(NEW YORK) — Shares of PacWest Bancorp plummeted more than 20% in early trading on Thursday after the regional lender said it faced a sizable withdrawal of deposits last week, renewing concern over financial trouble in the aftermath of a string of major bank collapses.
The sharp decline of PacWest stock prompted a pause in trading of the company’s shares minutes after the market opened on Thursday morning, but trading later resumed.
PacWest said in a securities filing on Thursday that the bank lost 9.5% of deposits last week, marking a turnabout after the company said at the outset of this month that deposits remained stable.
While noting the deposit flight, PacWest said that as of Wednesday it retained $15 billion in immediately-available cash if needed to fulfill further withdrawals. The liquidity far exceeds total uninsured deposits, which amount to $5.2 billion, the bank said.
PacWest did not immediately respond to ABC News’ request for comment on the stock decline.
The Los Angeles-based midsized lender said last week that it is exploring “all options” as it weighs offers from potential investors as well as the sale of a $2.7 billion loan portfolio.
In the statement last week, the company rejected concern about a sudden run on deposits, saying it had “not experienced out-of-the-ordinary deposit flows” after the seizure and sale of First Republic two days prior.
The significant withdrawal of deposits mostly took place in the days following the announcement last week, PacWest said on Thursday.
In all, PacWest stock has fallen more than 80% this year, erasing hundreds of millions of dollars in value.
The financial distress at PacWest follows the collapse within weeks of three of the nation’s 30-largest banks.
As the Fed aggressively hiked interest rates over the past year, the value of long-term Treasury and mortgage bonds dropped, punching a hole in the balance sheets at some regional banks.
The failure of Silicon Valley Bank in March sent shockwaves through the financial system that days later helped bring down New York City-based Signature Bank. Last Monday, First Republic fell under government control before a sale to JPMorgan Chase.
While high interest rates contributed to the collapses, each of the banks also retained a sizable portion of uninsured depositors, who tend to panic without a government backstop for their funds.
Addressing concern about deposits that lack government protection, PacWest said last week that insured deposits make up 75% of its holdings, which marks a sharp increase from the end of last year, when just 48% of its deposits were insured.
Stock prices at some other regional banks held steady or increased in early trading on Thursday, suggesting that the financial fallout remained limited to PacWest. Phoenix-based Western Alliance Bancorp shares rose about 5%; while Salt Lake City-based Zions Bancorp inched down less than 1%.
Copyright © 2023, ABC Audio. All rights reserved.
