California TARP recipient hit with Fed enforcement action

Heritage Oaks Bancorp, which received $21 million in TARP funds last spring, was hit by an enforcement action from the Federal Reserve last month, the board announced Monday. 

Heritage Oaks Bancorp is a holding company for the 15-branch Heritage Oaks Bank, which serves the San Luis Obispo County, Calif. region 

The Fed agreement requires the company to: 

      Not pay dividends without the Fed's permission.

      Not incur debt without the Fed's permission.

      Submit a plan for maintaining proper levels of capital.

      Submit a plan that details expected sources and uses of cash.

      Submit progress reports on compliance with the agreement.

The enforcement action did not come as a surprise. In November - less than 8 months after getting the TARP aid - the company disclosed in SEC filings that it expected to get slapped with enforcement action and greater scrutiny from regulators.  

TARP was intended as a source of funding for healthy banks and was not meant to prop up failing institutions. Heritage Oaks has not repaid the government's TARP investment but has paid $685,000 in dividends on the preferred stock it issued to the Treasury. 

The bank had assets of $881.3 million at the close of 2009. It lost $4.7 million last year. 

Following the announcement of the Fed's enforcement action, the company's stock fell 4.05 percent, closing the day at $4.26 per share.