Two weeks after Pacific Capital Bancorp, owner of First Bank of San Luis Obispo, announced an expected $500 million capital infusion, the company has been issued another order by federal regulators designed to help improve its financial health.
The Office of the Comptroller of the Currency, the regulator of nationally chartered banks, has given Pacific Capital Bancorp until Sept. 8 to “submit an acceptable capital plan.” If it fails to do so or does not achieve minimum capital ratios, the OCC could direct the company’s board of directors to sell, merge or liquidate, according to a recent filing with the Securities and Exchange Commission.
As of March 31, the company failed to meet the minimum level for the Tier 1 leverage ratio – a bank’s capital divided by its assets – required to be considered well-capitalized according to federal regulatory standards.
Among other things, the order requires the bank to develop and implement a three-year strategic plan, a three-year capital plan, which outlines how the bank will maintain adequate capital and have a contingency plan for alternative sources of capital.
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As part of the agreement, the bank also may not pay a dividend or make a capital distribution without the prior written consent of the regulatory agency, and must develop a written credit policy and a commercial real estate concentration management program.
The enforcement action comes on the heels of an agreement with a Texas-based private equity fund that has promised the $500 million capital investment. Pacific Capital is expected to receive the capital infusion from SB Acquisition Co. LLC, a subsidiary of Ford Financial Fund, managed by managing member and billionaire Gerald J. Ford.
Under the agreement, Ford will acquire 91 percent of the Santa Barbara-based company’s common stock. After the investment, which must still be approved by federal regulators, the U.S. Treasury Department, which has given the company $188 million as part of the Troubled Asset Relief Program’s Capital Purchase Program, would own about 7 percent, while shareholders would own about 2 percent.
When the agreement was announced April 29, company officials said they were hopeful that the additional capital and its recapitalization plan would allow it to continue and strengthen its Central Coast franchise. If the deal with the private-equity firm fell through, however, the company’s capital levels “will decline further and it will need to raise more capital to satisfy its regulatory requirements,” according to the SEC filing.
Pacific Capital Bancorp posted a net loss in the first quarter of this year or nearly $80 million and last year announced a plan to reduce its workforce by about 300 employees.
- Julie Lynem