PacWest Bancorp Announces Results for the Second Quarter of 2021

Los Angeles, California, UNITED STATES


LOS ANGELES, July 19, 2021 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) -

SECOND QUARTER 2021 RESULTS

$180.5M $1.52 $154.9M 29.25%
Net Earnings Diluted Earnings per Share PPNR ROATE

SECOND QUARTER 2021 HIGHLIGHTS

  • Net Earnings of $180.5 Million or $1.52 Per Diluted Share
  • Core Deposits Up $1.5 Billion or 22.9% annualized in 2Q21; Represents 91% of Total Deposits
  • Loan Growth of $527.0 Million or 11.1% annualized, Excluding PPP Loan Activity, Growth of $997.1 Million or 22.3% annualized
  • Civic Loan Production of $423 Million in 2Q21, Compared to $231 Million for Two Months in 1Q21
  • Provision for Credit Losses Benefit of $88.0 Million in 2Q21 Compared to Benefit of $48.0 Million in 1Q21
  • Net Interest Income (TE) of $270.1 Million, Compared To $264.6 Million in 1Q21
  • Noninterest Income of $40.4 Million With Continued Strength in Warrant Income
  • Noninterest Expense of $151.8 Million, Up 1% From 1Q21, Driven By Three Months of Civic Financial Services (“Civic”) Operations Compared to Two Months in 1Q21 and Higher Variable Compensation From Strong Growth Across the Company
  • Classified and Special Mention Loans Fell $15.9 Million and $96.9 Million, Respectively, From 1Q21
  • ACL Ratio of 1.54% and ALLL Ratio of 1.16%; Excluding PPP Loans, ACL Ratio of 1.59% and ALLL Ratio of 1.19%
  • Net Recoveries of $5.2 Million (11bps of Average Loans and Leases)
  • Cost of Deposits Decreased 1 bp to 10 bps
  • Loan and Lease Production of $1.7 Billion Up From $1.6 Billion in 1Q21; WAC of 4.55% vs. 4.36% in 1Q21
  • Strong Capital Position – CET1 Ratio of 10.41%
  • Total Capital Ratio Increased From 13.60% at 1Q21 to 14.99% at 2Q21
  • Tangible Book Value Per Share Increased From $20.39 at 1Q21 to $21.95 at 2Q21

CEO COMMENTARY
Matt Wagner, President and CEO, commented, “We continued to experience strong deposit growth in the second quarter driven by outstanding growth from our venture banking as well as our commercial banking clients resulting in increased liquidity. The excess liquidity at the Fed continues to be a drag on our net interest margin, which had a negative impact of approximately 73 basis points in the second quarter, however, net interest income is growing as we continue to deploy the excess liquidity.”

“We had significant loan growth in the second quarter as the economy begins to re-open after the pandemic. This loan growth was despite a $470 million reduction in the PPP loan portfolio due to increased forgiveness activity by the SBA. Excluding PPP loan activity, our loans grew by $997 million or 22.3% annualized.”

“The continued improvement in credit quality as evidenced by the net recoveries for the first half of the year and continued decreases in nonaccrual, special mention and classified loans and leases along with improved economic conditions related to the CECL forecast resulted in a provision benefit for the second consecutive quarter. Our ACL ratio, excluding PPP loans, decreased from 2.14% in the first quarter to 1.59% as of the end of the second quarter. Our second quarter results produced a return on average assets of 2.11% and a return on average tangible equity of 29.25%.”

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/0623d789-0178-417f-bc6c-55dc09803da8

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 (1) 2021   2021  (Decrease)  2021   2020  (Decrease)
 (Dollars in thousands, except per share data)
Net earnings (loss)$180,512  $150,406  $30,106  $330,918  $(1,399,907) $1,730,825 
Diluted earnings (loss)           
per share$1.52  $1.27  $0.25  $2.78  $(11.98) $14.76 
Pre-provision, pre-goodwill           
impairment, pre-tax net           
revenue ("PPNR") (2)$154,929  $155,962  $(1,033) $310,891  $327,049  $(16,158)
Return on average assets 2.11%  1.94%  0.17   2.03%  (10.48)%  12.51 
PPNR return on average           
assets (2) 1.81%  2.01%  (0.20)  1.91%  2.45%  (0.54)
Return on average           
tangible equity (2) 29.25%  25.67%  3.58   27.51%  6.64%  20.87 
            
Yield on average loans and           
leases (tax equivalent) 5.18%  5.20%  (0.02)  5.19%  5.27%  (0.08)
Cost of average total           
deposits 0.10%  0.11%  (0.01)  0.11%  0.41%  (0.30)
Net interest margin ("NIM")           
(tax equivalent) 3.40%  3.69%  (0.29)  3.53%  4.26%  (0.73)
Efficiency ratio 47.9%  46.4%  1.5   47.2%  41.8%  5.4 
            
Total assets$34,867,987  $32,856,533  $2,011,454  $34,867,987  $27,365,738  $7,502,249 
Loans and leases held           
for investment,           
net of deferred fees$19,506,257  $18,979,228  $527,029  $19,506,257  $19,694,631  $(188,374)
Noninterest-bearing           
demand deposits$11,252,286  $11,017,462  $234,824  $11,252,286  $8,629,543  $2,622,743 
Core deposits$27,038,161  $25,576,348  $1,461,813  $27,038,161  $19,535,814  $7,502,347 
Total deposits$29,647,034  $28,223,291  $1,423,743  $29,647,034  $22,928,579  $6,718,455 
            
As percentage of total           
deposits:           
Noninterest-bearing           
demand deposits 38%  39%  (1)  38%  38%  - 
Core deposits 91%  91%  -   91%  85%  6 
            
Equity to assets ratio 11.03%  11.12%  (0.09)  11.03%  12.62%  (1.59)
Common equity tier 1           
capital ratio 10.41%  10.39%  0.02   10.41%  9.97%  0.44 
Total capital ratio 14.99%  13.60%  1.39   14.99%  13.18%  1.81 
Tangible common equity           
ratio (2) 7.80%  7.68%  0.12   7.80%  8.93%  (1.13)
Book value per share$32.17  $30.68  $1.49  $32.17  $29.17  $3.00 
Tangible book value per           
share (2)$21.95  $20.39  $1.56  $21.95  $19.80  $2.15 
            
(1) The operations of Civic are included from its February 1, 2021 acquisition date.      
(2) Non-GAAP measure.
            

INCOME STATEMENT HIGHLIGHTS

NET INTEREST INCOME

Net interest income increased by $5.0 million to $266.3 million for the second quarter of 2021 compared to $261.3 million for the first quarter of 2021 due mainly to higher income on investment securities and loans and leases, partially offset by higher interest expense resulting from the $400 million of subordinated debt issued on April 30, 2021. The tax equivalent yield on average loans and leases was 5.18% for the second quarter of 2021 compared to 5.20% for the first quarter of 2021. The decrease in the tax equivalent yield on average loans and leases was primarily due to lower amortized loan fee income of $1.4 million and lower loan discount accretion of $0.4 million.

The tax equivalent NIM was 3.40% for the second quarter of 2021 compared to 3.69% for the first quarter of 2021. The decrease in the NIM was primarily due to the change in the earning assets mix driven by the increase in the investment portfolio and cash at the Federal Reserve as a percentage of earning assets. The average balance of deposits in financial institutions increased by $1.6 billion to $6.3 billion, the average balance of investment securities increased by $1.1 billion to $6.5 billion, and the average balance of loans and leases increased by $130.1 million in the second quarter of 2021. This excess liquidity had a negative impact on the second quarter tax equivalent NIM of approximately 73 basis points.

The cost of average total deposits decreased to 0.10% in the second quarter of 2021 from 0.11% for the first quarter of 2021. The lower cost of average total deposits was due primarily to the increased average balance of noninterest-bearing deposits.

PROVISION FOR CREDIT LOSSES

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

 Three Months Ended  
 June 30, March 31, Increase
Provision for Credit Losses 2021   2021  (Decrease)
 (In thousands)  
(Reduction in) addition to allowance for loan     
and lease losses$(72,000) $(53,000) $(19,000)
(Reduction in) addition to reserve for     
unfunded loan commitments (16,000)  5,000   (21,000)
Total provision for credit losses$(88,000) $(48,000) $(40,000)
            

The provision for credit losses decreased by $40.0 million to a benefit of $88.0 million for the second quarter of 2021 compared to a $48.0 million benefit for the first quarter of 2021. This reduction reflected improvement in both macro-economic forecast variables and loan portfolio credit quality metrics along with decreased provisions for individually evaluated loans and leases and for unfunded commitments.

NONINTEREST INCOME

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

 Three Months Ended  
 June 30, March 31, Increase
Noninterest Income2021 2021 (Decrease)
 (In thousands)  
Service charges on deposit accounts$3,452 $2,934 $518 
Other commissions and fees 10,704  9,158  1,546 
Leased equipment income 10,847  11,354  (507)
Gain on sale of loans and leases 1,422  139  1,283 
Gain on sale of securities -  101  (101)
Other income:     
Dividends and gains on equity investments 5,394  10,904  (5,510)
Warrant income 5,650  6,123  (473)
Other 2,902  4,116  (1,214)
Total noninterest income$40,371 $44,829 $(4,458)
          

Noninterest income decreased by $4.5 million to $40.4 million for the second quarter of 2021 compared to $44.8 million for the first quarter of 2021 due primarily to a decrease of $5.5 million in dividends and gains on equity investments and a $1.2 million decrease in other income, offset partially by increases of $1.5 million in other commissions and fees and $1.3 million in gain on sale of loans and leases. The decrease in dividends and gains on equity investments was due primarily to a $10.1 million gain on one equity investment in the first quarter of 2021, offset partially by higher net fair value gains on equity investments still held. The decrease in other income was due primarily to lower foreign currency translation gains and negative fair value adjustments related to servicing assets. The increase in other commissions and fees was due primarily to higher foreign exchange transaction fees and customer success fees. The increase in the gain on sale of loans and leases resulted from the sales of $52.2 million of loans for gains of $1.4 million in the second quarter of 2021 compared to sales of $72.6 million for gains of $0.1 million in the first quarter of 2021. Warrant income decreased slightly in the second quarter of 2021, but remained at elevated levels and was the third highest quarter ever.

NONINTEREST EXPENSE

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

 Three Months Ended  
 June 30, March 31, Increase
Noninterest Expense 2021  2021 (Decrease)
 (In thousands)  
Compensation$90,807  $79,882 $10,925 
Occupancy 14,784   14,054  730 
Data processing 7,758   6,957  801 
Other professional services 5,256   5,126  130 
Insurance and assessments 3,745   4,903  (1,158)
Intangible asset amortization 2,889   3,079  (190)
Leased equipment depreciation 8,614   8,969  (355)
Foreclosed assets (income) expense, net (119)  1  (120)
Acquisition, integration and reorganization costs 200   3,425  (3,225)
Customer related expense 4,973   4,818  155 
Loan expense 4,031   3,193  838 
Other 8,812   15,729  (6,917)
Total noninterest expense$151,750  $150,136 $1,614 
           

Noninterest expense increased by $1.6 million to $151.8 million for the second quarter of 2021 compared to $150.1 million for the first quarter of 2021 due primarily to an increase of $10.9 million in compensation expense, offset partially by decreases of $6.9 million in other expense, $3.2 million in acquisition, integration and reorganization costs and $1.1 million in insurance and assessments expense. The increase in compensation expense was mostly due to compensation expense related to the Civic operations as a result of three months of activity in the second quarter of 2021 compared to two months of activity in the first quarter of 2021, in addition to increases in loan production across the Company which contributed to an increase in variable compensation during the second quarter of 2021. The decrease in other expense was largely due to a legal settlement accrual in the first quarter of 2021. The decrease in acquisition, integration and reorganization costs was due to lower advisory services and integration expenses related to the closed Civic acquisition and the pending acquisition of MUFG Union Bank’s Homeowners Association Services Division. The decrease in insurance and assessments expense was primarily due to lower FDIC assessment expense resulting from a lower assessment rate partially offset by a higher assessment base.

INCOME TAXES

The effective income tax rate was 25.7% in the second quarter of 2021 compared to 26.3% for the first quarter of 2021. The decrease in the effective tax rate is due mainly to tax benefits resulting from the vesting of restricted stock and return-to-provision adjustments recorded in the second quarter of 2021. The effective income tax rate for the full year 2021 is estimated to be in the range of 25% to 27%.

BALANCE SHEET HIGHLIGHTS

DEPOSITS AND CLIENT INVESTMENT FUNDS

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

 June 30, 2021 March 31, 2021 June 30, 2020
  % of   % of   % of
Deposit CompositionBalanceTotal BalanceTotal BalanceTotal
 (Dollars in thousands)
Noninterest-bearing demand$11,252,28638% $11,017,46239% $8,629,54338%
Interest checking 7,394,47225%  6,862,39825%  4,858,16821%
Money market 7,777,19926%  7,112,61025%  5,498,15024%
Savings 614,2042%  583,8782%  549,9532%
Total core deposits 27,038,16191%  25,576,34891%  19,535,81485%
Non-core non-maturity deposits 1,122,9714%  1,162,5904%  1,217,2665%
Total non-maturity deposits 28,161,13295%  26,738,93895%  20,753,08090%
Time deposits $250,000 and under 913,3713%  940,3403%  1,522,9287%
Time deposits over $250,000 572,5312%  544,0132%  652,5713%
Total time deposits 1,485,9025%  1,484,3535%  2,175,49910%
Total deposits$29,647,034100% $28,223,291100% $22,928,579100%
               

At June 30, 2021, core deposits totaled $27.0 billion or 91% of total deposits, including $11.3 billion of noninterest-bearing demand deposits or 38% of total deposits. Core deposits increased by $1.5 billion or 22.9% annualized in the second quarter of 2021 driven by continued strong deposit growth from our venture banking clients.

In addition to deposit products, we also offer alternative, non-depository cash investment options for select clients. These alternative options include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds at June 30, 2021 were $1.3 billion, of which $1.0 billion was managed by PWAM.

LOANS AND LEASES

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

 Three Months Ended Six Months Ended
Roll Forward of Loans and Leases HeldJune 30, March 31, June 30,
for Investment, Net of Deferred Fees (1) 2021   2021   2021 
 (Dollars in thousands)
Balance, beginning of period$18,979,228  $19,083,377  $19,083,377 
Additions:     
Production 1,663,151   1,612,777   3,275,928 
Disbursements 1,662,644   1,022,986   2,685,630 
Total production and disbursements 3,325,795   2,635,763   5,961,558 
Reductions:     
Payoffs (1,969,118)  (1,635,264)  (3,604,382)
Paydowns (802,222)  (1,067,418)  (1,869,640)
Total payoffs and paydowns (2,771,340)  (2,702,682)  (5,474,022)
Sales (26,610)  (72,641)  (99,251)
Transfers to foreclosed assets -   (647)  (647)
Charge-offs (816)  (3,988)  (4,804)
Transfers to loans held for sale -   (25,554)  (25,554)
Total reductions (2,798,766)  (2,805,512)  (5,604,278)
Loans acquired through Civic acquisition -   65,600   65,600 
Net increase (decrease) 527,029   (104,149)  422,880 
Balance, end of period$19,506,257  $18,979,228  $19,506,257 
      
Weighted average rate on production (2) 4.55%  4.36%  4.46%
      
(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 41 basis points to loan yields in 2021.
   

Loans and leases held for investment, net of deferred fees, increased by $527.0 million or 11.1% annualized in the second quarter of 2021 to $19.5 billion at June 30, 2021. Excluding PPP loan activity, loans grew by $997.1 million or 22.3% annualized. The increase in the loans and leases balance for the second quarter of 2021 was primarily due to increases in the income producing and other residential, asset-based and venture capital portfolios partially offset by a reduction in the other commercial portfolio due to increased PPP loan forgiveness. The PPP forgiveness in the second quarter of 2021 was $506 million, up from $354 million in the first quarter of 2021. Remaining PPP loans total $609 million as of June 30, 2021 with $15.6 million of net fees to amortize over the remaining life of the loans. The weighted average rate on the $1.7 billion of new production for the second quarter of 2021 increased to 4.55% from 4.36% in the first quarter of 2021 due mainly to a lower amount of PPP loan originations in the second quarter compared to the first quarter.

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, 2021 March 31, 2021 June 30, 2020
  % of   % of   % of
Loan and Lease Portfolio BalanceTotal BalanceTotal BalanceTotal
 (In thousands)
Real estate mortgage:        
Commercial$3,792,19819% $3,941,61021% $4,222,07522%
Income producing and other        
residential 4,620,82224%  4,045,60321%  3,733,65919%
Total real estate mortgage 8,413,02043%  7,987,21342%  7,955,73441%
Real estate construction and land:        
Commercial 930,7855%  990,0355%  1,167,6096%
Residential 2,574,79913%  2,575,78814%  2,172,91911%
Total real estate construction        
and land 3,505,58418%  3,565,82319%  3,340,52817%
Total real estate 11,918,60461%  11,553,03661%  11,296,26258%
Commercial:        
Asset-based 3,550,90318%  3,383,40318%  3,412,43117%
Venture capital 1,749,4329%  1,495,7988%  1,814,3419%
Other commercial 1,921,90910%  2,206,63911%  2,760,27814%
Total commercial 7,222,24437%  7,085,84037%  7,987,05040%
Consumer 365,4092%  340,3522%  411,3192%
Total loans and leases held for        
investment, net of deferred fees$19,506,257100% $18,979,228100% $19,694,631100%
         
Total unfunded loan commitments$7,891,875  $8,127,999  $7,745,921 
            

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, 2021
 Allowance for Reserve for  Total
Allowance for Credit Loan and  Unfunded Loan Allowance for
Losses RollforwardLease Losses Commitments Credit Losses
 (In thousands)
Beginning balance$292,445  $90,571  $383,016 
Charge-offs (816)  -   (816)
Recoveries 5,971   -   5,971 
Net recoveries 5,155   -   5,155 
Provision (72,000)  (16,000)  (88,000)
Ending balance$225,600  $74,571  $300,171 
      
 Three Months Ended March 31, 2021
 Allowance for Reserve for  Total
Allowance for Credit Loan and  Unfunded Loan Allowance for
Losses RollforwardLease Losses Commitments Credit Losses
 (In thousands)
Beginning balance$348,181  $85,571  $433,752 
Charge-offs (3,988)  -   (3,988)
Recoveries 1,252   -   1,252 
Net charge-offs (2,736)  -   (2,736)
Provision (53,000)  5,000   (48,000)
Ending balance$292,445  $90,571  $383,016 
            

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

 June 30, March 31, Increase
Allowance for Credit Losses 2021   2021  (Decrease)
 (Dollars in thousands)
Allowance for loan and lease losses$225,600  $292,445  $(66,845)
Reserve for unfunded loan commitments 74,571   90,571   (16,000)
Allowance for credit losses$300,171  $383,016  $(82,845)
      
Provision for credit losses (for the quarter)$(88,000) $(48,000) $(40,000)
Net (recoveries) charge-offs (for the quarter)$(5,155) $2,736  $(7,891)
Net (recoveries) charge-offs to average loans and leases     
(for the quarter) (0.11)%  0.06%  
Allowance for loan and lease losses to loans     
and leases held for investment 1.16%  1.54%  
Allowance for loan and lease losses to loans     
and leases held for investment, excluding PPP loans 1.19%  1.63%  
Allowance for credit losses to loans and leases     
held for investment 1.54%  2.02%  
Allowance for credit losses to loans and leases     
held for investment, excluding PPP loans 1.59%  2.14%  
          

The allowance for credit losses decreased by $82.8 million in the second quarter of 2021 to $300.2 million at June 30, 2021. The decrease in the allowance for credit losses during the second quarter of 2021 was attributable to a provision for credit losses benefit of $88.0 million partially offset by $5.2 million in net recoveries. The allowance for credit losses ratio, excluding PPP loans, of 1.59% remains robust and significantly higher than the pre-pandemic level of 0.97% as of the January 1, 2020 CECL adoption date.

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

Net charge-offs were $2.7 million for the first quarter of 2021. Gross charge-offs of $4.0 million were reduced by recoveries of $1.3 million.

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  2021   2021  (Decrease)
 (Dollars in thousands)
NPAs and Performing TDRs:     
Nonaccrual loans and leases held for investment (1)$56,803  $67,652  $(10,849)
Accruing loans contractually past due 90 days or more -   -   - 
Foreclosed assets, net 13,227   14,298   (1,071)
Total nonperforming assets ("NPAs")$70,030  $81,950  $(11,920)
      
Performing TDRs held for investment$40,129  $27,999  $12,130 
      
Nonaccrual loans and leases held for investment     
to loans and leases held for investment 0.29%  0.36%  
Nonperforming assets to loans and leases     
held for investment and foreclosed assets 0.36%  0.43%  
Allowance for credit losses to nonaccrual loans     
and leases held for investment 528.4%  566.2%  
      
Loan and Lease Credit Risk Ratings:     
Pass$18,822,938  $18,183,114  $639,824 
Special mention 536,052   632,997   (96,945)
Classified 147,267   163,117   (15,850)
Total loans and leases held for investment,     
net of deferred fees$19,506,257  $18,979,228  $527,029 
      
Classified loans and leases held for investment     
to loans and leases held for investment 0.75%  0.86%  
      
(1) Nonaccrual loans include SBA guaranteed amounts of $24.2 million at June 30, 2021 and $18.4 million at March 31, 2021.
 

Since pro-actively downgrading certain loans at the onset of the pandemic in the first quarter of 2020, special mention loans and leases have decreased $362.6 million from their peak in the first quarter of 2020, while classified loans and leases have decreased $146.0 million from their peak in the second quarter of 2020, and each have continued their steady decline in the second quarter of 2021. Classified and nonaccrual loans and leases are below their pre-pandemic levels and are at their lowest levels since December 31, 2013.

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, 2021 March 31, 2021 Increase (Decrease)
   Accruing   Accruing   Accruing
   and 30-89   and 30-89   and 30-89
   Days Past   Days Past   Days Past
 Nonaccrual  Due Nonaccrual Due Nonaccrual Due
 (Dollars in thousands)
Real estate mortgage:           
Commercial$32,065 $- $46,436 $5 $(14,371) $(5)
Income producing and other           
residential 6,133  2,179  2,471  6,339  3,662   (4,160)
Total real estate mortgage 38,198  2,179  48,907  6,344  (10,709)  (4,165)
Real estate construction and land:           
Commercial 284  -  302  -  (18)  - 
Residential 1,934  22,714  416  1,241  1,518   21,473 
Total real estate           
construction and land 2,218  22,714  718  1,241  1,500   21,473 
Commercial:           
Asset-based 1,973  -  2,379  -  (406)  - 
Venture capital 2,717  -  2,432  6,750  285   (6,750)
Other commercial 11,337  270  12,660  1,251  (1,323)  (981)
Total commercial 16,027  270  17,471  8,001  (1,444)  (7,731)
Consumer 360  1,454  556  954  (196)  500 
Total held for investment$56,803 $26,617 $67,652 $16,540 $(10,849) $10,077 
                    

During the second quarter of 2021, nonaccrual loans and leases decreased by $10.8 million due primarily to the payoff of one retail commercial real estate loan.

CAPITAL

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

 June 30, 2021  
   Excluding March 31,
   PPP 2021
 Actual (1)  Loans (1) Actual
PacWest Bancorp Consolidated:     
Tier 1 leverage capital ratio7.67% 7.89%(3)7.95%
Common equity tier 1 capital ratio10.41% 10.41% 10.39%
Total capital ratio14.99% 14.99% 13.60%
Tangible common equity ratio (2)7.80% 7.94%(3)7.68%
      
(1) Capital information for June 30, 2021 is preliminary.    
(2) Non-GAAP measure.     
(3) PPP loans have been excluded from total assets in denominator as they are zero risk-weighted.
 

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $34 billion in assets headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 70 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 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 has adversely affected PacWest, its employees, customers and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity and prospects is uncertain. The risks from the COVID-19 pandemic have decreased as the pandemic subsides, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our allowance for credit losses and related provision for credit losses. Continued deterioration in general business and economic conditions could adversely affect PacWest’s revenues and the values of its assets, including goodwill, and liabilities, lead to a tightening of credit, and increase stock price volatility. In addition, PacWest’s results could be adversely affected by changes in interest rates, sustained high unemployment rates, deterioration in the credit quality of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment securities, the magnitude of individual loan losses on security monitoring loans, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission.

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

PACWEST BANCORP AND SUBSIDIARIES     
CONDENSED CONSOLIDATED BALANCE SHEET     
      
 June 30, March 31, June 30,
  2021   2021   2020 
 (Dollars in thousands, except per share data)
ASSETS:     
Cash and due from banks$179,505  $177,199  $174,059 
Interest-earning deposits in financial institutions 5,678,587   5,517,667   1,747,077 
Total cash and cash equivalents  5,858,092   5,694,866   1,921,136 
      
Securities available-for-sale, at estimated fair value 7,198,608   5,941,690   3,851,141 
Federal Home Loan Bank stock, at cost 17,250   17,250   17,250 
Total investment securities 7,215,858   5,958,940   3,868,391 
      
Loans held for sale -   25,554   - 
      
Gross loans and leases held for investment 19,580,731   19,055,165   19,780,476 
Deferred fees, net (74,474)  (75,937)  (85,845)
Total loans and leases held for investment,     
net of deferred fees 19,506,257   18,979,228   19,694,631 
Allowance for loan and lease losses (225,600)  (292,445)  (301,050)
Total loans and leases held for investment, net 19,280,657   18,686,783   19,393,581 
      
Equipment leased to others under operating leases 313,574   327,413   295,191 
Premises and equipment, net 39,541   39,622   42,299 
Foreclosed assets, net 13,227   14,298   1,449 
Goodwill 1,204,118   1,204,092   1,078,670 
Core deposit and customer relationship intangibles, net 18,423   21,312   30,564 
Other assets 924,497   883,653   734,457 
Total assets$34,867,987  $32,856,533  $27,365,738 
      
LIABILITIES:     
Noninterest-bearing deposits$11,252,286  $11,017,462  $8,629,543 
Interest-bearing deposits 18,394,748   17,205,829   14,299,036 
Total deposits 29,647,034   28,223,291   22,928,579 
Borrowings 6,625   19,750   60,000 
Subordinated debentures 861,788   465,814   460,772 
Accrued interest payable and other liabilities 505,859   493,541   463,489 
Total liabilities 31,021,306   29,202,396   23,912,840 
STOCKHOLDERS' EQUITY (1) 3,846,681   3,654,137   3,452,898 
Total liabilities and stockholders’ equity$34,867,987  $32,856,533  $27,365,738 
      
Book value per share$32.17  $30.68  $29.17 
Tangible book value per share (2)$21.95  $20.39  $19.80 
Shares outstanding 119,555,102   119,105,642   118,374,603 
      
(1) Includes net unrealized gain on securities     
available-for-sale, net$145,516  $106,381  $145,038 
(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,
  2021   2021   2020   2021   2020 
 (Dollars in thousands, except per share data)
Interest income:         
Loans and leases$244,529  $241,544  $247,851  $486,073  $510,129 
Investment securities 33,954   30,265   26,038   64,219   53,484 
Deposits in financial institutions 2,022   1,528   186   3,550   1,794 
Total interest income 280,505   273,337   274,075   553,842   565,407 
          
Interest expense:         
Deposits 7,269   7,500   13,075   14,769   41,322 
Borrowings 265   193   1,319   458   8,097 
Subordinated debentures 6,663   4,375   5,402   11,038   11,962 
Total interest expense 14,197   12,068   19,796   26,265   61,381 
          
Net interest income 266,308   261,269   254,279   527,577   504,026 
Provision for credit losses (88,000)  (48,000)  120,000   (136,000)  232,000 
Net interest income after provision         
for credit losses 354,308   309,269   134,279   663,577   272,026 
          
Noninterest income:         
Service charges on deposit accounts 3,452   2,934   2,004   6,386   4,662 
Other commissions and fees 10,704   9,158   10,111   19,862   19,832 
Leased equipment income 10,847   11,354   12,037   22,201   24,288 
Gain on sale of loans and leases 1,422   139   346   1,561   433 
Gain on sale of securities -   101   7,715   101   7,897 
Other income 13,946   21,143   6,645   35,089   10,846 
Total noninterest income 40,371   44,829   38,858   85,200   67,958 
          
Noninterest expense:         
Compensation 90,807   79,882   61,910   170,689   123,192 
Occupancy 14,784   14,054   14,494   28,838   28,701 
Data processing 7,758   6,957   7,102   14,715   13,556 
Other professional services 5,256   5,126   4,146   10,382   8,404 
Insurance and assessments 3,745   4,903   9,373   8,648   13,622 
Intangible asset amortization 2,889   3,079   3,882   5,968   7,830 
Leased equipment depreciation 8,614   8,969   7,102   17,583   14,307 
Foreclosed assets (income) expense, net (119)  1   (146)  (118)  (80)
Acquisition, integration and         
reorganization costs 200   3,425   -   3,625   - 
Customer related expense 4,973   4,818   4,408   9,791   8,340 
Loan expense 4,031   3,193   3,379   7,224   6,029 
Goodwill impairment -   -   -   -   1,470,000 
Other expense 8,812   15,729   11,315   24,541   21,034 
Total noninterest expense 151,750   150,136   126,965   301,886   1,714,935 
          
Earnings (loss) before income taxes 242,929   203,962   46,172   446,891   (1,374,951)
Income tax expense 62,417   53,556   12,968   115,973   24,956 
Net earnings (loss)$180,512  $150,406  $33,204  $330,918  $(1,399,907)
          
Basic and diluted earnings (loss) per share$1.52  $1.27  $0.28  $2.78  $(11.98)
Dividends declared and paid per share$0.25  $0.25  $0.25  $0.50  $0.85 
                    


 

PACWEST BANCORP AND SUBSIDIARIES         
NET EARNINGS (LOSS) PER SHARE CALCULATIONS        
          
 Three Months Ended
 Six Months Ended
 June 30, March 31, June 30, June 30,
  2021   2021   2020   2021   2020 
 (In thousands, except per share data)
Basic Earnings (Loss) Per Share:         
Net earnings (loss)$180,512  $150,406  $33,204  $330,918  $(1,399,907)
Less: earnings allocated to         
unvested restricted stock (1) (3,172)  (2,355)  (362)  (5,495)  (1,251)
Net earnings (loss) allocated to         
common shares$177,340  $148,051  $32,842  $325,423  $(1,401,158)
          
Weighted-average basic shares         
and unvested restricted stock         
outstanding 119,386   118,852   118,192   119,121   118,484 
Less: weighted-average unvested         
restricted stock outstanding (2,356)  (2,003)  (1,606)  (2,181)  (1,551)
Weighted-average basic shares         
outstanding 117,030   116,849   116,586   116,940   116,933 
          
Basic earnings (loss) per share$1.52  $1.27  $0.28  $2.78  $(11.98)
          
Diluted Earnings (Loss) Per Share:         
Net earnings (loss) allocated to         
common shares$177,340  $148,051  $32,842  $325,423  $(1,401,158)
          
Weighted-average diluted shares         
outstanding 117,030   116,849   116,586   116,940   116,933 
          
Diluted earnings (loss) per share$1.52  $1.27  $0.28  $2.78  $(11.98)
          
(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, 2021 March 31, 2021 June 30, 2020
  InterestAverage  InterestAverage  InterestAverage
 Average Income/Yield/ Average Income/Yield/ Average Income/Yield/
 BalanceExpenseCost BalanceExpenseCost BalanceExpenseCost
 (Dollars in thousands)
Assets:           
Loans and leases (1)(2)$19,057,420$246,1475.18% $18,927,314$242,8465.20% $19,951,603$248,4745.01%
Investment securities (3) 6,492,721 36,1112.23%  5,383,140 32,3292.44%  3,846,459 27,4302.87%
Deposits in financial           
institutions 6,347,764 2,0220.13%  4,790,231 1,5280.13%  733,142 1860.10%
Total interest-earning           
assets (1) 31,897,905 284,2803.57%  29,100,685 276,7033.86%  24,531,204 276,0904.53%
Other assets 2,428,207    2,315,197    2,090,023  
Total assets$34,326,112   $31,415,882   $26,621,227  
            
Liabilities and            
Stockholders' Equity:           
Interest checking$7,235,726 2,3940.13% $6,401,869 2,2320.14% $4,001,750 1,5730.16%
Money market 8,484,933 3,3180.16%  7,975,996 3,2780.17%  6,114,354 2,8560.19%
Savings 598,225 360.02%  572,959 350.02%  524,335 330.03%
Time 1,498,169 1,5210.41%  1,493,267 1,9550.53%  2,475,858 8,6131.40%
Total interest-bearing           
deposits 17,817,053 7,2690.16%  16,444,091 7,5000.18%  13,116,297 13,0750.40%
Borrowings 225,446 2650.47%  226,053 1930.35%  871,110 1,3190.61%
Subordinated debentures 735,725 6,6633.63%  466,101 4,3753.81%  459,466 5,4024.73%
Total interest-bearing           
liabilities 18,778,224 14,1970.30%  17,136,245 12,0680.29%  14,446,873 19,7960.55%
Noninterest-bearing           
demand deposits 11,304,757    10,173,459    8,292,151  
Other liabilities 504,089    488,930    435,353  
Total liabilities 30,587,070    27,798,634    23,174,377  
Stockholders' equity 3,739,042    3,617,248    3,446,850  
Total liabilities and           
stockholders' equity$34,326,112   $31,415,882   $26,621,227  
Net interest income (1) $270,083   $264,635   $256,294 
Net interest spread (1)  3.27%   3.57%   3.98%
Net interest margin (1)  3.40%   3.69%   4.20%
            
Total deposits (4)$29,121,810$7,2690.10% $26,617,550$7,5000.11% $21,408,448$13,0750.25%
            
(1) Tax equivalent.           
(2) Includes net loan premium amortization of $1.5 million and $1.2 million and net loan discount accretion of $1.2 million for the three months ended
June 30, 2021, March 31, 2021, and June 30, 2020, respectively.      
(3) Includes tax-equivalent adjustments of $2.2 million, $2.1 million, and $1.4 million for the three months ended June 30, 2021, 
March 31, 2021, and June 30, 2020 related to tax-exempt income on investment securities.     
The federal statutory tax rate utilized was 21%.         
(4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is 
calculated as annualized interest expense on total deposits divided by average total deposits.     
      


PACWEST BANCORP AND SUBSIDIARIES         
FIVE QUARTER BALANCE SHEET         
          
 June 30, March 31, December 31, September 30, June 30,
  2021   2021   2020   2020   2020 
 (Dollars in thousands, except per share data)
ASSETS:         
Cash and due from banks$179,505  $177,199  $150,464  $187,176  $174,059 
Interest-earning deposits in financial         
institutions 5,678,587   5,517,667   3,010,197   2,766,020   1,747,077 
Total cash and cash equivalents  5,858,092   5,694,866   3,160,661   2,953,196   1,921,136 
          
Securities available-for-sale 7,198,608   5,941,690   5,235,591   4,532,614   3,851,141 
Federal Home Loan Bank stock 17,250   17,250   17,250   17,250   17,250 
Total investment securities 7,215,858   5,958,940   5,252,841   4,549,864   3,868,391 
          
Loans held for sale -   25,554   -   -   - 
          
Gross loans and leases held for investment 19,580,731   19,055,165   19,153,357   19,101,680   19,780,476 
Deferred fees, net (74,474)  (75,937)  (69,980)  (75,480)  (85,845)
Total loans and leases held for         
investment, net of deferred fees 19,506,257   18,979,228   19,083,377   19,026,200   19,694,631 
Allowance for loan and lease losses (225,600)  (292,445)  (348,181)  (345,966)  (301,050)
Total loans and leases held for         
investment, net 19,280,657   18,686,783   18,735,196   18,680,234   19,393,581 
          
Equipment leased to others under         
operating leases 313,574   327,413   333,846   286,425   295,191 
Premises and equipment, net 39,541   39,622   39,234   40,544   42,299 
Foreclosed assets, net 13,227   14,298   14,027   13,747   1,449 
Goodwill 1,204,118   1,204,092   1,078,670   1,078,670   1,078,670 
Core deposit and customer relationship         
intangibles, net 18,423   21,312   23,641   26,813   30,564 
Other assets 924,497   883,653   860,326   797,223   734,457 
Total assets$34,867,987  $32,856,533  $29,498,442  $28,426,716  $27,365,738 
          
LIABILITIES:         
Noninterest-bearing deposits$11,252,286  $11,017,462  $9,193,827  $9,346,744  $8,629,543 
Interest-bearing deposits 18,394,748   17,205,829   15,746,890   14,618,951   14,299,036 
Total deposits 29,647,034   28,223,291   24,940,717   23,965,695   22,928,579 
Borrowings 6,625   19,750   5,000   60,000   60,000 
Subordinated debentures 861,788   465,814   465,812   463,282   460,772 
Accrued interest payable and other         
liabilities 505,859   493,541   491,962   451,508   463,489 
Total liabilities 31,021,306   29,202,396   25,903,491   24,940,485   23,912,840 
STOCKHOLDERS' EQUITY (1) 3,846,681   3,654,137   3,594,951   3,486,231   3,452,898 
Total liabilities and stockholders’          
equity$34,867,987  $32,856,533  $29,498,442  $28,426,716  $27,365,738 
          
Book value per share$32.17  $30.68  $30.36  $29.42  $29.17 
Tangible book value per share (2)$21.95  $20.39  $21.05  $20.09  $19.80 
Shares outstanding 119,555,102   119,105,642   118,414,853   118,489,927   118,374,603 
          
(1) Includes net unrealized gain on         
securities available-for-sale, net$145,516  $106,381  $172,523  $155,474  $145,038 
(2) Non-GAAP measure.         
          


PACWEST BANCORP AND SUBSIDIARIES         
FIVE QUARTER STATEMENT OF EARNINGS         
          
 Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
  2021   2021   2020   2020  2020 
 (Dollars in thousands, except per share data)
Interest income:         
Loans and leases$244,529  $241,544  $242,198  $240,811 $247,851 
Investment securities 33,954   30,265   28,843   24,443  26,038 
Deposits in financial institutions 2,022   1,528   1,135   654  186 
Total interest income 280,505   273,337   272,176   265,908  274,075 
          
Interest expense:         
Deposits 7,269   7,500   8,454   9,887  13,075 
Borrowings 265   193   37   27  1,319 
Subordinated debentures 6,663   4,375   4,477   4,670  5,402 
Total interest expense 14,197   12,068   12,968   14,584  19,796 
          
Net interest income 266,308   261,269   259,208   251,324  254,279 
Provision for credit losses (88,000)  (48,000)  10,000   97,000  120,000 
Net interest income after provision         
for credit losses 354,308   309,269   249,208   154,324  134,279 
          
Noninterest income:         
Service charges on deposit accounts 3,452   2,934   3,119   2,570  2,004 
Other commissions and fees 10,704   9,158   9,974   10,541  10,111 
Leased equipment income 10,847   11,354   9,440   9,900  12,037 
Gain on sale of loans and leases 1,422   139   1,671   35  346 
Gain on sale of securities -   101   4   5,270  7,715 
Other income 13,946   21,143   15,642   9,936  6,645 
Total noninterest income 40,371   44,829   39,850   38,252  38,858 
          
Noninterest expense:         
Compensation 90,807   79,882   73,171   75,131  61,910 
Occupancy 14,784   14,054   14,083   14,771  14,494 
Data processing 7,758   6,957   6,718   6,505  7,102 
Other professional services 5,256   5,126   6,800   4,713  4,146 
Insurance and assessments 3,745   4,903   5,064   3,939  9,373 
Intangible asset amortization 2,889   3,079   3,172   3,751  3,882 
Leased equipment depreciation 8,614   8,969   7,501   7,057  7,102 
Foreclosed assets (income) expense, net (119)  1   (272)  335  (146)
Acquisition, integration and         
reorganization costs 200   3,425   1,060   -  - 
Customer related expense 4,973   4,818   4,430   4,762  4,408 
Loan expense 4,031   3,193   3,926   3,499  3,379 
Other expense 8,812   15,729   10,029   8,939  11,315 
Total noninterest expense 151,750   150,136   135,682   133,402  126,965 
          
Earnings before income taxes 242,929   203,962   153,376   59,174  46,172 
Income tax expense 62,417   53,556   36,546   13,671  12,968 
Net earnings $180,512  $150,406  $116,830  $45,503 $33,204 
          
Basic and diluted earnings per share$1.52  $1.27  $0.99  $0.38 $0.28 
Dividends declared and paid per share$0.25  $0.25  $0.25  $0.25 $0.25 
                   


PACWEST BANCORP AND SUBSIDIARIES         
FIVE QUARTER SELECTED FINANCIAL DATA        
          
 At or For the Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
  2021   2021   2020   2020   2020 
 (Dollars in thousands)    
Performance Ratios:         
Return on average assets (1) 2.11%  1.94%  1.58%  0.65%  0.50%
Pre-provision, pre-goodwill impairment,         
pre-tax net revenue ("PPNR")         
return on average assets (1)(2) 1.81%  2.01%  2.22%  2.22%  2.51%
Return on average equity (1) 19.36%  16.86%  13.14%  5.18%  3.87%
Return on average tangible equity (1)(2) 29.25%  25.67%  19.63%  8.20%  6.39%
Efficiency ratio 47.9%  46.4%  43.6%  45.1%  42.9%
Noninterest expense as a percentage         
of average assets (1) 1.77%  1.94%  1.84%  1.90%  1.92%
          
Average Yields/Costs (1):         
Yield on:         
Average loans and leases (3) 5.18%  5.20%  5.15%  5.01%  5.01%
Average investment securities (3) 2.23%  2.44%  2.50%  2.52%  2.87%
Average interest-earning assets (3) 3.57%  3.86%  4.02%  4.13%  4.53%
Cost of:         
Average interest-bearing deposits 0.16%  0.18%  0.22%  0.27%  0.40%
Average total deposits 0.10%  0.11%  0.14%  0.17%  0.25%
Average interest-bearing liabilities 0.30%  0.29%  0.33%  0.38%  0.55%
Net interest spread (3) 3.27%  3.57%  3.69%  3.75%  3.98%
Net interest margin (3) 3.40%  3.69%  3.83%  3.90%  4.20%
          
Average Balances:         
Assets:         
Loans and leases, net of deferred fees$19,057,420  $18,927,314  $18,769,214  $19,195,737  $19,951,603 
Investment securities 6,492,721   5,383,140   4,888,993   4,107,915   3,846,459 
Deposits in financial institutions 6,347,764   4,790,231   3,576,335   2,554,349   733,142 
Interest-earning assets 31,897,905   29,100,685   27,234,542   25,858,001   24,531,204 
Total assets 34,326,112   31,415,882   29,334,789   27,935,193   26,621,227 
Liabilities:         
Noninterest-bearing deposits 11,304,757   10,173,459   9,589,789   8,812,391   8,292,151 
Interest-bearing deposits 17,817,053   16,444,091   15,045,451   14,516,923   13,116,297 
Total deposits 29,121,810   26,617,550   24,635,240   23,329,314   21,408,448 
Borrowings 225,446   226,053   237,098   181,315   871,110 
Subordinated debentures 735,725   466,101   463,951   462,375   459,466 
Interest-bearing liabilities 18,778,224   17,136,245   15,746,500   15,160,613   14,446,873 
Stockholders' equity 3,739,042   3,617,248   3,536,425   3,497,869   3,446,850 
          
(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,
  2021   2021   2020   2020   2020 
 (Dollars in thousands)    
Credit Quality Ratios:         
Nonaccrual loans and leases held for         
investment to loans and leases         
held for investment 0.29%  0.36%  0.48%  0.45%  0.84%
Nonperforming assets to loans and         
leases held for investment and         
foreclosed assets 0.36%  0.43%  0.55%  0.52%  0.85%
Classified loans and leases held for         
investment to loans and leases         
held for investment 0.75%  0.86%  1.39%  1.44%  1.49%
Provision for credit losses (for the         
quarter) to average loans and leases         
held for investment (annualized) (1.85)%  (1.03)%  0.21%  2.01%  2.42%
Net charge-offs (for the quarter) to         
average loans and leases held         
for investment (annualized) (0.11)%  0.06%  0.40%  0.75%  0.27%
Trailing 12 months net charge-offs         
to average loans and leases         
held for investment 0.27%  0.37%  0.45%  0.36%  0.20%
Allowance for loan and lease losses to         
loans and leases held for investment 1.16%  1.54%  1.82%  1.82%  1.53%
Allowance for credit losses to loans         
and leases held for investment 1.54%  2.02%  2.27%  2.33%  1.94%
Allowance for credit losses to         
nonaccrual loans and leases         
held for investment 528.4%  566.2%  475.8%  516.9%  229.7%
          
PacWest Bancorp Consolidated:         
Tier 1 leverage capital ratio (1) 7.67%  7.95%  8.55%  8.66%  8.93%
Common equity tier 1 capital ratio (1) 10.41%  10.39%  10.53%  10.45%  9.97%
Tier 1 capital ratio (1) 10.41%  10.39%  10.53%  10.45%  9.97%
Total capital ratio (1) 14.99%  13.60%  13.76%  13.74%  13.18%
Risk-weighted assets (1)$24,274,256  $23,012,350  $22,837,693  $22,114,040  $22,781,836 
          
Equity to assets ratio 11.03%  11.12%  12.19%  12.26%  12.62%
Tangible common equity ratio (2) 7.80%  7.68%  8.78%  8.71%  8.93%
Book value per share$32.17  $30.68  $30.36  $29.42  $29.17 
Tangible book value per share (2)$21.95  $20.39  $21.05  $20.09  $19.80 
          
Pacific Western Bank:         
Tier 1 leverage capital ratio (1) 8.47%  8.83%  9.53%  9.70%  10.03%
Common equity tier 1 capital ratio (1) 11.51%  11.54%  11.73%  11.70%  11.18%
Tier 1 capital ratio (1) 11.51%  11.54%  11.73%  11.70%  11.18%
Total capital ratio (1) 14.22%  12.80%  12.99%  12.95%  12.44%
          
(1) Capital information for June 30, 2021 is preliminary.        
(2) Non-GAAP measure.         
          

GAAP TO NON-GAAP RECONCILIATIONS

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

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

 Three Months Ended Six Months Ended
PPNR and PPNR Return June 30, March 31, June 30, June 30,
on Average Assets 2021   2021   2020   2021   2020 
 (Dollars in thousands)
Net earnings (loss)$180,512  $150,406  $33,204  $330,918  $(1,399,907)
Add: Provision for credit losses (88,000)  (48,000)  120,000   (136,000)  232,000 
Add: Goodwill impairment -   -   -   -   1,470,000 
Add: Income tax expense 62,417   53,556   12,968   115,973   24,956 
Pre-provision, pre-goodwill impairment,         
pre-tax net revenue ("PPNR")$154,929  $155,962  $166,172  $310,891  $327,049 
          
Average assets$34,326,112  $31,415,882  $26,621,227  $32,879,037  $26,860,133 
          
Return on average assets (1) 2.11%  1.94%  0.50%  2.03%  (10.48)%
PPNR return on average assets (2) 1.81%  2.01%  2.51%  1.91%  2.45%
          
(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 2021   2021   2020   2021   2020 
 (Dollars in thousands)
Net earnings (loss)$180,512  $150,406  $33,204  $330,918  $(1,399,907)
Add: Intangible asset amortization 2,889   3,079   3,882   5,968   7,830 
Add: Goodwill impairment -   -   -   -   1,470,000 
Adjusted net earnings$183,401  $153,485  $37,086  $336,886  $77,923 
          
Average stockholders' equity$3,739,042  $3,617,248  $3,446,850  $3,678,481  $4,201,814 
Less: Average intangible assets 1,224,208   1,192,780   1,111,302   1,208,581   1,840,246 
Average tangible common equity$2,514,834  $2,424,468  $2,335,548  $2,469,900  $2,361,568 
          
Return on average equity (1) 19.36%  16.86%  3.87%  18.14%  (67.00)%
Return on average tangible equity (2) 29.25%  25.67%  6.39%  27.51%  6.64%
          
(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 2021   2021   2020   2020   2020 
 (Dollars in thousands, except per share data)    
Stockholders' equity$3,846,681  $3,654,137  $3,594,951  $3,486,231  $3,452,898 
Less: Intangible assets 1,222,541   1,225,404   1,102,311   1,105,483   1,109,234 
Tangible common equity$2,624,140  $2,428,733  $2,492,640  $2,380,748  $2,343,664 
          
Total assets$34,867,987  $32,856,533  $29,498,442  $28,426,716  $27,365,738 
Less: Intangible assets 1,222,541   1,225,404   1,102,311   1,105,483   1,109,234 
Tangible assets$33,645,446  $31,631,129  $28,396,131  $27,321,233  $26,256,504 
          
Equity to assets ratio 11.03%  11.12%  12.19%  12.26%  12.62%
Tangible common equity ratio (1) 7.80%  7.68%  8.78%  8.71%  8.93%
          
Book value per share$32.17  $30.68  $30.36  $29.42  $29.17 
Tangible book value per share (2)$21.95  $20.39  $21.05  $20.09  $19.80 
Shares outstanding 119,555,102   119,105,642   118,414,853   118,489,927   118,374,603 
          
(1) Tangible common equity divided by tangible assets.        
(2) Tangible common equity divided by shares outstanding.        
         


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

Figure 1