By Ray Estrada
The bank holding company that owns Santa Barbara Bank & Trust reported net income of $24.1 million for the three-months period that ended June 30 this year compared with $21 million for the same period that ended June 30, 2011.
The company, Pacific Capital Bancorp, is merging with Union Bank in a $1 billion deal that is supposed to close late this year amid a flurry of investor lawsuits.
Pacific Capital’s net income for the second quarter of 2012 was the highest reported for a quarter since the Ford Financial Group’s $500 million bailout of the Santa Barbara-based company in August 2010. Net income for the second quarter of 2012, included $1.4 million of merger related costs.
“Our strong performance in the second quarter reflects our successful execution of bringing high quality banking and financial services to our customers,” said Carl B. Webb, Pacific Capital chief executive officer. “This customer focus is shared by Union Bank and makes us confident that joining forces with such a strong, California-based financial services organization will position us to continue to provide this level of service to the communities we serve.”
The Ford bailout included a deal with the U.S. Treasury Department that allowed Pacific Capital to pay back only two-thirds of the $180 million it received in taxpayer dollars from the Troubled Asset Recovery Program, or TARP.
That federal bailout money was given to the company in 2008 when it faced multimillion dollar losses in a wave of bad real estate loans that almost prompted federal regulators to seize the bank’s assets. Its capital ratios needed to be shored up as it shed some 350 employees. Many of them have been hired back since the bailouts.
Pacific Capital also said this quarter that it increased regulatory capital ratios to 13.3 percent and 22.1 percent for tier 1 leverage and total risk-based capital at June 30, 2012, respectively.
Company officials said progress continues to be made in the acquisition of Pacific Capital by UnionBanCal Corp. that was announced on March 12, which requires approval from federal regulators and is subject to other closing conditions
The provision for loan losses was $317,000 for the second quarter of 2012, compared with $1.8 million for the second quarter of 2011. The decline in the provision for loan loss is attributed to lower historical loss rates, and better performance of purchased credit impaired loan portfolios than expected, Pacific Capital said.
Local real estate brokers see steady second half
Brokers at Hayes Commercial Real Estate released a mid-year report this week that shines a ray of hope the South Coast’s shaky recovery.
“We expect transaction volume to hold steady through the second half of the year,” Hayes officials said. “With interest rates at historic lows and the stability other investment classes still in flux, this is an excellent time to purchase commercial property, and buyer demand will remain strong in the near future.”
Hayes officials said the second quarter of 2012 showed that three years after the official end of the Great Recession, economic recovery is still fragile. The 3 percent growth in Gross Domestic Product during the fourth quarter of last year fizzled to around 2 percent during the first half of 2012, they said.
“Although many businesses have cash available to invest in production, the apparent crux of the slow recovery has been the vicious cycle in which consumers aren’t spending because of concern about unemployment, and unemployment isn’t improving because businesses are concerned about consumer spending,” Hayes officials said. “Europe’s prolonged debt crisis also continues to have a dampening effect on the U.S. economy.”
As for real estate, they said, the best news about the current economy is that low interest rates are expected to remain at or near historic lows for the rest of this year.
“As evidence mounts that housing prices have finally reached bottom and are starting to rise, residential real estate is on track to provide net growth to the economy this year for the first time since 2006,” Hayes officials said. “And now that cheap money isn’t only available for homes, local owner-users and investors have taken advantage of attractive financing throughout the first half of the year to buy commercial property.”
While real estate sales were not as active as 2011, when more than a million square feet of buildings were sold on the South Coast, this year is still on pace to produce nearly $250 million in sales transactions, Hayes said.
“In commercial leasing, retail property continued to be the most active sector on the South Coast in the second quarter, bringing some new names to Santa Barbara’s downtown corridor,” Hayes said. “Although leasing of office and industrial space lost some momentum in the past three months, vacancy has held steady and actually declined in most sub-markets.”
Commercial sales continued at a healthy pace in the second quarter on the South Coast. Sales of retail property again played a disproportionate role, comprising 60 percent of the dollar volume for the quarter. “Santa Barbara properties remain in demand, where dollar volume for the first half of this year has already surpassed the total for all of 2011,” Hayes said
About half of the South Coast sales this year have been purchased by owner-users. Hayes said the most notable owner-user transaction in the second quarter was MedBridge’s purchase of 121 Gray Ave, a 19,429-square-foot office property in Santa Barbara. The sale is also noteworthy for being the 14th property sold in the “Funk Zone” in as many quarters, they said.
Hayes said that among the acquisitions made by investors in the second quarter, the largest was the grocery store building at 220 N. Milpas St, which changed hands twice in April for more than $11 million. Formerly Scolari’s Market & Drug Store, the property has been leased by The Fresh Market. These transactions were part of a recent flurry of real estate activity around the Milpas Street corridor, which has included 22 commercial sales totaling more than $50 million since 2009.