PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2022


LOS ANGELES, Jan. 26, 2023 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) -

FOURTH QUARTER 2022 RESULTS

$39.6M$0.3314.39%8.70%
Net Earnings Available to Common StockholdersDiluted Earnings
per Common Share
ROATCECET1

FOURTH QUARTER 2022 HIGHLIGHTS 

  • Announced leadership transition with Paul Taylor as President and CEO and Kevin Thompson as CFO
  • Strategically sold $1 billion of available-for-sale securities for a loss of $49 million to pay down FHLB borrowings and to improve the capital and liquidity position of the Bank
  • Recorded goodwill impairment of $29 million related to Civic as part of a strategy to restructure this lending subsidiary
  • Shut down Premium Finance and Multi-Family lending groups as part of a strategy to focus on relationship-based community banking, which will result in cost savings and improved capital
  • Recorded early retirement benefits and severance expense of $5.7 million as a first step in operational efficiency initiative
  • All risk-based capital ratios increased from 3Q22, with CET1 increasing from 8.56% to 8.70%
  • Credit metrics remain steady with nonperforming assets ratio of 38 basis points

FULL YEAR 2022 RESULTS

$404.3M$3.3721.04%51.0%
Net Earnings Available to Common StockholdersDiluted Earnings
per Common Share
ROATCEEfficiency Ratio

FULL YEAR 2022 HIGHLIGHTS

  • Loan growth of $5.7 billion; up 24.7% from 2021
  • Net interest income (TE) of $1.3 billion in 2022 vs. $1.1 billion in 2021; up 16.6%
  • Strong earnings allowed us to return $140 million to our stockholders through dividends

CEO COMMENTARY

Paul Taylor, President and CEO, commented, “In the fourth quarter, we initiated a new strategic plan designed to maximize shareholder value by strengthening our community bank focus, exiting non-core products, and improving our operational efficiency. The first strategic step we took was to sell $1 billion of available-for-sale securities, resulting in a loss on sale of $49 million. The proceeds were used to pay down FHLB borrowings and to improve the capital and liquidity position of the Bank going forward. Secondly, we recorded goodwill impairment of $29 million related to Civic as part of a strategy to restructure this lending subsidiary. Goodwill is a non-cash charge and has no impact on our regulatory capital ratios, cash flows, or liquidity position. We believe these actions will result in an improvement in the profitability and risk profile of Civic going forward. Next, we are slowing loan growth to preserve capital and strengthen our balance sheet, including shutting down our operations in our Premium Finance and Multi-Family lending groups. Finally, we are working to improve the overall operational efficiency of the Bank. As a first step in this initiative, we recorded early retirement benefits and severance expense of $5.7 million.”

“PacWest is a strong organization with extraordinary clients and has a talented and loyal team. Credit quality remains strong as evidenced by credit metrics such as nonperforming assets of 38 basis points and net charge-offs of four basis points for the quarter and two basis points for the year. As we head into 2023, our priority is to refocus on core relationship-based community banking, which is expected to result in increased core deposits, increased capital ratios, and an improved efficiency ratio, and allow us to maintain our credit quality at the current favorable levels.”

FINANCIAL HIGHLIGHTS

            
 At or For the    At or For the   
 Three Months Ended   Year Ended  
 December 31, September 30, Increase December 31, Increase
Financial Highlights (1) 2022   2022  (Decrease)  2022   2021  (Decrease)
 (Dollars in thousands, except per share data)
Net earnings available to           
common stockholders$39,562  $122,224  $(82,662) $404,274  $606,959  $(202,685)
Diluted earnings per           
common share$0.33  $1.02  $(0.69) $3.37  $5.10  $(1.73)
Pre-provision, pre-goodwill           
impairment, pre-tax net           
revenue ("PPNR") (2)$106,151  $178,182  $(72,031) $621,068  $660,334  $(39,266)
Return on average assets 0.48%  1.28%  (0.80)  1.05%  1.71%  (0.66)
PPNR return on average           
assets (2) 1.02%  1.73%  (0.71)  1.53%  1.86%  (0.33)
Return on average           
tangible common equity (2) 14.39%  24.11%  (9.72)  21.04%  24.41%  (3.37)
            
Yield on average loans and           
leases (tax equivalent) 5.73%  5.12%  0.61   5.07%  5.08%  (0.01)
Cost of average total           
deposits 1.37%  0.70%  0.67   0.59%  0.09%  0.50 
Net interest margin ("NIM")           
(tax equivalent) 3.41%  3.57%  (0.16)  3.49%  3.40%  0.09 
Efficiency ratio 53.3%  51.0%  2.3   51.0%  46.9%  4.1 
            
Total assets$41,228,936  $41,404,592  $(175,656) $41,228,936  $40,443,344  $785,592 
Loans and leases held           
for investment,           
net of deferred fees$28,609,129  $27,660,041  $949,088  $28,609,129  $22,941,548  $5,667,581 
Noninterest-bearing           
demand deposits$11,212,357  $12,775,756  $(1,563,399) $11,212,357  $14,543,133  $(3,330,776)
Core deposits$26,561,129  $28,559,310  $(1,998,181) $26,561,129  $32,734,949  $(6,173,820)
Total deposits$33,936,334  $34,195,872  $(259,538) $33,936,334  $34,997,757  $(1,061,423)
            
As percentage of total           
deposits:           
Noninterest-bearing           
demand deposits 33%  37%  (4)  33%  41%  (8)
Core deposits 78%  83%  (5)  78%  93%  (15)
            
Equity to assets ratio 9.58%  9.36%  0.22   9.58%  9.89%  (0.31)
Common equity tier 1           
capital ratio 8.70%  8.56%  0.14   8.70%  8.86%  (0.16)
Tier 1 capital ratio 10.60%  10.46%  0.14   10.60%  9.32%  1.28 
Total capital ratio 13.61%  13.43%  0.18   13.61%  12.69%  0.92 
Tangible common equity           
ratio (2) 5.13%  4.85%  0.28   5.13%  6.54%  (1.41)
Tangible book value per           
common share (2)$17.00  $16.11  $0.89  $17.00  $21.31  $(4.31)
            
(1) The operations of the HOA Business are included from its October 8, 2021 acquisition date and 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 decreased by $12.2 million to $322.9 million for the fourth quarter of 2022 compared to $335.2 million for the third quarter of 2022 due mainly to higher interest expense on deposits and borrowings, offset partially by higher interest income on loans and leases and deposits in financial institutions. Interest income on loans and leases increased by $58.4 million in the fourth quarter of 2022 due to a 61 basis points increase in the tax equivalent yield on average loans and leases and a $1.2 billion increase in the average balance of loans and leases compared to the third quarter of 2022. Interest income on deposits in financial institutions increased by $7.4 million in the fourth quarter of 2022 due mainly to a 147 basis points increase in the yield on average deposits in financial institutions. The tax equivalent yield on average loans and leases was 5.73% for the fourth quarter of 2022 compared to 5.12% for the third quarter of 2022. The increase in the tax equivalent yield on average loans and leases was due primarily to higher coupon interest attributable to increased rates on production and on existing variable rate loans. Interest expense on deposits increased by $56.3 million in the fourth quarter of 2022 due mainly to increased market rates that contributed to a 67 basis points increase in the cost of average total deposits. Interest expense on borrowings increased by $16.9 million due to a $1.2 billion increase in the average balance and a 231 basis points increase in the cost of average borrowings attributable mainly to having a full quarter of the higher-cost credit-linked notes outstanding.

The tax equivalent NIM was 3.41% for the fourth quarter of 2022 compared to 3.57% for the third quarter of 2022. The decrease in the NIM was due mainly to a higher cost of average interest-bearing liabilities due primarily to a $1.7 billion decrease in the average balance of core deposits and an increase in average time deposits, offset partially by higher yields on average loans and leases and deposits in financial institutions.

The cost of average total deposits was 1.37% for the fourth quarter of 2022 compared to 0.70% for the third quarter of 2022 due mainly to higher market interest rates and an increase in the average balance of time deposits.

PROVISION FOR CREDIT LOSSES

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

      
 Three Months Ended  
 December 31, September 30, Increase
Provision for Credit Losses 2022   2022  (Decrease)
          
          
          
          
  
 (In thousands)
Addition to allowance for     
loan and lease losses$14,000  $3,000  $11,000 
Reduction in reserve for     
unfunded loan commitments (4,000)  -   (4,000)
Total loan-related provision 10,000   3,000   7,000 
Addition to allowance for     
held-to-maturity securities -   -   - 
Total provision for credit losses$10,000  $3,000  $7,000 
      

The provision for credit losses was $10.0 million for the fourth quarter of 2022 compared to $3.0 million for the third quarter of 2022. The $7.0 million increase in the loan-related provision was due mainly to net loan growth in portfolios with a higher loss rate, a slight increase in the levels of special mention and classified loans and leases, and an updated economic forecast reflecting management’s expectation of a mild recession ahead.

NONINTEREST INCOME

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

      
 Three Months Ended  
 December 31, September 30, Increase
Noninterest Income 2022   2022  (Decrease)
          
          
          
          
  
 (In thousands)
Service charges on deposit accounts$3,178  $3,608  $(430)
Other commissions and fees 11,208   10,034   1,174 
Leased equipment income 12,322   12,835   (513)
Gain on sale of loans and leases 388   58   330 
(Loss) gain on sale of securities (49,302)  86   (49,388)
Dividends and gains on equity investments 661   3,228   (2,567)
Warrant (loss) income (46)  292   (338)
Other income 2,635   8,478   (5,843)
Total noninterest (loss) income$(18,956) $38,619  $(57,575)
      

Noninterest income decreased by $57.6 million to a loss of $19.0 million for the fourth quarter of 2022 compared to income of $38.6 million for the third quarter of 2022 due primarily to decreases of $49.4 million in gain on sale of securities, $5.8 million in other income, and $2.6 million in dividends and gains on equity investments. The decrease in gain on sale of securities resulted from the sales of $1.0 billion of securities for a net loss of $49.3 million compared to sales of $440.4 million of securities for a net gain of $86,000 for the third quarter of 2022. The decrease in other income was due primarily to the receipt of a $5.5 million legal settlement, net of current year legal fees, in the third quarter of 2022. The decrease in dividends and gains on equity investments was due mainly to lower fair value gains on SBIC investments and income distributions on equity investments.

NONINTEREST EXPENSE

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

      
 Three Months Ended  
 December 31, September 30, Increase
Noninterest Expense 2022   2022  (Decrease)
          
          
          
  
 (In thousands)
Compensation$106,124  $105,933  $191 
Occupancy 14,922   15,574   (652)
Data processing 9,722   9,568   154 
Other professional services 6,924   10,674   (3,750)
Insurance and assessments 7,205   7,159   46 
Intangible asset amortization 2,629   3,649   (1,020)
Leased equipment depreciation 8,627   8,908   (281)
Foreclosed assets (income) expense, net (108)  (248)  140 
Acquisition, integration and reorganization costs 5,703   -   5,703 
Customer related expense 18,197   12,673   5,524 
Loan expense 6,150   6,228   (78)
Other 11,737   15,500   (3,763)
Total operating expense 197,832   195,618   2,214 
Goodwill impairment 29,000   -   29,000 
Total noninterest expense$226,832  $195,618  $31,214 
      

Noninterest expense increased by $31.2 million to $226.8 million for the fourth quarter 2022 compared to $195.6 million for the third quarter of 2022 due primarily to a $29.0 million goodwill impairment charge related to Civic. Excluding the goodwill impairment, noninterest expense increased by $2.2 million to $197.8 million. The $2.2 million increase was due mainly to increases of $5.7 million in acquisition, integration and reorganization costs and $5.5 million in customer related expense, offset partially by decreases of $3.8 million in other expense, $3.8 million in other professional services, and $1.0 million in intangible asset amortization. The increase in acquisition, integration and reorganization costs was due to early retirement benefits and severance expense in the fourth quarter. The increase in customer related expense was due mostly to higher third-party payments for deposit customers on account analysis. The decrease in other expense was due primarily to a non-recurring legal settlement accrual in the third quarter of 2022. The decrease in other professional services was due mostly to non-recurring issuance costs of the credit-linked notes transaction in the third quarter of 2022. The decrease in intangible asset amortization was due primarily to declining amortization expense on the intangible assets added from acquisitions prior to 2021.

INCOME TAXES

The effective income tax rate was 26.3% for the fourth quarter of 2022 compared to 24.9% for the third quarter of 2022. The increase from the third quarter of 2022 was primarily due to a tax benefit recorded in the third quarter resulting from a lapsed statute. The effective tax rate for the full year 2022 was 25.4%. The effective tax rate for the full year 2023 is currently estimated to be in the range of 26% to 28%.

BALANCE SHEET HIGHLIGHTS

DEPOSITS AND CLIENT INVESTMENT FUNDS

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

         
 December 31, 2022 September 30, 2022 December 31, 2021
  % of   % of   % of
Deposit CompositionBalanceTotal BalanceTotal BalanceTotal
 (Dollars in thousands)
Noninterest-bearing demand$11,212,357 33% $12,775,756 37% $14,543,133 41%
Interest checking 6,990,377 20%  6,780,900 20%  7,319,898 21%
Money market 7,780,758 23%  8,361,779 24%  10,241,265 29%
Savings 577,637 2%  640,875 2%  630,653 2%
Total core deposits 26,561,129 78%  28,559,310 83%  32,734,949 93%
Wholesale non-maturity deposits 2,637,362 8%  2,367,544 7%  889,976 3%
Total non-maturity deposits 29,198,491 86%  30,926,854 90%  33,624,925 96%
Retail time deposits 2,434,414 7%  1,778,325 5%  1,177,147 3%
Brokered time deposits 2,303,429 7%  1,490,693 5%  195,685 1%
Total time deposits (1) 4,737,843 14%  3,269,018 10%  1,372,832 4%
Total deposits$33,936,334 100% $34,195,872 100% $34,997,757 100%
         
(1) Includes time deposits over $250,000 of $1.5 billion, $1.0 billion, and $486.9 million at December 31, 2022, September 30, 2022, and December 31, 2021, respectively.
        

Total deposits decreased by $259.5 million or 0.8% in the fourth quarter of 2022 due primarily to a $2.0 billion or 7.0% decrease in core deposits, offset partially by a $1.5 billion increase in time deposits and a $269.8 million increase in wholesale non-maturity deposits. At December 31, 2022, core deposits totaled $26.6 billion or 78% of total deposits, including $11.2 billion of noninterest-bearing demand deposits or 33% of total deposits.

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 decreased from $1.8 billion as of September 30, 2022 to $1.4 billion as of December 31, 2022, of which $0.9 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 Year Ended
Roll Forward of Loans and Leases HeldDecember 31, September 30, December 31,
for Investment, Net of Deferred Fees  2022   2022   2022 
 (Dollars in thousands)
Balance, beginning of period$27,660,041  $26,501,137  $22,941,548 
Additions:     
Production 1,287,248   1,758,107   8,435,396 
Disbursements 1,919,979   1,677,795   7,058,553 
Total production and disbursements 3,207,227   3,435,902   15,493,949 
Reductions:     
Payoffs (1,136,016)  (977,654)  (4,909,797)
Paydowns (1,050,727)  (1,256,557)  (4,755,033)
Total payoffs and paydowns (2,186,743)  (2,234,211)  (9,664,830)
Sales (2,611)  (19,635)  (63,263)
Transfers to foreclosed assets (4,714)  (2,966)  (7,985)
Charge-offs (3,352)  (4,652)  (14,037)
Transfers to loans held for sale (60,719)  (15,534)  (76,253)
Total reductions (2,258,139)  (2,276,998)  (9,826,368)
Net increase 949,088   1,158,904   5,667,581 
Balance, end of period$28,609,129  $27,660,041  $28,609,129 
      
Weighted average rate on production (1) 7.55%  5.92%  5.24%
      
(1) 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 2022. 
   

Loans and leases held for investment, net of deferred fees, increased by $949.1 million or 3.4% in the fourth quarter of 2022 to $28.6 billion at December 31, 2022. The overall increase in the loans and leases balance for the fourth quarter of 2022 was due primarily to increases in the residential real estate mortgage and residential real estate construction portfolios.

Civic loan production was $713 million for the fourth quarter of 2022 compared to $831 million for the third quarter of 2022. The Civic loan portfolio as of December 31, 2022 totaled $3.3 billion.

The weighted average rate on the $1.3 billion of production for the fourth quarter of 2022 increased to 7.55% from 5.92% for the third quarter of 2022 due primarily to the loan mix (lower percentage of multi-family production and a higher percentage of Civic production) and the increase in market interest rates.

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: 

         
 December 31, 2022 September 30, 2022 December 31, 2021
  % of   % of   % of
Loan and Lease Portfolio BalanceTotal BalanceTotal BalanceTotal
 (Dollars in thousands)
Real estate mortgage:        
Commercial$3,846,83113% $3,770,70614% $3,762,29917%
Residential 11,396,78140%  10,860,04339%  7,416,42132%
Total real estate mortgage 15,243,61253%  14,630,74953%  11,178,72049%
Real estate construction and land:        
Commercial 898,5923%  843,0863%  832,5914%
Residential 3,740,29213%  3,450,43012%  2,604,53611%
Total real estate construction        
and land 4,638,88416%  4,293,51615%  3,437,12715%
Total real estate 19,882,49669%  18,924,26568%  14,615,84764%
Commercial:        
Asset-based 5,140,20918%  5,154,65419%  4,075,47718%
Venture capital 2,033,3027%  2,001,0867%  2,320,59310%
Other commercial 1,108,4514%  1,115,4424%  1,471,9816%
Total commercial 8,281,96229%  8,271,18230%  7,868,05134%
Consumer 444,6712%  464,5942%  457,6502%
Total loans and leases held for        
investment, net of deferred fees$28,609,129100% $27,660,041100% $22,941,548100%
         
Total unfunded loan commitments$11,110,264  $11,227,234  $9,006,350 

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

The following tables present roll forwards of the allowance for credit losses on loans and leases for the periods indicated: 

      
 Three Months Ended December 31, 2022
Allowance for Credit Allowance for Reserve for  Total
Losses on Loans and Loan and  Unfunded Loan Allowance for
Leases RollforwardLease Losses Commitments Credit Losses
 (In thousands)
Beginning balance$189,327  $95,071  $284,398 
Charge-offs (3,352)  -   (3,352)
Recoveries 757   -   757 
Net charge-offs (2,595)  -   (2,595)
Provision 14,000   (4,000)  10,000 
Ending balance$200,732  $91,071  $291,803 
      
      
      
 Three Months Ended September 30, 2022
Allowance for Credit Allowance for Reserve for  Total
Losses on Loans and Loan and  Unfunded Loan Allowance for
Leases RollforwardLease Losses Commitments Credit Losses
 (In thousands)
Beginning balance$188,705  $95,071  $283,776 
Charge-offs (4,652)  -   (4,652)
Recoveries 2,274   -   2,274 
Net charge-offs (2,378)  -   (2,378)
Provision 3,000   -   3,000 
Ending balance$189,327  $95,071  $284,398 
      
      
Allowance for Credit      
Losses on Loans and Year Ended December 31,   
Leases Rollforward 2022   2021   
 (In thousands)  
Beginning balance$273,635  $433,752   
Charge-offs (14,037)  (10,715)  
Recoveries 9,205   12,598   
Net (charge-offs) recoveries (4,832)  1,883   
Provision 23,000   (162,000)  
Ending balance$291,803  $273,635   
      

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

      
Allowance for Credit LossesDecember 31, September 30, Increase
on Loans and Leases 2022   2022  (Decrease)
 (Dollars in thousands)
Allowance for loan and lease losses$200,732  $189,327  $11,405 
Reserve for unfunded loan commitments 91,071   95,071   (4,000)
Allowance for credit losses$291,803  $284,398  $7,405 
      
Provision for credit losses (for the quarter)$10,000  $3,000  $7,000 
Net charge-offs (for the quarter)$2,595  $2,378  $217 
Net charge-offs to average loans     
and leases (for the quarter) 0.04%  0.03%  
Allowance for loan and lease losses to loans     
and leases held for investment 0.70%  0.68%  
Allowance for credit losses to loans and leases     
held for investment 1.02%  1.03%  
      

The allowance for credit losses increased by $7.4 million in the fourth quarter of 2022 to $291.8 million at December 31, 2022. This increase was attributable mainly to a $10.0 million provision for credit losses, offset partially by $2.6 million in net charge-offs.

Net charge-offs over the trailing twelve months were $4.8 million, which results in net charge-offs to average loans and leases over the trailing twelve months of 0.2%.

CREDIT QUALITY

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

      
 December 31, September 30, Increase
Credit Quality Metrics  2022   2022  (Decrease)
 (Dollars in thousands)
NPAs and Performing TDRs:     
Nonaccrual loans and leases held for investment (1)$103,778  $89,742  $14,036 
Accruing loans contractually past due 90 days or more -   -   - 
Foreclosed assets, net 5,022   2,967   2,055 
Total nonperforming assets ("NPAs")$108,800  $92,709  $16,091 
      
Performing TDRs held for investment$7,141  $8,106  $(965)
      
Nonaccrual loans and leases held for investment     
to loans and leases held for investment 0.36%  0.32%  
Nonperforming assets to loans and leases     
held for investment and foreclosed assets 0.38%  0.34%  
Allowance for credit losses to nonaccrual loans     
and leases held for investment 281.2%  316.9%  
      
Loan and Lease Credit Risk Ratings:     
Pass$27,924,599  $27,099,362  $825,237 
Special mention 566,259   463,994   102,265 
Classified 118,271   96,685   21,586 
Total loans and leases held for investment,     
net of deferred fees$28,609,129  $27,660,041  $949,088 
      
Special mention loans and leases held for investment     
to loans and leases held for investment 1.98%  1.68%  
Classified loans and leases held for investment     
to loans and leases held for investment 0.41%  0.35%  
      
(1) Nonaccrual loans include SBA guaranteed amounts of $14.3 million at December 31, 2022 and $17.2 million at September 30, 2022.
      

Nonaccrual loans and leases increased by $14.0 million to $103.8 million in the fourth quarter of 2022 due primarily to an increase in nonaccrual Civic loans.

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:

            
 December 31, 2022 September 30, 2022 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
 (In thousands)
Real estate mortgage:           
Commercial$42,509 $1,047  $42,772 $14  $(263) $1,033 
Residential 45,272  69,397   25,950  21,700   19,322   47,697 
Total real estate mortgage 87,781  70,444   68,722  21,714   19,059   48,730 
Real estate construction and land:           
Commercial -  -   -  -   -   - 
Residential 10,621  26,257   7,101  3,051   3,520   23,206 
Total real estate           
construction and land 10,621  26,257   7,101  3,051   3,520   23,206 
Commercial:           
Asset-based 865  -   2,127  -   (1,262)  - 
Venture capital -  -   3,809  -   (3,809)  - 
Other commercial 4,345  385   7,616  265   (3,271)  120 
Total commercial 5,210  385   13,552  265   (8,342)  120 
Consumer 166  1,935   367  1,996   (201)  (61)
Total held for investment$103,778 $99,021  $89,742 $27,026  $14,036  $71,995 
            

Loans and leases accruing and 30-89 days past due generally fluctuate from period to period. The $72.0 million increase to $99.0 million in the fourth quarter of 2022 was due mainly to an increase in Civic delinquent loans. This was due primarily to an increase in matured loans and an increase in the dollar amount of delinquent loans which correlates with the continued growth in the Civic loan portfolio balance.

CAPITAL

The following table presents capital ratios as of the dates indicated: 

 December 31, September 30,  December 31,
  2022   2022    2021 
PacWest Bancorp Consolidated:  
Common equity tier 1 capital ratio (1) 8.70
%
  8.56
%
   8.86
%
Tier 1 capital ratio (1) 10.60
%
  10.46
%
   9.32
%
Total capital ratio (1) 13.61%  13.43%   12.69%
Tier 1 leverage capital ratio (1) 8.61
%
  8.63
%
   6.84
%
Risk-weighted assets (1) (in thousands)
$
33,033,597
  $
33,042,173
   $
28,508,808
 
Tangible common equity ratio (2) 5.13
%  4.85
%   6.54
%
Tangible common equity ratio excluding      
the impact of AOCI for securities (2)
 7.12
%  6.97
%   6.37
%
       
(1) Capital information for December 31, 2022 is preliminary.
(2) Non-GAAP measure.      

CONFERENCE CALL

PacWest Bancorp (“PacWest”) will host a conference call at 8:00 AM PT/ 11:00 AM ET on Friday, January 27, 2023, to discuss the Company’s performance for the fourth quarter of 2022.

Participants may access the conference call/webcast at:
Participant Dial-in: (888) 204-4368
Participant Webcast Link: https://event.webcasts.com/starthere.jsp?ei=1590835&tp key=aedee87ee7
Confirmation Code: 2205611

The call will be recorded and made available for replay on January 27, 2023, after 12:00 PM PT. The recording may be accessed through the link above or at https://www.pacwestbancorp.com/news-market-data/presentations/default.aspx.

ABOUT PACWEST BANCORP

PacWest is a bank holding company with over $41 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”). Pacific Western Bank is a relationship-based community bank focused on providing business banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and lease and deposit products and services through full-service branches throughout California and in Durham, North Carolina and Denver, Colorado, and loan production offices around the country. 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 often use words such as “anticipates,” “targets,” “expects,” “estimates,” “intends,” “plans,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of PacWest’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those expressed in them. Continued deterioration in general business, economic, and political conditions, geopolitical tensions, uncertainty in U.S. fiscal monetary policy, including the interest rate policies of the Federal Reserve Board, and volatility and disruptions in credit and capital markets could lead to a tightening of credit and an increase of credit losses, adversely affect PacWest’s revenues and the values of our assets, including goodwill, and liabilities, and increase stock price volatility. The risks and impacts of the COVID-19 pandemic appear to have largely subsided, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our business, financial position, and results of operations. In addition, PacWest’s results could be adversely affected by changes in interest rates, inflation, and unemployment rates, our ability to attract deposits and other sources of funding and liquidity, deterioration in the credit quality of our loan portfolio or in the value of the collateral securing those loans, deterioration in the value of our investment securities, our ability to successfully execute on our digital and innovation initiatives, the effectiveness of our risk management framework and quantitative models, 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.

All forward-looking statements in this communication are based on information available at the time the statement is made. 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     
      
 December 31, September 30, December 31,
  2022   2022   2021 
 (Dollars in thousands, except per share data)
ASSETS:     
Cash and due from banks$212,273  $216,436  $112,548 
Interest-earning deposits in financial institutions 2,027,949   2,244,272   3,944,686 
Total cash and cash equivalents  2,240,222   2,460,708   4,057,234 
      
Securities available-for-sale, at estimated fair value 4,843,487   5,891,328   10,694,458 
Securities held-to-maturity, at amortized cost,     
net of allowance for credit losses 2,269,135   2,264,601   - 
Federal Home Loan Bank stock, at cost 34,290   36,990   17,250 
Total investment securities 7,146,912   8,192,919   10,711,708 
      
Loans held for sale 65,076   15,534   - 
      
Gross loans and leases held for investment 28,726,016   27,775,962   23,026,308 
Deferred fees, net (116,887)  (115,921)  (84,760)
Total loans and leases held for investment,     
net of deferred fees 28,609,129   27,660,041   22,941,548 
Allowance for loan and lease losses (200,732)  (189,327)  (200,564)
Total loans and leases held for investment, net 28,408,397   27,470,714   22,740,984 
      
Equipment leased to others under operating leases 404,245   338,691   339,150 
Premises and equipment, net 54,315   50,781   46,740 
Foreclosed assets, net 5,022   2,967   12,843 
Goodwill 1,376,736   1,405,736   1,405,736 
Core deposit and customer relationship intangibles, net 31,381   34,010   44,957 
Other assets 1,496,630   1,432,532   1,083,992 
Total assets$41,228,936  $41,404,592  $40,443,344 
      
LIABILITIES:     
Noninterest-bearing deposits$11,212,357  $12,775,756  $14,543,133 
Interest-bearing deposits 22,723,977   21,420,116   20,454,624 
Total deposits 33,936,334   34,195,872   34,997,757 
Borrowings 1,764,030   1,864,815   - 
Subordinated debt 867,087   863,379   863,283 
Accrued interest payable and other liabilities 710,954   604,581   582,674 
Total liabilities 37,278,405   37,528,647   36,443,714 
STOCKHOLDERS' EQUITY (1) 3,950,531   3,875,945   3,999,630 
Total liabilities and stockholders’ equity$41,228,936  $41,404,592  $40,443,344 
      
Book value per common share$28.71  $28.07  $33.45 
Tangible book value per common share (2)$17.00  $16.11  $21.31 
Common shares outstanding 120,222,057   120,314,023   119,584,854 
      
(1) Includes net unrealized (loss) gain on:     
Securities available-for-sale, net$(586,450) $(637,346) $65,968 
Securities held to maturity (204,453)  (210,868)  - 
Total$(790,903) $(848,214) $65,968 
(2) Non-GAAP measure.     
      


PACWEST BANCORP AND SUBSIDIARIES         
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS    
          
 Three Months Ended Year Ended
 December 31, September 30, December 31, December 31,
  2022   2022   2021   2022   2021 
 (In thousands, except per share data)
Interest income:         
Loans and leases$404,985  $346,550  $263,662  $1,312,580  $996,457 
Investment securities 50,292   53,135   48,469   209,751   153,468 
Deposits in financial institutions 17,746   10,359   2,674   34,158   8,804 
Total interest income 473,023   410,044   314,805   1,556,489   1,158,729 
          
Interest expense:         
Deposits 117,591   61,288   6,622   200,449   27,808 
Borrowings 19,962   3,081   64   25,645   623 
Subordinated debt 12,531   10,494   7,714   39,633   26,474 
Total interest expense 150,084   74,863   14,400   265,727   54,905 
          
Net interest income 322,939   335,181   300,405   1,290,762   1,103,824 
Provision for credit losses 10,000   3,000   (6,000)  24,500   (162,000)
Net interest income after provision         
for credit losses 312,939   332,181   306,405   1,266,262   1,265,824 
          
Noninterest income:         
Service charges on deposit accounts 3,178   3,608   3,476   13,991   13,269 
Other commissions and fees 11,208   10,034   10,633   43,635   42,287 
Leased equipment income 12,322   12,835   12,602   50,586   45,746 
Gain on sale of loans and leases 388   58   172   518   1,733 
(Loss) gain on sale of securities (49,302)  86   999   (50,321)  1,615 
Dividends and gains (losses) on equity investments 661   3,228   (1,570)  (3,389)  23,115 
Warrant (loss) income (46)  292   23,990   2,490   49,341 
Other income 2,635   8,478   7,080   17,317   16,821 
Total noninterest (loss) income (18,956)  38,619   57,382   74,827   193,927 
          
Noninterest expense:         
Compensation 106,124   105,933   99,700   406,839   368,450 
Occupancy 14,922   15,574   14,656   60,964   58,422 
Data processing 9,722   9,568   8,171   38,177   30,277 
Other professional services 6,924   10,674   5,946   30,278   21,492 
Insurance and assessments 7,205   7,159   5,032   25,486   17,365 
Intangible asset amortization 2,629   3,649   3,876   13,576   12,734 
Leased equipment depreciation 8,627   8,908   9,569   35,658   35,755 
Foreclosed assets (income) expense, net (108)  (248)  (260)  (3,737)  (213)
Acquisition, integration and reorganization costs 5,703   -   5,590   5,703   9,415 
Customer related expense 18,197   12,673   6,175   55,273   20,504 
Loan expense 6,150   6,228   5,627   24,572   17,031 
Goodwill impairment 29,000   -   -   29,000   - 
Other expense 11,737   15,500   12,028   51,732   46,185 
Total noninterest expense 226,832   195,618   176,110   773,521   637,417 
          
Earnings before income taxes 67,151   175,182   187,677   567,568   822,334 
Income tax expense 17,642   43,566   51,632   143,955   215,375 
Net earnings  49,509   131,616   136,045   423,613   606,959 
Preferred stock dividends 9,947   9,392   -   19,339   - 
Net earnings available to          
common stockholders$39,562  $122,224  $136,045  $404,274  $606,959 
          
Basic and diluted earnings per common share$0.33  $1.02  $1.14  $3.37  $5.10 
Dividends declared and paid per common share$0.25  $0.25  $0.25  $1.00  $1.00 
          



PACWEST BANCORP AND SUBSIDIARIES        
NET EARNINGS PER COMMON SHARE         
          
 Three Months Ended Year Ended
 December 31, September 30, December 31, December 31,
  2022   2022   2021   2022   2021 
 (Dollars in thousands, except per share data)
Basic Earnings Per Common Share:         
Net earnings$49,509  $131,616  $136,045  $423,613  $606,959 
Less: Preferred stock dividends (9,947)  (9,392)  -   (19,339)  - 
Net earnings available to         
common stockholders 39,562   122,224   136,045   404,274   606,959 
Less: Earnings allocated to         
unvested restricted stock (1) (714)  (2,331)  (2,311)  (7,474)  (10,248)
Net earnings allocated to         
common shares$38,848  $119,893  $133,734  $396,800  $596,711 
          
Weighted average basic shares         
and unvested restricted stock         
outstanding 120,314   120,342   119,577   120,071   119,349 
Less: weighted average unvested         
restricted stock outstanding (2,503)  (2,556)  (2,314)  (2,442)  (2,255)
Weighted average basic shares         
outstanding 117,811   117,786   117,263   117,629   117,094 
          
Basic earnings per common share$0.33  $1.02  $1.14  $3.37  $5.10 
          
Diluted Earnings Per Common Share:         
Net earnings allocated to         
common shares$38,848  $119,893  $133,734  $396,800  $596,711 
          
Weighted average diluted shares         
outstanding 117,811   117,786   117,263   117,629   117,094 
          
Diluted earnings per common share$0.33  $1.02  $1.14  $3.37  $5.10 
          
(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
 December 31, 2022 September 30, 2022 December 31, 2021
  InterestAverage InterestAverage InterestAverage
 Average Income/Yield/ Average Income/Yield/ Average Income/Yield/
 BalanceExpenseCost BalanceExpenseCost BalanceExpenseCost
 (Dollars in thousands)
Assets:           
Loans and leases (1)(2)$28,192,953 $407,135 5.73% $27,038,873 $348,639 5.12% $21,367,665 $265,549 4.93%
Investment securities (3) 7,824,915  50,697 2.57%  8,803,349  54,423 2.45%  9,964,568  50,710 2.02%
Deposits in financial           
institutions 1,881,950  17,746 3.74%  1,809,809  10,359 2.27%  5,961,104  2,674 0.18%
Total interest-earning           
assets (1) 37,899,818  475,578 4.98%  37,652,031  413,421 4.36%  37,293,337  318,933 3.39%
Other assets 3,252,145     3,189,241     3,064,810   
Total assets$41,151,963    $40,841,272    $40,358,147   
            
Liabilities and            
Stockholders' Equity:          
Interest checking$7,146,333  41,427 2.30% $6,650,477  19,475 1.16% $7,767,211  2,041 0.10%
Money market 10,088,641  51,687 2.03%  10,914,027  31,780 1.16%  10,226,366  3,400 0.13%
Savings 616,298  66 0.04%  649,574  42 0.03%  634,874  39 0.02%
Time 3,909,130  24,411 2.48%  3,000,187  9,991 1.32%  1,421,859  1,142 0.32%
Total interest-bearing           
deposits 21,760,402  117,591 2.14%  21,214,265  61,288 1.15%  20,050,310  6,622 0.13%
Borrowings 1,675,738  19,962 4.73%  505,482  3,081 2.42%  234,391  64 0.11%
Subordinated debt 864,581  12,531 5.75%  863,719  10,494 4.82%  862,777  7,714 3.55%
Total interest-bearing           
liabilities 24,300,721  150,084 2.45%  22,583,466  74,863 1.32%  21,147,478  14,400 0.27%
Noninterest-bearing           
demand deposits 12,325,902     13,653,177     14,713,385   
Other liabilities 626,540     593,450     543,017   
Total liabilities 37,253,163     36,830,093     36,403,880   
Stockholders' equity 3,898,800     4,011,179     3,954,267   
Total liabilities and           
stockholders' equity$41,151,963    $40,841,272    $40,358,147   
Net interest income (1) $325,494    $338,558    $304,533  
Net interest spread (1)  2.53%   3.04%   3.12%
Net interest margin (1)  3.41%   3.57%   3.24%
            
Total deposits (4)$34,086,304 $117,591 1.37% $34,867,442 $61,288 0.70% $34,763,695 $6,622 0.08%
            
(1) Tax equivalent.           
(2) Includes net loan premium amortization of $2.5 million, $3.8 million, and $6.4 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively.
(3) Includes tax-equivalent adjustments of $0.4 million, $1.3 million, and $2.2 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021 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         
          
 December 31, September 30, June 30, March 31, December 31,
  2022   2022   2022   2022   2021 
 (Dollars in thousands, except per share data)
ASSETS:         
Cash and due from banks$212,273  $216,436  $197,027  $205,446  $112,548 
Interest-earning deposits in financial         
institutions 2,027,949   2,244,272   2,192,877   1,865,235   3,944,686 
Total cash and cash equivalents  2,240,222   2,460,708   2,389,904   2,070,681   4,057,234 
          
Securities available-for-sale 4,843,487   5,891,328   6,780,648   9,975,109   10,694,458 
Securities held-to-maturity 2,269,135   2,264,601   2,260,367   -   - 
Federal Home Loan Bank stock 34,290   36,990   33,210   17,250   17,250 
   Total investment securities 7,146,912   8,192,919   9,074,225   9,992,359   10,711,708 
          
Loans held for sale 65,076   15,534   -   -   - 
          
Gross loans and leases held for investment 28,726,016   27,775,962   26,608,541   24,439,749   23,026,308 
Deferred fees, net (116,887)  (115,921)  (107,404)  (87,677)  (84,760)
Total loans and leases held for         
investment, net of deferred fees 28,609,129   27,660,041   26,501,137   24,352,072   22,941,548 
Allowance for loan and lease losses (200,732)  (189,327)  (188,705)  (197,398)  (200,564)
Total loans and leases held for         
investment, net 28,408,397   27,470,714   26,312,432   24,154,674   22,740,984 
          
Equipment leased to others under         
operating leases 404,245   338,691   324,233   325,305 - 339,150 
Premises and equipment, net 54,315   50,781   51,083   51,011   46,740 
Foreclosed assets, net 5,022   2,967   -   304   12,843 
Goodwill 1,376,736   1,405,736   1,405,736   1,405,736   1,405,736 
Core deposit and customer relationship         
intangibles, net 31,381   34,010   37,659   41,308   44,957 
Other assets 1,496,630   1,432,532   1,355,451   1,208,261   1,083,992 
Total assets$41,228,936  $41,404,592  $40,950,723  $39,249,639  $40,443,344 
          
LIABILITIES:         
Noninterest-bearing deposits$11,212,357  $12,775,756  $13,338,029  $14,057,051  $14,543,133 
Interest-bearing deposits 22,723,977   21,420,116   20,630,123   19,167,844   20,454,624 
Total deposits 33,936,334   34,195,872   33,968,152   33,224,895   34,997,757 
Borrowings 1,764,030   1,864,815   1,592,000   991,000   - 
Subordinated debt 867,087   863,379   863,756   863,880   863,283 
Accrued interest payable and other         
liabilities 710,954   604,581   548,412   519,269   582,674 
Total liabilities 37,278,405   37,528,647   36,972,320   35,599,044   36,443,714 
STOCKHOLDERS' EQUITY (1) 3,950,531   3,875,945   3,978,403   3,650,595   3,999,630 
Total liabilities and stockholders’          
equity$41,228,936  $41,404,592  $40,950,723  $39,249,639  $40,443,344 
          
Book value per common share$28.71  $28.07  $28.93  $30.52  $33.45 
Tangible book value per common share (2)$17.00  $16.11  $16.93  $18.42  $21.31 
Common shares outstanding 120,222,057   120,314,023   120,288,024   119,601,766   119,584,854 
          
(1) Includes net unrealized (loss) gain on:         
Securities available-for-sale, net$(586,450) $(637,346) $(428,242) $(376,475) $65,968 
Securities held to maturity (204,453)  (210,868)  (216,508)  -   - 
Total$(790,903) $(848,214) $(644,750) $(376,475) $65,968 
(2) Non-GAAP measure.         


PACWEST BANCORP AND SUBSIDIARIES         
FIVE QUARTER STATEMENT OF EARNINGS         
          
 Three Months Ended
 December 31, September 30, June 30, March 31, December 31,
  2022   2022   2022   2022   2021 
 (In thousands, except per share data)
Interest income:         
Loans and leases$404,985  $346,550  $293,286  $267,759  $263,662 
Investment securities 50,292   53,135   52,902   53,422   48,469 
Deposits in financial institutions 17,746   10,359   4,330   1,723   2,674 
Total interest income 473,023   410,044   350,518   322,904   314,805 
          
Interest expense:         
Deposits 117,591   61,288   15,362   6,208   6,622 
Borrowings 19,962   3,081   2,441   161   64 
Subordinated debt 12,531   10,494   8,790   7,818   7,714 
Total interest expense 150,084   74,863   26,593   14,187   14,400 
          
Net interest income 322,939   335,181   323,925   308,717   300,405 
Provision for credit losses 10,000   3,000   11,500   -   (6,000)
Net interest income after provision         
for credit losses 312,939   332,181   312,425   308,717   306,405 
          
Noninterest income:         
Service charges on deposit accounts 3,178   3,608   3,634   3,571   3,476 
Other commissions and fees 11,208   10,034   10,813   11,580   10,633 
Leased equipment income 12,322   12,835   12,335   13,094   12,602 
Gain on sale of loans and leases 388   58   12   60   172 
(Loss) gain on sale of securities (49,302)  86   (1,209)  104   999 
Dividends and gains (losses) on equity investments 661   3,228   4,097   (11,375)  (1,570)
Warrant (loss) income (46)  292   1,615   629   23,990 
Other income 2,635   8,478   3,049   3,155   7,080 
Total noninterest (loss) income (18,956)  38,619   34,346   20,818   57,382 
          
Noninterest expense:         
Compensation 106,124   105,933   102,542   92,240   99,700 
Occupancy 14,922   15,574   15,268   15,200   14,656 
Data processing 9,722   9,568   9,258   9,629   8,171 
Other professional services 6,924   10,674   6,726   5,954   5,946 
Insurance and assessments 7,205   7,159   5,632   5,490   5,032 
Intangible asset amortization 2,629   3,649   3,649   3,649   3,876 
Leased equipment depreciation 8,627   8,908   8,934   9,189   9,569 
Foreclosed assets (income) expense, net (108)  (248)  (28)  (3,353)  (260)
Acquisition, integration and reorganization costs 5,703   -   -   -   5,590 
Customer related expense 18,197   12,673   11,748   12,655   6,175 
Loan expense 6,150   6,228   7,037   5,157   5,627 
Goodwill impairment 29,000   -   -   -   - 
Other expense 11,737   15,500   12,879   11,616   12,028 
Total noninterest expense 226,832   195,618   183,645   167,426   176,110 
          
Earnings before income taxes 67,151   175,182   163,126   162,109   187,677 
Income tax expense 17,642   43,566   40,766   41,981   51,632 
Net earnings  49,509   131,616   122,360   120,128   136,045 
Preferred stock dividends 9,947   9,392   -   -   - 
Net earnings available to          
common stockholders$39,562  $122,224  $122,360  $120,128  $136,045 
          
Basic and diluted earnings per common share$0.33  $1.02  $1.02  $1.01  $1.14 
Dividends declared and paid per common 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
 December 31, September 30, June 30, March 31, December 31,
  2022   2022   2022   2022   2021 
 (Dollars in thousands)
Performance Ratios:         
Return on average assets (1) 0.48%  1.28%  1.23%  1.22%  1.34%
Pre-provision, pre-goodwill impairment,         
pre-tax net revenue ("PPNR") return         
on average assets (1)(2) 1.02%  1.73%  1.75%  1.65%  1.79%
Return on average equity (1) 5.04%  13.02%  13.44%  12.66%  13.65%
Return on average tangible common         
equity (1)(2) 14.39%  24.11%  24.42%  20.93%  22.06%
Efficiency ratio 53.3%  51.0%  49.5%  50.1%  46.2%
Noninterest expense as a percentage         
of average assets (1) 2.19%  1.90%  1.84%  1.70%  1.73%
          
Average Yields/Costs (1):         
Yield on:         
Average loans and leases (3) 5.73%  5.12%  4.65%  4.66%  4.93%
Average investment securities (3) 2.57%  2.45%  2.32%  2.17%  2.02%
Average interest-earning assets (3) 4.98%  4.36%  3.85%  3.59%  3.39%
Cost of:         
Average interest-bearing deposits 2.14%  1.15%  0.31%  0.13%  0.13%
Average total deposits 1.37%  0.70%  0.18%  0.07%  0.08%
Average interest-bearing liabilities 2.45%  1.32%  0.49%  0.27%  0.27%
Net interest spread (3) 2.53%  3.04%  3.36%  3.32%  3.12%
Net interest margin (3) 3.41%  3.57%  3.56%  3.43%  3.24%
          
Average Balances:         
Assets:         
Loans and leases, net of deferred fees$28,192,953  $27,038,873  $25,499,773  $23,433,019  $21,367,665 
Investment securities 7,824,915   8,803,349   9,488,653   10,397,709   9,964,568 
Deposits in financial institutions 1,881,950   1,809,809   1,984,751   3,083,159   5,961,104 
Interest-earning assets 37,899,818   37,652,031   36,973,177   36,913,887   37,293,337 
Total assets 41,151,963   40,841,272   40,031,891   39,883,304   40,358,147 
Liabilities:         
Noninterest-bearing deposits 12,325,902   13,653,177   13,987,398   14,463,667   14,713,385 
Interest-bearing deposits 21,760,402   21,214,265   19,661,618   19,868,395   20,050,310 
Total deposits 34,086,304   34,867,442   33,649,016   34,332,062   34,763,695 
Borrowings 1,675,738   505,482   1,356,616   298,444   234,391 
Subordinated debt 864,581   863,719   863,653   863,572   862,777 
Interest-bearing liabilities 24,300,721   22,583,466   21,881,887   21,030,411   21,147,478 
Stockholders' equity 3,898,800   4,011,179   3,652,368   3,847,481   3,954,267 
          
(1) Annualized.         
(2) Non-GAAP measure.         
(3) Tax equivalent.         


PACWEST BANCORP AND SUBSIDIARIES        
FIVE QUARTER SELECTED FINANCIAL DATA        
          
 At or For the Three Months Ended
 December 31, September 30, June 30, March 31, December 31,
  2022   2022   2022   2022   2021 
 (Dollars in thousands, except per share data)
Credit Quality Metrics for Loans          
and Leases Held for Investment:         
Nonaccrual loans and leases$103,778  $89,742  $78,527  $66,538  $61,174 
Nonperforming assets 108,800   92,709   78,527   66,842   74,017 
Special mention loans and leases 566,259   463,994   480,261   377,315   391,611 
Classified loans and leases 118,271   96,685   104,264   82,068   116,104 
Allowance for loan and lease losses 200,732   189,327   188,705   197,398   200,564 
Allowance for credit losses 291,803   284,398   283,776   272,469   273,635 
For the quarter:         
Provision for credit losses 10,000   3,000   10,000   -   (6,000)
Net charge-offs (recoveries) 2,595   2,378   (1,307)  1,166   169 
          
Nonaccrual loans and leases to loans         
and leases 0.36%  0.32%  0.30%  0.27%  0.27%
Nonperforming assets to loans and         
leases and foreclosed assets 0.38%  0.34%  0.30%  0.27%  0.32%
Special mention loans and leases to         
loans and leases 1.98%  1.68%  1.81%  1.55%  1.71%
Classified loans and leases to loans         
and leases 0.41%  0.35%  0.39%  0.34%  0.51%
Allowance for loan and lease losses         
to loans and leases 0.70%  0.68%  0.71%  0.81%  0.87%
Allowance for credit losses to loans         
and leases 1.02%  1.03%  1.07%  1.12%  1.19%
Allowance for credit losses to         
nonaccrual loans and leases 281.18%  316.91%  361.37%  409.49%  447.31%
Net charge-offs (recoveries)         
to average loans and leases 0.04%  0.03%  (0.02)%  0.02%  0.00%
Trailing 12 months net charge-offs         
(recoveries) to average loans and         
leases 0.02%  0.01%  0.00%  (0.02)%  (0.01)%
          
PacWest Bancorp Consolidated:         
Common equity tier 1 capital ratio (1) 8.70%  8.56%  8.24%  8.64%  8.86%
Tier 1 capital ratio (1) 10.60%  10.46%  10.15%  9.07%  9.32%
Total capital ratio (1) 13.61%  13.43%  13.12%  12.27%  12.69%
Tier 1 leverage capital ratio (1) 8.61%  8.63%  8.52%  7.11%  6.84%
Risk-weighted assets (1)$33,033,597  $33,042,173  $33,009,455  $30,297,312  $28,508,808 
          
Equity to assets ratio 9.58%  9.36%  9.72%  9.30%  9.89%
Tangible common equity ratio (2) 5.13%  4.85%  5.15%  5.83%  6.54%
Book value per common share$28.71  $28.07  $28.93  $30.52  $33.45 
Tangible book value per common share (2)$17.00  $16.11  $16.93  $18.42  $21.31 
          
Pacific Western Bank:         
Common equity tier 1 capital ratio (1) 10.32%  10.17%  9.78%  9.32%  9.56%
Tier 1 capital ratio (1) 10.32%  10.17%  9.78%  9.32%  9.56%
Total capital ratio (1) 12.34%  12.16%  11.77%  11.45%  11.80%
Tier 1 leverage capital ratio (1) 8.39%  8.39%  8.21%  7.31%  7.00%
          
(1) Capital information for December 31, 2022 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 common equity, (4) tangible common equity ratio, and (5) tangible book value per common 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 PPNR, return on average tangible common equity, tangible common equity ratio, and tangible book value per common share is prevalent among banking regulators, investors, and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, and (5) book value per common share.

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

          
 Three Months Ended Year Ended
PPNR and PPNR Return December 31, September 30, December 31, December 31,
on Average Assets 2022   2022   2021   2022   2021 
 (Dollars in thousands)
Net earnings$49,509  $131,616  $136,045  $423,613  $606,959 
          
Net interest income$322,939  $335,181  $300,405  $1,290,762  $1,103,824 
Add: Noninterest (loss) income (18,956)  38,619   57,382   74,827   193,927 
Less: Noninterest expense (226,832)  (195,618)  (176,110)  (773,521)  (637,417)
Add: Goodwill impairment 29,000   -   -   29,000   - 
Pre-provision, pre-goodwill impairment,         
pre-tax net revenue ("PPNR")$106,151  $178,182  $181,677  $621,068  $660,334 
          
Average assets$41,151,963  $40,841,272  $40,358,147  $40,481,581  $35,518,488 
          
Return on average assets (1) 0.48%  1.28%  1.34%  1.05%  1.71%
PPNR return on average assets (2) 1.02%  1.73%  1.79%  1.53%  1.86%
          
(1) Annualized net earnings divided by average assets.        
(2) Annualized PPNR divided by average assets.        


 Three Months Ended Year Ended
Return on Average December 31, September 30, December 31, December 31,
Tangible Common Equity 2022   2022   2021   2022   2021 
 (Dollars in thousands)
Net earnings$49,509  $131,616  $136,045  $423,613  $606,959 
Less: Preferred stock dividends (9,947)  (9,392)  -   (19,339)  - 
Net earnings available to         
common stockholders 39,562   122,224   136,045   404,274   606,959 
Add: Intangible asset amortization 2,629   3,649   3,876   13,576   12,734 
Add: Goodwill impairment 29,000   -   -   29,000   - 
Adjusted net earnings$71,191  $125,873  $139,921  $446,850  $619,693 
          
Average stockholders' equity$3,898,800  $4,011,179  $3,954,267  $3,853,033  $3,808,019 
Less: Average intangible assets 1,438,173   1,441,689   1,437,780   1,443,528   1,269,546 
Less: Average preferred stock 498,516   498,516   -   285,488   - 
Average tangible common equity$1,962,111  $2,070,974  $2,516,487  $2,124,017  $2,538,473 
          
Return on average equity (1) 5.04%  13.02%  13.65%  10.99%  15.94%
Return on average tangible         
common equity (2) 14.39%  24.11%  22.06%  21.04%  24.41%
          
(1) Annualized net earnings divided by average stockholders' equity.      
(2) Annualized adjusted net earnings divided by average tangible common equity.     


Tangible Common Equity Ratio/         
Tangible Book Value Per December 31, September 30, June 30, March 31, December 31,
Common Share 2022   2022   2022   2022   2021 
 (Dollars in thousands, except per share data)
Stockholders' equity$3,950,531  $3,875,945  $3,978,403  $3,650,595  $3,999,630 
Less: Preferred stock 498,516   498,516   498,516   -   - 
Total common equity 3,452,015   3,377,429   3,479,887   3,650,595   3,999,630 
Less: Intangible assets 1,408,117   1,439,746   1,443,395   1,447,044   1,450,693 
Tangible common equity 2,043,898   1,937,683   2,036,492   2,203,551   2,548,937 
Add: Accumulated other         
comprehensive loss (income) 790,903   848,214   644,750   376,475   (65,968)
Adjusted tangible common equity$2,834,801  $2,785,897  $2,681,242  $2,580,026  $2,482,969 
          
Total assets$41,228,936  $41,404,592  $40,950,723  $39,249,639  $40,443,344 
Less: Intangible assets 1,408,117   1,439,746   1,443,395   1,447,044   1,450,693 
Tangible assets$39,820,819  $39,964,846  $39,507,328  $37,802,595  $38,992,651 
          
Equity to assets ratio 9.58%  9.36%  9.72%  9.30%  9.89%
Tangible common equity ratio (1) 5.13%  4.85%  5.15%  5.83%  6.54%
Tangible common equity ratio,         
excluding AOCI (2) 7.12%  6.97%  6.79%  6.82%  6.37%
Book value per common share (3)$28.71  $28.07  $28.93  $30.52  $33.45 
Tangible book value per common share (4)$17.00  $16.11  $16.93  $18.42  $21.31 
Tangible book value per common share,         
excluding AOCI (5)$23.58  $23.16  $22.29  $21.57  $20.76 
Common shares outstanding 120,222,057   120,314,023   120,288,024   119,601,766   119,584,854 
          
(1) Tangible common equity divided by tangible assets.        
(2) Adjusted tangible common equity divided by tangible assets.      
(3) Total common equity divided by common shares outstanding.      
(4) Tangible common equity divided by common shares outstanding.      
(5) Adjusted tangible common equity divided by common shares outstanding.      
          


CONTACTS 
Kevin L. Thompson
Executive Vice President, Chief Financial Officer
303.802.8934
William J. Black
Executive Vice President,
Strategy and Corporate Development
919.597.7466