Heritage Oaks Bancorp and Mission Community Bancorp announced plans late Monday to merge their operations, creating what they called the largest locally managed community bank based on the Central Coast.
Heritage Oaks Bancorp — which owns Heritage Oaks Bank — will buy Mission Community Bancorp in a transaction valued at about $56.4 million, including $8 million in cash and 7.54 million shares of Heritage Oaks common stock. That’s based on the bank stock’s closing price of $6.42 a share on Friday.
Each share of Mission Community will be exchanged for about .86 shares of Heritage Oaks common stock plus cash of about 19 cents.
The new organization, Heritage Oaks Bank, will have about $1.5 billion in assets, $1.3 billion in deposits and $1 billion in loans.
The agreement, subject to shareholder and regulatory approval, is expected to close in February. The boards of directors of both organizations have already approved the transaction.
“With Internet banking and new competition redefining the market … business as usual will no longer win the day,” said Mission Community Bank Chief Executive Officer Tom Dobyns in a joint news release issued by both companies. “The reality is that we are stronger together than we are apart.”
Dobyns, who told The Tribune on Monday that he will stay on until the deal closes, said the deal wasn’t necessary for Mission Community Bank to survive.
“We were in the black, making money and had, over the last year, pretty robust loan and deposit growth,’’ he said.
Dobyns said he doesn’t yet know what he will do next.
The two banks struck the deal because it was compelling for stockholders — and will be compelling for customers, Dobyns added.
Simone Lagomarsino, president and chief executive officer of Heritage Oaks Bancorp and bank, told The Tribune the acquisition was a natural move.
By combining forces, she said, the new bank will be able to offer larger loans and a larger, more expanded array of products.
Until the transaction closes, the companies said they won’t make any merger-related changes to employees or customers.
But most likely there will be some layoffs, Lagomarsino said.
Senior executives will predominately be from Heritage Oaks, while managers and associates will be drawn from both organizations.
Top banking executives, such as Dobyns, typically have employment agreements that provide payment in the event of change of control. For other employees impacted, she said, the banks will provide enough notice and severance packages.
Heritage Oaks currently employs 244 people, while Mission employs 113, she said.
It’s too early to say if any offices will close as a result of the combination, Lagomarsino said. “We are looking at traffic patterns and customer transaction levels at all branches. … There are some branches within a mile and a half of each other.” That analysis must be completed before any decisions are made.
The two organizations have talked on and off over the years about a possible merger, Lagomarsino said, adding that this time Heritage Oaks approached Mission in June.
Heritage Oaks’ plan has long been to seek acquisitions once regulatory agreements requiring it to improve overall credit quality, operations and financial profitability had been lifted and once it had repaid the U.S. Treasury as part of the Troubled Asset Relief Program, or TARP, Lagomarsino said.
The regulatory orders were lifted earlier this year, and the bank repaid TARP $21 million in July, she said.
Paso Robles-headquartered Heritage Oaks Bank, founded 30 years ago, has operations along the Central Coast from Paso Robles into Ventura County. It reported net income for the first six months of this year of $5.7 million. Its stock closed Monday at $6.41, down one cent.
Mission Community Bank, founded in 1997, is based in San Luis Obispo and has five branch locations from Paso Robles to Santa Maria and a loan production office in Ventura County. It reported net income for the first six months of this year of $1.52 million.
Its thinly traded stock closed Monday at $4.20 a share, unchanged.