Another loss: A 65-year-old Texas billionaire has agreed to buy 91 percent of the struggling parent of Santa Barbara Bank & Trust, which today posted a $79.9 million first-quarter loss.
Texan Gerald J. Ford’s $500 million investment in parent Pacific Capital Bancorp (PCBC) gives the 50-year-old bank the capital boost it desperately needs to help weather the financial storms that have engulfed it since 2007, the last year it posted a profit.
After the announcement of Ford’s right to buy stock at 20 cents a share, the price of PCBC stock dropped from $4.11 Wednesday to $1.44 earlier today. The $4.11 itself reflected a dramatic surge from the market price of under $1 a few months ago, apparently because investors believed that the housing market was improving.
Pacific Capital has been hit hard by toxic real estate loans for large out-of-state residential projects. After posting a stunning $431 million loss in 2009, the bank went on a cost-slashing campaign, including eliminating dividends, which badly hurt its retirees. Some in the market hoped that the bank would show a first quarter profit this year, but that didn’t happen.
Ford, former chairman and CEO of Golden State Bancorp, will join Pacific Capital’s board of directors, along with Carl B. Webb, a senior principal of Ford Financial and former president of Golden State.
As of March 31, the bank had a Tier 1 total risk-based capital ratio of 10.2 percent, which meant it was not in compliance with ratios set by federal regulators in order to be considered “well-capitalized,” the bank said today. “As a result of the most recent examination of the bank (by regulators) we expect that the bank and the company will be subject to further supervisory action. Any such supervisory action could have a material adverse effect on the results of operations, financial condition and business of the company and bank.”
Ownership of a small-town bank three local businessmen began a half-century ago now passes to a Texan rescuer. It still has not repaid its $180 million federal TARP (Troubled Asset Relief Program) loan. Not only is the fate of the once-beloved local institution, operating from its longtime red-tile roofed headquarters at Anacapa and Carrillo streets, bemoaned in Santa Barbara today as the news sinks in, but the pain of recent cost-cutting has caused much bitterness among longtime employees and retirees. Dividends they had counted on for their “golden years” have been eliminated, and medical benefits have also been slashed or, in the case of those 65 years old, eliminated.