PacWest Bancorp. (PACW) shares on Thursday traded sharply lower, pulling a host of regional-bank stocks into the red, after the struggling West Coast lender reported its deposit base declined over the first few days of the month.
PacWest, which has moved to lower or suspend shareholder payouts in an effort to shore up its balance sheet, said deposits fell 9.5%, or $1.8 billion, during the week ended May 5.
Most of the flight came after it confirmed reports that it has been talking with potential partners amid a broad study of strategic alternatives.
In March PacWest scrapped plans to raise capital, as bank stocks were pummeled in the wake of the Silicon Valley Bank collapse. The Los Angeles bank noted late last month that 75% of its then $28.2 billion deposit base fell within the FDIC's protection threshold.
The bank added that it had around $15 billion in "immediately available" liquidity, which was set against the $5.2 billion of deposits that weren't covered by the FDIC's $250,000 threshold.
"On the afternoon of May 3, 2023, PacWest was featured prominently in the financial news headlines with reports that PacWest was 'exploring all of its options and having talks with potential investors and partners,'" the bank said in a Thursday filing with the Securities and Exchange Commission.
"The news headlines increased our customers' fears of the safety of their deposits," the statement added. "During the week ended May 5, 2023, our deposits declined approximately 9.5%, with a majority of that decline occurring on May 4th and May 5th after the news reports on the afternoon of May 3rd."
At last check PacWest shares were marked 21% lower at $4.78 each, a move that extends the stock's six-month decline to around 82.
Among regional-bank peers, Zions Bancorp (ZION )of Salt Lake City was down 4.1% while KeyCorp (KEY) of Cleveland fell 2.3%.
Western Alliance Bancorp. (WAL) shares fell 1.3% even after the Phoenix-based lender late on Wednesday reported a $1.8 billion boost to its deposit base, taking it to $49.4 billion.
Fed Data Helped Regional-Bank Stocks
Regional-bank stocks had found some support last week after the Federal Reserve published data indicating that most of the lending from its emergency facilities was directed toward First Republic prior to its sale to JPMorgan Chase late last month.
Banks borrowed just $5.3 billion from the Fed's main discount window over the seven-day period ended on May 3, according to Fed data, down from the $73.9 billion handed out over the prior period.
The bulk of that decline, however, was linked to a change in allocation of borrowing from First Republic Bank. First Republic's borrowing's were labeled as "other credit," with that tally rising by around 34% to $228.2 billion.
Borrowing from the Fed's new Bank Term Funding Program, which enables banks to exchange high-quality assets for one-year loans, fell by $5.5 billion to $75.8 billion.
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