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Dec-27-2009Jackson Hewitt Slips After Losing Partner's Support(topic overview)
CONTENTS:
- Separately, Jackson Hewitt Tax Service Inc ( JTX.N ) said Pacific Capital's tax division was to provide about 75 percent of Jackson Hewitt's overall financial products for the 2010 tax season, and a sale of the division now forces the tax preparer to seek other alternatives. (More...)
- "Following the review of our capital plan with the OCC, we have determined that the best course of action is for the Company to pursue a sale of the Tax Division," said George Leis, President and CEO of Pacific Capital Bancorp. (More...)
- The refund loan programs have generated much of the profit that the bank used to expand over the last decade. (More...)
- Tony Rossi, a spokesperson of the bank said that "the tax refund loan business is a sort of niche business that falls outside of what would be considered core banking operations". (More...)
- Pacific Capital shares rose 3 cents, or 2.9 percent, to close at $1.08. (More...)
- The troubled bank's shares have taken a beating over the past year, at some points trading for less than dollar, down from a 52-week high of above $17. (More...)
- The Company has signed a non-binding letter of intent with a private equity firm to sell the Tax Division. (More...)
- NEW YORK, Dec 24 (Reuters) - Some U.S. stocks on the move on Thursday: PFIZER INC, $18.55, down 0.2 pct MERCK & CO INC, $36.87, down 1 pct AETNA INC $33.70, down 0.2 pct CIGNA CORP, $36.26, down 0.6 pct The U.S. Senate approved President Barack Obama's healthcare overhaul on Thursday, backing sweeping changes in the medical insurance market and new coverage for tens of millions of uninsured Americans. (More...)
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Separately, Jackson Hewitt Tax Service Inc ( JTX.N ) said Pacific Capital's tax division was to provide about 75 percent of Jackson Hewitt's overall financial products for the 2010 tax season, and a sale of the division now forces the tax preparer to seek other alternatives. "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," Jackson Hewitt said in a regulatory filing. The company said it was working with the bank to prevent any interruption in its financial product program for the 2010 tax season, it said. Pacific Capital said its regulator, the Office of the Comptroller of the Currency, notified it earlier this month that it would not receive regulatory approval to originate any refund anticipation loan in 2010. [1] Dec. 24 (Bloomberg) -- Jackson Hewitt Tax Service Inc. plunged 23 percent, the biggest decline in the New York Stock Exchange Composite Index, after Santa Barbara Bank & Trust told the firm it won't be able to originate refund-anticipation loans for the 2010 tax season. SBBT, a unit of Pacific Capital Bank, based the decision on a directive from its regulator, Parsippany, New Jersey-based Jackson Hewitt said today in a U.S. Securities and Exchange Commission filing. The bank has signed a non-binding letter of intent to sell its RAL and assisted refund business, according to the filing. "We had expected SBBT to provide approximately 75 percent of our overall program for financial products for the 2010 tax season, including both RALs and assisted refunds," Jackson Hewitt said in the filing. [2]
SANTA BARBARA, Calif. - (Business Wire) Pacific Capital Bancorp (Nasdaq: PCBC), a community bank holding company, today announced that it plans to sell its E-Filing Financial Services Division (the "Tax Division") that offers Refund Anticipation Loan ("RAL") and Refund Transfer ("RT") tax products as part of the Company's ongoing efforts to strengthen its capital ratios. [3]
BANGALORE, Dec 24 (Reuters) - Jackson Hewitt Tax Service Inc ( JTX.N ) said the bank that originated its refund anticipation loans to taxpayers in the past would be unable to do so in the coming tax season, casting doubt on the tax preparer's ability to offer the lucrative loans. Shares of Jackson Hewitt fell more than 24 percent after the company said about 75 percent of its overall funding for 2010 depended on the loan from a unit of Pacific Capital Bancorp ( PCBC.O ). [4] H&R; BLOCK INC $21.47, up 3.1 pct Rival Jackson Hewitt Tax Service said Pacific Capital Bancorp's tax division was to provide about 75 percent of Jackson Hewitt's overall financial products for the 2010 tax season, and a sale of the division forces the tax preparer to seek other alternatives. [5] Jackson Hewitt said the potential sale of Pacific Capital's division now forces the tax preparer to seek other alternatives for funding. "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," Jackson Hewitt said. Jackson Hewitt said it was working with the bank to prevent any interruption in its financial product program for the 2010 tax season. [4]
Shares of Jackson Hewitt tumbled $1.34, or 23 percent, on the news, closing at $4.50 in holiday-shortened trading. The tax preparer said it had expected Santa Barbara Bank & Trust to provide about 75 percent of its overall program for financial products for the 2010 tax season. [6] Regulators ordered Santa Barbara Bank & Trust to stop providing money, which covered about 75 percent of Jackson Hewitt's financial products program, according to a federal filing today by the Parsippany, New Jersey-based tax preparer. [7] Santa Barbara Bank & Trust was ordered by the regulators to stop providing the loan funds, which took care of nearly 75% of Jackson's financial products program, as per a regulatory filing undertaken by the company. The second-ranked tax preparer after H&R; Block, lost much of it's per share value when it dropped by $1.34 to $4.50. [8]
Tax preparers like Jackson Hewitt extend refund anticipation loans at high interest rates to taxpayers who expect to receive refunds from the government. In a regulatory filing, Jackson Hewitt said it had expected Pacific Capital's Santa Barbara Bank & Trust (SBBT) unit to match its 2009 contribution to refund anticipation loans in the coming year. [4] In a regulatory filing, Jackson Hewitt said Santa Barbara Bank & Trust, a division of Pacific Capital Bancorp, will not be able to originate refund anticipation loans for 2010. [6]
On December 18, the Office of the Comptroller of the Currency informed Santa Barbara Bank & Trust that the lender would not be able to receive "regulatory approval to originate the refund anticipation loans in 2010, according to a statement from the bank's parent, the Pacific Capital Bancorp". [8]
Jackson Hewitt did not respond to emails seeking comment. Separately, loss-making lender Pacific Capital Bancorp said it was seeking to sell its tax division to a private equity firm after regulators notified it earlier this month that it would not receive approval to originate any refund anticipation loans in 2010. [4] The tax-return preparer said a unit of Pacific Capital Bancorp will be unable to originate loans in the coming tax season, raising questions about how Jackson Hewitt Tax Service ( JTX ) will give so-called "instant refunds" to customers. It had been counting on the bank for most of the lending money. [9] NEW YORK (Dow Jones)--Shares of Jackson Hewitt Tax Service Inc. (JTX) tumbled Thursday after the tax-services company said that a unit of Pacific Capital Bancorp (PCBC) wouldn't be able to deliver expected refund-anticipated loans, leaving Jackson Hewitt without 75% of the funding for its program. [10]
Dec. 24 (Bloomberg) -- Jackson Hewitt Tax Service Inc. plunged 23 percent, the worst on the New York Stock Exchange, after its bank partner cut off funds for tax refund loans. [7] After losing out on the support of its bank partner, which cut off most of the money that the firm had been using for tax refund loans, Jackson Hewitt Tax Service's shares tumbled by 23% on Thursday. [8] Shares of tax-return preparer Jackson Hewitt Tax Service Inc. tumbled Thursday after the company said a bank that is supposed to supply most of its tax-refund loans to customers in 2010 will not be able to do so. [6]
H&R; Block added 3.7 percent to $21.59. Tax preparers are locked in a battle for customers, with Jackson Hewitt vowing earlier this month to regain market share from H&R; Block. Firms attract clients with refund-anticipation loans, or RALs, in which customers who need cash immediately can get a short-term loan, typically lasting a few weeks, that's based on the expected amount of their tax refund. [7] Jackson Hewitt, the No. 2 tax preparer behind H&R; Block Inc., dropped $1.34 to $4.50 at 1:01 p.m. in New York Stock Exchange composite trading, and sold for as little as $4.30. [7] Shares of Parsippany, New Jersey-based Jackson Hewitt were trading down 24 percent at $4.46 late Thursday morning on the New York Stock Exchange. They touched a low of $4.41 in early trade. [4]
Pratt & Whitney signed a 15-year contract with the Chinese airline to maintain the carrier's fleet of CFM56. SERVICES Jackson Hewitt facing price fight Shares of the tax-return preparation consultant fell 5% to 30.53 after Morgan Stanley downgraded it to underweight and dropped its price target to $30 from $32. [9]
Jackson Hewitt (JTX), a tax preparer, narrowed its Q1 loss to 67 cents a share ex items, topping views by 4 cents. [9]
Since 2001, the IRS has made more than 3,250 changes to the tax code, according to Nina Olson, head of the government's Office of the Taxpayer Advocate. That complexity means job stability for H&R; Block (HRB) and Jackson Hewitt Tax Service (JTX). [9]
"Following the review of our capital plan with the OCC, we have determined that the best course of action is for the Company to pursue a sale of the Tax Division," said George Leis, President and CEO of Pacific Capital Bancorp. "The sale of the business will help return Pacific Capital Bancorp to its roots of being a pure community bank serving the Central Coast of California, while also providing an infusion of capital that will further strengthen the financial position of the Company. We intend to enter into a definitive agreement with this private equity firm for the sale of the business prior to the start of the 2010 tax season in January." The intended purchaser of the Tax Division is working with a number of institutions to replace Pacific Capital Bank, N.A., as the originating bank for these products, and has indicated that the entire management team of the Tax Division, led by Rich Turner, will continue to manage the operations after the sale. [3] Pacific Capital, the parent of Santa Barbara Bank & Trust and several other banking brands on the Central Coast, said it has signed a non-binding letter of intent with a private equity firm to sell its tax division before the start of the 2010 tax season in January. [11]
Pacific Capital Bancorp is the parent company of Pacific Capital Bank, N.A., a nationally chartered bank that operates 46 branches under the local brand names of Santa Barbara Bank & Trust, First National Bank of Central California, South Valley National Bank, San Benito Bank and First Bank of San Luis Obispo. [3]
The prospective buyer is working with a number of institutions to replace the parent company as the originating bank for the tax products, and has indicated that the entire management team of the tax division will be retained, Pacific Capital said. Pacific Capital posted a $40.7 million quarterly loss last month, its sixth in a row, as like other California banks with heavy exposure to the housing market, it struggles to remain profitable amid declining real-estate prices and soaring defaults. [1] The tax division, or the e-filing financial services division, offers refund anticipation loans and refund transfer tax products, the Santa Barbara, California-based company said in a statement. [1] If unable to find another source to originate refund anticipation loans and assisted refunds, the Parsippany, N.J., company said there would be a "material adverse effect on our business, financial condition and results of operations." [6]
The refund loan programs have generated much of the profit that the bank used to expand over the last decade. The business provided taxpayers a loan based on their estimated income tax return. The consumer received instant cash minus some fees after filing his or her taxes, and the IRS sent the refund to Pacific Capital. [11] Pacific Capital, the third-biggest provider of tax refund loans, received $180 million from the Treasury Department's Troubled Asset Relief Program. [7] Pacific Capital's write downs on refund loans nearly doubled between 2008 and 2009, from $41 million to $81 million. Whereas in the past the bank would bundle those loans up and sell them off so they didn't clog its books and require extra capital, the dead credit market at the beginning of 2009 meant the bank had to take $2 billion of the loans onto its balance sheet. [11]
Pacific Capital's capital ratios have been under close scrutiny by federal regulators for months. It fell well short of its voluntary agreement with federal regulators to boost its tier one capital ratio to 9 percent by Sept. 30. The ratio - which consists of the bank's free cash divided by its loans and other assets - came in at 5.6 percent, essentially unchanged from the quarter before. The bank held its capital steady in the third quarter - during which it turned in a $40.7 million loss - halting a decline in capital ratios. The bank is still retaining an investment bank to help it evaluate options - which could include a merger - to boost its liquidity. [11]
The bank signed a nonbinding letter of intent with a private equity firm to sell the tax business, the statement said. "It will certainly lower our profitability," bank spokesman Tony Rossi said today in an interview. "The primary impetus is a desire on Pacific Capital's part to return to its roots as a strictly community bank focused on supporting the economies of its local markets. [7] Pacific Capital Bancorp (PCBC) plans to sell its electronic-tax filing and transfer services in an effort to bolster its capital levels. [12]
Pacific Capital Bancorp received notification from the Office of the Comptroller of the Currency ("OCC") on December 18, 2009, that it would not receive regulatory approval to originate any RALs during 2010. [3]
Pacific Capital expects to sign a definitive agreement with the prospective buyer prior to the start of 2010 tax season in January. [1] The bank expects to sign a definitive agreement with the prospective buyer prior to the start of 2010 tax season in January but did not disclose any details about the financial terms of the proposed deal. [4]
Tony Rossi, a spokesperson of the bank said that "the tax refund loan business is a sort of niche business that falls outside of what would be considered core banking operations". [8] Loans secured by an expected tax refund often leave borrowers with effective interest rates of as much as 500 percent for a $300 loan over a 10-day repayment period, according to a study from the Consumer Federation of America and the National Consumer Law Center. [2] Tax preparers profit heavily from high-interest loans made to customers expecting a tax refund. [9] A refund anticipation loan is a high-cost loan that tax-return preparers offer to customers expecting a refund from the Internal Revenue Service. [6]
Pacific Capital shares rose 3 cents, or 2.9 percent, to close at $1.08. [6] Pacific Capital shares closed at $1.05 Wednesday on Nasdaq. They had traded as high as $17.47 at the start of the year. [1]
The troubled bank's shares have taken a beating over the past year, at some points trading for less than dollar, down from a 52-week high of above $17. [11] Jackson Hewitt, the second-biggest U.S. tax-preparation firm, fell $1.35 to $4.49 at 12:06 p.m. in composite trading. [2] Jackson Hewitt said it is seeking "alternative arrangements" for financial products. [6] Jackson Hewitt, with 6,600 outlets and almost 3 million clients, has been losing customers to Kansas City, Missouri- based H&R; Block and Intuit Inc., which makes TurboTax software. It suspended its dividend in March and has hired Goldman Sachs Group Inc. to explore "strategic alternatives," language that typically means a company may be sold. [7]
The Company has signed a non-binding letter of intent with a private equity firm to sell the Tax Division. [3] According to a company press release, the entire management team of the tax division, led by Rich Turner, will continue to manage the operations after the sale of the division. [11]
NEW YORK, Dec 24 (Reuters) - Some U.S. stocks on the move on Thursday: PFIZER INC, $18.55, down 0.2 pct MERCK & CO INC, $36.87, down 1 pct AETNA INC $33.70, down 0.2 pct CIGNA CORP, $36.26, down 0.6 pct The U.S. Senate approved President Barack Obama's healthcare overhaul on Thursday, backing sweeping changes in the medical insurance market and new coverage for tens of millions of uninsured Americans. [5]
SOURCES
1. Pacific Capital may sell tax unit to private equity fund | Reuters
2. Jackson Hewitt Says Lender Can'''t Do Tax-Refund Loans (Update1) - BusinessWeek
3. Pacific Capital Bancorp Announces Planned Sale of Refund Anticipation Loan and Refund Transfer Businesses
4. UPDATE 3-Jackson Hewitt's tax-refund loans in doubt, shrs tank | Reuters
5. Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
6. Jackson Hewitt shares sink on tax-refund loan woes - BusinessWeek
7. Jackson Hewitt Plunges as Partner Halts Tax Loans (Update2) - BusinessWeek
8. Jackson Hewitt Loses Partners Backing, Shares Tumble | TopNews United States
9. Investors.com - Jackson Hewitt's loans in doubt
10. Jackson Hewitt Won't Get Loan-Funding From Pacific Capital - WSJ.com
11. Pacific Coast Business Times - Breaking news: PCBC to sell tax-refund loan division
12. Pacific Capital Plans To Sell Electronic Tax Division - WSJ.com
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