PacWest Bancorp Announces Results for the First Quarter 2017


Highlights

  • Net Earnings of $78.7 Million, or $0.65 Per Diluted Share
  • New Loan and Lease Production of $1.0 Billion; $101 Million of Net Loan Growth
  • Core Deposits Increase of $245 Million and Represent 78% of Total Deposits
  • Tax Equivalent Net Interest Margin of 5.16%; Tax Equivalent Net Interest Margin Excluding Acquired Loan Discount Accretion of 5.02%

LOS ANGELES, April 17, 2017 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq:PACW) today announced net earnings for first quarter of 2017 of $78.7 million, or $0.65 per diluted share, compared to net earnings for the fourth quarter of 2016 of $85.6 million, or $0.71 per diluted share.  The decrease in net earnings from the prior quarter was primarily due to a decrease in interest income due to a $14.7 million decrease in acquired loan discount accretion as the fourth quarter of 2016 included $13.5 million of discount accretion from the payoff of a single loan.

Matt Wagner, President and CEO, commented, “First quarter 2017 earnings were below our expectations due mostly to an elevated credit provision and significant loan repayment activity. While the higher than expected provision was not driven by newly classified or impaired loans, it was a disappointment. We remain focused on driving high quality growth and minimizing credit costs.”

Patrick Rusnak, Executive Vice President and CFO stated, “Our first quarter tax equivalent NIM excluding acquired loan discount accretion increased one basis point to 5.02%. While the NIM benefitted from the repricing of variable-rate loans, this was partially offset by the mix of loan types that were paid off and originated during the quarter, combined with higher balances and rates on non-core deposits and borrowings.”

Mr. Wagner continued, “We recently announced our pending acquisition of CU Bancorp and are excited about the opportunities created through this transaction. CU Bancorp’s exceptional core deposit franchise and asset sensitive balance sheet will strengthen our position in a rising rate environment. This transaction will increase our scale and operating efficiencies, and will also increase our market share in the highly attractive Southern California market.”

FINANCIAL HIGHLIGHTS

        
  At or For the Three Months Ended 
  March 31, December 31,   
Financial Highlights  2017   2016  Change 
  (Dollars in thousands, except per share data) 
Net earnings $  78,668  $  85,647  $  (6,979) 
Diluted earnings per share $  0.65  $  0.71  $  (0.06) 
Return on average assets  1.47%  1.59%    (0.12) 
Return on average tangible equity (1)   13.90%  14.88%    (0.98) 
        
Net interest margin (tax equivalent)  5.16%  5.47%    (0.31) 
Net interest margin excluding acquired loan        
discount accretion (tax equivalent) (1)  5.02%  5.01%    0.01  
Efficiency ratio  41.4%  40.1%    1.3  
        
Total assets $  21,927,254  $  21,869,767  $  57,487  
Loans and leases, net of deferred fees $  15,556,689  $  15,455,954  $  100,735  
Noninterest-bearing deposits $  6,789,808  $  6,659,016  $  130,792  
Core deposits $  12,769,073  $  12,523,834  $  245,239  
Total deposits $  16,331,008  $  15,870,611  $  460,397  
        
Noninterest-bearing deposits as percentage        
of total deposits  42%  42%    -  
Core deposits as percentage of total deposits  78%  79%    (1) 
        
Equity to assets ratio   20.56%  20.48%    0.08  
Tangible common equity ratio (1)  11.67%  11.54%    0.13  
Book value per share $  37.13  $  36.93  $  0.20  
Tangible book value per share (1) $  18.95  $  18.71  $  0.24  
        
        
(1) Non-GAAP measure.       
        

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income decreased by $15.9 million to $232.5 million in the first quarter of 2017 compared to $248.3 million in the fourth quarter of 2016 due to lower discount accretion on acquired loans, offset by higher average loan and lease balances.   Total accretion on acquired loans was $6.4 million in the first quarter of 2017 (17 basis points on the loan and lease yield) compared to $21.2 million in the fourth quarter of 2016 (56 basis points on the loan and lease yield).  The decrease in accretion was due primarily to lower accelerated accretion from payoffs on acquired loans, including $13.5 million from the payoff of a nonaccrual purchased credit impaired (“PCI”) loan in the fourth quarter of 2016.  The loan and lease yield for the first quarter of 2017 was 5.94% compared to 6.31% for the fourth quarter of 2016.  The decrease in the loan and lease yield was principally due to the lower discount accretion on acquired loans. Excluding acquired loan discount accretion, the loan and lease yield was 5.77% in the first quarter of 2017 compared to 5.75% in the fourth quarter of 2016.    

The tax equivalent NIM for the first quarter of 2017 was 5.16% compared to 5.47% for the fourth quarter of 2016. The decrease in the NIM was mostly due to lower discount accretion on acquired loans. Such accretion contributed 14 basis points to the NIM in the first quarter of 2017 and 46 basis points to the NIM in the fourth quarter of 2016.  Excluding acquired loan discount accretion, the tax equivalent NIM was 5.02% in the first quarter of 2017 compared to 5.01% in the fourth quarter of 2016.       

The cost of total deposits increased to 0.21% in the first quarter of 2017 from 0.19% in the fourth quarter of 2016 due to higher average costs and balances of non-core interest-bearing deposits.

The tax equivalent net interest income and NIM as well as the loan and lease interest income and loan and lease yield are impacted by volatility in accretion of acquisition discounts on acquired loans and leases. The effects of this are shown in the following tables for the periods indicated:

        
 Three Months Ended Three Months Ended 
 March 31, 2017 December 31, 2016 
  Impact on  Impact on 
 AmountNIM AmountNIM 
 (Dollars in thousands) 
Net interest income/NIM $  237,235 5.16% $  253,131 5.47% 
Less: Accelerated accretion of acquisition       
 discounts from early payoffs of       
 acquired loans    (2,944)(0.06)%    (17,454)(0.38)% 
 Remaining accretion of Non-PCI loan       
 acquisition discounts   (3,505)(0.08)%    (3,726)(0.08)% 
 Total acquired loan discount accretion    (6,449)(0.14)%    (21,180)(0.46)% 
Net interest income/NIM excluding total       
acquired loan discount accretion$  230,786 5.02% $  231,951 5.01% 
        
        
        
 Three Months Ended Three Months Ended 
 March 31, 2017 December 31, 2016 
  Impact on  Impact on 
  Loan and   Loan and  
 AmountLease Yield AmountLease Yield 
 (Dollars in thousands) 
Loan and lease interest income/Yield$  224,178 5.94% $  238,223 6.31% 
Less: Accelerated accretion of acquisition       
 discounts from early payoffs of       
 acquired loans    (2,944)(0.08)%    (17,454)(0.46)% 
 Remaining accretion of Non-PCI loan       
 acquisition discounts   (3,505)(0.09)%    (3,726)(0.10)% 
 Total acquired loan discount accretion    (6,449)(0.17)%    (21,180)(0.56)% 
Loan and lease interest income/Yield excluding       
total acquired loan discount accretion$  217,729 5.77% $  217,043 5.75% 
        

Noninterest Income

Noninterest income increased by $6.2 million to $35.1 million in the first quarter of 2017 compared to $28.9 million in the fourth quarter of 2016 due mostly to a $7.9 million increase in other income attributable mainly to a $5.0 million legal settlement with a former borrower and a $1.2 million increase in loan syndication fees. This was offset by a decrease in other commissions and fees of $1.6 million driven by a decrease in loan prepayment and unused commitment fees of $2.0 million. Warrant income decreased $0.9 million mainly due to lower realized gains on exercised warrants.   

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

 
 Three Months Ended
 March 31, December 31, Increase
Noninterest Income 2017   2016 (Decrease)
 (In thousands)
Service charges on deposit accounts$  3,758  $  3,557 $  201 
Other commissions and fees   10,390     12,036    (1,646)
Leased equipment income   9,475     8,614    861 
Gain on sale of loans and leases   712     119    593 
Gain (loss) on sale of securities   (99)    515    (614)
FDIC loss sharing expense, net   -     -    - 
Other income:    
Dividends and realized gains on equity investments   1,345     1,453    (108)
Warrant income   155     1,101    (946)
Other   9,378     1,500    7,878 
Total noninterest income $  35,114  $  28,895 $  6,219 
 

Noninterest Expense

Noninterest expense decreased by $2.1 million to $116.5 million in the first quarter of 2017 compared to $118.6 million in the fourth quarter of 2016. The decrease was due mostly to a decrease in foreclosed assets expense of $2.6 million, a decrease in other professional services expense of $1.5 million, and a decrease in compensation expense of $1.1 million, offset by an increase in other expense of $1.5 million.  Foreclosed assets expense decreased primarily due to a $2.6 million write-down recorded in the fourth quarter of 2016.  Other professional services expense decreased due to lower legal expense and consulting expense. The $1.1 million reduction in compensation expense was attributable to lower bonus and severance expense, offset by a seasonal increase in payroll taxes. The increase in other expense is mainly attributable to a $1.5 million accrual to increase our reserve for probable loss contingencies.

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

       
 Three Months Ended 
 March 31, December 31, Increase 
Noninterest Expense 2017  2016 (Decrease) 
 (In thousands) 
Compensation$  64,880 $  66,013 $  (1,133) 
Occupancy    11,608    12,076    (468) 
Data processing   7,015    6,574    441  
Other professional services   3,378    4,880    (1,502) 
Insurance and assessments   4,791    4,124    667  
Intangible asset amortization   3,064    3,176    (112) 
Leased equipment depreciation   5,625    5,291    334  
Foreclosed assets expense (income), net   143    2,693    (2,550) 
Acquisition, integration and reorganization costs   500    -    500  
Other expense:      
Loan expense   3,387    3,140    247  
Other   12,153    10,655    1,498  
Total noninterest expense$  116,544 $  118,622 $  (2,078) 
 

Income Taxes

The overall effective income tax rate was 37.7% in the first quarter of 2017 and 36.7% in the fourth quarter of 2016.  The estimated effective tax rate for the full year 2017 is approximately 38.1%. 

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Total loans and leases increased by $100.7 million in the first quarter of 2017 to $15.6 billion at March 31, 2017.  The net increase was driven by first quarter originations and purchases of $1.0 billion, offset partially by principal repayments of $0.9 billion. A portfolio of 56 multi-family loans with an aggregate principal balance of $183 million was purchased from another bank during the first quarter of 2017.

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

     
 Three Months Ended 
 March 31, December 31, 
Loan and Lease Roll Forward (1) 2017   2016  
 (Dollars in thousands) 
Beginning balance$  15,455,954  $  14,742,846  
New production   1,048,841     1,272,900  
Existing loans and leases:    
Principal repayments, net (2)   (888,409)    (526,232) 
Loan and lease sales    (36,461)    (14,825) 
Transfers to foreclosed assets   (78)    (652) 
Charge-offs   (23,158)    (18,083) 
Ending balance$  15,556,689  $  15,455,954  
     
Weighted average rate on new production  4.91%  4.83% 
     
         
(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:

      
 March 31, December 31, March 31,
Loan and Lease Portfolio 2017  2016  2016
 (In thousands)
Real estate mortgage:     
Commercial$  4,420,923 $  4,396,696 $  4,640,419
Residential   1,554,946    1,314,036    1,149,998
Total real estate mortgage   5,975,869    5,710,732    5,790,417
Real estate construction and land:     
Commercial   668,510    581,246    308,192
Residential   442,051    384,001    269,965
Total real estate construction and land       1,110,561    965,247    578,157
Total real estate loans   7,086,430    6,675,979    6,368,574
Commercial:     
Cash flow   3,138,196    3,112,890    3,173,424
Asset-based   2,391,161    2,611,796    2,589,598
Venture capital   1,934,949    1,987,900    1,507,788
Equipment finance   623,237    691,967    733,228
Total commercial   8,087,543    8,404,553    8,004,038
Consumer   382,716    375,422    110,905
Total loans and leases, net of      
deferred fees$  15,556,689 $  15,455,954 $  14,483,517
      
Total unfunded loan commitments$  4,497,373 $  4,166,703 $  3,812,554
      

Loan growth in the first quarter came primarily from the multi-family mortgage and construction portfolios. High repayment activity in our lender finance portfolio drove the $220 million decline in asset-based loans for the quarter.

Deposits and Client Investment Funds

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

       
 March 31, December 31, March 31, 
Deposit Category 2017   2016   2016  
 (Dollars in thousands) 
Noninterest-bearing demand deposits$  6,789,808  $  6,659,016  $  6,139,963  
Interest checking deposits   1,509,902     1,448,394     921,189  
Money market deposits   3,758,962     3,705,385     3,144,843  
Savings deposits   710,401     711,039     764,323  
Total core deposits   12,769,073     12,523,834     10,970,318  
Brokered non-maturity deposits   1,154,070     1,174,487     985,784  
Total non-maturity deposits   13,923,143     13,698,321     11,956,102  
Time deposits $250,000 and under   1,998,597     1,758,434     2,752,315  
Time deposits over $250,000   409,268     413,856     732,958  
Total time deposits   2,407,865     2,172,290     3,485,273  
Total deposits$  16,331,008  $  15,870,611  $  15,441,375  
       
Noninterest-bearing demand deposits       
as percentage of total deposits 42%  42%  40% 
Core deposits as percentage of total deposits   78%  79%  71% 
       

At March 31, 2017, core deposits totaled $12.8 billion, or 78% of total deposits, including $6.8 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 off-balance sheet client investment funds at March 31, 2017 were $1.5 billion, of which $1.3 billion was managed by S1AM.

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

A provision for credit losses of $24.7 million was recorded in the first quarter of 2017 compared to $23.2 million in the fourth quarter of 2016. The first quarter provision consisted of $24.5 million for non-purchased credit impaired (“Non-PCI”) loans and leases and $0.2 million for PCI loans; this compares to $21.0 million and $2.2 million for the fourth quarter of 2016.  The level of provision for the first quarter of 2017 was mainly attributable to specific provisions for impaired loans that were classified or impaired at December 31, 2016 and general provisions from increased general reserve loss factors which are influenced by net charge-off experience. The allowance for Non-PCI credit losses to Non-PCI loans and leases coverage ratio was 1.08% and 1.05% at March 31, 2017 and December 31, 2016.

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

          
 Three Months Ended March 31, 2017
 Non-PCI         
Allowance for Credit Loans and  Unfunded  Total  PCI  
Losses RollforwardLeases Commitments Non-PCI Loans Total
 (In thousands)
Beginning balance$  143,755  $  17,523 $  161,278  $  13,483  $  174,761 
  Charge-offs   (20,928)    -    (20,928)    (2,230)    (23,158)
  Recoveries   2,739     -    2,739     -     2,739 
Net (charge-offs) recoveries     (18,189)    -    (18,189)    (2,230)    (20,419)
  Provision    24,260     240    24,500     228     24,728 
Ending balance$  149,826  $  17,763 $  167,589  $  11,481  $  179,070 
          
          
   
 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   (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 
          

The gross charge-offs for the first quarter of 2017 included approximately $12.5 million related to two healthcare cash flow loans for which $7.5 million of specific reserves were recorded as of the prior quarter-end. Approximately $5.5 million of the gross charge-offs were associated with four venture capital loans for which $3.2 million of specific reserves were recorded as of the prior quarter-end. The annualized ratio of net charge-offs to total average loans for the quarter ended March 31, 2017 was 0.48%.  

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:

        
 March 31, 2017 December 31, 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$  15,526,518 $  167,589  1.08% $  15,412,092 $  161,278   1.05%
Acquired loans and allowance   (3,965,423)   (42,807)(1)      (4,413,176)   (44,352)(1)   
Adjusted balance$  11,561,095 $  124,782  1.08% $  10,998,916 $  116,926   1.06%
              
Adjustment for Unamortized        
Purchase Discount on        
Acquired Loans and Leases:       
Ending balance$  15,526,518 $  167,589  1.08% $  15,412,092 $  161,278   1.05%
Unamortized purchase discount   39,347    39,347 (2)      45,639    45,639 (2)   
Adjusted balance$  15,565,865 $  206,936  1.33% $  15,457,731 $  206,917   1.34%
              
                     
(1) Allowance attributed to $4.0 billion and $4.4 billion of acquired Non-PCI loans at March 31, 2017 and December 31, 2016, 
based on the allowance calculation that includes an amount for credit deterioration on acquired loans and leases since their
acquisition dates. 
(2) Unamortized purchase discount relates to $4.0 billion and $4.4 billion of acquired Non-PCI loans at March 31, 2017 and 
December 31, 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 $39.3 million at 
March 31, 2017, 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:

    
 March 31, December 31,
Non-PCI Credit Quality Metrics 2017   2016 
 (Dollars in thousands)
Nonaccrual loans and leases $  173,030  $  170,599 
Classified loans and leases    424,399     409,645 
Performing troubled debt restructured loans   56,947     64,952 
Allowance for credit losses   167,589     161,278 
Net charge-offs (for the quarter)   18,189     13,792 
Provision for credit losses (for the quarter)   24,500     21,000 
Allowance for credit losses to loans and leases 1.08%  1.05%
Allowance for credit losses to nonaccrual loans    
and leases  96.9%  94.5%
Nonaccrual loans and leases to loans and leases  1.11%  1.11%
Nonperforming assets to loans and leases and    
foreclosed assets 1.20%  1.19%
Classified loans and leases to loans and leases 2.73%  2.66%
    

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
 March 31, 2017 December 31, 2016 30-89 Days Past Due
  % of   % of  March 31, December 31,
  Loan   Loan   2017  2016
 AmountCategory AmountCategory Amount Amount
 (Dollars in thousands)
Real estate mortgage:         
Commercial$  66,2161.5% $  62,4541.4% $  7,383 $  7,691
Residential   5,8260.4%    6,8810.5%    640    5,524
  Total real estate mortgage   72,0421.2%    69,3351.2%    8,023    13,215
Real estate construction and land:           
  Commercial   -0.0%    -0.0%    -    -
  Residential   3620.1%    3640.1%    -    -
  Total real estate          
  construction and land   3620.0%    3640.0%    -    -
Commercial:         
  Cash flow   53,6111.7%    53,9081.7%    394    153
  Asset-based   1,1650.0%    2,1180.1%    -    1,500
Venture capital   15,2890.8%    11,6870.6%    13,265    13,295
  Equipment finance    30,3884.9%    32,8484.7%    115    218
  Total commercial   100,4531.2%    100,5611.2%    13,774    15,166
Consumer   1730.0%    3390.1%    49    224
  Total Non-PCI loans and          
  leases $  173,0301.1% $  170,5991.1% $  21,846 $  28,605
          

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

    
 March 31, December 31,
Nonperforming Assets 2017   2016 
 (Dollars in thousands)
Nonaccrual Non-PCI loans and leases$  173,030  $  170,599 
Nonaccrual PCI loans    2,404     2,928 
  Total nonaccrual loans and leases   175,434     173,527 
Foreclosed assets, net   12,842     12,976 
  Total nonperforming assets$  188,276  $  186,503 
    
Nonaccrual loans and leases to loans and leases   1.12%  1.12%
Nonperforming assets to loans and leases   
  and foreclosed assets 1.20%  1.20%
    

CU BANCORP MERGER ANNOUNCEMENT

On April 6, 2017, PacWest announced the signing of a definitive agreement and plan of merger (the “Agreement”) whereby PacWest will acquire CU Bancorp in a transaction valued at approximately $705 million. 

CU Bancorp, headquartered in Los Angeles, California, is the parent of California United Bank, a California state-chartered non-member bank, with approximately $3.0 billion in assets and nine branches located in Los Angeles, Orange, Ventura, and San Bernardino counties at December 31, 2016. In connection with the transaction, California United Bank will be merged into Pacific Western Bank, the principal operating subsidiary of PacWest Bancorp.

The transaction, which was approved by the PacWest and CU Bancorp boards of directors, is expected to close in the fourth quarter of 2017 and is subject to customary closing conditions, including obtaining approval by CU Bancorp’s shareholders and bank regulatory authorities.

As of December 31, 2016, on a pro forma consolidated basis, the combined company would have approximately $25.0 billion in assets and 87 branches, prior to contemplated consolidations.

Under terms of the Agreement, CU Bancorp shareholders will receive 0.5308 shares of PacWest common stock and $12.00 in cash for each share of CU Bancorp. Based on PacWest’s April 5, 2017 closing price of $51.72, the total value of the merger consideration is $39.45 per CU Bancorp share.

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 (the “Bank”). The Bank has 74 full-service branches located throughout the state of California and one branch in Durham, North Carolina. We provide commercial banking services, including real estate, construction, and commercial loans, and comprehensive deposit and treasury management services to small and medium-sized businesses.  We offer additional products and services through our CapitalSource and Square 1 Bank divisions. Our CapitalSource Division provides cash flow, asset-based, equipment and real estate loans and treasury management services to established middle market businesses on a national basis.  Our Square 1 Bank Division 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 and including statements about our expectations regarding our pending merger between the Company and CU Bancorp. 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; the Company’s ability to complete the proposed CU Bancorp transaction, including by obtaining regulatory approvals and approval by the shareholders of CU Bancorp, or any future transaction, successfully integrate such acquired entities, or achieve expected beneficial synergies and/or operating efficiencies, in each case within expected timeframes or at all; changes in the Company’s stock price before completion of the CU Bancorp merger, including as a result of the financial performance of the Company or CU Bancorp before closing; 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, 2016, 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.

ADDITIONAL INFORMATION ABOUT THE PROPOSED TRANSACTION AND WHERE TO FIND IT

Investors and security holders are urged to carefully review and consider each of PacWest’s and CU Bancorp’s public filings with the SEC, including but not limited to their Annual Reports on Form 10-K, their proxy statements, their Current Reports on Form 8-K and their Quarterly Reports on Form 10-Q. The documents filed by PacWest with the SEC may be obtained free of charge at PacWest’s website at www.pacwestbancorp.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from PacWest by requesting them in writing to PacWest Bancorp, 9701 Wilshire Boulevard, Suite 700, Beverly Hills, CA 90212; Attention: Investor Relations, by submitting an email request to investor-relations@pacwestbancorp.com or by telephone at (310) 887-8521.

The documents filed by CU Bancorp with the SEC may be obtained free of charge at CU Bancorp’s website at www.cubancorp.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from CU Bancorp by requesting them in writing to CU Bancorp, 818 W. 7th Street, Suite 220, Los Angeles, CA 90017; Attention: Investor Relations, or by telephone at 818-257-7700.

PacWest intends to file a registration statement with the SEC which will include a proxy statement of CU Bancorp and a prospectus of PacWest, and each party will file other documents regarding the proposed transaction with the SEC. Before making any voting or investment decision, investors and security holders of CU Bancorp are urged to carefully read the entire registration statement and proxy statement/prospectus, when they become available, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction. A definitive proxy statement/prospectus will be sent to the shareholders of CU Bancorp seeking any required shareholder approvals. Investors and security holders will be able to obtain the registration statement and the proxy statement/prospectus free of charge from the SEC’s website or from PacWest or CU Bancorp by writing to the addresses provided for each company set forth in the paragraphs above.

PacWest, CU Bancorp, their directors, executive officers and certain other persons may be deemed to be participants in the solicitation of proxies from CU Bancorp shareholders in favor of the approval of the transaction. Information about the directors and executive officers of PacWest and their ownership of PacWest common stock is set forth in the proxy statement for PacWest’s 2017 annual meeting of stockholders, as previously filed with the SEC. Information about the directors and executive officers of CU Bancorp and their ownership of CU Bancorp common shares is set forth in the proxy statement for CU Bancorp’s 2016 annual meeting of shareholders, as previously filed with the SEC. Shareholders may obtain additional information regarding the interests of such participants by reading the registration statement and the proxy statement/prospectus when they become available.

    
PACWEST BANCORP AND SUBSIDIARIES   
CONDENSED CONSOLIDATED BALANCE SHEET   
    
 March 31, December 31,
  2017   2016 
 (Dollars in thousands, except per share data)
ASSETS:   
Cash and due from banks$  184,608  $  337,965 
Interest-earning deposits in financial institutions   111,892     81,705 
  Total cash and cash equivalents    296,500     419,670 
    
Securities available-for-sale, at estimated fair value   3,336,992     3,223,830 
Federal Home Loan Bank stock, at cost   17,901     21,870 
  Total investment securities   3,354,893     3,245,700 
    
Non-PCI loans and leases   15,526,518     15,412,092 
PCI loans   96,353     108,445 
  Total gross loans and leases   15,622,871     15,520,537 
Deferred fees, net   (66,182)    (64,583)
Total loans and leases, net of deferred fees   15,556,689     15,455,954 
Allowance for loan and lease losses   (161,307)    (157,238)
  Total loans and leases, net   15,395,382     15,298,716 
    
Equipment leased to others under operating leases   224,580     229,905 
Premises and equipment, net   28,908     38,594 
Foreclosed assets, net   12,842     12,976 
Deferred tax asset, net   88,765     94,112 
Goodwill   2,173,949     2,173,949 
Core deposit and customer   
relationship intangibles, net   33,302     36,366 
Other assets   318,133     319,779 
  Total assets$  21,927,254  $  21,869,767 
    
LIABILITIES:   
Noninterest-bearing deposits$  6,789,808  $  6,659,016 
Interest-bearing deposits   9,541,200     9,211,595 
  Total deposits   16,331,008     15,870,611 
Borrowings   460,609     905,812 
Subordinated debentures   442,516     440,744 
Accrued interest payable and other liabilities   185,015     173,545 
  Total liabilities   17,419,148     17,390,712 
    
STOCKHOLDERS' EQUITY (1)   4,508,106     4,479,055 
  Total liabilities and stockholders’ equity$  21,927,254  $  21,869,767 
    
Book value per share$  37.13  $  36.93 
Tangible book value per share (2)$  18.95  $  18.71 
Shares outstanding    121,408,133     121,283,669 
    
(1) Includes net unrealized gain on securities   
available-for-sale, net$  12,718  $  5,982 
(2) Non-GAAP measure.   
    


PACWEST BANCORP AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS 
  
 Three Months Ended 
 March 31, December 31, March 31, 
  2017   2016   2016  
 (Dollars in thousands, except per share data) 
Interest income:      
Loans and leases$  224,178  $  238,223  $  236,375  
Investment securities   23,039     23,403     22,547  
Deposits in financial institutions   192     147     308  
Total interest income   247,409     261,773     259,230  
       
Interest expense:      
Deposits   8,377     7,369     9,073  
Borrowings   1,018     631     581  
Subordinated debentures   5,562     5,468     4,982  
Total interest expense   14,957     13,468     14,636  
       
Net interest income   232,452     248,305     244,594  
Provision for credit losses   24,728     23,215     20,140  
Net interest income after provision       
for credit losses   207,724     225,090     224,454  
       
Noninterest income:      
Service charges on deposit accounts   3,758     3,557     3,856  
Other commissions and fees   10,390     12,036     11,489  
Leased equipment income   9,475     8,614     8,244  
Gain on sale of loans and leases   712     119     245  
Gain (loss) on sale of securities   (99)    515     8,110  
FDIC loss sharing expense, net   -     -     (2,415) 
Other income   10,878     4,054     5,010  
Total noninterest income   35,114     28,895     34,539  
       
Noninterest expense:      
Compensation    64,880     66,013     61,065  
Occupancy   11,608     12,076     12,632  
Data processing   7,015     6,574     5,904  
Other professional services   3,378     4,880     3,572  
Insurance and assessments   4,791     4,124     4,965  
Intangible asset amortization   3,064     3,176     4,746  
Leased equipment depreciation   5,625     5,291     5,024  
Foreclosed assets expense (income), net     143     2,693     (561) 
Acquisition, integration and       
reorganization costs    500     -     200  
Other expense   15,540     13,795     13,141  
Total noninterest expense   116,544     118,622     110,688  
       
Earnings before income taxes   126,294     135,363     148,305  
Income tax expense    (47,626)    (49,716)    (57,849) 
Net earnings $  78,668  $  85,647  $  90,456  
       
Basic and diluted earnings per share$  0.65  $  0.71  $  0.74  
       


PACWEST BANCORP AND SUBSIDIARIES 
NET EARNINGS PER SHARE CALCULATIONS 
  
 Three Months Ended 
 March 31, December 31, March 31, 
  2017   2016   2016  
 (In thousands, except per share data) 
Basic Earnings Per Share:      
Net earnings $  78,668  $  85,647  $  90,456  
Less: earnings allocated to unvested       
restricted stock (1)   (999)    (1,004)    (1,067) 
Net earnings allocated to common       
shares$  77,669  $  84,643  $  89,389  
       
Weighted-average basic shares and       
unvested restricted stock outstanding   121,346     121,464     121,598  
Less: weighted-average unvested       
restricted stock outstanding   (1,503)    (1,450)    (1,392) 
Weighted-average basic shares       
outstanding   119,843     120,014     120,206  
       
Basic earnings per share$  0.65  $  0.71  $  0.74  
       
Diluted Earnings Per Share:      
Net earnings allocated to common       
shares$  77,669  $  84,643  $  89,389  
       
Weighted-average basic shares       
outstanding   119,843     120,014     120,206  
       
Diluted earnings per share$  0.65  $  0.71  $  0.74  
       
(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
 March 31, 2017 December 31, 2016 March 31, 2016
  InterestAverage  InterestAverage  InterestAverage
 Average Income/Yield/ Average Income/Yield/ Average Income/Yield/
 BalanceExpenseCost BalanceExpenseCost BalanceExpenseCost
 (Dollars in thousands)
Assets:           
PCI loans$  89,335 $  4,25019.29% $  104,234$  17,48166.72% $  167,626$  20,07248.16%
Non-PCI loans and leases   15,207,709   219,9285.86%    14,904,034   220,7425.89%    14,303,539   216,3036.08%
Total loans and leases   15,297,044   224,1785.94%    15,008,268   238,2236.31%    14,471,165   236,3756.57%
Investment securities (1)   3,257,448   27,8223.46%    3,293,003   28,2293.41%    3,460,293   27,4933.20%
Deposits in financial            
institutions   100,751   1920.77%    111,918   1470.52%    230,293   3080.54%
Total interest-earning           
assets   18,655,243   252,1925.48%    18,413,189   266,5995.76%    18,161,751   264,1765.85%
Other assets   2,990,291      3,014,761      3,036,843  
Total assets$  21,645,534   $  21,427,950   $  21,198,594  
            
Liabilities and            
Stockholders' Equity:          
Interest checking$  1,505,439   1,1670.31% $  1,449,346   9510.26% $  926,256   3830.17%
Money market   4,866,720   4,4100.37%    4,740,944   3,6720.31%    3,848,753   2,4150.25%
Savings   711,529   2980.17%    751,817   3310.18%    753,371   4440.24%
Time   2,246,547   2,5020.45%    2,384,973   2,4150.40%    3,860,272   5,8310.61%
Total interest-bearing           
deposits   9,330,235   8,3770.36%    9,327,080   7,3690.31%    9,388,652   9,0730.39%
Borrowings   596,903   1,0180.69%    505,567   6310.50%    494,725   5810.47%
Subordinated debentures   441,521   5,5625.11%    440,907   5,4684.93%    436,535   4,9824.59%
Total interest-bearing           
liabilities   10,368,659   14,9570.59%    10,273,554   13,4680.52%    10,319,912   14,6360.57%
Noninterest-bearing            
demand deposits   6,595,346      6,496,221      6,273,249  
Other liabilities   177,854      156,227      166,831  
Total liabilities   17,141,859      16,926,002      16,759,992  
Stockholders' equity   4,503,675      4,501,948      4,438,602  
Total liabilities and            
stockholders' equity$  21,645,534   $  21,427,950   $  21,198,594  
Net interest income (2) $  237,235   $  253,131   $  249,540 
Net interest spread (2)  4.89%   5.24%   5.28%
Net interest margin (2)  5.16%   5.47%   5.53%
            
Total deposits (3)$  15,925,581$  8,3770.21% $  15,823,301 $  7,3690.19% $  15,661,901 $  9,0730.23%
Funding sources (4)$  16,964,005$  14,9570.36% $  16,769,775$  13,4680.32% $  16,593,161$  14,6360.35%
            
                     
(1) Includes tax equivalent adjustments of $4.8 million, $4.8 million, and $4.9 million for the three months ended March 31, 2017, December 31, 2016,
and March 31, 2016 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 as 
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
          
 March 31, December 31, September 30, June 30, March 31,
  2017   2016   2016   2016   2016 
 (Dollars in thousands, except per share data)
ASSETS:         
Cash and due from banks$  184,608  $  337,965  $  286,371  $  226,471  $  161,977 
Interest-earning deposits in financial          
institutions   111,892     81,705     253,994     218,882     357,541 
  Total cash and cash equivalents    296,500     419,670     540,365     445,353     519,518 
          
Securities available-for-sale   3,336,992     3,223,830     3,341,335     3,347,546     3,240,586 
Federal Home Loan Bank stock   17,901     21,870     19,386     24,214     17,250 
  Total investment securities   3,354,893     3,245,700     3,360,721     3,371,760     3,257,836 
          
Non-PCI loans and leases   15,526,518     15,412,092     14,686,206     14,566,425     14,365,915 
PCI loans   96,353     108,445     120,221     136,901     176,607 
  Total gross loans and leases   15,622,871     15,520,537     14,806,427     14,703,326     14,542,522 
Deferred fees, net   (66,182)    (64,583)    (63,581)    (61,866)    (59,005)
Total loans and leases, net of          
deferred fees   15,556,689     15,455,954     14,742,846     14,641,460     14,483,517 
Allowance for loan and lease losses   (161,307)    (157,238)    (147,976)    (143,289)    (130,361)
  Total loans and leases, net   15,395,382     15,298,716     14,594,870     14,498,171     14,353,156 
          
Equipment leased to others under          
operating leases   224,580     229,905     198,931     204,062     205,163 
Premises and equipment, net   28,908     38,594     38,977     38,718     39,713 
Foreclosed assets, net   12,842     12,976     15,113     16,181     18,310 
Deferred tax asset, net   88,765     94,112     27,073     24,413     91,126 
Goodwill   2,173,949     2,173,949     2,173,949     2,175,791     2,175,791 
Core deposit and customer          
relationship intangibles, net   33,302     36,366     39,542     43,766     48,137 
Other assets   318,133     319,779     325,750     328,924     322,259 
  Total assets$  21,927,254  $  21,869,767  $  21,315,291  $  21,147,139  $  21,031,009 
          
LIABILITIES:         
Noninterest-bearing deposits$  6,789,808  $  6,659,016  $  6,521,946  $  6,222,696  $  6,139,963 
Interest-bearing deposits   9,541,200     9,211,595     9,123,722     8,925,313     9,301,412 
  Total deposits   16,331,008     15,870,611     15,645,668     15,148,009     15,441,375 
Borrowings   460,609     905,812     541,011     918,208     551,401 
Subordinated debentures   442,516     440,744     441,112     439,322     438,723 
Accrued interest payable and other         
liabilities   185,015     173,545     144,905     128,296     142,918 
  Total liabilities   17,419,148     17,390,712     16,772,696     16,633,835     16,574,417 
STOCKHOLDERS' EQUITY (1)   4,508,106     4,479,055     4,542,595     4,513,304     4,456,592 
  Total liabilities and stockholders’          
  equity$  21,927,254  $  21,869,767  $  21,315,291  $  21,147,139  $  21,031,009 
          
Book value per share$  37.13  $  36.93  $  37.29  $  37.05  $  36.60 
Tangible book value per share (2)$  18.95  $  18.71  $  19.12  $  18.83  $  18.33 
Shares outstanding   121,408,133     121,283,669     121,817,524     121,819,849     121,771,252 
          
(1) Includes net unrealized gain on          
securities available-for-sale, net$  12,718  $  5,982  $  72,073  $  81,744  $  48,479 
(2) Non-GAAP measure.         
          


PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
          
 Three Months Ended
 March 31, December 31, September 30, June 30, March 31,
  2017   2016   2016   2016   2016 
 (Dollars in thousands, except per share data)
Interest income:         
Loans and leases$  224,178  $  238,223  $  225,370  $  224,326  $  236,375 
Investment securities   23,039     23,403     22,187     22,420     22,547 
Deposits in financial institutions   192     147     298     308     308 
Total interest income   247,409     261,773     247,855     247,054     259,230 
          
Interest expense:         
Deposits   8,377     7,369     7,247     7,823     9,073 
Borrowings   1,018     631     695     352     581 
Subordinated debentures   5,562     5,468     5,278     5,122     4,982 
Total interest expense   14,957     13,468     13,220     13,297     14,636 
          
Net interest income   232,452     248,305     234,635     233,757     244,594 
Provision for credit losses   24,728     23,215     8,471     13,903     20,140 
Net interest income after provision          
for credit losses   207,724     225,090     226,164     219,854     224,454 
          
Noninterest income:         
Service charges on deposit accounts   3,758     3,557     3,488     3,633     3,856 
Other commissions and fees   10,390     12,036     12,528     11,073     11,489 
Leased equipment income   9,475     8,614     8,538     8,523     8,244 
Gain on sale of loans and leases   712     119     157     388     245 
Gain (loss) on sale of securities   (99)    515     382     478     8,110 
FDIC loss sharing expense, net   -     -     -     (6,502)    (2,415)
Other income   10,878     4,054     1,827     4,528     5,010 
Total noninterest income   35,114     28,895     26,920     22,121     34,539 
          
Noninterest expense:         
Compensation    64,880     66,013     62,661     62,174     61,065 
Occupancy   11,608     12,076     12,010     12,193     12,632 
Data processing   7,015     6,574     6,234     5,644     5,904 
Other professional services   3,378     4,880     4,625     3,401     3,572 
Insurance and assessments   4,791     4,124     4,324     4,951     4,965 
Intangible asset amortization   3,064     3,176     4,224     4,371     4,746 
Leased equipment depreciation   5,625     5,291     5,298     5,286     5,024 
Foreclosed assets expense (income), net   143     2,693     (248)    (3)    (561)
Acquisition, integration and          
reorganization costs    500     -     -     -     200 
Other expense   15,540     13,795     11,582     12,064     13,141 
Total noninterest expense   116,544     118,622     110,710     110,081     110,688 
          
Earnings before income taxes   126,294     135,363     142,374     131,894     148,305 
Income tax expense    (47,626)    (49,716)    (48,479)    (49,726)    (57,849)
Net earnings $  78,668  $  85,647  $  93,895  $  82,168  $  90,456 
          
Basic and diluted earnings per share$  0.65  $  0.71  $  0.77  $  0.68  $  0.74 
          


PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
          
 At or For the Three Months Ended
 March 31, December 31, September 30, June 30, March 31,
  2017   2016   2016   2016   2016 
 (Dollars in thousands)
Performance Ratios:         
Return on average assets (1) 1.47%  1.59%  1.77%  1.57%  1.72%
Return on average equity (1) 7.08%  7.57%  8.24%  7.37%  8.20%
Return on average tangible equity (1)(2) 13.90%  14.88%  16.15%  14.61%  16.45%
          
Yield on average loans and leases (1) 5.94%  6.31%  6.17%  6.24%  6.57%
Yield on average interest-earning          
assets (1)(3) 5.48%  5.76%  5.55%  5.63%  5.85%
Cost of average total deposits (1) 0.21%  0.19%  0.19%  0.20%  0.23%
Cost of average time deposits (1) 0.45%  0.40%  0.45%  0.52%  0.61%
Cost of average interest-bearing          
liabilities (1) 0.59%  0.52%  0.52%  0.54%  0.57%
Cost of average funding sources (1) 0.36%  0.32%  0.32%  0.33%  0.35%
Net interest rate spread (1)(3) 4.89%  5.24%  5.03%  5.09%  5.28%
Net interest margin (1)(3) 5.16%  5.47%  5.26%  5.33%  5.53%
Net interest margin excluding acquired          
loan discount accretion (1)(2)(3) 5.02%  5.01%  4.95%  4.97%  4.91%
          
Efficiency ratio 41.4%  40.1%  40.1%  40.6%  38.5%
Noninterest expense as a percentage         
of average assets (1) 2.18%  2.20%  2.09%  2.11%  2.10%
          
Average Balances:         
Loans and leases$  15,297,044  $  15,008,268  $  14,534,951  $  14,468,590  $  14,471,165 
Interest-earning assets   18,655,243     18,413,189     18,111,585     18,003,075     18,161,751 
Total assets   21,645,534     21,427,950     21,072,053     20,999,942     21,198,594 
Noninterest-bearing deposits   6,595,346     6,496,221     6,274,294     6,437,720     6,273,249 
Interest-bearing deposits   9,330,235     9,327,080     9,107,305     9,199,097     9,388,652 
Total deposits   15,925,581     15,823,301     15,381,599     15,636,817     15,661,901 
Borrowings and subordinated          
debentures   1,038,424     946,474     1,023,952     739,509     931,260 
Interest-bearing liabilities   10,368,659     10,273,554     10,131,257     9,938,606     10,319,912 
Funding sources   16,964,005     16,769,775     16,405,551     16,376,326     16,593,161 
Stockholders' equity   4,503,675     4,501,948     4,530,701     4,483,593     4,438,602 
          
          
(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
 March 31, December 31, September 30, June 30, March 31,
  2017   2016   2016   2016   2016 
                    
 (Dollars in thousands)
Non-PCI Credit Quality:         
Allowance for credit losses to loans          
and leases 1.08%  1.05%  1.05%  1.03%  0.96%
Allowance for credit losses to          
nonaccrual loans and leases 97%  95%  90%  118%  106%
Nonaccrual loans and leases to loans          
and leases 1.11%  1.11%  1.16%  0.88%  0.91%
Nonperforming assets to loans and          
leases and foreclosed assets 1.20%  1.19%  1.27%  0.99%  1.05%
Nonperforming assets to total assets 0.85%  0.84%  0.87%  0.68%  0.72%
Trailing twelve month net charge-offs          
to average loans and leases 0.24%  0.15%  0.04%  0.04%  0.03%
          
PacWest Bancorp Consolidated          
Capital:         
Tier 1 leverage ratio (1) 11.87%  11.91%  12.13%  11.92%  11.51%
Common equity tier 1 capital ratio (1) 12.31%  12.31%  12.83%  12.72%  12.63%
Tier 1 capital ratio (1) 12.31%  12.31%  12.83%  12.72%  12.63%
Total capital ratio (1) 15.56%  15.56%  16.18%  16.08%  15.96%
Risk-weighted assets (1)$  18,734,604  $  18,568,622  $  17,713,506  $  17,520,609  $  17,226,658 
          
Equity to assets ratio  20.56%  20.48%  21.31%  21.34%  21.19%
Tangible common equity ratio (2) 11.67%  11.54%  12.19%  12.12%  11.87%
Book value per share$  37.13  $  36.93  $  37.29  $  37.05  $  36.60 
Tangible book value per share (2)$  18.95  $  18.71  $  19.12  $  18.83  $  18.33 
          
Pacific Western Bank Capital:         
Tier 1 leverage ratio (1) 11.36%  11.40%  11.54%  11.38%  11.10%
Common equity tier 1 capital ratio (1) 11.79%  11.78%  12.21%  12.13%  12.18%
Tier 1 capital ratio (1) 11.79%  11.78%  12.21%  12.13%  12.18%
Total capital ratio (1) 12.74%  12.72%  13.15%  13.06%  13.05%
          
Equity to assets ratio  20.11%  20.02%  20.77%  20.82%  20.70%
Tangible common equity ratio (2) 11.16%  11.02%  11.56%  11.51%  11.27%
          
         
(1) Capital information for March 31, 2017 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, net interest margin excluding acquired loan discount accretion, loan and lease yield excluding acquired loan discount accretion, 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 net interest margin excluding acquired loan discount accretion, (2) loan and lease yield to loan and lease yield excluding acquired loan discount accretion, 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
  March 31, December 31, September 30, June 30, March 31,
Return on Average Tangible Equity 2017   2016   2016   2016   2016 
  (Dollars in thousands)
Net earnings$  78,668  $  85,647  $  93,895  $  82,168  $  90,456 
           
Average stockholders' equity$  4,503,675  $  4,501,948  $  4,530,701  $  4,483,593  $  4,438,602 
Less: Average intangible assets   2,209,112     2,212,042     2,217,564     2,222,007     2,227,520 
Average tangible common equity$  2,294,563  $  2,289,906  $  2,313,137  $  2,261,586  $  2,211,082 
           
Return on average equity (1) 7.08%  7.57%  8.24%  7.37%  8.20%
Return on average tangible equity (2) 13.90%  14.88%  16.15%  14.61%  16.45%
           
                     
(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/March 31, December 31, September 30, June 30, March 31,
Tangible Book Value Per Share 2017   2016   2016   2016   2016 
 (Dollars in thousands, except per share data)
PacWest Bancorp Consolidated:         
Stockholders' equity$  4,508,106  $  4,479,055  $  4,542,595  $  4,513,304  $  4,456,592 
Less: Intangible assets   2,207,251     2,210,315     2,213,491     2,219,557     2,223,928 
Tangible common equity$  2,300,855  $  2,268,740  $  2,329,104  $  2,293,747  $  2,232,664 
          
Total assets$  21,927,254  $  21,869,767  $  21,315,291  $  21,147,139  $  21,031,009 
Less: Intangible assets   2,207,251     2,210,315     2,213,491     2,219,557     2,223,928 
Tangible assets$  19,720,003  $  19,659,452  $  19,101,800  $  18,927,582  $  18,807,081 
          
Equity to assets ratio 20.56%  20.48%  21.31%  21.34%  21.19%
Tangible common equity ratio (1) 11.67%  11.54%  12.19%  12.12%  11.87%
          
Book value per share$  37.13  $  36.93  $  37.29  $  37.05  $  36.60 
Tangible book value per share (2)    $  18.95  $  18.71  $  19.12  $  18.83  $  18.33 
Shares outstanding   121,408,133     121,283,669     121,817,524     121,819,849     121,771,252 
          
          
Pacific Western Bank:         
Stockholder's equity$  4,405,770  $  4,374,478  $  4,416,623  $  4,390,928  $  4,331,841 
Less: Intangible assets   2,207,251     2,210,315     2,213,491     2,219,557     2,223,928 
Tangible common equity$  2,198,519  $  2,164,163  $  2,203,132  $  2,171,371  $  2,107,913 
          
Total assets$  21,910,720  $  21,848,644  $  21,266,705  $  21,084,950  $  20,928,105 
Less: Intangible assets   2,207,251     2,210,315     2,213,491     2,219,557     2,223,928 
Tangible assets$  19,703,469  $  19,638,329  $  19,053,214  $  18,865,393  $  18,704,177 
          
Equity to assets ratio 20.11%  20.02%  20.77%  20.82%  20.70%
Tangible common equity ratio (1) 11.16%  11.02%  11.56%  11.51%  11.27%
          
                    
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by shares outstanding.
 

            

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