A credit union buying First Sound Bank after prior sale was canceled

First Sound Bank in Seattle has been looking for a buyer all year. It found one in Harborstone Credit Union. 

Back in November 2021, BM Technologies agreed to pay $23 million for the bank. It was called off in December 2022 after regulatory delays pushed the deal beyond its expected closing window. 

Under the new terms with Lakewood, Washington-based Harborstone, the $175 million-asset bank's shareholders will receive approximately $6.90 to $7.10 in cash for each share of First Sound Bank common stock owned, subject to adjustment based on the equity value at closing, the companies said in a press release Tuesday. 

Following completion of the transaction, First Sound Bank will liquidate and distribute its remaining assets to its stockholders. The deal would push the $1.9 billion-asset Harborstone past the $2 billion-asset mark.

The acquisition, which Harborstone expects to close in the first quarter of 2024, would help the credit union grow its presence in the Seattle market, diversify its assets and add talent and expertise, the credit union said.

"[We] owe this opportunity to the decades of smart and strategic decisions that have created a solid foundation for our expansion," Harborstone's President and CEO Geoff Bullock said in the press release. 

Marty Steele, president and CEO of First Sound Bank, said the deal provides many benefits for its customers, employees, community and shareholders. 

"As a community bank, we are deeply focused on providing resources and services for our customers to succeed, and feel the additional services, products and locations Harborstone Credit Union provides will help us continue to meet the needs of our customers in this competitive environment," Steele said in the press release.

The combined institution would have approximately $2.1 billion in assets, $1.5 billion in loans, $1.8 billion in shares and deposits and 16 branches throughout King, Pierce and Thurston counties.

The deal is the fifth involving a credit union buying a bank announced in 2023. By this time last year, nine credit union-bank deals had been announced. 

Most recently, Nusenda Credit Union said in early June that it plans to acquire the $338 million-asset Western Heritage Bank in Las Cruces, New Mexico. 

In total, 16 credit union deals for banks were announced in 2022.

Steve Swofford, the president and CEO of Alabama Credit Union — which acquired Security Federal Savings Bank in 2021 — said in an interview Wednesday that his company is not actively looking at bank targets today, and he believes some potential sellers feel that their values are too depressed to get a fair price.

"Bank values are lower due to their holding portfolios of securities that have sizable losses in them," Swofford said. Alabama Credit Union is based in Tuscaloosa and has $1.8 billion of assets. 

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Traditional credit union mergers and bank acquisitions have also been slow to develop this year.

McQueen Financial Advisors served as financial advisor for Harborstone and Luse Gorman, PC was its legal counsel. First Sound Bank was advised by D.A. Davidson Companies and Keller Rohrback, L.L.P.

Harborstone Credit Union earned $4.2 million in the first six months of 2023, a 50% decrease from a year earlier, according to call report data from the National Credit Union Administration.