Chapel Hill-based Harrington Bank ads tell customers, "You deserve banking like this." In a 28-page report issued July 21, federal regulators disagreed.
They notified the bank that it must stop issuing land and construction loans, develop more stringent loan requirements and bolster its capital. Under the supervisory agreement reached with the Office of Thrift Supervision (OTS), the primary regulator of thrift organizations including savings banks and loan associations, the bank will face federal takeover unless it does just that by the end of the calendar year.
Harrington, which was named the large business of the year by the Chapel Hill-Carrboro Chamber of Commerce for 2008, faces a far different plight now.
OTS found that the bank "failed to comply with the requirements of laws and regulations to which the Association is subject, failed to adopt and implement appropriate and comprehensive operational and risk management practices and strategies, and failed to identify and correct other deficiencies and weaknesses in its operations."
The agreement outlines that Harrington must:
• achieve a risk-based capital ratio of 8 to 12 percent and prepare and maintain a written plan to keep that level;
• reduce operating expenses, adopt a liquidity plan and create more scrupulous loan requirements;
• stop originating or purchasing loans for new construction, nonresidential real estate and land;
• OK all executive pay changes with OTS.
Bank President and CEO Larry Loeser is on vacation until Monday. Harrington officials are directing media inquiries to him when he returns.
Harrington Bank has a main office on N.C. Hwy 54 and Farrington Road and has two branches in Chapel Hill and one in Raleigh.
You can find the full agreement here.
Triangle Business Journal, which broke this story Friday morning, originally reported that Harrington was issued a "cease and desist order." TBJ has since amended that to a "supervisory agreement."