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PacWest Bancorp Announces Results for the Second Quarter 2020

Company Release - 07/16/2020

Significant Items

  • Net Earnings of $33.2 Million, or $0.28 Per Diluted Share
  • Strong Pre-Provision, Pre-Tax Net Revenue (“PPNR”) of $166.2 Million
  • Funded $1.2 Billion of Paycheck Protection Program Loans (“PPP”) in Q2
  • Core Deposits Up $3.5 Billion or 22% in Q2; Represents 85% of Total Deposits
  • Tax Equivalent Net Interest Margin of 4.20% Compared to 4.31% in Q1
  • Cost of Average Total Deposits Decreased 34 Basis Points from Q1 to 25 Basis Points
  • Quarter Includes $6.6 Million of Prepayment Penalties Related to Early Payoff of FHLB Term Advances and $7.7 Million of Gain on Sale of Securities

LOS ANGELES, July 16, 2020 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the second quarter of 2020 of $33.2 million, or $0.28 per diluted share, compared to a net loss for the first quarter of 2020 of $1.43 billion, or $12.23 per diluted share. The increase in net earnings in the second quarter was due primarily to a $1.47 billion goodwill impairment charge in the first quarter.

Matt Wagner, President and CEO, commented, “Our focus continues to be the health and safety of our employees while assisting our customers during the COVID-19 pandemic. We assisted our customers by funding over 4,100 PPP loans in the second quarter totaling over $1.2 billion, while granting loan payment modifications on approximately $1.8 billion, or 9% of loans and leases, most during May and June. The ultimate resolution of these modified loans is largely dependent on how long the pandemic impacts consumer demand and business activity. ”

Mr. Wagner added, “We continued enhanced monitoring of our loan portfolios and saw less loan migration to special mention during the second quarter after being proactive in downgrading loans in the first quarter. We recorded another significant provision for credit losses largely due to deterioration in the macro-economic variables used in our CECL forecast.”  

Mr. Wagner continued, “Our operations remain healthy and continue to produce increasing revenues while generating internal capital. PPNR increased by $5.3 million in the second quarter to $166.2 million, which resulted in a PPNR return on average assets of 2.51%.  These solid operating earnings highlight the resilience of our business as we continue to navigate the challenging economic conditions.”   

FINANCIAL HIGHLIGHTS

  At or For the       At or For the    
  Three Months Ended       Six Months Ended    
  June 30,   March 31,   Increase   June 30,   Increase
Financial Highlights   2020       2020     (Decrease)     2020       2019     (Decrease)
                                       
  (Dollars in thousands, except per share data)
Net earnings (loss) $ 33,204     $ (1,433,111 )   $ 1,466,315     $ (1,399,907 )   $ 240,729     $ (1,640,636 )
Diluted earnings (loss)                      
per share $ 0.28     $ (12.23 )   $ 12.51     $ (11.98 )   $ 1.99     $ (13.97 )
Return on average assets   0.50 %     (21.27 )%     21.77       (10.48 )%     1.88 %     (12.36 )
Pre-provision, pre-goodwill                      
impairment, pre-tax net                      
revenue ("PPNR") (1) $ 166,172     $ 160,877     $ 5,295     $ 327,049     $ 346,017     $ (18,968 )
PPNR return on average                      
assets (1)   2.51 %     2.39 %     0.12       2.45 %     2.70 %     (0.25 )
Return on average                      
tangible equity (1)   6.39 %     6.88 %     (0.49 )     6.64 %     22.79 %     (16.15 )
                       
Net interest margin ("NIM")                      
(tax equivalent)   4.20 %     4.31 %     (0.11 )     4.26 %     4.70 %     (0.44 )
Yield on average loans and                      
leases (tax equivalent)   5.01 %     5.54 %     (0.53 )     5.27 %     6.21 %     (0.94 )
Cost of average total                      
deposits   0.25 %     0.59 %     (0.34 )     0.41 %     0.77 %     (0.36 )
Efficiency ratio   42.9 %     40.6 %     2.3       41.8 %     42.0 %     (0.2 )
                       
Total assets $ 27,365,738     $ 26,143,267     $ 1,222,471     $ 27,365,738     $ 26,344,414     $ 1,021,324  
Loans and leases held                      
for investment,                      
net of deferred fees $ 19,694,631     $ 19,745,305     $ (50,674 )   $ 19,694,631     $ 18,472,852     $ 1,221,779  
Noninterest-bearing                      
demand deposits $ 8,629,543     $ 7,510,218     $ 1,119,325     $ 8,629,543     $ 7,299,213     $ 1,330,330  
Core deposits $ 19,535,814     $ 16,050,522     $ 3,485,292     $ 19,535,814     $ 15,617,488     $ 3,918,326  
Total deposits $ 22,928,579     $ 19,575,837     $ 3,352,742     $ 22,928,579     $ 18,805,756     $ 4,122,823  
                       
As percentage of total                      
deposits:                      
Noninterest-bearing                      
  demand deposits   38 %     38 %     -       38 %     39 %     (1 )
Core deposits   85 %     82 %     3       85 %     83 %     2  
                       
Equity to assets ratio   12.62 %     12.97 %     (0.35 )     12.62 %     18.42 %     (5.80 )
Tangible common equity                      
ratio (1)   8.93 %     9.10 %     (0.17 )     8.93 %     9.50 %     (0.57 )
Book value per share $ 29.17     $ 28.75     $ 0.42     $ 29.17     $ 40.49     $ (11.32 )
Tangible book value per                      
share (1) $ 19.80     $ 19.31     $ 0.49     $ 19.80     $ 18.83     $ 0.97  
                       
(1) Non-GAAP measure.                      
                       

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased by $4.5 million to $254.3 million for the second quarter of 2020 compared to $249.7 million for the first quarter of 2020 due mainly to a lower cost of average interest-bearing liabilities and a higher balance of average loans and leases, partially offset by a lower yield on average loans and leases and securities. The tax equivalent yield on average loans and leases was 5.01% for the second quarter of 2020 compared to 5.54% for the first quarter of 2020. The decrease in the yield on average loans and leases was due principally to lower market rates, a lower rate on loan production from the impact of the PPP loans, and lower loan discount accretion. Excluding the PPP loans, which have a coupon rate of 1%, the tax equivalent yield on average loans and leases was 5.10%.

The tax equivalent NIM was 4.20% for the second quarter of 2020 compared to 4.31% for the first quarter of 2020. The decrease in the NIM was due mainly to lower market rates resulting in lower loan and lease and security yields, a lower rate on loan production from the impact of the PPP loans, and lower loan discount accretion, offset partially by the lower cost of average interest-bearing liabilities. Excluding the PPP loans, the tax equivalent NIM was 4.25%.

The cost of average total deposits decreased to 0.25% for the second quarter of 2020 from 0.59% for the first quarter of 2020. The lower cost of average interest-bearing deposits reflected actions taken to reduce deposit rates in light of the two emergency interest rate cuts by the Federal Reserve in March of 2020. The cost of deposits at June 30, 2020 was 0.19%.

Provision for Credit Losses

The following table presents details of the provision for credit losses for the periods indicated:

  Three Months Ended    
  June 30,   March 31,   Increase
Provision for Credit Losses 2020   2020   (Decrease)
               
  (In thousands)    
Addition to allowance for loan and lease losses $ 93,000   $ 98,000   $ (5,000 )
Addition to reserve for unfunded          
loan commitments   27,000     14,000     13,000  
Total provision for credit losses $ 120,000   $ 112,000   $ 8,000  
 

The provision for credit losses was $120.0 million for the second quarter of 2020, up $8.0 million from the first quarter of 2020, driven by reserve builds that reflected significant deterioration and continued uncertainty in the key macro-economic forecast variables such as unemployment and GDP as a result of the impact of COVID-19.

Noninterest Income

The following table presents details of noninterest income for the periods indicated:   

  Three Months Ended    
  June 30,   March 31,   Increase
Noninterest Income 2020   2020   (Decrease)
           
  (In thousands)    
Service charges on deposit accounts $ 2,004   $ 2,658   $ (654 )
Other commissions and fees   10,111     9,721     390  
Leased equipment income   12,037     12,251     (214 )
Gain on sale of loans and leases   346     87     259  
Gain on sale of securities   7,715     182     7,533  
Other income:          
Dividends and gains on equity investments   2,947     28     2,919  
Warrant income   1,973     837     1,136  
Other   1,725     3,336     (1,611 )
Total noninterest income $ 38,858   $ 29,100   $ 9,758  
 

Noninterest income increased by $9.8 million to $38.9 million for the second quarter of 2020 compared to $29.1 million for the first quarter of 2020 due primarily to a $7.5 million increase in gain on sale of securities and a $2.9 million increase in dividends and gains on equity investments, partially offset by a $1.6 million decrease in other income. The increase in gain on sale of securities resulted from the sale of $122 million of securities in the second quarter. The increase in dividends and gains on equity investments resulted from increases in the fair value of equity investments still held and a $1.5 million gain on the sale of an equity investment. The decrease in other income was primarily due to $1.1 million of bankruptcy proceeds received on a former credit in the first quarter.

Noninterest Expense

The following table presents details of noninterest expense for the periods indicated:

  Three Months Ended    
  June 30,   March 31,   Increase
Noninterest Expense 2020   2020   (Decrease)
  (In thousands)        
Compensation $ 61,910     $ 61,282   $ 628  
Occupancy   14,494       14,207     287  
Data processing   7,102       6,454     648  
Other professional services   4,146       4,258     (112 )
Insurance and assessments   9,373       4,249     5,124  
Intangible asset amortization   3,882       3,948     (66 )
Leased equipment depreciation   7,102       7,205     (103 )
Foreclosed assets (income) expense, net   (146 )     66     (212 )
Customer related expense   4,408       3,932     476  
Loan expense   3,379       2,650     729  
Other   11,315       9,719     1,596  
Total operating expense   126,965       117,970     8,995  
Goodwill impairment   -       1,470,000     (1,470,000 )
Total noninterest expense $ 126,965     $ 1,587,970   $ (1,461,005 )
 

Noninterest expense decreased by $1.46 billion to $127.0 million for the second quarter of 2020 compared to $1.59 billion for the first quarter of 2020 attributable primarily to a $1.47 billion goodwill impairment charge in the first quarter. Excluding the goodwill impairment charge, noninterest expense increased by $9.0 million to $127.0 million. This increase was mainly due to a $5.1 million increase in insurance and assessments expense, a $1.6 million increase in other expense, a $0.7 million increase in loan expense, and a $0.6 million increase in data processing expense. The increase in insurance and assessments expense was due to an increase in FDIC assessment expense resulting from an increase in our assessment rate due primarily to the first quarter loss from the goodwill impairment charge. The higher assessment rate will continue for one year. The increase in other expense was due to $6.6 million in prepayment penalties incurred from the early payoff of $750 million of FHLB term advances, partially offset by the reversal of a $1.5 million accrual for operational loss contingencies and decreases in various business expenses due to less activity as a result of COVID-19. The FHLB term advances had a weighted average interest rate of 0.96% and the prepayment decision was made after the significant drop in market rates in March and the expectation of continued low rates for an extended time. The increase in loan expense was due primarily to higher loan-related legal and workout expenses. The increase in data processing expense was due to a one-time expense to create systems for the origination and loan documentation submissions necessary for the Paycheck Protection Program.

Income Taxes

The effective income tax rate was 28.1% for the second quarter of 2020 compared to (0.8)% for the first quarter of 2020. Excluding non-deductible goodwill impairment, the effective income tax rate for the first quarter of 2020 was 24.5%. Excluding the non-deductible goodwill impairment, the effective tax rate for the full year 2020 is currently estimated to be in the range of 26-28%. The higher effective tax rate in the second quarter was mainly due to tax expense related to restricted stock vestings combined with benefits recorded in the first quarter related to the filing of amended state returns.  

BALANCE SHEET HIGHLIGHTS

Loans and Leases

The following table presents roll forwards of loans and leases held for investment, net of deferred fees, for the periods indicated:

  Three Months Ended   Six Months Ended
Roll Forward of Loans and Leases Held June 30,   March 31,   June 30,
for Investment, Net of Deferred Fees (1)   2020       2020       2020  
                       
  (Dollars in thousands)
Balance, beginning of period $   19,745,305     $   18,846,872     $   18,846,872  
Additions:          
Production     1,802,956         789,746         2,592,702  
Disbursements     800,458         1,997,080         2,797,538  
Total production and disbursements     2,603,414         2,786,826         5,390,240  
Reductions:          
Payoffs     (612,837 )       (812,707 )       (1,425,544 )
Paydowns     (2,022,376 )       (1,053,705 )       (3,076,081 )
Total payoffs and paydowns     (2,635,213 )       (1,866,412 )       (4,501,625 )
Sales     (3,089 )       -         (3,089 )
Transfers to foreclosed assets     -         (1,776 )       (1,776 )
Charge-offs     (15,786 )       (20,205 )       (35,991 )
Total reductions     (2,654,088 )       (1,888,393 )       (4,542,481 )
Net (decrease) increase     (50,674 )       898,433         847,759  
Balance, end of period $   19,694,631     $   19,745,305     $   19,694,631  
           
Weighted average rate on production (2)   2.33 %     4.31 %     2.93 %
           
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.        
(2) The weighted average rate on production presents contractual rates on a tax equivalent basis        
      and excludes amortized fees.  Amortized fees added approximately 21 basis points to loan        
      yields in 2020.          
           

Loans and leases held for investment, net of deferred fees, decreased by $50.7 million in the second quarter of 2020 to $19.7 billion at June 30, 2020. We funded $1.2 billion of PPP loans in the second quarter and continued ongoing fundings in the construction loan class, however, this was more than offset by paydowns on existing credits in the venture capital and asset-based loan portfolio classes. Many borrowers who drew down on their loans in the first quarter to ensure liquidity during the COVID-19 pandemic paid back the funds in the second quarter as the economy began to reopen. In addition, our venture banking equity funds business saw balances decline $662.7 million in the second quarter after growing $203.2 million in the first quarter, as drawdowns by equity funds in late March were repaid during the second quarter. The weighted average rate on production decreased to 2.33% since most of the loan production related to PPP loans at a coupon rate of 1%. Excluding PPP loans, the weighted average rate on production was 5.39%. 

The following table presents the composition of loans and leases held for investment by loan portfolio segment and class, net of deferred fees, as of the dates indicated:

  June 30, 2020   March 31, 2020   June 30, 2019
    % of     % of     % of
Loan and Lease Portfolio Balance Total   Balance Total   Balance Total
                 
  (In thousands)
Real estate mortgage:                
Commercial $ 4,222,075 22 %   $ 4,220,649 21 %   $ 4,435,274 24 %
Income producing and other                
residential   3,733,659 19 %     3,788,295 19 %     3,640,752 20 %
Total real estate mortgage   7,955,734 41 %     8,008,944 40 %     8,076,026 44 %
Real estate construction and land:                
Commercial   1,167,609 6 %     1,087,505 6 %     972,891 5 %
Residential   2,172,919 11 %     1,792,748 9 %     1,403,239 8 %
Total real estate construction                
  and land   3,340,528 17 %     2,880,253 15 %     2,376,130 13 %
  Total real estate   11,296,262 58 %     10,889,197 55 %     10,452,156 57 %
Commercial:                
Asset-based   3,412,431 17 %     3,938,402 20 %     3,606,007 19 %
Venture capital   1,814,341 9 %     2,715,837 14 %     2,194,743 12 %
Other commercial   2,760,278 14 %     1,771,985 9 %     1,773,564 10 %
Total commercial   7,987,050 40 %     8,426,224 43 %     7,574,314 41 %
Consumer   411,319 2 %     429,884 2 %     446,382 2 %
Total loans and leases held for                
investment, net of deferred fees $ 19,694,631 100 %   $ 19,745,305 100 %   $ 18,472,852 100 %
                 
Total unfunded loan commitments $ 7,745,921     $ 7,697,724     $ 7,610,899  
                 

Allowance for Credit Losses

The following tables present roll forwards of the allowance for credit losses for the periods indicated:

  Three Months Ended June 30, 2020
  Allowance for   Reserve for   Total
Allowance for Credit Loan and   Unfunded Loan   Allowance for
Losses Rollforward Lease Losses   Commitments   Credit Losses
           
  (In thousands)
Beginning balance $ 221,292     $ 53,571   $ 274,863  
Charge-offs   (15,786 )     -     (15,786 )
Recoveries   2,544       -     2,544  
Net charge-offs   (13,242 )     -     (13,242 )
Provision   93,000       27,000     120,000  
Ending balance $ 301,050     $ 80,571   $ 381,621  
           
           
  Three Months Ended March 31, 2020
  Allowance for   Reserve for   Total
Allowance for Credit Loan and   Unfunded Loan   Allowance for
Losses Rollforward Lease Losses   Commitments   Credit Losses
           
  (In thousands)
Beginning balance $ 138,785     $ 35,861   $ 174,646  
Charge-offs   (20,205 )     -     (20,205 )
Recoveries   1,095       -     1,095  
Net charge-offs   (19,110 )     -     (19,110 )
Provision   98,000       14,000     112,000  
Cumulative effect of change in          
accounting principle - CECL   3,617       3,710     7,327  
Ending balance $ 221,292     $ 53,571   $ 274,863  
 

The allowance for credit losses increased by $106.8 million in the second quarter of 2020 to $381.6 million at June 30, 2020. Substantially all of the increase in the allowance for credit losses during the second quarter was attributable to deterioration in the macro-economic variables used in our CECL forecast. Net charge-offs decreased from $19.1 million in the first quarter to $13.2 million in the second quarter.

The allowance for credit losses as a percentage of loans and leases held for investment was 1.94% at June 30, 2020 and 1.39% at March 31, 2020.  The allowance for loan and lease losses as a percentage of loans and leases held for investment was 1.53% at June 30, 2020 and 1.12% at March 31, 2020. The allowance for credit losses and allowance for loan and lease losses as a percentage of loans and leases held for investment, excluding PPP loans that are fully guaranteed and do not carry any allowance, was 2.06% and 1.63% at June 30, 2020, respectively.

Gross charge-offs for the second quarter of 2020 were $15.8 million and included $6.5 million for venture capital loans, $5.0 million for other commercial loans, and $4.2 million for commercial real estate mortgage loans compared to gross charge-offs for the first quarter of 2020 of $20.2 million that included $11.5 million for an asset-based oil industry loan and $7.3 million for other commercial loans.

Recoveries for the second quarter of 2020 were $2.5 million and included $2.3 million for other commercial loans compared to recoveries for the first quarter of 2020 of $1.1 million that included $0.4 million for other commercial loans and $0.4 million for asset-based loans.

For the second quarter of 2020 and first quarter of 2020, annualized net charge-offs to average loans and leases were 0.27% and 0.40%, respectively.

Deposits and Client Investment Funds

The following table presents the composition of our deposit portfolio as of the dates indicated:

  June 30, 2020   March 31, 2020   June 30, 2019
    % of     % of     % of
Deposit Composition Balance Total   Balance Total   Balance Total
                 
  (Dollars in thousands)
Noninterest-bearing demand $ 8,629,543 38 %   $ 7,510,218 38 %   $ 7,299,213 39 %
Interest checking   4,858,168 21 %     3,333,147 17 %     3,220,353 17 %
Money market   5,498,150 24 %     4,712,118 24 %     4,578,083 24 %
Savings   549,953 2 %     495,039 3 %     519,839 3 %
Total core deposits   19,535,814 85 %     16,050,522 82 %     15,617,488 83 %
Non-core non-maturity deposits   1,217,266 5 %     836,157 4 %     436,833 2 %
Total non-maturity deposits   20,753,080 90 %     16,886,679 86 %     16,054,321 85 %
Time deposits $250,000 and under   1,522,928 7 %     2,086,188 11 %     2,284,023 12 %
Time deposits over $250,000   652,571 3 %     602,970 3 %     467,412 3 %
Total time deposits   2,175,499 10 %     2,689,158 14 %     2,751,435 15 %
Total deposits $ 22,928,579 100 %   $ 19,575,837 100 %   $ 18,805,756 100 %
 

At June 30, 2020, core deposits totaled $19.5 billion, or 85% of total deposits, including $8.6 billion of noninterest-bearing demand deposits, or 38% of total deposits. Core deposits increased by $3.5 billion in the second quarter driven by PPP loan proceeds being deposited into customers’ accounts and venture banking which saw deposits increase by $2.0 billion to a record $8.7 billion as of June 30, 2020.

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products.  Total off-balance sheet client investment funds at June 30, 2020 were $1.4 billion, of which $1.1 billion was managed by PWAM.

CREDIT QUALITY  

The following table presents loan and lease credit quality metrics as of the dates indicated:

  June 30,   March 31,   Increase
                   
Credit Quality Metrics   2020       2020     (Decrease)
                   
  (Dollars in thousands)
NPAs and Performing TDRs:          
Nonaccrual loans and leases held for investment (1) $ 166,113     $ 95,602     $ 70,511  
Accruing loans contractually past due 90 days or more   -       -       -  
Foreclosed assets, net   1,449       1,701       (252 )
Total nonperforming assets ("NPAs") $ 167,562     $ 97,303     $ 70,259  
           
Performing TDRs held for investment $ 15,037     $ 8,978     $ 6,059  
           
Nonaccrual loans and leases held for investment          
to loans and leases held for investment   0.84 %     0.48 %    
Nonperforming assets to loans and leases          
held for investment and foreclosed assets   0.85 %     0.49 %    
           
Loan and Lease Credit Risk Ratings:          
Pass $ 18,635,004     $ 18,698,942     $ (63,938 )
Special mention   766,397       898,658       (132,261 )
Classified   293,230       147,705       145,525  
Total loans and leases held for investment,          
net of deferred fees $ 19,694,631     $ 19,745,305     $ (50,674 )
           
Classified loans and leases held for investment          
to loans and leases held for investment   1.49 %     0.75 %    
           
Allowance for Credit Losses:          
Allowance for credit losses $ 381,621     $ 274,863     $ 106,758  
Provision for credit losses (for the quarter) $ 120,000     $ 112,000     $ 8,000  
Net charge-offs (for the quarter) $ 13,242     $ 19,110     $ (5,868 )
Net charge-offs to average loans and leases          
(for the quarter)   0.27 %     0.40 %    
Allowance for credit losses to loans and leases          
held for investment   1.94 %     1.39 %    
Allowance for credit losses to nonaccrual loans          
and leases held for investment   229.7 %     287.5 %    
           
(1) Nonaccrual loans include guaranteed amounts of $16.2 million at June 30, 2020 and $16.0 million        
at March 31, 2020.          
           

Nonaccrual, classified, and special mention loans and leases fluctuate from period to period as a result of loan repayments and our ongoing active portfolio monitoring, including loan downgrades.

During the second quarter of 2020, classified loans and leases increased by $145.5 million, while special mention loans and leases decreased by $132.3 million. The increase in classified loans and leases and the decrease in special mention loans and leases was due primarily to three security monitoring loans totaling $119.2 million and two retail real estate loans totaling $42.0 million migrating out of special mention and into the classified category. 

The following table presents nonaccrual loans and leases and accruing loans and leases past due between 30 and 89 days by loan portfolio segment and class as of the dates indicated:

  June 30, 2020   March 31, 2020   Increase (Decrease)
      Accruing       Accruing       Accruing
      and 30-89       and 30-89       and 30-89
      Days Past       Days Past       Days Past
  Nonaccrual   Due   Nonaccrual   Due   Nonaccrual   Due
                       
  (Dollars in thousands)
Real estate mortgage:                      
Commercial $ 61,771   $ -   $ 19,088   $ 1,807   $ 42,683     $ (1,807 )
Income producing and other                      
residential   2,207     -     2,308     1,064     (101 )     (1,064 )
  Total real estate mortgage   63,978     -     21,396     2,871     42,582       (2,871 )
Real estate construction and land:                      
Commercial   337     -     351     -     (14 )     -  
Residential   -     1,021     -     241     -       780  
Total real estate                      
  construction and land   337     1,021     351     241     (14 )     780  
Commercial:                      
Asset-based   19,013     3,697     17,104     -     1,909       3,697  
Venture capital   8,270     1,924     18,612     183     (10,342 )     1,741  
Other commercial   73,995     191     37,726     4,393     36,269       (4,202 )
Total commercial   101,278     5,812     73,442     4,576     27,836       1,236  
Consumer   520     1,067     413     518     107       549  
Total held for investment $ 166,113   $ 7,900   $ 95,602   $ 8,206   $ 70,511     $ (306 )
 

During the second quarter of 2020, nonaccrual loans and leases increased by $70.5 million due primarily to two retail real estate loans and one security monitoring loan.

CAPITAL

The following table presents certain actual capital ratios and ratios excluding PPP loans:

  June 30, 2020    
      Excluding   March 31,
      PPP   2020 
  Actual (1)    Loans (1)   Actual
PacWest Bancorp Consolidated:          
Tier 1 leverage capital ratio 8.93 %   9.22 % (3) 8.63 %
Common equity tier 1 capital ratio 9.97 %   9.97 %   9.22 %
Total capital ratio 13.18 %   13.18 %   12.07 %
Tangible common equity ratio (2) 8.93 %   9.36 % (3) 9.10 %
           
(1) Capital information for June 30, 2020 is preliminary.          
(2) Non-GAAP measure.          
(3) PPP loans have been excluded from total assets in denominator as they are zero risk-weighted.      
       

STOCK REPURCHASE PROGRAM

During the second quarter of 2020, there were no stock repurchases. On April 21, 2020, we announced that stock repurchases were suspended indefinitely.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $27 billion in assets headquartered in Los Angeles, California, with executive offices in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 full-service branches located in California, one branch located in Durham, North Carolina, and one branch located in Denver, Colorado. The Bank provides community banking products including lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank also offers venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States.  For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.

FORWARD LOOKING STATEMENTS

This communication contains certain forward-looking information about PacWest Bancorp that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control.  The COVID-19 pandemic is adversely affecting PacWest Bancorp, its employees, customers and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity and prospects is uncertain. The length of the COVID-19 pandemic and the severity of its impact on key macro-economic indicators such as unemployment and GDP may have a material impact on our allowance for credit losses and related provision for credit losses. Continued deterioration in general business and economic conditions could adversely affect PacWest Bancorp’s revenues and the values of its assets, including goodwill, and liabilities, lead to a tightening of credit, and increase stock price volatility. In addition, PacWest Bancorp’s results could be adversely affected by changes in interest rates, sustained high unemployment rates, deterioration in the credit quality of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment securities, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the U.S. Securities and Exchange Commission.

We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

           
PACWEST BANCORP AND SUBSIDIARIES          
CONDENSED CONSOLIDATED BALANCE SHEET          
           
  June 30,   March 31,   June 30,
    2020       2020       2019  
                       
  (Dollars in thousands, except per share data)
ASSETS:          
Cash and due from banks $ 174,059     $ 172,570     $ 185,075  
Interest-earning deposits in financial institutions   1,747,077       439,690       422,663  
Total cash and cash equivalents   1,921,136       612,260       607,738  
           
Securities available-for-sale, at estimated fair value   3,851,141       3,757,663       3,807,244  
Federal Home Loan Bank stock, at cost   17,250       54,244       43,146  
Total investment securities   3,868,391       3,811,907       3,850,390  
           
Gross loans and leases held for investment   19,780,476       19,806,394       18,532,740  
Deferred fees, net   (85,845 )     (61,089 )     (59,888 )
Total loans and leases held for investment,          
net of deferred fees   19,694,631       19,745,305       18,472,852  
Allowance for loan and lease losses   (301,050 )     (221,292 )     (135,037 )
Total loans and leases held for investment, net   19,393,581       19,524,013       18,337,815  
           
Equipment leased to others under operating leases   295,191       306,530       300,668  
Premises and equipment, net   42,299       39,799       38,162  
Foreclosed assets, net   1,449       1,701       1,472  
Goodwill   1,078,670       1,078,670       2,548,670  
Core deposit and customer relationship intangibles, net   30,564       34,446       47,380  
Other assets   734,457       733,941       612,119  
Total assets $ 27,365,738     $ 26,143,267     $ 26,344,414  
           
LIABILITIES:          
Noninterest-bearing deposits $ 8,629,543     $ 7,510,218     $ 7,299,213  
Interest-bearing deposits   14,299,036       12,065,619       11,506,543  
Total deposits   22,928,579       19,575,837       18,805,756  
Borrowings   60,000       2,295,000       1,913,059  
Subordinated debentures   460,772       458,994       456,112  
Accrued interest payable and other liabilities   463,489       423,047       317,477  
Total liabilities   23,912,840       22,752,878       21,492,404  
STOCKHOLDERS' EQUITY (1)   3,452,898       3,390,389       4,852,010  
Total liabilities and stockholders’ equity $ 27,365,738     $ 26,143,267     $ 26,344,414  
           
Book value per share $ 29.17     $ 28.75     $ 40.49  
Tangible book value per share (2) $ 19.80     $ 19.31     $ 18.83  
Shares outstanding   118,374,603       117,916,789       119,829,104  
           
(1) Includes net unrealized gain on securities          
      available-for-sale, net $ 145,038     $ 90,916     $ 73,066  
(2) Non-GAAP measure.          
           

 

                   
PACWEST BANCORP AND SUBSIDIARIES                  
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS)                
                   
  Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,   June 30,
    2020       2020       2019       2020       2019  
                                       
  (Dollars in thousands, except per share data)
Interest income:                  
Loans and leases $   247,851     $   262,278     $   284,236     $   510,129     $   558,465  
Investment securities     26,038         27,446         28,948         53,484         58,628  
Deposits in financial institutions     186         1,608         1,349         1,794         1,999  
Total interest income     274,075         291,332         314,533         565,407         619,092  
                   
Interest expense:                  
Deposits     13,075         28,247         38,720         41,322         72,955  
Borrowings     1,319         6,778         7,210         8,097         14,920  
Subordinated debentures     5,402         6,560         7,705         11,962         15,443  
Total interest expense     19,796         41,585         53,635         61,381         103,318  
                   
Net interest income     254,279         249,747         260,898         504,026         515,774  
Provision for credit losses     120,000         112,000         8,000         232,000         12,000  
Net interest income after                  
provision for credit losses     134,279         137,747         252,898         272,026         503,774  
                   
Noninterest income:                  
Service charges on deposit accounts     2,004         2,658         3,771         4,662         7,501  
Other commissions and fees     10,111         9,721         11,590         19,832         22,598  
Leased equipment income     12,037         12,251         9,182         24,288         18,464  
Gain on sale of loans and leases     346         87         326         433         326  
Gain on sale of securities     7,715         182         22,192         7,897         24,353  
Other income     6,645         4,201         3,832         10,846         8,715  
Total noninterest income     38,858         29,100         50,893         67,958         81,957  
                   
Noninterest expense:                  
Compensation     61,910         61,282         68,956         123,192         139,801  
Occupancy     14,494         14,207         14,457         28,701         28,777  
Data processing     7,102         6,454         6,817         13,556         13,742  
Other professional services     4,146         4,258         4,629         8,404         9,142  
Insurance and assessments     9,373         4,249         4,098         13,622         8,136  
Intangible asset amortization     3,882         3,948         4,870         7,830         9,740  
Leased equipment depreciation     7,102         7,205         5,558         14,307         11,209  
Foreclosed assets (income) expense, net     (146 )       66         (146 )       (80 )       (117 )
Acquisition, integration and                  
reorganization costs     -         -         -         -         618  
Customer related expense     4,408         3,932         3,405         8,340         6,348  
Loan expense     3,379         2,650         3,451         6,029         6,336  
Goodwill impairment     -         1,470,000         -         1,470,000         -  
Other expense     11,315         9,719         9,332         21,034         17,982  
Total noninterest expense     126,965         1,587,970         125,427          1,714,935         251,714  
                   
Earnings (loss) before income taxes     46,172         (1,421,123 )       178,364         (1,374,951 )       334,017  
Income tax expense     12,968         11,988         50,239         24,956         93,288  
Net earnings (loss) $   33,204     $   (1,433,111 )   $    128,125     $   (1,399,907 )   $   240,729  
                   
Basic and diluted earnings (loss) per share $   0.28     $   (12.23 )   $   1.07     $   (11.98 )   $   1.99  
Dividends declared and paid per share $   0.25     $   0.60     $   0.60     $   0.85     $   1.20  
                                       

 

                   
PACWEST BANCORP AND SUBSIDIARIES                  
NET EARNINGS (LOSS) PER SHARE CALCULATIONS                  
                   
  Three Months Ended
  Six Months Ended
  June 30,   March 31,   June 30,   June 30,
    2020       2020       2019       2020       2019  
                                       
  (In thousands, except per share data)
Basic Earnings (Loss) Per Share:                  
Net earnings (loss) $ 33,204     $ (1,433,111 )   $ 128,125     $ (1,399,907 )   $ 240,729  
Less: earnings allocated to unvested                  
restricted stock (1)   (362 )     (939 )     (1,190 )     (1,251 )     (2,343 )
Net earnings (loss) allocated to                  
common shares $ 32,842     $ (1,434,050 )   $ 126,935     $ (1,401,158 )   $ 238,386  
                   
Weighted-average basic shares and                  
unvested restricted stock outstanding   118,192       118,775       120,042       118,484       121,128  
Less: weighted-average unvested                  
restricted stock outstanding   (1,606 )     (1,495 )     (1,462 )     (1,551 )     (1,407 )
Weighted-average basic shares                  
outstanding   116,586       117,280       118,580       116,933       119,721  
                   
Basic earnings (loss) per share $ 0.28     $ (12.23 )   $ 1.07     $ (11.98 )   $ 1.99  
                   
Diluted Earnings (Loss) Per Share:                  
Net earnings (loss) allocated to                  
common shares $ 32,842     $ (1,434,050 )   $ 126,935     $ (1,401,158 )   $ 238,386  
                   
Weighted-average diluted shares                  
outstanding   116,586       117,280       118,580       116,933       119,721  
                   
Diluted earnings (loss) per share $ 0.28     $ (12.23 )   $ 1.07     $ (11.98 )   $ 1.99  
                   
(1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus                
      undistributed earnings amounts available to holders of unvested restricted stock, if any.            
             

 

                     
PACWEST BANCORP AND SUBSIDIARIES                    
AVERAGE BALANCE SHEET AND YIELD ANALYSIS                    
                       
  Three Months Ended
  June 30, 2020   March 31, 2020   June 30, 2019
    Interest Average     Interest Average     Interest Average
  Average Income/ Yield/   Average Income/ Yield/   Average Income/ Yield/
  Balance Expense Cost   Balance Expense Cost   Balance Expense Cost
  (Dollars in thousands)
Assets:                      
Loans and leases (1)(2) $ 19,951,603 $ 248,474 5.01 %   $ 19,065,035 $ 262,764 5.54 %   $ 18,239,690 $ 284,513 6.26 %
Investment securities (3)   3,846,459   27,430 2.87 %     3,853,217   28,641 2.99 %     3,790,436   29,462 3.12 %
Deposits in financial                      
institutions   733,142   186 0.10 %     537,384   1,608 1.20 %     228,702   1,349 2.37 %
Total interest-earning                      
assets (1)   24,531,204   276,090 4.53 %     23,455,636   293,013 5.02 %     22,258,828   315,324 5.68 %
Other assets   2,090,023         3,643,404         3,590,361    
Total assets $ 26,621,227       $ 27,099,040       $ 25,849,189    
                       
Liabilities and                      
Stockholders' Equity:                      
Interest checking $ 4,001,750   1,573 0.16 %   $ 3,466,812   7,135 0.83 %   $ 3,242,960   10,644 1.32 %
Money market   6,114,354   2,856 0.19 %     5,247,866   10,016 0.77 %     5,046,021   14,604 1.16 %
Savings   524,335   33 0.03 %     497,959   160 0.13 %     525,648   227 0.17 %
Time   2,475,858   8,613 1.40 %     2,684,143   10,936 1.64 %     2,731,156   13,245 1.95 %
Total interest-bearing                      
deposits   13,116,297   13,075 0.40 %     11,896,780   28,247 0.95 %     11,545,785   38,720 1.35 %
Borrowings   871,110   1,319 0.61 %     2,026,749   6,778 1.35 %     1,142,223   7,210 2.53 %
Subordinated debentures   459,466   5,402 4.73 %     458,399   6,560 5.76 %     454,901   7,705 6.79 %
Total interest-bearing                      
liabilities   14,446,873   19,796 0.55 %     14,381,928   41,585 1.16 %     13,142,909   53,635 1.64 %
Noninterest-bearing                      
demand deposits   8,292,151         7,357,717         7,544,027    
Other liabilities   435,353         402,617         343,364    
Total liabilities   23,174,377         22,142,262         21,030,300    
Stockholders' equity   3,446,850         4,956,778         4,818,889    
Total liabilities and                      
stockholders' equity $ 26,621,227       $ 27,099,040       $ 25,849,189    
Net interest income (1)   $ 256,294       $ 251,428       $ 261,689  
Net interest spread (1)     3.98 %       3.86 %       4.04 %
Net interest margin (1)     4.20 %       4.31 %       4.72 %
                       
Total deposits (4) $ 21,408,448 $ 13,075 0.25 %   $ 19,254,497 $ 28,247 0.59 %   $ 19,089,812 $ 38,720 0.81 %
                       
(1) Tax equivalent.                      
(2) Includes discount accretion on acquired loans of $2.5 million, $4.8 million, and $3.5 million for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively.
(3) Includes tax-equivalent adjustments of $1.4 million, $1.2 million, and $0.5 million for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019 related to tax-exempt income on investment securities. The federal statutory tax rate utilized was 21%.
(4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits.  The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.
 

 

                   
PACWEST BANCORP AND SUBSIDIARIES                  
FIVE QUARTER BALANCE SHEET                  
                   
  June 30,   March 31,   December 31,   September 30,   June 30,
    2020       2020       2019       2019       2019  
                                       
  (Dollars in thousands, except per share data)
ASSETS:                  
Cash and due from banks $ 174,059     $ 172,570     $ 172,585     $ 252,596     $ 185,075  
Interest-earning deposits in financial                  
institutions   1,747,077       439,690       465,039       483,405       422,663  
Total cash and cash equivalents   1,921,136       612,260       637,624       736,001       607,738  
                   
Securities available-for-sale   3,851,141       3,757,663       3,797,187       3,817,348       3,807,244  
Federal Home Loan Bank stock   17,250       54,244       40,924       26,865       43,146  
Total investment securities   3,868,391       3,811,907       3,838,111       3,844,213       3,850,390  
                   
Gross loans and leases held for investment   19,780,476       19,806,394       18,910,740       18,796,011       18,532,740  
Deferred fees, net   (85,845 )     (61,089 )     (63,868 )     (60,468 )     (59,888 )
Total loans and leases held for                  
investment, net of deferred fees   19,694,631       19,745,305       18,846,872       18,735,543       18,472,852  
Allowance for loan and lease losses   (301,050 )     (221,292 )     (138,785 )     (138,552 )     (135,037 )
Total loans and leases held for                  
investment, net   19,393,581       19,524,013       18,708,087       18,596,991       18,337,815  
                   
Equipment leased to others under                  
operating leases   295,191       306,530       324,084       295,854       300,668  
Premises and equipment, net   42,299       39,799       38,585       37,926       38,162  
Foreclosed assets, net   1,449       1,701       440       1,366       1,472  
Goodwill   1,078,670       1,078,670       2,548,670       2,548,670       2,548,670  
Core deposit and customer relationship                  
intangibles, net   30,564       34,446       38,394       42,547       47,380  
Other assets   734,457       733,941       636,811       621,059       612,119  
Total assets $ 27,365,738     $ 26,143,267     $ 26,770,806     $ 26,724,627     $ 26,344,414  
                   
LIABILITIES:                  
Noninterest-bearing deposits $ 8,629,543     $ 7,510,218     $ 7,243,298     $ 7,441,185     $ 7,299,213  
Interest-bearing deposits   14,299,036       12,065,619       11,989,738       12,292,018       11,506,543  
Total deposits   22,928,579       19,575,837       19,233,036       19,733,203       18,805,756  
Borrowings   60,000       2,295,000       1,759,008       1,253,031       1,913,059  
Subordinated debentures   460,772       458,994       458,209       456,145       456,112  
Accrued interest payable and other                  
liabilities   463,489       423,047       365,856       362,140       317,477  
Total liabilities   23,912,840       22,752,878       21,816,109       21,804,519       21,492,404  
STOCKHOLDERS' EQUITY (1)   3,452,898       3,390,389       4,954,697       4,920,108       4,852,010  
Total liabilities and stockholders’                  
equity $ 27,365,738     $ 26,143,267     $ 26,770,806     $ 26,724,627     $ 26,344,414  
                   
Book value per share $ 29.17     $ 28.75     $ 41.36     $ 41.06     $ 40.49  
Tangible book value per share (2) $ 19.80     $ 19.31     $ 19.77     $ 19.43     $ 18.83  
Shares outstanding   118,374,603       117,916,789       119,781,605       119,831,192       119,829,104  
                   
(1) Includes net unrealized gain on                  
      securities available-for-sale, net $ 145,038     $ 90,916     $ 78,658     $ 95,887     $ 73,066  
(2) Non-GAAP measure.                  
                   

 

                   
PACWEST BANCORP AND SUBSIDIARIES                  
FIVE QUARTER STATEMENT OF EARNINGS (LOSS)                  
                   
  Three Months Ended
  June 30,   March 31,   December 31,   September 30,   June 30,
    2020       2020       2019       2019     2019  
                                     
  (Dollars in thousands, except per share data)
Interest income:                  
Loans and leases $ 247,851     $ 262,278     $ 263,402     $ 275,978   $ 284,236  
Investment securities   26,038       27,446       28,135       28,806     28,948  
Deposits in financial institutions   186       1,608       2,056       2,424     1,349  
Total interest income   274,075       291,332       293,593       307,208     314,533  
                   
Interest expense:                  
Deposits   13,075       28,247       34,802       40,703     38,720  
Borrowings   1,319       6,778       5,189       6,852     7,210  
Subordinated debentures   5,402       6,560       6,983       7,417     7,705  
Total interest expense   19,796       41,585       46,974       54,972     53,635  
                   
Net interest income   254,279       249,747       246,619       252,236     260,898  
Provision for credit losses   120,000       112,000       3,000       7,000     8,000  
Net interest income after                  
provision for credit losses   134,279       137,747       243,619       245,236     252,898  
                   
Noninterest income:                  
Service charges on deposit accounts   2,004       2,658       3,611       3,525     3,771  
Other commissions and fees   10,111       9,721       10,170       10,855     11,590  
Leased equipment income   12,037       12,251       10,648       9,615     9,182  
Gain on sale of loans and leases   346       87       23       765     326  
Gain on sale of securities   7,715       182       184       908     22,192  
Other income   6,645       4,201       2,540       7,761     3,832  
Total noninterest income   38,858       29,100       27,176       33,429     50,893  
                   
Noninterest expense:                  
Compensation   61,910       61,282       74,637       71,424     68,956  
Occupancy   14,494       14,207       14,541       14,089     14,457  
Data processing   7,102       6,454       6,770       7,044     6,817  
Other professional services   4,146       4,258       4,261       4,400     4,629  
Insurance and assessments   9,373       4,249       4,168       4,100     4,098  
Intangible asset amortization   3,882       3,948       4,153       4,833     4,870  
Leased equipment depreciation   7,102       7,205       6,856       5,951     5,558  
Foreclosed assets (income) expense, net   (146 )     66       (3,446 )     8     (146 )
Acquisition, integration and                  
reorganization costs   -       -       (269 )     -     -  
Customer related expense   4,408       3,932       3,952       3,539     3,405  
Loan expense   3,379       2,650       2,967       3,628     3,451  
Goodwill impairment   -       1,470,000       -       -     -  
Other expense   11,315       9,719       5,138       7,793     9,332  
Total noninterest expense   126,965       1,587,970       123,728       126,809     125,427  
                   
Earnings (loss) before income taxes   46,172       (1,421,123 )     147,067       151,856     178,364  
Income tax expense   12,968       11,988       29,186       41,830     50,239  
Net earnings (loss) $ 33,204     $ (1,433,111 )   $ 117,881     $ 110,026   $ 128,125  
                   
Basic and diluted earnings (loss) per share $ 0.28     $ (12.23 )   $ 0.98     $ 0.92   $ 1.07  
Dividends declared and paid per share $ 0.25     $ 0.60     $ 0.60     $ 0.60   $ 0.60  
                                     

 

                   
PACWEST BANCORP AND SUBSIDIARIES                  
FIVE QUARTER SELECTED FINANCIAL DATA                  
                   
  At or For the Three Months Ended
  June 30,   March 31,   December 31,   September 30,   June 30,
    2020       2020       2019       2019       2019  
  (Dollars in thousands)                
Performance Ratios:                  
Return on average assets (1)   0.50 %     (21.27 )%     1.77 %     1.65 %     1.99 %
Return on average equity (1)   3.87 %     (116.28 )%     9.49 %     8.93 %     10.66 %
Return on average tangible equity (1)(2)   6.39 %     6.88 %     20.68 %     19.84 %     24.03 %
Efficiency ratio   42.9 %     40.6 %     44.8 %     42.3 %     41.6 %
Noninterest expense as a percentage                  
of average assets (1)   1.92 %     23.57 %     1.86 %     1.91 %     1.95 %
                   
Average Yields/Costs (1):                  
Yield on:                  
Average loans and leases (3)   5.01 %     5.54 %     5.67 %     5.91 %     6.26 %
Average interest-earning assets (3)   4.53 %     5.02 %     5.14 %     5.41 %     5.68 %
Cost of:                  
Average interest-bearing deposits   0.40 %     0.95 %     1.14 %     1.34 %     1.35 %
Average total deposits   0.25 %     0.59 %     0.71 %     0.83 %     0.81 %
Average interest-bearing liabilities   0.55 %     1.16 %     1.36 %     1.60 %     1.64 %
Net interest spread (3)   3.98 %     3.86 %     3.78 %     3.81 %     4.04 %
Net interest margin (3)   4.20 %     4.31 %     4.33 %     4.46 %     4.72 %
                   
Average Balances:                  
Assets:                  
Loans and leases, net of deferred fees $ 19,951,603     $ 19,065,035     $ 18,470,583     $ 18,539,281     $ 18,239,690  
Interest-earning assets   24,531,204       23,455,636       22,779,867       22,793,676       22,258,828  
Total assets   26,621,227       27,099,040       26,380,739       26,406,603       25,849,189  
Liabilities:                  
Noninterest-bearing deposits   8,292,151       7,357,717       7,338,888       7,487,555       7,544,027  
Interest-bearing deposits   13,116,297       11,896,780       12,102,902       12,031,776       11,545,785  
Total deposits   21,408,448       19,254,497       19,441,790       19,519,331       19,089,812  
Borrowings   871,110       2,026,749       1,179,220       1,181,313       1,142,223  
Subordinated debentures   459,466       458,399       456,997       456,011       454,901  
Interest-bearing liabilities   14,446,873       14,381,928       13,739,119       13,669,100       13,142,909  
Stockholders' equity   3,446,850       4,956,778       4,930,182       4,890,746       4,818,889  
                   
(1) Annualized.                  
(2) Non-GAAP measure.                  
(3) Tax equivalent.                  
                   

 

                   
PACWEST BANCORP AND SUBSIDIARIES                  
FIVE QUARTER SELECTED FINANCIAL DATA                  
                   
  At or For the Three Months Ended
  June 30,   March 31,   December 31,   September 30,   June 30,
    2020       2020       2019       2019       2019  
  (Dollars in thousands)                
Credit Quality Ratios:                  
Nonaccrual loans and leases held for                  
investment to loans and leases                  
held for investment   0.84 %     0.48 %     0.49 %     0.53 %     0.44 %
Nonperforming assets to loans and                  
leases held for investment and                  
foreclosed assets   0.85 %     0.49 %     0.49 %     0.54 %     0.45 %
Classified loans and leases held for                  
investment to loans and leases                  
held for investment   1.49 %     0.75 %     0.93 %     1.01 %     1.03 %
Provision for credit losses (for the                  
quarter) to average loans and leases                  
held for investment (annualized)   2.42 %     2.36 %     0.06 %     0.15 %     0.18 %
Net charge-offs (for the quarter) to                  
average loans and leases held                  
for investment (annualized)   0.27 %     0.40 %     0.02 %     0.10 %     0.25 %
Trailing 12 months net charge-offs                  
to average loans and leases                  
held for investment   0.20 %     0.19 %     0.09 %     0.20 %     0.18 %
Allowance for credit losses to loans                  
and leases held for investment   1.94 %     1.39 %     0.93 %     0.92 %     0.92 %
Allowance for credit losses to                  
nonaccrual loans and leases                  
held for investment   229.7 %     287.5 %     189.1 %     174.0 %     209.1 %
                   
PacWest Bancorp Consolidated:                  
Tier 1 leverage capital ratio (1)   8.93 %     8.63 %     9.74 %     9.50 %     9.49 %
Common equity tier 1 capital ratio (1)   9.97 %     9.22 %     9.78 %     9.55 %     9.53 %
Tier 1 capital ratio (1)   9.97 %     9.22 %     9.78 %     9.55 %     9.53 %
Total capital ratio (1)   13.18 %     12.07 %     12.41 %     12.16 %     12.18 %
Risk-weighted assets (1) $ 22,781,405     $ 24,214,209     $ 23,582,495     $ 23,579,614     $ 23,117,199  
                   
Equity to assets ratio   12.62 %     12.97 %     18.51 %     18.41 %     18.42 %
Tangible common equity ratio (2)   8.93 %     9.10 %     9.79 %     9.65 %     9.50 %
Book value per share $ 29.17     $ 28.75     $ 41.36     $ 41.06     $ 40.49  
Tangible book value per share (2) $ 19.80     $ 19.31     $ 19.77     $ 19.43     $ 18.83  
                   
Pacific Western Bank:                  
Tier 1 leverage capital ratio (1)   10.03 %     9.71 %     10.95 %     10.72 %     10.76 %
Common equity tier 1 capital ratio (1)   11.18 %     10.38 %     11.00 %     10.79 %     10.80 %
Tier 1 capital ratio (1)   11.18 %     10.38 %     11.00 %     10.79 %     10.80 %
Total capital ratio (1)   12.44 %     11.39 %     11.74 %     11.52 %     11.53 %
                   
(1) Capital information for June 30, 2020 is preliminary.                  
(2) Non-GAAP measure.                  
                   

GAAP TO NON-GAAP RECONCILIATIONS

This press release contains certain non-GAAP financial disclosures for: (1) PPNR, (2) PPNR return on average assets (3) return on average tangible equity, (4) tangible common equity ratio, and (5) tangible book value per share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance.  In particular, the use of return on average tangible equity, tangible common equity ratio, tangible book value per share, and PPNR is prevalent among banking regulators, investors, and analysts.  Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, and (5) book value per share.   

The tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:

  Three Months Ended   Six Months Ended
PPNR and PPNR Return June 30,   March 31,   June 30,   June 30,
on Average Assets   2020       2020       2019       2020       2019  
                                       
  (Dollars in thousands)
Net earnings (loss) $ 33,204     $ (1,433,111 )   $ 128,125     $ (1,399,907 )   $ 240,729  
Add: Provision for credit losses   120,000       112,000       8,000       232,000       12,000  
Add: Goodwill impairment   -       1,470,000       -       1,470,000       -  
Add: Income tax expense   12,968       11,988       50,239       24,956       93,288  
Pre-provision, pre-goodwill impairment,                  
pre-tax net revenue ("PPNR") $ 166,172     $ 160,877     $ 186,364     $ 327,049     $ 346,017  
                   
Average assets $ 26,621,227     $ 27,099,040     $ 25,849,189     $ 26,860,133     $ 25,812,771  
                   
Return on average assets (1)   0.50 %     (21.27 )%     1.99 %     (10.48 )%     1.88 %
PPNR return on average assets (2)   2.51 %     2.39 %     2.89 %     2.45 %     2.70 %
                   
(1) Annualized net earnings (loss) divided by average assets.                  
(2) Annualized PPNR divided by average assets.                  
                   

 

  Three Months Ended   Six Months Ended
  June 30,   March 31,   June 30,   June 30,
Return on Average Tangible Equity   2020       2020       2019       2020       2019  
                                       
  (Dollars in thousands)
Net earnings (loss) $ 33,204     $ (1,433,111 )   $ 128,125     $ (1,399,907 )   $ 240,729  
Add: Intangible asset amortization   3,882       3,948       4,870       7,830       9,740  
Add: Goodwill impairment   -       1,470,000       -       1,470,000       -  
Adjusted net earnings $ 37,086     $ 40,837     $ 132,995     $ 77,923     $ 250,469  
                   
Average stockholders' equity $ 3,446,850     $ 4,956,778     $ 4,818,889     $ 4,201,814     $ 4,817,435  
Less: Average intangible assets   1,111,302       2,569,189       2,598,762       1,840,246       2,601,288  
Average tangible common equity $ 2,335,548     $ 2,387,589     $ 2,220,127     $ 2,361,568     $ 2,216,147  
                   
Return on average equity (1)   3.87 %     (116.28 )%     10.66 %     (67.00 )%     10.08 %
Return on average tangible equity (2)   6.39 %     6.88 %     24.03 %     6.64 %     22.79 %
                   
(1) Annualized net earnings divided by average stockholders' equity.                
(2) Annualized adjusted net earnings divided by average tangible common equity.                
                 

 

                   
Tangible Common Equity Ratio/ June 30,   March 31,   December 31,   September 30,   June 30,
Tangible Book Value Per Share   2020       2020       2019       2019       2019  
  (Dollars in thousands, except per share data)        
Stockholders' equity $ 3,452,898     $ 3,390,389     $ 4,954,697     $ 4,920,108     $ 4,852,010  
Less: Intangible assets   1,109,234       1,113,116       2,587,064       2,591,217       2,596,050  
Tangible common equity $ 2,343,664     $ 2,277,273     $ 2,367,633     $ 2,328,891     $ 2,255,960  
                   
Total assets $ 27,365,738     $ 26,143,267     $ 26,770,806     $ 26,724,627     $ 26,344,414  
Less: Intangible assets   1,109,234       1,113,116       2,587,064       2,591,217       2,596,050  
Tangible assets $ 26,256,504     $ 25,030,151     $ 24,183,742     $ 24,133,410     $ 23,748,364  
                   
Equity to assets ratio   12.62 %     12.97 %     18.51 %     18.41 %     18.42 %
Tangible common equity ratio (1)   8.93 %     9.10 %     9.79 %     9.65 %     9.50 %
                   
Book value per share $ 29.17     $ 28.75     $ 41.36     $ 41.06     $ 40.49  
Tangible book value per share (2) $ 19.80     $ 19.31     $ 19.77     $ 19.43     $ 18.83  
Shares outstanding   118,374,603       117,916,789       119,781,605       119,831,192       119,829,104  
                   
(1) Tangible common equity divided by tangible assets.                  
(2) Tangible common equity divided by shares outstanding.                  

 

Contact:   Matthew P. Wagner
President and CEO
  Patrick J. Rusnak
Executive Vice President and CFO
Phone:   303-802-8900   714-989-4705
         
Contact:   William Black
Executive Vice President
Strategy and Corporate Development
   
Phone:   919-597-7466    
         

Source: PacWest Bancorp

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