Pacific Capital shares fall as analyst cuts rating

NEW YORK—Shares of Pacific Capital Bancorp fell Thursday as an RBC Capital Markets analyst cut his rating on the stock due to continued credit deterioration.

Pacific Capital shares fell $1.06, or 5 percent, to $20.08. Shares have traded between $16.08 and $28.79 during the past year.

RBC Capital Markets analyst Joe Morford cut his rating to "Underperform" from "Sector Perform" saying, "shares are trading at a slight premium to community bank peers despite more serious credit issues and much lower profitability."

Credit trends have deteriorated rapidly during the past six months at Pacific Capital with non-performing assets rising to $162.5 million, Morford wrote in a research note. Much of the rise in non-performing assets is tied to relationships with homebuilders, Morford added.

Delinquency data in Pacific Capital's lending portfolios also indicates non-performing assets are likely to grow in the coming quarter, Morford said.

The real estate and mortgage markets have weakened since the middle of 2007 with defaults among loans connected to property increasingly defaulting. That has forced most banks to increase their loss reserves to cover the troubled loans.

Morford cut his 2008 earnings estimate 10 cents to $2.05 per share. He cut his 2009 earnings estimate by 15 cents to $2.35 per share. The lower estimates are mainly tied to an expectation for higher loss provisions.