The holding company for AmericanWest Bank in Spokane, Wash., has agreed to repay what PremierWest Bancorp (PRWT) owes the Troubled Asset Relief Program before the banks merge.

Starbuck Bancshares will repurchase PremierWest's preferred stock and warrant issued to the Treasury Department for $41.4 million in cash, the $1.2 billion-asset PremierWest said Thursday in a filing with the Securities and Exchange Commission. PremierWest received $41 million from Treasury in February 2009 under Tarp.

In October, AmericanWest agreed to buy PremierWest in Medford, Ore., for $16.6 million in cash. At the time of the announcement, the companies said that Treasury had "indicated its willingness" to allow the $2.5 billion-asset AmericanWest to repay PremierWest's funds, and that it would waive the $6.6 million of accrued dividend payments PremierWest owed.

AmericanWest expects to make the payment immediately before the deal closes in the first half.

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