PacWest Bancorp has reported a first-quarter loss after it booked a massive goodwill impairment as recent market volatility resulted in a sharp fall in its share price.
However, news of a recovery in bank deposits sent its shares higher in early trade.
The regional bank’s stock toppled more than 60% to below $10 in early March following the failure of Silicon Valley Bank. As a result, it recorded a goodwill impairment of $1.38 billion, resulting in a 1Q net loss of $1.21 billion, or $10.22 per share. Excluding the non-cash impairment, it reported adjusted earnings of $89.4 million, or $0.66 per share.
While total deposits fell more than 16% to $28.2 billion over the quarter due to volatility in the banking sector, it noted a $1.1 billion inflow towards the end of March from the $27.1 billion it reported on March 20.
Almost three-quarters of total deposits were insured as of April 24, the bank said, up from 48% at the end of 2022, with immediately-available liquidity of $12.4 billion exceeding uninsured deposits of $8.1 billion with a coverage ratio of 153%.
“Our strong banking franchise and our loyal, diversified customer base have driven us through one of the most challenging recent periods in the banking industry,” president and CEO Paul Taylor said in an earnings statement.
“Importantly, deposits stabilized in the latter part of March and rebounded nicely in April, increasing approximately $700 million subsequent to quarter-end."
Taylor said it was important to note that goodwill impairment is a non-cash charge and has no impact on the bank's regulatory capital ratios, cash flows, or liquidity position.
"Moreover, in light of the recent events, management took immediate steps to maximize liquidity, including the exploration of strategic asset sales, which has led to the transfer of our $2.7 billion Lender Finance loan portfolio to held for sale," he added.
The bank said its credit quality remains strong with nonperforming assets of 35 basis points and net charge-offs of 13 basis points for the quarter and 5 basis points for the trailing twelve months.
PacWest Bancorp’s shares rose 11% to $11.47 in early trade.
Contact the author at stephen.gunnion@proactiveinvestors.com