Highlights

  • Net Earnings of $110.0 Million, or $0.92 Per Diluted Share
  • Loan and Lease Production of $1.2 Billion; $263 Million of Net Loan Growth
  • Core Deposits Growth of $854 million; Represent 84% of Total Deposits
  • Net Charge-offs to Average Loans of 10 basis points in Third Quarter; 12 basis points Year-To-Date

LOS ANGELES, Oct. 16, 2019 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the third quarter of 2019 of $110.0 million, or $0.92 per diluted share, compared to net earnings for the second quarter of 2019 of $128.1 million, or $1.07 per diluted share. The decrease in net earnings in the third quarter of 2019 was due primarily to a $22.2 million pre-tax gain on the sale of securities in the second quarter of 2019 that contributed $0.13 per diluted share.

Matt Wagner, President and CEO, commented, “We had a solid quarter highlighted by very strong core deposits growth, another quarter of consistent loan production from all of our business groups, and the continuation of our trend of lower credit costs. Our third quarter of 2019 results produced a return on assets of 1.65% and a return on tangible equity of 19.01%.”

Mr. Wagner continued, “In a very competitive market, we achieved our largest core deposit growth quarter ever with growth of $854 million in the third quarter. Core deposits generation, with an emphasis on noninterest-bearing deposits, remains a priority in this declining-rate environment. We achieved solid loan and lease production of $1.2 billion in the third quarter bringing our net loan growth to $778 million, or 6% annualized, for the first nine months of 2019.”

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 
 2019   2019   (Decrease)   2019
   2018   (Decrease)
 
                        
 (Dollars in thousands, except per share data)
Net earnings$  110,026  $  128,125  $  (18,099) $  350,755  $  350,298  $  457 
Diluted earnings per share$  0.92  $  1.07  $  (0.15) $  2.91  $  2.79  $  0.12 
Return on average assets1.65% 1.99%   (0.34) 1.80% 1.94%   (0.14)
Return on average                 
tangible equity (1) 19.01% 23.15%   (4.14) 20.90% 21.22%   (0.32)
                  
Net interest margin ("NIM")                 
(tax equivalent)4.46% 4.72%   (0.26) 4.62% 5.09%   (0.47)
Yield on average loans and                  
leases (tax equivalent)5.91% 6.26%   (0.35) 6.11% 6.20%   (0.09)
Cost of average total                  
deposits0.83% 0.81%   0.02  0.79% 0.38%   0.41 
Efficiency ratio42.3% 41.6%   0.7  42.1% 40.8%   1.3 
                  
Total assets$  26,724,627  $  26,344,414  $  380,213  $  26,724,627  $  24,782,126  $  1,942,501 
Loans and leases held                  
for investment,                  
net of deferred fees$  18,735,543  $  18,472,852  $  262,691  $  18,735,543  $  17,230,146  $  1,505,397 
Noninterest-bearing                  
demand deposits$  7,441,185  $  7,299,213  $  141,972  $  7,441,185  $  7,834,480  $  (393,295)
Core deposits$  16,471,264  $  15,617,488  $  853,776  $  16,471,264  $  15,512,742  $  958,522 
Total deposits$  19,733,203  $  18,805,756  $  927,447  $  19,733,203  $  17,879,543  $  1,853,660 
                  
As percentage of total                 
deposits:                 
Noninterest-bearing                  
demand deposits38% 39%   (1) 38% 44%   (6)
Core deposits 84% 83%   1  84% 87%   (3)
                  
Equity to assets ratio 18.41% 18.42%   (0.01) 18.41% 19.13%   (0.72)
Tangible common equity                  
ratio (1)9.65% 9.50%   0.15  9.65% 9.61%   0.04 
Book value per share$  41.06  $  40.49  $  0.57  $  41.06  $  38.46  $  2.60 
Tangible book value per                  
share (1)$  19.43  $  18.83  $  0.60  $  19.43  $  17.28  $  2.15 
                  
(1) Non-GAAP measure.                 


INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income decreased by $8.7 million to $252.2 million for the third quarter of 2019 compared to $260.9 million for the second quarter of 2019 due mainly to a lower yield on average loans and leases, offset partially by a higher balance of average loans and leases and one more day in the third quarter of 2019. The tax equivalent yield on average loans and leases was 5.91% for the third quarter of 2019 compared to 6.26% for the second quarter of 2019. The decrease in the yield on average loans and leases was due principally to the repricing of variable-rate loans causing lower coupon interest in addition to lower loan prepayment fees in the third quarter compared to the second quarter. The prepayment fees added five basis points to the third quarter loan and lease yield and 14 basis points to the second quarter loan and lease yield.

The tax equivalent NIM was 4.46% for the third quarter of 2019 compared to 4.72% for the second quarter of 2019. The decrease in the NIM was due mainly to lower coupon interest, lower loan prepayment fees, and lower loan fee income.

The cost of average total deposits increased to 0.83% for the third quarter of 2019 from 0.81% for the second quarter of 2019 due to a higher average balance of core interest-bearing deposits combined with a lower average balance of noninterest-bearing deposits. The cost of average interest-bearing deposits declined by one basis point in the third quarter and the cost of average total deposits for the month of September was 0.80%, reflecting actions taken to reduce certain deposit rates in light of the fed funds target rate cuts during the third quarter.

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 Losses2019  2019  (Decrease) 
     (In thousands)     
Addition to allowance for loan and lease losses$  8,000  $  10,000  $  (2,000)
Reduction to reserve for unfunded loan commitments  (1,000)   (2,000)   1,000 
Total provision for credit losses$  7,000  $  8,000  $  (1,000)


Noninterest Income

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

 Three Months Ended    
 September 30, June 30,  Increase 
Noninterest Income2019 2019  (Decrease) 
    (In thousands)     
Service charges on deposit accounts$  3,525 $  3,771  $  (246)
Other commissions and fees  10,855   11,590    (735)
Leased equipment income  9,615   9,182    433 
Gain on sale of loans and leases  765   326    439 
Gain on sale of securities  908   22,192    (21,284)
Other income:       
Dividends and gains (losses) on equity investments  14   (83)   97 
Warrant income  3,936   1,214    2,722 
Other  3,811   2,701    1,110 
Total noninterest income $  33,429 $  50,893  $  (17,464)


Noninterest income decreased by $17.5 million to $33.4 million for the third quarter of 2019 compared to $50.9 million for the second quarter of 2019 due primarily to a $21.3 million decrease in the gain on sale of securities attributable to a $0.9 million net gain on sales of $143 million in the third quarter of 2019 compared to a $22.2 million net gain on sales of $980 million in the second quarter of 2019. We re-positioned a portion of our securities portfolio in the second quarter to shorten the duration of the portfolio and to enhance liquidity. Partially offsetting the decrease in the gain on sale of securities was a $2.7 million increase in warrant income and a $1.1 million increase in other income for the third quarter of 2019. The increase in warrant income was due to higher gains resulting from exercised warrants. The increase in other income was mainly due to higher gains from lease terminations.

Noninterest Expense

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

 Three Months Ended    
 September 30, June 30,  Increase 
Noninterest Expense2019 2019  (Decrease) 
    (In thousands)     
Compensation$  71,424 $  68,956  $  2,468 
Occupancy   14,089   14,457    (368)
Data processing  7,044   6,817    227 
Other professional services  4,400   4,629    (229)
Insurance and assessments  4,100   4,098    2 
Intangible asset amortization  4,833   4,870    (37)
Leased equipment depreciation  5,951   5,558    393 
Foreclosed assets expense (income), net  8   (146)   154 
Loan expense  3,628   3,451    177 
Other  11,332   12,737    (1,405)
Total noninterest expense$  126,809 $  125,427  $  1,382 

 

Noninterest expense increased by $1.4 million to $126.8 million for the third quarter of 2019 compared to $125.4 million for the second quarter of 2019 attributable primarily to a $2.5 million increase in compensation expense, offset partially by a $1.4 million decrease in other expense. Compensation expense increased due mainly to higher incentives expense and higher stock compensation expense, partially offset by lower payroll taxes and benefits expense. Other expense decreased primarily due to lower business development expense and a loss on the early termination of an office lease in the second quarter.

Income Taxes

The overall effective income tax rate was 27.5% for the third quarter of 2019 and 28.2% for the second quarter of 2019. The effective tax rate for the full year 2019 is estimated to be in the range of 27-28%.

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 HeldSeptember 30,   June 30,   September 30, 
for Investment, Net of Deferred Fees (1)2019  2019  2019
     (Dollars in thousands)     
Balance, beginning of period$  18,472,852  $  18,307,697  $  17,957,713 
Additions:        
Production  1,230,817    1,436,299    3,841,954 
Disbursements  1,288,111    1,293,747    3,774,830 
Total production and disbursements  2,518,928    2,730,046    7,616,784 
Reductions:        
Payoffs  (1,390,883)   (1,529,213)   (3,853,396)
Paydowns  (837,551)   (979,987)   (2,856,502)
Total payoffs and paydowns  (2,228,434)   (2,509,200)   (6,709,898)
Sales   (21,302)   (38,054)   (76,292)
Transfers to foreclosed assets  -    -    (37)
Charge-offs  (6,501)   (17,637)   (27,603)
Transfers to loans held for sale  -    -    (25,124)
Total reductions  (2,256,237)   (2,564,891)   (6,838,954)
Net increase   262,691    165,155    777,830 
Balance, end of period$  18,735,543  $  18,472,852  $  18,735,543 
         
Weighted average rate on production (2)5.45% 5.15% 5.21%
         
(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 30 basis points to loan yields in 2019 and 31 basis points to loan yields in 2018.


Loans and leases held for investment, net of deferred fees, increased by $262.7 million, or 6% annualized, in the third quarter of 2019 to $18.7 billion at September 30, 2019. The net loan growth in the third quarter was primarily from the asset-based loan portfolio class and residential real estate construction loan portfolio class.

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, 2019  June 30, 2019  September 30, 2018 
  % of    % of    % of  
Loan and Lease Portfolio AmountTotal  AmountTotal  AmountTotal 
     (In thousands)     
Real estate mortgage:           
Commercial$  4,300,56623% $  4,435,27424% $  4,932,82328%
Income producing and other            
residential  3,596,35819%   3,640,75220%   2,745,83716%
Total real estate mortgage  7,896,92442%   8,076,02644%   7,678,66044%
Real estate construction and land:           
Commercial  1,009,3626%   972,8915%   854,3465%
Residential  1,542,1128%   1,403,2398%   1,146,6117%
Total real estate construction            
and land  2,551,47414%   2,376,13013%   2,000,95712%
Total real estate   10,448,39856%   10,452,15657%   9,679,61756%
Commercial:           
Asset-based  3,810,74120%   3,606,00719%   3,222,31119%
Venture capital  2,209,64912%   2,194,74312%   2,031,89512%
Other commercial  1,858,16710%   1,773,56410%   1,897,85211%
Total commercial  7,878,55742%   7,574,31441%   7,152,05842%
Consumer  408,5882%   446,3822%   398,4712%
Total loans and leases held for            
investment, net of deferred fees$  18,735,543100% $  18,472,852100% $  17,230,146100%
            
Total unfunded loan commitments$  7,790,796   $  7,610,899   $  7,055,833  


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, 2019
 Allowance for  Reserve for   Total 
Allowance for Credit Loan and   Unfunded Loan  Allowance for 
Losses RollforwardLease Losses  Commitments  Credit Losses 
    (In thousands)    
Beginning balance$  135,037  $  34,861  $  169,898 
Charge-offs  (6,501)   -    (6,501)
Recoveries  2,016    -    2,016 
Net charge-offs  (4,485)   -    (4,485)
Provision   8,000    (1,000)   7,000 
Ending balance$  138,552  $  33,861  $  172,413 


 Three Months Ended June 30, 2019 
 Allowance for  Reserve for   Total 
Allowance for Credit Loan and   Unfunded Loan  Allowance for 
Losses RollforwardLease Losses  Commitments  Credit Losses 
    (In thousands)    
Beginning balance$  136,281  $  36,861  $  173,142 
Charge-offs  (17,637)   -    (17,637)
Recoveries  6,393    -    6,393 
Net charge-offs  (11,244)   -    (11,244)
Provision   10,000    (2,000)   8,000 
Ending balance$  135,037  $  34,861  $  169,898 


The allowance for credit losses as a percentage of loans and leases held for investment was 0.92% at both September 30, 2019 and June 30, 2019.

Gross charge-offs for the third quarter of 2019 were $6.5 million and included $4.4 million for venture capital loans and $1.7 million for other commercial loans compared to gross charge-offs for the second quarter of 2019 of $17.6 million that included $11.8 million for a single asset-based loan, $3.7 million for other commercial loans, and $1.5 million for venture capital loans.

Recoveries for the third quarter of 2019 were $2.0 million and included $1.2 million for other commercial loans and $0.4 million for venture capital loans compared to recoveries for the second quarter of 2019 of $6.4 million that included $4.8 million for venture capital loans and $1.0 million for other commercial loans.

For the third quarter of 2019 and second quarter of 2019, annualized net charge-offs to average loans and leases were 0.10% and 0.25%.

Deposits and Client Investment Funds

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

 September 30, 2019  June 30, 2019  September 30, 2018 
  % of    % of    % of  
Deposit CompositionAmountTotal  AmountTotal  AmountTotal 
     (Dollars in thousands)     
Noninterest-bearing demand$  7,441,18538% $  7,299,21339% $  7,834,48044%
Interest checking   3,645,66018%   3,220,35317%   2,277,53713%
Money market   4,870,34425%   4,578,08324%   4,782,72427%
Savings   514,0753%   519,8393%   618,0013%
Total core deposits  16,471,26484%   15,617,48883%   15,512,74287%
Non-core non-maturity deposits  479,7322%   436,8332%   483,5283%
Total non-maturity deposits  16,950,99686%   16,054,32185%   15,996,27090%
Time deposits $250,000 and under  2,282,97612%   2,284,02312%   1,509,2148%
Time deposits over $250,000  499,2312%   467,4123%   374,0592%
Total time deposits  2,782,20714%   2,751,43515%   1,883,27310%
Total deposits$  19,733,203100% $  18,805,756100% $  17,879,543100%


At September 30, 2019, core deposits totaled $16.5 billion, or 84% of total deposits, including $7.4 billion of noninterest-bearing demand deposits, or 38% of total deposits. The $854 million increase in core deposits for the third quarter of 2019 included strong growth in both our Venture Banking and Community Banking groups.

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, 2019 were $1.8 billion, of which $1.5 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 2019  2019  (Decrease) 
    (Dollars in thousands)    
NPAs and Performing TDRs:        
Nonaccrual loans and leases held for investment (1)$  99,113  $  81,265  $  17,848 
Accruing loans contractually past due 90 days or more  -    -    - 
Foreclosed assets, net  1,366    1,472    (106)
  Total nonperforming assets ("NPAs")$  100,479  $  82,737  $  17,742 
         
Nonaccrual loans and leases held for investment         
to loans and leases held for investment0.53% 0.44%   
Nonperforming assets to loans and leases         
held for investment and foreclosed assets0.54% 0.45%   
         
Nonaccrual loans and leases held for investment (1)$  99,113  $  81,265  $  17,848 
Performing TDRs held for investment  16,329    16,464    (135)
Total impaired loans and leases$  115,442  $  97,729  $  17,713 
         
Loan and Lease Credit Risk Ratings:        
Pass $  18,279,011  $  18,042,569  $  236,442 
Special mention  267,925    239,304    28,621 
Classified   188,607    190,979    (2,372)
Total loans and leases held for investment,         
net of deferred fees$  18,735,543  $  18,472,852  $  262,691 
         
Classified loans and leases held for investment         
to loans and leases held for investment1.01% 1.03%   
         
Allowance for Credit Losses:        
Allowance for credit losses$  172,413  $  169,898  $  2,515 
Provision for credit losses (for the quarter)$  7,000  $  8,000  $  (1,000)
Net charge-offs (for the quarter)$  4,485  $  11,244  $  (6,759)
Net charge-offs to average loans and leases        
(for the quarter)0.10% 0.25%   
Allowance for credit losses to loans and leases        
held for investment0.92% 0.92%   
Allowance for credit losses to nonaccrual loans         
and leases held for investment174.0% 209.1%   
         
(1) Nonaccrual loans include guaranteed amounts of $15.4 million at September 30, 2019 and $13.0 million at June 30, 2019.


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

During the third quarter of 2019, nonaccrual loans and leases increased by $17.8 million, while classified loans and leases decreased by $2.4 million and special mention loans and leases increased by $28.6 million. The increase in nonaccrual loans was primarily attributable to one previously classified $14.9 million security monitoring commercial loan. The increase in special mention loans and leases was due primarily to the downgrade of two security monitoring commercial loans totaling $49 million, partially offset by a net decrease from other activity.

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:

 Nonaccrual Loans and Leases  Accruing and
 September 30, 2019  June 30, 2019  30-89 Days Past Due 
  % of    % of   September 30, June 30,
  Loan    Loan   2019 2019
 AmountCategory  AmountCategory  Amount Amount
     (Dollars in thousands)     
Real estate mortgage:           
Commercial$  19,5150.5% $  17,0120.4%  $- $  3,948
Income producing and other            
residential  2,8680.1%   2,8830.1%   3,750   3,262
Total real estate mortgage  22,3830.3%   19,8950.2%   3,750   7,210
Real estate construction and land:           
Commercial  3770.0%   3900.0%   -   -
Residential  -0.0%   -0.0%   2,622   4,672
Total real estate            
construction and land  3770.0%   3900.0%   2,622   4,672
Commercial:           
Asset-based  33,0150.9%   32,2360.9%   48   12,382
Venture capital  20,1310.9%   22,5011.0%   -   -
Other commercial  22,5541.2%   5,7990.3%   4,068   439
Total commercial  75,7001.0%   60,5360.8%   4,116   12,821
Consumer  6530.2%   4440.1%   795   964
Total held for investment $  99,1130.5% $  81,2650.4% $  11,283 $  25,667


STOCK REPURCHASE PROGRAM

During the third quarter of 2019, there were no stock repurchases. At September 30, 2019, the remaining amount that could be used to repurchase shares under the $225 million Stock Repurchase Program was $124.7 million.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $26 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 full-service branches located throughout the state of California and one branch in Durham, North Carolina. Our Community Banking group provides lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices. We offer additional products and services through our National Lending and Venture Banking groups. National Lending provides asset-based, equipment, real estate and security monitoring cash flow loans and treasury management services to established middle-market businesses on a national basis. Venture Banking offers a comprehensive suite of financial services focused on entrepreneurial 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, visit www.pacwestbancorp.com, or to learn more about 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. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on information available at the time of this 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. Actual results may differ materially from those set forth in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the 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,  December 31, 
 2019  2019  2018 
         
  (Dollars in thousands, except per share data) 
ASSETS:        
Cash and due from banks$  252,596  $  185,075  $  175,830 
Interest-earning deposits in financial institutions  483,405    422,663    209,937 
Total cash and cash equivalents   736,001    607,738    385,767 
         
Securities available-for-sale, at estimated fair value  3,817,348    3,807,244    4,009,431 
Federal Home Loan Bank stock, at cost  26,865    43,146    32,103 
Total investment securities  3,844,213    3,850,390    4,041,534 
         
Loans held for sale  -    -    - 
         
Gross loans and leases held for investment  18,796,011    18,532,740    18,026,365 
Deferred fees, net  (60,468)   (59,888)   (68,652)
Total loans and leases held for investment,        
net of deferred fees  18,735,543    18,472,852    17,957,713 
Allowance for loan and lease losses  (138,552)   (135,037)   (132,472)
Total loans and leases held for investment, net  18,596,991    18,337,815    17,825,241 
         
Equipment leased to others under operating leases  295,854    300,668    292,677 
Premises and equipment, net  37,926    38,162    34,661 
Foreclosed assets, net  1,366    1,472    5,299 
Deferred tax asset, net  -    -    17,489 
Goodwill  2,548,670    2,548,670    2,548,670 
Core deposit and customer relationship intangibles, net  42,547    47,380    57,120 
Other assets  621,059    612,119    522,896 
Total assets$  26,724,627  $  26,344,414  $  25,731,354 
         
LIABILITIES:        
Noninterest-bearing deposits$  7,441,185  $  7,299,213  $  7,888,915 
Interest-bearing deposits  12,292,018    11,506,543    10,981,586 
Total deposits  19,733,203    18,805,756    18,870,501 
Borrowings  1,253,031    1,913,059    1,371,114 
Subordinated debentures  456,145    456,112    453,846 
Accrued interest payable and other liabilities  362,140    317,477    210,305 
Total liabilities  21,804,519    21,492,404    20,905,766 
STOCKHOLDERS' EQUITY (1)  4,920,108    4,852,010    4,825,588 
Total liabilities and stockholders’ equity$  26,724,627  $  26,344,414  $  25,731,354 
         
Book value per share$  41.06  $  40.49  $  39.17 
Tangible book value per share (2)$  19.43  $  18.83  $  18.02 
Shares outstanding   119,831,192    119,829,104    123,189,833 
         
(1) Includes net unrealized gain (loss) on securities        
available-for-sale, net$  95,887  $  73,066  $  (6,075)
(2) Non-GAAP measure.        



 

PACWEST BANCORP AND SUBSIDIARIES             
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS             
              
 Three Months Ended
 Nine Months Ended
 
 September 30, June 30,  September 30,  September 30,
 
 2019 2019  2018  2019  2018 
              
 (Dollars in thousands, except per share data)
Interest income:             
Loans and leases$  275,978 $  284,236  $  264,062  $  834,443  $  775,447 
Investment securities  28,806   28,948    28,061    87,434    81,929 
Deposits in financial institutions  2,424   1,349    519    4,423    1,555 
Total interest income  307,208   314,533    292,642    926,300    858,931 
              
Interest expense:             
Deposits  40,703   38,720    21,121    113,658    51,306 
Borrowings  6,852   7,210    3,814    21,772    7,383 
Subordinated debentures  7,417   7,705    7,390    22,860    21,093 
Total interest expense  54,972   53,635    32,325    158,290    79,782 
              
Net interest income  252,236   260,898    260,317    768,010    779,149 
Provision for credit losses  7,000   8,000    11,500    19,000    33,000 
Net interest income after              
provision for credit losses  245,236   252,898    248,817    749,010    746,149 
              
Noninterest income:             
Service charges on deposit accounts  3,525   3,771    3,979    11,026    12,418 
Other commissions and fees  10,855   11,590    12,397    33,453    34,429 
Leased equipment income  9,615   9,182    9,120    28,079    28,497 
Gain on sale of loans and leases  765   326    -    1,091    4,675 
Gain on sale of securities  908   22,192    826    25,261    7,390 
Other income  7,761   3,832    10,590    16,476    27,700 
Total noninterest income  33,429   50,893    36,912    115,386    115,109 
              
Noninterest expense:             
Compensation   71,424   68,956    72,333    211,225    213,269 
Occupancy  14,089   14,457    13,069    42,866    39,867 
Data processing  7,044   6,817    6,740    20,786    20,295 
Other professional services  4,400   4,629    6,058    13,542    15,754 
Insurance and assessments  4,100   4,098    5,446    12,236    16,503 
Intangible asset amortization  4,833   4,870    5,587    14,573    17,520 
Leased equipment depreciation  5,951   5,558    5,001    17,160    15,613 
Foreclosed assets expense (income), net  8   (146)   (257)   (109)   (440)
Acquisition, integration and              
reorganization costs   -   -    800    618    800 
Loan expense  3,628   3,451    2,249    9,964    7,578 
Other expense  11,332   12,737    11,127    35,662    35,238 
Total noninterest expense  126,809   125,427    128,153    378,523    381,997 
              
Earnings before income taxes  151,856   178,364    157,576    485,873    479,261 
Income tax expense   41,830   50,239    41,289    135,118    128,963 
Net earnings $  110,026 $  128,125  $  116,287  $  350,755  $  350,298 
              
Basic and diluted earnings per share$  0.92 $  1.07  $  0.94  $  2.91  $  2.79 
Dividends declared and paid per share$  0.60 $  0.60  $  0.60  $  1.80  $  1.70 




PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS
               
 Three Months Ended
 Nine Months Ended
 September 30,  June 30,  September 30,  September 30,
 2019  2019  2018  2019  2018 
               
 (In thousands, except per share data)
Basic Earnings Per Share:              
Net earnings $  110,026  $  128,125  $  116,287  $  350,755  $  350,298 
Less: earnings allocated to unvested               
restricted stock (1)  (1,369)   (1,190)   (1,428)   (3,725)   (3,899)
Net earnings allocated to common               
shares$  108,657  $  126,935  $  114,859  $  347,030  $  346,399 
               
Weighted-average basic shares and               
unvested restricted stock outstanding  119,831    120,042    123,657    120,691    125,728 
Less: weighted-average unvested               
restricted stock outstanding  (1,622)   (1,462)   (1,537)   (1,480)   (1,473)
Weighted-average basic shares               
outstanding  118,209    118,580    122,120    119,211    124,255 
               
Basic earnings per share$  0.92  $  1.07  $  0.94  $  2.91  $  2.79 
               
Diluted Earnings Per Share:              
Net earnings allocated to common               
shares$  108,657  $  126,935  $  114,859  $  347,030  $  346,399 
               
Weighted-average basic shares               
outstanding  118,209    118,580    122,120    119,211    124,255 
               
Diluted earnings per share$  0.92  $  1.07  $  0.94  $  2.91  $  2.79 
                    
(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, 2019  June 30, 2019  September 30, 2018 
  InterestAverage   InterestAverage   InterestAverage 
 Average Income/Yield/  Average Income/Yield/  Average Income/Yield/ 
 BalanceExpenseCost  BalanceExpenseCost  BalanceExpenseCost 
               
 (Dollars in thousands) 
Assets:              
Loans and leases (1)(2)$  18,539,281$ 276,3095.91% $  18,239,690$ 284,5136.26% $  16,913,792$ 264,3716.20%
Investment securities (3)  3,809,243  32,2133.36%   3,790,436  29,4623.12%   3,844,201  29,7113.07%
Deposits in financial               
institutions  445,152  2,4242.16%   228,702  1,3492.37%   108,485  5191.90%
Total interest-earning               
assets (1)  22,793,676  310,9465.41%   22,258,828  315,3245.68%   20,866,478  294,6015.60%
Other assets  3,612,927      3,590,361      3,491,293   
Total assets$  26,406,603    $  25,849,189    $  24,357,771   
               
Liabilities and               
Stockholders' Equity:              
Interest checking$  3,598,698  11,9421.32% $  3,242,960  10,6441.32% $  2,433,837  5,1350.84%
Money market  5,121,856  14,8071.15%   5,046,021  14,6041.16%   5,270,297  10,6890.80%
Savings  515,649  2180.17%   525,648  2270.17%   629,241  2330.15%
Time  2,795,573  13,7361.95%   2,731,156  13,2451.95%   1,778,552  5,0641.13%
Total interest-bearing               
deposits  12,031,776  40,7031.34%   11,545,785  38,7201.35%   10,111,927  21,1210.83%
Borrowings  1,181,313  6,8522.30%   1,142,223  7,2102.53%   720,449  3,8142.10%
Subordinated debentures  456,011  7,4176.45%   454,901  7,7056.79%   452,312  7,3906.48%
Total interest-bearing               
liabilities  13,669,100  54,9721.60%   13,142,909  53,6351.64%   11,284,688  32,3251.14%
Noninterest-bearing               
demand deposits  7,487,555      7,544,027      8,120,306   
Other liabilities  359,202      343,364      203,958   
Total liabilities  21,515,857      21,030,300      19,608,952   
Stockholders' equity  4,890,746      4,818,889      4,748,819   
Total liabilities and               
stockholders' equity$  26,406,603    $  25,849,189    $  24,357,771   
Net interest income (1) $ 255,974    $ 261,689    $ 262,276  
Net interest spread (1)  3.81%   4.04%   4.46%
Net interest margin (1)  4.46%   4.72%   4.99%
               
Total deposits (4)$  19,519,331$  40,7030.83% $  19,089,812$  38,7200.81% $  18,232,233$  21,1210.46%
                     
(1) Tax equivalent. 
(2) Includes discount accretion on acquired loans of $2.6 million, $3.5 million, and $6.1 million for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, respectively.
(3) Includes tax-equivalent adjustments of $3.4 million, $0.5 million, and $1.7 million for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018 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, 
 2019  2019  2019  2018  2018 
               
 (Dollars in thousands, except per share data)
ASSETS:              
Cash and due from banks$  252,596  $  185,075  $  224,758  $  175,830  $  196,502 
Interest-earning deposits in financial               
institutions  483,405    422,663    332,124    209,937    185,284 
Total cash and cash equivalents   736,001    607,738    556,882    385,767    381,786 
               
Securities available-for-sale  3,817,348    3,807,244    3,994,708    4,009,431    3,820,333 
Federal Home Loan Bank stock  26,865    43,146    29,430    32,103    31,077 
  Total investment securities  3,844,213    3,850,390    4,024,138    4,041,534    3,851,410 
               
Loans held for sale  -     -    25,124    -    - 
               
Gross loans and leases held for investment  18,796,011    18,532,740    18,371,295    18,026,365    17,295,589 
Deferred fees, net  (60,468)   (59,888)   (63,598)   (68,652)   (65,443)
Total loans and leases held for              
investment, net of deferred fees  18,735,543    18,472,852    18,307,697    17,957,713    17,230,146 
Allowance for loan and lease losses  (138,552)   (135,037)   (136,281)   (132,472)   (141,920)
Total loans and leases held for              
investment, net  18,596,991    18,337,815    18,171,416    17,825,241    17,088,226 
               
Equipment leased to others under               
operating leases  295,854    300,668    293,853    292,677    275,707 
Premises and equipment, net  37,926    38,162    37,783    34,661    34,012 
Foreclosed assets, net  1,366    1,472    3,291    5,299    4,407 
Deferred tax asset, net  -    -    -    17,489    41,280 
Goodwill  2,548,670    2,548,670    2,548,670    2,548,670    2,548,670 
Core deposit and customer relationship              
intangibles, net  42,547    47,380    52,250    57,120    62,106 
Other assets  621,059    612,119    610,731    522,896    494,522 
Total assets$  26,724,627  $  26,344,414  $  26,324,138  $  25,731,354  $  24,782,126 
               
LIABILITIES:              
Noninterest-bearing deposits$  7,441,185  $  7,299,213  $  7,712,409  $  7,888,915  $  7,834,480 
Interest-bearing deposits  12,292,018    11,506,543    11,573,518    10,981,586    10,045,063 
Total deposits  19,733,203    18,805,756    19,285,927    18,870,501    17,879,543 
Borrowings  1,253,031    1,913,059    1,481,087    1,371,114    1,513,166 
Subordinated debentures  456,145    456,112    454,458    453,846    452,944 
Accrued interest payable and other              
liabilities  362,140    317,477    311,684    210,305    194,788 
Total liabilities  21,804,519    21,492,404    21,533,156    20,905,766    20,040,441 
STOCKHOLDERS' EQUITY (1)  4,920,108    4,852,010    4,790,982    4,825,588    4,741,685 
Total liabilities and stockholders’               
equity$  26,724,627  $  26,344,414  $  26,324,138  $  25,731,354  $  24,782,126 
               
Book value per share$  41.06  $  40.49  $  39.86  $  39.17  $  38.46 
Tangible book value per share (2)$  19.43  $  18.83  $  18.22  $  18.02  $  17.28 
Shares outstanding  119,831,192    119,829,104    120,201,149    123,189,833    123,283,450 
               
(1) Includes net unrealized gain (loss) on               
securities available-for-sale, net$  95,887  $  73,066  $  37,258  $  (6,075) $  (43,854)
(2) Non-GAAP measure.              


PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
             
 Three Months Ended
 September 30, June 30,  March 31, December 31,  September 30, 
 2019 2019  2019 2018  2018 
             
 (Dollars in thousands, except per share data)
Interest income:            
Loans and leases$  275,978 $  284,236  $  274,229 $  272,522  $  264,062 
Investment securities  28,806   28,948    29,680   29,690    28,061 
Deposits in financial institutions  2,424   1,349    650   527    519 
Total interest income  307,208   314,533    304,559   302,739    292,642 
             
Interest expense:            
Deposits  40,703   38,720    34,235   28,834    21,121 
Borrowings  6,852   7,210    7,710   4,602    3,814 
Subordinated debentures  7,417   7,705    7,738   7,538    7,390 
Total interest expense  54,972   53,635    49,683   40,974    32,325 
             
Net interest income  252,236   260,898    254,876   261,765    260,317 
Provision for credit losses  7,000   8,000    4,000   12,000    11,500 
Net interest income after             
provision for credit losses  245,236   252,898    250,876   249,765    248,817 
             
Noninterest income:            
Service charges on deposit accounts  3,525   3,771    3,730   4,091    3,979 
Other commissions and fees  10,855   11,590    11,008   11,114    12,397 
Leased equipment income  9,615   9,182    9,282   9,384    9,120 
Gain on sale of loans and leases  765   326    -   -    - 
Gain on sale of securities  908   22,192    2,161   786    826 
Other income  7,761   3,832    4,883   8,151    10,590 
Total noninterest income  33,429   50,893    31,064   33,526    36,912 
             
Noninterest expense:            
Compensation   71,424   68,956    70,845   69,299    72,333 
Occupancy  14,089   14,457    14,320   13,356    13,069 
Data processing  7,044   6,817    6,925   6,930    6,740 
Other professional services  4,400   4,629    4,513   6,198    6,058 
Insurance and assessments  4,100   4,098    4,038   4,202    5,446 
Intangible asset amortization  4,833   4,870    4,870   4,986    5,587 
Leased equipment depreciation  5,951   5,558    5,651   5,758    5,001 
Foreclosed assets expense (income), net  8   (146)   29   (311)   (257)
Acquisition, integration and             
reorganization costs   -   -    618   970    800 
Loan expense  3,628   3,451    2,885   2,991    2,249 
Other expense  11,332   12,737    11,593   14,856    11,127 
Total noninterest expense  126,809   125,427    126,287   129,235    128,153 
             
Earnings before income taxes  151,856   178,364    155,653   154,056    157,576 
Income tax expense   41,830   50,239    43,049   39,015    41,289 
Net earnings $  110,026 $  128,125  $  112,604 $  115,041  $  116,287 
             
Basic and diluted earnings per share$  0.92 $  1.07  $  0.92 $  0.93  $  0.94 
Dividends declared and paid per share$  0.60 $  0.60  $  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, 
 2019  2019  2019  2018  2018 
               
 (Dollars in thousands)
Performance Ratios:              
Return on average assets (1)1.65% 1.99% 1.77% 1.84% 1.89%
Return on average equity (1)8.93% 10.66% 9.48% 9.59% 9.72%
Return on average tangible equity (1)(2)19.01% 23.15% 20.64% 21.23% 21.61%
Efficiency ratio42.3% 41.6% 42.4% 41.7% 40.9%
Noninterest expense as a percentage              
of average assets (1)1.91% 1.95% 1.99% 2.07% 2.09%
               
Average Yields/Costs (1):              
Yield on:              
Average loans and leases (3)5.91% 6.26% 6.16% 6.27% 6.20%
Average interest-earning assets (3)5.41% 5.68% 5.60% 5.68% 5.60%
Cost of:              
Average interest-bearing deposits 1.34% 1.35% 1.24% 1.10% 0.83%
Average total deposits 0.83% 0.81% 0.73% 0.62% 0.46%
Average interest-bearing liabilities 1.60% 1.64% 1.57% 1.40% 1.14%
Net interest spread (3)3.81% 4.04% 4.03% 4.28% 4.46%
Net interest margin (3)4.46% 4.72% 4.69% 4.91% 4.99%
               
Average Balances:              
Assets:              
Loans and leases, net of deferred fees$  18,539,281  $  18,239,690  $  18,064,230  $  17,275,343  $  16,913,792 
Interest-earning assets  22,793,676    22,258,828    22,144,711    21,269,363    20,866,478 
Total assets  26,406,603    25,849,189    25,775,949    24,784,462    24,357,771 
Liabilities:              
Noninterest-bearing deposits  7,487,555    7,544,027    7,783,652    8,163,699    8,120,306 
Interest-bearing deposits  12,031,776    11,545,785    11,156,773    10,422,761    10,111,927 
Total deposits  19,519,331    19,089,812    18,940,425    18,586,460    18,232,233 
Borrowings   1,181,313    1,142,223    1,218,319    764,039    720,449 
Subordinated debentures  456,011    454,901    454,203    452,998    452,312 
Interest-bearing liabilities  13,669,100    13,142,909    12,829,295    11,639,798    11,284,688 
Stockholders' equity  4,890,746    4,818,889    4,815,965    4,758,401    4,748,819 
               
(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, 
 2019  2019  2019  2018  2018 
               
 (Dollars in thousands)
Credit Quality Ratios:              
Nonaccrual loans and leases held for               
investment to loans and leases               
held for investment0.53% 0.44% 0.48% 0.44% 0.66%
Nonperforming assets to loans and               
leases held for investment and               
foreclosed assets0.54% 0.45% 0.50% 0.47% 0.68%
Classified loans and leases held for               
investment to loans and leases               
held for investment1.01% 1.03% 1.04% 1.32% 1.51%
Provision for credit losses (for the               
quarter) to average loans and leases               
held for investment (annualized)0.15% 0.18% 0.09% 0.28% 0.27%
Net charge-offs (for the quarter) to               
average loans and leases held               
for investment (annualized)0.10% 0.25% 0.00% 0.46% 0.04%
Trailing 12 months net charge-offs               
to average loans and leases              
held for investment0.20% 0.18% 0.22% 0.26% 0.28%
Allowance for credit losses to loans               
and leases held for investment0.92% 0.92% 0.95% 0.94% 1.03%
Allowance for credit losses to               
nonaccrual loans and leases               
held for investment174.0% 209.1% 195.6% 213.5% 156.9%
               
PacWest Bancorp Consolidated               
Capital:              
Tier 1 leverage ratio (1)9.50% 9.49% 9.38% 10.13% 10.10%
Common equity tier 1 capital ratio (1)9.55% 9.53% 9.48% 10.01% 10.18%
Tier 1 capital ratio (1)9.55% 9.53% 9.48% 10.01% 10.18%
Total capital ratio (1)12.16% 12.18% 12.15% 12.72% 13.03%
Risk-weighted assets (1)$  23,579,614  $  23,117,199  $  22,939,074  $  22,525,096  $  21,650,542 
               
Equity to assets ratio 18.41% 18.42% 18.20% 18.75% 19.13%
Tangible common equity ratio (2)9.65% 9.50% 9.23% 9.60% 9.61%
Book value per share$  41.06  $  40.49  $  39.86  $  39.17  $  38.46 
Tangible book value per share (2)$  19.43  $  18.83  $  18.22  $  18.02  $  17.28 
               
Pacific Western Bank Capital:              
Tier 1 leverage ratio (1)10.72% 10.76% 10.57% 10.80% 10.78%
Common equity tier 1 capital ratio (1)10.79% 10.80% 10.69% 10.68% 10.87%
Tier 1 capital ratio (1)10.79% 10.80% 10.69% 10.68% 10.87%
Total capital ratio (1)11.52% 11.53% 11.45% 11.44% 11.69%
               
(1) Capital information for September 30, 2019 is preliminary.              
(2) Non-GAAP measure.              


GAAP TO NON-GAAP RECONCILIATIONS

This press release contains certain non-GAAP financial disclosures for: (1) return on average tangible equity, (2) tangible common equity ratio, and (3) 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, and tangible book value per share is prevalent among banking regulators, investors and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) return on average equity, (2) equity to assets ratio, and (3) 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
 September 30,  June 30,  September 30,  September 30,
Return on Average Tangible Equity2019  2019  2018  2019  2018 
               
 (Dollars in thousands) 
Net earnings$  110,026  $  128,125  $  116,287  $  350,755  $  350,298 
               
Average stockholders' equity$  4,890,746  $  4,818,889  $  4,748,819  $  4,842,140  $  4,826,944 
Less: Average intangible assets  2,593,925    2,598,762    2,614,055    2,598,806    2,619,624 
Average tangible common equity$  2,296,821  $  2,220,127  $  2,134,764  $  2,243,334  $  2,207,320 
               
Return on average equity (1)8.93% 10.66% 9.72% 9.68% 9.70%
Return on average tangible equity (2)19.01% 23.15% 21.61% 20.90% 21.22%
               
(1) Annualized net earnings divided by average stockholders' equity.           
(2) Annualized net earnings divided by average tangible common equity.           


Tangible Common Equity Ratio/September 30,  June 30,  March 31,  December 31,  September 30, 
Tangible Book Value Per Share2019  2019  2019  2018  2018 
               
 (Dollars in thousands, except per share data)        
Stockholders' equity$  4,920,108  $  4,852,010  $  4,790,982  $  4,825,588  $  4,741,685 
Less: Intangible assets  2,591,217    2,596,050    2,600,920    2,605,790    2,610,776 
Tangible common equity$  2,328,891  $  2,255,960  $  2,190,062  $  2,219,798  $  2,130,909 
               
Total assets$  26,724,627  $  26,344,414  $  26,324,138  $  25,731,354  $  24,782,126 
Less: Intangible assets  2,591,217    2,596,050    2,600,920    2,605,790    2,610,776 
Tangible assets$  24,133,410  $  23,748,364  $  23,723,218  $  23,125,564  $  22,171,350 
               
Equity to assets ratio18.41% 18.42% 18.20% 18.75% 19.13%
Tangible common equity ratio (1)9.65% 9.50% 9.23% 9.60% 9.61%
               
Book value per share$  41.06  $  40.49  $  39.86  $  39.17  $  38.46 
Tangible book value per share (2)$  19.43  $  18.83  $  18.22  $  18.02  $  17.28 
Shares outstanding  119,831,192    119,829,104    120,201,149    123,189,833    123,283,450 
               
(1) Tangible common equity divided by tangible assets.             
(2) Tangible common equity divided by shares outstanding.             

 

Contact:Matthew P. WagnerPatrick J. Rusnak
 President and CEOExecutive Vice President and CFO
Phone:310-887-8520714-989-4705