After months of struggling with capital ratios, Harrington West Financial Group, parent company of Solvang-based Los Padres Bank, has escaped a regulatory action that can precede a seizure and returned to “adequately capitalized,” the bank said Jan. 25. The bank remains under a longer-term cease and desist order to raise capital ratios.
Harrington West had been under what is known as a “prompt corrective action,” a measure that lets federal regulators take a bank into receivership when its capital dwindles. Harrington West had slipped into the “undercapitalized” category, two levels above the most serious class of capital shortage.
Harrington West said it has returned to “adequately capitalized.” A deal to sell its Midwest operations and a favorable change in tax law boosted its capital.
Harrington West’s capital ratios came under scrutiny from federal regulators in October 2009, when regulators ordered Harrington Wet to raise its core tangible capital ratio to 4 percent and its risk-based capital ratio to 8 percent of assets by Nov. 6.
The company was further ordered to boost its core capital ratios to 8 percent and its risk-based capital to 12 percent by Dec. 31, 2009 — a requirement it has not yet met. Harrington West has not announced its fourth-quarter earnings or capital ratios.
On Nov. 6, Los Padres sold its Kansas City branches to Arvest, an Arkansas-based company for book value plus a $4.1 million cash premium, clearing $96.2 million in loans and assets from its books as well as $94.9 million in deposits.