PacWest reports 1Q loss over goodwill impairment charge
PacWest Bancorp in Los Angeles reported a large quarterly loss after recording a nearly $1.5 billion goodwill impairment charge.
The $26 billion-asset company said in a Tuesday press release that it opted for the charge after its stock price, which closed at $17.92 a share on March 31, fell below its tangible book value, which ended the month at $19.31 a share.
PacWest's stock fell by 56% in March, outpacing the 29% decline in the KBW Nasdaq Bank Index over that period.
PacWest, which reported a $1.4 billion loss in the first quarter, noted that the noncash charge had no impact on its capital ratios, cash flows or liquidity position.
Absent the charge, the company's earnings fell 67% from a year earlier to $37 million, reflecting a $112 million loan-loss provision. The provision reflected the impact of the coronavirus outbreak and the comapny's decision to adopt the Current Expected Credit Losses standard, or CECL.
CECL requires banks to set funds aside when a loan is originated, rather than waiting for signs of distress.
“The COVID-19 pandemic has significantly impacted the entire economy resulting in non-essential businesses temporarily closing, record increases in unemployment, and severe declines in business activity in certain industries such as travel and restaurants among others,” Matt Wagner, PacWest's president and CEO, said in the release.
Net charge-offs rose by 4% from a year earlier to $19.1 million, or 0.4% of total loans.
PacWest's loan portfolio increased by 8% to $19.7 billion, while deposits rose by 2% to $19.6 billion.