PacWest Bancorp(PACW) - 2022 Q4 - Annual Report

Financial Performance - The Bank had a cumulative net loss of $195.4 million during the three fiscal years of 2022, 2021, and 2020 due to a $1.47 billion goodwill impairment in Q1 2020 [106]. - The Bank's retained deficit was $790.9 million as of December 31, 2022, requiring DFPI and FDIC approval for any further cash dividends to the Company [106]. - For the year ended December 31, 2022, the Company incurred $19.7 million of FDIC assessment expense [118]. Capital Requirements - The Company is subject to the comprehensive capital framework known as "Basel III," which mandates increased capital levels and introduces the CET1 capital measure [108]. - The Company must maintain minimum ratios of Common Equity Tier 1 capital, Tier 1 capital, and total capital to total risk-weighted assets [97]. - As of December 31, 2022, the Company and the Bank met all capital adequacy requirements under Basel III, with minimum capital ratios of 4.5% CET1, 6.0% Tier 1, and 8.0% Total capital to risk-weighted assets [109]. - The capital conservation buffer of 2.5% of CET1 is required, resulting in minimum ratios of at least 7% CET1, 8.5% Tier 1, and 10.5% Total capital to risk-weighted assets [110]. - The carrying amount of subordinated debt totaled $867.1 million at December 31, 2022, with $131.0 million included in Tier 1 capital and $721.9 million in Tier 2 capital [113]. Regulatory Compliance - The Company and the Bank are subject to extensive regulation under federal and state banking laws to protect customer interests and minimize risk to the banking system [92]. - The Dodd-Frank Act requires the Company to act as a source of financial strength to the Bank, committing resources even when the Company may not be financially positioned to do so [94]. - The ability to pay dividends is restricted by various factors, including covenants in subordinated debt agreements and regulatory authority of the FRB, DFPI, and FDIC [101]. - The Company is required to notify the FRB prior to declaring dividends if net earnings are insufficient to fund the dividend amount [104]. - The Company is required to obtain prior approval from the FRB for acquisitions that would result in owning more than 5% of the voting shares of any bank [95]. Cybersecurity and Privacy Regulations - The Company is subject to the USA PATRIOT Act, requiring the establishment of policies for anti-money laundering and suspicious activity reporting [128]. - The Anti-Money Laundering Act of 2020 mandates FinCEN to adopt a more stringent system for identifying legal entities, which may increase compliance obligations for the Bank [131]. - The Company has adopted a customer information security program to comply with guidelines for safeguarding confidential customer information [135]. - The Gramm-Leach-Bliley Act of 1999 mandates financial institutions to implement policies for disclosing non-public personal information, with strict adherence to privacy policies distributed to customers [137]. - Federal regulators issued statements in March 2015 emphasizing the need for multiple layers of security controls and business continuity planning to mitigate risks from cyber-attacks [138]. - A joint rule established in November 2021 requires banking organizations to notify relevant parties of computer-security incidents, effective from April 1, 2022, with compliance required by May 1, 2022 [139]. - State regulators are increasingly implementing privacy and cybersecurity standards, with California's Consumer Privacy Act and Colorado's Privacy Act imposing significant requirements on financial institutions [140]. - The California Consumer Privacy Act took effect on January 1, 2020, and was followed by the California Privacy Rights Act, effective January 1, 2023, enhancing consumer privacy rights [140]. - Colorado's Privacy Act, modeled after the CCPA, is set to take effect on July 1, 2023, indicating a trend towards comprehensive data privacy legislation across states [140]. CRA Rating - The Bank received a CRA rating of "Outstanding" as of its most recent examination, which is crucial for undertaking certain activities, including acquisitions [133]. SEC Recommendations - The SEC has recommended enhancing its examination authority over investment advisers, which may impact the company's subsidiary PWAM [141].