While posting another multimillion-dollar quarterly loss, Pacific Capital Bancorp officials in Santa Barbara said Tuesday that the company has satisfied “significant conditions” to close a $500 million investment in the company by SB Acquisition Company LLC, a subsidiary of Ford Financial Fund LP. They anticipate closing the deal Aug. 31.
Pacific Capital announced a net loss of $61 million, or $1.24 per share, for the second quarter of 2010, compared with a net loss of $362.6 million, or $7.80 per share, for the same period a year ago.
The company said it has reached a key agreement with the U.S. Department of the Treasury on the treatment of the preferred stock issued by the company under the Troubled Asset Relief Program, or TARP, and is waiting for regulatory approval of the proposed Ford investment. Pacific Capital has taken $188 million in TARP funds and said it can’t yet pay it back.
“We are pleased that we have reached an agreement with Treasury and that Ford has indicated to us that we have made sufficient progress on our tender offers,” George Leis, president and chief executive officer of Pacific Capital, said in a news release. “These were clearly two of the most critical conditions to completing the Ford investment, and their resolution allows us to see a clear path to a targeted closing by the end of August.”
Leis said that when the deal closes, “we expect our capital ratios will again exceed the ratios required to be considered ‘well capitalized’ under generally applicable regulatory guidelines.”
“In our 35-year history in the financial services sector, we have been highly selective in identifying financial services partners, focusing on quality companies that meet our high standards,” Texas billionaire Gerald Ford, managing member of the Ford Financial Fund, said in a statement two months after he offered to buy 91 percent of Pacific Capital’s stock. “We believe Pacific Capital is one of the great community bank franchises in California. We are pleased that we are making such good progress towards completing our investment in this franchise, which will provide the financial support that will allow the bank to continue serving its customers and actively support its community partners.”
Pacific Capital officials said they have entered into a “definitive exchange agreement” with the Treasury providing for the exchange of 180,634 shares of preferred stock, having an aggregate liquidation amount of $180.6 million, issued by the company to the Treasury Department under TARP for shares of a new Series D “fixed-rate cumulative mandatorily convertible preferred stock,” with an aggregate liquidation amount equal to $180.6 million.
Complete terms and conditions of the Treasury exchange agreement will be detailed in a filing made on Form 8-K by July 30 with the Securities and Exchange Commission. A copy of the Form 8-K filing will be accessible online.
Bank officials will host a conference call at 8 a.m. Tuesday to discuss second-quarter 2010 financial results and operational highlights.
The public can listen in to the live quarterly conference call through the investor relations page of the company’s Web site at www.pcbancorp.com. For those who can’t listen to the broadcast, a replay of the conference call will be available shortly after the call at the same site.
Federal regulators have required Pacific Capital to submit a capital plan by Sept. 8. Regulators said if the bank can’t meet the minimum capital ratios, Pacific Capital’s board of directors must submit a proposal to sell or merge the bank or liquidate it.
Since 2008, the company has laid off more than 315 employees and cut retiree benefits. A first-quarter net loss for the bank of $72.6 million followed a 2009 net loss of $405 million, as loan losses cut the bank’s capital.
The company’s noninterest income was $7.3 million in the second quarter of this year, compared with $11 million in the second quarter of 2009. The decrease is primarily attributable to an increase in write downs on other real estate owned.
The company recorded a provision for loan losses of $56.7 million for the second quarter of 2010, compared with $194.1 million in the same period of the prior year and a provision of $99.9 million for the first quarter of 2010. The decrease in the provision for loan losses reflects a lower level of net charge-offs from the same period a year ago and in the preceding quarter. However, the overall allowance for loan losses increased to 6.01 percent of total loans at June 30, 2010 , from 5.80 percent at March 31, 2010.
Click here to read a letter to the community from Pacific Capital Bancorp.
— Noozhawk contributor Ray Estrada can be reached at news@noozhawk.com.