California merger terminated over delayed regulatory approval
Summit Bancshares in Oakland, Calif., said its proposed sale to investor Faciam Holdings will not happen due to a lack of regulatory approval.
The deal, announced in November 2018, was expected to close in mid-2019.
The Federal Deposit Insurance Corp.’s San Francisco office said earlier this year that it would recommend that the agency reject the merger application because the company’s business proposal included a plan to serve marijuana-related businesses. The FDIC had not issued a formal ruling on the deal.
Summit decided to proceed with the merger in hopes that doing so would force the FDIC to make an official call, Gary Findley, a lawyer at Gary Steven Findley & Associates and the bank's legal counsel, said in an interview.
“When you're blazing a new trail, sometimes the regulators are slow to the uptake,” Findley added.
Recreational marijuana is permitted under California law. But it remains illegal under federal law, so banks that choose to serve marijuana-related industries could be exposed to federal prosecution.
Though the companies amended the agreement in October to allow more time, the $250 million-asset Summit said in a press release Wednesday that it “recently received communication from the FDIC which made clear that the necessary approvals would not be forthcoming within the time frames of the agreement.”
While the amendment pushed the deal's potential completion date to February, Findley said the parties "knew we couldn’t get the deal done by then” after their conversations with the FDIC.
Terms of the deal allowed Summit to terminate the transaction if government approvals were further delayed.
Summit Chairman Shirley Nelson called the cancellation of the deal “disappointing,” but in the release she said that the bank is on solid footing independently and that "2019 has been a very good year” financially.