425: HomeStreet Addresses Shareholder Concerns with Supplemental Disclosures Amidst FirstSun Merger

HomeStreet supplements its proxy statement/prospectus with additional disclosures to address shareholder demand letters regarding the proposed merger with FirstSun, aiming to avoid delays and costs.

Summary

• HomeStreet, Inc. has received demand letters from purported shareholders alleging insufficiencies in the disclosures made in the proxy statement/prospectus related to the proposed merger with FirstSun Capital Bancorp.
• To avoid nuisance, cost, and distraction, and to prevent any delays in the closing of the proposed transaction, HomeStreet has decided to voluntarily supplement the proxy statement/prospectus with additional disclosures.
• These supplemental disclosures will not change the consideration to be paid to HomeStreet's shareholders or the timing of the shareholder meeting scheduled for June 18, 2024.
• The HomeStreet board of directors continues to unanimously recommend that shareholders vote in favor of the proposals related to the merger.
• The supplemental disclosures include information regarding KBW's prior services to both FirstSun and HomeStreet, specifically related to subordinated notes offerings in January 2022, where KBW received \$0.5 million from FirstSun and \$0.75 million from HomeStreet.
• HomeStreet maintains that the original disclosures in the proxy statement/prospectus fully comply with applicable law and denies any legal necessity or materiality of the additional disclosures.

Sentiment

Score: 7

Explanation: The sentiment is cautiously optimistic. While the need for supplemental disclosures introduces a slight negative, the proactive approach and continued board support for the merger are positive indicators.

Positives

• HomeStreet is proactively addressing shareholder concerns to ensure a smooth merger process.
• The supplemental disclosures aim to prevent potential delays and associated costs.
• The board of directors is unanimously recommending shareholders vote in favor of the merger, indicating confidence in the transaction.
• HomeStreet is providing additional transparency regarding KBW's prior relationships with both companies.

Negatives

• The demand letters from shareholders suggest potential dissatisfaction or concerns regarding the initial disclosures.
• The need for supplemental disclosures, even if voluntary, could indicate areas where the initial disclosures were perceived as lacking.
• The fact that HomeStreet is incurring costs to address these concerns, even if to avoid larger issues, is a negative aspect.

Risks

• The possibility of further legal proceedings or challenges from shareholders remains, despite the supplemental disclosures.
• The merger could still face delays or be terminated if the closing conditions are not met or if regulatory approvals are not obtained.
• The integration of HomeStreet and FirstSun could present unforeseen challenges, impacting the expected financial benefits of the merger.
• There is a risk that the expected cost savings and synergies from the merger may not be realized within the anticipated time frames or at all.

Future Outlook

The document contains forward-looking statements regarding the proposed merger between HomeStreet and FirstSun, including expectations about timing, completion, financial benefits, and other effects. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially.

Management Comments

• HomeStreet believes that the Demand Letters are without merit and that the disclosures set forth in the Proxy Statement/Prospectus comply fully with applicable law.
• The HomeStreet board of directors continues to unanimously recommend that you vote FOR the proposals to be voted on at the HomeStreet shareholder meeting described in the Proxy Statement/Prospectus.

Industry Context

In the current environment of banking consolidation, this merger reflects a trend of smaller banks seeking to gain scale and efficiency. Similar mergers have been seen across the industry as institutions look to navigate increasing regulatory burdens and compete more effectively with larger players.

Comparison to Industry Standards

• The fees paid to KBW for the subordinated notes offerings appear to be within the typical range for such services in the banking industry.
• Comparable transactions, such as the merger of two regional banks, often involve similar advisory fees and legal expenses.
• The supplemental disclosures made by HomeStreet are a proactive measure, which aligns with best practices in corporate governance and transparency, as seen in other merger transactions.

Stakeholder Impact

• Shareholders are impacted by the potential merger and the supplemental disclosures.
• Employees of both HomeStreet and FirstSun may experience changes due to the integration of the two companies.
• Customers of HomeStreet Bank may see changes in services and products as a result of the merger.

Next Steps

• HomeStreet shareholders will vote on the proposed merger at the shareholder meeting on June 18, 2024.
• FirstSun and HomeStreet need to obtain required governmental and regulatory approvals for the merger.
• HomeStreet needs to dispose of or sell certain commercial real estate loans to obtain regulatory approval of the Merger.

Key Dates