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Pacific Capital Bancorp Announces Return to Profitability After Completion of Recapitalization Transactions


"Following the completion of our recapitalization transactions, we are poised to resume our position as the premier community banking franchise along the Central Coast of California," continued Mr. Webb. "We have returned to the basic community banking principles that this franchise was built upon, and we are now in a position to fully serve the financial services needs of our customers with a broad array of lending, depository and wealth management products and services, delivered with a commitment to superior customer service. We believe the model we have put in place will enable us to generate consistent profitability going forward and steadily increase the value of the franchise over time."

As a result of the completion of its recapitalization transactions, the Company and its wholly-owned banking subsidiary, Pacific Capital Bank, N.A. (the "Bank") now exceed the ratios required to be considered "well capitalized" under generally applicable regulatory guidelines, as well as capital levels that the Bank is required to meet under its agreement with the Office of the Comptroller of the Currency.

Impact of Push-Down Accounting

On August 31, 2010, pursuant to the terms of the Investment Agreement dated April 29, 2010, a wholly-owned subsidiary of Ford Financial Fund, L.P. became a majority owner of the Company. As a result of this change in control, the Company was required to account for this transaction using the acquisition method of accounting and applied "push down accounting" treatment based on authoritative accounting guidance. Accordingly, the Company was required to allocate the aggregate purchase price of $500 million to the assets, liabilities and non-controlling interests of the Company based on their respective fair values. Authoritative accounting guidance also requires that the statements of financial position and results of operations from periods prior to the transaction be labeled as the predecessor company and periods subsequent to the transaction be labeled as the successor company.

Statement of Operations

Net interest income was $18.1 million for the one month ended September 30, 2010. Net interest margin was 3.77% for the one month ended September 30, 2010, or 100 bps higher than the net interest margin for the three months ended September 30, 2009. The increase in net interest margin is primarily the result of the fair valuation of interest-earning assets and interest-bearing liabilities, and the repayment of $802 million in FHLB advances with the proceeds from this investment transaction and excess cash held by the Company.

The Company recorded a provision for loan losses of $55,000 for the month ended September 30, 2010, which related only to loans originated subsequent to the closing of the investment on August 31, 2010.

Non-interest income was $4.1 million for the one month ended September 30, 2010, primarily from service charges and fees from the Company's retail banking operations, and trust and investment advisory fees from the Company's wealth management operations.

Non-interest expense was $17.2 million for the one month ended September 30, 2010.

Quarterly Report on Form 10-Q

The Company intends to file today with the Securities and Exchange Commission its Quarterly Report on Form 10-Q for the quarter ended September 30, 2010. This report can be accessed at the Securities and Exchange Commission's website, U.S. Securities and Exchange Commission (Home Page). Shortly after filing, it is also available free of charge at the Company's website, Welcome - Pacific Capital Bancorp or by contacting the Company's Investor Relations Department.

About Pacific Capital Bancorp

Pacific Capital Bancorp, with $6.3 billion in assets, is the parent company of Pacific Capital Bank, N.A., a nationally chartered bank that operates 47 branches under the local brand names of Santa Barbara Bank & Trust, First National Bank of Central California, South Valley National Bank, San Benito Bank and First Bank of San Luis Obispo. The Company's website is Welcome - Pacific Capital Bancorp.

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