NEW YORK — Shares of Jackson Hewitt Tax Service Inc. tumbled Thursday after the tax-services company said that a unit of Pacific Capital Bancorp wouldn't be able to deliver expected refund-anticipated loans, leaving Jackson Hewitt without 75% of the funding for its program.
Pacific Capital's Santa Barbara Bank & Trust had been expected to match its 2009 contributions to Jackson Hewitt's program, Jackson Hewitt said in a federal filing. But on Sunday, Santa Barbara Bank told Jackson Hewitt it wouldn't be in position to originate the loans for the tax season based "upon a directive received by them from their regulator."
Shares of Jackson Hewitt dropped 19% to $4.73 soon after the opening bell.
Pacific Capital has separately announced Thursday it will be selling its electronic-tax filing and transfer services in an effort to bolster its capital levels.
For Jackson Hewitt, it could be without a funding source only months ahead of the tax rush.
"We are separately seeking alternative arrangements for additional financial products," Jackson Hewitt said in the filing. "If no alternative sources are obtained or if such sale is not consummated, it would have a material adverse effect on our business, financial condition and results of operations."
Refund anticipated loans are short-term loans that tax servicers, such as Jackson Hewitt, can give filers to bridge a gap before their Federal tax return is received. In its 2009 fiscal year, Jackson Hewitt delivered 2.75 million financial products, which includes the loans and other financial services.