425: HomeStreet and FirstSun Address Employee Concerns Regarding Merger

HomeStreet and FirstSun Capital Bancorp provide answers to employee questions regarding the proposed merger, covering topics such as vacation time, benefits, and severance.

Summary

• HomeStreet and FirstSun Capital Bancorp have released a Q&A document addressing employee concerns related to the proposed merger.
• Sunflower Bank (SFB) will map eligible continuing HomeStreet employees into a PTO guideline level that is similar though slightly higher than an employee's HomeStreet accrual opportunity.
• Employees accruing up to 2 weeks of vacation at HomeStreet will be mapped to 3 weeks/year PTO at SFB, those accruing 3 weeks will be mapped to 4 weeks, and those accruing 4 weeks will be mapped to 5 weeks.
• Accrued vacation balances will not be cashed out to continuing employees, but unused vacation time will be paid out upon termination.
• HomeStreet anticipates terminating the HomeStreet 401(k) retirement plan.
• HomeStreet employees should continue usual health screening practices to potentially receive a $600 discount off health plan costs in 2025, pending SFB's final benefit determination in October 2024.
• SFB pays on a bi-weekly basis, and commissioned employees can choose to be paid bi-weekly or monthly.
• For continuing employees, AIP payment will be made no later than March 15 of the next year.
• Employees who voluntarily resign before their position is eliminated will not be eligible for severance or prorated AIP.
• HomeStreet Bank employees transitioning to Sunflower temporarily for conversion/integration and whose positions are then eliminated will be eligible for the same severance package being offered to other HSB employees.

Sentiment

Score: 6

Explanation: The document is neutral in tone, providing information about changes related to the merger. While some changes may be perceived negatively (e.g., termination of the 401k plan), the document aims to address employee concerns and provide clarity.

Positives

• Sunflower Bank's PTO plan may offer slightly higher time off benefits for former HomeStreet employees.
• Unused vacation time will be paid out to employees upon termination.
• Employees transitioning temporarily to Sunflower for conversion/integration will be eligible for the same severance package as other HomeStreet employees if their positions are eliminated.

Negatives

• Accrued vacation balances will not be cashed out to continuing employees.
• HomeStreet anticipates terminating the HomeStreet 401(k) retirement plan.
• Employees who voluntarily resign before their position is eliminated will not be eligible for severance or prorated AIP.

Risks

• The merger may lead to job losses for some HomeStreet employees.
• Changes in PTO policies could impact employees with large accrued vacation balances.
• The termination of the HomeStreet 401(k) plan could affect employees' retirement savings.
• There is a risk that the expected cost savings, synergies, and other financial benefits from the merger may not be realized.
• Obtaining necessary regulatory approvals for the merger may be delayed or may result in conditions that could adversely affect the combined company.

Future Outlook

The document outlines the handling of employee benefits and compensation during and after the merger, but does not provide specific financial guidance beyond that.

Management Comments

• SFB recognizes the accrual methods at HomeStreet with separate sick & safe and vacation banks of time is different from the annual PTO usage method of time off at Sunflower.
• The decision has been made that accrued vacation balances will not be cashed out to continuing employees.
• HomeStreet anticipates terminating the HomeStreet 401(k) retirement plan.

Industry Context

Mergers in the banking industry often involve changes to employee benefits and compensation structures, requiring clear communication to address employee concerns and ensure a smooth transition.

Comparison to Industry Standards

• The approach to PTO and vacation accrual varies across the banking industry.
• Some banks offer traditional vacation and sick leave accrual, while others use a PTO model.
• Companies like JP Morgan Chase and Bank of America have similar PTO policies that vary based on tenure.
• Severance packages also vary, but typically include a number of weeks of pay based on years of service, similar to the HomeStreet Bank severance package.

Stakeholder Impact

• Shareholders will vote on the merger.
• Employees will experience changes to their benefits and compensation.
• Customers may experience changes as the two banks integrate.

Next Steps

• HomeStreet shareholders will vote on the proposed merger.
• FirstSun and HomeStreet will seek required governmental and regulatory approvals.
• SFB will provide greater detail and/or training around their PTO guidelines and how managers are to navigate that process.
• HomeStreet employees should continue usual health screening practices to potentially receive a $600 discount off health plan costs in 2025, pending SFB's final benefit determination in October 2024.
• The HomeStreet 401(k) retirement plan will be terminated.

Key Dates