San Benito Bank’s parent company, Pacific Capital Bancorp, will
suspend dividend payments to shareholders, prompting credit rating
agencies to downgrade the bank’s ratings and sending its stock
price plunging to an all-time low, according to company
spokespeople and industry professionals.
San Benito Bank’s parent company, Pacific Capital Bancorp, will suspend dividend payments to shareholders, prompting credit rating agencies to downgrade the bank’s ratings and sending its stock price plunging to an all-time low, according to company spokespeople and industry professionals.
The chain of events that started Monday is not likely to directly affect bank customers, but those who own shares will notice an impact, said a local financial adviser.
“A lot of people have made a lot of money on this stock. When you look at that stock price going from $40 (in 2005) down to $2, a lot of people have been impacted,” said Brad Ledwith of Ledwith Financial Services in Morgan Hill.
Pacific Capital owns three South Valley National Bank Branches in Morgan Hill and Gilroy, and the three San Benito Bank branches in the Hollister area. The company has headquarters in Santa Barbara and owns about 40 other regional bank branches throughout California.
The company’s stock price closed at $2.69 a share Wednesday, two days after Moody’s Investor Services and DBRS lowered the company’s credit ratings. Near the end of the day Thursday, the price was about $2.25 per share.
“The downgrade reflects the challenges the bank may face in raising capital in a weaker economic environment,” said a press release from Moody’s.
It’s no news that the company has suffered lately, as financial institutions across the country have fallen victim to the worsening credit crisis that has significantly contributed to the current economic downturn. On Friday, the stock price reached a five-day high of $4.38. In Pacific Capital’s heyday from 2005 to mid-2007, its stock hovered between $30 and $40 per share.
As of Monday, not only are shareholders stuck with that loss, but they won’t be paid any quarterly dividends for up to five years. Via a press release, the company announced it will suspend interest payments on $69 million worth of security notes, saving an anticipated $32 million in capital for each of the next five years. Stock dividend payments will also be suspended, the press release said.
“The actions we announced this week are designed to preserve capital,” said Pacific Capital spokeswoman Debbie Whiteley in an e-mail. “They have no impact on the operations of any of our community banks or our ability to meet the financial services needs of our customers.”
Following Monday’s announcement, Moody’s dropped Pacific Capital’s issuer ratings and its subsidiary Pacific Capital Bank’s financial strength rating from a C to a D+. Furthermore, DBRS, another international credit rating agency, downgraded the company’s issuer rating from BBB to BB.
Look back to www.freelancenews.com and to the Free Lance on Tuesday for more.
