Pacific Capital Bancorp in Santa Barbara, Calif., announced after the markets closed Monday that it would record a loan-loss provision of $22.4 million in the third quarter to reflect increased losses in its tax-refund anticipation loan business.
The $7.4 billion-asset company works with a number of national and independent tax preparers providing refund-anticipation loans to taxpayers that are repaid when borrowers receive their income tax refunds from the Internal Revenue Service.
Pacific Capital said Monday that many of the loans would not be repaid because the IRS denied refund claims after determining that the tax returns included fraudulent information.
The company said the provision would reduce earnings per share by 27 cents. It is expected to report third-quarter earnings Thursday.
Pacific Capital earned $16.8 million, or 36 cents per share, in last year's third quarter.
