Heritage Oaks Bancorp (HEOP) in Paso Robles, Calif., has agreed to buy Mission Community Bancorp (MISN) in San Luis Obispo, Calif.

Heritage Oaks, which was freed from a regulatory order last month, will pay $56.4 million for the $447 million-asset Mission Community. About 14% of the consideration involves cash, the companies said late Monday.

The $1.1 billion-asset Heritage Oaks said it expects the transaction to be immediately accretive to earnings per share, excluding merger-related expenses in 2014. The deal will dilute Heritage Oaks' tangible book value by about 5.7%, though the company expects to earn it back in just under three years. The companies expect to complete the sale in the first quarter.

"This is an exceptional opportunity to combine two well-respected banks that share a deep commitment to our local communities," Simone Lagomarsino, Heritage Oaks' president and chief executive, said in a press release. "The merger … provides an exciting future for customers, the community, and shareholders.”

Heritage Oaks plans to reduce operating costs by roughly $9 million a year, given the companies' overlap. That will include cutting Mission Community's noninterest expense in half. "We believe the combination of these organizations creates a more valuable community bank franchise,” Lagomarsino said. "It also creates a banking platform that is well positioned for future growth, both organically and through acquisitions."

Certain shareholders of each company have agreed to support the deal, including Carpenter Community BancFunds, which controls 79% of Mission Community, and Patriot Financial Partners, which owns nearly 15% of Heritage Oaks. Carpenter will become Heritage Oaks' biggest shareholder, with an 18.2% stake. Patriot will own 11.3% of the company, and Castle Creek Capital Partners will own 7.6%.

Sandler O'Neill was the financial advisor to Heritage Oaks, and Manatt, Phelps & Phillips served as legal counsel. D.A. Davidson was the financial advisor for Mission Community, and King, Holmes, Paterno & Berliner was the legal counsel.


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