Pacific Capital Bancorp Reports Net Income Of $20.8 Million In Fourth Quarter 2010

Pacific Capital Bancorp (Nasdaq: PCBC), a community bank holding company, reported net income of $20.8 million, or $0.66 per diluted share for the three months ended December 31, 2010, and $25.7 million, or $0.83 per diluted share, for the four months since the closing of the $500 million investment from a wholly-owned subsidiary of Ford Financial Fund, L.P. on August 31, 2010.

“We are pleased with the results Pacific Capital Bancorp has achieved over the past four months,” said Carl B. Webb, Chief Executive Officer. “Following the completion of our recapitalization transactions, we have resumed our position as the premier community banking franchise along the Central Coast of California. We have returned to the basic community banking principles that this franchise was built upon, and we are now in a position to fully serve the financial services needs of our customers with a broad array of lending, depository and wealth management products and services.”

During the fourth quarter of 2010, Pacific Capital Bancorp completed its shareholders rights offering, raising gross proceeds of $76.4 million, and completed its 1-for-100 reverse stock split of its common stock, reducing the current number of outstanding shares from approximately 3.29 billion to approximately 32.9 million (without giving effect to the treatment of fractional shares) bringing the Company’s book value per share to $19.53 at December 31, 2010.

Pacific Capital Bancorp and its wholly-owned banking subsidiary, Pacific Capital Bank, N.A. (the “Bank”), exceed the ratios required to be considered ”well capitalized” under generally applicable regulatory guidelines, as well as capital levels that the Bank is required to meet under its agreement with the Office of the Comptroller of the Currency. Tier 1 leverage capital ratios were 9.2% and 10.3% and total risk-based capital ratios were 14.6% and 16.4% at December 31, 2010, for the Bank and Company, respectively.

Impact of Push Down Accounting

On August 31, 2010, a wholly-owned subsidiary of Ford Financial Fund, L.P. became the majority owner of the Company through a $500 million investment. As a result of this change in control, the Company was required to account for this transaction using the acquisition method of accounting and applied “push down accounting” based on authoritative accounting guidance. Accordingly, the Company was required to allocate the aggregate purchase price of $500 million to the assets, liabilities and non-controlling interests of the Company based on their respective fair values. This included recording the Company’s loan portfolio at fair value under “purchased credit-impaired loan” accounting guidance. Fair value is calculated based on discounted estimated future expected cash flows. This accounting allows future credit losses related to the purchased loan portfolio to be brought forward by reducing the carrying value of the loans as part of push down accounting. Authoritative accounting guidance also requires that the statements of financial position and results of operations from periods prior to the transaction be labeled as the predecessor company and periods subsequent to the transaction be labeled as the successor company.

Statement of Operations

Net interest income was $54.0 million and $72.2 million for the three and four months ended December 31, 2010, respectively. Net interest margin was 3.75% for the same respective periods. The improvement in net interest margin from prior periods is primarily the result of the fair valuation of interest-earning assets and interest-bearing liabilities, the repricing of higher interest bearing deposits, and the purchase of investment securities with available cash.

The Company recorded provision for loan losses of $535,000 and $590,000 for the three and four months ended December 31, 2010, respectively, which related only to loans originated subsequent to the closing of the investment on August 31, 2010. The Company expects provision for loan losses to increase in 2011 as it expands loan originations.

Noninterest income was $16.1 million and $20.1 million for the three and four months ended December 31, 2010, respectively. The improvements in noninterest income are primarily from the gains on sales of loans and other real estate owned.

Noninterest expense was $48.7 million and $65.9 million for the three and four months ended December 31, 2010, respectively. Noninterest expense trended lower due to a decrease in employee head count, a reduction in occupancy expense and lower depreciation expense. The Company expects noninterest expense to increase in 2011 due to future investments in technology and personnel.

Annual Report on Form 10-K

The Company intends to file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 2010 on or before March 31, 2011. This report can be accessed at the Securities and Exchange Commission’s website, www.sec.gov. Shortly after filing, it is also available free of charge at the Company’s website, www.pcbancorp.com or by contacting the Company’s Investor Relations Department.

About Pacific Capital Bancorp

Pacific Capital Bancorp, with $6.1 billion in assets, is the parent company of Pacific Capital Bank, N.A., a nationally chartered bank that is headquartered in Santa Barbara and operates 47 branches throughout the Central Coast of California. The Company’s website is www.pcbancorp.com.

Forward Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward‐looking statements to be covered by the safe harbor provisions for forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business prospects, strategic alternatives, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, acquisition and divestiture opportunities, plans and objectives of management for future operations, and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. Words such as “will likely result,” “aims,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of these words and similar expressions are intended to identify these forward-looking statements.

Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the regulatory environment, the economy and other future conditions. The Company’s actual results may differ materially from those contemplated by the forward-looking statements. The Company cautions you against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in reports filed by the Company with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, as amended, and with reference to the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on October 5, 2010, and subsequent Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update forward‐looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, whether as a result of new information, future developments or otherwise, except as may be required by law.

                                 

Pacific Capital Bancorp
Consolidated Balance Sheets
(in thousands)
         
Successor Company Predecessor Company
12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
(unaudited) (unaudited) (unaudited) (unaudited)
Assets
Cash and due from banks $ 45,820 $ 49,741 $ 50,840 $ 20,013 $ 45,593

Interest bearing demand deposits in other financial institutions
450,044 844,919 1,331,674 1,109,927 878,823
Trading assets 4,640 5,286 5,403
Investment securities 1,278,100 869,074 825,958 944,539 1,153,687
Loans held for sale 16,512 25,570 17,300 26,629 19,211
Loans held for investment 3,761,517 3,948,217 4,603,829 4,887,138 5,166,431
Allowance for loan and lease losses   (520 )   (55 )   (276,900 )   (283,412 )   (272,852 )
Net loans held for investment 3,760,997 3,948,162 4,326,929 4,603,726 4,893,579
Goodwill and other intangible assets 93,700 99,418 7,892 8,641 9,289
Premises and equipment, net 71,465 74,904 64,654 68,304 71,934
FHLB and other investments 84,235 79,405 82,112 84,774 84,777
Other assets 284,675 303,976 313,455 311,468 304,701
Assets from discontinued operations           100,772     185,812     75,258  
Total assets $ 6,085,548   $ 6,295,169   $ 7,126,226   $ 7,369,119   $ 7,542,255  
 
Liabilities
Deposits:
Noninterest bearing demand deposits $ 1,099,260 $ 1,105,773 $ 1,021,836 $ 1,051,008 $ 1,076,916
Interest bearing deposits:
NOW accounts 936,728 882,289 925,335 963,770 938,336
Money market deposit accounts 314,362 278,219 274,386 268,153 287,271
Other savings deposits 434,897 370,985 356,385 372,132 353,712
Time deposits   2,121,541     2,523,515     2,696,262     2,762,898     2,717,584  
Total interest bearing deposits 3,807,528 4,055,008 4,252,368 4,366,953 4,296,903
Total deposits 4,906,788 5,160,781 5,274,204 5,417,961 5,373,819
 

Securities sold under agreements to repurchase and Federal funds purchased
321,237 325,143 308,255 316,808 322,131
Long-term debt and other borrowings 117,184 121,516 1,118,657 1,076,951 1,311,828
Other liabilities 97,656 110,242 100,840 92,209 94,616
Liabilities from discontinued operations           100,772     185,812     75,258  
Total liabilities 5,442,865 5,717,682 6,902,728 7,089,741 7,177,652
 
Shareholders' equity   642,683     577,487     223,498     279,378     364,603  
Total liabilities and shareholders' equity $ 6,085,548   $ 6,295,169   $ 7,126,226   $ 7,369,119   $ 7,542,255  
 
 
                                 

Pacific Capital Bancorp
Consolidated Statements of Operations
(dollars and shares in thousands, except per share amounts)
     
Successor Company Predecessor Company
Three Months Four Months Eight Months Three Months Twelve Months
Ended Ended Ended Ended Ended
December 31, December 31, August 31, December 31, December 31,
2010 2010 2010 2009 2009
(unaudited) (unaudited) (unaudited) (unaudited)
Interest income
Loans $ 56,496 $ 76,878 $ 166,581 $ 70,920 $ 303,057
Trading assets 143 70 5,131
Investment securities 5,343 6,872 20,052 9,919 42,759
Other   733     990     2,924     656     2,325  
Total interest income 62,572 84,740 189,700 81,565 353,272
Interest expense
Deposits 4,374 6,754 46,510 18,490 83,629

Securities sold under agreements to repurchase and Federal funds purchased
1,452 1,771 5,392 2,116 10,127
Long-term debt and other borrowings   2,721     4,043     28,426     12,807     59,885  
Total interest expense   8,547     12,568     80,328     33,413     153,641  
Net interest income 54,025 72,172 109,372 48,152 199,631
Provision for loan losses   535     590     171,583     37,639     352,398  
Net interest income/(loss) after provision for loan losses 53,490 71,582 (62,211 ) 10,513 (152,767 )
Noninterest income
Service charges and fees 5,783 7,579 14,901 6,311 24,884
Trust and investment advisory fees 5,128 6,743 14,035 5,390 21,247
(Loss)/gain on securities, net (1 ) (32 ) 5,667 10,729 10,970
Other   5,146     5,782     1,194     (1,557 )   460  
Total noninterest income 16,056 20,072 35,797 20,873 57,561
Noninterest expense
Goodwill impairment 128,710
Salaries and employee benefits 21,047 28,128 58,816 23,530 103,228
Net occupancy expense 5,693 7,711 15,494 7,421 26,214
Other   21,995     30,045     75,653     21,623     122,089  
Total noninterest expense   48,735     65,884     149,963     52,574     380,241  
Income/(loss) before income tax benefit 20,811 25,770 (176,377 ) (21,188 ) (475,447 )
Income tax benefit           (4,742 )   (5,278 )   (18,823 )
Net income/(loss) from continuing operations 20,811 25,770 (171,635 ) (15,910 ) (456,624 )
(Expense)/income from discontinued operations, net of tax (25 ) (26 ) (1,429 ) (1,548 ) 35,363
Gain on sale of discontinued operations, net of tax           8,160          
(Expense)/income from discontinued operations, net (25 ) (26 ) 6,731 (1,548 ) 35,363
Net income/(loss) 20,786 25,744 (164,904 ) (17,458 ) (421,261 )
Dividends and accretion on preferred stock           6,938     2,544     9,996  
Net income/(loss) applicable to common shareholders $ 20,786   $ 25,744   $ (171,842 ) $ (20,002 ) $ (431,257 )
 
Income/(loss) from continuing operations:
Basic $ 0.68 $ 1.02 $ (359.07 ) $ (34.07 ) $ (977.78 )
Diluted $ 0.66 $ 0.83 $ (359.07 ) $ (34.07 ) $ (977.78 )
Income/(expense) from discontinued operations:
Basic $ $ $ 14.08 $ (3.31 ) $ 75.72
Diluted $ $ $ 14.08 $ (3.31 ) $ 75.72
Income/(loss) applicable to common shareholders per share:
Basic $ 0.68 $ 1.02 $ (359.50 ) $ (42.83 ) $ (923.46 )
Diluted $ 0.66 $ 0.83 $ (359.50 ) $ (42.83 ) $ (923.46 )
Average number of common shares - basic 30,463 25,340 478 467 467
Average number of common shares - diluted 31,354 31,113 478 467 467
Dividends declared per common share $ $ $ $ $ 11.00
 
 
                                       

Pacific Capital Bancorp
Consolidated Average Balances and Annualized Yields (unaudited)
 
          Successor Company

For the Three Months EndedDecember 31, 2010

For the Four Months EndedDecember 31, 2010
Average

Balance
Income Rate Average

Balance
Income Rate
(dollars in thousands)
Assets

Interest bearing demand deposits in other financial institutions
$ 667,507 $ 406 0.24 % $ 740,199 $ 599 0.24 %
Investment securities available for sale:
Taxable 881,847 3,166 1.42 % 825,991 3,976 1.44 %
Non-taxable (1)   213,283   2,177 4.08 %   214,987   2,896 4.04 %
Total securities 1,095,130 5,343 1.94 % 1,040,978 6,872 1.98 %
Loans: (2)
Commercial 490,811 4,578 3.70 % 502,650 7,655 4.56 %
Real estate - commercial (3) 2,101,915 35,501 6.76 % 2,114,527 46,812 6.64 %
Real estate - residential 1 to 4 family 1,194,706 15,305 5.12 % 1,202,802 20,860 5.20 %
Consumer   79,801   1,112 5.53 %   80,422   1,551 5.77 %
Total loans, gross 3,867,233 56,496 5.84 % 3,900,401 76,878 5.91 %
Other interest earning assets   82,364   327 1.58 %   81,636   391 1.43 %
Total interest earning assets 5,712,234 62,572 4.38 % 5,763,214 84,740 4.41 %
Noninterest earning assets   520,993   519,755
Total assets $ 6,233,227 $ 6,282,969
 
Liabilities and shareholders' equity
Interest bearing deposits:

Savings and interest bearing transaction accounts
$ 1,623,480 1,335 0.33 % $ 1,605,435 1,821 0.34 %
Time certificates of deposit   2,333,723   3,039 0.52 %   2,379,972   4,933 0.62 %
Total interest bearing deposits 3,957,203 4,374 0.44 % 3,985,407 6,754 0.51 %
Borrowed funds:

Securities sold under agreements to repurchase and Federal funds purchased
325,002 1,452 1.77 % 325,442 1,771 1.63 %
Other borrowings   115,127   2,721 9.38 %   145,611   4,043 8.31 %
Total borrowed funds   440,129   4,173 3.76 %   471,053   5,814 3.69 %
Total interest bearing liabilities 4,397,332 8,547 0.77 % 4,456,460 12,568 0.85 %
Noninterest bearing demand deposits 1,116,768 1,112,944
Other noninterest bearing liabilities 106,723 109,607
Shareholders' equity   612,404   603,958

Total liabilities and shareholders' equity
$ 6,233,227 $ 6,282,969
   
Net interest spread 3.61 % 3.56 %
       
Net interest income/margin $ 54,025 3.75 % $ 72,172 3.75 %
 

(1)
 

Because of the Company's tax position, the yield on tax exempt investments is not reported on a tax equivalent basis.

(2)

Nonaccrual loans are included in loan balances. Interest income includes related fee income.

(3)

Commercial real estate loans include multi-family residential real estate loans.
 
 
                                 

Pacific Capital Bancorp
Consolidated Average Balances and Annualized Yields (unaudited)
 
          Predecessor Company

For the Eight Months EndedAugust 31, 2010

For the Twelve MonthsEnded December 31, 2009
Average

Balance
Income       Rate Average

Balance
Income Rate
(dollars in thousands)
Assets

Interest bearing demand deposits in other financial institutions
$ 1,030,268 $ 2,241 0.33 % $ 603,223 $ 1,635 0.27 %
Federal funds sold 329 1 0.30 %
Securities:
Trading assets 4,998 143 4.30 % 106,623 5,131 4.81 %
Investment securities available for sale:
Taxable 737,155 12,325 2.51 % 854,005 27,968 3.27 %
Non-taxable (1)   238,375   7,727 4.86 %   306,547   14,791 4.83 %
Total securities 980,528 20,195 3.09 % 1,267,175 47,890 3.78 %
Loans: (2)
Commercial 820,380 24,034 4.40 % 1,088,847 49,778 4.57 %
Real estate - commercial (3) 2,511,673 90,159 5.38 % 2,785,416 158,558 5.69 %
Real estate - residential 1 to 4 family 935,245 33,438 5.36 % 1,086,122 62,798 5.78 %
Consumer   574,519   18,950 4.95 %   632,350   31,923 5.05 %
Total loans, gross 4,841,817 166,581 5.16 % 5,592,735 303,057 5.42 %
Other interest earning assets   83,364   683 1.23 %   80,382   689 0.86 %
Total interest earning assets 6,935,977 189,700 4.10 % 7,543,844 353,272 4.68 %
Noninterest earning assets 216,057 381,358
Total assets from discontinued operations   225,897   668,428
Total assets $ 7,377,931 $ 8,593,630
 
Liabilities and shareholders' equity
Interest bearing deposits:

Savings and interest bearing transaction accounts
$ 1,591,632 4,607 0.43 % $ 1,849,045 13,788 0.75 %
Time certificates of deposit   2,706,043   41,903 2.33 %   2,580,600   69,841 2.71 %
Total interest bearing deposits 4,297,675 46,510 1.63 % 4,429,645 83,629 1.89 %
Borrowed funds:

Securities sold under agreements to repurchase and Federal funds purchased
314,009 5,392 2.58 % 336,434 10,127 3.01 %
Other borrowings   1,127,676   28,426 3.79 %   1,441,866   59,885 4.15 %
Total borrowed funds   1,441,685   33,818 3.53 %   1,778,300   70,012 3.93 %
Total interest bearing liabilities 5,739,360 80,328 2.11 % 6,207,945 153,641 2.47 %
Noninterest bearing demand deposits 1,020,775 1,003,647
Other noninterest bearing liabilities 103,257 113,612
Total liabilities from discontinued operations 225,897 668,428
Shareholders' equity   288,642   599,998

Total liabilities and shareholders' equity
$ 7,377,931 $ 8,593,630
   
Net interest spread 1.99 % 2.21 %
       
Net interest income/margin $ 109,372 2.37 % $ 199,631 2.65 %
 

(1)
 

Because of the Company's tax position, the yield on tax exempt investments is not reported on a tax equivalent basis.

(2)

Nonaccrual loans are included in loan balances. Interest income includes related fee income.

(3)

Commercial real estate loans include multi-family residential real estate loans.
 
 
                   

Pacific Capital Bancorp
Key Financial Ratios (unaudited)
(dollars and shares in thousands, except per share amounts)
 

SuccessorCompany

PredecessorCompany
Three Months Three Months
Ended Ended
December 31, December 31,
2010 2009
 
Financial Ratios, Consolidated:
Return on average equity 13.47 %
Return on average assets 1.32 %
 
Financial Ratios, PCBNA:
Return on average equity 14.13 %
Return on average assets 1.39 %
 

SuccessorCompany

PredecessorCompany
December 31, December 31,
2010 2009
 
Capital Ratios, Consolidated:
Tier 1 leverage ratio 10.31 % 5.34 %
Tier 1 risk-based capital ratio 16.07 % 7.81 %
Total risk-based capital ratio 16.38 % 10.40 %
 
Capital Ratios, PCBNA:
Tier 1 leverage ratio 9.17 % 5.51 %
Tier 1 risk-based capital ratio 14.26 % 8.09 %
Total risk-based capital ratio 14.58 % 10.69 %
 
 
Book value per share of common stock:
Shares of common stock outstanding 32,901 467
Book value per share of common stock $ 19.53 $ 401.92
Tangible book value per share of common stock $ 16.69 $ 382.04

Copyright Business Wire 2010

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