BANKING/FINANCE

Growing Pains: Dana Niguel Bank grew rapidly for about 18 months, nearly doubling its size to $85 million in assets. But its growth outstripped its capital last fall, and it had to retrench.

Executives of the small Dana Point bank said they were worried that they couldn’t manage the quick rise in assets.

“We cut the growth down to something we can handle,” said Robert Brown, the bank’s chairman. They found, he said, that fast growth can mean big problems.

Concerned that the bank’s ratio of capital to assets--a leading indicator of a bank’s health--was falling below regulatory limits, executives lowered the institution’s assets to $75 million by year’s end, said Charles Goodson, the bank’s chief financial officer. Still, its primary ratio was 5.5%, just below the 6% that regulators consider a benchmark for adequate capital.

Bad loans ballooned to just over 5% of total loans at the end of the year, Goodson said. But the bank managed to reduce its bad-loan ratio to 2.75% by the end of February, he said. Bankers like to keep that ratio below 1%, and regulators take note when it gets above 3%.

Meanwhile, the bank is close to naming a new president to replace Thomas Herndon, who retired four months ago. He had been president since its founding eight years ago.