Federal regulators issued a new enforcement order this week against Solvang-based Los Padres Bank, a subsidiary of Harrington West Financial Group, calling on the savings association to strengthen its capital levels or be subject to further supervisory action.
The deadline to increase the level of capital to the “adequately capitalized” category is today, and it must remain so for four consecutive quarters, according to the Office of Thrift Supervision, a government agency that regulates all federal and many state-chartered savings associations.
Regulators have ordered the bank to take certain steps to improve its capital level, including merge with or be acquired by another financial institution, sell all or substantially all of its assets and liabilities to another institution, or raise capital by issuing shares of stock through a public offering or private placement.
The OTS “prompt corrective action directive” kicks into gear when institutions insured by the Federal Deposit Insurance Corp. have deteriorating capital ratios or are critically undercapitalized to a point where there could be a long-term loss to the FDIC. Such severely deficient institutions are required to be taken into receivership by federal regulators.
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
Los Padres Bank has branches in San Luis Obispo, Atascadero, Pismo Beach and Nipomo.
In May, the savings association submitted a plan to restore its capital to the OTS, but in late June, regulators determined that it was not acceptable.
Federal regulators issued a cease-and-desist order against Los Padres Bank in October 2009, ordering the bank to strengthen its capital position by the end of the year.
Craig Cerny, president of Harrington West Financial Group, which owns Los Padres, told The Tribune last year that the bank had a plan to build up capital to meet regulators’ requirements, including the sale of Harrington West to Arkansas-based Arvest Bank for $4.1 million. To improve its capital ratios, bank officials also reduced Los Padres’ net loans.
With nearly $1 billion in assets, Harrington West Financial Group had a net loss of $45.4 million in 2009, compared with a loss of $10.8 million the prior year, due to severe stress in the real estate market and broader economy.
As of March 31, the bank had net income of $74,000, compared with a net loss of $2.1 million in the quarter ending March 2009.
Bank officials did not return a call for comment on Thursday about its financial performance. A release issued by the bank said that “the company and the bank cannot provide any assurance that the deadlines and other terms of the PCA directive can be satisfied.”
Officials, however, said they would “continue to vigorously pursue avenues to meet the PCA directive and all other regulatory requirements.”
— Julie Lynem
Central Coast design firm evolves
Local web design firm Hathway has rebranded itself to be a comprehensive digital media agency. Founded in January 2008 by Cal Poly graduates Jesse Dundon and Kevin Rice, the company expanded from a garage office to the San Luis Obispo Business Center and is now doing programming, graphic design, search engine optimization and online business strategy.
Its clients include Expression College, UC Berkeley, and Pyramind, according to Mary Dundon, the company’s accounts and marketing coordinator.
— Melanie Cleveland