The parent company of Solvang-based Los Padres Bank has been hit with a cease and desist order and faces a series of deadlines to raise capital.
Harrington West Financial Group, which owns Los Padres and other banking operations, reported on Oct. 16 that it consented to the entry of a cease and desist order from the Office of Thrift Supervision. Los Padres is the third largest bank in the tri-county region, with 13 branches.
The order replaces a milder supervisory agreement reached in April with regulators. In it, Harrington West and Los Padres agree to raise the Los Padres level of core capital to 4 percent and risk-based capital to 8 percent of assets by Nov. 6 with a further boost to 8 percent and 12 percent respectively by Dec. 31.
Los Padres and Harrington West have been hard hit by the real estate and economic meltdowns and the credit crisis during the past four quarters, a statement from Harrington West said. The date of the cease and desist order was Oct. 14.
Harrington West and Los Padres said they expect the sale of the company’s Harrington Bank division in Kansas City will close prior to year’s end, boosting the company’s ratios. Harrington West said it was in discussions with several investors in order to boost Los Padres Bank’s capital ratios.
Harrington West and Los Padres said there were no assurances the “required capital can be raised and the capital ratios satisfied” by the deadlines set in the cease and desist order. Until that time, the company can’t pay stock dividends or roll over debt without permission from regulators.