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Pacific Capital Bancorp (Nasdaq: PCBC) announced today that its wholly-owned subsidiary, Santa Barbara Bank & Trust, N.A., has completed the early redemption of all of its outstanding subordinated debentures. The subordinated debentures, which had a $35 million principal amount and were scheduled to mature in December 2013, were redeemed at a price equal to 100% of the principal amount, plus accrued interest on the subordinated debentures through December 19, 2011. As a result of this redemption, the Company will recognize a pre-tax charge of approximately $5 million during the fourth quarter of 2011 related to the non-cash fair valuation of the subordinated debt in connection with the Company’s recapitalization in August 2010. This redemption will reduce interest expense by approximately $1.1 million (pre-tax) in 2012.
Pacific Capital also announced today that it has instructed the trustees for its outstanding trust preferred securities to end the deferral of its obligation to make regularly scheduled interest payments on the trust preferred securities. To end this deferral, Pacific Capital deposited an aggregate of $5.6 million with the trustees for the trust preferred securities for the upcoming interest payment dates. The deposits, when paid by the trustees to the holders of the trust preferred securities, will bring Pacific Capital’s obligations current under the applicable agreements. Because Pacific Capital has accrued the expense of each deferred interest payment at the normal rate on a compounded basis, the cash payment of the accrued interest will not have any impact on the Company’s earnings for the fourth quarter of 2011.
“Early redemption of these subordinated debentures further evidences the financial strength of our community bank,” said Carl B. Webb, Chief Executive Officer of Pacific Capital Bancorp. “In the 13 months following our recapitalization, we have reported $84 million in net income, as we effectively managed credit issues from the Company’s legacy loan portfolio. Today, PCB is among the most well capitalized financial institutions in the country, with 20.0% in risk based capital at September 30, 2011. Our core deposit base is growing, we are lending throughout our footprint, and we are underway with a core system upgrade that sets the stage for our continued growth.”