Attached files
Exhibit 10.1
UNITED STATES OF AMERICA
Before the
OFFICE OF THRIFT SUPERVISION
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In the Matter of ) Order No.: WN-09-032
)
HARRINGTON WEST FINANCIAL ) Effective Date: October 14, 2009
GROUP, INC. )
)
Solvang, California )
OTS Docket No. H2621 )
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ORDER TO CEASE AND DESIST
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WHEREAS, Harrington West Financial Group, Inc., Solvang, California, OTS
Docket No. H2621 (Holding Company), by and through its Board of Directors
(Board), has executed a Stipulation and Consent to the Issuance of an Order to
Cease and Desist (Stipulation); and
WHEREAS, the Holding Company, by executing the Stipulation, has consented
and agreed to the issuance of this Order to Cease and Desist (Order) by the
Office of Thrift Supervision (OTS) pursuant to 12 U.S.C. ss. 1818(b); and
WHEREAS, pursuant to delegated authority, the OTS Regional Director for the
Western Region (Regional Director) is authorized to issue Orders to Cease and
Desist where a savings and loan holding company has consented to the issuance of
an order.
NOW, THEREFORE, IT IS ORDERED that:
Cease and Desist.
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1. The Holding Company and its directors, officers, employees, and agents shall
cease and desist from any action (alone or with another or others) for or toward
causing, bringing about, participating in, counseling, or the aiding and
abetting of unsafe or unsound practices that resulted in deteriorating asset
quality, deficient earnings, and inadequate capital levels at its wholly owned
subsidiary, Los Padres Bank, Solvang, California, OTS Docket No. 07935
(Association).
Harrington West Financial Group, Inc.
Order to Cease and Desist
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Capital.
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2. By October 30, 2009, the Holding Company shall submit for Regional Director
review and comment a consolidated capital plan to preserve and enhance the
capital of the Holding Company and the Association (Capital Plan). At a minimum,
the Capital Plan shall:
(a) consider the requirements and restrictions imposed by this Order and
the Order to Cease and Desist issued by the OTS against the Association,
dated_______________, 2009
(Association Order);
(b) address specifically the actions to be taken by the Holding Company to
cause the Association to attain and maintain the required capital ratios in
the Association Order and provide time frames for those actions;
(c) provide quarterly pro forma capital projections for the Holding Company
and the Association; and (d) describe all relevant assumptions and
projections.
3. Within fifteen (15) days of receipt of any comments from the Regional
Director, the Board shall make the changes, if any, to the Capital Plan required
by the Regional Director. Thereafter, the Board shall adopt and ensure that the
Holding Company implements and complies with the Capital Plan. Within five (5)
days of the Board meeting at which it was adopted, the Holding Company shall
provide a copy of the Capital Plan adopted by the Board to the Regional
Director.
Harrington West Financial Group, Inc.
Order to Cease and Desist
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4. [On the first (1st) and fifteenth (15th) of each month, beginning with the
month of December 2009, Senior Executive Officers(1) (Management) shall provide
the Regional Director and the Board with written updates on the status of steps
taken by the Holding Company to comply with the Capital Plan (Capital Plan
Updates).
5. Within thirty (30) days after the end of each month, beginning with the month
of November 2009, Management shall also provide monthly variance reports
(Monthly Capital Plan Variance Reports) to the Regional Director and the Board
that describe the Holding Company's compliance with the Capital Plan. The
Monthly Capital Variance Reports shall: (a) detail actual operating results
versus projected results; (b) include detailed explanations of any material
deviations; and (c) include a description of any specific corrective actions or
measures that have been implemented or are proposed to address each material
deviation.
6. The Board's review of the Capital Plan Updates and the Monthly Capital Plan
Variance Reports and its evaluation of Management's compliance with the Capital
Plan shall be thoroughly documented in the Board meeting minutes. The Holding
Company shall submit the Board meeting minutes to the Regional Director within
five (5) days of the Board meeting.
Capital Distributions and Stock Repurchases.
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7. Effective immediately, the Holding Company shall not declare, make, or pay
any dividends or other capital distributions, or repurchase or redeem any
capital stock without receiving the prior written non-objection of the Regional
Director. The Holding Company's written request for such non-objection shall be
submitted to the Regional Director at least thirty (30) days prior to the
anticipated date of the proposed dividend payment, capital distribution or stock
redemption.
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(1) The term Senior Executive Officer is defined at 12 C.F.R. ss. 563.555.
Harrington West Financial Group, Inc.
Order to Cease and Desist
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8. Effective immediately, the Holding Company shall not take, directly or
indirectly, dividends or any other form of payment representing a reduction in
the Association's capital from the Association without receiving the prior
written non-objection of the Regional Director. The Holding Company's written
request for such non-objection shall be submitted to the Regional Director at
least thirty (30) days prior to the anticipated date of receipt of the proposed
dividend payment or capital distribution.
Debt Limitations/Restrictions.
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9. Effective immediately, the Holding Company shall not incur, issue, renew,
repurchase, or rollover any debt, increase any current lines of credit, or
guarantee the debt of any entity without receiving the prior written notice of
non-objection of the Regional Director. The Holding Company's written request
for such non-objection shall be submitted to the Regional Director at least
thirty (30) days prior to the anticipated date of any such proposed action.
Operations Plan.
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10. By October 30, 2009, the Holding Company shall submit to the Regional
Director for review and comment an Operations Plan that addresses how the
Holding Company will meet all financial obligations for the remainder of
calendar year 2009 through the end of calendar year 2012, including, but not
limited to, payments on senior notes, dividend payments on preferred stock, and
interest payments on trust preferred securities without reliance on dividends
from the Association. The Operations Plan shall include, at a minimum,
comprehensive pro forma cash flow projections detailing all anticipated sources
and uses of funds, including, but not limited to, any scheduled payment
obligations of Holding Company related to outstanding debt, deferred dividends,
operating expenses, and equity issuances.
Harrington West Financial Group, Inc.
Order to Cease and Desist
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11. Within fifteen (15) days of receipt of any comments from the Regional
Director, the Board shall make the changes, if any, to the Operations Plan
required by the Regional Director. Thereafter, the Board shall adopt and ensure
that the Holding Company implements and complies with the Operations Plan.
Within five (5) days of the Board meeting at which it was adopted, the
Association shall provide a copy of the Operations Plan adopted by the Board to
the Regional Director.
12. Any request to modify the Operations Plan shall be submitted to Regional
Director for review and written non-objection at least thirty (30) days prior to
the proposed date to implement any such modification.
13. On a quarterly basis, beginning with the quarter ending December 31, 2009,
the Board shall review a report prepared by Management detailing the adequacy of
the Operations Plan given the projected financial obligations of the Holding
Company and actual operating results, including a detailed description of any
material deviations from the Operations Plan and a description of any corrective
actions or measures that have been implemented or are proposed to address each
material deviation (Variance Analysis Report).
14. Within thirty (30) days after the end of each quarter, beginning with the
quarter ending December 31, 2009, the Board shall provide the Regional Director
with a copy of each Variance Analysis Report, and the minutes from the Board
meeting containing the Board's discussion of the Variance Analysis Report,
including, if applicable, any Board discussion of possible modifications to the
Operations Plan.
Thrift Oversight.
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15. Effective immediately, the Holding Company shall ensure the Association's
compliance with applicable laws, rules and regulations and all terms and
conditions of the Association Order.
Harrington West Financial Group, Inc.
Order to Cease and Desist
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Directorate and Management Changes.
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16. Effective immediately, the Holding Company shall comply with the prior
notification requirements for changes in directors and Senior Executive Officers
set forth in 12 C.F.R. Part 563, Subpart H.
Employment Contracts/Compensation Arrangements.
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17. Effective immediately, the Holding Company shall not enter into, renew,
extend, or revise any contractual arrangement relating to compensation or
benefits for any Senior Executive Officer or Director of the Holding Company,
unless it first provides the Regional Director with not less than thirty (30)
days prior written notice of the proposed transaction. The notice to the
Regional Director shall include a copy of the proposed employment contract or
compensation arrangement, or a detailed written description of the compensation
arrangement to be offered such Officer or Director, including all benefits and
perquisites. The Board shall ensure that any contract, agreement, or arrangement
submitted to the Regional Director fully complies with the requirements of 12
C.F.R. Part 359.
Severance and Indemnification Payments.
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18. Effective immediately, the Holding Company shall not make any golden
parachute payment(2) or prohibited indemnification payment(3) unless, with
respect to each such payment, the Holding Company has complied with the
requirements of 12 C.F.R. Part 359.
Effective Date, Incorporation of Stipulation.
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19. This Order is effective on the Effective Date as shown on the first page.
The Stipulation is made a part hereof and is incorporated herein by this
reference.
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(2) The term "golden parachute payment" is defined at 12 C.F.R. ss. 359.1(f).
(3) The term "prohibited indemnification payment" is defined at 12 C.F.R.
ss. 359.1(l).
Harrington West Financial Group, Inc.
Order to Cease and Desist
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Duration.
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20. This Order shall remain in effect until terminated, modified, or suspended
by written notice of such action by the OTS, acting by and through its
authorized representatives.
Time Calculations.
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21. Calculation of time limitations for compliance with the terms of this Order
run from the Effective Date and shall be based on calendar days, unless
otherwise noted.
22. The Regional Director, or an OTS authorized representative, may extend any
of the deadlines set forth in the provisions of this Order upon written request
by the Holding Company that includes reasons in support for any such extension.
Any OTS extension shall be made in writing.
Submissions and Notices.
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23. All submissions, including any reports, to the OTS that are required by or
contemplated by this Order shall be submitted within the specified time frames.
24. Except as otherwise provided herein, all submissions, requests,
communications, consents, or other documents relating to this Order shall be in
writing and sent by first-class U. S. mail (or by reputable overnight carrier,
electronic facsimile transmission, or hand delivery by messenger) addressed as
follows:
(a) To the OTS:
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C.K. Lee, Regional Director
Western Region, Office of Thrift Supervision
225 E. John Carpenter Freeway, Suite 500
Irving, TX 75062-2326
Harrington West Financial Group, Inc.
Order to Cease and Desist
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With a copy to:
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Anthony J. Jardieu, III, Assistant Director
Office of Thrift Supervision, Western Region
225 E. John Carpenter Freeway, Suite 500
Irving, TX 75062-2326
(b) To the Holding Company:
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Craig J. Cerny, Chairman
Harrington West Financial Group, Inc.
610 Alamo Pintado Road
Solvang, CA 93463
No Violations Authorized.
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25. Nothing in this Order or the Stipulation shall be construed as allowing the
Holding Company, its Board, officers, or employees to violate any law, rule, or
regulation.
IT IS SO ORDERED.
OFFICE OF THRIFT SUPERVISION
By: /s/
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C.K. Lee
Regional Director, Western Region
Date: See Effective Date on page 1
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Order to Cease and Desist
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