Significant Items

  • Net Earnings of $33.2 Million, or $0.28 Per Diluted Share
  • Strong Pre-Provision, Pre-Tax Net Revenue (“PPNR”) of $166.2 Million
  • Funded $1.2 Billion of Paycheck Protection Program Loans (“PPP”) in Q2
  • Core Deposits Up $3.5 Billion or 22% in Q2; Represents 85% of Total Deposits
  • Tax Equivalent Net Interest Margin of 4.20% Compared to 4.31% in Q1
  • Cost of Average Total Deposits Decreased 34 Basis Points from Q1 to 25 Basis Points
  • Quarter Includes $6.6 Million of Prepayment Penalties Related to Early Payoff of FHLB Term Advances and $7.7 Million of Gain on Sale of Securities

LOS ANGELES, July 16, 2020 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the second quarter of 2020 of $33.2 million, or $0.28 per diluted share, compared to a net loss for the first quarter of 2020 of $1.43 billion, or $12.23 per diluted share. The increase in net earnings in the second quarter was due primarily to a $1.47 billion goodwill impairment charge in the first quarter.

Matt Wagner, President and CEO, commented, “Our focus continues to be the health and safety of our employees while assisting our customers during the COVID-19 pandemic. We assisted our customers by funding over 4,100 PPP loans in the second quarter totaling over $1.2 billion, while granting loan payment modifications on approximately $1.8 billion, or 9% of loans and leases, most during May and June. The ultimate resolution of these modified loans is largely dependent on how long the pandemic impacts consumer demand and business activity. ”

Mr. Wagner added, “We continued enhanced monitoring of our loan portfolios and saw less loan migration to special mention during the second quarter after being proactive in downgrading loans in the first quarter. We recorded another significant provision for credit losses largely due to deterioration in the macro-economic variables used in our CECL forecast.”  

Mr. Wagner continued, “Our operations remain healthy and continue to produce increasing revenues while generating internal capital. PPNR increased by $5.3 million in the second quarter to $166.2 million, which resulted in a PPNR return on average assets of 2.51%.  These solid operating earnings highlight the resilience of our business as we continue to navigate the challenging economic conditions.”   

FINANCIAL HIGHLIGHTS

 At or For the    At or For the   
 Three Months Ended   Six Months Ended  
 June 30, March 31, Increase June 30, Increase
Financial Highlights  2020   2020  (Decrease)  2020   2019  (Decrease)
                    
 (Dollars in thousands, except per share data)
Net earnings (loss)$33,204  $(1,433,111) $1,466,315  $(1,399,907) $240,729  $(1,640,636)
Diluted earnings (loss)           
per share$0.28  $(12.23) $12.51  $(11.98) $1.99  $(13.97)
Return on average assets 0.50%  (21.27)%  21.77   (10.48)%  1.88%  (12.36)
Pre-provision, pre-goodwill           
impairment, pre-tax net           
revenue ("PPNR") (1)$166,172  $160,877  $5,295  $327,049  $346,017  $(18,968)
PPNR return on average           
assets (1) 2.51%  2.39%  0.12   2.45%  2.70%  (0.25)
Return on average           
tangible equity (1) 6.39%  6.88%  (0.49)  6.64%  22.79%  (16.15)
            
Net interest margin ("NIM")           
(tax equivalent) 4.20%  4.31%  (0.11)  4.26%  4.70%  (0.44)
Yield on average loans and           
leases (tax equivalent) 5.01%  5.54%  (0.53)  5.27%  6.21%  (0.94)
Cost of average total           
deposits 0.25%  0.59%  (0.34)  0.41%  0.77%  (0.36)
Efficiency ratio 42.9%  40.6%  2.3   41.8%  42.0%  (0.2)
            
Total assets$27,365,738  $26,143,267  $1,222,471  $27,365,738  $26,344,414  $1,021,324 
Loans and leases held           
for investment,           
net of deferred fees$19,694,631  $19,745,305  $(50,674) $19,694,631  $18,472,852  $1,221,779 
Noninterest-bearing           
demand deposits$8,629,543  $7,510,218  $1,119,325  $8,629,543  $7,299,213  $1,330,330 
Core deposits$19,535,814  $16,050,522  $3,485,292  $19,535,814  $15,617,488  $3,918,326 
Total deposits$22,928,579  $19,575,837  $3,352,742  $22,928,579  $18,805,756  $4,122,823 
            
As percentage of total           
deposits:           
Noninterest-bearing           
  demand deposits 38%  38%  -   38%  39%  (1)
Core deposits 85%  82%  3   85%  83%  2 
            
Equity to assets ratio 12.62%  12.97%  (0.35)  12.62%  18.42%  (5.80)
Tangible common equity           
ratio (1) 8.93%  9.10%  (0.17)  8.93%  9.50%  (0.57)
Book value per share$29.17  $28.75  $0.42  $29.17  $40.49  $(11.32)
Tangible book value per           
share (1)$19.80  $19.31  $0.49  $19.80  $18.83  $0.97 
            
(1) Non-GAAP measure.           
            

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased by $4.5 million to $254.3 million for the second quarter of 2020 compared to $249.7 million for the first quarter of 2020 due mainly to a lower cost of average interest-bearing liabilities and a higher balance of average loans and leases, partially offset by a lower yield on average loans and leases and securities. The tax equivalent yield on average loans and leases was 5.01% for the second quarter of 2020 compared to 5.54% for the first quarter of 2020. The decrease in the yield on average loans and leases was due principally to lower market rates, a lower rate on loan production from the impact of the PPP loans, and lower loan discount accretion. Excluding the PPP loans, which have a coupon rate of 1%, the tax equivalent yield on average loans and leases was 5.10%.

The tax equivalent NIM was 4.20% for the second quarter of 2020 compared to 4.31% for the first quarter of 2020. The decrease in the NIM was due mainly to lower market rates resulting in lower loan and lease and security yields, a lower rate on loan production from the impact of the PPP loans, and lower loan discount accretion, offset partially by the lower cost of average interest-bearing liabilities. Excluding the PPP loans, the tax equivalent NIM was 4.25%.

The cost of average total deposits decreased to 0.25% for the second quarter of 2020 from 0.59% for the first quarter of 2020. The lower cost of average interest-bearing deposits reflected actions taken to reduce deposit rates in light of the two emergency interest rate cuts by the Federal Reserve in March of 2020. The cost of deposits at June 30, 2020 was 0.19%.

Provision for Credit Losses

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

 Three Months Ended  
 June 30, March 31, Increase
Provision for Credit Losses2020 2020 (Decrease)
        
 (In thousands)  
Addition to allowance for loan and lease losses$93,000 $98,000 $(5,000)
Addition to reserve for unfunded     
loan commitments 27,000  14,000  13,000 
Total provision for credit losses$120,000 $112,000 $8,000 
 

The provision for credit losses was $120.0 million for the second quarter of 2020, up $8.0 million from the first quarter of 2020, driven by reserve builds that reflected significant deterioration and continued uncertainty in the key macro-economic forecast variables such as unemployment and GDP as a result of the impact of COVID-19.

Noninterest Income

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

 Three Months Ended  
 June 30, March 31, Increase
Noninterest Income2020 2020 (Decrease)
      
 (In thousands)  
Service charges on deposit accounts$2,004 $2,658 $(654)
Other commissions and fees 10,111  9,721  390 
Leased equipment income 12,037  12,251  (214)
Gain on sale of loans and leases 346  87  259 
Gain on sale of securities 7,715  182  7,533 
Other income:     
Dividends and gains on equity investments 2,947  28  2,919 
Warrant income 1,973  837  1,136 
Other 1,725  3,336  (1,611)
Total noninterest income$38,858 $29,100 $9,758 
 

Noninterest income increased by $9.8 million to $38.9 million for the second quarter of 2020 compared to $29.1 million for the first quarter of 2020 due primarily to a $7.5 million increase in gain on sale of securities and a $2.9 million increase in dividends and gains on equity investments, partially offset by a $1.6 million decrease in other income. The increase in gain on sale of securities resulted from the sale of $122 million of securities in the second quarter. The increase in dividends and gains on equity investments resulted from increases in the fair value of equity investments still held and a $1.5 million gain on the sale of an equity investment. The decrease in other income was primarily due to $1.1 million of bankruptcy proceeds received on a former credit in the first quarter.

Noninterest Expense

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

 Three Months Ended  
 June 30, March 31, Increase
Noninterest Expense2020 2020 (Decrease)
 (In thousands)    
Compensation$61,910  $61,282 $628 
Occupancy 14,494   14,207  287 
Data processing 7,102   6,454  648 
Other professional services 4,146   4,258  (112)
Insurance and assessments 9,373   4,249  5,124 
Intangible asset amortization 3,882   3,948  (66)
Leased equipment depreciation 7,102   7,205  (103)
Foreclosed assets (income) expense, net (146)  66  (212)
Customer related expense 4,408   3,932  476 
Loan expense 3,379   2,650  729 
Other 11,315   9,719  1,596 
Total operating expense 126,965   117,970  8,995 
Goodwill impairment -   1,470,000  (1,470,000)
Total noninterest expense$126,965  $1,587,970 $(1,461,005)
 

Noninterest expense decreased by $1.46 billion to $127.0 million for the second quarter of 2020 compared to $1.59 billion for the first quarter of 2020 attributable primarily to a $1.47 billion goodwill impairment charge in the first quarter. Excluding the goodwill impairment charge, noninterest expense increased by $9.0 million to $127.0 million. This increase was mainly due to a $5.1 million increase in insurance and assessments expense, a $1.6 million increase in other expense, a $0.7 million increase in loan expense, and a $0.6 million increase in data processing expense. The increase in insurance and assessments expense was due to an increase in FDIC assessment expense resulting from an increase in our assessment rate due primarily to the first quarter loss from the goodwill impairment charge. The higher assessment rate will continue for one year. The increase in other expense was due to $6.6 million in prepayment penalties incurred from the early payoff of $750 million of FHLB term advances, partially offset by the reversal of a $1.5 million accrual for operational loss contingencies and decreases in various business expenses due to less activity as a result of COVID-19. The FHLB term advances had a weighted average interest rate of 0.96% and the prepayment decision was made after the significant drop in market rates in March and the expectation of continued low rates for an extended time. The increase in loan expense was due primarily to higher loan-related legal and workout expenses. The increase in data processing expense was due to a one-time expense to create systems for the origination and loan documentation submissions necessary for the Paycheck Protection Program.

Income Taxes

The effective income tax rate was 28.1% for the second quarter of 2020 compared to (0.8)% for the first quarter of 2020. Excluding non-deductible goodwill impairment, the effective income tax rate for the first quarter of 2020 was 24.5%. Excluding the non-deductible goodwill impairment, the effective tax rate for the full year 2020 is currently estimated to be in the range of 26-28%. The higher effective tax rate in the second quarter was mainly due to tax expense related to restricted stock vestings combined with benefits recorded in the first quarter related to the filing of amended state returns.  

BALANCE SHEET HIGHLIGHTS

Loans and Leases

The following table presents roll forwards of loans and leases held for investment, net of deferred fees, for the periods indicated:

 Three Months Ended Six Months Ended
Roll Forward of Loans and Leases HeldJune 30, March 31, June 30,
for Investment, Net of Deferred Fees (1) 2020   2020   2020 
            
 (Dollars in thousands)
Balance, beginning of period$  19,745,305  $  18,846,872  $  18,846,872 
Additions:     
Production   1,802,956     789,746     2,592,702 
Disbursements   800,458     1,997,080     2,797,538 
Total production and disbursements   2,603,414     2,786,826     5,390,240 
Reductions:     
Payoffs   (612,837)    (812,707)    (1,425,544)
Paydowns   (2,022,376)    (1,053,705)    (3,076,081)
Total payoffs and paydowns   (2,635,213)    (1,866,412)    (4,501,625)
Sales   (3,089)    -     (3,089)
Transfers to foreclosed assets   -     (1,776)    (1,776)
Charge-offs   (15,786)    (20,205)    (35,991)
Total reductions   (2,654,088)    (1,888,393)    (4,542,481)
Net (decrease) increase   (50,674)    898,433     847,759 
Balance, end of period$  19,694,631  $  19,745,305  $  19,694,631 
      
Weighted average rate on production (2) 2.33%  4.31%  2.93%
      
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.    
(2) The weighted average rate on production presents contractual rates on a tax equivalent basis    
      and excludes amortized fees.  Amortized fees added approximately 21 basis points to loan    
      yields in 2020.     
      

Loans and leases held for investment, net of deferred fees, decreased by $50.7 million in the second quarter of 2020 to $19.7 billion at June 30, 2020. We funded $1.2 billion of PPP loans in the second quarter and continued ongoing fundings in the construction loan class, however, this was more than offset by paydowns on existing credits in the venture capital and asset-based loan portfolio classes. Many borrowers who drew down on their loans in the first quarter to ensure liquidity during the COVID-19 pandemic paid back the funds in the second quarter as the economy began to reopen. In addition, our venture banking equity funds business saw balances decline $662.7 million in the second quarter after growing $203.2 million in the first quarter, as drawdowns by equity funds in late March were repaid during the second quarter. The weighted average rate on production decreased to 2.33% since most of the loan production related to PPP loans at a coupon rate of 1%. Excluding PPP loans, the weighted average rate on production was 5.39%. 

The following table presents the composition of loans and leases held for investment by loan portfolio segment and class, net of deferred fees, as of the dates indicated:

 June 30, 2020 March 31, 2020 June 30, 2019
  % of   % of   % of
Loan and Lease Portfolio BalanceTotal BalanceTotal BalanceTotal
         
 (In thousands)
Real estate mortgage:        
Commercial$4,222,07522% $4,220,64921% $4,435,27424%
Income producing and other        
residential 3,733,65919%  3,788,29519%  3,640,75220%
Total real estate mortgage 7,955,73441%  8,008,94440%  8,076,02644%
Real estate construction and land:        
Commercial 1,167,6096%  1,087,5056%  972,8915%
Residential 2,172,91911%  1,792,7489%  1,403,2398%
Total real estate construction        
  and land 3,340,52817%  2,880,25315%  2,376,13013%
  Total real estate 11,296,26258%  10,889,19755%  10,452,15657%
Commercial:        
Asset-based 3,412,43117%  3,938,40220%  3,606,00719%
Venture capital 1,814,3419%  2,715,83714%  2,194,74312%
Other commercial 2,760,27814%  1,771,9859%  1,773,56410%
Total commercial 7,987,05040%  8,426,22443%  7,574,31441%
Consumer 411,3192%  429,8842%  446,3822%
Total loans and leases held for        
investment, net of deferred fees$19,694,631100% $19,745,305100% $18,472,852100%
         
Total unfunded loan commitments$7,745,921  $7,697,724  $7,610,899 
         

Allowance for Credit Losses

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

 Three Months Ended June 30, 2020
 Allowance for Reserve for  Total
Allowance for Credit Loan and  Unfunded Loan Allowance for
Losses RollforwardLease Losses Commitments Credit Losses
      
 (In thousands)
Beginning balance$221,292  $53,571 $274,863 
Charge-offs (15,786)  -  (15,786)
Recoveries 2,544   -  2,544 
Net charge-offs (13,242)  -  (13,242)
Provision 93,000   27,000  120,000 
Ending balance$301,050  $80,571 $381,621 
      
      
 Three Months Ended March 31, 2020
 Allowance for Reserve for  Total
Allowance for Credit Loan and  Unfunded Loan Allowance for
Losses RollforwardLease Losses Commitments Credit Losses
      
 (In thousands)
Beginning balance$138,785  $35,861 $174,646 
Charge-offs (20,205)  -  (20,205)
Recoveries 1,095   -  1,095 
Net charge-offs (19,110)  -  (19,110)
Provision 98,000   14,000  112,000 
Cumulative effect of change in     
accounting principle - CECL 3,617   3,710  7,327 
Ending balance$221,292  $53,571 $274,863 
 

The allowance for credit losses increased by $106.8 million in the second quarter of 2020 to $381.6 million at June 30, 2020. Substantially all of the increase in the allowance for credit losses during the second quarter was attributable to deterioration in the macro-economic variables used in our CECL forecast. Net charge-offs decreased from $19.1 million in the first quarter to $13.2 million in the second quarter.

The allowance for credit losses as a percentage of loans and leases held for investment was 1.94% at June 30, 2020 and 1.39% at March 31, 2020.  The allowance for loan and lease losses as a percentage of loans and leases held for investment was 1.53% at June 30, 2020 and 1.12% at March 31, 2020. The allowance for credit losses and allowance for loan and lease losses as a percentage of loans and leases held for investment, excluding PPP loans that are fully guaranteed and do not carry any allowance, was 2.06% and 1.63% at June 30, 2020, respectively.

Gross charge-offs for the second quarter of 2020 were $15.8 million and included $6.5 million for venture capital loans, $5.0 million for other commercial loans, and $4.2 million for commercial real estate mortgage loans compared to gross charge-offs for the first quarter of 2020 of $20.2 million that included $11.5 million for an asset-based oil industry loan and $7.3 million for other commercial loans.

Recoveries for the second quarter of 2020 were $2.5 million and included $2.3 million for other commercial loans compared to recoveries for the first quarter of 2020 of $1.1 million that included $0.4 million for other commercial loans and $0.4 million for asset-based loans.

For the second quarter of 2020 and first quarter of 2020, annualized net charge-offs to average loans and leases were 0.27% and 0.40%, respectively.

Deposits and Client Investment Funds

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

 June 30, 2020 March 31, 2020 June 30, 2019
  % of   % of   % of
Deposit CompositionBalanceTotal BalanceTotal BalanceTotal
         
 (Dollars in thousands)
Noninterest-bearing demand$8,629,54338% $7,510,21838% $7,299,21339%
Interest checking 4,858,16821%  3,333,14717%  3,220,35317%
Money market 5,498,15024%  4,712,11824%  4,578,08324%
Savings 549,9532%  495,0393%  519,8393%
Total core deposits 19,535,81485%  16,050,52282%  15,617,48883%
Non-core non-maturity deposits 1,217,2665%  836,1574%  436,8332%
Total non-maturity deposits 20,753,08090%  16,886,67986%  16,054,32185%
Time deposits $250,000 and under 1,522,9287%  2,086,18811%  2,284,02312%
Time deposits over $250,000 652,5713%  602,9703%  467,4123%
Total time deposits 2,175,49910%  2,689,15814%  2,751,43515%
Total deposits$22,928,579100% $19,575,837100% $18,805,756100%
 

At June 30, 2020, core deposits totaled $19.5 billion, or 85% of total deposits, including $8.6 billion of noninterest-bearing demand deposits, or 38% of total deposits. Core deposits increased by $3.5 billion in the second quarter driven by PPP loan proceeds being deposited into customers’ accounts and venture banking which saw deposits increase by $2.0 billion to a record $8.7 billion as of June 30, 2020.

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products.  Total off-balance sheet client investment funds at June 30, 2020 were $1.4 billion, of which $1.1 billion was managed by PWAM.

CREDIT QUALITY  

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

 June 30, March 31, Increase
          
Credit Quality Metrics  2020   2020  (Decrease)
          
 (Dollars in thousands)
NPAs and Performing TDRs:     
Nonaccrual loans and leases held for investment (1)$166,113  $95,602  $70,511 
Accruing loans contractually past due 90 days or more -   -   - 
Foreclosed assets, net 1,449   1,701   (252)
Total nonperforming assets ("NPAs")$167,562  $97,303  $70,259 
      
Performing TDRs held for investment$15,037  $8,978  $6,059 
      
Nonaccrual loans and leases held for investment     
to loans and leases held for investment 0.84%  0.48%  
Nonperforming assets to loans and leases     
held for investment and foreclosed assets 0.85%  0.49%  
      
Loan and Lease Credit Risk Ratings:     
Pass$18,635,004  $18,698,942  $(63,938)
Special mention 766,397   898,658   (132,261)
Classified 293,230   147,705   145,525 
Total loans and leases held for investment,     
net of deferred fees$19,694,631  $19,745,305  $(50,674)
      
Classified loans and leases held for investment     
to loans and leases held for investment 1.49%  0.75%  
      
Allowance for Credit Losses:     
Allowance for credit losses$381,621  $274,863  $106,758 
Provision for credit losses (for the quarter)$120,000  $112,000  $8,000 
Net charge-offs (for the quarter)$13,242  $19,110  $(5,868)
Net charge-offs to average loans and leases     
(for the quarter) 0.27%  0.40%  
Allowance for credit losses to loans and leases     
held for investment 1.94%  1.39%  
Allowance for credit losses to nonaccrual loans     
and leases held for investment 229.7%  287.5%  
      
(1) Nonaccrual loans include guaranteed amounts of $16.2 million at June 30, 2020 and $16.0 million    
at March 31, 2020.     
      

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

During the second quarter of 2020, classified loans and leases increased by $145.5 million, while special mention loans and leases decreased by $132.3 million. The increase in classified loans and leases and the decrease in special mention loans and leases was due primarily to three security monitoring loans totaling $119.2 million and two retail real estate loans totaling $42.0 million migrating out of special mention and into the classified category. 

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

 June 30, 2020 March 31, 2020 Increase (Decrease)
   Accruing   Accruing   Accruing
   and 30-89   and 30-89   and 30-89
   Days Past   Days Past   Days Past
 Nonaccrual Due Nonaccrual Due Nonaccrual Due
            
 (Dollars in thousands)
Real estate mortgage:           
Commercial$61,771 $- $19,088 $1,807 $42,683  $(1,807)
Income producing and other           
residential 2,207  -  2,308  1,064  (101)  (1,064)
  Total real estate mortgage 63,978  -  21,396  2,871  42,582   (2,871)
Real estate construction and land:           
Commercial 337  -  351  -  (14)  - 
Residential -  1,021  -  241  -   780 
Total real estate           
  construction and land 337  1,021  351  241  (14)  780 
Commercial:           
Asset-based 19,013  3,697  17,104  -  1,909   3,697 
Venture capital 8,270  1,924  18,612  183  (10,342)  1,741 
Other commercial 73,995  191  37,726  4,393  36,269   (4,202)
Total commercial 101,278  5,812  73,442  4,576  27,836   1,236 
Consumer 520  1,067  413  518  107   549 
Total held for investment$166,113 $7,900 $95,602 $8,206 $70,511  $(306)
 

During the second quarter of 2020, nonaccrual loans and leases increased by $70.5 million due primarily to two retail real estate loans and one security monitoring loan.

CAPITAL

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

 June 30, 2020  
   Excluding March 31,
   PPP 2020 
 Actual (1)  Loans (1) Actual
PacWest Bancorp Consolidated:     
Tier 1 leverage capital ratio8.93% 9.22%(3)8.63%
Common equity tier 1 capital ratio9.97% 9.97% 9.22%
Total capital ratio13.18% 13.18% 12.07%
Tangible common equity ratio (2)8.93% 9.36%(3)9.10%
      
(1) Capital information for June 30, 2020 is preliminary.     
(2) Non-GAAP measure.     
(3) PPP loans have been excluded from total assets in denominator as they are zero risk-weighted.   
    

STOCK REPURCHASE PROGRAM

During the second quarter of 2020, there were no stock repurchases. On April 21, 2020, we announced that stock repurchases were suspended indefinitely.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $27 billion in assets headquartered in Los Angeles, California, with executive offices in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 full-service branches located in California, one branch located in Durham, North Carolina, and one branch located in Denver, Colorado. The Bank provides community banking products including lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank also offers venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States.  For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.

FORWARD LOOKING STATEMENTS

This communication contains certain forward-looking information about PacWest Bancorp that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control.  The COVID-19 pandemic is adversely affecting PacWest Bancorp, its employees, customers and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity and prospects is uncertain. The length of the COVID-19 pandemic and the severity of its impact on key macro-economic indicators such as unemployment and GDP may have a material impact on our allowance for credit losses and related provision for credit losses. Continued deterioration in general business and economic conditions could adversely affect PacWest Bancorp’s revenues and the values of its assets, including goodwill, and liabilities, lead to a tightening of credit, and increase stock price volatility. In addition, PacWest Bancorp’s results could be adversely affected by changes in interest rates, sustained high unemployment rates, deterioration in the credit quality of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment securities, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the U.S. Securities and Exchange Commission.

We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

      
PACWEST BANCORP AND SUBSIDIARIES     
CONDENSED CONSOLIDATED BALANCE SHEET     
      
 June 30, March 31, June 30,
  2020   2020   2019 
            
 (Dollars in thousands, except per share data)
ASSETS:     
Cash and due from banks$174,059  $172,570  $185,075 
Interest-earning deposits in financial institutions 1,747,077   439,690   422,663 
Total cash and cash equivalents  1,921,136   612,260   607,738 
      
Securities available-for-sale, at estimated fair value 3,851,141   3,757,663   3,807,244 
Federal Home Loan Bank stock, at cost 17,250   54,244   43,146 
Total investment securities 3,868,391   3,811,907   3,850,390 
      
Gross loans and leases held for investment 19,780,476   19,806,394   18,532,740 
Deferred fees, net (85,845)  (61,089)  (59,888)
Total loans and leases held for investment,     
net of deferred fees 19,694,631   19,745,305   18,472,852 
Allowance for loan and lease losses (301,050)  (221,292)  (135,037)
Total loans and leases held for investment, net 19,393,581   19,524,013   18,337,815 
      
Equipment leased to others under operating leases 295,191   306,530   300,668 
Premises and equipment, net 42,299   39,799   38,162 
Foreclosed assets, net 1,449   1,701   1,472 
Goodwill 1,078,670   1,078,670   2,548,670 
Core deposit and customer relationship intangibles, net 30,564   34,446   47,380 
Other assets 734,457   733,941   612,119 
Total assets$27,365,738  $26,143,267  $26,344,414 
      
LIABILITIES:     
Noninterest-bearing deposits$8,629,543  $7,510,218  $7,299,213 
Interest-bearing deposits 14,299,036   12,065,619   11,506,543 
Total deposits 22,928,579   19,575,837   18,805,756 
Borrowings 60,000   2,295,000   1,913,059 
Subordinated debentures 460,772   458,994   456,112 
Accrued interest payable and other liabilities 463,489   423,047   317,477 
Total liabilities 23,912,840   22,752,878   21,492,404 
STOCKHOLDERS' EQUITY (1) 3,452,898   3,390,389   4,852,010 
Total liabilities and stockholders’ equity$27,365,738  $26,143,267  $26,344,414 
      
Book value per share$29.17  $28.75  $40.49 
Tangible book value per share (2)$19.80  $19.31  $18.83 
Shares outstanding 118,374,603   117,916,789   119,829,104 
      
(1) Includes net unrealized gain on securities     
      available-for-sale, net$145,038  $90,916  $73,066 
(2) Non-GAAP measure.     
      


          
PACWEST BANCORP AND SUBSIDIARIES         
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS)        
          
 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30,
  2020   2020   2019   2020   2019 
                    
 (Dollars in thousands, except per share data)
Interest income:         
Loans and leases$  247,851  $  262,278  $  284,236  $  510,129  $  558,465 
Investment securities   26,038     27,446     28,948     53,484     58,628 
Deposits in financial institutions   186     1,608     1,349     1,794     1,999 
Total interest income   274,075     291,332     314,533     565,407     619,092 
          
Interest expense:         
Deposits   13,075     28,247     38,720     41,322     72,955 
Borrowings   1,319     6,778     7,210     8,097     14,920 
Subordinated debentures   5,402     6,560     7,705     11,962     15,443 
Total interest expense   19,796     41,585     53,635     61,381     103,318 
          
Net interest income   254,279     249,747     260,898     504,026     515,774 
Provision for credit losses   120,000     112,000     8,000     232,000     12,000 
Net interest income after         
provision for credit losses   134,279     137,747     252,898     272,026     503,774 
          
Noninterest income:         
Service charges on deposit accounts   2,004     2,658     3,771     4,662     7,501 
Other commissions and fees   10,111     9,721     11,590     19,832     22,598 
Leased equipment income   12,037     12,251     9,182     24,288     18,464 
Gain on sale of loans and leases   346     87     326     433     326 
Gain on sale of securities   7,715     182     22,192     7,897     24,353 
Other income   6,645     4,201     3,832     10,846     8,715 
Total noninterest income   38,858     29,100     50,893     67,958     81,957 
          
Noninterest expense:         
Compensation   61,910     61,282     68,956     123,192     139,801 
Occupancy   14,494     14,207     14,457     28,701     28,777 
Data processing   7,102     6,454     6,817     13,556     13,742 
Other professional services   4,146     4,258     4,629     8,404     9,142 
Insurance and assessments   9,373     4,249     4,098     13,622     8,136 
Intangible asset amortization   3,882     3,948     4,870     7,830     9,740 
Leased equipment depreciation   7,102     7,205     5,558     14,307     11,209 
Foreclosed assets (income) expense, net   (146)    66     (146)    (80)    (117)
Acquisition, integration and         
reorganization costs   -     -     -     -     618 
Customer related expense   4,408     3,932     3,405     8,340     6,348 
Loan expense   3,379     2,650     3,451     6,029     6,336 
Goodwill impairment   -     1,470,000     -     1,470,000     - 
Other expense   11,315     9,719     9,332     21,034     17,982 
Total noninterest expense   126,965     1,587,970     125,427      1,714,935     251,714 
          
Earnings (loss) before income taxes   46,172     (1,421,123)    178,364     (1,374,951)    334,017 
Income tax expense   12,968     11,988     50,239     24,956     93,288 
Net earnings (loss)$  33,204  $  (1,433,111) $   128,125  $  (1,399,907) $  240,729 
          
Basic and diluted earnings (loss) per share$  0.28  $  (12.23) $  1.07  $  (11.98) $  1.99 
Dividends declared and paid per share$  0.25  $  0.60  $  0.60  $  0.85  $  1.20 
                    


          
PACWEST BANCORP AND SUBSIDIARIES         
NET EARNINGS (LOSS) PER SHARE CALCULATIONS         
          
 Three Months Ended
 Six Months Ended
 June 30, March 31, June 30, June 30,
  2020   2020   2019   2020   2019 
                    
 (In thousands, except per share data)
Basic Earnings (Loss) Per Share:         
Net earnings (loss)$33,204  $(1,433,111) $128,125  $(1,399,907) $240,729 
Less: earnings allocated to unvested         
restricted stock (1) (362)  (939)  (1,190)  (1,251)  (2,343)
Net earnings (loss) allocated to         
common shares$32,842  $(1,434,050) $126,935  $(1,401,158) $238,386 
          
Weighted-average basic shares and         
unvested restricted stock outstanding 118,192   118,775   120,042   118,484   121,128 
Less: weighted-average unvested         
restricted stock outstanding (1,606)  (1,495)  (1,462)  (1,551)  (1,407)
Weighted-average basic shares         
outstanding 116,586   117,280   118,580   116,933   119,721 
          
Basic earnings (loss) per share$0.28  $(12.23) $1.07  $(11.98) $1.99 
          
Diluted Earnings (Loss) Per Share:         
Net earnings (loss) allocated to         
common shares$32,842  $(1,434,050) $126,935  $(1,401,158) $238,386 
          
Weighted-average diluted shares         
outstanding 116,586   117,280   118,580   116,933   119,721 
          
Diluted earnings (loss) per share$0.28  $(12.23) $1.07  $(11.98) $1.99 
          
(1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus        
      undistributed earnings amounts available to holders of unvested restricted stock, if any.      
       


           
PACWEST BANCORP AND SUBSIDIARIES          
AVERAGE BALANCE SHEET AND YIELD ANALYSIS          
            
 Three Months Ended
 June 30, 2020 March 31, 2020 June 30, 2019
  InterestAverage  InterestAverage  InterestAverage
 Average Income/Yield/ Average Income/Yield/ Average Income/Yield/
 BalanceExpenseCost BalanceExpenseCost BalanceExpenseCost
 (Dollars in thousands)
Assets:           
Loans and leases (1)(2)$19,951,603$248,4745.01% $19,065,035$262,7645.54% $18,239,690$284,5136.26%
Investment securities (3) 3,846,459 27,4302.87%  3,853,217 28,6412.99%  3,790,436 29,4623.12%
Deposits in financial           
institutions 733,142 1860.10%  537,384 1,6081.20%  228,702 1,3492.37%
Total interest-earning           
assets (1) 24,531,204 276,0904.53%  23,455,636 293,0135.02%  22,258,828 315,3245.68%
Other assets 2,090,023    3,643,404    3,590,361  
Total assets$26,621,227   $27,099,040   $25,849,189  
            
Liabilities and            
Stockholders' Equity:           
Interest checking$4,001,750 1,5730.16% $3,466,812 7,1350.83% $3,242,960 10,6441.32%
Money market 6,114,354 2,8560.19%  5,247,866 10,0160.77%  5,046,021 14,6041.16%
Savings 524,335 330.03%  497,959 1600.13%  525,648 2270.17%
Time 2,475,858 8,6131.40%  2,684,143 10,9361.64%  2,731,156 13,2451.95%
Total interest-bearing           
deposits 13,116,297 13,0750.40%  11,896,780 28,2470.95%  11,545,785 38,7201.35%
Borrowings 871,110 1,3190.61%  2,026,749 6,7781.35%  1,142,223 7,2102.53%
Subordinated debentures 459,466 5,4024.73%  458,399 6,5605.76%  454,901 7,7056.79%
Total interest-bearing           
liabilities 14,446,873 19,7960.55%  14,381,928 41,5851.16%  13,142,909 53,6351.64%
Noninterest-bearing           
demand deposits 8,292,151    7,357,717    7,544,027  
Other liabilities 435,353    402,617    343,364  
Total liabilities 23,174,377    22,142,262    21,030,300  
Stockholders' equity 3,446,850    4,956,778    4,818,889  
Total liabilities and           
stockholders' equity$26,621,227   $27,099,040   $25,849,189  
Net interest income (1) $256,294   $251,428   $261,689 
Net interest spread (1)  3.98%   3.86%   4.04%
Net interest margin (1)  4.20%   4.31%   4.72%
            
Total deposits (4)$21,408,448$13,0750.25% $19,254,497$28,2470.59% $19,089,812$38,7200.81%
            
(1) Tax equivalent.           
(2) Includes discount accretion on acquired loans of $2.5 million, $4.8 million, and $3.5 million for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively.
(3) Includes tax-equivalent adjustments of $1.4 million, $1.2 million, and $0.5 million for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019 related to tax-exempt income on investment securities. The federal statutory tax rate utilized was 21%.
(4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits.  The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.
 


          
PACWEST BANCORP AND SUBSIDIARIES         
FIVE QUARTER BALANCE SHEET         
          
 June 30, March 31, December 31, September 30, June 30,
  2020   2020   2019   2019   2019 
                    
 (Dollars in thousands, except per share data)
ASSETS:         
Cash and due from banks$174,059  $172,570  $172,585  $252,596  $185,075 
Interest-earning deposits in financial         
institutions 1,747,077   439,690   465,039   483,405   422,663 
Total cash and cash equivalents  1,921,136   612,260   637,624   736,001   607,738 
          
Securities available-for-sale 3,851,141   3,757,663   3,797,187   3,817,348   3,807,244 
Federal Home Loan Bank stock 17,250   54,244   40,924   26,865   43,146 
Total investment securities 3,868,391   3,811,907   3,838,111   3,844,213   3,850,390 
          
Gross loans and leases held for investment 19,780,476   19,806,394   18,910,740   18,796,011   18,532,740 
Deferred fees, net (85,845)  (61,089)  (63,868)  (60,468)  (59,888)
Total loans and leases held for         
investment, net of deferred fees 19,694,631   19,745,305   18,846,872   18,735,543   18,472,852 
Allowance for loan and lease losses (301,050)  (221,292)  (138,785)  (138,552)  (135,037)
Total loans and leases held for         
investment, net 19,393,581   19,524,013   18,708,087   18,596,991   18,337,815 
          
Equipment leased to others under         
operating leases 295,191   306,530   324,084   295,854   300,668 
Premises and equipment, net 42,299   39,799   38,585   37,926   38,162 
Foreclosed assets, net 1,449   1,701   440   1,366   1,472 
Goodwill 1,078,670   1,078,670   2,548,670   2,548,670   2,548,670 
Core deposit and customer relationship         
intangibles, net 30,564   34,446   38,394   42,547   47,380 
Other assets 734,457   733,941   636,811   621,059   612,119 
Total assets$27,365,738  $26,143,267  $26,770,806  $26,724,627  $26,344,414 
          
LIABILITIES:         
Noninterest-bearing deposits$8,629,543  $7,510,218  $7,243,298  $7,441,185  $7,299,213 
Interest-bearing deposits 14,299,036   12,065,619   11,989,738   12,292,018   11,506,543 
Total deposits 22,928,579   19,575,837   19,233,036   19,733,203   18,805,756 
Borrowings 60,000   2,295,000   1,759,008   1,253,031   1,913,059 
Subordinated debentures 460,772   458,994   458,209   456,145   456,112 
Accrued interest payable and other         
liabilities 463,489   423,047   365,856   362,140   317,477 
Total liabilities 23,912,840   22,752,878   21,816,109   21,804,519   21,492,404 
STOCKHOLDERS' EQUITY (1) 3,452,898   3,390,389   4,954,697   4,920,108   4,852,010 
Total liabilities and stockholders’          
equity$27,365,738  $26,143,267  $26,770,806  $26,724,627  $26,344,414 
          
Book value per share$29.17  $28.75  $41.36  $41.06  $40.49 
Tangible book value per share (2)$19.80  $19.31  $19.77  $19.43  $18.83 
Shares outstanding 118,374,603   117,916,789   119,781,605   119,831,192   119,829,104 
          
(1) Includes net unrealized gain on         
      securities available-for-sale, net$145,038  $90,916  $78,658  $95,887  $73,066 
(2) Non-GAAP measure.         
          


          
PACWEST BANCORP AND SUBSIDIARIES         
FIVE QUARTER STATEMENT OF EARNINGS (LOSS)         
          
 Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
  2020   2020   2019   2019  2019 
                   
 (Dollars in thousands, except per share data)
Interest income:         
Loans and leases$247,851  $262,278  $263,402  $275,978 $284,236 
Investment securities 26,038   27,446   28,135   28,806  28,948 
Deposits in financial institutions 186   1,608   2,056   2,424  1,349 
Total interest income 274,075   291,332   293,593   307,208  314,533 
          
Interest expense:         
Deposits 13,075   28,247   34,802   40,703  38,720 
Borrowings 1,319   6,778   5,189   6,852  7,210 
Subordinated debentures 5,402   6,560   6,983   7,417  7,705 
Total interest expense 19,796   41,585   46,974   54,972  53,635 
          
Net interest income 254,279   249,747   246,619   252,236  260,898 
Provision for credit losses 120,000   112,000   3,000   7,000  8,000 
Net interest income after         
provision for credit losses 134,279   137,747   243,619   245,236  252,898 
          
Noninterest income:         
Service charges on deposit accounts 2,004   2,658   3,611   3,525  3,771 
Other commissions and fees 10,111   9,721   10,170   10,855  11,590 
Leased equipment income 12,037   12,251   10,648   9,615  9,182 
Gain on sale of loans and leases 346   87   23   765  326 
Gain on sale of securities 7,715   182   184   908  22,192 
Other income 6,645   4,201   2,540   7,761  3,832 
Total noninterest income 38,858   29,100   27,176   33,429  50,893 
          
Noninterest expense:         
Compensation 61,910   61,282   74,637   71,424  68,956 
Occupancy 14,494   14,207   14,541   14,089  14,457 
Data processing 7,102   6,454   6,770   7,044  6,817 
Other professional services 4,146   4,258   4,261   4,400  4,629 
Insurance and assessments 9,373   4,249   4,168   4,100  4,098 
Intangible asset amortization 3,882   3,948   4,153   4,833  4,870 
Leased equipment depreciation 7,102   7,205   6,856   5,951  5,558 
Foreclosed assets (income) expense, net (146)  66   (3,446)  8  (146)
Acquisition, integration and         
reorganization costs -   -   (269)  -  - 
Customer related expense 4,408   3,932   3,952   3,539  3,405 
Loan expense 3,379   2,650   2,967   3,628  3,451 
Goodwill impairment -   1,470,000   -   -  - 
Other expense 11,315   9,719   5,138   7,793  9,332 
Total noninterest expense 126,965   1,587,970   123,728   126,809  125,427 
          
Earnings (loss) before income taxes 46,172   (1,421,123)  147,067   151,856  178,364 
Income tax expense 12,968   11,988   29,186   41,830  50,239 
Net earnings (loss) $33,204  $(1,433,111) $117,881  $110,026 $128,125 
          
Basic and diluted earnings (loss) per share$0.28  $(12.23) $0.98  $0.92 $1.07 
Dividends declared and paid per share$0.25  $0.60  $0.60  $0.60 $0.60 
                   


          
PACWEST BANCORP AND SUBSIDIARIES         
FIVE QUARTER SELECTED FINANCIAL DATA         
          
 At or For the Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
  2020   2020   2019   2019   2019 
 (Dollars in thousands)        
Performance Ratios:         
Return on average assets (1) 0.50%  (21.27)%  1.77%  1.65%  1.99%
Return on average equity (1) 3.87%  (116.28)%  9.49%  8.93%  10.66%
Return on average tangible equity (1)(2) 6.39%  6.88%  20.68%  19.84%  24.03%
Efficiency ratio 42.9%  40.6%  44.8%  42.3%  41.6%
Noninterest expense as a percentage         
of average assets (1) 1.92%  23.57%  1.86%  1.91%  1.95%
          
Average Yields/Costs (1):         
Yield on:         
Average loans and leases (3) 5.01%  5.54%  5.67%  5.91%  6.26%
Average interest-earning assets (3) 4.53%  5.02%  5.14%  5.41%  5.68%
Cost of:         
Average interest-bearing deposits 0.40%  0.95%  1.14%  1.34%  1.35%
Average total deposits 0.25%  0.59%  0.71%  0.83%  0.81%
Average interest-bearing liabilities 0.55%  1.16%  1.36%  1.60%  1.64%
Net interest spread (3) 3.98%  3.86%  3.78%  3.81%  4.04%
Net interest margin (3) 4.20%  4.31%  4.33%  4.46%  4.72%
          
Average Balances:         
Assets:         
Loans and leases, net of deferred fees$19,951,603  $19,065,035  $18,470,583  $18,539,281  $18,239,690 
Interest-earning assets 24,531,204   23,455,636   22,779,867   22,793,676   22,258,828 
Total assets 26,621,227   27,099,040   26,380,739   26,406,603   25,849,189 
Liabilities:         
Noninterest-bearing deposits 8,292,151   7,357,717   7,338,888   7,487,555   7,544,027 
Interest-bearing deposits 13,116,297   11,896,780   12,102,902   12,031,776   11,545,785 
Total deposits 21,408,448   19,254,497   19,441,790   19,519,331   19,089,812 
Borrowings 871,110   2,026,749   1,179,220   1,181,313   1,142,223 
Subordinated debentures 459,466   458,399   456,997   456,011   454,901 
Interest-bearing liabilities 14,446,873   14,381,928   13,739,119   13,669,100   13,142,909 
Stockholders' equity 3,446,850   4,956,778   4,930,182   4,890,746   4,818,889 
          
(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
 June 30, March 31, December 31, September 30, June 30,
  2020   2020   2019   2019   2019 
 (Dollars in thousands)        
Credit Quality Ratios:         
Nonaccrual loans and leases held for         
investment to loans and leases         
held for investment 0.84%  0.48%  0.49%  0.53%  0.44%
Nonperforming assets to loans and         
leases held for investment and         
foreclosed assets 0.85%  0.49%  0.49%  0.54%  0.45%
Classified loans and leases held for         
investment to loans and leases         
held for investment 1.49%  0.75%  0.93%  1.01%  1.03%
Provision for credit losses (for the         
quarter) to average loans and leases         
held for investment (annualized) 2.42%  2.36%  0.06%  0.15%  0.18%
Net charge-offs (for the quarter) to         
average loans and leases held         
for investment (annualized) 0.27%  0.40%  0.02%  0.10%  0.25%
Trailing 12 months net charge-offs         
to average loans and leases         
held for investment 0.20%  0.19%  0.09%  0.20%  0.18%
Allowance for credit losses to loans         
and leases held for investment 1.94%  1.39%  0.93%  0.92%  0.92%
Allowance for credit losses to         
nonaccrual loans and leases         
held for investment 229.7%  287.5%  189.1%  174.0%  209.1%
          
PacWest Bancorp Consolidated:         
Tier 1 leverage capital ratio (1) 8.93%  8.63%  9.74%  9.50%  9.49%
Common equity tier 1 capital ratio (1) 9.97%  9.22%  9.78%  9.55%  9.53%
Tier 1 capital ratio (1) 9.97%  9.22%  9.78%  9.55%  9.53%
Total capital ratio (1) 13.18%  12.07%  12.41%  12.16%  12.18%
Risk-weighted assets (1)$22,781,405  $24,214,209  $23,582,495  $23,579,614  $23,117,199 
          
Equity to assets ratio 12.62%  12.97%  18.51%  18.41%  18.42%
Tangible common equity ratio (2) 8.93%  9.10%  9.79%  9.65%  9.50%
Book value per share$29.17  $28.75  $41.36  $41.06  $40.49 
Tangible book value per share (2)$19.80  $19.31  $19.77  $19.43  $18.83 
          
Pacific Western Bank:         
Tier 1 leverage capital ratio (1) 10.03%  9.71%  10.95%  10.72%  10.76%
Common equity tier 1 capital ratio (1) 11.18%  10.38%  11.00%  10.79%  10.80%
Tier 1 capital ratio (1) 11.18%  10.38%  11.00%  10.79%  10.80%
Total capital ratio (1) 12.44%  11.39%  11.74%  11.52%  11.53%
          
(1) Capital information for June 30, 2020 is preliminary.         
(2) Non-GAAP measure.         
          

GAAP TO NON-GAAP RECONCILIATIONS

This press release contains certain non-GAAP financial disclosures for: (1) PPNR, (2) PPNR return on average assets (3) return on average tangible equity, (4) tangible common equity ratio, and (5) tangible book value per share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance.  In particular, the use of return on average tangible equity, tangible common equity ratio, tangible book value per share, and PPNR is prevalent among banking regulators, investors, and analysts.  Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, and (5) book value per share.   

The tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:

 Three Months Ended Six Months Ended
PPNR and PPNR Return June 30, March 31, June 30, June 30,
on Average Assets 2020   2020   2019   2020   2019 
                    
 (Dollars in thousands)
Net earnings (loss)$33,204  $(1,433,111) $128,125  $(1,399,907) $240,729 
Add: Provision for credit losses 120,000   112,000   8,000   232,000   12,000 
Add: Goodwill impairment -   1,470,000   -   1,470,000   - 
Add: Income tax expense 12,968   11,988   50,239   24,956   93,288 
Pre-provision, pre-goodwill impairment,         
pre-tax net revenue ("PPNR")$166,172  $160,877  $186,364  $327,049  $346,017 
          
Average assets$26,621,227  $27,099,040  $25,849,189  $26,860,133  $25,812,771 
          
Return on average assets (1) 0.50%  (21.27)%  1.99%  (10.48)%  1.88%
PPNR return on average assets (2) 2.51%  2.39%  2.89%  2.45%  2.70%
          
(1) Annualized net earnings (loss) divided by average assets.         
(2) Annualized PPNR divided by average assets.         
          


 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30,
Return on Average Tangible Equity 2020   2020   2019   2020   2019 
                    
 (Dollars in thousands)
Net earnings (loss)$33,204  $(1,433,111) $128,125  $(1,399,907) $240,729 
Add: Intangible asset amortization 3,882   3,948   4,870   7,830   9,740 
Add: Goodwill impairment -   1,470,000   -   1,470,000   - 
Adjusted net earnings$37,086  $40,837  $132,995  $77,923  $250,469 
          
Average stockholders' equity$3,446,850  $4,956,778  $4,818,889  $4,201,814  $4,817,435 
Less: Average intangible assets 1,111,302   2,569,189   2,598,762   1,840,246   2,601,288 
Average tangible common equity$2,335,548  $2,387,589  $2,220,127  $2,361,568  $2,216,147 
          
Return on average equity (1) 3.87%  (116.28)%  10.66%  (67.00)%  10.08%
Return on average tangible equity (2) 6.39%  6.88%  24.03%  6.64%  22.79%
          
(1) Annualized net earnings divided by average stockholders' equity.        
(2) Annualized adjusted net earnings divided by average tangible common equity.        
         


          
Tangible Common Equity Ratio/June 30, March 31, December 31, September 30, June 30,
Tangible Book Value Per Share 2020   2020   2019   2019   2019 
 (Dollars in thousands, except per share data)    
Stockholders' equity$3,452,898  $3,390,389  $4,954,697  $4,920,108  $4,852,010 
Less: Intangible assets 1,109,234   1,113,116   2,587,064   2,591,217   2,596,050 
Tangible common equity$2,343,664  $2,277,273  $2,367,633  $2,328,891  $2,255,960 
          
Total assets$27,365,738  $26,143,267  $26,770,806  $26,724,627  $26,344,414 
Less: Intangible assets 1,109,234   1,113,116   2,587,064   2,591,217   2,596,050 
Tangible assets$26,256,504  $25,030,151  $24,183,742  $24,133,410  $23,748,364 
          
Equity to assets ratio 12.62%  12.97%  18.51%  18.41%  18.42%
Tangible common equity ratio (1) 8.93%  9.10%  9.79%  9.65%  9.50%
          
Book value per share$29.17  $28.75  $41.36  $41.06  $40.49 
Tangible book value per share (2)$19.80  $19.31  $19.77  $19.43  $18.83 
Shares outstanding 118,374,603   117,916,789   119,781,605   119,831,192   119,829,104 
          
(1) Tangible common equity divided by tangible assets.         
(2) Tangible common equity divided by shares outstanding.         


Contact: Matthew P. Wagner
President and CEO
 Patrick J. Rusnak
Executive Vice President and CFO
Phone: 303-802-8900 714-989-4705
     
Contact: William Black
Executive Vice President
Strategy and Corporate Development
  
Phone: 919-597-7466