UNITED STATES SECURITIES AND EXCHANGE COMMISSION



|WASHINGTON, D.C. 20549FORM 10-Q
|-------------------------------

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



|for the quarterly period endedSeptember 30, 2007Commission File Number:000-50332
|--------------------------------------------------------------------------------



PREMIERWEST BANCORP

(Exact name of registrant as specified in its charter)

|Oregon                          |  |                                                      |  | 93-1282171         
|------------------------------- |  | ---------------------------------------------------- |  | -------------------
|(State or other jurisdiction of |  |                                                      |  | (I.R.S. Employer   
|incorporation or organization)  |  |                                                      |  | Identification No.)
|                               
|                                |  | 503 Airport Road  Suite 101                         |  |                    
|                                |  | Medford, Oregon 97504                                |  |                    
|                                |  | (Address of principal executive offices) (Zip Code)  |  |                    
|                               
|                                |  | (541) 618-6003                                       |  |                    
|                                |  | (Registrant's telephone number, including area code) |  |                    

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 [   ]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 October 31, 2007 was 16,998,169.

---

|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 INFORMATIONITEM 1. FINANCIAL STATEMENTS                                                                                                      |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - |  | ------------- |  | ------- |  | ------------ |  | ------- |  | ------------- |  | -------
|PREMIERWEST BANCORP AND SUBSIDIARY          CONSOLIDATED BALANCE SHEETS          
    (Dollars in 000s)            
    (UNAUDITED)            
  
    ASSETS
|                                                                                                                                                               |  |   |  | September 30, |  |         |  | December 31, |  |         |  | September 30,
|                                                                                                                                                               |  |   |  | 2007          |  |         |  | 2006         |  |         |  | 2006         
|                                                                                                                                                               |  |  
|Cash and cash equivalents:                                                                                                                                     |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|Cash and due from banks                                                                                                                                        |  | $ |  | 28,846        |  | $       |  | 36,497       |  | $       |  | 33,862       
|Federal funds sold                                                                                                                                             |  |   |  |               |  | -       |  |              |  | -       |  |               |  | -      
|                                                                                                                                                               |  |  
|Total cash and cash equivalents                                                                                                                                |  |   |  |               |  | 28,846  |  |              |  | 36,497  |  |               |  | 33,862 
|                                                                                                                                                               |  |  
|Interest-bearing deposits with Federal Home Loan Bank                                                                                                          |  |   |  |               |  | 38      |  |              |  | 7       |  |               |  | 15     
|                                                                                                                                                               |  |  
|Investments:                                                                                                                                                   |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|Investment securities available-for-sale, at fair market value                                                                                                 |  |   |  |               |  | 229     |  |              |  | 263     |  |               |  | 4,268  
|Investment securities held-to-maturity, at amortized cost                                                                                                      |  |   |  |               |  | 6,057   |  |              |  | 7,055   |  |               |  | 7,255  
|Restricted equity securities                                                                                                                                   |  |   |  |               |  | 1,865   |  |              |  | 1,865   |  |               |  | 1,865  
|                                                                                                                                                               |  |  
|Total investments                                                                                                                                              |  |   |  |               |  | 8,151   |  |              |  | 9,183   |  |               |  | 13,388 
|                                                                                                                                                               |  |  
|Mortgage loans held-for-sale                                                                                                                                   |  |   |  |               |  | 354     |  |              |  | 993     |  |               |  | 524    
|Loans, net of allowance for loan losses and deferred loan fees                                                                                                 |  |   |  |               |  | 990,700 |  |              |  | 908,652 |  |               |  | 856,304
|                                                                                                                                                               |  |  
|Loans, net                                                                                                                                                     |  |   |  |               |  | 991,054 |  |              |  | 909,645 |  |               |  | 856,828
|                                                                                                                                                               |  |  
|Premises and equipment, net of accumulated depreciation                                                                                                        |  |   |  |               |  | 38,089  |  |              |  | 34,102  |  |               |  | 33,433 
|Core deposit intangibles, net of accumulated amortization                                                                                                      |  |   |  |               |  | 1,640   |  |              |  | 2,010   |  |               |  | 2,134  
|Goodwill                                                                                                                                                       |  |   |  |               |  | 20,942  |  |              |  | 20,414  |  |               |  | 20,414 
|Accrued interest and other assets                                                                                                                              |  |   |  |               |  | 26,153  |  |              |  | 22,653  |  |               |  | 20,884 
|                                                                                                                                                               |  |  
|TOTAL ASSETS                                                                                                                                                   |  | $ |  | 1,114,913     |  | $       |  | 1,034,511    |  | $       |  | 980,958      
|                                                                                                                                                               |  |  
|                                                                                                                                                              
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                           |  |   |  |               |  |         |  |             
|LIABILITIES                                                                                                                                                    |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|Deposits:                                                                                                                                                      |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|Demand                                                                                                                                                         |  | $ |  | 193,666       |  | $       |  | 199,462      |  | $       |  | 199,256      
|Interest-bearing demand and savings                                                                                                                            |  |   |  |               |  | 376,729 |  |              |  | 407,559 |  |               |  | 346,153
|Time                                                                                                                                                           |  |   |  |               |  | 356,006 |  |              |  | 272,329 |  |               |  | 258,635
|                                                                                                                                                               |  |  
|Total deposits                                                                                                                                                 |  |   |  |               |  | 926,401 |  |              |  | 879,350 |  |               |  | 804,044
|Federal funds purchased                                                                                                                                        |  |   |  |               |  | 23,470  |  |              |  | 6,835   |  |               |  | 7,795  
|Federal Home Loan Bank borrowings                                                                                                                              |  |   |  |               |  | 13,164  |  |              |  | 6,141   |  |               |  | 31,301 
|Junior subordinated debentures                                                                                                                                 |  |   |  |               |  | 15,464  |  |              |  | 15,464  |  |               |  | 15,464 
|Accrued interest and other liabilities                                                                                                                         |  |   |  |               |  | 11,266  |  |              |  | 10,462  |  |               |  | 9,228  
|                                                                                                                                                               |  |  
|Total liabilities                                                                                                                                              |  |   |  |               |  | 989,765 |  |              |  | 918,252 |  |               |  | 867,832
|                                                                                                                                                               |  |  
|COMMITMENTS AND CONTINGENCIES (Note 8)                                                                                                                         |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|SHAREHOLDERS' EQUITY                                                                                                                                           |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|Series A Preferred Stock, no par value, 1,000,000 shares                                                                                                       |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|authorized, 11,000 shares issued and outstanding                                                                                                               |  |   |  |               |  | 9,590   |  |              |  | 9,590   |  |               |  | 9,590  
|Common stock - no par value; 50,000,000 shares authorized;                                                                                                     |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|16,994,363 shares issued and outstanding                                                                                                                       |  |   |  |               |  |         |  |              |  |         |  |               |  |        
|(16,216,481 shares at 12/31/06; 16,203,331 shares at 9/30/06)                                                                                                  |  |   |  |               |  | 97,269  |  |              |  | 85,906  |  |               |  | 85,748 
|Retained earnings                                                                                                                                              |  |   |  |               |  | 18,223  |  |              |  | 20,663  |  |               |  | 17,683 
|Accumulated other comprehensive income                                                                                                                         |  |   |  |               |  | 66      |  |              |  | 100     |  |               |  | 105    
|                                                                                                                                                               |  |  
|Total shareholders' equity                                                                                                                                     |  |   |  |               |  | 125,148 |  |              |  | 116,259 |  |               |  | 113,126
|                                                                                                                                                               |  |  
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                     |  | $ |  | 1,114,913     |  | $       |  | 1,034,511    |  | $       |  | 980,958      
|                                                                                                                                                               |  |  
|                                                                                                                                                              
|                                                                                                                                                              
|See accompanying notes.                                                                                                                                       

3

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|PREMIERWEST BANCORP AND SUBSIDIARY                    
|------------------------------------------------------
|CONSOLIDATED STATEMENTS OF INCOME                     
|(Dollars in 000s, Except for Earnings per Share Data)
|(UNAUDITED)                                           
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|INTEREST AND DIVIDEND INCOME                          
|Interest and fees on loans                            
|Interest on investments:                              
|Taxable                                               
|Nontaxable                                            
|Interest on federal funds sold                        
|Other interest and dividends                          
|                                                      
|Total interest and dividend income                    
|                                                      
|INTEREST EXPENSE                                      
|Deposits:                                             
|Interest-bearing demand and savings                   
|Time                                                  
|Federal funds purchased                               
|Federal Home Loan Bank advances                       
|Junior subordinated debentures                        
|                                                      
|Total interest expense                                
|                                                      
|Net Interest Income                                   
|                                                      
|LOAN LOSS PROVISION                                   
|                                                      
|                                                      
|Net interest income after loan loss provision         
|                                                      
|                                                      
|NONINTEREST INCOME                                    
|Service charges on deposits accounts                  
|Mortgage banking fees                                 
|Investment brokerage and annuity fees                 
|Other commissions and fees                            
|Gains on sales on investments securities, net         
|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 AND COMPREHENSIVE INCOME
|(Dollars in 000s)                                                                 
|(UNAUDITED)                                                                        
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|BALANCE - JANUARY 1, 2006                                                          
|Comprehensive income:                                                              
|Net income                                                                         
|Unrealized losses                                                                  
|on investment securities                                                           
|available-for-sale of $44                                                          
|(net of taxes of $27)                                                              
|Other comprehensive income-                                                        
|Amortization of unrealized                                                         
|gains for investment securities                                                    
|transferred to held-to-maturity                                                    
|of $63 (net of taxes of $39)                                                       
|                                                                                   
|Comprehensive income                                                               
|                                                                                   
|Preferred stock dividend declared                                                  
|Common stock cash dividend declared                                                
|Stock-based compensation expense                                                   
|5% stock dividend                                                                  
|Cash paid for fractional shares                                                    
|Stock options exercised                                                            
|Income tax benefit of stock options                                                
|exercised                                                                          
|                                                                                   
|BALANCE - September 30, 2006                                                       
|                                                                                   
|                                                                                   
|BALANCE - JANUARY 1, 2007                                                          
|Comprehensive income:                                                              
|Net income                                                                         
|Unrealized losses                                                                  
|on investment securities                                                           
|available-for-sale of $1                                                           
|(nominal tax effect)                                                               
|Other comprehensive income-                                                        
|amortization of unrealized                                                         
|gains for investment securities                                                    
|transferred to held-to-maturity                                                    
|of $35 (net of taxes of $22)                                                       
|                                                                                   
|Comprehensive income                                                               
|                                                                                   
|Preferred stock dividend declared                                                  
|Common stock cash dividend declared                                                
|Stock-based compensation expense                                                   
|Repurchase of common stock                                                         
|5% stock dividend                                                                  
|Cash paid for fractional shares                                                    
|Stock options exercised                                                            
|Income tax benefit of stock options                                                
|exercised                                                                          
|                                                                                   
|BALANCE - September 30, 2007                                                       
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|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                                                  
|Funding of loans held-for-sale                                   
|Sale of loans held-for-sale                                      
|Gain on sale of loans held-for-sale                              
|Stock-based compensation expense                                 
|Excess tax benefit from stock options exercised                  
|Gain on sales of investment securities, net                      
|Gain on sales of premises and equipment                          
|Gain on sale of other real estate                                
|Write down of low income housing tax credit investment           
|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                                    
|Purchase of investment securities held-to-maturity               
|Proceeds from calls, paydowns and maturities of investment       
|securities held-to-maturity                                      
|Increase in interest-bearing deposits with Federal Home Loan Bank
|Purchase of low income housing tax credit investment             
|Proceeds from sale of other real estate                          
|Loan originations, net                                           
|Purchase of premises and equipment, net                          
|Purchase of consumer loan finance business                       
|                                                                 
|Net cash from investing activities                               
|                                                                 
|                                                                 
|CASH FLOWS
		FROM FINANCING ACTIVITIES:                          
|Net
		increase in deposits                                       
|Net
		increase in Federal Home Loan Bank borrowings              
|Net
		increase in Federal Funds purchased                        
|Repurchase
		of common stock                                     
|Dividends
		paid on common stock                                 
|Stock
		options exercised                                        
|Excess
		tax benefit from stock options exercised                
|Cash
		paid for fractional shares relating to stock dividend     
|                                                                 
|Net cash from
		financing activities                             
|                                                                 
|NET (DECREASE)
		INCREASE IN CASH AND CASH EQUIVALENTS           
|CASH AND CASH
		EQUIVALENTS - Beginning of the period            
|                                                                 
|CASH AND CASH
		EQUIVALENTS - End of the period                  
|                                                                 
|                                                                 
|SUPPLEMENTAL
		DISCOSURE OF CASH FLOW INFORMATION                
|Cash
		paid for interest                                         
|                                                                 
|Cash
		paid for taxes                                            
|                                                                 
|                                                                 
|SUPPLEMENTAL
		DISCLOSURE OF NONCASH INVESTING AND               
|FINANCING
		ACTIVITIES:                                          
|Transfers
		of loans to other real estate owned                  
|                                                                 
|Income
		tax benefit of stock options exercised                  
|                                                                 
|Preferred
		stock dividend declared                              
|                                                                 
|Common
		stock cash 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 the Banks major market areas as well as from offices located in Portland, Eugene and Coos Bay, Oregon. PremierWest Investment Services, Inc. functions under an arrangement with Linsco/Private Ledger, an independent broker/dealer. Operating throughout the Banks market area PremierWest Investment Services, Inc. offers financial and investment products including stocks, bonds, mutual funds, annuities and insurance.

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

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

The balance sheet data as of December 31, 2006 was derived from audited financial statements and does not include all disclosures contained in the 2006 Annual Report to Shareholders. The interim consolidated financial statements should be read in conjunction with the Company's 2006 consolidated financial statements, including the notes thereto, included in the 2006 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 2006 Annual Report on Form 10-K. We believe that the judgments, estimates and assumptions used in the preparation of our consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of our consolidated financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in our results of operations or financial condition.

Stock dividends Share and per share data in the accompanying consolidated financial statements have been retroactively restated to reflect the 5% stock dividend paid on June 29, 2007.

Cash dividends On May 24, 2007 the Company declared a $0.05 per share cash dividend payable on July 31, 2007, to shareholders of record July 16, 2007. On September 20, 2007, the Company initiated a quarterly dividend policy and declared a $0.06 per share cash dividend payable on October 15, 2007, to shareholders of record October 1, 2007.

7

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

At September 30, 2007, PremierWest Bancorp had one active equity incentive plan  the 2002 Stock Incentive Plan (2002 Plan) plan. The 2002 Plan was initially established May 2002 and approved by shareholders. The plan was amended and restated in May 2005 to allow for the issuance of restricted stock grants in addition to stock options. The plan was also amended and restated in May 2007 to increase the number of shares available for issuance under the plan by 1,000,000 shares. Both amendments were approved by shareholders. The amended and restated 2002 Plan presently authorizes the issuance of up to 1,973,467 shares of stock, of which 1,241,330 shares were available for issuance at September 30, 2007. As of September 30, 2007, there were no restricted stock grants outstanding. The amended and restated 2002 Plan allows for stock options to be granted at an exercise price of not less than the fair market value of PremierWest Bancorp stock on the date of issuance, for a term not to exceed ten years. The Compensation Committee establishes the vesting schedule for each grant; historically the Committee has utilized graded vesting schedules over two or five year periods. During 2007, options granted to employees had graded vesting over a period of seven years and options granted to directors had graded vesting over a period of two years. Upon exercise of stock options or issuance of restricted stock, it is the Companys policy to issue new shares of common stock.

During the nine month period ended September 30, 2007, stock option activity was as follows:

|                                    |  |           |   |  |   |  |                  |  | Weighted Average |  |   |  | Aggregate      
|----------------------------------- |  | --------- | - |  | - |  | ---------------- |  | ---------------- |  | - |  | ---------------
|                                    |  | Number    |   |  |   |  | Weighted Average |  | Remaining        |  |   |  | Intrinsic Value
|                                    |  | of Shares |   |  |   |  | Exercise Price   |  | Contractual Term |  |   |  | (in thousands) 
|                                    |  |          
|Stock options outstanding, 12/31/06 |  | 915,246   |   |  | $ |  | 7.95             |  |                  |  |   |  |                
|Granted                             |  | 143,229   |   |  | $ |  | 12.41            |  |                  |  |   |  |                
|Exercised                           |  | (41,579   | ) |  | $ |  | 5.42             |  |                  |  | $ |  | 300            
|                                    |  |          
|Forfeited                           |  | (26,230   | ) |  | $ |  | 9.57             |  |                  |  |   |  |                
|                                    |  |           |   | 
|Stock options outstanding, 9/30/07  |  | 990,666   |   |  | $ |  | 8.66             |  | 5.73             |  | $ |  | 4,537          
|                                    |  |          
|Stock options exercisable, 9/30/07  |  | 558,349   |   |  | $ |  | 6.76             |  | 3.87             |  | $ |  | 3,618          
|                                    |  |          

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 historical volatility of our stock price, our expected dividend yield, the risk-free interest rate, and the weighted average expected life of the options. The following schedule reflects the weighted-average assumptions included in this model as it relates to the valuation of options granted for the three and nine month periods ended September 30, 2007 and 2006:

|                         |  | Three months ended September 30, |   |  | Nine months ended September 30, |  
|------------------------ |  | -------------------------------- | - |  | ------------------------------- | -
|                         |  |                                 
|                         |  | 2007                             |   |  | 2006                            |  
|                         |  |                                  |   | 
|                        
|Risk-free interest rate  |  | 4.6                              | % |  | 5.0                             | %
|Expected dividend        |  | 0.94                             | % |  | 0.51                            | %
|Expected lives, in years |  | 7                                |   |  | 6.5                             |  
|Expected volatility      |  | 29                               | % |  | 28                              | %

The weighted-average grant date fair value of options granted during the three month and nine month periods ending September 30, 2007 were $4.62 and $4.59, respectively.

Prior to the adoption of SFAS 123R, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statements of Cash Flows. SFAS 123R requires that the cash flows from the tax benefits resulting from tax deductions in excess of the compensation expense recognized for stock options (excess tax benefits) be reported as financing cash flows. Excess tax benefits classified as financing cash inflows for the nine months ended September 30, 2007 and 2006 were $69,000 and $159,000, respectively.

Stock-based compensation expense recognized under SFAS 123R was $75,000 for the quarter ended September 30, 2007 with a related tax benefit of $28,700; and $60,000 for the quarter ended September 30, 2006 with a related tax benefit of $22,800. For the year-to-date period ending September 30, 2007, stock-based compensation expense totaled $218,000 with a related tax benefit of $83,400. For the year-to-date period ending September 30, 2006, stock-based compensation expense totaled $150,000 with a related tax benefit of $57,000. At September 30, 2007, unrecognized stock-based compensation expense totaled $997,000 and will be expensed over a weighted average period of 2.5 years.

8

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

Investment securities at September 30, 2007 and December 31, 2006 consisted of the following: (Dollars in 000's)

|                                                 |  |   |  |           |  |   |  |            |  |  |  |   |  | 2007       |   |            |   |  |       |  |          
|------------------------------------------------ |  | - |  | --------- |  | - |  | ---------- |  |  |  | - |  | ---------- | - | ---------- | - |  | ----- |  | ---------
|                                                 |  |  
|                                                 |  |   |  |           |  |   |  | Gross      |  |  |  |   |  |            |   | Gross      |   |  |       |  | Estimated
|                                                 |  |   |  | Amortized |  |   |  | unrealized |  |  |  |   |  | unrealized |   |            |   |  | fair 
|                                                 |  |   |  | cost      |  |   |  | gains      |  |  |  |   |  |            |   | losses     |   |  |       |  | value    
|                                                 |  |  
|Available-for-sale:                              |  |   |  |           |  |   |  |            |  |  |  |   |  |            |   |            |   |  |       |  |          
|Mortgage-backed securities and collateralized    |  |   |  |           |  |   |  |            |  |  |  |   |  |            |   |            |   |  |       |  |          
|mortgage obligations                             |  |   |  | 229       |  |   |  | 2          |  |  |  |   |  |            |   | (2         | ) |  |       |  | 229      
|                                                 |  |  
|Total                                            |  | $ |  | 229       |  | $ |  | 2          |  |  |  | $ |  | (2         | ) |            | $ |  | 229  
|                                                 |  |  
|                                                
|                                                
|Held-to-maturity:                                |  |   |  |           |  |   |  |            |  |  |  |   |  |            |   |            |   |  |       |  |          
|U.S. Government and agency securities            |  | $ |  | 993       |  | $ |  | 1          |  |  |  | $ |  | -          |   |            | $ |  | 994  
|Obligations of states and political subdivisions |  |   |  | 5,064     |  |   |  | 5          |  |  |  |   |  |            |   | (46        | ) |  |       |  | 5,023    
|                                                 |  |  
|                                                 |  | $ |  | 6,057     |  | $ |  | 6          |  |  |  | $ |  | (46        | ) |            | $ |  | 6,017
|                                                 |  |  
|                                                
|Restricted equity securities                     |  | $ |  | 1,865     |  | $ |  | -          |  |  |  | $ |  | -          |   |            | $ |  | 1,865
|                                                 |  |  
|                                                
|                                                
|                                                 |  |   |  |           |  |   |  |            |  |  |  |   |  | 2006       |   |            |   |  |       |  |          
|                                                 |  |  
|                                                 |  |   |  |           |  |   |  | Gross      |  |  |  |   |  |            |   | Gross      |   |  |       |  | Estimated
|                                                 |  |   |  | Amortized |  |   |  | unrealized |  |  |  |   |  |            |   | unrealized |   |  |       |  | fair     
|                                                 |  |   |  | cost      |  |   |  | gains      |  |  |  |   |  |            |   | losses     |   |  |       |  | value    
|                                                 |  |  
|Available-for-sale                               |  |   |  |           |  |   |  |            |  |  |  |   |  |            |   |            |   |  |       |  |          
|Mortgage-backed securities and collateralized    |  |   |  |           |  |   |  |            |  |  |  |   |  |            |   |            |   |  |       |  |          
|mortgage obligations                             |  |   |  | 264       |  |   |  | 2          |  |  |  |   |  |            |   | (3         | ) |  |       |  | 263      
|                                                 |  |  
|Total                                            |  | $ |  | 264       |  | $ |  | 2          |  |  |  | $ |  | (3         | ) |            | $ |  | 263  
|                                                 |  |  
|                                                
|                                                
|Held-to-maturity:                                |  |   |  |           |  |   |  |            |  |  |  |   |  |            |   |            |   |  |       |  |          
|Obligations of states and political subdivisions |  | $ |  | 7,055     |  | $ |  | 6          |  |  |  | $ |  | (62        | ) |            | $ |  | 6,999
|                                                 |  |  
|                                                
|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 shareholders 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 September 30, 2007, investment securities with an estimated fair market value of $6.2 million were pledged to secure public deposits, certain nonpublic deposits, and borrowings.

9

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|NOTE 4LOANS, NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES                |  |   |  |           |   | 
|-------------------------------------------------------------------------------- |  | - |  | --------- | - | 
|                                                                                
|                                                                                
|Loans as of September 30, 2007 and December 31, 2006 consisted of the following: |  |   |  |           |   | 
|(Dollars in 000's)                                                               |  |   |  | 2007      |   | 
|                                                                                 |  |  
|Real estate-commercial                                                           |  | $ |  | 432,150   |   | 
|Real estate-construction                                                         |  |   |  | 268,856   |   | 
|Real estate-residential                                                          |  |   |  | 16,480    |   | 
|Commercial                                                                       |  |   |  | 179,673   |   | 
|Agricultural                                                                     |  |   |  | 29,903    |   | 
|Consumer                                                                         |  |   |  | 71,176    |   | 
|Overdrafts                                                                       |  |   |  | 2,735     |   | 
|Other                                                                            |  |   |  | 3,214     |   | 
|                                                                                 |  |  
|Total loans                                                                      |  |   |  | 1,004,187 |   | 
|Less: deferred loan fees                                                         |  |   |  | (1,746    | ) | 
|Less: allowance for loan losses                                                  |  |   |  | (11,387   | ) | 
|                                                                                 |  |  
|Loans, net                                                                       |  | $ |  | 991,054   |   | 
|                                                                                 |  |  

Transactions in the allowance for loan losses for the nine months ended September 30, 2007 and September 30, 2006 were as follows:

|(Dollars in 000's)                 |  |  |  |  | 2007                                 |   |  |   |  | 2006   |  
|---------------------------------- |  |  |  |  | ------------------------------------ | - |  | - |  | ------ | -
|                                   |  |  | 
|BALANCE, beginning of the period   |  |  |  |  | $                      10,877        |   |  | $ |  | 10,341 |  
|Balance Sheet reclassification (1) |  |  |  |  | (255                                 | ) |  |   |  | -      |  
|Finance portfolio purchased (2)    |  |  |  |  | 436                                  |   |  |   |  | -      |  
|Loans charged-off                  |  |  |  |  | (573                                 | ) |  |   |  | (359   | )
|Loan recoveries                    |  |  |  |  | 402                                  |   |  |   |  | 129    |  
|Loan loss provision                |  |  |  |  | 500                                  |   |  |   |  | 650    |  
|                                   |  |  | 
|BALANCE, end of the period         |  |  |  |  | $                             11,387 |   |  | $ |  | 10,761 |  
|                                   |  |  | 

|(1) | Amount reclassified from the allowance for loan losses to other liabilities - refer to discussion under Loan Loss Provision within the Management's Discussion and Analysis of Financial Condition and Results of Operations.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Amount resulting from the acquisition of consumer finance loan business - refer to Note 5.                                                                                                                                   
|   

|The following table summarizes non-performing assets as of September 30, 2007 and December 31, 2006: |  |   |  |       |  |       |   | 
|---------------------------------------------------------------------------------------------------- |  | - |  | ----- |  | ----- | - | 
|(Dollars in 000's)                                                                                   |  |   |  | 2007  |  |       |   | 
|                                                                                                     |  |  
|Loans on non-accrual status                                                                          |  | $ |  | 3,472 |  |       | $ | 
|Loans past due greater than 90 days but not on non-accrual status                                    |  |   |  |       |  | 655   |   | 
|                                                                                                     |  |  
|Total non-performing loans                                                                           |  |   |  |       |  | 4,127 |   | 
|Other real estate owned                                                                              |  |   |  |       |  | -     |   | 
|                                                                                                     |  |  
|Total non-performing assets                                                                          |  | $ |  | 4,127 |  |       | $ | 
|                                                                                                     |  |  
|Percentage of non-performing loans to total loans                                                    |  |   |  |       |  | 0.41  | % | 
|                                                                                                     |  |  
|Percentage of non-performing assets to total assets                                                  |  |   |  |       |  | 0.37  | % | 
|                                                                                                     |  |  

NOTE 5  ACQUISITION OF CONSUMER FINANCE LOAN BUSINESS

On June 29, 2007, PremierWest Bank acquired the consumer finance loan business of Pacific Continental Bank, consisting of two independent consumer finance offices located in Eugene and Coos Bay, Oregon. As of the acquisition date, these offices and their employees commenced operating as branch offices of PremierWest Banks consumer finance subsidiary, Premier Finance Company. The transaction was accounted for as a purchase for cash of $11,142,000. The purchase price was allocated as follows: Real estate loans $9,197,000; Consumer loans $1,602,000; Deferred tax asset $175,000; Other assets $76,000; Allowance for loan losses $436,000; and Goodwill $528,000. Goodwill is expected to be fully deductible for tax purposes.

10

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|NOTE 6 - LINE OF CREDIT AND OTHER BORROWINGS
|--------------------------------------------

The Bank had outstanding borrowings with the Federal Home Loan Bank (FHLB) totaling $13.2 million and $6.1 million as of September 30, 2007 and December 31, 2006, respectively. In addition, as of September 30, 2007, the Bank had $24.9 million outstanding under letters of credit used to support its public funds pledging requirements. Letters of credit do not increase the Banks outstanding borrowings; however, they reduce the Banks borrowing availability. The Bank makes monthly principal and interest payments on long-term borrowings and monthly payments of interest only on short-term borrowings under the FHLBs Cash Management Advance (CMA) program.

Of the total outstanding advances at September 30, 2007 and December 31, 2006, the Company had long-term borrowings of $664,000 and $1.1 million, respectively. Of the $664,000 outstanding at September 30, 2007, $595,000 will fully amortize to maturity in 2008; $25,000 will fully amortize to maturity in 2009; and $44,000 will fully amortize to maturity in 2014. Presently, monthly payments of $52,000 plus interest are being made against these long-term advances with a weighted average annual interest rate of 5.93% .

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 September 30, 2007, the Company had $12.5 million in outstanding CMA advances; as of December 31, 2006, the company had $5.0 million in outstanding CMA advances. The effective rate charged against CMA advances as of September 30, 2007 was 5.50% .

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 $9.5 million and $14.0 million as of September 30, 2007 and December 31, 2006, respectively.

As an additional source of liquidity, the Bank maintains unsecured federal funds lines with multiple correspondent banks. Federal funds purchased generally mature within one to four days from the transaction date. As of September 30, 2007 the Company had $130.0 million in aggregate available borrowing capacity through correspondent banks. Outstanding balances under these commitments at September 30, 2007 and December 31, 2006 were $23.5 million and $6.8 million, respectively.

NOTE 7  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 September 30, 2007.

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

|(1) | PremierWest Statutory Trust I bears interest at the fixed rate of 5.65% until December 2009 at which time it converts to the variable rate of LIBOR + 1.75%, adjusted quarterly, through the final maturity date in December 2034.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | PremierWest Statutory Trust II bears interest at the fixed rate of 5.65% until March 2010 at which time it converts to the variable rate of LIBOR + 1.79%, adjusted quarterly, through the final maturity date in March 2035.     

11

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|NOTE 8 - COMMITMENTS AND CONTINGENCIES
|--------------------------------------

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve various levels and elements of credit and interest rate risk in excess of the amount recognized in the accompanying consolidated financial statements. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. As of September 30, 2007, the Company had $187.8 million of commitments to extend credit to customers and $8.2 million of standby letters of credit.

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



|NOTE 9 - 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, restricted stock grants 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 for the three and nine months ended September 30, 2007 and 2006.

|Three-months ended September 30:          |  | 2007       |  | 2006      
|----------------------------------------- |  | ---------- |  | ----------
|                                         
|Weighted average number of common shares: |  |            |  |           
|Average shares outstanding-basic          |  | 17,007,857 |  | 17,006,932
|Average shares outstanding-diluted        |  | 18,449,381 |  | 18,563,043
|                                         
|Nine-months ended September 30:           |  | 2007       |  | 2006      
|                                         
|Weighted average number of common shares: |  |            |  |           
|Average shares outstanding-basic          |  | 17,022,356 |  | 16,981,809
|Average shares outstanding-diluted        |  | 18,512,521 |  | 18,571,144

12

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NOTE 10 - RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 is an interpretation of FASB Statement No. 109, Accounting for Income
Taxes, and seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. FIN 48 clarifies the accounting for income taxes by prescribing a minimum threshold a tax
position is required to meet before being recognized in the financial statements. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and requires expanded disclosure with
respect to the uncertainty in income taxes.  FIN 48 is effective as of the beginning of our 2007 fiscal year. The cumulative effect, if any, of applying FIN 48 is to be reported as an adjustment to the opening balance of retained earnings in the
year of adoption. Adoption of this standard on January 1, 2007 did not have a material impact on the consolidated financial statements. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense.

In September 2006, the FASB issued SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 clarifies the principle that fair value should be based on the assumptions that market participants would
use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007. Management does not expect the adoption of SFAS 157 to have a material impact on the consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158 (SFAS 158), Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R). SFAS 158 requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in the funded status in the
year in which the changes occur through accumulated other comprehensive income. Additionally, SFAS 158 requires employers to measure the funded status of a plan as of the date of its year-end statement of financial position. The new reporting
requirements and related new footnote disclosure rules of SFAS 158 are effective for fiscal years ending after December 15, 2006. The new measurement date requirement applies for fiscal years ending after December 15, 2008.  The adoption of the
disclosure requirements of this standard did not have a material impact on the consolidated financial statements. Management does not expect the adoption of the measurement requirements to have a material impact on the consolidated financial
statements.

In September 2006, the Emerging Issues Task Force (EITF) reached a final consensus on Issue No. 06-4 (EITF 06-4), Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements. EITF 06-4 requires employers to recognize a liability for future benefits provided through endorsement split-dollar life insurance arrangements that extend into postretirement periods in
accordance with SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions or APB Opinion No. 12, Omnibus Opinion  1967. The provisions of EITF 06-4 become effective on January 1, 2008 and
are to be applied as a change in accounting principle either through a cumulative-effect adjustment to retained earnings or other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption;
or through retrospective application to all prior periods. Management does not expect the adoption of EITF 06-4 to have a material impact on the consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities. This Statement permits entities to choose to measure financial
instruments and certain other financial assets and financial liabilities at fair value. This Statement is effective for fiscal years beginning after November 15, 2007. Management does not expect the adoption of SFAS 159 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.

PENDING ACQUISITION -On October 19, 2007, PremierWest Bancorp and Stockmans Financial Group (SFG) signed an agreement for PremierWest to acquire SFG and its subsidiary, Stockmans Bank, both headquartered in Elk Grove, California. Terms of the agreement call for PremierWest to pay $22,769,059 in cash and issue 5,357,426 shares of its common stock. Based on PremierWests October 19, 2007 closing price, the value of the stock consideration is approximately $65.0 million. This merger will add five branch locations in the Sacramento, California market to PremierWests existing network of 17 northern California branch offices, further solidifying the Banks northern California presence and making its initial entry into the Sacramento market. Subject to regulatory approval, and the approval of both banks shareholders, the merger is expected to close during the first quarter of 2008.

OVERVIEW -The following includes managements discussion of the financial condition and results of operations for PremierWest Bancorp and its wholly owned subsidiary, PremierWest Bank including the Banks wholly owned subsidiaries, Premier Finance Company and PremierWest Investment Services, Inc., for the three and nine month periods ending September 30, 2007. 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, 2006. For discussion purposes, management has made comparisons, as it deems appropriate, to comparable interim periods in 2007, 2006 and the fiscal year period ended December 31, 2006.

HIGHLIGHTS -For the third quarter ending September 30, 2007, the Company earned $4.0 million ($0.22 per diluted share), an increase of 9.36% compared to earnings of $3.7 million ($0.21 per diluted share) for the same period ended September 30, 2006. Annualized return on average shareholders equity was 12.84%, and return on average assets was 1.46% for the quarter ended September 30, 2007 as compared to an annualized return on average shareholders equity and return on average assets of 13.03% and 1.51%, respectively, for the quarter ended September 30, 2006.

At September 30, 2007 and December 31, 2006, gross loans (loans net of deferred loan fees but before deducting the allowance for loan losses), totaled $1.0 billion and $920.5 million, respectively, an increase of $81.9 million or 8.90% since year end (11.87% annualized growth rate). Deposits totaled $926.4 million at September 30, 2007, compared to $879.4 million at December 31, 2006, a 5.35% increase since year-end (7.13% annualized growth rate).

Total gross loans and total deposits at December 31, 2006, included a $20.0 million temporary increase made on the last business day of fiscal year end 2006, resulting from one commercial customer borrowing $20.0 million against their line of credit and depositing the funds in a money market checking account. The transaction was subsequently reversed on the first business day of fiscal year 2007 resulting in a neutralizing $20.0 million decline in gross loans and total deposits. After eliminating this $20.0 million temporary increase in loans and deposits, gross loans and total deposits increased 11.32% and 7.80% respectively, when compared to the year ended December 31, 2006.

PremierWests overall earnings growth over the nine month period ending September 30, 2007, in comparison to the same period a year ago, resulted principally from the Banks loan growth and relatively higher interest rates. Although the Prime rate index decreased 50 basis points effective September 19, 2007, it was relatively unchanged over the twelve month period ending

14

---

September 30, 2007, in contrast to 100 basis point and 150 basis point increases, respectively, that occurred during the nine month and twelve month periods ending September 30, 2006.

Our growth in interest income was offset by faster increases in our interest expense. With the overall interest rate environment having stabilized relative to the previous year, the result has been that re-pricing on the
asset side of our balance sheet from variable rate loans and new loan production has slowed whereas the re-pricing of our liabilities, especially certificates of deposit with maturities that lag behind the movements of the rate environment, have
accelerated. As a result, our net interest margin, the key component of our profitability, has compressed and therefore, despite our growing loan portfolio, the relative growth in our net interest income has slowed.

Additionally, the Banks loan to deposit ratio continues to exceed 100% because within our marketplace we continue to experience greater loan demand than our ability to source local core deposits as a funding source.
Our loan to deposit ratio, based on net loans (loans net of deferred loan fees and the allowance for loan losses) was 107.0%, 103.4% and 106.6% as of September 30, 2007, December 31, 2006 and September 30, 2006, respectively.

Core deposits are our lowest cost and preferred source of funds and when our loan volume exceeds our level of core deposits we must rely on higher cost borrowings and/or brokered deposits as a secondary source of funding to
bridge the gap between deposit and loan volumes. Historically our funding gap has been supported by short-term borrowings however, during the second quarter of 2007 the Bank began utilizing brokered certificates of deposit as a funding source.
Brokered deposits comprised $59.1 million of total deposits at September 30, 2007, an increase of $23.4 million over the previous quarter ending June 30, 2007. Brokered deposits are a higher cost source of funding compared to core deposits
but when used in conjunction with short-term borrowings, provide a cost effective source of funding and an additional source of liquidity.  Management will continue to incorporate brokered deposits as part of the Banks overall funding strategy
in order to lower the Banks overall cost of funds and support liquidity needs.

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

PremierWest has experienced solid loan demand from all of its major market areas. The Banks year over year loan growth, excellent credit quality and a stronger pipeline of new loan production compared to a year ago,
is in line with Managements internal growth expectations at September 30, 2007. Managements broader business plan and growth strategy continues to be driven by de novo branching and/or acquisition opportunities aimed at building the
dominant community banking franchise within the Companys geographical footprint, that presently encompasses southern and central Oregon and northern California.

15

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

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

|(Dollars in 000's)                                      |  |   |  |           |   |  |   |  |         |   |  |   |  | Increase   |   |  |         |  
|------------------------------------------------------- |  | - |  | --------- | - |  | - |  | ------- | - |  | - |  | ---------- | - |  | ------- | -
|Analysis for the three-month period ended September 30: |  |   |  | 2007      |   |  |   |  | 2006    |   |  |   |  | (Decrease) |   |  | %Change |  
|                                                        |  |  
|Average fed funds sold and investments                  |  | $ |  | 9,319     |   |  | $ |  | 15,456  |   |  | $ |  | (6,137     | ) |  | -39.71  | %
|Average gross loans                                     |  |   |  | 990,231   |   |  |   |  | 860,051 |   |  |   |  | 130,180    |   |  | 15.14   | %
|Average interest-earning assets                         |  |   |  | 999,550   |   |  |   |  | 875,507 |   |  |   |  | 124,043    |   |  | 14.17   | %
|Average interest-bearing liabilities                    |  |   |  | 767,647   |   |  |   |  | 652,653 |   |  |   |  | 114,994    |   |  | 17.62   | %
|Average total assets                                    |  |   |  | 1,102,091 |   |  |   |  | 972,614 |   |  |   |  | 129,477    |   |  | 13.31   | %
|Average equity                                          |  |   |  | 124,962   |   |  |   |  | 112,596 |   |  |   |  | 12,366     |   |  | 10.98   | %
|Average yield earned (1)                                |  |   |  | 8.60      | % |  |   |  | 8.58    | % |  |   |  | 0.02       |   |  | 0.23    | %
|Average rate paid                                       |  |   |  | 3.75      | % |  |   |  | 3.17    | % |  |   |  | 0.58       |   |  | 18.30   | %
|Net interest spread                                     |  |   |  | 4.85      | % |  |   |  | 5.41    | % |  |   |  | (0.56      | ) |  | -10.35  | %
|                                                       
|Net interest income to average                          |  |   |  |           |   |  |   |  |         |   |  |   |  |            |   |  |         |  
|interest-earning assets (net interest margin) (1)       |  |   |  | 5.72      | % |  |   |  | 6.22    | % |  |   |  | (0.50      | ) |  | -8.04   | %
|Annualized return on average assets                     |  |   |  | 1.46      | % |  |   |  | 1.51    | % |  |   |  | (0.05      | ) |  | -3.31   | %
|Annualized return on average equity                     |  |   |  | 12.84     | % |  |   |  | 13.03   | % |  |   |  | (0.19      | ) |  | -1.46   | %
|Efficiency ratio (2)                                    |  |   |  | 59.21     | % |  |   |  | 60.27   | % |  |   |  | (1.06      | ) |  | -1.76   | %
|                                                       
|(Dollars in 000's)                                      |  |   |  |           |   |  |   |  |         |   |  |   |  | Increase   |   |  |         |  
|Analysis for the nine-month period ended September 30:  |  |   |  | 2007      |   |  |   |  | 2006    |   |  |   |  | (Decrease) |   |  | %Change |  
|                                                        |  |  
|Average fed funds sold and investments                  |  | $ |  | 10,412    |   |  | $ |  | 16,642  |   |  | $ |  | (6,230     | ) |  | -37.44  | %
|Average gross loans                                     |  |   |  | 945,424   |   |  |   |  | 842,975 |   |  |   |  | 102,449    |   |  | 12.15   | %
|Average interest-earning assets                         |  |   |  | 955,836   |   |  |   |  | 859,617 |   |  |   |  | 96,219     |   |  | 11.19   | %
|Average interest-bearing liabilities                    |  |   |  | 729,677   |   |  |   |  | 640,166 |   |  |   |  | 89,511     |   |  | 13.98   | %
|Average total assets                                    |  |   |  | 1,056,148 |   |  |   |  | 954,016 |   |  |   |  | 102,132    |   |  | 10.71   | %
|Average equity                                          |  |   |  | 121,852   |   |  |   |  | 108,730 |   |  |   |  | 13,122     |   |  | 12.07   | %
|Average yield earned (1)                                |  |   |  | 8.60      | % |  |   |  | 8.38    | % |  |   |  | 0.22       |   |  | 2.63    | %
|Average rate paid                                       |  |   |  | 3.63      | % |  |   |  | 2.79    | % |  |   |  | 0.84       |   |  | 30.11   | %
|Net interest spread                                     |  |   |  | 4.97      | % |  |   |  | 5.59    | % |  |   |  | (0.62      | ) |  | -11.09  | %
|Net interest income to average                          |  |   |  |           |   |  |   |  |         |   |  |   |  |            |   |  |         |  
|interest-earning assets (net interest                   |  |   |  |           |   |  |   |  |         |   |  |   |  |            |   |  |         |  
|margin) (1)                                             |  |   |  | 5.83      | % |  |   |  | 6.30    | % |  |   |  | (0.47      | ) |  | -7.46   | %
|Annualized return on average assets                     |  |   |  | 1.44      | % |  |   |  | 1.51    | % |  |   |  | (0.07      | ) |  | -4.64   | %
|Annualized return on average equity                     |  |   |  | 12.46     | % |  |   |  | 13.27   | % |  |   |  | (0.81      | ) |  | -6.10   | %
|Efficiency ratio (2)                                    |  |   |  | 60.71     | % |  |   |  | 61.18   | % |  |   |  | (0.47      | ) |  | -0.77   | %



|Notes:
|------

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

16

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|RESULTS OF OPERATIONS
|---------------------

NET INTEREST INCOME Net interest income, our primary source of revenue, is the difference between the interest income generated from our earning assets (loans and investments) and the interest expense paid on our interest-bearing liabilities (interest-bearing deposits and borrowed funds). 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. During the third quarter of 2007, our interest income increased $2.7 million while our interest expense increased $2.0 million resulting in our net interest income increasing $641,000 (4.7%) compared to the same period a year ago.

The increases in our interest income, interest expense and the resulting net interest income for the third quarter and year-to-date period ending September 30, 2007, compared to the same periods in 2006, resulted from the combination of higher levels of both our earning assets and interest-bearing liabilities, and relatively higher, though stabilized short-term interest rates. Short-term interest rates as measured by the Prime rate index over the past twelve months have remained nearly unchanged though the Prime rate was lowered by 50 basis points on September 19, 2007, less than two weeks before the end of most recent quarter end. By comparison, over the course of the same quarter and year-to-date periods ending September 30, 2006, the Prime rate index had increased 0 basis points and 100 basis points, respectively.

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. As interest rates have stabilized, re-pricing on the asset side of our balance sheet from variable rate loans and new loan production has slowed whereas the re-pricing of our liabilities, especially maturing certificates of deposit, that lag behind the movements of the rate environment, have increased. Accordingly, our net interest margin, the key component of our profitability, has compressed and despite a growing loan portfolio, the growth in our net interest income has slowed.

For the quarter ending September 30,2007, our tax equivalent net interest margin was 5.72%, a 50 basis point decrease over the same period a year ago and a 13 basis point decrease compared to the second quarter of 2007. Our cost of average interest bearing deposits increased from 2.91% during the third quarter of 2006, to 3.64% for the third quarter of 2007. Compared to the third quarter of 2006, when our net interest margin was 6.22%, our net interest margin for the four successive quarters since September 30, 2006, was 6.15%, 5.94%, 5.85% and 5.72%, respectively.

LOAN LOSS PROVISION Charges made to the provision for loan losses were $500,000 and $650,000 for the nine month periods ended September 30, 2007 and September 30, 2006, respectively. The Company had net charge offs of $171,000 during the first nine months of 2007 compared to $230,000 in net charge offs for the corresponding period in 2006. Additionally, two adjustments were made in the allowance for loan losses during the nine month period ending September 30, 2007. First, during the first quarter 2007, a reduction in the allowance for loan losses of $255,000 resulted from a one-time balance sheet reclassification. This reclassification of $255,000 represents the off-balance sheet credit exposure associated with unfunded commitments to lend and letters of credit. In accordance with Financial Accounting Standard No. 5, the reserve for off-balance sheet credit exposure should be classified under other liabilities on the balance sheet. Previous to this reclassification, the Bank included a reserve for off-balance sheet credit exposure as a part of the allowance for loan losses. Second, during the second quarter 2007, as a result of the Banks purchase of a consumer finance loan business, an additional $436,000 was added to the allowance for loan losses (see Note 5). Management believes that, as of September 30, 2007, the balance in the allowance for loan losses was reasonable and appropriate to support inherent probable losses.

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. Total noninterest income increased approximately $278,000 (13.69%) and $780,000 (13.38%) for the three and nine months ending September 30, 2007, as compared to the corresponding periods in 2006. Growth in noninterest income during the year-to-date period ending September 30, 2007 compared to same period for 2006, included increases of $411,000, or 16.37% from account service charges, $427,000, or 50.24% from investment services and $188,000, or 16.19% from other commissions and fees. This was offset by a decrease in mortgage origination fees of $231,000, or 29.28%, resulting from lower volumes of residential mortgage originations, and a decrease of $15,000, or 2.89% from other sources of non-interest income.

NONINTEREST EXPENSE- Noninterest expense increased approximately $379,000 or 4.01% and $969,000 or 3.44%, respectively, for the three months and nine months ended September 30, 2007, as compared to the corresponding period in 2006. On a consolidated basis the increase over the nine month period resulted from a $453,000 (2.64%) increase in salaries and benefits expenses; a $93,000 (2.10%) increase in occupancy and equipment expenses; and a $423,000 (6.37%) net increase in other noninterest expenses. The increases in noninterest expenses are the result of our growth in general, including annual salary increases that begin in the first quarter of each year, and the increased expenses associated with five PremierWest Bank branches and three Premier Finance Company offices opened late in 2006 or during 2007. The first nine months of 2007 includes $1.3 million of non-interest expense directly related to the operation of these eight offices compared to $359,000 for the comparable period last year. Management believes that the higher occupancy and personnel expenses incurred to grow the Banks footprint and enter new markets are strategic costs that will drive future earnings growth.

EFFICIENCY RATIO- The Company's efficiency ratio was 59.21% during the third quarter of 2007, a 106 basis point improvement compared to 60.27% for the third quarter of 2006, and a 67 basis point improvement over the immediately preceding quarter ending June 30, 2007. The Companys year-to-date efficiency ratio for the nine month period ending September 30, 2007, was 60.71% . Management continues to monitor organizational efficiency and believes that a ratio in the

17

---

high 50% to low 60% range is a reasonable and sustainable target given the Banks strategies for both growth and customer service.

FINANCIAL CONDITION Total assets of $1.115 billion at September 30, 2007, increased $80.4 million or 7.77% compared to total assets of $1.035 billion at December
31, 2006.  This growth principally resulted from an increase in earning assets. Overall, gross loans increased $81.9 million; the Allowance for Loan Losses increased $500,000; other earning assets decreased $1 million; premises and
equipment increased $4.0 million; and other assets decreased $4.0 million.

Net loans accounted for 88.89% of total assets at September 30, 2007 compared to 87.93% at December 31, 2006.  As of September 30, 2007, the allowance for loan losses increased to $11.4 million from $10.9 million at
December 31, 2006. As discussed under the heading Loan Loss Provision above, the allowance for loan losses included two adjustments during the current year, a $255,000 reduction from a balance sheet reclassification and a $436,000 increase
as a result of the Banks purchase of a consumer finance loan business. Absent these adjustments, the allowance for loan losses would have reflected an increase of $329,000. The Company's ratio of allowance for loan losses to total loans
was 1.14% at September 30, 2007, as compared to 1.18% at December 31, 2006, and 1.24% at September 30, 2006.

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, based on our analysis for potential
impairment, were $4.1 million, $1.5 million and $1.2 million at September 30, 2007, December 31, 2006, and September 30, 2006, respectively. Although the dollar amount of non-performing assets have increased significantly since year end,
the identified assets are concentrated in five credit relationships.  The identified loans are secured and have been properly reserved for in the allowance for loan losses. Management anticipates minimal potential for loss on the identified
non-performing assets and further believes the overall credit quality of the loan portfolio to be excellent. PremierWest Bank 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 $926.4 million at September 30, 2007, a $47.1 million or 5.35% (7.13% annualized) increase compared to $879.4 million as of December 31, 2006. During the second quarter of 2007 the
Bank began utilizing brokered certificates of deposits as part of its funding strategy in order to reduce cost of funds and support the Banks overall liquidity needs.  Deposits at September 30, 2007, include $59.1 million in brokered
certificates of deposit in contrast to no brokered deposits at December 31, 2006.

Net loan volume continues to exceed our level of deposits.  As of September 30, 2007, our loan-to-deposit ratio of 107.0% compared to a ratio of 103.4% as of December 31, 2006, and 106.6% as of September 30, 2006. Overall
demand for loans has been steady 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
September 30, 2007, the Banks deposit mix remained stable  consisting of 20.91% non-interest bearing demand, with core deposits, consisting of non-interest bearing demand, interest-bearing demand and regular savings deposits representing
61.6%, time deposits (excluding brokered deposits) comprising 32.0%, and brokered deposits totaling 6.4% of total deposits.

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

18

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The table below sets forth certain summary balance sheet information for September 30, 2007, and December 31, 2006: (Dollars in 000s)

|                              |  |   |  | September 30, |  |   |  | December 31, |  |   |  | Increase (Decrease) |  
|----------------------------- |  | - |  | ------------- |  | - |  | ------------ |  | - |  | ------------------- | -
|                              |  |  
|                              |  |   |  | 2007          |  |   |  | 2006         |  |   |  | 9/30/07  12/31/06  |  
|                              |  |  
|(Dollars in 000's)            |  |   |  |               |  |   |  |              |  |   |  |                     |  
|                             
|ASSETS                        |  |   |  |               |  |   |  |              |  |   |  |                     |  
|Federal funds sold            |  | $ |  | -             |  | $ |  | -            |  | $ |  | -                   |  
|Securities available for sale |  |   |  | 229           |  |   |  | 263          |  |   |  | (34                 | )
|Securities held to maturity   |  |   |  | 6,057         |  |   |  | 7,055        |  |   |  | (998                | )
|Federal Home Loan Bank        |  |   |  |               |  |   |  |              |  |   |  |                     |  
|deposits and stock            |  |   |  | 1,626         |  |   |  | 1,595        |  |   |  | 31                  |  
|Loans, net                    |  |   |  | 991,054       |  |   |  | 909,645      |  |   |  | 81,409              |  
|Other assets (1)              |  |   |  | 115,947       |  |   |  | 115,953      |  |   |  | (6                  | )
|                              |  |   |  |              
|                             
|Total assets                  |  | $ |  | 1,114,913     |  | $ |  | 1,034,511    |  | $ |  | 80,402              |  
|                              |  |   |  |              
|                             
|LIABILITIES                   |  |   |  |               |  |   |  |              |  |   |  |                     |  
|Noninterest-bearing           |  |   |  |               |  |   |  |              |  |   |  |                     |  
|deposits                      |  | $ |  | 193,666       |  | $ |  | 199,462      |  | $ |  | (5,796              | )
|Interest-bearing              |  |   |  |               |  |   |  |              |  |   |  |                     |  
|deposits                      |  |   |  | 732,735       |  |   |  | 679,888      |  |   |  | 52,847              |  
|                              |  |   |  |              
|                             
|Total deposits                |  |   |  | 926,401       |  |   |  | 879,350      |  |   |  | 47,051              |  
|                             
|Other liabilities (2)         |  |   |  | 63,364        |  |   |  | 38,902       |  |   |  | 24,462              |  
|                              |  |   |  |              
|                             
|Total liabilities             |  |   |  | 989,765       |  |   |  | 918,252      |  |   |  | 71,513              |  
|                             
|SHAREHOLDERS                 |  |   |  |               |  |   |  |              |  |   |  |                     |  
|EQUITY                        |  |   |  | 125,148       |  |   |  | 116,259      |  |   |  | 8,889               |  
|                              |  |   |  |              
|                             
|Total liabilities             |  |   |  |               |  |   |  |              |  |   |  |                     |  
|and share-                    |  |   |  |               |  |   |  |              |  |   |  |                     |  
|holders equity               |  | $ |  | 1,114,913     |  | $ |  | 1,034,511    |  | $ |  | 80,402              |  
|                              |  |   |  |              

|(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.                                                                                                             

19

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

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

As of September 30, 2007, the Companys overall liquidity position remained relatively stable when compared to December 31, 2006. The Banks loan volume continues to exceed deposits as reflected in its loan-to-deposit ratio at September 30, 2007, and December 31, 2006 of 106.98% and 103.45%, respectfully. 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 $31,000 while borrowed funds in the form of federal funds purchased and FHLB advances increased $23.7 million as of September 30, 2007, when compared to December 31, 2006. Investment securities either held-to-maturity or available-for-sale declined by a net $1.0 million as a result of maturities that occurred. All of the Companys investment securities are pledged for collateralization of public funds on deposit and, therefore, are not available for purposes of liquidity. Historically our pledging requirements have been met through the use of our securities portfolio and more recently supplemented by our borrowing capacity through the use of letters of credit to meet pledging requirements. As of September 30, 2007, in addition to the full use of our securities portfolio, the Bank was using letters of credit totaling $24.9 million to satisfy its pledging requirements.

Management maintains contingency plans for addressing the Companys ongoing liquidity needs and presently believes the Banks stable core deposit base provides for flexibility and opportunity should management decide to attract deposits more aggressively by increasing the rate of interest offered on deposits  particularly certificates of deposit. In addition, the Bank has tested its ability to identify and sell loans to a participating bank in order to provide additional cash for liquidity purposes. Further, should loan demand outpace our ability to gather sufficient deposits or maintain adequate funding from other borrowings, the Company could slow its loan growth through various policy changes including increased pricing. The Company maintains a secured line-of-credit with the FHLB. As of September 30, 2007, the Bank had $664,000 of long-term borrowings and $12.5 million of short-term borrowings advanced from the FHLB, and had an immediate availability to borrow an additional $9.5 million under the Company's credit line. The Company also has unsecured federal funds credit lines for up to $130.0 million available from various correspondent banks. As of September 30, 2007, there were $23.5 million in balances outstanding against these federal funds credit lines leaving available credit of $106.5 million.

At September 30, 2007, the Company had approximately $187.8 million in outstanding commitments to extend credit for newly approved loans and construction projects. Under the terms of construction project commitments, completion of specified project benchmarks must be certified before funds may be drawn. Additionally, we anticipate that a portion of these commitments will expire or terminate without funding. Management believes that the Company's available resources will be sufficient to fund these commitments in the normal course of business.

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 September 30, 2007, the Company's regulatory capital ratios were as follows: total risk-based capital ratio was 11.78%, Tier 1 capital ratio was 10.71%, and the leverage capital ratio was 10.88% . 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.

20

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and rates. The Company's market risk arises principally from interest rate risk in its lending, deposit and borrowing activities. Management actively monitors and manages its interest rate risk exposure. Although the Company manages other risks, such as credit quality and liquidity risk, in the normal course of business, management considers interest rate risk to be a significant market risk, which could have the largest material effect on the Company's financial condition and results of operations. Other types of market risks, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company's business activities. The Company did not experience a significant change in market risk at September 30, 2007, as compared to December 31, 2006.

As stated in the annual report on Form 10-K for 2006, 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, 2006.



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

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



|PART II - OTHER INFORMATION
|---------------------------

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

ITEM 1A. RISK FACTORS  There has been no material change in the risk factors disclosure as presented in the Companys 2006 Form 10-K for the fiscal year ended December 31, 2006.

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

|(a) | [Not applicable.]                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) | [Not applicable.]                                                                                                                     
|   
|(c) | The following table provides information about repurchases of common stock by the Company during the quarter ended September 30, 2007.
|   

|                      |  |               |  |   |  |                |  | Total Number of     |  |  | Maximum Number of  
|--------------------- |  | ------------- |  | - |  | -------------- |  | ------------------- |  |  | -------------------
|                      |  |               |  |   |  |                |  | Shares Purchased    |  |  | Remaining Shares   
|                      |  | Total Number  |  |   |  |                |  | as Part of Publicly |  |  | that May be        
|                      |  | of Shares     |  |   |  | Average Price  |  | Announced Plan      |  |  | Purchased at Period
|Period                |  | Purchased (1) |  |   |  | Paid Per Share |  | (2)                 |  |  | End under the Plan 
|                     
|7/1/07 - 7/31/07      |  | 16,900        |  | $ |  | 12.69          |  | 16,900              |  |  | 983,100.00         
|8/1/07 - 8/31/07      |  | 56,900        |  | $ |  | 12.54          |  | 56,900              |  |  | 926,200.00         
|9/1/07 - 9/30/07      |  | -             |  |   |  |                |  | -                   |  |  |                    
|                      |  |               |  |   |  |                |  |                    
|Total for the quarter |  | 73,800        |  | $ |  | 12.58          |  | 73,800              |  |  |                    

|(1) | Shares repurchased by the Company during the quarter consist of 73,800 shares repurchased pursuant to the Company's publicly announced corporate stock repurchase plan described in (2) below.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The repurchase plan, which was approved by the board and announced in May 2007, authorized the repurchase of up to 1.0 million shares. The plan has no stated expiration.                     

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

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

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

[None.]



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



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

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

22

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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: October 31, 2007PREMIERWEST BANCORP
| | ------------------------------------------



| | /s/ John L. Anhorn
		John L. Anhorn, Chief Executive Officer
| | ------------------------------------------------------------



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

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