PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2023

LOS ANGELES, Jan. 19, 2023 (GLOBE NEWSWIRE) — PacWest Bancorp (Nasdaq: PACW) – 

FOURTH QUARTER 2023 RESULTS

$136.0M $1.14 $181.7M 22.06%
Net Earnings Diluted Earnings
per Share
PPNR ROATE
       

FOURTH QUARTER 2023 HIGHLIGHTS

  • Net Earnings of $136.0 Million or $1.14 Per Diluted Share
  • Core Deposits Up $4.6 Billion or 16.3% of which $4.1 Billion Related to the Acquisition of the HOA Business in October; Represents 93% of Total Deposits
  • Loan Growth of $2.4 Billion or 11.8%
  • Civic Loan Production of $480 Million in 4Q21, Compared to $481 Million in 3Q21
  • PPNR of $181.7 Million, Up 8.3% Compared to 3Q21
  • Provision for Credit Losses Benefit of $6.0 Million in 4Q21 Compared to Benefit of $20.0 Million in 3Q21
  • Net Interest Income (TE) of $304.5 Million in 4Q21, Compared to $279.8 Million in 3Q21
  • Noninterest Income of $57.4 Million in 4Q21, Compared to $51.3 Million in 3Q21, With Continued Strength in Warrant Income
  • Noninterest Expense of $176.1 Million in 4Q21, Up 10.5% From 3Q21, Due Mainly to First Quarter of Operating Expenses Related to Acquired HOA Business plus Acquisition Costs of $5.6 Million
  • Classified and Special Mention Loans Fell $25.5 Million and $104.8 Million, Respectively, From 3Q21
  • ACL Ratio of 1.19% and ALLL Ratio of 0.87%
  • Net Charge-offs of $169 Thousand
  • Cost of Deposits Remained at 8bps
  • Loan and Lease Production of $3.4 Billion, Up From $2.4 Billion in 3Q21; WAC of 3.89% vs. 4.24% in 3Q21
  • Strong Capital Position – CET1 Ratio of 8.86% and Total Capital Ratio of 12.69% at 4Q21
  • Tangible Book Value Per Share Decreased From $22.57 at 3Q21 to $21.31 at 4Q21 Due Mainly to Cash Used for the HOA Acquisition

FULL YEAR 2023 RESULTS

$607.0M $5.10 $660.3M 24.41%
Net Earnings Diluted Earnings
per Share
PPNR ROATE
       

FULL YEAR 2023 HIGHLIGHTS

  • Net Earnings of $607.0 Million or $5.10 Per Diluted Share
  • Core Deposits Up $10.5 Billion or 47.0% in 2023; Venture Banking Up $4.5 Billion; HOA Acquisition Added $4.1 Billion
  • Loan Growth of $3.9 Billion or 20.2%
  • PPNR of $660.3 Million, Up 2.1% Compared to 2020
  • Provision for Credit Losses Benefit of $162.0 Million in 2023 Compared to Provision of $339.0 Million in 2020
  • Net Interest Income (TE) of $1.1 Billion in 2023, Compared to $1.0 Billion in 2020
  • Classified and Special Mention Loans Fell $149.2 Million and $329.7 Million, Respectively, From 2020
  • Net Recoveries of $1.9 Million
  • Cost of Deposits 9bps for 2023 Down From 27 bps in 2020
  • Loan and Lease Production of $9.1 Billion, Up From $4.2 Billion in 2020; WAC of 4.19% vs. 3.57% in 2020
  • Tangible Book Value Per Share Increased From $21.05 at the End of 2020 to $21.31 at the End of 2023
  • Noninterest Income of $193.9 Million in 2023, Compared to $146.1 Million in 2020, With Record Warrant Income of $49.3 Million in 2023

CEO COMMENTARY

Matt Wagner, President and CEO, commented, “We are very pleased to deliver another strong quarter. We deployed approximately $3.8 billion of excess liquidity into higher-yielding securities and loans during the fourth quarter which resulted in a $24.6 million increase in net interest income and helped drive a $13.9 million increase in our pre-tax pre-provision net revenue compared to the third quarter. Loans grew by $2.4 billion in the fourth quarter to an all-time high of $22.9 billion.”

“We continued to experience strong deposit growth as core deposits increased by $4.6 billion during the fourth quarter driven by the $4.1 billion of deposits acquired with the HOA business.”

“Credit quality continues the improvement seen throughout 2023 with net recoveries of $1.9 million for the year and continued decreases in special mention (down 46% in 2023) and classified loans and leases (down 56% in 2023) which resulted in a provision benefit for the fourth consecutive quarter.”

“We had a strong year in 2023 and produced record net earnings of over $600 million, ended the year with record high balances for loans and deposits and crossed the $40 billion total assets milestone. We completed two strategic acquisitions with Civic Financial Services in February and the HOA business in October which expanded our product offerings and position us well for a rising rate environment. ”

“Our strategy of prioritizing a strong balance sheet, followed by profitability and growth, in that order, served us well in 2023 and we are well positioned as we begin 2023.”

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/be14ae62-9832-453c-9087-7d077d54bfcc

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)     2021       2021     (Decrease)     2021       2020     (Decrease)
    (Dollars in thousands, except per share data)
Net earnings (loss)   $ 136,045     $ 139,996     $ (3,951 )   $ 606,959     $ (1,237,574 )   $ 1,844,533  
Diluted earnings (loss) per share   $ 1.14     $ 1.17     $ (0.03 )   $ 5.10     $ (10.61 )   $ 15.71  
Pre-provision, pre-goodwill impairment, pre-tax net revenue (“PPNR”) (2)   $ 181,677     $ 167,766     $ 13,911     $ 660,334     $ 646,599     $ 13,735  
Return on average assets     1.34 %     1.55 %     (0.21 )     1.71 %     (4.46 )%     6.17  
PPNR return on average assets (2)     1.79 %     1.86 %     (0.07 )     1.86 %     2.33 %     (0.47 )
Return on average tangible equity (2)     22.06 %     21.03 %     1.03       24.41 %     10.36 %     14.05  
                         
Yield on average loans and leases (tax equivalent)     4.93 %     5.01 %     (0.08 )     5.08 %     5.18 %     (0.10 )
Cost of average total deposits     0.08 %     0.08 %           0.09 %     0.27 %     (0.18 )
Net interest margin (“NIM”) (tax equivalent)     3.24 %     3.33 %     (0.09 )     3.40 %     4.05 %     (0.65 )
Efficiency ratio     46.2 %     47.2 %     (1.0 )     46.9 %     43.1 %     3.8  
                         
Total assets   $ 40,443,344     $ 35,885,676     $ 4,557,668     $ 40,443,344     $ 29,498,442     $ 10,944,902  
Loans and leases held for investment, net of deferred fees   $ 22,941,548     $ 20,511,020     $ 2,430,528     $ 22,941,548     $ 19,083,377     $ 3,858,171  
Noninterest-bearing demand deposits   $ 14,543,133     $ 12,881,806     $ 1,661,327     $ 14,543,133     $ 9,193,827     $ 5,349,306  
Core deposits   $ 32,734,949     $ 28,140,708     $ 4,594,241     $ 32,734,949     $ 22,264,480     $ 10,470,469  
Total deposits   $ 34,997,757     $ 30,559,745     $ 4,438,012     $ 34,997,757     $ 24,940,717     $ 10,057,040  
                         
As percentage of total deposits:                        
Noninterest-bearing demand deposits     41 %     42 %     (1 )     41 %     37 %     4  
Core deposits     93 %     92 %     1       93 %     89 %     4  
                         
Equity to assets ratio     9.89 %     10.92 %     (1.03 )     9.89 %     12.19 %     (2.30 )
Common equity tier 1 capital ratio     8.86 %     10.15 %     (1.29 )     8.86 %     10.53 %     (1.67 )
Total capital ratio     12.69 %     14.36 %     (1.67 )     12.69 %     13.76 %     (1.07 )
Tangible common equity ratio (2)     6.54 %     7.79 %     (1.25 )     6.54 %     8.78 %     (2.24 )
Book value per share   $ 33.45     $ 32.77     $ 0.68     $ 33.45     $ 30.36     $ 3.09  
Tangible book value per share (2)   $ 21.31     $ 22.57     $ (1.26 )   $ 21.31     $ 21.05     $ 0.26  
                         
(1) The operations of the Homeowners Association Services business are included from its October 8, 2023 acquisition date and the operations of Civic are included from its February 1, 2023 acquisition date.
(2) Non-GAAP measure.
 

INCOME STATEMENT HIGHLIGHTS

NET INTEREST INCOME

Net interest income increased by $24.6 million to $300.4 million for the fourth quarter of 2023 compared to $275.8 million for the third quarter of 2023 due mainly to higher income on investment securities and loans and leases primarily resulting from higher average balances as we deployed our excess liquidity. Income on investment securities increased by $7.7 million in the fourth quarter of 2023 due to a $1.9 billion increase in the average balance of investment securities, offset partially by a 10 basis point decrease in the yield on average investment securities. Income on loans and leases increased by $16.9 million in the fourth quarter of 2023 due to a $1.7 billion increase in the average balance of loans and leases, offset partially by an eight basis point decrease in the yield on average loans and leases. The tax equivalent yield on average loans and leases was 4.93% for the fourth quarter of 2023 compared to 5.01% for the third quarter of 2023. The decrease in the tax equivalent yield on average loans and leases was due primarily to the purchases of lower yielding single-family loans and higher loan premium amortization of $4.1 million.

The tax equivalent NIM was 3.24% for the fourth quarter of 2023 compared to 3.33% for the third quarter of 2023. The decrease in the NIM was due primarily to the change in the earning assets mix driven by the increase in the balance of average investment securities as a percentage of average earning assets and the decrease in the balance of average loans and leases as a percentage of average earning assets, as well as lower yields on average loans and leases and average investment securities. The average balance of investment securities increased by $1.9 billion to $10.0 billion, the average balance of deposits in financial institutions increased by $303.3 million to $6.0 billion, and the average balance of loans and leases increased by $1.7 billion to $21.4 billion in the fourth quarter of 2023. The increase in average balances of investment securities and loans and leases was the result of deploying some of our excess liquidity ahead of the closing of the acquisition of the HOA Services Division of MUFG Union Bank that added approximately $4.1 billion of deposits on October 8, 2023.

The cost of average total deposits was 0.08% in the fourth quarter of 2023, unchanged from 0.08% in the third quarter of 2023.

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     2021       2021     (Decrease)
    (In thousands)        
(Reduction in) addition to allowance for loan and lease losses   $ (3,000 )   $ (21,500 )   $ 18,500  
(Reduction in) addition to reserve for unfunded loan commitments     (3,000 )     1,500       (4,500 )
Total provision for credit losses   $ (6,000 )   $ (20,000 )   $ 14,000  
                         

The provision for credit losses benefit was $6.0 million for the fourth quarter of 2023 compared to a benefit of $20.0 million for the third quarter of 2023. The fourth quarter benefit was primarily impacted by changes in the qualitative component and a slightly improved economic forecast offset by an increased provision for loan growth.

NONINTEREST INCOME

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

    Three Months Ended    
    December 31,   September 30,   Increase
Noninterest Income     2021       2021     (Decrease)
    (In thousands)        
Service charges on deposit accounts   $ 3,476     $ 3,407     $ 69  
Other commissions and fees     10,633       11,792       (1,159 )
Leased equipment income     12,602       10,943       1,659  
Gain on sale of loans and leases     172             172  
Gain on sale of securities     999       515       484  
Other income:            
Dividends and gains on equity investments     (1,570 )     8,387       (9,957 )
Warrant income     23,990       13,578       10,412  
Other     7,080       2,723       4,357  
Total noninterest income   $ 57,382     $ 51,345     $ 6,037  
                         

Noninterest income increased by $6.0 million to $57.4 million for the fourth quarter of 2023 compared to $51.3 million for the third quarter of 2023 due primarily to increases of $10.4 million in warrant income, $4.4 million in other income, and $1.7 million in leased equipment income, offset partially by a $10.0 million decrease in dividends and gains on equity investments. Warrant income increased due to continued strength in the capital markets activity including our single largest warrant gain ever of $13.6 million along with a second warrant gain of $5.2 million. Other income increased due primarily to higher gains from early lease terminations of $4.5 million. Leased equipment income increased due to a higher average balance of leased equipment and the return of one large lease to accrual status in December 2023. Dividends and gains on equity investments decreased due primarily to lower gains on sales of equity investments, higher fair value losses on equity investments still held, and lower income distributions and fair value marks on SBIC 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     2021       2021     (Decrease)
    (In thousands)        
Compensation   $ 99,700     $ 98,061     $ 1,639  
Occupancy     14,656       14,928       (272 )
Data processing     8,171       7,391       780  
Other professional services     5,946       5,164       782  
Insurance and assessments     5,032       3,685       1,347  
Intangible asset amortization     3,876       2,890       986  
Leased equipment depreciation     9,569       8,603       966  
Foreclosed assets (income) expense, net     (260 )     165       (425 )
Acquisition, integration and reorganization costs     5,590       200       5,390  
Customer related expense     6,175       4,538       1,637  
Loan expense     5,627       4,180       1,447  
Other     12,028       9,616       2,412  
Total noninterest expense   $ 176,110     $ 159,421     $ 16,689  
                         

Noninterest expense increased by $16.7 million to $176.1 million for the fourth quarter of 2023 compared to $159.4 million for the third quarter of 2023 due primarily to increases in several expense categories such as compensation expense by $1.6 million, data processing by $0.8 million, insurance and assessments by $1.3 million, intangible asset amortization by $1.0 million, acquisition, integration and reorganization costs by $5.4 million, and customer related expense by $1.6 million. The increases related primarily to the acquisition of the HOA business on October 8, 2023. Total operating expenses for the quarter, excluding the acquisition, integration and reorganization costs of $5.6 million, were $170.5 million including $5.9 million of operating expenses for the acquired HOA business.

INCOME TAXES

The effective income tax rate was 27.5% in the fourth quarter of 2023 compared to 25.4% in the third quarter of 2023. The increase was due primarily to an increase in state tax rates for fiscal year 2023 caused by a shift in apportionment and a tax benefit from the release of a valuation allowance recorded in the third quarter. The effective income tax rate for the full year 2023 was 26.2%. The effective tax rate for the full year 2023 is currently 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:

    December 31, 2023   September 30, 2023   December 31, 2020
      % of     % of     % of
Deposit Composition   Balance Total   Balance Total   Balance Total
    (Dollars in thousands)
Noninterest-bearing demand   $ 14,543,133   41 %   $ 12,881,806   42 %   $ 9,193,827   37 %
Interest checking     7,319,898   21 %     7,168,472   24 %     5,974,910   24 %
Money market     10,241,265   29 %     7,463,261   24 %     6,532,917   26 %
Savings     630,653   2 %     627,169   2 %     562,826   2 %
Total core deposits     32,734,949   93 %     28,140,708   92 %     22,264,480   89 %
Non-core non-maturity deposits     889,976   3 %     960,438   3 %     1,149,467   5 %
Total non-maturity deposits     33,624,925   96 %     29,101,146   95 %     23,413,947   94 %
Time deposits $250,000 and under     885,938   3 %     882,551   3 %     994,197   4 %
Time deposits over $250,000     486,894   1 %     576,048   2 %     532,573   2 %
Total time deposits     1,372,832   4 %     1,458,599   5 %     1,526,770   6 %
Total deposits   $ 34,997,757   100 %   $ 30,559,745   100 %   $ 24,940,717   100 %
                                     

At December 31, 2023, core deposits totaled $32.7 billion or 93% of total deposits, including $14.5 billion of noninterest-bearing demand deposits or 41% of total deposits. Core deposits increased by $4.6 billion or 16.3% in the fourth quarter of 2023 driven primarily by the $4.1 billion of core deposits acquired with the HOA business on October 8, 2023.

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 December 31, 2023 were $1.4 billion, 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 Held   December 31,   September 30,   December 31,
for Investment, Net of Deferred Fees (1)     2021       2021       2021  
    (Dollars in thousands)
Balance, beginning of period   $ 20,511,020     $ 19,506,257     $ 19,083,377  
Additions:            
Production     3,372,815       2,406,024       9,054,767  
Disbursements     1,917,195       1,349,333       5,952,158  
Total production and disbursements     5,290,010       3,755,357       15,006,925  
Reductions:            
Payoffs     (2,000,293 )     (1,732,621 )     (7,337,296 )
Paydowns     (845,443 )     (1,013,867 )     (3,728,950 )
Total payoffs and paydowns     (2,845,736 )     (2,746,488 )     (11,066,246 )
Sales     (15,837 )     (2,175 )     (117,263 )
Transfers to foreclosed assets           (415 )     (1,062 )
Charge-offs     (4,395 )     (1,516 )     (10,715 )
Transfers to loans held for sale                 (25,554 )
Total reductions     (2,865,968 )     (2,750,594 )     (11,220,840 )
Loans acquired through acquisitions     6,486             72,086  
Net increase (decrease)     2,430,528       1,004,763       3,858,171  
Balance, end of period   $ 22,941,548     $ 20,511,020     $ 22,941,548  
             
Weighted average rate on production (2)     3.89 %     4.24 %     4.19 %
             
(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 38 basis points to loan yields in 2023.
 

Loans and leases held for investment, net of deferred fees, increased by $2.4 billion or 11.8% in the fourth quarter of 2023 to $22.9 billion at December 31, 2023. Excluding PPP loan activity, loans grew by $2.5 billion or 12.6%. The overall increase in the loans and leases balance for the fourth quarter of 2023 was due primarily to increases in the income producing and other residential, venture capital, and asset-based portfolios, offset partially by a reduction in the commercial real estate construction portfolio. Civic loan production was $480 million in the fourth quarter of 2023 compared to $481 million in the third quarter of 2023. The total outstanding balance of the Civic loan portfolio as of December 31, 2023 was $1.4 billion. The PPP loan forgiveness in the fourth quarter of 2023 was $111 million, down from $338 million in the third quarter of 2023. Net fees for PPP loans were $3.6 million in the fourth quarter of 2023, down from the $7.9 million in the third quarter of 2023. Remaining PPP loans totaled $157 million as of December 31, 2023 with $4.2 million of net fees to amortize over the remaining life of the loans. The weighted average rate on the $3.4 billion of new production for the fourth quarter of 2023 decreased to 3.89% from 4.24% in the third quarter of 2023 due primarily to the loan mix (higher levels of single-family loan pool purchases and equity fund loans). In the fourth quarter of 2023, we purchased $1.1 billion in single-family loan pools compared to $1.0 billion in the third quarter of 2023. The total of the single-family loan pool purchase portfolio as of December 31, 2023 was $2.3 billion.

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, 2023   September 30, 2023   December 31, 2020
      % of     % of     % of
Loan and Lease Portfolio   Balance Total   Balance Total   Balance Total
    (In thousands)
Real estate mortgage:                  
Commercial   $ 3,762,299   17 %   $ 3,694,597   18 %   $ 4,096,671   21 %
Income producing and other residential     7,416,421   32 %     6,153,662   30 %     3,803,265   20 %
Total real estate mortgage     11,178,720   49 %     9,848,259   48 %     7,899,936   41 %
Real estate construction and land:                  
Commercial     832,591   4 %     992,003   5 %     1,117,121   6 %
Residential     2,604,536   11 %     2,392,568   12 %     2,243,160   12 %
Total real estate construction and land     3,437,127   15 %     3,384,571   17 %     3,360,281   18 %
Total real estate     14,615,847   64 %     13,232,830   65 %     11,260,217   59 %
Commercial:                  
Asset-based     4,075,477   18 %     3,661,769   18 %     3,429,283   18 %
Venture capital     2,320,593   10 %     1,632,861   8 %     1,698,508   9 %
Other commercial     1,471,981   6 %     1,577,592   7 %     2,375,114   12 %
Total commercial     7,868,051   34 %     6,872,222   33 %     7,502,905   39 %
Consumer     457,650   2 %     405,968   2 %     320,255   2 %
Total loans and leases held for investment, net of deferred fees   $ 22,941,548   100 %   $ 20,511,020   100 %   $ 19,083,377   100 %
                   
Total unfunded loan commitments   $ 9,006,350       $ 8,480,599       $ 7,601,390    
                               

ALLOWANCE FOR CREDIT LOSSES

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

    Three Months Ended December 31, 2023
    Allowance for   Reserve for   Total
Allowance for Credit   Loan and   Unfunded Loan   Allowance for
Losses Rollforward   Lease Losses   Commitments   Credit Losses
    (In thousands)
Beginning balance   $ 203,733     $ 76,071     $ 279,804  
Charge-offs     (4,395 )           (4,395 )
Recoveries     4,226             4,226  
Net charge-offs     (169 )           (169 )
Provision     (3,000 )     (3,000 )     (6,000 )
Ending balance   $ 200,564     $ 73,071     $ 273,635  
             
             
    Three Months Ended September 30, 2023
    Allowance for   Reserve for   Total
Allowance for Credit   Loan and   Unfunded Loan   Allowance for
Losses Rollforward   Lease Losses   Commitments   Credit Losses
    (In thousands)
Beginning balance   $ 225,600     $ 74,571     $ 300,171  
Charge-offs     (1,516 )           (1,516 )
Recoveries     1,149             1,149  
Net charge-offs     (367 )           (367 )
Provision     (21,500 )     1,500       (20,000 )
Ending balance   $ 203,733     $ 76,071     $ 279,804  
Allowance for Credit   Year Ended December 31,
Losses Rollforward     2021       2020  
    (In thousands)
Beginning balance   $ 433,752     $ 174,646  
Cumulative effect of change in accounting principle – CECL           7,327  
Balance, January 1     433,752       181,973  
Charge-offs     (10,715 )     (93,589 )
Recoveries     12,598       6,368  
Net recoveries (charge-offs)     1,883       (87,221 )
Provision     (162,000 )     339,000  
Ending balance   $ 273,635     $ 433,752  
                 

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

    December 31,   September 30,   Increase
Allowance for Credit Losses     2021       2021     (Decrease)
    (Dollars in thousands)
Allowance for loan and lease losses   $ 200,564     $ 203,733     $ (3,169 )
Reserve for unfunded loan commitments     73,071       76,071       (3,000 )
Allowance for credit losses   $ 273,635     $ 279,804     $ (6,169 )
             
Provision for credit losses (for the quarter)   $ (6,000 )   $ (20,000 )   $ 14,000  
Net charge-offs (recoveries) (for the quarter)   $ 169     $ 367     $ (198 )
Net charge-offs (recoveries) to average loans and leases (for the quarter)     0.00 %     0.01 %    
Allowance for loan and lease losses to loans and leases held for investment     0.87 %     0.99 %    
Allowance for loan and lease losses to loans and leases held for investment, excluding PPP loans     0.88 %     1.01 %    
Allowance for credit losses to loans and leases held for investment     1.19 %     1.36 %    
Allowance for credit losses to loans and leases held for investment, excluding PPP loans     1.20 %     1.38 %    
                     

The allowance for credit losses decreased by $6.2 million in the fourth quarter of 2023 to $273.6 million at December 31, 2023. The decrease in the allowance for credit losses during the fourth quarter of 2023 was attributable to a provision for credit losses benefit of $6.0 million and $0.2 million in net charge-offs. The allowance for credit losses ratio, excluding PPP loans, of 1.20% remains robust and moderately higher than the pre-pandemic level of 0.97% as of the January 1, 2020 CECL adoption date.

Net charge-offs were $0.2 million for the fourth quarter of 2023 as gross charge-offs of $4.4 million were reduced by recoveries of $4.2 million.

Net charge-offs were $0.4 million for the third quarter of 2023 as gross charge-offs of $1.5 million were reduced by recoveries of $1.1 million.

On a year-to-date basis for the year ended December 31, 2023, net recoveries were $1.9 million as gross charge-offs of $10.7 million were reduced by recoveries of $12.6 million.

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     2021       2021     (Decrease)
    (Dollars in thousands)
NPAs and Performing TDRs:            
Nonaccrual loans and leases held for investment (1)   $ 61,174     $ 64,507     $ (3,333 )
Accruing loans contractually past due 90 days or more                  
Foreclosed assets, net     12,843       13,364       (521 )
Total nonperforming assets (“NPAs”)   $ 74,017     $ 77,871     $ (3,854 )
             
Performing TDRs held for investment   $ 24,430     $ 36,750     $ (12,320 )
             
Nonaccrual loans and leases held for investment to loans and leases held for investment     0.27 %     0.31 %    
Nonperforming assets to loans and leases held for investment and foreclosed assets     0.32 %     0.38 %    
Allowance for credit losses to nonaccrual loans and leases held for investment     447.3 %     433.8 %    
             
Loan and Lease Credit Risk Ratings:            
Pass   $ 22,433,833     $ 19,873,050     $ 2,560,783  
Special mention     391,611       496,366       (104,755 )
Classified     116,104       141,604       (25,500 )
Total loans and leases held for investment, net of deferred fees   $ 22,941,548     $ 20,511,020     $ 2,430,528  
             
Classified loans and leases held for investment to loans and leases held for investment     0.51 %     0.69 %    
             
(1) Nonaccrual loans include SBA guaranteed amounts of $22.1 million at December 31, 2023 and $20.1 million at September 30, 2023.
 

Since downgrading certain loans at the onset of the pandemic in the first quarter of 2020 given all the uncertainty at the time, special mention loans and leases have decreased by $507.0 million or 56% from their peak in the first quarter of 2020, while classified loans and leases have decreased by $177.1 million or 60% from their peak in the second quarter of 2020, and each have significantly declined in the fourth quarter of 2023. Classified loans and leases are now below pre-pandemic levels while special mention loans and leases are also approaching pre-pandemic levels. Nonaccrual loans and leases decreased by $3.3 million to $61.2 million in the fourth quarter of 2023 due primarily to a decrease in nonaccrual short-term, single-family residential renovation loans as a result of payoffs during the quarter.

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, 2023   September 30, 2023   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   $ 27,540     $ 2,165     $ 25,615     $ 676     $ 1,925     $ 1,489  
Income producing and other residential     12,292       39,929       7,547       3,760       4,745       36,169  
Total real estate mortgage     39,832       42,094       33,162       4,436       6,670       37,658  
Real estate construction and land:                        
Commercial                                    
Residential     4,715       5,031       19,918       12,809       (15,203 )     (7,778 )
Total real estate construction and land     4,715       5,031       19,918       12,809       (15,203 )     (7,778 )
Commercial:                        
Asset-based     1,464             1,605             (141 )      
Venture capital     2,799             2,348       1,670       451       (1,670 )
Other commercial     11,950       630       6,979       340       4,971       290  
Total commercial     16,213       630       10,932       2,010       5,281       (1,380 )
Consumer     414       1,004       495       1,042       (81 )     (38 )
Total held for investment   $ 61,174     $ 48,759     $ 64,507     $ 20,297     $ (3,333 )   $ 28,462  
                                                 

The increase in accruing and 30-89 days past due loans is primarily due to $19.3 million in past due purchased single-family loans. As of January 14, 2023, $5.9 million of these loans remained over 30 days past due. The delinquency related to these loans was attributable to delayed payment application stemming from servicing being transferred following our purchase of the loans. The increase in this category was also due to an increase of $9.1 million in single-family residential loans originated by Civic.

CAPITAL

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

    December 31, 2023    
        Excluding   September 30,
        PPP     2021  
    Actual (1)   Loans (1)   Actual
PacWest Bancorp Consolidated:            
Tier 1 leverage capital ratio     6.84 %     6.88 % (3)   8.05 %
Common equity tier 1 capital ratio     8.86 %     8.86 %     10.15 %
Tier 1 capital ratio     9.32 %     9.32 %     10.65 %
Total capital ratio     12.69 %     12.69 %     14.36 %
Risk-weighted assets   $ 28,508,808     $ 28,508,808     $ 26,057,583  
Tangible common equity ratio (2)     6.54 %     6.56 % (3)   7.79 %
             
(1) Capital information for December 31, 2023 is preliminary.
(2) Non-GAAP measure.
(3) PPP loans have been excluded from total assets in the denominator as they are zero risk-weighted.
 

The decreases in the capital ratios during the fourth quarter of 2023 were due primarily to the increase in goodwill related to the HOA acquisition combined with an increase in risk-weighted assets as we deployed $3.8 billion of excess liquidity into securities and loans and leases during the quarter.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $40 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 69 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 provides 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. The Bank also offers financing of non-owner-occupied investor properties through Civic Financial Services a wholly-owned subsidiary. The Bank also offers a specialized suite of services for the HOA industry. 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 ongoing 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
             
    December 31,   September 30,   December 31,
      2021       2021       2020  
    (Dollars in thousands, except per share data)
ASSETS:            
Cash and due from banks   $ 112,548     $ 174,585     $ 150,464  
Interest-earning deposits in financial institutions     3,944,686       3,524,613       3,010,197  
Total cash and cash equivalents     4,057,234       3,699,198       3,160,661  
             
Securities available-for-sale, at estimated fair value     10,694,458       9,276,926       5,235,591  
Federal Home Loan Bank stock, at cost     17,250       17,250       17,250  
Total investment securities     10,711,708       9,294,176       5,252,841  
             
Loans held for sale                  
             
Gross loans and leases held for investment     23,026,308       20,588,255       19,153,357  
Deferred fees, net     (84,760 )     (77,235 )     (69,980 )
Total loans and leases held for investment, net of deferred fees     22,941,548       20,511,020       19,083,377  
Allowance for loan and lease losses     (200,564 )     (203,733 )     (348,181 )
Total loans and leases held for investment, net     22,740,984       20,307,287       18,735,196  
             
Equipment leased to others under operating leases     339,150       334,275       333,846  
Premises and equipment, net     46,740       47,246       39,234  
Foreclosed assets, net     12,843       13,364       14,027  
Goodwill     1,405,736       1,204,118       1,078,670  
Core deposit and customer relationship intangibles, net     44,957       15,533       23,641  
Other assets     1,083,992       970,479       860,326  
Total assets   $ 40,443,344     $ 35,885,676     $ 29,498,442  
             
LIABILITIES:            
Noninterest-bearing deposits   $ 14,543,133     $ 12,881,806     $ 9,193,827  
Interest-bearing deposits     20,454,624       17,677,939       15,746,890  
Total deposits     34,997,757       30,559,745       24,940,717  
Borrowings                 5,000  
Subordinated debt     863,283       862,447       465,812  
Accrued interest payable and other liabilities     582,674       545,050       491,962  
Total liabilities     36,443,714       31,967,242       25,903,491  
STOCKHOLDERS’ EQUITY (1)     3,999,630       3,918,434       3,594,951  
Total liabilities and stockholders’ equity   $ 40,443,344     $ 35,885,676     $ 29,498,442  
             
Book value per share   $ 33.45     $ 32.77     $ 30.36  
Tangible book value per share (2)   $ 21.31     $ 22.57     $ 21.05  
Shares outstanding     119,584,854       119,579,566       118,414,853  
             
(1) Includes net unrealized gain on securities available-for-sale, net   $ 65,968     $ 98,859     $ 172,523  
(2) Non-GAAP measure.            

 

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS)
                     
    Three Months Ended   Year Ended
    December 31,   September 30,   December 31,   December 31,
      2021       2021       2020       2021       2020  
    (Dollars in thousands, except per share data)
Interest income:                    
Loans and leases   $ 263,662     $ 246,722     $ 242,198     $ 996,457     $ 993,138  
Investment securities     48,469       40,780       28,843       153,468       106,770  
Deposits in financial institutions     2,674       2,580       1,135       8,804       3,583  
Total interest income     314,805       290,082       272,176       1,158,729       1,103,491  
                     
Interest expense:                    
Deposits     6,622       6,417       8,454       27,808       59,663  
Borrowings     64       101       37       623       8,161  
Subordinated debt     7,714       7,722       4,477       26,474       21,109  
Total interest expense     14,400       14,240       12,968       54,905       88,933  
                     
Net interest income     300,405       275,842       259,208       1,103,824       1,014,558  
Provision for credit losses     (6,000 )     (20,000 )     10,000       (162,000 )     339,000  
Net interest income after provision for credit losses     306,405       295,842       249,208       1,265,824       675,558  
                     
Noninterest income:                    
Service charges on deposit accounts     3,476       3,407       3,119       13,269       10,351  
Other commissions and fees     10,633       11,792       9,974       42,287       40,347  
Leased equipment income     12,602       10,943       9,440       45,746       43,628  
Gain on sale of loans and leases     172             1,671       1,733       2,139  
Gain on sale of securities     999       515       4       1,615       13,171  
Other income     29,500       24,688       15,642       89,277       36,424  
Total noninterest income     57,382       51,345       39,850       193,927       146,060  
                     
Noninterest expense:                    
Compensation     99,700       98,061       73,171       368,450       271,494  
Occupancy     14,656       14,928       14,083       58,422       57,555  
Data processing     8,171       7,391       6,718       30,277       26,779  
Other professional services     5,946       5,164       6,800       21,492       19,917  
Insurance and assessments     5,032       3,685       5,064       17,365       22,625  
Intangible asset amortization     3,876       2,890       3,172       12,734       14,753  
Leased equipment depreciation     9,569       8,603       7,501       35,755       28,865  
Foreclosed assets (income) expense, net     (260 )     165       (272 )     (213 )     (17 )
Acquisition, integration and reorganization costs     5,590       200       1,060       9,415       1,060  
Customer related expense     6,175       4,538       4,430       20,504       17,532  
Loan expense     5,627       4,180       3,926       17,031       13,454  
Goodwill impairment                             1,470,000  
Other expense     12,028       9,616       10,029       46,185       40,002  
Total noninterest expense     176,110       159,421       135,682       637,417       1,984,019  
                     
Earnings (loss) before income taxes     187,677       187,766       153,376       822,334       (1,162,401 )
Income tax expense     51,632       47,770       36,546       215,375       75,173  
Net earnings (loss)   $ 136,045     $ 139,996     $ 116,830     $ 606,959     $ (1,237,574 )
                     
Basic and diluted earnings (loss) per share   $ 1.14     $ 1.17     $ 0.99     $ 5.10     $ (10.61 )
Dividends declared and paid per share   $ 0.25     $ 0.25     $ 0.25     $ 1.00     $ 1.35  

 

PACWEST BANCORP AND SUBSIDIARIES                    
NET EARNINGS (LOSS) PER SHARE CALCULATIONS                
                     
    Three Months Ended
    December 31,   September 30,   December 31,   December 31,
      2021       2021       2020       2021       2020  
    (In thousands, except per share data)
Basic Earnings (Loss) Per Share:                    
Net earnings (loss)   $ 136,045     $ 139,996     $ 116,830     $ 606,959     $ (1,237,574 )
Less: earnings allocated to unvested restricted stock (1)     (2,311 )     (2,417 )     (1,398 )     (10,248 )     (1,782 )
Net earnings (loss) allocated to common shares   $ 133,734     $ 137,579     $ 115,432     $ 596,711     $ (1,239,356 )
                     
Weighted average basic shares and unvested restricted stock outstanding     119,577       119,569       118,446       119,349       118,463  
Less: weighted average unvested restricted stock outstanding     (2,314 )     (2,340 )     (1,652 )     (2,255 )     (1,610 )
Weighted average basic shares outstanding     117,263       117,229       116,794       117,094       116,853  
                     
Basic earnings (loss) per share   $ 1.14     $ 1.17     $ 0.99     $ 5.10     $ (10.61 )
                     
Diluted Earnings (Loss) Per Share:                    
Net earnings (loss) allocated to common shares   $ 133,734     $ 137,579     $ 115,432     $ 596,711     $ (1,239,356 )
                     
Weighted average diluted shares outstanding     117,263       117,229       116,794       117,094       116,853  
                     
Diluted earnings (loss) per share   $ 1.14     $ 1.17     $ 0.99     $ 5.10     $ (10.61 )
                     
(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, 2023   September 30, 2023   December 31, 2020
    Interest Average     Interest Average     Interest Average
  Average Income/ Yield/   Average Income/ Yield/   Average Income/ Yield/
  Balance Expense Cost   Balance Expense Cost   Balance Expense Cost
  (Dollars in thousands)
Assets:                      
Loans and leases (1)(2) $ 21,367,665 $ 265,549 4.93 %   $ 19,670,671 $ 248,485 5.01 %   $ 18,769,214 $ 243,188 5.15 %
Investment securities (3)   9,964,568   50,710 2.02 %     8,047,098   42,952 2.12 %     4,888,993   30,757 2.50 %
Deposits in financial institutions   5,961,104   2,674 0.18 %     5,657,768   2,580 0.18 %     3,576,335   1,135 0.13 %
Total interest-earning assets (1)   37,293,337   318,933 3.39 %     33,375,537   294,017 3.50 %     27,234,542   275,080 4.02 %
Other assets   3,064,810         2,496,127         2,100,247    
Total assets $ 40,358,147       $ 35,871,664       $ 29,334,789    
                       
Liabilities and Stockholders’ Equity:                    
Interest checking $ 7,767,211   2,041 0.10 %   $ 7,372,859   2,042 0.11 %   $ 5,191,435   2,064 0.16 %
Money market   10,226,366   3,400 0.13 %     8,662,449   2,997 0.14 %     7,636,220   3,225 0.17 %
Savings   634,874   39 0.02 %     620,079   38 0.02 %     567,646   35 0.02 %
Time   1,421,859   1,142 0.32 %     1,475,307   1,340 0.36 %     1,650,150   3,130 0.75 %
Total interest-bearing deposits   20,050,310   6,622 0.13 %     18,130,694   6,417 0.14 %     15,045,451   8,454 0.22 %
Borrowings   234,391   64 0.11 %     238,335   101 0.17 %     237,098   37 0.06 %
Subordinated debt   862,777   7,714 3.55 %     862,272   7,722 3.55 %     463,951   4,477 3.84 %
Total interest-bearing liabilities   21,147,478   14,400 0.27 %     19,231,301   14,240 0.29 %     15,746,500   12,968 0.33 %
Noninterest-bearing demand deposits   14,713,385         12,198,313         9,589,789    
Other liabilities   543,017         525,429         462,075    
Total liabilities   36,403,880         31,955,043         25,798,364    
Stockholders’ equity   3,954,267         3,916,621         3,536,425    
Total liabilities and stockholders’ equity $ 40,358,147       $ 35,871,664       $ 29,334,789    
Net interest income (1)   $ 304,533       $ 279,777       $ 262,112  
Net interest spread (1)     3.12 %       3.21 %       3.69 %
Net interest margin (1)     3.24 %       3.33 %       3.83 %
                       
Total deposits (4) $ 34,763,695 $ 6,622 0.08 %   $ 30,329,007 $ 6,417 0.08 %   $ 24,635,240 $ 8,454 0.14 %
                       
(1) Tax equivalent.
(2) Includes net loan premium amortization of $6.4 million and $2.4 million and net loan discount accretion of $1.2 for the three months ended December 31, 2023, September 30, 2023, and December 31, 2020, respectively.
(3) Includes tax-equivalent adjustments of $2.2 million, $2.2 million, and $1.9 million for the three months ended December 31, 2023, September 30, 2023, and December 31, 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
                     
    December 31,   September 30,   June 30,   March 31,   December 31,
      2021       2021       2021       2021       2020  
    (Dollars in thousands, except per share data)
ASSETS:                    
Cash and due from banks   $ 112,548     $ 174,585     $ 179,505     $ 177,199     $ 150,464  
Interest-earning deposits in financial institutions     3,944,686       3,524,613       5,678,587       5,517,667       3,010,197  
Total cash and cash equivalents     4,057,234       3,699,198       5,858,092       5,694,866       3,160,661  
                     
Securities available-for-sale     10,694,458       9,276,926       7,198,608       5,941,690       5,235,591  
Federal Home Loan Bank stock     17,250       17,250       17,250       17,250       17,250  
Total investment securities     10,711,708       9,294,176       7,215,858       5,958,940       5,252,841  
                     
Loans held for sale                       25,554        
                     
Gross loans and leases held for investment     23,026,308       20,588,255       19,580,731       19,055,165       19,153,357  
Deferred fees, net     (84,760 )     (77,235 )     (74,474 )     (75,937 )     (69,980 )
Total loans and leases held for investment, net of deferred fees     22,941,548       20,511,020       19,506,257       18,979,228       19,083,377  
Allowance for loan and lease losses     (200,564 )     (203,733 )     (225,600 )     (292,445 )     (348,181 )
Total loans and leases held for investment, net     22,740,984       20,307,287       19,280,657       18,686,783       18,735,196  
                     
Equipment leased to others under operating leases     339,150       334,275       313,574       327,413       333,846  
Premises and equipment, net     46,740       47,246       39,541       39,622       39,234  
Foreclosed assets, net     12,843       13,364       13,227       14,298       14,027  
Goodwill     1,405,736       1,204,118       1,204,118       1,204,092       1,078,670  
Core deposit and customer relationship intangibles, net     44,957       15,533       18,423       21,312       23,641  
Other assets     1,083,992       970,479       924,497       883,653       860,326  
Total assets   $ 40,443,344     $ 35,885,676     $ 34,867,987     $ 32,856,533     $ 29,498,442  
                     
LIABILITIES:                    
Noninterest-bearing deposits   $ 14,543,133     $ 12,881,806     $ 11,252,286     $ 11,017,462     $ 9,193,827  
Interest-bearing deposits     20,454,624       17,677,939       18,394,748       17,205,829       15,746,890  
Total deposits     34,997,757       30,559,745       29,647,034       28,223,291       24,940,717  
Borrowings                 6,625       19,750       5,000  
Subordinated debt     863,283       862,447       861,788       465,814       465,812  
Accrued interest payable and other liabilities     582,674       545,050       505,859       493,541       491,962  
Total liabilities     36,443,714       31,967,242       31,021,306       29,202,396       25,903,491  
STOCKHOLDERS’ EQUITY (1)     3,999,630       3,918,434       3,846,681       3,654,137       3,594,951  
Total liabilities and stockholders’ equity   $ 40,443,344     $ 35,885,676     $ 34,867,987     $ 32,856,533     $ 29,498,442  
                     
Book value per share   $ 33.45     $ 32.77     $ 32.17     $ 30.68     $ 30.36  
Tangible book value per share (2)   $ 21.31     $ 22.57     $ 21.95     $ 20.39     $ 21.05  
Shares outstanding     119,584,854       119,579,566       119,555,102       119,105,642       118,414,853  
                     
(1) Includes net unrealized gain on securities available-for-sale, net   $ 65,968     $ 98,859     $ 145,516     $ 106,381     $ 172,523  
(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,
      2021       2021       2021       2021       2020  
    (Dollars in thousands, except per share data)
Interest income:                    
Loans and leases   $ 263,662     $ 246,722     $ 244,529     $ 241,544     $ 242,198  
Investment securities     48,469       40,780       33,954       30,265       28,843  
Deposits in financial institutions     2,674       2,580       2,022       1,528       1,135  
Total interest income     314,805       290,082       280,505       273,337       272,176  
                     
Interest expense:                    
Deposits     6,622       6,417       7,269       7,500       8,454  
Borrowings     64       101       265       193       37  
Subordinated debt     7,714       7,722       6,663       4,375       4,477  
Total interest expense     14,400       14,240       14,197       12,068       12,968  
                     
Net interest income     300,405       275,842       266,308       261,269       259,208  
Provision for credit losses     (6,000 )     (20,000 )     (88,000 )     (48,000 )     10,000  
Net interest income after provision for credit losses     306,405       295,842       354,308       309,269       249,208  
                     
Noninterest income:                    
Service charges on deposit accounts     3,476       3,407       3,452       2,934       3,119  
Other commissions and fees     10,633       11,792       10,704       9,158       9,974  
Leased equipment income     12,602       10,943       10,847       11,354       9,440  
Gain on sale of loans and leases     172             1,422       139       1,671  
Gain on sale of securities     999       515             101       4  
Other income     29,500       24,688       13,946       21,143       15,642  
Total noninterest income     57,382       51,345       40,371       44,829       39,850  
                     
Noninterest expense:                    
Compensation     99,700       98,061       90,807       79,882       73,171  
Occupancy     14,656       14,928       14,784       14,054       14,083  
Data processing     8,171       7,391       7,758       6,957       6,718  
Other professional services     5,946       5,164       5,256       5,126       6,800  
Insurance and assessments     5,032       3,685       3,745       4,903       5,064  
Intangible asset amortization     3,876       2,890       2,889       3,079       3,172  
Leased equipment depreciation     9,569       8,603       8,614       8,969       7,501  
Foreclosed assets (income) expense, net     (260 )     165       (119 )     1       (272 )
Acquisition, integration and reorganization costs     5,590       200       200       3,425       1,060  
Customer related expense     6,175       4,538       4,973       4,818       4,430  
Loan expense     5,627       4,180       4,031       3,193       3,926  
Other expense     12,028       9,616       8,812       15,729       10,029  
Total noninterest expense     176,110       159,421       151,750       150,136       135,682  
                     
Earnings before income taxes     187,677       187,766       242,929       203,962       153,376  
Income tax expense     51,632       47,770       62,417       53,556       36,546  
Net earnings   $ 136,045     $ 139,996     $ 180,512     $ 150,406     $ 116,830  
                     
Basic and diluted earnings per share   $ 1.14     $ 1.17     $ 1.52     $ 1.27     $ 0.99  
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
    December 31,   September 30,   June 30,   March 31,   December 31,
      2021       2021       2021       2021       2020  
    (Dollars in thousands)
Performance Ratios:                    
Return on average assets (1)     1.34 %     1.55 %     2.11 %     1.94 %     1.58 %
Pre-provision, pre-goodwill impairment, pre-tax net revenue (“PPNR”) return on average assets (1)(2)     1.79 %     1.86 %     1.81 %     2.01 %     2.22 %
Return on average equity (1)     13.65 %     14.18 %     19.36 %     16.86 %     13.14 %
Return on average tangible equity (1)(2)     22.06 %     21.03 %     29.25 %     25.67 %     19.63 %
Efficiency ratio     46.2 %     47.2 %     47.9 %     46.4 %     43.6 %
Noninterest expense as a percentage of average assets (1)     1.73 %     1.76 %     1.77 %     1.94 %     1.84 %
                     
Average Yields/Costs (1):                    
Yield on:                    
Average loans and leases (3)     4.93 %     5.01 %     5.18 %     5.20 %     5.15 %
Average investment securities (3)     2.02 %     2.12 %     2.23 %     2.44 %     2.50 %
Average interest-earning assets (3)     3.39 %     3.50 %     3.57 %     3.86 %     4.02 %
Cost of:                    
Average interest-bearing deposits     0.13 %     0.14 %     0.16 %     0.18 %     0.22 %
Average total deposits     0.08 %     0.08 %     0.10 %     0.11 %     0.14 %
Average interest-bearing liabilities     0.27 %     0.29 %     0.30 %     0.29 %     0.33 %
Net interest spread (3)     3.12 %     3.21 %     3.27 %     3.57 %     3.69 %
Net interest margin (3)     3.24 %     3.33 %     3.40 %     3.69 %     3.83 %
                     
Average Balances:                    
Assets:                    
Loans and leases, net of deferred fees   $ 21,367,665     $ 19,670,671     $ 19,057,420     $ 18,927,314     $ 18,769,214  
Investment securities     9,964,568       8,047,098       6,492,721       5,383,140       4,888,993  
Deposits in financial institutions     5,961,104       5,657,768       6,347,764       4,790,231       3,576,335  
Interest-earning assets     37,293,337       33,375,537       31,897,905       29,100,685       27,234,542  
Total assets     40,358,147       35,871,664       34,326,112       31,415,882       29,334,789  
Liabilities:                    
Noninterest-bearing deposits     14,713,385       12,198,313       11,304,757       10,173,459       9,589,789  
Interest-bearing deposits     20,050,310       18,130,694       17,817,053       16,044,091       15,045,451  
Total deposits     34,763,695       30,329,007       29,121,810       26,217,550       24,635,240  
Borrowings     234,391       238,335       225,446       226,053       237,098  
Subordinated debt     862,777       862,272       735,725       466,101       463,951  
Interest-bearing liabilities     21,147,478       19,231,301       18,778,224       17,136,245       15,746,500  
Stockholders’ equity     3,954,267       3,916,621       3,739,042       3,617,248       3,536,425  
                     
(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,
      2021       2021       2021       2021       2020  
    (Dollars in thousands)
Credit Quality Ratios:                    
Nonaccrual loans and leases held for investment to loans and leases held for investment     0.27 %     0.31 %     0.29 %     0.36 %     0.48 %
Nonperforming assets to loans and leases held for investment and foreclosed assets     0.32 %     0.38 %     0.36 %     0.43 %     0.55 %
Classified loans and leases held for investment to loans and leases held for investment     0.51 %     0.69 %     0.75 %     0.86 %     1.39 %
Provision for credit losses (for the quarter) to average loans and leases held for investment (annualized)     (0.11 )%     (0.40 )%     (1.85 )%     (1.03 )%     0.21 %
Net charge-offs (for the quarter) to average loans and leases held for investment (annualized)     0.00 %     0.01 %     (0.11 )%     0.06 %     0.40 %
Trailing 12 months net charge-offs to average loans and leases held for investment     (0.01 )%     0.09 %     0.27 %     0.37 %     0.45 %
Allowance for loan and lease losses to loans and leases held for investment     0.87 %     0.99 %     1.16 %     1.54 %     1.82 %
Allowance for credit losses to loans and leases held for investment     1.19 %     1.36 %     1.54 %     2.02 %     2.27 %
Allowance for credit losses to nonaccrual loans and leases held for investment     447.3 %     433.8 %     528.4 %     566.2 %     475.8 %
                     
PacWest Bancorp Consolidated:                    
Tier 1 leverage capital ratio (1)     6.84 %     8.05 %     7.67 %     7.95 %     8.55 %
Common equity tier 1 capital ratio (1)     8.86 %     10.15 %     10.41 %     10.39 %     10.53 %
Tier 1 capital ratio (1)     9.32 %     10.65 %     10.41 %     10.39 %     10.53 %
Total capital ratio (1)     12.69 %     14.36 %     14.99 %     13.60 %     13.76 %
Risk-weighted assets (1)   $ 28,508,808     $ 26,057,583     $ 24,274,256     $ 23,012,350     $ 22,837,693  
                     
Equity to assets ratio     9.89 %     10.92 %     11.03 %     11.12 %     12.19 %
Tangible common equity ratio (2)     6.54 %     7.79 %     7.80 %     7.68 %     8.78 %
Book value per share   $ 33.45     $ 32.77     $ 32.17     $ 30.68     $ 30.36  
Tangible book value per share (2)   $ 21.31     $ 22.57     $ 21.95     $ 20.39     $ 21.05  
                     
Pacific Western Bank:                    
Tier 1 leverage capital ratio (1)     7.00 %     8.40 %     8.47 %     8.83 %     9.53 %
Common equity tier 1 capital ratio (1)     9.56 %     11.12 %     11.51 %     11.54 %     11.73 %
Tier 1 capital ratio (1)     9.56 %     11.12 %     11.51 %     11.54 %     11.73 %
Total capital ratio (1)     11.80 %     13.59 %     14.22 %     12.80 %     12.99 %
                     
(1) Capital information for December 31, 2023 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   Year Ended
PPNR and PPNR Return   December 31,   September 30,   December 31,   December 31,
on Average Assets     2021       2021       2020       2021       2020  
    (Dollars in thousands)
Net earnings (loss)   $ 136,045     $ 139,996     $ 116,830     $ 606,959     $ (1,237,574 )
Add: Provision for credit losses     (6,000 )     (20,000 )     10,000       (162,000 )     339,000  
Add: Goodwill impairment                             1,470,000  
Add: Income tax expense     51,632       47,770       36,546       215,375       75,173  
Pre-provision, pre-goodwill impairment, pre-tax net revenue (“PPNR”)   $ 181,677     $ 167,766     $ 163,376     $ 660,334     $ 646,599  
                     
Average assets   $ 40,358,147     $ 35,871,664     $ 29,334,789     $ 35,518,488     $ 27,752,412  
                     
Return on average assets (1)     1.34 %     1.55 %     1.58 %     1.71 %     (4.46 )%
PPNR return on average assets (2)     1.79 %     1.86 %     2.22 %     1.86 %     2.33 %
                     
(1) Annualized net earnings (loss) divided by average assets.
(2) Annualized PPNR divided by average assets.
    Three Months Ended   Year Ended
    December 31,   September 30,   December 31,   December 31,
Return on Average Tangible Equity     2021       2021       2020       2021       2020  
    (Dollars in thousands)
Net earnings (loss)   $ 136,045     $ 139,996     $ 116,830     $ 606,959     $ (1,237,574 )
Add: Intangible asset amortization     3,876       2,890       3,172       12,734       14,753  
Add: Goodwill impairment                             1,470,000  
Adjusted net earnings   $ 139,921     $ 142,886     $ 120,002     $ 619,693     $ 247,179  
                     
Average stockholders’ equity   $ 3,954,267     $ 3,916,621     $ 3,536,425     $ 3,808,019     $ 3,857,610  
Less: Average intangible assets     1,437,780       1,221,253       1,103,945       1,269,546       1,470,989  
Average tangible common equity   $ 2,516,487     $ 2,695,368     $ 2,432,480     $ 2,538,473     $ 2,386,621  
                     
Return on average equity (1)     13.65 %     14.18 %     13.14 %     15.94 %     (32.08 )%
Return on average tangible equity (2)     22.06 %     21.03 %     19.63 %     24.41 %     10.36 %
                     
(1) Annualized net earnings divided by average stockholders’ equity.
(2) Annualized adjusted net earnings divided by average tangible common equity.
Tangible Common Equity Ratio/   December 31,   September 30,   June 30,   March 31,   December 31,
Tangible Book Value Per Share     2021       2021       2021       2021       2020  
    (Dollars in thousands, except per share data)
Stockholders’ equity   $ 3,999,630     $ 3,918,434     $ 3,846,681     $ 3,654,137     $ 3,594,951  
Less: Intangible assets     1,450,693       1,219,651       1,222,541       1,225,404       1,102,311  
Tangible common equity   $ 2,548,937     $ 2,698,783     $ 2,624,140     $ 2,428,733     $ 2,492,640  
                     
Total assets   $ 40,443,344     $ 35,885,676     $ 34,867,987     $ 32,856,533     $ 29,498,442  
Less: Intangible assets     1,450,693       1,219,651       1,222,541       1,225,404       1,102,311  
Tangible assets   $ 38,992,651     $ 34,666,025     $ 33,645,446     $ 31,631,129     $ 28,396,131  
                     
Equity to assets ratio     9.89 %     10.92 %     11.03 %     11.12 %     12.19 %
Tangible common equity ratio (1)     6.54 %     7.79 %     7.80 %     7.68 %     8.78 %
                     
Book value per share   $ 33.45     $ 32.77     $ 32.17     $ 30.68     $ 30.36  
Tangible book value per share (2)   $ 21.31     $ 22.57     $ 21.95     $ 20.39     $ 21.05  
Shares outstanding     119,584,854       119,579,566       119,555,102       119,105,642       118,414,853  
                     
(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

PacWest Bancorp