PacWest Bancorp (PACW -3.52%) had a bounce-back week, as its stock price was up 16.9% this week, as of Friday morning at 10:45 a.m. EDT, according to S&P Global Market Intelligence. The stock price had been up as much as 19.5% during the week. The stock was trading at about $6.90 per share at that time, down roughly 70% year to date.
The market was mixed this week, as the S&P 500 was up 0.1%, the Dow Jones Industrial Average was down 0.9%, and the Nasdaq Composite gained 1.7%, all as of 10:45 a.m. EDT.
It has been a brutal year for PacWest Bancorp., the holding company for Beverly Hills–based Pacific Western Bank. The bank, which is a major lender to start-ups and the venture capital community, was hit hard by the March banking crisis. With a higher level of uninsured deposits than most banks, PacWest saw a high level of deposit outflows. Its stock price also tanked because many investors associated it with another failed bank because it also serves the VC community.
However, PacWest's beaten-down share price got a lift this week after the company filed papers with the Securities and Exchange Commission to sell roughly $2.7 billion in real estate construction loans. The construction loans were sold to Kennedy-Wilson Holdings, which will assume all future funding obligations. In addition, PacWest officials said they will sell Kennedy-Wilson an additional six real estate construction loans with an aggregate balance of around $363 million.
In the SEC filing, bank officials said the move is "consistent with the previously announced strategy of PacWest Bancorp to pursue strategic assets sales and focus on our core community banking business." The deal is anticipated to close in multiple tranches in the second and third quarters.
Investors reacted positively to the transaction, as it will provide the bank with much-needed capital to offset the deposit outflows it has seen following the banking crisis. Earlier this month, the bank reported that deposits had decreased 9.5% after the collapse of First Republic Bank.
On Tuesday of this week, it was reported that PacWest made another move to enhance its liquidity, selling its Civic Financial Services unit to Roc360, a real estate lending company. The Civic Financial Services arm lends money to landlords and investors to fix up properties for resale. The financial terms of the deal were not disclosed.
Analyst Gary Tenner at D.A. Davidson raised PacWest's price target from $3 to $8 per share this week on the news, approving of the plan to focus on its community banking business.
PacWest still has a long way to go, but these are steps in the right direction. For now, there's still way too much uncertainty to do anything but monitor its progress.