News - Local

Published: Tuesday, Nov. 03, 2009

Biz Buzz: Bank parent may be delisted

Los Padres owner must raise its stock price or it will be pulled off exchange

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Weeks after regulators hit Harrington West Financial Group with a cease-and-desist order, the parent company of Los Padres Bank could be delisted from the Nasdaq exchange if it fails to raise its falling stock price.

The Solvang-based company, a federally chartered savings bank with four branches in

San Luis Obispo County, announced on Monday that it had received a deficiency letter from Nasdaq saying that it could be removed from the exchange because the company’s market capitalization rate — the number of publicly held shares of a company multiplied by the current market price of a share — had dipped below $5 million for 30 consecutive trading days.

The company has 90 days to correct the problem, although increasing the market cap could prove difficult because its market value of publicly held securities is based on a limited number of shares, according to the company. About half of its common shares are not included in the market cap calculation.

Harrington West Financial said it is “evaluating alternatives for listing or quotation of its common stock’’ including options “beyond regaining compliance” with global market requirements of the exchange.

The company’s stock on Nasdaq (HWFG) closed down 14.71 percent at 58 cents a share on Monday. The market cap rate at closing was $4.1 million.

The news about the bank facing potential delisting follows a cease-and- desist order filed last month by the Office of Thrift Supervision. The federal regulator has ordered the bank to raise more capital by the end of the year.

A financial institution’s capital ratios — assets and cash relative to its risk profile—measure its overall financial health. Los Padres is expected to raise its core capital ratio to at least 8 percent.

The bank, which reported a net loss of $17.7 million in the first six months of the year, entered into a supervisory agreement with federal regulators in April, a move designed to boost its capital.

Bank officials did not return calls seeking comment Monday afternoon.

However, Craig Cerny, chairman of the board and chief executive officer for Los Padres and Harrington West, told The Tribune in October that the real estate market and overall tough economic environment led to the bank’s troubles. He also said that the bank has continued its efforts to raise capital, generating $12.3 million last year.

With about $1.1 billion in assets, Harrington West Financial operates 17 bank offices on the Central Coast and has branches in Scottsdale, Ariz., and Kansas City. The company plans this week to close a deal on the sale of its Kansas City division to Arvest Bank for $4.1 million. That deal could satisfy federal regulators by raising the company’s core capital ratio up to their requirements, Cerny said.

— Julie Lynem

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