PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2016


Fourth Quarter 2016 Highlights

  • Net Earnings of $85.6 Million, or $0.71 Per Diluted Share
  • New Loan and Lease Production of $1.3 Billion; $713 Million of Net Loan Growth
  • Core Deposits Increase of $513 Million and Represent 79% of Total Deposits
  • Tax Equivalent Net Interest Margin of 5.47%; Core Tax Equivalent Net Interest Margin of 5.09%

Full Year 2016 Highlights

  • Net Earnings of $352.2 Million, or $2.90 Per Diluted Share
  • New Loan and Lease Production of $4.1 Billion; $978 Million of Net Loan Growth
  • Core Deposits Increase of $2.0 Billion
  • Tax Equivalent Net Interest Margin of 5.40%; Core Tax Equivalent Net Interest Margin of 5.10%

LOS ANGELES, Jan. 19, 2017 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq:PACW) today announced net earnings for the fourth quarter of 2016 of $85.6 million, or $0.71 per diluted share, compared to net earnings for the third quarter of 2016 of $93.9 million, or $0.77 per diluted share.  Net earnings for the full year 2016 were $352.2 million, or $2.90 per diluted share, compared to net earnings for the full year 2015 of $299.6 million, or $2.79 per diluted share.  The 18% increase in annual net earnings was due mostly to including the operations of Square 1 Financial, Inc. for all of 2016 compared to including its operations in 2015 from the October 6, 2015 acquisition date.

Matt Wagner, President and CEO, commented, “Our strong fourth quarter results capped a year of profitable growth and continued solid operating performance.  Our full year 2016 return on assets of 1.66% and return on tangible equity of 15.52% drove a 4% increase in diluted EPS. These exceptional operating results allowed us to return $271 million to our stockholders in 2016 through stock repurchases and dividends.”

Patrick Rusnak, Executive Vice President and CFO stated, “Our fourth quarter core tax equivalent NIM increased one basis point to 5.09% while our NIM excluding all purchase accounting items increased six basis points to 5.04%. Our NIM has continued to hold up during this sustained period of low interest rates and, with our large concentrations of floating rate loans and core deposits, our balance sheet is well-positioned for a rising rate environment.”

Mr. Rusnak continued, “We are pleased with the 2016 full year loan and lease growth of 7% as it was produced by various business groups, maintaining our favorable loan diversification along our product lines.”

Mr. Wagner continued, “We are very well-positioned for continued growth and superior financial performance in 2017 given our proven and efficient business banking model supported by talented bankers. Even with the prospect of a more favorable outlook for economic growth and the banking sector, we will remain vigilant with respect to prudent risk management. Our financial performance was recently recognized in Forbes magazine’s 2017 List of America’s Best Banks where PacWest was named the best performing of the 100 largest publicly-traded U.S. banks.”

FINANCIAL HIGHLIGHTS

 At or For the Three Months Ended At or For the Year Ended
 December 31, September 30,   December 31,  
  2016   2016  Change  2016   2015  Change
 (Dollars in thousands, except per share data)
Financial Highlights          
Net Earnings$  85,647  $  93,895  $  (8,248) $  352,166  $  299,619  $  52,547 
Diluted Earnings Per Share$  0.71  $  0.77  $  (0.06) $  2.90  $  2.79  $  0.11 
Return on Average Assets  1.59%  1.77%    (0.18)  1.66%  1.70%    (0.04)
Return on Average              
Tangible Equity (1)  14.88%  16.15%    (1.27)  15.52%  15.76%    (0.24)
              
Net Interest Margin             
(tax equivalent) 5.47%  5.26%    0.21   5.40%  5.60%    (0.20)
Core Net Interest Margin              
(tax equivalent) (1) 5.09%  5.08%    0.01   5.10%  5.25%    (0.15)
Efficiency Ratio 40.1%  40.1%    -    39.8%  38.5%    1.3 
              
Total Assets$  21,869,767  $  21,315,291  $  554,476  $  21,869,767  $  21,288,490  $  581,277 
Loans and Leases, Net              
of Deferred Fees$  15,455,954  $  14,742,846  $  713,108  $  15,455,954  $  14,478,254  $  977,700 
Noninterest-Bearing              
Deposits$  6,659,016  $  6,521,946  $  137,070  $  6,659,016  $  6,171,455  $  487,561 
Core Deposits$  12,523,834  $  12,010,639  $  513,195  $  12,523,834  $  10,571,573  $  1,952,261 
Total Deposits$  15,870,611  $  15,645,668  $  224,943  $  15,870,611  $  15,666,182  $  204,429 
              
Noninterest-Bearing              
Deposits as Percentage              
of Total Deposits 42%  42%    -   42%  39%    3 
Core Deposits as              
Percentage of Total             
Deposits 79%  77%    2   79%  67%    12 
              
Equity to Assets Ratio  20.48%  21.31%    (0.83)  20.48%  20.66%    (0.18)
Tangible Common Equity              
Ratio (1) 11.54%  12.19%    (0.65)  11.54%  11.38%    0.16 
Book Value Per Share$  36.93  $  37.29  $  (0.36) $  36.93  $  36.22  $  0.71 
Tangible Book Value Per              
Share (1)$  18.71  $  19.12  $  (0.41) $  18.71  $  17.86  $  0.85 
              
(1) Non-GAAP measure.          
            

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased by $13.7 million to $248.3 million in the fourth quarter of 2016 compared to $234.6 million in the third quarter of 2016 due to the combination of higher discount accretion on acquired loans and higher average loan and lease balances, offset by lower nonaccrual interest recoveries.  Total accretion on acquired loans was $21.2 million in the fourth quarter of 2016 (56 basis points on the loan and lease yield) compared to $14.2 million in the third quarter of 2016 (39 basis points on the loan and lease yield).  The increase in accretion was due primarily to higher accelerated accretion from payoffs on acquired loans, including $13.5 million from the payoff of a nonaccrual purchased credit impaired (“PCI”) loan.  The loan and lease yield for the fourth quarter of 2016 was 6.31% compared to 6.17% for the third quarter of 2016.  The increase in the loan and lease yield was due to the higher accretion on acquired loans offset by a lower yield on new production relative to the current portfolio yield.  Excluding accelerated accretion, the core loan and lease yield was 5.85% in the fourth quarter compared to 5.94% in the third quarter. 

The tax equivalent NIM for the fourth quarter of 2016 was 5.47% compared to 5.26% for the third quarter of 2016.  The increase in the NIM was mostly due to higher accretion on acquired loans. Such accretion contributed 46 basis points to the NIM in the fourth quarter of 2016 and 31 basis points to the NIM in the third quarter of 2016. Excluding accelerated accretion, the core tax equivalent NIM was 5.09% in the fourth quarter compared to 5.08% for the third quarter.

Included in net interest income for the third quarter of 2016 was $3.0 million of interest resulting from the full payoff of a nonperforming loan. This recovery contributed seven basis points to the NIM and eight basis points of loan and lease yield for the third quarter of 2016.     

The cost of total deposits was 0.19% in the fourth quarter, unchanged from the third quarter.

The tax equivalent NIM and loan and lease yield are impacted by volatility in accretion of acquisition discounts on acquired loans and leases. The effects of this item are shown in the following table for the periods indicated:

        
  Three Months Ended Three Months Ended 
  December 31, 2016 September 30, 2016 
   Loan and   Loan and  
  NIMLease Yield NIMLease Yield 
Reported 5.47%6.31% 5.26%6.17% 
Less:Accelerated accretion of acquisition         
 discounts from early payoffs of         
 acquired loans (0.38)%(0.46)% (0.18)%(0.23)% 
Core  5.09%5.85% 5.08%5.94% 
Less:Remaining accretion of Non-PCI loan         
 acquisition discounts(0.08)%(0.10)% (0.13)%(0.16)% 
Excluding total accretion of loan acquisition         
 discounts5.01%5.75% 4.95%5.78% 
        
Total accretion of loan acquisition discounts(0.46)%(0.56)% (0.31)%(0.39)% 
        

The impact on the tax equivalent net interest income and NIM from all purchase accounting items is set forth in the table below for the periods indicated:

       
 Three Months Ended Three Months Ended
 December 31, 2016 September 30, 2016
  Impact on  Impact on
 AmountNIM AmountNIM
 (Dollars in thousands)
      
Net interest income/NIM $  253,131 5.47% $  239,473 5.26%
Less: Accelerated accretion of acquisition    
 discounts from early payoffs of         
 acquired loans    (17,454)(0.38)%    (8,226)(0.18)%
 Remaining accretion of Non-PCI loan    
 acquisition discounts   (3,726)(0.08)%    (5,997)(0.13)%
 Total accretion of loan acquisition         
 discounts   (21,180)(0.46)%    (14,223)(0.31)%
 Amortization of TruPS discount   1,388 0.03%    1,391 0.03%
 Accretion of time deposits premium   (94)0.00%    (121)0.00%
     (19,886)(0.43)%    (12,953)(0.28)%
Net interest income/NIM - excluding purchase   
accounting$  233,245 5.04% $  226,520 4.98%
       

Noninterest Income

Noninterest income increased by $2.0 million to $28.9 million in the fourth quarter of 2016 compared to $26.9 million for the third quarter of 2016 due mostly to a $1.1 million increase in dividends and gains on equity investments and a $1.1 million increase in other income attributable mainly to higher warrant income.   

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

      
 Three Months Ended
 December 31, September 30, Increase
Noninterest Income 2016   2016  (Decrease)
 (In thousands)
      
Service charges on deposit accounts$  3,557  $  3,488  $  69 
Other commissions and fees   12,036     12,528     (492)
Leased equipment income   8,614     8,538     76 
Gain on sale of loans and leases   119     157     (38)
Gain on securities   515     382     133 
Other income:    
Dividends and realized gains on equity investments   1,453     377     1,076 
Foreign currency translation net (losses) gains    (171)    (224)    53 
Other   2,772     1,674     1,098 
Total noninterest income $  28,895  $  26,920  $  1,975 
      

Noninterest Expense

Noninterest expense increased by $7.9 million to $118.6 million for the fourth quarter of 2016 compared to $110.7 million for the third quarter of 2016.  The increase was due mostly to higher compensation expense of $3.4 million, higher foreclosed assets expense of $2.9 million, higher loan expense of $1.2 million, and higher other expense of $1.0 million, offset by lower intangible asset amortization of $1.0 million.  Compensation expense increased due mainly to higher severance, bonus, and commissions expense. Foreclosed assets expense increased due primarily to a $2.6 million write-down on an existing property.  Loan expense increased primarily due to a $0.9 million recovery of work-out expenses for a single credit in the third quarter. Intangible asset amortization decreased due to declining amortization on the Square 1 customer deposit and customer relationship intangible assets.

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

       
 Three Months Ended 
 December 31, September 30, Increase 
Noninterest Expense 2016   2016  (Decrease) 
 (In thousands)
 
       
Compensation$  66,013  $  62,661  $  3,352  
Occupancy    12,076     12,010     66  
Data processing   6,574     6,234     340  
Other professional services   4,880     4,625     255  
Insurance and assessments   4,124     4,324     (200) 
Intangible asset amortization   3,176     4,224     (1,048) 
Leased equipment depreciation   5,291     5,298     (7) 
Foreclosed assets expense (income), net   2,693     (248)    2,941  
Other expense:     
Loan expense   3,140     1,931     1,209  
Other   10,655     9,651     1,004  
Total noninterest expense$  118,622  $  110,710  $  7,912  
       

Income Taxes

The overall effective income tax rate was 36.7% in the fourth quarter of 2016 and 34.1% in the third quarter of 2016. The effective rate for the third quarter was lower due to certain discrete items associated with completion of the 2015 tax returns. The effective tax rate for the full year 2016 was 36.9%. The estimated effective tax rate for the full year 2017 is approximately 38.5%. 

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Total loans and leases increased by $713.1 million in the fourth quarter to $15.5 billion at December 31, 2016.  The net increase was driven by fourth quarter originations and purchases of $1.3 billion, offset partially by principal repayments of $526.2 million.   For the year ended December 31, 2016, total loans and leases increased by $977.7 million, or approximately 7%.

The following table presents a roll forward of the loan and lease portfolio for the periods indicated:

       
 Three Months Ended Year Ended 
 December 31, September 30, December 31, 
Loan and Lease Roll Forward (1) 2016   2016   2016  
 (Dollars in thousands) 
       
Beginning balance$  14,742,846  $  14,641,460  $  14,478,254  
New production   1,272,900     1,071,943     4,118,330  
Existing loans and leases:     
Principal repayments, net (2)   (526,232)    (933,037)    (2,844,553) 
Loan and lease sales    (14,825)    (27,065)    (120,144) 
Transfers to foreclosed assets   (652)    -     (781) 
Charge-offs   (18,083)    (10,455)    (35,954) 
Sale of PWEF    -     -     (139,198) 
Ending balance$  15,455,954  $  14,742,846  $  15,455,954  
       
Weighted average rate on new production  4.83%  5.11%  4.92% 
       
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.   
(2) Includes principal repayments on existing loans, changes in revolving lines of credit
(repayments and draws), loan participation sales and other changes within the loan portfolio.
   
       

The following table presents the composition of our loan and lease portfolio as of the dates indicated:

        
 December 31, September 30, June 30, December 31,
Loan and Lease Portfolio 2016  2016  2016  2015 
 (In thousands)
Real estate mortgage:      
Commercial$  4,396,696 $  4,327,565 $  4,519,209 $  4,645,533 
Residential   1,314,036    1,242,254    1,164,784    1,211,209 
Total real estate mortgage   5,710,732    5,569,819    5,683,993    5,856,742 
Real estate construction and land:     
Commercial   581,246    510,831    417,144    345,991 
Residential   384,001    323,104    281,788    184,382 
Total real estate construction and land   965,247    833,935    698,932    530,373 
Total real estate loans   6,675,979    6,403,754    6,382,925    6,387,115 
Commercial:      
Cash flow   3,112,890    3,071,606    3,048,439    3,073,965 
Asset-based   2,611,796    2,573,437    2,683,913    2,547,665 
Venture capital   1,987,900    1,766,509    1,666,352    1,458,013 
Equipment finance   691,967    670,783    646,940    890,349 
Total commercial   8,404,553    8,082,335    8,045,644    7,969,992 
Consumer   375,422    256,757    212,891    121,147 
Total loans and leases, net of         
deferred fees$  15,455,954 $  14,742,846 $  14,641,460 $  14,478,254 
        
Total unfunded loan commitments$  4,166,703 $  4,156,147 $  3,888,686 $  3,580,655 
        

Loan growth in the fourth quarter came primarily from the venture capital, construction, and consumer portfolios.

Deposits and Client Investment Funds

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

         
         
 December 31, September 30, June 30, December 31, 
Deposit Category 2016   2016   2016   2015  
 (Dollars in thousands) 
         
Noninterest-bearing demand deposits$  6,659,016  $  6,521,946  $  6,222,696  $  6,171,455  
Interest checking deposits   1,448,394     1,184,350     1,035,395     874,349  
Money market deposits   3,705,385     3,532,050     3,392,811     2,782,974  
Savings deposits   711,039     772,293     761,090     742,795  
Total core deposits   12,523,834     12,010,639     11,411,992     10,571,573  
Brokered non-maturity deposits   1,174,487     1,082,114     972,820     942,253  
Total non-maturity deposits   13,698,321     13,092,753     12,384,812     11,513,826  
Time deposits under $100,000   1,018,849     1,180,428     1,114,074     1,656,227  
Time deposits of $100,000 and over   1,153,441     1,372,487     1,649,123     2,496,129  
Total time deposits   2,172,290     2,552,915     2,763,197     4,152,356  
Total deposits$  15,870,611  $  15,645,668  $  15,148,009  $  15,666,182  
         
Noninterest-bearing demand deposits       
as percentage of total deposits 42%  42%  41%  39% 
Core deposits as percentage of total deposits 79%  77%  75%  67% 
         

At December 31, 2016, core deposits totaled $12.5 billion, or 79% of total deposits, including $6.7 billion of noninterest-bearing demand deposits, or 42% of total deposits. 

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Square 1 Asset Management, Inc. (“S1AM”), our registered investment advisor subsidiary, and third-party sweep products.  Total client investment funds at December 31, 2016 were $1.3 billion, of which $1.1 billion was managed by S1AM.

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

A provision for credit losses of $23.2 million was recorded in the fourth quarter of 2016 compared to $8.5 million in the third quarter of 2016.  The fourth quarter provision consisted of $21.0 million for non-purchased credit impaired (“Non-PCI”) loans and leases and $2.2 million for PCI loans; this compares to $8.0 million and $0.5 million for the third quarter. The higher fourth quarter 2016 provision was due to significant loan and lease portfolio growth and lower recoveries. The allowance for Non-PCI credit losses to Non-PCI loans and leases coverage ratio was 1.05% at December 31, 2016 and September 30, 2016.

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

          
 Three Months Ended December 31, 2016
 Non-PCI         
Allowance for Credit Loans and  Unfunded  Total  PCI  
Losses RollforwardLeases Commitments Non-PCI Loans Total
 (In thousands)
          
Beginning balance$136,747  $17,323  $154,070  $11,229  $165,299 
Charge-offs (18,083)  -   (18,083)  -   (18,083)
Recoveries 4,291   -   4,291   39   4,330 
Net (charge-offs) recoveries (13,792)  -   (13,792)  39   (13,753)
Provision 20,800   200   21,000   2,215   23,215 
Ending balance$143,755  $17,523  $161,278  $13,483  $174,761 
          
          
   
 Three Months Ended September 30, 2016
 Non-PCI         
Allowance for Credit Loans and  Unfunded  Total  PCI  
Losses RollforwardLeases Commitments Non-PCI Loans Total
 (In thousands)
          
Beginning balance$132,000  $17,944  $149,944  $11,289  $161,233 
Charge-offs (9,924)  -   (9,924)  (531)  (10,455)
Recoveries 6,050   -   6,050   -   6,050 
Net charge-offs (3,874)  -   (3,874)  (531)  (4,405)
Provision 8,621   (621)  8,000   471   8,471 
Ending balance$136,747  $17,323  $154,070  $11,229  $165,299 
          

The higher fourth quarter 2016 charge-offs were principally due to the charge-off of $15.7 million of specific reserves that were established in previous quarters compared to $9.7 million in the third quarter. 

All acquired loans are recorded initially at their estimated fair value including an estimate of credit losses. The table below presents two alternative views of credit risk coverage ratios for Non-PCI loans reflecting adjustments for acquired loans and leases and associated purchase accounting discounts:

         
 December 31, 2016 September 30, 2016 
Non-PCI Adjusted Non-PCI   Non-PCI   
Allowance for Credit LossesLoans andAllowance/Coverage Loans andAllowance/Coverage 
to Loans and LeasesLeasesDiscountRatio LeasesDiscountRatio 
 (Dollars in thousands) 
Adjustment for -        
Acquired loans and leases        
and related allowance:       
Ending balance$15,412,092 $161,278  1.05% $14,686,206 $154,070  1.05% 
Acquired loans and allowance (4,413,176) (44,352)(1)    (4,612,787) (46,039)(1)   
Adjusted balance$10,998,916 $116,926  1.06% $10,073,419 $108,031  1.07% 
               
Adjustment for -           
Unamortized net discount on          
acquired loans and leases:          
Ending balance$15,412,092 $161,278  1.05% $14,686,206 $154,070  1.05% 
Unamortized net discount 45,639  45,639 (2)    53,041  53,041 (2)   
Adjusted balance$15,457,731 $206,917  1.34% $14,739,247 $207,111  1.41% 
               
(1) Allowance attributed to $4.4 billion and $4.6 billion of acquired Non-PCI loans at December 31, 2016 and September 30, 2016, based on the allowance calculation that includes an amount for credit deterioration on acquired loans and leases since their acquisition dates.
(2) Unamortized net discount relates to $4.4 billion and $4.6 billion of acquired Non-PCI loans at December 31, 2016 and September 30, 2016, and is assigned specifically to those loans only.  Such discount represents the acquisition date fair value adjustment based on market, liquidity, interest rate risk and credit risk and is being accreted to interest income over the remaining life of the respective loans using the interest method.  Use of the interest method results in steadily declining amounts being taken into income in each reporting period.  The remaining discount of $45.6 million at December 31, 2016, is expected to be substantially accreted to income by the end of 2018.
 

CREDIT QUALITY

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

     
 December 31, September 30, 
Non-PCI Credit Quality Metrics 2016   2016  
 (Dollars in thousands) 
     
Nonaccrual loans and leases $  170,599  $  171,085  
Classified loans and leases    409,645     417,541  
Performing troubled debt restructured loans   64,952     70,348  
Allowance for credit losses   161,278     154,070  
Net charge-offs (for the quarter)   13,792     3,874  
Provision for credit losses (for the quarter)   21,000     8,000  
Allowance for credit losses to loans and leases 1.05%  1.05% 
Allowance for credit losses to nonaccrual loans  
and leases  94.5%  90.1% 
Nonaccrual loans and leases to loans and leases  1.11%  1.16% 
Nonperforming assets to loans and leases and  
foreclosed assets 1.19%  1.27% 
Classified loans and leases to loans and leases 2.66%  2.84% 
     

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

           
 Non-PCI Nonaccrual Loans and Leases Non-PCI Accruing and 
 December 31, 2016 September 30, 2016 30-89 Days Past Due 
  % of   % of  December 31, September 30, 
  Loan   Loan   2016  2016 
 AmountCategory AmountCategory Amount Amount 
 (Dollars in thousands) 
Real estate mortgage:         
Commercial$  62,4541.4% $  74,6061.7% $  7,691 $  2,146 
Residential   6,8810.5%    5,0890.4%    5,524    - 
  Total real estate mortgage   69,3351.2%    79,6951.5%    13,215    2,146 
Real estate construction and land:        
  Commercial   -0.0%    1,2450.2%    -    - 
  Residential   3640.1%    3660.1%    -    - 
  Total real estate            
  construction and land   3640.0%    1,6110.2%    -    - 
Commercial:         
  Cash flow   53,9081.7%    27,8310.9%    153    21 
  Asset-based   2,1180.1%    4,0440.2%    1,500    6,644 
Venture capital   11,6870.6%    10,7820.6%    13,295    - 
  Equipment finance    32,8484.7%    46,9167.0%    218    - 
  Total commercial   100,5611.2%    89,5731.1%    15,166    6,665 
Consumer   3390.1%    2060.1%    224    - 
  Total Non-PCI loans and         
  leases $  170,5991.1% $  171,0851.2% $  28,605 $  8,811 
           

The following table presents nonperforming assets as of the dates indicated:

     
 December 31, September 30, 
Nonperforming Assets 2016   2016  
 (Dollars in thousands) 
     
Nonaccrual Non-PCI loans and leases$  170,599  $  171,085  
Nonaccrual PCI loans    2,928     3,478  
  Total nonaccrual loans and leases   173,527     174,563  
Foreclosed assets, net   12,976     15,113  
  Total nonperforming assets$  186,503  $  189,676  
     
Nonaccrual loans and leases to loans and leases 1.12%  1.18% 
Nonperforming assets to loans and leases  
  and foreclosed assets 1.20%  1.28% 
     

STOCK REPURCHASE PROGRAM

In the fourth quarter of 2016, the Company repurchased 652,835 shares of common stock for a total amount of $27.9 million under its previously announced $400 million stock repurchase program. The repurchased shares were retired by the Company. 

SALE AND CLOSURE OF BRANCHES

In December 2016, Pacific Western Bank completed the sale of two branches to First Foundation Bank (the “Transaction”).  The branches were located in Laguna Hills and Seal Beach, California (the “Branches”).  The deposits of the Branches totaled approximately $180 million, principally comprised of time deposits.  No loans were sold in connection with the Transaction. In addition, Pacific Western Bank will close its three branches located in the San Francisco Bay Area in the first quarter of 2017. At December 31, 2016, the deposits of these branches totaled approximately $100 million. No significant one-time charges are expected to be incurred related to the closure of these branches. 

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $21 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (“Pacific Western”). The Bank has 77 full-service branches located throughout the state of California and one branch in Durham, North Carolina. Pacific Western provides commercial banking services, including real estate, construction, and commercial loans, and comprehensive deposit and treasury management services to small and medium-sized businesses.  Pacific Western offers additional products and services under the brands of its business groups, CapitalSource and Square 1 Bank. CapitalSource provides cash flow, asset-based, equipment and real estate loans and treasury management services to established middle market businesses on a national basis.  Square 1 Bank offers a comprehensive suite of financial services focused on entrepreneurial businesses and their venture capital and private equity investors, with offices located in key innovation 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.pacificwesternbank.com.

FORWARD LOOKING STATEMENTS

This release contains certain “forward-looking statements” about the Company and its subsidiaries within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results and metrics. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “assume,” “intend,” “believe,” “forecast,” “expect,” “estimate,” “plan,” “continue,” “will,” “should,” “look forward” and similar expressions are generally intended to identify forward-looking statements. All forward-looking statements (including statements regarding future financial and operating results and future transactions and their results) involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements. These risks and uncertainties include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; the impact of changes in interest rates or levels of market activity, especially on our loan and investment portfolios; deterioration, weaker than expected improvement, or other changes in the state of the economy or the markets in which we conduct business (including the levels of IPOs and M&A activities); changes in credit quality and the effect of credit quality on our provision for loan and lease losses and allowance for loan and leases losses; our ability to attract deposits and other sources of funding or liquidity; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the impact of adverse judgments or settlements in litigation, the initiation and resolution of regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; and our success at managing the risks involved in the foregoing items and all other factors set forth in the Company’s public reports, including the Annual Report on Form 10-K for the year ended December 31, 2015, and particularly the discussion of risk factors within that document.

All forward-looking statements included in this release are based on information available at the time of the release. We are under no obligation to (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   
       
 December 31, September 30, December 31, 
  2016   2016   2015  
 (Dollars in thousands, except per share data) 
ASSETS:      
Cash and due from banks$  337,965  $  286,371  $  161,020  
Interest-earning deposits in financial institutions   81,705     253,994     235,466  
  Total cash and cash equivalents    419,670     540,365     396,486  
       
Securities available-for-sale, at estimated fair value   3,223,830     3,341,335     3,559,437  
Federal Home Loan Bank stock, at cost   21,870     19,386     19,710  
   Total investment securities   3,245,700     3,360,721     3,579,147  
       
Non-PCI loans and leases   15,412,092     14,686,206     14,339,070  
PCI loans   108,445     120,221     189,095  
  Total gross loans and leases   15,520,537     14,806,427     14,528,165  
Deferred fees, net   (64,583)    (63,581)    (49,911) 
Total loans and leases, net of deferred fees   15,455,954     14,742,846     14,478,254  
Allowance for loan and lease losses   (157,238)    (147,976)    (115,111) 
   Total loans and leases, net   15,298,716     14,594,870     14,363,143  
       
Equipment leased to others under operating leases   229,905     198,931     197,452  
Premises and equipment, net   38,594     38,977     39,197  
Foreclosed assets, net   12,976     15,113     22,120  
Deferred tax asset, net   94,112     27,073     126,389  
Goodwill   2,173,949     2,173,949     2,176,291  
Core deposit and customer     
relationship intangibles, net   36,366     39,542     53,220  
Other assets   319,779     325,750     335,045  
   Total assets$  21,869,767  $  21,315,291  $  21,288,490  
       
LIABILITIES:     
Noninterest-bearing deposits$  6,659,016  $  6,521,946  $  6,171,455  
Interest-bearing deposits   9,211,595     9,123,722     9,494,727  
   Total deposits   15,870,611     15,645,668     15,666,182  
Borrowings   905,812     541,011     621,914  
Subordinated debentures   440,744     441,112     436,000  
Accrued interest payable and other liabilities   173,545     144,905     166,703  
   Total liabilities   17,390,712     16,772,696     16,890,799  
STOCKHOLDERS' EQUITY (1)   4,479,055     4,542,595     4,397,691  
  Total liabilities and stockholders’ equity$  21,869,767  $  21,315,291  $  21,288,490  
       
Book value per share$  36.93  $  37.29  $  36.22  
Tangible book value per share (2)$  18.71  $  19.12  $  17.86  
Shares outstanding    121,283,669     121,817,524     121,413,727  
       
(1) Includes net unrealized gain on securities
available-for-sale, net
$  5,982  $  72,073  $  27,828  
(2) Non-GAAP measure.     
       

 

PACWEST BANCORP AND SUBSIDIARIES       
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS     
           
 Three Months Ended Year Ended 
 December 31, September 30, December 31, December 31, 
  2016   2016   2015   2016   2015  
 (Dollars in thousands, except per share data) 
Interest income:         
Loans and leases$  238,223  $  225,370  $  219,677  $  924,294  $  819,094  
Investment securities   23,403     22,187     23,648     90,557     64,368  
Deposits in financial institutions   147     298     172     1,061     476  
Total interest income   261,773     247,855     243,497     1,015,912     883,938  
           
Interest expense:         
Deposits   7,369     7,247     9,391     31,512     41,503  
Borrowings   631     695     159     2,259     554  
Subordinated debentures   5,468     5,278     4,748     20,850     18,535  
Total interest expense   13,468     13,220     14,298     54,621     60,592  
           
Net interest income   248,305     234,635     229,199     961,291     823,346  
Provision for credit losses   23,215     8,471     13,772     65,729     45,481  
Net interest income after provision        
for credit losses   225,090     226,164     215,427     895,562     777,865  
           
Noninterest income:         
Service charges on deposit accounts   3,557     3,488     3,901     14,534     11,688  
Other commissions and fees   12,036     12,528     12,691     47,126     31,586  
Leased equipment income   8,614     8,538     7,791     33,919     24,023  
Gain on sale of loans and leases   119     157     183     909     373  
Gain on securities   515     382     -     9,485     3,744  
FDIC loss sharing expense, net   -     -     (4,291)    (8,917)    (18,246) 
Other income   4,054     1,827     7,783     15,419     31,142  
Total noninterest income   28,895     26,920     28,058     112,475     84,310  
           
Noninterest expense:         
Compensation    66,013     62,661     58,992     251,913     203,914  
Occupancy   12,076     12,010     12,194     48,911     44,144  
Data processing   6,574     6,234     5,585     24,356     18,617  
Other professional services   4,880     4,625     3,811     16,478     13,760  
Insurance and assessments   4,124     4,324     5,450     18,364     16,996  
Intangible asset amortization   3,176     4,224     4,910     16,517     9,410  
Leased equipment depreciation   5,291     5,298     4,235     20,899     13,603  
Foreclosed assets expense (income), net   2,693     (248)    (3,185)    1,881     (668) 
Acquisition, integration and         
reorganization costs    -     -     17,600     200     21,247  
Other expense   13,795     11,582     12,672     50,582     41,016  
Total noninterest expense   118,622     110,710     122,264     450,101     382,039  
           
Earnings before income taxes   135,363     142,374     121,221     557,936     480,136  
Income tax expense    (49,716)    (48,479)    (49,380)    (205,770)    (180,517) 
Net earnings $  85,647  $  93,895  $  71,841  $  352,166  $  299,619  
           
Basic and diluted earnings per share$  0.71  $  0.77  $  0.60  $  2.90  $  2.79  
           

 

PACWEST BANCORP AND SUBSIDIARIES       
NET EARNINGS PER SHARE CALCULATIONS      
           
 Three Months EndedYear Ended 
 December 31, September 30, December 31,
 December 31, 
  2016   2016   2015   2016   2015  
 (Dollars in thousands, except per share data) 
Basic Earnings Per Share:        
Net earnings$85,647  $93,895  $71,841
  $352,166  $299,619  
Less: earnings allocated to unvested            
restricted stock (1) (1,004)  (1,048)  (690)  (3,988)  (2,892) 
Net earnings allocated to common            
shares$84,643  $92,847  $71,151  $348,178  $296,727  
           
Weighted-average basic shares and            
unvested restricted stock outstanding 121,464   121,818   120,385   121,670   107,401  
Less: weighted-average unvested            
restricted stock outstanding (1,450)  (1,401)  (1,133)  (1,431)  (1,074) 
Weighted-average basic shares            
outstanding 120,014   120,417   119,252
   120,239   106,327  
             
Basic earnings per share$0.71  $0.77  $0.60  $2.90  $2.79  
             
Diluted Earnings Per Share:            
Net earnings allocated to common            
shares$84,643  $92,847  $71,151
  $348,178  $296,727  
             
Weighted-average basic shares            
outstanding 120,014   120,417   119,252
   120,239   106,327  
             
Diluted earnings per share$0.71  $0.77  $0.60  $2.90  $2.79  
           
(1) Represents cash dividends paid to holders of unvested stock, net of estimated 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
 December 31, 2016 September 30, 2016 December 31, 2015
  InterestAverage  InterestAverage  InterestAverage
 Average Income/Yield/ Average Income/Yield/ Average Income/Yield/
 BalanceExpenseCost BalanceExpenseCost BalanceExpenseCost
 (Dollars in thousands)
Assets:           
PCI loans$  104,234 $  17,481 66.72% $  117,781 $  5,868 19.82% $  169,772 $  6,345 14.83%
Non-PCI loans and leases   14,904,034    220,742 5.89%    14,417,170    219,502 6.06%    13,861,330    213,332 6.11%
Total loans and leases   15,008,268    238,223 6.31%    14,534,951    225,370 6.17%    14,031,102    219,677 6.21%
Investment securities (1)   3,293,003    28,229 3.41%    3,338,209    27,025 3.22%    3,492,124    28,408 3.23%
Deposits in financial           
institutions   111,918    147 0.52%    238,425    298 0.50%    254,308    172 0.27%
Total interest-earning              
assets   18,413,189    266,599 5.76%    18,111,585    252,693 5.55%    17,777,534    248,257 5.54%
Other assets   3,014,761       2,960,468       3,047,714   
Total assets$  21,427,950    $  21,072,053    $  20,825,248   
            
Liabilities and           
Stockholders' Equity:          
Interest checking$  1,449,346    951 0.26% $  1,161,931    604 0.21% $  889,035    345 0.15%
Money market   4,740,944    3,672 0.31%    4,514,525    3,303 0.29%    3,557,364    1,543 0.17%
Savings   751,817    331 0.18%    764,415    341 0.18%    747,054    445 0.24%
Time   2,384,973    2,415 0.40%    2,666,434    2,999 0.45%    4,439,940    7,058 0.63%
Total interest-bearing              
deposits   9,327,080    7,369 0.31%    9,107,305    7,247 0.32%    9,633,393    9,391 0.39%
Borrowings   505,567    631 0.50%    583,982    695 0.47%    206,236    159 0.31%
Subordinated debentures   440,907    5,468 4.93%    439,970    5,278 4.77%    435,293    4,748 4.33%
Total interest-bearing              
liabilities   10,273,554    13,468 0.52%    10,131,257    13,220 0.52%    10,274,922    14,298 0.55%
Noninterest-bearing              
demand deposits   6,496,221       6,274,294       6,043,900   
Other liabilities   156,227       135,801       160,264   
Total liabilities   16,926,002       16,541,352       16,479,086   
Stockholders' equity   4,501,948       4,530,701       4,346,162   
Total liabilities and              
stockholders' equity$  21,427,950    $  21,072,053    $  20,825,248   
Net interest income (2)$  253,131    $  239,473    $  233,959  
Net interest spread (2) 5.24%   5.03%   4.99%
Net interest margin (2) 5.47%   5.26%   5.22%
            
Total deposits (3)$  15,823,301 $  7,369 0.19% $  15,381,599 $  7,247 0.19% $  15,677,293 $  9,391 0.24%
Funding sources (4)$  16,769,775 $  13,468 0.32% $  16,405,551 $  13,220 0.32% $  16,318,822 $  14,298 0.35%
            
(1) Includes tax equivalent adjustments of $4.8 million, $4.8 million, and $4.8 million for the three months ended December 31, 2016, September 30, 2016 and December 31, 2015 related to tax exempt income on municipal securities.  The federal statutory tax rate utilized was 35% for the periods. 
(2) Tax equivalent.          
(3) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits.  The cost of total deposits is calculated annualized interest expense on deposits divided by average total deposits.
 
(4) Funding sources is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of funding sources is calculated as annualized total interest expense divided by average funding sources. 
            

 

PACWEST BANCORP AND SUBSIDIARIES       
FIVE QUARTER BALANCE SHEET        
           
 December 31, September 30, June 30, March 31, December 31, 
  2016   2016   2016   2016   2015  
 (Dollars in thousands, except per share data) 
ASSETS:          
Cash and due from banks$  337,965  $  286,371  $  226,471  $  161,977  $  161,020  
Interest-earning deposits in financial         
institutions   81,705     253,994     218,882     357,541     235,466  
  Total cash and cash equivalents    419,670     540,365     445,353     519,518     396,486  
           
Securities available-for-sale   3,223,830     3,341,335     3,347,546     3,240,586     3,559,437  
Federal Home Loan Bank stock   21,870     19,386     24,214     17,250     19,710  
  Total investment securities   3,245,700     3,360,721     3,371,760     3,257,836     3,579,147  
           
Non-PCI loans and leases   15,412,092     14,686,206     14,566,425     14,365,915     14,339,070  
PCI loans   108,445     120,221     136,901     176,607     189,095  
  Total gross loans and leases   15,520,537     14,806,427     14,703,326     14,542,522     14,528,165  
Deferred fees, net   (64,583)    (63,581)    (61,866)    (59,005)    (49,911) 
Total loans and leases, net of         
deferred fees   15,455,954     14,742,846     14,641,460     14,483,517     14,478,254  
Allowance for loan and lease losses   (157,238)    (147,976)    (143,289)    (130,361)    (115,111) 
  Total loans and leases, net   15,298,716     14,594,870     14,498,171     14,353,156     14,363,143  
           
Equipment leased to others under         
operating leases   229,905     198,931     204,062     205,163   -   197,452  
Premises and equipment, net   38,594     38,977     38,718     39,713     39,197  
Foreclosed assets, net   12,976     15,113     16,181     18,310     22,120  
Deferred tax asset, net   94,112     27,073     24,413     91,126     126,389  
Goodwill   2,173,949     2,173,949     2,175,791     2,175,791     2,176,291  
Core deposit and customer          
relationship intangibles, net   36,366     39,542     43,766     48,137     53,220  
Other assets   319,779     325,750     328,924     322,259     335,045  
  Total assets$  21,869,767  $  21,315,291  $  21,147,139  $  21,031,009  $  21,288,490  
           
LIABILITIES:         
Noninterest-bearing deposits$  6,659,016  $  6,521,946  $  6,222,696  $  6,139,963  $  6,171,455  
Interest-bearing deposits   9,211,595     9,123,722     8,925,313     9,301,412     9,494,727  
  Total deposits   15,870,611     15,645,668     15,148,009     15,441,375     15,666,182  
Borrowings   905,812     541,011     918,208     551,401     621,914  
Subordinated debentures   440,744     441,112     439,322     438,723     436,000  
Accrued interest payable and other        
liabilities   173,545     144,905     128,296     142,918     166,703  
Total liabilities   17,390,712     16,772,696     16,633,835     16,574,417     16,890,799  
STOCKHOLDERS' EQUITY (1)   4,479,055     4,542,595     4,513,304     4,456,592     4,397,691  
  Total liabilities and stockholders’         
  equity$  21,869,767  $  21,315,291  $  21,147,139  $  21,031,009  $  21,288,490  
           
Book value per share$  36.93  $  37.29  $  37.05  $  36.60  $  36.22  
Tangible book value per share (2)$  18.71  $  19.12  $  18.83  $  18.33  $  17.86  
Shares outstanding   121,283,669     121,817,524     121,819,849     121,771,252     121,413,727  
           
(1) Includes net unrealized gain on
securities available-for-sale, net
$  5,982  $  72,073  $  81,744  $  48,479  $  27,828  
(2) Non-GAAP measure.         
           

 

PACWEST BANCORP AND SUBSIDIARIES       
FIVE QUARTER STATEMENT OF EARNINGS       
           
 Three Months Ended 
 December 31, September 30, June 30, March 31, December 31, 
  2016   2016   2016   2016   2015  
 (Dollars in thousands, except per share data) 
Interest income:         
Loans and leases$  238,223  $  225,370  $  224,326  $  236,375  $  219,677  
Investment securities   23,403     22,187     22,420     22,547     23,648  
Deposits in financial institutions   147     298     308     308     172  
Total interest income   261,773     247,855     247,054     259,230     243,497  
           
Interest expense:         
Deposits   7,369     7,247     7,823     9,073     9,391  
Borrowings   631     695     352     581     159  
Subordinated debentures   5,468     5,278     5,122     4,982     4,748  
Total interest expense   13,468     13,220     13,297     14,636     14,298  
           
Net interest income   248,305     234,635     233,757     244,594     229,199  
Provision for credit losses   23,215     8,471     13,903     20,140     13,772  
Net interest income after provision               
for credit losses   225,090     226,164     219,854     224,454     215,427  
           
Noninterest income:         
Service charges on deposit accounts   3,557     3,488     3,633     3,856     3,901  
Other commissions and fees   12,036     12,528     11,073     11,489     12,691  
Leased equipment income   8,614     8,538     8,523     8,244     7,791  
Gain on sale of loans and leases   119     157     388     245     183  
Gain on securities   515     382     478     8,110     -   
FDIC loss sharing expense, net   -     -     (6,502)    (2,415)    (4,291) 
Other income   4,054     1,827     4,528     5,010     7,783  
Total noninterest income   28,895     26,920     22,121     34,539     28,058  
           
Noninterest expense:         
Compensation    66,013     62,661     62,174     61,065     58,992  
Occupancy   12,076     12,010     12,193     12,632     12,194  
Data processing   6,574     6,234     5,644     5,904     5,585  
Other professional services   4,880     4,625     3,401     3,572     3,811  
Insurance and assessments   4,124     4,324     4,951     4,965     5,450  
Intangible asset amortization   3,176     4,224     4,371     4,746     4,910  
Leased equipment depreciation   5,291     5,298     5,286     5,024     4,235  
Foreclosed assets expense (income), net   2,693     (248)    (3)    (561)    (3,185) 
Acquisition, integration and         
reorganization costs    -     -     -     200     17,600  
Other expense   13,795     11,582     12,064     13,141     12,672  
Total noninterest expense   118,622     110,710     110,081     110,688     122,264  
           
Earnings before income taxes   135,363     142,374     131,894     148,305     121,221  
Income tax expense    (49,716)    (48,479)    (49,726)    (57,849)    (49,380) 
Net earnings $  85,647  $  93,895  $  82,168  $  90,456  $  71,841  
           
Basic and diluted earnings per share$  0.71  $  0.77  $  0.68  $  0.74  $  0.60  
           

 

PACWEST BANCORP AND SUBSIDIARIES      
FIVE QUARTER SELECTED FINANCIAL DATA      
          
 At or For the Three Months Ended
 December 31, September 30, June 30, March 31, December 31,
  2016   2016   2016   2016   2015 
 (Dollars in thousands)
Performance Ratios:        
Return on average assets (1) 1.59%  1.77%  1.57%  1.72%  1.37%
Return on average equity (1) 7.57%  8.24%  7.37%  8.20%  6.56%
Return on average tangible equity (1)(2) 14.88%  16.15%  14.61%  16.45%  13.14%
            
Yield on average loans and leases (1) 6.31%  6.17%  6.24%  6.57%  6.21%
Yield on average interest-earning            
assets (1)(3) 5.76%  5.55%  5.63%  5.85%  5.54%
Cost of average total deposits (1) 0.19%  0.19%  0.20%  0.23%  0.24%
Cost of average time deposits (1) 0.40%  0.45%  0.52%  0.61%  0.63%
Cost of average interest-bearing            
liabilities (1) 0.52%  0.52%  0.54%  0.57%  0.55%
Cost of average funding sources (1) 0.32%  0.32%  0.33%  0.35%  0.35%
Net interest rate spread (1)(3) 5.24%  5.03%  5.09%  5.28%  4.99%
Net interest margin (1)(3) 5.47%  5.26%  5.33%  5.53%  5.22%
Core net interest margin (1)(2)(3) 5.09%  5.08%  5.11%  5.10%  5.10%
          
Efficiency ratio 40.1%  40.1%  40.6%  38.5%  39.3%
Noninterest expense as a percentage           
of average assets (1) 2.20%  2.09%  2.11%  2.10%  2.33%
          
Average Balances:        
Loans and leases$  15,008,268  $  14,534,951  $  14,468,590  $  14,471,165  $  14,031,102 
Interest-earning assets   18,413,189     18,111,585     18,003,075     18,161,751     17,777,534 
Total assets   21,427,950     21,072,053     20,999,942     21,198,594     20,825,248 
Noninterest-bearing deposits   6,496,221     6,274,294     6,437,720     6,273,249     6,043,900 
Interest-bearing deposits   9,327,080     9,107,305     9,199,097     9,388,652     9,633,393 
Total deposits   15,823,301     15,381,599     15,636,817     15,661,901     15,677,293 
Borrowings and subordinated            
debentures   946,474     1,023,952     739,509     931,260     641,529 
Interest-bearing liabilities   10,273,554     10,131,257     9,938,606     10,319,912     10,274,922 
Funding sources   16,769,775     16,405,551     16,376,326     16,593,161     16,318,822 
Stockholders' equity   4,501,948     4,530,701     4,483,593     4,438,602     4,346,162 
          
(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 
 December 31, September 30, June 30, March 31, December 31, 
  2016   2016   2016   2016   2015  
 (Dollars in thousands)
 
Non-PCI Credit Quality:         
Allowance for credit losses to loans             
and leases 1.05%  1.05%  1.03%  0.96%  0.85% 
Allowance for credit losses to             
nonaccrual loans and leases 95%  90%  118%  106%  95% 
Nonaccrual loans and leases to loans             
and leases 1.11%  1.16%  0.88%  0.91%  0.90% 
Nonperforming assets to loans and             
leases and foreclosed assets 1.19%  1.27%  0.99%  1.05%  1.06% 
Nonperforming assets to total assets 0.84%  0.87%  0.68%  0.72%  0.71% 
Trailing twelve month net charge-offs             
to average loans and leases 0.15%  0.04%  0.04%  0.03%  0.06% 
             
PacWest Bancorp Consolidated             
Capital:            
Tier 1 leverage ratio (1) 11.91%  12.13%  11.92%  11.51%  11.67% 
Common equity tier 1 capital ratio (1) 12.31%  12.83%  12.72%  12.63%  12.58% 
Tier 1 capital ratio (1) 12.31%  12.83%  12.72%  12.63%  12.60% 
Total capital ratio (1) 15.56%  16.18%  16.08%  15.96%  15.65% 
Risk-weighted assets (1)$  18,568,724  $  17,713,506  $  17,520,609  $  17,226,658  $  17,170,292  
             
Equity to assets ratio  20.48%  21.31%  21.34%  21.19%  20.66% 
Tangible common equity ratio (2) 11.54%  12.19%  12.12%  11.87%  11.38% 
Book value per share$  36.93  $  37.29  $  37.05  $  36.60  $  36.22  
Tangible book value per share (2)$  18.71  $  19.12  $  18.83  $  18.33  $  17.86  
             
Pacific Western Bank Capital:            
Tier 1 leverage ratio (1) 11.40%  11.54%  11.38%  11.10%  11.40% 
Common equity tier 1 capital ratio (1) 11.78%  12.21%  12.13%  12.18%  12.03% 
Tier 1 capital ratio (1) 11.78%  12.21%  12.13%  12.18%  12.03% 
Total capital ratio (1) 12.72%  13.15%  13.06%  13.05%  12.80% 
             
Equity to assets ratio  20.02%  20.77%  20.82%  20.70%  20.19% 
Tangible common equity ratio (2) 11.02%  11.56%  11.51%  11.27%  10.80% 
           
(1) Capital information for December 31, 2016 is preliminary.       
(2) Non-GAAP measure.         
           

GAAP TO NON-GAAP RECONCILIATION

This press release contains certain non-GAAP financial disclosures for return on average tangible equity, tangible common equity ratio, tangible book value per share, core net interest margin, core loan and lease yield, and adjusted allowance for credit losses to loans and leases. 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 return on average equity, equity to assets ratio, book value per share, net interest margin, loan and lease yield, and allowance for credit losses to loans and leases, respectively. 

The reconciliations for the following GAAP financial measures to the non-GAAP financial measures are presented earlier in this press release: (1) net interest margin to core net interest margin, (2) loan and lease yield to core loan and lease yield, and (3) allowance for credit losses to loans and leases to adjusted allowance for credit losses to loans and leases. 

The reconciliations for the following GAAP financial measures to the non-GAAP financial measures are presented below: (1) return on average equity to return on average tangible equity, (2) equity to assets ratio to tangible common equity ratio, and (3) book value per share to tangible book value per share.

PACWEST BANCORP AND SUBSIDIARIES        
GAAP TO NON-GAAP RECONCILIATION        
            
  Three Months Ended Year Ended 
  December 31, September 30, December 31, December 31, 
Return on Average Tangible Equity 2016   2016   2015   2016   2015  
  (Dollars in thousands) 
            
Net earnings$  85,647  $  93,895  $  71,841  $  352,166  $  299,619  
            
Average stockholders' equity$  4,501,948  $  4,530,701  $  4,346,162  $  4,488,862  $  3,751,995  
Less: Average intangible assets   2,212,042     2,217,564     2,177,631     2,219,756     1,850,988  
Average tangible common equity$  2,289,906  $  2,313,137  $  2,168,531  $  2,269,106  $  1,901,007  
            
Return on average equity (1) 7.57%  8.24%  6.56%  7.85%  7.99% 
Return on average tangible equity (2) 14.88%  16.15%  13.14%  15.52%  15.76% 
            
(1) Annualized net earnings divided by average stockholders' equity.       
(2) Annualized net earnings divided by average tangible common equity.       
            

 

PACWEST BANCORP AND SUBSIDIARIES        
GAAP TO NON-GAAP RECONCILIATION        
            
            
Tangible Common Equity Ratio/December 31, September 30, June 30, March 31, December 31,
Tangible Book Value Per Share 2016   2016   2016   2016   2015 
 (Dollars in thousands, except per share data)
PacWest Bancorp Consolidated:         
Stockholders' equity$  4,479,055  $  4,542,595  $  4,513,304  $4,456,592  $  4,397,691 
Less: Intangible assets   2,210,315     2,213,491     2,219,557   2,223,928     2,229,511 
Tangible common equity$  2,268,740  $  2,329,104  $  2,293,747  $2,232,664  $  2,168,180 
            
Total assets$  21,869,767  $  21,315,291  $ 21,147,139  $21,031,009  $  21,288,490 
Less: Intangible assets   2,210,315     2,213,491     2,219,557   2,223,928     2,229,511 
Tangible assets$  19,659,452  $  19,101,800  $ 18,927,582  $18,807,081  $  19,058,979 
            
Equity to assets ratio 20.48%  21.31%  21.34%  21.19%  20.66%
Tangible common equity ratio (1) 11.54%  12.19%  12.12%  11.87%  11.38%
            
Book value per share$  36.93  $  37.29  $  37.05  $36.60  $  36.22 
Tangible book value per share (2)$  18.71  $  19.12  $  18.83  $18.33  $  17.86 
Shares outstanding   121,283,669     121,817,524    121,819,849   121,8771,252     121,413,727 
            
            
Pacific Western Bank:          
Stockholder's equity$  4,374,478  $  4,416,623  $  4,390,928  $4,331,841  $  4,276,279 
Less: Intangible assets   2,210,315     2,213,491     2,219,557   2,223,928     2,229,511 
Tangible common equity$  2,164,163  $  2,203,132  $  2,171,371  $2,107,913  $  2,046,768 
            
Total assets$  21,848,644  $  21,266,705  $ 21,084,950  $20,928,105  $  21,180,689 
Less: Intangible assets   2,210,315     2,213,491     2,219,557   2,223,928     2,229,511 
Tangible assets$  19,638,329  $  19,053,214  $ 18,865,393  $18,704,177  $  18,951,178 
            
Equity to assets ratio 20.02%  20.77%  20.82%  20.70%  20.19%
Tangible common equity ratio (1) 11.02%  11.56%  11.51%  11.27%  10.80%
            
(1) Tangible common equity divided by tangible assets.        
(2) Tangible common equity divided by shares outstanding.        
            

            

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