HomeStreet would sell multifamily loans if FirstSun sale falls through

HomeStreet in Seattle could look to shed $800 million of multifamily loans if its planned sale to FirstSun Capital Bancorp in Denver is terminated.

The $8.1 billion-asset FirstSun agreed in January to buy the $9.4 billion-asset HomeStreet in a deal that was originally expected to close in mid-2024. FirstSun planned to raise up to $235 million to help offset the costs tied to purging $300 million of HomeStreet’s loans.

The Federal Reserve recently asked FirstSun to withdraw its application, leaving the companies to contemplate alternatives to complete the deal. They said they are also discussing the terms for terminating the merger agreement.

HomeStreet would focus on returning to profitability as soon as the first quarter of 2025, Mark Mason, the company’s chairman, president and CEO, said during a conference call to discuss quarterly results. A loan sale would reduce HomeStreet’s ratio of commercial real estate to risk-based capital from about 600% to 500%.

“If we were to execute an $800 million sale to assist our return to profitability, we would believe we would choose the longest-duration loans, which would have the lowest value but would create the greatest impact on improving profitability over the near term,” Mason said during the call.