Coast National Bank is selling its Morro Bay branch to Heritage Oaks Bank for an undisclosed sum – a move that will strengthen its capital and allow Heritage Oaks to return to Morro Bay.
The Paso Robles-based bank had closed its branch there earlier this year because the lease was expiring and the location wasn’t optimal, according to Simone Lagomarsino, president and chief executive officer in a news release announcing the sale Monday.
Coast National President and Chief Executive Officer Anita Robinson said the bank is selling the branch to increase its capital base. “It’s a profitable transaction that decreases expenses and builds capital,’’ she said, adding that the bank is currently adequately capitalized though it is still operating under a 2011 consent order designed to strengthen its financial performance.
Putting it another way, Robinson said, the bank is shrinking in order to grow again. “it’s bittersweet to give up clients we’ve worked so hard to build in Morro Bay but it’s nice that it’s going to a local competitor.’’
Under terms of the sale, Heritage Oaks will receive about $30 million in deposits, as well as the branch building and land at 898 Morro Bay Boulevard. In return, it will pay a premium of 2.2 percent for the deposits, as well as market value for the building and physical assets. No loans will be transferred.
Coast National Bank reported a loss of $87,000 for the six months ended June 30, compared with a loss of $1,379,000 in the year-earlier period, according to the FDIC. It has operated at a loss since 2008.
Heritage Oaks Bank reported $3,695,000 in net income for the six months ended June 30, compared with $1,443,000 in the year-earlier period.
The purchase, subject to regulatory approval, is expected to close by year-end. If completed, Heritage Oaks Bank, a subsidiary of Heritage Oaks Bancorp, will have 12 offices from Paso Robles to Ventura County.
Coast National Bank will have three offices in San Luis Obispo, Paso Robles and Arroyo Grande.