PacWest Bank Taps Credit Lines After 20% Drop in Deposits
Pacific Western Bank said on Wednesday that customers had withdrawn 20 percent of their deposits since the start of the year, providing one of the first official accounts of the uneasiness that has engulfed smaller lenders after Silicon Valley Bank and Signature Bank collapsed nearly two weeks ago.
The Los Angeles bank also said it had raised $1.4 billion in cash from a facility provided by the investment firm Atlas SP Partners, backed by some of the bank’s assets. It also borrowed about $15 billion from various federal programs, including just over $2 billion from the emergency lending program that the Federal Reserve set up after the demise of Silicon Valley Bank and Signature Bank.
PacWest Bancorp, the bank’s parent company, saw its stock slip after the announcement, which also detailed the measures the company has taken to raise cash to bolster its balance sheet. The bank has lost more than half its market value over the past month.
The bank had been in talks to raise money by selling a stake in itself, but it said that “it would not be prudent to move forward with a transaction at this time,” citing market volatility and “depressed” values for regional bank stocks.
As of Monday, Pacific Western Bank had about $11.4 billion in cash, exceeding the $9.5 billion it had in uninsured deposits. Of its overall $27.1 billion in deposits, about a quarter were held by its unit serving the start-up and venture industry. At the start of the year, about a third of PacWest’s deposits were at its venture arm, highlighting how severely that sector has been rattled since the implosion of Silicon Valley Bank.
Regional banks like Pacific Western have come under particular pressure as customers worried about lenders that may share some characteristics with Silicon Valley Bank. Some banks, like First Republic, have also shored up their capital base and explored deals to raise more money, but investors have remained wary, particularly as they look for assurances from the government about protections for depositors.
“We continue to be encouraged by the clear messaging from government officials, regulatory agencies and industry leaders, including Secretary Yellen’s recent remarks regarding the protection of smaller bank depositors,” Paul W. Taylor, the chief executive of PacWest, said in a statement.
Treasury Secretary Janet L. Yellen said Tuesday that the US government was prepared to step in and back deposits above the $250,000 insurance limit at other banks if they ran into trouble, similar to Silicon Valley Bank and Signature Bank.
PacWest said it generated a profit of nearly $50 million in the first two months of the year, “and asset quality remains excellent with no significant changes since year-end.”