SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



FORM 10-Q

(Mark One)

/X/
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
For the quarterly period ended March 31, 2002OR/   /
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from  to Commission File Number   333-96209

PREMIERWEST BANCORP
(Exact name of registrant as specified in its charter) OREGON 
(State of Incorporation)
93-1282171(I.R.S. Employer Identification Number)  503 Airport Road
P.O. Box 40
Medford, Oregon
(Address of principal executive offices)
97504
(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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes /X/          No /   /

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of latest practicable date: 10,978,674 shares as of May 9, 2002. 1 Disclosure Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are based on the beliefs of the Company's management and on assumptions made by and information currently available to management.  All statements other than statements of historical fact, regarding the Company's financial position, business strategy and plans and objectives of management for future operations of the Company are forward-looking statements.  When used herein, 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 to identify forward-looking statements.  Examples of forward-looking statements include, but are not limited to (i) projections of revenues, income or expenses, earnings per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of the plans and objectives of the Company or its management, or Board of Directors, including the introduction of new products or services, plans for expansion, acquisitions or future growth, or estimates or predictions of actions by customers, vendors, competitors or regulatory authorities, (iii) statements of future economic performance, and (iv) statements of assumptions underlying other statements about the Company and its business.  Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.  Forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those indicated by the forward-looking statements.  These risks and uncertainties include the Company's ability to maintain or expand its market share, net interest margins, or implement its marketing and growth strategies.  Further, actual results may be affected by the Company's ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; general trends in the banking industry and the regulatory environment, as they relate to the Company's cost of funds and returns on assets.  In addition, there are risks inherent in the banking industry relating to collectibility of loans and changes in interest rates.  The reader is advised that this list of risks is not exhaustive and should not be construed as any prediction by the Company as to which risks would cause actual results to differ materially from those indicated by the forward-looking statements. 2 Form 10-Q
Table of Contents  PAGEPart I
FINANCIAL INFORMATIONItem 1.
Condensed Consolidated Financial Statements
4Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
13Part II
OTHER INFORMATIONItem 1.
Legal Proceedings
16Item 4.
Submission of Matters to a Vote of Securities Holders
16Item 6.
Exhibits and Reports on Form 8-K
16Signatures

16 3   PART I. FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. PREMIERWEST BANCORP AND SUBSIDIARYCONDENSED CONSOLIDATED BALANCE SHEETS
      (Dollars in 000's)
      (UNAUDITED)March 31,2002
      
      December 31,2001ASSETSCASH AND DUE FROM BANKS
      
      
      $
      19,877
      $
      19,731FEDERAL FUNDS SOLD AND
      INTEREST-BEARING DEPOSITS
      
      9,304
      
      15,000Total
      cash and cash equivalents
      
      29,181
      
      34,731INVESTMENT SECURITIES
      AVAILABLE-FOR-SALE
      
      62,020
      
      65,328LOANS, NET OF ALLOWANCE FOR LOAN
      LOSSES
      
      361,389
      
      352,791FEDERAL HOME LOAN BANK STOCK
      
      1,595
      
      1,595PREMISES AND EQUIPMENT, NET
      
      18,621
      
      18,286ACCRUED INTEREST AND OTHER ASSETS
      
      16,359
      
      15,579TOTAL
      ASSETS
      $
      489,165
      $
      488,310LIABILITIES
      AND SHAREHOLDERS' EQUITYLIABILITIES:DEPOSITS:Non-interest-bearing checking
      $
      80,300
      $
      82,685Savings and interest-bearing demand
      
      202,373
      
      187,372Time
      
      145,493
      
      159,998Total deposits
      
      428,166
      
      430,055FEDERAL
      HOME LOAN BANK BORROWINGS
      
      5,406
      
      5,566REPURCHASE AGREEMENTS
      
      7,183
      
      5,480EMPLOYEE STOCK OWNERSHIP PLAN NOTES PAYABLE
      
      91
      
      162Total borrowings
      
      12,680
      
      11,208OTHER LIABILITIES
      
      3,451
      
      3,353Total liabilities
      
      444,297
      
      444,616COMMITMENTS AND CONTINGENCIESSHAREHOLDERS' EQUITYPreferred stock - no par value; 1,000,000 shares authorized;none
      issued
      
      -
      
      -Common
      stock - no par value; 20,000,000 shares authorized;and
      11,512,539 and 11,397,468 shares issued and outstandingin 2002
      and 2001, respectively
      
      29,870
      
      29,480Retained
      earnings
      
      14,915
      
      14,008Unearned
      Employee Stock Ownership Plan compensation
      
      (91
      )
      (162)Accumulated other comprehensive income
      
      174
      
      368Total shareholders' equity
      
      44,868
      
      43,694TOTAL LIABILITIES AND SHAREHOLDERS'
      EQUITY
      $
      489,165
      $
      488,310
  See accompanying notes.
  4
PREMIERWEST BANCORP AND SUBSIDIARYCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Dollars in 000's, Except for Earnings per Share Data)(UNAUDITED)FOR THE THREE MONTHS ENDEDMarch 31,
      
      
      March 31,2002
      
      
      2001Interest income:Interest and fees on loans
      $
      7,299
      
      $
      5,712Interest-earning deposits
      
      51
      
      
      128Investment securities
      
      800
      
      
      1,013Total
      interest income
      
      8,150
      
      
      6,853Interest expense:Deposits
      
      2,356
      
      
      2,940Other borrowings
      
      102
      
      
      183Total
      interest expense
      
      2,458
      
      
      3,123Net interest income
      
      5,692
      
      
      3,730Loan loss provision
      
      292
      
      
      162Net
      interest income afterloan loss provision
      
      5,400
      
      
      3,568Non-interest income
      
      1,278
      
      
      706Non-interest expense:Salaries and employee benefits
      
      3,151
      
      
      1,964Occupancy & equipment, net
      
      985
      
      
      555Communications
      
      296
      
      
      128Professional fees
      
      174
      
      
      80Supplies
      
      143
      
      
      67Other
      
      545
      
      
      506Total non-interest expense
      
      5,294
      
      
      3,300Income before income taxes
      
      1,384
      
      
      974Provision for income taxes
      
      477
      
      
      324Net
      income
      $
      907
      
      $
      650Earnings per common share:Basic
      
      $
      0.08
      
      $
      0.07Diluted
      
      $
      0.08
      
      $
      0.07
  See accompanying notes.
  5
  PREMIERWEST BANCORP AND SUBSIDIARYCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(Dollars in 000's)(UNAUDITED)AccumulatedUnearned
      
      
      other
      
      
      
      
      
      TotalComprehensive
      
      
      Retained
      
      
      ESOP
      
      
      comprehensive
      
      
      Common
      
      
      shareholders'income
      
      
      earnings
      
      
      compensation
      
      
      income (loss)
      
      
      stock
      
      
      equityBALANCE - JANUARY 1, 2001
      
      
      
      $
      14,514
      
      $
      (383)
      
      $
      (368)
      
      $
      18,679
      
      $
      32,442Comprehensive income:Net income
      $
      650
      
      
      650
      
      
      -
      
      
      -
      
      
      -
      
      
      650Unrealized gainon investment securitiesavailable-for-sale,net of taxes
      
      642
      
      
      -
      
      
      -
      
      
      642
      
      
      -
      
      
      642Comprehensive income
      $
      $ 1,292ESOP compensation expense
      
      
      
      
      -
      
      
      55
      
      
      -
      
      
      -
      
      
      55Stock options exercised
      
      
      
      
      -
      
      
      -
      
      
      -
      
      
      15
      
      
      15BALANCE - MARCH 31, 2001
      
      
      
      $
      15,164
      
      $
      (328)
      
      $
      274
      
      $
      18,694
      
      $
      33,804BALANCE - JANUARY 1, 2002
      
      
      
      $
      14,008
      
      $
      (162)
      
      $
      368
      
      $
      29,480
      
      $
      43,694Comprehensive income:Net income
      $
      907
      
      
      907
      
      
      -
      
      
      -
      
      
      -
      
      
      907Unrealized losson investment securitiesavailable-for-sale(net of taxes),net of reclassificationadjustment for gains includedin the income statementof approximately $89(net of$55 in taxes)
      
      (194)
      
      
      -
      
      
      -
      
      
      (194)
      
      
      -
      
      
      (194)Comprehensive income
      $
      713ESOP compensation expense
      
      
      
      
      -
      
      
      71
      
      
      -
      
      
      27
      
      
      98Tax benefit of stockoptions exercised
      
      
      
      
      -
      
      
      -
      
      
      -
      
      
      148
      
      
      148Stock options exercised
      
      
      
      
      -
      
      
      -
      
      
      -
      
      
      215
      
      
      215BALANCE - MARCH 31, 2002
      
      
      
      $
      14,915
      
      $
      (91)
      
      $
      174
      
      $
      29,870
      
      $
      44,868See
  accompanying notes.
  6
  
  
  
  
  PREMIERWEST BANCORP
      AND SUBSIDIARYCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in 000's)(UNAUDITED)FOR THE THREE MONTHS ENDEDMarch 31,
      
      
      March 31,2002
      
      
      2001CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
      $
      907
      
      $
      650Adjustments to reconcile net income to net cash providedby operating
      activities:Depreciation and
      amortization
      
      495
      
      
      288Amortization of
      premiums (accretion of discounts)on investment
      securities, net
      
      16
      
      
      (20)Dividends on
      Federal Home Loan Bank stock
      
      (24)
      
      
      (24)Net securities
      gains
      
      (145)
      
      
      -Net gain on sale
      of property
      
      (41)
      
      
      -Loan loss
      provision
      
      292
      
      
      162Recognition of
      deferred compensation relating to ESOP
      
      98
      
      
      55Increase in
      accrued interest and other assets
      
      (634)
      
      
      (47)Increase
      (decrease) in accrued interest and other liabilities
      
      98
      
      
      (150)Net cash provided
      by operating activities
      
      1,062
      
      
      914CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases of investment securities available-for-sale
      
      (7,056)
      
      
      (7,059)Proceeds from sales of investment securities available-for-sale
      
      6,334
      
      
      2,500Proceeds from calls and maturities of investmentsecurities
      available-for-sale
      
      3,991
      
      
      20,302Loan
      originations, net
      
      (8,890)
      
      
      (5,756)Purchase of premises and equipment, net
      
      (789)
      
      
      (274)Net cash (used)
      provided by investing activities
      
      (6,410)
      
      
      9,713CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      (decrease) increase in deposits
      
      (1,889)
      
      
      3,254Net
      borrowings (repayments)
      
      1,472
      
      
      (347)Proceeds from exercise of stock options
      
      215
      
      
      15Net cash (used)
      provided by financing activities
      
      (202)
      
      
      2,922(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
      
      (5,550)
      
      
      13,549CASH
      AND CASH EQUIVALENTS - Beginning of the period
      
      34,731
      
      
      18,036CASH
      AND CASH EQUIVALENTS - End of the period
      $
      29,181
      
      $
      31,585See accompanying notes.
  71.	SUMMARY OF ORGANIZATION, BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Organization and merger:  PremierWest Bancorp was incorporated in the state of Oregon on November 26, 2000.  Effective on May 8, 2000, in a reorganization and merger accounted for as a pooling-of-interests, PremierWest Bancorp became the holding company for PremierWest Bank (formerly, Bank of Southern Oregon); United Bancorp (United) merged with and into PremierWest Bancorp and United's wholly owned subsidiary, Douglas National Bank, merged with and into PremierWest Bank (the Bank).On April 16, 2001, PremierWest Bancorp completed the acquisition of Timberline Bancshares, Inc. and its wholly owned subsidiary, Timberline Community Bank (Timberline).  The acquisition was accounted for using the purchase method of accounting.  Accordingly, the assets and liabilities of Timberline have been recorded by PremierWest Bancorp at their respective fair values at the time of the completion of the merger and the results of Timberline have been included with those of PremierWest Bancorp since the date of the acquisition.  The financial statement data for the periods presented are not comparable as a result of the acquisition of Timberline using the purchase method of accounting (see Note 8).
PremierWest Bank, including its subsidiaries, serves Jackson, Josephine, Douglas, and Klamath counties of Southern Oregon and Siskiyou and Shasta counties of Northern California.
Basis of presentation:	The condensed consolidated financial statements include the accounts of PremierWest Bancorp and its wholly owned subsidiary, PremierWest Bank, and the PremierWest Bank's wholly owned subsidiaries, PremierWest Investment Services, Premier Finance Company, and Blue Star Properties, Inc. (collectively, "the Company" or "the Bank").  All significant intercompany accounts and transactions have been eliminated in consolidation.

The interim condensed consolidated financial statements are not audited, but include all adjustments that management considers necessary for a fair presentation of the results of operations for such interim periods.  In preparing the condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and income and expenses for the periods.  Actual results could differ from those estimates.
The balance sheet data as of December 31, 2001 was derived from audited financial statements and does not include all disclosures contained in the 2001 Annual Report to Shareholders.  The interim condensed consolidated financial statements should be read in conjunction with the Company's 2001 consolidated financial statements, including the notes thereto, included in the 2001 Annual Report to Shareholders.  The reader should keep in mind that the results of operations for the interim periods shown in the accompanying condensed consolidated financial statements are not necessarily indicative of results for any future interim periods or the entire fiscal year.
Method of accounting:  The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States.  The Company utilizes the accrual method of accounting, which recognizes income when earned and expenses when incurred.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period.  Actual results could differ from those estimates.
Stock dividends:  On April 19, 2001, the Company declared a 5% stock dividend payable to its shareholders of record June 1, 2001.  On April 18, 2002, the Company declared a 5% stock dividend payable to its shareholders of record June 1, 2002.  All share and per share data in the accompanying condensed consolidated financial statements have been retroactively restated to reflect the stock dividends.82. 	INVESTMENT SECURITIESAt March 31, 2002, approximately $36 million in investment securities available-for-sale were pledged to secure public deposits and nonpublic deposits and borrowings. Investment securities available-for-sale at March 31, 2002 and December 31, 2001 consisted of the following:





2002(Dollars in 000's)
    
    Amortized
 cost
    
    Gross
 unrealized gains
    
    Gross
 unrealized
 losses
    
    Estimated
 fair
 valueU.S. agency securities
    $
    30,988
    $
    189
    $
    101
    $
    31,076Mortgage-backed securitiesand
    collateralized mortgage obligations
    
    8,749
    
    95
    
    2
    
    8,842Obligations of states andpolitical
    subdivisions
    
    16,902
    
    202
    
    41
    
    17,063Corporate bonds
    
    3,969
    
    -
    
    58
    
    3,911Other securities
    
    1,128
    
    -
    
    -
    
    1,128Total
    $
    61,736
    $
    486
    $
    202
    $
    62,0202001Gross
    
    Gross
    
    EstimatedAmortized
    
    unrealized
    
    unrealized
    
    fair(Dollars in 000's)
    
    cost
    
    gains
    
    losses
    
    valueU.S. agency securities
    $
    31,263
    $
    453
    $
    35
    $
    31,681Mortgage-backed securitiesand
    collateralized mortgage obligations
    
    11,669
    
    161
    
    11
    
    11,819Obligations of states andpolitical
    subdivisions
    
    16,255
    
    162
    
    84
    
    16,333Corporate bonds
    
    3,971
    
    -
    
    50
    
    3,921Other securities
    
    1,574
    
    -
    
    -
    
    1,574Total
    $
    64,732
    $
    776
    $
    180
    $
    65,3283. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of the loan portfolio at March 31, 2002 and December 31, 2001
was as follows:



  
  (Dollars in 000's)
        2002
        2001Commercial
        $               
        94,090
        $               
        80,866Real estate - construction
        56,266
        59,754Real estate - other
        180,212
        175,047Consumer installment
        33,982
        36,110Other
        2,843
        6,616367,393
        358,393Less:Allowance for loan losses
        5,142
        4,825Deferred loan fees
        862
        777Loan, net
        $             
        361,389
        $             
        352,791
  
  
  

  9Impaired loans, on which the accrual of interest had been discontinued, were
approximately $2.1 million at March 31, 2002 and December 31, 2001.
A summary of changes in the allowance for loan losses for the three months ended March 31, 2002 and 2001 were as follows:



(Dollars in 000's)
      2002
      2001Balance - Beginning of the period
      $            
      4,825
      $            
      3,476Loans charged-off
      (19)
      (22)Loan recoveries
      44
      14Loan loss provision
      292
      162Balance - End of the period
      $            
      5,142
      $            
      3,6304.	LINE OF CREDIT AND OTHER BORROWINGS

The Company has a line of credit available with Federal Home Loan Bank of Seattle (FHLB) for up to approximately $70 million as of March 31, 2002.  This line of credit is secured by restricted FHLB stock owned by the Company and is limited to 15% of the Bank's total assets and by the amount of FHLB stock held by the Bank.  Interest and principal payments are due monthly on any outstanding borrowings.  As of March 31, 2002 and December 31, 2001, the Company had no draws on short-term advances from FHLB under the line of credit.  The Company has also borrowed long-term funds from the FHLB against this line of credit, aggregating approximately $5.4 million and $5.6 million as of March 31, 2002 and December 31, 2001, respectively.  As of March 31, 2002, $4.9 million is due August 28, 2008, and the remaining $500,000 is due at various times through February 2014.  The Company is making monthly principal payments of approximately $53,000 plus interest at rates of 5.82% to 7.63%.
Borrowings of approximately $7.2 million and $5.5 million at March 31, 2002 and December 31, 2001, relate to repurchase agreements used for customer overnight sweep accounts.  The cost of these funds at March 31, 2002 is an average annual rate of interest of approximately 1.29%.  Certain investment securities, as required, have been pledged as collateral to fully secure the long-term debt and the repurchase agreements.
Additionally, as of March 31, 2002 the Company has approximately $20 million in available borrowings through lines of credit with certain correspondent banks and through the Federal Reserve Bank's discount window.
5.	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 condensed 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, 2002, the Company has $57 million of commitments to extend credit to customers and $2 million of standby letters of credit.
In the ordinary course of business, the Bank becomes involved in various litigation arising from normal banking activities.  In the opinion of management, the ultimate disposition of these actions will not have a material adverse effect on the Bank's consolidated financial position or results of operations.106.	EARNINGS PER SHARE

The Company's basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period, retroactively adjusted for all stock dividends.  The Company's diluted earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding plus dilutive common shares related to stock options, retroactively adjusted for all stock dividends.Three-months ended March 31, 2002 and 2001:Weighted average number of common shares:
      
      2002
      
      2001Basic earnings per common share
      
      11,447,000
      
      9,482,000Diluted earnings common per share
      
      11,536,000
      
      9,594,0007.	RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets."  SFAS No. 142 discontinues the practice of amortizing goodwill and requires that goodwill be continually evaluated for impairment and be written-down when appropriate.  SFAS No. 142 also requires that other intangible assets that have been separately identified and accounted for continue to be amortized over a determinable useful life.  SFAS No. 142 is effective for fiscal years beginning after December 15, 2001.  Application of the non-amortization provisions of SFAS No. 142 have eliminated the Bank's amortization of goodwill beginning with the three months ended March 31, 2002.  However, beginning in 2002, the Bank will perform the first of the required goodwill impairment tests to determine if an impairment loss should be recognized.  Management has not yet determined the effect that these impairment tests will have on the Bank's consolidated financial position or results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting obligations associated with the retirement of long-lived assets and the associated asset retirement costs.  SFAS No. 143 is effective for fiscal years beginning after June 15, 2002.  Management does not expect that the adoption of SFAS No. 143 will have a material effect on the Bank's consolidated financial statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets.  This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and provides guidance on the classification and accounting for such assets when held for sale or abandonment.  SFAS No. 144 is effective for fiscal years beginning after December 15, 2001.  The Bank's adoption of SFAS No. 144 did not have a material effect on its consolidated financial statements.118.	ACQUISITION OF TIMBERLINE BANCSHARES, INC.

On April 16, 2001, the Company completed the acquisition of Timberline Bancshares, Inc. and its wholly owned subsidiary, Timberline Community Bank (Timberline). The acquisition was accounted for using the purchase method of accounting.  Accordingly, the assets and liabilities of Timberline have been recorded by the Company at their respective estimated fair values at the time of the completion of the transaction and the results of Timberline have been included with those of the Company since the date of the acquisition.  As of March 31, 2002, the accompanying condensed consolidated balance sheet included approximately $5.9 million in goodwill related to this acquisition.
The following pro forma information presents the Company's consolidated results of operations as if the acquisition of Timberline had occurred at the beginning of the first period presented.  The pro forma information does not purport to be indicative of the actual results of operations that would have occurred had the transactions taken place at the beginning of the first period presented or of future results of operations.(Dollars in 000's, except earnings per share)
      Three-months ended March 31,2002
      
      2001Actual
      
      Pro FormaTotal interest and non-interest income
      $              
      9,428
      
      $              
      9,382Net income
      $                 
      907
      
      $                 
      317Basic earnings per common share
      $                
      0.08
      
      $                
      0.03Diluted earnings per common share
      $                
      0.08
      
      $                
      0.0312

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

As discussed in the notes accompanying the condensed consolidated financial statements included in this report, effective May 8, 2000, PremierWest Bancorp and its subsidiaries consummated a merger as a pooling-of-interests.  The merger was between Bank of Southern Oregon, which changed its name to PremierWest Bank, and United Bancorp and its wholly owned subsidiary, Douglas National Bank.
On April 16, 2001, the Company completed the acquisition of Timberline Bancshares, Inc. and its wholly owned subsidiary, Timberline Community Bank ("Timberline").  The acquisition was accounted for using the purchase method of accounting.  Accordingly, the assets and liabilities of Timberline have been recorded by the Company at their respective estimated fair values at the time of the completion of the acquisition and the results of Timberline have been included with those of the Company since the date of the acquisition.  The unidentified intangible assets related to the excess of the Company's purchase price over the estimated net fair value of the assets acquired and liabilities assumed is reported as goodwill.  The financial statement data for the periods presented are not comparable as a result of the acquisition of Timberline using the purchase method of accounting.
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001

The Company had net income of $907,000 for the three months ended March 31, 2002, which was an increase of $257,000 (or 40%) compared to the same period in 2001.  This increase is due mainly to a $2.5 million increase in net interest income and non-interest income offset by an increase of $2.2 million in non-interest expense and applicable income taxes over the comparative three-month period ended March 31, 2001.
The following table presents information regarding yields on interest-earning assets, expense on interest-bearing liabilities, net interest spread, net yields on average interest-earning assets, return on average assets and return on average equity for the periods indicated (dollars in thousands):
Analysis for the three-month period
      ended
 March 31, 2002 and 2001
      
      2002
      
      2001
      
      Increase
 (Decrease)
      
      % ChangeAverage interest earning assets
      
      $ 436,415
      
      $ 312,999
      
      $ 123,416
      
      39.4%Average
      interest bearing liabilities
      
      438,715
      
      306,498
      
      132,217
      
      43.1%Average
      total assets
      
      485,411
      
      341,828
      
      143,583
      
      42.0%Average
      equity
      
      44,425
      
      33,343
      
      11,082
      
      33.2%Average
      yield earned
      
      7.57
      %
      8.88
      %
      -1.3
      %
      -14.7%Average
      rate paid
      
      2.27
      %
      4.13
      %
      -1.9
      %
      -45.0%Net
      interest spread
      
      5.30
      %
      4.75
      %
      0.6
      %
      11.6%Net
      interest income to average interest earning assets
      
      5.29
      %
      4.83
      %
      0.5
      %
      9.5%Return on average
      assets
      
      
      0.76
      %
      0.77
      %
      0.0
      %
      -1.3%Return on average
      equity
      
      
      8.28
      %
      7.91
      %
      0.4
      %
      4.7%Efficiency ratio
      
      
      75.95
      %
      74.39
      %
      1.6
      %
      2.1%NET INTEREST INCOME.  Net interest income before the loan loss provision increased $2 million for the three-month period ended March 31, 2002 over the same period in 2001.  Of this increase, $590,000 was contributed from the Timberline operations.  The remaining increase was mainly due to an increase in the volume of loans offset by a decrease in overall yields.  The Company's volume of interest-earning assets increased approximately $123 million during the three months ended March 31, 2002 as compared to the corresponding period in 2001.  Average earning assets of $50 million relates to the acquired Timberline operations. Though the Company's cost of funds decreased to 2.27%, the volume of its interest-bearing liabilities increased $132 million ($92 million relating to the acquired Timberline operations) during the three months ended March 31, 2002 as compared to the corresponding period in 2001.  As a result, the Company's interest rate margin increased 46 basis points resulting in a 9.5% increase in net interest margin.

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LOAN LOSS PROVISION.  The loan loss provision during the three-month periods ended March 31, 2002 was $292,000 compared to $162,000 for the three-month period ended March 31, 2001.  The Company had net recoveries of $25,000 during the three-month period ended March 31, 2002, compared to net charge-offs of $8,000 for the corresponding period in 2001.  Additions to the loan loss provision have increased the allowance for loan losses to $5.1 million as of March 31, 2002, compared to $3.6 million as of March 31, 2001.  Of the increase in the allowance for loan losses, $1.4 million relates to loans of $57 million acquired in the Timberline transaction.  The remaining increase in the allowance for loan losses is primarily related to specific and inherent losses in the loan portfolio.  The Company's ratio of allowance for loan losses to total loans was 1.4% at March 31, 2002, compared to 1.5% at March 31, 2001.  Non-performing assets (defined as loans on non-accrual status, 90 days or more past due, and other real estate owned) either specifically reserved or adequately collateralized were $4.4 million and $6.4 million at March 31, 2002 and 2001, respectively.
NON-INTEREST INCOME.  Non-interest income increased 81% to $1.3 million for the three months ended March 31, 2002, as compared to $706,000 for the same period in 2001. Of this increase, $145,000 relates to net gain on sale of securities, $127,000 relates to the acquired Timberline operations, $190,000 relates to an increase in mortgage brokerage fees, $68,000 relates to investment services, and $55,000 relates to account service fees.
NON-INTEREST EXPENSE. Non-interest expense increased $2.0 million for the three months ended March 31, 2002 as compared to the corresponding period in 2001.  Salaries and employee benefits increased $1.2 million ($290,000 relates to Timberline) as a result of higher costs associated with new branch personnel, severance costs incurred, increases in commissions paid and employee benefits incurred during the three months ended March 31, 2002 as compared to the corresponding period in 2001.  Occupancy and equipment expenses increased a total of $430,000 ($122,000 relates to Timberline) for the three months ended March 31, 2002, as compared to the same period in 2001.  This increase was attributed to depreciation and other building charges with new branch and office facilities. Other non-interest expense increased by $39,000 due to the Company's increase in operations offset by cost savings associated with the two community bank acquisitions.
While the Company's efficiency ratio was 75.95% during the first quarter 2002 compared to 74.39% for the first quarter of 2001, it would had been 76.48% if Timberline's results of operations were combined with PremierWest's as of the beginning of the first quarter of 2001.
FINANCIAL CONDITION. Total assets at March 31, 2002, increased slightly to $489 million since December 31, 2001. Loans grew $8.6 million to $361 million accounting for 74% of total assets.  Deposits remained level at $428 million resulting in a loan to deposit ratio of 85.6% compared to 80.8% as of March 31, 2001. With the acquisition of Timberline in April 2001, the Company added approximately $8 million to capital increasing the Company's capital to assets ratio to 9.17% as of March 31, 2002.
LIQUIDITY.  Liquidity enables the Company to meet withdrawals of its deposits and borrowing needs of its loan customers.  The Company maintains its liquidity position through maintenance of cash resources and the stability of its core deposit base.  Liquidity declined slightly during this quarter as a result of the increase in loan volume.  Excess cash was invested on a short-term basis into federal funds sold and interest-earning deposits with the FHLB.  As of March 31, 2002, the Company had $9.3 million in federal funds sold.
A further source of liquidity is the Company's ability to borrow funds by maintaining a secured line-of-credit with the FHLB up to 15% of the Bank's total assets.  As of March 31, 2002, $5.4 million had been advanced in long-term borrowings from the FHLB against the Company's credit line.  Other borrowings of approximately $7.2 million relate to repurchase agreements for customer overnight sweep accounts.  The cost of these funds is approximately 1.29%.  The Company also has established secured credit lines of approximately $20 million through certain correspondent banks and the discount window with the Federal Reserve Bank of San Francisco.
At March 31, 2002, the Company had approximately $57 million in outstanding commitments to extend credit for newly approved loans and available funds for construction projects.  Under the terms of such commitments, completion of specified project benchmarks must be certified before funds may be drawn.  In addition, it is anticipated that a portion of other 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.

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CAPITAL RESOURCES.  Federal regulators require the calculation of risk-based capital. This is 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, total risk-based capital ratio should be at least 8.00%, Tier 1 capital ratio should be at least 4.00%, and a leverage capital ratio should be at least 4.00%.  At March 31, 2002, the Company's estimated regulatory capital ratios were as follows: total risk-based capital ratio of 10.46%, Tier 1 capital ratio of 9.21%, and a leverage capital ratio of 7.80%.  If the Company were fully leveraged, further growth could be restricted to the level attainable through generation and retention of net income or the Company could seek additional capital from outside sources.
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, as in 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 had not experienced a significant change in market risk at March 31, 2002 as compared to December 31, 2001.  The Company is experiencing a reduction in cost of deposits due to the increase in non-interest bearing deposits and the run-off of certificates of deposits with interest rates in excess of 6% resulting in an improvement in its interest rate margin.

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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. From time to time PremierWest or its wholly owned subsidiary, PremierWest Bank (the "bank"), is involved in various legal proceedings that are incident to its business. The following information is given with respect to the more significant pending matters.
Bernard J. Woodward, et al vs. Bank of Southern Oregon (nka PremierWest Bank), Black Oak Construction, Inc., et al; Jackson County Circuit Court, Oregon filed March 1, 2001.
This matter involves a claim by the plaintiff alleging that the bank deposited checks payable to the plaintiff and Black Oak Construction, a bank customer in the amount of $930,840, without plaintiff's consent. Plaintiff is seeking return of the proceeds, interest and costs and has indicated an intent to seek punitive damages. The bank has denied liability and filed a counterclaim for approximately $1.16 million for losses incurred on other loans to Black Oak Construction. The dispute involves the right of the bank to deposit the proceeds of checks payable to the plaintiff and Black Oak Construction to repay certain outstanding loans to Black Oak Construction in connection with a joint construction project between the plaintiff and Black Oak Construction. The bank's counterclaim alleges the plaintiff intentionally caused Black Oak Construction to under bid other construction contracts. Discovery in the case is not yet completed. A trial date is currently scheduled for May 2002. Management believes its actions were proper; however a favorable outcome in the litigation cannot be assured.
Bank of Southern Oregon (nka PremierWest Bank) vs. Barry Fronek, Stanley Kelly, et al; Jackson County Circuit Court, Oregon filed in 1998; on Appeal to the Court of Appeals, State of Oregon.
The bank brought suit against the defendant borrowers and guarantors for collection of a loan owing to the bank. After a trial in 2001, the bank was awarded an amount of $1,200,000 plus interest and attorney fees. When the bank's borrowers failed to pay the loan, defendant Stanley Kelly, as guarantor, paid the total judgment in the amount of $1,475,000 but has appealed the Judgment as it applied to him arguing, among other things, that his guaranty was obtained by the bank fraudulently. Management believes the judgment will be confirmed although no assurances can be given that the appellate court will uphold the decision of the trial court judge.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  None
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
(a)	     None

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.

PREMIERWEST BANCORP
(Registrant)
DATED:  May 13, 2002
By: /s/ Tom Anderson      Tom Anderson
      Chief Financial OfficerDATED:  May 13, 2002
By: /s/ John L. Anhorn      John L. Anhorn 
      Chief Executive OfficerDATED:  May 13, 2002
By: /s/ Bruce R. McKee      Bruce R. McKee 
      Chief Accounting Officer

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