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

FORM 10-Q



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

for the quarterly period endedMarch 31, 2006

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. Employerincorporation or organization)
	
	Identification No.)503 Airport Road - Suite 101Medford, Oregon
	
	97504(Address of principal executive offices)
	
	(Zip Code)Registrant's telephone number, including area code:(541) 618-6003Securities registered pursuant to Section 12(b) of the Act:NoneSecurities registered pursuant to Section 12(g) of the Act:Common Stock, No Par Value(title of class)


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.

Large accelerated filer [  ]                                         Accelerated filer
[X]                                    Non-accelerated filer[  ]

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

The number of shares outstanding of Registrant's common stock as of May 5, 2006 was 15,396,159.

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|Form 10-Q        
|-----------------
|Table of Contents
|                 
|Part I           
|Item 1.          
|Item 2.          
|Item 3.          
|Item 4.          
|Part II          
|Item 1.          
|Item 1A.         
|Item 2.          
|Item 3.          
|Item 4.          
|Item 5.          
|Item 6.          
|SIGNATURES       

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,
|                                                               |  |   |  | 2006      |  | 2005        
|                                                               |  |   |  |          
|Cash and cash equivalents:                                     |  |   |  |           |  |              |  |        
|Cash and due from banks                                        |  | $ |  | 26,019    |  | $            |  | 28,059 
|Federal funds sold                                             |  |   |  | 7,355     |  |              |  | 453    
|                                                               |  |   |  |          
|Total cash and cash equivalents                                |  |   |  | 33,374    |  |              |  | 28,512 
|                                                               |  |   |  |          
|Interest-bearing deposits with Federal Home Loan Bank          |  |   |  | 9         |  |              |  | 9      
|                                                               |  |   |  |          
|Investments:                                                   |  |   |  |           |  |              |  |        
|Investment securities available-for-sale, at fair market value |  |   |  | 4,275     |  |              |  | 5,292  
|Investment securities held-to-maturity, at amortized cost      |  |   |  | 8,739     |  |              |  | 9,577  
|Restricted equity securities                                   |  |   |  | 1,865     |  |              |  | 1,865  
|                                                               |  |   |  |          
|Total investments                                              |  |   |  | 14,879    |  |              |  | 16,734 
|                                                               |  |   |  |          
|                                                              
|Mortgage loans held-for-sale                                   |  |   |  | 140       |  |              |  | 767    
|Loans, net of allowance for loan losses and deferred loan fees |  |   |  | 817,619   |  |              |  | 795,230
|                                                               |  |   |  |          
|Total loans                                                    |  |   |  | 817,759   |  |              |  | 795,997
|                                                               |  |   |  |          
|                                                              
|Premises and equipment, net of accumulated depreciation        |  |   |  |           |  |              |  |        
|and amortization                                               |  |   |  | 32,446    |  |              |  | 30,589 
|Core deposit intangible, net                                   |  |   |  | 2,381     |  |              |  | 2,504  
|Goodwill                                                       |  |   |  | 20,414    |  |              |  | 20,414 
|Accrued interest and other assets                              |  |   |  | 18,926    |  |              |  | 18,902 
|                                                               |  |   |  |          
|TOTAL ASSETS                                                   |  | $ |  | 940,188   |  | $            |  | 913,661
|                                                               |  |   |  |          
|                                                              
|LIABILITIES AND SHAREHOLDERS' EQUITY                          
|LIABILITIES                                                    |  |   |  |           |  |              |  |        
|Deposits:                                                      |  |   |  |           |  |              |  |        
|Demand                                                         |  | $ |  | 190,663   |  | $            |  | 208,840
|Interest-bearing demand and savings                            |  |   |  | 344,901   |  |              |  | 345,794
|Time                                                           |  |   |  | 236,936   |  |              |  | 213,785
|                                                               |  |   |  |          
|Total deposits                                                 |  |   |  | 772,500   |  |              |  | 768,419
|                                                              
|Federal funds purchased                                        |  |   |  | 5,182     |  |              |  | 16,430 
|Federal Home Loan Bank borrowings                              |  |   |  | 31,621    |  |              |  | 1,780  
|Junior subordinated debentures                                 |  |   |  | 15,464    |  |              |  | 15,464 
|Accrued interest and other liabilities                         |  |   |  | 9,252     |  |              |  | 8,784  
|                                                               |  |   |  |          
|Total liabilities                                              |  |   |  | 834,019   |  |              |  | 810,877
|                                                               |  |   |  |          
|COMMITMENTS AND CONTINGENCIES (Note 7)                         |  |   |  |           |  |              |  |        
|SHAREHOLDERS' EQUITY                                           |  |   |  |           |  |              |  |        
|Series A Preferred Stock, no par value, 1,000,000 shares       |  |   |  |           |  |              |  |        
|authorized, 11,000 shares issued and outstanding               |  |   |  | 9,590     |  |              |  | 9,590  
|Common stock - no par value; 50,000,000 shares authorized;     |  |   |  |           |  |              |  |        
|15,394,099 shares issued and outstanding (15,373,431 in 2005)  |  |   |  | 73,414    |  |              |  | 73,234 
|Retained earnings                                              |  |   |  | 23,053    |  |              |  | 19,836 
|Accumulated other comprehensive income                         |  |   |  | 112       |  |              |  | 124    
|                                                               |  |   |  |          
|Total shareholders' equity                                     |  |   |  | 106,169   |  |              |  | 102,784
|                                                               |  |   |  |          
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                     |  | $ |  | 940,188   |  | $            |  | 913,661
|                                                               |  |   |  |          

See accompanying notes.

3

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

4

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|PREMIERWEST BANCORP AND SUBSIDIARY                        
|----------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|(in thousands, except share amounts)                      
|(Unaudited)                                               
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|BALANCE, January 1, 2005                                  
|                                                          
|Comprehensive income:                                     
|Net income                                                
|Other comprehensive income -                              
|Amortization of unrealized                                
|gains for investment securities                           
|transferred to held-to-maturity                           
|of $31 (net of taxes of $18)                              
|                                                          
|Unrealized losses on investment                           
|securities available-for-sale of                          
|$36 (net of taxes of $18)                                 
|                                                          
|Comprehensive income                                      
|                                                          
|Preferred stock dividend declared                         
|Stock options exercised                                   
|Income tax benefit of stock options                       
|exercised                                                 
|                                                          
|BALANCE, March 31, 2005                                   
|                                                          
|                                                          
|BALANCE - January 1, 2006                                 
|                                                          
|Comprehensive income:                                     
|Net income                                                
|Other comprehensive income -                              
|Amortization of unrealized                                
|gains for investment securities                           
|transferred to held-to-maturity                           
|of $22 (net of taxes of $13)                              
|                                                          
|Unrealized gains on investment                            
|securities available-for-sale of                          
|$10 (net of taxes of $3)                                  
|                                                          
|Comprehensive income                                      
|                                                          
|Preferred stock dividend declared                         
|Stock-based compensation expense                          
|Stock options exercised                                   
|Income tax benefit of stock options                       
|exercised                                                 
|                                                          
|BALANCE - March 31, 2006                                  
|                                                          

See accompanying notes.

5

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|PREMIERWEST BANCORP AND SUBSIDIARY                         
|-----------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                      
|(Dollars in 000's)                                         
|(Unaudited)                                                
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|CASH FLOWS FROM OPERATING ACTIVITIES                       
|Net income                                                 
|Adjustments to reconcile net income to net cash            
|from operating activities:                                 
|Depreciation and amortization                              
|Loan loss provision                                        
|Deferred income taxes                                      
|Amortization of premium on investment                      
|securities, net                                            
|Net funding of loans held for sale                         
|Gain on sale of loans held for sale                        
|Restricted equity security stock dividends                 
|Stock-based compensation expense                           
|Gain on sales of premises and equipment                    
|Changes in accrued interest receivable/payable             
|and other assets/liabilities                               
|                                                           
|                                                           
|Net cash from operating activities                         
|                                                           
|                                                           
|CASH FLOWS FROM INVESTING ACTIVITIES                       
|Proceeds from calls, paydowns and maturities of investment 
|securities available-for-sale                              
|Proceeds from calls and maturities of investment           
|securities held-to-maturity                                
|Decrease in interest-bearing deposits with                 
|Federal Home Loan Bank                                     
|Loan originations, net                                     
|Purchases of premises and equipment, net                   
|                                                           
|                                                           
|Net cash from investing activities                         
|                                                           
|                                                           
|CASH FLOWS FROM FINANCING ACTIVITIES                       
|Net increase in deposits                                   
|Net incease (decrease) in Federal Home Loan Bank borrowings
|Net decrease in Federal Funds purchased                    
|Excess tax benefit from exercise of stock options          
|Stock options exercised                                    
|                                                           
|                                                           
|Net cash from financing activities                         
|                                                           
|                                                           
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS       
|                                                           
|CASH AND CASH EQUIVALENTS - Beginning of the period        
|                                                           
|                                                           
|CASH AND CASH EQUIVALENTS - End of the period              
|                                                           
|                                                           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION           
|Cash paid for interest                                     
|                                                           
|Cash paid for taxes                                        
|                                                           
|                                                           
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND           
|FINANCING ACTIVITIES                                       
|Income tax benefit of stock options exercised              
|                                                           
|Preferred stock dividend declared                          
|                                                           
|                                                           
|                                                           
|                                                           
|See accompanying notes.                                    

6

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NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

PremierWest Bank's two principal operating subsidiaries, Premier Finance Company and PremierWest Investment Services, Inc. provide financial services that compliment and support the traditional commercial banking operations
of the Bank. Premier Finance Company is engaged in the business of consumer lending and operates from independent office locations or from within PremierWest Bank branch offices in Portland, Medford, Grants Pass, Roseburg and Klamath Falls, Oregon
and in Yreka and Redding, California. PremierWest Investment Services, Inc. functions under an arrangement with Linsco/Private Ledger, an independent broker/dealer.  Operating throughout the Bank's market area PremierWest Investment Services, Inc.
offers brokerage services for financial and investment products including stocks, bonds, mutual funds and annuities.

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 such
interim periods.

The balance sheet data as of December 31, 2005 was derived from audited financial statements and does not include all disclosures contained in the 2005 Annual Report to Shareholders. The interim consolidated financial
statements should be read in conjunction with the Company's 2005 consolidated financial statements, including the notes thereto, included in the 2005 Annual Report to Shareholders as filed with the Securities and Exchange Commission under Form 10-K.
The reader should keep in mind that the results of operations for the interim periods shown in the accompanying consolidated financial statements are not necessarily indicative of results for any future interim periods or the entire fiscal year.

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

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

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

There are other complex accounting standards that require the Company to employ significant judgment in interpreting and applying certain of the principles prescribed by those standards. These judgments include the
determination of whether a financial instrument or other contract meets the definition of a derivative and qualifies for accounting in accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities". These judgments also include significant estimates and assumptions necessary to determine the disclosure requirements of Statement of Financial Accounting Standards No. 123R, "Share Based Payments." These policies and judgments,
estimates and assumptions are described in greater detail in the Notes to the consolidated financial statements included in our 2005 Annual Report on Form 10-K. We believe that the judgments, estimates and assumptions used in the preparation of our
consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of our consolidated financial statements to these critical accounting policies, the use of other judgments, estimates and
assumptions could result in material differences in our results of operations or financial condition.

Stock dividends- On February 27, 2006, the Company declared a 5% stock dividend payable June 29, 2006 to our shareholders of record on June 1, 2006.  OnMarch 22, 2005, the Company declared a 5% stock dividend payable on June 27, 2005 to our shareholders of record on June 1, 2005.  Share and per share data in the accompanying consolidated financial statements have been retroactively
restated to reflect all stock dividends declared.

7

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|NOTE 2 - STOCK-BASED COMPENSATION
|---------------------------------

At March 31, 2006, PremierWest Bancorp had two outstanding stock option plans - the 1992 Stock Option Plan ("1992 Plan") and the 2002 Stock Incentive Plan ("2002 Plan") plan. The 2002 Plan superseded the 1992 Plan; no
additional grants may be made under the 1992 Plan. The 2002 Plan was initially established May 2002 and was approved by shareholders. The plan was subsequently amended and restated to allow for the issuance of restricted stock grants in addition to
stock options. The amended and restated 2002 Plan was approved by shareholders in May 2005 and allows for the issuance of up to 972,447 shares of stock awards of which a total of 366,215 shares were available for issuance as either stock options or
restricted stock grants as of March 31, 2006. As of March 31, 2006, there were no restricted stock grants outstanding. The 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 or five 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.

Stock option activity during the quarter ended March 31, 2006 was as follows:

|                                    |  |           |  |                  |  |                  |  | Weighted Average |  | Aggregate
|----------------------------------- |  | --------- |  | ---------------- |  | ---------------- |  | ---------------- |  | ---------
|                                    |  | Number    |  | Weighted Average |  | Remaining        |  | Intrinsic Value 
|                                    |  | of Shares |  | Exercise Price   |  | Contractual Term |  | (in thousands)  
|                                    |  |           |  |                  |  |                  |  |                 
|Stock options outstanding, 12/31/05 |  | 908,003   |  | $                |  | 7.08             |  |                  |  |          
|Granted                             |  | 2,100     |  | $                |  | 13.69            |  |                  |  |          
|Exercised                           |  | (20,668)  |  | $                |  | 6.20             |  |                  |  | $        
|                                    |  |           |  |                  |  |                  |  |                  |  |          
|Forfeited                           |  | (6,173)   |  | $                |  | 10.23            |  |                  |  |          
|                                    |  |           |  |                  |  |                  |  |                  |  |          
|Stock options outstanding, 3/31/06  |  | 883,262   |  | $                |  | 7.51             |  | 6.21             |  | $        
|                                    |  |           |  |                  |  |                  |  |                 
|Stock options exercisable, 3/31/06  |  | 457,073   |  | $                |  | 6.39             |  | 4.35             |  | $        
|                                    |  |           |  |                  |  |                  |  |                 

Effective January 1, 2006, PremierWest Bancorp adopted Financial Accounting Standards Board Statement 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 expected forfeiture rate of options, 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 various assumptions included in this model as it relates to the valuation of our options:

|                                        |  | Black-Scholes Assumptions
|--------------------------------------- |  | -------------------------
|                                        |  |                          
|                                        |  | March 31, 2006           
|                                        |  |                          
|Risk-free interest rate                 |  | 4.39%                    
|Expected dividend                       |  | 0.35%                    
|Expected lives, in years                |  | 7.7                      
|Expected volatility                     |  | 39%                      
|Fair value of options granted in period |  | $5.53                    

We adopted SFAS 123R using the modified prospective transition method, which requires adoption as of January 1, 2006, the first day of PremierWest Bancorp's 2006 fiscal year. In accordance with the modified prospective
method, the Company's consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123R. Stock-based compensation expense recognized under SFAS 123R for the quarter ended March 31,
2006, resulting from stock options that were granted during the current and previous periods that vested during the current period, totaled $40,000 with a related tax benefit of $14,600 being recognized. At March 31, 2006, unrecognized
stock-based compensation expense totaled $324,000 and will be expensed over a weighted average period of 1.8 years.

8

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|NOTE 2 - STOCK-BASED COMPENSATION (continued)
|---------------------------------------------

Under SFAS 123, prior to its revision, the Company previously accounted for stock based compensation in accordance with Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" (APB No. 25).
Accordingly, prior to January 1, 2006, no accounting recognition was given to stock options granted at fair market value until they were exercised, at which time the net proceeds including tax benefits realized, were credited to shareholders equity.

The following table presents the pro forma effect on net income and earnings per share had PremierWest Bancorp applied the fair value recognition provisions of SFAS 123 in the prior period reported:

|For The Three Months Ended                        |  | March 31, 2005
|------------------------------------------------- |  | --------------
|                                                  |  |               
|Net Income, as reported                           |  | $             
|Less: Total stock based employee compensation     |  |               
|expense determined under fair value based methods |  |               
|for all awards, net of related tax effects        |  |               
|                                                  |  |               
|Pro forma Net Income                              |  | $             
|Earnings Per Share                                |  |               
|Basic - as reported                               |  | $             
|Basic - pro forma                                 |  | $             
|Diluted - as reported                             |  | $             
|Diluted - pro forma                               |  | $             

9

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|NOTE 3 - INVESTMENT SECURITIES
|------------------------------

Investment securities at March 31, 2006 and December 31, 2005 consisted of the following: (Dollars in 000's)

|                                                 |  |           |  |            |  |            |  |       |  | 2006      |  |      |  |   |  |      
|------------------------------------------------ |  | --------- |  | ---------- |  | ---------- |  | ----- |  | --------- |  | ---- |  | - |  | -----
|                                                 |  |          
|                                                 |  |           |  |            |  | Gross      |  | Gross |  | Estimated
|                                                 |  | Amortized |  | unrealized |  | unrealized |  | fair 
|                                                 |  | cost      |  | gains      |  | losses     |  | value
|                                                 |  |           |  |            |  |            |  |      
|Available-for-sale:                              |  |           |  |            |  |            |  |       |  |           |  |      |  |   |  |      
|U.S. Government and agency securities            |  | $         |  | 4,036      |  | $          |  | -     |  | $         |  | (69) |  | $ |  | 3,967
|Mortgage-backed securities and collateralized    |  |           |  |            |  |            |  |       |  |           |  |      |  |   |  |      
|mortgage obligations                             |  |           |  | 310        |  |            |  | 1     |  |           |  | (3)  |  |   |  | 308  
|                                                 |  |           |  |            |  |            |  |      
|                                                
|Total                                            |  | $         |  | 4,346      |  | $          |  | 1     |  | $         |  | (72) |  | $ |  | 4,275
|                                                 |  |           |  |            |  |            |  |      
|                                                
|                                                
|Held-to-maturity:                                |  |           |  |            |  |            |  |       |  |           |  |      |  |   |  |      
|Obligations of states and political subdivisions |  | $         |  | 8,739      |  | $          |  | 4     |  | $         |  | (73) |  | $ |  | 8,670
|                                                 |  |           |  |            |  |            |  |      
|                                                
|Restricted equity securities                     |  | $         |  | 1,865      |  |            |  | -     |  |           |  | -    |  | $ |  | 1,865
|                                                 |  |           |  |            |  |            |  |      
|                                                
|                                                
|                                                 |  |           |  |            |  |            |  |       |  | 2005      |  |      |  |   |  |      
|                                                 |  |          
|                                                 |  |           |  |            |  | Gross      |  | Gross |  | Estimated
|                                                 |  | Amortized |  | unrealized |  | unrealized |  | fair 
|                                                 |  | cost      |  | gains      |  | losses     |  | value
|                                                 |  |           |  |            |  |            |  |      
|Available-for-sale:                              |  |           |  |            |  |            |  |       |  |           |  |      |  |   |  |      
|U.S. Government and agency securities            |  | $         |  | 4,050      |  | $          |  | -     |  | $         |  | (81) |  | $ |  | 3,969
|Mortgage-backed securities and collateralized    |  |           |  |            |  |            |  |       |  |           |  |      |  |   |  |      
|mortgage obligations                             |  |           |  | 327        |  |            |  | 2     |  |           |  | (3)  |  |   |  | 326  
|Corporate bonds                                  |  |           |  | 999        |  |            |  | -     |  |           |  | (2)  |  |   |  | 997  
|                                                 |  |           |  |            |  |            |  |      
|                                                
|Total                                            |  | $         |  | 5,376      |  | $          |  | 2     |  | $         |  | (86) |  | $ |  | 5,292
|                                                 |  |           |  |            |  |            |  |      
|                                                
|                                                
|Held-to-maturity:                                |  |           |  |            |  |            |  |       |  |           |  |      |  |   |  |      
|Obligations of states and political subdivisions |  | $         |  | 9,577      |  | $          |  | 4     |  | $         |  | (74) |  | $ |  | 9,507
|                                                 |  |           |  |            |  |            |  |      
|                                                
|Restricted equity securities                     |  | $         |  | 1,865      |  | $          |  | -     |  | $         |  | -    |  | $ |  | 1,865
|                                                 |  |           |  |            |  |            |  |      

During the third quarter of 2004, the Bank reclassified obligations of state and political subdivision securities from available-for-sale to held-to-maturity to more accurately reflect the purpose and intent in holding
these securities for long-term pledging requirements. The unrealized holding gains at the time of transfer was $335,000, net of deferred taxes of $224,000, and is being amortized as an adjustment to yield.  This is offset by the amortization
of a similar amount recorded in shareholder's equity within accumulated other comprehensive income from the date of transfer through the maturity date of each security transferred.

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, 2006, investment securities with an estimated fair market value of $12.9 million were pledged to secure public deposits, certain nonpublic deposits, and borrowings.

10

---

|NOTE 4-LOANS, NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES                               |  |                       |  |                        
|----------------------------------------------------------------------------------------------- |  | --------------------- |  | -----------------------
|                                                                                               
|Loans as of March 31, 2006 and December 31, 2005 consisted of the following: (Dollars in 000's) |  |                       |  |                        
|                                                                                               
|                                                                                                |  | 2006                  |  | 2005                   
|                                                                                                |  |                       |  |                        
|                                                                                               
|Real estate-commercial                                                                          |  | $             356,126 |  | $               347,033
|Real estate-construction                                                                        |  | 241,959               |  | 237,150                
|Real estate-residential                                                                         |  | 16,475                |  | 20,036                 
|Commercial                                                                                      |  | 143,282               |  | 131,819                
|Agricultural                                                                                    |  | 17,283                |  | 15,858                 
|Consumer                                                                                        |  | 46,553                |  | 49,520                 
|Overdrafts                                                                                      |  | 1,373                 |  | 4,958                  
|Other                                                                                           |  | 7,460                 |  | 2,203                  
|                                                                                                |  |                       |  |                        
|                                                                                               
|Total loans                                                                                     |  | 830,511               |  | 808,577                
|                                                                                               
|Less allowance for loan losses                                                                  |  | (10,641)              |  | (10,341)               
|Less deferred loan fees                                                                         |  | (2,111)               |  | (2,239)                
|                                                                                                |  |                       |  |                        
|                                                                                               
|Loans, net of allowance for loan losses                                                         |  |                       |  |                        
|and deferred loan fees                                                                          |  | $             817,759 |  | $               795,997
|                                                                                                |  |                       |  |                        

Transactions in the allowance for loan losses for the three months ended March 31, 2006 and March 31, 2005 were as follows: (Dollars in 000's)

|                                                                                                                    |  | 2006                     |  | 2005                   
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------ |  | -----------------------
|                                                                                                                    |  |                          |  |                        
|BALANCE, beginning of the period                                                                                    |  | $                10,341  |  | $                 9,171
|Loans charged-off                                                                                                   |  | (46)                     |  | (16)                   
|Loan recoveries                                                                                                     |  | 46                       |  | 73                     
|Loan loss provision                                                                                                 |  | 300                      |  | 150                    
|                                                                                                                    |  |                          |  |                        
|BALANCE, end of the period                                                                                          |  | $                 10,641 |  | $                9,378 
|                                                                                                                    |  |                          |  |                        
|The following table summarizes non-performing assets as of March 31, 2006 and December 31, 2005: (Dollars in 000's) |  |                         
|                                                                                                                    |  | 2006                     |  | 2005                   
|                                                                                                                    |  |                          |  |                        
|                                                                                                                   
|Loans on non-accrual status                                                                                         |  | $                2,141   |  | $                2,273 
|Loans past due greater than 90 days but not on non-accrual status                                                   |  | 10                       |  | 2                      
|                                                                                                                    |  |                          |  |                        
|Total non-performing loans                                                                                          |  | 2,151                    |  | 2,275                  
|Other real estate owned                                                                                             |  | -                        |  | -                      
|                                                                                                                    |  |                          |  |                        
|Total non-performing assets                                                                                         |  | $                2,151   |  | $                2,275 
|                                                                                                                    |  |                          |  |                        
|Percentage of non-performing loans to total loans                                                                   |  | 0.26%                    |  | 0.28%                  
|                                                                                                                    |  |                          |  |                        
|Percentage of non-performing assets to total assets                                                                 |  | 0.23%                    |  | 0.25%                  
|                                                                                                                    |  |                          |  |                        

11

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NOTE 5 - LINE OF CREDIT AND OTHER BORROWINGS

The Bank had outstanding borrowings with the Federal Home Loan Bank (FHLB) totaling $31.6 million and $1.8 million as of March 31, 2006 and December 31, 2005, respectively. In addition, as of March 31, 2006, the
Bank had $2.1 million outstanding under letters of credit used to support its public funds pledging requirements.  Letters of credit do not increase the Bank's outstanding borrowings however they reduce the Bank's borrowing availability. The
Bank makes monthly principal and interest payments on long-term borrowings and monthly payments of interest only on short-term borrowings under the FHLB's Cash Management Advance (CMA) program.

Of the total outstanding advances on March 31, 2006 and December 31, 2005, the Company had long-term borrowings of $1.6 million and $1.8 million, respectively, with various maturity dates through February 2014.
Monthly payments of $53,000 plus interest are being made against these long-term advances at the March 31, 2006 weighted average annual interest rate of 5.92% .

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, 2006, the Company had $30.0 million in
outstanding CMA advances; as of December 31, 2005, there were no outstanding balances under this program. At March 31, 2006, the annual rate of interest charged against the Bank's outstanding CMA balances was 5.08% .

All outstanding borrowings with the FHLB are collateralized as provided for under the Advances, Security and Deposit Agreement between the Bank and the FHLB and include the Bank's FHLB stock and any funds or investment
securities held by the FHLB that are not otherwise pledged for the benefit of others. In addition, certain qualifying loans were pledged to support the Bank's outstanding advances and provided for immediate available borrowing capacity, after
subtracting existing borrowings and outstanding letters of credit, of approximately $10.4 million and $42.4 million as of March 31, 2006 and December 31, 2005, respectively.

As an additional source of liquidity, the Bank maintains unsecured federal funds lines with four correspondent banks and a secured borrowing arrangement through the Federal Reserve Bank of San Francisco (FRB). Federal funds
purchased generally mature within one to four days from the transaction date. As of March 31, 2006 the Company had $121.0 million in aggregate available borrowing commitments through these correspondent banks and the Federal Reserve Bank's
discount window. Outstanding balances under these commitments at March 31, 2006 and December 31, 2005 were $5.2 million and $16.4 million, respectively.

|NOTE 6 - 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.  The
$15,464,000 of junior subordinated debentures issued by the Trusts requires quarterly interest-only payments. Common stock issued by 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, 2006.

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

|(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.     
|   

|NOTE 7 - 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, 2006, the Company had $176.2 million of commitments to extend credit to customers and $11.4 million of standby
letters of credit.

12

---

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 Bank's consolidated financial position or results of operations.

|NOTE 8 - EARNINGS PER SHARE
|---------------------------

The Company's basic earnings per common share is computed by dividing net income, less dividends declared on convertible preferred stock, by the weighted average number of common shares outstanding during the period,
retroactively adjusted for all stock dividends paid and declared. 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 and convertible preferred shares, retroactively adjusted for all stock dividends paid and declared.  The following summarizes the weighted average shares outstanding for computation of basic and diluted shares as of March 31, 2006 and
2005.

|Three-months ended March 31:              |  | 2006       |  | 2005      
|----------------------------------------- |  | ---------- |  | ----------
|                                          |  |            |  |           
|                                         
|Weighted average number of common shares: |  |            |  |           
|Average shares outstanding-basic          |  | 16,157,328 |  | 16,112,861
|Average shares outstanding-diluted        |  | 17,692,106 |  | 17,506,406

NOTE 9 - RECENTLY ISSUED ACCOUNTING STANDARDS

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections."  SFAS No. 154 requires retrospective application to prior-period financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effect or the cumulative effect of the change. SFAS No. 154 also redefines "restatement" as the revising of previously issued financial statements to reflect the correction of an error.  This
statement is effective for accounting changes and corrections or errors made in fiscal years beginning after December 15, 2005. Management does not believe that the adoption of SFAS No. 154 will have a material impact on the consolidated financial
statements.

In October 2005, the FASB issues FASB Staff Position ("FSP") No. FAS 13-1, "Accounting for Rental Costs incurred during a Construction Period," which addresses the accounting for rental costs associated with operating
leases that are incurred during a construction period. The FSP requires that rental costs during a construction period be recognized as rental expense, rather than capitalized. The guidance applies to periods beginning after December 15, 2005 and is
not expected to have a significant impact on PremierWest's consolidated financial condition or results of operations.

In November 2005, the FASB issued FSP Nos. FAS 115-1 and FAS 124-1, "The Meaning of Other-Than-Temporary Impairment and its Applications to Certain Investments."  The FSP provides guidance on determining when an investment
is considered impaired, whether the impairment is other-than-temporary and the measurement of an impairment loss. The FSP also includes accounting considerations subsequent to recognition of an other-than-temporary impairment and requires certain
disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance applies to periods beginning after December 15, 2005 and is not expected to have a significant impact on PremierWest's consolidated
financial condition or results of operations.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments" which amends SFAS No. 133 " Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS 155 simplifies the accounting for certain derivative embedded in other financial instruments by allowing them to be accounted for as a whole if the holder
elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS 140. SFAS 155 is effective for all financial instruments acquired, issued or subject to a
re-measurement event occurring in fiscal years beginning after September 15, 2006.  Earlier adoption is permitted, provided the Company has not yet issued financial statements, including for interim periods, for that fiscal year. Management does not
expect the adoption of SFAS 155 to have a material impact on the consolidated financial statements.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets" which amends SFAS No. 140. SFAS 156 requires that all separately recognized servicing assets and servicing liabilities be initially
measured at fair value, if practicable. The statement permits, but does not require, the subsequent measurement of servicing assets and servicing liabilities at fair value.  SFAS 156 is effective for fiscal years beginning after September 15, 2006.
Management does not expect the adoption of SFAS 155 to have a material impact on the consolidated financial statements.

13

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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. Such forward-looking statements are based on the
beliefs of PremierWest Bancorp's (the Company) management and on assumptions made by management on the basis of information currently available. 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; and statements of assumptions underlying other statements about the Company and its business. 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. These risks and uncertainties
include factors that might inhibit our ability to maintain or expand our market share or our net interest margins and factors that could limit or delay implementation of our marketing and growth strategies. Further, actual results may be affected by
our ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; localized economic conditions and events that disproportionately affect our business; and general trends in the
banking industry, interest rate economy and regulatory environment. In addition, we face various risks inherent in the banking industry relating to collectibility of loans and changes in interest rates. 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.

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 first quarter period ending March 31, 2006. This discussion should be read in conjunction with the consolidated financial
statements and accompanying notes contained in this report as well as the Company's Form 10-K for the year ended December 31, 2005. For discussion purposes, management has made comparisons, as it deems appropriate, to other periods including the
quarter ending March 31, 2005 and the quarter and fiscal year periods ended December 31, 2005.

HIGHLIGHTS -For the first quarter ending March 31, 2006, the Company earned $3.3 million ($0.19 per diluted share), an increase of 24.14% compared to earnings of $2.6
million ($0.15 per diluted share) for the same period ended March 31, 2005. Annualized return on average shareholders' equity was 12.51%, and return on average assets was 1.42% for the quarter ended March 31, 2006 as compared to an annualized
return on average shareholders' equity and return on average assets of 11.49% and 1.29%, respectively, for the quarter ended March 31, 2005. At March 31, 2006 and December 31, 2005, loans, net of deferred loan fees, totaled $828.4 and $806.3
million, respectively, an increase of $22.1 million or 2.74% since year end (10.96% annualized growth rate). Deposits totaled $772.5 million at March 31, 2006 compared to $768.4 million at December 31, 2005, a .53% increase since
year-end (2.12% annualized growth rate). When compared to the first quarter ended March 31, 2005, loans, net of deferred loan fees grew 13.29% and deposits increased 7.61% .

Earnings growth for the first quarter of 2006, when compared to the same period a year ago, has been driven by the combination of the Bank's loan growth in conjunction with the rising interest rate environment experienced
during the past year. As rates increased, re-pricing opportunities on the asset side of our balance sheet from variable rate loans and new loan production occurred at a faster rate than the re-pricing of our liabilities - primarily our deposit base.
As a result, during 2005 the Company experienced quarter over quarter increases in its net interest margin - the key component of our profitability. For the first quarter of 2006, the Bank's net interest margin was 6.24%, 56 basis points higher than
the 5.68% net interest margin earned during the first quarter of 2005, but 16 basis points lower than the 6.40% net interest margin earned during the fourth quarter of 2005.

The Bank has enjoyed excellent loan demand such that loan growth has exceeded the growth rate of our deposit base. As of March 31, 2006, the Bank's loan to deposit ratio was 105.9% compared to 103.6% as of December 31,
2005. This has resulted in greater reliance on relatively higher cost short term borrowings as a temporary source of funding. Increased borrowings, along with the lagging but inevitable re-pricing of our interest-bearing deposits, particularly with
regard to maturing certificates of deposit, has resulted in an increase to our cost of funds. This has placed downward pressure on our net interest margin during the first quarter of 2006. Management has implemented initiatives for attracting core
deposits in order to reduce our reliance on short-term borrowings and to maximize our interest rate spread within the constraints of a competitive marketplace.

We continue to pursue our business plan for building the dominant community banking franchise along the Interstate 5 corridor between Eugene, Oregon and Sacramento, California. In addition, the high growth market of central
Oregon has been targeted for expanding our footprint away from Interstate 5.  We are generating loan growth from throughout the Bank's geographic markets. This growth is in line with our expectations and overall strategy which remains focused on
strengthening or expanding the Bank's position within existing markets; opening de novo start-up offices in new markets; and seeking opportunities to grow by acquisition. During the second quarter of 2006, our previously announced de novo offices
located in Ashland and Shady Cove, Oregon will open for business and begin contributing to our 2006 results.

14

---

|FINANCIAL HIGHLIGHTS
|--------------------

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

|(Dollars in 000's)                                  |  |          |  |      |  |         |  |            |  | Increase |  |        
|--------------------------------------------------- |  | -------- |  | ---- |  | ------- |  | ---------- |  | -------- |  | -------
|Analysis for the three-month period ended March 31: |  | 2006     |  | 2005 |  |         |  | (Decrease) |  | % Change
|                                                    |  |          |  |      |  |         |  |           
|                                                   
|Average fed funds sold and investments              |  | $ 17,549 |  | $    |  | 31,813  |  | $          |  | (14,264) |  | -44.84%
|Average gross loans                                 |  | 819,398  |  |      |  | 701,028 |  |            |  | 118,370  |  | 16.89% 
|Average interest-earning assets                     |  | 836,947  |  |      |  | 732,841 |  |            |  | 104,106  |  | 14.21% 
|Average interest-bearing liabilities                |  | 619,261  |  |      |  | 536,407 |  |            |  | 82,854   |  | 15.45% 
|Average total assets                                |  | 928,270  |  |      |  | 818,445 |  |            |  | 109,825  |  | 13.42% 
|Average equity                                      |  | 105,046  |  |      |  | 92,131  |  |            |  | 12,915   |  | 14.02% 
|                                                   
|Average yield earned (1)                            |  | 8.02%    |  |      |  | 6.87%   |  |            |  | 1.15%    |  | 16.74% 
|Average rate paid                                   |  | 2.41%    |  |      |  | 1.64%   |  |            |  | 0.77%    |  | 46.95% 
|                                                    |  |          |  |      |  |         |  |           
|                                                   
|Net interest spread                                 |  | 5.61%    |  |      |  | 5.23%   |  |            |  | 0.38%    |  | 7.27%  
|                                                    |  |          |  |      |  |         |  |           
|                                                   
|                                                   
|Net interest income to average                      |  |          |  |      |  |         |  |            |  |          |  |        
|interest-earning assets (net interest margin) (1)   |  | 6.24%    |  |      |  | 5.68%   |  |            |  | 0.56%    |  | 9.86%  
|Return on average assets                            |  | 1.42%    |  |      |  | 1.29%   |  |            |  | 0.13%    |  | 10.08% 
|Return on average equity                            |  | 12.51%   |  |      |  | 11.49%  |  |            |  | 1.02%    |  | 8.88%  
|Efficiency ratio (2)                                |  | 63.02%   |  |      |  | 65.26%  |  |            |  | -2.24%   |  | -3.43% 

|(1) | Tax equivalent                                                             
|--- | ---------------------------------------------------------------------------
|(2) | Noninterest expense divided by net interest income plus noninterest income.
|   

|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). Our net interest income is impacted 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 quality of our loan portfolio; and the general movement in the market rates of interest. A key measurement of profitability is our net interest margin (net interest income divided by average
interest-earning assets), which represents the relative stability in net interest income over time.

During the first quarter of 2006, our interest income increased $4.2 million while our interest expense increased $1.5 million resulting in our net interest income increasing $2.7 million (26.0%) for the first
quarter of 2006 compared to the same period a year ago.

The increases in our interest income, interest expense and the resulting net interest margin for the first quarter of 2006, compared to the same period in 2005, was driven by the combination of higher levels of both our
earning assets and interest-bearing liabilities, as well as the general trend of rising short-term interest rates.  During the past twelve months, movements in increments of 25 basis points by the Federal Reserve Bank have resulted in an equal rise
in the prime rate of interest, the leading short-term rate index, by a total of 200 basis points, 50 basis points in each of the last four quarters. The growth in our earning assets over the past year resulted from strong loan demand across all of
our markets, including our two newest geographic markets located in northern California and central Oregon.

For the quarter ending March 31, 2006, our tax equivalent net interest margin was 6.24%, a 56 basis point increase over the same period a year ago and a 16 basis point decline from the fourth quarter ended December 31,
2005. The decline in our net interest margin compared to the previous quarter resulted from the narrowing of our net interest spread as the average cost of our interest-bearing liabilities increased 19 basis points more than the increase in yield on
our average earning assets.  While benefiting from excellent loan demand and stable loan quality, our loan growth has continued to exceed the growth of our deposit base. This has resulted in our reliance on higher cost short-term borrowings to
support loan growth. During the first quarter of 2006, our average borrowings were $57.4 million compared to $20.7 million during the fourth quarter of 2005 and $18.1 million during the first quarter of 2005.

LOAN LOSS PROVISION- Charges made to the provision for loan losses were $300,000 and $150,000 for the three-month periods ended March 31, 2006 and March 31, 2005,
respectively. On a net basis the Company had no charge offs during the first quarter of 2006 compared to net recoveries of $57,000 for the corresponding period in 2005. The increase in provision expense for the first quarter of 2006 compared to
the first quarter of 2005 is directly related to management's ongoing assessment of risk within the loan portfolio. Management believes that as of March 31, 2006, the balance in the allowance for loan losses was reasonable and appropriate to support
potential future losses.

15

---

NONINTEREST INCOME- Noninterest income represents service charges, fees, commissions and other income derived principally from general banking services, residential mortgage
brokerage activity, sales of investment and insurance products, and gains from the sale of other assets. Through March 2006, total noninterest income increased approximately $75,000 (4.3%) compared to the same period in 2005. Growth in
noninterest income included $132,000 from account service fees; $38,000 from mortgage banking fees; and, $34,000 from other commissions and fees. This growth was offset by a decrease in other non-interest income of $101,000 and
commissions earned from investment services of $28,000.

NONINTEREST EXPENSE- Noninterest expense increased approximately $1.5 million or 18.6% for the three months ended March 31, 2006 as compared to the corresponding period in 2005.
The increase resulted from $1.1 million increase in salaries and benefits expenses; a $102,000 increase in occupancy and equipment expenses; and, a $197,000 net increase in other noninterest expenses.  The increases in noninterest
expense are the result of our growth in general, including annual salary increases that begin in the first quarter of each year, and the implementation of our growth strategies. Management believes that the higher occupancy and personnel expenses
that we've incurred as we enter new markets will drive future earnings growth.

EFFICIENCY RATIO- The Company's efficiency ratio was 63.0% during the first quarter 2006 compared to 65.3% for the first quarter of 2005. The improvement in this key measure was
driven by the overall growth in our net interest income. Overall the increase in our net interest income and noninterest income exceeded the increase in noninterest expense for the quarter ending March 31, 2006 when compared to the quarter ending
March 31, 2005. The efficiency ratio for the first quarter of 2006 reflected a 190 basis point deterioration when compared to the 61.12% efficiency ratio achieved for the immediately preceding quarter ending December 31, 2005. This deterioration in
our efficiency ratio resulted from higher non-interest expenses incurred during the first quarter of 2006 relative to the growth in our net interest and non interest income when compared to the fourth quarter of 2005. Contributing to higher overhead
costs were annual compensation increases as well as personnel and occupancy expenses resulting from the implementation of our growth strategies and included an increase in overhead associated with our four newest branch locations, specifically, the
first full quarter of operations at our Eagle Point, Oregon and Anderson, California branches, and the initial hiring of staff for our Shady Cove and Ashland, Oregon branches that will open during the second quarter of 2006. Management continues to
target an efficiency ratio in the low 60% range.

FINANCIAL CONDITION -Total assets of $940.2 million at March 31, 2006 increased 2.90% over total assets of $913.7 million at December 31, 2005. The increase in assets
primarily resulted from an increase in loan volume as total loans increased $21.8 million or 2.7% .

Net loans accounted for 86.98% of total assets at March 31, 2006 compared to 87.12% at December 31, 2005. As of March 31, 2006, the allowance for loan losses increased to $10.6 million from $10.3 million at December
31, 2005. The Company's ratio of allowance for loan losses to total loans was 1.28% at March 31, 2006, unchanged when compared December 31, 2005. Non-performing assets (defined as loans on non-accrual status, loans 90 days or more past due and other
real estate owned) either specifically reserved or adequately collateralized were $2.2 million and $2.3 million at March 31, 2006 and December 31, 2005, respectively.  Management maintains and adheres to disciplined underwriting standards
and has a proven track record for managing credit risk as well as identifying and aggressively administering problem loans.

Total deposits increased to $772.5 million at March 31, 2006, a $4.1 million or 0.50% increase compared to $768.4 million as of December 31, 2005. Net loan growth has continued to outpace our growth in deposits
and as of March 31, 2006, resulted in a loan-to-deposit ratio of 105.9% compared to a ratio of 103.6% as of December 31, 2005 and 100.6% as of March 31, 2005. Demand for loans has been steady throughout our markets and as anticipated, deposit
growth, particularly in our newest market areas, has lagged behind loan production. Notwithstanding management's desire to maintain a loan-to-deposit ratio at or below 100%, as of March 31, 2006, the Bank's deposit mix remained stable - consisting
of 24.7% noninterest bearing demand, with core deposits, consisting of noninterest bearing demand, interest-bearing demand and regular savings deposits, representing 69.3%, and, time deposits comprising 30.7% of total deposits. The Bank has not
utilized brokered time deposits as a part of our funding strategy. However, should liquidity and profitability considerations dictate the need to grow deposits more rapidly than may be generated through our traditional deposit gathering efforts, the
Bank has flexibility in strategically pricing time deposits more aggressively, and/or utilizing brokered time deposits in order to attract higher cost deposits.

Management closely monitors the Bank's liquidity needs and maintains the ability to borrow from the Federal Home Loan Bank of Seattle and other correspondent banks. For more information about liquidity refer to the
Liquidity and Capital Resources section below.

16

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The table below sets forth certain summary balance sheet information for March 31, 2006 and December 31, 2005: (Dollars in 000's)

|                              |  | March 31, |  | December 31, |  |   |  | Increase (Decrease)
|----------------------------- |  | --------- |  | ------------ |  | - |  | -------------------
|                              |  | 2006      |  | 2005         |  |   |  | 3/31/06  12/31/05 
|                              |  |           |  |              |  |  
|                             
|ASSETS                        |  |           |  |              |  |   |  |                    
|Federal funds sold            |  | $         |  | 7,355        |  | $ |  | 453                
|Securities available for sale |  |           |  | 4,275        |  |   |  | 5,292              
|Securities held to maturity   |  |           |  | 8,739        |  |   |  | 9,577              
|Federal Home Loan Bank        |  |           |  |              |  |   |  |                    
|deposits and stock            |  |           |  | 1,597        |  |   |  | 1,598              
|Loans, net                    |  |           |  | 817,759      |  |   |  | 795,997            
|Other assets (1)              |  |           |  | 100,463      |  |   |  | 100,744            
|                              |  |           |  |              |  |   |  |                    
|                             
|Total assets                  |  | $         |  | 940,188      |  | $ |  | 913,661            
|                              |  |           |  |              |  |   |  |                    
|                             
|LIABILITIES                   |  |           |  |              |  |   |  |                    
|Noninterest-bearing           |  |           |  |              |  |   |  |                    
|deposits                      |  | $         |  | 190,663      |  | $ |  | 208,840            
|Interest-bearing              |  |           |  |              |  |   |  |                    
|deposits                      |  |           |  | 581,837      |  |   |  | 559,579            
|                              |  |           |  |              |  |   |  |                    
|                             
|Total deposits                |  |           |  | 772,500      |  |   |  | 768,419            
|Other liabilities (2)         |  |           |  | 61,519       |  |   |  | 42,458             
|                              |  |           |  |              |  |   |  |                    
|                             
|Total liabilities             |  |           |  | 834,019      |  |   |  | 810,877            
|                             
|SHAREHOLDERS                 |  |           |  |              |  |   |  |                    
|EQUITY                        |  |           |  | 106,169      |  |   |  | 102,784            
|                              |  |           |  |              |  |   |  |                    
|                             
|Total liabilities             |  |           |  |              |  |   |  |                    
|and share-                    |  |           |  |              |  |   |  |                    
|holders equity               |  | $         |  | 940,188      |  | $ |  | 913,661            
|                              |  |           |  |              |  |   |  |                    

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

|LIQUIDITY AND CAPITAL RESOURCES
|-------------------------------

LIQUIDITY- - Liquidity enables the Company to fund loan commitments and meet customer withdrawals of deposits. The Company maintains its liquidity position through maintenance of
cash resources, the stability of and growth in our core deposit base and through our ability to borrow funds from committed sources of credit.  Overall, the Company's liquidity position decreased during the quarter ended March 31, 2006 as our loan
volume has continued to exceed the growth rate of our deposit base. During the quarter, our loan-to-deposit ratio tightened from 103.7% at December 31, 2005 to 105.9% at March 31, 2006 whereas 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 $4.9 million. Investments in the form of securities either held-to-maturity or available-for-sale declined by $1.9 million from
calls and maturities that occurred and are presently 100% pledged for collateralization of public funds on deposit that exceed the $100,000 FDIC insurance limit and, therefore, are not available for purposes of liquidity. Historically our
pledging requirements have been met through the use of our securities portfolio although we are also able to use our borrowing capacity through the use of letters of credit to meet pledging requirements. As of March 31, 2006, in addition to the full
use of our securities portfolio the Bank was using letters of credit totaling $2.1 million to meet its pledging needs.

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. Management has also identified certain loans where a portion of the outstanding balance could be sold to a
participating bank 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 cause loan growth to decrease
through higher pricing strategies.  The Company maintains a secured line-of-credit with the FHLB. As of March 31, 2006, the Bank had $1.6 million of long-term and $30.0 million of short-term borrowings advanced from the FHLB with the
immediate availability for an additional $10.4 million under the Company's credit line. The Company also has unsecured federal funds credit lines for up to $121.0 million through certain correspondent banks and a $1.0 million secured
line of credit through the Federal Reserve Bank of San Francisco. As of March 31, 2006, there were $5.2 million in balances outstanding against these credit lines leaving available credit of $115.8 million.

At March 31, 2006, the Company had approximately $176.2 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

17

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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.

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 8.00%, the Tier 1
capital ratio should be at least 4.00%, and the leverage capital ratio should be at least 4.00% . At March 31, 2006, the Company's regulatory capital ratios were as follows: total risk-based capital ratio was 11.88%, Tier 1 capital ratio was 10.72%,
and the leverage capital ratio was 10.86% . 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 may 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, 2006 as compared to December 31, 2005.

As stated in the annual report on Form 10-K for 2005, the Company attempts to monitor interest rate risk from the perspective of changes in the economic value of equity, also referred to as net portfolio value (NPV), and
changes in net interest income. Changes to the NPV and net interest income are simulated using instant and permanent rate shocks of plus and minus 200 basis points, in increments of 50 basis points. It is the Company's policy to manage interest rate
risk to maximize long-term profitability under the range of likely interest-rate scenarios. For additional information, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" referenced in the Company's
annual report on Form 10-K for the year ended December 31, 2005.

|ITEM 4. CONTROLS AND PROCEDURES
|-------------------------------

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

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|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. Generally these actions are not expected to have a material adverse impact on our business, financial condition or results of operations. Litigation matters that have been reported previously have been resolved
or, in the opinion of management, are not expected to have a material adverse impact on the financial condition or results of operations for the Company.

ITEM 1A. RISK FACTORS -There has been no material change in the risk factors disclosure as presented in the Company's 2005 Form 10-K for the fiscal year ended December 31, 2005.

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

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

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

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

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

No matters were submitted to a vote of securities holders of PremierWest during the quarter ended March 31, 2006.

|ITEM 5. OTHER INFORMATION
|-------------------------

|[None.]
|-------

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

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

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

DATED: May 5, 2006PREMIERWEST BANCORP

/s/ John L. Anhorn
John L. Anhorn, President and Chief Executive Officer

/s/ Tom Anderson
Tom Anderson, Executive Vice-President and Chief Financial Officer

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