Heritage Oaks Bancorp, which owns Paso Robles-based Heritage Oaks Bank, plans to raise $60 million in capital through the sale of securities to private investors.
Bank officials said Wednesday that the move would put the bank in a stronger financial position by increasing its capital and bolstering its balance sheet. The deal is expected to close Friday.
“We are very pleased to see such a strong interest from institutional investors in Heritage Oaks,” said Larry Ward, president and chief executive officer. “We believe this indicates both the market’s and customer’s confidence that Heritage Oaks is taking aggressive action to successfully navigate through the current economic storm.”
The company plans to raise most of the $60 million in capital by selling nonvoting shares of stock that will convert to shares of voting stock if the deal is approved by shareholders at a meeting to be held on or before Sept. 30. When completed, only one investor will own more than 9.9 percent of the company’s voting shares. That lone investor could end up owning about 14 percent of the company.
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With the additional capital, Ward said, the bank will be able to successfully address recent regulatory concerns and will be well positioned for future growth.
Last week, the FDIC and the California Department of Insurance ordered Heritage Oaks Bancorp to increase its capital ratios, reduce its classified assets and increase board oversight of management. As well, the company is required to submit a capital plan in the next 60 days to the Federal Reserve Bank of San Francisco, which supervises and regulates bank holding companies.
As part of the written agreement with the Reserve Bank, Heritage Oaks cannot pay dividends to shareholders, incur or guarantee any debt, or purchase or redeem any shares of its stock without federal regulatory approval.
The company also was ordered to notify regulators if its capital ratios fall below the approved capital plan’s minimum ratios and offer a plan to correct it.
Ward said the company was already taking steps to improve its capital position before the written agreement with regulators.
Ward declined to name the institutional investors involved in the capital being raised. However, he said the company has been working on raising capital with this group of about 21 investors for the past eight months.
“They are widely known institutional investors who are very skilled investors in the banking arena,’’ he said.
— Julie Lynem
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