HomeStreet agrees to acquire The Bank of Oswego
Deal includes the Lake Oswego bank's deposits, loans and two branches, but no liability involving ongoing fraud litigation involving former bank officers
Seattle-based HomeStreet Inc. announced Wednesday that it has agreed to acquire the assets and liabilities including deposits and loans of The Bank of Oswego in a deal that is expected to close in the third quarter of 2016.
The agreement, which includes The Bank of Oswegos two branches in Lake Oswego, is subject to state and federal regulatory approval and the approval of the banks shareholders. If the deal clears those hurdles, it would increase the number of HomeStreet's retail branches in the Portland area to five, including one in Vancouver, Wash.
Altogether, HomeStreet operates 113 branches and lending centers in the western United States and in Hawaii. The bank, which currently has 2,264 full-time-equivalent employees, reported $5.42 billion in assets as of March 31.
By comparison, The Bank of Oswego reported total deposits of approximately $52.4 million as of the same date. In addition to those deposits, HomeStreet said it will acquire certain other assets, including loans totaling about $42.9 million.
The two Lake Oswego locations will continue to operate as The Bank of Oswego until the transaction is completed. Once the agreement is finalized, the branches will become part of HomeStreet Bank.
Were excited to be expanding our branch network to serve new and existing customers in the Portland market, HomeStreet Bank Chairman, President and CEO Mark K. Mason said Wednesday. The customer base of these branches from The Bank of Oswego is an extremely good fit within our commercial and consumer banking strategy. We look forward to welcoming new employees to our company from The Bank of Oswego and are excited by the growth opportunities from the acquisition as a result of the Portland-Vancouver areas strong employment and population growth.
Stephen G. Andrews, The Bank of Oswego's president and CEO, said bank employees were told about the aquisition Tuesday evening "and took the news well." Mason said employees from both HomeStreet and The Bank of Oswego are working together now to ensure a seamless transition for customers, employees and the community.
"This is a very, very good situation for our customers, our shareholders and our employees," Andrews told The Review on Wednesday. "It offers more opportunity for us to offer a wider array of products and services and to invest in technological advances.
"It's a chance," Andrews said, "to join an organization that shares our value structure and our culture of investing in the community."
The transaction is structured as a purchase of assets and assumption of deposit liabilities, which means HomeStreet will not assume any liability relating to the ongoing litigation involving former CEO Dan Heine, former CFO Diana Yates or any other officers or directors of The Bank of Oswego. According to financial records, The Bank of Oswego has lost 57 percent of its assets since the legal troubles became public in June 2012.
Heine and Yates face charges that include conspiracy to commit bank fraud and making false bank entries. Prosecutors for the U.S. Attorney's Office have alleged that both were involved in a scheme to hide bad loans from the bank's board of directors, shareholders and regulators in an effort to portray the bank's financial condition as much better than it was.
If convicted, Heine and Yates face a maximum of 30 years in prison for each count, as well as the forfeiture of any money or property obtained as the result of the violations.
The allegations against Heine and Yates gained traction last July when former Bank of Oswego executive Geoff Walsh admitted his role in such a scheme as part of a plea deal on the eve of his own criminal trial, which was to include 32 fraud-related charges unrelated to his time at the Lake Oswego financial institution. Walsh's sentencing has been rescheduled for later this year.
In November 2015, U.S. District Court Judge Michael Simon ordered The Bank of Oswego to cover Heine's legal costs in the pending criminal trial, agreeing with Heine's civil suit that the bank's articles of incorporation require it to pay all legal expenses for any person involved in a criminal action as a result of their role as a director or officer of the bank.
Both Heine and Yates have waived their rights to a speedy trial in favor of a Nov. 1 court date.
Heine, who founded The Bank of Oswego in 2004, stepped down as CEO in August 2014 and now lives in Florida. Yates left the bank in 2012. Andrews, the former president and CEO of the Bank of Alameda in California, took over for Heine and remains the banks president and CEO.
Andrews said he expected to have materials in the hands of bank shareholders for a vote on the acquisition by the end of May. He told The Review his own future with the bank was "undetermined at this point."