OCB Bancorp, parent company of Ojai Community Bank, raised additional funds by issuing $3 million of subordinated notes to facilitate future growth.

“During this extended period of low rates, many corporations have found it advantageous to issue corporate bonds instead of common stock to assist capital growth,” President and CEO Dave Brubaker said in a news release. “With our bank holding company structure, OCB Bancorp can issue corporate debt and downstream funds to the bank in the form of common equity, which will allow the bank to continue to grow, maintain and improve its regulatory capital ratios.”

Rather than dilute shareholders by issuing additional stock, a small group of OCB Bancorp directors provided the bank with notes at an annual interest rate of 6.5 percent — a percentage that is less than it could have borrowed elsewhere, the bank said. The notes will take five years to mature.

The $3 million in notes supplements the bank’s previous borrowings of a $4 million term loan and a $3 million credit line. It down-streamed most of the proceeds to the bank, using a portion to reduce the outstanding balance of its credit line and retaining a small amount to provide for future debt service.

“It’s a strategy many banks are deploying at this time,” George Melton, chairman of the OCB Bancorp board, said in a news release. “Increasing capital by issuing more common stock is always the best alternative, especially when a bank can raise capital at attractive levels. The current difficulty for many small banks, Ojai Community Bank included, is that regardless of how well banks are doing, to issue common stock at today’s discounted prices is not in the best interest of our shareholders.”

OCB Bancorp, a locally owned and operated holding company, was formed in September 2013 as the parent company of Ojai Community Bank, which also operates branches under the trade names of Santa Barbara Community Bank, Ventura Community Bank and Santa Paula Community Bank.

“In this period of low interest rates, banks must expand to become more profitable,” Brubaker said.  “At $250 million in assets, we are just now entering our stride.”

• Contact Alex Kacik at akacik@pacbiztimes.com.