A branch of regional lender Pacific Western Bank in Whittier, California.
AP Photo/Ashley Landis
PacWest sank 28% Thursday after the regional lender reported a 9.5% drop in deposits last week.
The bulk of the deposit decline came after reports said PacWest was exploring strategic options.
“The news headlines increased our customers’ fears of the safety of their deposits,” the bank said.
PacWest stock sank Thursday after the California-based lender said deposits fell last week, reviving concerns about the bank’s future.
Shares tumbled as much as 28% during premarket trade then trimmed the loss to 20%. Shares of other regional banks fell early Thursday, with Western Alliance down 10% and Zion off 2.7%. The SPDR S&P Regional Banking ETF lost 1.7%.
In a regulatory filing, PacWest said deposits dropped 9.5% in the week ended May 5. The majority of the decline took place following news reports it was exploring strategic options, including a sale. Bloomberg first reported PacWest was considering its options, which the bank later confirmed.
“The news headlines increased our customers’ fears of the safety of their deposits,” PacWest said in its filing with the Securities and Exchange Commission.
The lender said it has $15 billion in immediately available liquidity, exceeding uninsured deposits of $5.2 billion for a coverage ratio of 288%.
The Federal Insurance Deposit Corp. insures accounts up to $250,000, although in its March seizures of failed Silicon Valley Bank and Signature Bank, the agency covered all deposits.
PacWest’s latest update was dramatic a change in tone from a May 4 release when management said it had “not experienced out-of-the-ordinary deposit flows” following the failure of First Republic early this month, and that core customer deposits had increased since March 31.
On May 5, the company said its “business remains fundamentally sound” and that it would make the “prudent step” to cut its quarterly dividend to 1 cent a share from 25 cents a share.
Shares of PacWest started rising on May before dipping again slightly on Wednesday. The banking turmoil triggered by Silicon Valley Bank’s abrupt implosion has led to a 73% slide in PacWest stock this year.