I am not sure why banks are showing up on my stock screens so much lately, but this has been three in the last two weeks.  I have profiled the large money center banks in the past (C and BAC), but I believe that greater opportunity (and greater risk) lies with the smaller regional banks.

Today’s screen uncovered Pacific Capital Bancorp (NasdaqGS: PCBC),  a regional bank with a geographic focus on the Central Coast of California.  That means San Luis Obispo (home of the greatest University in the world, my alma mater:  Cal Poly San Luis Obispo), Santa Barbara and other mid-CA communities.

This is a stock that traded at almost $18/share in January of 2009 and now trades for under $1.  Now I know that you should NEVER buy a stock because is was ONCE an expensive stock, but I think that in the case of PCBC an exception could be made.

I searched for the skeletons in PCBC’s closet, the spectre of bankruptcy hanging over the company, Federal regulators hanging around to shut them down….and, couldn’t find anything. PCBC seems well capitalized (by the reduced standards of the industry) and has some financial strength reflected in its balance sheet.  The company just took a major writedown ($128MM) last Q, but management states publicly that it is on the “way back up”.  The company continues to lose money, but it is challenging to figure out what is operating and non-recurring expenses.

Since I am not a buy-and-hold investor, my interest is strictly short-term.  And, I think that short-term is the best place to be in PCBC.  The questions I ask myself are along the lines of, “when will the turnaround begin and what will be its duration”.  I wish I knew, but let’s take a peek at the chart anyway.

Here is a link to an interesting story in one of the local Santa Barbara papers dispelling rumors of the closure of the bank.  I don’t think anyone at the bank thought they would be a penny stock.  The pressure is on to get the stock price up and I think traders will benefit.

I would recommend that you keep PCBC on your radar list. When it turns, I couldn’t tell you, but I believe that it will.

Good luck and good trading

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