Pacific Capital Bancorp in Santa Barbara, Calif., said second-quarter earnings fell 20.2% from a year earlier, to $11.5 million, because of higher expenses and reduced margins.
The $7.2 billion-asset company said Thursday that its loans rose 22.8%, to $5.23 billion, and deposits rose just 4.8%, to $4.84 billion. Pacific Capital resorted to higher-cost borrowings to fund loan growth; its net interest margin fell 6 basis points, to 4.44%.
Noninterest expenses soared 41.6%, to $68.4 million, mainly because of the protracted conversion of information technology systems tied to acquisitions and higher-than-expected costs of complying with the section 404 internal-controls requirements of the Sarbanes-Oxley Act.
One bright spot: Pretax income for the 2006 tax season from refund anticipation loans and refund transfers jumped 36%, to $87.7 million.
Still, earnings per share of 25 cents missed the average of analysts' forecasts by 9 cents before the company issued a profit warning last month.
Pacific Capital said it was launching a number of initiatives to improve performance. It is replacing its chief information technology officer, reassessing operations that generate no revenue, and requiring its chief financial officer to approve all large expenditures.
It also plans to launch several promotions to boost deposits and will open at least three branches by the end of next year.
