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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACTOF 1934

For the fiscal year ended:December 31, 2005Commission file number: 000-50332

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

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


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


Registrant's telephone number, including area code:(541) 618-6003Securities registered pursuant to Section 12(b) of the Act:NoneSecurities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ___ No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes ___ No X

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 
X

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

Large accelerated filer 
____Accelerated filer 
X
Non-accelerated filer 
___

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

As of June 30, 2005, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $211,156,742 based on the $14.82 closing price as reported on the National Association of
Securities Dealers Automated Quotation System National Market System.

The number of shares outstanding of Registrant's common stock as of March 10, 2005 was 15,389,691.

Documents Incorporated by Reference

Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held May 25, 2006 are incorporated by reference into Part III.

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|                                                |  | PREMIERWEST BANCORP                                                   |  |        
|----------------------------------------------- |  | --------------------------------------------------------------------- |  | -------
|                                                |  | FORM 10-K                                                             |  |        
|                                                |  | TABLE OF CONTENTS                                                     |  |        
|                                               
|                                                |  |                                                                       |  | PAGE   
|                                               
|Disclosure Regarding Forward Looking Statements |  | 1                                                                    
|                                               
|PART I                                          |  |                                                                       |  |        
|                                               
|Item 1.                                         |  | Business                                                              |  | 1 - 8  
|Item 1A.                                        |  | Risk Factors                                                          |  | 9 - 10 
|Item 1B.                                        |  | Unresolved Staff Comments                                             |  | 10     
|Item 2.                                         |  | Properties                                                            |  | 10     
|Item 3.                                         |  | Legal Proceedings                                                     |  | 11     
|Item 4.                                         |  | Submission of Matters to a Vote of Security Holders                   |  | 11     
|                                               
|PART II                                         |  |                                                                       |  |        
|                                               
|Item 5.                                         |  | Market for Registrant's Common Equity and Related Stockholder Matters |  | 12     
|Item 6.                                         |  | Selected Financial Data                                               |  | 13     
|Item 7.                                         |  | Management's Discussion and Analysis of Financial Condition           |  |        
|                                                |  | and Results of Operations                                             |  | 14 - 33
|Item 7A.                                        |  | Quantitative and Qualitative Disclosures About Market Risk            |  | 34 - 35
|Item 8.                                         |  | Financial Statements and Supplementary Data                           |  | 36     
|Item 9.                                         |  | Changes In and Disagreements with Accountants on Accounting           |  |        
|                                                |  | and Financial Disclosure                                              |  | 37     
|Item 9A                                         |  | Controls and Procedures                                               |  | 37     
|Item 9B                                         |  | Other Information                                                     |  | 37     
|                                               
|PART III                                        |  |                                                                       |  |        
|                                               
|Item 10.                                        |  | Directors and Executive Officers of the Registrant                    |  | 38     
|Item 11                                         |  | Executive Compensation                                                |  | 38     
|Item 12.                                        |  | Security Ownership of Certain Beneficial Owners and Management        |  |        
|                                                |  | and Related Stockholder Matters                                       |  | 38     
|Item 13.                                        |  | Certain Relationships and Related Transactions                        |  | 39     
|Item 14.                                        |  | Principal Accountant Fees and Services                                |  | 39     
|                                               
|PART IV                                         |  |                                                                       |  |        
|                                               
|Item 15.                                        |  | Exhibits and Financial Statement Schedules                            |  | 40 - 41
|                                               
|SIGNATURES                                      |  | 42 - 43                                                              

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DISCLOSUREREGARDINGFORWARD-LOOKINGSTATEMENTS

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 our ability to maintain or expand our market share or our net interest margin; 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. See other risks identified in the section captioned
"Factors that May Affect Future Results of Operations." 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.

PART I

ITEM 1. BUSINESS

INTRODUCTION

PremierWest Bancorp, an Oregon corporation (the "Company"), is a financial services holding company headquartered in Medford, Oregon. The Company operates primarily through its principal
subsidiary, PremierWest Bank ("PremierWest Bank" or "Bank" and collectively with the Company, "PremierWest"). In addition there are two special purpose trust subsidiaries - PremierWest Statutory Trust I and II.

PremierWest earned $13.2 million for the year ended December 31, 2005, a 44.8% increase compared to net income of $9.1 million for 2004. Net income of $9.1 in 2004 was up 51.7% over 2003 earnings of $6.0
million. Our diluted earnings per share were $0.75, $0.53 and $0.42 for the years ended 2005, 2004 and 2003, respectively. Return on average shareholders' equity was 13.59% for the year ended December 31, 2005 compared to the return on
average shareholder's equity of 10.74% and 11.23% for 2004 and 2003, respectively.

|SUBSIDIARIES
|------------

PremierWest Bank conducts a general commercial banking business, gathering deposits from the general public and applying those funds to the origination of loans for commercial, real estate, and
consumer purposes and investments. The Bank was created from the merger of Bank of Southern Oregon and Douglas National Bank on May 8, 2000, and the simultaneous formation of a bank holding company for the resulting bank, PremierWest Bank. In April
2001, the Company acquired Timberline Bancshares, Inc. and its wholly-owned subsidiary, Timberline Community Bank ("Timberline"), with eight branch offices located in Siskiyou County in northern California. This acquisition was accounted for as a
purchase. Accordingly, the consolidated financial statements of PremierWest include the results of operations of Timberline since the acquisition date.  On January 23, 2004, the Company acquired Mid Valley Bank, with five branch offices located in
the northern California counties of Shasta, Tehama, and Butte. This acquisition was also accounted for as a purchase and is reflected in the 2004 consolidated financial statements of PremierWest from the date of acquisition.

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PremierWest Bank adheres to a community banking strategy by offering a full range of financial products and services through its network of branches located principally along the Interstate 5 freeway corridor between
Roseburg, Oregon, and Woodland, California. The Bank has three subsidiaries:  Premier Finance Company, PremierWest Investment Services, Inc. and Blue Star Properties, Inc. Premier Finance Company originates consumer loans from offices located in
Medford, Grants Pass, Klamath Falls, Roseburg and Portland, Oregon and Redding and Yreka, California. PremierWest Investment Services, Inc. provides investment brokerage services to customers throughout the Bank's market.  Blue Star Properties
serves solely to hold real estate properties of PremierWest and is currently inactive.

PremierWest Statutory Trusts I and II are two special purpose subsidiaries formed for the sole purpose of issuing Trust Preferred Securities.  Further information regarding the Company's
issuance of trust preferred securities, recorded as junior subordinated debentures, is included in Note 12 to the Consolidated Financial Statements.

|PRODUCTS AND SERVICES
|---------------------

PremierWest Bank offers a broad range of banking services to its customers, principally to small and medium-sized businesses, professionals and retail customers.

Loan products- PremierWest Bank makes commercial and real estate loans, construction loans for owner-occupied and investment properties, commercial
and equipment leases, and secured and unsecured consumer loans. Commercial and real estate-based lending has been the primary focus of the Bank's lending activities.

Commercial lending- PremierWest Bank offers specialized loans for business and commercial customers, including equipment and inventory financing, accounts receivable financing,
operating lines of credit, and real estate construction loans. PremierWest Bank also makes Small Business Administration loans to qualified businesses. A substantial portion of the Bank's commercial loans are designated as real estate loans for
regulatory reporting purposes because they are secured by mortgages and trust deeds on real property, even if the loans are made for the purpose of financing commercial activities, such as inventory and equipment purchases and leasing, and even if
they are secured by other assets such as equipment or accounts receivable.

One of the primary risks associated with commercial loans is the risk that the commercial borrower might not generate sufficient cash flows to repay the loan. PremierWest Bank's underwriting guidelines require secondary
sources of repayment, such as real estate collateral, and generally require personal guarantees from the borrower's principals.

Real estate lending- Real estate is commonly a material component of collateral for PremierWest Bank's loans. Although the expected source of
repayment for these loans is generally business or personal income, real estate collateral provides an additional measure of security. Risks associated with loans secured by real estate include fluctuating property values, changing local economic
conditions, changes in tax policies, and a concentration of real estate loans within a limited geographic area.

Commercial real estate loans primarily include owner-occupied commercial properties and income-producing or farm properties. The primary risks of commercial real estate loans are the potential loss of income for the
borrower and the ability of the market to sustain occupancy and rent levels. PremierWest Bank's underwriting standards limit the maximum loan-to-value ratio on real estate held as collateral and requires a minimum debt service coverage ratio for
each of its commercial real estate loans.

Although commercial loans and commercial real estate loans generally are accompanied by somewhat greater risk than single-family residential mortgage loans, commercial loans and commercial real estate loans tend to be
higher yielding, have shorter terms and generally provide for interest-rate adjustments as prevailing rates change. Accordingly, commercial loans and commercial real estate loans assist with interest-rate risk management while contributing to strong
asset and income growth.

PremierWest Bank originates several different types of construction loans, including residential construction loans to borrowers who will occupy the premises upon completion of construction, residential construction loans
to builders, commercial construction loans, and real estate acquisition and development loans. Because of the complex nature of construction lending, these loans have a higher degree of risk than other forms of real estate lending. Generally, the
Bank mitigates its risk on construction loans by lending to customers who have been pre-qualified for long-term financing and who are using contractors acceptable to PremierWest Bank.

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Consumer lending- PremierWest Bank and Premier Finance Company, make secured and unsecured loans to individual borrowers for a variety of purposes
including personal loans and revolving credit lines, as well as consumer loans secured by autos, boats, recreational vehicles, and other consumer products. Besides targeting non-bank customers in PremierWest Bank's immediate markets, Premier Finance
Company also makes loans to Bank customers where the loans may carry a higher risk than permitted under the Bank's lending criteria.

Lease financing- During 2001, the Bank contracted with a commercial leasing management company in Portland, Oregon, to introduce commercial equipment lease financing to customers
primarily involved in the waste management industry. Management initially viewed commercial leasing as an alternative that brought additional flexibility to conventional borrowing for the purchase of business equipment. However, during 2002
management elected to curtail its leasing activities in favor of other commercial lending opportunities. No lease transactions have been originated since 2002 and no activity is anticipated to occur during 2006.  The existing commercial lease
portfolio is not significant to the operations of PremierWest Bank.

Deposit products and other services- PremierWest Bank offers a variety of traditional deposit products to attract both commercial and consumer deposits through checking and savings
accounts, money market accounts, and certificates of deposit. The Bank also offers safe deposit facilities, traveler's checks, money orders and automated teller machines at most of its facilities.

PremierWest Bank's investment subsidiary, PremierWest Investment Services, Inc., provides investment brokerage services to its customers through a third-party broker-dealer arrangement as well as through independent
insurance companies allowing for the sale of investment and insurance products such as stocks, bonds, mutual funds, annuities, and other insurance products.

For the three year period ended December 31, 2005, no class of similar products or services accounted for 10% or more of consolidated revenues for PremierWest.

|MARKET AREA
|-----------

PremierWest Bank conducts business in southern Oregon and northern California through a network of 36 branches principally located along the Interstate 5 corridor from just south of Eugene, Oregon to just north of
Sacramento, California. The Bank has evolved over the past five years through a combination of acquisitions and de novo branch openings and its geographic footprint can be subdivided into several key market areas that are generally identifiable by a
specific community, county or combination thereof.

The Company serves Jackson County, Oregon, from its main office facility in Medford plus six branch offices in Medford, one branch in Central Point and one branch in Eagle Point. The Bank also
has two branch offices under construction in the Jackson County communities of Ashland and Shady Cove that are scheduled to open during 2006.  Medford is the fourth largest city in Oregon and is the center for commerce, medicine and transportation
in southwestern Oregon. PremierWest Bank also has two full-service branches in Grants Pass (Josephine County), Oregon. The principal industries in Jackson and Josephine Counties include forest products, manufacturing and agriculture. Other
manufacturing segments include electrical equipment and supplies, computing equipment, printing and publishing, fabricated metal products and machinery, and stone and concrete products. In the non-manufacturing sector, significant industries include
recreational services, wholesale and retail trades, as well as medical care, particularly in connection with the area's growing retirement community.

Another primary market area is centered in Roseburg, Oregon, and the surrounding communities in Douglas County, that PremierWest Bank serves from eight branches - four of which are located in Roseburg and four others
located in the communities of Winston, Glide, Sutherlin, and Drain. PremierWest Bank's presence in the Douglas County market area resulted from Bank of Southern Oregon's merger with Douglas National Bank in May of 2000. The economy in Douglas County
has historically depended on the forest products industry, which is generally a declining industry, resulting in little economic growth and lower per capita income levels compared to other market areas along the Interstate 5 corridor, including
those in Medford and Grants Pass and those in northern California, which are somewhat more economically diversified.

The Bank has eight branch locations within Siskiyou County in northern California, resulting from the April 2001 acquisition of Timberline Bank and five branch locations resulting from the January 2004 acquisition of Mid
Valley Bank.  The Mid Valley Bank branches are located in Redding (2), Red Bluff, Chico and Corning representing Shasta, Tehama and Butte counties, respectively. Late in 2005 PremierWest opened a new branch in the community of Anderson outside of
Redding. The economy of northern California from Siskiyou County south

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to Butte County is primarily involved in government services, retail trade and services, education, healthcare, agriculture, recreation and tourism.

Late in 2004 the Bank opened a branch office in Woodland (Yolo County), California. This was followed by a branch opened in Roseville (Placer County), California in August 2005. These two
branches have established PremierWest Bank's most southern reach with Woodland being located 20 miles northwest of Sacramento, at the intersection of Interstate 5 and State Route 113, while Roseville is located 16 miles northeast of Sacramento on
Interstate 80.  In addition to wholesale and retail trade, Woodland's key industries include agriculture and food processing, manufacturing, transportation and distribution, education, healthcare and government services, while Roseville's major
employers include manufacturing, healthcare, transportation, and government services.

Outside of the Interstate 5 corridor PremierWest Bank has established two branches in Oregon - Klamath Falls and Bend. The Company opened it's Klamath Falls office during the first quarter of
2004. In addition to a full service branch facility, the branch also houses an office for the Bank's mortgage division and offices for Premier Finance Company.  Klamath County's principal industries include lumber and wood products, agriculture,
transportation, recreation and government.

In October 2004, the Bank opened a loan production office in Bend, Oregon.  This office subsequently converted to a full service banking office in August 2005 firmly establishing PremierWest Bank in Deschutes County of
central Oregon. Deschutes County is Oregon's fastest growing county with a diverse employment base including manufacturing, retail trade, tourism, natural resources and government. The Company anticipates opening a second branch office in this
market during 2006.

While PremierWest Bank does business in many different communities, the geographic areas we serve make the Bank more reliant on local economies in contrast to super-regional and national banks. Nevertheless, management
considers the diversity of our customers, communities, and economic sectors a source of strength and competitive advantage in pursuing our community banking strategy.

|INDUSTRY OVERVIEW
|-----------------

The commercial banking industry continues to undergo increased competition, consolidation and change. In addition to traditional competitors such as banks and credit unions, noninsured financial service companies such as
mutual funds, brokerage firms, insurance companies, mortgage companies and leasing companies now offer alternative investment opportunities for customers' funds and lending sources for their needs. Banks have been granted extended powers to better
compete with these financial service providers through the limited right to sell insurance, securities products and other services, but the percentage of financial transactions handled by commercial banks continues to decline as the market
penetration of other financial service providers has grown.

PremierWest Bank's business model is to compete on the basis of customer service, not solely on price, and to compete for deposits by offering a variety of accounts at rates generally competitive with other financial
institutions in the area.

PremierWest Bank's competition for loans comes principally from commercial banks, savings banks, mortgage companies, finance companies, insurance companies, credit unions, and other traditional lenders. We compete for
loans on the basis of interest rates and loan fees, our array of commercial and mortgage loan products, and the efficiency and quality of our services. Lending activity can also be affected by our liquidity, local and national economic conditions,
current interest rate levels, and loan demand. As described above, PremierWest Bank competes with larger commercial banks by emphasizing a community bank orientation and efficient personal service to both commercial and individual customers.

|EMPLOYEES
|---------

As of December 31, 2005, PremierWest Bank had 422 full-time equivalent employees compared to 398 at December 31, 2004.  None of our employees are represented by a collective bargaining group.  Management considers its
relations with employees to be good.

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|WEBSITE ACCESS TO PUBLIC FILINGS
|--------------------------------

PremierWest makes available all periodic and current reports, free of charge, on PremierWest Bank's website, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities
and Exchange Commission ("SEC"). PremierWest Bank's website address iswww.premierwestbank.com. The contents of our website are not incorporated into this
report or into our other filings with the SEC.

|GOVERNMENT POLICIES
|-------------------

The operations of PremierWest and its subsidiaries are affected by state and federal legislative changes and by policies of various regulatory authorities, including those of the
States of Oregon and California, the Federal Reserve Bank, and the Federal Deposit Insurance Corporation. These policies include, for example, statutory maximum legal lending limits and rates, domestic monetary policies of the Board of Governors of
the Federal Reserve System, United States fiscal policy, and capital adequacy and liquidity constraints imposed by national and state regulatory agencies.

|SUPERVISION AND REGULATION
|--------------------------

General- PremierWest is extensively regulated under federal and state law. These laws and regulations are generally intended to protect depositors,
not shareholders. To the extent that the following information describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statutory or regulatory provisions. Any change in applicable laws or
regulations may have a material effect on the business and prospects of the Company. The operations of the Company may be affected by legislative changes and by the policies of various regulatory authorities. The Company cannot accurately predict
the nature or the extent of the effects on its business and earnings that fiscal or monetary policies, or new federal or state legislation, may have in the future.

Federal and State Bank Regulation- PremierWest Bank, as a state chartered bank with deposits insured by the Federal Deposit Insurance Corporation ("FDIC"), is subject to the
supervision and regulation of the State of Oregon and the FDIC. These agencies may prohibit the Company from engaging in what they believe constitutes unsafe or unsound banking practices.

The Community Reinvestment Act ("CRA") requires that, in connection with examinations of financial institutions within its jurisdiction, the FDIC evaluate the record of financial institutions in meeting the credit needs of
their local communities, including low and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions. These factors are also considered in evaluating mergers, acquisitions and applications to open a new branch
or facility. The Company's current CRA rating is "Satisfactory."

Banks are also subject to certain restrictions imposed by the Federal Reserve Act on extensions of credit to executive officers, directors, principal shareholders or any related interest of such persons. Extensions of
credit (i) must be made on substantially the same terms, including interest rates and collateral as, and follow credit underwriting procedures that are not less stringent than, those prevailing at the time for comparable transactions with persons
not affiliated with the Company, and (ii) must not involve more than the normal risk of repayment or present other unfavorable features. Banks are also subject to certain lending limits and restrictions on overdrafts to such persons. A violation of
these restrictions may result in the assessment of substantial civil monetary penalties on the bank or any officer, director, employee, agent or other person participating in the conduct of the affairs of that bank, the imposition of a cease and
desist order, and other regulatory sanctions.

Under the Federal Deposit Insurance Corporation Improvement Act ("FDICIA"), each federal banking agency has prescribed, by regulation, capital safety and soundness standards for institutions under its authority. These
standards cover internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, and standards for asset quality, earnings and stock valuation.
An institution that fails to meet these standards must develop a plan acceptable to the agency, specifying the steps that the institution will take to meet the standards. Failure to submit or implement such a plan may subject the institution to
regulatory sanctions. Management believes that the Company is in compliance with these standards.

Deposit Insurance- The deposits of the Company are currently insured to a maximum of $100,000 per depositor through the Bank Insurance
Fund ("BIF"), administered by the FDIC. The Company is required to pay semiannual deposit insurance premium assessments to the FDIC.

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The FDICIA included provisions to reform the federal deposit insurance system, including the implementation of risk-based deposit insurance premiums. The FDICIA also permits the FDIC to make special assessments on insured
depository institutions in amounts determined by the FDIC to be necessary to give it adequate assessment income to repay amounts borrowed from the U.S. Treasury and other sources or for any other purpose the FDIC deems necessary. Pursuant to the
FDICIA, the FDIC implemented a transitional risk-based insurance premium system on January 1, 1993. Under this system, banks are assessed insurance premiums according to how much risk they are deemed to present to the BIF. Banks with higher levels
of capital and a low degree of supervisory concern are assessed lower premiums than banks with lower levels of capital or involving a higher degree of supervisory concern. PremierWest Bank qualifies for the lowest premium level, and currently pays
only the statutory minimum rate.

Dividends -Under the Oregon Bank Act, banks are subject to restrictions on the payment of cash dividends to their parent holding company. A bank may not pay cash dividends if that
payment would reduce the amount of its capital below that necessary to meet minimum applicable regulatory capital requirements. In addition, the amount of the dividend may not be greater than its net unreserved retained earnings, after first
deducting (i) to the extent not already charged against earnings or reflected in a reserve, all bad debts, which are debts on which interest is unpaid and past due at least six months; (ii) all other assets charged off as required by the state or
federal examiner; and (iii) all accrued expenses, interest and taxes of the Company.

In addition, the appropriate regulatory authorities are authorized to prohibit banks and bank holding companies from paying dividends constituting an unsafe or unsound banking practice. The Company is not currently subject
to any regulatory restrictions on dividends other than those noted above.

Capital Adequacy -The federal and state bank regulatory agencies use capital adequacy guidelines in their examination and regulation of
financial holding companies and banks. If capital falls below the minimum levels established by these guidelines, a holding company or a bank may be denied approval to acquire or establish additional banks or non-bank businesses or to open new
facilities.

The FDIC and Federal Reserve have adopted risk-based capital guidelines for banks and bank holding companies. The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies, to account for off-balance-sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance-sheet items are assigned to broad risk categories, each
with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.  The current guidelines require all bank holding companies and federally regulated banks to maintain
a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital. Generally, banking regulators expect banks to maintain capital ratios well in excess of the minimum.

Tier 1 capital for banks includes common shareholders' equity, qualifying perpetual preferred stock (up to 25% of total Tier 1 capital, if cumulative; under a Federal Reserve rule, redeemable perpetual preferred stock may
not be counted as Tier 1 capital unless the redemption is subject to the prior approval of the Federal Reserve) and minority interests in equity accounts of consolidated subsidiaries, less intangibles. Tier 2 capital includes: (i) the allowance for
loan losses of up to 1.25% of risk-weighted assets; (ii) any qualifying perpetual preferred stock which exceeds the amount which may be included in Tier 1 capital; (iii) hybrid capital instruments (iv) perpetual debt; (v) mandatory convertible
securities and (vi) subordinated debt and intermediate term preferred stock of up to 50% of Tier 1 capital. Total capital is the sum of Tier 1 and Tier 2 capital less reciprocal holdings of other banking organizations, capital instruments and
investments in unconsolidated subsidiaries.

Banks' assets are given risk-weights of 0%, 20%, 50%, and 100%. In addition, certain off-balance sheet items are given credit conversion factors to convert them to asset equivalent amounts to which an appropriate
risk-weight will apply. These computations result in the total risk-weighted assets.

Most loans are assigned to the 100% risk category, except for first mortgage loans fully secured by residential property, which carry a 50% rating. Most investment securities are assigned to the 20% category, except for
municipal or state revenue bonds, which have a 50% risk-weight, and direct obligations of or obligations guaranteed by the U.S. Treasury or U.S. Government agencies, which have 0% risk-weight. In converting off-balance sheet items, direct credit
substitutes, including general guarantees and standby letters of credit backing financial obligations, are given 100% conversion factor. The transaction-related contingencies such as bid bonds, other standby letters of credit and undrawn
commitments, including commercial credit lines with an initial maturity

6

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of more than one year, have a 50% conversion factor. Short-term, self-liquidating trade contingencies are converted at 20%, and short-term commitments have a 0% factor.

The FDIC also has implemented a leverage ratio, which is Tier 1 capital as a percentage of total assets less intangibles, to be used as a supplement to risk-based guidelines. The principal objective of the leverage ratio
is to place a constraint on the maximum degree to which a bank may leverage its equity capital base. The FDIC requires a minimum leverage ratio of 3%. However, for all but the most highly rated bank holding companies and for banks seeking to expand
or experiencing or anticipating significant growth, the FDIC requires a minimum leverage ratio of 4%.

The FDICIA created a statutory framework of supervisory actions indexed to the capital level of the individual institution. Under regulations adopted by the FDIC, an institution is assigned to one of five capital
categories depending on its total risk-based capital ratio, Tier 1 risk-based capital ratio, and leverage ratio, together with certain subjective factors. Institutions deemed to be "undercapitalized" are subject to certain mandatory supervisory
corrective actions. The Company does not believe that these regulations have any material effect on its operations.

Effects of Government Monetary Policy -The earnings and growth of the Company are affected not only by general economic conditions, but also by the fiscal and monetary policies of
the federal government, particularly the Federal Reserve. The Federal Reserve can and does implement national monetary policy for such purposes as curbing inflation and combating recession, by its open market operations in U.S. Government
securities, control of the discount rate applicable to borrowings from the Federal Reserve, and establishment of reserve requirements against certain deposits. These activities influence growth of bank loans, investments and deposits, and also
affect interest rates charged on loans or paid on deposits. The nature and impact of future changes in monetary policies and their impact on the Company cannot be predicted with certainty.

Changing Regulatory Structure of the Banking Industry -The laws and regulations affecting banks and bank holding companies frequently undergo
significant changes. Pending bills, or bills that may be introduced in the future, may be expected to contain proposals for altering the structure, regulation, and competitive relationships of the nation's financial institutions. If enacted into
law, these bills could have the effect of increasing or decreasing the cost of doing business, limiting or expanding permissible activities (including insurance and securities activities), or affecting the competitive balance among banks, savings
associations, and other financial institutions. Some of these bills could reduce the extent of federal deposit insurance, broaden the powers or the geographical range of operations of bank holding companies, alter the extent to which banks will be
permitted to engage in securities activities, and realign the structure and jurisdiction of various financial institution regulatory agencies. Whether, or in what form, any such legislation may be adopted or the extent to which the business of the
Company might be affected thereby cannot be predicted with certainty.

Of particular note is legislation enacted by Congress in 1995 permitting interstate banking and branching, which allows banks to expand nationwide through acquisition, consolidation or merger. Under this law, an adequately
capitalized bank holding company may acquire banks in any state or merge banks across state lines if permitted by state law. Further, banks may establish and operate branches in any state subject to the restrictions of applicable state law. Under
Oregon law, an out-of-state bank or bank holding company may merge with or acquire an Oregon state chartered bank or bank holding company if the Oregon bank, or in the case of a bank holding company, the subsidiary bank, has been in existence for a
minimum of three years, so long as the law of the state in which the acquiring bank is located permits such merger. Branches may not be acquired or opened separately, but once an out-of-state bank has acquired branches in Oregon, either through a
merger with or acquisition of substantially all the assets of an Oregon bank, the acquirer may open additional branches.

In December 1999, Congress enacted the Gramm-Leach-Bliley Act (the "GLB Act") and repealed the nearly 70-year prohibition on banks and bank holding companies engaging in the businesses of
securities and insurance underwriting imposed by the Glass-Steagall Act.

Under the GLB Act, a bank holding company may, if it meets certain criteria, elect to be a "financial holding company," which is permitted to offer, through a nonbank subsidiary, products and services that are "financial
in nature" and to make investments in companies providing such services. A financial holding company may also engage in investment banking, and an insurance company subsidiary of a financial holding company may also invest in "portfolio" companies,
without regard to whether the businesses of such companies are financial in nature.

7

---

The GLB Act also permits eligible banks to engage in a broader range of activities through a "financial subsidiary," although a financial subsidiary of a bank is more limited than a financial holding company in the range
of services it may provide. Financial subsidiaries of banks are not permitted to engage in insurance underwriting, real estate investment or development, merchant banking or insurance portfolio investing. Banks with financial subsidiaries must (i)
separately state the assets, liabilities and capital of the financial subsidiary in financial statements; (ii) comply with operational safeguards to separate the subsidiary's activities from the bank; and (iii) comply with statutory restrictions on
transactions with affiliates under Sections 23A and 23B of the Federal Reserve Act.

Activities that are "financial in nature" include activities normally associated with banking, such as lending, exchanging, transferring and safeguarding money or securities, and investing for customers. Financial
activities also include the sale of insurance as agent (and as principal for a financial holding company, but not for a financial subsidiary of a bank), investment advisory services, underwriting, dealing or making a market in securities, and any
other activities previously determined by the Federal Reserve to be permissible non-banking activities.

Financial holding companies and financial subsidiaries of banks may also engage in any activities that are incidental to, or determined by order of the Federal Reserve to be complementary to, activities that are financial
in nature.

To be eligible to elect status as a financial holding company, a bank holding company must be well capitalized, under the Federal Reserve capital adequacy guidelines, and to be well managed, as indicated in the
institution's most recent regulatory examination. In addition, each bank subsidiary must also be well capitalized and well managed, and must have received a rating of "satisfactory" in its most recent CRA examination. Failure to maintain eligibility
would result in suspension of the institution's ability to commence new activities or acquire additional businesses until the deficiencies are corrected. The Federal Reserve could require a non-compliant financial holding company that has failed to
correct noted deficiencies to divest one or more subsidiary banks, or to cease all activities other than those permitted to ordinary bank holding companies under the regulatory scheme in place prior to enactment of the GLB Act.

In addition to expanding the scope of financial services permitted to be offered by banks and bank holding companies, the GLB Act addressed the jurisdictional conflicts between the regulatory authorities that supervise
various types of financial businesses. Historically, supervision was an entity-based approach, with the Federal Reserve regulating member banks and bank holding companies and their subsidiaries. As holding companies are now permitted to have
insurance and broker-dealer subsidiaries, the supervisory scheme is oriented toward functional regulation. Thus, a financial holding company is subject to regulation and examination by the Federal Reserve, but a broker-dealer subsidiary of a
financial holding company is subject to regulation by the Securities and Exchange Commission, while an insurance company subsidiary of a financial holding company would be subject to regulation and supervision by the applicable state insurance
commission.

The GLB Act also includes provisions to protect consumer privacy by prohibiting financial services providers, whether or not affiliated with a bank, from disclosing non-public, personal, financial information to
unaffiliated parties without the consent of the customer, and by requiring annual disclosure of the provider's privacy policy. Each functional regulator is charged with promulgating rules to implement these provisions.

The Company is also subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA Patriot Act"). Among other things, the USA Patriot Act
requires financial institutions, such as the Company to adopt and implement specific policies and procedures designed to prevent and defeat money laundering. Management believes the Company is in compliance with the USA Patriot Act.

The Sarbanes-Oxley Act ("Sarbanes-Oxley" or "Act") of 2002 implemented legislative reforms intended to address corporate and accounting fraud.  Sarbanes-Oxley applies to publicly reporting companies including PremierWest
Bancorp. The legislation established the Public Company Accounting Oversight Board whose duties include the registering of public accounting firms and the establishment of standards for auditing, quality control, ethics and independence relating to
the preparation of public company audit reports by registered accounting firms. The Act includes numerous provisions, but in particular, Section 404 that requires PremierWest Bancorp's management, to assess the adequacy and effectiveness of its
internal controls over financial reporting.  As of December 31, 2005, management believes the Company is in full compliance with the requirements and provisions of the Sarbanes-Oxley Act.

8

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ITEM 1A.  RISK FACTORS

The following are certain risk factors that management believes are specific to PremierWest Bancorp. These risks are not all inclusive and should be read in conjunction with the other
information contained in this report.

Interest Rate Risk - Our earnings depend upon the spread between the interest rate we receive on loans and securities and the interest rates we pay on
deposits and borrowings. Changes in interest rates could adversely impact our net interest margin, net interest income and net income.PremierWest Bancorp's earnings are impacted by changing interest rates.
Changes in interest rates affect the demand for new loans, the credit profile of existing loans, the rates received on loans and securities, and rates paid on deposits and borrowings. The relationship between the rates received on loans and
securities and the rates paid on deposits and borrowings is known as interest rate spread. Given our current volume and mix of interest-bearing liabilities and interest-earning assets, our interest rate spread could be expected to increase during
times of rising interest rates and, conversely, to decline during times of falling interest rates. Exposure to interest rate risk is managed by monitoring the re-pricing frequency of PremierWest Bank's rate-sensitive assets and rate-sensitive
liabilities over any given period. Although we believe our current level of interest rate sensitivity is reasonable, significant fluctuations in interest rates may have an adverse affect on our business, financial condition and results of
operations.

Credit Risk - Our earnings depend to a large extent upon the ability of our borrowers to repay their loans and our inability to manage credit risk would negatively affect our business.A source of risk arises from the possibility that losses will be sustained if a significant number of our borrowers, guarantors and related parties fail to perform in accordance with the terms of their loans. We
have adopted underwriting and credit monitoring procedures and credit a policy, including the establishment and review of the allowance for loan losses that management believes are appropriate to minimize this risk by assessing the likelihood of
nonperformance, tracking loan performance and diversifying our credit portfolio. These policies and procedures, however, may not prevent unexpected losses that could materially affect our results of operations.

Management Risk - We may not effectively manage our growth or our recent or future acquisitions which could adversely affect the quality of our operations and our costs.PremierWest Bancorp's financial performance and profitability will depend on our ability to manage recent growth and implement our plans and strategies for future growth. Although management believes that it has substantially
integrated the business and operations of recent acquisitions, there can be no assurance that unforeseen issues relating to the acquisitions will not adversely affect us. In addition, any future acquisitions and continued growth may present
operational or other problems that could have an adverse effect on our business, financial condition and results of operations. Accordingly, there can be no assurance that we will be able to execute our growth strategy or maintain the level of
profitability that we have recently experienced.

Competitive Risk - In our intensely competitive markets our competitors offer similar services, which could affect our ability to successfully attract new customers and retain existing
customers.Competition may adversely affect our performance. The financial services business in our market areas is highly competitive. It is becoming increasingly competitive due to changes in regulation,
technological advances, and the accelerating pace of consolidation among financial services providers. We face competition both in attracting deposits and in making loans. We compete for loans principally through interest rates and loan fees we
charge and the efficiency and quality of services we provide. Increasing levels of competition in the banking and financial services industries may reduce our market share or cause the prices we charge for our services to fall. Our results may
differ in future periods depending upon the nature or level of competition.

Geographic Risk - Our markets are geographically concentrated and regional economic factors that impact our markets will affect our business more than they might a bank holding company with
greater geographic diversity.PremierWest Bancorp's geographic footprint is predominately situated along the Interstate 5 corridor from just south of Eugene, Oregon to just
north of Sacramento, California. Our customers are directly and indirectly dependent upon the economies of these areas and upon the timber and tourism industries, which are the primary employers and revenue sources in our markets. National,
regional, and local economic factors that affect these industries will have a disproportionately negative impact on our customers. Localized economic declines will thus adversely impact our customers, and in exacerbated circumstances may increase
the rate at which our borrowers default on their loans. Additionally, the vast majority of our loans are secured by real and personal property located in this same region, and declining economic conditions in this area could make it more difficult
for us to realize full value on the collateral that secures these loans. A deterioration in economic and business conditions in our market areas, particularly in the natural resources, manufacturing and real estate industries on which some of these
areas depend, could have a material adverse impact on the quality of our loan portfolio and the demand for our products

9

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and services, which in turn may have a material adverse effect on our results of operations. Further, a downturn in the national economy might further exacerbate local economic conditions. The extent of the future impact of
these events on economic and business conditions cannot be predicted.

Regulatory Risk - Our business is heavily regulated and the creation of additional regulations may negatively affect our operations.We are subject to
government regulation that could limit or restrict our activities, which in turn could adversely impact our operations. The financial services industry is regulated extensively. Federal and state regulations are designed primarily to protect the
deposit insurance funds and consumers, and not to benefit our stockholders. These regulations can sometimes impose significant limitations on our operations as well as result in higher operation costs. In addition, these regulations are constantly
evolving and may change significantly over time. Significant new regulation or changes in existing regulations or repeal of existing laws may cause our results to differ materially. Further, federal monetary policy, particularly as implemented
through the Federal Reserve System, significantly affects credit conditions for us.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

| | None.
| | -----

ITEM 2.  PROPERTIES

As of December 31, 2005, the Company conducted business through 44 offices including the operations of PremierWest Bank, PremierWest Bank's mortgage division, and also PremierWest Bank's two subsidiaries - Premier Finance
Company and PremierWest Investment Services, Inc. The 44 offices included 36 full service bank branches and 8 other offices locations.

PremierWest Bank's 36 full service branch facilities are located in Oregon and California and more specifically broken down as follows: 20 branches are located in Jackson (8), Josephine (2), Deschutes (1), Douglas (8) and
Klamath (1) counties of Oregon and 16 branches offices located in Siskiyou (8), Shasta (3), Butte (1), Tehama (2), Placer (1) and Yolo (1) counties of California.  Of the 36 branch locations, 26 are owned by PremierWest Bank, 8 are leased, and two
locations involve long-term land leases where the Bank owns the building.

The Company's eight other locations house administrative, subsidiary or mortgage lending operations. These facilities include two owned buildings housing the Company's administrative head office, operations and data
processing facilities located on one campus located in Medford, Oregon; two owned administrative facilities - one in Redding, California housing regional administration, our Premier Finance Company subsidiary and PremierWest Bank mortgage division
offices and one in Red Bluff, California housing PremierWest Bank data processing and loan processing functions; three leased locations housing stand-alone Premier Finance Company offices in Portland, Roseburg and Medford, Oregon; and, one owned
location in Medford, Oregon occupied by the Bank's mortgage division.

In addition, to the above, four Premier Finance Company offices are housed within PremierWest Bank full service branch offices, as are various employees of PremierWest Investment Services, Inc. and the Bank's mortgage
division.

As of December 31, 2005, the aggregate monthly rental on leased locations was $32,000.

10



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ITEM 3.  LEGALPROCEEDINGS

From time to time, in the normal course of business, PremierWest may become party to various legal actions. Generally these actions are not expected to have a material adverse impact on our
business, financial condition or results of operations. Litigation matters that have been reported previously have been resolved or, in the opinion of management, are not expected to have a material adverse impact on the financial condition or
results of operations for the Company.

ITEM 4.  SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of securities holders of PremierWest during the quarter ended December 31, 2005.

11

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PART II

ITEM 5. 
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

PremierWest common stock is quoted on the Nasdaq SmallCap Market ("Nasdaq") under the symbol "PRWT".  Prior to July 31, 2003, PremierWest common stock was traded over-the-counter through the OTC Bulletin Board maintained
by the NASD. The common stock is registered under the Securities Exchange Act of 1934. The table below sets forth the high and low sales prices of PremierWest common stock as reported on the Nasdaq and OTC Bulletin Board. This information has been
adjusted to reflect previous stock dividends paid in 2005, 2004 and 2003. Bid quotations reflect inter-dealer prices, without adjustment for mark-ups, mark-downs, or commissions and may not necessarily represent actual transactions.  On March 10,
2006, the Company had 15,389,691 shares of common stock issued and outstanding which were held by approximately 820 shareholders of record, a number which does not include approximately 2,250 beneficial owners who hold shares in "street name." As of
March 10, 2006, the most recent date prior to the date of this Report, the closing price of the common stock was $18.02 per share.

|            |  |              |  |           |  | 2005         |  |                     |  |              |  |           |  |          |  | 2004         |  |              |  |      |  |          |  | 2003   |  |   |  |  
|----------- |  | ------------ |  | --------- |  | ------------ |  | ------------------- |  | ------------ |  | --------- |  | -------- |  | ------------ |  | ------------ |  | ---- |  | -------- |  | ------ |  | - |  | -
|            |  |              |  |          
|            |  | Closing      |  |           |  |              |  | Closing             |  |              |  | Closing   |  |         
|            |  | Market Price |  | Cash      |  | Market Price |  | Cash                |  | Market Price |  | Cash     
|            |  |              |  | Dividends |  |              |  | Dividends           |  |              |  | Dividends
|            |  | High         |  |           |  | Low          |  | Declared            |  | High         |  | Low       |  | Declared |  |              |  | High         |  | Low  |  | Declared
|            |  |              |  |           |  |              |  |                     |  |              |  |           |  |          |  |              |  |             
|           
|1st Quarter |  | $ 12.30      |  | $         |  | 10.34        |  | $                   |  | -            |  | $ 9.26    |  | $        |  | 8.60         |  | $         
- |  | $    |  | 6.46     |  | $ 5.16 |  | $ |  | -
|2nd Quarter |  | $ 14.91      |  | $         |  | 10.30        |  | $                   |  | -            |  | $ 9.72    |  | $        |  | 8.82         |  | $         
- |  | $    |  | 7.68     |  | $ 6.03 |  | $ |  | -
|3rd Quarter |  | $ 16.00      |  | $         |  | 12.75        |  | $                   |  | -            |  | $ 10.44   |  | $        |  | 9.25         |  | $         
- |  | $    |  | 8.59     |  | $ 7.23 |  | $ |  | -
|4th Quarter |  | $ 14.95      |  | $         |  | 13.38        |  | $              0.05 |  | $ 12.58      |  | $         |  | 9.60     |  | $         
- |  | $            |  | 9.90 |  | $ 8.13   |  | $      |  | -

Historically PremierWest has retained all earnings in support of its growth and acquisition plans. However, during the fourth quarter of 2005, the Company's board of directors declared a $0.05
per share cash dividend that was paid out on January 31, 2006. The timing and amount of any future dividends PremierWest might pay will be determined by its board of directors and will depend on earnings, cash requirements and the financial
condition of PremierWest and its subsidiaries, applicable government regulations, and other factors deemed relevant by the board of directors.

The Company did not repurchase any shares during the quarter ending December 31, 2005.

12

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ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth certain information concerning the consolidated financial condition, operating results, and key operating ratios for PremierWest at the dates and for the periods indicated. This information
does not purport to be complete, and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the Consolidated Financial Statements of PremierWest and Notes thereto.

|(dollars in thousands except per share data and financial ratios) |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|----------------------------------------------------------------- |  | -------------- |  | ------------------------ |  | ------------------ |  | ---------- |  | ------------ |  | ------------ |  | -------------
|                                                                  |  |                |  | Years Ended December 31, |  |                    |  |           
|                                                                  |  |               
|                                                                  |  | 2005           |  | 2004                     |  | 2003               |  | 2002       |  | 2001        
|                                                                  |  |                |  |                          |  |                    |  |            |  |             
|Operating Results                                                 |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|                                                                  |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|Total interest income                                             |  | $       57,527 |  | $       42,835           |  | $           31,779 |  | $          |  | 32,298       |  | $     31,739
|Total interest expense                                            |  | 10,785         |  | 6,356                    |  |                    |  | 6,391      |  |              |  | 8,502        |  | 13,569       
|                                                                  |  |                |  |                          |  |                    |  |            |  |             
|Net interest income                                               |  | 46,742         |  | 36,479                   |  | 25,388             |  |            |  | 23,796       |  | 18,170      
|Provision for loan losses                                         |  | 150            |  | 800                      |  |                    |  | 1,200      |  |              |  | 1,037        |  | 1,163        
|Noninterest income                                                |  | 7,351          |  | 6,602                    |  |                    |  | 5,880      |  |              |  | 5,552        |  | 3,983        
|Noninterest expense                                               |  | 33,618         |  | 28,687                   |  | 21,041             |  |            |  | 21,739       |  | 17,906      
|                                                                  |  |                |  |                          |  |                    |  |            |  |             
|Income before provision for income taxes and                      |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|cumulative effect of an accounting change                         |  | 20,325         |  | 13,594                   |  |                    |  | 9,027      |  |              |  | 6,572        |  | 3,084        
|Provision for income taxes                                        |  | 7,136          |  | 4,486                    |  |                    |  | 3,024      |  |              |  | 2,169        |  | 1,044        
|                                                                  |  |                |  |                          |  |                    |  |            |  |             
|Net income before cumulative effect                               |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|of an accounting change                                           |  | 13,189         |  | 9,108                    |  |                    |  | 6,003      |  |              |  | 4,403        |  | 2,040        
|Cumulative effect of an accounting change, net of tax             |  | -              |  | -                        |  |                    |  | -          |  |              |  | (99)         |  | -            
|                                                                  |  |                |  |                          |  |                    |  |            |  |             
|Net income                                                        |  | $      13,189  |  | $       9,108            |  | $                  |  | 6,003      |  | $            |  | 4,304        |  | $      2,040 
|                                                                  |  |                |  |                          |  |                    |  |            |  |             
|Per Share Data (1)                                                |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|                                                                  |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|Basic earnings per common share                                   |  | $    0.80      |  | $    0.55                |  | $                  |  | 0.42       |  | $            |  | 0.31         |  | $      0.16  
|Diluted earnings per common share                                 |  | $    0.75      |  | $    0.53                |  | $                  |  | 0.42       |  | $            |  | 0.31         |  | $      0.16  
|Dividends declared per common share                               |  | $    0.05      |  | $         -              |  | $                  |  | -          |  | $            |  | -            |  | $           -
|Ratio of dividends declared to net income                         |  | 5.83%          |  | 0.0%                     |  |                    |  | 0.0%       |  |              |  | 0.0%         |  | 0.0%         
|                                                                 
|Financial Ratios                                                  |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|                                                                  |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|Return on average equity                                          |  | 13.59%         |  | 10.74%                   |  | 11.23%             |  |            |  | 9.13%        |  | 5.12%       
|Return on average assets                                          |  | 1.52%          |  | 1.20%                    |  |                    |  | 1.11%      |  |              |  | 0.87%        |  | 0.46%        
|Efficiency ratio (2)                                              |  | 62.15%         |  | 66.59%                   |  | 67.29%             |  |            |  | 74.07%       |  | 80.83%      
|Net interest margin (3)                                           |  | 6.05%          |  | 5.48%                    |  |                    |  | 5.29%      |  |              |  | 5.44%        |  | 4.66%        
|                                                                 
|Balance Sheet Data at Year-End                                    |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|                                                                  |  |                |  |                          |  |                    |  |            |  |              |  |              |  |              
|Gross loans                                                       |  | $ 808,577      |  | $  690,461               |  | $  459,763         |  | $  398,350 |  | $  358,393  
|Allowance for loan losses                                         |  | $   10,341     |  | $      9,171             |  | $ 
5,466           |  | $ 
4,838   |  | $      4,825
|Allowance as percentage of loans                                  |  | 1.28%          |  | 1.33%                    |  |                    |  | 1.19%      |  |              |  | 1.21%        |  | 1.35%        
|Total assets                                                      |  | $  913,661     |  | $  804,445               |  | $  571,321         |  | $  515,084 |  | $  488,310  
|Total deposits                                                    |  | $  768,419     |  | $  688,985               |  | $  475,746         |  | $  428,337 |  | $  430,055  
|Total equity                                                      |  | $  102,784     |  | $    90,580              |  | $    64,751        |  | $  
49,172 |  | $    43,694 

| | Notes:
| | ------

|(1) | Per share data has been restated for subsequent stock dividends.                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------
|(2) | Efficiency ratio is calculated by dividing noninterest expense by the sum of net interest income plus noninterest income.
|(3) | Tax adjusted at 34%.                                                                                                     
|   

13

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|ITEM 7.  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
|-------- |  | -------------------------------------------------
|         |  | CONDITION AND RESULTS OF OPERATION               
|        
|OVERVIEW |  |                                                  

The following discussion should be read in conjunction with PremierWest's audited consolidated financial statements and the notes thereto as of December 31, 2005 and 2004, and for each of the
three years in the period ended December 31, 2005, included elsewhere in this report.

PremierWest conducts a general commercial banking business, gathering deposits from the general public and applying those funds to the origination of loans for commercial, real estate, and
consumer purposes and investments.

PremierWest's profitability depends primarily on net interest income, which is the difference between interest income generated by interest-earning assets (principally loans and investments)
and interest expense incurred on interest-bearing liabilities (principally customer deposits and borrowed funds). Net interest income is affected by the difference (the "interest rate spread") between interest rates earned on interest-earning assets
and interest rates paid on interest-bearing liabilities, and by the relative volume of interest-earning assets and interest-bearing liabilities. Financial institutions have traditionally used interest rate spreads as a measure of net interest
income. Another indication of an institution's net interest income is its "net yield on interest-earning assets" or "net interest margin," which is net interest income divided by average interest-earning assets.

To a lesser extent, PremierWest's profitability is also affected by such factors as the level of noninterest income and expenses, the provision for loan losses, and the provision for income
taxes. Noninterest income consists primarily of service charges on deposit accounts and fees generated through PremierWest's mortgage division and investment services subsidiary. Noninterest expense consists primarily of salaries, commissions and
employee benefits, professional fees, equipment expenses, occupancy-related expenses, communications, advertising and other operating expenses.

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

Net income for 2005 was $13.2 million, a 44.8% improvement over 2004 net income of $9.1 million. Our diluted earnings per share were $0.75 and $0.53 for the years ended 2005 and
2004, respectively. This improvement resulted from a $14.7 million increase in interest income, a $749,000 increase in noninterest income and a $650,000 decrease in the loan loss provision. These results were offset by a $4.2 million
increase in interest expense and a $5.1 million increase in noninterest expense.  Return on average shareholders' equity was 13.59% and return on average assets was 1.52% for the year ended December 31, 2005.  This compared with a return on
average shareholders' equity of 10.74% and a return on average assets of 1.20% for 2004.

|                              |  |   |  |         |  |   |  | Years Ended December 31, |  |   |  |        
|----------------------------- |  | - |  | ------- |  | - |  | ------------------------ |  | - |  | -------
|                              |  |  
|                              |  |   |  | 2005    |  |   |  | 2004                     |  |   |  | 2003   
|                              |  |   |  |         |  |   |  |                          |  |  
|(dollars in thousands except  |  |   |  |         |  |   |  |                          |  |   |  |        
|financial ratios)             |  |   |  |         |  |   |  |                          |  |   |  |        
|Net income                    |  | $ |  | 13,189  |  | $ |  | 9,108                    |  | $ |  | 6,003  
|Average assets                |  | $ |  | 867,532 |  | $ |  | 755,945                  |  | $ |  | 538,870
|RETURN ON AVERAGE ASSETS      |  |   |  | 1.52%   |  |   |  | 1.20%                    |  |   |  | 1.11%  
|                             
|Net income                    |  | $ |  | 13,189  |  | $ |  | 9,108                    |  | $ |  | 6,003  
|Average equity                |  | $ |  | 97,058  |  | $ |  | 84,790                   |  | $ |  | 53,464 
|RETURN ON AVERAGE EQUITY      |  |   |  | 13.59%  |  |   |  | 10.74%                   |  |   |  | 11.23% 
|                             
|Cash dividends declared       |  | $ |  | 769     |  | $ |  | -                        |  | $ |  | -      
|Net income                    |  | $ |  | 13,189  |  | $ |  | 9,108                    |  | $ |  | 6,003  
|PAYOUT RATIO                  |  |   |  | 5.83%   |  |   |  | 0.00%                    |  |   |  | 0.00%  
|                             
|Average equity                |  | $ |  | 97,058  |  | $ |  | 84,790                   |  | $ |  | 53,464 
|Average assets                |  | $ |  | 867,532 |  | $ |  | 755,945                  |  | $ |  | 538,870
|AVERAGE EQUITY TO ASSET RATIO |  |   |  | 11.19%  |  |   |  | 11.22%                   |  |   |  | 9.92%  

14

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Total loans outstanding, net of deferred loan fees, grew $118.0 million, or 17.1% in 2005 and totaled $806.3 million at December 31, 2005 compared to $688.3 at December 31, 2004.  Growth in loan volumes were
generated internally across all of PremierWest Bank's market areas including the newest market areas of Bend, Oregon and Woodland, California. Over the past year our allowance for loan loss increased 12.8% to $10.3 million totaling 1.28% of
outstanding loans. A significant portion of this increase came from a large recovery in the second quarter contributing to a net recovery position of $1.0 million for the year.  As a result of the recovery, the provision expense for loan losses
was $150,000 for 2005 compared to $800,000 in 2004.  Management believes that an appropriate overall reserve exists based on our ongoing assessment of loan portfolio quality, the relatively stable level of nonperforming assets over the past
three operating years, continuing seasoning of acquired loan portfolios and our judgment of economic conditions that exist.

Total deposits also grew to $768.4 million at December 31, 2005, an increase of $79.4 million from $689.0 million at December 31, 2004.  Noninterest-bearing demand deposits accounted for $25.0 million or
31.5% of overall deposit growth and accounted for 27.2% of total deposits at year end compared to 26.7% at December 31, 2004. The Bank intends to maintain an aggressive approach in pursuing noninterest-bearing deposit relationships from consumers
and businesses as we progress towards attaining a noninterest-bearing deposit base of 30% or more of total deposits.

|CRITICAL ACCOUNTING POLICIES AND ESTIMATES
|------------------------------------------

This "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as disclosures included elsewhere in this Form 10-K, are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. On an ongoing basis, management evaluates the estimates used, including the adequacy of the allowance for loan and lease losses, impairment of intangible assets, and contingencies and litigation. Estimates are
based upon historical experience, current economic conditions and other factors that management considers reasonable under the circumstances. These estimates result in judgments regarding the carrying values of assets and liabilities when these
values are not readily available from other sources as well as assessing and identifying the accounting treatments of commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions. The
following critical accounting policies involve the more significant judgments and assumptions used in the preparation of the consolidated financial statements.

The allowance for loan and lease losses is established to absorb known and inherent losses attributable to loans and leases outstanding and related off-balance-sheet commitments. The adequacy of the allowance is monitored
on an ongoing basis and is based on management's evaluation of numerous factors. These factors include the quality of the current loan portfolio, the trend in the loan portfolio's risk ratings, current economic conditions, loan concentrations, loan
growth rates, past-due and nonperforming trends, evaluation of specific loss estimates for all significant problem loans, historical charge-off and recovery experience and other pertinent information. As of December 31, 2005, approximately 74.7% of
PremierWest's loan portfolio is secured by real estate. Accordingly, a significant rise in loan interest rates and/or a decline in real estate values in Oregon and California may cause management to increase the allowance for loan and lease losses.

At December 31, 2005, PremierWest had approximately $20.4 million in unamortized goodwill as a result of previous business combinations. The acquisition of Mid Valley Bank increased unamortized goodwill by $13.8
million.  PremierWest adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002. Annual and periodic analysis of the fair value of recorded goodwill for impairment involves a
substantial amount of judgment, as does establishing and monitoring estimated lives of other amortizable intangible assets.

15

---

PremierWest applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock option plans. Accordingly,
compensation costs are recognized as the difference between the exercise price of each option and the market price of PremierWest's stock at the date of each grant. Had compensation cost for PremierWest's 2005, 2004, and 2003 grants for stock-based
compensation plans been determined consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," its net income and earnings per common share for December 31, 2005, 2004, and 2003 would approximate the pro forma amounts below (dollars in
thousands except per share amounts).

|(dollars in thousands except per share amounts) |  |   |        |      |   |  |       |      |   |      |       | 
|----------------------------------------------- |  | - | ------ | ---- | - |  | ----- | ---- | - | ---- | ----- | 
|                                               
|                                                |  |   |        | 2005 |   |  |       | 2004 |   | 2003
|                                                |  |   |        |      |   | 
|Net income, as reported                         |  | $ | 13,189 |      | $ |  | 9,108 |      | $ |      | 6,003
|Pro forma net income                            |  | $ | 13,102 |      | $ |  | 9,026 |      | $ |      | 5,936
|Earnings per share:                             |  |   |        |      |   |  |       |      |   |      |       | 
|Basic - as reported                             |  | $ | 0.80   |      | $ |  | 0.55  |      | $ |      | 0.42 
|Basic - pro forma                               |  | $ | 0.80   |      | $ |  | 0.55  |      | $ |      | 0.42 
|Diluted -as reported                            |  | $ | 0.75   |      | $ |  | 0.53  |      | $ |      | 0.42 
|Diluted - pro forma                             |  | $ | 0.74   |      | $ |  | 0.52  |      | $ |      | 0.41 

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions for December 31, 2005, 2004, and 2003:

|                      |  | 2005 |  | 2004 |  | 2003
|--------------------- |  | ---- |  | ---- |  | ----
|                      |  |      |  |      |  |     
|Dividend yield        |  | 5.0% |  | 5.0% |  | 5.0%
|Expected life (years) |  | 7.50 |  | 7.75 |  | 4.00
|Expected volatility   |  | 39%  |  | 40%  |  | 44% 
|Risk-free rate        |  | 4.4% |  | 3.4% |  | 3.3%

The effects of applying SFAS No. 123 in the pro forma disclosures are not indicative of future amounts. Additionally, in December 2004, the FASB revised SFAS No. 123 superceding APB Opinion No. 25 effective for public
entities as of the beginning of the first fiscal year that begins after June 15, 2005. Management estimates that the effect of adopting this Statement will result in the recognition of additional pre-tax compensation expense of approximately
$120,000 during 2006.

16

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RESULTS OF OPERATIONS

Average Balances, Interest Rates and Yields

The following tables set forth certain information relating to PremierWest's consolidated average interest-earning assets and interest-bearing liabilities and reflect the average yield on assets and average cost of
liabilities for the years indicated. The yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the periods presented. During the periods indicated, nonaccruing loans, if
any, are included in the net loan category. The yields and costs include fees, premiums and discounts, which are considered adjustments to yield. The table reflects the effect of income taxes on nontaxable loans and securities.

|                                              |  | Year Ended December 31, 2005 |  | Year Ended December 31, 2004 |  | Year Ended December 31, 2003
|--------------------------------------------- |  | ---------------------------- |  | ---------------------------- |  | ----------------------------
|                                              |  |                              |  |                              |  |                             
|                                              |  |                              |  | Interest                     |  | Average                     
|                                              |  | Average                      |  | Income or                    |  | Yields or                   
|                                              |  | Balance                      |  | Expense                      |  | Rates                       
|                                              |  |                              |  |                              |  |                             
|(dollars in thousands)                        |  |                              |  |                              |  |                             
|INTEREST-EARNING ASSETS:                      |  |                              |  |                              |  |                             
|Loans (1) (2)                                 |  | $ 754,465                    |  | $  56,901                    |  | 7.54%                       
|Investment securities:                        |  |                              |  |                              |  |                             
|Taxable securities                            |  | 7,498                        |  | 188                          |  | 2.51%                       
|Nontaxable securities (1)                     |  | 10,559                       |  | 638                          |  | 6.04%                       
|Temporary investments                         |  | 6,900                        |  | 209                          |  | 3.03%                       
|                                              |  |                              |  |                              |  |                             
|Total interest-earning assets                 |  | 779,422                      |  | 57,936                       |  | 7.43%                       
|Cash and due from banks                       |  | 27,883                       |  |                              |  |                             
|Allowance for loan losses                     |  | (10,315)                     |  |                              |  |                             
|Other assets                                  |  | 70,542                       |  |                              |  |                             
|                                              |  |                              |  |                              |  |                             
|Total assets                                  |  | $ 867,532                    |  |                              |  |                             
|                                              |  |                              |  |                              |  |                             
|                                             
|INTEREST-BEARING LIABILITIES:                 |  |                              |  |                              |  |                             
|Interest-bearing checking and                 |  |                              |  |                              |  |                             
|savings accounts                              |  | $ 339,480                    |  | 3,662                        |  | 1.08%                       
|Time deposits                                 |  | 198,833                      |  | 5,817                        |  | 2.93%                       
|Other borrowings                              |  | 26,259                       |  | 1,306                        |  | 4.97%                       
|                                              |  |                              |  |                              |  |                             
|Total interest-bearing liabilities            |  | 564,572                      |  | 10,785                       |  | 1.91%                       
|Noninterest-bearing deposits                  |  | 198,777                      |  |                              |  |                             
|Other liabilities                             |  | 7,125                        |  |                              |  |                             
|                                              |  |                              |  |                              |  |                             
|Total liabilities                             |  | 770,474                      |  |                              |  |                             
|Shareholders' equity                          |  | 97,058                       |  |                              |  |                             
|                                              |  |                              |  |                              |  |                             
|Total liabilities and                         |  |                              |  |                              |  |                             
|shareholders' equity                          |  | $ 867,532                    |  |                              |  |                             
|                                              |  |                              |  |                              |  |                             
|Net interest income (1)                       |  |                              |  | $  47,151                    |  |                             
|                                              |  |                              |  |                              |  |                             
|Net interest spread                           |  |                              |  |                              |  | 5.52%                       
|                                              |  |                              |  |                              |  |                             
|                                             
|Average yield on earning assets (1) (2)       |  |                              |  | 7.43%                        |  |                             
|Interest expense to earning assets            |  |                              |  |                              |  | 1.38%                       
|                                              |  |                              |  |                              |  |                             
|Net interest income to earning assets (1) (2) |  |                              |  | 6.05%                        |  |                             
|                                              |  |                              |  |                              |  |                             

|(1) | Tax-exempt income has been adjusted to a tax equivalent basis at a 34% effective rate. The amount of such adjustment was an addition to recorded pre tax income of $409,000, $402,000 and $373,000 for 2005, 2004,
and 2003, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Average nonaccrual loans of approximately $2.0 million for 2005, $3.8 million for 2004 and $2.5 million for 2003 are included in the average loan balances.                                                                               
|   

17

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|Net Interest Income
|-------------------

PremierWest's profitability depends primarily on net interest income, which is the difference between interest income generated by interest-earning assets (principally loans and investments) and interest expense incurred
on interest-bearing liabilities (principally customer deposits and borrowed funds). Net interest income is affected by the difference between rates of interest earned on interest-earning assets and rates of interest paid on interest-bearing
liabilities (the "interest rate spread"), as well as the relative volumes of interest-earning assets and interest-bearing liabilities. Financial institutions have traditionally used interest rate spreads as a measure of net interest income. Another
indication of an institution's net interest income is its "net yield on interest-earning assets" or "net interest margin," which is net interest income divided by average interest-earning assets.

Net interest income on a tax equivalent basis, before provisions for loan losses, for the year ended December 31, 2005, was $47.2 million, an increase of 27.8% compared to tax equivalent
net interest income of $36.9 million in 2004, which was an increase of 43.2% compared to tax equivalent net interest income of $25.8 million in 2003. The overall tax-equivalent earning asset yield was 7.43% in 2005 compared to 6.43% in 2004
and 6.60% in 2003. For the same years, rates on interest-bearing liabilities were 1.91%, 1.29% and 1.68%, respectively.

Total interest-earning assets averaged $779.4 million for the year ended December 31, 2005, compared to $672.4 million for the corresponding period in 2004. The net growth in earning assets resulted from an overall
growth in loan volume from all markets served including growing volumes coming from markets the Company initially entered during 2004 and 2005 - specifically, Bend in central Oregon and Woodland and Roseville, California located north of Sacramento.
Increasing higher yielding loan volumes were partially offset by decreases in temporary investments (primarily Federal Funds sold) and in investment securities.

Interest-bearing liabilities averaged $564.6 million for the year ended December 31, 2005, compared to $494.3 million for the same period in 2004. Interest expense, as a percentage of average earning assets,
increased to 1.38% in 2005, compared to .95% in 2004 and 1.31% in 2003.

PremierWest continued to grow and evolve its operations in northern California.  During 2005 the Company consolidated two branches into one new location in Redding, and opened branches in Roseville and Anderson for a net
increase of one branch. The Company now has sixteen full service branch offices located in California, up from fifteen branches in 2004 and nine branches in 2003. Management expects that the Company's larger geographic footprint in California will
drive further growth opportunities leading to increased loan and deposit volumes.

Average loans, which generally carry a higher yield than investment securities and other earning assets, comprised 96.80% of average earning assets during 2005, compared to 90.08% in 2004 and 85.07% in 2003. During the
same periods, average yields on loans were 7.54% in 2005, 6.86% in 2004, and 7.24% in 2003. Average investment securities comprised 2.32% of average earning assets in 2005, which was down from 4.11% in 2004 and 6.73% in 2003. Tax equivalent interest
yields on investment securities were 4.57% for 2005, 4.48% for 2004, and 5.23% in 2003.

With the rising interest rate environment throughout 2005 combined with our continued solid loan growth, stable credit quality and a growing core deposit base, our net interest margin
increased 57 basis points, from 5.48% in 2004 to 6.05% for 2005. Also, our net interest spread increased 38 basis points, from 5.14% in 2004 to 5.52% in 2005.  Management believes that the Bank's strong core deposit base coupled with a quality
credit portfolio continues to position the Bank well for the future. However, an expectation for continued increases in interest rates during 2006 coupled with a tightened liquidity position necessitating a reliance on borrowed funds in the short
term will likely place downward pressure on our net interest margin and net interest spread during 2006.

18

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|Rate/Volume Analysis
|--------------------

The following table analyzes net interest income on a tax equivalent basis in terms of changes in the volume of interest-earning assets and interest-bearing liabilities, and changes in net
interest income that are attributable to changes in yields earned on interest-earning assets and rates paid on interest-bearing liabilities. The table reflects the extent to which changes in interest income and changes in interest expense are
attributable to changes in volume (changes in volume multiplied by the prior-year rate) and changes in rate (changes in rate multiplied by prior-year volume). Changes attributable to the combined impact of volume and rate have been allocated to
rate.

|                                      |  | 2005 vs. 2004              |  | 2004 vs. 2003
|------------------------------------- |  | -------------------------- |  | -------------
|                                      |  | Increase (Decrease) Due To |  |              
|                                      |  |                            |  |              
|                                      |  |                            |  |              
|(in thousands)                        |  | Volume                     |  |              
|                                      |  |                            |  |              
|Interest-earning assets:              |  |                            |  |              
|Loans                                 |  | $ 10,200                   |  | $            
|Investment securities:                |  |                            |  |              
|Taxable securities                    |  | (211)                      |  |              
|Nontaxable securities                 |  | (173)                      |  |              
|Temporary investments                 |  | (371)                      |  |              
|                                      |  |                            |  |              
|Total                                 |  | 9,445                      |  |              
|                                      |  |                            |  |              
|Interest-bearing liabilities:         |  |                            |  |              
|Deposits:                             |  |                            |  |              
|Interest-bearing checking and savings |  | $ 276                      |  |              
|Time deposits                         |  | 414                        |  |              
|Other borrowings                      |  | 338                        |  |              
|                                      |  |                            |  |              
|Total                                 |  | 1,028                      |  |              
|                                      |  |                            |  |              
|Net increase (decrease) in net        |  |                            |  |              
|interest income                       |  | $ 8,417                    |  | $            
|                                      |  |                            |  |              

|Loan Loss Provision
|-------------------

The loan loss provision represents charges made against earnings to maintain an adequate allowance for loan losses. The allowance is maintained at an amount believed to be sufficient to absorb losses in the loan portfolio
and has two components, one of which represents a pre-determined percentage of our entire loan portfolio, and the other representing specifically established reserves for individually classified loans. Factors considered in establishing an
appropriate allowance include a careful assessment of the financial condition of the borrower; a realistic determination of the value and adequacy of underlying collateral; the condition of the local economy and the condition of the specific
industry of the borrower; a comprehensive analysis of the levels and trends of loan categories; an assessment of pending legal action for collection of loans and related guarantees; and, a review of delinquent and classified loans. PremierWest
applies a systematic process for determining the adequacy of the allowance for loan losses, including an internal loan review program and a quarterly analysis of the adequacy of the allowance. The quarterly analysis includes determination of
specific potential loss factors on individual classified loans, historical potential loss factors derived from actual net charge-off experience and trends in nonperforming loans, and potential loss factors for other loan portfolio risks such as loan
concentrations, the condition of the local economy, and the nature and volume of loans. The loan loss provision reflects management's judgment of the credit risk inherent in the loan portfolio. Although management believes the loan loss provision
has been sufficient to maintain an adequate reserve for loan losses, there can be no assurance that actual loan losses will not require more significant charges to operations in the future.

For the year ended December 31, 2005, the loan loss provision totaled $150,000, compared to $800,000 for 2004, and $1.2 million for 2003. This represents a decrease of 81.25% between 2004 and 2005 and a
decrease of 33.33% between 2003 and 2004. The significant reduction in the loan loss provision during 2005 was principally the result of a large recovery that contributed to overall net loan loss recoveries of $1.0 million during 2005.
Contributing to the stable trends in overall credit quality since 2003 has been the concerted effort on the part of management towards building and maintaining a consistent, proactive and responsive credit culture throughout the organization.
Beginning in 2003 management has evolved the Company's loan policies and procedures, conducted an ongoing and comprehensive analysis of loan portfolio quality, increased the number of credit administration and internal audit personnel to oversee the
consistent application and adherence to established loan policies and procedures and provided training to all lending personnel. A more detailed review of the loan loss provision is presented in the table on page 28.

19

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Loan "charge-offs" refer to the recorded values of loans actually removed from the consolidated balance sheet and, after netting out "recoveries" on previously charged-off loans, become
"net charge-offs". PremierWest's policy is to charge off loans when, in management's opinion, the loan or a portion thereof is deemed uncollectible, although concerted efforts are made to maximize recovery after the charge-off.  Management will continue to
closely monitor the loan quality of new and existing relationships through strict review and evaluation procedures and by making loan officers accountable for collection efforts.

For the year ended December 31, 2005 loan recoveries exceeded charge-offs by $1.0 million. In contrast, loan charge-offs exceeded recoveries by $3.2 million in 2004. A more detailed review of charge-offs and
recoveries is presented in the table on page 28.

|Noninterest Income
|------------------

Noninterest income is primarily comprised of service charges on deposit accounts; mortgage banking income; investment brokerage and annuity fees; other commissions and fees; and other noninterest income including gains on
sales of investment securities. With the exception of mortgage banking income in 2004 and other noninterest income during 2005, all categories of noninterest income have grown consistently over the past three years.

During 2005 noninterest income increased from $6.6 million to $7.4 million, an increase of $749,000 or 11.3% . Overall, service charge income increased $156,000; mortgage banking income increased
$108,000; investment brokerage and annuity fees grew $332,000; other commissions and fees increased $289,000; offset by a $138,000 decrease in other noninterest income. Gains from the sale of investment securities were $3,000.

For 2004, non interest income increased 12.3% or $722,000 from $5.9 million recorded in 2003 to $6.6 million. Contributing to the growth in 2004 was the acquisition of Mid Valley
Bank that, along with internal growth from existing operations, drove overall increases in service charges on deposit accounts, investment brokerage and annuity fees and other commissions and fees of 27.0%, 17.6% and 41.0%, respectively. Other
noninterest income recorded in 2004 increased 52.7% over 2003 and included non-recurring items of approximately $110,000. Offsetting these increases was a drop in mortgage banking revenue by 27.1% as a result of the significant decline in
refinance activity that occurred after 2003. Gains from the sale of investment securities were $1,000.

In general, management prices the Bank's deposit accounts at rates competitive with those offered by other commercial banks in its market area. Deposit and deposit fee growth have been generated by branch expansion,
offering competitive deposit products, cultivating strong customer relationships through exceptional service and cross-selling deposit products to loan customers.

|Noninterest Expense
|-------------------

Noninterest expenses consist principally of salaries and employee benefits, occupancy and equipment costs, communication expenses, professional fees, advertising and other expenses.

Over 2005, noninterest expense increased an overall 17.2% from $28.7 million in 2004 to $33.6 million in 2005 as management pursued its business plan and strategies for growth,
expanding its number of full service branch offices to 36 while making plans and preparations to open an additional four branches in 2006. As a result, increased expenses were centered in salaries and employee benefits ($3.4 million or 21.4%),
occupancy expenses ($618,000 or 12.5%) and other expenses ($632,000 or 14.8%) . Expenses for communications, professional fees and advertising grew 2.7%, 9.0%, and 12.9% respectively.

During 2004 noninterest expense increased $7.6 million or 36.3% to $28.7 million from $21.0 million in 2003. Of the $7.6 million increase in noninterest expense, $3.4
million or 46.3% was directly associated with the ongoing operations of Mid Valley Bank. Overall, salaries and employee benefits increased $3.9 million (32.0%) and occupancy expenses increased $1.1 million (27.3%) including $2.3 million
and $400,000, respectively, directly associated with the continuing operations of Mid Valley Bank.  The other categories of noninterest expense -communications, professional fees, advertising and other expense increased 39.2%, 79.5%, 45.8% and
56.6%, respectively, and were significantly impacted by the growth and activities that resulted from our acquisition of Mid Valley Bank.

20

---

|Provision for Income Taxes
|--------------------------

PremierWest's taxable income resulted in an effective tax rate of 35.1% or $7.1 million in federal and state income taxes for 2005. This compares to an effective tax rate of 33.0% for 2004
and 33.5% for 2003.

|Efficiency Ratio
|----------------

Banks use the term "efficiency ratio" to describe the relationship of administrative and other costs associated with generating revenues, a concept similar to a measurement of overhead. The
efficiency ratio is computed by dividing noninterest expense bythe sum of net interest income plus noninterest income. Management views the efficiency ratio as a measure of
PremierWest's ability to control noninterest expenses.

Management continues to target a high 50 to low 60 percent range as acceptable for this important measurement. For the year ended December 31, 2005, our efficiency ratio was 62.15%, as compared
to 66.59% in 2004, and 67.29% in 2003. The efficiency ratio reflects a continuing trend of year over year improvement though only a modest improvement was attained during 2004 principally due to the additional expenses incurred in conjunction with
the acquisition and integration of Mid Valley Bank and the expenses associated with the first year of Sarbanes-Oxley 404 compliance.

Generally, lower efficiency ratios reflect greater cost controls; however, the success of PremierWest's community banking strategy necessitates a balance between pure expense control and the
need to maintain a high level of customer service in conjunction with effective risk management.  Accordingly, PremierWest staffs its branches in a manner to support its high standards for delivering exceptional customer service and maintains the
necessary administrative personnel to support the delivery of exceptional customer service and effective risk management through internal control functions such as credit administration, internal audit, credit examination and
compliance.

21

---

|FINANCIAL CONDITION
|-------------------

The table below sets forth certain summary balance sheet information for December 31, 2005, 2004 and 2003.

|                       |  |           |  | December 31, |  |         |  |           |  | Increase (Decrease) |  |                    
|---------------------- |  | --------- |  | ------------ |  | ------- |  | --------- |  | ------------------- |  | -------------------
|                       |  |           |  |             
|                       |  | 2005      |  |              |  | 2004    |  | 2003      |  | 12/31/04  12/31/05 |  | 12/31/03  12/31/04
|                       |  |           |  |              |  |         |  |           |  |                    
|(dollars in thousands) |  |           |  |              |  |         |  |           |  |                     |  |                    
|                      
|ASSETS                 |  |           |  |              |  |         |  |           |  |                     |  |                    
|Federal funds sold     |  | $ 453     |  | $            |  | 15,350  |  | $ 31,400  |  | $ (14,897)          |  | (97.05%)           
|Investment securities  |  | 14,869    |  |              |  | 17,602  |  | 23,006    |  | (2,733)             |  | (15.53%)           
|Restricted equity      |  |           |  |              |  |         |  |           |  |                     |  |                    
|investments            |  | 1,865     |  |              |  | 1,599   |  | 1,797     |  | 266                 |  | 16.64%             
|Loans                  |  | 795,230   |  |              |  | 678,594 |  | 452,972   |  | 116,636             |  | 17.19%             
|Other assets (1)       |  | 101,244   |  |              |  | 91,300  |  | 62,146    |  | 9,944               |  | 10.89%             
|                       |  |           |  |              |  |         |  |           |  |                     |  |                    
|                      
|Total assets           |  | $ 913,661 |  | $            |  | 804,445 |  | $ 571,321 |  | $ 109,216           |  | 13.58%             
|                       |  |           |  |              |  |         |  |           |  |                     |  |                    
|                      
|LIABILITIES            |  |           |  |              |  |         |  |           |  |                     |  |                    
|Noninterest-bearing    |  |           |  |              |  |         |  |           |  |                     |  |                    
|deposits               |  | $ 208,840 |  | $            |  | 183,845 |  | $ 121,467 |  | $ 24,995            |  | 13.60%             
|Interest-bearing       |  |           |  |              |  |         |  |           |  |                     |  |                    
|deposits               |  | 559,579   |  |              |  | 505,140 |  | 354,279   |  | 54,439              |  | 10.78%             
|                       |  |           |  |              |  |         |  |           |  |                     |  |                    
|                      
|Total deposits         |  | 768,419   |  |              |  | 688,985 |  | 475,746   |  | 79,434              |  | 11.53%             
|                      
|Other liabilities (2)  |  | 42,458    |  |              |  | 24,880  |  | 30,824    |  | 17,578              |  | 70.65%             
|                       |  |           |  |              |  |         |  |           |  |                     |  |                    
|                      
|Total liabilities      |  | 810,877   |  |              |  | 713,865 |  | 506,570   |  | 97,012              |  | 13.59%             
|                      
|SHAREHOLDERS          |  |           |  |              |  |         |  |           |  |                     |  |                    
|EQUITY                 |  | 102,784   |  |              |  | 90,580  |  | 64,751    |  | 12,204              |  | 13.47%             
|                       |  |           |  |              |  |         |  |           |  |                     |  |                    
|                      
|Total liabilities      |  |           |  |              |  |         |  |           |  |                     |  |                    
|and share-             |  |           |  |              |  |         |  |           |  |                     |  |                    
|holders equity        |  | $ 913,661 |  | $            |  | 804,445 |  | $ 571,321 |  | $ 109,216           |  | 13.58%             
|                       |  |           |  |              |  |         |  |           |  |                     |  |                    

|(1) | Includes cash and due from banks, mortgage loans held-for-sale, property and equipment, goodwill, other investments, accrued interest receivable and other assets.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes borrowings, repurchase agreements, accrued interest payable and other liabilities.                                                                       
|   

Investment Portfolio

Investment securities provide a return on residual funds after lending activities. Investments may be in interest-bearing deposits, U.S. government and agency obligations, state and local
government obligations or government-guaranteed, mortgage-backed securities. PremierWest generally does not invest in securities that are rated less than investment grade by a nationally recognized statistical rating organization. All
securities-related investment activity is reported to the Board of Directors. Board review is required for significant changes in investment strategy. Certain senior executives have the authority to purchase and sell securities for our portfolio in
accordance with PremierWest's stated Funds Management policy.

Management determines the appropriate classification of securities at the time of purchase. If management has the intent and PremierWest has the ability at the time of purchase to hold a security until maturity or on a
long-term basis, the security is classified as "held-to-maturity" and is reflected on the balance sheet at historical cost. Securities to be held for indefinite periods and not intended to be held to maturity or on a long-term basis are classified
as "available-for-sale." Available-for-sale securities are reflected on the balance sheet at their estimated fair market value.

22

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The following table sets forth the carrying value of PremierWest's investment portfolio at the dates indicated.

|                                           |  | December 31,                          
|------------------------------------------ |  | --------------------------------------
|                                           |  |                                       
|                                           |  | 2005                                  
|                                           |  |                                       
|Investment securities (available-for sale) |  |                                       
|U.S. Government and agency                 |  |                                       
|securities                                 |  | $                               
3,969
|Mortgage-backed securities and             |  |                                       
|collateralized mortgage                    |  |                                       
|obligations                                |  |                                       
|Obligations of states and                  |  |                                       
|political subdivisions                     |  |                                       
|Corporate bonds                            |  |                                       
|Restricted equity securities               |  |                                       
|                                           |  |                                       
|                                           |  |                                       
|Investment securities (held-to-maturity)   |  |                                       
|Obligations of states and                  |  |                                       
|political subdivisions                     |  |                                       
|                                           |  |                                       
|Total Investment Securities                |  | $                                     
|                                           |  |                                       

The contractual maturity of investment securities at December 31, 2005, including restricted equity securities, is shown below. Expected maturities of investment securities could
differ from contractual maturities because the borrower, or issuer, may have the right to call or prepay obligations with or without call or prepayment penalties.

|                                                                                        |  | December 31, 2005 |  | December 31, 2004 |  | December 31, 2003
|--------------------------------------------------------------------------------------- |  | ----------------- |  | ----------------- |  | -----------------
|                                                                                        |  |                   |  |                   |  |                  
|                                                                                        |  | Amortized         |  | Estimated         |  | %                
|                                                                                        |  | Cost              |  | Fair Value        |  | Yield (1)        
|                                                                                        |  |                   |  |                   |  |                  
|(dollars in thousands)                                                                  |  |                   |  |                   |  |                  
|                                                                                        |  |                   |  |                   |  |                  
|U.S. Government and                                                                     |  |                   |  |                   |  |                  
|agency securities:                                                                      |  |                   |  |                   |  |                  
|One year or less                                                                        |  | $    4,050        |  | $    3,969        |  | 3.46%            
|One to five years                                                                       |  | -                 |  | -                 |  | -                
|Five to ten years                                                                       |  | -                 |  | -                 |  | -                
|                                                                                       
|Obligations of states and                                                               |  |                   |  |                   |  |                  
|political subdivisions:                                                                 |  |                   |  |                   |  |                  
|One year or less                                                                        |  | 1,871             |  | 1,866             |  | 5.68%            
|One to five years                                                                       |  | 4,494             |  | 4,451             |  | 6.16%            
|Five to ten years                                                                       |  | 3,212             |  | 3,190             |  | 6.09%            
|Over ten years                                                                          |  | -                 |  | -                 |  | -                
|                                                                                       
|Corporate bonds:                                                                        |  |                   |  |                   |  |                  
|One year or less                                                                        |  | 1,000             |  | 998               |  | 6.13%            
|One to five years                                                                       |  | -                 |  | -                 |  | -                
|                                                                                        |  |                   |  |                   |  |                  
|                                                                                       
|Total debt securities                                                                   |  | 14,627            |  | 14,474            |  |                  
|                                                                                       
|Mortgaged-backed securities                                                             |  |                   |  |                   |  |                  
|and collateralized mortgage                                                             |  |                   |  |                   |  |                  
|obligations                                                                             |  | 326               |  | 325               |  | 5.10%            
|Restricted equity securities                                                            |  | 1,865             |  | 1,865             |  | N/A              
|                                                                                        |  |                   |  |                   |  |                  
|                                                                                       
|Total securities                                                                        |  | $   16,818        |  | $   16,664        |  |                  
|                                                                                        |  |                   |  |                   |  |                  
|                                                                                       
|(1) Weighted average yields are stated on a federal tax-equivalent basis at a 34% rate. |  |                   |  |                   |  |                  

23

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During 2005, $2.2 million in securities matured, called or were paid down, a $150,000 security was sold and no purchases were made. This compares to proceeds from maturities and calls of investment securities of
$15.4 million and $23.1 million in 2004 and 2003, respectively. These sales, calls and maturities resulted in realized gains of $3,000, $1,000 and $29,000 for the years ended December 31, 2005, 2004 and 2003,
respectively.

At December 31, 2005, PremierWest's investment portfolio had total net unrealized losses of approximately $154,000. This compares to net unrealized gains of approximately $60,000 at December 31, 2004, and
$710,000 at December 31, 2003. Unrealized gains and losses reflect changes in market conditions and do not represent the amount of actual profits or losses that may be recognized by the Bank. Actual realized gains and losses occur at the time
investment securities are sold or called. During the third quarter of 2004, the Bank reclassified obligations of states and political subdivisions from available-for-sale to held-to-maturity to more accurately reflect its purpose and intent to be
reserved for the on-going pledging needs, particularly for collateralizing public funds on deposit that exceed the $100,000 FDIC insurance limit. The unrealized holding gain at the time of transfer was $335,000 and is being amortized as an
adjustment to yield from the date of transfer through the maturity date of each security transferred. The amortization of the unrealized holding gain reported in shareholders' equity will offset or mitigate the effect on interest income of the
amortization of the discount for the securities transferred. As of December 31, 2005, the remaining unamortized unrealized holding gain on held-to-maturity securities was $180,000.

Securities may be pledged from time-to-time to secure public deposits, FHLB borrowings, repurchase agreement deposit accounts, or for other purposes as required or permitted by law. At December 31, 2005, securities with a
market value of $14.9 million were pledged for such purposes.

As of December 31, 2005, PremierWest also held 15,881 shares of $100 par value Federal Home Loan Bank of Seattle (FHLB) stock, which is a restricted equity security. FHLB stock represents an equity interest in the
FHLB, but it does not have a readily determinable market value. The stock can be sold at its par value only, and only to the FHLB or to another member institution. Member institutions are required to maintain a minimum stock investment in the FHLB
based on specific percentages of their outstanding mortgages, total assets or FHLB advances. At December 31, 2005 and 2004, the Bank met its minimum required investment in FHLB.

The Bank also owns stock in Pacific Coast Banker's Bank (PCBB). The investment in PCBB of $277,000 is carried at its fair market value at acquisition and is included in restricted equity investments on the balance
sheet. Pacific Coast Banker's Bank operates under a special purpose charter to provide wholesale correspondent banking services to depository institutions. By statute, 100% of PCBB's outstanding stock is held by depository institutions that utilize
its correspondent banking services.

Loan Portfolio

The most significant asset on our balance sheet in terms of risk and the effect on our earnings is our loan portfolio. On our balance sheet, the term "net loans" refers to total loans outstanding, at their principal
balance outstanding, net of the allowance for loan losses and deferred loan fees. PremierWest's loan policies and procedures establish the basic guidelines governing our lending operations. Generally, the guidelines address the types of loans that
we seek, our target markets, underwriting and collateral requirements, terms, interest rate and yield considerations, and compliance with laws and regulations. All loans or credit lines are subject to approval procedures and amount limitations.
These limitations apply to the borrower's total outstanding indebtedness to the Bank, including the indebtedness of any guarantor. The policies are reviewed and approved by the Board of Directors of PremierWest on a routine basis.

Bank officers are charged with loan origination in compliance with underwriting standards overseen by the loan administration department and in conformity with established loan policies. On
an as needed but not less than annual basis, the Board of Directors determines the lending authority of the Bank's loan officers. Such delegated authority may include authority related to loans, letters of credit, overdrafts, uncollected funds, and
such other authority as determined by the Board, the President or Chief Credit Officer within their own delegated authority.

The Chief Credit Officer has the authority to approve loans up to a lending limit as set by the Board of Directors. All loans above the lending limit of the Chief Credit Officer, and up to a certain higher limit, are
reviewed for approval by the President. Loans, that exceed this limit, are subject to review and approval by the Board's Loan Committee. All loans approved by the Board Loan Committee are reviewed by the full Board at regularly scheduled meetings.
PremierWest's unsecured legal lending limit was approximately $15.0 million and our real estate secured lending limit was $25.0 million at December 31, 2005. PremierWest seldom makes loans for an amount approaching

24

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its legal lending limits. The following table sets forth the composition of the loan portfolio in dollar amounts and in percentages as of December 31, 2001, through 2005.

|                           |  | December 31, 2005 |  |            |  | December 31, 2004 |  |         |  | December 31, 2003 |  |   |  | December 31, 2002 |  |            |  | December 31, 2001
|-------------------------- |  | ----------------- |  | ---------- |  | ----------------- |  | ------- |  | ----------------- |  | - |  | ----------------- |  | ---------- |  | -----------------
|                           |  |                   |  |            |  |                   |  |         |  |                  
|(dollars in thousands)     |  | Amount            |  | Percentage |  |                   |  | Amount  |  | Percentage        |  |   |  | Amount            |  | Percentage |  |                  
|                           |  |                   |  |            |  |                   |  |         |  |                   |  |   |  |                   |  |            |  |                  
|                          
|Commercial                 |  | $ 131,819         |  | 16.3%      |  | $                 |  | 94,560  |  | 13.7%             |  | $ |  | 60,598            |  | 13.2%      |  | $                
|Real estate  Construction |  | 237,150           |  | 29.3%      |  |                   |  | 149,250 |  | 21.6%             |  |   |  | 54,900            |  | 11.9%      |  |                  
|Real estate  Commercial/  |  |                   |  |            |  |                   |  |         |  |                   |  |   |  |                   |  |            |  |                  
|Residential                |  | 367,069           |  | 45.4%      |  |                   |  | 372,812 |  | 54.0%             |  |   |  | 288,051           |  | 62.7%      |  |                  
|Consumer                   |  | 49,520            |  | 6.1%       |  |                   |  | 43,039  |  | 6.2%              |  |   |  | 34,273            |  | 7.5%       |  |                  
|Other                      |  | 23,019            |  | 2.8%       |  |                   |  | 30,800  |  | 4.5%              |  |   |  | 21,941            |  | 4.8%       |  |                  
|                           |  |                   |  |            |  |                   |  |         |  |                   |  |   |  |                   |  |            |  |                  
|                          
|Total                      |  | $ 808,577         |  | 100.0%     |  | $                 |  | 690,461 |  | 100.0%            |  | $ |  | 459,763           |  | 100.0%     |  | $                
|                           |  |                   |  |            |  |                   |  |         |  |                   |  |   |  |                   |  |            |  |                  

Net outstanding loans totaled $796.0 million at December 31, 2005, representing an increase of $116.9 million, or 17.2% compared to $679.1 million as of December 31, 2004. Loan
commitments grew to $197.7 million as of December 31, 2005, representing an increase of $18.9 million over year-end 2004. For a more detailed discussion of off-balance sheet arrangements, see Note 14 to the financial statements included in
this report starting on page F-29.

PremierWest's gross loan portfolio at December 31, 2005, includes loans secured by real estate 74.7%, commercial loans 16.3%, and consumer and other loans 8.9% . The largest category is concentrated in real estate loans,
typical for a community bank and also due to management's focus on the significant growth opportunities existing within mortgage and commercial real estate activities occurring in the Bank's market area. Some commercial loans are secured by real
estate, but funds are used for purposes other than financing the purchase of real property, such as inventory financing and equipment purchases, where real property serves as collateral for the loan. Loans of this type are characterized as real
estate loans because of the real estate held as collateral.

The following table presents maturity and re-pricing information for the loan portfolio at December 31, 2005. The table segments the loan portfolio between fixed-rate and adjustable rate loans and their respective
repricing intervals based on fixed-rate loan maturity dates and variable-rate loan re-pricing dates for the periods indicated.

|                                      |  |            |  |             |  |            |  | December 31, 2005 |  |   |  |       
|------------------------------------- |  | ---------- |  | ----------- |  | ---------- |  | ----------------- |  | - |  | ------
|                                      |  |           
|                                      |  | Within One |  | One to Five |  | After Five |  |                   |  |  
|(dollars in thousands)                |  |            |  | Year (1)    |  |            |  | Years             |  |   |  | Years 
|                                      |  |            |  |             |  |            |  |                  
|                                     
|FIXED-RATE LOAN MATURITIES            |  |            |  |             |  |            |  |                   |  |   |  |       
|Commercial                            |  | $          |  | 6,633       |  | $          |  | 9,226             |  | $ |  | 2,901 
|Real estate  Construction            |  |            |  | 8,440       |  |            |  | 7,756             |  |   |  | -     
|Real estate  Commercial/Residential  |  |            |  | 28,642      |  |            |  | 6,480             |  |   |  | 630   
|Consumer                              |  |            |  | 11,754      |  |            |  | 7,812             |  |   |  | 12,700
|Other                                 |  |            |  | 928         |  |            |  | 588               |  |   |  | 225   
|                                      |  |            |  |             |  |            |  |                  
|Total fixed rate loan maturities      |  |            |  | 56,397      |  |            |  | 31,862            |  |   |  | 16,456
|                                      |  |            |  |             |  |            |  |                  
|                                     
|ADJUSTABLE-RATE LOAN REPRICINGS       |  |            |  |             |  |            |  |                   |  |   |  |       
|Commercial                            |  |            |  | 99,769      |  |            |  | 13,274            |  |   |  | 15    
|Real estate  Construction            |  |            |  | 216,270     |  |            |  | 4,386             |  |   |  | 299   
|Real estate  Commercial/Residential  |  |            |  | 198,895     |  |            |  | 130,926           |  |   |  | 1,495 
|Consumer                              |  |            |  | 16,976      |  |            |  | 304               |  |   |  | 1     
|Other                                 |  |            |  | 16,533      |  |            |  | 4,719             |  |   |  | -     
|                                      |  |            |  |             |  |            |  |                  
|Total adjustable-rate loan repricings |  |            |  | 548,443     |  |            |  | 153,609           |  |   |  | 1,810 
|                                      |  |            |  |             |  |            |  |                  
|                                     
|Total maturities and repricings       |  | $          |  | 604,840     |  | $          |  | 185,471           |  | $ |  | 18,266
|                                      |  |            |  |             |  |            |  |                  

|(1) | Loans due on demand and overdrafts are included in the amount due in one year or less. PremierWest has no loans without a stated schedule for repayment or a stated maturity.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   

25

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|Nonperforming Loans
|-------------------

Management considers a loan to be nonperforming when it is 90 days or more past due, or sooner when the Bank has determined that repayment of the loan in full is unlikely. Generally, unless collateral for a loan is a one-
to-four family residential dwelling, interest accrual ceases in 90 days (but no later than the date of acquisition by foreclosure, voluntary deed or other means) and the loan is classified as nonperforming. A loan placed on nonaccrual status may or
may not be contractually past due at the time the determination is made to place the loan on nonaccrual status, and it may or may not be secured. When a loan is placed on nonaccrual status, it is the Bank's policy to reverse interest previously
accrued but uncollected. Interest later collected on the nonaccrual loan, for book purposes, is credited to loan principal if, in management's opinion, full collectibility of principal is doubtful.

At December 31, 2005, loans that were more than 90 days delinquent or for which the accrual of interest had been discontinued included the following:

|                                     |  |        |  |           |  | % of   
|------------------------------------ |  | ------ |  | --------- |  | -------
|                                     |  |        |  |           |  | Related
|(dollars in thousands)               |  | Amount |  | Portfolio
|                                     |  |        |  |          
|                                    
|Commercial                           |  | $      |  | 791       |  | 0.60%  
|Real estate  Construction           |  |        |  | -         |  | 0.00%  
|Real estate  Commercial/Residential |  |        |  | 1,405     |  | 0.38%  
|Consumer                             |  |        |  | 77        |  | 0.16%  
|Other                                |  |        |  | -         |  | 0.00%  
|                                     |  |        |  |          
|                                    
|Total                                |  | $      |  | 2,273     |  | 0.28%  
|                                     |  |        |  |          

Impaired loans include all nonaccrual and restructured commercial and real estate loans. Loan impairment is measured as the present value of expected future cash flows discounted at the loan's effective interest rate, the
fair value of the collateral of an impaired collateral-dependent loan or an observable market price. Interest income on impaired loans is recognized by the cash basis method.

When the Bank acquires real estate through foreclosure, voluntary deed, or similar means, it is classified as "other real estate owned" until it is sold. On December 31, 2005, there was no other real estate owned, compared
to approximately $483,000 in 2004. When property is acquired in this manner, it is recorded at the lower of cost (the unpaid principal balance at the date of acquisition) or fair value less estimated selling costs. Any further write-down is
charged to expense. All costs incurred from the date of acquisition to maintain the property are expensed as incurred. "Other real estate owned" is appraised during the foreclosure process, before acquisition. Losses are recognized against the
allowance for loan losses in the amount by which the cost value of the related loan exceeds the estimated net realizable value of the property acquired. Subsequent write-downs are recorded as noninterest expense.

At December 31, 2005 and 2004, nonperforming loans (loans more than 90 days delinquent and/or on nonaccrual status) totaled approximately $2.3 million and $1.9 million, respectively. Management is committed to a
credit culture that emphasizes quality underwriting standards and that provides for the effective monitoring of loan quality and aggressive resolution to problem loans once they are identified.  Nonperforming assets amounted to 0.25% of total assets
outstanding at December 31, 2005 and 0.30% at December 31, 2004. Interest income that would have been recognized on nonaccrual loans if such loans had performed in accordance with contractual terms totaled $143,000 for the year ended December
31, 2005, $177,000 for the year ended December 31, 2004, and $118,000 for the year ended December 31, 2003. Actual interest income recognized on such loans during all of the periods was not significant. At December 31, 2005 and 2004, the
allowance for loan losses related to impaired loans was $710,000 and $834,000, respectively.

26

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|The following table summarizes nonperforming assets by category: |  |   |  |       |  |   |  |       |  |              |  |      
|---------------------------------------------------------------- |  | - |  | ----- |  | - |  | ----- |  | ------------ |  | -----
|                                                                
|                                                                 |  |   |  |       |  |   |  |       |  | December 31, |  |      
|                                                                 |  |  
|(dollars in thousands)                                           |  |   |  | 2005  |  |   |  | 2004  |  |              |  | 2003 
|                                                                 |  |   |  |       |  |   |  |       |  |             
|Loans on nonaccrual status                                       |  | $ |  | 2,273 |  | $ |  | 1,890 |  | $            |  | 385  
|Loans past due greater than 90 days but                          |  |   |  |       |  |   |  |       |  |              |  |      
|not on nonaccrual status                                         |  |   |  | 2     |  |   |  | 26    |  |              |  | 15   
|Other real estate owned                                          |  |   |  | -     |  |   |  | 483   |  |              |  | 1,511
|                                                                 |  |   |  |       |  |   |  |       |  |             
|Total nonperforming assets                                       |  | $ |  | 2,275 |  | $ |  | 2,399 |  | $            |  | 1,911
|                                                                 |  |   |  |       |  |   |  |       |  |             
|                                                                
|Percentage of nonperforming assets                               |  |   |  |       |  |   |  |       |  |              |  |      
|to total assets                                                  |  |   |  | 0.25% |  |   |  | 0.30% |  |              |  | 0.33%
|                                                                 |  |   |  |       |  |   |  |       |  |             

|Allowance for Loan Losses
|-------------------------

The allowance for loan losses is established through the provision for loan losses charged to expense and represents the aggregate of the loan loss provision charged against earnings as described above, net of loans
charged-off and recoveries on previously charged-off loans. The provision charged to operating expense is based on loan loss experience and other factors that, in management's judgment, should be recognized to estimate losses. Management monitors
the loan portfolio to ensure that the reserve for loan losses remains adequate to absorb potential losses identified by the portfolio review process, including loans on nonaccrual status and current loans whose repayment according to the loan's
repayment plan is considered by management to be in serious doubt.

The amount of the allowance for loan losses is based on a variety of factors, including:

- Analysis of risks inherent in the various segments of the loan portfolio;
- Management's assessment of known or potential problem credits which have come to management's attention during the ongoing review of credit quality;
- Estimates of the value of underlying collateral and guarantees;
- Legal representation regarding the potential outcome of pending actions for collection of loans and related guarantees;
- Historical loss experience; and,
- Current local and national economic conditions and other factors.

If actual circumstances and losses differ substantially from management's assumptions and estimates, the allowance for loan losses might not be sufficient to absorb all future losses. Net earnings would be adversely
affected if that occurred. Loan loss estimates are reviewed periodically. Adjustments to the allowance, if any, are charged against or credited to earnings in the period in which the basis for the adjustment becomes known. In addition, management
maintains a portion of the loan loss allowance to cover inherent losses that have not been specifically identified.

A downturn in the local Oregon and/or California economies and employment could result in increased levels of nonperforming assets and charge-offs, increased loan loss provisions and reductions in income. Additionally, as
an integral part of the examination process, bank regulatory agencies periodically review PremierWest's allowance for loan losses. The banking agencies could require the recognition of additions to the loan loss allowance based on their judgment of
information available to them at the time of their examination.

PremierWest's allowance for loan losses totaled $10.3 million at December 31, 2005, and $9.1 million at December 31, 2004, representing 1.28% of total loans at December 31, 2005 and 1.33% of total loans at December
31, 2004. The loan loss allowance represents 454.56% of nonperforming loans at December 31, 2005, and 478.65% of nonperforming loans at December 31, 2004. Although management believes that it uses the best information available in providing for
estimated loan losses and believes that the allowance was adequate at December 31, 2005, future adjustments could be necessary and net earnings could be negatively affected if circumstances and/or economic conditions differ substantially from the
assumptions used in making the determinations of the adequacy of the allowance for loan losses.

27

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The following is a summary of PremierWest's loan loss experience and selected ratios for the periods presented.

|                                           |  |           |  |           |  |           |  |           |  | December 31, |  |         |  |   |  |         |  |  
|------------------------------------------ |  | --------- |  | --------- |  | --------- |  | --------- |  | ------------ |  | ------- |  | - |  | ------- |  | -
|                                           |  |          
|(dollars in thousands)                     |  |           |  | 2005      |  |           |  | 2004      |  |              |  | 2003    |  |   |  | 2002    |  |  
|                                           |  |           |  |           |  |           |  |           |  |             
|                                          
|Loans outstanding at end of year           |  | $ 808,577 |  | $ 690,461 |  | $ 459,763 |  | $ 398,350 |  | $ 358,393   
|                                           |  |           |  |           |  |           |  |           |  |             
|Average loans outstanding                  |  | $ 754,465 |  | $ 605,747 |  | $ 414,623 |  | $ 380,068 |  | $ 304,257   
|                                           |  |           |  |           |  |           |  |           |  |             
|Allowance for loan losses, beginning       |  |           |  |           |  |           |  |           |  |              |  |         |  |   |  |         |  |  
|of year                                    |  | $         |  | 9,171     |  | $         |  | 5,466     |  | $            |  | 4,838   |  | $ |  | 4,825   |  | $
|Loans charged off:                         |  |           |  |           |  |           |  |           |  |              |  |         |  |   |  |         |  |  
|Commercial                                 |  |           |  | (13)      |  |           |  | (176)     |  |              |  | (252)   |  |   |  | (672)   |  |  
|Real estate                                |  |           |  | (500)     |  |           |  | (563)     |  |              |  | (160)   |  |   |  | (253)   |  |  
|Consumer                                   |  |           |  | (147)     |  |           |  | (302)     |  |              |  | (222)   |  |   |  | (216)   |  |  
|Other                                      |  |           |  | (111)     |  |           |  | (2,758)   |  |              |  | -       |  |   |  | -       |  |  
|                                           |  |           |  |           |  |           |  |           |  |             
|Total loans charged off                    |  |           |  | (771)     |  |           |  | (3,799)   |  |              |  | (634)   |  |   |  | (1,141) |  |  
|                                           |  |           |  |           |  |           |  |           |  |             
|Recoveries:                                |  |           |  |           |  |           |  |           |  |              |  |         |  |   |  |         |  |  
|Commercial                                 |  |           |  | 119       |  |           |  | 75        |  |              |  | 28      |  |   |  | 55      |  |  
|Real estate                                |  |           |  | -         |  |           |  | 3         |  |              |  | -       |  |   |  | 2       |  |  
|Consumer                                   |  |           |  | 50        |  |           |  | 87        |  |              |  | 34      |  |   |  | 60      |  |  
|Other                                      |  |           |  | 1,622     |  |           |  | 454       |  |              |  | -       |  |   |  | -       |  |  
|                                           |  |           |  |           |  |           |  |           |  |             
|                                          
|Total recoveries                           |  |           |  | 1,791     |  |           |  | 619       |  |              |  | 62      |  |   |  | 117     |  |  
|                                           |  |           |  |           |  |           |  |           |  |             
|Net loans charged off                      |  |           |  | 1,020     |  |           |  | (3,180)   |  |              |  | (572)   |  |   |  | (1,024) |  |  
|Allowance for loan losses transferred from |  |           |  |           |  |           |  |           |  |              |  |         |  |   |  |         |  |  
|Timberline (2001); Mid Valley Bank (2004)  |  |           |  | -         |  |           |  | 6,085     |  |              |  | -       |  |   |  | -       |  |  
|Provision charged to income                |  |           |  | 150       |  |           |  | 800       |  |              |  | 1,200   |  |   |  | 1,037   |  |  
|                                           |  |           |  |           |  |           |  |           |  |             
|Allowance for loan losses, end of year     |  | $         |  | 10,341    |  | $         |  | 9,171     |  | $            |  | 5,466   |  | $ |  | 4,838   |  | $
|                                           |  |           |  |           |  |           |  |           |  |             
|Ratio of net loans charged off to average  |  |           |  |           |  |           |  |           |  |              |  |         |  |   |  |         |  |  
|loans outstanding                          |  |           |  | 0.14%     |  |           |  | (0.53)%   |  |              |  | (0.14)% |  |   |  | (0.27)% |  |  
|                                           |  |           |  |           |  |           |  |           |  |             
|Ratio of allowance for loan losses to      |  |           |  |           |  |           |  |           |  |              |  |         |  |   |  |         |  |  
|ending total loans                         |  |           |  | 1.28%     |  |           |  | 1.33%     |  |              |  | 1.19%   |  |   |  | 1.21%   |  |  
|                                           |  |           |  |           |  |           |  |           |  |             

The following table shows the allocation of PremierWest's allowance for loan losses by category and the percent of loans in each category to total loans at the dates indicated. PremierWest allocates its allowance for loan
losses to each loan classification based on relative risk characteristics. Specific allocations represent estimated losses that are due to current credit circumstances and other available information. Unallocated portions of the allowance are
intended to compensate for the subjective nature of the determination of losses inherent in the overall loan portfolio. Because the total loan loss allowance is a valuation reserve applicable to the entire loan portfolio, the portion of the
allowance allocated to each loan category does not represent the total potential for future losses that may occur within that loan category.

|                       |  |         |  |               |  |         |  |               |  | December 31, |  |               |  |         |  |               |  |        
|---------------------- |  | ------- |  | ------------- |  | ------- |  | ------------- |  | ------------ |  | ------------- |  | ------- |  | ------------- |  | -------
|                       |  |        
|                       |  |         |  | 2005          |  |         |  | 2004          |  |              |  | 2003          |  |         |  | 2002          |  |        
|                       |  |         |  |               |  |         |  |               |  |             
|                       |  | Total   |  | Percentage of |  | Total   |  | Percentage of |  | Total        |  | Percentage of |  | Total   |  | Percentage of |  | Total  
|(dollars in thousands) |  | Amount  |  | Allowance     |  | Amount  |  | Allowance     |  | Amount       |  | Allowance     |  | Amount  |  | Allowance     |  | Amount 
|                       |  |         |  |               |  |         |  |               |  |              |  |               |  |         |  |               |  |        
|Type of loan:          |  |         |  |               |  |         |  |               |  |              |  |               |  |         |  |               |  |        
|Commercial             |  | $ 2,478 |  | 23.96%        |  | $ 2,833 |  | 30.89%        |  | $ 874        |  | 15.99%        |  | $ 1,148 |  | 23.73%        |  | $ 1,208
|Real estate-           |  |         |  |               |  |         |  |               |  |              |  |               |  |         |  |               |  |        
|Construction           |  | 2,005   |  | 19.39%        |  | 767     |  | 8.36%         |  | 475          |  | 8.69%         |  | 286     |  | 5.91%         |  | 658    
|Real estate-           |  |         |  |               |  |         |  |               |  |              |  |               |  |         |  |               |  |        
|Commercial/            |  |         |  |               |  |         |  |               |  |              |  |               |  |         |  |               |  |        
|Residential            |  | 4,148   |  | 40.11%        |  | 3,171   |  | 34.58%        |  | 3,038        |  | 55.58%        |  | 2,374   |  | 49.07%        |  | 2,677  
|Consumer and Other     |  | 718     |  | 6.94%         |  | 435     |  | 4.74%         |  | 718          |  | 13.14%        |  | 822     |  | 16.99%        |  | 237    
|Unallocated            |  | 992     |  | 9.59%         |  | 1,965   |  | 21.43%        |  | 361          |  | 6.60%         |  | 208     |  | 4.30%         |  | 45     
|                       |  |         |  |               |  |         |  |               |  |              |  |               |  |         |  |               |  |        
|Total                  |  | $10,341 |  | 100.00%       |  | $ 9,171 |  | 100.00%       |  | $ 5,466      |  | 100.00%       |  | $ 4,838 |  | 100.0%        |  | $ 4,825
|                       |  |         |  |               |  |         |  |               |  |              |  |               |  |         |  |               |  |        

28

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As of December 31, 2005, PremierWest's specific allocation of its allowance for loan losses related to loans on nonaccrual status; estimated reserves based on individual credit risk ratings;
loans for which management believes the borrower might be unable to comply with loan repayment terms, even though the loans are not in nonaccrual status; and, loans for which supporting collateral might not be adequate to recover loan amounts if
foreclosure and subsequent sale of collateral become necessary. The unallocated portion of the allowance for loan losses is provided to recognize estimated potential losses for which a specific reserve has not been established. The unallocated,
general reserve decreased from 2004 to 2005 principally as the result of management's assessment of credit risk, particularly in our real estate secured portfolio, from higher interest rates and expectations for continued increases in interest rates
during 2006. As a result, a significant amount of the unallocated portion of the allowance for loan losses as of December 31, 2004 was shifted to loans in our portfolio that are secured by real estate. The unallocated, general reserve had increased
significantly from 2003 to 2004 and was considered reasonable at that time based on several factors specifically the lack of seasoning within the acquired portfolio of loans from Mid Valley Bank, which contributed a significant portion of the
charge-off volume during 2004, and the Bank's geographical expansion from its acquisition of Mid Valley Bank, into markets and economies where we lack experience in assessing patterns of risk. Even with a diligent assessment by management, there can
be no assurance regarding the actual amount of future charge-offs that will be incurred in the future.

|Deposits
|--------

Deposit accounts are PremierWest's primary source of funds. PremierWest offers a number of deposit products to attract both commercial and consumer customers including regular checking and savings accounts, money market
accounts, IRA accounts, NOW accounts, and a variety of fixed-maturity, fixed-rate certificates with maturities ranging from seven days to 60 months. These accounts earn interest at rates established by management based on competitive market factors
and management's desire to increase certain types or maturities of deposit liabilities.

The distribution of deposit accounts by type and rate is set forth in the following tables as of the indicated
dates.

|                                |  |              |  |            |  |         |  |   |  | Years Ended December 31, |  |          |  |         |  |        
|------------------------------- |  | ------------ |  | ---------- |  | ------- |  | - |  | ------------------------ |  | -------- |  | ------- |  | -------
|                                |  |             
|                                |  |              |  | 2005       |  |         |  |   |  |                          |  | 2004     |  |         |  |        
|                                |  |              |  |            |  |        
|                                |  | Average      |  | Interest   |  | Average |  |   |  | Average                  |  | Interest |  | Average |  | Average
|(dollars in thousands)          |  | Balance      |  | Expense    |  | Rate    |  |   |  | Balance                  |  | Expense  |  | Rate    |  | Balance
|                                |  |              |  |            |  |         |  |   |  |                          |  |          |  |         |  |        
|Savings, money market and       |  |              |  |            |  |         |  |   |  |                          |  |          |  |         |  |        
|interest bearing demand         |  | $    339,480 |  | $    3,662 |  | 1.08%   |  | $ |  | 299,460                  |  | $        |  | 2,063   |  | 0.69%  
|                               
|Time deposits                   |  | 198,833      |  | 5,817      |  | 2.93%   |  |   |  | 179,305                  |  |          |  | 3,799   |  | 2.12%  
|                                |  |              |  |            |  |         |  |   |  |                          |  |          |  |         |  |        
|                               
|Total interest-bearing deposits |  | 538,313      |  | $    9,479 |  | 1.76%   |  |   |  | 478,765                  |  | $        |  | 5,862   |  | 1.22%  
|                                |  |              |  |            |  |         |  |   |  |                          |  |          |  |         |  |        
|Noninterest-bearing deposits    |  | 198,777      |  |            |  |         |  |   |  | 168,493                  |  |          |  |         |  |        
|                                |  |              |  |            |  |         |  |   |  |                          |  |          |  |         |  |        
|Total interest-bearing and      |  |              |  |            |  |         |  |   |  |                          |  |          |  |         |  |        
|noninterest-bearing deposits    |  | $    737,090 |  |            |  |         |  | $ |  | 647,258                  |  |          |  |         |  |        
|                                |  |              |  |            |  |         |  |   |  |                          |  |          |  |         |  |        

Total deposits grew $79.4 million during 2005, reaching $768.4 million at December 31, 2005 compared to $689.0 million at December 31, 2004, a 11.5% increase. At December 31, 2004, total deposits were
$689.0 million, an increase of $213.2 million or 44.8%, from total deposits of $475.7 million at December 31, 2003.  Of this increase, approximately $165.0 million was attributable to the acquisition of Mid Valley Bank.  During 2005,
noninterest-bearing deposits grew $25.0 million, from $183.8 million at December 31, 2004 to $208.8 million at December 31, 2005, a 13.6% increase. At December 31, 2005, core deposits, which consist of all demand deposit accounts,
savings accounts, and certificates of deposit less than $100,000, accounted for 90.2% of total deposits, down from 91.2% as of December 31, 2004.

Interest-bearing deposits consist of money market, NOW, savings, and time certificate accounts. Interest-bearing account balances tend to grow or decline as PremierWest adjusts its pricing and product strategies based on
market conditions, including competing deposit products. At December 31, 2005, total interest-bearing deposit accounts were $559.6 million, an increase of $54.4 million, or 10.8%, from December 31, 2004.

29

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Management generally follows a policy against relying on brokered deposits as a source for funding future loan growth, since in most cases, brokered deposit accounts are purchased with long-term maturities of two to seven
years. At December 31, 2005, time certificates of deposits of $100,000 and over totaled $75.0 million, or 9.76% of total outstanding deposits, compared to $60.9 million, or 8.83%, of total outstanding deposits at December 31, 2004, and
$42.2 million, or 8.87%, of total outstanding deposits at December 31, 2003. The following table sets forth, by time remaining to maturity, time certificates of deposit accounts outstanding at December 31, 2005:

|                                     |  |   |  | Time Deposits of |  |            |  | Time Deposits Less
|------------------------------------ |  | - |  | ---------------- |  | ---------- |  | ------------------
|                                     |  |   |  | $100,000 or More |  |            |  | Than $100,000     
|                                     |  |   |  |                 
|(dollars in thousands)               |  |   |  | Amount           |  | Percentage |  |                   
|                                     |  |   |  |                  |  |            |  |                   
|                                    
|Three months or less                 |  | $ |  | 16,142           |  | 21.51%     |  | $                 
|Over three months through six months |  |   |  | 7,483            |  | 9.97%      |  |                   
|Over six months through 12 months    |  |   |  | 21,537           |  | 28.70%     |  |                   
|Over 12 months                       |  |   |  | 29,883           |  | 39.82%     |  |                   
|                                     |  |   |  |                  |  |            |  |                   
|                                    
|Total                                |  | $ |  | 75,045           |  | 100.0%     |  | $                 
|                                     |  |   |  |                  |  |            |  |                   

Short-term and Long-term Borrowings and Other Contractual Obligations

The following table sets forth certain information with respect to PremierWest's short-term borrowings of federal funds purchased and securities sold under agreements to repurchase:

|                                    |  |                  |  |           |  | Years Ended December 31, |  |           |  |           
|----------------------------------- |  | ---------------- |  | --------- |  | ------------------------ |  | --------- |  | ----------
|                                    |  |                 
|                                    |  | 2005             |  |           |  |                          |  | 2004      |  |           
|                                    |  |                  |  |           |  |                         
|                                    |  |                  |  | Federal   |  |                          |  |           |  | Federal   
|                                    |  | Repurchase       |  | Funds     |  | Repurchase               |  | Funds     |  | Repurchase
|                                    |  | Agreements       |  | Purchased |  | Agreements               |  | Purchased |  | Agreements
|                                    |  |                  |  |           |  |                         
|(dollars in thousands)              |  |                  |  |           |  |                          |  |           |  |           
|                                   
|Amount outstanding at end of period |  | $              - |  | 16,430    |  | $                        |  | -         |  | -         
|Weighted average interest rate at   |  |                  |  |           |  |                          |  |           |  |           
|end of period                       |  | -                |  | 5.07%     |  |                          |  | -         |  | -         
|Maximum amount outstanding at any   |  |                  |  |           |  |                          |  |           |  |           
|month-end during the year           |  | $              - |  | 16,430    |  | $                        |  | 2,578     |  | -         
|Average amount outstanding during   |  |                  |  |           |  |                          |  |           |  |           
|the period                          |  | $              - |  | 1,822     |  | $                        |  | 1,039     |  | -         
|Average weighted interest rate      |  |                  |  |           |  |                          |  |           |  |           
|during the period                   |  | 0.00%            |  | 4.39%     |  |                          |  | 0.14%     |  | 0.00%     

PremierWest had long-term borrowings outstanding with the Federal Home Loan Bank of Seattle (FHLB) totaling $1.8 million and $2.4 million as of December 31, 2005 and 2004, respectively. The Bank makes monthly
principal and interest payments on the long-term borrowings which mature between 2007 and 2014 and bear interest at rates ranging from 5.82% to 7.63% . The Bank also participates in the Cash Management Advance Program (the Program) with the FHLB and
as of December 31, 2005 and 2004 the Bank had no borrowings outstanding under the Program. The Bank had total FHLB borrowings of $1.8 million against an available line of credit of approximately $42.4 million as of December 31, 2005. All
outstanding borrowings with the FHLB are collateralized by a blanket pledge agreement principally covering loans in the Bank's portfolio that are secured by 1stliens
against 1-4 family and multi-family residential properties as well as the Bank's FHLB stock and potentially any funds, investment securities or loans on deposit with the FHLB.

At December 31, 2005, two wholly-owned special purpose subsidiary trusts established by PremierWest Bancorp had issued $15.5 million of pooled trust preferred securities.  Trust preferred securities accrue and pay
distributions periodically at specified annual rates as provided in the indentures. The trusts used the net proceeds from the offering to purchase a like amount of Junior Subordinated Debentures (the "Debentures") of the Company. The Debentures are
the sole assets of the trusts.  The Company's obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the trusts.  The trust preferred securities are
mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. The Company has the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date.

30

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By issuing Trust Preferred Securities the Company is able to secure a long-term source of borrowed funds in support of its growth needs with a debt instrument that is includable as capital for regulatory purposes in the
calculation of its risk based capital ratios.  Under current Federal Reserve Bank policy, all of the outstanding debentures, subject to certain limitations, have been included in the determination of Tier I capital for regulatory
purposes.

The following table is a summary of current trust preferred securities at December 31, 2005.

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

PremierWest is a party to numerous contractual financial obligations including repayment of borrowings, operating lease payments and commitments to extend credit under off-balance sheet arrangements. The scheduled
repayment of long-term borrowings and other contractual obligations is as follows (in thousands):

|                               |  |   |  |        |  |          |  | Payments due by period |  |           |  |      
|------------------------------ |  | - |  | ------ |  | -------- |  | ---------------------- |  | --------- |  | -----
|                               |  |  
|Contractual Obligations        |  |   |  | Total  |  | < 1 year |  |                        |  | 1-3 years |  |      
|                               |  |   |  |        |  |          |  |                        |  |          
|Long-term borrowings           |  | $ |  | 1,780  |  | $        |  | 639                    |  | $         |  | 1,099
|Operating lease obligations    |  | $ |  | 3,237  |  |          |  | 384                    |  |           |  | 441  
|Junior subordinated debentures |  | $ |  | 15,464 |  |          |  | -                      |  |           |  | -    
|                               |  |   |  |        |  |          |  |                        |  |          
|Total                          |  | $ |  | 20,481 |  | $        |  | 1,023                  |  | $         |  | 1,540
|                               |  |   |  |        |  |          |  |                        |  |          

|Off-Balance Sheet Arrangements
|------------------------------

Significant off-balance sheet commitments at December 31, 2005 include commitments to extend credit of $187.1 million and standby letters of credit of $10.6 million. See Note 14 on page F-29 of theNotes to Consolidated Financial Statementsincluded with this report for a discussion on the nature, business purpose and importance of off-balance sheet arrangements.

LIQUIDITY AND CAPITAL RESOURCES;REGULATORY CAPITAL

Shareholders' equity was $102.8 million at December 31, 2005, an increase of $12.2 million or 13.5% from December 31, 2004. The increase reflects comprehensive income of $13.0
million and the exercise of stock options and related tax benefit of $229,000. This was offset by the declaration of preferred and common stock dividends of $275,000 and $769,000, respectively, and cash paid for fractional shares
resulting from a 5% stock dividend.

PremierWest has adopted policies to maintain a relatively liquid position to enable it to respond to changes in the financial environment and ensure sufficient funds are available to meet
customers' needs for borrowing and deposit withdrawals. Generally, PremierWest's major sources of liquidity are customer deposits, sales and maturities of investment securities, the use of borrowings from the FHLB and correspondent banks, and net
cash provided by operating activities. As of December 31, 2005, unused and available lines of credit totaled $42.4 million from FHLB's Cash Management Advance Program, $104.0 million from correspondent banks and $1.0 million from the
Federal Reserve Bank of San Francisco. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and unscheduled loan prepayments are not as stable because they are influenced by general interest rate levels, competing
interest rates available on other investments, market competition, economic conditions, and other factors. Liquid asset balances include cash, amounts due from other banks, federal funds sold, and investment securities available-for-sale. At
December 31, 2005, these liquid assets totaled $33.8 million or 3.70% of total assets

31

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as compared to $43.0 million or 5.34% of total assets at December 31, 2004. Total liquid assets of $43.0 million as of December 31, 2004, compare to $73.7 million or 12.90% of total assets at December 31, 2003.
Our liquidity continues to tighten as loan volumes have grown faster than our ability to build deposits as our preferred source of funding.  Further, our securities portfolio has declined from calls and maturities to a point where 100% of our
securities portfolio is committed towards pledging requirements for collateralizing public funds deposits that exceed the FDIC insurance limits. It is expected that continued strong loan growth and management's reluctance to attract higher cost
transactional deposits will result in an increase in borrowings in the near future. Management continues to focus on strategies to grow the Bank's core deposit base, while exploring alternate wholesale funding avenues. The Bank maintains contingency
plans to address its liquidity needs including borrowing capacity through the Federal Home Loan Bank and other correspondent banks to support its funding needs that are not covered by our deposit base. Further, to date management has elected to
pursue strategies for building core deposits rather than aggressively attracting higher cost certificates of deposit either through more aggressive pricing or through brokered sources.

Analysis of liquidity should include a review of the changes that appear in the consolidated statements of cash flows for the year ended December 31, 2005. The statement of cash flows includes operating, investing, and
financing categories. Operating activities include net income of $13.2 million and $3.1 million in adjustments for non-cash items and changes in cash due to changes in certain assets and liabilities. Investing activities consist primarily of
proceeds from sold or matured securities and purchases of securities, the impact of the net growth in loans, and purchases of premises and equipment. Financing activities present the cash flows associated with the change in deposit accounts, changes
in long-term and other borrowings and various shareholder transactions.

At December 31, 2005, PremierWest had outstanding unfunded lending commitments of $197.7 million. Nearly all of these commitments represented unused portions of credit lines available to businesses. Many of these
credit lines are not expected to be fully drawn upon and, accordingly, the aggregate commitments do not necessarily represent future cash requirements. Management believes that PremierWest's sources of liquidity are sufficient to meet likely calls
on outstanding commitments, although there can be no assurance in this regard.

The Federal Reserve Board and the Federal Deposit Insurance Corporation have established minimum requirements for capital adequacy for financial holding companies and member banks. The requirements address both risk-based
capital and leveraged capital. The regulatory agencies may establish higher minimum requirements if, for example, a corporation has previously received special attention or has a high susceptibility to interest rate risk.

The following table reflects PremierWest Bank's various capital ratios at December 31, as compared to regulatory minimums for capital adequacy purposes:

|                                |  | 2005   |  | 2004   |  | Minimum to be            |  | Minimum to be     
|------------------------------- |  | ------ |  | ------ |  | ------------------------ |  | ------------------
|                                |  | Actual |  | Actual |  | Adequately Capitalized |  | Well-Capitalized
|                                |  |        |  |        |  |                          |  |                   
|                               
|Total risk-based capital ratio  |  | 11.36% |  | 11.27% |  | >8.00%                   |  | >10.00%           
|Tier 1 risk-based capital ratio |  | 10.19% |  | 10.06% |  | >4.00%                   |  | >6.00%            
|Leverage ratio                  |  | 10.27% |  | 9.94%  |  | >4.00%                   |  | >5.00%            

The various capital ratios for PremierWest Bancorp at December 31, compared to regulatory minimums for capital adequacy purposes are as follows:

|                                |  | 2005   |  | 2004   |  | Minimum to be           
|------------------------------- |  | ------ |  | ------ |  | ------------------------
|                                |  | Actual |  | Actual |  | Adequately Capitalized
|                                |  |        |  |        |  |                         
|                               
|Total risk-based capital ratio  |  | 11.85% |  | 12.06% |  | >8.00%                  
|Tier 1 risk-based capital ratio |  | 10.68% |  | 10.86% |  | >4.00%                  
|Leverage ratio                  |  | 10.76% |  | 10.70% |  | >4.00%                  

32

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|RECENTLY ISSUED ACCOUNTING STANDARDS
|------------------------------------

In March 2004, the FASB ratified the consensus reached by the Emerging Issues Task Force (EITF) regarding Issue 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments." EITF Issue
03-1 provided guidance on recognition and measurement of other-than-temporary impairment and its application to certain investments, including all debt securities and equity securities that are subject to the scope of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."

On September 30, 2004, the FASB issued a proposed Board-directed Staff Position, FSP EITF Issue 03-1-a, "Implementation Guidance for the Application of Paragraph 16," of EITF Issue No. 03-1. The proposed FSP provided
implementation guidance with respect to debt securities that are impaired solely due to interest rates and/or sector spreads and analyzed for other-than-temporary impairment under paragraph 16 of EITF Issue 03-1.

In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments."  This FSP nullified certain requirements of Issue 03-1. Based on
the clarification provided in FSP FAS 115-1 and FAS 124-1, the amount of any other-than-temporary impairment that needs to be recognized will continue to be dependent on market conditions, the occurrence of certain events or changes in circumstances
relative to an impaired investment and an entity's intent and ability to hold the impaired investment at the time of the valuation. The effective date for implementing FSP FAS 115-1 and FAS 124-1 is for reporting periods beginning after December 15,
2005. Management does not anticipate adoption of FSP FAS 115-1 and FAS 124-1 will have a significant impact upon PremierWest's consolidated financial statements.

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123R,Shared Based Payment, a revision to the previously issued
guidance on accounting for stock options and other forms of equity-based compensation. SFAS No. 123R requires companies to recognize in the income statement the grant-date fair value of stock options and other equity-based forms of compensation
issued to employees. This statement is effective for financial statements as of the beginning of the first fiscal year that begins after June 15, 2005.

The Company does not expect the impact of adoption of SFAS No. 123R on net income and earnings per share will be materially different from the current fair value pro forma disclosure.

Companies may elect one of two methods for adoption of SFAS No. 123R. Under themodified prospectivemethod, any awards that are granted or modified
after the date of adoption will be measured and accounted for under the provisions of SFAS No. 123R. The unvested portion of previously granted awards will continue to be accounted for under SFAS No. 123,Accounting for Stock-Based Compensation, except that the compensation expense associated with the unvested portions will be recognized in the statement of income. Under themodified retrospectivemethod, all amounts previously reported are restated to reflect the amounts in the SFAS No. 123 pro forma disclosure. The Company expects to adopt the modified prospective
accounting method upon implementation in 2006.

In March 2005, the SEC issued Staff Accounting Bulletin ("SAB") No. 107 which expressed the views of the SEC regarding the interaction between SFAS No. 123R and certain SEC rules and regulations. SAB No. 107 provides
guidance related to the valuation of share-based payment arrangements for public companies, including assumptions such as expected volatility and expected term. The Company is assessing the impact SAB No. 107 will have on its consolidated financial
statements but does not currently believe the effect will be materially different for the current fair value disclosure described in the footnote.

33

---

ITEM7A. QUANTITATIVEANDQUALITATIVEDISCLOSURESABOUTMARKETRISK

Like other financial institutions, PremierWest is subject to interest rate risk. Interest-earning assets could mature or re-price more rapidly than, or on a different basis from, interest-bearing liabilities (primarily
borrowings and deposits with short-and medium-term maturities) in a period of declining interest rates. Although having assets that mature or re-price more frequently on average than liabilities will be beneficial in times of rising interest rates,
such an asset/liability structure will result in lower net interest income during periods of declining interest rates. Interest rate sensitivity, or interest rate risk, relates to the effect of changing interest rates on net interest income.
Interest-earning assets with interest rates tied to the prime rate for example, or that mature in relatively short periods of time, are considered interest-rate sensitive. Interest-bearing liabilities with interest rates that can be re-priced in a
discretionary manner, or that mature in relatively short periods of time, are also considered interest-rate sensitive.

The differences between interest-sensitive assets and interest-sensitive liabilities over various time horizons are commonly referred to as sensitivity gaps. As interest rates change, the sensitivity gap will have either a
favorable effect or an adverse effect on net interest income. A negative gap (with liabilities repricing more rapidly than assets) generally should have a favorable effect when interest rates are falling, and an adverse effect when rates are rising.
A positive gap (with assets repricing more rapidly than liabilities) generally should have the opposite effect: an adverse effect when rates are falling and a favorable effect when rates are rising.

The following table illustrates the maturities or repricing of PremierWest's assets and liabilities as of December 31, 2005, based upon the contractual maturity or contractual repricing dates of loans and the contractual
maturities of time deposits and borrowings. Prepayment assumptions have not been applied to fixed-rate mortgage loans. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year
or less.

|(dollars in thousands)                  |  |              |  |               |  | BY REPRICING INTERVAL |  |              |  |          |  |        |  |        
|--------------------------------------- |  | ------------ |  | ------------- |  | --------------------- |  | ------------ |  | -------- |  | ------ |  | -------
|                                        |  |              |  |               |  |                       |  |              |  |         
|                                        |  | 0  3 Months |  | 4  12 Months |  | 1  5 Years           |  | Over 5 Years |  |          |  | Total 
|                                        |  |              |  |               |  |                       |  |              |  |         
|ASSETS                                  |  |              |  |               |  |                       |  |              |  |          |  |        |  |        
|Interest-earning assets:                |  |              |  |               |  |                       |  |              |  |          |  |        |  |        
|Federal funds sold and interest-earning |  |              |  |               |  |                       |  |              |  |          |  |        |  |        
|deposits                                |  | $            |  | 462           |  | $                     |  | -            |  | $        |  | -      |  | $      
|Investment Securities                   |  |              |  | 1,814         |  |                       |  | 5,023        |  |          |  | 4,507  |  |        
|Loans                                   |  |              |  | 457,924       |  | 146,916               |  |              |  | 185,471  |  |        |  | 18,266 
|                                        |  |              |  |               |  |                       |  |              |  |         
|Total                                   |  | $            |  | 460,200       |  | $ 151,939             |  | $            |  | 189,978  |  | $      |  | 21,791 
|                                        |  |              |  |               |  |                       |  |              |  |         
|LIABILITIES                             |  |              |  |               |  |                       |  |              |  |          |  |        |  |        
|Interest-bearing liabilities:           |  |              |  |               |  |                       |  |              |  |          |  |        |  |        
|Interest-bearing checking and savings   |  | $            |  | 138,672       |  | $ 52,908              |  | $            |  | 129,957  |  | $      |  | 24,257 
|Time deposits                           |  |              |  | 48,298        |  | 80,972                |  |              |  | 84,183   |  |        |  | 332    
|Borrowings                              |  |              |  | 16,482        |  |                       |  | 160          |  |          |  | 17,007 |  |        
|                                        |  |              |  |               |  |                       |  |              |  |         
|Total                                   |  | $            |  | 203,452       |  | $ 134,040             |  | $            |  | 231,147  |  | $      |  | 24,614 
|                                        |  |              |  |               |  |                       |  |              |  |         
|Interest rate sensitivity gap           |  | $            |  | 256,748       |  | $ 17,899              |  | $            |  | (41,169) |  | $      |  | (2,823)
|                                        |  |              |  |               |  |                       |  |              |  |          |  |        |  |        
|Cumulative                              |  | $            |  | 256,748       |  | $ 274,647             |  | $            |  | 233,478  |  | $      |  | 230,655
|                                        |  |              |  |               |  |                       |  |              |  |         
|Cumulative gap as a % of earning-assets |  |              |  | 31.2%         |  |                       |  | 33.3%        |  |          |  | 28.3%  |  |        
|                                        |  |              |  |               |  |                       |  |              |  |         

For purposes of the gap analysis, loans are not reduced by the allowance for loan losses and nonperforming loans. Unearned discounts and deferred loan fees are also excluded.

This analysis of interest-rate sensitivity has a number of limitations. The gap analysis above is based upon assumptions concerning such matters as when assets and liabilities will re-price in a changing interest rate
environment. Because these assumptions are no more than estimates, certain assets and liabilities indicated as maturing or repricing within a stated period might actually mature or re-price at different times and at different volumes from those
estimated. The actual prepayments and withdrawals after a change in interest rates could deviate

34

---

significantly from those assumed in calculating the data shown in the table. Certain assets, adjustable-rate loans for example, commonly have provisions that limit changes in interest rates each time the interest rate
changes and on a cumulative basis over the life of the loan. Also, the renewal or repricing of certain assets and liabilities can be discretionary and subject to competitive and other pressures. The ability of many borrowers to service their debt
could diminish after an interest rate increase. Therefore, the gap table above does not and cannot necessarily indicate the actual future impact of general interest movements on net interest income.

In addition to a static gap analysis of interest rate sensitivity, PremierWest also 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. These results are then compared
to prior periods to determine the effect of previously implemented strategies. If estimated changes to

NPV or net interest income are not within acceptable limits, the Board may direct management to adjust its asset and liability mix to bring interest rate risk within acceptable limits. The NPV calculations are based on the
net present value of discounted cash flows, using market prepayment assumptions and market rates of interest for each asset and liability product type based on its characteristics. The theoretical projected change in NPV and net interest income over
a 12-month period under each of the instantaneous and permanent rate shocks have been calculated by PremierWest using computer simulation.

PremierWest's simulation analysis forecasts net interest income and earnings given unchanged interest rates (stable rate scenario). The model then estimates a percentage change from the stable rate scenario under scenarios
of rising and falling market interest rates over various time horizons. The simulation model based on December 31, 2005 data, estimates that if a decline of 200 basis points occurs, net interest income could be unfavorably affected up to
approximately 9.29%, while a similar increase in market rates would have a favorable impact of approximately 11.72% . Because of uncertainties about customer behavior, refinance activity, absolute and relative loan and deposit pricing levels,
competitor pricing and market behavior, product volumes and mix, and other unexpected changes in economic events affecting movements and volatility in market rates, there can be no assurance that simulation results are reliable indicators of
earnings under such conditions.

|                                |  | Net (Decrease) in   |  | Net      |  |          
|------------------------------- |  | ------------------- |  | -------- |  | ---------
|                                |  | Net Interest Income |  | Interest |  | Return on
|                                |  | (in thousands)      |  | Margin   |  | Equity   
|                                |  |                     |  |          |  |          
|                               
|As of December 31, 2005,        |  |                     |  |          |  |          
|the prime rate was 7.25%        |  | $                   |  | -        |  | 6.05%    
|                                |  |                     |  |          |  |          
|                               
|Prime rate increase of:         |  |                     |  |          |  |          
|200 basis points to 9.25%       |  | $                   |  | 5,477    |  | 6.75%    
|100 basis points to 8.25%       |  | $                   |  | 2,804    |  | 6.41%    
|                               
|Prime rate decrease of:         |  |                     |  |          |  |          
|200 basis points to 5.25%       |  | $                   |  | (4,344)  |  | 5.49%    
|100 basis points to 6.25%       |  | $                   |  | (2,617)  |  | 5.71%    
|                               
|(1) Tax adjusted at a 34% rate. |  |                     |  |          |  |          

It is PremierWest's policy to manage interest rate risk to maximize long-term profitability under the range of likely interest-rate scenarios.

35

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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements called for by this item are included in this report beginning on page F-3.

The following tables set forth the Company's unaudited consolidated financial data regarding operations for each quarter of 2005 and 2004. This information, in the opinion of management, includes all adjustments necessary,
consisting only of normal and recurring adjustments, to state fairly the information set forth therein. Certain amounts previously reported have been reclassified to conform to the current presentation. These reclassifications had no net impact on
the results of operations.

|                                              |  |               |  |         |  |                         |  | 2005    |  |        |  |                 
|--------------------------------------------- |  | ------------- |  | ------- |  | ----------------------- |  | ------- |  | ------ |  | ----------------
|                                              |  |              
|                                              |  |               |  |         |  | Second                  |  |         |  |        |  | Fourth          
|(dollars in thousands, except per share data) |  | First Quarter |  | Quarter |  | Third Quarter           |  | Quarter
|                                              |  |               |  |         |  |                         |  |        
|INCOME STATEMENT DATA                         |  |               |  |         |  |                         |  |         |  |        |  |                 
|Total interest income                         |  | $             |  | 12,496  |  | $                13,845 |  | $       |  | 15,230 |  | $         15,956
|Total interest expense                        |  |               |  | 2,195   |  | 2,624                   |  |         |  | 2,913  |  | 3,053           
|                                              |  |               |  |         |  |                         |  |        
|Net interest income                           |  |               |  | 10,301  |  | 11,221                  |  |         |  | 12,317 |  | 12,903          
|Provision for loan losses                     |  |               |  | 150     |  | -                       |  |         |  | -      |  | -               
|                                              |  |               |  |         |  |                         |  |        
|Net interest income after                     |  |               |  |         |  |                         |  |         |  |        |  |                 
|provision for loan losses                     |  |               |  | 10,151  |  | 11,221                  |  |         |  | 12,317 |  | 12,903          
|Noninterest income                            |  |               |  | 1,759   |  | 1,869                   |  |         |  | 1,855  |  | 1,868           
|Noninterest expense                           |  |               |  | 7,870   |  | 8,148                   |  |         |  | 8,572  |  | 9,028           
|                                              |  |               |  |         |  |                         |  |        
|Income before income taxes                    |  |               |  | 4,040   |  | 4,941                   |  |         |  | 5,600  |  | 5,743           
|Provision for income taxes                    |  |               |  | 1,393   |  | 1,704                   |  |         |  | 2,097  |  | 1,942           
|                                              |  |               |  |         |  |                         |  |        
|Net income                                    |  | $             |  | 2,647   |  | $               3,237   |  | $       |  | 3,503  |  | $          3,801
|                                              |  |               |  |         |  |                         |  |        
|                                             
|Basic earnings per common share               |  | $             |  | 0.16    |  | $ 0.20                  |  | $       |  | 0.21   |  | $ 0.23          
|                                              |  |               |  |         |  |                         |  |        
|Diluted earnings per common share             |  | $             |  | 0.15    |  | $ 0.18                  |  | $       |  | 0.20   |  | $ 0.22          
|                                              |  |               |  |         |  |                         |  |        
|                                             
|                                              |  |               |  |         |  |                         |  | 2004    |  |        |  |                 
|                                              |  |              
|                                              |  |               |  |         |  | Second                  |  |         |  |        |  | Fourth          
|(dollars in thousands, except per share data) |  | First Quarter |  | Quarter |  | Third Quarter           |  | Quarter
|                                              |  |               |  |         |  |                         |  |        
|INCOME STATEMENT DATA                         |  |               |  |         |  |                         |  |         |  |        |  |                 
|Total interest income                         |  | $             |  | 9,520   |  | $ 10,346                |  | $       |  | 11,227 |  | $ 11,742        
|Total interest expense                        |  |               |  | 1,518   |  | 1,547                   |  |         |  | 1,550  |  | 1,741           
|                                              |  |               |  |         |  |                         |  |        
|Net interest income                           |  |               |  | 8,002   |  | 8,799                   |  |         |  | 9,677  |  | 10,001          
|Provision for loan losses                     |  |               |  | 300     |  | 200                     |  |         |  | 150    |  | 150             
|                                              |  |               |  |         |  |                         |  |        
|Net interest income after                     |  |               |  |         |  |                         |  |         |  |        |  |                 
|provision for loan losses                     |  |               |  | 7,702   |  | 8,599                   |  |         |  | 9,527  |  | 9,851           
|Noninterest income                            |  |               |  | 1,551   |  | 1,696                   |  |         |  | 1,687  |  | 1,668           
|Noninterest expense                           |  |               |  | 6,514   |  | 7,156                   |  |         |  | 7,593  |  | 7,424           
|                                              |  |               |  |         |  |                         |  |        
|Income before income taxes                    |  |               |  | 2,739   |  | 3,139                   |  |         |  | 3,621  |  | 4,095           
|Provision for income taxes                    |  |               |  | 904     |  | 1,036                   |  |         |  | 1,195  |  | 1,351           
|                                              |  |               |  |         |  |                         |  |        
|Net income                                    |  | $             |  | 1,835   |  | $ 2,103                 |  | $       |  | 2,426  |  | $ 2,744         
|                                              |  |               |  |         |  |                         |  |        
|                                             
|Basic earnings per common share               |  | $             |  | 0.11    |  | $ 0.12                  |  | $       |  | 0.15   |  | $ 0.17          
|                                              |  |               |  |         |  |                         |  |        
|Diluted earnings per common share             |  | $             |  | 0.11    |  | $ 0.12                  |  | $       |  | 0.14   |  | $ 0.16          
|                                              |  |               |  |         |  |                         |  |        

36

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|ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
|-------- |  | -----------------------------------------------------------
|         |  | AND FINANCIAL DISCLOSURE                                   
|None.    |  |                                                            
|ITEM 9A. |  | CONTROLS AND PROCEDURES                                    

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Exchange Act Rules 13a -15(f). Under the
supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the
framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded
that our internal controls over financial reporting were effective as of December 31, 2005.

Management's assessment of the effectiveness of our internal controls over financial reporting as of December 31, 2005 has been audited by Moss Adams, LLP, an independent registered public
accounting firm, as stated in their report which is included herein.

INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

|DISCLOSURE CONTROLS AND PROCEDURES
|----------------------------------

Our management has evaluated, under the supervision and with the participation of our President & Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based on that evaluation, our President & Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded,
processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our President & Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.

|ITEM 9B.   OTHER INFORMATION
|----------------------------

|None.
|-----

37

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PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information provided in response to this Item is incorporated by reference to the Definitive Proxy Statement on Schedule 14A for the Company's 2006 Annual Meeting of Shareholders, which the Company expects first to be
sent or given to security holders on or about April 10, 2006.

|ITEM 11.  EXECUTIVE COMPENSATION
|--------------------------------

The information provided in response to this Item is incorporated by reference to the Definitive Proxy Statement on Schedule 14A for the Company's 2006 Annual Meeting of Shareholders, which the Company expects first to be
sent or given to security holders on or about April 10, 2006.

|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|-------- |  | --------------------------------------------------------------
|         |  | AND RELATED STOCKHOLDER MATTERS                               

The information provided in response to the Security Ownership of Certain Beneficial Owners and Management required by this Item is incorporated by reference to the Definitive Proxy Statement on Schedule 14A for the
Company's 2006 Annual Meeting of Shareholders, which the Company expects first to be sent or given to security holders on or about April 10, 2006.

Equity Compensation Plan Information

Equity Compensation Plan Information

|Plan category                                               | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of 
outstanding options, warrants and rights (b) | Number of securitiesremaining available forfuture issuance under 
equity compensation
 plans (excluding 
securities reflected in
 column (a))
 (c)
|----------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation
plans approved by
security holders      | 908,003 (1)                                                                                     | $7.49 (1)                                                                        | 380,144                                                                                                                                           
|Equity compensation  plans not approved by
security holders | -                                                                                               | -                                                                                | -                                                                                                                                                 
|Total                                                       | 908,003                                                                                         | $7.49                                                                            | 380,144                                                                                                                                           

Notes: 
(1) - Includes 66,033 options with a weighted average exercise price of $3.07 that were assumed in the merger of United Bancorp (Douglas National Bank) on May 8, 2000.

Under PremierWest Bank's Stock Option Plan (the Stock Option Plan), it may grant Incentive Stock Options (ISOs) and Nonqualified Stock Options (NQSOs) to key employees. The option price of ISOs is the fair market value at
the date of grant, and the option price of NQSOs is to be a price not less than 85% of the fair market value at the date of grant. The options generally vest over time, and all options generally expire after a period of ten years. However, the Board
has the right to suspend or terminate the Stock Option Plan at any time, except with respect to the remaining options outstanding.

38

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information provided in response to this Item is incorporated by reference to the Definitive Proxy Statement on Schedule 14A for the Company's 2006 Annual Meeting of Shareholders, which the Company expects first to be
sent or given to security holders on or about April 10, 2006.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information provided in response to this item is incorporated by reference to the Definitive Proxy Statement on Schedule 14A for the Company's 2006 Annual Meeting of Shareholders, which the Company expects first to be
sent or given to security holders on or about April 10, 2006.

39

---

|PART IV 
|--------
|        
|ITEM 15.
|        
|(a)(1)  
|        
|        
|        
|(2)     
|        
|        
|        
|        

|(3) | The following exhibits are filed with, and incorporated into by reference, this report, and this list constitutes the exhibit index:
|--- | ------------------------------------------------------------------------------------------------------------------------------------
|   

|Exhibits
|--------

|3.1    | Articles of Incorporation of PremierWest Bancorp1                                                                                                           
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|3.2    | Amended and Restated Bylaws of PremierWest Bancorp2                                                                                                         
|      
|4.1    | Specimen Stock Certificate3                                                                                                                                 
|      
|4.2    | Series A Preferred Stock Certificate Designation of the Registrant1                                                                                         
|      
|10.1   | Employment Agreement, dated July 29, 2004, between John L. Anhorn and PremierWest Bancorp4 A +                                                              
|      
|10.1.1 | Amendment, dated December 27, 2004, to Employment Agreement, dated July 29, 2004, between John L. Anhorn and PremierWest Bancorp6 A
+                       
|      
|10.2   | Employment Agreement, dated July 29, 2004, between Tom Anderson and PremierWest Bancorp4 B +                                                                
|      
|10.2.1 | Amendment, dated December 27, 2004, to Employment Agreement, dated July 29, 2004, between Tom Anderson and PremierWest Bancorp6 B +                         
|      
|10.3   | Employment Agreement, dated effective March 1, 2006, between
Bobby L. DuMilieu and PremierWest Bancorp                                                      
|      
|10.4   | Supplemental Executive Retirement Plan Agreement, dated July 29, 2004, between
John Anhorn and PremierWest Bank4C +                                         
|      
|10.4.1 | Amendment, dated December 27, 2004, to Supplemental Executive Retirement Plan Agreement, dated July 29, 2004, between
John Anhorn and PremierWest Bank6C +  
|      
|10.5   | Supplemental Executive Retirement Plan Agreement, dated July 29, 2004, between
Tom Anderson and PremierWest Bank4D +                                        
|      
|10.5.1 | Amendment, dated December 27, 2004, to Supplemental
Executive Retirement Plan Agreement, dated July 29, 2004, between Tom Anderson and PremierWest Bank6
D +
|      
|10.6   | Executive Survivor Income Agreement dated, November 12, 2002, between
John A. Anhorn and PremierWest BankE
+                                                
|      
|10.6.1 | Amendment, dated July 29, 2004, to Executive Survivor Income Agreement dated, November 12, 2002, between
John A. Anhorn and PremierWest Bank4
E
+           
|      
|10.7   | 2005 Executive Deferred Compensation Agreement between John A. Anhorn and PremierWest Bank dated December 27, 20046
E +                                     
|      
|10.8   | Continuing Benefits Agreement between Thomas Becker and PremierWest Bank dated December 27, 20046 F +                                                       
|      
|10.9   | 2005 Director Deferred Compensation Agreement between Thomas Becker and PremierWest Bank dated December 27, 20046
G +                                       
|      
|10.10  | 1992 Combined Incentive and Non-Qualified Stock Option Plan of Bank of Southern Oregon3                                                                     
|      
|10.11  | United Bancorp Stock Option Plan, as amended5                                                                                                               
|      

40

---

|10.12   | PremierWest Bancorp Stock Option Plan4                                                                                                                         
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|10.12.1 | Non Qualified Stock Option Agreement                                                                                                                           
|       
|10.12.2 | Incentive Stock Option Agreement                                                                                                                               
|       
|10.13   | 2006 Bonus Program7                                                                                                                                            
|       
|10.14   | Summary of 2006 Director Compensation                                                                                                                          
|       
|21.1    | Subsidiaries of PremierWest Bancorp1                                                                                                                           
|       
|23.1    | Consent of Moss AdamsLLPrelating to the audited financial statements of the registrant for the period ending December 31, 2005, 2004 and 2003                  
|       
|31.1    | Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002                        
|       
|31.2    | Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002                        
|       
|32.1    | Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|       
|32.2    | Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|       
|1       | Incorporated by reference to Registrant's statement on Form S-4 (File NO. 333-110842).                                                                         
|2       | Incorporated by reference to Registrant's quarterly report on Form 10-Q for the period ended September 30, 2003.                                               
|3       | Incorporated by reference to Registrant's statement on Form S-4 (File No. 333-96209).                                                                          
|4       | Incorporated by reference to the Registrant's quarterly report on from 10-Q for the period ended September 30, 2004.                                           
|5       | Incorporated by reference to the registration statement on Form S-8 (File No. 333-40886).                                                                      
|6       | Incorporated by reference to the Registrant's report on Form 8-K
filed December 29, 2004.                                                                      
|7       | Incorporated by reference to the Registrant's report on Form 8-K
filed January 3, 2006.                                                                        
|       
|        | A                                                                                                                                                              
|        | B                                                                                                                                                              
|        | C                                                                                                                                                              
|        | D                                                                                                                                                              
|        | E                                                                                                                                                              
|        | F                                                                                                                                                              
|        | G                                                                                                                                                              

+Management contract or compensatory plan or arrangement.

41

---

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized.

|
|

|PREMIERWEST BANCORP(Registrant)                       |  |                   
|----------------------------------------------------- |  | ------------------
|By:                                                   |  | /s/ John L. Anhorn
|John L. Anhorn, President and Chief Executive Officer |  |                   

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

|By: |  | /s/John Duke                               |  | Date: March 10, 2006
|--- |  | ------------------------------------------ |  | --------------------
|    |  | John Duke, Director                        |  |                     
|   
|   
|By: |  | /s/ Dennis Hoffbuhr                        |  | Date: March 10, 2006
|    |  | Dennis Hoffbuhr, Director                  |  |                     
|   
|   
|By: |  | /s/ Rickar Watkins                         |  | Date: March 10, 2006
|    |  | Rickar Watkins, Director                   |  |                     
|   
|   
|By: |  | /s/ James Patterson                        |  | Date: March 10, 2006
|    |  | James Patterson, Director                  |  |                     
|   
|   
|By: |  | /s/ John L. Anhorn                         |  | Date: March 10, 2006
|    |  | John L. Anhorn, Director, President and    |  |                     
|    |  | Chief Executive Officer                    |  |                     
|   
|   
|By: |  | /s/ Richard R. Hieb                        |  | Date: March 10, 2006
|    |  | Richard R. Hieb, Chief Operating Officer   |  |                     
|   
|   
|By: |  | /s/ Tom Anderson                           |  | Date: March 10, 2006
|    |  | Tom Anderson, Chief Financial Officer, and |  |                     
|    |  | Principal Accounting Officer               |  |                     

42

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|Signatures- (continued)
|-----------------------

|By: |  | /s/ Tom Becker           |  | Date: March 10, 2006
|--- |  | ------------------------ |  | --------------------
|    |  | Tom Becker, Director     |  |                     
|   
|   
|By: |  | /s/ Brian Pargeter       |  | Date: March 10, 2006
|    |  | Brian Pargeter, Director |  |                     
|   
|   
|By: |  | /s/ Patrick Huycke       |  | Date: March 10, 2006
|    |  | Patrick Huycke, Director |  |                     
|   
|   
|By: |  | /s/ John Dickerson       |  | Date: March 10, 2006
|    |  | John Dickerson, Director |  |                     

43

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