PacWest Bancorp, a regional bank, experienced a significant 20% drop in its stock during premarket trading on Thursday. This occurred after the bank disclosed another round of deposit flight, resulting from news reports that have increased customer concerns regarding the safety of their deposits.
Other regional banks also faced declines in their shares with Western Alliance down by nearly 7%, and Zions stock falling around 3%. According to PacWest's SEC filing, "news headlines increased our customers fears of the safety of their deposits."
The majority of withdrawals took place within two days following such news reports. In fact, last week saw an accelerated deposit-flight for PacWest Shares as they crashed after reporting a decline in deposits by 9.5% during the week ended May 5.
In response to this ongoing crisis affecting regional banking institutions, PacWest has outlined several actions it is taking to mitigate risks. These measures include reducing its second-quarter common dividend from $0.25 cents to just $0.01 cent.
As investors eagerly await data on Federal Reserve Bank bailout facility usage tonight and additional deposit data tomorrow, it will become clearer how far-reaching this acceleration might be for other affected banks.
Already facing challenges prior to this latest development, shares of PacWest had seen a decrease of about 40% earlier this month and more than 70% since the beginning of the year.
Mark Thompson, Chief Financial Officer at PacWest stated: "We are actively addressing these issues head-on and implementing necessary steps to ensure our clients' confidence remains intact while navigating through these challenging times."