Safe and Sound

Pacific Western Bank

Beverly Hills, CA
4
Star Rating
Pacific Western Bank is a Beverly Hills, CA-based, FDIC-insured bank dating back to 1982. Regulatory filings show the bank having equity of $5.19 billion on assets of $24.96 billion, as of December 31, 2017.

Thanks to the efforts of 1,797 full-time employees in 80 offices in multiple states, the bank currently holds loans and leases worth $17.31 billion, including real estate loans of $9.41 billion. U.S. bank customers currently have $19.06 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Pacific Western Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and as protection for depositors during periods of financial instability for the bank. Therefore, when it comes to measuring an a bank's financial resilience, capital is essential. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Pacific Western Bank racked up 14 out of a possible 30 points, beating the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Pacific Western Bank's Tier 1 capital ratio was 11.91 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Pacific Western Bank held equity amounting to 20.79 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having a large number of these types of assets could eventually require a bank to use capital to cover losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Pacific Western Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.92 percent of Pacific Western Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Pacific Western Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money are less able to do those things.

Pacific Western Bank received below-average marks on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. The most recent annualized quarterly return on equity for Pacific Western Bank was 7.64 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $350.2 million on total equity of $5.19 billion. The bank had an annualized return on average assets, or ROA, of 1.55 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.