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PacWest Bancorp Announces Results for the Third Quarter 2020

Company Release - 10/14/2020

Significant Items

  • Net Earnings of $45.5 Million, or $0.38 Per Diluted Share
  • Strong Pre-Provision, Pre-Tax Net Revenue (“PPNR”) of $156.2 Million
  • Strong Capital Position – CET1 Ratio up 49 Basis Points to 10.46%
  • Core Deposits Up $1.6 Billion or 10% in Q3; Represents 88% of Total Deposits
  • Tax Equivalent Net Interest Margin of 3.90% Compared to 4.20% in Q2
  • Cost of Average Total Deposits Decreased to 17 Basis Points

LOS ANGELES, Oct. 14, 2020 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the third quarter of 2020 of $45.5 million, or $0.38 per diluted share, compared to net earnings for the second quarter of 2020 of $33.2 million, or $0.28 per diluted share. The increase in net earnings for the third quarter was due primarily to a $23 million decrease in the provision for credit losses.

Matt Wagner, President and CEO, commented, “Our operations continue to produce strong revenues and internal capital as evidenced by $156.2 million in PPNR during the third quarter, which resulted in a PPNR return on average assets of 2.22%. These solid operating earnings highlight the resilience of our business as we navigate the challenging economic conditions.”

Mr. Wagner continued, “We experienced strong deposit growth again in the third quarter, resulting in a significant increase in liquidity. Our average deposits in financial institutions balance was $2.6 billion in the third quarter with a yield of 10 basis points. While our focus is on managing net interest income, this excess liquidity had a negative impact on our third quarter NIM of 32 basis points.”

Mr. Wagner added, “Our priority continues to be on mitigating potential credit losses in our portfolios, especially those portfolios impacted most by COVID-19. We were proactive in downgrading loans in the first quarter at the start of the pandemic, and the net loan migration to the special mention and classified categories during the second and third quarters was minimal. As of September 30, 2020, only 3.3% of loans are on deferral with the vast majority of those expiring in November 2020, while only 13% of loans previously granted a deferral received a second modification.”

FINANCIAL HIGHLIGHTS

  At or For the       At or For the    
  Three Months Ended       Nine Months Ended    
  September 30,   June 30,   Increase   September 30,   Increase
Financial Highlights  2020    2020   (Decrease)    2020    2019   (Decrease)
                                       
  (Dollars in thousands, except per share data)
Net earnings (loss) $ 45,503     $ 33,204     $ 12,299     $ (1,354,404 )   $ 350,755     $ (1,705,159 )
Diluted earnings (loss)                      
per share $ 0.38     $ 0.28     $ 0.10     $ (11.60 )   $ 2.91     $ (14.51 )
Return on average assets   0.65 %     0.50 %     0.15       (6.65 )%     1.80 %     (8.45 )
Pre-provision, pre-goodwill                      
impairment, pre-tax net                      
revenue ("PPNR") (1) $ 156,174     $ 166,172     $ (9,998 )   $ 483,223     $ 504,873     $ (21,650 )
PPNR return on average                      
assets (1)   2.22 %     2.51 %     (0.29 )     2.37 %     2.59 %     (0.22 )
Return on average                      
tangible equity (1)   8.20 %     6.39 %     1.81       7.16 %     21.77 %     (14.61 )
                       
Net interest margin ("NIM")                      
(tax equivalent)   3.90 %     4.20 %     (0.30 )     4.13 %     4.62 %     (0.49 )
Yield on average loans and                      
leases (tax equivalent)   5.01 %     5.01 %     -       5.18 %     6.11 %     (0.93 )
Cost of average total                      
deposits   0.17 %     0.25 %     (0.08 )     0.32 %     0.79 %     (0.47 )
Efficiency ratio   45.1 %     42.9 %     2.2       42.9 %     42.1 %     0.8  
                       
Total assets $ 28,426,716     $ 27,365,738     $ 1,060,978     $ 28,426,716     $ 26,724,627     $ 1,702,089  
Loans and leases held                      
for investment,                      
net of deferred fees $ 19,026,200     $ 19,694,631     $ (668,431 )   $ 19,026,200     $ 18,735,543     $ 290,657  
Noninterest-bearing                      
demand deposits $ 9,346,744     $ 8,629,543     $ 717,201     $ 9,346,744     $ 7,441,185     $ 1,905,559  
Core deposits $ 21,117,629     $ 19,535,814     $ 1,581,815     $ 21,117,629     $ 16,471,264     $ 4,646,365  
Total deposits $ 23,965,695     $ 22,928,579     $ 1,037,116     $ 23,965,695     $ 19,733,203     $ 4,232,492  
                       
As percentage of total                      
deposits:                      
Noninterest-bearing                      
demand deposits   39 %     38 %     1       39 %     38 %     1  
Core deposits   88 %     85 %     3       88 %     84 %     4  
                       
Equity to assets ratio   12.26 %     12.62 %     (0.36 )     12.26 %     18.41 %     (6.15 )
Tangible common equity                      
ratio (1)   8.71 %     8.93 %     (0.22 )     8.71 %     9.65 %     (0.94 )
Book value per share $ 29.42     $ 29.17     $ 0.25     $ 29.42     $ 41.06     $ (11.64 )
Tangible book value per                      
share (1) $ 20.09     $ 19.80     $ 0.29     $ 20.09     $ 19.43     $ 0.66  
                       
(1) Non-GAAP measure.                      

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income decreased by $3.0 million to $251.3 million for the third quarter of 2020 compared to $254.3 million for the second quarter of 2020 due mainly to a lower balance of average loans and leases. The tax equivalent yield on average loans and leases was 5.01% for both the third and second quarters of 2020.

The tax equivalent NIM was 3.90% for the third quarter of 2020 compared to 4.20% for the second quarter of 2020. The decrease in the NIM was due mostly to the change in the earning asset mix. Average loans and leases decreased by $756 million, while the average balance of deposits in financial institutions increased by $1.8 billion in the third quarter of 2020. This excess liquidity had a negative impact on the third quarter tax equivalent NIM of 32 basis points, while the PPP loans, which have a coupon rate of 1%, had a negative impact of seven basis points.

The cost of average total deposits decreased to 0.17% for the third quarter of 2020 from 0.25% for the second quarter of 2020. The lower cost of average total deposits was due primarily to the repricing of maturing time deposits. The cost of deposits at September 30, 2020 was 0.13%.

Provision for Credit Losses

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

  Three Months Ended    
  September 30,   June 30,   Increase
Provision for Credit Losses  2020    2020   (Decrease)
      (In thousands)    
Addition to allowance for loan and lease losses $ 81,000     $ 93,000     $ (12,000 )
Addition to reserve for unfunded      
loan commitments   16,000       27,000       (11,000 )
Total provision for credit losses $ 97,000     $ 120,000     $ (23,000 )

The provision for credit losses was $97.0 million for the third quarter of 2020, down $23.0 million from the second quarter of 2020. This reduction reflected improvement in certain key macro-economic forecast variables (unemployment and real GDP growth), partially offset by deterioration in other key macro-economic variables, including CRE price index and BBB spreads, and increased provisions for individually evaluated loans and leases.

Noninterest Income

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

  Three Months Ended    
  September 30,   June 30,   Increase
Noninterest Income  2020    2020   (Decrease)
          (In thousands)    
Service charges on deposit accounts $ 2,570     $ 2,004     $ 566  
Other commissions and fees   10,541       10,111       430  
Leased equipment income   9,900       12,037       (2,137 )
Gain on sale of loans and leases   35       346       (311 )
Gain on sale of securities   5,270       7,715       (2,445 )
Other income:        
Dividends and gains on equity investments   6,945       2,947       3,998  
Warrant income   500       1,973       (1,473 )
Other   2,491       1,725       766  
Total noninterest income $ 38,252     $ 38,858     $ (606 )

Noninterest income decreased by $0.6 million to $38.3 million for the third quarter of 2020 compared to $38.9 million for the second quarter of 2020 due primarily to decreases of $2.4 million in gain on sale of securities, $2.1 million in leased equipment income, and $1.5 million in warrant income, offset partially by a $4.0 million increase in dividends and gains on equity investments. The decrease in gain on sale of securities resulted from the sale of $17 million of securities for a gain of $5.3 million in the third quarter compared to sales of $122 million of securities for a gain of $7.7 million in the second quarter. The decrease in leased equipment income was due to lower gains from early lease terminations and lower rental income due to an operating lease placed on nonaccrual status in the third quarter. The decrease in warrant income was due to lower gains from exercised warrants. The increase in dividends and gains on equity investments resulted primarily from net fair value gains of $5.9 million on equity investments still held.

Noninterest Expense

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

  Three Months Ended    
  September 30,   June 30,   Increase
Noninterest Expense  2020    2020   (Decrease)
          (In thousands)    
Compensation $ 75,131     $ 61,910     $ 13,221  
Occupancy   14,771       14,494       277  
Data processing   6,505       7,102       (597 )
Other professional services   4,713       4,146       567  
Insurance and assessments   3,939       9,373       (5,434 )
Intangible asset amortization   3,751       3,882       (131 )
Leased equipment depreciation   7,057       7,102       (45 )
Foreclosed assets expense (income), net   335       (146 )     481  
Customer related expense   4,762       4,408       354  
Loan expense   3,499       3,379       120  
Other   8,939       11,315       (2,376 )
Total noninterest expense   133,402       126,965       6,437  

Noninterest expense increased by $6.4 million to $133.4 million for the third quarter of 2020 compared to $127.0 million for the second quarter of 2020 attributable primarily to a $13.2 million increase in compensation expense, offset partially by decreases of $5.4 million in insurance and assessments expense and $2.4 million in other expense. The increase in compensation expense was due mainly to higher bonus accruals of $12.4 million and stock compensation expense of $1.4 million. The decrease in insurance and assessments expense was due to a decrease in the FDIC assessment expense due primarily to increases in liquidity and uninsured deposits during the last two quarters. The decrease in other expense was due primarily to $6.6 million in prepayment penalties incurred in the second quarter from the early payoff of $750 million of FHLB term advances, which was offset partially by higher legal accruals in the third quarter.

Income Taxes

The effective income tax rate was 23.1% for the third quarter compared to 28.1% for the second quarter of 2020. Excluding non-deductible goodwill impairment, the effective tax rate for the full year 2020 is currently estimated to be in the range of 25-27%. The lower effective tax rate in the third quarter was due mainly to higher shortfall amounts from restricted stock vestings in the second quarter that elevated the second quarter effective tax rate.

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   Nine Months Ended
Roll Forward of Loans and Leases Held September 30,   June 30,   September 30,
for Investment, Net of Deferred Fees (1)  2020    2020   2020
          (Dollars in thousands)        
Balance, beginning of period $ 19,694,631     $ 19,745,305     $ 18,846,872  
Additions:                      
Production   519,671       1,802,956       3,112,373  
Disbursements   1,008,336       800,458       3,805,874  
Total production and disbursements   1,528,007       2,603,414       6,918,247  
Reductions:        
Payoffs   (982,889 )     (612,837 )     (2,408,433 )
Paydowns   (1,160,692 )     (2,022,376 )     (4,236,773 )
Total payoffs and paydowns   (2,143,581 )     (2,635,213 )     (6,645,206 )
Sales   (2,979 )     (3,089 )     (6,068 )
Transfers to foreclosed assets   (12,594 )     -       (14,370 )
Charge-offs   (37,284 )     (15,786 )     (73,275 )
Total reductions   (2,196,438 )     (2,654,088 )     (6,738,919 )
Net (decrease) increase   (668,431 )     (50,674 )     179,328  
Balance, end of period $ 19,026,200     $ 19,694,631     $ 19,026,200  
           
Weighted average rate on production (2)   4.95 %     2.33 %     3.27 %
           
(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 23 basis points to loan  
yields in 2020.        

Loans and leases held for investment, net of deferred fees, decreased by $668.4 million in the third quarter of 2020 to $19.0 billion at September 30, 2020. The majority of the decrease in the loans and leases balance in the third quarter of 2020 was in the commercial category as business lending demand has decreased during the COVID-19 pandemic. Total revolving balances declined by approximately $350 million in the third quarter due to a lower line utilization rate. The largest decreases were in the lender finance, equipment finance, venture capital, and security monitoring portfolios. The weighted average rate on third quarter production increased to 4.95%. The increase was due to the unusually low rate on second quarter production since $1.2 billion, or 69%, of second quarter loan production related to PPP loans at a coupon rate of 1%. Excluding PPP loans, the weighted average rate on second quarter 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:

  September 30, 2020   June 30, 2020   September 30, 2019
    % of     % of     % of
Loan and Lease Portfolio Balance Total   Balance Total   Balance Total
        (In thousands)      
Real estate mortgage:              
Commercial $ 4,192,466 22 %   $ 4,222,075 22 %   $ 4,300,566 23 %
Income producing and other            
residential   3,684,579 19 %     3,733,659 19 %     3,596,358 19 %
Total real estate mortgage   7,877,045 41 %     7,955,734 41 %     7,896,924 42 %
Real estate construction and land:          
Commercial   1,241,647 7 %     1,167,609 6 %     1,009,362 6 %
Residential   2,182,100 11 %     2,172,919 11 %     1,542,112 8 %
Total real estate construction            
and land   3,423,747 18 %     3,340,528 17 %     2,551,474 14 %
Total real estate   11,300,792 59 %     11,296,262 58 %     10,448,398 56 %
Commercial:              
Asset-based   3,153,048 17 %     3,412,431 17 %     3,810,741 20 %
Venture capital   1,637,132 9 %     1,814,341 9 %     2,209,649 12 %
Other commercial   2,572,994 13 %     2,760,278 14 %     1,858,167 10 %
Total commercial   7,363,174 39 %     7,987,050 40 %     7,878,557 42 %
Consumer   362,234 2 %     411,319 2 %     408,588 2 %
Total loans and leases held for            
investment, net of deferred fees $ 19,026,200 100 %   $ 19,694,631 100 %   $ 18,735,543 100 %
                 
Total unfunded loan commitments $ 7,178,506     $ 7,745,921     $ 7,790,796  

Allowance for Credit Losses

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

  Three Months Ended September 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 $ 301,050     $ 80,571     $ 381,621  
   Charge-offs   (37,284 )     -       (37,284 )
   Recoveries   1,200       -       1,200  
Net charge-offs   (36,084 )     -       (36,084 )
   Provision    81,000       16,000       97,000  
Ending balance $ 345,966     $ 96,571     $ 442,537  
           
  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  

The allowance for credit losses increased by $60.9 million in the third quarter of 2020 to $442.5 million. The increase in the allowance for credit losses during the third quarter was attributable to changes in the economic forecast and changes to modeling assumptions. Net charge-offs increased from $13.2 million in the second quarter to $36.1 million in the third quarter due primarily to one security monitoring loan with a charge-off of $32.8 million. This loan was the only junior lien exposure in the security monitoring portfolio and, accordingly, additional losses of this magnitude are not expected.

Gross charge-offs for the third quarter of 2020 were $37.3 million and included $35.4 million for other commercial loans and $1.5 million for commercial real estate mortgage loans compared to gross charge-offs for the second quarter of 2020 of $15.8 million that 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.

Recoveries for the third quarter of 2020 were $1.2 million and included $0.6 million for venture capital loans and $0.3 million for other commercial loans compared to recoveries for the second quarter of 2020 of $2.5 million that included $2.3 million for other commercial loans.

For the three and nine months ended September 30, 2020, annualized net charge-offs to average loans and leases were 0.75% and 0.47%, respectively.

The allowance for credit losses as a percentage of loans and leases held for investment was 2.33% at September 30, 2020 and 1.94% at June 30, 2020. The allowance for loan and lease losses as a percentage of loans and leases held for investment was 1.82% at September 30, 2020 and 1.53% at June 30, 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 2.48% and 1.94% at September 30, 2020, respectively, compared to 2.06% and 1.63% at June 30, 2020, respectively.

Deposits and Client Investment Funds

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

  September 30, 2020   June 30, 2020   September 30, 2019
    % of
    % of     % of
Deposit Composition Balance Total
  Balance Total   Balance Total
          (Dollars in thousands)      
Noninterest-bearing demand $ 9,346,744 39 %   $ 8,629,543 38 %   $ 7,441,185 38 %
Interest checking   4,657,511 20 %     4,858,168 21 %     3,645,660 18 %
Money market   6,539,313 27 %     5,498,150 24 %     4,870,344 25 %
Savings   574,061 2 %     549,953 2 %     514,075 3 %
Total core deposits   21,117,629 88 %     19,535,814 85 %     16,471,264 84 %
Non-core non-maturity deposits   1,123,909 5 %     1,217,266 5 %     479,732 2 %
Total non-maturity deposits   22,241,538 93 %     20,753,080 90 %     16,950,996 86 %
Time deposits $250,000 and under   1,047,621 4 %     1,522,928 7 %     2,282,976 12 %
Time deposits over $250,000   676,536 3 %     652,571 3 %     499,231 2 %
Total time deposits   1,724,157 7 %     2,175,499 10 %     2,782,207 14 %
Total deposits $ 23,965,695 100 %   $ 22,928,579 100 %   $ 19,733,203 100 %

At September 30, 2020, core deposits totaled $21.1 billion, or 88% of total deposits, including $9.3 billion of noninterest-bearing demand deposits, or 39% of total deposits. Core deposits increased by $1.6 billion in the third quarter driven by continued strong deposit growth from our venture banking clients.

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 September 30, 2020 were $1.2 billion, of which $1.0 billion was managed by PWAM.

CREDIT QUALITY

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

  September 30,   June 30,   Increase
Credit Quality Metrics  2020    2020   (Decrease)
      (Dollars in thousands)    
NPAs and Performing TDRs:          
Nonaccrual loans and leases held for investment (1) $ 85,615     $ 166,113     $ (80,498 )
Accruing loans contractually past due 90 days or more   -       -       -  
Foreclosed assets, net   13,747       1,449       12,298  
   Total nonperforming assets ("NPAs") $ 99,362     $ 167,562     $ (68,200 )
           
Performing TDRs held for investment $ 13,679     $ 15,037     $ (1,358 )
           
Nonaccrual loans and leases held for investment  
to loans and leases held for investment   0.45 %     0.84 %    
Nonperforming assets to loans and leases    
held for investment and foreclosed assets   0.52 %     0.85 %    
           
Loan and Lease Credit Risk Ratings:    
Pass $ 17,967,872     $ 18,635,004     $ (667,132 )
Special mention   783,756       766,397       17,359  
Classified   274,572       293,230       (18,658 )
Total loans and leases held for investment,  
net of deferred fees $ 19,026,200     $ 19,694,631     $ (668,431 )
           
Classified loans and leases held for investment  
to loans and leases held for investment   1.44 %     1.49 %    
           
Allowance for Credit Losses:      
Allowance for loan and lease losses $ 345,966     $ 301,050     $ 44,916  
Reserve for unfunded loan commitments   96,571       80,571       16,000  
Allowance for credit losses $ 442,537     $ 381,621     $ 60,916  
Provision for credit losses (for the quarter) $ 97,000     $ 120,000     $ (23,000 )
Net charge-offs (for the quarter) $ 36,084     $ 13,242     $ 22,842  
Net charge-offs to average loans and leases    
(for the quarter)   0.75 %     0.27 %    
Allowance for loan and lease losses to loans  
and leases held for investment   1.82 %     1.53 %    
Allowance for credit losses to loans and leases  
held for investment   2.33 %     1.94 %    
Allowance for credit losses to nonaccrual loans  
and leases held for investment   516.9 %     229.7 %    
           
(1) Nonaccrual loans include guaranteed amounts of $13.8 million at September 30, 2020 and $16.2 million
at June 30, 2020.        

During the third quarter of 2020, classified loans and leases decreased by $18.7 million driven mostly by payoffs, paydowns, and other reductions of $55.0 million, charge-offs of $35.7 million, and the transfer to other real estate owned of $12.6 million, offset partially by the migration of $66.0 million in loans and leases from special mention and downgrades from pass of $19.4 million. Special mention loans and leases increased by $17.4 million driven mainly by downgrades from pass of $167.3 million, offset partially by upgrades to pass of $39.4 million, payoffs, paydowns, and other reductions of $44.5 million, and the migration of $66.0 million in loans and leases to classified.

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:

  September 30, 2020   June 30, 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 $ 45,120     $ -     $ 61,771     $ -     $ (16,651 )   $ -  
Income producing and other                  
residential   2,008       1,761       2,207       -       (199 )     1,761  
Total real estate mortgage   47,128       1,761       63,978       -       (16,850 )     1,761  
Real estate construction and land:                
Commercial   324       -       337       -       (13 )     -  
Residential   -       3,108       -       1,021       -       2,087  
Total real estate                    
construction and land   324       3,108       337       1,021       (13 )     2,087  
Commercial:                    
Asset-based   2,817       -       19,013       3,697       (16,196 )     (3,697 )
Venture capital   2,001       2,319       8,270       1,924       (6,269 )     395  
Other commercial   32,941       185       73,995       191       (41,054 )     (6 )
Total commercial   37,759       2,504       101,278       5,812       (63,519 )     (3,308 )
Consumer   404       791       520       1,067       (116 )     (276 )
Total held for investment $ 85,615     $ 8,164     $ 166,113     $ 7,900     $ (80,498 )   $ 264  

During the third quarter of 2020, nonaccrual loans and leases decreased by $80.5 million due primarily to charge-offs of $35 million, payoffs of $29 million, and transfers to foreclosed assets of $12.6 million.

CAPITAL

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

           
  September 30, 2020    
      Excluding   June 30,
      PPP   2020
  Actual (1)    Loans (1)   Actual
PacWest Bancorp Consolidated:    
Tier 1 leverage capital ratio 8.66 %   9.07 % (3) 8.93 %
Common equity tier 1 capital ratio 10.46 %   10.46 %   9.97 %
Total capital ratio 13.74 %   13.74 %   13.18 %
Tangible common equity ratio (2) 8.71 %   9.12 % (3) 8.93 %
                 
(1) Capital information for September 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 third 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 $28 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 72 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, the magnitude of individual loan losses on security monitoring loans, 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
                   
  September 30,
  June 30,
  September 30,
   2020    2020   2019
                   
  (Dollars in thousands, except per share data)
ASSETS:                  
Cash and due from banks $ 187,176     $ 174,059     $ 252,596  
Interest-earning deposits in financial institutions   2,766,020       1,747,077       483,405  
Total cash and cash equivalents   2,953,196       1,921,136       736,001  
                   
Securities available-for-sale, at estimated fair value 4,532,614     3,851,141       3,817,348  
Federal Home Loan Bank stock, at cost 17,250     17,250       26,865  
Total investment securities 4,549,864     3,868,391       3,844,213  
                   
Gross loans and leases held for investment   19,101,680       19,780,476       18,796,011  
Deferred fees, net   (75,480 )     (85,845 )     (60,468 )
Total loans and leases held for investment,          
net of deferred fees   19,026,200       19,694,631       18,735,543  
Allowance for loan and lease losses   (345,966 )     (301,050 )     (138,552 )
Total loans and leases held for investment, net   18,680,234       19,393,581       18,596,991  
                   
Equipment leased to others under operating leases 286,425     295,191       295,854  
Premises and equipment, net 40,544     42,299       37,926  
Foreclosed assets, net 13,747     1,449       1,366  
Goodwill 1,078,670     1,078,670       2,548,670  
Core deposit and customer relationship intangibles, net 26,813     30,564       42,547  
Other assets   797,223       734,457       621,059  
Total assets $ 28,426,716     $ 27,365,738     $ 26,724,627  
                   
LIABILITIES:                
Noninterest-bearing deposits $ 9,346,744     $ 8,629,543     $ 7,441,185  
Interest-bearing deposits   14,618,951       14,299,036       12,292,018  
Total deposits   23,965,695       22,928,579       19,733,203  
Borrowings 60,000     60,000       1,253,031  
Subordinated debentures 463,282     460,772       456,145  
Accrued interest payable and other liabilities   451,508       463,489       362,140  
Total liabilities 24,940,485     23,912,840       21,804,519  
STOCKHOLDERS' EQUITY (1) 3,486,231     3,452,898       4,920,108  
Total liabilities and stockholders’ equity $ 28,426,716     $ 27,365,738     $ 26,724,627  
                       
Book value per share $ 29.42     $ 29.17     $ 41.06  
Tangible book value per share (2) $ 20.09     $ 19.80     $ 19.43  
Shares outstanding   118,489,927       118,374,603       119,831,192  
                       
(1) Includes net unrealized gain on securities                      
available-for-sale, net $ 155,474     $ 145,038     $ 95,887  
(2) Non-GAAP measure.                      
                       

 

PACWEST BANCORP AND SUBSIDIARIES          
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS)      
                   
  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,   September 30,
   2020    2020    2019    2020    2019
                                       
  (Dollars in thousands, except per share data)
Interest income:                
Loans and leases $ 240,811     $ 247,851     $ 275,978     $ 750,940     $ 834,443  
Investment securities   24,443       26,038       28,806       77,927       87,434  
Deposits in financial institutions   654       186       2,424       2,448       4,423  
Total interest income   265,908       274,075       307,208       831,315       926,300  
                   
Interest expense:                
Deposits   9,887       13,075       40,703       51,209       113,658  
Borrowings   27       1,319       6,852       8,124       21,772  
Subordinated debentures   4,670       5,402       7,417       16,632       22,860  
Total interest expense   14,584       19,796       54,972       75,965       158,290  
                   
Net interest income   251,324       254,279       252,236       755,350       768,010  
Provision for credit losses   97,000       120,000       7,000       329,000       19,000  
Net interest income after              
provision for credit losses   154,324       134,279       245,236       426,350       749,010  
                   
Noninterest income:                
Service charges on deposit accounts   2,570       2,004       3,525       7,232       11,026  
Other commissions and fees   10,541       10,111       10,855       30,373       33,453  
Leased equipment income   9,900       12,037       9,615       34,188       28,079  
Gain on sale of loans and leases   35       346       765       468       1,091  
Gain on sale of securities   5,270       7,715       908       13,167       25,261  
Other income   9,936       6,645       7,761       20,782       16,476  
Total noninterest income   38,252       38,858       33,429       106,210       115,386  
                   
Noninterest expense:                
Compensation   75,131       61,910       71,424       198,323       211,225  
Occupancy   14,771       14,494       14,089       43,472       42,866  
Data processing   6,505       7,102       7,044       20,061       20,786  
Other professional services   4,713       4,146       4,400       13,117       13,542  
Insurance and assessments   3,939       9,373       4,100       17,561       12,236  
Intangible asset amortization   3,751       3,882       4,833       11,581       14,573  
Leased equipment depreciation   7,057       7,102       5,951       21,364       17,160  
Foreclosed assets expense (income), net   335       (146 )     8       255       (109 )
Acquisition, integration and              
reorganization costs   -       -       -       -       618  
Customer related expense   4,762       4,408       3,539       13,102       9,887  
Loan expense   3,499       3,379       3,628       9,528       9,964  
Goodwill impairment   -       -       -       1,470,000       -  
Other expense   8,939       11,315       7,793       29,973       25,775  
Total noninterest expense   133,402       126,965       126,809       1,848,337       378,523  
                   
Earnings (loss) before income taxes   59,174       46,172       151,856       (1,315,777 )     485,873  
Income tax expense   13,671       12,968       41,830       38,627       135,118  
Net earnings (loss) $ 45,503     $ 33,204     $ 110,026     $ (1,354,404 )   $ 350,755  
                   
Basic and diluted earnings (loss) per share $ 0.38     $ 0.28     $ 0.92     $ (11.60 )   $ 2.91  
Dividends declared and paid per share $ 0.25     $ 0.25     $ 0.60     $ 1.10     $ 1.80  
                                       

 

PACWEST BANCORP AND SUBSIDIARIES          
NET EARNINGS (LOSS) PER SHARE CALCULATIONS          
                   
  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,   September 30,
   2020    2020    2019    2020    2019
                                       
  (In thousands, except per share data)
Basic Earnings (Loss) Per Share:            
Net earnings (loss) $ 45,503     $ 33,204     $ 110,026     $ (1,354,404 )   $ 350,755  
Less: earnings allocated to unvested            
restricted stock (1)   (578 )     (362 )     (1,369 )     (1,603 )     (3,725 )
Net earnings (loss) allocated to              
common shares $ 44,925     $ 32,842     $ 108,657     $ (1,356,007 )   $ 347,030  
                   
Weighted-average basic shares and            
unvested restricted stock outstanding   118,438       118,192       119,831       118,469       120,691  
Less: weighted-average unvested            
restricted stock outstanding   (1,684 )     (1,606 )     (1,622 )     (1,596 )     (1,480 )
Weighted-average basic shares              
outstanding   116,754       116,586       118,209       116,873       119,211  
                   
Basic earnings (loss) per share $ 0.38     $ 0.28     $ 0.92     $ (11.60 )   $ 2.91  
                   
Diluted Earnings (Loss) Per Share:            
Net earnings (loss) allocated to              
common shares $ 44,925     $ 32,842     $ 108,657     $ (1,356,007 )   $ 347,030  
                   
Weighted-average diluted shares            
outstanding   116,754       116,586       118,209       116,873       119,211  
                   
Diluted earnings (loss) per share $ 0.38     $ 0.28     $ 0.92     $ (11.60 )   $ 2.91  
                   
(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
  September 30, 2020
  June 30, 2020    September 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) $ 19,195,737     $ 241,547       5.01 %   $ 19,951,603     $ 248,474       5.01 %   $ 18,539,281     $ 276,309       5.91 %
Investment securities (3)   4,107,915       26,015       2.52 %     3,846,459       27,430       2.87 %     3,809,243       32,213       3.36 %
Deposits in financial                                                            
institutions   2,554,349       654       0.10 %     733,142       186       0.10 %     445,152       2,424       2.16 %
Total interest-earning                                                            
assets (1)   25,858,001       268,216       4.13 %     24,531,204       276,090       4.53 %     22,793,676       310,946       5.41 %
Other assets   2,077,192                       2,090,023                       3,612,927                  
Total assets $ 27,935,193                     $ 26,621,227                     $ 26,406,603                  
                                                                       
Liabilities and                                                            
Stockholders' Equity:                                                            
Interest checking $ 4,904,614       2,019       0.16 %   $ 4,001,750       1,573       0.16 %   $ 3,598,698       11,942       1.32 %
Money market   7,170,842       3,081       0.17 %     6,114,354       2,856       0.19 %     5,121,856       14,807       1.15 %
Savings   565,395       35       0.02 %     524,335       33       0.03 %     515,649       218       0.17 %
Time   1,876,072       4,752       1.01 %     2,475,858       8,613       1.40 %     2,795,573       13,736       1.95 %
Total interest-bearing                                                            
deposits   14,516,923       9,887       0.27 %     13,116,297       13,075       0.40 %     12,031,776       40,703       1.34 %
Borrowings   181,315       27       0.06 %     871,110       1,319       0.61 %     1,181,313       6,852       2.30 %
Subordinated debentures   462,375       4,670       4.02 %     459,466       5,402       4.73 %     456,011       7,417       6.45 %
Total interest-bearing                                                            
liabilities   15,160,613       14,584       0.38 %     14,446,873       19,796       0.55 %     13,669,100       54,972       1.60 %
Noninterest-bearing                                                            
demand deposits   8,812,391                       8,292,151                       7,487,555                  
Other liabilities   464,320                       435,353                       359,202                  
Total liabilities   24,437,324                       23,174,377                       21,515,857                  
Stockholders' equity   3,497,869                       3,446,850                       4,890,746                  
Total liabilities and                                                            
stockholders' equity $ 27,935,193                     $ 26,621,227                      $ 26,406,603                  
Net interest income (1)         $ 253,632                     $ 256,294                     $ 255,974          
Net interest spread (1)         3.75 %                     3.98 %                     3.81 %
Net interest margin (1)         3.90 %                     4.20 %                     4.46 %
                                                                       
Total deposits (4) $ 23,329,314     $ 9,887       0.17 %   $ 21,408,448     $ 13,075       0.25 %   $ 19,519,331     $ 40,703       0.83 %
                                                                       
(1) Tax equivalent.                                                            
(2) Includes discount accretion on acquired loans of $2.0 million, $2.5 million, and $2.6 million for the three months ended September 30, 2020,  
June 30, 2020, and September 30, 2019, respectively.                                            
(3) Includes tax-equivalent adjustments of $1.6 million, $1.4 million, and $3.4 million for the three months ended September 30, 2020,    
June 30, 2020, and September 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                          
                                       
  September 30,   June 30,   March 31,   December 31,   September 30,
  2020   2020   2020   2019   2019
                                     
    (Dollars in thousands, except per share data)  
ASSETS:                                      
Cash and due from banks $ 187,176     $ 174,059     $ 172,570     $ 172,585     $ 252,596  
Interest-earning deposits in financial                          
institutions   2,766,020       1,747,077       439,690       465,039       483,405  
Total cash and cash equivalents   2,953,196       1,921,136       612,260       637,624       736,001  
                                       
Securities available-for-sale   4,532,614       3,851,141       3,757,663       3,797,187       3,817,348  
Federal Home Loan Bank stock   17,250       17,250       54,244       40,924       26,865  
   Total investment securities   4,549,864       3,868,391       3,811,907       3,838,111       3,844,213  
                                       
Gross loans and leases held for investment   19,101,680       19,780,476       19,806,394       18,910,740       18,796,011  
Deferred fees, net   (75,480 )     (85,845 )     (61,089 )     (63,868 )     (60,468 )
Total loans and leases held for                            
investment, net of deferred fees   19,026,200       19,694,631       19,745,305       18,846,872       18,735,543  
Allowance for loan and lease losses   (345,966 )     (301,050 )     (221,292 )     (138,785 )     (138,552 )
Total loans and leases held for                          
investment, net   18,680,234       19,393,581       19,524,013       18,708,087       18,596,991  
                                       
Equipment leased to others under                          
operating leases   286,425       295,191       306,530       324,084       295,854  
Premises and equipment, net   40,544       42,299       39,799       38,585       37,926  
Foreclosed assets, net   13,747       1,449       1,701       440       1,366  
Goodwill   1,078,670       1,078,670       1,078,670       2,548,670       2,548,670  
Core deposit and customer relationship                          
intangibles, net   26,813       30,564       34,446       38,394       42,547  
Other assets   797,223       734,457       733,941       636,811       621,059  
Total assets $ 28,426,716     $ 27,365,738     $ 26,143,267     $ 26,770,806     $ 26,724,627  
                                       
LIABILITIES:                                  
Noninterest-bearing deposits   9,346,744       8,629,543       7,510,218       7,243,298       7,441,185  
Interest-bearing deposits   14,618,951       14,299,036       12,065,619       11,989,738       12,292,018  
Total deposits   23,965,695       22,928,579       19,575,837       19,233,036       19,733,203  
Borrowings   60,000       60,000       2,295,000       1,759,008       1,253,031  
Subordinated debentures   463,282       460,772       458,994       458,209       456,145  
Accrued interest payable and other                          
liabilities   451,508       463,489       423,047       365,856       362,140  
Total liabilities   24,940,485       23,912,840       22,752,878       21,816,109       21,804,519  
STOCKHOLDERS' EQUITY (1)   3,486,231       3,452,898       3,390,389       4,954,697       4,920,108  
Total liabilities and stockholders’                          
equity $ 28,426,716     $ 27,365,738     $ 26,143,267     $ 26,770,806     $ 26,724,627  
                                       
Book value per share $ 29.42     $ 29.17     $ 28.75     $ 41.36     $ 41.06  
Tangible book value per share (2) $ 20.09     $ 19.80     $ 19.31     $ 19.77     $ 19.43  
Shares outstanding   118,489,927       118,374,603       117,916,789       119,781,605       119,831,192  
                                       
(1) Includes net unrealized gain on                          
securities available-for-sale, net $ 155,474     $ 145,038     $ 90,916     $ 78,658     $ 95,887  
(2) Non-GAAP measure.                            
                                       

 

PACWEST BANCORP AND SUBSIDIARIES          
FIVE QUARTER STATEMENT OF EARNINGS (LOSS)        
                   
  Three Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,
   2020    2020    2020    2019    2019
                                   
  (Dollars in thousands, except per share data)
Interest income:                
Loans and leases $ 240,811     $ 247,851     $ 262,278     $ 263,402     $ 275,978  
Investment securities   24,443       26,038       27,446       28,135       28,806  
Deposits in financial institutions   654       186       1,608       2,056       2,424  
Total interest income   265,908       274,075       291,332       293,593       307,208  
                   
Interest expense:                
Deposits   9,887       13,075       28,247       34,802       40,703  
Borrowings   27       1,319       6,778       5,189       6,852  
Subordinated debentures   4,670       5,402       6,560       6,983       7,417  
Total interest expense   14,584       19,796       41,585       46,974       54,972  
                   
Net interest income   251,324       254,279       249,747       246,619       252,236  
Provision for credit losses   97,000       120,000       112,000       3,000       7,000  
Net interest income after              
provision for credit losses   154,324       134,279       137,747       243,619       245,236  
                   
Noninterest income:                
Service charges on deposit accounts   2,570       2,004       2,658       3,611       3,525  
Other commissions and fees   10,541       10,111       9,721       10,170       10,855  
Leased equipment income   9,900       12,037       12,251       10,648       9,615  
Gain on sale of loans and leases   35       346       87       23       765  
Gain on sale of securities   5,270       7,715       182       184       908  
Other income   9,936       6,645       4,201       2,540       7,761  
Total noninterest income   38,252       38,858       29,100       27,176       33,429  
                   
Noninterest expense:                
Compensation   75,131       61,910       61,282       74,637       71,424  
Occupancy   14,771       14,494       14,207       14,541       14,089  
Data processing   6,505       7,102       6,454       6,770       7,044  
Other professional services   4,713       4,146       4,258       4,261       4,400  
Insurance and assessments   3,939       9,373       4,249       4,168       4,100  
Intangible asset amortization   3,751       3,882       3,948       4,153       4,833  
Leased equipment depreciation   7,057       7,102       7,205       6,856       5,951  
Foreclosed assets expense (income), net   335       (146 )     66       (3,446 )     8  
Acquisition, integration and              
reorganization costs   -       -       -       (269 )     -  
Customer related expense   4,762       4,408       3,932       3,952       3,539  
Loan expense   3,499       3,379       2,650       2,967       3,628  
Goodwill impairment   -       -       1,470,000       -       -  
Other expense   8,939       11,315       9,719       5,138       7,793  
Total noninterest expense   133,402       126,965       1,587,970       123,728       126,809  
                   
Earnings (loss) before income taxes   59,174       46,172       (1,421,123 )     147,067       151,856  
Income tax expense   13,671       12,968       11,988       29,186       41,830  
Net earnings (loss) $ 45,503     $ 33,204     $ (1,433,111 )   $ 117,881     $ 110,026  
                   
Basic and diluted earnings (loss) per share $ 0.38     $ 0.28     $ (12.23 )   $ 0.98     $ 0.92  
Dividends declared and paid per share $ 0.25     $ 0.25     $ 0.60     $ 0.60     $ 0.60  
                   

 

PACWEST BANCORP AND SUBSIDIARIES          
FIVE QUARTER SELECTED FINANCIAL DATA          
                   
  At or For the Three Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,
   2020    2020    2020    2019    2019
                   
  (Dollars in thousands)
Performance Ratios:                
Return on average assets (1)   0.65 %     0.50 %     (21.27 )%     1.77 %     1.65 %
Pre-provision, pre-goodwill impairment,            
pre-tax net revenue ("PPNR")              
return on average assets (1)(2)   2.22 %     2.51 %     2.39 %     2.26 %     2.39 %
Return on average equity (1)   5.18 %     3.87 %     (116.28 )%     9.49 %     8.93 %
Return on average tangible equity (1)(2)   8.20 %     6.39 %     6.88 %     20.68 %     19.84 %
Efficiency ratio   45.1 %     42.9 %     40.6 %     44.8 %     42.3 %
Noninterest expense as a percentage            
of average assets (1)   1.90 %     1.92 %     23.57 %     1.86 %     1.91 %
                   
Average Yields/Costs (1):              
Yield on:                  
Average loans and leases (3)   5.01 %     5.01 %     5.54 %     5.67 %     5.91 %
Average interest-earning assets (3)   4.13 %     4.53 %     5.02 %     5.14 %     5.41 %
Cost of:                  
Average interest-bearing deposits   0.27 %     0.40 %     0.95 %     1.14 %     1.34 %
Average total deposits   0.17 %     0.25 %     0.59 %     0.71 %     0.83 %
Average interest-bearing liabilities   0.38 %     0.55 %     1.16 %     1.36 %     1.60 %
Net interest spread (3)   3.75 %     3.98 %     3.86 %     3.78 %     3.81 %
Net interest margin (3)   3.90 %     4.20 %     4.31 %     4.33 %     4.46 %
                   
Average Balances:                
Assets:                  
Loans and leases, net of deferred fees $ 19,195,737     $ 19,951,603     $ 19,065,035     $ 18,470,583     $ 18,539,281  
Interest-earning assets   25,858,001       24,531,204       23,455,636       22,779,867       22,793,676  
Total assets   27,935,193       26,621,227       27,099,040       26,380,739       26,406,603  
Liabilities:                
Noninterest-bearing deposits   8,812,391       8,292,151       7,357,717       7,338,888       7,487,555  
Interest-bearing deposits   14,516,923       13,116,297       11,896,780       12,102,902       12,031,776  
Total deposits   23,329,314       21,408,448       19,254,497       19,441,790       19,519,331  
Borrowings   181,315       871,110       2,026,749       1,179,220       1,181,313  
Subordinated debentures   462,375       459,466       458,399       456,997       456,011  
Interest-bearing liabilities   15,160,613       14,446,873       14,381,928       13,739,119       13,669,100  
Stockholders' equity   3,497,869       3,446,850       4,956,778       4,930,182       4,890,746  
                   
(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
  September 30,   June 30,   March 31,   December 31,   September 30,
   2020    2020    2020    2019    2019
                   
  (Dollars in thousands)
Credit Quality Ratios:              
Nonaccrual loans and leases held for            
investment to loans and leases            
held for investment   0.45 %     0.84 %     0.48 %     0.49 %     0.53 %
Nonperforming assets to loans and            
leases held for investment and            
foreclosed assets   0.52 %     0.85 %     0.49 %     0.49 %     0.54 %
Classified loans and leases held for            
investment to loans and leases            
held for investment   1.44 %     1.49 %     0.75 %     0.93 %     1.01 %
Provision for credit losses (for the            
quarter) to average loans and leases            
held for investment (annualized)   2.01 %     2.42 %     2.36 %     0.06 %     0.15 %
Net charge-offs (for the quarter) to            
average loans and leases held              
for investment (annualized)   0.75 %     0.27 %     0.40 %     0.02 %     0.10 %
Trailing 12 months net charge-offs            
to average loans and leases              
held for investment   0.36 %     0.20 %     0.19 %     0.09 %     0.20 %
Allowance for loan and lease losses to            
loans and leases held for investment   1.82 %     1.53 %     1.12 %     0.74 %     0.74 %
Allowance for credit losses to loans            
and leases held for investment   2.33 %     1.94 %     1.39 %     0.93 %     0.92 %
Allowance for credit losses to              
nonaccrual loans and leases              
held for investment   516.9 %     229.7 %     287.5 %     189.1 %     174.0 %
                   
PacWest Bancorp Consolidated:            
Tier 1 leverage capital ratio (1)   8.66 %     8.93 %     8.63 %     9.74 %     9.50 %
Common equity tier 1 capital ratio (1)   10.46 %     9.97 %     9.22 %     9.78 %     9.55 %
Tier 1 capital ratio (1)   10.46 %     9.97 %     9.22 %     9.78 %     9.55 %
Total capital ratio (1)   13.74 %     13.18 %     12.07 %     12.41 %     12.16 %
Risk-weighted assets (1) $ 22,109,592     $ 22,781,836     $ 24,214,209     $ 23,582,495     $ 23,579,614  
                   
Equity to assets ratio   12.26 %     12.62 %     12.97 %     18.51 %     18.41 %
Tangible common equity ratio (2)   8.71 %     8.93 %     9.10 %     9.79 %     9.65 %
Book value per share $ 29.42     $ 29.17     $ 28.75     $ 41.36     $ 41.06  
Tangible book value per share (2) $ 20.09     $ 19.80     $ 19.31     $ 19.77     $ 19.43  
                   
Pacific Western Bank:              
Tier 1 leverage capital ratio (1)   9.70 %     10.03 %     9.71 %     10.95 %     10.72 %
Common equity tier 1 capital ratio (1)   11.71 %     11.18 %     10.38 %     11.00 %     10.79 %
Tier 1 capital ratio (1)   11.71 %     11.18 %     10.38 %     11.00 %     10.79 %
Total capital ratio (1)   12.97 %     12.44 %     11.39 %     11.74 %     11.52 %
                   
(1) Capital information for September 30, 2020 is preliminary.        
(2) Non-GAAP measure.              
                   

GAAP TO NON-GAAP RECONCILIATION S

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   Nine Months Ended
PPNR and PPNR Return September 30,   June 30,   September 30,   September 30,
on Average Assets  2020    2020    2019    2020    2019
                                       
  (Dollars in thousands)      
Net earnings (loss) $ 45,503