In this video, I’m sharing with you what I found analyzing Pacwest Bancorp’s 10K filing regarding its Available-for-Sale Investments (AFS) and Held-to-Maturity Investments (HTM).

Available for Sale Securities (AFS)

Financial Accounting states that the classification of available for sale (AFS) only applies to debt securities as ASU 2016-01 made equity securities trading securities for GAAP purposes.

Held to Maturity Securities (HTM)

ASC 320-10-25-1 classifies certain Debt
Securities as Held to Maturity Securities (HTM) which is an exception to fair market accounting as held to maturity investments are recorded at cost and are not adjusted to fair market value.

Also check more investment accounting videos:

Reviewing Available for Sale and Held to Maturity Securities using SVBs 10k

Reviewing Available for Sale and Held to Maturity Securities using First Republic Banks 10k

How to Account for Investments (Trading – AFS – HTM – Equity Method)

Lets look at 4 ways Investments can be classified under GAAP (ex: Consolidation Accounting) 🧵

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In recent years, the banking sector has been facing numerous challenges, leading to increased concerns over bank failures. The year 2023 is no exception, with reports of several banks experiencing financial difficulties. One such bank that has come under scrutiny is PacWest, a prominent financial institution in the United States.

In order to understand the potential risks and issues facing PacWest, it is crucial to review the bank’s 2022 10k report. This document provides a comprehensive overview of the bank’s financial performance, as well as insights into its risk factors and potential areas of concern.

According to PacWest’s 10k report, the bank experienced a decline in its net income in 2022 compared to the previous year. This is a red flag that indicates financial challenges and potential instability within the bank. Additionally, the report highlights that PacWest’s nonperforming assets have increased, indicating a rise in loans that are not being repaid by customers. This is a troubling trend that could lead to significant financial losses for the bank.

Furthermore, the 10k report also reveals that PacWest’s capital levels may be at risk, with the bank potentially facing challenges in meeting regulatory requirements. This is a serious concern, as it indicates that the bank may not have enough capital to cover potential losses, putting depositors and shareholders at risk.

In addition to financial challenges, PacWest’s 10k report also highlights potential risks related to its business operations. This includes exposure to volatile market conditions, potential cybersecurity threats, and challenges related to regulatory compliance. These factors further exacerbate concerns over the bank’s stability and financial health.

The potential for PacWest to face financial difficulties and potential bank failure in 2023 is a cause for concern. A bank failure can have far-reaching consequences, impacting not only the bank’s customers and shareholders but also the broader financial system. Therefore, it is crucial for regulators and stakeholders to closely monitor PacWest’s financial situation and take appropriate measures to mitigate potential risks.

In conclusion, the 2022 10k report for PacWest highlights several concerning trends that indicate potential financial instability and risks of bank failure. It is crucial for the bank to address these challenges and take proactive measures to strengthen its financial position. Additionally, regulators and stakeholders must closely monitor the situation and take appropriate actions to safeguard the interests of depositors and the broader financial system.