10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 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, 2007

Commission file number: 000-50332

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

Oregon (State or other jurisdiction of incorporation or organization)	93-1282171 (I.R.S. Employer Identification No.)
503 Airport Road – Suite 101         Medford, Oregon  (Address of principal executive offices)	97504        (Zip Code)

Registrant's telephone number, including area code: (541) 618-6003
Securities registered pursuant to Section 12(b) of the Act: None
Securities 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, 2007, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $205,098,057 based on the $13.46 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 7, 2008 was 22,329,900.

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 22, 2008 are incorporated by reference into Part III.

	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	8 - 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 - 14
Item 6.	Selected Financial Data	15
Item 7.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations	16 - 35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	35 - 37
Item 8.	Financial Statements and Supplementary Data	38
Item 9.	Changes In and Disagreements with Accountants on Accounting
	and Financial Disclosure	39
Item 9A.	Controls and Procedures	39
Item 9B.	Other Information	39
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	40
Item 11.	Executive Compensation	40
Item 12.	Security Ownership of Certain Beneficial Owners and Management
	and Related Stockholder Matters	40
Item 13.	Certain Relationships and Related Transactions, and Director Independence	40
Item 14.	Principal Accountant Fees and Services	40
PART IV
Item 15.	Exhibits and Financial Statement Schedules	41 - 42
SIGNATURES		43 - 44

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. For a more comprehensive discussion of the risk factors impacting our business refer to Item 1A Risk Factors in this report beginning on page 9. These risks and uncertainties include 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. 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 $15.1 million for the year ended December 31, 2007, a 3.10% increase compared to net income of $14.6 million for 2006. Net income of $14.6 million in 2006 was up 11.10% over 2005 earnings of $13.2 million. Our diluted earnings per share were $0.82, $0.79 and $0.71 for the years ended 2007, 2006 and 2005, respectively. Return on average shareholders' equity was 12.25% for the year ended December 31, 2007 compared to the return on average shareholder’s equity of 13.26% and 13.59% for 2006 and 2005, 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. 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 accounted for as a purchase, accordingly the consolidated financial statements of PremierWest Bancorp include the results of operation of Mid Valley Bank since the date of acquisition. On January 26, 2008, the Company acquired Stockmans Financial Group and its wholly owned banking subsidiary, Stockmans Bank, with five branch offices located in the greater Sacramento, California

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area. This acquisition will also be accounted for as a purchase and be reflected in the 2008 consolidated financial statements of PremierWest from the date of acquisition forward.

       PremierWest Bank adheres to a community banking strategy by offering a full range of financial products and services through its network of branches encompassing a two state region between northern California and southern Oregon from Roseburg, Oregon, to the north, and the markets situated around Roseville and Woodland, California, to the south; and the high growth market area of Deschutes County located in central Oregon. 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, Coos Bay, Eugene and Portland, Oregon and Redding, 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 for PremierWest and presently has no properties under its ownership.

     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 require 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.

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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.

       Consumer lending - PremierWest Bank and Premier Finance Company, make secured and unsecured loans to individual borrowers for a variety of purposes including personal loans, revolving credit lines and home equity loans, as well as consumer loans secured by autos, boats and recreational vehicles. 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.

       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, 2007, no class of similar products or services accounted for 10% or more of consolidated revenues for PremierWest.

MARKET AREA

PremierWest Bank conducts a regional community banking business in southern and central Oregon and northern California through a network of 40 full service bank branches. The Bank has evolved over the past seven 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 and branch offices in the surrounding communities of Central Point, Eagle Point, Ashland and Shady Cove. Medford is the seventh 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 and in October 2007 opened a second branch office in Chico. The economy of northern California from Siskiyou County south to Butte County is primarily involved in government services, retail trade and services, education, healthcare, agriculture, recreation and tourism.

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     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.

     Within Oregon and located inland from the Interstate 5 corridor, PremierWest Bank operates three branches, one located in Klamath Falls (Klamath County), and two located in Deschutes County (Bend and Redmond). The Company opened its Klamath Falls office during the first quarter of 2004. Klamath County's principal industries include lumber and wood products, agriculture, transportation, recreation and government. In October 2004, the Bank established a loan production office in Bend. This office was subsequently converted to a full service banking office in August 2005. During the fourth quarter of 2006, a new branch was opened in Redmond firmly establishing PremierWest Bank’s presence in central Oregon’s Deschutes County. Deschutes County is Oregon's fastest growing county with a diverse employment base including manufacturing, retail trade, tourism, natural resources and government.

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 personal service to both commercial and individual customers.

EMPLOYEES

As of December 31, 2007, PremierWest Bank had 445 full-time equivalent employees compared to 435 at December 31, 2006. None of our employees are represented by a collective bargaining group. Management considers its relations with employees to be good.

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 is www.premierwestbank.com. The contents of our website are not incorporated into this report or into our other filings with the SEC.

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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 quarterly deposit insurance premium assessments to the FDIC.

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

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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 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

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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.

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)

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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, 2007, management believes the Company is in full compliance with the requirements and provisions of the Sarbanes-Oxley Act.

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.

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     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 a credit 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 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.

     Acquisition Risk – PremierWest acquired Stockmans Financial Group on January 26, 2008. PremierWest may fail to achieve expected revenue increases or realize anticipated cost savings from the Stockmans Financial Group acquisition and combining Stockmans’ operations into PremeirWest’s may be more difficult, costly or time consuming than expected. The success of the Stockmans merger will depend, in part, on our ability to achieve the revenue increases and realize anticipated cost savings from combining the businesses of PremierWest and Stockmans. Our cost savings expectations depend on our ability to combine the two businesses in a manner that permits those cost savings to be realized. If our estimates prove incorrect or if we cannot combine our two companies successfully and efficiently, the anticipated cost savings may not be realized fully, or at all, or may take longer to realize than expected. Further, prior to merging, PremierWest and Stockmans operated independently, each with separate operating procedures and management teams. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. As with any bank merger, there also may be disruptions that cause us to lose customers or cause customers to take their deposits out of our bank.

     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

9

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 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

The Company has not received any comments from the Securities and Exchange Commission.

ITEM 2.   PROPERTIES

As of December 31, 2007, the Company conducted business through 50 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 50 offices included 40 full service bank branches and 10 other office locations.

PremierWest Bank’s 40 full service branch facilities are located in Oregon and California and more specifically broken down as follows: 23 branches are located in Jackson (10), Josephine (2), Deschutes (2), Douglas (8) and Klamath (1) counties of Oregon and 17 branches offices located in Siskiyou (8), Shasta (3), Butte (2), Tehama (2), Placer (1) and Yolo (1) counties of California. Of the 40 branch locations, 29 are owned by PremierWest Bank, nine are leased, and two locations involve long-term land leases where the Bank owns the building.

The Company’s ten other locations house administrative and subsidiary 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 one in Red Bluff, California housing PremierWest Bank data processing functions; four leased locations housing stand-alone Premier Finance Company offices in Portland, Eugene, Coos Bay and Roseburg, Oregon; and, two owned locations in Medford, Oregon occupied by a Premier Finance Company office, the Bank’s consumer lending group and the Bank’s internal audit department.

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, 2007, the aggregate monthly rental on leased locations was $72,000.

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ITEM 3.    LEGAL PROCEEDINGS

     From time to time, in the normal course of business, PremierWest may become party to various legal actions. Except as noted below, management is unaware of any existing legal actions against the Company or its subsidiaries that would have a materially adverse impact on our business, financial condition or results of operations.

     Ball v. PremierWest Bank, filed August 7, 2007 in the United States District Court of California (USDC Case No. 07-01618 LKK/DAD). Ball was a principal in Indian Springs Vineyard, which had borrowed in excess of $4,000,000 from the PremierWest’s predecessor, Mid Valley Bank. Included in these loans was a line of credit in the amount of $750,000 made to Ball individually, which was guaranteed up to ninety percent by the Farm Services Agency. Through the merger with Mid Valley Bank, PremierWest assumed these loans. Shortly after the merger, Indian Springs Vineyard defaulted on the loans and, in mid-2004, PremierWest initiated action to liquidate the assets of the Vineyard to satisfy the loans. Indian Springs subsequently sought protection in Chapter 11 bankruptcy. In February, 2005, with the approval of the bankruptcy court, the parties negotiated a settlement with Indian Springs and its principals, including Ball, in which PremierWest accepted $2,175,000 in satisfaction of the indebtedness and released Indian Springs and its principals. PreimerWest then submitted a Guaranteed Farm Loan Default Status report to the Farm Service Agency and subsequently collected $411,452 on the guaranty. The Farm Service Agency then notified Ball that he had incurred a “federal debt” for the amount paid to PremierWest by the Farm Service Agency. Ball subsequently sued the Farm Service Agency to enjoin collection of the debt and sued PremierWest alleging that PremierWest willfully and knowingly breached the settlement agreement; and its actions constituted fraud or subterfuge, alleging violation of the California Business and Professions Code and the Federal False Claims Act, which may entitle Ball to recovery of tort and punitive damages in addition to the breach of contract claims.

     Ball alleges damages in the sum of $411,452 plus economic losses in excess of $2,000,000 and punitive damages in an unknown amount. PremierWest’s insurance carrier has accepted the tender of defense of this claim subject to a reservation of rights.

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, 2007.

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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 Capital Market ("Nasdaq") under thesymbol "PRWT". 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. This information has been adjusted to reflect previous stock dividends paid in 2007, 2006 and 2005. Bid quotations reflect inter-dealer prices, without adjustment for mark-ups, mark-downs, or commissions and may not necessarily represent actual transactions. On March 7, 2008, the Company had 22,329,900 shares of common stock issued and outstanding which were held by approximately 701 shareholders of record, a number which does not include approximately 2,667 beneficial owners who hold shares in "street name." As of March 7, 2008, the most recent date prior to the date of this Report, the closing price of the common stock was $10.60 per share.

	2007						2006						2005
		Closing				Cash		Closing				Cash		Closing					Cash
		Market Price				Dividends		Market Price				Dividends		Market Price					Dividends
		High		Low		Declared		High		Low		Declared		High			Low		Declared
1st Quarter	$	15.29	$	12.16	$	-	$	17.06	$	12.67	$	-	$	11.20	$		9.42	$	-
2nd Quarter	$	14.44	$	11.81	$	0.05	$	16.78	$	12.88	$	-	$	13.57	$		9.37	$	-
3rd Quarter	$	13.64	$	12.00	$	0.06	$	15.59	$	13.48	$	0.05	$	14.51	$	11.56		$	-
4th Quarter	$	12.90	$	11.16	$	0.06	$	16.17	$	14.52	$	0.05	$	13.56	$	12.14		$	0.05

       PremierWest declared its first cash dividend in the fourth quarter of 2005; declared two cash dividends during 2006; and declared three cash dividends during 2007. In conjunction with declaring the fourth quarter 2007 cash dividend the Company also announced its intention to institute a quarterly cash dividend program, however, 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 following table provides information about repurchases of common stock by the Company during the quarter ended December 31, 2007

				Total Number of	Maximum Number of
				Shares Purchased	Remaining Shares
	Total Number			as Part of Publicly	that May be
	of Shares		Average Price	Announced Plan	Purchased at Period
Period	Purchased (1)		Paid Per Share	(2)	End under the Plan
10/1/07 - 10/31/07	-			-
11/1/07 - 11/30/07	11,000	$	11.70	11,000	915,200.00
12/1/07 - 12/31/07	-			-
Total for the quarter	11,000	$	11.70	11,000

(1)	Shares repurchased by the Company during the quarter consist of 11,000 shares repurchased pursuant to the Company's publicly announced corporate stock repurchase plan described in (2) below.
(2)	The repurchase plan, which was approved by the board and announced in May 2007, authorized the repurchase of up to 1.0 million shares. The plan has no stated expiration.

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Equity Compensation Plan Information
				Number of securities
				remaining available for
				future issuance under
	Number of securities to		Weighted-average	equity compensation
	be issued upon exercise		exercise price of	plans (excluding
	of outstanding options,		outstanding options,	securities reflected in
	warrants and rights		warrants and rights	column (a))
Plan category	(a)		(b)	(c)
Equity compensation
plans approved by
security holders	987,247(1)	$	8.68(1)	1,240,616
Equity compensation
plans not approved by
security holders	-		-	-
Total	987,247	$	8.68	1,240,616

Notes:

(1) - Includes 36,054 options with a weighted average exercise price of $3.54 that were assumed in the merger of United Bancorp (Douglas National Bank) on May 8, 2000.

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Performance Graph

The following graph shows the cumulative total return for our common stock compared to the cumulative total returns for the SNL NASDAQ Bank index and the NASDAQ Composite index. All values were gathered by SNL Financial LC from sources deemed to be reliable. The comparison assumes that $100.00 was invested on December 31, 2002 in PremierWest Bancorp common stock and in each of the comparative indexes. The cumulative total return on each investment is as of December 31 for each of the subsequent five years and assumes the reinvestment of all cash dividends and the retention of all stock dividends. PremierWest Bancorp’s five year cumulative total return was 147.90% compared to 19.40% and 98.60% for the SNL NASDAQ Bank and NASDAQ Composite indexes, respectively.

			Period Ending
Index	12/31/02	12/31/03	12/31/04	12/31/05	12/31/06	12/31/07
PremierWest Bancorp	100.00	179.38	235.74	270.12	325.50	247.89
SNL NASDAQ Bank	100.00	129.93	144.21	137.97	153.15	119.35
NASDAQ Composite	100.00	150.01	162.89	165.13	180.85	198.60

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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,
		2007			2006				2005			2004			2003
Operating Results
Total interest income	$	82,455		$	73,252			$	57,527		$	42,835		$	31,779
Total interest expense		27,216			19,104				10,785			6,356			6,391
Net interest income		55,239			54,148				46,742			36,479			25,388
Provision for loan losses		686			800				150			800			1,200
Noninterest income		8,810			7,701				7,351			6,602			5,880
Noninterest expense		38,958			37,415				33,618			28,687			21,041
Income before provision for income taxes		24,405			23,634				20,325			13,594			9,027
Provision for income taxes		9,303			8,986				7,136			4,486			3,024
Net income	$	15,102		$	14,648			$	13,189		$	9,108		$	6,003
Per Share Data (1)
Basic earnings per common share	$	0.87		$	0.85			$	0.76		$	0.52		$	0.40
Diluted earnings per common share	$	0.82		$	0.79			$	0.71		$	0.50		$	0.40
Dividends declared per common share	$	0.17		$	0.10			$	0.05		$	-		$	-
Ratio of dividends declared to net income		19.14	%		11.07	%			5.83	%		0.0	%		0.0	%
Financial Ratios
Return on average equity		12.25	%		13.26	%			13.59	%		10.74	%		11.23	%
Return on average assets		1.41	%		1.52	%			1.52	%		1.20	%		1.11	%
Efficiency ratio (2)		60.83	%		60.49	%			62.15	%		66.59	%		67.29	%
Net interest margin (3)		5.72	%		6.25	%			6.05	%		5.48	%		5.29	%
Balance Sheet Data at Year-End
Gross loans	$	1,025,898		$	922,687		$	808,577			$	690,461		$	459,763
Allowance for loan losses	$	11,450		$	10,877		$		10,341		$	9,171		$	5,466
Allowance as percentage of loans		1.12	%		1.18	%			1.28	%		1.33	%		1.19	%
Total assets	$	1,157,961		$	1,034,511		$	913,661			$	804,445		$	571,321
Total deposits	$	935,315		$	879,350		$	768,419			$	688,985		$	475,746
Total equity	$	127,675		$	116,259		$	102,784			$	90,580		$	64,751

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 38.25% for 2007, 38.00% for 2006 and 34.00% in prior years.

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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, 2007 and 2006, and for each of the three years in the period ended December 31, 2007, that are included as exhibits 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 2007 was $15.1 million, a 3.10% improvement over 2006 net income of $14.6 million. Our diluted earnings per share were $0.82 and $0.79 for the years ended 2007 and 2006, respectively. This improvement resulted from a $9.2 million increase in interest income and a $1.1 million increase in noninterest income and $100,000 decrease in the loan loss provision. These results were offset by an $8.1 million increase in interest expense, a $1.5 million increase in noninterest expense and a $300,000 increase in the provision for income taxes. Return on average shareholders' equity was 12.25% and return on average assets was 1.41% for the year ended December 31, 2007. This compared with a return on average shareholders' equity of 13.26% and a return on average assets of 1.52% for 2006.

					Years Ended December 31,
		2007			2006			2005				2004			2003
(dollars in thousands except
financial ratios)
Net income	$	15,102		$	14,648			$	13,189		$	9,108		$	6,003
Average assets	$	1,073,571		$	966,786		$	867,532			$	755,945		$	538,870
RETURN ON AVERAGE ASSETS		1.41	%		1.52	%			1.52	%		1.20	%		1.11	%
Net income	$	15,102		$	14,648			$	13,189		$	9,108		$	6,003
Average equity	$	123,244		$	110,454			$	97,058		$	84,790		$	53,464
RETURN ON AVERAGE EQUITY		12.25	%		13.26	%			13.59	%		10.74	%		11.23	%
Cash dividends declared	$	2,891		$	1,621			$	769		$	-		$	-
Net income	$	15,102		$	14,648			$	13,189		$	9,108		$	6,003
PAYOUT RATIO		19.14	%		11.07	%			5.83	%		0.00	%		0.00	%
Average equity	$	123,244		$	110,454			$	97,058		$	84,790		$	53,464
Average assets	$	1,073,571		$	966,786		$	867,532			$	755,945		$	538,870
AVERAGE EQUITY TO ASSET RATIO		11.48	%		11.42	%			11.19	%		11.22	%		9.92	%

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       Total loans outstanding, net of deferred loan fees, grew $103.8 million, or 11.30% in 2007 and totaled $1.024 billion at December 31, 2007 compared to $920.5 million at December 31, 2006. Growth in loan volumes were generated internally across all of PremierWest Bank’s market areas. Over the past year our allowance for loan loss increased 5.30% to $11.5 million totaling 1.12% of outstanding loans. The provision expense for loan losses was $686,000 for 2007 compared to $800,000 in 2006. Management believes that an appropriate overall reserve exists based on our ongoing assessment of loan portfolio quality, the relatively stable level of average 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 $935.3 million at December 31, 2007, an increase of $55.9 million from $879.4 million at December 31, 2006. Noninterest-bearing demand deposits totaled $199.9 million and accounted for 21.40% of total deposits at year end compared to 22.70% at December 31, 2006. The Bank continues to aggressively pursue noninterest-bearing deposit relationships from consumers and businesses.

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 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 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, 2007, approximately 71.40% 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 losses.

       At December 31, 2007, PremierWest had approximately $20.9 million in unamortized goodwill as a result of previous business combinations. 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.

       Effective January 1, 2006, PremierWest Bancorp adopted Financial Accounting Standards Board Statement No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires companies to measure and recognize as compensation expense, the grant date fair market value for all share-based awards. SFAS 123R requires companies to estimate the fair market value of stock-based payment awards on the date of grant using an option-pricing model. We use the Black-Scholes option-pricing model to value our stock options. The Black-Scholes model requires the use of assumptions regarding the risk-free interest rate, our expected dividend yield, the weighted average expected life of the options and the historical volatility of our stock price.

17

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, 2007							Year Ended December 31, 2006							Year Ended December 31, 2005
					Interest	Average						Interest	Average						Interest	Average
		Average			Income or	Yields or			Average			Income or	Yields or			Average			Income or	Yields or
		Balance			Expense	Rates			Balance			Expense	Rates			Balance			Expense	Rates
(dollars in thousands)
INTEREST-EARNING ASSETS:
Loans (1) (2) (3)	$	962,419		$	82,313	8.55	%	$	855,562		$	72,830	8.51	%	$	754,465		$	56,901	7.54	%
Investment securities:
Taxable securities		2,730			66	2.42	%		5,735			98	1.71	%		7,498			188	2.51	%
Nontaxable securities (1)		5,649			372	6.59	%		7,896			521	6.60	%		10,559			638	6.04	%
Temporary investments		1,750			95	5.43	%		2,591			136	5.25	%		6,900			209	3.03	%
Total interest-earning assets		972,548			82,846	8.52	%		871,784			73,585	8.44	%		779,422			57,936	7.43	%
Cash and due frombanks		28,073							30,453							27,883
Allowance for loan losses		(11,174	)						(10,682	)						(10,315	)
Other assets		84,124							75,231							70,542
Total assets	$	1,073,571						$	966,786						$	867,532
INTEREST-BEARINGLIABILITIES:
Interest-bearing checking and
savings accounts	$	377,550			9,691	2.57	%	$	342,221			5,896	1.72	%	$	339,480			3,662	1.08	%
Time deposits		329,912			15,454	4.68	%		248,887			10,035	4.03	%		198,833			5,817	2.93	%
Other borrowings		37,571			2,071	5.51	%		58,106			3,173	5.46	%		26,259			1,306	4.97	%
Total interest-bearing liabilities		745,033			27,216	3.65	%		649,214			19,104	2.94	%		564,572			10,785	1.91	%
Noninterest-bearing deposits		194,456							198,295							198,777
Other liabilities		10,838							8,823							7,125
Total liabilities		950,327							856,332							770,474
Shareholders' equity		123,244							110,454							97,058
Total liabilities and
shareholders' equity	$	1,073,571						$	966,786						$	867,532
Net interest income (1)				$	55,630						$	54,481						$	47,151
Net interest spread						4.87	%						5.50	%						5.52	%
Average yield on earning assets (1) (2)						8.52	%						8.44	%						7.43	%
Interest expense to earning assets						2.80	%						2.19	%						1.38	%
Net interest income to earning assets (1) (2)						5.72	%						6.25	%						6.05	%

(1)	Tax-exempt income has been adjusted to a tax equivalent basis at a 38.25% effective rate for 2007, a 38.00% effective rate for 2006, and 34.00% for 2005. The amount of such adjustment was an addition to recorded pre- tax income of $391,000, $333,000 and $409,000 for 2007, 2006, and 2005, respectively.
(2)	Average nonaccrual loans of approximately $3.2 million for 2007, $1.5 million for 2006 and $2.0 million for 2005 are included in the average loan balances.
(3)	Loan interest income includes loan fee income of $2.6 million, $2.8 million, and $2.9 million for 2007, 2006, and 2005, respectively.

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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, 2007, was $55.6 million, an increase of 2.11% compared to tax equivalent net interest income of $54.5 million in 2006, which was an increase of 15.54% compared to tax equivalent net interest income of $47.2 million in 2005. The overall tax-equivalent earning asset yield was 8.52% in 2007 compared to 8.44% in 2006 and 7.43% in 2005. For the same years, rates on interest-bearing liabilities were 3.65%, 2.94% and 1.91%, respectively.

       Total interest-earning assets averaged $972.5 million for the year ended December 31, 2007, compared to $871.8 million for the corresponding period in 2006. The net growth in earning assets resulted from an overall growth in loan volume from all our geographic markets served. Growth in our higher yielding loan assets were partially offset by decreases in lower yielding Federal Funds sold and investment securities.

       Interest-bearing liabilities averaged $745.0 million for the year ended December 31, 2007, compared to $649.2 million for the same period in 2006. Interest expense, as a percentage of average earning assets, decreased to 2.80% in 2007, compared to 2.19% in 2006 and 1.38% in 2005.

       Average loans, which generally carry a higher yield than investment securities and other earning assets, comprised 98.96% of average earning assets during 2007, compared to 98.14% in 2006 and 96.80% in 2005. During the same periods, average yields on loans were 8.55% in 2007, 8.51% in 2006, and 7.54% in 2005. Average investment securities comprised .86% of average earning assets in 2007, which was down from 1.56% in 2006 and 2.32% in 2005. Tax equivalent interest yields on investment securities were 5.23% for 2007, 4.54% for 2006, and 4.57% in 2005.

       The short-term interest rate environment, as measured by the Prime lending rate, remained stable from the end of the second quarter in 2006 until near the end of the third quarter of 2007. As was anticipated at the end of 2006, rates began to decline during the latter half of 2007 as actions to lower short term rates by the Federal Reserve resulted in a 50 basis point reduction in the Prime Rate on September 18, 2007, followed by separate 25 basis point reductions occurring on October 31 and December 11, 2007, respectively. A nearly 15 month period of stable interest rates leading up to these declines in the Prime Rate contributed to the narrowing of our interest rate spread as during this period of time, the repricing of our interest-bearing deposits, which had lagged behind the previous period of rising interest rates, were repricing to higher interest rates while the loan portfolio yield remained relatively stable. As a result, our net interest spread decreased 63 basis points between 2006 and 2007. This in combination with the 100 basis point overall drop in Prime, which negatively impacted our loan portfolio yield during the fourth quarter of 2007, resulted in a decline in our net interest margin by 53 basis points from 6.25% for 2006 to 5.72% in 2007. Our balance sheet is asset sensitive; accordingly, a declining interest rate environment will negatively impact our net interest margin.

19

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.

				2007 vs. 2006									2006 vs. 2005
		Increase (Decrease) Due To									Increase (Decrease) Due To
								Net									Net
(in thousands)		Volume			Rate			Change			Volume			Rate			Change
Interest-earning assets:
Loans	$	9,094		$	389		$	9,483		$	7,621		$	8,308		$	15,929
Investment securities:
Taxable securities		(51	)		19			(32	)		(44	)		(46	)		(90	)
Nontaxable securities		(148	)		(1	)		(149	)		(161	)		44			(117	)
Temporary investments		(44	)		3			(41	)		(131	)		58			(73	)
Total		8,851			410			9,261			7,285			8,364			15,649
Interest-bearing liabilities:
Deposits:
Interest-bearingdemand and savings	$	608			3,187			3,795		$	30			2,204			2,234
Time deposits		3,265			2,154			5,419			1,470			2,748			4,218
Other borrowings		(1,121	)		19			(1,102	)		1,582			285			1,867
Total		2,752			5,360			8,112			3,082			5,237			8,319
Net increase (decrease) in net
interest income	$	6,099		$	(4,950	)	$	1,149		$	4,203		$	3,127		$	7,330

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 estimated reserves based on assigned credit risk ratings for 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, 2007, the loan loss provision totaled $686,000, compared to $800,000 for 2006, and $150,000 for 2005. This represents a decrease of 14.25% between 2006 and 2007 and an increase of 433.30% between 2005 and 2006. The large increase in the loan loss provision that occurred between 2006 and 2005 resulted from a relatively modest loan loss provision that was taken during 2005 because of a large recovery during 2005 that contributed to overall net loan loss recoveries of $1.0 million. During 2007 the Bank continued to experience significant loan growth and the loan loss provision reflected this growth. Contributing to stable trends in overall credit quality has been the concerted effort on the part of management toward building and maintaining a consistent, proactive and responsive credit culture throughout the organization. Management has progressively 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 29.

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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, 2007 and December 31, 2006, loan charge-offs exceeded recoveries by $294,000 and $264,000 respectfully. A more detailed review of charge-offs and recoveries are presented in the table on page 29.

Noninterest Income

       Noninterest income is primarily comprised of service charges on deposit accounts; mortgage origination fees; investment brokerage and annuity fees; other commissions and fees; and other noninterest income including gains on sales of investment securities. Deposit account related service charges and fees for other banking services have grown consistently over the past three years as a result of the Bank’s internal growth generally and also from increases made in our fee schedule for banking services. Mortgage origination fees, investment brokerage and annuity fees are commission based sources of revenue that reflected a net increase in revenue in 2007 compared with 2006.

       During 2007 noninterest income increased from $7.7 million to $8.8 million, an increase of $1.1 million or 14.40% . Overall, deposit service charge income increased $703,000; investment brokerage and annuity fees increased $506,000; other commissions and fees increased $222,000; other noninterest income increased $45,000 while mortgage origination income decreased $365,000.

     For 2006, noninterest income increased 4.76% or $350,000 from $7.4 million recorded in 2005 to $7.7 million. Overall deposit service charge income increased $582,000; mortgage banking income decreased $390,000; investment brokerage and annuity fees fell $106,000; other commissions and fees increased $183,000 while other noninterest income increased $82,000. Gains from the sale of investment securities were $2,000.

       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.

       During 2007, noninterest expense increased $1.6 million or 4.01% from $37.4 million in 2006 to $39 million in 2007. Increased expenses were primarily other expenses $1.4 million or 2.98% . There was a slight increase in salaries and employee benefits increasing $674,000 or 2.93% and communications of $44,000 or 2.62% . The increases in total noninterest expense was offset by a decline in net occupancy expense by $74,000 or 1.19%, decline in professional fees of $123,000 or 12.56%, and a decline in advertising expenditures of $333,000 or 32.36% .

     During 2006, noninterest expense increased $3.8 million or 11.29% from $33.6 million in 2005 to $37.4 million in 2006 as the Bank continued to pursue its growth strategy through the opening of three new branch offices bringing the total number of branches to 40. Increased expenses were principally in salaries and employee benefits ($3.5 million or 17.97%), occupancy expenses ($567,000 or 10.18%), and communications, professional fees and advertising expense ($84,000 or 2.33%) . These increases were partially offset by a decline in other expenses ($363,000 or 7.38%) .

21

Provision for Income Taxes

     PremierWest's taxable income resulted in an effective tax rate of 38.25% or $9.3 million in federal and state income taxes for 2007. This compares to an effective tax rate of 38.00% for 2006 and 35.10% for 2005.

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 has been successful at achieving its targeted efficiency ratio in the low 60 percent range. For the year ended December 31, 2007, our efficiency ratio was 60.83%, as compared to 60.49% in 2006, and 62.15% in 2005.

     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.

22

FINANCIAL CONDITION

       The table below sets forth certain summary balance sheet information for December 31, 2007, 2006 and 2005.

				December 31,						Increase (Decrease)
		2007		2006		2005		12/31/06 – 12/31/07					12/31/05 – 12/31/06
(dollars in thousands)
ASSETS
Federal funds sold	$	10,350	$	-	$	453	$	10,350		-		$	(453	)	(100.00	%)
Investment securities		6,320		7,318		14,869		(998	)	(13.64	%)		(7,551	)	(50.78	%)
Restricted equity
investments		1,865		1,865		1,865		-		0.00	%		0		0.00	%
Loans		1,012,269		908,652		795,230		103,617		11.40	%		113,422		14.26	%
Other assets (1)		127,157		116,676		101,244		10,481		8.98	%		15,432		15.24	%
Total assets	$	1,157,961	$	1,034,511	$	913,661	$	123,450		11.93	%	$	120,850		13.23	%
LIABILITIES
Noninterest-bearing
deposits	$	199,941	$	199,462	$	208,840	$	479		0.24	%	$	(9,378	)	(4.49	%)
Interest-bearing
deposits		735,374		679,888		559,579		55,486		8.16	%		120,309		21.50	%
Total deposits		935,315		879,350		768,419		55,965		6.36	%		110,931		14.44	%
Other liabilities (2)		94,971		38,902		42,458		56,069		144.13	%		(3,556	)	(8.38	%)
Total liabilities		1,030,286		918,252		810,877		112,034		12.20	%		107,375		13.24	%
SHAREHOLDERS’
EQUITY		127,675		116,259		102,784		11,416		9.82	%		13,475		13.11	%
Total liabilities
and share-
holder’s equity	$	1,157,961	$	1,034,511	$	913,661	$	123,450		11.93	%	$	120,850		13.23	%

(1) Includes cash and due from banks, mortgage loans held-for-sale, property and equipment, goodwill, and accrued interest receivable and other assets.
(2) Includes federal funds purchased, borrowings, 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.

23

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

Investment securities (available-for sale)

	December 31,
(in thousands)		2007		2006		2005
U.S. Government and agency
securities	$	-	$	-	$	3,969
Mortgage-backed securities and
collateralized mortgage
obligations		222		263		326
Corporate bonds		-		-		997
		222		263		5,292
Investment securities (held-to-maturity)
Investment securities
U.S. Government and agency	$	1,484	$	-	$	-
Obligations of states and
political subdivisions		4,614		7,055		9,577
		6,098		7,055		9,577
Restricted equity securities		1,865		1,865		1,865
Total Investment Securitites		8,185		9,183		16,734

The contractual maturity of investment securities at December 31, 2007, 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, 2007							December 31, 2006							December 31, 2005
		Amortized	Estimated		%				Amortized	Estimated		%				Amortized		Estimated	%
		Cost	Fair Value		Yield (1)				Cost	Fair Value		Yield (1)				Cost		Fair Value	Yield (1)
(dollars in thousands)
U.S. Government and
agency securities:
One year or less	$	1,484	$	1,484		-		$	-	$	-		-		$	4,050	$	3,969		3.46	%
One to five years		-		-		-			-		-		-			-		-		-
Five to ten years		-		-		-			-		-		-			-		-		-
Obligations of states and
political subdivisions:
One year or less		638		638		5.44	%		2,180		2,175		5.89	%		1,871		1,866		5.68	%
One to five years		1,437		1,428		5.73	%		2,002		1,980		6.72	%		4,494		4,451		6.16	%
Five to ten years		2,539		2,522		6.28	%		2,873		2,844		6.03	%		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		6,098		6,072					7,055		6,999					14,627		14,474
Mortgaged-backed securities
and collateralized mortgage
obligations		222		222		5.69	%		264		263		5.78	%		326		325		5.10	%
Restricted equity securities		1,865		1,865		N/A			1,865		1,865		N/A			1,865		1,865		N/A
Total securities	$	8,185	$	8,159				$	9,184	$	9,127				$	16,818	$	16,664
(1) For the purposes of this schedule, weighted average yields are stated on a federal tax-equivalent basis at a 34.00% rate.

24

       During 2007, $3.4 million in securities matured, called or were paid down and no purchases or sales were made. This compares to proceeds from sales, maturities and/or calls of investment securities of $7.5 million in 2006, and $2.5 million in 2005. These sales, maturities and/or calls resulted in no gains in 2007 and realized gains of $2,000 and $3,000 for the years ended December 31, 2006 and 2005, respectively.

       At December 31, 2007, PremierWest's investment portfolio had total net unrealized losses of approximately $26,000. This compares to net unrealized losses of approximately $57,000 at December 31, 2006, and $154,000 at December 31, 2005. 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, 2007, the unamortized unrealized holding loss on held-to-maturity securities was $26,000.

       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, 2007, securities with a market value of $6.3 million were pledged for such purposes.

       As of December 31, 2007, 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, 2007 and 2006, 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 credit 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, may be approved jointly by the Chief Credit Officer along with either the President or Chief Executive Officer. 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 $19.8 million and our real estate secured lending limit was approximately $33.0 million at December 31, 2007. PremierWest seldom makes loans for an amount approaching its legal lending

25

limits. The following table sets forth the composition of the loan portfolio including loans held-for-sale, in dollar amounts and in percentages as of December 31, 2003, through 2007.

		December 31, 2007				December 31, 2006				December 31, 2005				December 31, 2004				December 31, 2003
(dollars in thousands)		Amount	Percentage			Amount	Percentage			Amount	Percentage			Amount	Percentage			Amount	Percentage
Commercial	$	186,536	18.18	%	$	175,292	19.00	%	$	131,819	16.30	%	$	94,560	13.70	%	$	60,598	13.20	%
Real estate - Construction		268,254	26.15	%		259,254	28.10	%		237,150	29.30	%		149,250	21.60	%		54,900	11.90	%
Real Estate- Commercial/
Residential		463,852	45.21	%		405,499	43.95	%		367,069	45.40	%		372,812	54.00	%		288,051	62.70	%
Consumer		75,395	7.45	%		53,542	5.80	%		49,520	6.10	%		43,039	6.20	%		34,273	7.50	%
Other		31,861	3.11	%		29,100	3.15	%		23,019	2.90	%		30,800	4.50	%		21,941	4.70	%
Total loans, gross	$	1,025,898	100.10	%	$	922,687	100.00	%	$	808,577	100.00	%	$	690,461	100.00	%	$	459,763	100.00	%

       Net outstanding loans, excluding loans held-for-sale, totaled $1.012 billion at December 31, 2007, representing an increase of $103.6 million, or 11.40% compared to $908.7 million as of December 31, 2006. Loan commitments were $172.2 million as of December 31, 2007, representing a decrease of $13.0 million over year-end 2006. 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, 2007, includes loans secured by real estate 71.30%, commercial loans 18.20%, and consumer and other loans 10.50% . 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, 2007. 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, 2007
		Within One			One to Five	After Five
(dollars in thousands)		Year (1)			Years	Years			Total
FIX E D -RATE LOAN MATURITIES
Commercial	$		15,674	$	12,434	$	180	$	28,288
Real estate – Construction			26,003		5,203		23		31,229
Real estate – Commercial/Residential			22,754		13,912		4,213		40,879
Consumer			8,622		20,129		26,366		55,117
Other			4,880		1,667		592		7,139
Total fixed rate loan maturities			77,933		53,345		31,374		162,652
ADJUSTABLE-RATE LOAN REPRICINGS
Commercial			129,360		23,811		5,077		158,248
Real estate – Construction			215,952		17,030		4,043		237,025
Real estate – Commercial/Residential			2 37,593		163,501		21,879		422,973
Consumer			19,177		1,083		18		20,278
Other			17,495		5,954		1,273		24,722
Total adjustable-rate loan repricings			619,577		211,379		32,290		863,246
Total maturities and repricings	$		697,510	$	264,724	$	63,664	$	1,025,898

(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.

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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, 2007 and 2006, loans that were more than 90 days delinquent or for which the accrual of interest had been discontinued included the following:

		December 31,
			2007					2006
				% of				% of
				Related				Related
(dollars in thousands)		Amount		Portfolio			Amount	Portfolio
Commercial	$	1,638		0.88	%	$	995	0.57	%
Real estate – Construction		5,235		1.95	%		278	0.11	%
Real estate – Commercial/Residential		603		0.13	%		23	0.01	%
Consumer		810		1.07	%		51	0.10	%
Other		82		0.26	%		107	0.37	%
Total	$	8,368		0.82	%	$	1,454	0.16	%

       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, 2007 and 2006 there was no other real estate owned. 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, 2007 and 2006, nonperforming loans (loans more than 90 days delinquent and/or on nonaccrual status) totaled approximately $8.4 million and $1.5 million, respectively. The large dollar increase in non performing loans between 2007 and 2006 is concentrated in one $5.0 million real estate construction loan that is a purchased participation from a bank with a national presence and for which management believes the credit is well secured. 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 0.73% of total assets outstanding at December 31, 2007 and 0.14% at December 31, 2006. Interest income that would have been recognized on nonaccrual loans if such loans had performed in accordance with contractual terms totaled $516,000 for the year ended December 31, 2007, $40,000 for the year ended December 31, 2006, and $143,000 for the year ended December 31, 2005. Actual interest income recognized on such loans during all of the periods was not significant. At December 31, 2007 and 2006, the allowance for loan losses related to impaired loans was $372,000 and $151,000, respectively.

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The following table summarizes nonperforming assets by category:
							December 31,
(dollars in thousands)		2007			2006			2005			2004			2003
Loans on nonaccrual status	$	8,221		$	1,430		$	2,273		$	1,890		$	385
Loans past due greater than 90 days but
not on nonaccrual status		147			24			2			26			15
Other real estate owned		-			-			-			483			1,511
Total nonperforming assets	$	8,368		$	1,454		$	2,275		$	2,399		$	1,911
Percentage of nonperforming assets
to total assets		0.73	%		0.14	%		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.

       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 $11.5 million at December 31, 2007, and $10.9 million at December 31, 2006, representing 1.12% of total loans at December 31, 2007 and 1.18% of total loans at December 31, 2006. The loan loss allowance represents 135.89% of nonperforming loans at December 31, 2007, and 748.07% of nonperforming loans at December 31, 2006. 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, 2007, 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.

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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)		2007			2006			2005			2004			2003
Gross loans outstanding at end of year	$	1,025,898		$	922,687		$	808,577		$	690,461		$	459,763
Average loans outstanding	$	962,419		$	855,562		$	754,465		$	605,747		$	414,623
Allowance for loan losses, beginning
of year	$	10,877		$	10,341		$	9,171		$	5,466		$	4,838
Loans charged off:
Commercial		(134	)		(100	)		(13	)		(176	)		(252	)
Real estate		-			-			(500	)		(563	)		(160	)
Consumer		(539	)		(271	)		(147	)		(302	)		(222	)
Other		(154	)		(125	)		(111	)		(2,758	)		-
Total loans charged off		(827	)		(496	)		(771	)		(3,799	)		(634	)
Recoveries:
Commercial		204			95			119			75			28
Real estate		-			-			-			3			-
Consumer		217			93			50			87			34
Other		112			44			1,622			454			-
Total recoveries		533			232			1,791			619			62
Net (charge offs) or recoveries		(294	)		(264	)		1,020			(3,180	)		(572	)
Allowance for loan losses transferred from:
Mid Valley Bank		-			-			-			6,085			-
Other adjustments (1)		181			-			-			-			-
Provision charged to income		686			800			150			800			1,200
Allowance for loan losses, end of year	$	11,450		$	10,877		$	10,341		$	9,171		$	5,466
Ratio of net loans charged off to average
loans outstanding		0.03	%		0.03	%		n/a			0.52	%		0.14	%
Ratio of allowance for loan losses to
ending total loans		1.12	%		1.18	%		1.28	%		1.33	%		1.19	%

(1) Includes a balance sheet reclassification adjustment (decrease) of $255,000 from the allowance for loan losses to other liabilities in accordance with Financial Accounting Standard No. 5. The amount reclassified represents the off-balance sheet credit exposure related to unfunded commitments to lend and letters of credit; and a $436,000 increase resulting from the purchase of a consumer finance loan portfolio on June 29, 2007.

       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. General, Specific and Qualitative  allocations are made based on estimated losses that are due to current credit circumstances and other available information for each loan category.  General allocations are based on historical loss factors.  Specific allocations are 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.  Qualitative allocations include adjustments for economic conditions, concentrations and other subjective factors, and 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,
		2007				2006					2005			2004				2003
			Percentage of				Percentage of				Percentage of				Percentage of				Percentage of
		Reserve	loans in each			Reserve	loans in each			Reserve	loans in each			Reserve	loans in each			Reserve	loans in each
		for loan	category to			for loan	category to			for loan	category to			for loan	category to			for loan	category to
(dollars in thousands)		losses	total loans			losses	total loans			losses	total loans			losses	total loans			losses	total loans
Type of loan:
Commercial	$	1,684	18.18	%	$	1,889	19.00	%	$	2,640	16.30	%	$	3,102	13.70	%	$	922	13.20	%
Real estate-
Construction		3,720	26.15	%		4,096	28.10	%		2,295	29.30	%		1,191	21.60	%		518	11.90	%
Real estate-
Commercial/
Residential		4,516	45.21	%		3,820	43.90	%		4,599	45.40	%		4,232	54.00	%		3,264	62.70	%
Consumer and Other		1,530	10.46	%		1,072	9.00	%		807	9.00	%		646	10.70	%		762	12.20	%
Total	$	11,450	100.00	%	$	10,877	100.00	%	$	10,341	100.00	%	$	9,171	100.00	%	$	5,466	100.00	%

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Even with a diligent assessment by management, there can be no assurance regarding the actual amount of 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 time deposits 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,
				2007						2006						2005
		Average		Interest	Average			Average		Interest	Average			Average		Interest	Average
(dollars in thousands)		Balance		Expense	Rate			Balance		Expense	Rate			Balance		Expense	Rate
Savings, money market and
interest bearing demand	$	377,550	$	9,691	2.57	%	$	342,221	$	5,896	1.72	%	$	339,480	$	3,662	1.08	%
Time deposits		329,912		15,454	4.68	%		248,887		10,035	4.03	%		198,833		5,817	2.93	%
Total interest-bearing deposits		707,462	$	25,145	3.55	%		591,108	$	15,931	2.70	%		538,313	$	9,479	1.76	%
Noninterest-bearing deposits		194,456						198,295						198,777
Total interest-bearing and
noninterest-bearing deposits	$	901,918					$	789,403					$	737,090

       Total deposits grew $55.9 million during 2007, reaching $935.3 million at December 31, 2007 compared to $879.4 million at December 31, 2006, a 6.40% increase. At December 31, 2006, total deposits were $879.4 million, an increase of $110.9 million or 14.40%, from total deposits of $768.4 million at December 31, 2005. During 2007, noninterest-bearing deposits increased $479,000, from $199.5 million at December 31, 2006 to $199.9 million at December 31, 2007, a 0.20% increase. At December 31, 2007, core deposits, which consist of all demand deposit accounts, savings accounts, and time deposits less than $100,000 (excluding brokered deposits), accounted for 79.80% of total deposits, down from 88.90% as of December 31, 2006.

       Interest-bearing deposits consist of money market, NOW, savings, and time deposit 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, 2007, total interest-bearing deposit accounts were $735.4 million, an increase of $55.5 million, or 8.20%, from December 31, 2006.

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       Management utilizes brokered deposits with maturities that are typically less than one year as a short-term funding source for loan growth. Brokered deposits are classified as time deposits that are less than $100,000 but are not considered core deposits. At December 31, 2007 brokered deposits totaled $59.3 million, or 6.30% of total deposits; there were no brokered deposits as of December 31, 2006. At December 31, 2007, time deposits of $100,000 and over totaled $130.2 million, or 13.90% of total outstanding deposits, compared to $103.0 million, or 11.70%, of total outstanding deposits at December 31, 2006, and $75 million, or 9.76%, of total outstanding deposits at December 31, 2005. The following table sets forth, by time remaining to maturity, time deposit accounts outstanding at December 31, 2007:

		Time Deposits of				Time Deposits Less
		$100,000 or More				Than $ 100,000
(dollars in thousands)		Amount	Percentage			Amount	Percentage
Three months or less	$	41,633	31.98	%	$	78,829	34.25	%
Over three months through six months		23,841	18.31	%		48,655	21.14	%
Over six months through 12 months		35,111	26.97	%		59,385	25.80	%
Over 12 months		29,609	22.74	%		43,310	18.82	%
Total	$	130,194	100.0	%	$	230,179	100.00	%

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 from Federal Home Loan Bank (FHLB) Cash Management Advances (CMA) and federal funds purchased:

							Years Ended December 31,
		2007					2006					2005
		FHLB		Federal			FHLB		Federal			FHLB		Federal
		CMA		Funds			CMA		Funds			CMA		Funds
		Advances		Purchased			Advances		Purchased			Advances		Purchased
(dollars in thousands)
Amount outstanding at end of period	$	13,500		54,019		$	5,000		6,835		$	-		16,430
Weighted average interest rate at
end of period		4.35	%	4.76	%		5.63	%	6.21	%		n/a		5.07	%
Maximum amount outstanding at any
month-end during the year	$	17,500		54,019		$	35,000		33,551		$	25,000		16,430
Average amount outstanding during
the period	$	8,230		13,081		$	24,973		16,236		$	6,901		1,822
Average weighted interest rate
during the period		5.28	%	5.47	%		5.31	%	5.46	%		3.36	%	4.39	%

       PremierWest had long-term borrowings outstanding with the Federal Home Loan Bank of Seattle (FHLB) totaling $508,000, $1.1 million and $1.8 million as of December 31, 2007, 2006 and 2005, respectively. The Bank makes monthly principal and interest payments on the long-term borrowings which mature between 2008 and 2014 and bear interest at rates ranging from 5.82% to 7.52% . The Bank also participates in the Cash Management Advance Program (CMA) with the FHLB. CMA borrowings outstanding were $13.5 million at December 31, 2007. At December 31, 2007, the Bank had total FHLB borrowings of $14 million against an available collateral base of approximately $41.0 million. 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 1^st liens against 1-4 family or 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, 2006, 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

31

(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.

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, 2007.

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

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		< 1year		1-3 years		3-5 years	> 5 years
Long-term borrowings	$	508	$	465	$	21	$	14	$	8
Operating lease obligations	$	6,626		875		1,594		1,236		2,921
Junior subordinated debentures	$	15,464		-		-		-		15,464
Total	$	22,598	$	1,340	$	1,615	$	1,250	$	18,393

Off-Balance Sheet Arrangements

       Significant off-balance sheet commitments at December 31, 2007 include commitments to extend credit of $164.0 million and standby letters of credit of $8.2 million. See Note 14 on page F-30 of the Notes to Consolidated Financial Statements included 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 $127.7 million at December 31, 2007, an increase of $11.4 million or 9.82% from December 31, 2006. The increase reflects comprehensive income of $15.1 million, the exercise of stock options and related tax benefit of $411,000 and stock-based compensation expense of $306,000. This was offset by the declaration of preferred and common stock dividends of $275,000 and $2.9 million, respectively, repurchase of common stock totaling $1.1 million, and cash paid for fractional shares ($10,000) 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, 2007, unused and available lines of credit totaled $1.3 million from FHLB's Cash Management Advance Program and $76.0 million from correspondent banks. 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, 2007, these liquid assets

32

totaled $48.9 million or 4.20% of total assets as compared to $36.8 million or 3.55% of total assets at December 31, 2006. Total liquid assets of $36.8 million as of December 31, 2006, compare to $33.8 million or 3.70% of total assets at December 31, 2005. 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 the highly competitive marketplace for local deposits will result in the continued reliance on a combination of short-term borrowings and brokered deposits to augment core deposits as a stable source of funding. Management continues to focus on strategies to grow the Bank’s core deposit base, while exploring alternative 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 core deposit base. Management has elected to pursue strategies for building relationship oriented core deposits over time rather than aggressively attracting higher cost transactional time deposits from within our local markets.

       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, 2007. The statement of cash flows includes operating, investing, and financing categories. Operating activities include net income of $15.1 million and $1.1 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, 2007, PremierWest had outstanding unfunded lending commitments of $172.2 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:

	2007		2006		Minimum to be		Minimum to be
	Actual		Actual		“Adequately Capitalized”		“Well-Capitalized”
Total risk-based capital ratio	11.81	%	11.49	%	>8.00	%	>10.00	%
Tier 1 risk-based capital ratio	10.77	%	10.42	%	>4.00	%	>6.00	%
Leverage ratio	10.92	%	10.79	%	>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:

	2007		2006		Minimum to be
	Actual		Actual		“Adequately Capitalized”
Total risk-based capital ratio	11.80	%	11.78	%	>8.00	%
Tier 1 risk-based capital ratio	10.75	%	10.71	%	>4.00	%
Leverage ratio	10.89	%	11.08	%	>4.00	%

33

RECENTLY ISSUED ACCOUNTING STANDARDS

       In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB 51.” SFAS No. 160 improves the information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require that the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in equity in the consolidated financial statements but separate from the parent’s equity; the share of net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income; changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently; and when a subsidiary is deconsolidated, through sale or otherwise, any retained noncontrolling equity interest in the former subsidiary be initially measured at fair value. SFAS No. 160 is effective for fiscal years and interim periods within those fiscal year, beginning on or after December 15, 2008. Early adoption is not permitted. Management does not expect the adoption of SFAS 160 to have a material impact on the consolidated financial statements.

       In December 2007, the FASB issued SFAS No. 141R (revised 2007), “Business Combinations,” which replaces SFAS No. 141. SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements, which will enable users to evaluate the nature and financial effects of the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (on or after June 28, 2009 of fiscal 2010). Early adoption is not permitted. After the effective date, the Company will apply the requirements of SFAS No. 141R to its future business combinations.

       In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115.” SFAS No. 159 permits the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value. This statement gives entities the option to record certain financial assets and liabilities at fair value with the changes in fair value recorded in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Management does not expect the adoption of SFAS 157 to have a material impact on the consolidated financial statements.

       In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” and seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. FIN 48 clarifies the accounting for income taxes by prescribing a minimum threshold a tax position is required to meet before being recognized in the financial statements. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 is effective as of the beginning of our 2007 fiscal year. The cumulative effect, if any, of applying FIN 48 is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption. Adoption of this standard on January 1, 2007 did not have a material impact on the consolidated financial statements. The Company had no unrecognized tax benefits at January 1, 2007 and at December 31, 2007. The Company recognizes interest and accrued penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2007 and 2006, the Company recognized no interest and penalties. The Company files income tax returns in the U.S. federal jurisdiction, California, and Oregon. The Company is no longer subject to U.S. or Oregon state examinations by tax authorities for years before 2004 and California state examinations for years before 2003.

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

       In September 2006, the FASB issued SFAS No. 158 (“SFAS 158”), “Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS

34

158 requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income. Additionally, SFAS 158 requires employers to measure the funded status of a plan as of the date of its year-end statement of financial position. The new reporting requirements and related new footnote disclosure rules of SFAS 158 are effective for fiscal years ending after December 15, 2006. The new measurement date requirement applies for fiscal years ending after December 15, 2008. The adoption of the disclosure requirements of this standard did not have a material impact on the consolidated financial statements. Management does not expect the adoption of the measurement requirements to have a material impact on the consolidated financial statements.

       In September 2006, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue No. 06-4 (“EITF 06-4”), “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” EITF 06-4 requires employers to recognize a liability for future benefits provided through endorsement split-dollar life insurance arrangements that extend into postretirement periods in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” or APB Opinion No. 12, “Omnibus Opinion – 1967.” The provisions of EITF 06-4 become effective on January 1, 2008 and are to be applied as a change in accounting principle either through a cumulative-effect adjustment to retained earnings or other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption; or through retrospective application to all prior periods. Adoption of this standard was effective for the Company on January 1, 2007, and resulted in a $127,000 adjustment to retained earnings and did not have a material impact on the consolidated financial statements for any of the quarters or year end.

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, 2007, 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.

35

(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	$	10,391		$	-		$	-		$	-		$	10,391
Investment securities		497			1,625			1,437			2,761			6,320
Loans		509,740			187,770			264,724			63,664			1,025,898
Total	$	520,628		$	189,395		$	266,161		$	66,425		$	1,042,609
LIABILITIES
Interest-bearing liabilities:
Interest-bearing demand and savings	$	180,407		$	51,226		$	121,801		$	21,567		$	375,001
Time deposits		149,149			138,345			72,639			240			360,373
Borrowings		54,189			13,795			15,498			9			83,491
Total	$	383,745		$	203,366		$	209,938		$	21,816		$	818,865
Interest rate sensitivity gap	$	136,883		$	(13,971	)	$	56,223		$	44,609		$	223,744
Cumulative	$	136,883		$	122,912		$	179,135		$	223,744
Cumulative gap as a % of
interest-earning assets		13.1	%		11.8	%		17.2	%		21.5	%

       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 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, 2007 data, estimates that if a decline of 200 basis points occurs, net interest income could be unfavorably affected up to approximately 3.97%, while a similar increase in market rates would have a favorable impact of approximately 4.74% . 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.

36

		Net Increase (Decrease) in		Net
		Net Interest Income		Interest		Return on
		(in thousands)		Margin		Equity
As of December 31, 2007,
the prime rate was 7.25%	$	-		5.72	%	12.25	%
Prime rate increase of:
200 basis points to 9.25%	$	2,618		5.99	%	14.38	%
100 basis points to 8.25%	$	1,238		5.85	%	13.26	%
Prime rate decrease of:
200 basis points to 5.25%	$	(2,110	)	5.50	%	10.54	%
100 basis points to 6.25%	$	(1,037	)	5.61	%	11.41	%
(1) Tax adjusted at a 38.25% rate.

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

37

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 2007 and 2006. 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.

					2007
				Second				Fourth
(dollars in thousands, except per share data)		First Quarter		Quarter	Third Quarter			Quarter
INCOME STATEMENT DATA
Total interest income	$	19,360	$	20,337	$	21,540	$	21,218
Total interest expense		6,018		6,531		7,250	$	7,417
Net interest income		13,342		13,806		14,290		13,801
Provision for loan losses		200		75		225	$	186
Net interest income after
provision for loan losses		13,142		13,731		14,065		13,615
Noninterest income		2,010		2,287		2,308	$	2,205
Noninterest expense		9,704		9,636		9,828	$	9,790
Income before income taxes		5,448		6,382		6,545		6,030
Provision for income taxes		2,080		2,441		2,502	$	2,280
Net income	$	3,368	$	3,941	$	4,043	$	3,750
Basic earnings per common share	$	0.19	$	0.23	$	0.23	$	0.22
Diluted earnings per common share	$	0.19	$	0.21	$	0.22	$	0.20
					2006
				Second				Fourth
(dollars in thousands, except per share data)		First Quarter		Quarter	Third Quarter			Quarter
INCOME STATEMENT DATA
Total interest income	$	16,700	$	18,086	$	18,861	$	19,605
Total interest expense		3,724		4,441		5,212		5,727
Net interest income		12,976		13,645		13,649		13,878
Provision for loan losses		300		200		150		150
Net interest income after
provision for loan losses		12,676		13,445		13,499		13,728
Noninterest income		1,834		1,966		2,030		1,871
Noninterest expense		9,334		9,422		9,449		9,210
Income before income taxes		5,176		5,989		6,080		6,389
Provision for income taxes		1,890		2,184		2,383		2,529
Net income	$	3,286	$	3,805	$	3,697	$	3,860
Basic earnings per common share	$	0.20	$	0.22	$	0.21	$	0.22
Diluted earnings per common share	$	0.18	$	0.20	$	0.20	$	0.21

38

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

MANAGEMENT'S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

     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, 2007.

     The effectiveness of our internal controls over financial reporting as of December 31, 2007 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 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 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 Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

ITEM 9B.     OTHER INFORMATION

None.

39

PART III

ITEM 10.      DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information provided in response to this Item is incorporated by reference to the Definitive Proxy Statement on Schedule 14A for the Company's 2008 Annual Meeting of Shareholders, which the Company expects first to be sent or given to security holders on or about April 10, 2008.

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 2008 Annual Meeting of Shareholders, which the Company expects first to be sent or given to security holders on or about April 10, 2008.

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 2008 Annual Meeting of Shareholders, which the Company expects first to be sent or given to security holders on or about April 10, 2008.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

       The information provided in response to this Item is incorporated by reference to the Definitive Proxy Statement on Schedule 14A for the Company's 2008 Annual Meeting of Shareholders, which the Company expects first to be sent or given to security holders on or about April 10, 2008.

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 2008 Annual Meeting of Shareholders, which the Company expects first to be sent or given to security holders on or about April 10, 2008.

40

PART IV
	ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)	(1	)	Financial Statements:
			The consolidated financial statements for the fiscal years ended December 31, 2007, 2006,
			and 2005 are included in this report beginning on page F-1.
	(2	)	Financial Statement Schedules:
			All schedules have been omitted because the information is not required, not applicable, not
			present in amounts sufficient to require submission of the schedule, or is included in the
			financial statements or notes thereto.
	(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 December 13, 2007, between John L. Anhorn and PremierWest Bancorp ^A

10.2 Employment Agreement, dated December 13, 2007, between Tom Anderson and PremierWest Bancorp ^B

10.3 Supplemental Executive Retirement Plan Agreement, dated December 13, 2007, between John L. Anhorn and PremierWest Bank

10.4 Supplemental Executive Retirement Plan Agreement, dated December 13, 2007, between Richard Heib and PremierWest Bank

10.5 Supplemental Executive Retirement Plan Agreement, dated December 13, 2007, between Tom Anderson and PremierWest Bank. ^C

10.6 Executive Survivor Income Agreement dated, November 12, 2002, amended dated July 29, 2004, between John A. Anhorn and PremierWest Bank^{4 D}

10.7 Executive Survivor Income Agreement dated, November 12, 2002, amended dated July 29, 2004, between Tom Anderson and PremierWest Bank^{4 E}

10.8 Executive Deferred Compensation Agreement between Tom Anderson and PremierWest Bank dated December 13, 2007^F

10.9 Continuing Benefits Agreement between individual Board members and PremierWest Bank dated December 13, 2007 ^G

10.10 Director Deferred Compensation Agreement between individual Board members and PremierWest Bank dated December 13, 2007^G

10.11 1992 Combined Incentive and Non-Qualified Stock Option Plan of Bank of Southern Oregon ²

10.12 United Bancorp Stock Option Plan, as amended⁵

10.13 2002 PremierWest Bancorp Stock Option Plan⁶

10.14 Non Qualified Stock Option Agreement⁷

10.15 Incentive Stock Option Agreement⁷

21.1 Subsidiaries of PremierWest Bancorp

23.1 Consent of Moss AdamsLLP

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

41

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/A filed December 6, 2007 (File NO. 333- 147460).
2	Incorporated by reference to Registrant's statement on Form S-4/A filed April 3, 2000 (File No. 333- 96209).
3	Incorporated by reference to Registrant's statement on Form S-4/A filed November 28, 2003 (File No. 333-110842).
4	Incorporated by reference to the Registrant's quarterly report on form 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 Form DEF 14A, filed April 13, 2005, (SEC File No. 000-50332)
7	Incorporated by reference to the Registrant's annual report on form 10-K for the year ended December 31, 2005.
	A	A substantially identical agreement exists between PremierWest Bancorp and Richard Hieb, except that Mr. Hieb's agreement provides for a base salary of $197,600.
	B	A substantially identical agreement exists between PremierWest Bancorp and James Earley, except that Mr. Earley's agreement provides for a base salary of $147,000 and Mr. Ford’s agreement provides for a base salary of $200,000.
	C	A substantially identical agreement exists between PremierWest Bancorp and James Earley, except that Mr. Earley's agreement provides for retirement pay of 40% of base salary.
	D	A substantially identical agreement exists between PremierWest Bancorp and Richard Hieb, except that Mr. Hieb's agreement provides for a pre-retirement death benefit of $150,000.
		A substantially identical agreement exists between PremierWest Bancorp and James Earley, except that
	E	Mr. Earley's agreement provides for a pre- and post-retirement death benefits of $150,000 and $150,000 respectively.
		Substantially identical agreements dated December 13, 2007 were entered into by and between
	F	PremierWest Bank and the following executives: Richard Hieb, John Anhorn and Jim Earley .Substantially identical agreements dated December 13, 2007 were entered into by and between
	G	PremierWest Bank and the following directors: John B. Dickerson, John A. Duke, Dennis N. Hoffbuhr, Patrick G. Huycke, Brian Pargeter, James L. Patterson, Tom Becker and Rickar D. Watkins.

42

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	Date:  March 14, 2008
	John L. Anhorn, 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 14, 2008
	John Duke, Director
By:	/s/ Dennis Hoffbuhr	Date:  March 14, 2008
	Dennis Hoffbuhr, Director
By:	/s/ Rickar Watkins	Date:  March 14, 2008
	Rickar Watkins, Director
By:	/s/ James Patterson	Date:  March 14, 2008
	James Patterson, Director
By:	/s/ John L. Anhorn	Date:  March 14, 2008
	John L. Anhorn, Director and
	Chief Executive Officer
By:	/s/ Richard R. Hieb	Date:  March 14, 2008
	Richard R. Hieb, Director and Chief Operating Officer
By:	/s/ Tom Anderson	Date:  March 14, 2008
	Tom Anderson, Chief Financial Officer, and
	Principal Accounting Officer

43

Signatures - (continued)
By:    /s/ James M. Ford	Date:  March 14, 2008
James M. Ford, Director and President
By:  /s/ Tom Becker	Date  March 14, 2008
Tom Becker, Director
By:  /s/ Brian Pargeter	Date:  March 14, 2008
Brian Pargeter, Director
By: /s/ Patrick Huycke	Date:  March 14, 2008
Patrick Huycke, Director
By:   /s/ John Dickerson	Date:  March 14, 2008
John Dickerson, Director
By:    /s/ Gary Wright	Date:  March 14, 2008
Gary Wright, Director

44

PREMIERWEST BANCORP AND SUBSIDIARY

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND

CONSOLIDATED FINANCIAL STATEMENTS

__________

DECEMBER 31, 2007, 2006, AND 2005

CONTENTS
	PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM	F1	– F2
CONSOLIDATED FINANCIAL STATEMENTS
Balance sheets	F3
Statements of income	F4
Statements of changes in shareholders’ equity and comprehensive income	F5
Statements of cash flows	F6	– F7
Notes to financial statements	F8	– F43

Note: These consolidated financial statements have not been reviewed, or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders
PremierWest Bancorp and Subsidiary

We have audited the accompanying consolidated balance sheets of PremierWest Bancorp and Subsidiary (the Company) as of December 31, 2007 and 2006, and the related consolidated statements of income, changes in shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2007. We also have audited the Company’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

F-1

Report of Independent Registered Public Accounting Firm
Page Two

A Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of PremierWest Bancorp and Subsidiary as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, PremierWest Bancorp and Subsidiary maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Portland, Oregon
March 14, 2008

F-2

PREMIERWEST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
		December 31,
		2007		2006
		(in thousands, except share amounts)
Cash and cash equivalents:
Cash and due from banks	$	38,281	$	36,497
Federal funds sold		10,350		-
Total cash and cash equivalents		48,631		36,497
Interest-bearing deposits with Federal Home Loan Bank		41		7
Investments :
Investment securities available-for-sale, at fair market value		222		263
Investment securities held-to-maturity, at amortized cost
(fair value of $ 6,072 in 2007 and $6,999 in 2006)		6,098		7,055
Restricted equity securities		1,865		1,865
Total investments		8,185		9,183
Mortgage loans held -for-sale		569		993
Loans, net o f allowance for loan losses and
deferred loan fees		1,012,269		908,652
Total loans		1,012,838		909,645
Premises and equipment, net of accumulated
depreciation and amortization		38,795		34,102
Core deposit intangibles, net of amortization		1,516		2,010
Goodwill		20,942		20,414
Accrued interest and other assets		27,013		22,653
TOTAL ASSETS	$	1,157,961	$	1,034,511
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits :
Demand	$	199,941	$	199,462
Interest-bearing demand and savings		375,001		407,559
Ti me		360,373		272,329
Total deposits		935,315		879,350
Federal funds purchased		54,019		6,835
Federal Home Loan Bank borrowings		14,008		6,141
Junior subordinated debentures		15,464		15,464
Accrued interest and other liabilities		11,480		10,462
Total liabilities		1,030,286		918,252
COMMITMENTS AND CONTINGENCI ES (Notes 14 and 20 )
SHAREHOLDERS’ EQUITY
Series A Preferred Stock, no par value, 1,000,000 shares
authorized; 11,000 shares issued and outstanding		9,590		9,590
Common stock, no par value, 50,000,000 shares
authorized; 16,987,496 shares issued
and outstanding (16,216,481 in 2006)		97,266		85, 906
Retained earnings		20,759		20,663
Accumulated other comprehensive income		60		100
Total shareholders’ equity		127,675		116,259
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,157,961	$	1,034,511
F-3
See accompanying notes.

PREMIERWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
		Years Ended December 31,
		2007		2006		2005
	(in thousands, except earnings per share amounts)
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	82,064	$	72,695	$	56,709
Interest on investments:
Taxable		42		88		183
Nontaxable		230		323		421
Interest on federal funds sold		93		136		208
Other interest and dividends		26		10		6
Total interest and dividend income		82,455		73,252		57,527
INTEREST EXPENSE
Deposits:
Interest-bearing demand and savings		9,691		5,896		3,662
Time		15,454		10,035		5,817
Other borrowing		2,071		3,173		1,306
Total interest expense		27,216		19,104		10,785
NET INTEREST INCOME		55,239		54,148		46,742
LOAN LOSS PROVISION		686		800		150
Net interest income after loan loss provision		54,553		53,348		46,592
NONINTEREST INCOME
Service charges on deposit accounts		4,019		3,316		2,734
Mortgage banking fees		671		1,036		1,426
Investment brokerage and annuity fees		1,668		1,162		1,268
Other commissions and fees		1,794		1,572		1,389
Other noninterest income		658		613		531
Net gains on sales of securities		-		2		3
Total noninterest income		8,810		7,701		7,351
NONINTEREST EXPENSE
Salaries and employee benefits		23,712		23,038		19,529
Net occupancy and equipment		6,065		6,138		5,571
Communications		1,722		1,678		1,527
Professional fees		856		979		1,076
Advertising		696		1,029		999
Other		5,907		4,553		4,916
Total noninterest expense		38,958		37,415		33,618
INCOME BEFORE PROVISION FOR INCOME TAXES		24,405		23,634		20,325
PROVISION FOR INCOME TAXES		9,303		8,986		7,136
NET INCOME	$	15,102	$	14,648	$	13,189
BASIC EARNINGS PER COMMON SHARE	$	0.87	$	0.85	$	0.76
DILUTED EARNINGS PER COMMON SHARE	$	0.82	$	0.79	$	0.71

F-4
See accompanying notes.

PREMIERWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share amounts)

													Accumulated
	Preferred Stock			Common Stock									Other			Total’
									Retained			Comprehensive					Shareholders				Comprehensive
	Shares		Amount	Shares			Amount			Earnings			Income						Equity				Income
BALANCE, December 31, 2004	11,000		9,590	14,612,332			62,482			18,224				284					90,580
Comprehensive income:
Net income	-		-	-			-			13,189				-					13,189			$	13,189
Other comprehensive income –
Amortization of unrealized gains
for investment securities
transferred to held-to-maturity
of $126 (net of taxes of $65)	-		-	-			-			-				(126	)				(126	)			(126	)
Unrealized losses on investment
securities available-for-sale of
$51 (net of taxes of $17)	-		-	-			-			-				(34	)				(34	)			(34	)
Comprehensive income																						$	13,029
Preferred stock dividend declared	-		-	-			-			(275	)			-					(275	)
Common stock cash dividend declared										(769	)								(769	)
5% stock dividend	-		-	730,756			10,523			(10,523	)			-					-
Cash paid for fractional shares	-		-	-			-			(10	)			-					(10	)
Stock options exercised	-		-	30,343			188			-				-					188
Income tax benefit of stock options
exercised	-		-	-			41			-				-					41
BALANCE, December 31, 2005	11,000	$	9,590	15,373,431		$	73,234		$	19,836			$	124				$	102,784
Comprehensive income:
Net income	-		-	-			-			14,648				-					14,648			$	14,648
Other comprehensive income –
Amortization of unrealized gains
for investment securities
transferred to held-to-maturity
of $79 (net of taxes of $49)	-		-	-			-			-				(79	)				(79	)			(79	)
Unrealized losses on investment
securities available-for-sale of
$88 (net of taxes of $33)	-		-	-			-			-				55					55				55
Comprehensive income																						$	14,624
Preferred stock dividend declared	-		-	-			-			(275	)			-					(275	)
Common stock cash dividend declared				-			-			(1,621	)								(1,621	)
Stock-based compensation expense				-			226			-									226
5% stock dividend	-		-	769,145			11,914			(11,914	)			-					-
Cash paid for fractional shares	-		-	-			-			(11	)			-					(11	)
Stock options exercised	-		-	73,905			363			-				-					363
Income tax benefit of stock options
exercised	-		-	-			169			-				-					169
BALANCE, December 31, 2006	11,000	$	9,590	16,216,481		$	85,906		$	20,663			$	100				$	116,259
Comprehensive income:
Net income	-		-	-			-			15,102				-					15,102			$	15,102
Other comprehensive income –
Amortization of unrealized gains
for investment securities
transferred to held-to-maturity
of $66 (net of taxes of $25)	-		-	-			-			-				(41	)				(41	)			(41	)
Unrealized gains on investment
securities available-for-sale of
$1 (nominal tax effect)	-		-	-			-			-				1					1				1
Comprehensive income																						$	15,062
Adjustment for change in accounting
principle related to EITF 06-04	-		-	-			-			(127	)			-					(127	)
Preferred stock dividend declared	-		-	-			-			(275	)			-					(275	)
Common stock cash dividend declared	-		-	-			-			(2,891	)			-					(2,891	)
Stock-based compensation expense	-		-	-			306			-				-					306
Repurchase of common stock	-		-	(84,800	)		(1,060	)		-				-					(1,060	)
5% stock dividend	-		-	810,457			11,703			(11,703	)			-					-
Cash paid for fractional shares	-		-	-			-			(10	)			-					(10	)
Stock options exercised	-		-	45,358			254			-				-					254
Income tax benefit of stock options
exercised	-		-	-			157			-				-					157
BALANCE, December 31, 2007	11,000	$	9,590	16,987,496		$	97,266		$	20,759			$	60				$	127,675
F-5
See accompanying notes.

PREMIERWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
					Years Ended December 31,
		2007			2006			2005
					(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	15,102		$	14,648		$	13,189
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization		3,069			3,188			3,133
Loan loss provision		686			800			150
Deferred income taxes		(1,098	)		(1,772	)		(1,770	)
Net gains on sales of investment securities		-			(2	)		(3	)
Amortization of premiums and accretion of discounts
on investment securities, net		(13	)		48			57
Funding of loans held-for-sale		(28,042	)		(18,788	)		(18,404	)
Sale of loans held-for-sale		28,770			18,728			18,395
Gain on sale of loans held for sale		(304	)		(166	)		(225	)
Restricted equity security stock dividends		-			-			(6	)
Excess tax benefit from stock options exercised		(69	)		(146	)		-
Stock-based compensation expense		306			226			-
Gain on sales of premises and equipment		(88	)		(18	)		(25	)
Write down of low income housing tax credit investment		269			26			-
(Gain) loss on sale of other real estate owned		(5	)		(145	)		28
Changes in accrued interest receivable/payable
and other assets/liabilities		(2,407	)		(5	)		1,790
Net cash from operating activities		16,176			16,622			16,309
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and calls of investment
securities available-for-sale		42			5,062			1,114
Proceeds from maturities and calls of investment
securities held-to-maturity		3,385			2,447			1,235
Proceeds from sales of investment securities held-to-
maturity		-			-			153
Purchase of securities held-to-maturity		(2,456	)		-			-
Decrease (increase) in interest-bearing deposits with
Federal Home Loan Bank		(34	)		2			12
Purchase of equity securities		-			-			(260	)
Loan originations, net		(93,686	)		(114,222	)		(116,786	)
Purchases of premises and equipment, net		(7,172	)		(6,189	)		(5,282	)
Proceeds from the sale of other real estate owned		101			145			455
Purchase of low income housing tax credit investment		(392	)		(223	)		-
Purchase of consumer loan finance business		(11,141	)		-			-
Net cash from investing activities		(111,353	)		(112,978	)		(119,359	)

F-6

See accompanying notes.

PREMIERWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
				Years Ended December 31,
		2007			2006			2005
				(in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	$	55,965		$	110,931		$	79,434
Net increase (decrease) in borrowings from
the Federal Home Loan Bank		7,867			4,361			(639		)
Net increase (decrease) in Federal Funds purchased		47,184			(9,595	)		16,430
Repurchase of common stock		(1,060	)		-				-
Excess tax benefit from stock options exercised		69			146				-
Dividends paid on common stock		(2,683	)		(1,579	)			-
Dividends paid on preferred stock		(275	)		(275	)		(275		)
Stock options exercised		254			363				188
Cash paid for fractional shares relating to stock dividend		(10	)		(11	)			(10	)
Net cash from financing activities		107,311			104,341			95,128
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		12,134			7,985			(7,922		)
CASH AND CASH EQUIVALENTS,
beginning of year		36,497			28,512			36,434
CASH AND CASH EQUIVALENTS,
end of year	$	48,631		$	36,497		$	28,512
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest	$	26,603		$	18,693		$	9,744
Cash paid for taxes	$	10,677		$	10,517		$	7,980
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Transfers of loans to other real estate owned	$	101		$	-			$	-
Income tax benefit of stock options exercised	$	156		$	169			$	41
Increase in goodwill resulting from Mid Valley
Bank purchase price adjustment	$	-		$	-			$	848
Preferred stock dividend declared	$	275		$	275			$	275
Cash dividends declared	$	1,020		$	811			$	769

F-7

See accompanying notes.

PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization – The accompanying consolidated financial statements include the accounts of PremierWest Bancorp (the Company or PremierWest) and its wholly-owned subsidiary, PremierWest Bank (the Bank).

The Bank offers a full range of financial products and services through a network of 40 full service branch offices, 37 of which are located along the Interstate 5 freeway corridor between Roseburg, Oregon, and Woodland, California. Of the 40 full service branch offices, 23 are located in Oregon (Jackson, Josephine, Deschutes, Douglas, and Klamath Counties) and 17 are located in California (Siskiyou, Shasta, Butte, Tehama, Placer and Yolo Counties). The Bank’s activities include the usual lending and deposit functions of a community oriented commercial bank: commercial, real estate, installment, and mortgage loans; checking, time deposit, and savings accounts; mortgage loan brokerage services; and automated teller machines (ATMs) and safe deposit facilities. The Bank has three subsidiaries: Premier Finance Company, PremierWest Investment Services, Inc., and Blue Star Properties, Inc. Premier Finance Company, has offices in Medford, Grants Pass, Roseburg, Klamath Falls, Coos Bay, Eugene and Portland, Oregon and Redding, California and is engaged in the business of consumer lending. PremierWest Investment Services, Inc. operates throughout the Bank’s market area providing brokerage services for investment products including stocks, bonds, mutual funds and annuities. Blue Star Properties, Inc. serves solely to hold real estate properties for the Company but is currently inactive.

In December 2004, the Company established PremierWest Statutory Trust I and II (the Trusts), as wholly-owned Delaware statutory business trusts, for the purpose of issuing guaranteed individual beneficial interests in junior subordinated debentures (Trust Preferred Securities). The Trusts issued $15.5 million in Trust Preferred Securities for the purpose of providing additional funding for operations and enhancing the Company’s consolidated regulatory capital. In accordance with the Financial Accounting Standards Board’s (FASB) Interpretation No. 46(R), “Consolidation of Variable Interest Entities,” the Company has not included the Trusts in its consolidated financial statements but has recognized, as junior subordinated debt, the outstanding balance of the Trust Preferred Securities as of December 31, 2007 and 2006.

The Company declared 5% stock dividends in June 2007, June 2006, and June 2005. All per share amounts and calculations in the accompanying consolidated financial statements have been restated to reflect the effects of these stock dividends.

Method of accounting and use of estimates – The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America and prevailing practices within the banking industry. The Company utilizes the accrual method of accounting which recognizes income when earned and expenses when incurred. In preparation of the consolidated financial statements, all significant intercompany accounts and transactions have been eliminated.

F-8

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

The preparation of consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates made by management involve the calculation of the allowance for loan loss, the fair value of available-for-sale investment securities, the value of other real estate owned, and the calculations involved in determining potential goodwill impairment.

Cash and cash equivalents – For purposes of reporting cash flows, cash and cash equivalents include cash on hand, money market funds, amounts due from banks, and federal funds sold. Generally, federal funds are sold for one-day periods.

The Bank maintains balances in correspondent bank accounts which at times may exceed federally insured limits. Management believes that its risk of loss associated with such balances is minimal due to the financial strength of correspondent banks. The Bank has not experienced any losses in such accounts.

Investment securities – The Bank is required to specifically identify its investment securities as “available-for-sale,” “held-to-maturity,” or “trading accounts.”

Securities are classified as available-for-sale if the Bank intends to hold those debt securities for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available-for-sale would be based on various factors such as (1) changes in market interest rates and related changes in the prepayment risk, (2) needs for liquidity, (3) changes in the availability of and the yield on alternative instruments, and (4) changes in funding sources and terms. Unrealized holding gains and losses, net of tax, on available-for-sale securities are reported as other comprehensive income and carried as accumulated comprehensive income or loss within shareholders’ equity until realized. Fair values for these investment securities are based on quoted market prices. Premiums and discounts are recognized in interest income using the effective interest method. Realized gains and losses are determined using the specific-identification method and included in earnings.

Securities are classified as held-to-maturity if the Bank has both the intent and ability to hold those debt securities to maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. These securities are carried at cost adjusted for amortization of premium or accretion of discount computed using the effective interest method.

F-9

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

PremierWest Bancorp’s investment policy does not permit management to purchase securities for the purpose of trading. Accordingly, no securities were classified as trading securities during the periods reported.

Upon transfers of securities from the available-for sale classification to the held-to-maturity classification, the Bank ceases to recognize unrealized gains and losses, net of deferred taxes, in other comprehensive income, and records the unrealized gain or loss at the time of transfer, net of related deferred taxes, as a premium or discount on the related security. The unrealized gain or loss at the time of transfer is then amortized or accreted as an adjustment to yield from the date of transfer through the maturity date of each security transferred. The amortization or accretion of the unrealized gain or loss reported in shareholders’ equity will offset or mitigate the effect on interest income, of the amortization or accretion of the discount or premium resulting from the transfer of available-for-sale securities to the held-to-maturity classification.

At each financial statement date, management assesses each investment to determine if impaired investments are temporarily impaired or if the impairment is other-than-temporary based upon the positive and negative evidence available. Evidence evaluated includes, but is not limited to, industry analyst reports, credit market conditions, and interest rate trends. A decline in the market value of any security below cost that is deemed other-than-temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security.

Restricted equity securities – The Bank’s investment in FHLB stock is recorded as a restricted equity security and carried at par value, which approximates fair value. As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding mortgages, total assets, or FHLB advances. At December 31, 2007 and 2006, the Bank met its minimum required investment. The Bank may request redemption at par value of any FHLB stock in excess of the minimum required investment. Stock redemptions are at the discretion of the FHLB.

The Bank also owns stock in Pacific Coast Banker’s Bank (PCBB). The investment in PCBB is carried at cost. 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

Investments in limited partnerships– The Bank has a minority interest (less than 10%) in two limited partnerships that own and operate affordable housing projects. Investments in these projects serve as an element of the Bank’s compliance with the Community Reinvestment Act, and the Bank receives tax benefits in the form of deductions for operating losses and tax credits. The tax credits may be used to reduce taxes currently payable or may be carried back one year or forward 20 years to recapture or reduce taxes. The Bank uses the equity method in accounting for its interest in the partnerships’ operating results. The credits are recorded in the years they become available to reduce income taxes.

F-10

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

Mortgage loans held-for-sale – Mortgage loans held-for-sale are reported at the lower of cost or market value. Gains or losses on the sale of loans that are held-for-sale are recognized at the time of sale and determined by the difference between net sale proceeds and the net book value of the loans less the estimated fair value of any retained mortgage servicing rights. The Bank currently does not retain mortgage servicing rights.

Loans and the allowance for loan losses -- Loans are stated at the amount of unpaid principal, reduced by the allowance for loan losses and deferred loan fees. The allowance for loan losses represents management’s recognition of the assumed risks of extending credit and the quality of the existing loan portfolio. The allowance is established to absorb known and inherent losses in the loan portfolio as of the balance sheet date. The allowance is maintained at a level considered adequate to provide for estimated loan losses based on management’s assessment of various factors affecting the portfolio. Such factors include historical loss experience; review of problem loans; underlying collateral values and guarantees; current economic conditions; legal representation regarding the outcome of pending legal action for collection of loans and related loan guarantees; and an overall evaluation of the quality, risk characteristics, and concentration of loans in the portfolio. The allowance is based on estimates and ultimate losses may vary from the current estimates. These estimates are reviewed periodically and as adjustments become necessary, they are reported in operations in the periods in which they become known. The allowance is increased by provisions charged to operations and reduced by loans charged-off, net of recoveries.

Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgment of the information available to them at the time of their examinations.

The Bank considers loans to be impaired when management believes that it is probable that all amounts due will not be collected according to the contractual terms. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the loan’s underlying collateral or related guarantee. Since a significant portion of the Bank’s loans are collateralized by real estate, the Bank primarily measures impairment based on the estimated fair value of the underlying collateral or related guarantee. In certain other cases, impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate. Amounts deemed impaired are either specifically allocated for in the allowance for loan losses or reflected as a partial charge-off of the loan balance. Smaller balance homogeneous loans (typically, installment loans) are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual installment loans for impairment disclosures. Generally, the Bank evaluates a loan for impairment when it is placed on nonaccrual status. All of the Bank’s impaired loans at December 31, 2007 and 2006, were on nonaccrual status. After considering the borrower’s financial condition, the loan’s collateral position, collection efforts and other pertinent factors, impaired loans and other loans are charged to the allowance when the Bank believes that collection of future payments of principal is not probable.

F-11

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

Interest income on all loans is accrued as earned by the simple interest method. The accrual of interest on impaired loans is discontinued when, in management’s opinion, the borrower may be unable to make payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on nonaccrual loans is subsequently recognized only to the extent cash payments are received. Nonaccrual loans are returned to accrual status when the loans are paid current as to principal and interest and future payments are expected to be made in accordance with the contractual terms of the loan.

Loan origination and commitment fees, net of certain direct loan origination costs, are capitalized as an offset to the outstanding loan balance and recognized as an adjustment of the yield of the related loan.

Premises and equipment – Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization of premises and equipment is computed by the straight-line method over the shorter of the estimated useful lives of the assets or terms of underlying leases. Estimated useful lives range from 3 to 15 years for furniture, equipment, and leasehold improvements, and up to 40 years for building premises.

Core deposit intangibles – Core deposit intangibles are amortized by the straight-line method over seven years.

Goodwill – Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations. Effective January 1, 2002, the Bank ceased amortization of goodwill upon application of the nonamortization provisions of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” Under this statement, impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. Required annual analysis of this and other recorded goodwill components indicate that no impairment of asset values existed for the years ended December 31, 2007, 2006 and 2005.

Other real estate – Other real estate, acquired through foreclosure or deeds in lieu of foreclosure, is carried at the lower of cost, less estimated costs of disposal, or estimated net realizable value. When property is acquired, any excess of the loan balance over the estimated net realizable value is charged to the allowance for loan losses. Holding costs, subsequent write-downs to net realizable value, if any, or any disposition gains or losses are included in noninterest income and expense. The Bank held no other real estate at December 31, 2007 and 2006. During 2007, the Bank disposed of one other real estate property acquired during the year at a gain of approximately $5,000. During 2006, the Bank received proceeds totaling $145,000 relating to other real estate that had been written down to zero book value in previous years.

F-12

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

Advertising – Advertising and promotional costs are generally charged to expense during the period in which they are incurred. Advertising and promotional expenses were approximately $696,000, $1,029,000, and $999,000, for the years ended December 31, 2007, 2006, and 2005, respectively.

Income taxes – Income taxes are accounted for using the asset and liability method. Deferred income tax assets and liabilities are determined based on the tax effects of the differences between the book and tax bases of the various balance sheet assets and liabilities. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established to reduce the net carrying amount of deferred tax assets if it is determined to be more likely than not that all or some of the deferred tax asset will not be realized.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” and seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. FIN 48 clarifies the accounting for income taxes by prescribing a minimum threshold a tax position is required to meet before being recognized in the financial statements. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 is effective as of the beginning of our 2007 fiscal year. The cumulative effect, if any, of applying FIN 48 is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption. Adoption of this standard on January 1, 2007 did not have a material impact on the consolidated financial statements. The Company had no unrecognized tax benefits at January 1, 2007 and at December 31, 2007. During the years ended December 31, 2007 and 2006, the Company recognized no interest and penalties. The Company files income tax returns in the U.S. federal jurisdiction, California, and Oregon. The Company is no longer subject to U.S. or Oregon state examinations by tax authorities for years before 2004 and California state examinations for years before 2003.

Earnings per common share – Basic earnings per common share is computed by dividing net income available to common shareholders (net income less dividends declared on preferred stock) by the weighted average number of common shares outstanding during the period, after giving retroactive effect to stock dividends and splits. Diluted earnings per common share is computed similar to basic earnings per common share except that the numerator is equal to net income and the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. Included in the denominator is the dilutive effect of stock options computed under the treasury stock method and the dilutive effect of preferred stock as if converted to common stock.

F-13

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

Stock-Based Compensation – Effective January 1, 2006, PremierWest Bancorp adopted Financial Accounting Standards Board Statement No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires companies to measure and recognize as compensation expense the grant date fair market value for all share-based awards. That portion of the grant date fair market value that is ultimately expected to vest is recognized as expense over the requisite service period, typically the vesting period, utilizing the straight-line attribution method.

SFAS 123R requires companies to estimate the fair market value of stock-based payment awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model to value stock options. The Black-Scholes model requires the use of assumptions regarding the risk-free interest rate; expected dividend yield; the weighted average expected life of the options; and the historical stock price volatility.

The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield is based on management’s estimate at the time of grant. PremierWest Bancorp declared its first cash dividend during fiscal year 2005; two cash dividends were declared during fiscal year 2006; and three cash dividends were declared during fiscal year 2007; and during the fourth quarter of 2007, management announced a quarterly dividend policy for fiscal year 2008. Cash dividends are not paid on unexercised options. The Company attempts to use historical data to estimate option exercise and employee termination behavior in order to estimate an expected life for each option grant. The expected life falls between the vesting period or requisite service period and the contractual term for the option. Two employee classes having similar exercise and termination behavior are used for valuation purposes. Those classes are “employees” and “executive officers and directors.” During 2007, for options granted to the “employees” class, the Company estimated an expected life of 7 years based on the Security and Exchange Commission’s shortcut methodology as defined by SAB 107. During 2007, for options granted to the “executive officers and directors” class, the Company estimated an expected life of 7.5 years based on management’s historical analysis of exercise and forfeiture behavior for the Company’s executives and directors.

F-14

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

We adopted SFAS 123R using the modified prospective transition method, which requires adoption as of January 1, 2006, the first day of PremierWest Bancorp’s 2006 fiscal year. In accordance with the modified prospective method, the Company’s consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123R. Stock-based compensation expense recognized under SFAS 123R for the year ended December 31, 2007, resulting from stock options that were granted during the current and previous periods that vested during the current period, totaled $306,775 with a related tax benefit of $117,341. At December 31, 2007, unrecognized stock-based compensation expense totaled $1,335,156 and will be expensed over a weighted average period of 2.0 years.

Prior to the adoption of SFAS 123R, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statements of Cash Flows. SFAS 123R requires that the cash flows from the tax benefits resulting from tax deductions in excess of the compensation expense recognized for stock options (excess tax benefits) be reported as financing cash flows. An excess tax benefit of $69,000 is classified as financing cash inflows for the year ended December 31, 2007. The excess tax benefits reported as operating cash flows for the years ended December 31, 2006 and 2005 were $146,000 and $29,000, respectively.

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

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

	Year Ended December 31, 2005
Net income, as reported	$	13,189
Less: Total stock based employee compensation
expense determined under fair value based methods
for all awards, net of related tax effects		(87	)
Pro forma net income	$	13,102
Earnings per share
Basic - as reported	$	0.76
Basic - pro forma	$	0.76
Diluted - as reported	$	0.71
Diluted - pro forma	$	0.70

F-15

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

Comprehensive income - Comprehensive income for the Company includes net income reported on the consolidated statements of income, the amortization of unrealized gains for available-for-sale securities transferred to held-to-maturity, and changes in the fair value of available-for-sale investments which are reported as a component of shareholders’ equity.

Off-balance-sheet financial instruments – In the ordinary course of business, the Bank enters into off-balance-sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, and standby letters of credit. These financial instruments are recorded in the consolidated financial statements when they are funded or related fees are incurred or received.

Fair value of financial instruments – The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein:

Cash and cash equivalents – The carrying amounts of cash and short-term instruments approximate their fair value.

Interest-bearing deposits with FHLB and restricted equity securities – The carrying amount approximates the estimated fair value and expected redemption values.

Investment securities available-for-sale and held-to-maturity – Fair values for investment securities are based on quoted market prices or the market values for comparable securities.

Loans – For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for certain mortgage loans (for example, one-to-four family residential), credit card loans, and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for commercial real estate and commercial loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Loans held-for-sale – Loans held-for-sale includes mortgage loans and are reported at the lower of cost or market value. Cost generally approximates market value, given the short duration of these assets. Gains or losses on the sale of loans that are held for sale are recognized at the time of the sale and determined by the difference between net sale proceeds and the net book value of the loans less the estimated fair value of any retained mortgage servicing rights.

Deposit liabilities – The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate money market accounts, savings accounts, and interest checking accounts approximate their fair values at the reporting date. Fair values for fixed-rate CDs are

F-16

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings – The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within 90 days approximate their fair values. Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Bank’s current incremental borrowing rate for similar types of borrowing arrangements.

Long-term debt – The fair values of the Bank’s long-term debt is estimated using discounted cash flow analyses based on the Bank’s current incremental borrowing rate for similar types of borrowing arrangements.

Off-balance-sheet instruments – The Bank’s off-balance-sheet instruments include unfunded commitments to extend credit and standby letters of credit. The fair value of these instruments is not considered practicable to estimate because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.

Recently issued accounting standards – In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB 51.” SFAS No. 160 improves the information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require that the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in equity in the consolidated financial statements but separate from the parent’s equity; the share of net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income; changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently; and when a subsidiary is deconsolidated, through sale or otherwise, any retained noncontrolling equity interest in the former subsidiary be initially measured at fair value. SFAS No. 160 is effective for fiscal years and interim periods within those fiscal year, beginning on or after December 15, 2008. Early adoption is not permitted. Management does not expect the adoption of SFAS 160 to have a material impact on the consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141R (revised 2007), “Business Combinations,” which replaces SFAS No. 141. SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements, which will enable users to evaluate the nature and financial effects of the business combination. SFAS No. 141R applies prospectively

F-17

to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (on or after June 28, 2009 of fiscal 2010). Early adoption is not permitted. After the effective date, the Company will apply the requirements of SFAS No. 141R to its future business combinations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115.” SFAS No. 159 permits the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value. This statement gives entities the option to record certain financial assets and liabilities at fair value with the changes in fair value recorded in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Management does not expect the adoption of SFAS 157 to have a material impact on the consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” and seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. FIN 48 clarifies the accounting for income taxes by prescribing a minimum threshold a tax position is required to meet before being recognized in the financial statements. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 is effective as of the beginning of our 2007 fiscal year. The cumulative effect, if any, of applying FIN 48 is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption. Adoption of this standard on January 1, 2007 did not have a material impact on the consolidated financial statements. The Company had no unrecognized tax benefits at January 1, 2007 and at December 31, 2007. The Company recognizes interest and accrued penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2007 and 2006, the Company recognized no interest and penalties. The Company files income tax returns in the U.S. federal jurisdiction, California, and Oregon. The Company is no longer subject to U.S. or Oregon state examinations by tax authorities for years before 2004 and California state examinations for years before 2003.

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

F-18

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)

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

In September 2006, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue No. 06-4 (“EITF 06-4”), “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” EITF 06-4 requires employers to recognize a liability for future benefits provided through endorsement split-dollar life insurance arrangements that extend into postretirement periods in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” or APB Opinion No. 12, “Omnibus Opinion – 1967.” The provisions of EITF 06-4 become effective on January 1, 2008 and are to be applied as a change in accounting principle either through a cumulative-effect adjustment to retained earnings or other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption; or through retrospective application to all prior periods. Adoption of this standard was effective for the Company on January 1, 2007, and resulted in a $127,000 adjustment to retained earnings and did not have a material impact on the consolidated financial statements for any of the quarters or year end.

Reclassifications – Certain reclassifications have been made to the 2006 and 2005 consolidated financial statements to conform with current year presentations. These reclassifications have no effect on previously reported net income or earnings per share.

F-19

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – MERGERS AND ACQUISITIONS

On October 19, 2007, PremierWest entered into an Agreement and Plan of Reorganization with Stockmans Financial Group (“Stockmans”) and Stockmans Bank, pursuant to which Stockmans would merge with and into PremierWest with PremierWest the surviving corporation, and Stockmans Bank would merge with and into PremierWest Bank with PremierWest Bank the surviving bank. Stockmans is a bank holding company headquartered in Elk Grove, California whose principal subsidiary is Stockmans Bank, with five branches in the Sacramento area communities of Elk Grove, Folsom, Galt, Natomas and Rocklin. The merger was approved by PremierWest Bancorp shareholders on January 16, 2008, and by Stockmans shareholders on January 18, 2008. The transaction closed on January 26, 2008. Stockmans shareholders will receive approximately 5,357,426 in PremierWest Bancorp common stock and $24.0 million in cash aggregating to total purchase price of $81.2 million. The transaction will be accounted for as a purchase; accordingly, the results of operations from the acquisition will be included in the consolidated financial statements of PremierWest from the date of acquisition forward. As of December 31, 2007, the Company had capitalized and recorded, among other assets, approximately $387,000 in direct merger related costs.

On June 29, 2007, PremierWest Bank acquired the consumer finance loan business of Pacific Continental Bank, consisting of two independent consumer finance offices located in Eugene and Coos Bay, Oregon. As of the acquisition date, these offices and their employees commenced operating as branch offices of PremierWest Bank’s consumer finance subsidiary, Premier Finance Company. The transaction was accounted for as a purchase for cash of $11,142,000. The purchase price was allocated as follows: Real estate loans $9,197,000; Consumer loans $1,602,000; Deferred tax asset $175,000; Other assets $76,000; Allowance for loan losses $436,000; and Goodwill $528,000. Goodwill is expected to be fully deductible for tax purposes. The acquired Company had no liabilities.

F-20

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – CASH AND DUE FROM BANKS

The Bank was required to maintain an average reserve balance of approximately $3.6 million and $3.5 million at December 31, 2007 and 2006, respectively, with the Federal Reserve Bank or maintain such reserve balances in the form of cash. This requirement was met by holding cash and maintaining average reserve balances with the Federal Reserve Bank in excess of these amounts.

F-21

PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – INVESTMENT SECURITIES

Investment securities as of December 31 consisted of the following (in thousands):

				Gross		Gross			Estimated
		Amortized		Unrealized		Unrealized			Fair
2007		Cost		Gains		Losses			Value
Available-for-sale:
Mortgage-backed securities
and collateralized
mortgage obligations	$	222	$	2	$	(2	)	$	222

Held-to-maturity:
U.S. Government and agency
securities	$	1,484	$	-	$	-		$	1,484
Obligations of state and
political subdivisions	$	4,614	$	8	$	(34	)	$	4,588
	$	6,098	$	8	$	(34	)	$	6,072
Restricted equity securities	$	1,865	$	-	$	-		$	1,865
				Gross		Gross			Estimated
		Amortized		Unrealized		Unrealized			Fair
		Cost		Gains		Losses			Value
2006
Available-for-sale:
Mortgage-backed securities
and collateralized
mortgage obligations	$	264	$	2	$	(3	)	$	263
Held-to-maturity:
Obligations of state and
political subdivisions	$	7,055	$	6	$	(62	)	$	6,999
Restricted equity securities	$	1,865	$	-	$	-		$	1,865

F-22

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – INVESTMENT SECURITIES – (continued)

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

The following table presents the gross unrealized losses and fair value (in thousands) of the Bank’s investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2007:

		Less Than 12 Months					12 Months or More						Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses				Fair Value	Losses			Fair Value		Losses
Mortgage-backed securities
and collateralized
mortgage obligations	$	-	$	-		$	91	$	(2	)	$	91	$	(2	)
Obligations of state and political
subdivisions	$	253	$	(2	)	$	3,187	$	(32	)	$	3,440	$	(34	)
	$	253	$	(2	)	$	3,278	$	(34	)	$	3,531	$	(36	)

All unrealized losses reflected above were the result of changes in interest rates subsequent to the purchase of the securities. Because the decline in fair value is attributable to the changes in interest rates and not credit quality, and because the Bank has the ability and intent to hold these investments until a market price recovery or to maturity, the unrealized losses on these investments are not considered other-than-temporarily impaired.

F-23

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – INVESTMENT SECURITIES – (continued)

The amortized cost and estimated fair value of investment securities at December 31, 2007, by contractual maturity are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Available-for-Sale				Held-to-Maturity
		Amortized	Estimated			Amortized		Estimated
		Cost	Fair Value			Cost		Fair Value
Due in one year or less	$	-	$	-	$	2,122	$	2,122
Due after one year through
five years		-		-		1,437		1,428
Due after five through ten years		-		-		2,539		2,522
Mortgage-backed securities and
collateralized mortgage
obligations		222		222		-		-
	$	222	$	222	$	6,098	$	6,072

Investment securities with a carrying amount of $6.3 million and $7.3 million at December 31, 2007 and 2006, respectively, were pledged to secure public deposits, FHLB borrowings, and for other purposes as required or permitted by law.

Realized gains on sales of investment securities were $0, $2,000 and $3,000 in 2007, 2006, and 2005, respectively. There were no realized losses for these years.

F-24

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – LOANS

Loans, including loans held-for-sale, as of December 31 consisted of the following (in thousands):

		2007			2006
Real estate – commercial	$	446,724		$	387,986
Real estate – construction		268,254			259,254
Real estate – residential		17,128			17,513
Commercial		186,536			175,292
Agricultural		28,833			20,066
Consumer		73,743			53,542
Overdrafts		1,652			2,333
Other		3,028			6,701
Total loans		1,025,898			922,687
Less allowance for loan losses		(11,450	)		(10,877	)
Less deferred loan fees		(1,610	)		(2,165	)
Loans, net of allowance for loan losses
and deferred loan fees	$	1,012,838		$	909,645

The Bank’s market area consists principally of Jackson, Josephine, Deschutes, Douglas, and Klamath counties of Oregon, and Butte, Siskiyou, Shasta, Tehama, Placer and Yolo counties of northern California. A substantial portion of the Bank’s loans are collateralized by real estate in these geographic areas and, accordingly, the ultimate collectibility of a substantial portion of the Bank’s loan portfolio is susceptible to changes in the respective local market conditions.

In the normal course of business, the Bank participates portions of loans to third parties in order to extend the Bank’s lending capability or to mitigate risk. At December 31, 2007 and 2006, the portion of these loans participated to third parties (which are not included in the accompanying consolidated financial statements) totaled approximately $40.0 million and $42.4 million, respectively.

F-25

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – ALLOWANCE FOR LOAN LOSSES

Transactions in the allowance for loan losses for the years ended December 31 were as follows (in thousands):

		2007			2006			2005
BALANCE, beginning of year	$	10,877		$	10,341		$	9,171
Loan loss provision		686			800			150
Loans charged of f		(827	)		(496	)		( 771	)
Recoveries of loans previously
charged of f		533			232			1,791
Balance sheet reclassification		(255	)		-			-
Finance portfolio purchased		436			-			-
BALANCE, end of year	$	11,450		$	10,877		$	10,341

Impaired loans, including loans on nonaccrual status, had a recorded investment of approximately $8.4 million and $1.5 million at December 31, 2007 and 2006, respectively. The total allowance for loan losses related to these loans at December 31, 2007 and 2006, was approximately $372,000 and $151,000, respectively. The Bank’s average investment in impaired loans was approximately $4.1 million, $1.8 million and $2.2 million during 2007, 2006 and 2005 respectively. Had the impaired loans performed according to their original terms, additional interest income of $516,000, $40,000, and $143,000, would have been recognized in 2007, 2006, and 2005, respectively. No interest income has been recognized on impaired loans during the period of impairment. Further, loans contractually past due 90 days or more on which the Bank continued to accrue interest at December 31, 2007 and 2006, were insignificant.

F-26

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – PREMISES AND EQUIPMENT

Premises and equipment at December 31 consisted of the following (in thousands)

		2007			2006
Land and improvements	$	8,475		$	7,035
Buildings and leasehold improvements		30,351			26,122
Furniture and equipment		17,975			16,628
		56,801			49,785
Less accumulated depreciation and amortization		(18,312	)		(16,259	)
		38,489			33,526
Construction in progress		306			576
Premises and equipment, net of accumulated
depreciation and amortization	$	38,795		$	34,102

Depreciation expense totaled $2.6 million, $2.7 million, and $2.6 million for the years ended December 31, 2007, 2006, and 2005, respectively.

At December 31, 2007, there were two branch facilities subject to construction contracts for their improvement. Aggregate unpaid construction contracts related to branch facility improvements were approximately $560,000 as of December 31, 2007.

NOTE 8 – CORE DEPOSIT INTANGIBLES

At December 31, 2007 and 2006, PremierWest had $1,516,000 and $2,010,000 of core deposit intangibles, respectively, net of accumulated amortization of $2,354,000 and $1,860,000, respectively. The estimated annual amortization of core deposit intangibles over a remaining life of approximately three years is $494,000.

For each of the years ending December 31, 2007, 2006, and 2005, PremierWest recorded amortization expense related to these core deposit intangibles totaling $494,000.

F-27

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – TIME DEPOSITS

Time deposits of $100,000 and over totaled approximately $130.2 million and $103.0 million at December 31, 2007 and 2006, respectively.

At December 31, 2007, the scheduled annual maturities for all time deposits were as follows (in thousands):

Years ending December 31,	2008	$	287,495
	2009		49,079
	2010		10,549
	2011		6,098
	2012		6,912
	Thereafter		240
		$	360,373

NOTE 10 – FEDERAL FUNDS PURCHASED

The Bank maintains federal funds lines with correspondent banks as a backup source of liquidity. Federal funds purchased generally mature within one to four days from the transaction date. The balance outstanding as of December 31, 2007 was $54.0 million, on an unsecured basis and accruing interest at the weighted average rate of 4.60% . The balance outstanding as of December 31, 2006 was $6.8 million. As of December 31, 2007, the Bank had approximately $76.0 million of federal funds lines available to draw against on an unsecured basis.

NOTE 11 – FEDERAL HOME LOAN BANK BORROWINGS

The Bank had long-term borrowings outstanding with the Federal Home Loan Bank totaling $508,000 and $1.1 million as of December 31, 2007 and 2006, respectively. The Bank makes monthly principal and interest payments on the long-term borrowings, which mature between 2008 and 2014 and bear fixed interest at rates ranging from 5.82% to 7.52% . The Bank also participates in the Cash Management Advance (CMA) program with the FHLB. CMA borrowings are short-term borrowings that mature within one year and accrue interest at the variable Cash Management Advance rate as published by the FHLB. As of December 31, 2007, the Bank had $13.5 million in CMA borrowings outstanding at the variable interest rate of 4.35% . As of December 31, 2006 the Bank had $5.0 million in CMA borrowings outstanding at the variable interest rate of 5.63% . All outstanding borrowings with the FHLB are collateralized as provided for under the Advances, Security and Deposit Agreement between the Bank and the FHLB and include the Bank’s FHLB stock and any funds or investment securities held by the FHLB that are not otherwise pledged for the benefit of others. In addition, certain qualifying loans totaling approximately $51.0 million were pledged to support the Bank’s outstanding advances and provided for an additional available borrowing capacity of approximately $1.3 million as of December 31, 2007.

F-28

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – FEDERAL HOME LOAN BANK BORROWINGS – (continued)

The scheduled repayment of FHLB borrowings is as follows (in thousands):

Years ending December 31,	2008	$	13,965
	2009		14
	2010		7
	2011		7
	2012		7
	Thereafter		8
		$	14,008

NOTE 12 – JUNIOR SUBORDINATED DEBENTURES

On December 30, 2004, the Company established two wholly-owned statutory business trusts (PremierWest Statutory Trust I and II) that were formed to issue junior subordinated debentures and related common securities. The $15,464,000 of junior subordinated debentures issued by the Trusts require quarterly interest-only payments. Common stock issued by the Trusts and held as an investment by the Company is recorded in other assets in the consolidated balance sheets. Following are the terms of the junior subordinated debentures as of December 31, 2007:

	Issue		Issued			Maturity	Redemption
Trust Name	Date		Amount	Rate		Date	Date
PremierWest Statutory	December					December	December
Trust I	2004	$	7,732,000	5.65	% (1)	2034	2009
PremierWest Statutory	December					March	March
Trust II	2004		7,732,000	5.65	% (2)	2035	2010
		$	15,464,000
(1) PremierWest Statutory Trust I bears interest at the fixed rate of 5.65% until December 2009 at which time
it converts to the variable rate of LIBOR + 1.75%, adjusted quarterly, through the maturity date.
(2) PremierWest Statutory Trust II bears interest at the fixed rate of 5.65% until March 2010 at which time
it converts to the variable rate of LIBOR + 1.79%, adjusted quarterly, through the maturity date.

F-29

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – PREFERRED STOCK

On November 17, 2003, PremierWest closed a private offering involving 11,000 shares of its Series A Preferred Stock to a group of private investors, including a director of PremierWest, for $875 per share. The Series A Preferred Stock offering yielded net proceeds of $9.6 million. Holders of the preferred stock are entitled to receive cash dividends at the annual rate of $25 per share, payable when and if declared by the Board of Directors. Such dividends are not cumulative. Beginning November 17, 2006, each share of the Series A Preferred Stock became convertible into 106.357 shares of PremierWest common stock. As of December 31, 2007, no shares had been converted to common stock. If not previously converted to common stock, the Series A Preferred Stock will automatically convert to common stock on the fifth anniversary of the issue date. Although the preferred stock ranks senior to common stock through a liquidation preference of $875 per share plus any declared but unpaid dividends, the shares do not have voting rights except in the event of extraordinary corporate events, such as a merger in which PremierWest is not the surviving entity. In 2007, 2006, and 2005 the Company declared and paid dividends of $275,000 to holders of preferred stock.

NOTE 14 – OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS

In the normal course of business, the Bank is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of amounts recognized in the accompanying consolidated balance sheets. The contractual amounts of these instruments reflect the extent of the Bank’s involvement in these particular classes of financial instruments. As of December 31, 2007 and 2006, the Bank had no commitments to extend credit at below-market interest rates and held no derivative financial instruments.

The Bank’s exposure to credit loss in the event of nonperformance by another party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The distribution of commitments to extend credit approximates the distribution of loans outstanding.

F-30

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS - (continued)

A summary of the Bank’s off-balance-sheet financial instruments at December 31 is as follows (in thousands):

		2007		2006
Commitments to extend credit	$	164,032	$	175,032
Standby letters of credit		8,181		10,154
Total off-balance-sheet financial instruments	$	172,213	$	185,186

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held for commitments varies but may include accounts receivable, inventory, property and equipment, residential real estate, or income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. These guaranties are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held, if required, varies as specified above.

NOTE 15 – INCOME TAXES

The provision for income taxes for the years ended December 31 was as follows (in thousands):

		2007			2006			2005
Current expense:
Federal	$	8,506		$	8,772		$	7,720
State		1,895			1,986			1,186
		10,401			10,758			8,906
Deferred expense (benefit):
Federal		(806	)		(1,401	)		(1,548	)
State		(292	)		(371	)		(222	)
		(1,098	)		(1,772	)		(1,770	)
Provision for income taxes	$	9,303		$	8,986		$	7,136

F-31

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – INCOME TAXES – (continued)

The provision for income taxes results in effective tax rates which are different than the federal income tax statutory rate. The nature of the differences for the years ended December 31 were as follows (in thousands):

		2007					2006					2005
		Amount		Rate			Amount		Rate			Amount		Rate
Expected federal income tax provision
at statutory rate	$	8,542		35.00	%	$	8,272		35.00	%	$	7,114		35.00	%
State income taxes, net of federal effect		1,208		4.95	%		1,200		5.08	%		721		3.55	%
Effect of nontaxable interest income, net		(199	)	-0.82	%		(174	)	-0.74	%		(263	)	-1.29	%
Effect of nontaxable increases in the
surrender value of life insurance		(188	)	-0.77	%		(150	)	-0.63	%		(155	)	-0.76	%
Other, net		(60	)	-0.25	%		(162	)	-0.69	%		(281	)	-1.38	%
Provision for income taxes	$	9,303		38.11	%	$	8,986		38.02	%	$	7,136		35.12	%

The components of the net deferred tax assets as of December 31 were approximately as follows (in thousands):

		2007		2006
Assets:
Allowance for loan losses	$	4,701	$	4,170
Benefit plans		2,399		1,973
State tax credits		301		358
Other		448		354
Total deferred tax assets		7,849		6,855
Liabilities:
Net unrealized gains on investment
securities available-for-sale		-		1
FHLB stock dividends		353		353
Premises and equipment		1,407		1,489
Intangibles		648		814
Loan origination costs		949		799
Prepaids		230		315
Deferred revenue		174		356
Other		314		171
Total deferred tax liabilities		4,075		4,298
Net deferred tax asset	$	3,774	$	2,557

F-32

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – INCOME TAXES – (continued)

The state tax credits include purchased tax credits totaling $147,000 and $168,000 at December 31, 2007 and 2006. These purchased tax credits consist of State of Oregon Business Energy Tax Credits (BETC) that will be utilized to offset future Oregon income taxes. The Company made BETC purchases during both 2007 and 2006. The purchased credits expire after eight years but are expected to be utilized within five years of purchase.

Management believes, primarily based upon the Bank’s historical performance, that deferred tax assets will be recognized in the normal course of operations and, accordingly, management has not reduced deferred tax assets by a valuation allowance.

F-33

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – BASIC AND DILUTED EARNINGS PER COMMON SHARE

The following summarizes the calculations for basic and diluted earnings per common share, after giving retroactive effect for stock dividends, for the years ended December 31, (in thousands, except per share amounts):

			Weighted Average
		Net Income	Shares		Per Share
		(Numerator)	(Denominator)		Amount
2007
Basic earnings per common share -
income available to common
shareholders (net of $275,000 declared
dividends to preferred shareholders)	$	14,827	17,014,873	$		0.87
Effect of assumed conversion of
stock options		-	308,187
Effect of assumed conversion of
Preferred Stock		-	1,169,925
Add back preferred stock dividend
declared		275	-
Diluted earnings per common share	$	15,102	18,492,985	$		0.82
2006
Basic earnings per common share -
income available to common
shareholders (net of $275,000 declared
dividends to preferred shareholders)	$	14,373	16,991,451	$		0.85
Effect of assumed conversion of
stock options		-	411,410
Effect of assumed conversion of
Preferred Stock		-	1,169,925
Add back preferred stock dividend
declared		275	-
Diluted earnings per common share	$	14,648	18,572,786	$		0.79
2005
Basic earnings per common share -
income available to common
shareholders (net of $275,000 declared
dividends to preferred shareholders)	$	12,914	16,932,935	$		0.76
Effect of assumed conversion of
stock options		-	398,828
Effect of assumed conversion of
Preferred Stock		-	1,169,925
Add back preferred stock dividend
declared		275	-
Diluted earnings per common share	$	13,189	18,501,688	$		0.71

Stock-based awards of approximately 219,000 in fiscal 2007, were not included in the computation of diluted earnings per share, as their inclusion would be anti-dilutive. As of December 31, 2006 and 2005, there were no antidilutive options outstanding.

F-34

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 – TRANSACTIONS WITH RELATED PARTIES

Certain officers and directors (and the companies with which they are associated) are customers of, and have had banking transactions with, the Bank in the ordinary course of business. In addition, the Bank expects to continue to have such banking transactions in the future. All loans, and commitments to lend, to such parties are generally made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. In the opinion of management, these transactions do not involve more than the normal risk of collectibility or present any other unfavorable features.

An analysis of the activity with respect to loans outstanding to directors and executive officers of the Bank and their affiliates for the years ended December 31 is as follows (in thousands):

		2007			2006
Beginning balance	$	11,495		$	8,870
Additions		8,215			5,874
Repayments		(2,527	)		(3,249	)
Ending balance	$	17,183		$	11,495

Deposits held for executive officers and directors at December 31, 2007 and 2006, were approximately $3,677,000 and $2,641,000, respectively.

NOTE 18 – BENEFIT PLANS

401(k) profit sharing plan – The Bank maintains a 401(k) profit sharing plan (the Plan) that covers substantially all full-time employees. Employees may make voluntary tax deferred contributions to the Plan, and the Bank’s contributions to the Plan are at the discretion of the Board of Directors, not to exceed the amount deductible for federal income tax purposes. Employees vest in the Bank’s contributions to the Plan over a period of six years. Total amounts charged to operations under the Plan were approximately $506,000, $366,000 and $267,000 for the years ended December 31, 2007, 2006, and 2005, respectively.

Executive supplemental retirement and severance plans – In connection with previous acquisitions of United Bancorp, Timberline Bancshares, Inc. and Mid Valley Bank, the Company entered into various severance, noncompete, and retirement agreements with previous executives and Board members of the acquired companies. As of December 31, 2007 and 2006, the Bank’s recorded liability pursuant to these collective agreements was $889,000 and $1.0 million, respectively. Payments on these plans are generally made on a monthly or quarterly basis and will continue until all liabilities are paid in full. To support its obligations under these arrangements, the Bank acquired bank-owned life insurance policies which had aggregate cash surrender values of $6.9 million and $6.2 million as of December 31, 2007 and 2006, respectively. For the years ended December 31, 2007, 2006, and 2005, the Bank recognized expenses relating to these agreements of $144,000, $123,000, and $113,000, respectively.

F-35

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18 – BENEFIT PLANS – (continued)

The Bank has entered into supplemental retirement plans with five key executive officers. These plans provide for retirement benefits which increase annually until each executive reaches retirement age and will be paid out over a 15-year period following the retirement of covered executives. To support its obligations under these plans and to provide death benefits to other selected employees, the Bank has acquired bank-owned life insurance with a cash surrender value of $6.0 million and $5.4 million at December 31, 2007 and 2006, respectively. As of December 31, 2007 and 2006, the Bank’s liability pursuant to these supplemental retirement plans was $2.6 million and $2.0 million, respectively. For the years ended December 31, 2007, 2006 and 2005, related expenses of $631,000, $859,000 and $564,000, respectively, were recorded.

NOTE 19 – STOCK OPTION PLAN

At December 31, 2007, PremierWest Bancorp had two outstanding stock option plans – the 1992 Stock Option Plan (“1992 Plan”) and the 2002 Stock Incentive Plan (“2002 Plan”). The 2002 Plan superseded the 1992 Plan; no additional grants may be made under the 1992 Plan. The 2002 Plan was initially established in May 2002 and was approved by shareholders. The 2002 Plan was subsequently amended and restated in May 2005 to allow for the issuance of restricted stock grants in addition to stock options. The 2002 Plan was also amended and restated in May 2007 to increase the number of shares available for issuance under the plan by 1,000,000 shares. The amended and restated 2002 Plan was approved by shareholders in May 2005 and 2007, and allows for the issuance of up to 1,969,334 shares of stock awards of which a total of 1,240,616 shares were available for issuance as either stock options or restricted stock grants as of December 31, 2007. As of December 31, 2007, there were no restricted stock grants outstanding.

The amended and restated 2002 Plan allows for stock options to be granted at an exercise price of not less than the fair market value of PremierWest Bancorp stock on the date of issuance, for a term not to exceed ten years. The Compensation Committee establishes the vesting schedule for each grant; historically, the Committee has utilized graded vesting schedules over two, five, or seven year periods. Upon exercise of stock options or issuance of restricted stock grants, it is the Company’s policy to issue new shares of common stock.

During the year ended December 31, 2007, stock option activity, adjusted for the 5% common stock dividend paid on June 29, 2007, was as follows:

					Weighted Average
					Remaining		Aggregate
	Number			Weighted Average	Contractual Term		Intrinsic Value
	of Options			Exercise Price	(years)		(in thousands)
Stock options outstanding, 12/31/06	915,247		$	7.95
Granted	147,718		$	12.44
Exercised	(45,358	)	$	5.57
Forfeited or Expired	(30,360	)	$	9.68
Stock options outstanding, 12/31/07	987,247		$	8.68	5.52	$	2,725
Stock options exercisable, 12/31/07	558,050		$	6.77	3.63	$	2,606

F-36

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 – STOCK OPTION PLAN – (continued)

The weighted-average grant date fair value of options granted during the years ended 2007, 2006 and 2005 was $4.82, $6.84, and $2.49 respectively.

The following schedule reflects the weighted-average assumptions included in the Black-Scholes model as it relates to the valuation of options granted for the years ended December 31:

	2007		2006		2005
Risk-free interest rate	4.6	%	4.8	%	4.4	%
Expected dividend	0.78	%	0.29	%	5.0	%
Expected life, in years	7.1		7.3		7.5
Expected volatility	28	%	27	%	39	%

The following table presents the intrinsic value of stock options exercised, cash received from stock options exercised, and the tax benefit realized for deductions related to stock options exercised for the years ended December 31, 2007, 2006 and 2005.

		2007		2006		2005
Intrinsic value of stock options exercised	$	328,000	$	778,000	$	466,000
Cash received from stock options exercised	$	254,000	$	363,000	$	188,000
Tax benefit realized from stock options exercised	$	157,000	$	169,000	$	41,000

Information regarding the number, weighted-average exercise price, and weighted-average remaining contractual life of options by range of exercise price at December 31, 2007, is as follows:

				Options Outstanding		Exercisable Options
					Weighted-				Weighted-
				Weighted-	Average			Weighted-	Average
				Average	Remaining			Average	Remaining
	Exercise	Number of		Exercise	Contractual	Number		Exercise	Contractual
	Price Range	Options		Price	Life (Years)	of Options		Price	Life (Years)
$	3.01 – $6.00	403,491	$	5.49	2.27	388,462	$	5.52	2.17
$	6.01 – $9.00	110,115	$	8.47	6.35	69,868	$	8.46	6.34
$	9.01 – $12.00	254,727	$	9.57	7.25	85,271	$	9.57	7.25
$	12.01 – $15.00	163,788	$	12.55	9.29	3,424	$	13.24	8.18
$	15.01 – $18.00	55,125	$	16.78	8.33	11,025	$	16.78	8.33
		987,246	$	8.68	5.52	558,050	$	6.77	3.63

F-37

PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 – COMMITMENTS AND CONTINGENCIES

Operating lease commitments – As of December 31, 2007, the Bank leased certain properties from unrelated third parties. Future minimum lease commitments pursuant to these operating leases are as follows (in thousands):

Years ending December 31,	2008	$	875,331
	2009		855,047
	2010		738,745
	2011		642,454
	2012		592,879
	Thereafter		2,921,267
		$	6,625,723

Rental expense for all operating leases was $695,973, $642,000 and $442,000for the years ended December 31, 2007, 2006, and 2005, respectively.

Legal contingencies - We are currently a party to various claims and legal proceedings.  If management believes that a loss arising from these matters is probable and can reasonably be estimated, we record the amount of the loss, or the minimum estimated liability when the loss is estimated using a range, and no point within the range is more probable than another.  As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary.  Based on currently available information, management believes that the ultimate outcome of these matters, individual and in the aggregate, will not have a material adverse effect on our financial position or overall trend in results of operations.  However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur.  An unfavorable ruling could include monetary damages or an injunction prohibiting us from selling one or more products.  If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the financial position and results of operations of the period in which the ruling occurs, or future periods.

NOTE 21 – ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS

The following disclosures are made in accordance with the provisions of SFAS No. 107, “Disclosures About Fair Value of Financial Instruments,” which requires the disclosure of fair value information about financial instruments where it is practicable to estimate that value.

In cases where quoted market values are not available, the Bank primarily uses present value techniques to estimate the fair values of its financial instruments. Valuation methods require considerable judgment, and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used. Accordingly, the estimates provided herein do not necessarily indicate amounts which could be realized in a current market exchange.

In addition, as the Bank normally intends to hold the majority of its financial instruments until maturity, it does not expect to realize many of the estimated amounts disclosed. The disclosures also do not include estimated fair value amounts for items which are not defined as financial instruments but which have significant value. These include such off-balance-sheet items as core deposit intangibles on nonacquired deposits. The Bank does not believe that it would be practicable to estimate a representational fair value for these types of items as of December 31, 2007 and 2006.

F-38

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21 – ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS – (continued)

Because SFAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements, any aggregation of the fair value amounts presented would not represent the underlying value of the Bank.

The estimated fair values of the Bank’s significant on-balance-sheet financial instruments at December 31 were as follows (in thousands):

			2007				2006
		Carrying		Estimated		Carrying		Estimated
		Value		Fair Value		Value		Fair Value
Financial assets:
Cash and cash equivalents	$	48,631	$	48,631	$	36,497	$	36,497
Interest-bearing deposits with FHLB	$	41	$	41	$	7	$	7
Investment securities available-for-
sale	$	222	$	222	$	263	$	263
Investment securities held-to-
maturity	$	6,098	$	6,072	$	7,055	$	6,999
Restricted equity investments	$	1,865	$	1,865	$	1,865	$	1,865
Loans held-for-sale	$	569	$	569	$	993	$	993
Loans, net	$	1,012,269	$	1,014,597	$	908,652	$	904,381
Financial liabilities:
Deposits	$	935,315	$	936,723	$	879,350	$	879,415
Federal funds purchased	$	54,019	$	54,019	$	6,835	$	6,835
FHLB borrowings	$	14,008	$	13,966	$	6,141	$	6,146
Junior Subordinated Debentures	$	15,464	$	15,246	$	15,464	$	15,730

NOTE 22 – REGULATORY MATTERS

PremierWest and the Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on PremierWest’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, PremierWest and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. PremierWest’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

F-39

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22 – REGULATORY MATTERS – (continued)

Quantitative measures established by regulation to ensure capital adequacy require PremierWest and the Bank to maintain minimum amounts and ratios (set forth in the following tables) of Tier 1 capital to average assets, and Tier 1 and total capital to risk-weighted assets (all as defined in the regulations). Management believes that as of December 31, 2007 and 2006, PremierWest and the Bank met or exceeded all relevant capital adequacy requirements.

As of December 31, 2007, the most recent notification from the regulators categorized the Bank as well capitalized under the regulatory framework for prompt correction action. There are no conditions or events since the notification from the regulators that management believes would change the Bank’s regulatory capital categorization. To be categorized as well capitalized, PremierWest and the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table.

PremierWest’s and the Bank’s actual and required capital amounts and ratios are presented in the following table (amounts in thousands):

										Regulatory
										Minimum To Be
						Regulatory				Well Capitalized
						Minimum To Be				Under Prompt
						Adequately				Corrective
		Actual				Capitalized				Action Provisions
		Amount	Ratio			Amount	Ratio			Amount	Ratio
December 31, 2007
Tier 1 capital (to
average assets)
Company	$	120,157	10.9	%	$	44,115	>4.0	%		N/A	N/A
Bank	$	120,251	10.9	%	$	44,067	>4.0	%	$	55,084	>5.0	%
Tier 1 capital (to risk-
weighted assets)
Company	$	120,157	10.8	%	$	44,710	>4.0	%		N/A	N/A
Bank	$	120,251	10.8	%	$	44,676	>4.0	%	$	67,014	>6.0	%
Total capital (to risk-
weighted assets)
Company	$	131,862	11.8	%	$	89,420	>8.0	%		N/A	N/A
Bank	$	131,956	11.8	%	$	89,353	>8.0	%	$	111,691	>10.0	%

F-40

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22 – REGULATORY MATTERS – (continued)

										Regulatory
										Minimum To Be
						Regulatory				Well Capitalized
						Minimum To Be				Under Prompt
						Adequately				Corrective
		Actual				Capitalized				Action Provisions
		Amount	Ratio			Amount	Ratio			Amount	Ratio
December 31, 2006
Tier 1 capital (to
average assets)
Company	$	108,735	11.1	%	$	39,245	>4.0	%		N/A	N/A
Bank	$	105,693	10.8	%	$	39,185	>4.0	%	$	48,981	>5.0	%
Tier 1 capital (to risk-
weighted assets)
Company	$	108,735	10.7	%	$	40,615	>4.0	%		N/A	N/A
Bank	$	105,693	10.4	%	$	40,576	>4.0	%	$	60,863	>6.0	%
Total capital (to risk-
weighted assets)
Company	$	119,612	11.8	%	$	81,231	>8.0	%		N/A	N/A
Bank	$	116,570	11.5	%	$	81,151	>8.0	%	$	101,439	>10.0	%

F-41

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 23 – PARENT COMPANY FINANCIAL INFORMATION

Condensed financial information for PremierWest (parent company only) is presented as follows (in thousands):

CONDENSED BALANCE SHEETS

				December 31,
				2007			2006
ASSETS
Cash and cash equivalents			$	38		$	24
Investment in subsidiary				142,769			129,042
Advances made to subsidiary				62			2,140
Other assets				1,313			1,642
Total assets			$	144,182		$	132,848
LIABILITIES
Junior subordinated debentures			$	15,464		$	15,464
Other liabilities				1,043			1,125
Total liabilities				16,507			16,589
SHAREHOLDERS’ EQUITY				127,675			116,259
Total liabilities and shareholders’ equity			$	144,182		$	132,848
CONDENSED STATEMENTS OF INCOME
		Years Ended December 31,
		2007		2006			2005
Operating income	$	103	$	211		$	210
Cash dividends from bank subsidiary		2,525		-			-
Interest expense		874		874			874
Other operating expense		546		436			188
Income (loss) before equity in undistributed
net earnings of subsidiary		1,208		(1,099	)		(852	)
Equity in undistributed net earnings of
subsidiary		13,894		15,747			14,041
NET INCOME	$	15,102	$	14,648		$	13,189

F-42

     PREMIERWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 23 – PARENT COMPANY FINANCIAL INFORMATION – (continued)

CONDENSED STATEMENTS OF CASH FLOWS

		Years Ended December 31,
		2007			2006			2005
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income	$	15,102		$	14,648		$	13,189
Adjustments to reconcile net income to
net cash from operating activities:
Equity in undistributed net
earnings of subsidiary		(13,894	)		(15,747	)		(14,041	)
Excess tax benefit from stock options
excercised		(69	)		(146	)		-
Other, net		502			406			56
Net cash from operating
activities		1,641			(839	)		(796	)
CASH FLOWS FROM INVESTING
ACTIVITIES
Repayment of advances made to Bank subsidiary		2,078			2,186			675
Net cash from investing
activities		2,078			2,186			675
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from stock options exercised		254			363			188
Dividends paid on common stock		(2,683	)		(1,579	)		-
Dividends paid on preferred stock		(275	)		(275	)		(275	)
Excess tax benefit from stock options
excercised		69			146			-
Stock Repurchased		(1,060	)		-			-
Cash paid for fractional shares related to
stock dividend		(10	)		(11	)		(10	)
Net cash from financing
activities		(3,705	)		(1,356	)		(97	)
NET DECREASE IN
CASH AND CASH EQUIVALENTS		14			(9	)		(218	)
CASH AND CASH EQUIVALENTS,
beginning of year		24			33			251
CASH AND CASH EQUIVALENTS,
end of year	$	38		$	24		$	33

F-43

EX-10.1

Exhibit 10.1

PREMIERWEST BANCORP

EMPLOYMENT AGREEMENT

FOR

JOHN ANHORN

Dated as of December 13, 2007

			TABLE OF CONTENTS
1	.	EMPLOYMENT		1
		1.1	Officer Position	1
		1.2	Board Service	1
2	.	TERM OF AGREEMENT		2
		2.1	Initial Term	2
3	.	NO TERM OF EMPLOYMENT		2
4	.	DUTIES		2
		4.1	Duties	2
		4.2	Obligations	2
5	.	COMPENSATION		2
		5.1	Base Salary	3
		5.2	Vacation	3
		5.3	Stock Options	3
		5.4	Long-Term Care Insurance	3
		5.5	[Reserved]	3
		5.6	Automobile	3
		5.7	Club Dues	4
		5.8	Other Benefits	4
		5.9	Reimbursements	4
		5.10	Existing Benefit Agreements	4
6	.	TERMINATION		4
		6.1	For Cause	4
		6.2	Without Cause	5
		6.3	For Good Reason	5
		6.4	Resignation	5
		6.5	Death or Disability	5
		6.6	Retirement	5
7	.	DEFINITIONS		5
		7.1	Cause	5
		7.2	Good Reason	6
		7.3	Disability	8
		7.4	Change in Control	8
8	.	PAYMENT UPON TERMINATION		9
9	.	RETIREMENT BENEFITS		9
		9.1	Stock Option Vesting	9
		9.2	401(k) Contribution	9
		9.3	Retiree Health Insurance	9
		9.4	Long-Term Care Insurance	10
10	.	CONSIDERATION FOR RELEASE OF CLAIMS		10
		10.1	Normal Retirement Benefits	10
		10.2	Disability Insurance	10
11	.	CONSIDERATION FOR NOT COMPETING		10
		11.1	Self-Imposed Limitation	10

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		11.2	Amount/Payment of Consideration	10
12	.	CHANGE IN CONTROL RETENTION BONUS		11
13	.	IRC 280G		11
14	.	POTENTIAL TRANSACTION BONUS		11
15	.	CONFIDENTIALITY AND CREATIVE WORK		12
		15.1	Nondisclosure	12
		15.2	Return of Material	12
		15.3	Injunctive Relief	13
		15.4	Creative Work	13
16	.	DISPUTE RESOLUTION		13
		16.1	Arbitration	13
		16.2	Expenses/Attorneys’ Fees	13
		16.3	Injunctive Relief	14
17	.	NOTICES		14
18	.	GENERAL PROVISIONS		14
		18.1	Governing Law	14
		18.2	Saving Provision	14
		18.3	Survival Provision	14
		18.4	Captions and Counterparts	14
		18.5	Entire Agreement	14
		18.6	Previous Agreement	15
		18.7	Waiver/Amendment	15
		18.8	Assignment	15
19	.	ADVICE OF COUNSEL		15

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EMPLOYMENT AGREEMENT

     This Employment Agreement (this “Agreement”) by and among PremierWest Bancorp, an Oregon corporation, PremierWest Bank, an Oregon state chartered bank (the “Bank”) (collectively “PremierWest”) and John Anhorn (“Executive”), is dated December 13, 2007.

RECITALS

     A. Incentive to Continued Service. PremierWest recognizes that Executive possesses unique skills, knowledge, and experience related to PremierWest’s business and Executive has made and is expected to continue to make major contributions to the profitability, growth and financial strength of PremierWest and its affiliates. To assure itself of the continuity of management, PremierWest desires to provide incentives for Executive to remain employed until retirement age and following a Change in Control.

     B. Replace Existing Agreement. Executive and PremierWest were parties to an employment agreement dated April 2, 1998 which was replaced by employment agreements dated August 9, 2002 and July 29, 2004, which in turn was amended on December 24, 2004 and again on January 25, 2006. The parties intend for this Agreement to supersede and replace the provisions of these previous employment agreements, except as otherwise stated herein.

     C. No Currently Anticipated Change in Control. As of the date of this Agreement, none of the conditions or events included in the definition of the term “golden parachute payment” that is set forth in Section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of PremierWest, is contemplated insofar as PremierWest or any affiliates are concerned.

     D. Code Section 409A. This Agreement is intended to comply with Section 409A of the Internal Revenue Code (the “Code”). Any ambiguity hereunder shall be interpreted in such a way as to comply, to the extent necessary, with Section 409A and the regulations thereunder.

AGREEMENT

     1. EMPLOYMENT.

          1.1 Officer Position. PremierWest Bancorp and the Bank shall continue to employ Executive to serve as Chief Executive Officer according to the terms and conditions of this Agreement, for the period stated in Section 2 below.

          1.2 Board Service. Executive is currently serving on the boards of directors of PremierWest Bancorp (the “Board)” and the Bank (the “Bank Board”). PremierWest Bancorp shall nominate Executive for election as a director at such times as necessary so that Executive will, if elected by stockholders, remain on the Board throughout the term of this Agreement. PremierWest shall also undertake every lawful effort to ensure that Executive continues

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throughout the term of his employment on the Bank Board. Executive shall be deemed to have resigned from the Board and the Bank Board effective immediately after termination of Executive’s employment, regardless of whether Executive submits a formal, written resignation as director.

     2. TERM OF AGREEMENT.

          2.1 Initial Term/Automatic Renewal. The initial term of this Agreement shall expire on December 31, 2007. On December 31, 2007 and each anniversary thereof, this Agreement shall be extended automatically for one (1) additional year unless the Board determines, on or before such date, that the term shall not be extended. If the Board determines not to extend the term, it shall promptly notify Executive in writing and this Agreement will remain in force only until its term expires. The Board’s decision not to extend the term of this Agreement shall not by itself give Executive any rights under this Agreement to claim an adverse change in his position, compensation, or circumstances or otherwise to claim entitlement to rights under Sections 10, 11, or 12 below.

     3. NO TERM OF EMPLOYMENT. Notwithstanding the term of this Agreement, PremierWest may terminate Executive’s employment at any time for any lawful reason or for no reason at all, subject to the provisions of this Agreement.

     4. DUTIES.

          4.1 Duties. As President and Chief Executive Officer, Executive shall serve under the direction of the Board and the Bank Board and in accordance with the Articles of Incorporation and Bylaws (as each may be amended or restated from time to time) of PremierWest Bancorp and the Bank, respectively.

          4.2 Obligations.

               (a) Executive agrees that to the best of Executive’s ability and experience, Executive will at all times loyally and conscientiously perform all of the duties and obligations required of Executive pursuant to the express and implicit terms of this Agreement and as directed by the Board or the Supervisor.

               (b) Executive shall devote Executive’s entire working time, attention and efforts to PremierWest’s business and affairs, shall faithfully and diligently serve PremierWest’s interests and shall not engage in any business or employment activity that is not on PremierWest’s behalf (whether or not pursued for gain or profit) except for (i) activities approved in writing in advance by the Board and (ii) passive investments that do not involve Executive providing any advice or services to the businesses in which the investments are made.

     5. COMPENSATION. For all services performed under this Agreement, PremierWest agrees to pay the following compensation and benefits:

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          5.1 Base Salary. Executive’s annual base salary is $292,000 payable in semi-monthly installments (the “Base Salary”). Executive’s base salary shall be subject to annual review by the Board’s Compensation Committee. Taking into account the committee’s recommendation, the Board may increase the Base Salary, but the Base Salary shall not be reduced.

          5.2 Vacation. Executive is entitled to not less than four (4) weeks of paid vacation per year to be used in accordance with the terms and conditions of the Bank’s personnel policies. Notwithstanding anything in the Bank’s personnel policies to the contrary, up to two weeks of Executive’s four weeks of paid vacation may be carried over from one year to the next if unused by the end of the year, but Executive shall not be entitled under any circumstance to payment for unused vacation.

          5.3 Stock Options. Executive is eligible to participate in PremierWest Bancorp’s stock option plans and other stock-based compensation, incentive, bonus, or purchase plans currently existing or adopted during the term of this Agreement for the benefit of officers or employees. The Employment Agreement dated April 2, 1998 between Executive and PremierWest continues to govern the terms of the stock options granted under that agreement except that Executive acknowledges that he is prevented from treating the entirety of the stock options granted on April 2, 1998 as incentive stock options. Executive agrees that the portion of the stock option grant exceeding Internal Revenue Service limits for incentive stock options shall be treated as nonqualified stock options under the Internal Revenue Code, even though the original intention when the stock option was granted might have been that the entire stock option grant would be a qualified incentive stock option grant.

          5.4 Long-Term Care Insurance. PremierWest currently will pay annual premiums on existing long-term care insurance policies for Executive and Executive’s spouse. Following a Change in Control or vesting of the benefits under Section 9 or 10, below, PremierWest shall continue to pay all remaining premium payments on long-term care insurance policies for Executive and Executive’s spouse until the earlier of the death of the Executive or the death of the Executive’s spouse or until fully paid. Each such premium payment shall be made by PremierWest no later than the date on which it is due..

          5.5 [Reserved].

          5.6 Automobile. PremierWest has purchased a vehicle for Executive’s use during the term of his employment. The vehicle will have a maximum cost determined by the Chairman of the Board or a Vice Chairman of the Board. PremierWest will pay all expenses associated with the maintenance, repair, and operation of the vehicle, including insurance coverage. Executive shall maintain records of his use of the vehicle with sufficient detail to allow PremierWest to determine Executive’s personal versus business use of the vehicle. Executive’s year end W-2 will include the value of the personal use of the vehicle as required by IRS regulations. Because the value of Executive’s personal use of the vehicle will be treated as taxable income to him, PremierWest shall on April 1 of each year make a cash payment to Executive in an amount sufficient to offset fully all taxes payable by Executive that are attributable to his personal use of the vehicle, and the cash payment shall be grossed up to

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compensate Executive for taxes payable on the cash payment itself. Upon termination of Executive’s employment other than Termination For Cause or Resignation (as defined below), PremierWest shall transfer all right, title, and interest in and to the vehicle to Executive no later than the day on which the Executive has a Termination of Employment.

          5.7 Club Dues. During the term of this Agreement, PremierWest shall pay Executive’s monthly golf and social dues at the Reams Golf Club and the Rogue Valley Country Club no later than the date on which they are due.

          5.8 Other Benefits. Executive is entitled to participate in all officer or employee compensation, bonus, incentive, and benefit plans in effect from time to time throughout the term of this Agreement, including, without limitation, plans providing pension, medical, dental, disability, and group life benefits, and 401(k) retirement plans, and to receive any and all other fringe benefits provided from time to time, provided that Executive satisfies the eligibility requirements for any such plans or benefits.

          5.9 Reimbursements. Executive shall be entitled to reimbursement for all reasonable business expenses incurred in performing his obligations under this Agreement, including, but not limited to, all reasonable business travel and entertainment expenses incurred while acting at the request of or in the service of PremierWest, provided such expenses are incurred and accounted for in accordance with the policies and procedures established from time to time by PremierWest.

          5.10 Existing Benefit Agreements. Executive and PremierWest are already parties to the following additional benefit agreements, the benefits under which shall be governed solely by the terms of those agreements:

               (a) Supplemental Executive Retirement Plan Agreement (SERP) (retirement benefits),

               (b) Executive Survivor Income Agreement (death benefits), and

               (c) Deferred Compensation Agreement.

     6. TERMINATION. If Executive has a Termination of Employment before the expiration of this Agreement as described in this Section, Executive’s compensation and benefits shall terminate except as otherwise provided in this Agreement. Any purported Termination of Employment by PremierWest or by Executive shall be communicated by written notice of termination to the other. The notice must state (i) the specific termination provision of this Agreement relied upon, (ii) the date on which termination shall become effective and (iii) if Termination For Cause or Termination For Good Reason the notice must state in reasonable detail the facts and circumstances forming the basis for termination. Employment shall terminate:

     6.1 For Cause. Upon delivery to Executive of notice of termination of Executive for Cause (as defined in Section 7.1 below), along with a copy of the duly adopted

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Board or Bank Board resolution finding Cause, as described below (“Termination of Employment For Cause”).

               (a) As a prerequisite to Termination of Employment For Cause, at a meeting called and held for such purpose, the Board or Bank Board must adopt a resolution which (i) contains findings that, in the good faith opinion of the Board or Bank Board, as appropriate, Executive has committed an act constituting Cause, and (ii) specifies the particulars thereof in detail. The resolution must be adopted by the affirmative vote of at least 75% of the directors of the Board or the Bank Board.

               (b) Notice of that meeting and the proposed Termination of Employment For Cause shall be given to Executive a reasonable amount of time before the meeting. Executive and his counsel (if Executive chooses to have counsel present) shall have a reasonable opportunity to be heard at the meeting. Nothing in this Agreement limits Executive’s or his beneficiaries’ right to contest the validity or propriety of the Board or Bank Board’s determination of Cause.

          6.2 Without Cause. Upon PremierWest’s termination of Executive without Cause, upon 90 days’ written notice, at any time in PremierWest’s sole discretion, for any reason other than for Cause or for no reason (“Termination of Employment Without Cause”). A Change in Control does not in itself constitute Termination of Employment Without Cause.

          6.3 For Good Reason. Upon Executive’s Termination of the Employment for Good Reason (as defined in Section 7.2 below) (“Termination of Employment For Good Reason”).

          6.4 Resignation. Upon Executive’s voluntary resignation without Good Reason (“Resignation”), written notice of which Executive must give to PremierWest at least 90 days in advance of Resignation.

          6.5 Death or Disability. Upon Executive’s death or Disability (as defined in Section 7.3 below).

          6.6 Retirement. Upon Executive’s Termination of Employment on or after reaching the retirement age of 65 (“Retirement Age”).

     7. DEFINITIONS.

          7.1 Cause. “Cause” for Executive’s termination will exist upon the occurrence of one or more of the following events:

               (a) Fraudulent Conduct. An intentional act of fraud, embezzlement, or theft by Executive in the course of his employment with PremierWest Bancorp or the Bank. No act or failure to act on Executive’s part shall be deemed to have been intentional if it was primarily to an error in judgment or negligence. An act or failure to act on Executive’s part shall

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be considered intentional if it is not in good faith and if it is without a reasonable belief that the action or failure to act is in PremierWest’s best interests,

               (b) Material Breach of Agreement. A material breach by Executive of this Agreement if such breach is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the breach, has been delivered by the respective board to Executive,

               (c) Gross Negligence/Insubordination. Gross negligence or insubordination by Executive in the performance of his duties as an officer of PremierWest Bancorp or the Bank if such gross negligence or insubordination is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the gross negligence or insubordination, has been delivered by the respective board to Executive,

               (d) Breach of Fiduciary Duties. A breach by Executive of his fiduciary duties to PremierWest Bancorp and its stockholders or misconduct involving dishonesty, in either case whether in his capacity as an officer or as a director of PremierWest Bancorp or the Bank,

               (e) Criminal Conviction. Conviction of Executive for a felony or conviction of a misdemeanor involving moral turpitude,

               (f) Violation of Law. Intentional violation of any law or significant policy of PremierWest Bancorp or the Bank committed in connection with Executive’s employment, which has a material adverse effect on PremierWest Bancorp or the Bank, or

               (g) FDIC Removal Order. Removal of Executive from office or permanent prohibition of Executive from participating in the conduct of PremierWest Bank’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1).

          7.2 Good Reason. “Good Reason” for Executive’s Termination of Employment by resignation will exist upon the occurrence, without Executive’s consent, of one or more of the following events, if Executive has informed PremierWest in writing of the circumstances described below in this Section 7.2 that could give rise to Termination of Employment For Good Reason and PremierWest has not removed the circumstances within 30 days of the written notice:

               (a) Reduction in Base Salary. A reduction of Executive’s Base Salary,

               (b) Reduced Participation in Bonus, Incentive, Compensation, and Other Plans. A reduction of Executive’s bonus, incentive, and other compensation award opportunities under PremierWest Bancorp’s benefit plans and the Bank’s benefit plans, unless in the case of either, a company-wide reduction of all officers’ award opportunities occurs simultaneously,

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               (c) Participation in Benefit Plans. Discontinuance of Executive’s participation in any officer or employee benefit plan maintained by PremierWest Bancorp or by the Bank, unless the plan is discontinued by reason of law or loss of tax deductibility to PremierWest with respect to contributions to the plan, or is discontinued as a matter of PremierWest Bancorp policy or PremierWest Bank policy applied equally to all participants in the plan,

               (d) A Reduction in Responsibilities or Status. (other than such changes made after the Executive has announced his intention to retire as are consistent with his anticipated retirement) based on one of the following:

                    (1) assignment to Executive of duties or responsibilities that are materially inconsistent with Executive’s position as stated in this Agreement or that represent a material reduction of his authority,

                    (2) any other action by PremierWest that results in a material reduction or material adverse change in Executive’s position, authority, duties or responsibilities,

                    (3) failure to appoint or reappoint Executive to the position stated in this Agreement,

                    (4) failure to reelect Executive or cause Executive to be reelected to the Bank Board without Executive’s written consent,

                    (5) failure to nominate Executive as a director of PremierWest Bancorp, or

                    (6) following a Change in Control, failure to retain Executive in an executive officer position with authority, duties or responsibilities consistent with that of an executive officer.

(Subsections (d)(1), (2), (3), (4) and (5) do not apply following a Change in Control),

               (e) Failure to Obtain Assumption Agreement. The failure of a successor or assign of the Bank to assume and agree to perform this Agreement, if assignment and assumption does not occur automatically under operation of law,

               (f) Termination without Compliance with this Agreement. Termination by PremierWest of Executive’s employment without the notice required under this Agreement,

               (g) Material Breach. A material breach of this Agreement by PremierWest that is not corrected within a reasonable time, or

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               (h) Relocation of Executive. Requiring Executive to change his principal work location, to any location that is more than 15 miles from the location of PremierWest Bancorp’s principal executive offices on the date of this Agreement.

          7.3 Disability. “Disability” shall mean that (i) Executive has been unable to perform Executive’s duties under this Agreement as a result of Executive’s incapacity due to physical or mental illness for at least 90 consecutive calendar days or 150 calendar days during any consecutive 12 month period and (ii) a physician selected by PremierWest and its insurers and acceptable to Executive or Executive’s legal representative (with such Agreement on acceptability of the physician not to be unreasonably withheld), determines the incapacity to be (a) total and permanent and (b) prohibiting of Executive’s ability to perform the essential functions of Executive’s position with or without reasonable accommodation. Executive shall not be deemed to be disabled, however, if he returns to work on a full-time basis within 30 days after PremierWest gives him notice of termination due to Disability. PremierWest may require Executive to submit to such physical or mental evaluations and tests as the Board of Directors deems appropriate.

          7.4 Change in Control. For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred when any of the following events take place:

               (a) Merger. PremierWest Bancorp merges into or consolidates with another corporation, or merges another corporation into PremierWest Bancorp, and as a result, less than 50% of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were the holders of PremierWest Bancorp’s voting securities immediately before the merger or consolidation. The term “person” means an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or other entity.

               (b) Acquisition of Significant Share Ownership. (1) A report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of PremierWest Bancorp’s voting securities, or (2) a person or persons acting in concert has or have become the beneficial owner of 10% or more of a class of PremierWest Bancorp’s voting securities and the person or the person’s or group’s nominee becomes the Chairman of the Board of PremierWest Bancorp, but this paragraph (b) shall not apply to beneficial ownership of voting shares of PremierWest Bancorp held in a fiduciary capacity by an entity in which PremierWest Bancorp directly or indirectly beneficially owns 50% or more of the outstanding voting securities.

               (c) Change in Board Composition. During any period of two (2) consecutive years, individuals who constitute PremierWest Bancorp’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this paragraph (c), each director who is first elected by the Board (or first nominated by the Board for election by stockholders) by a vote of at least two-

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thirds of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period.

               (d) Sale of Assets. PremierWest Bancorp sells to a third party all or substantially all of PremierWest Bancorp’s assets. For this purpose, sale of all or substantially all of PremierWest Bancorp’s assets includes sale of PremierWest Bank.

          7.5 Termination of Employment. When used in this Agreement, the phrase “Termination of Employment” means a separation from service under Code Section 409A and the regulations thereunder, as such regulations may change from time to time, or any successor provision of the Code and regulations.

     8. PAYMENT UPON TERMINATION. Upon the Executive’s Termination of Employment for any of the reasons set forth in Section 6 above, Executive or Executive’s estate, as appropriate, will receive payment for all Base Salary earned through the date of termination and, except in the event of Termination of Employment For Cause or Resignation, all unpaid bonus or incentive compensation due to Executive for the previous calendar year (“Earned Compensation”). Earned Compensation, unless deferred under a plan of deferred compensation, shall be paid by the end of the business day following termination or sooner if required by applicable law.

     9. RETIREMENT BENEFITS. Upon Retirement, Executive shall additionally be entitled to the following benefits:

          9.1 Stock Option Vesting. Executive shall also be fully vested in any stock options, restricted stock grants, or other similar equity compensation arrangements regardless of whether the respective plan provides for accelerated vesting.

          9.2 401(k) Contribution. PremierWest shall pay to Executive a lump sum payment in an amount equal to the matching and profit sharing contributions, if any, that would have been made had Executive’s employment not terminated before the end of the plan year. PremierWest shall make such payment on the first day of the seventh month after the Executive’s Termination of Employment.

          9.3 Retiree Health Insurance. PremierWest shall provide and Executive shall be entitled to retiree health care coverage for himself and his spouse for 15 years after the Executive’s Termination of Employment as follows: (1) until Executive and his spouse, respectively, each reach the eligible age for Medicare, the retiree health care coverage for each shall be substantially similar to the most favorable coverage maintained for PremierWest employees, but in no event shall such coverage be less favorable than coverage with a $2,000 annual deductible and 80% reimbursement/20% co-payment; and (2) after Executive and his spouse, respectively, reach the eligible age for Medicare, for the life of Executive and his spouse, respectively, PremierWest will provide Medicare Supplemental Insurance comparable to the best of such policies offered by a major insurance carrier in the market area. In the event that the Executive is required to pay monthly premiums for such coverage, PremierWest shall reimburse

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Executive for such premium cost no later than the last day of the calendar month following the calendar month in which the expense was incurred by the Executive.

          9.4 Long-Term Care Insurance. PremierWest shall continue to pay the remaining long-term care insurance premiums for Executive and Executive’s spouse until the earlier of (i) the date the premiums are fully paid, or (ii) the later of the death of the Executive or the Executive’s spouse. Such premium payments shall be made by PremierWest no later than the day the premium payment is due.

     10. CONSIDERATION FOR RELEASE OF CLAIMS. In the event of (i) Termination of Employment Without Cause, (ii) Termination of Employment For Good Reason, or (iii) if Termination of Employment occurs for any reason other than Termination of Employment For Cause more than six (6) months after a Change in Control, (each an “Eligible Termination Event”) PremierWest will offer and Executive may choose to execute the Separation Agreement, attached hereto as Exhibit A, which provides for the release of claims against PremierWest. Provided Executive executes and does not revoke Section 7(a) of the Separation Agreement, Executive will be entitled to the benefits listed below in this Section 10 in consideration for the release of claims.

          10.1 Normal Retirement Benefits. Executive will be entitled to all of the benefits in Section 9 that Executive would have received had Executive’s employment terminated due to Retirement.

          10.2 Disability Insurance. PremierWest will continue to pay premiums on Executive’s disability policy until age 65. Such premium payments shall be made by PremierWest no later than the day the premium payment is made.

     11. CONSIDERATION FOR NOT COMPETING.

          11.1 Self-Imposed Limitation. In the event of an Eligible Termination Event (as defined in Section 10 above), which occurs after a Change in Control, Executive may choose to indicate in the Separation Agreement that Executive does not intend to engage in certain activities competitive to PremierWest, as identified in Section 2 of the Separation Agreement, attached hereto as Exhibit A. For as long as Executive does not engage in such activities, up to a maximum of two years (the “Optional Restriction Period”), PremierWest will pay Executive the consideration set forth in Section 11.2. Unless Executive executes the Separation Agreement (regardless of whether Executive revokes Section 7(a) of the Separation Agreement) and indicates Executive’s intention not to engage in the competitive activities, PremierWest will not compensate Executive for refraining from engaging in such activities.

          11.2 Amount/Payment of Consideration. As consideration for each month during the Optional Restriction Period that Executive does not engage in the competitive activities, and provided the Executive has signed (and not revoked) the Separation Agreement indicated in Section 11.1, PremierWest will pay Executive one-twelfth (1/12) of the amount of any bonuses or incentive compensation earned for the calendar year ended immediately before the year in which the Change in Control occurred, or the subsequent year, if ended, whichever is

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greater (not including the Potential Transaction Bonus in Section 14). In the event the Executive engages in any competitive activities during any month in the Optional Restriction Period, PremierWest shall pay no compensation under this Section for such month or any subsequent month. Payment of the consideration will commence on the first day of the seventh month following Termination of Employment, and the first payment shall include the consideration for all months preceding such date. Subsequent payments shall be made on the first day of the month following the month for which Executive does not engage in competitive activities.

     12. CHANGE IN CONTROL RETENTION BONUS. If Executive remains employed with PremierWest or its successor for six (6) months following a Change in Control, as additional compensation for assisting PremierWest with the Change in Control transition and as a reward for continued service, upon Termination of Employment (other than Termination of Employment For Cause), PremierWest will pay Executive an amount of cash equal to the amount of interest that would have accrued had PremierWest, upon the six month anniversary of the Change in Control, paid to Executive’s Deferral Account under the Deferred Compensation Agreement, an amount equal to two times the sum of (i) Executive’s annual Base Salary and (ii) the amount of any bonuses or incentive compensation earned for the calendar year ended immediately before the year in which the Change in Control occurred, or the subsequent year, if ended, whichever is greater (not including the Potential Transaction Bonus in Section 14). Payment of the retention bonus described in this Section 12 shall be made on the first day of the seventh month after the Executive’s Termination of Employment.

     13. IRC 280G. If all or any portion of the amounts payable to Executive pursuant to this Agreement, the Benefit Agreements described in Section 5.10 and the Stock Option Agreement described in Section 5.3, either alone or together with other payment which the Executive has the right to receive from PremierWest, constitute “excess parachute payments” within the meaning of Section 280G of the Code , that are subject to the excise tax imposed by Section 4999 of the Code (or similar tax and/or assessment), Executive shall be responsible for the payment of such excise tax and PremierWest shall be responsible for any loss of deductibility related thereto; provided, however, that PremierWest and Executive shall cooperate with each other and use all reasonable efforts to minimize to the fullest extent possible the amount of excise tax imposed by Section 4999 of the Code.

     14. POTENTIAL TRANSACTION BONUS. If a Change in Control occurs, Executive may be entitled to a Transaction Bonus under this Section. The Transaction Bonus, if any, is separate from and shall not be reduced by any benefit payable to Executive under Sections 10, 11, or 12. The Transaction Bonus is an amount in cash equal to 30% of Executive’s Base Salary at the time of the Change in Control and shall be payable to Executive on the Change in Control date. The Transaction Bonus shall be payable to Executive if, but only if, the Change in Control provides that shareholders of PremierWest Bancorp receive as consideration for each share of PremierWest Bancorp common stock:

          (a) cash equal to or greater than 2.5 times the book value per share of PremierWest Bancorp common stock,

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          (b) securities whose fair market value at the time of closing of the Change in Control equals or exceeds 2.5 times the book value per share of PremierWest Bancorp common stock, or

          (c) a combination of cash and securities whose value, calculated as provided in paragraphs (a) and (b) immediately above, equals or exceeds 2.5 times the book value per share of PremierWest Bancorp common stock.

     For purposes of this section, “book value” shall be based on shareholders’ equity and shares outstanding reflected in PremierWest Bancorp’s consolidated balance sheet as of the end of the quarter preceding the date of announcement of the Change in Control.

     15. CONFIDENTIALITY AND CREATIVE WORK.

          15.1 Nondisclosure. Executive covenants and agrees that he will not reveal to any person, firm, or corporation any Confidential Information of any nature concerning PremierWest or its business, or anything connected therewith. “Confidential Information” means all of PremierWest’s confidential and proprietary information and trade secrets in existence on the date hereof or existing at any time during the term of this Agreement, including, but not limited to:

               (a) the whole or any portion or phase of any business plans, financial information, purchasing data, supplier data, accounting data, or other financial information,

               (b) the whole or any portion or phase of any research and development information, design procedures, algorithms or processes, or other technical information,

               (c) the whole or any portion or phase of any marketing or sales information, sales records, customer lists, prices, sales projections, or other sales information, and

               (d) trade secrets, as defined from time to time by the laws of the State of Oregon.

Notwithstanding the foregoing, Confidential Information excludes information that, as of the date hereof or at any time after the date hereof, is published or disseminated without obligation of confidence or that becomes a part of the public domain (1) by or through action of PremierWest, or (2) by or through action of another person not in violation of non-disclosure covenant with PremierWest. This section does not prohibit disclosure required by an order of a court having jurisdiction or a subpoena from an appropriate governmental agency or disclosure made by Executive in the ordinary course of business and within the scope of his authority.

          15.2 Return of Material. Executive agrees to deliver or return to PremierWest upon termination of employment, or as soon thereafter as possible, all written information and any other similar items furnished by PremierWest or prepared by Executive in connection with

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his services hereunder. Executive will retain no copies thereof after termination of Executive’s employment.

          15.3 Injunctive Relief. Executive acknowledges that it is impossible to measure in money the damages that will accrue to PremierWest if Executive fails to observe the obligations imposed on him by this section. Accordingly, if PremierWest institutes an action to enforce the provisions hereof, Executive hereby waives the claim or defense that an adequate remedy at law is available to PremierWest, and Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists.

          15.4 Creative Work. Executive agrees that all creative work and work product, including, but not limited to, all technology, business management tools, processes, software, patents, trademarks, and copyrights developed by Executive during his employment with PremierWest, regardless of when or where such work or work product was produced, constitutes work made for hire, all rights of which are owned by PremierWest. Executive hereby assigns to PremierWest Bancorp and to PremierWest Bank all rights, title, and interest, whether by way of copyrights, trade secret, trademark, patent, or otherwise, in all such work or work product, regardless of whether the same is subject to protection by patent, trademark, or copyright laws.

     16. DISPUTE RESOLUTION.

          16.1 Arbitration. The parties agree to submit any dispute arising under this Agreement to final, binding, private arbitration in Medford, Oregon. The disputes subject to arbitration include not only disputes involving the meaning or performance of the Agreement, but disputes about its negotiation, drafting, or execution. The dispute will be determined by a single arbitrator and governed by the then-existing rules of arbitration procedure in Jackson County Circuit Court, except as set forth herein. Instead of filing of a civil complaint in Jackson County Circuit Court, a party will commence the arbitration process by noticing the other party The parties will choose an arbitrator who specializes in employment conflicts from the arbitration list for Jackson County Circuit Court. If the parties are unable to agree on an arbitrator within ten (10) days of receipt of the list of arbitrators, each party will select one attorney from the list, and those two attorneys shall select the arbitrator from the list (with each of the two selecting attorneys then concluding their services and each being compensated by the party selecting each attorney, subject to recovery of such fees under Section 16.2) . The arbitrator may charge his or her standard arbitration fees rather than the fees prescribed in the Jackson County Circuit Court arbitration procedures. The arbitrator will have full authority to determine all issues, including arbitrability, to award any remedy, including permanent injunctive relief, and to determine any request for attorney’s fees, costs and expenses in accordance with Section 16.2. There shall be no right to review of the arbitrator’s decision in court. The arbitrator’s award may be reduced to final judgment or decree in Jackson County Circuit Court.

          16.2 Expenses/Attorneys’ Fees. The prevailing party shall be awarded all costs and expenses of the proceeding, including, but not limited to, attorneys’ fees, filing and service fees, witness fees, and arbitrators’ fees. If arbitration is commenced, the arbitrator will have full authority and complete discretion to determine the “prevailing party” and the amount of costs and expenses to be awarded.

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          16.3 Injunctive Relief. Notwithstanding any other provision of this Agreement, an aggrieved party may seek a temporary restraining order or preliminary injunction in Jackson County Circuit Court to preserve the status quo during the arbitration proceeding, provided however, that the party seeking relief agrees that ultimate resolution of the dispute will still be determined through arbitration and not through court process. The filing of the court action for injunctive relief shall not hinder or delay the arbitration process.

     17. NOTICES. All notices, requests, demands, and other communications provided for by this Agreement will be in writing and shall be deemed sufficient upon receipt, when delivered personally or by a nationally-recognized delivery service (such as Federal Express), or three (3) business days after being deposited in the U.S. mail as certified mail, return receipt requested, with postage prepaid, if such notice is properly addressed. Unless otherwise changed in writing, notice shall be properly addressed to Executive if addressed to the address of Executive on the books and records of PremierWest at the time of mailing of such notice, and properly addressed to PremierWest if addressed to PremierWest Bancorp 503 Airport Road, Medford, OR 97504, Attention: Corporate Secretary.

     18. GENERAL PROVISIONS.

          18.1 Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oregon.

          18.2 Saving Provision. If any part of this Agreement is held to be unenforceable, it shall not affect any other part. If any part of this Agreement is held to be unenforceable as written, it shall be enforced to the maximum extent allowed by applicable law.

          18.3 Survival Provision. If any benefits provided under this Agreement are still owed, or claims pursuant to this Agreement are still pending, at the time of termination of this Agreement, this Agreement shall continue in force, with respect to those obligations or claims, until such benefits are paid in full or claims are resolved in full. The sections related to Confidential Information and Creative Work shall survive after termination of this Agreement and shall be enforceable regardless of any claim Employee may have against PremierWest.

          18.4 Captions and Counterparts. The captions in this Agreement are solely for convenience. The captions in no way define, limit, or describe the scope or intent of this Agreement. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

          18.5 Entire Agreement. Except as otherwise stated herein, this Agreement constitutes the sole Agreement of the parties regarding Executive’s benefits upon termination of employment and together with PremierWest’s employee handbook governs the terms of Executive’s employment. Where there is a conflict between the employee handbook and this Agreement, the terms of this Agreement shall govern.

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          18.6 Previous Agreement. This Agreement supersedes all prior oral and written agreements between Executive and PremierWest, or any affiliates or representatives of PremierWest regarding the subject matters set forth herein.

          18.7 Waiver/Amendment. This Agreement may not be amended, released, discharged, abandoned, changed, or modified in any manner, except by an instrument in writing signed by each of the parties hereto. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part thereof or the right of any party thereafter to enforce each and every such provision. No waiver or any breach of this Agreement shall be held to be a waiver of any other or subsequent breach.

     18.8 Assignment.

          (a) Executive shall not assign or transfer any of Executive’s rights pursuant to this Agreement, wholly or partially, to any other person or to delegate the performance of its duties under the terms of this Agreement. If Executive attempts an assignment or transfer that is contrary to this section, PremierWest shall have no liability to pay any amount to the assignee or transferee.

          (b) The rights and obligations of PremierWest under this Agreement shall inure to the benefit of and be binding in each and every respect upon the direct and indirect successors and assigns of PremierWest’s, regardless of the manner in which the successors or assigns succeed to the interests or assets of PremierWest’s. If this Agreement is not otherwise transferred to and assumed by PremierWest’s successor or assign by operation of law, PremierWest shall require such successor of substantially all of the business or assets of PremierWest Bancorp to expressly assume and agree to perform PremierWest’s obligations hereunder.

          (c) This Agreement shall not be terminated by the voluntary or involuntary dissolution of PremierWest, by any merger, consolidation or acquisition where PremierWest is not the surviving corporation, by any transfer of all or substantially all of PremierWest’s assets, or by any other change in PremierWest’s structure or the manner in which PremierWest’s business or assets are held. Executive’s employment shall not be deemed terminated upon the occurrence of one of the foregoing events.

          (d) This Agreement will inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executives, administrators, successors, heirs, distributees and legatees.

     19. ADVICE OF COUNSEL. Executive acknowledges that, in executing this Agreement, Executive has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any party by reason of the drafting or preparation hereof.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

PREMIERWEST BANCORP	EXECUTIVE
By:                                                              Its:	John Anhorn

PREMIERWEST BANK

By:                                                             

Its:                                                             

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Exhibit A – Employment Agreement

SEPARATION AGREEMENT

     This SEPARATION AGREEMENT(this “Agreement”) is entered into as of this ____ day of __________, 20___, by and among PremierWest Bancorp (“Bancorp”), an Oregon corporation, PremierWest Bank (the “Bank”), an Oregon-chartered bank and wholly owned subsidiary of PremierWest Bancorp, and John Anhorn (the “Executive”). (Bancorp, the Bank, and their subsidiaries and affiliates, including any entity or organization controlling, controlled by, or under common control with PremierWest Bancorp or the Bank, are hereinafter sometimes referred to collectively or individually as “PremierWest.”)

WHEREAS, Executive, PremierWest Bancorp, and the Bank entered into an Employment Agreement dated effective as of _____________, 2007 (as the same may be amended, the “Employment Agreement”) which provided that PremierWest would provide certain benefits to Executive after Termination of his Employment under certain circumstances (as defined in the Employment Agreement) as consideration for Executive’s release of claims against PremierWest and certain other benefits as consideration for Executive’s agreement not to engage in certain competitive activities for a specified period of time;

WHEREAS, Executive’s employment will terminate on _____________, 20____ (the “Termination Date”);

WHEREAS, Executive has consulted with counsel of Executive’s choice concerning this Agreement, or Executive has chosen not to consult with counsel, and Executive, and as applicable Executive’s counsel, have had the opportunity to discuss with PremierWest the terms and conditions of this Agreement; and

NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, PremierWest and Executive hereby agree as follows:

     1. Consideration for Release of Claims. Provided Executive does not revoke Section 7(a) and complies with the terms of this Agreement, PremierWest will provide Executive the benefits set forth in Section 10 of the Employment Agreement.

     2. Intent Not to Compete. [This Section 2 is applicable only if termination of Employment occurs after a Change in Control.]

          2.1 Declaration of Intent. Executive hereby indicates that Executive intends/does not intend [indicate by crossing through the inapplicable language] to refrain from engaging in certain activities specified in Section 2.2 (“Competitive Activities”) for some period of time following his Termination of Employment. If Executive has indicated an intent not to engage in Competitive Activities, in consideration for each month Executive refrains from engaging in Competitive Activities, PremierWest will pay Executive the monthly payments as

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described in Section 11 of the Employment Agreement until the earlier of (i) the date when Executive engages in a Competitive Activity or (ii) the end of the Optional Restriction Period, which is [one year/two years] after the date on which Executive’s Termination of Employment becomes effective.

          2.2 Competitive Activities. Competitive Activities include:

               (a) Becoming associated with any entity, whether as an owner, principal, partner, director, trustee, employee, agent, consultant, or stockholder (except as a holder of 1% or less of the outstanding voting stock of a company) that is engaged or proposes to engage in any business that solicits, deposits or offers loans and is located within a 30-mile radius of any of PremierWest’s offices or branches (a “Competitor”),

               (b) Encouraging or soliciting or assisting any other person or firm in encouraging or soliciting any person who, during the two-year period preceding Executive’s Termination of Employment, is or was engaged in a business relationship with PremierWest to terminate the person’s relationship with PremierWest or to engage in a business relationship with a Competitor, or

               (c) Inducing any employee of PremierWest to terminate employment with PremierWest and, either individually or as owner, principal, partner, director, trustee, agent, employee, consultant or otherwise, employing, offering employment, or causing employment to be offered to any person who is or was employed by PremierWest unless such person shall have ceased to be employed by such entity for a period of at least six months.

          2.3 Notice of Activities. If Executive has indicated above an intent not to engage in Competitive Activities, Executive will notify PremierWest before engaging in any such activities. If Executive fails to give such notice and continues to receive payments under this section, Executive shall not be entitled to keep any payments received after engaging in a Competitive Activity.

          2.4 Not Enforceable Covenant. This is not a covenant not to compete and PremierWest may not seek injunctive relief to prohibit Executive from engaging in a Competitive Activity. If Executive chooses to engage in a Competitive Activity, PremierWest will cease making monthly payments of the consideration.

     3. Nondisclosure. Executive covenants and agrees that he will not reveal to any person, firm, or corporation any Confidential Information of any nature concerning PremierWest or concerning the business of any of them. As used in this Agreement, the term “Confidential Information” means all of PremierWest’s confidential and proprietary information and trade secrets in existence on the date hereof or existing at any time during the term of this Agreement, including, but not limited to:

          (a) the whole or any portion or phase of any business plans, financial information, purchasing data, supplier data, accounting data, or other financial information,

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          (b) the whole or any portion or phase of any research and development information, design procedures, algorithms or processes, or other technical information,

          (c) the whole or any portion or phase of any marketing or sales information, sales records, customer lists, prices, sales projections, or other sales information, and

          (d) trade secrets, as defined from time to time by the laws of the State of Oregon.

Notwithstanding the foregoing, Confidential Information excludes information that, as of the date hereof or at any time after the date hereof, is published or disseminated without obligation of confidence or that becomes a part of the public domain (1) by or through action of PremierWest, or (2) by or through action of another person not in violation of a nondisclosure covenant with PremierWest. This Section does not prohibit disclosure required by an order of a court having jurisdiction or a subpoena from an appropriate governmental agency or disclosure made by Executive in the ordinary course of business and within the scope of his authority.

     4. Return of Materials. Executive agrees to deliver or return to the Bank upon Termination of Employment or as soon thereafter as possible all written information and any other similar items furnished by PremierWest or prepared by Executive in connection with his service to PremierWest. Executive will retain no copies thereof after Termination of Employment.

     5. Creative Work. Executive agrees that all creative work and work product, including, but not limited to, all technology, business management tools, processes, software, patents, trademarks, and copyrights developed by Executive during the term of his employment with PremierWest, regardless of when or where such work or work product was produced, constitutes work made for hire, all rights of which are owned by PremierWest. Executive hereby assigns to Bancorp and to the Bank all rights, title, and interest, whether by way of copyrights, trade secret, trademark, patent, or otherwise, in all such work or work product, regardless of whether the same is subject to protection by patent, trademark, or copyright laws.

     6. Agreement to Cooperate with PremierWest Through the Executive’s Termination Date. Executive agrees to cooperate as directed by PremierWest with PremierWest and its customers through the date of the Executive’s Termination of Employment and throughout the term of any post-employment consulting agreement, if any. If Executive fails to cooperate to PremierWest’s satisfaction as reasonably determined by PremierWest, Executive shall be deemed to have resigned for purposes of determining benefits under the Employment Agreement, but the other provisions of this Agreement shall remain in full force and effect.

     7. Release of Claims.

          (a) Release and Covenant Not to Sue. As consideration for receipt of certain benefits specified in the Employment Agreement, Executive, on his or her own behalf and on behalf of Executive’s heirs, executors, successors, and assigns hereby releases PremierWest, its directors, officers, executives, managers, and employees from any and all debts, claims,

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demands, rights, actions, causes of action, suits, or damages whatsoever and of every kind and nature, whether known or unknown, contingent or otherwise (collectively the “Claims”), against PremierWest and the others released herein, relating to or arising out of Executive’s termination, except to the extent such Claims cannot, under applicable law, be released. Executive also covenants not to sue or file or cause to be filed any complaint with any federal, state, or local agency or in any court against PremierWest or the others released herein regarding any matter related to Executive’s Termination of Employment with PremierWest, including, but not limited to, any Claims under the Age Discrimination in Employment Act or any similar federal, state or local law, except to the extent such Claims cannot, under applicable law, be released. The release of liability set forth herein does not extend to rights or claims that may arise from events occurring after execution of this Agreement, including, but not limited to, claims for the enforcement of this Agreement, or to Executive’s exercise of rights under the Consolidated Omnibus Budget Reconciliation Act of 1986 to continued insurance, if applicable.

          (b) Acceptance and Revocation Period. Executive shall have a period of 21 days from the date of delivery of this Agreement to accept Section 7(a) of this Agreement. Executive shall have a period of seven days after his execution of this Agreement during which Executive may revoke his acceptance of Section 7(a) of this Agreement by providing written notice of revocation to PremierWest Bancorp. Any such acceptance or revocation must be addressed to the Chairman, PremierWest Bancorp, 503 Airport Road, Medford, Oregon 97504, or such other address as Executive may be directed in writing by PremierWest Bancorp to provide such acceptance or revocation. To be effective, the acceptance or revocation must be received no later than 5:00 p.m. Pacific Time within the applicable time period. The 21-day acceptance period may be waived by Executive, but the seven-day revocation period may not be waived. If Executive’s acceptance of Section 7(a) of this Agreement is not affirmatively revoked in writing by Executive during the seven-day revocation period, it shall be deemed to have been accepted and not revoked. Section 7(a) of this Agreement shall not be effective or enforceable until the seven-day revocation period has expired. If Executive properly executes his right to revoke acceptance of Section 7(a), the remainder of this Agreement shall nevertheless remain in full force and effect.

     8. No Admission of Wrongdoing. Executive acknowledges and agrees that nothing in this Agreement constitutes or shall be construed as an admission of liability or wrongdoing on the part of PremierWest or the others released herein.

     9. Successors. This Agreement shall be binding upon and inure to the benefit of and be enforceable by PremierWest and its successors and assigns.

     10. Severability. The provisions of this Agreement shall be deemed severable. The invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. Any provision held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it valid and enforceable.

     11. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by and construed in accordance with the substantive laws of the State of Oregon, without giving effect to the principles of conflict of laws of such State.

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     12. Arbitration. The parties agree to submit any dispute arising under this Agreement to final, binding, private arbitration in Medford, Oregon. The disputes subject to arbitration include not only disputes involving the meaning or performance of the Agreement, but disputes about its negotiation, drafting, or execution. The dispute will be determined by a single arbitrator and governed by the then-existing rules of arbitration procedure in Jackson County Circuit Court, except as set forth herein. Instead of filing a civil complaint in Jackson County Circuit Court, a party will commence the arbitration process by noticing the other party. The parties will choose an arbitrator who specializes in employment conflicts from the arbitration list for Jackson County Circuit Court. If the parties are unable to agree on an arbitrator within ten (10) days of receipt of the list of arbitrators, each party will select one attorney from the list, and those two attorneys shall select the arbitrator from the list (with each of the two selecting attorneys then concluding their services and each being compensated by the party selecting each attorney, subject to recovery of such fees under Section 13). The arbitrator may charge his or her standard arbitration fees rather than the fees prescribed in the Jackson County Circuit Court arbitration procedures. The arbitrator will have full authority to determine all issues, including arbitrability, to award any remedy, including permanent injunctive relief, and to determine any request for attorney’s fees, costs and expenses in accordance with Section 13. There shall be no right to review the arbitrator’s decision in court. The arbitrator’s award may be reduced to final judgment or decree in Jackson County Circuit Court.

     13. Expense/Attorneys’ Fees. The prevailing party shall be awarded all costs and expenses of the proceeding, including, but not limited to, attorneys’ fees, filing and service fees, witness fees, and arbitrators’ fees. If arbitration is commenced, the arbitrator will have full authority and complete discretion to determine the “prevailing party” and the amount of costs and expenses to be awarded.

     14. Injunctive Relief. Notwithstanding any other provision of this Agreement, an aggrieved party may seek a temporary restraining order or preliminary injunction in Jackson County Circuit Court to preserve the status quo during the arbitration proceeding, provided however, that the party seeking relief agrees that ultimate resolution of the dispute will still be determined through arbitration and not through court process. The filing of the court action for injunctive relief shall not hinder or delay the arbitration process.

     15. This Agreement is Not Exclusive. This Agreement does not supersede any other agreement to which Executive may be party with PremierWest relating to noncompetition, nondisclosure, or the other matters referred to in this Agreement, whether those noncompetition, nondisclosure, or other provisions are contained in an employment agreement, a severance agreement, a salary continuation agreement, or any other agreement. This Agreement is in addition to any such other agreement(s). In case of conflict between this Agreement, on one hand, and any such other agreement(s), on the other, PremierWest shall have sole and exclusive authority to determine whether this Agreement or such other agreement(s) shall govern in the particular case and whether to enforce its rights under this Agreement, under such other agreement(s), or under both.

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     16. Defined Terms. Terms used but not defined in this Agreement shall have the meanings given to them in the Employment Agreement.

     IN WITNESS WHEREOF, Executive, PremierWest Bancorp, and the Bank have executed this Separation Agreement effective as of the day and year first set forth above.

PREMIERWEST BANCORP:

By:                                                         

Its:                                                         

PREMIERWEST BANK:

By:                                                         

Its:                                                         

     By signing below, I hereby agree to and accept all provisions of this Separation Agreement, specifically including, but not limited to, the release and covenant not to sue that is set forth in Section 7(a) of this Separation Agreement. I understand that I have seven days after the date of my execution of this Separation Agreement to revoke my acceptance of the release and covenant not to sue contained in Section 7(a) of the Separation Agreement, and that if I do not revoke my acceptance by 5:00 p.m. Pacific Time on that date, the release and covenant not to sue will become effective. I understand that if I do revoke my acceptance of the release and covenant not to sue, I will forfeit all consideration for the release of claims as set forth in Section 10 of the Employment Agreement.

EXECUTIVE:

                                                        
John Anhorn

Date signed:                           , 20      

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EX-10.2

Exhibit 10.2

PREMIERWEST BANCORP

EMPLOYMENT AGREEMENT

FOR

TOM ANDERSON

Dated as of December 13, 2007

			TABLE OF CONTENTS
1	.	EMPLOYMENT		1
2	.	TERM OF AGREEMENT		1
		2.1	Initial Term/Automatic Renewal	1
		2.2	Perpetual Term After Change in Control	2
		2.3	Termination Upon Retirement	2
3	.	NO TERM OF EMPLOYMENT		2
4	.	DUTIES		2
		4.1	Duties	2
		4.2	Obligations	2
5	.	COMPENSATION		2
		5.1	Base Salary	2
		5.2	Vacation	3
		5.3	Stock Options	3
		5.4	Long-Term Care Insurance	3
		5.5	Disability Policy	3
		5.6	Automobile	3
		5.7	Other Benefits	3
		5.8	Reimbursements	4
		5.9	Existing Benefit Agreements	4
6	.	TERMINATION		4
		6.1	For Cause	4
		6.2	Without Cause	5
		6.3	For Good Reason	5
		6.4	Resignation	5
		6.5	Death or Disability	5
		6.6	Retirement	5
7	.	DEFINITIONS		5
		7.1	Cause	5
		7.2	Good Reason	6
		7.3	Disability	7
		7.4	Change in Control	7
		7.5	Termination of Employment	8
8	.	PAYMENT UPON TERMINATION		8
9	.	RETIREMENT BENEFITS		8
		9.1	Stock Option Vesting	9
		9.2	401(k) Contribution	9
		9.3	Retiree Health Insurance	9
		9.4	Long-Term Care Insurance	9
10	.	CONSIDERATION FOR RELEASE OF CLAIMS		9
		10.1	Normal Retirement Benefits	10
		10.2	Disability Insurance	10
11	.	CONSIDERATION FOR NOT COMPETING		10
		11.1	Self-Imposed Limitation	10

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		11.2	Amount/Payment of Consideration	10
12	.	CHANGE IN CONTROL RETENTION BONUS		10
13	.	IRC 280G		11
14	.	CONFIDENTIALITY AND CREATIVE WORK		11
		14.1	Nondisclosure	11
		14.2	Return of Material	12
		14.3	Injunctive Relief	12
		14.4	Creative Work	12
15	.	DISPUTE RESOLUTION		12
		15.1	Arbitration	12
		15.2	Expenses/Attorneys’ Fees	13
		15.3	Injunctive Relief	13
16	.	NOTICES		13
17	.	GENERAL PROVISIONS		13
		17.1	Governing Law	13
		17.2	Saving Provision	13
		17.3	Survival Provision	13
		17.4	Captions and Counterparts	13
		17.5	Entire Agreement	14
		17.6	Previous Agreement	14
		17.7	Waiver/Amendment	14
		17.8	Assignment	14
18	.	ADVICE OF COUNSEL		15

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EMPLOYMENT AGREEMENT

     This Employment Agreement (this “Agreement”) by and among PremierWest Bancorp, an Oregon Corporation, PremierWest Bank, an Oregon state chartered bank (the “Bank”) (collectively “PremierWest”) and Tom Anderson (“Executive”), is dated December 13, 2007.

RECITALS

     A. Incentive to Continued Service. PremierWest recognizes that Executive possesses unique skills, knowledge, and experience related to PremierWest’s business and Executive has made and is expected to continue to make major contributions to the profitability, growth and financial strength of PremierWest and its affiliates. To assure itself of the continuity of management, PremierWest desires to provide incentives for Executive to remain employed until retirement age and following a Change in Control.

     B. Replace Existing Agreement. Executive and PremierWest were parties to an employment agreement dated January 11, 2002 which was replaced by another employment agreement dated July 29, 2004, which in turn was amended on December 14, 2005. The parties intend for this Agreement to supersede and replace the provisions of the previous employment agreement, except as otherwise stated herein.

     C. No Currently Anticipated Change in Control. As of the date of this Agreement, none of the conditions or events included in the definition of the term “golden parachute payment” that is set forth in Section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of PremierWest, is contemplated insofar as PremierWest or any affiliates are concerned.

     D. Code Section 409A. This Agreement is intended to comply with Section 409A of the Internal Revenue Code (the “Code”). Any ambiguity hereunder shall be interpreted in such a way as to comply, to the extent necessary, with Section 409A and the regulations thereunder.

AGREEMENT

     1. EMPLOYMENT. PremierWest Bancorp and the Bank shall continue to employ Executive to serve as Senior Vice President and Chief Financial Officer according to the terms and conditions of this Agreement, for the period stated in Section 2 below.

     2. TERM OF AGREEMENT.

          2.1 Initial Term/Automatic Renewal. The initial term of this Agreement shall expire on December 31, 2008. On the expiration date and each anniversary thereof, this Agreement shall be extended automatically for one (1) additional year unless PremierWest Bancorp’s Board of Directors (the “Board”) determines that the term shall not be extended. If the Board determines not to extend the term, it shall promptly notify Executive in writing and this

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Agreement will remain in force only until its term expires. The Board’s decision not to extend the term of this Agreement shall not by itself give Executive any rights under this Agreement to claim an adverse change in his position, compensation, or circumstances or otherwise to claim entitlement to rights under Sections 10, 11, or 12 below.

          2.2 Perpetual Term After Change in Control. Following a Change in Control, or replacement of the current Chief Executive Officer, this Agreement will be subject to a perpetual term (subject to Section 2.3) and will be terminable only with Executive’s written consent.

          2.3 Termination Upon Retirement. Unless sooner terminated, Executive’s employment shall terminate automatically when he reaches age 62.

     3. NO TERM OF EMPLOYMENT. Notwithstanding the term of this Agreement, PremierWest may terminate Executive’s employment at any time for any lawful reason or for no reason at all, subject to the provisions of this Agreement.

     4. DUTIES.

          4.1 Duties. As Senior Vice President and Chief Financial Officer, Executive shall serve under the direction of the Board, the Bank’s Board (the “Bank Board”), and the Chief Operating Officer (the “Supervisor”) and in accordance with the Articles of Incorporation and Bylaws (as each may be amended or restated from time to time) of PremierWest Bancorp and the Bank, respectively.

          4.2 Obligations.

               (a) Executive agrees that to the best of Executive’s ability and experience, Executive will at all times, loyally and conscientiously, perform all of the duties and obligations required of Executive pursuant to the express and implicit terms of this Agreement and as directed by the Board or the Supervisor.

               (b) Executive shall devote Executive’s entire working time, attention and efforts to PremierWest’s business and affairs, shall faithfully and diligently serve PremierWest’s interests and shall not engage in any business or employment activity that is not on PremierWest’s behalf (whether or not pursued for gain or profit) except for (i) activities approved in writing in advance by the Board, and (ii) passive investments that do not involve Executive providing any advice or services to the businesses in which the investments are made.

     5. COMPENSATION. For all services performed under this Agreement, PremierWest agrees to pay the following compensation and benefits:

          5.1 Base Salary. Executive’s annual base salary is $159,000 payable in semi-monthly installments (the “Base Salary”). Executive’s base salary shall be subject to annual review by the Board’s Compensation Committee. Taking into account the committee’s

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recommendation, the Board may increase the Base Salary, but the Base Salary shall not be reduced.

          5.2 Vacation. Executive is entitled to not less than four (4) weeks of paid vacation per year to be used in accordance with the terms and conditions of the Bank’s personnel policies. Notwithstanding anything in the Bank’s personnel policies to the contrary, up to two weeks of Executive’s four weeks of paid vacation may be carried over from one year to the next if unused by the end of the year, but Executive shall not be entitled under any circumstance to payment for unused vacation.

          5.3 Stock Options. Executive is eligible to participate in PremierWest Bancorp’s stock option plans and other stock-based compensation, incentive, bonus, or purchase plans currently existing or adopted during the term of this Agreement for the benefit of officers or employees.

          5.4 Long-Term Care Insurance. PremierWest currently pays the premiums on long-term care insurance policies for Executive’s spouse. PremierWest may cease to pay such premiums at any time prior to a Change in Control or prior to vesting of such benefits under Section 9 or 10 below, but following a Change in Control or vesting of the benefits under Section 9 or 10 below, PremierWest shall continue to pay all remaining premium payments on long-term care insurance policies of the Executive’s spouse, until the earlier of the spouse’s death or until fully paid, if PremierWest has made a premium payment on the policy for the preceding 12 months. Each such premium payment shall be made by PremierWest no later than the date on which it is due.

          5.5 Disability Policy. PremierWest shall continue to reimburse Executive for payment of premiums on the disability policy currently in force for Executive or a replacement disability policy providing equal or greater disability benefits. Such reimbursements shall be made by PremierWest no later than the last day of the month following the month in which each premium payment is due.

          5.6 Automobile. If PremierWest chooses to provide a vehicle for use by Executive during the term of his employment, upon Termination of Employment Without Cause or Termination of Employment For Good Reason, PremierWest shall transfer all right, title, and interest in and to the vehicle to Executive no later than the day on which the Executive has a Termination of Employment. Notwithstanding the foregoing, PremierWest is not obligated to provide Executive a vehicle.

          5.7 Other Benefits. Executive is entitled to participate in all officer or employee compensation, bonus, incentive, and benefit plans in effect from time to time throughout the term of this Agreement, including, without limitation, plans providing pension, medical, dental, disability, and group life benefits, and 401(k) retirement plans, and to receive any and all other fringe benefits provided from time to time, provided that Executive satisfies the eligibility requirements for any such plans or benefits.

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          5.8 Reimbursements. Executive shall be entitled to reimbursement for all reasonable business expenses incurred in performing his obligations under this Agreement, including, but not limited to, all reasonable business travel and entertainment expenses incurred while acting at the request of or in the service of PremierWest, provided such expenses are incurred and accounted for in accordance with the policies and procedures established from time to time by PremierWest. All reimbursements to the Executive by PremierWest shall be paid no later than the last day of the calendar month following the calendar month in which the expense was incurred.

          5.9 Existing Benefit Agreements. Executive and PremierWest are already parties to the following additional benefit agreements, the benefits under which shall be governed solely by the terms of those agreements:

               (a) Supplemental Executive Retirement Plan Agreement (SERP) (retirement benefits),

               (b) Executive Survivor Income Agreement (death benefits), and

               (c) Deferred Compensation Agreement.

     6. TERMINATION. If Executive has a Termination of Employment before the expiration of this Agreement as described in this Section, Executive’s compensation and benefits shall terminate except as otherwise provided in this Agreement. Any purported Termination of Employment by PremierWest or by Executive shall be communicated by written notice of termination to the other. The notice must state (i) the specific termination provision of this Agreement relied upon, (ii) the date on which termination shall become effective, and (iii) if Termination For Cause or Termination For Good Reason, the notice must state in reasonable detail the facts and circumstances forming the basis for termination. Employment shall terminate:

          6.1 For Cause. Upon delivery to Executive of notice of termination of Executive for Cause (as defined in Section 7.1 below), along with a copy of the duly adopted Board or Bank Board resolution finding Cause, as described below (“Termination of Employment For Cause”).

               (a) As a prerequisite to Termination of Employment For Cause, at a meeting called and held for such purpose, the Board or Bank Board must adopt a resolution which (i) contains findings that, in the good faith opinion of the Board or Bank Board, as appropriate, Executive has committed an act constituting Cause, and (ii) specifies the particulars thereof in detail. The resolution must be adopted by the affirmative vote of at least 75% of the directors of the Board or the Bank Board.

               (b) Notice of that meeting and the proposed Termination of Employment For Cause shall be given to Executive a reasonable amount of time before the meeting. Executive and his counsel (if Executive chooses to have counsel present) shall have a reasonable opportunity to be heard at the meeting. Nothing in this Agreement limits Executive’s

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or his beneficiaries’ right to contest the validity or propriety of the Board or Bank Board’s determination of Cause.

          6.2 Without Cause. Upon PremierWest’s termination of Executive without Cause, upon 90 days’ written notice, at any time in PremierWest’s sole discretion, for any reason other than for Cause or for no reason (“Termination of Employment Without Cause”). A Change in Control does not in itself constitute Termination of Employment Without Cause.

          6.3 For Good Reason. Upon Executive’s Termination of Employment for Good Reason (as defined in Section 7.2 below) (“Termination of Employment For Good Reason”).

          6.4 Resignation. Upon Executive’s voluntary resignation without Good Reason (“Resignation”), written notice of which Executive must give to PremierWest at least 90 days in advance of Resignation.

          6.5 Death or Disability. Upon Executive’s death or Disability (as defined in Section 7.3 below).

          6.6 Retirement. Upon Executive reaching the retirement age of 62 (“Retirement Age”). The automatic Termination of Employment upon reaching Retirement Age is referred to as “Retirement.”

     7. DEFINITIONS.

          7.1 Cause. “Cause” for Executive’s termination will exist upon the occurrence of one or more of the following events:

               (a) Fraudulent Conduct. An intentional act of fraud, embezzlement, or theft by Executive in the course of his employment with PremierWest Bancorp or the Bank. No act or failure to act on Executive’s part shall be deemed to have been intentional if it was due primarily to an error in judgment or negligence. An act or failure to act on Executive’s part shall be considered intentional if it is not in good faith and if it is without a reasonable belief that the action or failure to act is in PremierWest’s best interests,

               (b) Material Breach of Agreement. A material breach by Executive of this Agreement if such breach is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the breach, has been delivered by the respective board to Executive,

               (c) Gross Negligence/Insubordination. Gross negligence or insubordination by Executive in the performance of his duties as an officer of PremierWest Bancorp or the Bank if such gross negligence or insubordination is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the gross negligence or insubordination, has been delivered by the respective board to Executive,

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               (d) Breach of Fiduciary Duties. A breach by Executive of his fiduciary duties to PremierWest Bancorp and its stockholders or misconduct involving dishonesty, in either case whether in his capacity as an officer of PremierWest Bancorp or the Bank,

               (e) Criminal Conviction. Conviction of Executive for a felony or conviction of a misdemeanor involving moral turpitude,

               (f) Violation of Law. Intentional violation of any law or significant policy of PremierWest Bancorp or the Bank committed in connection with Executive’s employment, which has a material adverse effect on PremierWest Bancorp or the Bank, or

               (g) FDIC Removal Order. Removal of Executive from office or permanent prohibition of Executive from participating in the conduct of PremierWest Bank’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1).

          7.2 Good Reason. “Good Reason” for Executive’s Termination of Employment by resignation will exist upon the occurrence, without Executive’s consent, of one or more of the following events, if Executive has informed PremierWest in writing of the circumstances described below in this Section 7.2 that could give rise to Termination of Employment For Good Reason and PremierWest has not removed the circumstances within 30 days of the written notice:

               (a) Reduction in Base Salary. A reduction of Executive’s Base Salary,

               (b) Reduced Participation in Bonus, Incentive, Compensation, and Other Plans. A reduction of Executive’s bonus, incentive, and other compensation award opportunities under PremierWest Bancorp’s benefit plans and the Bank’s benefit plans, unless in the case of either, a company-wide reduction of all officers’ award opportunities occurs simultaneously,

               (c) Participation in Benefit Plans. Discontinuance of Executive’s participation in any officer or employee benefit plan maintained by PremierWest Bancorp or by the Bank, unless the plan is discontinued by reason of law or loss of tax deductibility to PremierWest with respect to contributions to the plan, or is discontinued as a matter of PremierWest Bancorp policy or PremierWest Bank policy applied equally to all participants in the plan,

               (d) A Reduction in Responsibilities or Status (other than such changes, made after the Executive has announced his intention to retire or within twelve months of his retirement age under Section 2.3, as are consistent with his anticipated retirement) based on one of the following:

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                    (1) Assignment to Executive of duties or responsibilities that are materially inconsistent with Executive’s position as stated in this Agreement or that represent a material reduction of his authority,

                    (2) Any other action by PremierWest that results in a material reduction or material adverse change in Executive’s position, authority, duties or responsibilities,

                    (3) Failure to appoint or reappoint Executive to the position stated in this Agreement, or

                    (4) Following a Change in Control, failure to retain Executive in an executive officer position with authority, duties or responsibilities consistent with that of an executive officer.

(Subsections (d)(1), (2) and (3) do not apply following a Change in Control),

               (e) Failure to Obtain Assumption Agreement. The failure of a successor or assign of the Bank to assume and agree to perform this Agreement, if assignment and assumption does not occur automatically under operation of law,

               (f) Termination without Compliance with this Agreement. Termination by PremierWest of Executive’s employment without the notice required under this Agreement,

               (g) Material Breach. A material breach of this Agreement by PremierWest that is not corrected within a reasonable time, or

               (h) Relocation of Executive. Requiring Executive to change his principal work location, to any location that is more than 15 miles from the location of PremierWest Bancorp’s principal executive offices on the date of this Agreement.

          7.3 Disability. “Disability” shall mean that (i) Executive has been unable to perform Executive’s duties under this Agreement as a result of Executive’s incapacity due to physical or mental illness for at least 90 consecutive calendar days or 150 calendar days during any consecutive 12 month period and (ii) a physician selected by PremierWest and its insurers and acceptable to Executive or Executive’s legal representative (with such Agreement on acceptability of the physician not to be unreasonably withheld), determines the incapacity to be (a) total and permanent and (b) prohibiting of Executive’s ability to perform the essential functions of Executive’s position with or without reasonable accommodation. Executive shall not be deemed to be disabled, however, if he returns to work on a full-time basis within 30 days after PremierWest gives him notice of termination due to Disability. PremierWest may require Executive to submit to such physical or mental evaluations and tests as the Board of Directors deems appropriate.

          7.4 Change in Control. For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred when any of the following events take place:

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               (a) Merger. PremierWest Bancorp merges into or consolidates with another corporation, or merges another corporation into PremierWest Bancorp, and as a result, less than 50% of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were the holders of PremierWest Bancorp’s voting securities immediately before the merger or consolidation. The term “person” means an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or other entity.

               (b) Acquisition of Significant Share Ownership. A report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of PremierWest Bancorp’s voting securities, but this paragraph (b) shall not apply to beneficial ownership of voting shares of PremierWest Bancorp held in a fiduciary capacity by an entity in which PremierWest Bancorp directly or indirectly beneficially owns 50% or more of the outstanding voting securities.

               (c) Change in Board Composition. During any period of two (2) consecutive years, individuals who constitute PremierWest Bancorp’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this paragraph (c), each director who is first elected by the Board (or first nominated by the Board for election by stockholders) by a vote of at least two-thirds of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period.

               (d) Sale of Assets. PremierWest Bancorp sells to a third party all or substantially all of PremierWest Bancorp’s assets. For this purpose, sale of all or substantially all of PremierWest Bancorp’s assets includes sale of PremierWest Bank.

          7.5 Termination of Employment. When used in this Agreement, the phrase “Termination of Employment” means a separation from service under Section 409A of the Code and the regulations thereunder, as such regulations may change from time to time, or any successor provision of the Code and regulations.

     8. PAYMENT UPON TERMINATION. Upon the Executive’s Termination of Employment for any of the reasons set forth in Section 6 above, Executive or Executive’s estate, as appropriate, will receive payment for all Base Salary earned through the date of termination and, except in the event of Termination of Employment For Cause or Resignation, all unpaid bonus or incentive compensation due to Executive for the previous calendar year (“Earned Compensation”). Earned Compensation, unless deferred under a plan of deferred compensation, shall be paid by the end of the business day following termination or sooner if required by applicable law.

     9. RETIREMENT BENEFITS. Upon Retirement, Executive shall additionally be entitled to the following benefits:

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          9.1 Stock Option Vesting. Executive shall also be fully vested in any stock options, restricted stock grants, or other similar equity compensation arrangements regardless of whether the respective plan provides for accelerated vesting.

          9.2 401(k) Contribution. PremierWest shall pay to Executive a lump sum payment in an amount equal to the matching and profit sharing contributions, if any, that would have been made had Executive’s employment not terminated before the end of the plan year. PremierWest shall make such payment on the first day of the seventh month after the Executive’s Termination of Employment.

          9.3 Retiree Health Insurance. PremierWest shall provide and Executive shall be entitled to retiree health care coverage for himself and his spouse for 15 years after Executive’s Termination of Employment as follows: (1) until Executive and his spouse, respectively, reach the eligible age for Medicare, the retiree health care coverage for each shall be substantially similar to the most favorable coverage maintained for PremierWest employees, but in no event shall such coverage be less favorable than coverage with a $2,000 annual deductible and 80% reimbursement/20% copayment, and (2) after Executive and his spouse, respectively, reach the eligible age for Medicare, PremierWest will provide Medicare Supplemental Insurance comparable to the best of such policies offered by a major insurance carrier in the market area. In the event that the Executive is required to pay monthly premiums for such coverage, PremierWest shall reimburse Executive for such premium cost no later than the last day of the calendar month following the calendar month in which the expense was incurred by the Executive. If Executive dies within 15 years after his Termination of Employment, Executive’s spouse shall continue to receive, and PremierWest shall continue to provide, retiree health care coverage on the same terms and conditions that Executive would have; provided, however, such spousal coverage will expire no later than 15 years after termination of Executive’s employment.

          9.4 Long-Term Care Insurance. To the extent premiums on Executive and Executive’s spouse’s long-term care insurance remain to be paid, if PremierWest has made a premium payment within the previous 12 months, PremierWest shall continue to pay the remaining long-term care insurance premiums for Executive’s spouse until the earlier of (i) the date the premiums are fully paid, or (ii) the death of the Executive’s spouse. Such premium payments shall be made by PremierWest no later than the day the premium payment is due.

     10. CONSIDERATION FOR RELEASE OF CLAIMS. In the event of (i) Termination of Employment Without Cause, (ii) Termination of Employment For Good Reason, or (iii) if Termination of Employment occurs for any reason other than Termination of Employment For Cause more than six (6) months after a Change in Control, (each an “Eligible Termination Event”) PremierWest will offer and Executive may choose to execute the Separation Agreement, attached hereto as Exhibit A, which provides for the release of claims against PremierWest. Provided Executive executes and does not revoke Section 7(a) of the Separation Agreement, Executive will be entitled to the benefits listed below in this Section 10 in consideration for the release of claims.

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          10.1 Normal Retirement Benefits. Executive will be entitled to all of the benefits in Section 9 that Executive would have received had the Executive’s employment terminated due to Retirement.

          10.2 Disability Insurance. PremierWest will continue to pay premiums on Executive’s disability policy until age 65. Such premium payments shall be made by PremierWest no later than the day the premium payment is due.

     11. CONSIDERATION FOR NOT COMPETING.

          11.1 Self-Imposed Limitation. In the event of an Eligible Termination Event (as defined in Section 10 above), Executive may choose to indicate in the Separation Agreement that Executive does not intend to engage in certain activities competitive to PremierWest, identified in Section 2 of the Separation Agreement attached hereto as Exhibit A. For as long as Executive does not engage in such activities, up to a maximum of one year (the “Optional Restriction Period”), PremierWest will pay Executive the consideration set forth in Section 11.2. Unless Executive executes the Separation Agreement (regardless of whether Executive revokes Section 7(a) of the Separation Agreement) and indicates Executive’s intention not to engage in the competitive activities, PremierWest will not compensate Executive for refraining from engaging in such activities.

          11.2 Amount/Payment of Consideration.

               (a) As consideration for each month during the Optional Restriction Period that Executive does not engage in the competitive activities, and provided the Executive has signed (and not revoked) the Separation Agreement indicated in Section 11.1, PremierWest will continue to pay Executive’s monthly Base Salary. In the event the Executive engages in any competitive activities during any month in the Optional Restriction Period, PremierWest shall pay no compensation under this Section for such month or any subsequent month. Payment of the consideration will commence on the first day of the seventh month following Termination of Employment, and the first payment shall include the consideration for all months preceding such date. Subsequent payments shall be made on the first day of the month following the month for which Executive does not engage in competitive activities.

               (b) If the Eligible Termination Event occurs after a Change in Control, the monthly Base Salary payment shall be increased by one-twelfth (1/12) of the amount of any bonuses or incentive compensation earned for the calendar year ended immediately before the year in which the Change in Control occurred, or the subsequent year, if ended, whichever is greater. For purposes of this Section, Termination of Employment For Cause or Termination of Employment For Good Reason will be deemed to have occurred after a Change in Control if Termination of Employment occurs after discussions between PremierWest and a third party regarding a Change in Control commence, if those discussions ultimately conclude with a Change in Control.

     12. CHANGE IN CONTROL RETENTION BONUS. If Executive remains employed with PremierWest or its successor for six (6) months following a Change in Control,

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as additional compensation for assisting PremierWest with the Change in Control transition and as a reward for continued service, upon Termination of Employment (other than Termination of Employment For Cause), PremierWest will pay Executive an amount of cash equal to the amount of interest that would have accrued had PremierWest, upon the six month anniversary of the Change in Control, paid to Executive’s Deferral Account under the Deferred Compensation Agreement, an amount equal to one times the sum of (i) Executive’s annual Base Salary and (ii) the amount of any bonuses or incentive compensation earned for the calendar year ended immediately before the year in which the Change in Control occurred, or the subsequent year, if ended, whichever is greater. Payment of the retention bonus described in this Section 12 shall be made on the first day of the seventh month after the Executive’s Termination of Employment.

     13. IRC 280G. If all or any portion of the amounts payable to Executive pursuant to this Agreement, the Benefit Agreements described in Section 5.9 and the Stock Option Agreement described in Section 5.3, either alone or together with other payments which the Executive has the right to receive from PremierWest, constitute “excess parachute payments” within the meaning of Section 280G of the Code that are subject to the excise tax imposed by Section 4999 of the Code (or similar tax and/or assessment), Executive shall be responsible for the payment of such excise tax and PremierWest shall be responsible for any loss of deductibility related thereto; provided, however, that PremierWest and Executive shall cooperate with each other and use all reasonable efforts to minimize to the fullest extent possible the amount of excise tax imposed by Section 4999 of the Code.

     14. CONFIDENTIALITY AND CREATIVE WORK.

          14.1 Nondisclosure. Executive covenants and agrees that he will not reveal to any person, firm, or corporation any Confidential Information of any nature concerning PremierWest or its business, or anything connected therewith. “Confidential Information” means all of PremierWest’s confidential and proprietary information and trade secrets in existence on the date hereof or existing at any time during the term of this Agreement, including, but not limited to:

               (a) the whole or any portion or phase of any business plans, financial information, purchasing data, supplier data, accounting data, or other financial information,

               (b) the whole or any portion or phase of any research and development information, design procedures, algorithms or processes, or other technical information,

               (c) the whole or any portion or phase of any marketing or sales information, sales records, customer lists, prices, sales projections, or other sales information, and

(d) trade secrets, as defined from time to time by the laws of the State of Oregon.

Notwithstanding the foregoing, Confidential Information excludes information that, as of the date hereof or at any time after the date hereof, is published or disseminated without obligation

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of confidence or that becomes a part of the public domain (1) by or through action of PremierWest, or (2) by or through action of another person not in violation of non-disclosure covenant with PremierWest. This section does not prohibit disclosure required by an order of a court having jurisdiction or a subpoena from an appropriate governmental agency or disclosure made by Executive in the ordinary course of business and within the scope of his authority.

          14.2 Return of Material. Executive agrees to deliver or return to PremierWest upon termination of employment, or as soon thereafter as possible, all written information and any other similar items furnished by PremierWest or prepared by Executive in connection with his services hereunder. Executive will retain no copies thereof after termination of Executive’s employment.

          14.3 Injunctive Relief. Executive acknowledges that it is impossible to measure in money the damages that will accrue to PremierWest if Executive fails to observe the obligations imposed on him by this section. Accordingly, if PremierWest institutes an action to enforce the provisions hereof, Executive hereby waives the claim or defense that an adequate remedy at law is available to PremierWest, and Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists.

          14.4 Creative Work. Executive agrees that all creative work and work product, including, but not limited to, all technology, business management tools, processes, software, patents, trademarks, and copyrights developed by Executive during his employment with PremierWest, regardless of when or where such work or work product was produced, constitutes work made for hire, all rights of which are owned by PremierWest. Executive hereby assigns to PremierWest Bancorp and to PremierWest Bank all rights, title, and interest, whether by way of copyrights, trade secret, trademark, patent, or otherwise, in all such work or work product, regardless of whether the same is subject to protection by patent, trademark, or copyright laws.

     15. DISPUTE RESOLUTION.

          15.1 Arbitration. The parties agree to submit any dispute arising under this Agreement to final, binding, private arbitration in Medford, Oregon. The disputes subject to arbitration include not only disputes involving the meaning or performance of the Agreement, but disputes about its negotiation, drafting, or execution. The dispute will be determined by a single arbitrator and governed by the then-existing rules of arbitration procedure in Jackson County Circuit Court, except as set forth herein. Instead of filing of a civil complaint in Jackson County Circuit Court, a party will commence the arbitration process by noticing the other party The parties will choose an arbitrator who specializes in employment conflicts from the arbitration list for Jackson County Circuit Court. If the parties are unable to agree on an arbitrator within ten (10) days of receipt of the list of arbitrators, each party will select one attorney from the list, and those two attorneys shall select the arbitrator from the list (with each of the two selecting attorneys then concluding their services and each being compensated by the party selecting each attorney, subject to recovery of such fees under Section 15.2) . The arbitrator may charge his or her standard arbitration fees rather than the fees prescribed in the Jackson County Circuit Court arbitration procedures. The arbitrator will have full authority to determine all issues, including arbitrability, to award any remedy, including permanent injunctive relief,

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and to determine any request for attorneys’ fees, costs and expenses in accordance with Section 15.2. There shall be no right to review of the arbitrator’s decision in court. The arbitrator’s award may be reduced to final judgment or decree in Jackson County Circuit Court.

          15.2 Expenses/Attorneys’ Fees. The prevailing party shall be awarded all costs and expenses of the proceeding, including, but not limited to, attorneys’ fees, filing and service fees, witness fees, and arbitrators’ fees. If arbitration is commenced, the arbitrator will have full authority and complete discretion to determine the “prevailing party” and the amount of costs and expenses to be awarded.

          15.3 Injunctive Relief. Notwithstanding any other provision of this Agreement, an aggrieved party may seek a temporary restraining order or preliminary injunction in Jackson County Circuit Court to preserve the status quo during the arbitration proceeding, provided however, that the party seeking relief agrees that ultimate resolution of the dispute will still be determined through arbitration and not through court process. The filing of the court action for injunctive relief shall not hinder or delay the arbitration process.

     16. NOTICES. All notices, requests, demands, and other communications provided for by this Agreement will be in writing and shall be deemed sufficient upon receipt, when delivered personally or by a nationally-recognized delivery service (such as Federal Express), or three (3) business days after being deposited in the U.S. mail as certified mail, return receipt requested, with postage prepaid, if such notice is properly addressed. Unless otherwise changed in writing, notice shall be properly addressed to Executive if addressed to the address of Executive on the books and records of PremierWest at the time of mailing of such notice, and properly addressed to PremierWest if addressed to PremierWest Bancorp 503 Airport Road, Medford, OR 97504, Attention: Corporate Secretary.

     17. GENERAL PROVISIONS.

          17.1 Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oregon.

          17.2 Saving Provision. If any part of this Agreement is held to be unenforceable, it shall not affect any other part. If any part of this Agreement is held to be unenforceable as written, it shall be enforced to the maximum extent allowed by applicable

          17.3 Survival Provision. If any benefits provided under this Agreement are owed, or claims pursuant to this Agreement are still pending, at the time of termination of this Agreement, this Agreement shall continue in force, with respect to those obligations or claims, until such benefits are paid in full or claims are resolved in full. The sections related to Confidential Information and Creative Work shall survive after termination of this Agreement and shall be enforceable regardless of any claim Executive may have against PremierWest.

          17.4 Captions and Counterparts. The captions in this Agreement are solely convenience. The captions in no way define, limit, or describe the scope or intent of this

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Agreement. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

          17.5 Entire Agreement. Except as otherwise stated herein, this Agreement constitutes the sole Agreement of the parties regarding Executive’s benefits upon Termination of Employment and together with PremierWest’s employee handbook governs the terms of Executive’s employment. Where there is a conflict between the employee handbook and this Agreement, the terms of this Agreement shall govern.

          17.6 Previous Agreement. This Agreement supersedes all prior oral and written agreements between Executive and PremierWest, or any affiliates or representatives of PremierWest regarding the subject matters set forth herein.

          17.7 Waiver/Amendment. This Agreement may not be amended, released, discharged, abandoned, changed, or modified in any manner, except by an instrument in writing signed by each of the parties hereto. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part thereof or the right of any party thereafter to enforce each and every such provision. No waiver or any breach of this Agreement shall be held to be a waiver of any other or subsequent breach.

          17.8 Assignment.

               (a) Executive shall not assign or transfer any of Executive’s rights pursuant to this Agreement, wholly or partially, to any other person or to delegate the performance of its duties under the terms of this Agreement. If Executive attempts an assignment or transfer that is contrary to this section, PremierWest shall have no liability to pay any amount to the assignee or transferee.

               (b) The rights and obligations of PremierWest under this Agreement shall inure to the benefit of and be binding in each and every respect upon the direct and indirect successors and assigns of PremierWest’s, regardless of the manner in which the successors or assigns succeed to the interests or assets of PremierWest’s. If this Agreement is not otherwise transferred to and assumed by PremierWest’s successor or assign by operation of law, PremierWest shall require such successor of substantially all of the business or assets of PremierWest Bancorp to expressly assume and agree to perform PremierWest’s obligations hereunder.

               (c) This Agreement shall not be terminated by the voluntary or involuntary dissolution of PremierWest, by any merger, consolidation or acquisition where PremierWest is not the surviving corporation, by any transfer of all or substantially all of PremierWest’s assets, or by any other change in PremierWest’s structure or the manner in which PremierWest’s business or assets are held. Executive’s employment shall not be deemed terminated upon the occurrence of one of the foregoing events.

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               (d) This Agreement will inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executives, administrators, successors, heirs, distributees and legatees.

     18. ADVICE OF COUNSEL. Executive acknowledges that, in executing this Agreement, Executive has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any party by reason of the drafting or preparation hereof.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

PREMIERWEST BANCORP	EXECUTIVE
By:                                                            Its:	Tom Anderson

PREMIERWEST BANK

By:                                                          

Its:                                                          

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Exhibit A – Employment Agreement

SEPARATION AGREEMENT

     This SEPARATION AGREEMENT(this “Agreement”) is entered into as of this ____ day of __________, 20___, by and among PremierWest Bancorp (“Bancorp”), an Oregon corporation, PremierWest Bank (the “Bank”), an Oregon-chartered bank and wholly owned subsidiary of Bancorp, and ________________(the “Executive”). (Bancorp, the Bank, and their subsidiaries and affiliates, including any entity or organization controlling, controlled by, or under common control with Bancorp or the Bank, are hereinafter sometimes referred to collectively or individually as “PremierWest.”)

WHEREAS, Executive, Bancorp, and the Bank entered into an Employment Agreement dated effective as of _______________, 2007 (as the same may be amended, the “Employment Agreement”) which provided that PremierWest would provide certain benefits to Executive after Termination of his Employment (as defined in the Employment Agreement) under certain circumstances specified in the Employment Agreement as consideration for Executive’s release of claims against PremierWest and certain other benefits as consideration for Executive’s agreement not to engage in certain competitive activities for a specified period of time;

WHEREAS, Executive’s employment will terminate on _____________, 20____ (the “Termination Date”);

WHEREAS, Executive has consulted with counsel of Executive’s choice concerning this Agreement, or Executive has chosen not to consult with counsel, and Executive, and as applicable Executive’s counsel, have had the opportunity to discuss with PremierWest the terms and conditions of this Agreement; and

NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, PremierWest and Executive hereby agree as follows:

     1. Consideration for Release of Claims. Provided Executive does not revoke Section 7(a) and complies with the terms of this Agreement, PremierWest will provide Executive the benefits set forth in Section 10 of the Employment Agreement.

     2. Declared Intent Not to Compete. Executive hereby indicates that Executive intends/does not intend [indicate by crossing through the inapplicable language] to refrain from engaging in certain activities specified in Section 2.1 (“Competitive Activities”) for some period of time following his Termination of Employment. If Executive has indicated an intent not to engage in Competitive Activities, in consideration for each month Executive refrains from engaging in Competitive Activities, PremierWest will pay Executive the monthly payments as

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described in Section 11 of the Employment Agreement until the earlier of (i) the date when Executive engages in a Competitive Activity or (ii) the end of the Optional Restriction Period, which is [one year/two years] after the date on which Executive’s Termination of Employment becomes effective.

          2.1 Competitive Activities. Competitive Activities include:

               (a) Becoming associated with any entity, whether as an owner, principal, partner, director, trustee, employee, agent, consultant, or stockholder (except as a holder of 1% or less of the outstanding voting stock of a company) that is engaged or proposes to engage in any business that solicits, deposits or offers loans and is located within a 30-mile radius of any of PremierWest’s offices or branches (a “Competitor”),

               (b) Encouraging or soliciting or assisting any other person or firm in encouraging or soliciting any person who, during the two-year period preceding Executive’s Termination of Employment, is or was engaged in a business relationship with PremierWest to terminate the person’s relationship with PremierWest or to engage in a business relationship with a Competitor, or

               (c) Inducing any employee of PremierWest to terminate employment with PremierWest and, either individually or as owner, principal, partner, director, trustee, agent, employee, consultant or otherwise, employing, offering employment, or causing employment to be offered to any person who is or was employed by PremierWest unless such person shall have ceased to be employed by such entity for a period of at least six months.

          2.2 Notice of Activities. If Executive has indicated above an intent not to engage in Competitive Activities, Executive will notify PremierWest before engaging in any such activities. If Executive fails to give such notice and continues to receive payments under this section, Executive shall not be entitled to keep any payments received after engaging in a Competitive Activity.

          2.3 Not Enforceable Covenant. This is not a covenant not to compete and PremierWest may not seek injunctive relief to prohibit Executive from engaging in a Competitive Activity. If Executive chooses to engage in a Competitive Activity, PremierWest will cease making monthly payments of the consideration.

     3. Nondisclosure. Executive covenants and agrees that he will not reveal to any person, firm, or corporation any Confidential Information of any nature concerning PremierWest or concerning the business of any of them. As used in this Agreement, the term “Confidential Information” means all of PremierWest’s confidential and proprietary information and trade secrets in existence on the date hereof or existing at any time during the term of this Agreement, including, but not limited to:

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          (a) the whole or any portion or phase of any business plans, financial information, purchasing data, supplier data, accounting data, or other financial information,

          (b) the whole or any portion or phase of any research and development information, design procedures, algorithms or processes, or other technical information,

          (c) the whole or any portion or phase of any marketing or sales information, sales records, customer lists, prices, sales projections, or other sales information, and

          (d) trade secrets, as defined from time to time by the laws of the State of Oregon.

Notwithstanding the foregoing, Confidential Information excludes information that, as of the date hereof or at any time after the date hereof, is published or disseminated without obligation of confidence or that becomes a part of the public domain (1) by or through action of PremierWest, or (2) by or through action of another person not in violation of a nondisclosure covenant with PremierWest. This Section does not prohibit disclosure required by an order of a court having jurisdiction or a subpoena from an appropriate governmental agency or disclosure made by Executive in the ordinary course of business and within the scope of his authority.

     4. Return of Materials. Executive agrees to deliver or return to the Bank upon Termination of Employment or as soon thereafter as possible all written information and any other similar items furnished by PremierWest or prepared by Executive in connection with his service to PremierWest. Executive will retain no copies thereof after Termination of Employment.

     5. Creative Work. Executive agrees that all creative work and work product, including, but not limited to, all technology, business management tools, processes, software, patents, trademarks, and copyrights developed by Executive during the term of his employment with PremierWest, regardless of when or where such work or work product was produced, constitutes work made for hire, all rights of which are owned by PremierWest. Executive hereby assigns to Bancorp and to the Bank all rights, title, and interest, whether by way of copyrights, trade secret, trademark, patent, or otherwise, in all such work or work product, regardless of whether the same is subject to protection by patent, trademark, or copyright laws.

     6. Agreement to Cooperate with PremierWest Through the Executive’s Termination Date. Executive agrees to cooperate as directed by PremierWest with PremierWest and its customers through the date of the Executive’s Termination of Employment and throughout the term of any post-employment consulting agreement, if any. If Executive fails to cooperate to PremierWest’s satisfaction as reasonably determined by PremierWest, Executive shall be deemed to have resigned for purposes of

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determining benefits under the Employment Agreement, but the other provisions of this Agreement shall remain in full force and effect.

     7. Release of Claims.

          (a) Release and Covenant Not to Sue. As consideration for receipt of certain benefits specified in the Employment Agreement, Executive, on his or her own behalf and on behalf of Executive’s heirs, executors, successors, and assigns hereby releases PremierWest, its directors, officers, executives, managers, and employees from any and all debts, claims, demands, rights, actions, causes of action, suits, or damages whatsoever and of every kind and nature, whether known or unknown, contingent or otherwise (collectively the “Claims”), against PremierWest and the others released herein, relating to or arising out of Executive’s termination, except to the extent such Claims cannot, under applicable law, be released. Executive also covenants not to sue or file or cause to be filed any complaint with any federal, state, or local agency or in any court against PremierWest or the others released herein regarding any matter related to Executive’s Termination of Employment with PremierWest, including, but not limited to, any Claims under the Age Discrimination in Employment Act or any similar federal, state or local law, except to the extent such Claims cannot, under applicable law, be released. The release of liability set forth herein does not extend to rights or claims that may arise from events occurring after execution of this Agreement, including, but not limited to, claims for the enforcement of this Agreement, or to Executive’s exercise of rights under the Consolidated Omnibus Budget Reconciliation Act of 1986 to continued insurance, if applicable.

          (b) Acceptance and Revocation Period. Executive shall have a period of 21 days from the date of delivery of this Agreement to accept Section 7(a) of this Agreement. Executive shall have a period of seven days after his execution of this Agreement during which Executive may revoke his acceptance of Section 7(a) of this Agreement by providing written notice of revocation to Bancorp. Any such acceptance or revocation must be addressed to the Chairman, Bancorp, 503 Airport Road, Medford, Oregon 97504, or such other address as Executive may be directed in writing by Bancorp to provide such acceptance or revocation. To be effective, the acceptance or revocation must be received no later than 5:00 p.m. Pacific Time within the applicable time period. The 21-day acceptance period may be waived by Executive, but the seven-day revocation period may not be waived. If Executive’s acceptance of Section 7(a) of this Agreement not affirmatively revoked in writing by Executive during the seven-day revocation period, it shall be deemed to have been accepted and not revoked. Section 7(a) of this Agreement shall not be effective or enforceable until the seven-day revocation period has expired. If Executive properly executes his right to revoke acceptance of Section 7(a), the remainder of this Agreement shall nevertheless remain in full force and effect.

     8. No Admission of Wrongdoing. Executive acknowledges and agrees that nothing in this Agreement constitutes or shall be construed as an admission of liability or wrongdoing on the part of PremierWest or the others released herein.

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     9. Successors. This Agreement shall be binding upon and inure to the benefit of and be enforceable by PremierWest and its successors and assigns.

     10. Severability. The provisions of this Agreement shall be deemed severable. The invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. Any provision held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it valid and enforceable.

     11. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by and construed in accordance with the substantive laws of the State of Oregon, without giving effect to the principles of conflict of laws of such State.

     12. Arbitration. The parties agree to submit any dispute arising under this Agreement to final, binding, private arbitration in Medford, Oregon. The disputes subject to arbitration include not only disputes involving the meaning or performance of the Agreement, but disputes about its negotiation, drafting, or execution. The dispute will be determined by a single arbitrator and governed by the then-existing rules of arbitration procedure in Jackson County Circuit Court, except as set forth herein. Instead of filing a civil complaint in Jackson County Circuit Court, a party will commence the arbitration process by noticing the other party. The parties will choose an arbitrator who specializes in employment conflicts from the arbitration list for Jackson County Circuit Court. If no such arbitrator is available, the parties will choose a similarly qualified arbitrator from any other arbitration list for other Circuit Courts in Oregon. If the parties are unable to agree on an arbitrator within ten (10) days of receipt of the list of arbitrators, each party will select one attorney from the list, and those two attorneys shall select the arbitrator from the list (with each of the two selecting attorneys then concluding their services and each being compensated by the party selecting each attorney, subject to recovery of such fees under Section 13). The arbitrator may charge his or her standard arbitration fees rather than the fees prescribed in the Jackson County Circuit Court arbitration procedures. The arbitrator will have full authority to determine all issues, including arbitrability, to award any remedy, including permanent injunctive relief, and to determine any request for attorney’s fees, costs and expenses in accordance with Section 13. There shall be no right to review the arbitrator’s decision in court. The arbitrator’s award may be reduced to final judgment or decree in Jackson County Circuit Court.

     13. Expense/Attorneys’ Fees. The prevailing party shall be awarded all costs and expenses of the proceeding, including, but not limited to, attorneys’ fees, filing and service fees, witness fees, and arbitrators’ fees. If arbitration is commenced, the arbitrator will have full authority and complete discretion to determine the “prevailing party” and the amount of costs and expenses to be awarded.

     14. Injunctive Relief. Notwithstanding any other provision of this Agreement, an aggrieved party may seek a temporary restraining order or preliminary injunction in Jackson County Circuit Court to preserve the status quo during the

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arbitration proceeding, provided however, that the party seeking relief agrees that ultimate resolution of the dispute will still be determined through arbitration and not through court process. The filing of the court action for injunctive relief shall not hinder or delay the arbitration process.

     15. This Agreement is Not Exclusive. This Agreement does not supersede any other agreement to which Executive may be party with PremierWest relating to noncompetition, nondisclosure, or the other matters referred to in this Agreement, whether those noncompetition, nondisclosure, or other provisions are contained in an employment agreement, a severance agreement, a salary continuation agreement, or any other agreement. This Agreement is in addition to any such other agreement(s). In case of conflict between this Agreement, on one hand, and any such other agreement(s), on the other, PremierWest shall have sole and exclusive authority to determine whether this Agreement or such other agreement(s) shall govern in the particular case and whether to enforce its rights under this Agreement, under such other agreement(s), or under both.

     16. Defined Terms. Terms used but not defined in this Agreement shall have the meanings given to them in the Employment Agreement.

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     IN WITNESS WHEREOF, Executive, Bancorp, and the Bank have executed this Separation Agreement effective as of the day and year first set forth above.

PREMIERWEST BANCORP:

By:                                                       

Its:                                                        

PREMIERWEST BANK:

By:                                                        

Its:                                                        

     By signing below, I hereby agree to and accept all provisions of this Separation Agreement, specifically including, but not limited to, the release and covenant not to sue that is set forth in Section 7(a) of this Separation Agreement. I understand that I have seven days after the date of my execution of this Separation Agreement to revoke my acceptance of the release and covenant not to sue contained in Section 7(a) of the Separation Agreement, and that if I do not revoke my acceptance by 5:00 p.m. Pacific Time on that date, the release and covenant not to sue will become effective. I understand that if I do revoke my acceptance of the release and covenant not to sue, I will forfeit all consideration for the release of claims as set forth in Section 10 of the Employment Agreement.

EXECUTIVE:

                                                       
[insert name]

Date signed:                            , 20

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EX-10.3

Exhibit 10.3

PREMIERWEST BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
(SERP)

     THIS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT (this “Agreement”) is made December 13, 2007, by and between PremierWest Bancorp, an Oregon corporation (“Bancorp”), PremierWest Bank, an Oregon-chartered, FDIC-insured bank with its main office in Medford, Oregon (the “Bank”) (collectively “PremierWest”), and John Anhorn, (the “Executive”), replacing the Agreement dated July 29, 2004, and is effectively retroactive to January 1, 2005.

     WHEREAS,the Executive has contributed substantially to the success of the Bank and its parent corporation, Bancorp, and the Bank desires that the Executive continue in its employ;

     WHEREAS, to encourage the Executive to remain an employee of the Bank, the Bank is willing to provide supplemental retirement benefits to the Executive, payable out of the Bank’s general assets;

     WHEREAS, none of the conditions or events included in the definition of the term “golden parachute payment” contained in Section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned;

     WHEREAS, this Agreement constitutes a plan of deferred compensation;

     WHEREAS, this Agreement is intended to comply with § 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and any ambiguity hereunder shall be interpreted in such a way as to comply, to the extent necessary, with Code § 409A and the regulations thereunder; and

     NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

     Whenever used in this Agreement, the following terms shall have the meanings specified:

     1.1 “Adjusted Base Salary” means the highest amount of Base Salary paid to the Executive during employment with the Bank.

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     1.2 “Base Salary” means the annual base compensation, not including any bonuses or benefits, paid to the Executive.

     1.3 “Cause” for an Executive’s termination for Cause will exist upon the occurrence of one or more of the following events:

          (a) Fraudulent Conduct. An intentional act of fraud, embezzlement, or theft by Executive in the course of his employment with PremierWest Bancorp or the Bank. No act or failure to act on Executive’s part shall be deemed to have been intentional if it was due primarily to an error in judgment or negligence. An act or failure to act on Executive’s part shall be considered intentional if it is not in good faith and it is without a reasonable belief that the action or failure to act is in PremierWest’s best interests,

          (b) Material Breach of Employment Agreement. A material breach by Executive of his Employment Agreement if such breach is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the breach, has been delivered by the respective board to Executive,

          (c) Gross Negligence/Insubordiation. Gross negligence or insubordination by Executive in the performance of his duties as an officer of PremierWest Bankcorp or the Bank if such gross negligence or insubordination is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the gross negligence or insubordination, has been delievered by the respective board to Executive,

          (d) Breach of Fiduciary Duties. A breach by Executive of his fiduciary duties to PremierWest Bancorp and its stockholders or misconduct involving dishonesty, in either case whether in his capacity as an officer of PremierWest Bancorp or the Bank,

          (e) Criminal Conviction. Conviction of Executive for a felony or conviction of a misdemeanor involving moral turpitude,

          (f) Violation of Law. Intentional violation of any law or significant policy of PremierWest Bancorp or the Bank committed in connection with Executive’s employment, which has a material adverse effect on PremierWest Bancorp or the Bank, or

          (g) FDIC Removal Order. Removal of Executive from office or permanent prohibition of Executive from participating in the conduct of PremierWest Bank’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1).

     1.4 “Change in Control” means if any one of the following events occurs:

          (a) Merger. Bancorp merges into or consolidates with another corporation, or merges another corporation into Bancorp, and as a result less than 50% of the combined voting

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power of the resulting corporation immediately after the merger or consolidation is held by Persons who were the holders of Bancorp’s voting securities immediately before the merger or consolidation,

          (b) Acquisition of Significant Share Ownership. (1) A report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of Bancorp’s voting securities, or (2) a person or persons acting in concert has or have become the beneficial owner of 10% or more of a class of Bancorp’s voting securities and the person or the person’s or group’s nominee becomes the Chairman of the Board of Bancorp, but this paragraph (b) shall not apply to beneficial ownership of voting shares of Bancorp held in a fiduciary capacity by an entity in which Bancorp directly or indirectly beneficially owns 50% or more of the outstanding voting securities,

          (c) Change in Board Composition. During any period of two consecutive years, individuals who constitute Bancorp’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this paragraph (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or

          (d) Sale of Assets. Bancorp sells to a third party all or substantially all of Bancorp’s assets. For this purposes, sale of all or substantially all of Bancorp’s assets includes sale of the shares or assets of the Bank.

     1.5 “Disability” means the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Bank. The Executive must submit proof to the Bank of the carrier’s or Social Security Administration’s determination upon the request of the Bank.

     1.6 “Disability Retirement” means termination of the Executive’s employment due to Disability.

     1.7 “Early Retirement” means the Executive’s Termination of Employment with the Bank before Normal Retirement Age for reasons other than death, Disability, Termination under Article 5 of this Agreement, termination without Cause or termination with Good Reason, and any termination other than termination for Cause more than six (6) months after a Change in Control.

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     1.8 “Early Retirement Date” means the month, day and year in which Early Retirement occurs.

     1.9 “Effective Date” means the date indicated in the first paragraph hereof.

     1.10 “Good Reason” for Executive’s Termination of Employment by resignation will exist upon the occurrence, without Executive’s consent, of one or more of the following events, if Executive has informed PremierWest in writing of the circumstances described below in this Section that could give rise to Termination of Employment for Good Reason and PremierWest has not removed the circumstances within 30 days of the written notice:

          (a) Reduction in Base Salary. A reduction of Executive’s Base Salary,

          (b) Reduced Participation in Bonus, Incentive, Compensation, and Other Plans. A reduction of Executive’s bonus, incentive, and other compensation award opportunities under PremierWest Bancorp’s benefit plans and the Bank’s benefit plans, unless in the case of either, a company-wide reduction of all officers’ award opportunities occurs simultaneously,

          (c) Participation in Benefit Plans. Discontinuance of Executive’s participation in any officer or employee benefit plan maintained by PremierWest Bancorp or by the Bank, unless the plan is discontinued by reason of law or loss of tax deductibility to PremierWest with respect to contributions to the plan, or is discontinued as a matter of PremierWest Bancorp policy or PremierWest Bank policy applied equally to all participants in the plan,

          (d) A Reduction in Responsibilities or Status (other than such changes, made after the Executive has announced his intention to retire or within twelve months of his Normal Retirement Date, as are consistent with his anticipated retirement) based on one of the following:

               (1) Assignment to Executive of duties or responsibilities that are materially inconsistent with Executive’s position as stated in Executive’s Employment Agreement or that represent a material reduction of his authority,

               (2) Any other action by PremierWest that results in a material reduction or material adverse change in Executive’s position, authority, duties or responsibilities,

               (3) Failure to appoint or reappoint Executive to the position stated in his Employment Agreement, or

               (4) Following a Change in Control, failure to retain Executive in an executive officer position with authority, duties or responsibilities consistent with that of an executive officer.

(Subsections (d)(1), (2) and (3) do not apply following a Change in Control),

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          (e) Failure to Obtain Assumption Agreement. The failure of a successor or assign of the Bank to assume and agree to perform this Agreement and the Executive’s Employment Agreement, if assignment and assumption does not occur automatically under operation of law,

          (f) Termination without Compliance with this Agreement. Termination by PremierWest of Executive’s employment without the notice required under Executive’s Employment Agreement,

          (g) Material Breach. A material breach of Executive’s Employment Agreement by PremierWest that is not corrected within a reasonable time, or

          (h) Relocation of Executive. Requiring Executive to change his principal work location, to any location that is more than 15 miles from the location of PremierWest Bancorp’s principal executive offices on the date of this Agreement.

     1.11 “Normal Retirement Date” means the Executive’s 65^th birthday.

     1.12 “Person” means an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or other entity.

     1.13 “Plan Year” means a twelve-month period commencing on January 1, and ending on the last day of December of each year. The initial Plan Year shall commence on the Effective Date of this Agreement.

     1.14 “Termination of Employment” with the Bank means a separation from service under Code § 409A and the regulations thereunder, as such regulations may change from time to time, or any successor provision of the Code and regulations. For purposes of this Agreement, if there is a dispute over the employment status of the Executive or the date of termination of the Executive’s employment, the Bank shall have the sole and absolute right to decide the dispute, unless a Change in Control shall have occurred.

ARTICLE 2
LIFETIME BENEFITS

     2.1 Normal Retirement Benefit. The Bank shall pay to the Executive the sum of $133,094 per year payable in monthly installments commencing August 1, 2008 and continuing for the life of the Executive. Payment of the Normal Retirement Benefit shall not be contingent on Termination of Employment. The monthly payments made hereunder shall be considered a series of separate payments for purposes of Code § 409A.

     2.2 Early Retirement Benefit. This section is no longer applicable.

     2.3 Premature Termination Benefit. This section is no longer applicable.

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     2.4 Disability Retirement Benefit. Upon the Executive’s Disability Retirement, the Bank shall pay to the Executive the benefit described in this Section 2.4 instead of any other benefit under this Agreement.

          2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the amount in Section 2.1.

          2.4.2 Payment of Benefit. The payment of benefits under this Section 2.4 shall begin on the first day of the month following the month in which Disability Retirement occurs. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments on the first day of each month for the life of the Executive. The monthly payments made hereunder shall be considered a series of separate payments for purposes of Code § 409A

     2.5 Change in Control Retention Benefit. This section is no longer applicable.

ARTICLE 3
DEATH BENEFITS

     3.1 Death During Active Service. Except as provided in Section 5.1, if the Executive dies in active service to the Bank before the date specified in Section 2.1, the Executive’s designated beneficiary is entitled to receive the benefit in this Section 3.1 instead of any other benefit under this Agreement.

          3.1.1 Amount of Benefit. The annual benefit under this Section 3.1 is the amount in Section 2.1.

          3.1.2 Payment of Benefit. Beginning with the month after the Executive’s death, the Bank shall pay the annual benefit to the Executive’s designated beneficiary in 12 monthly installments on the first day of each month. The annual benefit shall be paid to the Executive’s designated beneficiary for 15 years.

     3.2 Death During Benefit Period. If the Executive dies after benefit payments under Article 2 have commenced, and if benefit payments have been paid to Executive for less than 15 years, the Bank shall pay to the Executive’s beneficiary(ies) at the same time and in the same amounts the benefits that would have been paid to Executive, had the Executive survived, but the total period of payments to the Executive and the Executive’s beneficiary(ies) shall not exceed 15 years.

     3.3 Death After Termination of Employment But Before Benefit Payments Commence. If the Executive is entitled to benefit payments under Article 2, but dies before payments commence, the benefits shall be payable to the Executive’s beneficiary(ies), but the payments shall commence on the first day of the month after the date of the Executive’s death, and payments shall be paid to the beneficiary(ies) for 15 years. Annual payments shall be in the same amounts they would have been paid to the Executive had the Executive survived.

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ARTICLE 4
BENEFICIARIES

     4.1 Beneficiary Designations. The Executive shall designate a beneficiary or beneficiaries by filing a written designation with the Bank. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will be effective only if signed by the Executive and accepted by the Bank during the Executive’s lifetime. The Executive’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive’s estate.

     4.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incapacitated person or incapable person. The Bank may require such proof of incapacity, minority or guardianship as the Bank deems appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for such benefit.

ARTICLE 5
GENERAL LIMITATIONS

     5.1 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Executive commits suicide before August 1, 2008. Additionally, the Bank shall not pay any benefit under this Agreement if the Executive has made any material misstatement of fact on any application or resume provided to the Bank, or on any application for any benefits provided by the Bank to the Executive.

     5.2 Removal. If the Executive is removed from office or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order.

     5.3 Insolvency. If the Commissioner of the Oregon Department of Banking appoints the Federal Deposit Insurance Corporation as receiver for the Bank under Oregon Revised Statutes Section 711.405, all obligations under this Agreement shall terminate as of the date of the Bank’s declared insolvency.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

     6.1 Claims Procedure. If the Executive or his beneficiary (“claimant”) has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

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          6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Bank a written claim for the benefits.

          6.1.2 Timing of Bank Response. The Bank shall respond to such claimant within 90 days after receiving the claim. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

          6.1.3 Notice of Decision. If the Bank denies part or all of the claim, the Bank shall notify the claimant in writing of such denial. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

               6.1.3.1 the specific reasons for the denial,

               6.1.3.2 a reference to the specific provisions of the Agreement on which the denial is based,

               6.1.3.3 a description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed,

               6.1.3.4 an explanation of the Agreement’s review procedures and the time limits applicable to such procedures, and

               6.1.3.5 a statement of the claimant’s right to bring a civil action under ERISA (Employees Retirement Income Security Act) Section 502(a) following an adverse benefit determination on review.

     6.2 Review Procedure. If the Bank denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Bank of the denial, as follows:

          6.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Bank’s notice of denial, must file with the Bank a written request for review.

          6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Bank shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

          6.2.3 Considerations on Review. In considering the review, the Bank shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

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          6.2.4 Timing of Bank Response. The Bank shall respond in writing to such claimant within 60 days after receiving the request for review. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

          6.2.5 Notice of Decision. The Bank shall notify the claimant in writing of its decision on review. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

               6.2.5.1 the specific reasons for the denial,

               6.2.5.2 a reference to the specific provisions of the Agreement on which the denial is based,

               6.2.5.3 a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits, and

               6.2.5.4 a statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
MISCELLANEOUS

     7.1 Amendments and Termination. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive.

     7.2 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.

     7.3 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

     7.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner.

     7.5 Successors; Binding Agreement. If any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank does not assume this Agreement by operation of law, the Bank shall require such

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successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. The Bank’s failure to obtain an assumption agreement, if necessary, before the succession becomes effective shall be considered a breach of this Agreement and shall entitle the Employee to the right to payments specified in Section 2.5. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Bank, by any merger, consolidation or acquisition where the Bank is not the surviving corporation, by any transfer of all or substantially all of the Bank’s assets, or by any other change in the Bank’s structure or the manner in which the Bank’s business or assets are held. The Executive shall not be deemed to have had a Termination of Employment upon the occurrence of one of the foregoing events.

     7.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

     7.7 Applicable Law. Except to the extent preempted by the laws of the United States of America, the validity, interpretation, construction, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Oregon, without giving effect to the principles of conflict of laws of such state.

     7.8 Unfunded Arrangement. The Executive and the Executive’s beneficiary(ies) are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Bank to which the Executive and beneficiary(ies) have no preferred or secured claim.

     7.9 Administration. The Bank shall have the powers that are necessary to administer this Agreement, including but not limited to the power to:

          (a) interpret the provisions of the Agreement,

          (b) establish and revise the method of accounting for the Agreement,

          (c) maintain a record of benefit payments, and

          (d) establish rules and prescribe forms necessary or desirable to administer the Agreement.

     7.10 Named Fiduciary. The Bank shall be the named fiduciary and plan administrator under this Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan, including the employment of advisors and the delegation of ministerial duties to qualified individuals.

     7.11 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement, and each such other

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provision shall continue in full force and effect to the full extent consistent with the law. If any provision of this Agreement is held invalid in part, such invalidity shall in no way affect the remainder of the provision, and the remainder of such provision, together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with the law.

     7.12 Headings. The headings of sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement.

     7.13 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. If the communication is to the Bank, it should be directed to the Bank’s Chief Executive Officer and addressed to the Bank’s corporate office. If the communication is to the Executive, it should be addressed to the most recent address provided by the Executive to the Bank.

     7.14 IRC §1035 Exchanges. The Executive recognizes and agrees that after this Agreement is adopted, the Bank may wish to exchange the policy of life insurance on the Executive’s life, to be used to fund the benefit under Article 2 of this Agreement for another contract of life insurance insuring the Executive’s life. Provided that the policy is replaced (or intended to be replaced) with a comparable policy of life insurance, the Executive agrees to provide medical information and cooperate with medical insurance-related testing required by a prospective insurer for implementing the policy or, if necessary, for modifying or updating to a comparable insurer.

     7.15 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive concerning the subject matter hereof. No rights are granted to the Executive under this Agreement other than those specifically set forth herein.

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     IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have signed this Agreement the day and year first written above.

THE EXECUTIVE	THE BANK: PREMIERWEST BANK
John Anhorn	By:                                                                  Its:
	BANCORP: PREMIERWEST BANCORP By:                                                                  Its:

Agreement to Cooperate with Insurance Underwriting Incident to I.R.C. §1035 Exchange

     I acknowledge that I have read this Agreement and agree to be bound by its terms, particularly the covenant on my part set forth in Section 7.14 to provide medical information and cooperate with medical insurance-related testing required by an insurer to issue a comparable insurance policy to cover the benefit provided under Article 3 of this Agreement.

                                               
Witness                                                
Executive

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EX-10.4

Exhibit 10.4

PREMIERWEST BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
(SERP)

     THIS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT (this “Agreement”) is made December 13, 2007, by and between PremierWest Bancorp, an Oregon corporation (“Bancorp”), PremierWest Bank, an Oregon-chartered, FDIC-insured bank with its main office in Medford, Oregon (the “Bank”), and Richard Hieb, (the “Executive”). This Agreement is effective retroactively to January 1, 2005.

     WHEREAS, the Executive has contributed substantially to the success of the Bank and its parent corporation, PremierWest Bancorp (“Bancorp”), and the Bank desires that the Executive continue in its employ;

     WHEREAS, to encourage the Executive to remain an employee of the Bank, the Bank is willing to provide supplemental retirement benefits to the Executive, payable out of the Bank’s general assets;

     WHEREAS, none of the conditions or events included in the definition of the term “golden parachute payment” contained in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned;

     WHEREAS, this Agreement is a continuation of and amendment to the prior Supplemental Executive Retirement Plan Agreement between the Bank and the Executive dated July 24, 2004 as amended;

     WHEREAS, this Agreement constitutes a plan of deferred compensation; and

     WHEREAS, this Agreement is intended to comply with § 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and any ambiguity hereunder shall be interpreted in such a way as to comply, to the extent necessary, with Code § 409A and the regulations thereunder;

     NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

     Whenever used in this Agreement, the following terms shall have the meanings specified:

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     1.1 “Adjusted Base Salary” means the highest amount of Base Salary paid to the Executive during employment with the Bank.

     1.2 “Base Salary” means the annual base compensation, not including any bonuses or benefits, paid to the Executive.

     1.3 “Cause” for an Executive’s termination for Cause will exist upon the occurrence of one or more of the following events:

          (a) Fraudulent Conduct. An intentional act of fraud, embezzlement, or theft by Executive in the course of his employment with PremierWest Bancorp or the Bank. No act or failure to act on Executive’s part shall be deemed to have been intentional if it was due primarily to an error in judgment or negligence. An act or failure to act on Executive’s part shall be considered intentional if it is not in good faith and it is without a reasonable belief that the action or failure to act is in PremierWest’s best interests,

          (b) Material Breach of Employment Agreement. A material breach by Executive of his Employment Agreement if such breach is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the breach, has been delivered by the respective board to Executive,

          (c) Gross Negligence/Insubordiation. Gross negligence or insubordination by Executive in the performance of his duties as an officer of PremierWest Bankcorp or the Bank if such gross negligence or insubordination is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the gross negligence or insubordination, has been delievered by the respective board to Executive,

     (d) Breach of Fiduciary Duties. A breach by Executive of his fiduciary duties to PremierWest Bancorp and its stockholders or misconduct involving dishonesty, in either case whether in his capacity as an officer of PremierWest Bancorp or the Bank,

     (e) Criminal Conviction. Conviction of Executive for a felony or conviction of a misdemeanor involving moral turpitude,

     (f) Violation of Law. Intentional violation of any law or significant policy of PremierWest Bancorp or the Bank committed in connection with Executive’s employment, which has a material adverse effect on PremierWest Bancorp or the Bank, or

      (g) FDIC Removal Order. Removal of Executive from office or permanent prohibition of Executive from participating in the conduct of PremierWest Bank’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1).

     1.4 “Change in Control” means if any one of the following events occurs:

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     (a) Merger. Bancorp merges into or consolidates with another corporation, or merges another corporation into Bancorp, and as a result less than 50% of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by Persons who were the holders of Bancorp’s voting securities immediately before the merger or consolidation;

     (b) Acquisition of Significant Share Ownership. (1) A report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of Bancorp’s voting securities, or (2) a person or persons acting in concert has or have become the beneficial owner of 10% or more of a class of Bancorp’s voting securities and the person or the person’s or group’s nominee becomes the Chairman of the Board of Bancorp, but this paragraph (b) shall not apply to beneficial ownership of voting shares of Bancorp held in a fiduciary capacity by an entity in which Bancorp directly or indirectly beneficially owns 50% or more of the outstanding voting securities;

     (c) Change in Board Composition. During any period of two consecutive years, individuals who constitute Bancorp’s board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this paragraph (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period; or

     (d) Sale of Assets. Bancorp sells to a third party all or substantially all of Bancorp’s assets. For this purpose, sale of all or substantially all of Bancorp’s assets includes sale of the shares or assets of the Bank.

     1.4 “Disability” means the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Bank. The Executive must submit proof to the Bank of the carrier’s or Social Security Administration’s determination upon the request of the Bank.

     1.5 “Disability Retirement” means termination of the Executive’s employment due to Disability.

     1.6 “Effective Date” means the date indicated in the first paragraph hereof.

     1.7 “Good Reason” for Executive’s Termination of Employment by resignation will exist upon the occurrence, without Executive’s consent, of one or more of the following events,

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if Executive has informed PremierWest in writing of the circumstances described below in this Section that could give rise to Termination of Employment for Good Reason and PremierWest has not removed the circumstances within 30 days of the written notice:

          (a) Reduction in Base Salary. A reduction of Executive’s Base Salary,

          (b) Reduced Participation in Bonus, Incentive, Compensation, and Other Plans. A reduction of Executive’s bonus, incentive, and other compensation award opportunities under PremierWest Bancorp’s benefit plans and the Bank’s benefit plans, unless in the case of either, a company-wide reduction of all officers’ award opportunities occurs simultaneously,

          (c) Participation in Benefit Plans. Discontinuance of Executive’s participation in any officer or employee benefit plan maintained by PremierWest Bancorp or by the Bank, unless the plan is discontinued by reason of law or loss of tax deductibility to PremierWest with respect to contributions to the plan, or is discontinued as a matter of PremierWest Bancorp policy or PremierWest Bank policy applied equally to all participants in the plan,

          (d) A Reduction in Responsibilities or Status (other than such changes as are consistent with anticipated retirement) based on one of the following:

               (1) Assignment to Executive of duties or responsibilities that are materially inconsistent with Executive’s position as stated in Executive’s Employment Agreement or that represent a material reduction of his authority,

               (2) Any other action by PremierWest that results in a material reduction or material adverse change in Executive’s position, authority, duties or responsibilities,

               (3) Failure to appoint or reappoint Executive to the position stated in his Employment Agreement, or

               (4) Following a Change in Control, failure to retain Executive in an executive officer position with authority, duties or responsibilities consistent with that of an executive officer.

(Subsections (d)(1), (2) and (3) do not apply following a Change in Control),

          (e) Failure to Obtain Assumption Agreement. The failure of a successor or assign of the Bank to assume and agree to perform this Agreement and the Executive’s Employment Agreement, if assignment and assumption does not occur automatically under operation of law,

          (f) Termination without Compliance with this Agreement. Termination by PremierWest of Executive’s employment without the notice required under Executive’s Employment Agreement,

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           (g) Material Breach. A material breach of Executive’s Employment Agreement by PremierWest that is not corrected within a reasonable time, or

          (h) Relocation of Executive. Requiring Executive to change his principal work location, to any location that is more than 15 miles from the location of PremierWest Bancorp’s principal executive offices on the date of this Agreement.

     1.8 “Person” means an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or other entity.

     1.9 “Plan Year” means a twelve-month period commencing on January 1, and ending on the last day of December of each year. The initial Plan Year shall commence on the Effective Date of this Agreement.

     1.10 “Termination of Employment” with the Bank means a separation from service under Code § 409A and the regulations thereunder, as such regulations may change from time to time, or any successor provision of the Code and regulations. For purposes of this Agreement, if there is a dispute over the employment status of the Executive or the date of termination of the Executive’s employment, the Bank shall have the sole and absolute right to decide the dispute, unless a Change in Control shall have occurred.

ARTICLE 2
LIFETIME BENEFITS

     2.1 Normal Retirement Benefit. Except in the event of Executive’s Termination of Employment by reason of death or Disability or any termination giving rise to a benefit under Section 2.3 or 2.4, the Bank shall pay to the Executive the benefit described in this Section 2.1 instead of any other benefit under this Article 2.

     2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 shall be $85,067 per year.

     2.1.2 Payment of Benefit. The payment of benefits under this Section 2.1 shall begin on June 1, 2008. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments with the first installment paid on June 1, 2008 and the remaining installments paid on the first day of each month for the remainder of the Executive’s life.

     2.2 Disability Retirement Benefit. Upon the Executive’s Disability Retirement before May 1, 2008, the Bank shall pay to the Executive the benefit described in this Section 2.2 instead of any other benefit under this Article 2.

     2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the amount in Section 2.1.1.

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     2.2.2 Payment of Benefit. The payment of the benefits under this Section 2.2 shall begin on the first day of the month on or after the date of Disability Retirement, but no later than June 1, 2008. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments with the first installment paid on the first day of the month on or after the date of Disability Retirement and the remaining installments paid on the first day of each month for the remainder of the Executive’s life.

     2.3 Premature Termination Benefit. If the Executive’s employment with the Bank is terminated by the Bank without Cause or by the Executive for Good Reason, the Bank shall pay to the Executive the benefit described in this Section 2.3 instead of any other benefit under this Article 2.

     2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the amount in Section 2.1.1.

     2.3.2 Payment of Benefit. The payment of the benefits under this Section 2.3 shall begin on June 1, 2008. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments with the first installment paid on June 1, 2008 and the remaining installments paid on the first day of each monthfor the remainder of the Executive’s life.

     2.4 Change-in-Control Retention Benefit. If more than six (6) months after a Change in Control, and before June 1, 2008, the Executive’s employment is terminated for any reason other than for Cause, the Bank shall pay to the Executive the benefit described in this Section 2.4 instead of any other benefit under this Article 2.

     2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the amount in Section 2.1.1.

     2.4.2 Payment of Benefit. The payment of the benefits under this Section 2.4 shall begin on June 1, 2008. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments with the first installment paid on June 1, 2008 and the remaining installments paid on the first day of each month for the remainder of the Executive’s life.

ARTICLE 3
DEATH BENEFITS

     3.1 Death During Active Service. Except as provided in Section 5.1, if the Executive dies in active service to the Bank before June 1, 2008, the Executive’s designated beneficiary is entitled to receive the benefit in this Section 3.1 instead of any other benefit under this Agreement.

     3.1.1 Amount of Benefit. The annual benefit under this Section 3.1 is the amount in Section 2.1.1.

     3.1.2 Payment of Benefit. Beginning with the month after the Executive’s death, the Bank shall pay the annual benefit to the Executive’s designated beneficiary in 12

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monthly installments on the first day of each month. The annual benefit shall be paid to the Executive’s designated beneficiary for 15 years.

     3.2 Death During Benefit Period. If the Executive dies after benefit payments under Article 2 have commenced, and if benefit payments have been paid to Executive for less than 15 years, the Bank shall pay to the Executive’s beneficiary(ies) at the same time and in the same amounts the benefits that would have been paid to Executive, had the Executive survived, but the total period of payments to Executive and Executive’s beneficiary(ies) shall not exceed 15 years.

     3.3 Death After Termination of Employment But Before Benefit Payments Commence. If the Executive is entitled to benefit payments under Article 2, but dies before payments commence, the benefits shall be payable to the Executive’s beneficiary(ies), but the payments shall commence on the first day of the month after the date of the Executive’s death, and payments shall be paid to the beneficiary(ies) for 15 years. Annual payments shall be in the same amounts they would have been paid to the Executive had the Executive survived.

ARTICLE 4
BENEFICIARIES

     4.1 Beneficiary Designations. The Executive shall designate a beneficiary or beneficiaries by filing a written designation with the Bank. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will be effective only if signed by the Executive and accepted by the Bank during the Executive’s lifetime. The Executive’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive’s estate.

     4.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incapacitated person or incapable person. The Bank may require such proof of incapacity, minority or guardianship as the Bank deems appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for such benefit.

ARTICLE 5
GENERAL LIMITATIONS

     5.1 Misstatement. The Bank shall not pay any benefit under this Agreement if the Executive has made any material misstatement of fact on any application or resume provided to the Bank, or on any application for any benefits provided by the Bank to the Executive.

     5.2 Removal. If the Executive is removed from office or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order.

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     5.3 Insolvency. If the Commissioner of the Oregon Department of Banking appoints the Federal Deposit Insurance Corporation as receiver for the Bank under Oregon Revised Statutes section 711.405, all obligations under this Agreement shall terminate as of the date of the Bank’s declared insolvency.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

     6.1 Claims Procedure. If the Executive or his beneficiary (“claimant”) has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

          6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Bank a written claim for the benefits.

     6.1.2 Timing of Bank Response. The Bank shall respond to such claimant within 90 days after receiving the claim. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

     6.1.3 Notice of Decision. If the Bank denies part or all of the claim, the Bank shall notify the claimant in writing of such denial. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

          6.1.3.1 The specific reasons for the denial;

     6.1.3.2 A reference to the specific provisions of the Agreement on which the denial is based;

     6.1.3.3 A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

     6.1.3.4 An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

     6.1.3.5 A statement of the claimant’s right to bring a civil action under ERISA (Employees Retirement Income Security Act) Section 502(a) following an adverse benefit determination on review.

     6.2 Review Procedure. If the Bank denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Bank of the denial, as follows:

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     6.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Bank’s notice of denial, must file with the Bank a written request for review.

     6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Bank shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

     6.2.3 Considerations on Review. In considering the review, the Bank shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

     6.2.4 Timing of Bank Response. The Bank shall respond in writing to such claimant within 60 days after receiving the request for review. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

     6.2.5 Notice of Decision. The Bank shall notify the claimant in writing of its decision on review. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

               6.2.5.1 The specific reasons for the denial;

     6.2.5.2 A reference to the specific provisions of the Agreement on which the denial is based;

     6.2.5.3 A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

     6.2.5.4 A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
MISCELLANEOUS

     7.1 Amendments and Termination. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive.

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     7.2 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.

     7.3 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

     7.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner.

     7.5 Successors; Binding Agreement. If any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank does not assume this Agreement by operation of law, the Bank shall require such successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. The Bank’s failure to obtain an assumption agreement, if necessary, before the succession becomes effective shall be considered a breach of this Agreement and shall entitle the Executive to the right to payments specified in Section 2.4. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Bank, by any merger, consolidation or acquisition where the Bank is not the surviving corporation, by any transfer of all or substantially all of the Bank’s assets, or by any other change in the Bank’s structure or the manner in which the Bank’s business or assets are held. Executive shall not be deemed to have had a Termination of Employment upon the occurrence of one of the foregoing events.

     7.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

     7.7 Applicable Law. Except to the extent preempted by the laws of the United States of America, the validity, interpretation, construction, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Oregon, without giving effect to the principles of conflict of laws of such state.

     7.8 Unfunded Arrangement. The Executive and the Executive’s beneficiary(ies) are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Bank to which the Executive and beneficiary(ies) have no preferred or secured claim.

     7.9 Administration. The Bank shall have the powers that are necessary to administer this Agreement, including but not limited to the power to:

          (a) interpret the provisions of the Agreement;

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          (b) establish and revise the method of accounting for the Agreement;

          (c) maintain a record of benefit payments; and

    (d) establish rules and prescribe forms necessary or desirable to administer the Agreement.

     7.10 Named Fiduciary. The Bank shall be the named fiduciary and plan administrator under this Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan, including the employment of advisors and the delegation of ministerial duties to qualified individuals.

     7.11 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall in no way affect the remainder of the provision, and the remainder of such provision, together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law.

     7.12 Headings. The headings of sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement.

     7.13 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. If the communication is to the Bank, it should be directed to the Bank’s Chief Executive Officer and addressed to the Bank’s corporate office. If the communication is to the Executive, it should be addressed to the most recent address provided by the Executive to the Bank.

     7.14 IRC § 1035 Exchanges. The Executive recognizes and agrees that after this Agreement is adopted the Bank may wish to exchange the policy of life insurance on the Executive’s life, to be used to fund the benefit under Article 2 of this Agreement for another contract of life insurance insuring the Executive’s life. Provided that the policy is replaced (or intended to be replaced) with a comparable policy of life insurance, the Executive agrees to provide medical information and cooperate with medical insurance-related testing required by a prospective insurer for implementing the policy or, if necessary, for modifying or updating to a comparable insurer.

     7.15 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive concerning the subject matter hereof and supersedes in its entirety the Salary Continuation Agreement between the Bank and the Executive dated November 12, 2002. Addendum A to the Salary Continuation Agreement, also dated November 12, 2002 is hereby terminated in its entirety. No rights are granted to the Executive under this Agreement other than those specifically set forth herein.

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     IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have signed this Agreement the day and year first written above.

THE EXECUTIVE:	THE BANK:
	PREMIERWEST BANK
	By:
Richard Hieb
	Its:
	BANCORP:
	PREMIERWEST BANCORP
	By:_____________________________
	Its:

Agreement to Cooperate with Insurance Underwriting Incident to I.R.C. § 10355 Exchange

     I acknowledge that I have read this Agreement and agree to be bound by its terms, particularly the covenant on my part set forth in Section 7.14 to provide medical information and cooperate with medical insurance-related testing required by an insurer to issue a comparable insurance policy to cover the benefit provided under Article 2 of this Agreement.

                                                        
Witness                                                        
Executive

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BENEFICIARY DESIGNATION

PREMIERWEST BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT (SERP)

     I designate the following as beneficiary of any death benefits under this Supplemental Executive Retirement Plan Agreement:

Primary: _____________________________________________________

Contingent:___________________________________________________

Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

     I understand that I may change these beneficiary designations by filing a new written designation with the Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

Signature: ____________________________________________

Date: ________________________________________________

Accepted by the Bank this ________ day of  ________________, _______.

By: _________________________________


Title: ________________________________

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EX-10.5

Exhibit 10.5

PREMIERWEST BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
(SERP)

     THIS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT (this "Agreement") is made December 13, 2007, by and between PremierWest Bancorp, an Oregon corporation (“Bancorp”), PremierWest Bank, an Oregon-chartered, FDIC-insured bank with its main office in Medford, Oregon (the "Bank") (collectively, “PremierWest”), and Tom Anderson, (the "Executive") replacing the Agreement dated July 29, 2004, and is effective retroactively to January 1, 2005.

     WHEREAS,the Executive has contributed substantially to the success of the Bank and its parent corporation, Bancorp, and the Bank desires that the Executive continue in its employ;

     WHEREAS, to encourage the Executive to remain an employee of the Bank, the Bank is willing to provide supplemental retirement benefits to the Executive, payable out of the Bank's general assets;

     WHEREAS, none of the conditions or events included in the definition of the term "golden parachute payment" contained in Section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is contemplated insofar as the Bank is concerned;

     WHEREAS, this Agreement constitutes a plan of deferred compensation;

     WHEREAS, this Agreement is intended to comply with § 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and any ambiguity hereunder shall be interpreted in such a way as to comply, to the extent necessary, with Code § 409A and the regulations thereunder; and

     NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

     Whenever used in this Agreement, the following terms shall have the meanings specified:

     1.1 “Adjusted Base Salary” means the highest amount of Base Salary paid to the Executive during employment with the Bank.

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     1.2 "Base Salary" means the annual base compensation, not including any bonuses or benefits, paid to the Executive.

     1.3 "Cause" for an Executive’s termination for Cause will exist upon the occurrence of one or more of the following events:

          (a) Fraudulent Conduct. An intentional act of fraud, embezzlement, or theft by Executive in the course of his employment with PremierWest Bancorp or the Bank. No act or failure to act on Executive’s part shall be deemed to have been intentional if it was due primarily to an error in judgment or negligence. An act or failure to act on Executive’s part shall be considered intentional if it is not in good faith and it is without a reasonable belief that the action or failure to act is in PremierWest’s best interests,

          (b) Material Breach of Employment Agreement. A material breach by Executive of his EmploymentAgreement if such breach is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the breach, has been delivered by the respective board to Executive,

          (c) Gross Negligence/Insubordiation. Gross negligence or insubordination by Executive in the performance of his duties as an officer of PremierWest Bankcorp or the Bank if such gross negligence or insubordination is not remedied or is not being remedied to the Board or the Bank Board’s satisfaction within 30 days after written notice, including a detailed description of the gross negligence or insubordination, has been delievered by the respective board to Executive,

          (d) Breach of Fiduciary Duties. A breach by Executive of his fiduciary duties to PremierWest Bancorp and its stockholders or misconduct involving dishonesty, in either case whether in his capacity as an officer of PremierWest Bancorp or the Bank,

     (e) Criminal Conviction. Conviction of Executive for a felony or conviction of a misdemeanor involving moral turpitude,

     (f) Violation of Law. Intentional violation of any law or significant policy of PremierWest Bancorp or the Bank committed in connection with Executive’s employment, which has a material adverse effect on PremierWest Bancorp or the Bank, or

          (g) FDIC Removal Order. Removal of Executive from office or permanent prohibition of Executive from participating in the conduct of PremierWest Bank’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1).

     1.4 "Change in Control" means if any one of the following events occurs:

          (a) Merger. Bancorp merges into or consolidates with another corporation, or merges another corporation into Bancorp, and as a result less than 50% of the combined voting

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power of the resulting corporation immediately after the merger or consolidation is held by Persons who were the holders of Bancorp's voting securities immediately before the merger or consolidation,

          (b) Acquisition of Significant Share Ownership. A report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of Bancorp's voting securities, but this paragraph (b) shall not apply to beneficial ownership of voting shares of Bancorp held in a fiduciary capacity by an entity in which Bancorp directly or indirectly beneficially owns 50% or more of the outstanding voting securities,

          (c) Change in Board Composition. During any period of two consecutive years, individuals who constitute Bancorp's Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this paragraph (c) each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or

          (d) Sale of Assets. Bancorp sells to a third party all or substantially all of Bancorp's assets. For this purposes, sale of all or substantially all of Bancorp's assets includes sale of the shares or assets of the Bank.

     1.5 "Disability” means the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Bank. The Executive must submit proof to the Bank of the carrier's or Social Security Administration's determination upon the request of the Bank.

     1.6 "Disability Retirement" means termination of the Executive's employment due to Disability.

     1.7 "Early Retirement" means the Executive's Termination of Employment with the Bank before Normal Retirement Age for reasons other than death, Disability, Termination under Article 5 of this Agreement, termination without Cause or termination with Good Reason, and any termination other than termination for Cause more than six (6) months after a Change in Control.

     1.8 "Early Retirement Date" means the month, day and year in which Early Retirement occurs.

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     1.9 "Effective Date" means the date indicated in the first paragraph hereof.

     1.10 "Good Reason" for Executive’s Termination of Employment by resignation will exist upon the occurrence, without Executive’s consent, of one or more of the following events, if Executive has informed PremierWest in writing of the circumstances described below in this Section that could give rise to Termination of Employment for Good Reason and PremierWest has not removed the circumstances within 30 days of the written notice:

          (a) Reduction in Base Salary. A reduction of Executive’s Base Salary,

          (b) Reduced Participation in Bonus, Incentive, Compensation, and Other Plans. A reduction of Executive’s bonus, incentive, and other compensation award opportunities under PremierWest Bancorp’s benefit plans and the Bank’s benefit plans, unless in the case of either, a company-wide reduction of all officers’ award opportunities occurs simultaneously,

          (c) Participation in Benefit Plans. Discontinuance of Executive’s participation in any officer or employee benefit plan maintained by PremierWest Bancorp or by the Bank, unless the plan is discontinued by reason of law or loss of tax deductibility to PremierWest with respect to contributions to the plan, or is discontinued as a matter of PremierWest Bancorp policy or PremierWest Bank policy applied equally to all participants in the plan,

          (d) A Reduction in Responsibilities or Status (other than such changes, made after the Executive has announced his intention to retire or within twelve months of his Normal Retirement Date, as are consistent with his anticipated retirement) based on one of the following:

               (1) Assignment to Executive of duties or responsibilities that are materially inconsistent with Executive’s position as stated in Executive’s Employment Agreement or that represent a material reduction of his authority,

               (2) Any other action by PremierWest that results in a material reduction or material adverse change in Executive’s position, authority, duties or responsibilities,

               (3) Failure to appoint or reappoint Executive to the position stated in his Employment Agreement, or

               (4) Following a Change in Control, failure to retain Executive in an executive officer position with authority, duties or responsibilities consistent with that of an executive officer.

(Subsections (d)(1), (2) and (3) do not apply following a Change in Control),

          (e) Failure to Obtain Assumption Agreement. The failure of a successor or assign of the Bank to assume and agree to perform this Agreement and the Executive’s Employment Agreement, if assignment and assumption does not occur automatically under

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operation of law,

          (f) Termination without Compliance with this Agreement. Termination by PremierWest of Executive’s employment without the notice required under Executive’s Employment Agreement,

          (g) Material Breach. A material breach of Executive’s Employment Agreement by PremierWest that is not corrected within a reasonable time, or

          (h) Relocation of Executive. Requiring Executive to change his principal work location, to any location that is more than 15 miles from the location of PremierWest Bancorp’s principal executive offices on the date of this Agreement.

     1.11 “Normal Retirement Date” means the Executive’s 62^nd birthday.

     1.12 “Person” means an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or other entity.

     1.13 “Plan Year” means a twelve-month period commencing on January 1, and ending on the last day of December of each year. The initial Plan Year shall commence on the Effective Date of this Agreement.

     1.14 “Termination of Employment” with the Bank means a separation from service under Code § 409A and the regulations thereunder, as such regulations may change from time to time, or any successor provision of the Code and regulations. For purposes of this Agreement, if there is a dispute over the employment status of the Executive or the date of termination of the Executive’s employment, the Bank shall have the sole and absolute right to decide the dispute, unless a Change in Control shall have occurred.

ARTICLE 2
LIFETIME BENEFITS

     2.1 Normal Retirement Benefit. Upon the Executive’s Termination of Employment on or after the Normal Retirement Date for reasons other than death or Disability, the Bank shall pay to the Executive the benefit described in this Section 2.1 instead of any other benefit under this Agreement.

          2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 shall be calculated as a percentage of Base Salary. The applicable percentage is the percentage corresponding to the Plan Year in which the Normal Retirement Date occurs as shown on Schedule A. In its sole discretion, the Bank’s Board of Directors may increase the applicable percentage and such increase shall be reflected on a revised Schedule A.

          2.1.2 Payment of Benefit. The payment of the benefits under this Section 2.1 shall begin on the first day of the seventh month after the Executive’s Termination of

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Employment. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments on the first day of each month for a period of 15 years (with 6 monthly payments accumulated and paid on the commencement date and one payment made each month thereafter for the next 14 years and 6 months). The monthly payments made hereunder shall be considered a series of separate payments for purposes of Code § 409A.

     2.2 Early Retirement Benefit. Upon Early Retirement, the Bank shall pay to the Executive the benefit described in this Section 2.2 instead of any other benefit under this Agreement.

          2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is calculated as a percentage of Base Salary. The applicable percentage is the percentage corresponding to the Plan Year in which Early Retirement occurs as shown on Schedule A. In its sole discretion, the Bank’s Board of Directors may increase the applicable percentage and such increase shall be reflected on a revised Schedule A.

          2.2.2 Payment of Benefit. The payment of benefits under this Section shall begin on the first day of the seventh month after the Executive’s Termination of Employment. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments on the first day of each month for a period of 15 years (with 6 monthly payments accumulated and paid on the commencement date and one payment made each month thereafter for the next 14 years and 6 months). The monthly payments made hereunder shall be considered a series of separate payments for purposes of Code § 409A.

     2.3 Premature Termination Benefit. If the Executive’s employment with the Bank is terminated by the Bank without Cause or by the Executive for Good Reason, the Bank shall pay to the Executive the benefit described in this Section 2.3 instead of any other benefit under this Agreement.

          2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is calculated as a percentage of Base Salary. The applicable percentage is the percentage, as shown on Schedule A corresponding to the Plan Year three (3) years after the Plan Year in which the Termination of Employment occurs. In its sole discretion, the Bank’s Board of Directors may increase the applicable percentage and such increase shall be reflected on a revised Schedule A.

          2.3.2 Payment of Benefit. The payment of the benefits under this Section 2.3 shall begin on the first day of the seventh month after the Executive’s Termination of Employment. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments on the first day of each month for a period of 15 years (with 6 monthly payments accumulated and paid on the commencement date and one payment made each month thereafter for the next 14 years and 6 months). The monthly payments made hereunder shall be considered a series of separate payments for purposes of Code § 409A.

     2.4 Disability Retirement Benefit. Upon the Executive’s Disability Retirement, the Bank shall pay to the Executive the benefit described in this Section 2.4 instead of any other benefit under this Agreement.

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          2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is calculated as a percentage of Base Salary. The applicable percentage is the percentage corresponding to the Plan Year in which Disability Retirement occurs as shown on Schedule A. In its sole discretion, the Bank’s Board of Directors may increase the applicable percentage and such increase shall be reflected on a revised Schedule A.

          2.4.2 Payment of Benefit. The payment of benefits under this Section 2.4 shall begin on the first day of the month following the month in which Disability Retirement occurs. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments on the first day of each month for a period of 15 years.

     2.5 Change in Control Retention Benefit. If more than six (6) months after a Change in Control the Executive’s employment is terminated for any reason other than for Cause, the Bank shall pay to the Executive the benefit described in this Section 2.5 instead of any other benefit under this Agreement.

          2.5.1 Amount of Benefit. The annual benefit under this Section 2.5 is calculated as a percentage of Base Salary at the time of Termination of Employment. The applicable percentage is the percentage, as shown on Schedule A corresponding to the Plan Year three (3) years after the Plan Year in which the Termination of Employment occurs. In its sole discretion, the Bank’s Board of Directors may increase the applicable percentage and such increase shall be reflected on a revised Schedule A.

          2.5.2 Payment of Benefit. The payment of the benefits under this Section 2.5 shall begin on the first day of the seventh month after the Executive’s Termination of Employment. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments on the first day of each month for a period of 15 years (with 6 monthly payments accumulated and paid on the commencement date and one payment made each month thereafter for the next 14 years and 6 months).

ARTICLE 3
DEATH BENEFITS

     3.1 Death During Active Service. Except as provided in Section 5.1, if the Executive dies in active service to the Bank before the Normal Retirement Date, the Executive’s designated beneficiary is entitled to receive the benefit in this Section 3.1 instead of any other benefit under this Agreement.

          3.1.1 Amount of Benefit. The annual benefit under this Section 3.1 is calculated as a percentage of the Adjusted Base Salary. The applicable percentage is the percentage corresponding to the year in which the Normal Retirement Date would have occurred. In its sole discretion, the Bank’s Board of Directors may increase the applicable percentage and such increase shall be reflected on a revised Schedule A.

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          3.1.2 Payment of Benefit. Beginning with the month after the Executive’s death, the Bank shall pay the annual benefit to the Executive’s designated beneficiary in 12 monthly installments on the first day of each month. The annual benefit shall be paid to the Executive’s designated beneficiary for 15 years.

     3.2 Death During Benefit Period. If the Executive dies after benefit payments under Article 2 of this Agreement have commenced but before receiving all such payments, the Bank shall pay the remaining benefits to the Executive’s beneficiary(ies) at the same time and in the same amounts they would have been paid to the Executive had the Executive survived but the total period of payments to the Executive and the Executive’s beneficiary(ies) shall not exceed 15 years.

     3.3 Death After Termination of Employment But Before Benefit Payments Commence. If the Executive is entitled to benefit payments under Article 2 but dies before payments commence, the benefits shall be payable to the Executive’s beneficiary(ies), but payments shall commence on the first day of the month after the date of the Executive’s death. Payments shall be made in the same amounts they would have been paid to the Executive had the Executive survived.

ARTICLE 4
BENEFICIARIES

     4.1 Beneficiary Designations. The Executive shall designate a beneficiary or beneficiaries by filing a written designation with the Bank. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will be effective only if signed by the Executive and accepted by the Bank during the Executive’s lifetime. The Executive’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive’s estate.

     4.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incapacitated person or incapable person. The Bank may require such proof of incapacity, minority or guardianship as the Bank deems appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability for such benefit.

ARTICLE 5
GENERAL LIMITATIONS

     5.1 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Executive commits suicide before January 1, 2010. Additionally, the Bank shall not pay any benefit under this Agreement if the Executive has made any material

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misstatement of fact on any application or resume provided to the Bank, or on any application for any benefits provided by the Bank to the Executive.

     5.2 Removal. If the Executive is removed from office or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order.

     5.3 Insolvency. If the Commissioner of the Oregon Department of Banking appoints the Federal Deposit Insurance Corporation as receiver for the Bank under Oregon Revised Statutes Section 711.405, all obligations under this Agreement shall terminate as of the date of the Bank’s declared insolvency.

ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

     6.1 Claims Procedure. If the Executive or his beneficiary (“claimant”) has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

          6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Bank a written claim for the benefits.

          6.1.2 Timing of Bank Response. The Bank shall respond to such claimant within 90 days after receiving the claim. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

          6.1.3 Notice of Decision. If the Bank denies part or all of the claim, the Bank shall notify the claimant in writing of such denial. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

               6.1.3.1 the specific reasons for the denial,

               6.1.3.2 a reference to the specific provisions of the Agreement on which the denial is based,

               6.1.3.3 a description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed,

               6.1.3.4 an explanation of the Agreement’s review procedures and the time limits applicable to such procedures, and

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               6.1.3.5 a statement of the claimant’s right to bring a civil action under ERISA (Employees Retirement Income Security Act) Section 502(a) following an adverse benefit determination on review.

     6.2 Review Procedure. If the Bank denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Bank of the denial, as follows:

          6.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Bank’s notice of denial, must file with the Bank a written request for review.

          6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Bank shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

          6.2.3 Considerations on Review. In considering the review, the Bank shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

          6.2.4 Timing of Bank Response. The Bank shall respond in writing to such claimant within 60 days after receiving the request for review. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

          6.2.5 Notice of Decision. The Bank shall notify the claimant in writing of its decision on review. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

               6.2.5.1 the specific reasons for the denial,

               6.2.5.2 a reference to the specific provisions of the Agreement on which the denial is based,

               6.2.5.3 a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits, and

               6.2.5.4 a statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

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ARTICLE 7
MISCELLANEOUS

     7.1 Amendments and Termination. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive.

     7.2 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.

     7.3 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

     7.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner.

     7.5 Successors; Binding Agreement. If any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank does not assume this Agreement by operation of law, the Bank shall require such successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform this Agreement if no such succession had occurred. The Bank’s failure to obtain an assumption agreement, if necessary, before the succession becomes effective shall be considered a breach of this Agreement and shall entitle the Employee to the right to payments specified in Section 2.5. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Bank, by any merger, consolidation or acquisition where the Bank is not the surviving corporation, by any transfer of all or substantially all of the Bank’s assets, or by any other change in the Bank’s structure or the manner in which the Bank’s business or assets are held. The Executive shall not be deemed to have had a Termination of Employment upon the occurrence of one of the foregoing events.

     7.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

     7.7 Applicable Law. Except to the extent preempted by the laws of the United States of America, the validity, interpretation, construction, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Oregon, without giving effect to the principles of conflict of laws of such state.

     7.8 Unfunded Arrangement. The Executive and the Executive’s beneficiary(ies) are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life is

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a general asset of the Bank to which the Executive and beneficiary(ies) have no preferred or secured claim.

     7.9 Administration. The Bank shall have the powers that are necessary to administer this Agreement, including but not limited to the power to:

          (a) interpret the provisions of the Agreement,

          (b) establish and revise the method of accounting for the Agreement,

          (c) maintain a record of benefit payments, and

          (d) establish rules and prescribe forms necessary or desirable to administer the Agreement.

     7.10 Named Fiduciary. The Bank shall be the named fiduciary and plan administrator under this Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan, including the employment of advisors and the delegation of ministerial duties to qualified individuals.

     7.11 Severability. If for any reason any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement, and each such other provision shall continue in full force and effect to the full extent consistent with the law. If any provision of this Agreement is held invalid in part, such invalidity shall in no way affect the remainder of the provision, and the remainder of such provision, together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with the law.

     7.12 Headings. The headings of sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement.

     7.13 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. If the communication is to the Bank, it should be directed to the Bank’s Chief Executive Officer and addressed to the Bank’s corporate office. If the communication is to the Executive, it should be addressed to the most recent address provided by the Executive to the Bank.

     7.14 IRC §1035 Exchanges. The Executive recognizes and agrees that after this Agreement is adopted, the Bank may wish to exchange the policy of life insurance on the Executive’s life, to be used to fund the benefit under Article 2 of this Agreement for another contract of life insurance insuring the Executive’s life. Provided that the policy is replaced (or intended to be replaced) with a comparable policy of life insurance, the Executive agrees to provide medical information and cooperate with medical insurance-related testing required by a prospective insurer for implementing the policy or, if necessary, for modifying or updating to a comparable insurer.

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     7.15 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive concerning the subject matter hereof. No rights are granted to the Executive under this Agreement other than those specifically set forth herein.

     IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have signed this Agreement the day and year first written above.

THE EXECUTIVE	THE BANK: PREMIERWEST BANK
Tom Anderson	By:                                                           Its:
	BANCORP: PREMIERWEST BANCORP By:                                                           Its:

Agreement to Cooperate with Insurance Underwriting Incident to I.R.C. §1035 Exchange

     I acknowledge that I have read this Agreement and agree to be bound by its terms, particularly the covenant on my part set forth in Section 7.14 to provide medical information and cooperate with medical insurance-related testing required by an insurer to issue a comparable insurance policy to cover the benefit provided under Article 3 of this Agreement.

                                                        
Witness

                                                        
Executive

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     SCHEDULE A
PREMIERWEST BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT

The following Schedule sets forth the applicable percentage for purposes of calculating the annual benefits, as referenced in Article 2 of the SERP Agreement.

Plan Year	Year Ended  December 31,	Executive’s Age  at End of Period	Applicable Percentage %
1	2004	53	16 %
2	2005	54	18 %
3	2006	55	20 %
4	2007	56	22 %
5	2008	57	24 %
6	2009	58	26 %
7	2010	59	28 %
8	2011	60	30%
9	2012	61	32 %
10	2013	62	34 %
11	2014		36 %
12	2015		38 %
13	2016		40 %

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EX-10.8

Exhibit 10.8

PREMIERWEST BANK
2007 EXECUTIVE DEFERRED COMPENSATION AGREEMENT

     THIS AGREEMENT is made this 13th day of December, 2007 by and among PremierWest Bancorp, an Oregon corporation (“Bancorp”), PremierWest Bank, an Oregon-chartered bank (the “Bank”) (collectively “PremierWest”), and Tom Anderson (the “Executive”) replacing the Agreement dated December 27, 2004, and is effective retroactively to January 1, 2005.

INTRODUCTION

     To encourage the Executive to remain an employee of the Bank, the Bank is willing to provide to the Executive a deferred compensation opportunity together with matching contributions by the Bank. The Bank will pay the Executive’s benefits from the Bank’s general assets. This Agreement will govern any deferral of compensation by the Executive after the effective date hereof.

     This Agreement is intended to comply with Section 409A of the Internal Revenue Code. Any ambiguity hereunder shall be interpreted in such a way as to comply, to the extent necessary, with Section 409A and the regulations thereunder.

AGREEMENT

The Executive and the Bank agree as follows:

Article 1
Definitions

     Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

     1.1 “Change in Control” means any of the following events occur:

     (a) Merger. Bancorp merges into or consolidates with another corporation, or merges another corporation into Bancorp, and as a result less than 50% of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were the holders of Bancorp’s voting securities immediately before the merger or consolidation. For purposes of this Agreement, the term "person" means an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or other entity,

     (b) Acquisition of Significant Share Ownership. (1) a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the

filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of Bancorp's voting securities, or (2) a person or persons acting in concert has or have become the beneficial owner of 10% or more of a class of Bancorp's voting securities and the person or the person's or group's nominee becomes the Chairman of the Board of Bancorp, but this paragraph (b) shall not apply to beneficial ownership of voting shares of Bancorp held in a fiduciary capacity by an entity in which Bancorp directly or indirectly beneficially owns 50% or more of the outstanding voting securities,

     (c) Change in Board Composition. During any period of two consecutive years, individuals who constitute Bancorp's board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that, for purposes of this paragraph (c), each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or

     (d) Sale of Assets. Bancorp sells to a third party all or substantially all of Bancorp's assets. For this purpose, sale of all or substantially all of Bancorp's assets includes sale of the shares or assets of the Bank.

     1.2 "Code" means the Internal Revenue Code of 1986, as amended.

     1.3 "Compensation" means both salary and bonus compensation that would be paid to the Executive during a Plan Year.

     1.4 "Deferral Account" means the Bank's accounting of the Executive's accumulated Deferrals plus accrued interest.

     1.5 "Deferrals" means the amount of the Executive's Compensation that the Executive elects to defer according to this Agreement.

     1.6 "Disability" means the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of PremierWest.

     1.7 "Effective Date" means January 1, 2005.

     1.8 "Election Form" means the Form attached as Exhibit 1.

     1.9 "Normal Retirement Age" means the Executive's 62^nd birthday.

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     1.10 “Normal Retirement Date” means the later of the Normal Retirement Age or Termination of Employment.

     1.11 "Plan Year" means the calendar year.

     1.12 "Termination for Cause" means the definition of termination for cause specified in any employment agreement existing on the date hereof or hereafter entered into between the Executive and Bancorp or the Bank. If the Executive is not a party to an employment agreement containing a definition of termination for cause, Termination for Cause means the Bank has terminated the Executive's employment for any of the following reasons:

          (a) gross negligence or gross neglect of duties,

          (b) commission of a felony or commission of a misdemeanor involving moral turpitude, or

          (c) fraud, disloyalty or willful violation of any law or significant Bank policy committed in connection with the Executive's employment and resulting in an adverse effect on the Bank.

     1.13 "Termination of Employment" means a separation from service under Section 409A of the Code and the regulations thereunder, as such regulations may change from time to time, or any successor provision of the Internal Revenue Code and regulations.

     1.14 "Unforeseeable Emergency" means severe financial hardship of the Executive resulting from an illness or accident of the Executive, the Executive’s spouse or a dependent (as defined in Section 152(a) of the Code), loss of the Executive’s property due to casualty (including the need to rebuild a home not otherwise covered by insurance), or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive. Except as otherwise provided in this Section 1.14, the purchase of a home and the payment of college tuition are not unforeseeable emergencies.

Article 2
Deferral Election

     2.1 Initial Election. The Executive shall make an initial deferral election under this Agreement by filing with the Bank a signed Election Form within 30 days after the Effective Date of this Agreement. The Election Form shall set forth the amount of Compensation to be deferred and shall be effective to defer only Compensation earned after the date the Election Form is received by the Bank. In no event can the Executive's Deferrals for any Plan Year exceed 75% of the Executive's Compensation for that Plan Year.

     2.2 Election Changes.

          2.2.1 Generally. Upon the Bank's approval, the Executive may modify the amount of Compensation to be deferred annually by filing a new Election Form with the Bank

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prior to the beginning of the Plan Year in which the Compensation is to be deferred. The modified deferral election shall not be effective until the calendar year following the year in which the subsequent Election Form is received and approved by the Bank.

          2.2.2 Hardship. If an Unforeseeable Emergency occurs, the Executive, by written instructions to the Bank, may cancel future deferrals under this Agreement for the remainder of the calendar year in which the Unforeseeable Emergency arose as soon as is practically possible for the Bank to process such instruction.

     2.3 Change in Time and Form of Distribution. The timing of a distribution of the Deferral Account may not be accelerated except as set forth in Section 4.4.

Article 3
Deferral Account

     3.1 Establishing and Crediting. The Bank shall establish a Deferral Account on its books for the Executive and shall credit to the Deferral Account the following amounts:

          3.1.1 Deferrals. The portion of the Compensation deferred by the Executive as of the time the Compensation would have otherwise been paid to the Executive.

          3.1.2 Interest. At the end of each Plan Year under this Agreement but only until commencement of the benefit payments under this Agreement or until a Change in Control has occurred, interest is to be credited on the account balance at an annual rate equal to the Bank's ROE (return on equity) for that Plan Year, compounded monthly, with a maximum crediting rate of 18%. In the event the Executive and the Bank do not agree on what the Bank's ROE was for a particular Plan Year, the Executive and the Bank agree that the ROE shall be derived from the quarterly report of condition filed by the Bank with the Federal Deposit Insurance Corporation under Section 7(a) of the Federal Deposit Insurance Act for the fourth quarter of any year. If a Change in Control has occurred or if benefit payments have commenced, the Bank will not continue to credit interest pursuant to the ROE formula but rather will credit interest at an annual rate of interest, compounded monthly, on the remaining account balance during any applicable installment period, equal to the highest "Prime Rate" as published in the Wall Street Journal's "Money Rates" section. The interest credited each Plan Year shall be determined by reference to the "Prime Rate" as of the last business day of the preceding Plan Year.

     3.2 Statement of Accounts. Within 120 days after the end of each Plan Year, the Bank shall provide to the Executive a statement setting forth the Deferral Account balance.

     3.3 Accounting Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement. The Deferral Account is not a trust fund of any kind. The Executive is a general unsecured creditor of the Bank for the payment of benefits. The benefits represent the mere promise of the Bank to pay such benefits. The Executive's rights are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Executive's creditors.

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Article 4
Benefits During Lifetime

     4.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the Bank shall pay to the Executive the benefit described in this Section 4.1 in lieu of any other benefit under this Agreement.

          4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the Deferral Account balance at the date of the Executive's Termination of Employment.

          4.1.2 Payment of Benefit. The Bank shall pay the benefit to the Executive in the form elected by the Executive in the Election Form commencing on the first day of the seventh month following the Executive’s Normal Retirement Date. If the Executive elects payment of the benefit as other than a lump sum, the Bank will not continue to credit interest pursuant to the ROE formula of Section 3.1.2 but rather will credit interest at Prime Rate as defined in Section 3.1.2. In the event the Executive elects a fixed number of monthly installment payments, the first installment shall be six months of installments (that is, six times the monthly amount, with the remaining number of installments equal to the total number of monthly installments elected minus six). In the event the Executive elects a fixed number of annual installments, the first installment shall be a single annual installment, and each subsequent installment shall be paid on each subsequent January 1. Initially, each installment payment will be calculated as a level principal and interest payment based on the Executive’s Deferral Account Balance on the commencement date, the interest rate on the commencement date, and the number of installments. Thereafter, the amount of an installment shall be redetermined each January 1 based on the Executive’s Deferral Account Balance on such January 1, the interest rate on such January 1, and the number of installments remaining. This procedure for determining installment payments shall be used wherever installments are required herein. Any installment payments made hereunder shall be considered a series of separate payments for purposes of Code Section 409A.

     4.2 Early Retirement Benefit. Upon Termination of Employment prior to the Normal Retirement Age for reasons other than death, or Disability, the Bank shall pay to the Executive the benefit described in this Section 4.2 in lieu of any other benefit under this Agreement.

          4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the Deferral Account balance at the Executive's Termination of Employment.

          4.2.2 Payment of Benefit. The Bank shall pay the benefit to the Executive in the form elected by the Executive in the Election Form commencing at the later of (i) the month following the last cash payment pursuant to Section 11 of the Employment Agreement between the Executive, Bancorp and the Bank dated July 29, 2004 (the "Employment Agreement") is paid by the Bank or Bancorp to the Executive or (ii) the first day of the seventh month following Executive's Termination of Employment. If the Executive elects payment of the benefit as other than a lump sum, the Bank will not continue to credit interest pursuant to the ROE formula of Section 3.1.2 but rather will credit interest at Prime Rate as defined in Section 3.1.2.

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     4.3 Disability Benefit. If the Executive terminates employment due to Disability prior to Normal Retirement Age, the Bank shall pay to the Executive the benefit described in this Section 4.3 in lieu of any other benefit under this Agreement.

          4.3.1 Amount of Benefit. The benefit under this Section 4.3 is the Deferral Account balance at the Executive’s Termination of Employment.

          4.3.2 Payment of Benefit. The Bank shall pay the benefit to the Executive in the form elected by the Executive in the Election Form commencing with the month following the Executive’s Termination of Employment. If the Executive elects payment of the benefit as other than a lump sum, the Bank will not continue to credit interest pursuant to the ROE formula of Section 3.1.2 but rather will credit interest at Prime Rate as defined in Section 3.1.2.

     4.4 Hardship Distribution. Upon the Board of Director's determination (following petition by the Executive) that the Executive has suffered an Unforeseeable Emergency, the Bank shall distribute to the Executive all or a portion of the Deferral Account balance as determined by the Bank. The amount distributed may not exceed the amount necessary to satisfy the financial hardship plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Executive's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

Article 5
Death Benefits

     5.1 Death During Active Service. If the Executive dies while in the employment of the Bank, the Bank shall pay to the Executive's beneficiary the Early Retirement Benefit described in Section 4.2.1 commencing the month after the Executive's death, in lieu of any other benefit under this Agreement.

     5.2 Death During Payment of a Benefit. If the Executive dies after any benefit payments have commenced under this Agreement but before receiving all such payments, the Bank shall pay the remaining benefits to the Executive's beneficiary at the same time and in the same amounts they would have been paid to the Executive had the Executive survived.

     5.3 Death After Termination of Employment But Before Benefit Payments Commence. If the Executive is entitled to benefit payments under this Agreement, but dies prior to the commencement of said benefit payments, the Bank shall pay the same benefit payments to the Executive's beneficiary that the Executive was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Executive's death.

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Article 6
Beneficiaries

     6.1 Beneficiary Designations. The Executive shall designate a beneficiary by filing a written designation with the Bank. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and received by the Bank during the Executive's lifetime. The Executive's beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive's estate.

     6.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Bank may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Bank from all liability with respect to such benefit.

Article 7
General Limitations

     7.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement that is in excess of the Executive's Deferrals (i.e. no interest is paid) if Termination of Employment is due to the Executive's actions resulting in Termination for Cause. The Executive's Deferrals shall be paid to the Executive in a manner to be determined by the Bank. No interest shall be credited to the Deferrals during any applicable installment period.

Article 8
Claims and Review Procedures

     8.1 Claims Procedure. If the Executive or his beneficiary (“claimant”) has not received benefits under the Agreement that he or she believes should be paid, the claimant shall make a claim for such benefits as follows:

          8.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Bank a written claim for the benefits.

          8.1.2 Timing of Bank Response. The Bank shall respond to such claimant within 90 days after receiving the claim. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

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          8.1.3 Notice of Decision. If the Bank denies part or all of the claim, the Bank shall notify the claimant in writing of such denial. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

               (a) the specific reasons for the denial,

               (b) a reference to the specific provisions of the Agreement on which the denial is based,

               (c) a description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed,

               (d) an explanation of the Agreement's review procedures and the time limits applicable to such procedures, and

               (e) a statement of the claimant's right to bring a civil action under ERISA (Employee Retirement Income Security Act of 1974, 29 U.S.C. §1001, et. seq.) Section 502(a) following an adverse benefit determination on review.

     8.2 Review Procedure. If the Bank denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Bank of the denial, as follows:

          8.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Bank's notice of denial, must file with the Bank a written request for review.

          8.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Bank shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits.

          8.2.3 Considerations on Review. In considering the review, the Bank shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

          8.2.4 Timing of Bank Response. The Bank shall respond in writing to such claimant within 60 days after receiving the request for review. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

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          8.2.5 Notice of Decision. The Bank shall notify the claimant in writing of its decision on review. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

               (a) the specific reasons for the denial,

               (b) a reference to the specific provisions of the Agreement on which the denial is based,

               (c) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits, and

               (d) ERISA Section 502(a) a statement of the claimant's right to bring a civil action under

Article 9
Amendments and Termination

     This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive. Notwithstanding the foregoing, the Bank may terminate this Agreement at any time if, (1) pursuant to legislative, judicial or regulatory action, continuation of the Agreement would result in significant financial penalties or other significantly detrimental ramifications to the Bank (other than the financial impact of paying the benefits), and such penalty or detriment would be alleviated by termination of this Agreement, and (2) such termination of this Agreement complies with the restrictions on termination of arrangements specified in Regulations to Section 409A of the Code. In no event shall this Agreement be terminated under this section without payment to the Director of the Deferral Account balance attributable to the Director’s Deferrals and, except in the case of Termination for Cause, interest credited on such amounts.

Article 10
Miscellaneous

     10.1 Binding Effect. This Agreement shall bind the Executive and the Bank and their beneficiaries, survivors, executors, administrators and transferees.

     10.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

     10.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

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     10.4 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

     10.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of Oregon, except to the extent the laws of the United States of America otherwise require.

     10.6 Unfunded Arrangement. The Executive and the Executive's beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. In the event that Bancorp or the Bank purchase any policies of insurance for the purpose of defraying the cost to the Bank of providing benefits hereunder, any such insurance policies (whether or not on the Executive’s life) shall be a general asset of Bancorp or the Bank, as applicable, to which the Executive and the Executive’s beneficiary have no preferred or secured claim.

     10.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term "Bank" as used in this Agreement shall be deemed to refer to the successor or survivor bank.

     10.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

     10.9 Administration. The Bank shall have powers which are necessary to administer this Agreement, including but not limited to:

          (a) interpreting the provisions of the Agreement,

          (b) establishing and revising the method of accounting for the Agreement,

          (c) maintaining a record of benefit payments, and

          (d) establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

     10.10 Named Fiduciary. For purposes of the Employee Retirement Income Security Act of 1974, if applicable, the Bank shall be the named fiduciary and plan administrator under this Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan including the employment of advisors and the delegation of ministerial duties to qualified individuals.

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IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have signed this Agreement.

Executive:	Bank: PremierWest Bank
	By:
Tom Anderson	John L. Anhorn
	Chief Executive Officer
	PremierWest Bancorp
	By: ____________________________ Name:__________________________  Title:

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EX-10.9

Exhibit 10.9

PREMIERWEST BANK
CONTINUING BENEFITS AGREEMENT

     This Continuing Benefits Agreement (this “Agreement”) dated December 13, 2007, by and between PremierWest Bancorp, an Oregon Corporation (“PremierWest”), PremierWest Bank, an Oregon chartered Bank (the “Bank”) and _____________, a director of PremierWest (“Director”), replaces the Agreement dated December 27, 2004 and is retroactively effective January 1, 2005.

     WHEREAS, the Board of Directors, after due consideration and upon the recommendation of the Compensation Committee, has determined it to be necessary and appropriate to provide to its directors the benefits set forth herein as part of the compensation afforded to directors of PremierWest, and

     WHEREAS, the above-named Director has provided, and is expected to continue to provide, valuable services as a director of the Bank and of PremierWest, and

     WHEREAS, the Bank desires to retain the services of such Director and to provide incentives to continue to serve as a director of the Bank and PremierWest,

     NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1. The Director shall receive the following benefits in addition to such other compensation and benefits as may be from time to time determined by the Board of Directors:

          1.1 Subject to such limitations as may be set forth in any applicable insurance policy, the Director and the Director’s spouse shall be entitled to participate in, and be covered by, all group medical, dental, vision and accidental death and dismemberment insurance programs offered by the Bank or PremierWest and made generally available to its employees (the “PremierWest Insurance Programs”). Subject to the terms and conditions of such programs applicable to all participants, the Director may elect to include the Director’s dependent children as participants. Except as provided in Section 1.2, the Director shall pay the cost of, or reimburse the Bank or PremierWest for, premiums for PremierWest Insurance Programs.

          1.2 Subject to Section 2 hereof, following termination of the Director’s service as a director of the Bank or PremierWest, until the Director or the Director’s spouse, respectively, reaches the age of 65, and subject to such limitations as may be set forth in any applicable insurance policy, at the expense of the Bank or PremierWest, the Director and the Director’s spouse shall be entitled to participate in any PremierWest Insurance Programs. The retiree health care coverage for each shall, until the age of 65, be substantially similar to the most favorable coverage maintained for PremierWest employees, but in no event shall such coverage be less favorable than coverage with a $2,000 annual deductible and 80% reimbursement/20% copayment. Subject to the terms and conditions of such programs applicable to all participants,

at the Director’s or the Director’s spouse’s expense, the Director or the Director’s spouse may elect to include the Director’s dependent children as participants. Following termination of the Director’s service as a director of the Bank or PremierWest, and after attainment of age 65, the Director and the Director’s spouse, respectively, shall, at the Bank’s or PremierWest’s expense, be entitled to participate in, and be covered by, a Medicare Supplemental Insurance policy, comparable to the best of such policies offered by a major insurance carrier in the Bank’s market area, and such coverage shall continue from the age of 65 for the remainder of the life of the Director or the Director’s spouse, respectively. In the event that the Director is required to pay monthly premiums for such coverage, PremierWest shall reimburse Director for such premium cost no later than the last day of the calendar month following the calendar month in which the expense was incurred by the Director.

               1.2.1 The Director (or the Director’s spouse if the Director is deceased) may, at the first open enrollment period following termination of service as a director of the Bank or PremierWest, elect to continue participation in such insurance programs (if previously covered), enroll in such insurance programs or decline participation. The Director acknowledges that if Director is not participating in such insurance programs at the time of termination, enrollment may not be available until the next annual open enrollment period and that the Director may not have coverage for some period of time following termination of service.

               1.2.2 If the Director (or the Director’s spouse) declines to participate (for example by reason of duplicative coverage through another source), the Director (or the Director’s spouse if the Director is deceased) may, at any open enrollment period thereafter, elect to participate in such comparable insurance programs of the Bank or PremierWest as may be in effect at that time.

               1.2.3 If the Director (or the Director’s spouse) elects to participate in such insurance programs, the Director (or the Director’s spouse) may, at any time thereafter, elect to terminate participation, but shall have no further right to re-enroll.

               1.2.4 If the Director or the Director’s spouse has declined or terminated participation, or been ineligible to participate in such insurance programs, the Director (or, if the Director is then deceased, the Director’s spouse), shall be entitled to receive on a monthly basis a cash payment in the amount of one-twelfth (1/12) of the annual premiums the Bank or PremierWest would have paid for the Director and/or the Director’s spouse for any PremierWest Insurance Programs or Medicare Supplemental Insurance, as appropriate, under Section 1.2 of this Agreement. All payments with respect to the cost of premiums associated with the Director and the Director’s spouse shall cease upon the death of the Director and the Director’s spouse, respectively. Notwithstanding the foregoing, no cash payments will be made earlier than the first day of the seventh month following the date of the Director’s termination of services. The first payment shall equal six months of cash payments (that is, six times the monthly amount) and thereafter, payments shall be made on a monthly basis.

     2. If the following conditions are satisfied, the Director shall be entitled to the benefits described in Section 1.2 hereof:

          2.1 The Director is not entitled to any compensation or other benefit from the Bank or PremierWest upon the Director’s retirement from service as a director which results from prior

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service as a director of any bank or financial institution that was acquired, through merger or otherwise, by the Bank or PremierWest, and

     2.2 The Director shall have retired from the Board of Directors of the Bank or PremierWest and Termination for Cause shall not exist, and

     2.3 One of the following additional conditions applies:

          2.3.1 The Director shall have served a minimum of ten (10) years as a director of the Bank or PremierWest, including any service as a director of any bank or other financial institution that was acquired, through merger or otherwise, by the Bank or PremierWest; provided that if the Director previously served as a director of any bank or other financial institution that was so acquired, and unless prevented by death or disability, the Director shall have served not less than two (2) years as a director of the Bank or PremierWest following such acquisition, or

          2.3.2 The Director had served at least five (5) years as a director of the Bank or PremierWest, including service as a director of any bank or other financial institution acquired, by merger or otherwise, and the Director’s service as a director of the Bank or PremierWest is terminated solely as a result of a Change of Control of the Bank or PremierWest.

     3. Notwithstanding any other provisions in this Agreement, if at any time the Director or the Director’s spouse is ineligible to participate in the insurance programs described in Section 1.1 or 1.2 hereof, the Bank and PremierWest shall have no other obligation than as described in Section 1.2.4, and shall not be obligated to provide insurance benefits or be liable for the cost of any alternative benefits, including direct medical expenses or other costs.

     4. The Director and the Director’s spouse shall be solely responsible for any federal or state tax liability for benefits the Director or the Director’s spouse receives under this Agreement.

     5. Definitions.

          5.1 “Cause” shall mean

               5.1.1 a breach of the Director’s fiduciary duties to the Bank or PremierWest,

               5.1.2 an intentional violation of any law or significant policy of the Bank or PremierWest, which violation could reasonably be expected to have a material adverse effect on the Bank or PremierWest,

               5.1.3 conviction of the Director for a felony or for a misdemeanor involving moral turpitude, or

               5.1.4 an order by an applicable regulatory authority that the Director be removed from office.

          5.2 “Change of Control” means

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               5.2.1 any merger, consolidation, share exchange, reorganization or other corporate transaction involving PremierWest that results in the shareholders of PremierWest immediately preceding such transaction holding, following such transaction, less than 50% of the voting power of the entity surviving such transaction, or

               5.2.2 the acquisition by any person (as defined under Section 13(d) of the Securities Exchange Act of 1934) of 25% or more of the outstanding voting securities of PremierWest, followed by a change in the majority of the directors over the objection of, or without the recommendation of, the incumbent Board of Directors, acting as a whole. For purposes of this Section 5.2, “Board of Directors” means:

               (i) the group of persons serving as directors of PremierWest as of the date of this Agreement, and

               (ii) any person who thereafter becomes a director upon the recommendation or nomination by a majority of the Board of Directors for election by the shareholders, or any director appointed at the direction of any appropriate state or federal supervisory agency.

          5.3 “Retirement” means voluntary termination of service as a director, but shall also include death of the Director while in office.

          5.4 “Termination for Cause” means the Director ceases to be a director of the Bank or PremierWest after (i) having been removed from office or threatened with removal pursuant to a directive of any applicable regulatory authority, (ii) having been removed from office by a vote of shareholders at a special meeting thereof called for the purpose of such removal on the basis that Cause exists, or (iii) having failed to receive the nomination by the Board of Directors for reelection following a determination by the affirmative vote by at least 75% of the directors on the Board of Directors (with the Director abstaining from voting) that Cause exists. Prior to the board meeting at which such determination is made that Cause exists, each director shall be given notice of the grounds for alleged Cause. The Director shall be given the notice at least 48 hours prior to the meeting and Director and Director’s counsel (if Director chooses to have counsel present) shall have a reasonable opportunity to be heard at the meeting.

     6. General Provisions.

          6.1 Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by Oregon law.

          6.2 Saving Provision. If any part of this Agreement is held to be unenforceable, it shall not affect any other part. If any part of this Agreement is held to be unenforceable as written, it shall be enforced to the maximum extent allowed by applicable law.

          6.3 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

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          6.4 Entire Agreement. This Agreement constitutes the sole agreement of the parties, and supersedes all prior oral and written agreements regarding the specific benefits to be provided hereunder.

          6.5 Waiver; Amendment. No waiver of any provision of this Agreement shall be valid unless in writing, signed by the party against whom the waiver is sought to be enforced. The waiver of any breach of this Agreement or failure to enforce any provision of this Agreement shall not constitute a waiver of any subsequent breach. This Agreement may only be amended by a writing signed by the parties.

          6.6 Assignment. The Director shall not assign or transfer any of Director’s rights pursuant to this Agreement, wholly or partially, to any other person. The rights and obligations of the Bank and PremierWest under this Agreement shall inure to the benefit of and be binding in each and every respect upon the direct and indirect successors and assigns of the Bank and PremierWest, as the case may be, regardless of the manner in which the successors or assigns succeed to such interests or assets.

          6.7 Attorney Fees. If any suit or action is filed by any party to enforce this Agreement or otherwise with respect to the subject matter of this Agreement, the prevailing party shall be entitled to recover reasonable attorney fees incurred in preparation or in prosecution or defense of such suit or action as fixed by the trial court, and if any appeal is taken from the decision of the trial court, reasonable attorney fees as fixed by the appellate court.

     7. Advice of Counsel. The Director acknowledges that, in executing this Agreement, the Director has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any party by reason of the drafting or preparation hereof.

     This Agreement is retroactively effective as of January 1, 2005.

DIRECTOR		PREMIERWEST BANK
		By:
		John L. Anhorn
		Chief Executive Officer
	Joined into by:	PREMIERWEST BANCORP
		By:
		John L. Anhorn
		Chief Executive Officer

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EX-10.10

Exhibit 10.10

PREMIERWEST BANK
2007DIRECTOR DEFERRED COMPENSATION AGREEMENT

     THIS AGREEMENT is made December 13, 2007 by and between PremierWest Bancorp, an Oregon corporation (“Bancorp”), PremierWest Bank, an Oregon-chartered bank (the “Bank”) and ________________ (the “Director”), replacing the Agreement dated December 27, 2004, and is effective retroactively to January 1, 2005.

INTRODUCTION

     To encourage the Director to remain a director of PremierWest Bancorp (“Bancorp”) and of the Bank, the Bank is willing to provide to the Director an opportunity to defer receipt of director fees. The Bank will pay the Director’s benefit under this Agreement from the Bank’s general assets.

     This Agreement is intended to comply with Section 409A of the Code. Any ambiguity hereunder shall be interpreted in such a way as to comply, to the extent necessary, with Section 409A of the Code and the regulations thereunder.

AGREEMENT

The Director and the Bank agree as follows:

Article 1
Definitions

     Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 “Cause” means:

     1.1.1 A breach of the Director’s fiduciary duties to the Bank or Bancorp,

     1.1.2 An intentional violation of any law or significant policy of the Bank or Bancorp, which violation could reasonably be expected to have a material adverse effect on the Bank or Bancorp,

     1.1.3 Conviction of the Director for a felony or for a misdemeanor involving moral turpitude, or

     1.1.4 An order by an applicable regulatory authority that the Director be removed from office.

1.2 “Change in Control” means that any of the following events occur:

     1.2.1 Merger. Bancorp merges into or consolidates with another corporation, or merges another corporation into Bancorp, and as a result less than 50% of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were the holders of Bancorp’s voting securities immediately before the merger or consolidation. For purposes of this Agreement, the term “person” means an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or other entity.

     1.2.2 Sale of Assets. Bancorp sells to a third party all or substantially all of Bancorp’s assets. For this purpose, sale of all or substantially all of Bancorp’s assets includes sale of the shares or assets of the Bank.

1.3 “Code” means the Internal Revenue Code of 1986, as amended.

1.4 “Compensation” means director fees that would be paid to the Director during a Plan Year.

1.5 “Deferral Account” means the Bank’s accounting of the Director’s accumulated Deferrals plus accrued interest.

1.6 “Deferrals” means the amount of the Director’s Compensation that the Director elects to defer according to this Agreement.

1.7 “Disability” means the Director is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

1.8 “Effective Date” means January 1, 2005.

1.9 “Election Form” means the form attached as Exhibit 1.

1.10 “Plan Year” means the calendar year.

1.11 “Termination for Cause” means the Director ceases to be a director of the Bank or Bancorp after (i) having been removed from office or threatened with removal pursuant to a directive of any applicable regulatory authority, (ii) having been removed from office by a vote of shareholders at a special meeting thereof called for the purpose of such removal on the basis that Cause exists, or (iii) having failed to receive the nomination by the Bancorp’s Board of Directors for re-election following a determination by the affirmative vote by at least 75% of the directors on the Board of Directors (with the Director abstaining from voting) that Cause exists. Prior to the board meeting at which such determination is made that Cause exists, each director shall be given notice of the grounds for alleged Cause. The Director shall be given the notice at least 48 hours prior to the meeting and Director and Director’s counsel (if Director chooses to have counsel present) shall have a reasonable opportunity to be heard at the meeting.

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1.12 “Unforeseeable Emergency” means severe financial hardship of the Director resulting from an illness or accident of the Director, the Director’s spouse, the Director’s beneficiary or a dependent (as defined in Section 152 of the Code without regard to Section 152(b)(1), (b)(2) and (d)(1)(B)), loss of the Director’s property due to casualty (including the need to rebuild a home not otherwise covered by insurance), or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Director. Except as otherwise provided in Section 1.12, the purchase of a home and the payment of college tuition are not unforeseeable emergencies.

Article 2
Deferral Election

2.1 Initial Election. The Director shall make an initial deferral election under this Agreement by filing with the Bank a signed Election Form within 30 days after the Effective Date of this Agreement. The Election Form shall set forth the amount of Compensation to be deferred and shall be effective to defer only Compensation earned after the date the Election Form is received by the Bank.

2.2 Election Changes. Upon the Bank’s approval, the Director may modify the amount of Compensation to be deferred annually by filing a new Election Form with the Bank prior to the beginning of the Plan Year in which the Compensation is to be deferred. The modified deferral election shall not be effective until the calendar year following the year in which the subsequent Election Form is received and approved by the Bank.

2.3 Change in Time and Form of Distribution. The timing of a distribution of the Deferral Account may not be accelerated except as set forth in Section 4.3 or under Code Section 409A and the regulations thereunder. Any change which delays the timing of distributions or changes the form of distributions may only be made by a written agreement signed by the Bank and the Executive and only if the following requirements are met:

     2.3.1 any election to change the time and form of distribution may not take effect until at least 12 months after the date on which the election is made, and

     2.3.2 other than in the event of death, Disability or Unforeseeable Emergency, the first payment with respect to such election must be deferred for a period of at least five years from the date such payment otherwise would have been made, and

     2.3.3 any election related to a payment to be made at a specified time may not be made less than 12 months prior to the date of the first scheduled payment.

Article 3
Deferral Account

3.1 Establishing and Crediting. The Bank shall establish a Deferral Account on its books for the Director and shall credit to the Deferral Account the following amounts:

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     3.1.1 Deferrals. The portion of the Compensation deferred by the Director as of the time the Compensation would have otherwise been paid to the Director.

     3.1.2 Interest. At the end of each Plan Year under this Agreement, but only until a Change in Control has occurred or until commencement of the benefit payments under this Agreement, interest is to be credited on the account balance at an annual rate equal to the Bank’s ROE (return on equity) for that Plan Year, compounded monthly, with a maximum crediting rate of 18%. In the event the Director and the Bank do not agree on what the Bank’s ROE was for a particular Plan Year, the Director and the Bank agree that the ROE shall be derived from the quarterly report of condition filed by the Bank with the Federal Deposit Insurance Corporation year under Section 7(a) of the Federal Deposit Insurance Act for the fourth quarter of any year. If a Change in Control has occurred or payments have commenced, the Bank will not continue to credit interest pursuant to the ROE formula but rather will credit interest at an annual rate of interest, compounded monthly, on the remaining account balance during any applicable installment period, equal to the highest “Prime Rate” as published in the Wall Street Journal’s “Money Rates” section. The interest credited each Plan Year shall be determined by reference to the “Prime Rate” as of the last business day of the preceding Plan Year.

3.2 Statement of Accounts. Within 120 days after the end of each Plan Year, the Bank shall provide to the Director a statement setting forth the Deferral Account balance.

3.3 Accounting Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement. The Deferral Account is not a trust fund of any kind. The Director is a general unsecured creditor of the Bank for the payment of benefits. The benefits represent the mere promise of the Bank to pay such benefits. The Director’s rights are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Director’s creditors.

Article 4
Payment of Benefit

4.1 Normal Payment. The Deferral Account balance is payable to the Director commencing on the first day of the seventh month following the date of the Director’s termination of services for the Board in the form elected by the Director in the Election Form. If the Director elects payment of the benefit as other than a lump sum, the Bank will not continue to credit interest pursuant to the ROE formula of Section 3.1.2. Initially, each installment payment will be calculated as a level principal and interest payment based on the Director’s Deferral Account balance on the commencement date, the interest rate on the commencement date, and the number of installments. Therefore, the amount of an installment shall be redetermined each January 1 based on the Director’s Deferral Account balance on such January 1, the interest rate on such January 1, and the number of installments remaining. This procedure for determining installment payments shall be used wherever installments are required herein.

4.2 Death or Disability Payment. In the event of the Director’s death or Disability, the Deferral Account balance is payable to the Director commencing the month after death or Disability.

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4.3 Hardship Distribution. Upon the Board of Director’s determination (following petition by the Director) that the Director has suffered an Unforeseeable Emergency, the Bank shall distribute to the Director all or a portion of the Deferral Account balance as determined by the Bank. The amount distributed may not exceed the amount necessary to satisfy the financial hardship plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Director’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

Article 5
Death Benefit

     In the event of the Director’s death before all benefit payments have been made under this Agreement, the Bank shall pay the remaining benefits to the Director’s beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived.

Article 6
Beneficiaries

6.1 Beneficiary Designations. The Director shall designate a beneficiary by filing a written designation with the Bank. The Director may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Director and received by the Bank during the Director’s lifetime. The Director’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Director or if the Director names a spouse as beneficiary and the marriage is subsequently dissolved. If the Director dies without a valid beneficiary designation, all payments shall be made to the Director’s estate.

6.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Bank may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Bank from all liability with respect to such benefit.

Article 7
Termination for Cause

     Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement that is in excess of the Director’s Deferrals (i.e. no interest is paid) if the Director’s service ends as a result of Termination for Cause or the Director’s service is voluntarily terminated under any circumstances in which the Bancorp’s Board of Directors

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determines that Cause exists. Under such circumstances, the Director’s Deferrals shall be paid to the Director in a manner to be determined by the Bank.

Article 8
Amendments and Termination

     This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director. Notwithstanding the foregoing, the Bank may terminate this Agreement at any time if, pursuant to legislative, judicial or regulatory action, continuation of the Agreement would result in significant financial penalties or other significantly detrimental ramifications to the Bank (other than the financial impact of paying the benefits), and such termination of this Agreement complies with the restrictions on termination of arrangements specified in Regulations to Section 409A of the Code. In no event shall this Agreement be terminated under this section without payment to the Director of the Deferral Account balance attributable to the Director’s Deferrals and, except in the case of Termination for Cause, interest credited on such amounts.

Article 9
Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Director and the Bank and their beneficiaries, survivors, executors, administrators and transferees.

9.2 No Guarantee of Continued Position. This Agreement is not a contract for employment, nor does it entitle the Director to remain a director of the Bank or Bancorp. It also does not require the Director to remain a director nor interfere with the Director’s right to resign at any time.

9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of Oregon, except to the extent the laws of the United States of America otherwise require.

9.6 Unfunded Arrangement. The Director and the Director’s beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. In the event that Bancorp or the Bank purchase any policies of insurance for the purpose of defraying the cost to the Bank of providing benefits hereunder, any such insurance policies (whether or not on the Director’s life) shall be general assets of Bancorp or the Bank, as applicable, to which the Director and the Director’s beneficiary have no preferred or secured claim.

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9.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor bank.

9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

9.9 Administration. The Bank shall have powers which are necessary to administer this Agreement, including but not limited to:

     9.9.1 interpreting the provisions of the Agreement,

     9.9.2 establishing and revising the method of accounting for the Agreement,

     9.9.3 maintaining a record of benefit payments, and

     9.9.4 establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

9.10 Named Fiduciary. For purposes of the Employee Retirement Income Security Act of 1974, if applicable, the Bank shall be the named fiduciary and plan administrator under this Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of this Agreement including the employment of advisors and the delegation of ministerial duties to qualified individuals.

Article 10
Claims and Review Procedures

10.1 Claims Procedure. If the Director or his beneficiary (“claimant”) has not received benefits under the Agreement that he or she believes should be paid, the claimant shall make a claim for such benefits as follows:

      10.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Bank a written claim for the benefits.

      10.1.2 Timing of Bank Response. The Bank shall respond to such claimant within 90 days after receiving the claim. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

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      10.1.3 Notice of Decision. If the Bank denies part or all of the claim, the Bank shall notify the claimant in writing of such denial. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

          (a) The specific reasons for the denial,

          (b) A reference to the specific provisions of the Agreement on which the denial is based,

          (c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed,

          (d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures, and

          (e) A statement of the claimant’s right to bring a civil action under ERISA (Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et. seq.) Section 502(a) following an adverse benefit determination on review.

10.2 Review Procedure. If the Bank denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Bank of the denial, as follows:

      10.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Bank’s notice of denial, must file with the Bank a written request for review.

      10.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Bank shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

      10.2.3 Considerations on Review. In considering the review, the Bank shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

      10.2.4 Timing of Bank Response. The Bank shall respond in writing to such claimant within 60 days after receiving the request for review. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.

      10.2.5 Notice of Decision. The Bank shall notify the claimant in writing of its decision on review. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

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          (a) The specific reasons for the denial,

          (b) A reference to the specific provisions of the Agreement on which the denial is based,

          (c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits, and

          (d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

     IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have signed this Agreement.

DIRECTOR	PREMIERWEST BANK
	By:                                            Chief Executive Officer PREMIERWEST BANCORP By:                                             Name:                                         Title:

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EX-21.1

Exhibit 21.1

SUBSIDIARIES OF PREMIERWEST BANCORP

Subsidiary of PremierWest Bancorp                PremierWest Bank

Subsidiaries of PremierWest Bank                    Premier Finance Company
                                                                                PremierWest Investment Services, Inc.
                                                                                Blue Star Properties, Inc.

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
PremierWest Bancorp and Subsidiary

We consent to the incorporation by reference in the Annual Report on Form 10-K of PremierWest Bancorp and Subsidiary (PremierWest Bancorp) of our report dated March 12, 2008, with respect to the consolidated balance sheets of PremierWest Bancorp as of December 31, 2007 and 2006, and the related consolidated statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for the years ended December 31, 2007, 2006, and 2005, and in our same report, with respect to the effectiveness of internal control over financial reporting, which report is included in this annual report on Form 10-K of PremierWest Bancorp for the year ended December 31, 2007.

Portland, Oregon
March 14, 2008

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John Anhorn, certify that:

1.	I have reviewed this annual report on Form 10-K of PremierWest Bancorp;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 14, 2008 /s/ JOHN L. ANHORN
John L. Anhorn
Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Tom Anderson, certify that:

1.	I have reviewed this annual report on Form 10-K of PremierWest Bancorp;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 14, 2008 /s/ TOM ANDERSON
Tom Anderson
Chief Financial Officer and Principal Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of PremierWest Bancorp (the "Company") on Form 10-K for the year ending December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John L. Anhorn, the President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

       1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

       2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company for the period certified.

       This certification is being furnished solely to comply with the requirements of 18 U.S.C. Section 1350, and shall not be incorporated by reference into any of the Company's filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, or otherwise be deemed to be filed as part of the Report or under such Acts.

Date: March 14, 2008 /s/ JOHN L. ANHORN
John L. Anhorn
Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

       In connection with the Annual Report of PremierWest Bancorp (the "Company") on Form 10-K for the year ending December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Tom Anderson, the Chief Financial Officer and Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

       2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company for the period certified.

       This certification is being furnished solely to comply with the requirements of 18 U.S.C. Section 1350, and shall not be incorporated by reference into any of the Company's filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, or otherwise be deemed to be filed as part of the Report or under such Acts.

Date: March 14, 2008 /s/ TOM ANDERSON
Tom Anderson
Chief Financial Officer and Principal Accounting Officer