HomeStreet Inc

Current report

Regulatory approvals may not be received, have taken longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the Merger.

Current report

Before the Merger may be completed, various consents, approvals, waiver or non-objections must be obtained from state and federal governmental authorities, including the Federal Reserve Board, the Texas Department of Banking and the Director of the State of Washington Department of Financial Institutions. On October 29, 2024, we and FirstSun announced that, based on discussions FirstSun and its subsidiary, Sunflower Bank, have had with the Federal Reserve and the Texas Department of Banking, that regulatory approvals necessary for the Merger to proceed have not been obtained and FirstSun and Sunflower Bank have been asked to withdraw their merger applications. We and FirstSun are discussing the pursuit of an alternative regulatory structure for the Merger. We and FirstSun are also discussing terms on which the merger agreement would be terminated if no alternative structure is feasible. There can be no assurance that an alternative regulatory structure may ultimately be feasible. Under the Merger Agreement, the parties are not obligated to complete the Merger should any required regulatory approval contain any condition or restriction that would reasonably be expected to have a “material adverse effect” (as defined in the Merger Agreement) on the surviving entity in the Merger and its subsidiaries, taken as a whole, after giving effect to the Merger and the related merger of HomeStreet Bank into a wholly owned subsidiary of FirstSun.

Current report

Shareholder litigation could prevent or delay the completion of the Merger or otherwise negatively impact the business and operations of FirstSun and the Company.

Current report

On April 11, 2024, a putative shareholder of the Company filed a complaint against the Company and the Company’s Board of Directors in the U.S. District Court for the Southern District of New York (the “Complaint”), alleging, among other things, that the proxy statement/prospectus filed with the SEC on March 8, 2024 in connection with the Merger was materially incomplete and misleading. The Complaint seeks remedies, including an injunction enjoining the Merger and rescission or rescissory damages in the event the Merger contemplated by the Merger Agreement is consummated. For more information, see Part II, Item 1 Legal Proceedings in this Quarterly Report on Form 10-Q.

Current report

One of the conditions to the closing is that there must be no order, injunction or decree issued by any court or governmental entity of competent jurisdiction or other legal restraint preventing the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement. If any plaintiff were successful in obtaining an injunction prohibiting FirstSun or the Company from completing the Merger or any of the other transactions contemplated by the Merger Agreement, then such injunction may delay or prevent the effectiveness of the Merger and could result in significant costs to FirstSun or the Company, including any cost associated with the indemnification of directors and officers of each company. FirstSun and the Company may incur additional costs in connection with the defense or settlement of any stockholder or shareholder lawsuits filed in connection with the Merger. Such litigation could have an adverse effect on the financial condition and results of operations of FirstSun and the Company and could prevent or delay the completion of the Merger.

Current report

The Merger Agreement limits the Company’s ability to pursue alternatives to the Merger and may discourage other companies from trying to acquire the Company.

Current report

The Merger Agreement contains “no shop” covenants that restrict the Company’s ability to, directly or indirectly, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to the exercise of fiduciary duties by the Company’s board of directors, engage in any negotiations concerning, or provide any confidential or non-public information or data relating to, any alternative acquisition proposal. These provisions, which include a $10 million termination fee payable by the Company under certain circumstances, may discourage a potential third-party acquirer that might have an interest in acquiring all or a significant part of the Company from considering or proposing that acquisition. In addition, the terms of the Merger Agreement limit the ability of the Company to pursue alternative business opportunities, including sales or transfers of multifamily loans or other assets, or make changes to its business pending the completion of the Merger and other restrictions on the Company’s ability to conduct its business.

Current report

We are subject to business uncertainties and contractual restrictions while the Merger is pending that could harm our business relationships, financial condition and results of operations.

Current report

During the period prior to the closing of the Merger and pursuant to the terms of the Merger Agreement, our business is exposed to certain inherent risks and contractual restrictions that could harm our business relationships, financial condition, results of operations, and business, including:

Current report

•potential uncertainty in the market for our banking products and services, which could lead to the loss of customers or cause customers to remove their accounts from the Company and move their business to competing financial institutions;

Current report

•difficulties maintaining existing and establishing new business relationships with customers, associates and other business partners;

Current report

•disruption to our business and operations, including diversion of management attention and resources;

Current report

•the inability to attract and retain key personnel and recruit prospective employees, and the possibility that our current employees could be distracted, and their productivity decline as a result, due to uncertainty regarding the Merger;

Current report

•the inability to pursue alternative business opportunities or make changes to our business pending the completion of the Merger and other restrictions on our ability to conduct our business;

Current report

•our inability to freely issue securities, incur certain indebtedness, declare or authorize dividends or distributions or make certain material capital expenditures without FirstSun’s approval;

Current report

•our inability to solicit other acquisition proposals during the pendency of the Merger under the terms of the Merger Agreement;

Current report

•the costs, fees, expenses and charges related to the Merger Agreement and the Merger, including but not limited to the cost of professional services, insurance, regulatory compliance and litigation; and

Current report

•other developments beyond our control, including, but not limited to, changes in U.S. or global economic conditions that may affect the timing or success of the Merger.

Current report

If any of these effects were to occur, it could adversely impact our business, cash flow, results of operations or financial condition, as well as the market price of our common stock and our perceived value, regardless of whether the Merger is completed.

Current report

The Company may need to initiate litigation against FirstSun to seek judicial relief from the Merger Agreement if the parties are unable to reach agreement on an alternative regulatory structure for the Merger or a mutual termination of the Merger Agreement if no alternative structure is deemed feasible.

Current report

On October 29, 2024, FirstSun and the Company announced that based on discussions with the Federal Reserve and the Texas Department of Banking, regulatory approvals necessary for the Merger to proceed have not been obtained and FirstSun and Sunflower Bank have been asked to withdraw their merger applications. FirstSun and the Company are discussing the pursuit of an alternative regulatory structure for the Merger. The parties are also discussing terms on which they would terminate the Merger Agreement if no alternative regulatory structure is deemed feasible. There can be no assurance that an alternative regulatory structure may ultimately be feasible.

Current report

If the Company and FirstSun are unable to agree that an alternative regulatory structure is feasible, or upon terms on which a mutual termination of the Merger Agreement would be acceptable, the Company may need to initiate litigation against FirstSun to seek judicial relief from the Merger Agreement. Litigation is subject to inherent risk, and therefore, the Company’s success as to the outcome of any litigation cannot be guaranteed. Any litigation could also result in substantial costs to the Company, including litigation costs and potential settlement costs, and disruption to the Company’s business and operations, including diversion of management attention and resources. The pursuit of any judicial relief or the settlement, or failure to reach a settlement, for any claims may result in negative media attention, and may adversely affect our business, financial condition, results of operations and market price of our common stock.