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MailTribune.com
  • PREMIERWEST BANCORP

    Taking stock: Shareholders don't like deal

    Some of Medford holding firm's shareholders revolt against sale they say undervalues it
  • The deal that would end PremierWest Bank's existence has raised the hackles of some shareholders. From the beginning, PremierWest Bancorp's largest shareholder made it clear he was voting against a takeover, and he's not alone.
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  • The deal that would end PremierWest Bank's existence has raised the hackles of some shareholders. From the beginning, PremierWest Bancorp's largest shareholder made it clear he was voting against a takeover, and he's not alone.
    When Starbuck Bancshares made its $1.65-per-share bid for PremierWest Bancorp and the Medford holding company's PremierWest Bank in October, it appeared to be a chance to wave the white flag and exit the financial battleground. (Clarification: Details about where Starbuck is based have been removed from this story.)
    The suitor, whose AmericanWest Bank stands to be the commercial successor, was also willing to pay off PremierWest's $41.4 million TARP Capital Purchase Program debt to the U.S. Treasury.
    While the financial wounds promise to be deep, there was a sense that scars were better than a Friday visit from FDIC regulators. "It became evident to the board of directors and our bank management that without a sizable infusion of additional capital, the bank would not be able to exit all problem credit relationships, satisfy our commitment to the TARP program and adhere to recently enacted regulatory requirements," Chief Executive Officer Jim Ford said when the deal was announced.
    Georges St. Laurent, who owns nearly 10 percent of PremierWest's outstanding shares, immediately opposed the plan. Since then, other shareholders have come forward saying their best interests were ignored.
    Tom Hannah, a certified planner in Eugene whose family owns more than 40,000 shares, is campaigning against the proposal, saying PremierWest's leadership has given up too easily.
    "I know the turn-around is a bigger job than anyone reckoned," Hannah said. "It's taken longer, and the hole is deeper than anyone expected. All I know is that the bank is being sold for way less than it is worth. It's not a fair price or the right time for the board to throw in the towel."
    In a letter to fellow shareholders, Hannah asked: "Why now, when things are just beginning to get better? Why so cheap? Were shareholders' interests your highest priority when you struck the deal?"
    Hannah bought in when PremierWest was in the midst of an offering that raised $33 million by early 2010. "We sent checks to the bank to buy shares by subscription when they desperately needed shareholders' help to stay alive," Hannah wrote. "We are not terribly wealthy, but we invested something like $170,000 in PRWT shares — a significant part of our net worth. Yes, we knew it was risky, but we believed in the bank, and we thought it could be a valuable business to own. We still do."
    Hannah said he and business associates who owned about 10,000 additional shares of the stock kept the faith, thinking the economy — and the bank — would solidify.
    "We hoped a time would come when a larger bank might pay a fair price for our PRWT shares, or might swap us for a more liquid stock," he wrote. "Finally, after years of struggle and massive losses, years when a great many banks failed and were liquidated, PremierWest Bank seems to have turned the corner. On Oct. 23, the bank announced its first profitable quarter in recent memory — just one penny per share of profits, but at least it wasn't a loss! Our patience had been vindicated, and there was renewed hope. But all hope was dashed just a few days later, when the board of directors announced they had agreed to sell the bank, at a price far below what most investors had paid and dramatically below what I believe to be the actual value of the bank's business."
    Hannah said Thursday the AmericanWest offer is reasonable, given PremierWest's constraints. But after reviewing the details of the local bank, he thinks competing government agencies have pushed PremierWest to the brink. "On one hand, you have the FDIC in conjunction with state regulators doing a consent order, telling PremierWest you've got to raise some capital or merge with a stronger banking company," he said. "Then we have a different set of government officials in from the Treasury, injecting money into the bank and then saying we want the capital back now and that objective is at odds with the first objective."
    Whenever PremierWest tries to get its capital ratios to the right level, he said, Treasury foils the attempt. "The bank has made good faith efforts to comply with the consent order, and the Treasury has derailed those efforts."
    As detailed in PremierWest's Securities and Exchange Commission filing earlier this month, Treasury stood its ground and forced Starbuck Bancshares to up the ante several times.
    "This deal on the table right now is only fair to the Treasury and not fair to the other shareholders at large," Hannah said. "Treasury gets 100 cents on the dollar, and the shareholders are only getting 43 cents on the dollar. I don't think AmericanWest is being unfair. I think the Treasury is putting the bank at risk by forcing a deal on the table that is unacceptable to shareholders. It puts the bank at risk of being unable to comply with the FDIC consent order."
    Earlier this month, Hannah obtained a list of shareholders from PremierWest. "I think it's a blow to the community, but not all the shareholders are there," Hannah said. "You'd be surprised how many shareholders are scattered around the country."
    Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com.
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