Shares of Pacific Capital Bancorp closed down 10 percent in late trading Friday, to about $1.05, after the federal Office of the Comptroller of the Currency announced that the parent company of Santa Barbara Bank & Trust had entered into a “consent order” with the regulator.
“Consent order” is a name bank regulators are using instead of “cease and desist” order. The agency said its requirement for Pacific Capital to meet its capital ratio requirements meant it no longer considered the bank to be well capitalized.
The Office or the Comptroller of the Currency, or OCC, has called for Pacific Capital to achieve “a tier-1 risk-based capital” of at least 9 percent within four months and a ratio of total capital to risk-weighted assets of at least 12 percent within four months. The OCC called for Pacific Capital to comply or face possible liquidation.
A Pacific Capital spokeswoman downplayed the OCC announcement Friday.
“We fully disclosed this in our first quarter 10-Q (report), filed in mid-May,” bank vice president Debbie Whiteley told Noozhawk. “This has been mentioned numerous times in local news stories since that time, so there is nothing new here. As we shared back in May, this is a formal agreement that we believe reflects our commitment to strengthening certain areas of our operations.”
Texas billionaire Gerald J. Ford, who announced in April his intention to invest $500 million in the bank, said the investment will start building up Pacific Capital’s sagging capital ratios when the deal is completed in a few months.
For most banks, the minimum tier-1 risk-based capital ratio needed to be considered well capitalized is 6 percent.
The OCC order requires Pacific Capital to submit a capital plan within three months, along with a strategic plan. If the bank fails to do so, or fails to meet the minimum capital ratios, the agreement calls for Pacific Capital Bancorp’s board of directors to submit a “proposal to sell or merge the bank, or liquidate the bank.”
The order also requires the bank’s board of directors to assess and improve its executive management team, under supervision of the OCC. Various improvements to credit administration, collections and loan portfolio management are also required.
Pacific Capital’s recent call report says nonperforming assets made up 6.13 percent of its total assets as of March 31. The bank’s annualized ratio of net charge-offs, or loan losses less recoveries, to average loans was 6.62 percent for the first quarter of 2010.
A first-quarter net loss for the bank of $72.6 million followed a 2009 net loss of $405 million, as provisions for loan losses ate into the bank’s capital.
On Tuesday, Pacific Capital said it was extending a tender offer until June 30 for the holding company and the bank’s outstanding trust-preferred securities to 40 cents on the dollar from 20 cents. More than $60 million in such securities would be retired if the offer is successful.
— Noozhawk contributor Ray Estrada can be reached at news@noozhawk.com.