Yesterday’s earnings report at Pacific Capital was, at best, a mixed bag.  Pacific Capital lost 87 cents per share.  They were expected to lose 80 cents per share, but then again, last quarter they lost $7.77 per share, so maybe it is a vast improvement.

CEO George Leis was optimistic about their quarter.

“The aggressive approach we took earlier in 2009 towards resolving our problem loans helped drive a substantial decline in our credit costs, particularly in the construction and land portfolio, said Leis in a prepared release.  “While our credit costs still remain elevated above historical levels, we are encouraged by the moderation we experienced in the third quarter.”

Gee, that’s swell.  Lose $41 million, call it encouraging.

This earnings report should concern shareholders not just at Pacific Capital, but also franchise owners and shareholders at their RAL partners, Jackson Hewitt and Liberty Tax Service.

Unusual Accounting

The problem for PCBC is that they don’t have much more room for more losses.  Shareholder equity is now just $397 (more…)

5.8 million – RALs made by the three largest RAL providers in TY 2006:

• Jackson Hewitt – 1.3 million
• Liberty Tax Service – 0.3 million
• H&R Block – 4.0 million

Corporate investors: Pacific Capital Bancorp, Republic Bank & Trust, JP Morgan Chase Bank, River City, and HSBC.

8.67 million: Number of RALs originated in TY 2007:

$901 million:  Fees on RALs originated during that year.

$336 million: Additional money spent by taxpayers on the new refund anticipation check product.

Three to Nine Days: time saved by getting a RAL, as opposed to using IRS e-file service.

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The minimum wage is nice, but there are more efficent ways for the federal government to prevent poverty. We should think again about another increase to minimum wage, and instead think about putting more dollars into the Earned Income Tax Credit (the “EITC.”)

We like increasing the minimum wage because it enhances the livelihood of the poor, but it is not a welfare program.  It still requires that people work.

That said, its hardly the most direct way of targeting low-income working households.  The Economic Policy Institute suggests the minimum wage hits low-income households narrowly.  In a recent report, they estimated that almost two-thirds (63 percent) of gains from a minimum wage increase go to workers in the bottom 40 percent of income.

But what about the other 37 percent?  Well, that’s the first part of the problem.  Many of the other (more…)

Pacific Capital Bancorp reminds me of that difficult family member that keeps on finding new ways to create problems.

This week, the news is that Pacific Capital is one of three banks that has announced that it will not be able to make its TARP dividend payment to the Treasury Department. Pacific Capital (PCBC) received $180.6 million last fall. It is a bad sign about the financial health of a bank that routinely pushes bad financial products on poor consumers.

For a refresher about PCBC, read this here.  The summary of the facts are that PCBC, located in posh Santa Barbara, California, is unable to turn a profit through traditional branch banking.  The bank makes loans on small businesses and home mortgages.  Even in Santa Barbara, though, they aren’t able to find a way to make that work profitable.

Instead, PCBC makes its profits by capitalizing the refund anticipation loan (RAL) business.  It partners with main street RAL providers like Jackson Hewitt.

A RAL is an unusual product.  If you haven’t heard of it, its probably reflects well about your financial habits.  Nonetheless, millions of Americans use this product during tax season.  A RAL is an advance on a tax refund.  Typically, a tax preparer will (more…)

Pacific Capital Bancorp (PCBC) got $181 million in TARP funds in November.  This California firm includes Santa Barbara Bank & Trust.  Santa Barbara Bank is one of the four banks in the United States (JP Morgan, HSBC, and River City are the others) that provides funds for Refund Anticipation Loans (RALs), through its subsidiary SBBT RAL Funding Corp.

RALs are something that you may never have heard about, unless you have a very high discount rate.  They are very expensive, but many people get them because they (more…)