Pacific Capital Bancorp, parent company of First Bank of San Luis Obispo, has sold its tax division to a private equity firm for $10 million.
The agreement with Santa Barbara Tax Products Group LLC came several weeks after company representatives said they had plans to sell its E-Filing Financial Services Division, which offered refund anticipation loans and refund transfer tax products.
Santa Barbara Tax Products Group is a new company formed by the existing management team of the tax division and has the financial backing of an investment firm, according to bank officials.
“The sale of the tax division represents an important step in the return of the company back to our traditional community bank business model,” said George Leis, president and CEO of Pacific Capital Bancorp, in a company statement.
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“Recent changes in the regulatory and legislative environments have significantly altered the industry, including Pacific Capital Bancorp’s ability to offer RAL’s this tax season, which thereby reduced the value of the business to both Pacific Capital Bancorp and potential buyers.”
Pacific Capital Bancorp, which received $5 million in cash at the closing of the transaction and expects to get $5 million more on March 15, announced its intention to sell its tax division in late December after the Office of the Comptroller of the Currency, the federal regulator of nationally chartered banks, notified company officials that the company would not receive regulatory approval to originate any refund anticipation loans during 2010.
The move comes at a time when Pacific Capital Bancorp, which posted a $40.7 million loss in the third-quarter of last year, has been trying to boost its capital.
But the $10 million sale doesn’t address the company’s capital needs or necessarily puts it any closer to the sale of the company than it had before the purchase of its tax division, said Julianna Balicka, an analyst with Keefe, Bruyette & Woods.
Balicka said the refund anticipation loan program had been a significant earnings contributor to the bank over time, contributing 43 percent of the company’s net earnings between 2000 and 2008.
The buyer, however, was unable to find a method to offer the refund anticipation loans, which Balicka noted is the more profitable product. Therefore, Pacific Capital Bancorp was offered a lower purchase price for the tax division than it had hoped.
“They (the private equity firm) paid only for the ability to offer refund transfers, which have lower profitability,” Balicka said. “This was a fire sale because regulators had forbidden them from offering RAL’s.”
While the sale of the tax division doesn’t help the company from “a capital perspective,” it “does help them out in that all resources being directed at strengthening the core bank, and that makes them a more interesting target for some acquirers that may have had cold feet about the RAL business,’’ she said.
Despite its financial struggles, Balicka noted that the company’s brand remains strong, and that whoever acquires it will inherit a “strong footprint” along the Central Coast.
“This bank is being watched closely by a number of banks,’’ she said.
— Julie Lynem
SLO Chamber elects chairman
Members of the San Luis Obispo Chamber of Commerce have elected longtime local business owner, former City Councilmember and City Planning Commissioner John Ewan as chairman of its 2010 board of directors.
Ewan founded Pacific Energy Company, a local solar and alternative energy retailer, in 1980. He is also president of SLO Green Build and has chaired organizations including ECOSLO, the chamber’s former Air Quality and Circulation Task Force, and the Air Pollution Control District.
Ewan and nine new board members will join the ranks of 11 existing board members at an installation dinner on Saturday at the Embassy Suites Hotel in San Luis Obispo.
Other new Chamber of Commerce directors include: Russ Levanway, CEO of TekTegrity; Clint Pearce, real estate manager of Madonna Enterprises; Bruce Ray, president and publisher of The Tribune; Missy Reitner Cameron, creative director of iii Design; Charlene Rosales, COO of United Way of San Luis Obispo County; Rick Stollmeyer, CEO and founder of MINDBODY; Brian Talley, president of Talley Vineyards and Talley Farms; Kristen Yetter, president of Promega Biosciences; and Ron Yukelson, associate director of Sierra Vista Regional Medical Center.
— Julia Hickey