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Union Bank buying Santa Barbara Bank & Trust for $46 a share; will gain Watsonville branch

March 13, 2012

By Jondi Gumz - Santa Cruz Sentinel

Eighteen months after Texas investors Carl Webb and Gerald Ford put $500 million into the troubled Pacific Capital Bancorp, where the price had fallen to 25 cents per share, their bet is paying off.

Union Bank, a subdiary of Mitsubishi UFJ Financial Group, offered the new ownership $46 a share in cash, and the $1.5 billion deal was accepted by Pacific Capital Bancorp, which had rebranded itself Santa Barbara Bank & Trust in May.

The agreement announced Monday means Union Bank, which has a branch at 35 E. Lake Ave., Watsonville, gains 47 branches along the Central Coast including a second one in Watsonville at 655 Main St., less than a half mile from the other.

The acquisition, which requires approval from banking regulators, is expected to be completed in the fourth quarter.

"Between now and the close, it is business as usual for employees and for customers," said Debbie Whiteley, spokeswoman for Santa Barbara Bank & Trust.

The deal gives Union Bank a foothold in Santa Barbara and the Central Coast, "very attractive regions for banking and wealth management services," according to Masashi Oka, president and chief executive officer of Union Bank. It puts Union Bank in the leading market share position in the Santa Barbara metropolitan statistical area, fourth in Oxnard-Thousand Oaks and fourth in Salinas-Carmel.

The transaction "is confirmation of the significant achievements over the past 18 months of the entire team at Santa Barbara Bank & Trust," said Carl Webb, Pacific Capital's chief executive officer.

"This is a good premium, 1.6 times book value," said David Heald, president and chief executive officer of Santa Cruz County Bank. "These investors did a nice job in turning the bank around. They helped save a community bank and brought it back to viability."

The acquisition gives Union Bank 24 percent of the deposits in Watsonville, Heald observed.

The branch at 655 Main St. is a prominent location where Pajaro Valley Bank, a community bank founded in 1983, put its headquarters.

In 1989, Pajaro Valley Bank joined with Pacific Capital Bancorp, the holding company for First National Bank of Monterey, founded in 1984 and twice its size, to be more competitive.

Twenty years later, the financial crisis erupting after the housing bubble burst hit Pacific Capital Bancorp hard. About 18 percent of its loans were deemed nonperforming, its stock was at risk of delisting and Bauer Financial rated the bank "troubled."

For the fourth quarter, the bank posted a $12.5 million profit with nonperforming loans at 3.4 percent, and Bauer raised its rating to "good."

Webb told Pacific Coast Business Times that his team championed a "back to basics strategy" and the legacy portfolio performed better than expected with some loans returning to performing status.

Nancy Korach is the Watsonville branch manager for Santa Barbara Bank & Trust. Staff declined to say how many employees work there and referred questions to Whiteley in Santa Barbara.

Asked whether Union Bank would retain two branches in Watsonville, Whiteley said there is some geographic overlap but noted the consolidation process "will not begin until after the closing of the acquisition sometime in the fourth quarter of this year. It would be too early to make any comparisons of branch locations in terms of size or staffing."

Heald expects only one branch will remain open.

"That's where they can get economies of scale, where they have duplication of offices," he said. "You can see what Wells Fargo did."

Wells Fargo closed branches in Scotts Valley, Santa Cruz and Capitola after acquiring Wachovia. Space it leased at 75 River St. in Santa Cruz and 203 Mount Hermon Road in Scotts Valley remain empty.

With unemployment at 13.5 percent in the county and 27 percent in Watsonville, Mayor Eduardo Montesino hopes the deal won't bring layoffs.

"We're trying to hold onto every job we have," he said. "We need more banking."

Sentinel staff writer Donna Jones contributed to this report.



AT A GLANCE

Union Bank will gain market share in Watsonville by acquiring Santa Barbara Bank & Trust. These Watsonville market share figures from June 2011 are the most recent available.

Wells Fargo 23%

Bank of America 18%

Santa Barbara Bank & Trust 14%

Chase 11%

Union Bank 10%

Comerica 9%

Santa Cruz County Bank 6%

Citibank 5%

Rabobank 4%

Source: Federal Deposit Insurance Corporation

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