A securities class action has been filed against PacWest Bancorp (PACW) n behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired PacWest securities between February 28, 2022 through May 3, 2023. This case has been filed in the USDC – C.D.CA.
PacWest operates as a holding company for its wholly-owned subsidiary, Pacific Western Bank (“PWB”), a regional bank based in Los Angeles, California. To support its operations, the Company depends primarily on deposits and external financing sources. Accordingly, PacWest purports to offer “traditional deposit products to businesses and other customers with a variety of rates and terms, including demand, money market, and time deposits” to small, middle-market, and venture-backed businesses.
As the holding company of PWB, the value of PacWest’s deposit base is dependent upon interest rates established by the U.S. Federal Reserve (the “Fed”) for federal funds-i.e., excess reserves that commercial banks and other financial institutions deposit at regional banks which can be then lent to customers. Specifically, when the Fed raises interest rates for federal funds, the value of fixed income securities declines. For example, beginning in March 2022, the Fed raised interest rates approximately eight times over the course of a year, elevating the federal fund rate from neatly zero to a target of 4.5% to 4.75%. As a result, by early March 2023, the S&P U.S. Government Bond Index, which tracks the performance of U.S. dollar-denominated U.S. Treasury and U.S. agency debt issued in the U.S. domestic market, was down 6.4% over the preceding 12 months.
The complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (i) PacWest had understated the impact of interest rate hikes on PWB, a smaller bank with excessive concentration in specific industries; (ii) accordingly, the Company had overstated the stability and/or sustainability of its deposit base; (iii) as a result, PacWest was exceptionally vulnerable to excessive deposit flows and/or a liquidity crisis; and (iv) as a result, Defendants’ public statements were materially false and/or misleading at all relevant times.