After several weeks of speculation that it would be taken over by the feds, Pacific Capital Bancorp, the holding company of Santa Barbara Bank & Trust, appears to have survived through the holiday weekend.
“All of our branches are operating extremely smoothly,” Executive Vice President Debbie Whiteley said, but she declined to comment further on what customers could expect this week.
Pacific Capital owns Santa Barbara Bank & Trust as well as banking offices in eight counties, including South Valley National Bank, San Benito Bank, First Bank of San Luis Obispo and First National Bank of Central California.
The past few months have been rough, and what remains for the battered bank is yet to be seen. Pacific Capital announced last week that it would suspend dividend payments to shareholders, its credit rating was lowered to junk bond status and it announced in March that it would lay off 300 employees.
According to the company’s filings with the Securities and Exchange Commission, it lost nearly $8 million in the first quarter of 2009, compared with its net income of $72.5 million for the same quarter last year, even after receiving $180.6 million in TARP funds.
The filings report cites multiple factors for the loss, but one of the biggest came when the bank was forced to provide for loan losses of $155.7 million from the company’s Refund Anticipation Loans. Pacific Capital is one of the nation’s top issuers of that type of loan, which has been highly lucrative and brought in $140 million in net interest for the company in 2009’s first quarter. The loans, which are issued to borrowers after they file a tax return, are short term and reach interest rates of 100 percent or more. Fees on the loans increased $42.8 million from last year.
Still, the company was unable to sell off those debts as it had done in years past because of weak credit markets. During the first quarter of last year, the company sold off $2.21 billion of the loans to be secured. But because they couldn’t be sold in 2009, they had to be included on the bank’s balance sheets, affecting capital ratios. Even when that wasn’t an option, the bank was able to raise more than $1.5 billion in brokered CDs and funding lines, which were used during the first quarter.
In early April, the company entered into a memorandum of understanding with the Office of the Comptroller of the Currency. Pacific Capital pledged to manage risk within its commercial and residential real estate portfolios, enforce collection for delinquent residential real estate loans, report residential real estate loans in a timely manner and make sure that risks associated with its commercial loan portfolio were reflected on the company’s books.
The bank also agreed to maintain a Tier 1 leverage ratio of 8.5 percent that will be raised in September as well. Applying Tier 1 leverage guidelines is an action the Federal Reserve can require of any bank holding company at any time, if supervision of the company is warranted.
— Noozhawk staff writer Lara Cooper can be reached at lcooper@noozhawk.com.
