EXHIBIT 99.1
United Tennessee Bankshares Announces Proposed Going Private Transaction
April 14, 2005
United Tennessee Bankshares, Inc., the holding company for Newport Federal
announced today that the Company's Board of Directors has approved proceeding
with a proposed going private transaction. The proposed transaction would reduce
the number of stockholders of record from approximately 545 to approximately 96.
Following the proposed transaction, the Company would continue operations as a
privately held corporation that would not be required to file periodic public
reports with the Securities and Exchange Commission (the "SEC").
The terms of the proposed transaction are expected to provide that each
stockholder of record of the Company beneficially owning fewer than 2,500 common
shares will receive cash of $22.00 per share. The price was established by the
Board of Directors based on an independent valuation by a qualified valuation
firm. Each stockholder of record beneficially owning 2,500 or more common shares
will continue to hold the same number of shares of the Company after the
transaction and will not receive any cash for those shares. Beneficial ownership
includes stock owned by a person's immediate family and stock that a person has
the power to vote, as well as stock directly owned.
"In 2002, Congress passed the Sarbanes-Oxley Act in the wake of massive fraud at
Enron and other companies. Unfortunately, Congress did not distinguish between
companies the size of General Motors and General Electric, and small companies
the size of United Tennessee. According to the Wall Street Journal, a recent
study by Financial Executives International estimated it will cost small
companies approximately $550,000 per year to comply with the requirements of
Sarbanes-Oxley. While the annual costs to United Tennessee may not be as high as
this estimate, we believe that the annual costs to our company to remain a
public company will be at least $125,000," said Richard Harwood, President and
CEO of United Tennessee Bankshares.
"Newport Federal has been serving Cocke County for over 70 years. We believe
that a local bank provides a valuable service to the community. To remain an
independent bank and to remain competitive, we feel we have no choice except to
go private to avoid the significant cost of complying with Sarbanes-Oxley. The
proposed restructuring is an in-house process accomplished by buying back a
certain amount of the outstanding shares and does not involve any other
financial institution," continued Harwood.
"After the going private transaction, we will continue to operate as we
currently do. Our name will be the same, our management will be the same and our
employees will be the same. In addition, deposits will still be insured by the
FDIC," added Harwood.
The Board of Directors believes that there are a number of advantages of going
private, including relief from the significant burden and costs associated with
regulatory and reporting requirements, particularly the Sarbanes-Oxley Act
applicable to publicly owned companies.
The Company intends to finance the proposed transaction with a $5.5 million
dividend and/or loan from the Bank to the Company.
Consummation of the proposed going private transaction is conditioned upon the
filing of the requisite reports with the SEC, review by and consent of the
Office of Thrift Supervision, approval of the Company's stockholders, and other
conditions. Therefore, there is no assurance that the transaction will be
consummated on the terms described in this press release or at all.
Stockholders of record who presently beneficially own 2,500 or more common
shares and who do not want to remain stockholders after the going private
transaction, or stockholders of record who presently beneficially own less than
2,500 common shares and want to remain stockholders after the transaction,
should consider adjusting their holdings before the closing date of the
transaction. If all closing conditions described above are fulfilled timely, the
Company expects to close the transaction during the third quarter of 2005. The
Company is not providing any recommendation as to whether a stockholder should
buy or sell their common shares should a stockholder decide to adjust their
common stock holdings.
The Company is headquartered in Newport, Tennessee, and the Bank operates
through its main/executive office in Newport and 2 additional full-service
offices.
This press release may contain "forward-looking statements" as defined under the
federal securities laws. These forward-looking statements are subject to
numerous assumptions, risks and uncertainties because of the possibility of
changes in underlying factors and assumptions. Actual results could differ
materially from those contained or implied by such forward-looking statements
for a variety of factors including, among others: the ability of the Company and
others to obtain various regulatory approvals/consents to proceed with the
proposed transaction; the ability of the Company to obtain shareholder approval
of the proposed transaction. Because of the risks and uncertainties inherent in
forward-looking statements, readers are cautioned not to place undue reliance on
them. Whether included in this press release or made elsewhere from time to time
by the Company or on its behalf, except as may be required by applicable law or
regulation, the Company assumes no obligation to update any forward-looking
statements.
The Company will file a proxy statement and other relevant documents concerning
the proposed going private transaction with the SEC. INVESTORS ARE URGED TO READ
THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors will be able to
obtain these documents free of charge at the SEC's web site (www.sec.gov). In
addition, documents that the Company files with the SEC will be available free
of charge from the Company, Attention: Peggy Holston, Secretary, 344 W. Broadway
Newport, Tennessee 37821.
The directors, executive officers and certain other members of management of the
Company may be soliciting proxies in favor of the proposed going private
transaction from the Company's shareholders. For information about these
directors, executive officers and members of management, please refer to the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
2004, which is available at the SEC's website (www.sec.gov) and from the Company
at the address provided in the preceding paragraph.
This press release is not an offer to sell or the solicitation of an offer to
buy common stock.
Contact Information: United Tennessee Bankshares, Inc., Richard Harwood,
(423)623-6088