Texas banker Gerald J. Ford hit town Tuesday with a $500 million investment in Santa Barbara Bank & Trust, which means that the 50-year-old institution is able to meet federal capital requirements and not close or be sold.
“The money’s in the bank,” Ford announced this afternoon. The half-billion arrived by wire at 7:30 a.m. on Tuesday, said George Leis, who had been chief executive officer of the bank and its parent Pacific Capital Bancorp. As of now he’s board president and chief operating officer, as Ford becomes chairman of the board. Carl B. Webb, senior principal with the Ford Financial Fund, was appointed chief executive officer and chairman of the bank’s board.
Ford said the money transfusion assures that the bank has “more than” met demands by federal regulators, who had given Pacific Capital until September 8 to boost its capital levels or come up with a plan to be sold, merged or liquidated.
Not only can the landmark bank now kickstart its lending program, which had been on hold, officials said, but Ford’s enormous financial power and enthusiasm means that he can step in with more capital.
The investment provides “a very good platform for growth,” Webb said. “We’ll still be locally owned. The decisions will be made here.” It also gives the Ford group 86 percent of Pacific Capital stock, with the Treasury taking a major discount to accept another 12 percent to settle its $180,000 TARP (Troubled Assets Relief Program). But Ford said he wanted to “get the Treasury out as soon as we can” to regain the shares.
It also means that current stockholders will see their shares diluted down to two percent of value. The bank’s parent, which also owns 48 branches up the coast, is saddled with toxic, non-performing loans, and lost 142 million during the first two quarters of 2010. Pacific Capital Bancorp stock closed on Tuesday at 84 cents.
Webb was optimistic at Tuesday’s press conference. In a few years, he promised, “it will be a significantly different bank,” although no major changes were announced. In March Leis agreed to a new two-year contract, paying $600,000 a year, plus benefits and bonuses. The contract extends until April 1, 2012.