Pacific Capital Bancorp Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of California regional bank Pacific Capital Bancorp (Nasdaq: PCBC  ) slid 16% in intraday trading on higher-than-average volume.

So what: There's no particular news for the bank today, so what we're likely seeing is typical penny-stock volatility. Investors may also be continui ng to digest what the company's rights offering will mean for shares. Launched in late August, the offering could issue up to 727 million new shares at a price of $0.20 each.

Now what: What can I say really? The bank has been absolutely battered by the recession and housing downturn. At the end of the second quarter, 8.6% of the bank's assets were nonperforming. The bank did receive a $500 million investment from Gerald Ford's private equity fund, but the fund picked up all of its shares at $0.20 and the majority of its investment was in preferred shares, which puts the fund well ahead of common shareholders. "Avoid" isn't nearly a strong enough word to describe how investors should treat this stock.

Interested in more info on Pacific Capital Bancorp? Add it to your watchlist here by clicking here.

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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy assures you no Wookiees were harmed in the making of this article.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 28, 2010, at 10:38 PM, stockswatcher wrote:

    The Ford fund already converted its preferred shares to common stock last month, so your point doesn't have any merit.

  • Report this Comment On November 01, 2010, at 11:15 AM, TSIF wrote:

    The individual shareholder righst of 15 shares for one just started hitting the brokerage accounts the last week. All the new shares are starting to trade. Per my pitches on PCBC the real question is why it ever stayed above $0.70 after the rights date. My target was $0.40, still giving a decent profit to those buying rights. Good luck.

  • Report this Comment On November 03, 2010, at 7:28 AM, OliAnMo wrote:

    Ford now owns approx 90% of the bank. I believe the balance sheet is pretty clean after the writeoffs. He'll slowly wrangle it back to profitability. When the rights offering is done and the price done slipping, they will eventually do a reverse split of 100:1, to get out of the penny stock territory. I believe this bank is not dead, and will still see some good days. Santa Barbara where it is based is an affluent community with lot of money, expensive real property. I believe this is a turnaround story to watch.

  • Report this Comment On January 19, 2011, at 8:49 PM, OCCQUESTIONS wrote:

    January 12, 2011

    Sandra Sheffield, Vice President Office of the Comptroller of the Currency Case # 01394465

    SBA Credit Administration

    Pacific Capital Bank

    591 Camino de la Reina, Suite 1010

    San Diego, CA. 92108-3112

    619.260.4483 office

    Dear Mrs. Sheffield,

    Re: Loan Service Department-----SBA Banking Questions asked of Pacific Capital Bank----Proposal requested by George C. Lazar

    Sandra Sheffield, Please see that all questions asked below of Mr. Carl B. Webb and Mr. George S. Leis are answered by an Officer of Pacific Capital Bancorp! All communication with George C. Lazar has ended per his email December 10, 2011!

    All Pacific Capital Banks documents and communication are seen at www.pacificcapitalbankquestions.com -- www.fdicquestions.com and www.occquestions.com

    1) Sandra Sheffield, Mr. Carl B. Webb and Mr. George S. Leis-----Why has Pacific Capital Bank Breached, the 2007 forbearance agreement and raised my SBA Loan debt with Pacific Capital Bank from $453,969.99 to $472,941.00? This action or mistake ($18,971.01) by Pacific Capital Bank goes against the 2007 forbearance and workout agreement! P. 6 b. of the 2007 Forbearance and Workout Agreements States “Bank will not require Borrower to pay immediately the ten accrued but unpaid monthly payments of principal and interest due for the months from October 2006 through July 2007 ( the “Deferred Payments”) nor any accrued but unpaid late charges, including but not limited to the late charges assessed on the Deferred Payments (the “deferred Late Charges”) on the following terms and conditions:” Paragraph B. I. P. 6 “Bank will amortize the modified payment Amount, as defined above, so as to collected the Deferred Payments over the remaining life of the Loan.”

    2) Sandra Sheffield, Mr. Carl B. Webb and Mr. George S. Leis-----Why does Pacific Capital Bank charge Attorney fees after the 2007 forbearance and workout agreement? This action or mistake goes against this 2007 Forbearance and Workout Agreement! Please see that Pacific Capital Bank provides a detailed “Bill of Particulars” related to all Attorney fees and costs claimed by Pacific Capital Bank from 2007 to present! George C. Lazars Attorney legal fees 2007 (Breach of Contract) invoices from August 22, 2007 for $1,078.45--September 13, 2007 for $850.00—September 25, 2007 from Borrowers Deposit of $518.00 and October 1, 2007 of $25.00, that have been charged? Pacific Capital Bank legal costs should not occur after the Sandra Sheffield’s signed forbearance agreement July 2, 2007! Please review P. 4 forbearance and workout agreement Paragraph D.! George C. Lazar stated in this forbearance agreement signed by Sandra Sheffield! “In the event that funds remain in the Suspense Account after payment of all obligations specified in subsections (B) and (C), the balance will be returned to Borrower and account closed.”

    3) Please explain Pacific Capital Banks actions on P. 4 of the 2007 Forbearance and Workout Agreement # 3 A. Modified Payment “A. Borrower will be entitled to make monthly payments of principal and interest (the “Modified Payment Amount”) based upon a contingent interest rate of six percent (6%) per annum Bank ( the “Contingent Interest Rate”) rather than the Note rate of interest. The Modified Payment Amount will be calculated so as to amortize payment of the outstanding principal and current unpaid interest (after application of the funds from the Suspense Account) at the contingent Interest Rate over the remaining life of the loan. Only so long as there is no default under this Agreement or any of the Applicable Loan Documents will Borrower be able to make payments at the Modified Payment Amount. The maturity date for the Note shall not be modified by this Agreement.”

    4) Sandra Sheffield, Mr. Carl B. Webb and Mr. George S. Leis--------Pacific Capital Banks Breaches of Contract in the 2007 Forbearance Agreement have, not been resolved since first questioned in July 2007! Specifically Paragraph 2. B i. “$22,274.46 to pay the monthly principal and interest payments owing on Note for the earliest five past due monthly payments ( May, 2006, June, 2006 July 2006 and September, 2006). Pacific Capital Bank on September 13, 2010 has prepared a “Lender’s Transcript of Account” showing this PCB Breach of Contract! Pacific Capital Bank shows the Breach of Contract in the 2007, 2008 and 2009 IRS 1098 forms provided at the end of these years! Is this normal business practices for Pacific Capital Bancorp?

    5) Why has Pacific Capital Bank under Payment Terms not annually adjusted my SBA loan per SBA documents? Pacific Capital Bank States: “Lender must adjust the payment amount at least annually as needed to amortize principal over the remaining term of the note.”

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