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PacWest Bancorp Announces Results for the Third Quarter Of 2021

Company Release - 10/18/2021

LOS ANGELES, Oct. 18, 2021 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) -

THIRD QUARTER 2021 RESULTS

$140.0M $ 1.17 $167.8M 21.03 %
Net Earnings Diluted Earnings
per Share
PPNR ROATE

THIRD QUARTER 2021 HIGHLIGHTS

  • Net Earnings of $140.0 Million or $1.17 Per Diluted Share
  • Core Deposits Up $1.1 Billion or 4.1% in 3Q21; Represents 92% of Total Deposits
  • Loan Growth of $1.0 Billion or 5.2%; Excluding PPP Loan Activity, Loan Growth of $1.3 Billion or 7.1%
  • Civic Loan Production of $481 Million in 3Q21, Compared to $423 Million in 2Q21
  • PPNR of $167.8 Million, Up 8.3% Compared to 2Q21
  • Provision for Credit Losses Benefit of $20.0 Million in 3Q21 Compared to Benefit of $88.0 Million in 2Q21
  • Net Interest Income (TE) of $279.8 Million in 3Q21, Compared to $270.1 Million in 2Q21
  • Noninterest Income of $51.3 Million in 3Q21, Compared to $40.4 Million in 2Q21, With Continued Strength in Warrant Income
  • Noninterest Expense of $159.4 Million in 3Q21, Up 5% From 2Q21, Driven Mainly By Higher Compensation Expense
  • Classified and Special Mention Loans Fell $5.7 Million and $39.7 Million, Respectively, From 2Q21
  • ACL Ratio of 1.36% and ALLL Ratio of 0.99%; Excluding PPP Loans, ACL Ratio of 1.38% and ALLL Ratio of 1.01%
  • Net Charge-offs of $0.4 Million (1 bp of Average Loans and Leases)
  • Cost of Deposits Decreased 2 bps to 8 bps
  • Loan and Lease Production of $2.4 Billion, Up From $1.7 Billion in 2Q21; WAC of 4.24% vs. 4.55% in 2Q21
  • Strong Capital Position – CET1 Ratio of 10.15% and Total Capital Ratio of 14.36% at 3Q21
  • Tangible Book Value Per Share Increased From $21.95 at 2Q21 to $22.57 at 3Q21

CEO COMMENTARY

Matt Wagner, President and CEO, commented, “For the second consecutive quarter, we experienced significant loan growth as loans grew $1.0 billion to an all-time high of $20.5 billion. Deploying approximately $3 billion of excess liquidity into higher-yielding securities and loans during the third quarter resulted in a $9.5 million increase in net interest income and helped drive a $12.8 million increase in our pre-tax pre-provision net revenue compared to the second quarter.”

“We continued to experience strong deposit growth as core deposits grew by $1.1 billion during the third quarter while our cost of average total deposits moved into the single digits at 8 basis points.”

“Credit quality continues to improve with net recoveries year-to-date and continued decreases in special mention and classified loans and leases, along with improved economic conditions related to the CECL forecast which resulted in a provision benefit for the third consecutive quarter.”

“We are excited about the acquisition of the Homeowners Association Services Division of MUFG Union Bank, N.A. which closed on October 8th. The approximately $4.1 billion of stable, low-cost deposits enhances our franchise value, further diversifies our deposit portfolio, and will become more valuable in a rising rate environment.”

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/60516d02-d69d-4910-aaa9-0d9ace006bd6

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 (1) 2021   2021   (Decrease)   2021   2020   (Decrease)
  (Dollars in thousands, except per share data)
Net earnings (loss)  $          139,996   $          180,512   $        (40,516)   $          470,914   $      (1,354,404)   $     1,825,318
Diluted earnings (loss)                       
per share $                1.17   $                1.52   $            (0.35)   $                3.96   $             (11.60)   $            15.56
Pre-provision, pre-goodwill                      
impairment, pre-tax net                      
revenue ("PPNR") (2) $          167,766   $          154,929   $          12,837   $          478,657   $          483,223   $          (4,566)
Return on average assets 1.55%   2.11%                (0.56)   1.86%   (6.65)%                  8.51
PPNR return on average                       
assets (2) 1.86%   1.81%                  0.05   1.89%   2.37%                (0.48)
Return on average                      
tangible equity (2)  21.03%   29.25%                (8.22)   25.20%   7.16%                18.04
                       
Yield on average loans and                       
leases (tax equivalent) 5.01%   5.18%                (0.17)   5.13%   5.18%                (0.05)
Cost of average total                       
deposits 0.08%   0.10%                (0.02)   0.10%   0.32%                (0.22)
Net interest margin ("NIM")                      
(tax equivalent) 3.33%   3.40%                (0.07)   3.46%   4.13%                (0.67)
Efficiency ratio 47.2%   47.9%                  (0.7)   47.2%   42.9%                    4.3
                       
Total assets $     35,885,676   $     34,867,987   $     1,017,689   $     35,885,676   $     28,426,716   $     7,458,960
Loans and leases held                       
for investment,                       
net of deferred fees $     20,511,020   $     19,506,257   $     1,004,763   $     20,511,020   $     19,026,200   $     1,484,820
Noninterest-bearing                       
demand deposits $     12,881,806   $     11,252,286   $     1,629,520   $     12,881,806   $       9,346,744   $     3,535,062
Core deposits $     28,140,708   $     27,038,161   $     1,102,547   $     28,140,708   $     21,117,629   $     7,023,079
Total deposits $     30,559,745   $     29,647,034   $        912,711   $     30,559,745   $     23,965,695   $     6,594,050
                       
As percentage of total                      
deposits:                      
Noninterest-bearing                       
demand deposits 42%   38%                       4   42%   39%                       3
Core deposits  92%   91%                       1   92%   88%                       4
                       
Equity to assets ratio  10.92%   11.03%                (0.11)   10.92%   12.26%                (1.34)
Common equity tier 1                       
capital ratio 10.15%   10.41%                (0.26)   10.15%   10.45%                (0.30)
Total capital ratio 14.36%   14.99%                (0.63)   14.36%   13.74%                  0.62
Tangible common equity                       
ratio (2) 7.79%   7.80%                (0.01)   7.79%   8.71%                (0.92)
Book value per share $              32.77   $              32.17   $              0.60   $              32.77   $              29.42   $              3.35
Tangible book value per                       
share (2) $              22.57   $              21.95   $              0.62   $              22.57   $              20.09   $              2.48
                       
(1) The operations of Civic are included from its February 1, 2021 acquisition date.          
(2) Non-GAAP measure.                      

INCOME STATEMENT HIGHLIGHTS

NET INTEREST INCOME

Net interest income increased by $9.5 million to $275.8 million for the third quarter of 2021 compared to $266.3 million for the second quarter of 2021 due mainly to higher income on investment securities and loans and leases primarily resulting from higher average balances as we deploy our excess liquidity. Income on investment securities increased by $6.8 million in the third quarter of 2021 due to a $1.6 billion increase in the average balance of investment securities, partially offset by an 11 basis point decrease in the yield on average investment securities. Income on loans and leases increased $2.2 million in the third quarter of 2021 due to a $613.3 million increase in the average balance of loans and leases, partially offset by a 17 basis point decrease in the yield on average loans and leases. The tax equivalent yield on average loans and leases was 5.01% for the third quarter of 2021 compared to 5.18% for the second quarter of 2021. The decrease in the tax equivalent yield on average loans and leases was due primarily to lower nonaccrual interest recapture of $2.6 million, lower loan prepayment fees of $1.7 million, and higher loan premium amortization of $0.8 million.

The tax equivalent NIM was 3.33% for the third quarter of 2021 compared to 3.40% for the second quarter of 2021. The decrease in the NIM was due primarily to the change in the earning assets mix driven by the increase in the investment portfolio as a percentage of earning assets. The average balance of investment securities increased by $1.6 billion to $8.0 billion, the average balance of deposits in financial institutions decreased by $690.0 million to $5.7 billion, and the average balance of loans and leases increased by $613.3 million in the third quarter of 2021. The increase in average balances of investment securities and loans and leases was the result of prudently deploying some of our excess liquidity ahead of the closing of the acquisition of the HOA Services Division of MUFG Union Bank that added approximately $4.1 billion of deposits on October 8th. Excess liquidity continues to negatively impact the tax equivalent NIM, however, we saw the impact decrease from approximately 73 basis points in the second quarter of 2021 to approximately 57 basis points in the third quarter of 2021.

The cost of average total deposits decreased to 0.08% in the third quarter of 2021 from 0.10% in the second quarter of 2021. The lower cost of average total deposits was due primarily to the $894 million increase in the average balance of noninterest-bearing deposits.

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 2021   2021   (Decrease)
  (In thousands)    
(Reduction in) addition to allowance for loan           
and lease losses $              (21,500)   $              (72,000)   $                50,500
Addition to (reduction in) reserve for           
unfunded loan commitments 1,500   (16,000)   17,500
Total provision for credit losses $              (20,000)   $              (88,000)   $                68,000

The provision for credit losses benefit was $20.0 million for the third quarter of 2021 compared to a benefit of $88.0 million for the second quarter of 2021. The third quarter benefit reflected improvement in both macro-economic forecast variables and loan portfolio credit quality metrics, partially offset by increased provisions for unfunded commitments and loan growth.

Noninterest Income

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

           
  Three Months Ended    
  September 30,   June 30,   Increase
Noninterest Income 2021   2021   (Decrease)
  (In thousands)    
Service charges on deposit accounts $                   3,407   $                   3,452   $                      (45)
Other commissions and fees                   11,792                     10,704                       1,088
Leased equipment income                   10,943                     10,847                            96
Gain on sale of loans and leases                             -                       1,422                     (1,422)
Gain on sale of securities                        515                               -                          515
Other income:          
Dividends and gains on equity investments                     8,387                       5,394                       2,993
Warrant income                   13,578                       5,650                       7,928
Other                     2,723                       2,902                        (179)
Total noninterest income  $                 51,345   $                 40,371   $                 10,974

Noninterest income increased by $11.0 million to $51.3 million for the third quarter of 2021 compared to $40.4 million for the second quarter of 2021 due primarily to increases of $7.9 million in warrant income and $3.0 million in dividends and gains on equity investments. Warrant income increased due to a higher number of and dollar amount of gains on warrant exercises given the active capital markets. Dividends and gains on equity investments increased due primarily to higher gains on sales of equity investments and higher income distributions on SBIC investments, offset partially by lower net fair value gains 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 2021   2021   (Decrease)
  (In thousands)
Compensation $                 98,061   $                 90,807   $                   7,254
Occupancy                     14,928                     14,784                          144
Data processing                     7,391                       7,758                        (367)
Other professional services                     5,164                       5,256                          (92)
Insurance and assessments                     3,685                       3,745                          (60)
Intangible asset amortization                     2,890                       2,889                              1
Leased equipment depreciation                     8,603                       8,614                          (11)
Foreclosed assets expense (income), net                        165                        (119)                          284
Acquisition, integration and reorganization costs                        200                          200                               -
Customer related expense                     4,538                       4,973                        (435)
Loan expense                     4,180                       4,031                          149
Other                     9,616                       8,812                          804
Total noninterest expense $               159,421   $               151,750   $                   7,671
           

Noninterest expense increased by $7.7 million to $159.4 million for the third quarter of 2021 compared to $151.8 million for the second quarter of 2021 due primarily to an increase of $7.3 million in compensation expense attributable mainly to higher bonus and incentives expense related to increased warrant income, the growth in loans and deposits in the third quarter of 2021, and overall year-to-date performance.

Income Taxes

The effective income tax rate was 25.4% in the third quarter of 2021 compared to 25.7% in the second quarter of 2021. The effective income tax rate for the full year 2021 is estimated to be in the range of 25% to 27%.

BALANCE SHEET HIGHLIGHTS

Deposits and Client Investment Funds

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

                 
  September 30, 2021   June 30, 2021   September 30, 2020
    % of      % of      % of 
Deposit Composition Balance Total   Balance Total   Balance Total
  (Dollars in thousands)
Noninterest-bearing demand $    12,881,806 42%   $    11,252,286 38%   $      9,346,744 39%
Interest checking  7,168,472 24%   7,394,472 25%   4,657,511 20%
Money market  7,463,261 24%   7,777,199 26%   6,539,313 27%
Savings  627,169 2%   614,204 2%   574,061 2%
Total core deposits 28,140,708 92%   27,038,161 91%   21,117,629 88%
Non-core non-maturity deposits 960,438 3%   1,122,971 4%   1,123,909 5%
Total non-maturity deposits 29,101,146 95%   28,161,132 95%   22,241,538 93%
Time deposits $250,000 and under 882,551 3%   913,371 3%   1,047,621 4%
Time deposits over $250,000 576,048 2%   572,531 2%   676,536 3%
Total time deposits 1,458,599 5%   1,485,902 5%   1,724,157 7%
Total deposits $    30,559,745 100%   $    29,647,034 100%   $    23,965,695 100%

At September 30, 2021, core deposits totaled $28.1 billion or 92% of total deposits, including $12.9 billion of noninterest-bearing demand deposits or 42% of total deposits. Core deposits increased by $1.1 billion or 4.1% in the third quarter of 2021 driven by continued strong deposit growth from our venture banking and community banking clients.

In addition to deposit products, we also offer alternative, non-depository cash investment options for select clients. These alternative options 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, 2021 were $1.4 billion, of which $1.0 billion was managed by PWAM.

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) 2021   2021   2021
  (Dollars in thousands)
Balance, beginning of period $              19,506,257   $              18,979,228   $              19,083,377
Additions:          
Production 2,406,024   1,663,151   5,681,952
Disbursements 1,349,333   1,662,644   4,034,963
Total production and disbursements 3,755,357   3,325,795   9,716,915
Reductions:          
Payoffs (1,732,621)   (1,969,118)   (5,337,003)
Paydowns (1,013,867)   (802,222)   (2,883,507)
Total payoffs and paydowns (2,746,488)   (2,771,340)   (8,220,510)
Sales  (2,175)   (26,610)   (101,426)
Transfers to foreclosed assets (415)   -   (1,062)
Charge-offs (1,516)   (816)   (6,320)
Transfers to loans held for sale -   -   (25,554)
Total reductions (2,750,594)   (2,798,766)   (8,354,872)
Loans acquired through Civic acquisition -   -   65,600
Net increase (decrease)  1,004,763   527,029   1,427,643
Balance, end of period $              20,511,020   $              19,506,257   $              20,511,020
           
Weighted average rate on production (2) 4.24%   4.55%   4.37%
           
(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 40 basis points to loan yields in 2021.  

Loans and leases held for investment, net of deferred fees, increased by $1.0 billion or 5.2% in the third quarter of 2021 to $20.5 billion at September 30, 2021. Excluding PPP loan activity, loans grew by $1.3 billion or 7.1%. The overall increase in the loans and leases balance for the third quarter of 2021 was primarily due to increases in the income producing and other residential, real estate construction and land and asset-based portfolios partially offset by a reduction in the venture capital portfolio and other commercial portfolio due to PPP loan forgiveness. The PPP forgiveness in the third quarter of 2021 was $338 million, down from $506 million in the second quarter of 2021. Net fees for PPP loans were $7.9 million in the third quarter of 2021 down slightly from the $8.8 million in the second quarter of 2021. Remaining PPP loans totaled $272 million as of September 30, 2021 with $7.7 million of net fees to amortize over the remaining life of the loans. The weighted average rate on the $2.4 billion of new production for the third quarter of 2021 decreased to 4.24% from 4.55% in the second quarter of 2021 due to the loan mix.

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, 2021   June 30, 2021   September 30, 2020
    % of      % of      % of 
Loan and Lease Portfolio  Balance Total   Balance Total   Balance Total
  (In thousands)
Real estate mortgage:                
Commercial $       3,694,597 18%   $       3,792,198 19%   $       4,192,466 22%
Income producing and other                 
residential         5,886,360 29%           4,620,822 24%           3,684,579 19%
Total real estate mortgage         9,580,957 47%           8,413,020 43%           7,877,045 41%
Real estate construction and land:                
Commercial            992,003 5%              930,785 5%           1,241,647 7%
Residential         2,659,870 13%           2,574,799 13%           2,182,100 11%
Total real estate construction                 
and land         3,651,873 18%           3,505,584 18%           3,423,747 18%
Total real estate        13,232,830 65%         11,918,604 61%         11,300,792 59%
Commercial:                
Asset-based         3,661,769 18%           3,550,903 18%           3,153,048 17%
Venture capital         1,632,861 8%           1,749,432 9%           1,637,132 9%
Other commercial         1,577,592 7%           1,921,909 10%           2,572,994 13%
Total commercial         6,872,222 33%           7,222,244 37%           7,363,174 39%
Consumer            405,968 2%              365,409 2%              362,234 2%
Total loans and leases held for                 
investment, net of deferred fees $     20,511,020 100%   $     19,506,257 100%   $     19,026,200 100%
                 
Total unfunded loan commitments $       8,480,599     $       7,891,875     $       7,178,506  

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, 2021
  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 $              225,600   $                74,571   $              300,171
Charge-offs (1,516)   -   (1,516)
Recoveries 1,149   -   1,149
Net charge-offs (367)   -   (367)
Provision  (21,500)   1,500   (20,000)
Ending balance $              203,733   $                76,071   $              279,804
           
           
Net recoveries          
  Three Months Ended June 30, 2021
  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 $              292,445   $                90,571   $              383,016
Charge-offs (816)   -   (816)
Recoveries 5,971   -   5,971
Net recoveries 5,155   -   5,155
Provision  (72,000)   (16,000)   (88,000)
Ending balance $              225,600   $                74,571   $              300,171

The following table presents allowance for credit losses information as of and for the dates and periods indicated:

           
  September 30,   June 30,   Increase
Allowance for Credit Losses 2021   2021   (Decrease)
  (Dollars in thousands)
Allowance for loan and lease losses $               203,733   $               225,600   $               (21,867)
Reserve for unfunded loan commitments                   76,071                     74,571                       1,500
Allowance for credit losses $               279,804   $               300,171   $               (20,367)
           
Provision for credit losses (for the quarter) $               (20,000)   $               (88,000)   $                 68,000
Net charge-offs (recoveries) (for the quarter) $                      367   $                 (5,155)   $                   5,522
Net charge-offs (recoveries) to average loans           
and leases (for the quarter) 0.01%   (0.11)%    
Allowance for loan and lease losses to loans           
and leases held for investment 0.99%   1.16%    
Allowance for loan and lease losses to loans           
and leases held for investment, excluding PPP loans 1.01%   1.19%    
Allowance for credit losses to loans and leases          
held for investment 1.36%   1.54%    
Allowance for credit losses to loans and leases          
held for investment, excluding PPP loans 1.38%   1.59%    

The allowance for credit losses decreased by $20.4 million in the third quarter of 2021 to $279.8 million at September 30, 2021. The decrease in the allowance for credit losses during the third quarter of 2021 was attributable to a provision for credit losses benefit of $20.0 million and $0.4 million in net charge-offs. The allowance for credit losses ratio, excluding PPP loans, of 1.38% remains robust and significantly higher than the pre-pandemic level of 0.97% as of the January 1, 2020 CECL adoption date.

Net charge-offs were $0.4 million for the third quarter of 2021. Gross charge-offs of $1.5 million were reduced by recoveries of $1.1 million.

Net recoveries were $5.2 million for the second quarter of 2021. Gross charge-offs of $0.8 million were reduced by recoveries of $6.0 million.

On a year-to-date basis for the nine months ended September 30, 2021, net recoveries were $2.1 million. Gross charge-offs of $6.3 million were reduced by recoveries of $8.4 million.

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  2021   2021   (Decrease)
  (Dollars in thousands)
NPAs and Performing TDRs:          
Nonaccrual loans and leases held for investment (1) $                 64,507   $                 56,803   $                   7,704
Accruing loans contractually past due 90 days or more                             -                               -                               -
Foreclosed assets, net                   13,364                     13,227                          137
   Total nonperforming assets ("NPAs") $                 77,871   $                 70,030   $                   7,841
           
Performing TDRs held for investment $                 36,750   $                 40,129   $                 (3,379)
           
Nonaccrual loans and leases held for investment           
to loans and leases held for investment  0.31%   0.29%    
Nonperforming assets to loans and leases           
held for investment and foreclosed assets 0.38%   0.36%    
Allowance for credit losses to nonaccrual loans           
and leases held for investment 433.8%   528.4%    
           
Loan and Lease Credit Risk Ratings:          
Pass  $          19,873,050   $          18,822,938   $            1,050,112
Special mention                 496,366                   536,052                   (39,686)
Classified                  141,604                   147,267                     (5,663)
Total loans and leases held for investment,           
net of deferred fees $          20,511,020   $          19,506,257   $            1,004,763
           
Classified loans and leases held for investment           
to loans and leases held for investment  0.69%   0.75%    
           
(1) Nonaccrual loans include SBA guaranteed amounts of $20.1 million at September 30, 2021 and $24.2 million at June 30, 2021.

Since pro-actively downgrading certain loans at the onset of the pandemic in the first quarter of 2020, special mention loans and leases have decreased by $402.3 million from their peak in the first quarter of 2020, while classified loans and leases have decreased by $151.6 million from their peak in the second quarter of 2020, and each have continued a steady decline in the third quarter of 2021. Nonaccrual loans and leases increased by $7.7 million to $64.5 million in the third quarter of 2021 due primarily to an increase in nonaccrual short-term, single-family residential renovation loans, however $7.5 million of such nonaccrual loans paid off in the first week of October.

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, 2021   June 30, 2021   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 $          25,615   $             676   $          32,065    $               -   $          (6,450)   $             676
Income producing and other                       
residential              7,547              3,760                6,133              2,179                1,414              1,581
Total real estate mortgage            33,162              4,436              38,198              2,179              (5,036)              2,257
Real estate construction and land:                      
Commercial                      -                     -                   284                     -                 (284)                     -
Residential            19,918            12,809                1,934            22,714              17,984            (9,905)
Total real estate                       
construction and land            19,918            12,809                2,218            22,714              17,700            (9,905)
Commercial:                      
Asset-based              1,605                     -                1,973                     -                 (368)                     -
Venture capital              2,348              1,670                2,717                     -                 (369)              1,670
Other commercial              6,979                 340              11,337                 270              (4,358)                   70
Total commercial            10,932              2,010              16,027                 270              (5,095)              1,740
Consumer                 495              1,042                   360              1,454                   135               (412)
Total held for investment  $          64,507   $        20,297   $          56,803   $        26,617   $            7,704   $        (6,320)

 CAPITAL

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

           
  September 30, 2021    
      Excluding   June 30,
      PPP   2021
  Actual (1)    Loans (1)   Actual 
PacWest Bancorp Consolidated:          
Tier 1 leverage capital ratio 8.05% (3) 8.15% (4) 7.67%
Common equity tier 1 capital ratio 10.15%   10.15%   10.41%
Tier 1 capital ratio  10.65% (3) 10.65%   10.41%
Total capital ratio 14.36%   14.36%   14.99%
Tangible common equity ratio (2) 7.79%   7.85% (4) 7.80%
           
(1) Capital information for September 30, 2021 is preliminary.        
(2) Non-GAAP measure.          
(3) The increase in our consolidated Tier 1 capital ratio during the third quarter of 2021 was due in part to a reassessment of a Basel III implementation rule that permitted the grandfathering of certain trust preferred securities as Tier 1 capital. As a result, $131 million of trust preferred securities were reclassified from Tier 2 capital to Tier 1 capital during the third quarter of 2021. This change increased the Tier 1 leverage capital ratio by approximately 38 basis points and increased the Tier 1 capital ratio by approximately 50 basis points.
(4) PPP loans have been excluded from total assets in the denominator as they are zero risk-weighted.

 ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $35 billion in assets headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 69 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 provides 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. The Bank also offers financing of non-owner-occupied investor properties through Civic Financial Services a wholly-owned subsidiary. The Bank also offers a specialized suite of services for the HOA industry. 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 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 ongoing COVID-19 pandemic has adversely affected PacWest, 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 risks from the COVID-19 pandemic have decreased as the pandemic subsides, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and 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’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’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 PacWest 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,
  2021   2021   2020
  (Dollars in thousands, except per share data)
ASSETS:          
Cash and due from banks $                 174,585   $                 179,505   $               187,176
Interest-earning deposits in financial institutions                3,524,613                  5,678,587                2,766,020
Total cash and cash equivalents                 3,699,198                  5,858,092                2,953,196
           
Securities available-for-sale, at estimated fair value                9,276,926                  7,198,608                4,532,614
Federal Home Loan Bank stock, at cost                     17,250                       17,250                     17,250
Total investment securities                9,294,176                  7,215,858                4,549,864
           
Loans held for sale                               -                                 -                               -
           
Gross loans and leases held for investment              20,588,255                19,580,731              19,101,680
Deferred fees, net                    (77,235)                      (74,474)                   (75,480)
Total loans and leases held for investment,          
net of deferred fees              20,511,020                19,506,257              19,026,200
Allowance for loan and lease losses                  (203,733)                    (225,600)                 (345,966)
Total loans and leases held for investment, net              20,307,287                19,280,657              18,680,234
           
Equipment leased to others under operating leases                   334,275                     313,574                   286,425
Premises and equipment, net                     47,246                       39,541                     40,544
Foreclosed assets, net                     13,364                       13,227                     13,747
Goodwill                1,204,118                  1,204,118                1,078,670
Core deposit and customer relationship intangibles, net                     15,533                       18,423                     26,813
Other assets                   970,479                     924,497                   797,223
Total assets $            35,885,676   $            34,867,987   $          28,426,716
           
LIABILITIES:          
Noninterest-bearing deposits $            12,881,806   $            11,252,286   $            9,346,744
Interest-bearing deposits              17,677,939                18,394,748              14,618,951
Total deposits              30,559,745                29,647,034              23,965,695
Borrowings                               -                         6,625                     60,000
Subordinated debt                   862,447                     861,788                   463,282
Accrued interest payable and other liabilities                   545,050                     505,859                   451,508
Total liabilities              31,967,242                31,021,306              24,940,485
STOCKHOLDERS' EQUITY (1)                3,918,434                  3,846,681                3,486,231
Total liabilities and stockholders’ equity $            35,885,676   $            34,867,987   $          28,426,716
           
Book value per share $                     32.77   $                     32.17   $                   29.42
Tangible book value per share (2) $                     22.57   $                     21.95   $                   20.09
Shares outstanding             119,579,566              119,555,102            118,489,927
           
(1) Includes net unrealized gain on securities          
    available-for-sale, net $                   98,859   $                 145,516   $               155,474
(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,
  2021   2021   2020   2021   2020
  (Dollars in thousands, except per share data)
Interest income:                  
Loans and leases $          246,722   $          244,529   $          240,811   $          732,795   $          750,940
Investment securities              40,780                33,954                24,443              104,999                77,927
Deposits in financial institutions                2,580                  2,022                     654                  6,130                  2,448
Total interest income            290,082              280,505              265,908              843,924              831,315
                   
Interest expense:                  
Deposits                6,417                  7,269                  9,887                21,186                51,209
Borrowings                   101                     265                       27                     559                  8,124
Subordinated debt                7,722                  6,663                  4,670                18,760                16,632
Total interest expense              14,240                14,197                14,584                40,505                75,965
                   
Net interest income            275,842              266,308              251,324              803,419              755,350
Provision for credit losses             (20,000)               (88,000)                97,000             (156,000)              329,000
Net interest income after provision                   
for credit losses            295,842              354,308              154,324              959,419              426,350
                   
Noninterest income:                  
Service charges on deposit accounts                3,407                  3,452                  2,570                  9,793                  7,232
Other commissions and fees              11,792                10,704                10,541                31,654                30,373
Leased equipment income              10,943                10,847                  9,900                33,144                34,188
Gain on sale of loans and leases                        -                  1,422                       35                  1,561                     468
Gain on sale of securities                   515                          -                  5,270                     616                13,167
Other income              24,688                13,946                  9,936                59,777                20,782
Total noninterest income              51,345                40,371                38,252              136,545              106,210
                   
Noninterest expense:                  
Compensation               98,061                90,807                75,131              268,750              198,323
Occupancy              14,928                14,784                14,771                43,766                43,472
Data processing                7,391                  7,758                  6,505                22,106                20,061
Other professional services                5,164                  5,256                  4,713                15,546                13,117
Insurance and assessments                3,685                  3,745                  3,939                12,333                17,561
Intangible asset amortization                2,890                  2,889                  3,751                  8,858                11,581
Leased equipment depreciation                8,603                  8,614                  7,057                26,186                21,364
Foreclosed assets expense (income), net                   165                    (119)                     335                       47                     255
Acquisition, integration and                   
reorganization costs                    200                     200                          -                  3,825                          -
Customer related expense                4,538                  4,973                  4,762                14,329                13,102
Loan expense                4,180                  4,031                  3,499                11,404                  9,528
Goodwill impairment                        -                          -                          -                          -           1,470,000
Other expense                9,616                  8,812                  8,939                34,157                29,973
Total noninterest expense            159,421              151,750              133,402              461,307           1,848,337
                   
Earnings (loss) before income taxes            187,766              242,929                59,174              634,657          (1,315,777)
Income tax expense               47,770                62,417                13,671              163,743                38,627
Net earnings (loss) $          139,996   $          180,512   $            45,503   $          470,914   $      (1,354,404)
                   
Basic and diluted earnings (loss) per share $                1.17   $                1.52   $                0.38   $                3.96   $             (11.60)
Dividends declared and paid per share $                0.25   $                0.25   $                0.25   $                0.75   $                1.10

 

  Three Months Ended
  Nine Months Ended
  September 30,   June 30,   September 30,   September 30,
  2021   2021   2020   2021   2020
  (In thousands, except per share data)
Basic Earnings (Loss) Per Share:                  
Net earnings (loss)  $          139,996   $          180,512   $            45,503   $          470,914   $      (1,354,404)
Less: earnings allocated to                   
unvested restricted stock (1)               (2,417)                 (3,172)                    (578)                 (7,930)                 (1,603)
Net earnings (loss) allocated to                   
common shares $          137,579   $          177,340   $            44,925   $          462,984   $      (1,356,007)
                   
Weighted average basic shares                   
and unvested restricted stock                   
outstanding            119,569              119,386              118,438              119,272              118,469
Less: weighted average unvested                   
restricted stock outstanding               (2,340)                 (2,356)                 (1,684)                 (2,235)                 (1,596)
Weighted average basic shares                   
outstanding            117,229              117,030              116,754              117,037              116,873
                   
Basic earnings (loss) per share $                1.17   $                1.52   $                0.38   $                3.96   $             (11.60)
                   
Diluted Earnings (Loss) Per Share:                  
Net earnings (loss) allocated to                   
common shares $          137,579   $          177,340   $            44,925   $          462,984   $      (1,356,007)
                   
Weighted average diluted shares                   
outstanding            117,229              117,030              116,754              117,037              116,873
                   
Diluted earnings (loss) per share $                1.17   $                1.52   $                0.38   $                3.96   $             (11.60)
                   
(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, 2021   June 30, 2021   September 30, 2020
    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) $   19,670,671 $  248,485 5.01%   $   19,057,420 $  246,147 5.18%   $   19,195,737 $  241,547 5.01%
Investment securities (3)       8,047,098      42,952 2.12%         6,492,721      36,111 2.23%         4,107,915      26,015 2.52%
Deposits in financial                       
institutions       5,657,768        2,580 0.18%         6,347,764        2,022 0.13%         2,554,349           654 0.10%
Total interest-earning                       
assets (1)     33,375,537    294,017 3.50%       31,897,905    284,280 3.57%       25,858,001    268,216 4.13%
Other assets       2,496,127             2,428,207             2,077,192    
Total assets $   35,871,664       $   34,326,112       $   27,935,193    
                       
Liabilities and                       
Stockholders' Equity:                    
Interest checking $     7,372,859        2,042 0.11%   $     7,235,726        2,394 0.13%   $     4,904,614        2,019 0.16%
Money market       8,662,449        2,997 0.14%         8,484,933        3,318 0.16%         7,170,842        3,081 0.17%
Savings          620,079             38 0.02%            598,225             36 0.02%            565,395             35 0.02%
Time       1,475,307        1,340 0.36%         1,498,169        1,521 0.41%         1,876,072        4,752 1.01%
Total interest-bearing                       
deposits     18,130,694        6,417 0.14%       17,817,053        7,269 0.16%       14,516,923        9,887 0.27%
Borrowings          238,335           101 0.17%            225,446           265 0.47%            181,315             27 0.06%
Subordinated debt          862,272        7,722 3.55%            735,725        6,663 3.63%            462,375        4,670 4.02%
Total interest-bearing                       
liabilities     19,231,301      14,240 0.29%       18,778,224      14,197 0.30%       15,160,613      14,584 0.38%
Noninterest-bearing                       
demand deposits     12,198,313           11,304,757             8,812,391    
Other liabilities          525,429                504,089                464,320    
Total liabilities     31,955,043           30,587,070           24,437,324    
Stockholders' equity       3,916,621             3,739,042             3,497,869    
Total liabilities and                       
stockholders' equity $   35,871,664       $   34,326,112       $   27,935,193    
Net interest income (1)   $  279,777       $  270,083       $  253,632  
Net interest spread (1)     3.21%       3.27%       3.75%
Net interest margin (1)     3.33%       3.40%       3.90%
                       
Total deposits (4) $   30,329,007 $      6,417 0.08%   $   29,121,810 $      7,269 0.10%   $   23,329,314 $      9,887 0.17%
                       
(1) Tax equivalent.                      
(2) Includes net loan premium amortization of $2.4 million and $1.5 million and net loan discount accretion of $35,000 for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively.
(3) Includes tax-equivalent adjustments of $2.2 million, $2.2 million, and $1.6 million for the three months ended September 30, 2021,   June 30, 2021, and September 30, 2020 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,
  2021   2021   2021   2020   2020
  (Dollars in thousands, except per share data)
ASSETS:                  
Cash and due from banks $          174,585   $          179,505   $          177,199   $          150,464   $          187,176
Interest-earning deposits in financial                   
institutions         3,524,613           5,678,587           5,517,667           3,010,197           2,766,020
Total cash and cash equivalents          3,699,198           5,858,092           5,694,866           3,160,661           2,953,196
                   
Securities available-for-sale         9,276,926           7,198,608           5,941,690           5,235,591           4,532,614
Federal Home Loan Bank stock              17,250                17,250                17,250                17,250                17,250
   Total investment securities         9,294,176           7,215,858           5,958,940           5,252,841           4,549,864
                   
Loans held for sale                      -                            -                25,554                          -                          -
                   
Gross loans and leases held for investment       20,588,255         19,580,731         19,055,165         19,153,357         19,101,680
Deferred fees, net             (77,235)               (74,474)               (75,937)               (69,980)               (75,480)
Total loans and leases held for                  
investment, net of deferred fees       20,511,020         19,506,257         18,979,228         19,083,377         19,026,200
Allowance for loan and lease losses           (203,733)             (225,600)             (292,445)             (348,181)             (345,966)
Total loans and leases held for                  
investment, net       20,307,287         19,280,657         18,686,783         18,735,196         18,680,234
                   
Equipment leased to others under                   
operating leases            334,275              313,574              327,413              333,846              286,425
Premises and equipment, net              47,246                39,541                39,622                39,234                40,544
Foreclosed assets, net              13,364                13,227                14,298                14,027                13,747
Goodwill         1,204,118           1,204,118           1,204,092           1,078,670           1,078,670
Core deposit and customer relationship                  
intangibles, net              15,533                18,423                21,312                23,641                26,813
Other assets            970,479              924,497              883,653              860,326              797,223
Total assets $     35,885,676   $     34,867,987   $     32,856,533   $     29,498,442   $     28,426,716
                   
LIABILITIES:                  
Noninterest-bearing deposits $     12,881,806   $     11,252,286   $     11,017,462   $       9,193,827   $       9,346,744
Interest-bearing deposits       17,677,939         18,394,748         17,205,829         15,746,890         14,618,951
Total deposits       30,559,745         29,647,034         28,223,291         24,940,717         23,965,695
Borrowings                        -                  6,625                19,750                  5,000                60,000
Subordinated debt            862,447              861,788              465,814              465,812              463,282
Accrued interest payable and other                  
liabilities            545,050              505,859              493,541              491,962              451,508
Total liabilities       31,967,242         31,021,306         29,202,396         25,903,491         24,940,485
STOCKHOLDERS' EQUITY (1)         3,918,434           3,846,681           3,654,137           3,594,951           3,486,231
Total liabilities and stockholders’                   
equity $     35,885,676   $     34,867,987   $     32,856,533   $     29,498,442   $     28,426,716
                   
Book value per share $              32.77   $              32.17   $              30.68   $              30.36   $              29.42
Tangible book value per share (2) $              22.57   $              21.95   $              20.39   $              21.05   $              20.09
Shares outstanding     119,579,566       119,555,102       119,105,642       118,414,853       118,489,927
                   
(1) Includes net unrealized gain on                   
securities available-for-sale, net $            98,859   $          145,516   $          106,381   $          172,523   $          155,474
(2) Non-GAAP measure.                  

 

  Three Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,
  2021   2021   2021   2020   2020
  (Dollars in thousands, except per share data)
Interest income:                  
Loans and leases $          246,722   $          244,529   $          241,544   $          242,198   $          240,811
Investment securities              40,780                33,954                30,265                28,843                24,443
Deposits in financial institutions                2,580                  2,022                  1,528                  1,135                     654
Total interest income            290,082              280,505              273,337              272,176              265,908
                   
Interest expense:                  
Deposits                6,417                  7,269                  7,500                  8,454                  9,887
Borrowings                   101                     265                     193                       37                       27
Subordinated debt                7,722                  6,663                  4,375                  4,477                  4,670
Total interest expense              14,240                14,197                12,068                12,968                14,584
                   
Net interest income            275,842              266,308              261,269              259,208              251,324
Provision for credit losses             (20,000)               (88,000)               (48,000)                10,000                97,000
Net interest income after provision                  
for credit losses            295,842              354,308              309,269              249,208              154,324
                   
Noninterest income:                  
Service charges on deposit accounts                3,407                  3,452                  2,934                  3,119                  2,570
Other commissions and fees              11,792                10,704                  9,158                  9,974                10,541
Leased equipment income              10,943                10,847                11,354                  9,440                  9,900
Gain on sale of loans and leases                        -                  1,422                     139                  1,671                       35
Gain on sale of securities                   515                          -                     101                         4                  5,270
Other income              24,688                13,946                21,143                15,642                  9,936
Total noninterest income              51,345                40,371                44,829                39,850                38,252
                   
Noninterest expense:                  
Compensation               98,061                90,807                79,882                73,171                75,131
Occupancy              14,928                14,784                14,054                14,083                14,771
Data processing                7,391                  7,758                  6,957                  6,718                  6,505
Other professional services                5,164                  5,256                  5,126                  6,800                  4,713
Insurance and assessments                3,685                  3,745                  4,903                  5,064                  3,939
Intangible asset amortization                2,890                  2,889                  3,079                  3,172                  3,751
Leased equipment depreciation                8,603                  8,614                  8,969                  7,501                  7,057
Foreclosed assets expense (income), net                   165                    (119)                         1                    (272)                     335
Acquisition, integration and                   
reorganization costs                    200                     200                  3,425                  1,060                          -
Customer related expense                4,538                  4,973                  4,818                  4,430                  4,762
Loan expense                4,180                  4,031                  3,193                  3,926                  3,499
Other expense                9,616                  8,812                15,729                10,029                  8,939
Total noninterest expense            159,421              151,750              150,136              135,682              133,402
                   
Earnings before income taxes            187,766              242,929              203,962              153,376                59,174
Income tax expense               47,770                62,417                53,556                36,546                13,671
Net earnings  $          139,996   $          180,512   $          150,406   $          116,830   $            45,503
                   
Basic and diluted earnings per share $                1.17   $                1.52   $                1.27   $                0.99   $                0.38
Dividends declared and paid per share $                0.25   $                0.25   $                0.25   $                0.25   $                0.25

 

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,
  2021   2021   2021   2020   2020
  (Dollars in thousands)    
Performance Ratios:                  
Return on average assets (1) 1.55%   2.11%   1.94%   1.58%   0.65%
Pre-provision, pre-goodwill impairment,                  
pre-tax net revenue ("PPNR")                  
return on average assets (1)(2) 1.86%   1.81%   2.01%   2.22%   2.22%
Return on average equity (1) 14.18%   19.36%   16.86%   13.14%   5.18%
Return on average tangible equity (1)(2) 21.03%   29.25%   25.67%   19.63%   8.20%
Efficiency ratio 47.2%   47.9%   46.4%   43.6%   45.1%
Noninterest expense as a percentage                  
of average assets (1) 1.76%   1.77%   1.94%   1.84%   1.90%
                   
Average Yields/Costs (1):                  
Yield on:                  
Average loans and leases (3) 5.01%   5.18%   5.20%   5.15%   5.01%
Average investment securities (3) 2.12%   2.23%   2.44%   2.50%   2.52%
Average interest-earning assets (3) 3.50%   3.57%   3.86%   4.02%   4.13%
Cost of:                  
Average interest-bearing deposits  0.14%   0.16%   0.18%   0.22%   0.27%
Average total deposits  0.08%   0.10%   0.11%   0.14%   0.17%
Average interest-bearing liabilities  0.29%   0.30%   0.29%   0.33%   0.38%
Net interest spread (3) 3.21%   3.27%   3.57%   3.69%   3.75%
Net interest margin (3) 3.33%   3.40%   3.69%   3.83%   3.90%
                   
Average Balances:                  
Assets:                  
Loans and leases, net of deferred fees $     19,670,671   $     19,057,420   $     18,927,314   $     18,769,214   $     19,195,737
Investment securities         8,047,098           6,492,721           5,383,140           4,888,993           4,107,915
Deposits in financial institutions         5,657,768           6,347,764           4,790,231           3,576,335           2,554,349
Interest-earning assets       33,375,537         31,897,905         29,100,685         27,234,542         25,858,001
Total assets       35,871,664         34,326,112         31,415,882         29,334,789         27,935,193
Liabilities:                  
Noninterest-bearing deposits       12,198,313         11,304,757         10,173,459           9,589,789           8,812,391
Interest-bearing deposits       18,130,694         17,817,053         16,044,091         15,045,451         14,516,923
Total deposits       30,329,007         29,121,810         26,217,550         24,635,240         23,329,314
Borrowings             238,335              225,446              226,053              237,098              181,315
Subordinated debt            862,272              735,725              466,101              463,951              462,375
Interest-bearing liabilities       19,231,301         18,778,224         17,136,245         15,746,500         15,160,613
Stockholders' equity         3,916,621           3,739,042           3,617,248           3,536,425           3,497,869
                   
(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,
  2021   2021   2021   2020   2020
  (Dollars in thousands)  
Credit Quality Ratios:                  
Nonaccrual loans and leases held for                   
investment to loans and leases                   
held for investment 0.31%   0.29%   0.36%   0.48%   0.45%
Nonperforming assets to loans and                   
leases held for investment and                   
foreclosed assets 0.38%   0.36%   0.43%   0.55%   0.52%
Classified loans and leases held for                   
investment to loans and leases                   
held for investment 0.69%   0.75%   0.86%   1.39%   1.44%
Provision for credit losses (for the                   
quarter) to average loans and leases                   
held for investment (annualized) (0.40)%   (1.85)%   (1.03)%   0.21%   2.01%
Net charge-offs (for the quarter) to                   
average loans and leases held                   
for investment (annualized) 0.01%   (0.11)%   0.06%   0.40%   0.75%
Trailing 12 months net charge-offs                   
to average loans and leases                  
held for investment 0.09%   0.27%   0.37%   0.45%   0.36%
Allowance for loan and lease losses to                  
loans and leases held for investment 0.99%   1.16%   1.54%   1.82%   1.82%
Allowance for credit losses to loans                   
and leases held for investment 1.36%   1.54%   2.02%   2.27%   2.33%
Allowance for credit losses to                   
nonaccrual loans and leases                   
held for investment 433.8%   528.4%   566.2%   475.8%   516.9%
                   
PacWest Bancorp Consolidated:                  
Tier 1 leverage capital ratio (1) 8.05%   7.67%   7.95%   8.55%   8.66%
Common equity tier 1 capital ratio (1) 10.15%   10.41%   10.39%   10.53%   10.45%
Tier 1 capital ratio (1) 10.65%   10.41%   10.39%   10.53%   10.45%
Total capital ratio (1) 14.36%   14.99%   13.60%   13.76%   13.74%
Risk-weighted assets (1) $     26,057,583   $     24,274,256   $     23,012,350   $     22,837,693   $     22,114,040
                   
Equity to assets ratio  10.92%   11.03%   11.12%   12.19%   12.26%
Tangible common equity ratio (2) 7.79%   7.80%   7.68%   8.78%   8.71%
Book value per share $              32.77   $              32.17   $              30.68   $              30.36   $              29.42
Tangible book value per share (2) $              22.57   $              21.95   $              20.39   $              21.05   $              20.09
                   
Pacific Western Bank:                  
Tier 1 leverage capital ratio (1) 8.40%   8.47%   8.83%   9.53%   9.70%
Common equity tier 1 capital ratio (1) 11.12%   11.51%   11.54%   11.73%   11.70%
Tier 1 capital ratio (1) 11.12%   11.51%   11.54%   11.73%   11.70%
Total capital ratio (1) 13.59%   14.22%   12.80%   12.99%   12.95%
                   
(1) Capital information for September 30, 2021 is preliminary.                
(2) Non-GAAP measure.                  
                   

GAAP TO NON-GAAP RECONCILIATION S

This press release contains certain non-GAAP financial disclosures for: (1) Pre-provision, pre-goodwill impairment, pre-tax net revenue (“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 2021   2021   2020   2021   2020
  (Dollars in thousands)
Net earnings (loss)  $          139,996   $          180,512   $            45,503   $          470,914   $      (1,354,404)
Add: Provision for credit losses             (20,000)               (88,000)                97,000             (156,000)              329,000
Add: Goodwill impairment                        -                          -                          -                          -           1,470,000
Add: Income tax expense              47,770                62,417                13,671              163,743                38,627
Pre-provision, pre-goodwill impairment,                  
pre-tax net revenue ("PPNR") $          167,766   $          154,929   $          156,174   $          478,657   $          483,223
                   
Average assets $     35,871,664   $     34,326,112   $     27,935,193   $     33,887,541   $     27,221,102
                   
Return on average assets (1) 1.55%   2.11%   0.65%   1.86%   (6.65)%
PPNR return on average assets (2) 1.86%   1.81%   2.22%   1.89%   2.37%
                   
(1) Annualized net earnings (loss) divided by average assets.            
(2) Annualized PPNR divided by average assets.                

 

                   
                   
  Three Months Ended   Nine Months Ended
  September 30,   June 30,   September 30,   September 30,
Return on Average Tangible Equity 2021   2021   2020   2021   2020
  (Dollars in thousands)
Net earnings (loss)  $          139,996   $          180,512   $            45,503   $          470,914   $      (1,354,404)
Add: Intangible asset amortization                2,890                  2,889                  3,751                  8,858                11,581
Add: Goodwill impairment                        -                          -                          -                          -           1,470,000
Adjusted net earnings $          142,886   $          183,401   $            49,254   $          479,772   $          127,177
                   
Average stockholders' equity $       3,916,621   $       3,739,042   $       3,497,869   $       3,758,733   $       3,965,453
Less: Average intangible assets         1,221,253           1,224,208           1,107,548           1,212,851           1,594,231
Average tangible common equity $       2,695,368   $       2,514,834   $       2,390,321   $       2,545,882   $       2,371,222
                   
Return on average equity (1) 14.18%   19.36%   5.18%   16.75%   (45.62)%
Return on average tangible equity (2) 21.03%   29.25%   8.20%   25.20%   7.16%
                   
(1) Annualized net earnings divided by average stockholders' equity.            
(2) Annualized adjusted net earnings divided by average tangible common equity.     

CONTACTS

Matthew P. Wagner
President and CEO
303.802.8900
Bart R. Olson
EVP and CFO
714.989.4149
William J. Black
EVP Strategy and Corporate Development
919.597.7466

 


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Strong Performance
Source: PacWest Bancorp
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