In PremierWest’s own words

PremierWest Bancorp’s biggest shareholder, Georges St. Laurent, has come out against the proposed acquisition by Starbuck (no relation to the coffee folks) Bancshares. Here is story from today’s MT based on recent SEC filings.
At the bottom of this posting, is the complete timeline, as spelled out by PremierWest.

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Here is PremierWest Bancorp detailed outline of the proposed merger, in which PremierWest would go out of business and its branches become AmericanWest Bank offices.

Background of the Merger
PremierWest’s Board of Directors and management have periodically considered and pursued various strategic alternatives in
evaluating PremierWest’s and PremierWest Bank’s business and plans, including whether PremierWest should continue as an independent entity or combine with a larger financial institution. These reviews have focused on, among other things:
• PremierWest’s and PremierWest Bank’s regulatory status;
• banking industry trends and conditions;
• capital markets conditions;
• the availability of equity capital and the terms on which PremierWest could raise capital;
• the merger and acquisition environment affecting financial institutions;
• PremierWest’s historical and projected earnings and prospects;
When the financial and market crisis began, and the economic recession developed in PremierWest Bank’s market areas, in the summer and fall of 2008, PremierWest’s Board of Directors and management discussed various strategies to improve PremierWest’s capital position and address the potential deterioration in PremierWest’s loan portfolio. Strategies discussed included raising capital by issuing securities, selling existing loans and securities, reducing lending, reducing expenses and the sale/leaseback of appreciated bank properties. In 2009 through 2012 year-to-date, as a result of the continued challenging economic environment, which was especially pronounced in
PremierWest Bank’s market areas, PremierWest Bank experienced increased levels of non-performing assets, delinquencies and adversely
classified assets. We recorded net losses applicable to common shareholders of $148.6 million, $7.5 million, $17.6 million and $6.7 million in 2009,
2010, 2011 and 2012 year-to-date, respectively.
In 2009, PremierWest recorded an $88.0 million loan loss provision and recognized a $74.9 million
goodwill impairment charge. During 2009, PremierWest began cost savings initiatives including staff reductions.
In February 2009, PremierWest received $41.4 million of capital by issuing preferred shares and a warrant to purchase common stock to the Treasury under the TARP Capital Purchase Program.
In July 2009, the FDIC and Oregon DFCS conducted a regular examination of PremierWest Bank and noted deterioration in PremierWest
Bank’s condition, including continued issues with respect to credit quality. As a result of the examination, the FDIC and Oregon DFCS required
PremierWest Bank to take actions including seeking prior approval for any dividends from PremierWest Bank to PremierWest. The FDIC also notified PremierWest Bank that it had been designated a “troubled institution” under FDIC regulations.
On August 6, 2009, PremierWest’s Board of Directors held a strategic planning meeting to review the examination results and to begin to explore alternatives to improve the financial condition of PremierWest Bank.
In September 2009, PremierWest’s Board of Directors discussed the steps necessary to complete a capital raise, including reviewing a timeline and required actions with Davidson and with legal counsel, Lane Powell PC (“Lane Powell”), and analyzed a variety of capital improvement options.
On October 22, 2009, after considering a number of alternatives and assessing execution risk and timing, PremierWest’s Board of
Directors approved the issuance of rights to existing PremierWest shareholders to purchase shares of PremierWest common stock. PremierWest’s
Board of Directors also formed a pricing committee to review the proposed pricing of the rights offering.
On November 4, 2009, PremierWest engaged Davidson to act as PremierWest’s financial advisor in connection with the rights offering.
In November 2009, to preserve capital, PremierWest suspended quarterly common stock cash dividends, gave notice of the voluntary deferral of further preferred stock dividends to the Treasury and informed the trustees under the indentures related to TruPS that PremierWest would suspend interest payments on the TruPS.
On November 18, 2009, PremierWest filed a registration statement with the Securities and Exchange Commission in connection with the rights offering.
On December 29, 2009, PremierWest’s shareholders approved an amendment to PremierWest’s articles of incorporation to increase the authorized shares of PremierWest’s common stock to 150,000,000 from 50,000,000 to accommodate the projected issuance of shares in the rights offering.
• PremierWest’s obligations under the TARP Capital Purchase Program and to the holders of its TruPS; and
• PremierWest’s competitive position relative to other banks and financial services institutions, and the values that might be
obtained from each alternative.
On January 28, 2010, the pricing committee, in consultation with Davidson and Lane Powell, determined the final terms of the rights
offering, as well as a public offering to the extent the rights offering was not fully subscribed.
Following the expiration of the rights offering on March 10, 2010, PremierWest’s Board of Directors elected to extend the offering to the
general public.
On April 2, 2010, PremierWest completed the rights offering and public offering, raising $33.3 million in gross proceeds from the sale of
75.6 million shares. The rights offering generated approximately $18.7 million in gross proceeds from existing shareholders. The public offering
generated an additional $14.6 million in gross proceeds. Directors and executive officers of PremierWest participated in the rights offering and
public offering and purchased approximately 21.61% of the shares offered. As a result of the offering, PremierWest Bank’s regulatory capital ratios
were expected to exceed “well capitalized” levels, including a leverage ratio as of March 31, 2010 of approximately 8.36%.
Effective April 6, 2010, PremierWest Bank entered into a Stipulation to the Issuance of a Consent Order agreeing to the issuance of a
Consent Order with the FDIC and the Oregon DFCS. The Consent Order requires PremierWest Bank to undertake a number of corrective actions
including:
The Consent Order restricts PremierWest Bank from taking certain actions without prior regulatory approval, including paying dividends
to PremierWest, and from extending additional credit to certain types of borrowers.
Effective April 30, 2010, as part of continuing costs savings initiatives, PremierWest closed three California branches and one Oregon
branch, consolidating the branches with existing PremierWest branches in close proximity.
• within 180 days of the date of the Consent Order (by October 3, 2010), increase and maintain Tier 1 capital in an amount to
ensure the Bank’s leverage ratio (the ratio of PremierWest Bank’s Tier 1 capital to PremierWest Bank’s average assets,
calculated in accordance with FDIC regulations), equals or exceeds 10%;
• retain qualified management and notify the FDIC and the Oregon DFCS when it proposes to add a director or to employ any
new senior executive officer or change senior executive officer responsibilities;
• increase board participation in the affairs of the Bank, including assuming full responsibility for the approval of sound
policies and objectives and for the supervision of all the Bank’s activities;
• develop and adopt a plan to maintain the minimum risk-based capital requirements for a “well capitalized” bank;
• reduce its level of non-performing assets and implement plans to reduce delinquent loans;
• ensure the level of the allowance for loan losses is maintained at adequate levels and develop a comprehensive policy for
determining the adequacy of the allowance for loan and lease losses;
• reduce its loan concentrations in certain portfolios and implement plans to reduce loans and other extensions of credit to
borrowers in the commercial real estate sector;
• revise lending and collection policies;
• develop a plan to preserve liquidity and to reduce brokered deposits;
• develop a written three-year strategic plan; and
• provide periodic progress reports to the FDIC and Oregon DFCS.

Effective June 4, 2010, PremierWest entered into a Written Agreement with the FRB and Oregon DFCS. The Written Agreement
followed, and its terms are consistent with, the Consent Order issued to PremierWest Bank. The Written Agreement, among other requirements,
provides that PremierWest will:
The Consent Order and the Written Agreement remain in place.
On June 20, 2011, PremierWest engaged an investment banking firm to evaluate strategic options as PremierWest Bank had not achieved
compliance with the Consent Order capital requirements and continued to experience elevated levels of substandard assets and to incur quarterly
net losses.
On July 1, 2011, President and CEO James M. Ford met with FDIC representatives who orally informed Mr. Ford that PremierWest must
raise significant capital or merge with a healthy financial institution. Mr. Ford and members of PremierWest management worked with the
investment banking firm to prepare a confidential data room with due diligence materials and to review possible structures for a capital raise or a
potential merger.
In August 2011, Lane Powell and members of PremierWest management prepared a tentative timeline for a capital raise. On September 19,
2011, PremierWest and representatives of the investment banking firm met with the FDIC, Oregon DFCS and FRB to review PremierWest’s capital
plan.
On September 26, 2011, PremierWest’s Board of Directors met and discussed the presentation of the capital plan to regulators and
responses to the plan, and discussed market conditions, the potential terms of a proposed capital raise and directed management to prepare
additional information and models regarding a possible capital raise for further review.
On September 30, 2011, PremierWest terminated the engagement with the investment banking firm and contacted Davidson to discuss
an engagement.
On November 9, 2011, PremierWest formally engaged Davidson to evaluate strategic alternatives.
In December 2011, in preparation for discussions with potential investors, PremierWest engaged an independent third party loan review
firm to conduct a detailed review of PremierWest’s loan portfolio.
In December 2011, the Treasury exercised its right to appoint a candidate to the PremierWest Board of Directors due to PremierWest’s
continued non-payment of preferred stock dividends.
On January 12, 2012, PremierWest announced its plans to consolidate or close 11 branches by April 2012 as part of its further cost
saving initiatives.
On January 17, 2012, Davidson made a presentation to PremierWest’s Board of Directors and discussed strategic alternatives available
to PremierWest, including potential recapitalization, merger transaction and divestiture scenarios. Davidson advised PremierWest’s Board of
Directors that a potential discount on the preferred stock held by the Treasury may be required by recapitalization investors or merger partners in
connection with a cash redemption of the preferred stock or that recapitalization investors might require a conversion of the preferred stock into
PremierWest common stock. PremierWest’s Board of Directors determined to evaluate further the alternatives for a potential recapitalization,
merger or divestiture of certain PremierWest branches.
• provide quarterly progress reports;
• take steps to ensure that PremierWest Bank complies with the Consent Order;
• seek regulatory consent to pay cash dividends or to incur, increase or guarantee any debt;
• secure prior approval for the appointment of any new director or senior executive officer;
• submit annual cash flow projections; and
• submit for approval a capital plan to maintain sufficient capital on a consolidated basis.
Beginning in January 2012, Davidson contacted four potential buyers to discuss a potential divestiture of certain PremierWest branches,
of which three parties entered into non-disclosure agreements with PremierWest and received access to confidential information, including an
online due diligence data room.
On January 24, 2012, PremierWest announced a net loss applicable to common shareholders of $17.6 million for the year ended
December 31, 2011.
On January 25, 2012, PremierWest’s CEO and representatives of Davidson contacted the Treasury and discussed a request that the
preferred stock held by Treasury be redeemed for a discounted cash payment or discounted conversion in connection with a recapitalization
transaction. On March 15, 2012, the Treasury responded that it would be willing to participate in a potential transaction to allow the preferred stock
to be redeemed at a discount to par value as part of a recapitalization transaction but only at terms agreeable to Treasury. Further, the Treasury
informed PremierWest that a discount would only be considered after the Board of Directors had evaluated all strategic alternatives, including a
merger, capital raise and other restructuring scenarios.
Beginning in February 2012, Davidson contacted 110 potential recapitalization investors, of which 34 parties entered into non-disclosure
agreements with PremierWest and received access to confidential information, including an online due diligence data room. Davidson also
contacted 21 potential strategic merger partners beginning in February 2012, of which seven parties executed non-disclosure agreements and
received access to the data room.
On February 10, 2012, a regional commercial bank submitted a non-binding letter of intent to acquire certain PremierWest branches. After
reviewing the letter of intent and analyzing the potential transaction, PremierWest determined that a divestiture transaction would not be adequate
to solve all of the issues facing PremierWest. Thereafter, and until execution of the merger agreement, PremierWest and its investment advisors
engaged in dual-track efforts to complete a capital raise or merger.
On March 19, 2012, PremierWest announced a definitive agreement to sell two branches to Pacific Crest Federal Credit Union. The two
branches were part of the group of 11 branches slated for consolidation or closure from the January 2012 announcement.
In March 2012, the Treasury exercised its right to appoint a second candidate to the PremierWest Board of Directors due to
PremierWest’s continued non-payment of preferred stock dividends.
On March 22, 2012, a regional bank holding company submitted a non-binding letter of intent to acquire PremierWest for total cash
consideration of $30.0 million, which included consideration for common shareholders and the Treasury’s preferred stock. The merger partner
began due diligence, including on-site meetings with management and a detailed loan file review. Based on discussions with Treasury,
PremierWest believed that 70% of the merger consideration would be required to be paid to Treasury to redeem its preferred stock and that 30%, or
$9.0 million (approximately $0.90 per share), would be paid to common shareholders.
On March 22, 2012, PremierWest’s Board of Directors met to review the status of recapitalization initiatives and to review the nonbinding
letter of intent for a potential acquisition of PremierWest. At the meeting, Davidson presented a model of the target recapitalization amount
of up to $90.0 million based on management’s financial projections, reviews of the credit portfolio and feedback from investors and PremierWest’s
and PremierWest Bank’s regulators.
In March 2012, Davidson advised PremierWest, based on feedback from potential recapitalization investors, that following a
recapitalization PremierWest Bank would be in a position to sell non-performing loans and other real estate owned, together non-performing
assets. In March and April 2012, Davidson contacted firms with an interest in purchasing non-performing assets and received preliminary bids indicating ranges of discounts to book value of 49.5% to 58.0%, or $42.7 million to $48.6 million. The potential sale of non-performing assets was contingent upon a successful recapitalization transaction.
From March 25 through March 28, 2012, Davidson and PremierWest management traveled to meet with potential recapitalization
investors and provide additional information about PremierWest Bank and its prospects.
On April 9, 2012, PremierWest announced a plan to pursue additional expense control initiatives, including a restructuring of staff and
processes with some staff positions eliminated and other vacant positions not filled.
On April 20, 2012, the potential merger partner formally withdrew its non-binding letter of intent, indicating that the results of its due
diligence review presented credit risk uncertainty.
On April 26, 2012, PremierWest’s Board of Directors reviewed information from Davidson regarding the status of discussions with
potential recapitalization investors and the decision of the potential merger partner to withdraw its letter of intent. Lane Powell presented
information to PremierWest’s Board of Directors regarding the status of the TruPS interest deferral period and potential default scenarios and the
regulatory issues facing potential investors under the Bank Holding Company Act and the Change in Bank Control Act. The Board of Directors
also reviewed alternative capital raise scenarios and discussed the risks involved in pursuing a smaller capital raise and the ability to find investors
that met both regulatory standards and had the resources and capability to complete a transaction. A key consideration for the Board of Directors
with respect to structuring a proposed capital raise was to avoid an “ownership change” for federal tax purposes, and therefore avoid a limitation
on future tax benefits.
Based on feedback from potential investors and merger partners, on April 26, 2012, PremierWest formally presented a proposal to
Treasury requesting Treasury’s written confirmation of a willingness to consider a discount of 75.0% on the outstanding obligations of
PremierWest under the TARP Capital Purchase Program in connection with either a redemption for cash consideration or a conversion into
PremierWest common stock, with the understanding that in a merger transaction the Treasury would only be interested in a redemption for cash.
On May 2, 2012, Mr. Ford, together with representatives from Davidson and Lane Powell, held a conference call with the Treasury to
discuss PremierWest’s letter and the process for formal approval of any recapitalization transaction involving a discount or a conversion of
preferred stock into common stock.
On May 3, 2012, PremierWest’s Board of Directors formed a Capital Committee, consisting of four directors, each of whom would not
participate in a possible recapitalization transaction. Two directors had consistently expressed interest in supporting a recapitalization transaction
to maintain their existing ownership position and to support PremierWest Bank, and those two directors have not served on the Capital Committee.
In May 2012, the independent third party loan review firm hired by PremierWest provided an update to its December 2011 report.
On May 10, 2012, the Capital Committee met to review discussions with regulators, the independent third party loan review and to
discuss and review the status of recapitalization and merger alternatives.
On May 16, 2012, Mr. Ford provided an update to PremierWest’s and PremierWest Bank’s regulators regarding a proposed
recapitalization transaction.
On May 18, 2012, Davidson sent an initial recapitalization term sheet to two potential lead investors with a proposed investment of up to
$90.0 million in a private placement of mandatorily convertible preferred stock, resulting in an investment in PremierWest equivalent to $0.40 per
common share on an as-converted basis. Under the proposed structure, which Davidson and PremierWest management had discussed with numerous investors, lead investors would not have a voting interest in PremierWest greater than 9.9% and would enter into passivity commitments with the
applicable federal regulator. Further, the term sheet required, among other things, a conversion of the preferred stock held by Treasury at a
discount of 75.0% and the assurance that the recapitalization transaction would not cause an “ownership change” related to Section 382 of the
Internal Revenue Code of 1986, as amended (the “Code”), in order to preserve PremierWest’s deferred tax asset, which was $38.8 million as of
September 30, 2012, excluding the valuation reserve. After consulting with tax advisors and legal counsel, PremierWest determined that the
recapitalization transaction could be consummated without causing an “ownership change”.
During May 2012, four regional bank holding companies interested in a potential merger transaction with PremierWest, including
Starbuck, reviewed due diligence information in the confidential data room.
On May 24, 2012, PremierWest’s Board of Directors received an update from Davidson regarding merger related activity, indicating that
one of the four remaining interested parties declined to provide a term sheet following due diligence and that three banks continued to review due
diligence materials. Davidson also updated PremierWest’s Board of Directors on the discussions with two lead investors in a recapitalization
transaction and that 22 parties remained interested in a recapitalization pending a final term sheet and a clear understanding of Treasury’s position.
During May 2012, Lane Powell drafted documents related to a potential recapitalization transaction consistent with the term sheet.
On May 31, 2012, PremierWest management met with Mr. Kisting and other members of Starbuck’s and AmericanWest Bank’s
management team to discuss a potential merger transaction.
In late May and early June 2012, PremierWest received comments from potential lead investors and their counsel with respect to the term
sheet and Davidson and PremierWest management negotiated terms with lead investors.
On June 7, 2012, the Capital Committee received an update on merger related activity and discussions with lead investors related to the
proposed recapitalization, and instructed management and Davidson to seek a proposed letter of intent from the remaining interested merger
partners, including Starbuck. PremierWest management and Davidson revised the proposed term sheet to reflect a proposed capital raise of up to
$75.0 million and to include a third lead investor.
From June 7 through June 11, 2012, PremierWest executed non-binding term sheets with three lead recapitalization investors and two
directors for a private placement of mandatorily convertible preferred stock for $75.0 million at $0.40 per share (on an as-converted to common
stock basis). The term sheet required a conversion of the preferred stock held by Treasury at a discount of 75.0%.
On June 11, 2012, PremierWest submitted a written request to Treasury for formal approval of the conversion of the preferred stock held
by Treasury into mandatorily convertible preferred stock with a 75.0% discount, resulting in net value to Treasury of approximately $11.7 million.
On June 14, 2012, the Capital Committee discussed the status of merger and recapitalization discussions with Davidson and PremierWest
management.
On June 19, 2012, Mr. Ford held a conference call update with PremierWest’s and PremierWest Bank’s regulators, advising them of the
signed term sheets and the status of merger discussions.
On June 21, 2012, PremierWest, Davidson and Lane Powell discussed the proposed recapitalization terms with the Treasury, with Treasury representatives expressing concern over the conversion into common stock and the level of requested discount.
Davidson reported to PremierWest, after follow-up discussions, that only one merger partner, Starbuck, remained interested in pursuing a transaction and indicated to Davidson it would submit a non-binding letter of intent to PremierWest.
On June 23, 2012, Starbuck submitted a non-binding letter of intent with proposed total cash merger consideration of $1.50 per common share and a 50.0% discount on the outstanding preferred stock held by Treasury, subject to additional due diligence including a third party credit review.
After PremierWest expressed its desire to continue to pursue any available capital raise opportunities, on June 26, 2012, Starbuck
submitted a revised non-binding letter of intent, including a 45-day exclusivity period with respect to merger discussions, but PremierWest would
be allowed to continue recapitalization discussions and negotiations. The proposal provided total merger consideration of $38.8 million, with $15.0
million ($1.50 per share) to common shareholders and $23.8 million (representing a 50% discount) to the Treasury as the preferred shareholder. In
this proposal the Treasury would receive approximately 61.2% of the total merger consideration and common shareholders would receive
approximately 38.8%. Also on June 26, 2012, PremierWest’s management and Davidson had a call with Treasury to discuss transaction alternatives
and obtained Treasury feedback.
On June 27, 2012, PremierWest’s Board of Directors met to review the proposed merger terms with PremierWest management, Davidson
and Lane Powell. Davidson presented a detailed analysis comparing the proposed merger terms to the recapitalization transaction. Lane Powell
discussed legal duties and the potential timeline for a merger transaction. PremierWest’s Board of Directors authorized management and Davidson
to proceed with Starbuck. Management executed the non-binding letter of intent with Starbuck.
In June and July 2012, Starbuck conducted a due diligence review, including interviews with management, a review of PremierWest
Bank’s operations and financial condition and a third party loan file review. The due diligence review included on-site visitations by Starbuck and
conference calls.
On July 12, 2012, PremierWest management and a potential lead investor had a call with Treasury to discuss the terms of a capital raise
and the investor’s immediate ability to proceed, and answered questions from Treasury.
On July 19, 2012, the Capital Committee received an update on the status of Starbuck’s due diligence review.
On July 26, 2012, PremierWest’s Board of Directors authorized management to move forward with Starbuck to negotiate a definitive
merger agreement, and PremierWest management provided regulators with an update regarding the proposed transaction.
On July 30, 2012, Davidson received an email from one of the lead investors that proposed revised terms for the recapitalization, which
included a private placement of $50.0 million at $0.85 per share (on an as-converted basis) with a TARP conversion at a 42.8% discount (the “July
30th Recapitalization Proposal”).
On July 31, 2012, Mr. Ford and Davidson discussed the merger proposal with Treasury and compared the proposal to the recapitalization
terms. The Treasury indicated that, in order to accept a discount, the total merger consideration must be allocated 70% to Treasury and 30% to
common shareholders. Based on the original Starbuck proposal of $38.8 million total consideration, common shareholders would receive $11.6
million ($1.16 per share).
On August 6, 2012, the PremierWest Board of Directors authorized Davidson and Davidson submitted a proposal to Starbuck of total
cash merger consideration of $41.8 million, including the required 70% / 30% split between preferred shares and common shares, which would have
resulted in $1.25 per common share. On August 6, 2012, Starbuck proposed a revised merger structure with total cash merger consideration of $40.2 million, including the base consideration of $1.16 per share to common shareholders, but also including an earn-out that could provide an additional $0.14 per share cash merger consideration to common shareholders if certain credit performance conditions were met (the “August 6th
Proposal”).
On August 7, 2012, Starbuck delivered a draft definitive merger agreement to PremierWest.
On August 7, 2012, PremierWest and three lead private equity investors executed a term sheet reflecting the July 30th Recapitalization
Proposal.
On August 9, 2012, the Capital Committee met to compare the current proposals for a merger and a recapitalization, and decided to
recommend to the Board of Directors that PremierWest pursue the recapitalization proposal.
On August 10, 2012, PremierWest management and a potential lead investor had calls with regulators and Treasury to discuss the
proposals.
On August 13, 2012, PremierWest’s Board of Directors met to review the Capital Committee’s recommendation to pursue a
recapitalization based on the July 30th Recapitalization Proposal. Davidson presented a comparison of the July 30th Recapitalization Proposal and
the August 6th Proposal. After due consideration of each proposal, the Board of Directors authorized management to pursue the July 30th
Recapitalization Proposal.
On August 13, 2012, PremierWest submitted a request to Treasury for formal approval of the July 30th Recapitalization Proposal.
PremierWest never received a formal response from the Treasury to the July 30th Recapitalization Proposal and PremierWest did not receive any
formal response until the Treasury indicated its willingness to agree to sell its PremierWest preferred stock and warrant to Starbuck.
On August 13, 2012, PremierWest formally suspended discussions with Starbuck to pursue the recapitalization. Later on August 13,
2012, Starbuck contacted PremierWest and expressed continued interest in pursuing a merger and verbally presented a revised proposal to
increase the merger consideration for both common shareholders and the Treasury. The revised proposal for common shareholders was cash
merger consideration of $1.25 per share and an earn-out that could provide an additional $0.25 per share (the “August 13th Proposal”).
Management authorized Davidson to inform the Treasury of the August 13th Proposal.
On August 16, 2012, the Capital Committee discussed the August 13th Proposal and determined to recommend to PremierWest’s Board
of Directors that PremierWest continue to pursue the recapitalization transaction. Also on August 16, 2012, PremierWest’s Board of Directors
decided to move forward with the July 30th Recapitalization Proposal.
On August 29, 2012, PremierWest’s management discussed with Treasury the status of its review and answered questions regarding the
structure of the July 30th Recapitalization Proposal.
On August 30, 2012, PremierWest executed a revised non-binding term sheet reflecting the final terms and structure of the $50.0 million
recapitalization with three lead private equity investors and two directors.
On September 4, 2012, the Capital Committee met to discuss updated term sheets from potential investors.
On or about September 10, 2012, each of the three lead private equity investors submitted a request for a non-control determination to
the FRB in connection with the proposed recapitalization.
On September 11, 2012 Starbuck submitted a revised non-binding letter of intent with proposed cash merger consideration to common
shareholders of $1.25 per share and an earn-out payable six months after closing that could provide an additional $0.25 per common share, based upon certain credit performance conditions.
On September 13, 2012, PremierWest’s Board of Directors met to review the revised terms of Starbuck’s proposal and instructed the Capital Committee to continue to negotiate terms with Starbuck and to clarify the proposed merger consideration structure including the earn-out provisions.
On September 14, 2012, the Capital Committee held a conference call with Mr. Kisting to further clarify structure, terms and timing of a merger transaction. Starbuck presented revised terms on September 14, 2012, which included base cash merger consideration to common shareholders of $1.40 per share with an earn-out that could provide an additional $0.66 per share in cash merger consideration (the “September
14th Proposal”). The September 14th Proposal included proposed consideration to the Treasury of $32.8 million, based on telephone calls with
Treasury that indicated the Treasury would not participate in post-closing earn-out consideration.
On September 17, 2012, PremierWest’s Board of Directors evaluated the September 14th Proposal and decided to move forward with
Starbuck to prepare definitive documentation and further clarify the earn-out mechanics. During the week of September 17, 2012, PremierWest and
Starbuck negotiated terms including an exclusivity period.
On September 17, 2012, Mr. Ford called the Treasury to inquire as to the status of its review of the July 30th Recapitalization Proposal
and to inform the Treasury of the September 14th Proposal.
On September 20, 2012, Director Georges St. Laurent submitted a term sheet proposing that he invest $15.0 million at a price of $1.50 per
common share, with no required redemption of the preferred stock held by Treasury, and no required discount or conversion of the preferred
stock.
On September 21, 2012, the Capital Committee met and reviewed Mr. St. Laurent’s proposal. The Capital Committee determined that the
proposal did not adequately address the capital and regulatory issues facing PremierWest, and that $15.0 million of new capital would not put
PremierWest in a position to resolve classified asset issues and position PremierWest to be able to repay the Treasury and become current on
PremierWest’s TruPS. The Capital Committee also considered that the director’s proposal would limit PremierWest’s ability to raise additional
capital during the next three years if PremierWest was to avoid an “ownership change” and preserve its deferred tax asset, which was $38.8 million
as of September 30, 2012, excluding the valuation reserve.
On September 21, 2012, PremierWest submitted a letter to the Treasury requesting a redemption discount for the TARP preferred stock
based on the terms of the September 14th Proposal. The consideration for Treasury in the September 14th Proposal was $32.8 million based on a
70% / 30% split for the total merger consideration, excluding the potential post-closing earn-out consideration.
On September 24, 2012, PremierWest entered into an exclusivity agreement with Starbuck and Starbuck’s legal counsel delivered a draft
definitive agreement. On September 24, 2012, PremierWest, Starbuck and Treasury discussed the September 14th Proposal and Treasury requested
additional information.
On September 26, 2012, Davidson received an unsolicited telephone call from one of the lead private equity investors, indicating that
they believed they could propose new terms for a $50.0 million recapitalization at a purchase price of $1.40 per share (on an as-converted basis)
with no required redemption of the preferred stock held by Treasury, and no required discount or conversion of the preferred stock. After further
analysis of the proposal, the lead investor determined that the revised structure would not provide sufficient tangible common equity to
PremierWest and would result in significant downside risk. The investor withdrew the verbal offer on October 4, 2012, and indicated that it did not
believe a recapitalization transaction was possible at a price that would be competitive with the September 14th Proposal.
On October 2, 2012, Davidson received a phone call from the Treasury explaining that the terms of the September 14th Proposal were
unacceptable and the Treasury would require additional economic consideration for the post-closing earn-out. The Treasury explained that despite anything previously communicated to the contrary, the Treasury would not accept anything less than 70% of the total merger consideration including any post-closing earn-out.
PremierWest, Starbuck and Davidson discussed alternatives to the deal structure in response to the Treasury’s feedback regarding the
earn-out consideration component.
On October 3, 2012, Starbuck proposed a revised offer (the “October 3rd Proposal”) which included consideration for common
shareholders of $1.65 per share in cash at closing, or $16.6 million in the aggregate, and no post-closing earn-out. Under the October 3rd Proposal,
the Treasury would receive $38.6 million in cash consideration at closing. The October 3rd Proposal included a merger consideration split of 70% /
30% between Treasury and common shareholders, a preferred stock redemption discount of 6.7% of par value and 18.6% of par value plus unpaid
dividends. The total merger consideration was $55.2 million which was an increase of $1.7 million as compared to the September 14th Proposal.
On October 4, 2012, on behalf of PremierWest, Davidson sent the terms of the October 3rd Proposal to the Treasury and requested a
formal written response to approve the merger proposal.
On October 5, 2012, PremierWest’s Board of Directors held a meeting to discuss the October 3rd Proposal, and approved moving
forward with finalizing the definitive agreement in accordance with the proposed terms.
On October 15, 2012, PremierWest’s Board of Directors met to review the terms of the definitive merger agreement. Lane Powell
presented an overview of the terms of the merger agreement and duties of directors. Davidson reviewed the structure and other terms of the
proposed merger and presented financial information regarding PremierWest, Starbuck and AmericanWest, information regarding peer companies
and comparable merger transactions, and other relevant analyses. Davidson and Lane Powell responded to questions from directors concerning
the proposed merger and the final version of the merger agreement and related documents. In connection with the deliberations by PremierWest’s
Board of Directors, Davidson rendered its oral opinion (subsequently confirmed in writing) that as of such date, the merger consideration to be
received by PremierWest shareholders was fair, from a financial point of view, to PremierWest and its shareholders. PremierWest’s Board of
Directors voted to approve the definitive merger agreement.
Following the October 15th meeting, PremierWest held a conference call with representatives from the Treasury, Davidson and Lane Powell. The Treasury’s representatives explained that the proposed transaction would not be approved unless the Treasury received 100% of par
value plus 100% of unpaid dividends. PremierWest and its advisors explained to the Treasury this proposal would not be acceptable to PremierWest or Starbuck. The Treasury agreed to reconsider.
On October 16, 2012, PremierWest held a conference call meeting with representatives from the Treasury, Davidson and Lane Powell.
Starbuck’s Chief Executive Officer Mr. Kisting joined the conference call. The Treasury indicated that its final offer was for cash merger consideration equal to 100% of par value, or $41.4 million, and that Treasury would not require payment of unpaid dividends or consideration for its common stock warrant. The proposed increase of merger consideration to Treasury totaled $2.8 million.
Following the October 16th conference call, Mr. Kisting offered to increase Starbuck’s offer by $1.8 million, or 64% of the $2.8 million required to meet the Treasury’s requirements for approval of the proposed merger. As a result, PremierWest would be required to accept a reduction of $1.0 million from the proposed merger consideration to common shareholders, effectively reducing the consideration to $1.55 per common share.
On October 19, 2012, PremierWest’s Board of Directors considered Treasury’s requirements and Starbuck’s proposal to meet those
requirements. PremierWest’s Board of Directors instructed Davidson to inform Starbuck that it would be required to provide the $2.8 million and
that the consideration to common shareholders could not be reduced. After subsequent discussions between PremierWest management, Davidson and Starbuck management, on October 19, 2012, Starbuck agreed to provide 100% of the $2.8 million in order to avoid a price reduction for the common shareholders and to move toward executing a definitive agreement. The final terms of the transaction (the “October 19th Proposal”) included cash merger consideration to common shareholders of $1.65 per share or $16.6 million in the aggregate, and total cash merger consideration to the Treasury of $41.4 million.
On October 23, 2012, the Treasury confirmed in writing its willingness to consent to the October 19th Proposal.
Following approval of each party’s board of directors, the parties and their counsel finalized the definitive documentation for the
transaction. Thereafter, on October 29, 2012, the parties executed the merger agreement and certain PremierWest directors entered into voting
agreements with Starbuck. The parties announced the transaction in a joint press release on October 30, 2012.
Reasons for the Merger and Recommendation of the Board of Directors of PremierWest
In approving the merger agreement and the transactions contemplated thereby, PremierWest’s Board of Directors consulted with its
financial advisor with respect to the financial aspects and fairness of the proposed merger from a financial point of view and with its legal counsel
as to its legal duties and the terms of the merger agreement and related agreements. PremierWest’s Board of Directors also consulted with senior
management and reviewed various financial data, due diligence and evaluation materials. The terms of the merger agreement, including the
consideration to be paid to PremierWest shareholders, were the result of arm’s length negotiations between representatives of PremierWest and
Starbuck.
In evaluating Starbuck’s proposal and whether to approve the merger agreement, PremierWest’s Board of Directors considered a
number of factors, including the following:

• the information presented by PremierWest’s financial advisor, Davidson, to PremierWest’s Board of Directors with respect
to the merger and the opinion of Davidson that, as of the date of the merger agreement, the merger consideration is fair from
a financial point of view to PremierWest common shareholders. See Appendix B to this proxy statement and “—Opinion of
PremierWest’s Financial Advisor” for more information on Davidson’s analyses and opinion, including the assumptions
made, matters considered and limitations stated;
• PremierWest’s capital position and relationships with its regulators continued to present ongoing risks to operations;
• the current condition of PremierWest and the future prospects of its business in light of the following facts and
circumstances:
the requirements of the Consent Order issued by the FDIC and the Oregon DFCS, and the Written Agreement
among PremierWest, the FRB and the Oregon DFCS;
PremierWest Bank’s leverage ratio was 9.34% as of September 30, 2012, and PremierWest Bank is not in
compliance with the 10% leverage ratio requirement set forth in the Consent Order and would need to raise
additional capital or further reduce assets to achieve compliance;
the majority of PremierWest Bank’s regulatory capital is from PremierWest’s TruPS and TARP preferred stock;
the tangible common equity of PremierWest was 3.35% of tangible assets, as of September 30, 2012;
PremierWest Bank is considered a “troubled institution” by the FDIC;
the FDIC orally instructed management that PremierWest must raise significant capital or merge with a healthy
financial institution; although significant progress has been made with respect to the reduction of classified assets, we continue to
have elevated levels of classified assets, which were $133.0 million as of September 30, 2012;
existing capital resources, and projected continued expense related to classified assets and non-performing
assets, which limits management’s ability to support future growth, effectively manage problem credits, and
achieve meaningful levels of profitability for common shareholders in future periods;
the continued expense related to classified assets and the projected effect of the resolutions of such assets;
the need to realize further cost savings;
the current and prospective economic, regulatory, competitive and interest rate environment facing the financial
services industry generally, and PremierWest in particular, including the continued rapid consolidation in the
financial services industry and the competitive effects of the increased consolidation on smaller financial
institutions such as PremierWest;
PremierWest has had losses per annum since 2008, and although profitable in the third quarter of 2012, had
losses on a quarterly basis for the 15 quarter-end periods prior to that quarter;
$18.7 million of PremierWest Bank’s OREO, or 60% of the book value of the total OREO of PremierWest Bank, will
be re-appraised in the fourth quarter of 2012, which re-appraisals PremierWest expects to result in write-downs
on the OREO of between $4.0 and $4.8 million;
PremierWest executive management believes that meaningful levels of future profitability are not achievable
without at least $35.0 million of additional common equity from a capital offering in order to address OREO
valuation impairment expenses and other expenses related to managing classified assets, or to address and
implement future operational efficiencies;
the scheduled increase, in February 2014, of the dividend rate on PremierWest’s shares of preferred stock from
5.00% per annum to 9.00% per annum, or approximately $2.1 million per annum to approximately $3.7 million per
annum; and
the expiration of the twenty-quarter deferral period, in the third quarter of 2014, related to interest payments on
TruPS, and the possibility thereafter of a default on $30.9 million of the TruPS;
• that PremierWest received a proposal from only one other potential merger partner after contacting approximately 21 entities,
and that the proposal received was withdrawn after due diligence and was less attractive than the merger terms with
Starbuck;
• that PremierWest evaluated and pursued alternative scenarios which included a divestiture of branches or assets in an effort
to improve the capital ratios through deleveraging, operational efficiency and profitability (PremierWest received a nonbinding
letter of intent from a potential buyer for certain PremierWest branches; however, PremierWest determined that this
alternative would not be adequate to solve all of the issues facing PremierWest);
• PremierWest’s assessment that it was unlikely that another acquirer had both the willingness and the financial capability to
offer to acquire PremierWest at a value that was higher than that being offered by Starbuck and that met the requirements of
the Treasury with respect to its preferred stock;
• that the merger would provide the Treasury with payment of the par value of its investment and the Treasury was willing to
forfeit the accrued and unpaid dividends of $6.6 million;
• the results of management’s and Davidson’s efforts to raise capital from private equity and institutional investors, the lack
of a proposal acceptable to Treasury to raise sufficient capital to address the key issues facing PremierWest Bank and that any capital raise would be significantly dilutive to shareholders;
• its knowledge of the current environment in the financial services industry, including the continued consolidation of
financial services institutions, increased regulatory burdens, evolving trends in technology and increasing competition,
financial market conditions and the likely effects of these factors on PremierWest’s potential growth, development,
profitability and strategic options;
• its knowledge of current national and regional economic conditions and the prospect of relatively weak demand for loans
and projected slow economic growth in PremierWest Bank’s market areas;
• management’s projections that the conditions to closing the merger related to PremierWest’s common stockholders’ equity
and PremierWest Bank’s allowance for loan and lease losses would be satisfied;
• the historical market prices of PremierWest common stock and that the merger consideration of $1.65 in cash per share of
PremierWest common stock represented a premium of approximately 18.7% over the $1.39 per share closing price of
PremierWest common stock on October 12, 2012, the trading day immediately prior to the date of board approval of the
merger agreement, a premium of approximately 17.4% over the average price in the 20-trading days prior to and including
October 12, 2012 of $1.41 per share, and a 42.9% multiple of PremierWest’s tangible book value per share of $3.85 as of
September 30, 2012;
• subject to certain conditions, including the payment of a termination fee of $1.0 million or $2.5 million depending on the
specific circumstances, the terms of the merger agreement that allow PremierWest’s Board of Directors to exercise its
fiduciary duties to consider potential alternative transactions and to withdraw its recommendation to PremierWest
shareholders to approve the merger agreement;
• that the proposed merger is for all cash, which provides a specific value to PremierWest shareholders compared to a
hypothetical transaction pursuant to which shareholders receive stock, contingent earn-out consideration or other non-cash
consideration that could fluctuate in value;
• the financial condition and resources of Starbuck and AmericanWest Bank;
• AmericanWest Bank’s interest in expanding its business banking and commercial real estate businesses into PremierWest
Bank’s market areas;
• the effects of the merger on PremierWest’s employees, including the prospects for employment with a strong, growing
organization such as AmericanWest Bank and the severance benefits agreed to be provided by AmericanWest Bank to
employees whose employment is terminated in connection with the merger;
• AmericanWest’s historical record and commitment with respect to the communities and employees of the companies it has
acquired and its belief that AmericanWest is a high quality financial services company with a compatible business culture
and shared approach to customer service;
• the ability of the combined entities to compete in PremierWest Bank’s markets and the financial strength of the combined
institution;
• its assessment of the likelihood that the merger would be completed without unacceptable regulatory conditions or
requirements;
• the ability of AmericanWest Bank’s management team to successfully integrate and operate the business of the combined
company after the merger; and
• whether it was more advantageous for PremierWest to wait and see if PremierWest could establish consistent profitability
that might attract a better acquisition or capital raise proposal, if any.

PremierWest’s Board of Directors also considered the potential adverse consequences of the proposed acquisition and countervailing
risks and factors concerning the proposed merger including:
The above discussion of the information and factors considered by PremierWest’s Board of Directors is not intended to be exhaustive,
but includes the material factors PremierWest’s Board of Directors considered. In reaching its determination to approve and recommend the
proposed merger, PremierWest’s Board of Directors did not assign any relative or specific weights to the foregoing factors, and individual
directors may have given differing weights to different factors.
38
• the loss of autonomy associated with being an independent financial institution and that PremierWest shareholders would
be unable to participate in future earnings, if any, or receive any benefit from a future increase, if any, in value of
PremierWest;
• the merger agreement limiting PremierWest’s ability to pursue other merger opportunities as a result of restrictions on
PremierWest’s ability to solicit or engage in discussions or negotiations with a third party regarding specific transactions
involving PremierWest or PremierWest Bank;
• the merger agreement obligating PremierWest to pay a $1.0 million or $2.5 million termination fee to Starbuck upon the
occurrence of certain events, and the possible deterrent effect that might have on the desire of other potential acquirers to
propose an alternative transaction that may be more advantageous to PremierWest shareholders;
• the risk that the acquisition may not be consummated;
• the condition to closing that PremierWest maintain consolidated common stockholders’ equity less any goodwill or other
intangibles in an amount not less than $30.0 million, and that PremierWest Bank’s allowance for loan and lease losses be
equal to an amount not less than $16.0 million, each as of the effective date of the merger;
• potential negative reaction of communities within PremierWest Bank’s market areas and of PremierWest Bank customers to
AmericanWest Bank;
• the challenges of combining the businesses, assets and workforces of the two companies;
• the possibility that the merger and the related integration process could result in the loss of key employees, in the disruption
of PremierWest’s on-going business and in the loss of PremierWest Bank customers;
• that PremierWest’s officers and employees will have to focus extensively on actions required to complete the merger, which
will divert their attention from PremierWest’s business, and that PremierWest will incur substantial transaction costs even if
the merger is not consummated;
• that while the merger is pending, PremierWest will be subject to restrictions on how it conducts business that could delay or
prevent PremierWest from pursuing business opportunities or preclude it from taking actions that would be advisable if it
was to remain independent;
• that some of PremierWest’s directors and executive officers have other interests in the merger that are different from, or in
addition to, their interests as PremierWest shareholders, as more fully described under “—Interests of PremierWest’s
Directors and Executive Officers in the Merger”;
• that PremierWest shareholders would not be entitled to dissenters’ rights in connection with the merger under Oregon law;
• the possibility of litigation in connection with the merger;
• the capital losses that will be recognized by many PremierWest shareholders in connection with the merger and the lack of
flexibility in timing such losses; and
• the future limitations on the ability to use net operating losses and other tax assets as a result of the merger.

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    Covering the Southern Oregon business and economy since 2001. Read Full
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