Profile: Pacific Capital Bancorp (PCBC.O)

Pacific Capital Bancorp (PCB) is a community bank holding company providing full service banking, including consumer and commercial lending, trust and investment advisory services, and other consumer and business banking products through its subsidiaries’ retail branches, commercial and wealth management centers, and other distribution channels to consumers and businesses primarily located in the central coast of California. PCB has five wholly owned subsidiaries, Pacific Capital Bank, National Association (the Bank or PCBNA), a banking subsidiary and four unconsolidated subsidiaries. PCBNA has four wholly owned consolidated subsidiaries, Morton Capital Management (MCM) and R.E. Wacker Associates, Inc. (REWA), SBBT RAL Funding Corp. and PCB Service Corporation. The Company operates in three segments: Community Banking, Commercial Banking and Wealth Management. During 2008, the Bank opened two new retail branches, the Wood Ranch branch located in Simi Valley, and the Casa Dorinda branch located in Santa Barbara. In November 2008, the Bank opened a third commercial and wealth management center in Torrance. In January 2008, PCBNA acquired REWA, which provides personal and financial investment advisory services to individuals, families and fiduciaries. In January 2010, the Company announced that it has completed the sale of its Refund Anticipation Loan (RAL) and Refund Transfer (RT) businesses (together, the Tax Division) to Santa Barbara Tax Products Group, LLC.

The Community Banking, Commercial Banking and Wealth Management segments represent the banking operations for the Company and are referred to as the Core Bank by Management. The Community Banking, Commercial Banking and Wealth Management segments are responsible for collecting deposits, making loans and providing customary banking services. The deposit products include checking, savings, money market and certificates of deposit (CDs). As of January 1, 2009, the Commercial Banking and Wealth Management segments were combined into one operating segment. The combined segment will be called Commercial and Wealth Management segment.

Through the Company’s banking subsidiary, PCBNA, offers a range of lending products and banking services to households, professionals and businesses. The Company offers its lending products through its four operating business segments. The products offered by these segments include commercial, consumer, commercial and residential real estate loans and SBA guaranteed loans. The Bank’s loan portfolio as of December 31, 2008 was $5.76 billion. As of December 31, 2008, the Bank’s deposits consisted of negotiable order of withdrawal (NOW), money market deposit accounts, savings accounts, time certificates of deposit, Interest-bearing deposits and demand deposits.

Community Banking

Business units in this segment provide residential real estate loans, home equity lines and loans, consumer loans, small business loans and lines, and demand deposit overdraft protection products. Residential real estate loans consist of first and second mortgage loans secured by trust deeds on one-to-four unit single family homes. The Company has specific underwriting and pricing guidelines based on the credit worthiness of the borrower and the value of the collateral, including credit score, debt-to-income ratio of the borrower and loan-to-value ratio. Consumer loans and lines of credit are extended with or without collateral to provide financing for purposes, such as the acquisition of recreational vehicles, automobiles, or to provide liquidity. The Company has specific underwriting guidelines which consider the borrower’s credit history, debt-to-income ratio and loan-to-value ratio for secured loans. The consumer loans have fixed interest rates. Small business loans and lines of credit offered through the Community Bank are extended without collateral to small businesses based on credit performance of the business along with the principal owners of the business. The loans and lines of credit can have either variable or fixed interest rates.

Commercial Banking

This business segment offers commercial, industrial, corporate, and real estate loan products, including commercial loans and lines of credit, asset based lending, letters of credit, and small business administration (SBA) loans. The Commercial Banking segment also offers the Community Banking segment deposit products, as well as deposit products that are for middle market companies, such as cash management services, merchant services and certain international services for domestic customers. The Company considers several factors in order to extend the loan, including the borrower’s historical loan re-payment, company management, and current economic conditions, industry specific issues, capital structure, potential collateral and financial projections. SBA Loans are extended to small businesses for a variety of purposes, including working capital, business acquisitions, acquisition of real estate, growth capital and equipment financing. The Company focuses on 7(a), 504, and Express loan programs. 7(a) loans provide longer term financing, which are guaranteed 75% to 85% by the SBA depending on term and loan size. SBA 504 loans are used for the acquisition or construction of large equipment or real property.

Wealth Management

Business units in this segment offer a wide range of trust, investment, fiduciary and wealth management services and solutions, including planning and advice. These solutions are provided by the Bank’s Trust and Investment Management group, including MCM and REWA. The Wealth Management group provides clients a variety of banking solutions and other services. These include Private Capital Advantage deposit solutions, residential mortgages and lines of credit, investment review, analysis and customized portfolio management for separately managed accounts, full service brokerage, trust and fiduciary services, equity and fixed income management and real estate, and specialty asset management. The Company’s underwriting guidelines consider tangible net-worth, value of assets that make up this net-worth, personal cash flow, past history with the Company, and credit history. These loans may be either secured or unsecured, and may have either fixed or variable interest rates, with lines of credit generally having variable interest rates.