Feds give Pacific Capital September deadline to raise cash
Pacific Capital Bancorp, parent of Santa Barbara Bank & Trust and the largest banking company in the Tri-Counties, is under new orders from regulators to boost its capital levels by September or potentially sell or liquidate the bank.
Pacific Capital, which is in talks over a $500 million rescue that would transfer control of the company to Texas billionaire Gerald Ford, agreed to a consent order from the Office of the Comptroller of the Currency, or OCC, on May 11. Under it, the bank must by Sept. 8 boost its tier one leverage ratio — its capital divided by its assets — to 9 percent and its risk-based capital ratio to 12 percent. On March 31, the ratios were 4.6 percent and 10.1 percent, respectively.
If Pacific Capital can’t meet the goals, the OCC can ask Pacific Capital for a plan to sell or liquidate the bank and order the company to act on it.
The consent order from regulators comes just after Pacific Capital announced an $83 million loss for the first quarter and a $500 million transaction that would give as much as 91 percent of the company to Ford, a banking veteran with a history of buying troubled institutions at the bottom of the market and selling them at the top.
The deal, which has a walk-away date of Oct. 26, asks shareholders to endure massive dilution. It also asks debt holders and the U.S. Treasury, which still has a $180 million investment of Troubled Asset Relief Program money in Pacific Capital, to take hits of up to 80 percent on their investments.
The bank said the Ford transaction is crucial. But even if it gets the Ford deal done, Pacific Capital may need to raise additional money to meet the demands of regulators, the bank said in filings.
“If we fail to consummate the investment and the recapitalization or otherwise fail to raise sufficient capital, our ability to continue as a going concern would be in doubt and we may file for bankruptcy and/or the bank may be closed by the OCC and placed into FDIC receivership,” Pacific Capital said in regulatory filings.
Pacific Capital also entered a written agreement with the Federal Reserve Bank. In it, the company said it will not pay out dividends, buy back stock or take on debt without the Fed’s approval and that it will come up with a plan to fix its capital problems within 90 days.
The most recent orders from the OCC and the Fed follow a memorandum of understanding from the OCC that Pacific Capital disclosed in April 2009. That document laid out several capital targets for Pacific Capital in 2009, but the bank missed the goals each time.