Pacific Capital Sells the RAL business

I forgot to notice that Pacific Capital negotiated the sale of its tax refund division last week.It is an interesting event, and perhaps a commentary on the long-term viability of the refund anticipation loan business.

PCBC sold its tax division for just $10 million.  Only half of the money will be paid upfront. The other half will be paid to PCBC on March 15th.

$10 million isn’t much for a division that has moved $1 to $2 billion in loans during recent tax seasons.  It is even less when you consider that the buyer, Santa Barbara Tax Products Group, is claiming to have received more than just the book of business. They also got the real estate, the office’s computers, and their staff!

George Leis is going on and on about this is a chance for PCBC to go back to its roots as a community bank.  Nice. I guess that it was those RALs that were keeping them from meeting their goals.

He also notes that RALs constituted 40 percent of their net income last year. The American Banker adds that RAL programs (fees, gain on sale of securities, interest) generated  “virtually all of the company’s revenue last year.”

So, that provokes an interesting math question. If all of your revenue, 40 percent of your net income, and a bunch of commercial real estate in Santa Barbara San Diego, California is worth $10 million, how much is the remainder of the business worth?