Jamie Dimon’s 35-page letter to JP Morgan Chase shareholders is an interesting commentary on how his bank has navigated the financial crisis. The letter offers extensive insight into discrete elements of the WaMu acquisition.  Dimon even proffers several surprising opinions about TARP, Dodd-Frank, and the CFPB. While he extends some support for each, he is less than content with either the Durbin Amendment or the new Basel rules.

Tom Brown says that JP Morgan Chase’s letter, penned by Jamie Dimon, is an outstanding letter.

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The benefit of the liquidity nurtured by TARP is going to help people refinance their mortgages, and not to getting borrowers into new homes.

Data from the Federal Housing Finance Administration shows that only 1 in 8 loans made in the first quarter of 2010 went for a home purchase. More than 87 percent of loans made in the quarter were for refinances. With the exception of the first quarter of 2009, when less than 8 percent of loans went for home purchase, this is an inequality unseen in the last thirty years.

Home Purchase Loan Share in the Mortgage Market (Source: FHFA)

There is more than one type of refinance borrower. Some may include borrowers that are trying to get out of a loan with a resetting interest rate. Others may be trying to pull cash out of their home in order to finance a new purchase. Another group is probably made up of people who are current on fixed rate mortgages with affordable interest rates, but that want to take advantage of the historically low interest rates available to borrowers right now.

Fine. However, other data suggests that the people getting refinance loans are not drawn equally from all across our communities. More often than not, the chance of getting approved for a refinance loan is distinctly easier in some neighborhoods, than in others.

In a study (Paying More for the American Dream, IV) that analyzed mortgage data across seven different cities from 2006 to 2008, borrowers in minority neighborhoods were much more likely to be denied a new prime rate refinance. That inequality widened over time, too. During that period, approval rates dropped twice as fast in minority neighborhoods as they did elsewhere.

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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…)

Part of the beauty of blogging is its ability to generate constructive feedback. Some feedback yesterday led me to research the trail of insider lending at Pacific Capital.  I’m glad I did, because there’s more smoke out there and it points to CEO George Leis.

When I wrote yesterday about the incidence of high levels of credit extensions to insiders at Pacific Capital, it provoked some good responses.  One of those responses was this:

“Have you researched ‘when’ these loans were made? I would venture to guess over a long period of time, and not in the last few quarters.”

This is a very good question.  It takes the facts that I observed yesterday (lots of lending at a bank to its insiders), but by giving those decisions a time frame, it gives a better picture of the appropriateness of that decision-making.

Just for sake of definitions, insiders are considered to be “executive officers, directors, and prinicipal (more…)

Pacific Capital Bancorp uses its tax refund business to offset its poor performance in wealth management and community banking.

That should tell you something about how much confidence a person ought to have in their management.  Remember, Pacific Capital Bancorp is located in Santa Barbara, California.  That’s a pretty nice address.  There are a lot of deposits in that neighborhood.

In spite of the advantages that would be conferred upon a bank that serves (more…)