Deal halted as watchdogs urge withdrawal of applications
The planned merger between FirstSun Capital Bancorp and HomeStreet, Inc. has unraveled after regulators withheld necessary approvals, requesting that FirstSun and its subsidiary, Sunflower Bank, withdraw their applications.
Without clearance from the Federal Reserve and the Texas Department of Banking, the merger now faces a potentially permanent stall.
The parties said in a media release that they are “discussing the pursuit of an alternative regulatory structure” to salvage the deal but acknowledge that there is no certainty of success.
“We are disappointed in the process to date, but we remain hopeful that we will be able to continue productive discussions with regulators in order to obtain regulatory approval,” said FirstSun CEO and president Neal Arnold.
Mark Mason, chairman, president and CEO of HomeStreet, added that the company “has been advised by its regulators that there were no regulatory concerns specifically related to HomeStreet that would have prevented approval of the merger.”
The two financial institutions have attributed part of the regulatory difficulties to the current climate surrounding bank mergers.
“While we have worked tirelessly to obtain regulatory approval, we firmly believe the external environment and landscape regarding regulatory approvals for bank mergers of this nature has become more challenging, particularly following industry news earlier this year,” Arnold said.
Despite securing shareholder approval for the merger back in June, the companies have faced multiple adjustments to the agreement. Initially announced in January, the deal was revised in April, including an increase in FirstSun’s total equity capital commitment from $175 million to $235 million. The share exchange ratio was also amended, with each HomeStreet share valued at $13.53, based on FirstSun’s April 29 closing price.
FirstSun and HomeStreet are negotiating the terms to terminate the merger agreement if they are unable to develop an alternative structure. Terms of the deal’s amendment allow HomeStreet to pursue another acquisition offer within 30 days, with a $2.6 million termination fee payable to FirstSun to cover transaction expenses.
Should the merger ultimately proceed, FirstSun intended to transition Sunflower Bank from a national bank to a Texas state-chartered bank and apply for membership in the Federal Reserve System. To support this transition, FirstSun would issue $48.5 million in subordinated debt to boost Sunflower’s capital. Additionally, HomeStreet would move forward with plans to sell or dispose of approximately $300 million in commercial real estate loans.
Read more: FirstSun, HomeStreet revise merger terms, boost capital raise
“We intend to continue to work with HomeStreet and our regulators on possible solutions that will also make sense for our shareholders. We also remain focused on our organic business prospects following another quarter of strong financial results, including our strong earnings, liquidity, credit and capital profile,” Arnold said in a statement.
FirstSun, headquartered in Denver, operates Sunflower Bank across five states, with mortgage services in 43 states. Meanwhile, Seattle-based HomeStreet provides banking and mortgage services throughout the Western United States and Hawaii.
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