Santa Barbara Bank parent halts dividends on TARP money
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Pacific Capital Bancorp of Santa Barbara said it has stopped paying dividends on the capital infusion it received under the Treasury’s bank-bailout program.
The bank is one of at least three small lenders that have suspended dividends owed under the Troubled Asset Relief Program, the Wall Street Journal reported. The other two identified by the Journal: Seacoast Banking Corp. of Stuart, Fla., and Midwest Banc Holdings Inc., of Melrose Park, Ill.
The banks’ dividend troubles point up the continuing financial woes of many small lenders, even as regulators have pronounced some of the nation’s biggest banks healthy enough to operate without government capital.
Last week, 10 large banks, including JPMorgan Chase & Co. and U.S. Bancorp, announced that they had paid back $68 billion in TARP capital.
Pacific Capital, which owns Santa Barbara Bank & Trust, First Bank of San Luis Obispo and three other central California lenders, said in a statement that it was opting to conserve funds ‘during these difficult economic times.’
The company said it had suspended interest payments on its junior subordinated notes, and that as a result of the terms governing those notes it also was suspending dividend payments on all preferred and common stock issues.
A spokeswoman confirmed that the suspensions covered preferred stock the company had sold to the Treasury under the TARP program. She said TARP rules allowed banks to defer dividends owed for up to six quarters without penalty. Banks generally are paying a 5% annual dividend to Treasury under TARP. . . .
Pacific Capital, which has assets of $9.2 billion, received $181 million in TARP money last fall. The company has lost money for four straight quarters. It recorded a loss of $7.9 million in the first quarter as it set aside more money for expected charge-offs of residential construction loans and other debts. The firm also was hit by higher loan-loss provisions related to its business of lending money to individuals in advance of their federal tax refunds.
Pacific Capital said its total savings from deferring interest and dividends would be $32 million a year. ‘We would expect to resume paying dividends when such payments would be consistent with our overall financial performance and capital requirements,’ Chief Executive George Leis said in the statement.
The company’s common shares have tumbled in recent weeks, and are down 80% year to date. The stock slid 32 cents, or 8.8%, to a record low of $3.31 on Monday after the dividend suspensions were announced.
-- Tom Petruno