Heritage Commerce Corp. in San Jose, Calif., announced this week that it plans to buy Western Holdings Bancorp in nearby Los Altos for about $40.9 million of stock.

Western Holdings is the parent of $200 million-asset Bank of Los Altos, which has four branches in the Silicon Valley area and would become a subsidiary of $506 million-asset Heritage. Four Western Holdings directors would be named to the Heritage board.

"This merger of similar strategies will allow us to continue offering community banking while providing us the capital strength to support large loans and additional growth opportunities," said Bank of Los Altos president and chief executive officer Jim Wall.

Heritage operates three other community banks in Northern California - Heritage Bank of Commerce in San Jose, Heritage Bank East Bay in Fremont, and Heritage Bank South Valley in Morgan Hill. Upon completion the Bank of Los Altos deal, the holding company would have loans of $401 million and deposits of about $601 million.

The purchase is expected to close in the fourth quarter.

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