“There’s no reason to believe the (Federal Deposit Insurance Corp.) will do anything,” said Pacific Capital Executive Vice President Debbie Whiteley on Monday. “There’s no event tied to this week.”
The spokeswoman for the bank holding company, which owns Santa Barbara bank & Trust, said the firm’s assets “are safe and sound and we’re not struggling.”
Whiteley said no new information on the company’s situation is due until the regularly scheduled conference call on July 30 – not June 30 – as claimed in a Santa Barbara News-Press article quoting Craig Allen, who she described as a “competitor.”
Allen, founder and president of Montecito Private Asset Management in Santa Barbara, on Monday denied he was a competitor and said he was asked by the News-Press to help write an article because “no one at the paper understood how the TARP program works.” He was referring to the federal government’s Troubled Asset Relief Program Capital Purchase Plan.
Whiteley said she spent Friday squelching rumors that some type of action was expected today. Allen said while that might not be likely, “It could still happen.”
Speculation about a some type of FDIC action also was fueled by Pacific Capital’s fading stock price, which once reached $4 a share and declined to almost $2 a share last week. The stock has fallen more than 25 percent since company’s dividend suspension was announced last week. It closed at $2.27 a share Monday on Nasdaq.
“The stock price has nothing to do with our liquidity or capital ratio,” Whiteley said.
Pacific Capital announced June 22 it had delayed dividend payments to common and preferred shareholders – including the U.S. government, which extended a $180.6 million loan to the bank under the TARP Capital Purchase Plan.
The announcement’s timing was linked to the fact that the interest payments on certain types of its preferred securities were due and the bank needed to notify the people who held them that it was deferring the payments and couldn’t pay any dividends, Whiteley said.
Treasury Department officials have said a number of banks that received the TARP funds have stopped paying dividends to the government. Under the TARP plan, Treasury officials can allow banks to temporarily halt dividend payments and resume them later.
Pacific Capital received the TARP funds from the Treasury Department in November and has posted net losses of $49.7 million since then. After cutting 300 jobs in March, the company announced a first-quarter loss of $7.9 million.
Pacific Capital operates 48 branches under such other brand names of First National Bank of Central California, South Valley National Bank, San Benito Bank and First Bank of San Luis Obispo. Deposits at those banks are insured up to $250,000 by the FDIC.
In a company update issued recently, Whiteley wrote that Pacific Capital’s capital ratios are higher than Wells Fargo and Bank of America. The update also said the company is not running out of capital,” but is raising more, “which is prudent given the weak economic conditions California is currently experiencing.”
However, last week Moody’s Investment Service downgraded Pacific Capital and its subsidiary, Pacific Capital Bank, N.A. Long-term bank deposits dropped to A3 from A2 and the bank financial strength rating dropped to C from C+. Pacific Capital Bank, N.A.’s short-term ratings were downgraded to Prime-2 from Prime-1.
TARP’s Capital Purchase Program has injected about $200 billion into more than 600 U.S. banks since October. The government received preferred shares that can yield an annual dividend of 5 percent for the first five years, followed by 9 percent per year until the capital is repaid.
The dividends are meant to be paid each quarter and were designed to ensure that taxpayer money saw a return on investment.
Some analysts estimate Pacific Capital's losses will total $25.75 million in 2009, on top of a loss of $23.84 million in 2008.