Is there a Bubble Forming at Pacific Capital?
Thursday will be a telling day to followers of Pacific Capital Bancorp. BankTalk has not been tracking Pacific Capital much in the last few months, as they sold their refund anticipation loan business to Platform Partners in early January. Absent our gaze, PCBC shares have skyrocketed. Believe it or not, but PCBC has soared from about $1.20 to over $4 per share. It is the highest-returning stock in the Russell 3000!
This gain makes no sense. The performance at the bank has done nothing to justify its returns. Here are few important facts:
- Pacific Capital still has not made a TARP payment.
- Pacific Capital has not addressed its capital ratios. It has been operating in violation of expectations placed on the bank by the Office of the Comptroller of the Currency and the Federal Reserve for over a year.
Even a quantitative analysis hints that something is not right. PCBC’s Texas Ratio (non-performing assets/tangible equity) is 97 percent. That means that if all of the non-performing assets had to be written off, that there would be almost not tangible equity left. RBC developed this metric to predict bank failures. Banks tend to fail when Texas Ratios reach 100 percent. Hmmm.
PCBC is trading above book value! This means that the market believes that all of those construction loans at PCBC are actually worth more than their outstanding principal balances!
According to Seeking Alpha, the largest investors in Pacific Capital are all index funds and quantitative funds. These are uncommitted buyers.
Pacific Capital will host an earnings call on April 29th.
Scott Rickard
April 29, 2010
Please publish an article about the following current US single-family loan foreclosure situation.
In 2008, US financial institutions and Wall Street committed one of the greatest frauds ever perpetrated against the American people.
The government allocated $900 billion for special loans and rescues related to the US "housing bubble".
Several financial institutions used this money to buy single-family home loans from failed banks for only one penny on the dollar.
Case in point, JPMorgan Chase bought Washington Mutual for only for $1.9 billion. Washington Mutual held as assets of $118.9 billion in single-family loans, of which $52.9 billion were "option adjustable rate mortgages" (Option ARMs), with $16 billion in subprime mortgage loans, and $53.4 billion of Home Equity lines of Credit (HELOCs) and credit cards receivables of $10.6 billion.
That is why JPMorgan Chase is so incredibly profitable now.
Only 25% of Washington Mutual's single-family loans have actually foreclosed.
So the remaining 75% of Washington Mutual's single-family loans have not foreclosed, and JP Morgan Chase is making money hand over fist on the single-family loans they bought for only 1%.
Not to mention that the US is facing well over $300 billion dollars in single-family home loan foreclosures nationwide.
Right now the US is on pace to see over 1 million bank repossessions this year alone.
In all, more than 900,000 households, or one in every 138 homes, have received a foreclosure-related notice this year.
The $75 billion foreclosure prevention program has only helped a very small fraction of troubled homeowners.
So far, the Treasury has set aside $39.9 billion of the $75 billion foreclosure prevention program.
However, only $90 million of the $39.9 billion set aside for loan modifications has been spent on permanent loan modifications.
You can see a breakdown of the all the loan modifications for each financial institution here.
http://bailout.propublica.org/loan_mods/list
In essence, about 231,000 homeowners have completed the loan modification process as part of the foreclosure prevention program through March.
That's about 21 percent of the 1.2 million borrowers who began the program over the past year.
Total Number of Eligible Loans: 3,398,612
More than 1.3 million homeowners have received offers for trial modifications, and nearly 1.1 million trial modifications have begun under the program.
Only 170,000 homeowners now have permanent modifications, about double the number from December. An additional 91,000 borrowers have received final approval for a permanent modification.
While the government gave nearly $900 billion to Wall Street and financial institutions,very few single-family loans nationwide are receiving loan modifications and are only saving a median of 36 percent of their before-modification payment, which is a median of roughly $500 per month on mortgage payments.
However, homeowners have spent $2.7 billion in aggregate through trial and permanent modification loan payments. Please note that this is not loan principal savings, it is only trial and permanent modification loan payments.
This is ultimately another great deal for the banks, and a total rip off for the American people.
So for the few single-family loans that were modified at a median of $150,000, the amount of principle reduction was roughly 33% reducing the median loan principle by $50,000 to around $100,000. Nothing near the 99% off that financial institutions received when they bought assets from failed financial institutions using US government (Chinese actually) loans.
The worst part is that the US tax payer has already received a huge bill for the Troubled Assets Relief Program (TARP) which allowed the banks to experience record profits in under a year and a half. And now the $75 billion loan modification program, that barely helps a small fraction of affected single-family homeowners, is allowing the banks to cash in on the profits a second time through the term of the modified loans.
For more information on The State of the Government's Loan Modification Program see:
http://bailout.propublica.org/programs/6-making-h…
For more information on the Troubled Assets Relief Program (TARP) see:
http://www.financialstability.gov/docs/105Congres…
Read more at the Washington Examiner:
http://www.washingtonexaminer.com/economy/9090560…
Banker's Briefs | Bank Talk
April 30, 2010
[...] Tuesday, BankTalk slammed the recent surge in Pacific Capital shares (see “Is there a Bubble at Pacific Capital?). Pacific Capital has soared from less than $1 to over $4 this year. On Wednesday, Pacific [...]
MarkSpizer
May 3, 2010
great post as usual!