PacWest Bancorp(PACW) - 2023 Q1 - Quarterly Report

Financial Performance - The company reported a net loss of $1.20 billion for Q1 2023, compared to net earnings of $120.13 million in Q1 2022, indicating a significant downturn in profitability[14]. - For the three months ended March 31, 2023, the company reported a net loss of $1,195,424 thousand compared to net earnings of $120,128 thousand for the same period in 2022, indicating a significant decline in performance[22]. - Basic and diluted loss per common share was reported at $(10.22) for Q1 2023, compared to earnings of $1.01 per share in Q1 2022, indicating a substantial decline in shareholder value[14]. - Total revenue for the three months ended March 31, 2023, was $554,179 thousand, a significant increase from $343,722 thousand in the same period of 2022, driven by a rise in interest income to $517,788 thousand[180]. - The company reported net charge-offs of $9.2 million in Q1 2023, compared to net charge-offs of $1.2 million in Q1 2022[114]. Asset and Liability Management - Total assets increased to $44.30 billion as of March 31, 2023, compared to $41.23 billion at the end of 2022, reflecting a growth of approximately 5.03%[12]. - Total liabilities rose to $41.5 billion, compared to $37.3 billion at the end of 2022, driven by a $10.1 billion increase in borrowings, while total deposits decreased by $5.7 billion or 16.9%[207][210]. - The company experienced a net increase in borrowings of $10,119,680 thousand in Q1 2023, compared to $991,000 thousand in Q1 2022, reflecting a strategic shift in financing[22]. - Total deposits decreased to $28.19 billion as of March 31, 2023, down from $33.94 billion at the end of 2022, a reduction of approximately 17.1%[12]. - The percentage of insured deposits increased from 48% at December 31, 2022, to 71% at March 31, 2023, due to a significant outflow of uninsured deposits[210]. Income and Expense Analysis - Net interest income after provision for credit losses decreased to $276.27 million in Q1 2023, down from $308.72 million in Q1 2022, representing a decline of about 10.5%[14]. - Total noninterest expense surged to $1.57 billion in Q1 2023, compared to $167.43 million in Q1 2022, representing a dramatic increase attributed to goodwill impairment and acquisition costs[14]. - Noninterest income increased to $36.39 million in Q1 2023, compared to $20.82 million in Q1 2022, reflecting a growth of approximately 74.8%[14]. - Interest income from loans and leases rose to $430.69 million in Q1 2023, up from $267.76 million in Q1 2022, marking an increase of about 60.8%[14]. Goodwill and Impairment - The company recognized a goodwill impairment of $1,376,736 thousand during the first quarter of 2023, which contributed to the net loss[22]. - Goodwill impairment charge of $1.4 billion was recorded in Q1 2023, resulting in a total goodwill balance of $0 as of March 31, 2023[118][119]. Loan and Lease Portfolio - Total loans and leases held for investment decreased from $28,726,016 thousand as of December 31, 2022, to $25,770,912 thousand as of March 31, 2023, representing a decline of approximately 10%[68]. - The total amount of loans under internal risk rating 3-4 (Pass) amounted to $3,653,116, with a significant increase from previous periods[86]. - The total performing loans and leases held for investment reached $25.6 billion, with $25.6 billion in total loans and leases as of March 31, 2023[72]. - Nonaccrual loans and leases totaled $87.1 million as of March 31, 2023, down from $103.8 million at December 31, 2022[74]. - The company recorded $49.9 million of loans and leases 90 or more days past due as of March 31, 2023, compared to $70.9 million at December 31, 2022[74]. Capital and Equity - The company’s total stockholders' equity decreased to $2.77 billion as of March 31, 2023, down from $3.95 billion at the end of 2022, a decline of approximately 30.0%[12]. - Consolidated common equity Tier 1 (CET1) ratio increased to 9.21% as of March 31, 2023, due to positive adjusted earnings and a decrease in risk-weighted assets[208]. - The company reduced its common dividend from $0.25 to $0.01 in Q2 2023 to improve liquidity and capital ratios[41]. Strategic Initiatives - The company plans to complete strategic asset sales in Q2 2023 to enhance liquidity and capital ratios[41]. - The company is focused on enhancing its technology infrastructure and managing liquidity effectively amid changing economic conditions[201]. - The company has increased customer enrollment in reciprocal deposit programs to enhance FDIC insurance coverage and retain customers[41]. Securities and Investments - The total fair value of securities available-for-sale was $4.848 billion, with $2.249 billion in agency residential MBS and $685.436 million in U.S. Treasury securities[49]. - The company transferred $2.3 billion in fair value of various securities from available-for-sale to held-to-maturity, retaining $218.3 million of unrealized losses[44]. - The total fair value of securities held-to-maturity was $2.157 billion, reflecting gross unrealized losses of $117.408 million[54]. - The company concluded that unrealized losses were not credit-related, attributing them to market interest rates and supply-demand dynamics rather than credit rating downgrades[49].