197    |  
|Accumulated other comprehensive income                         |   | 28        |   |  |   | 39           |   |  |   | 60        |  
|Total shareholders' equity                                     |   | 214,415   |   |  |   | 176,984      |   |  |   | 188,976   |  
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                     | $ | 1,496,771 |   |  | $ | 1,475,954    |   |  | $ | 1,469,032 |  
|                                                              
|                                                              
|                                                              
|See accompanying notes.                                       

3

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|                                                          |   |                            |   |  |   |           |  
|--------------------------------------------------------- | - | -------------------------- | - |  | - | --------- | -
|PREMIERWEST BANCORP AND SUBSIDIARY                       
|CONSOLIDATED STATEMENTS OF OPERATIONS                    
|(Dollars in 000s, Except for Earnings per Share Data)   
|(UNAUDITED)                                              
|                                                         
|                                                          |   | For the Three Months Ended |  
|                                                          |   | March 31,                  |   |  |   | March 31, |  
|                                                          |   | 2009                       |   |  |   | 2008      |  
|INTEREST AND DIVIDEND INCOME                              |   |                            |   |  |   |           |  
|Interest and fees on loans                                | $ | 19,739                     |   |  | $ | 22,620    |  
|Interest on investments:                                  |   |                            |   |  |   |           |  
|Taxable                                                   |   | 237                        |   |  |   | 220       |  
|Nontaxable                                                |   | 66                         |   |  |   | 47        |  
|Interest on federal funds sold                            |   | 17                         |   |  |   | 39        |  
|Other interest and dividends                              |   | -                          |   |  |   | 29        |  
|                                                         
|Total interest and dividend income                        |   | 20,059                     |   |  |   | 22,955    |  
|                                                         
|INTEREST EXPENSE                                          |   |                            |   |  |   |           |  
|Deposits:                                                 |   |                            |   |  |   |           |  
|Interest-bearing demand and savings                       |   | 1,046                      |   |  |   | 2,285     |  
|Time                                                      |   | 4,139                      |   |  |   | 5,062     |  
|Federal funds purchased                                   |   | 14                         |   |  |   | 101       |  
|Federal Home Loan Bank advances                           |   | 18                         |   |  |   | 42        |  
|Junior subordinated debentures                            |   | 449                        |   |  |   | 381       |  
|                                                         
|Total interest expense                                    |   | 5,666                      |   |  |   | 7,871     |  
|Net interest income                                       |   | 14,393                     |   |  |   | 15,084    |  
|                                                         
|LOAN LOSS PROVISION                                       |   | 10,700                     |   |  |   | 3,075     |  
|                                                         
|Net interest income after loan loss provision             |   | 3,693                      |   |  |   | 12,009    |  
|                                                         
|NON-INTEREST INCOME                                       |   |                            |   |  |   |           |  
|Service charges on deposits accounts                      |   | 1,252                      |   |  |   | 1,083     |  
|Mortgage banking fees                                     |   | 162                        |   |  |   | 130       |  
|Investment brokerage and annuity fees                     |   | 273                        |   |  |   | 343       |  
|Other commissions and fees                                |   | 586                        |   |  |   | 543       |  
|Other non-interest income                                 |   | 193                        |   |  |   | 184       |  
|                                                         
|Total non-interest income                                 |   | 2,466                      |   |  |   | 2,283     |  
|                                                         
|NON-INTEREST EXPENSE                                      |   |                            |   |  |   |           |  
|Salaries and employee benefits                            |   | 7,046                      |   |  |   | 6,592     |  
|Net occupancy and equipment                               |   | 1,878                      |   |  |   | 1,869     |  
|Communications                                            |   | 502                        |   |  |   | 524       |  
|Professional fees                                         |   | 668                        |   |  |   | 415       |  
|Advertising                                               |   | 194                        |   |  |   | 220       |  
|Other                                                     |   | 2,313                      |   |  |   | 1,904     |  
|Total non-interest expense                                |   | 12,601                     |   |  |   | 11,524    |  
|                                                         
|INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES |   | (6,442                     | ) |  |   | 2,768     |  
|PROVISION (BENEFIT) FOR INCOME TAXES                      |   | (2,835                     | ) |  |   | 965       |  
|NET INCOME (LOSS)                                         | $ | (3,607                     | ) |  | $ | 1,803     |  
|PREFERRED STOCK DIVIDENDS AND DISCOUNT ACCRETION          | $ | (372                       | ) |  | $ | (69       | )
|NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS        | $ | (3,979                     | ) |  | $ | 1,734     |  
|                                                         
|EARNINGS (LOSS) PER COMMON SHARE:                         |   |                            |   |  |   |           |  
|BASIC                                                     | $ | (0.17                      | ) |  | $ | 0.08      |  
|DILUTED                                                   | $ | (0.17                      | ) |  | $ | 0.08      |  
|                                                         
|                                                         
|See accompanying notes.                                  

4

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|                                                           |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|---------------------------------------------------------- | --------------- |  |  | ------------ | ------- |  | -------- | ---------- |  |  | ------------- | ------ | ------- | --------- | ------------- | -------- |  | ------ | ------------- | ----------- |  | ------ | ------- | ------- |  | ---- | - | ------- | 
|PREMIERWEST BANCORP AND SUBSIDIARY                        
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|AND COMPREHENSIVE LOSS                                    
|(Dollars in 000s, Except Share Amounts)                  
|(UNAUDITED)                                               
|                                                          
|                                                          
|                                                           |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               | Accumulated |  |        |         |         |  |      |   |         | 
|                                                           |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               | Retained |  |        |               | Other       |  |        |         | Total   |  |      |   |         | 
|                                                           | Preferred Stock |  |  | Common Stock |         |  | Earnings |            |  |  | Comprehensive |        |         |           | Shareholders' |          |  |        | Comprehensive |            
|                                                           | Shares          |  |  | Amount       |         |  | Shares   |            |  |  | Amount        |        |         | (Deficit) |               |          |  | Income |               |             |  | Equity |         |         |  | Loss |  
|BALANCE - DECEMBER 31, 2007                                | 11,000          |  |  | $            | 9,590   |  |          | 16,987,496 |  |  | $             | 97,266 |         |           | 20,759        |          |  |        | 60            |             |  |        | 127,675 |         |  |      |   |        
|Comprehensive loss:                                        |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|Net loss                                                   | -               |  |  |              | -       |  |          | -          |  |  |               |        | -       |           |               | (7,539)  |  |        |               | -           |  |        |         | (7,539) |  |      |   | (7,539) | 
|Other comprehensive loss                                   |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|Amortization of unrealized gains                           |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|for investment securities                                  |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|transferred to held-to-maturity                            | -               |  |  |              | -       |  |          | -          |  |  |               |        | -       |           |               | -        |  |        |               | (20)        |  |        |         | (20)    |  |      |   | (20)    | 
|Unrealized losses on investment                            |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|securities available-for-sale                              | -               |  |  |              | -       |  |          | -          |  |  |               |        | -       |           |               | -        |  |        |               | (1)         |  |        |         | (1)     |  |      |   | (1)     | 
|Comprehensive loss                                         |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      | $ | (7,560) | 
|Preferred stock dividend declared                          | -               |  |  |              | -       |  |          | -          |  |  |               |        | -       |           |               | (275)    |  |        |               | -           |  |        |         | (275)   |  |      |   |         | 
|Common stock cash dividend declared                        | -               |  |  |              | -       |  |          | -          |  |  |               |        | -       |           |               | (4,032)  |  |        |               | -           |  |        |         | (4,032) |  |      |   |         | 
|Stock-based compensation expense                           | -               |  |  |              | -       |  |          | -          |  |  |               |        | 433     |           |               | -        |  |        |               | -           |  |        |         | 433     |  |      |   |         | 
|Repurchase of common stock                                 | -               |  |  |              | -       |  |          | (40,800)   |  |  |               |        | (435)   |           |               | -        |  |        |               | -           |  |        |         | (435)   |  |      |   |         | 
|Stockmans Bank Acquisition                                 | -               |  |  |              | -       |  |          | 5,357,404  |  |  |               |        | 60,967  |           |               | -        |  |        |               | -           |  |        |         | 60,967  |  |      |   |         | 
|Stock options exercised                                    | -               |  |  |              | -       |  |          | 12,970     |  |  |               |        | 66      |           |               | -        |  |        |               | -           |  |        |         | 66      |  |      |   |         | 
|Stock options exercised (Note 4)                           | -               |  |  |              | -       |  |          | 189,958    |  |  |               |        | 1,115   |           |               | -        |  |        |               | -           |  |        |         | 1,115   |  |      |   |         | 
|Shares exchanged in payment of                             |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|option exercise consideration (Note 4)                     | -               |  |  |              | -       |  |          | (102,599)  |  |  |               |        | (1,108) |           |               | -        |  |        |               | -           |  |        |         | (1,108) |  |      |   |         | 
|Income tax benefit of stock options                        |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|exercised                                                  | -               |  |  |              | -       |  |          | -          |  |  |               |        | 138     |           |               | -        |  |        |               | -           |  |        |         | 138     |  |      |   |         | 
|Preferred stock converted to common                        | (11,000)        |  |  |              | (9,590) |  |          | 1,169,922  |  |  |               |        | 9,590   |           |               | -        |  |        |               | -           |  |        |         | -       |  |      |   |         | 
|BALANCE - DECEMBER 31, 2008                                | -               |  |  |              | -       |  |          | 23,574,351 |  |  |               |        | 168,032 |           |               | 8,913    |  |        |               | 39          |  |        |         | 176,984 |  |      |   |         | 
|Comprehensive loss:                                        |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|Net loss                                                   | -               |  |  |              | -       |  |          | -          |  |  |               |        | -       |           |               | (3,607)  |  |        |               | -           |  |        |         | (3,607) |  |      | $ | (3,607) | 
|Other comprehensive loss                                   |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|Amortization of unrealized gains                           |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|for investment securities                                  |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|transferred to held-to-maturity                            | -               |  |  |              | -       |  |          | -          |  |  |               |        | -       |           |               | -        |  |        |               | (11)        |  |        |         | (11)    |  |      |   | (11)    | 
|Comprehensive loss                                         |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      | $ | (3,618) | 
|Preferred stock dividend declared                          | -               |  |  |              | -       |  |          | -          |  |  |               |        | -       |           |               | (276)    |  |        |               | -           |  |        |         | (276}   |  |      |   |         | 
|Common stock dividend declared                             | -               |  |  |              | -       |  |          | 1,179,410  |  |  |               |        | 4,745   |           |               | (4,745)  |  |        |               | -           |  |        |         | -       |  |      |   |         | 
|Common stock cash dividend                                 | -               |  |  |              | -       |  |          | -          |  |  |               |        | -       |           |               | (236)    |  |        |               | -           |  |        |         | (236)   |  |      |   |         | 
|Stock-based compensation expense                           | -               |  |  |              | -       |  |          | -          |  |  |               |        | 112     |           |               | -        |  |        |               | -           |  |        |         | 112     |  |      |   |         | 
|Stock options exercised                                    | -               |  |  |              | -       |  |          | 13,866     |  |  |               |        | 48      |           |               | -        |  |        |               | -           |  |        |         | 48      |  |      |   |         | 
|Income tax benefit of stock options                        |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|exercised                                                  | -               |  |  |              | -       |  |          | -          |  |  |               |        | 1       |           |               | -        |  |        |               | -           |  |        |         | 1       |  |      |   |         | 
|Issuance of preferred stock to U.S. Treasury,              |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 
|Series B and accretion of discount                         | 41,400          |  |  |              | 39,317  |  |          | -          |  |  |               |        | -       |           |               | (96)     |  |        |               | -           |  |        |         | 39,221  |  |      |   |         | 
|Issuance of warrant to U.S. Treasury                       | -               |  |  |              | 2,179   |  |          | -          |  |  |               |        | -       |           |               | -        |  |        |               | -           |  |        |         | 2,179   |  |      |   |         | 
|BALANCE - MARCH 31, 2009                                   | 41,400          |  |  | $            | 41,496  |  |          | 24,767,627 |  |  | $             |        | 172,938 |           | $             | (47)     |  |        | $             | 28          |  |        | $       | 214,415 |  |      |   |         | 
|                                                           |                 |  |  |              |         |  |          |            |  |  |               |        |         |           |               |          |  |        |               |             |  |        |         |         |  |      |   |         | 

See accompanying notes.

5

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|                                                                                        |   |                            |   |  |   |           |  
|--------------------------------------------------------------------------------------- | - | -------------------------- | - |  | - | --------- | -
|PREMIERWEST BANCORP AND SUBSIDIARY                                                     
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                  
|(Dollars in 000s)                                                                     
|(UNAUDITED)                                                                            
|                                                                                        |   | For the Three Months Ended |  
|                                                                                        |   | March 31,                  |   |  |   | March 31, |  
|                                                                                        |   | 2009                       |   |  |   | 2008      |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                   |   |                            |   |  |   |           |  
|                                                                                       
|Net income (loss)                                                                       | $ | (3,607                     | ) |  | $ | 1,803     |  
|Adjustments to reconcile net income (loss) to net cash                                  |   |                            |   |  |   |           |  
|from operating activities:                                                              |   |                            |   |  |   |           |  
|Depreciation and amortization                                                           |   | 962                        |   |  |   | 940       |  
|Loan loss provision                                                                     |   | 10,700                     |   |  |   | 3,075     |  
|Deferred income taxes                                                                   |   | (786                       | ) |  |   | (104      | )
|Amortization of premiums and accretion of discounts                                     |   |                            |   |  |   |           |  
|on investment securities, net                                                           |   | 80                         |   |  |   | (16       | )
|Funding of loans held-for-sale                                                          |   | (10,183                    | ) |  |   | (8,807    | )
|Sale of loans held-for-sale                                                             |   | 8,884                      |   |  |   | 8,566     |  
|Gain on sale of loans held-for-sale                                                     |   | (162                       | ) |  |   | (130      | )
|Change in BOLI value (net of benefit obligations)                                       |   | 89                         |   |  |   | -         |  
|Stock-based compensation expense                                                        |   | 112                        |   |  |   | 156       |  
|Excess tax benefit from stock options exercised                                         |   | -                          |   |  |   | (108      | )
|Gain on sales of premises and equipment                                                 |   | 4                          |   |  |   | (23       | )
|Write down of low income housing tax credit investment                                  |   | 23                         |   |  |   | -         |  
|Changes in accrued interest receivable/payable and other                                |   |                            |   |  |   |           |  
|assets/liabilities                                                                      |   | (12,842                    | ) |  |   | 3,521     |  
|Net cash provided by (used in) operating activities                                     |   | (6,726                     | ) |  |   | 8,873     |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                   |   |                            |   |  |   |           |  
|Proceeds from maturities and calls of investment                                        |   |                            |   |  |   |           |  
|securities available-for-sale                                                           |   | 6                          |   |  |   | -         |  
|Purchase of investment securities held-to-maturity                                      |   | (6,289                     | ) |  |   | -         |  
|Proceeds from maturities and calls of investment                                        |   |                            |   |  |   |           |  
|securities held-to-maturity                                                             |   | 3,606                      |   |  |   | 5,298     |  
|Decrease
     in interest-bearing deposits with Federal Home Loan Bank                  |   | -                          |   |  |   | 136       |  
|Loan originations, net                                                                  |   | 11,796                     |   |  |   | (24,206   | )
|Purchase of premises and equipment, net                                                 |   | (87                        | ) |  |   | (895      | )
|Purchase of low income housing tax credit investment                                    |   | (497                       | ) |  |   | -         |  
|Cash
     and cash equivalents  received, net of cash paid for acquisition of Stockmans |   |                            |   |  |   |           |  
|Financial Group                                                                         |   | -                          |   |  |   | 90,814    |  
|Net cash provided by investing activities                                               |   | 8,535                      |   |  |   | 71,147    |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                   |   |                            |   |  |   |           |  
|Net increase (decrease) in deposits                                                     |   | 28,043                     |   |  |   | (2,215    | )
|Net decrease in Federal Home Loan Bank borrowings                                       |   | (20,005                    | ) |  |   | (32,273   | )
|Net decrease in Federal Funds purchased                                                 |   | (25,003                    | ) |  |   | (54,019   | )
|Repurchase of common stock                                                              |   | -                          |   |  |   | (435      | )
|Dividends paid on common stock                                                          |   | (236                       | ) |  |   | (1,296    | )
|Stock options exercised                                                                 |   | 48                         |   |  |   | 16        |  
|Excess tax benefit from stock options exercised                                         |   | -                          |   |  |   | 108       |  
|Proceeds from issuance of preferred stock                                               |   | 41,400                     |   |  |   | -         |  
|Net cash provided by (used in) financing activities                                     |   | 24,247                     |   |  |   | (90,114   | )
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                    |   | 26,056                     |   |  |   | (10,094   | )
|CASH AND CASH EQUIVALENTS - Beginning of the period                                     |   | 38,752                     |   |  |   | 48,631    |  
|CASH AND CASH EQUIVALENTS - End of the period                                           | $ | 64,808                     |   |  | $ | 38,537    |  
|                                                                                       
|SUPPLEMENTAL DISCOSURE OF CASH FLOW INFORMATION                                         |   |                            |   |  |   |           |  
|Cash paid for interest                                                                  | $ | 5,975                      |   |  | $ | 6,325     |  
|Cash paid for taxes                                                                     | $ | -                          |   |  | $ | 2,930     |  
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND                                        |   |                            |   |  |   |           |  
|FINANCING ACTIVITIES:                                                                   |   |                            |   |  |   |           |  
|Transfers of loans to other real estate owned                                           | $ | 4,939                      |   |  | $ | 205       |  
|Income tax benefit of stock options exercised                                           | $ | 1                          |   |  | $ | 159       |  
|Increase in goodwill resulting from acquisition of Stockmans Financial Group            | $ | 37                         |   |  | $ | 50,893    |  
|Preferred cash dividend declared but not yet paid                                       | $ | 276                        |   |  | $ | 69        |  
|Accretion
     of preferred stock discount                                              | $ | 96                         |   |  | $ | 0         |  
|Common cash dividend declared but not yet paid                                          | $ | -                          |   |  | $ | 1,296     |  
|Stock issued for acquisition of Stockmans Financial Group                               | $ | -                          |   |  | $ | 60,967    |  
|                                                                                       
|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 (the Company or PremierWest) and its wholly-owned subsidiary, PremierWest Bank (the Bank).

The Bank offers a full range of financial products and services through a network of 46 full service branch offices, 41 of which are located along the Interstate 5 freeway corridor between Roseburg, Oregon, and Sacramento, California. Of the 46 full service branch offices, 24 are located in Oregon (Jackson, Josephine, Deschutes, Douglas, and Klamath Counties) and 22 are located in California (Siskiyou, Shasta, Butte, Tehama, Placer, Sacramento and Yolo Counties). The Banks activities include the usual lending and deposit functions of a community-oriented commercial bank: commercial, real estate, installment, and mortgage loans; checking, time deposit, and savings accounts; mortgage loan brokerage services; and automated teller machines (ATMs) and safe deposit facilities. The Bank has three subsidiaries: Premier Finance Company, PremierWest Investment Services, Inc., and Blue Star Properties, Inc. Premier Finance Company, has offices in Medford, Grants Pass, Roseburg, Klamath Falls, Coos Bay, Eugene and Portland, Oregon and Redding, California and is engaged in the business of consumer lending. PremierWest Investment Services, Inc. operates throughout the Banks market area providing brokerage services for investment products including stocks, bonds, mutual funds and annuities. Blue Star Properties, Inc. serves solely to hold real estate properties for the Company but is currently inactive.

In December 2004, the Company established PremierWest Statutory Trust I and II (the Trusts), as wholly-owned Delaware statutory business trusts, for the purpose of issuing guaranteed individual beneficial interests in junior subordinated debentures (Trust Preferred Securities). The Trusts issued $15.5 million in Trust Preferred Securities for the purpose of providing additional funding for operations and enhancing the Companys consolidated regulatory capital. A third trust, the Stockmans Financial Trust I in the amount of $15.5 million, was added in 2008 pursuant to the acquisition of Stockmans Financial Group. In accordance with the Financial Accounting Standards Boards (FASB) Interpretation No. 46(R), Consolidation of Variable Interest Entities, the Company has not included the Trusts in its consolidated financial statements but has recognized, as junior subordinated debt, the outstanding balance of the Trust Preferred Securities as of
March 31, 2009 and 2008.

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, 2008 was derived from audited financial statements and does not include all disclosures contained in the 2008 Annual Report to Shareholders. The interim consolidated financial statements should be read in conjunction with the Company's 2008 consolidated financial statements, including the notes thereto, included in the 2008 Annual Report to Shareholders as filed with the Securities and Exchange Commission under Form 10-K/A. 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. In preparation of the consolidated financial statements, all significant intercompany accounts and transactions have been eliminated.

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 consolidated financial statements, and the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates made by management involve the calculation of the allowance for loan losses, the fair value of available-for-sale investment securities, the value of other real estate owned, and the calculations involved in determining potential goodwill impairment.

Stock dividends Share and per share data in the accompanying consolidated financial statements reflect all previously declared and paid stock dividends. A 5% stock dividend was declared in March 2009, June 2007, June 2006 and June 2005. The Company did not declare a stock dividend in 2008. The first quarter 2009 stock dividend was declared on January 8, 2009, for shareholders of record March 31, 2009, and was paid on April 15, 2009. The impact of this stock dividend has been reflected in the  statement
of operations, statement of shareholders equity and comprehensive loss, and all share and per share amounts as of March 31, 2009.

Cash dividends On January 15, 2009, the Company declared a $0.01 per share quarterly cash dividend. The dividend was paid on February 17, 2009 to PremierWest Bancorp shareholders of record as of January 30, 2009.

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 $22.8 million 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)                     
| |                                        
| | Fair value of 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             |   | 9,556           
| | Core deposit intangibles                |   | 1,635           
| | Other assets                            |   | 8,918           
| | Total fair value of assets acquired     | $ | 371,111         
| |                                        
| | Fair value of liabilities assumed:      |   |                 
| | Deposits                                | $ | 296,051         
| | Borrowed funds                          |   | 18,618          
| | Junior subordinated debentures          |   | 15,464          
| | Other liabilities                       |   | 4,714           
| | Total fair value of liabilities assumed | $ | 334,847         
| |                                        
| | Net assets acquired                     | $ | 36,264          
| |                                        
| | Shares of PremierWest common stock      | $ | 60,967          
| | Cash paid to common shareholders of     |   |                 
| | Stockmans Bank                          |   | 22,769          
| | Transaction costs                       |   | 2,023           
| | Total consideration                     |   | 85,759          
| | Goodwill                                | $ | 49,495          

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 intangibles or goodwill during the period from acquisition to March 31, 2009.

The following table represents unaudited pro forma results of operations for the
twelve months ended December 31, 2008, as if the acquisition of Stockmans Bank had occurred at the beginning of 2008. 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 2008. Management of the Company anticipates cost savings and operational synergies will be realized after the operations of Stockmans Bank are fully integrated in 2009.

8

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| |                                           |  |                                  |   |            |   |  |  | 
| | ----------------------------------------- |  | -------------------------------- | - | ---------- | - |  |  | 
| | (Dollars in 000's, except per share data) | 
| |                                           |  |                                  |   |            |   |  |  | 
| |                                           |  | Twelve Months Ended December 31, |  
| |                                           |  |                                  |   | 2008       |   |  |  | 
| | Net interest income                       |  |                                  | $ | 60,917     |   |  |  | 
| | Provision for loan losses                 |  |                                  |   | (36,500    | ) |  |  | 
| | Non-interest income                       |  |                                  |   | 10,206     |   |  |  | 
| | Non-interest expense                      |  |                                  |   | (47,437    | ) |  |  | 
| | Loss before income taxes                  |  |                                  |   | (12,814    | ) |  |  | 
| | Provision for income taxes                |  |                                  |   | 5,419      |   |  |  | 
| | Net loss                                  |  |                                  | $ | (7,395     | ) |  |  | 
| |                                           |  |                                  |  
| | Loss per share                            |  |                                  |   |            |   |  |  | 
| | Basic                                     |  |                                  | $ | (0.31      | ) |  |  | 
| | Diluted                                   |  |                                  | $ | (0.31      | ) |  |  | 
| |                                           |  |                                  |  
| | Weighted average shares outstanding       |  |                                  |   |            |  
| | Basic                                     |  |                                  |   | 23,620,296 |   |  |  | 
| | Diluted                                   |  |                                  |   | 23,664,228 |   |  |  | 

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, as defined in the fair value
hierarchy of SFAS 157, Fair Value Measurements. The following table presents information about
these securities 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 3/31/09 Using
|                                   
|                                    |  |   |                  | Quoted Prices in        |                         |                     |            
|                                    |  |   |                  | Active Markets for      |                         |                     | Significant
|                                    |  |   | Fair Value       | Identical Assets        | Other Observable Inputs | Unobservable Inputs
|Description                         |  |   | 3/31/2009        | (Level 1)               | (Level 2)               | (Level 3)          
|SecuritiesAvailable-for-sale        |  | $ | 182              | -                       | $                       | 182                 | -          
|Total Assets Measured at Fair Value |  | $ | 182              | -                       | $                       | 182                 | -          

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.

9

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Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as loans measured for impairment and other real estate owned. The following table presents the fair value measurement for nonrecurring assets as ofMarch 31, 2009, 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 3/31/09 Using |                         |                    
|                                    |  |            |        |                  | Quoted Prices in        |                     |             |        | 
|                                    |  |            |        |                  | Active Markets for      |                     | Significant |       
|                                    |  | Fair Value |        | Identical Assets | Other Observable Inputs | Unobservable Inputs |            
|Description                         |  | 3/31/2009  |        | (Level 1)        | (Level 2)               | (Level 3)           |            
|Other real estate owned             |  | $          | 9,362  |                  | -                       | -                   | $           | 9,362  | 
|Loans measured for impairment       |  |            | 49,258 |                  | -                       | -                   |             | 46,258 | 
|Specific reserves on impaired loans |  | (6,468     | )      | -                | -                       | (6,468              | )          
|Total Assets Measured at Fair Value |  | $          | 49,152 |                  | -                       | -                   | $           | 49,152 | 

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 $6.5 million, the Bank also had $171,000 of charge-offs related to the $29.5 million of loans measured for impairment.

Other real estate owned The other real estate owned amount above represents impaired real estate that has been adjusted to fair value. Other real estate owned represents real estate which the Bank has taken control of in partial or full satisfaction of loans. At the time of foreclosure, other real estate owned is recorded as the lower of the carrying amount of the loan or fair value less estimated costs to sell, which becomes the propertys new basis. Any write-downs based on the assets fair value at the date of acquisition are charged to the allowance for loan and lease losses. After foreclosure,
Management periodically performs valuations such that the real estate is carried at the lower of its new cost basis or fair value, net of estimated costs to sell. Fair value adjustments on other real estate owned are recognized within net loss on real estate owned. The loss represents impairments on other real estate owned for fair value adjustments based on the fair value of the real estate.

NOTE 4  STOCK-BASED COMPENSATION

At March 31, 2009, 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 2,145,123 shares of stock, of which 1,135,742 shares were available for issuance at March 31, 2009. As of March 31, 2009, 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 three month period ended March 31, 2009, 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, 12/31/08 | 999,428   |   |  | $ | 9.41             |  |                  |  |                 |   
|Granted                             | 2,000     |   |  | $ | 4.99             |  |                  |  |                 |   
|Exercised                           | (13,866   | ) |  | $ | 3.16             |  |                  |  | $               | 30
|Forfeited                           | (9,150    | ) |  | $ | 10.72            |  |                  |  |                 |   
|Expired                             | (17,097   | ) |  | $ | 5.86             |  |                  |  |                 |   
|Stock options outstanding, 3/31/09  | 961,315   |   |  | $ | 9.55             |  | 6.62             |  | $               | - 
|Stock options exercisable, 3/31/09  | 459,867   |   |  | $ | 8.28             |  | 4.94             |  | $               | - 

10

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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 March 31,
|                         | 2009                         |   |  | 2008 |  
|                        
|Risk-free interest rate  | 2.4                          | % |  | 3.1  | %
|Expected dividend        | 2.54                         | % |  | 2.25 | %
|Expected lives, in years | 7.0                          |   |  | 7.0  |  
|Expected volatility      | 29                           | % |  | 28   | %

The weighted-average grant date fair value of options granted during the three month period ending March 31, 2009 was $0.84.

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 three months ended March 31, 2009 and 2008 were $0 and $108,000, respectively.

Stock-based compensation expense recognized under SFAS 123R was $112,000 with a related tax benefit of $38,000, for the quarter ended March 31, 2009, compared to stock-based compensation expense of $60,000, with a related tax benefit of $26,000, for the quarter ended March 31, 2008. At March 31, 2009, unrecognized stock-based compensation expense totaled $1,243,000 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.

11

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|                                                                                          |                |           |  |            |                   |            |   |           |   |  |        |      
|----------------------------------------------------------------------------------------- | -------------- | --------- |  | ---------- | ----------------- | ---------- | - | --------- | - |  | ------ | -----
|NOTE 5 - INVESTMENT SECURITIES                                                            |                |           |  |            |                   |            |   |           |   |  |        |      
|                                                                                         
|                                                                                         
|Investment securities at March 31, 2009 and December 31, 2008 consisted of the following: |                |           |  |            |                   |            |  
|(Dollars in 000's)                                                                        |                |           |  |            |                   |            |   |           |   |  |        |      
|                                                                                          | March 31, 2009
|                                                                                          |                |           |  | Gross      |                   | Gross      |   | Estimated
|                                                                                          |                | Amortized |  | unrealized |                   | unrealized |   | fair     
|                                                                                          |                | cost      |  | gains      |                   | losses     |   | value    
|Available-for-sale:                                                                       |                |           |  |            |                   |            |   |           |   |  |        |      
|Mortgage-backed securities and collateralized                                             |                |           |  |            |                   |            |   |           |   |  |        |      
|mortgage obligations                                                                      | $              | 182       |  | $          | 1                 |            | $ | (1        | ) |  | $      | 182  
|Total                                                                                     | $              | 182       |  | $          | 1                 |            | $ | (1        | ) |  | $      | 182  
|                                                                                         
|Held-to-maturity:                                                                         |                |           |  |            |                   |            |   |           |   |  |        |      
|Mortgage-backed securities and collateralized                                             |                |           |  |            |                   |            |   |           |   |  |        |      
|mortgage obligations                                                                      | $              | 1,793     |  | $          | 67                |            | $ | -         |   |  | $      | 1,860
|U.S. Government and agency securities                                                     |                | 30,192    |  |            | 291               |            |   | (25       | ) |  | 30,458
|Obligations of states and political subdivisions                                          |                | 2,823     |  |            | 28                |            |   | (17       | ) |  |        | 2,834
|Total                                                                                     | $              | 34,808    |  | $          | 386               |            | $ | (42       | ) |  | 35,152
|                                                                                         
|Investment securities - CRA                                                               | $              | 4,000     |  | $          | -                 |            | $ | -         |   |  | $      | 4,000
|Restricted equity securities                                                              | $              | 3,643     |  | $          | -                 |            | $ | -         |   |  | $      | 3,643
|                                                                                         
|                                                                                          |                |           |  |            | December 31, 2008 |            |   |           |   | 
|                                                                                          |                |           |  | Gross      |                   | Gross      |   | Estimated
|                                                                                          |                | Amortized |  | unrealized |                   | unrealized |   | fair     
|                                                                                          |                | cost      |  | gains      |                   | losses     |   | value    
|Available-for-sale:                                                                       |                |           |  |            |                   |            |   |           |   |  |        |      
|Mortgage-backed securities and collateralized                                             |                |           |  |            |                   |            |   |           |   |  |        |      
|mortgage obligations                                                                      | $              | 188       |  | $          | 1                 |            | $ | (1        | ) |  | $      | 188  
|Total                                                                                     | $              | 188       |  | $          | 1                 |            | $ | (1        | ) |  | $      | 188  
|                                                                                         
|Held-to-maturity:                                                                         |                |           |  |            |                   |            |   |           |   |  |        |      
|Mortgage-backed securities and collateralized                                             |                |           |  |            |                   |            |   |           |   |  |        |      
|mortgage obligations                                                                      | $              | 1,799     |  | $          | 52                |            | $ | -         |   |  | $      | 1,851
|U.S. Government and agency securities                                                     |                | 27,496    |  |            | 419               |            |   | -         |   |  | 27,915
|Obligations of states and political subdivisions                                          |                | 2,921     |  |            | 22                |            |   | (23       | ) |  |        | 2,920
|Total                                                                                     | $              | 32,216    |  | $          | 493               |            | $ | (23       | ) |  | 32,686
|Investment securities - CRA                                                               | $              | 4,000     |  | $          | -                 |            | $ | -         |   |  | $      | 4,000
|Restricted equity securities                                                              | $              | 3,643     |  | $          | -                 |            | $ | -         |   |  | $      | 3,643

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 March 31, 2009, investment securities with an estimated fair market value of $35.3 million were pledged to secure public deposits, certain nonpublic deposits and borrowings.

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|                                                                             |   |           |   |  |   |           |  
|---------------------------------------------------------------------------- | - | --------- | - |  | - | --------- | -
|NOTE 6LOANS, NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES            |   |           |   |  |  
|                                                                            
|Loans as of March 31, 2009 and December 31, 2008 consisted of the following: |   |           |   |  |   |           |  
|(Dollars in 000's)                                                           |   | 2009      |   |  |   | 2008      |  
|Real estate-commercial                                                       | $ | 616,344   |   |  | $ | 604,728   |  
|Real estate-construction                                                     |   | 264,028   |   |  |   | 280,219   |  
|Real estate-residential                                                      |   | 27,039    |   |  |   | 22,895    |  
|Commercial                                                                   |   | 205,989   |   |  |   | 199,739   |  
|Agricultural                                                                 |   | 42,626    |   |  |   | 48,640    |  
|Consumer                                                                     |   | 79,310    |   |  |   | 82,253    |  
|Overdrafts                                                                   |   | 2,951     |   |  |   | 7,462     |  
|Other                                                                        |   | 2,344     |   |  |   | 2,360     |  
|Total loans                                                                  |   | 1,240,631 |   |  |   | 1,248,296 |  
|Less: allowance for loan losses                                              |   | (25,659   | ) |  |   | (17,157   | )
|Less: deferred loan fees                                                     |   | (1,344    | ) |  |   | (1,415    | )
|Loans, net                                                                   | $ | 1,213,628 |   |  | $ | 1,229,724 |  

Transactions in the allowance for loan losses for the three months ended March 31, 2009 and March 31, 2008 were as follows:

|                                                                                                 |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------ | - | ------ | - |  | - | ------ | -
|(Dollars in 000's)                                                                               |   | 2009   |   |  |   | 2008   |  
|BALANCE, beginning of the period                                                                 | $ | 17,157 |   |  | $ | 11,450 |  
|Stockmans Bank purchase (1)                                                                      |   | -      |   |  |   | 5,983  |  
|Loans charged-off                                                                                |   | (2,524 | ) |  |   | (499   | )
|Loan recoveries                                                                                  |   | 326    |   |  |   | 255    |  
|Loan loss provision                                                                              |   | 10,700 |   |  |   | 3,075  |  
|BALANCE, end of the period                                                                       | $ | 25,659 |   |  | $ | 20,264 |  
|(1) Amount resulting from the acquisition of Stockmans Bank - refer to Note 2.                   |   |        |   |  |   |        |  
|                                                                                                
|The following table summarizes non-performing assets as of March 31, 2009 and December 31, 2008: |   |        |   |  |  
|(Dollars in 000's)                                                                               |   | 2009   |   |  |   | 2008   |  
|Non-performing loans                                                                             | $ | 69,045 |   |  | $ | 68,496 |  
|Impaired loans in process of collection                                                          |   | 14,207 |   |  |   | 12,682 |  
|Loans past due greater than 90 days but not on non-accrual status                                |   | 761    |   |  |   | 1,437  |  
|Total non-performing loans                                                                       |   | 84,013 |   |  |   | 82,615 |  
|Other real estate owned                                                                          |   | 9,362  |   |  |   | 4,423  |  
|Total non-performing assets                                                                      | $ | 93,375 |   |  | $ | 87,038 |  
|Percentage of non-performing loans to total loans                                                |   | 6.77   | % |  |   | 6.62   | %
|Percentage of non-performing assets to total assets                                              |   | 6.24   | % |  |   | 5.90   | %

NOTE 7 - LINE OF CREDIT AND OTHER BORROWINGS

The Bank had outstanding borrowings with the Federal Home Loan Bank (FHLB) totaling $37,000 and $20.0 million as of March 31, 2009 and December 31, 2008, respectively. In addition, as of March 31, 2009, the Bank had $21.4 million outstanding letters of credit used to support its public funds pledging requirements as well as insuring customers with excess deposit insurance. 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 March 31, 2009 and December 31, 2008, the Company had long-term borrowings of $37,000 and $42,000, respectively. Of the $37,000 outstanding at March 31, 2009, $4,000 will fully amortize to maturity in 2009; and $33,000 will fully amortize to maturity in 2014. Presently, monthly payments of $2,000 plus interest are being made against these long-term advances with a weighted average annual interest rate of 6.63%.

The Bank also utilizes FHLBs Cash Management Advance program for short-term borrowing needs. Advances taken under this program mature in less than one year. As of March 31, 2009, the Company had no outstanding CMA advances; as of December 31, 2008, the company had $20.0 million in outstanding CMA advances.

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 borrowingsand outstanding letters of credit, of approximately $23.4 million and $14.3 million as of March 31, 2009 and December 31, 2008, respectively.

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As an additional source of liquidity, the Bank maintains unsecured federal funds lines with correspondent banks. Federal funds purchased generally mature within one to four days from the transaction date. As of March 31, 2009 the Company had $20.0 million in aggregate available borrowing capacity through correspondent banks. Outstanding balances under these commitments at March 31, 2009 and December 31, 2008 were zero and $25.0 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 March 31, 2009.

|                      |  |            |  |   |            |  |                |      |   |      |           |      |           
|--------------------- |  | ---------- |  | - | ---------- |  | -------------- | ---- | - | ---- | --------- | ---- | ----------
|                      |  |            |  |   | Issued     |  |                |      |   |      | Maturity  |      | Redemption
|Trust Name            |  | Issue Date |  |   | Amount     |  | Rate (1)(2)(3) |      |   | Date |           | Date
|                     
|PremierWest Statutory |  | December   |  |   |            |  |                |      |   |      | December  |      | December  
|Trust I               |  | 2004       |  | $ | 7,732,000  |  |                | 5.65 | % |      | 2034      |      | 2009      
|                     
|PremierWest Statutory |  | December   |  |   |            |  |                |      |   |      | March     |      | March     
|Trust II              |  | 2004       |  |   | 7,732,000  |  |                | 5.65 | % |      | 2035      |      | 2010      
|                     
|Stockmans Financial   |  | August     |  |   | 15,464,000 |  |                | 5.93 | % |      | 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 March 2035.

NOTE 9  PREFERRED STOCK

On February 13, 2009, in exchange for an aggregate purchase price of $41.4 million, the company issued and sold to the United States Department of the Treasury pursuant to the Troubled Asset Relief Program Capital Purchase Program the following: (i) 41,400 shares of the Companys Fixed
Rate Cumulative Perpetual Preferred Stock, Series B, no par value per share, and liquidation preference of $1,000 per share and (ii) a warrant to purchase up to 1,090,385 shares of the Companys common stock, no par value per share, at an exercise price of $5.70 per share, subject to certain anti-dilution and other adjustments. The Warrant may be exercised for up to ten years after it is issued.

In connection with the issuance and sale of the Companys securities, the Company entered into a Letter Agreement including the Securities Purchase Agreement-Standard Terms, dated February 13, 2009, with the United States Department of the Treasury (the Agreement). The Agreement contains limitations on the payment of quarterly cash dividends on the Companys common stock in excess of $0.065 per share and on the Companys ability to repurchase its common stock. The Agreement also grants the holders of the Series B Preferred Stock, the Warrant and the common stock to be issues under the Warrant registration rights, and subjects the Company to executive compensation limitations included in the Emergency Economic Stabilization Act of 2008. Participants in the TARP Capital Purchase Program are required to have in place limitations on the compensation of Senior Executive Officers.

The Series B Preferred Stock will bear cumulative dividends at a rate of 5% per annum for the first five years and 9% per annum thereafter, in each case, applied to the $1,000 per share liquidation preference, but will only be paid when, as and if declared by the Companys Board of Directors out of funds legally available. The Series B Preferred Stock has no maturity date and ranks senior to the Companys common stock with respect to the payment of dividends and distributions and amounts payable upon liquidation, dissolution and winding up of the Company.

For three years from the date of the issuance, the preferred stock may only be redeemed with the proceeds from a qualified equity offering that results in aggregate gross proceeds to the Company of not less than 25% of the issue price of the preferred stock. A qualified equity offering means the sale of Tier 1 qualifying perpetual preferred stock or common stock for cash. After threeyears, the preferred stock may be redeemed by the Company at its issue price, plus all accrued and unpaid dividends, subject to the approval of the Companys primary federal bank regulator. The preferred stock has no maturity date.

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The preferred stock is not subject to any contractual restrictions on transfer. The holders of the preferred stock have no general voting rights, and have only limited class voting rights including, authorization or issuance of shares ranking senior to the preferred stock, any amendment to the rights of the preferred stock, or any merger, exchange or similar transaction which would adversely affect the rights of the preferred stock. If dividends on the preferred stock are not paid in full for six dividend periods, whether or not consecutive, the preferred stock holders will have the right to elect two directors. The right to elect directors will end when full dividends have been paid for four consecutive dividend periods. The preferred stock is not subject to sinking fund requirements and has no participation rights.

In accordance with the relevant accounting pronouncements and a letter from the Securities and Exchange Commissions the SEC) Office of the Chief Accountant, the Company recorded the preferred stock and detachable warrant within Shareholders Equity on the Consolidated Balance Sheets. The preferred stock and detachable warrant were initially recognized based on their relative fair values at the date of issuance. As a result, the preferred stocks carrying value is at a discount to the liquidation value or stated value. In accordance with the SECs Staff Accounting Bulletin No. 68, Increasing Rate Preferred Stock, the discount is considered an unstated dividend cost that shall be amortized over the period preceding commencement of the perpetual dividend using the effective interest method, by charging the imputed dividend cost against retained earnings and increasing the carrying amount of the preferred stock by a corresponding amount. The discount is therefore being amortized over five years using a 6.26% effective interest rate. The total stated dividends (whether or not declared) and unstated dividend cost combined represents a periods total preferred stock dividend, which is deducted from net income to arrive ant net income available to common shareholders on the Consolidated Statements of Income.

As of March 31, 2009, the Company has accrued for the first quarterly dividend, which is payable on May 15, 2009. As of March 31, 2009, no dividends were in arrears.

NOTE 10 - 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 March 31, 2009, the Company had $131.0 million of commitments to extend credit to customers and $27.1 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.

15

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NOTE 11 - EARNINGS (LOSS) PER SHARE

The Company's basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders (net income (loss) less dividends declared and accretion of discount 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 (loss) per common share is computed similar to basic earnings (loss) per common share except that the numerator is equal to net income (loss) 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 and the dilutive effect of preferred stock as if converted to common stock. The following summarizes the weighted average shares outstanding for computation of basic and diluted shares for the three months ended March 31, 2009 and 2008.

|                                          |  |            |           
|----------------------------------------- |  | ---------- | ----------
|Three-months ended March 31:              |  | 2009       | 2008      
|Weighted average number of common shares: |  |            |           
|Average shares outstanding-basic          |  | 23,600,242 | 20,898,008
|Average shares outstanding-diluted        |  | 23,600,926 | 22,236,025

As of March 31, 2009, stock options of approximately
1,009,000, were not included in the computation of diluted earnings per share as their inclusion would have been anti-dilutive. In addition, no common stock equivalents are considered when the Company reports a net loss as their inclusion would also have been anti-dilutive.

NOTE 12 - RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. The disclosures require publically traded companies to disclose the fair value of financial instruments in interim periods previously required in annual financial statements. These standards are effective for interim and annual periods ending after June 15, 2009. The Company is currently evaluating the effect that these statements will have on its consolidated financial statements.

In April 2009, the FASB issued Statement of Financial Accounting Standards No. 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. These statements amend the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. These statements are effective for interim and annual periods ending after June 15, 2009. The Company is currently evaluating the effect that these statements will have on its consolidated financial statements.

In April 2009, the FASB issued Statement of Financial Accounting Standards No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (SFAS 157-4). SFAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157, when the volume and level of activity for the asset or liability have significantly decreased. SFAS 157-4 also includes guidance on identifying circumstances that indicate a transaction in not orderly. It is effective for interim and annual periods ending after June 15, 2009. The Company is currently evaluating the effect that these statements will have on its consolidated financial statements.

In December 2008, the Financial Accounting Standards Board (FASB) issued Staff Position (FSP) 132(R)-1, Employers Disclosures about Postretirement Benefit Plan Assets, which provides additional guidance on an employers disclosures about plan assets of a defined benefit pension or other postretirement plan. This interpretation is effective for financial statements issued for fiscal years ending after December 15, 2009. The Company is currently evaluating the impact the adoption of FSP 132(R)-1 will have on its consolidated financial statements.

In June 2008, FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. FSP EITF 03-6-1 concludes that nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and shall be included in the compensation of EPS pursuant to the two-class method. This statement is effective for fiscal years beginning after December 15, 2008, to be applied retrospectively. The adoption of
this standard had no  impact on the Company.

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 does not expect the adoption of SFAS 163 to have a material impact on the consolidated financial statements.

16

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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 does not expect the adoption of SFAS 162 to have a material impact on the consolidated financial statements.

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3) which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets.FSP 142-3 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset in FSP 142-3 is to be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements in FSP 142-3 are to be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. The Company does not expect the adoption of FSP 142-3 to have a material impact on the 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 does not expect the adoption of SFAS 161 to have a material impact on the consolidated financial statements.

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 does not expect the adoption of SFAS 160 to have a material impact on the consolidated financial statements.

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.

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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 within the meaning of the "safe-harbor" provisions of Sections 21D and 21E of the Securities Exchange Act of 1934, as amended. Other than for statements of historical fact, all statements about our financial position and results of operations, business strategy and Management's plans and objectives for future operations are forward-looking statements. When used in this report, the words "anticipate," "believe," "estimate," "expect," and "intend" and words or phrases of similar meaning, as they relate to the Company or Management, are intended in part to help identify forward-looking statements. Examples of forward-looking statements include, but are not limited to: statements that include projections or Management's expectations for revenues, income or expenses, earnings per share, capital expenditures, dividends, capital structure and other financial items; statements of the plans and objectives of the Company, its Management or its Board of Directors, including the introduction of new products or services, plans for expansion, acquisitions or future growth and estimates or predictions of actions by customers, vendors, competitors or regulatory authorities; statements about future economic performance; statements of assumptions underlying other statements about the Company and its business; statements regarding the adequacy of the allowance for loan losses; and descriptions of assumptions underlying or relating to any of the foregoing. Although Management believes that the expectations reflected in forward-looking statements are reasonable, we can make no assurance that such expectations will prove correct. Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. For a more comprehensive discussion of the risk factors impacting our business refer to Item 1A Risk Factors in this report beginning on page 9. These risks and uncertainties include the effect of competition and our ability to compete on price and other factors; 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; changes in accounting policies; our ability to maintain or expand our market share or our net interest margin; factors that could limit or delay implementation of our marketing and growth strategies; and our ability to integrate acquired branches or banks. Other risks include those identified from time to time in our past and future filings with the Securities and Exchange Commission. Note that this list of risks is not exhaustive, and risks identified are applicable as of the date made and cannot be updated. You should not unduly rely on forward-looking statements. 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. 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 month period ending March 31, 2009. 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/A (Amendment No. 1) for the year ended December 31, 2008. For discussion purposes, Management has made comparisons, as it deems appropriate, to comparable interim periods in 2008 and the fiscal year period ended December 31, 2008.

HIGHLIGHTS -For the first quarter ending March 31, 2009, the Company lost $3.6 million or $0.17 per fully diluted share, compared to earnings of $1.8 million or $0.08 per fully diluted share for the quarter ended March 31, 2008. Annualized return on average common shareholders equity was -9.29% and annualized return on average assets was -0.98% for the quarter ended March 31, 2009, as compared to an annualized return on average shareholders equity and return on average assets of 4.17% and 0.52%, respectively, for the quarter ended March 31, 2008. Compared with the quarter ended December 31, 2008, the reported loss declined $7.7 million or 68.14%.

At March 31, 2009, loans (net of deferred loan fees but before deducting the allowance for loan losses), decreased $9.1 million or
0.73% compared to December 31, 2008. At March 31, 2009, deposits increased $28.0 million or 2.32% since year-end.

PremierWests overall earnings decline over the three month period ending March 31, 2009, in comparison to the same period a year ago, resulted principally from a charge to earnings of $10.7 million in loan loss provision. Slightly offsetting the decline was a 13 basis point increase in net interest margin from 4.28% during the quarter ending December 31, 2008 to 4.41% during the quarter ending March 31, 2009.

At March 31, 2009, our allowance for loan losses totaled $25.7 million, representing 2.07% of total loans net of deferred loan fees. The $8.5 million increase in our allowance from December 31, 2008, was comprised of a $10.7 million increase from the provision charge against earnings partially offset by both a $2.5 million in charge-offs less $326,000 in recoveries of previously charged-off loans.

Non-performing assets totaled $93.4 million at March 31, 2009, an increase of $6.3 million when compared to $87.0 million in non-performing assets at December 31, 2008. The March 31, 2009 balance includes $9.4 million in other real estate owned compared to $4.4 million at December 31, 2008, an increase of $5.0 million or 113.64%, reflecting foreclosure activity concluded during the quarter. Non-performing loans increased from $82.6 million at December 31, 2008 to $84.0 million atMarch 31, 2009. The increase in non-performing loans this quarter is symptomatic of the distressed economy and its effect on certain of our borrowers.

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The Banks loan to deposit ratio (based on gross loans) was 97.93 percent at March 31, 2009. Our loan to deposit ratio, based on net loans (loans net of deferred loan fees and the allowance for loan losses) was 101.52% and 100.91% as of December 31, 2008 and March 31, 2008, respectively and has continued to decline since reaching 108.29% at year end 2007. The decline is a result of loan paydowns as borrowers have deleveraged, loan pay offs, and increased deposits primarily associated with the acquisition of Stockmans Financial Group in early 2008.

Core deposits are our lowest cost and preferred source of funds and 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 $165.5 million of total deposits at March 31, 2009, which includes $26.7 million of customer placed brokered deposits. This represents an increase of $41.6 million over the previous quarter ending December 31, 2008. Brokered deposits are historically a higher cost source of funding compared to core deposits but current interest rates for brokered deposits are less than many of our customer deposit rates. Management will continue to emphasize core deposits as our preferred source of funding but will incorporate brokered deposits as part of the Banks overall funding strategy in order to support liquidity needs.

Management continues to implement relationship oriented strategies for attracting core deposits in order to reduce our reliance on higher costing borrowings and brokered deposits
and 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 impacted loan demand and deposit growth, Management continues to believe that the Bank will capture future loan volume at a faster rate than our ability to fully fund the loan volume from existing customer core deposit relationships.

The Banks year-over-year loan volume changes and our ongoing pipeline of new loan production is in line with Managements internal expectations at March 31, 2009, in light of general economic and credit quality considerations. Managements broader business plan and growth strategy continues to be focused on driving maturation of business at existing de novo branches and acquired 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 periods ended March 31: |   | 2009      |   |  |   | 2008      |   |  |   | (Decrease) |   |  | % Change
|                                                    
|Average fed funds sold and investments               | $ | 61,132    |   |  | $ | 36,644    |   |  | $ | 24,488     |   |  | 66.83    | %
|Average gross loans                                  |   | 1,266,653 |   |  |   | 1,186,600 |   |  |   | 80,053     |   |  | 6.75     | %
|Average interest-earning assets                      |   | 1,327,785 |   |  |   | 1,223,244 |   |  |   | 104,541    |   |  | 8.55     | %
|Average interest-bearing liabilities                 |   | 1,047,888 |   |  |   | 948,808   |   |  |   | 99,080     |   |  | 10.44    | %
|Average total assets                                 |   | 1,489,512 |   |  |   | 1,383,294 |   |  |   | 106,218    |   |  | 7.68     | %
|Average equity                                       |   | 195,293   |   |  |   | 173,692   |   |  |   | 21,601     |   |  | 12.44    | %
|Average common equity                                |   | 173,619   |   |  |   | 173,787   |   |  |   | (168       | ) |  | -0.10    | %
|                                                    
|Average yield earned (1)                             |   | 6.14      | % |  |   | 7.58      | % |  |   | (1.44      | ) |  | -19.00   | %
|Average rate paid                                    |   | 2.19      | % |  |   | 3.34      | % |  |   | (1.15      | ) |  | -34.43   | %
|Net interest spread                                  |   | 3.95      | % |  |   | 4.24      | % |  |   | (0.29      | ) |  | -6.84    | %
|                                                    
|                                                    
|Net interest income to average                       |   |           |   |  |   |           |   |  |   |            |   |  |          |  
|interest-earning assets (net interest margin) (1)    |   | 4.41      | % |  |   | 4.99      | % |  |   | (0.58      | ) |  | -11.62   | %
|Annualized return on average assets                  |   | -0.98     | % |  |   | 0.52      | % |  |   | (1.50      | ) |  | -288.46  | %
|Annualized return on average common equity           |   | -9.29     | % |  |   | 4.17      | % |  |   | (13.46     | ) |  | -322.78  | %
|Efficiency ratio (2)                                 |   | 74.74     | % |  |   | 66.36     | % |  |   | 8.38       |   |  | 12.63    | %

Notes:

(1) Tax equivalent

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RESULTS OF OPERATIONS

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. Net interest income for the quarter ended March 31, 2009 increased compared to the prior quarter but declined from the same period a year earlier. Net interest income increased $346,000 or 2.46% over the quarter ending December 31, 2008 and declined $691,000 or 4.58% from the quarter one year earlier. Market interest rates declined dramatically from the same period last year and were held at low levels during the current quarter by the Federal Reserve to stimulate the economy. The interest rate environment affected both our yield on earning assets and our cost of interest-bearing deposits and was the primary factor driving the decline in our net interest income from the same period last year.

A key metric of our profitability is our net interest margin (net interest income divided by average interest-earning assets), which relates to the relative stability in 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 both our interest-bearing and non interest-bearing liabilities; the credit quality of our loan portfolio; and the general movement in the market rates of interest.

Our asset sensitivity position in terms of interest rate sensitivity was the driving factor in the year over year decline in first quarter net interest margin from 4.99% in 2008 to 4.41% in the most recently completed quarter. Compared to the previous quarter ended December 31, 2008, net interest margin expanded by 13 basis points from 4.28% to 4.41%. Our yield on earning assets averaged 6.14%, down 14 basis points from the preceding quarter ended December 31, 2008. Our cost of interest bearing deposits and borrowings similarly fell 26 basis points from 2.05% in the preceding quarter to 1.79% in the most recent quarter. These changes resulted in an interest spread of 3.95% during the current quarter ended March 31, 2009, up 17 basis points from 3.78% recorded during the immediately preceding quarter.

LOAN LOSS PROVISION Charges made to the provision for loan losses that translate to increases in our allowance for loan losses were $10.7 million and $3.1 million for the three month periods ended March 31, 2009 and March 31, 2008, respectively. The Company had net charge-offs of $2.2 million during the first three months of 2009 compared to net charge offs of $244,000 for the corresponding period in 2008. Management believes that the March 31, 2009 balance in the allowance for loan losses was reasonable and appropriate to support inherent probable losses in the Companys loan portfolio.

NON-INTEREST INCOMEDuring the first quarter of 2009, PremierWest had non-interest income of $2.5 million, a decrease of $141,000 or 5.40% from the fourth quarter of 2008. The decrease was primarily a result of a $158,000 decline in deposit services charges, predominantly in NSF fees.

NON-INTEREST EXPENSE Non-interest expense increased approximately $1.1 million or 9.35% for the three months ended March 31, 2009, as compared to the corresponding period in 2008. On a summary basis, the increase over the three month period was a result of $454,000 or 6.89% increase in salary and benefit expenses; a $9,000 or 0.48% increases in occupancy and equipment expenses; and a $614,000 or 20.05% net increase in other non-interest expenses.

EFFICIENCY RATIO- The Company's efficiency ratio was 74.74% during the first quarter of 2009, an 838 basis point deterioration compared to 66.36% for the first quarter of 2008, and a 339 basis point decline from the immediately preceding quarter ending December 31, 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 implementing actions to bring the efficiency ratio back to its target range.

FINANCIAL CONDITION Total assets of $1.50 billion at March 31, 2009, increased $20.8 million or 1.41% compared to total assets of $1.48 billion at December 31, 2008. This growth principally resulted from a $41.4 million investment by the U.S. Department of Treasury through the TARP Capital Purchase Program. On a consolidated basis, gross loans declined $7.7 million; the Allowance for Loan Losses increased $8.5 million; cash and other earning assets increased $28.6 million; premises and equipment declined $0.7 million; and accrued interest and other assets increased $4.2 million.

Net loans accounted for 81.08% of total assets at March 31, 2009 compared to 83.32% at December 31, 2008. As of March 31, 2009, the allowance for loan losses increased to $25.7 million from $17.2 million at December 31, 2008. The allowance for loan losses was enhanced with $10.7 million in provision charged against earnings and decreased by $2.2 million in net charge-offs. The Company's ratio of allowance for loan losses to total loans was 2.07% at March 31, 2009, as compared to 1.38% at December 31, 2008, and 1.60% at March 31, 2008.

During the quarter ending March 31, 2009, we elected to continue to build our allowance for loan loss to position the company more conservatively in relationship to potential distress in our loan portfolio. The loan loss reserve as a percentage of gross loans was increased from 1.37% at December 31, 2008 to 2.07% at the end of the currently completed period. The ratio of loan loss reserve to non-performing loans concurrently grew from 20.77 % at year end 2008 to 30.54% at March 31, 2009. Our credit teams are working diligently with borrowers to assist them with their obligations until economic and real estate conditions improve.

Total non-performing assets were $93.3 million at March 31, 2009, up from $87.0 million as of December, 31, 2008, and represent 6.24 % of total assets. The non-performing assets include $9.4 million in other real estate owned as of March 31, 2009, up from $4.4 million as of December 31, 2008. Non-performing loans, totaling $84.0 million are concentrated in fifteen relationships comprising $66.0 million or 78.67% of the total.

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The first relationship consists of multiple loans secured by improved lots and a nearly complete single family residence in northern California. This relationship now totals $5.6 million following a $1.2 million loan pay down during 2008 and our decision to charge off the remainder of the impairment during 2008.Foreclosure by another lender against our guarantor on an adjacent property and the borrower filing personal bankruptcy led to the actions we have taken. We are working through the bankruptcy and are pre-marketing the property. We do not expect further impairment based on the reduced book value of the loans.

The second non-performing relationship consists of loans secured with undeveloped property in central and northern California. Foreclosure on the northern California property was completed in the second quarter of 2008 with a charge-off of $1.3 million and the remaining $1.0 million balance included as other real estate owned. The second credit consists of a $4.5 million loan secured by undeveloped real estate with a significant loan from a third-party investor group in second position behind our lien. The guarantor continued to keep this loan current while both parties negotiated a workout. We had previously established a specific reserve for impairment on this credit, which was charged-off as of December 2008. The non-performing balance is currently at $1.0 million. Management believes no further impairment will be necessary given the conservative actions already taken.

The third relationship is currently being carried at $2.2 million and is comprised of multiple loans secured by approved residential building lots and by completed and partially completed residential units, all situated in southern and central Oregon. The Bank has taken possession of the properties, and a stipulated deficiency was accepted by the borrower. The balance will be transferred to other real estate owned as of April 2009. The Bank is currently marketing the properties.

The fourth non-performing credit relationship consists of multiple notes currently totaling $13.7 million, all secured by commercial property including two assisted living facilities, commercially zoned land and a non-owner occupied commercial building. Three of the properties are in Oregon and one in northern California. The borrowers have experienced severe cash flow difficulties and are attempting to sell assets, and the lead guarantor has filed personal bankruptcy. We have obtained updated appraisals on the properties and, as a result, have charged-off a small impairment balance. Negotiations with the bankruptcy court and three outside parties interested in purchasing three of the four properties continue and are expected to be successful.

The fifth relationship consists of two non-performing loans currently totaling $2.3 million. This relationship is secured by two residential developments in central Oregon. Based on updated appraisals specific impairments were charged-off in December 2008. No additional impairment is expected. Negotiations with the borrower continues while the foreclosure is progressing.

The sixth relationship consists of multiple non-performing loans currently totaling $6.2 million. This borrower had been impacted by a real estate related business that failed with the downturn of the mortgage lending industry. The borrower had 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 had agreed to a restructure of this credit although this has not been successful, and foreclosure has been initiated. Based on current collateral values, we anticipate no loss at this time.

The seventh credit relationship consists of four non-performing loans totaling $3.1 million. The borrower is deceased, and the estate has been uncooperative to date. Our collateral consists of residential lots and raw commercial land in northern California. Current appraisals have been received and impairments were charged-off in 2008 with legal action commenced during the first quarter of 2009. The estate of this borrower has strong net worth and liquid assets.

The eighth credit relationship consists of two matured loans currently totaling $8.0 million. The loans are secured by a commercial building and commercial real estate in Central Oregon. The borrower had requested an extension of time to develop the project, which required a new appraisal. The appraised value was below the loan balances and the guarantors have pledged to either pay down the loans with a cash infusion or provide additional collateral. A significant guarantor is deceased and negotiations with the remaining guarantors continued over quarter end. An impairment has been established based on the appraised value, although successful negotiations are expected which should bring this loan back into a performing status once a paydown has occurred or additional collateral has been pledged.

A ninth relationship consists of eight non-performing loans currently at $2.9 million on various commercial properties and single family residences in the Rogue Valley of Oregon. The borrower and guarantors have been attempting to sell property to reduce debt while attempting to keep the loans current or within 60 days past due. The relationship was placed on non-accrual given severe delinquency of some of the loans. New appraisals have been ordered and an initial impairment established as of the end of 2008. The borrowers continue to make payments.

The tenth relationship, currently at $4.0 million, consists of loans secured by various commercial properties in Southern Oregon. The borrower and guarantors have experienced cash flow difficulties and payments are slow and promised property sales have not materialized. An impairment was established in December and current appraisals have been ordered.

The eleventh relationship involves a construction loan in Central Oregon where construction began on four-plex single family residences as part of a larger construction project. The borrower has been unable to sell the completed homes and updated appraisals indicated that the value of the project had declined. Negotiations to add additional collateral were undertaken during the first quarter and the loan placed on non-accrual until an acceptable plan can be negotiated with the borrowers. This loan currently has $1.3 million outstanding after an impairment was charged-off.

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A twelfth relationship totaling $2.7 million includes collateral consisting primarily of a commercial building and two completed residences in Southern Oregon. The borrower has been impacted by the decline in the construction industry and has been attempting to sell assets and keep payments current from other construction contracts. The loans have been frequently delinquentand all known sources of repayment including restructuring loans have been exhausted. The loans were placed on non-accrual during 2008, and legal means for obtaining the collateral for sale are being pursued. An impairment of $171,000 was charged-off during the quarter.

A thirteenth relationship totaling $1.3 million was put on non-accrual during the first quarter of 2009. This was the result of negotiations to restructure the credit that had gone beyond 90 days past due. The credit has been restructured and payments made as agreed since January. As long as payments continue in line with the stipulated payment schedule, the credit will be reclassified as performing during the next quarter.

The fourteenth relationship is a group of loans totaling $6.9 million to a developer in Northern California. This credit relationship, which is secured by land and completed single family residences, was placed on non-accrual due to a current appraisal showing insufficient collateral for the loans. The loan is paying in accordance with its terms and the borrower has agreed to pledge additional collateral, which is expected to return the relationship to performing status with no impairment.

A fifteenth loan to a developer in Northern California is secured by nearly completed single family residences and lots yet to be developed. The credit with an outstanding balance of $5.3 million was placed on non-accrual due to an appraisal showing insufficient collateral for the loan. Loan payments are occurring as agreed. A new appraisal has been ordered and a specific impairment has been established for the credit.

As previously reported, the bank has strengthened its concentration of resources directed at dealing with non-performing assets 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.

Deposits at March 31, 2009 were $1.24 billion, increasing $28.0 million or 2.32% from the December 31, 2008 total. Net loan volume continues at high levels in relation to our deposits. As of March 31, 2009, our loan-to-deposit ratio of
97.93% compared to a ratio of 101.52% as of December 31, 2008, and 100.91% as of March 31, 2008. Overall demand for loans has declined somewhat due to the economic climate and deposit volumes have remained relatively unchanged. Core deposits have declined somewhat and have been replaced by brokered CDs. The Banks deposit mix remained stable  consisting of 18.84% non-interest bearing demand. Core deposits, consisting of non-interest bearing demand, interest-bearing demand and regular savings deposits represented 53.72%, while time deposits (excluding brokered deposits) comprised 32.93%, and brokered deposits, including reciprocal brokered deposits placed on behalf of our customers, totaled 13.35% of total deposits.

As of March 31, 2009, loans, net of deferred loan fees, were $1.2 billion, down $9.1 million or 0.73% from December 31, 2008. The decline in loan volume during the most recently completed quarter reflects $5.1 million in loan pay offs net of loan originations and loan charge-offs of $2.5 million. New loan generation is continuing in the current environment, but the effect is being offset by borrower pay downs. On a year-over-year basis, March 31, 2009 loans were down $23.2 million principally due to loan charge-offs recorded during the fourth quarter of 2008 and the quarter just ended.

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, the Federal Reserve Bank of San Francisco as well as sourcing 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 March 31, 2009, and December 31, 2008: (Dollars in 000s)

|                              |   |           |  |   |              |  |   |                     |   |  |          |  
|----------------------------- | - | --------- |  | - | ------------ |  | - | ------------------- | - |  | -------- | -
|                              |   | March 31, |  |   | December 31, |  |   | Increase (Decrease) |  
|                              |   | 2009      |  |   | 2008         |  |   | 3/31/09  12/31/08  |  
|(Dollars in 000's)            |   |           |  |   |              |  |   |                     |   |  |          |  
|                             
|ASSETS                        |   |           |  |   |              |  |   |                     |   |  |          |  
|Federal funds sold            | $ | 36,045    |  | $ | 165          |  | $ | 35,880              |   |  | 21745.45 | %
|Securities available for sale |   | 182       |  |   | 188          |  |   | (6                  | ) |  | -3.19    | %
|Securities held to maturity   |   | 38,808    |  |   | 36,216       |  |   | 2,592               |   |  | 7.16     | %
|Restricted equity investments |   | 3,643     |  |   | 3,643        |  |   | 0                   |   |  | 0.00     | %
|Loans, net (1)                |   | 1,213,628 |  |   | 1,229,416    |  |   | (15,788             | ) |  | -1.28    | %
|Other assets (2)              |   | 204,465   |  |   | 206,326      |  |   | (1,861              | ) |  | -0.90    | %
|                             
|Total assets                  | $ | 1,496,771 |  | $ | 1,475,954    |  | $ | 20,817              |   |  | 1.41     | %
|                             
|LIABILITIES                   |   |           |  |   |              |  |   |                     |   |  |          |  
|Noninterest-bearing           |   |           |  |   |              |  |   |                     |   |  |          |  
|deposits                      | $ | 233,447   |  | $ | 228,788      |  | $ | 4,659               |   |  | 2.04     | %
|Interest-bearing              |   |           |  |   |              |  |   |                     |   |  |          |  
|deposits                      |   | 1,005,865 |  |   | 982,481      |  |   | 23,384              |   |  | 2.38     | %
|                             
|Total deposits                |   | 1,239,312 |  |   | 1,211,269    |  |   | 28,043              |   |  | 2.32     | %
|                             
|Other liabilities (3)         |   | 43,044    |  |   | 87,701       |  |   | (44,657             | ) |  | -50.92   | %
|                             
|Total liabilities             |   | 1,282,356 |  |   | 1,298,970    |  |   | (16,614             | ) |  | -1.28    | %
|                             
|SHAREHOLDERS                 |   |           |  |   |              |  |   |                     |   |  |          |  
|EQUITY                        |   | 214,415   |  |   | 176,984      |  |   | 37,431              |   |  | 21.15    | %
|                             
|Total liabilities             |   |           |  |   |              |  |   |                     |   |  |          |  
|and share-                    |   |           |  |   |              |  |   |                     |   |  |          |  
|holders equity               | $ | 1,496,771 |  | $ | 1,475,954    |  | $ | 20,817              |   |  | 1.41     | %

(1) Net of deferred loan fees and the allowance for loan losses(2) Includes cash and due from banks, other equity investments, premises and equipment, goodwill,core deposit intangible, accrued interest receivable and bank-owned life insurance.(3) 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 source brokered deposits.

As of March 31, 2009, the Companys overall liquidity position remained relatively stable when compared to December 31, 2008. The Banks loan volume continues to exceed deposits as reflected in its net loan-to-deposit ratio at March 31, 2009, and December 31, 2008 of 97.93% and 101.52%, 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 increased approximately $35.9 million while borrowed funds in the form of federal funds purchased and FHLB
advances decreased $45.0 million as of March 31, 2009, when compared to December
31, 2008. Investment securities either held-to-maturity or available-for-sale
increased by a net $2.6 million. 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.

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 deposits  particularly certificates of deposit. In addition, the Bank has tested its ability to identify and sell loans to a participating bank in order to provide additional cash for liquidity purposes. 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 March 31, 2009, the Bank had $37,000 of borrowings advanced from the FHLB and an aggregate of $21.4 million in letters of credit issued by the FHLB on behalf of the Company to meet its public funds deposit pledging requirements as well as excess deposit insurance on customers. The Company also had an immediate availability to borrow an additional $23.4 million under the Company's credit line. The Company also has unsecured federal funds credit lines for up to $20.0 million available from a correspondent bank as of March 31, 2009, pursuant to which no balances were outstanding.

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At March 31, 2009, the Company had approximately $131.0 million in outstanding commitments to extend credit for newly 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 used in operating activities totaled $6.7 million during the quarter and net cash of $8.5 million provided by investing activities. Cash provided by financing activities, totaling $24.2 million, was principally comprised of a $20.0 million paydown of Federal Home Loan Bank borrowings, a $25.0 million reduction in Fed Funds purchased, a $28.0 million increase in deposits and $41.4 million in TARP funds.

CAPITAL RESOURCES- Federal 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, 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 March 31, 2009, the Company's regulatory capital ratios were as follows: total risk-based capital ratio was 13.80%, Tier 1 capital ratio was 12.54% and the leverage capital ratio was 12.18%. 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 March 31, 2009, as compared to December 31, 2008.

As stated in the annual report on Form 10-K/A (Amendment No. 1) for 2008, 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/A (Amendment No. 1) for the year ended December 31, 2008.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE 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.

CONTINUING REMEDIATION OF MATERIAL WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL REPORTING

As of December 31, 2008, controls over the identification and valuation of impaired loans were not effective. The Company had not fully developed its controls to identify and assess, on a timely basis, loans requiring evaluation for impairment, and processes for appropriately valuing impaired loans, including the appropriate timing for the charge-off of collateral dependent loans. As a result, controls over the impaired loans and oversight thereof were not adequate to prevent or detect misstatements in the accuracy of
Managements estimates and disclosures on a timely basis, resulting in adjustments to the Companys December 31, 2008 consolidated financial statements.

In addition, this deficiency resulted in misstatements in Managements estimates and disclosures that were material to the Companys annual and fourth quarter interim consolidated financial statements and information that were not prevented or detected on a timely basis, requiring restatement of the financial statements. This misstatement was discovered subsequent to the filing of our Form 10-K, when
Management undertook a re-examination of the methodology for establishing fair market value and impairment on collateral dependent loans and the criteria for establishing the timing of related charge-offs. This reexamination was initiated in response to an interim examination by banking regulators that occurred after the filing of the Form 10-K. On April 15, 2009, the Board of Directors concluded that the Companys previously issued financial information and statements for the fourth quarter and year ended December 31, 2008 should no longer be relied upon.

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The Company has been actively engaged in the development and implementation of a remediation plan to address the material weakness in controls over impaired loans as of December 31, 2008. The components of this remediation plan are intended to ensure that the key controls over the identification and valuation process of impaired loans are operating effectively and are sustainable. These components include assigning dedicated and experienced resources at the Company with the responsibility for identification and valuation, and strengthening corporate oversight over the valuation methodologies and processes. Management continues to assign the highest priority to the remediation efforts in this area, with the goal of fully remediating this material weakness by year end 2009.

The Companys remediation efforts will be governed by a Committee under the direction of the Companys
President and Chief Executive Officer, Chief Operating Officer, Chief Credit Officer, Chief Financial Officer, Special Assets Manager and Controller. The status of remediation of the material weakness will be continuously reviewed with the Audit Committee, which will be advised of issues encountered and key decisions reached by
Management relating to the ongoing remediation efforts.

The Company recognizes that continued improvement in its internal controls over financial reporting related to impaired loans is necessary. Accordingly, the Company to date has modified its internal processes to more appropriately establish fair market values and impairment on real estate dependent loans and the criteria for determining the timing of related charge-offs, as detailed below:

Appraisals have been designated as the sole evidentiary support for real estate valuation. Impairment of collateral dependent loans will result in an immediate charge-off of the impairment based on the best available information at the time of impairment, and subsequently adjusted for updated information.

These changes have been implemented in conjunction with our evaluation of current regulatory guidance with respect to substantiating values of real estate collateral in distressed markets, the effect of the current prolonged downturn in the real estate market and the state of the general economy. Management believes that these changes will contribute significantly to the remediation of the material weakness in internal control over financial reporting that was in existence as of December 31, 2008. Additional changes will be implemented as determined necessary.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Other than as described above, there was no change in our internal control over financial reporting during our most recently completed fiscal quarter ended March 31, 2009, 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

There were no material changes in the risk factors presented in the Companys Form 10-K/A (Amendment No. 1) for the year ended December 31, 2008.

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

(a) [Not applicable.]

(b) [Not applicable.]

(c) None.

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.]

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ITEM 6. EXHIBITS

|(a) | Exhibits
|--- | --------
|    | 3.1     
|    | 3.2     
|    | 4.1     
|    | 4.2     
|    | 10.1    
|    | 10.2    
|    | 10.3    
|    | 31.1    
|    | 31.2    
|    | 32.1    
|    | 32.2    

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: May 11, 2009PREMIERWEST BANCORP

/s/ James M. FordJames M. Ford, 
President and Chief Executive Officer

/s/ Michael D. FowlerMichael D. Fowler, Chief Financial Officer and Principal Accounting Officer

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