Highlights

  • Net Earnings of $115.7 Million, or $0.92 Per Diluted Share
  • Tax Equivalent Net Interest Margin of 5.18%
  • New Loan and Lease Production of $1.3 Billion; $430 Million of Net Loan Growth
  • Core Deposits at 87% of Total Deposits

LOS ANGELES, July 17, 2018 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq:PACW) today announced net earnings for the second quarter of 2018 of $115.7 million, or $0.92 per diluted share, compared to net earnings for the first quarter of 2018 of $118.3 million, or $0.93 per diluted share.  The decrease in net earnings from the prior quarter was due primarily to a higher provision for credit losses offset partially by higher net interest income and higher noninterest income. 

The provision for credit losses increased by $13.5 million in the second quarter of 2018 compared to the first quarter of 2018 due mainly to higher net charge-offs.  Net interest income increased by $5.8 million in the second quarter of 2018 due mostly to a higher yield on average loans and leases and one more day in the current quarter, partially offset by an increase in the cost of average total deposits and borrowings.     

Matt Wagner, President and CEO, commented, “While the credit provision was higher than expected, we were pleased with the increase in loan and lease production and net loan growth in the second quarter.  The second quarter efficiency ratio improved to 39.8% as a result of higher revenues combined with lower operating expenses. Our second quarter results produced a return on assets of 1.93% and a return on tangible equity of 20.98%.”

Mr. Wagner continued, “Our second quarter tax equivalent NIM increased by seven basis points to 5.18%. While the NIM benefitted from the repricing of variable-rate loans and higher recapture of nonaccrual interest, this was partially offset by higher rates on deposits and higher balances and rates on borrowings.  The growth in loans outstanding and unfunded commitments during the quarter should be a catalyst for increased interest income in the second half of the year.”

FINANCIAL HIGHLIGHTS

            
 At or For the    At or For the   
 Three Months Ended   Six Months Ended  
 June 30, March 31, Increase June 30, Increase
Financial Highlights 2018
 2018
 (Decrease) 2018
 2017
 (Decrease)
                        
 (Dollars in thousands, except per share data)
Net earnings$115,735  $118,276  $(2,541) $234,011  $172,315  $61,696 
Diluted earnings per share$0.92  $0.93  $(0.01) $1.85  $1.42  $0.43 
Return on average assets 1.93%  1.99%  (0.06)  1.96%  1.59%  0.37 
Return on average           
tangible equity (1) 20.98%  21.08%  (0.10)  21.03%  15.00%  6.03 
            
Net interest margin ("NIM")           
(tax equivalent) 5.18%  5.11%  0.07   5.15%  5.19%  (0.04)
Yield on average loans and           
leases (tax equivalent) 6.30%  6.11%  0.19   6.21%  6.01%  0.20 
Cost of average total deposits 0.37%  0.31%  0.06   0.34%  0.23%  0.11 
Efficiency ratio 39.8%  41.7%  (1.9)  40.7%  40.8%  (0.1)
            
Total assets$24,529,557  $24,149,330  $380,227  $24,529,557  $22,246,877  $2,282,680 
Loans and leases held           
for investment,           
net of deferred fees$16,885,192  $16,455,285  $429,907  $16,885,192  $15,543,457  $1,341,735 
Noninterest-bearing deposits$8,126,153  $8,232,140  $(105,987) $8,126,153  $6,701,039  $1,425,114 
Core deposits$15,586,238  $15,661,529  $(75,291) $15,586,238  $13,217,574  $2,368,664 
Total deposits$17,929,192  $18,078,788  $(149,596) $17,929,192  $16,874,977  $1,054,215 
            
Noninterest-bearing           
deposits as percentage           
of total deposits 45%  46%  (1)  45%  40%  5 
Core deposits as           
percentage of total           
deposits 87%  87%  -   87%  78%  9 
            
Equity to assets ratio 19.48%  20.16%  (0.68)  19.48%  20.50%  (1.02)
Tangible common equity           
ratio (1) 9.86%  10.43%  (0.57)  9.86%  11.75%  (1.89)
Book value per share$38.36  $38.47  $(0.11) $38.36  $37.55  $0.81 
Tangible book value per           
share (1)$17.35  $17.75  $(0.40) $17.35  $19.40  $(2.05)
            
(1) Non-GAAP measure.           
            

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased by $5.8 million to $262.3 million for the second quarter of 2018 compared to $256.5 million for the first quarter of 2018 due mainly to a higher yield on average loans and leases and one additional day in the second quarter.  The tax equivalent yield on average loans and leases was 6.30% for the second quarter of 2018 compared to 6.11% for the first quarter of 2018. The increase in the yield on average loans and leases was due principally to higher coupon interest (15 basis points) and higher recapture of nonaccrual interest (four basis points).    

The tax equivalent NIM was 5.18% for the second quarter of 2018 compared to 5.11% for the first quarter of 2018.  The increase in the NIM was due mainly to the higher yield on average loans and leases resulting from higher loan coupon interest and higher recapture of nonaccrual interest, which was partially offset by an increase of six basis points in the cost of average total deposits.          

The cost of average total deposits increased to 0.37% for the second quarter of 2018 from 0.31% for the first quarter of 2018 due to higher rates paid for non-core deposits and pricing adjustments for select customers in light of recent market rate increases and the competitive market environment.  

Provision for Credit Losses

A provision for credit losses of $17.5 million was recorded in the second quarter of 2018 compared to $4.0 million in the first quarter of 2018, which benefitted from higher than normal recoveries of $7.2 million.  The higher provision for the second quarter of 2018 was due mainly to higher net charge-offs. The allowance for credit losses as a percentage of loans and leases held for investment decreased to 0.99% at June 30, 2018 from 1.02% at March 31, 2018.

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

      
 Three Months Ended  
 June 30, March 31, Increase
Provision for Credit Losses2018 2018 (Decrease)
      
 (In thousands)
Addition to (reduction in) allowance for loan     
and lease losses$15,000 $(226) $15,226 
Addition to (reduction in) reserve for unfunded     
loan commitments 2,500  4,226   (1,726)
Total provision for credit losses$17,500 $4,000  $13,500 
           

Noninterest Income

Noninterest income increased by $1.1 million to $39.6 million for the second quarter of 2018 compared to $38.6 million for the first quarter of 2018 due mainly to increases in all income categories except for the gain on sale of securities and the gain on sale of loans and leases, as sale activities were minimal in the second quarter.  The significant increase in other income was attributable to $7.5 million of gains on early lease terminations.

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

      
 Three Months Ended  
 June 30, March 31, Increase
Noninterest Income2018 2018 (Decrease)
      
 (In thousands)
Service charges on deposit accounts$4,265 $4,174 $91 
Other commissions and fees 11,767  10,265  1,502 
Leased equipment income 9,790  9,587  203 
Gain on sale of loans and leases 106  4,569  (4,463)
Gain on sale of securities 253  6,311  (6,058)
Other income:     
Dividends and gains on equity investments 1,992  251  1,741 
Warrant income 1,225  248  977 
Other 10,240  3,154  7,086 
Total noninterest income$39,638 $38,559 $1,079 
          

Noninterest Expense

Noninterest expense decreased by $0.9 million to $126.4 million for the second quarter of 2018 compared to $127.4 million for the first quarter of 2018 attributable primarily to a $1.1 million decrease in compensation expense due mainly to lower payroll taxes.

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

      
 Three Months Ended  
 June 30, March 31, Increase
Noninterest Expense2018 2018 (Decrease)
      
 (In thousands)
Compensation$69,913  $71,023  $(1,110)
Occupancy 13,575   13,223   352 
Data processing 6,896   6,659   237 
Other professional services 5,257   4,439   818 
Insurance and assessments 5,330   5,727   (397)
Intangible asset amortization 5,587   6,346   (759)
Leased equipment depreciation 5,237   5,375   (138)
Foreclosed assets income, net (61)  (122)  61 
Loan expense 3,058   2,271   787 
Other 11,657   12,454   (797)
Total noninterest expense$126,449  $127,395  $(946)
            

Income Taxes

The overall effective income tax rate was 26.8% for the second quarter of 2018 and 27.7% for the first quarter of 2018.  The effective tax rate for the full year 2018 is estimated to be approximately 28%.

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Loans and leases held for investment, net of deferred fees, increased by $429.9 million in the second quarter of 2018 to $16.9 billion at June 30, 2018.  The net increase was driven mainly by new production of $1.3 billion and disbursements of $1.2 billion, offset partially by payoffs of $1.2 billion, paydowns of $829.1 million, and sales of $27.8 million.

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

      
 Three Months Six Months
 Ended Ended
Loans and Leases June 30,  March 31, June 30,
Held for Investment Roll Forward (1)2018 2018 2018
            
 (Dollars in thousands)
Balance, beginning of period$16,455,285  $16,972,743  $16,972,743 
New production 1,256,559   744,918   2,001,477 
Existing loans and leases:     
Payoffs (1,154,400)  (930,973)  (2,085,373)
Paydowns (829,119)  (936,002)  (1,765,121)
Disbursements 1,203,940   747,376   1,951,316 
Sales (27,779)  (130,624)  (158,403)
Transfers to foreclosed assets (1,059)  -   (1,059)
Charge-offs (18,235)  (12,153)  (30,388)
Balance, end of period$16,885,192  $16,455,285  $16,885,192 
      
Weighted average rate on new production (2) 5.00%  5.36%  5.13%
        
          
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.
(2) The weighted average rate on new production presents contractual rates and does not include
amortized fees.  Amortized fees added approximately 31 basis points to loan yields in 2018.
 

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

        
 June 30, March 31, December 31, June 30,
Loan and Lease Portfolio2018 2018 2017 2017
            
 (In thousands)
Real estate mortgage:       
Commercial$5,010,680 $5,033,006 $5,385,740 $4,418,463
Residential 2,555,695  2,521,237  2,466,894  1,719,269
Total real estate mortgage 7,566,375  7,554,243  7,852,634  6,137,732
Real estate construction and land:       
Commercial 831,462  789,892  769,075  691,828
Residential 1,042,564  887,110  822,154  473,282
Total real estate construction and land 1,874,026  1,677,002  1,591,229  1,165,110
Total real estate 9,440,401  9,231,245  9,443,863  7,302,842
Commercial:       
Asset-based 3,184,300  2,957,890  2,924,950  2,655,762
Venture capital 2,008,205  1,920,643  2,122,735  2,001,427
Other commercial 1,873,607  1,947,590  2,071,394  3,184,957
Total commercial 7,066,112  6,826,123  7,119,079  7,842,146
Consumer 378,679  397,917  409,801  398,469
Total loans and leases held for       
investment, net of deferred fees (1)$16,885,192 $16,455,285 $16,972,743 $15,543,457
        
Total unfunded loan commitments$6,429,587 $6,352,803 $6,234,061 $4,926,743
        
            
(1) Excludes loans held for sale carried at lower of cost or fair value at December 31, 2017 and June 30, 2017.
 

Allowance for Credit Losses

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

      
 Three Months Ended June 30, 2018
 Allowance for Reserve for  Total
Allowance for Credit Loan and  Unfunded Loan Allowance for
Losses RollforwardLease Losses Commitments Credit Losses
           
 (In thousands)
Beginning balance$134,275  $32,861 $167,136 
Charge-offs (18,235)  -  (18,235)
Recoveries 1,099   -  1,099 
Net charge-offs (17,136)  -  (17,136)
Provision 15,000   2,500  17,500 
Ending balance$132,139  $35,361 $167,500 
           


  
 Three Months Ended March 31, 2018
 Allowance for Reserve for  Total
Allowance for CreditLoan and  Unfunded Loan Allowance for
Losses RollforwardLease Losses Commitments Credit Losses
           
 (In thousands)
           
Beginning balance$139,456  $28,635 $168,091 
Charge-offs (12,153)  -  (12,153)
Recoveries 7,198   -  7,198 
Net charge-offs (4,955)  -  (4,955)
Provision (226)  4,226  4,000 
Ending balance$134,275  $32,861 $167,136 
           

Gross charge-offs for the second quarter of 2018 were $18.2 million and included $6.1 million for venture capital loans, $4.7 million for real estate mortgage loans, $4.4 million for other commercial loans and $2.9 million for asset-based loans. Gross charge-offs for the first quarter of 2018 were $12.2 million and included $6.8 million for other commercial loans, $2.6 million for real estate mortgage loans, and $2.3 million for venture capital loans.  Four loans accounted for $14.2 million or 78 percent of the gross charge-offs in the second quarter of 2018. Recoveries in the second quarter of 2018 were $1.1 million and included $0.8 million for other commercial loans. Recoveries for the first quarter of 2018 were $7.2 million and included $4.6 million for venture capital loans.    

The annualized ratio of net charge-offs to average loans was 0.41% for the second quarter of 2018 and 0.12% for the first quarter of 2018.

Deposits and Client Investment Funds

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

        
 June 30, March 31, December 31, June 30,
Deposit Category2018 2018 2017 2017
                
 (Dollars in thousands)
Noninterest-bearing demand deposits$8,126,153  $8,232,140  $8,508,044  $6,701,039 
Interest checking deposits 2,184,785   2,076,152   2,226,885   1,762,016 
Money market deposits 4,631,658   4,676,734   4,511,730   4,033,471 
Savings deposits 643,642   676,503   690,353   721,048 
Total core deposits 15,586,238   15,661,529   15,937,012   13,217,574 
Non-core non-maturity deposits 607,388   585,399   863,202   1,329,324 
Total non-maturity deposits 16,193,626   16,246,928   16,800,214   14,546,898 
Time deposits $250,000 and under 1,394,117   1,482,118   1,709,980   1,940,872 
Time deposits over $250,000 341,449   349,742   355,342   387,207 
Total time deposits 1,735,566   1,831,860   2,065,322   2,328,079 
Total deposits$17,929,192  $18,078,788  $18,865,536  $16,874,977 
        
Noninterest-bearing demand deposits       
as percentage of total deposits 45%  46%  45%  40%
Core deposits as percentage of total deposits 87%  87%  85%  78%
                

At June 30, 2018, core deposits totaled $15.6 billion, or 87% of total deposits, including $8.1 billion of noninterest-bearing demand deposits, or 45% of total deposits.    

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Square 1 Asset Management, Inc. (“S1AM”), our registered investment advisor subsidiary, and third-party sweep products.  Total off-balance sheet client investment funds at June 30, 2018 were $2.5 billion, of which $1.7 billion was managed by S1AM.

CREDIT QUALITY  

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

      
 June 30, March 31, Increase
Credit Quality Metrics 2018 2018 (Decrease)
            
 (Dollars in thousands)
Nonaccrual loans and leases held for investment (1)$113,745  $103,725  $10,020 
Accruing loan contractually past due     
90 days or more -   500   (500)
Foreclosed assets, net 2,231   1,236   995 
Total nonperforming assets$115,976  $105,461  $10,515 
      
Nonaccrual loans and leases held for investment (1)$113,745  $103,725  $10,020 
Performing troubled debt restructured loans     
held for investment 58,148   60,173   (2,025)
Total impaired loans and leases$171,893  $163,898  $7,995 
      
Pass$16,142,052  $15,832,127  $309,925 
Special mention 506,848   415,116   91,732 
Classified 236,292   208,042   28,250 
Total loans and leases held for investment,     
net of deferred fees$16,885,192  $16,455,285  $429,907 
      
Allowance for credit losses$167,500  $167,136  $364 
Provision for credit losses (for the quarter)$17,500  $4,000  $13,500 
Net charge-offs (for the quarter)$17,136  $4,955  $12,181 
Net charge-offs to average loans and leases     
(for the quarter) 0.41%  0.12%  
Allowance for credit losses to loans and leases     
held for investment 0.99%  1.02%  
Allowance for credit losses to nonaccrual loans     
and leases held for investment 147.3%  161.1%  
Nonaccrual loans and leases held for investment     
to loans and leases held for investment 0.67%  0.63%  
Nonperforming assets to loans and leases     
held for investment and foreclosed assets 0.69%  0.64%  
Classified loans and leases held for investment     
to loans and leases held for investment 1.40%  1.26%  
      
            
(1) Nonaccrual loans include guaranteed amounts of $13.5 million and $13.4 million at June 30, 2018
and March 31, 2018.
 

Nonaccrual loans and leases increased by $10.0 million in the second quarter primarily due to a $14.0 million increase in nonaccrual commercial real estate loans and a $10.5 million increase in nonaccrual residential construction loans, partially offset by a $15.7 million decrease in nonaccrual other commercial loans. Classified loans and leases increased by $28.3 million in the second quarter primarily due to a $26.4 million increase in classified commercial real estate loans, a $22.9 million increase in classified venture capital loans, and a $10.5 million increase in classified residential construction loans, partially offset by a $16.0 million decrease in classified other commercial loans and a $14.5 million decrease in classified asset-based loans.

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

          
 Nonaccrual Loans and Leases  Accruing and
 June 30, 2018 March 31, 2018 30-89 Days Past Due
  % of   % of  June 30, March 31,
  Loan   Loan  2018 2018
 AmountCategory AmountCategory Amount Amount
                
 (Dollars in thousands)
Real estate mortgage:         
Commercial$33,1050.7% $19,1160.4% $2,620 $23,505
Residential 3,5270.1%  5,2250.2%  2,983  708
Total real estate mortgage 36,6320.5%  24,3410.3%  5,603  24,213
Real estate construction and land:         
Commercial -0.0%  -0.0%  -  -
Residential 10,4501.0%  -0.0%  5,969  2,605
Total real estate         
construction and land 10,4500.6%  -0.0%  5,969  2,605
Commercial:         
Asset-based 29,6770.9%  32,8381.1%  -  -
Venture capital 27,9401.4%  21,8611.1%  -  -
Other commercial 8,7820.5%  24,4341.3%  230  663
Total commercial 66,3990.9%  79,1331.2%  230  663
Consumer 2640.1%  2510.1%  75  1,000
Total held for investment$113,7450.7% $103,7250.6% $11,877 $28,481
                

STOCK REPURCHASE PROGRAM

During the second quarter of 2018, we repurchased 2,286,881 shares at an average price of $53.36 and a total cost of $122.0 million.  At June 30, 2018, the remaining amount that could be used to repurchase shares under the $350 million Stock Repurchase Program was $174.7 million.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $24 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 full-service branches located throughout the state of California and one branch in Durham, North Carolina. Our Community Banking group provides lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices. We offer additional products and services through our National Lending and Venture Banking business groups. National Lending provides asset-based, equipment, real estate and security cash flow loans and treasury management services to established middle-market businesses on a national basis. Venture Banking offers a comprehensive suite of financial services focused on entrepreneurial businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States.  For more information about PacWest Bancorp, visit www.pacwestbancorp.com, or to learn more about Pacific Western Bank, visit www.pacificwesternbank.com.

FORWARD LOOKING STATEMENTS

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts such as our future effective tax rate. Such statements are based on information available at the time of this 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. Actual results may differ materially from those set forth in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the Securities and Exchange Commission.

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

      
PACWEST BANCORP AND SUBSIDIARIES     
CONDENSED CONSOLIDATED BALANCE SHEET     
      
 June 30, March 31, December 31,
 2018
 2018
 2017
            
 (Dollars in thousands, except per share data)
ASSETS:     
Cash and due from banks$245,998  $235,061  $233,215 
Interest-earning deposits in financial institutions 205,567   312,735   165,222 
Total cash and cash equivalents  451,565   547,796   398,437 
      
Securities available-for-sale, at estimated fair value 3,857,788   3,801,986   3,774,431 
Federal Home Loan Bank stock, at cost 26,271   17,250   20,790 
Total investment securities 3,884,059   3,819,236   3,795,221 
      
Loans held for sale -   -   481,100 
      
Gross loans and leases held for investment 16,947,502   16,516,627   17,032,221 
Deferred fees, net (62,310)  (61,342)  (59,478)
Loans and leases held for investment,     
net of deferred fees 16,885,192   16,455,285   16,972,743 
Allowance for loan and lease losses (132,139)  (134,275)  (139,456)
Total loans and leases held for investment, net 16,753,053   16,321,010   16,833,287 
      
Equipment leased to others under operating leases 266,576   280,648   284,631 
Premises and equipment, net 34,513   33,686   31,852 
Foreclosed assets, net 2,231   1,236   1,329 
Deferred tax asset, net 25,551   12,584   - 
Goodwill 2,548,670   2,548,670   2,548,670 
Core deposit and customer relationship intangibles, net 67,693   73,280   79,626 
Other assets 495,646   511,184   540,723 
Total assets$24,529,557  $24,149,330  $24,994,876 
      
LIABILITIES:     
Noninterest-bearing deposits$8,126,153  $8,232,140  $8,508,044 
Interest-bearing deposits 9,803,039   9,846,648   10,357,492 
Total deposits 17,929,192   18,078,788   18,865,536 
Borrowings 1,187,226   575,284   467,342 
Subordinated debentures 451,878   452,223   462,437 
Accrued interest payable and other liabilities 183,302   175,545   221,963 
Total liabilities 19,751,598   19,281,840   20,017,278 
STOCKHOLDERS' EQUITY (1) 4,777,959   4,867,490   4,977,598 
Total liabilities and stockholders’ equity$24,529,557  $24,149,330  $24,994,876 
      
Book value per share$38.36  $38.47  $38.65 
Tangible book value per share (2)$17.35  $17.75  $18.24 
Shares outstanding 124,567,950   126,537,871   128,782,878 
      
(1) Includes net unrealized (loss) gain on securities     
available-for-sale, net$(22,340) $(11,936) $31,171 
(2) Non-GAAP measure.     
      


         
PACWEST BANCORP AND SUBSIDIARIES        
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS      
          
 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30,
 2018 2018 2017 2018 2017
                
 (Dollars in thousands, except per share data)    
Interest income:         
Loans and leases$260,300  $251,085  $234,618  $511,385  $458,796 
Investment securities 27,730   26,138   24,689   53,868   47,728 
Deposits in financial institutions 484   552   237   1,036   429 
Total interest income 288,514   277,775   259,544   566,289   506,953 
          
Interest expense:         
Deposits 16,367   13,818   10,205   30,185   18,582 
Borrowings 2,649   920   1,066   3,569   2,084 
Subordinated debentures 7,166   6,537   5,800   13,703   11,362 
Total interest expense 26,182   21,275   17,071   47,457   32,028 
          
Net interest income 262,332   256,500   242,473   518,832   474,925 
Provision for credit losses 17,500   4,000   11,499   21,500   36,227 
Net interest income after provision          
for credit losses 244,832   252,500   230,974   497,332   438,698 
          
Noninterest income:         
Service charges on deposit accounts 4,265   4,174   3,510   8,439   7,268 
Other commissions and fees 11,767   10,265   10,583   22,032   20,973 
Leased equipment income 9,790   9,587   11,635   19,377   21,110 
Gain on sale of loans and leases 106   4,569   649   4,675   1,361 
Gain on sale of securities 253   6,311   1,651   6,564   1,552 
Other income 13,457   3,653   7,254   17,110   18,132 
Total noninterest income 39,638   38,559   35,282   78,197   70,396 
          
Noninterest expense:         
Compensation 69,913   71,023   65,288   140,936   130,168 
Occupancy 13,575   13,223   11,811   26,798   23,419 
Data processing 6,896   6,659   6,337   13,555   13,352 
Other professional services 5,257   4,439   3,976   9,696   7,354 
Insurance and assessments 5,330   5,727   4,856   11,057   9,647 
Intangible asset amortization 5,587   6,346   3,065   11,933   6,129 
Leased equipment depreciation 5,237   5,375   5,232   10,612   10,857 
Foreclosed assets income, net (61)  (122)  (157)  (183)  (14)
Acquisition, integration and         
reorganization costs -   -   1,700   -   2,200 
Loan expense 3,058   2,271   3,884   5,329   7,271 
Other expense 11,657   12,454   11,715   24,111   23,868 
Total noninterest expense 126,449   127,395   117,707   253,844   234,251 
          
Earnings before income taxes 158,021   163,664   148,549   321,685   274,843 
Income tax expense (42,286)  (45,388)  (54,902)  (87,674)  (102,528)
Net earnings $115,735  $118,276  $93,647  $234,011  $172,315 
          
Basic and diluted earnings per share$0.92  $0.93  $0.77  $1.85  $1.42 
                    


         
PACWEST BANCORP AND SUBSIDIARIES        
NET EARNINGS PER SHARE CALCULATIONS        
          
 Three Months Ended
 Six Months Ended 
 June 30, March 31, June 30, June 30,
 2018 2018 2017 2018 2017
                    
 (In thousands, except per share data)
Basic Earnings Per Share:         
Net earnings$115,735  $118,276  $93,647  $234,011  $172,315 
Less: earnings allocated to unvested         
restricted stock (1) (1,348)  (1,115)  (1,080)  (2,469)  (2,082)
Net earnings allocated to common         
shares$114,387  $117,161  $92,567  $231,542  $170,233 
          
Weighted-average basic shares and         
unvested restricted stock outstanding 126,082   127,487   121,422   126,780   121,384 
Less: weighted-average unvested         
restricted stock outstanding (1,466)  (1,413)  (1,455)  (1,439)  (1,479)
Weighted-average basic shares         
outstanding 124,616   126,074   119,967   125,341   119,905 
          
Basic earnings per share$0.92  $0.93  $0.77  $1.85  $1.42 
          
Diluted Earnings Per Share:         
Net earnings allocated to common         
shares$114,387  $117,161  $92,567  $231,542  $170,233 
          
Weighted-average basic shares         
outstanding 124,616   126,074   119,967   125,341   119,905 
          
Diluted earnings per share$0.92  $0.93  $0.77  $1.85  $1.42 
          
                    
(1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus
undistributed earnings amounts available to holders of unvested restricted stock, if any.
 


          
PACWEST BANCORP AND SUBSIDIARIES         
AVERAGE BALANCE SHEET AND YIELD ANALYSIS        
            
 Three Months Ended
 June 30, 2018 March 31, 2018 June 30, 2017
  InterestAverage  InterestAverage  InterestAverage
 Average Income/Yield/ Average Income/Yield/ Average Income/Yield/
 BalanceExpenseCost BalanceExpenseCost BalanceExpenseCost
                     
 (Dollars in thousands)
Assets:           
Loans and leases (1)(2)$16,576,361$260,5296.30% $16,682,124$251,2606.11% $15,497,921$234,6186.07%
Investment securities (3) 3,803,590 29,9673.16%  3,682,138 27,9353.08%  3,436,785 29,5383.45%
Deposits in financial           
institutions 112,170 4841.73%  150,674 5521.49%  96,087 2370.99%
Total interest-earning          
assets (4) 20,492,121 290,9805.70%  20,514,936 279,7475.53%  19,030,793 264,3935.57%
Other assets 3,507,516    3,556,212    2,905,809  
Total assets$23,999,637   $24,071,148   $21,936,602  
            
Liabilities and            
Stockholders' Equity:          
Interest checking$2,243,767 3,9320.70% $2,311,988 3,0500.54% $1,709,699 1,6970.40%
Money market 5,013,119 8,0720.65%  5,038,119 6,8120.55%  4,907,865 4,9930.41%
Savings 656,310 2450.15%  685,173 2580.15%  708,389 2960.17%
Time 1,790,415 4,1180.92%  1,923,963 3,6980.78%  2,366,399 3,2190.55%
Total interest-bearing          
deposits 9,703,611 16,3670.68%  9,959,243 13,8180.56%  9,692,352 10,2050.42%
Borrowings 549,665 2,6491.93%  239,293 9201.56%  457,774 1,0660.93%
Subordinated debentures 451,973 7,1666.36%  461,648 6,5375.74%  443,756 5,8005.24%
Total interest-bearing          
liabilities 10,705,249 26,1820.98%  10,660,184 21,2750.81%  10,593,882 17,0710.65%
Noninterest-bearing           
demand deposits 8,253,413    8,311,104    6,646,349  
Other liabilities 208,495    198,653    151,095  
Total liabilities 19,167,157    19,169,941    17,391,326  
Stockholders' equity 4,832,480    4,901,207    4,545,276  
Total liabilities and           
stockholders' equity$23,999,637   $24,071,148   $21,936,602  
Net interest income (4) $264,798   $258,472   $247,322 
Net interest spread (4)  4.72%   4.72%   4.92%
Net interest margin (4)  5.18%   5.11%   5.21%
            
Total deposits (5)$17,957,024$16,3670.37% $18,270,347$13,8180.31% $16,338,701$10,2050.25%
Funding sources (6)$18,958,662$26,1820.55% $18,971,288$21,2750.45% $17,240,231$17,0710.40%
            
                   
(1) Starting with the third quarter of 2017, includes tax-equivalent adjustments related to tax-exempt interest on loans.
(2) Includes discount accretion on acquired loans of $8.7 million, $7.6 million, and $7.5 million for the three months ended June 30, 2018,
March 31, 2018, and June 30, 2017, respectively.
(3) Includes tax-equivalent adjustments of $2.1 million, $1.8 million, and $4.9 million for the three months ended June 30, 2018,
March 31, 2018, and June 30, 2017 related to tax-exempt income on municipal securities.  The federal statutory tax-rate utilized
was 21% for the 2018 periods and 35% for the 2017 period.
(4) Tax equivalent.
(5) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits.  The cost of total deposits is calculated
as annualized interest expense on deposits divided by average total deposits.
(6) Funding sources is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of funding sources is
calculated as annualized total interest expense divided by average funding sources.
 


         
PACWEST BANCORP AND SUBSIDIARIES        
FIVE QUARTER BALANCE SHEET         
          
 June 30, March 31, December 31, September 30, June 30,
 2018 2018 2017 2017 2017
                    
 (Dollars in thousands, except per share data)
ASSETS:         
Cash and due from banks$245,998  $235,061  $233,215  $147,579  $180,330 
Interest-earning deposits in financial         
institutions 205,567   312,735   165,222   122,439   107,150 
Total cash and cash equivalents  451,565   547,796   398,437   270,018   287,480 
          
Securities available-for-sale 3,857,788   3,801,986   3,774,431   3,532,230   3,474,560 
Federal Home Loan Bank stock 26,271   17,250   20,790   17,250   22,059 
  Total investment securities 3,884,059   3,819,236   3,795,221   3,549,480   3,496,619 
          
Loans held for sale -   -   481,100   -   175,158 
          
Gross loans and leases held for         
investment 16,947,502   16,516,627   17,032,221   15,756,285   15,609,180 
Deferred fees, net (62,310)  (61,342)  (59,478)  (65,768)  (65,723)
Loans and leases held for         
investment, net of deferred fees 16,885,192   16,455,285   16,972,743   15,690,517   15,543,457 
Allowance for loan and lease losses (132,139)  (134,275)  (139,456)  (159,606)  (145,958)
Total loans and leases held for         
investment, net 16,753,053   16,321,010   16,833,287   15,530,911   15,397,499 
          
Equipment leased to others under         
operating leases 266,576   280,648   284,631   233,866   203,212 
Premises and equipment, net 34,513   33,686   31,852   28,910   29,108 
Foreclosed assets, net 2,231   1,236   1,329   11,630   13,278 
Deferred tax asset, net 25,551   12,584   -   65,321   70,354 
Goodwill 2,548,670   2,548,670   2,548,670   2,173,949   2,173,949 
Core deposit and customer         
relationship intangibles, net 67,693   73,280   79,626   27,188   30,237 
Other assets 495,646   511,184   540,723   351,659   369,983 
Total assets$24,529,557  $24,149,330  $24,994,876  $22,242,932  $22,246,877 
          
LIABILITIES:         
Noninterest-bearing deposits$8,126,153  $8,232,140  $8,508,044  $6,911,874  $6,701,039 
Interest-bearing deposits 9,803,039   9,846,648   10,357,492   9,861,371   10,173,938 
Total deposits 17,929,192   18,078,788   18,865,536   16,773,245   16,874,977 
Borrowings 1,187,226   575,284   467,342   250,399   217,454 
Subordinated debentures 451,878   452,223   462,437   448,126   445,743 
Accrued interest payable and other         
liabilities 183,302   175,545   221,963   160,494   148,798 
Total liabilities 19,751,598   19,281,840   20,017,278   17,632,264   17,686,972 
STOCKHOLDERS' EQUITY (1) 4,777,959   4,867,490   4,977,598   4,610,668   4,559,905 
Total liabilities and stockholders’          
equity$24,529,557  $24,149,330  $24,994,876  $22,242,932  $22,246,877 
          
Book value per share$38.36  $38.47  $38.65  $37.96  $37.55 
Tangible book value per share (2)$17.35  $17.75  $18.24  $19.84  $19.40 
Shares outstanding 124,567,950   126,537,871   128,782,878   121,449,794   121,448,321 
          
(1) Includes net unrealized (loss) gain on         
securities available-for-sale, net$(22,340) $(11,936) $31,171  $33,613  $29,729 
(2) Non-GAAP measure.         
          


         
PACWEST BANCORP AND SUBSIDIARIES        
FIVE QUARTER STATEMENT OF EARNINGS        
          
 Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
 2018 2018 2017 2017 2017
                    
 (Dollars in thousands, except per share data)
Interest income:         
Loans and leases$260,300  $251,085  $258,309  $235,666  $234,618 
Investment securities 27,730   26,138   25,712   24,762   24,689 
Deposits in financial institutions 484   552   576   538   237 
Total interest income 288,514   277,775   284,597   260,966   259,544 
          
Interest expense:         
Deposits 16,367   13,818   14,041   13,071   10,205 
Borrowings 2,649   920   1,366   188   1,066 
Subordinated debentures 7,166   6,537   6,234   6,017   5,800 
Total interest expense 26,182   21,275   21,641   19,276   17,071 
          
Net interest income 262,332   256,500   262,956   241,690   242,473 
Provision for credit losses 17,500   4,000   6,406   15,119   11,499 
Net interest income after provision          
for credit losses 244,832   252,500   256,550   226,571   230,974 
          
Noninterest income:         
Service charges on deposit accounts 4,265   4,174   4,574   3,465   3,510 
Other commissions and fees 11,767   10,265   10,505   9,944   10,583 
Leased equipment income 9,790   9,587   8,258   8,332   11,635 
Gain on sale of loans and leases 106   4,569   1,988   2,848   649 
Gain (loss) on sale of securities 253   6,311   (3,329)  1,236   1,651 
Other income 13,457   3,653   4,799   5,557   7,254 
Total noninterest income 39,638   38,559   26,795   31,382   35,282 
          
Noninterest expense:         
Compensation 69,913   71,023   71,986   64,413   65,288 
Occupancy 13,575   13,223   12,715   12,729   11,811 
Data processing 6,896   6,659   6,764   6,459   6,337 
Other professional services 5,257   4,439   5,786   4,213   3,976 
Insurance and assessments 5,330   5,727   5,384   4,702   4,856 
Intangible asset amortization 5,587   6,346   5,062   3,049   3,065 
Leased equipment depreciation 5,237   5,375   5,048   4,862   5,232 
Foreclosed assets (income) expense, net (61)  (122)  (475)  2,191   (157)
Acquisition, integration and         
reorganization costs -   -   16,085   1,450   1,700 
Loan expense 3,058   2,271   3,140   3,421   3,884 
Other expense 11,657   12,454   11,373   11,053   11,715 
Total noninterest expense 126,449   127,395   142,868   118,542   117,707 
          
Earnings before income taxes 158,021   163,664   140,477   139,411   148,549 
Income tax expense (42,286)  (45,388)  (56,440)  (37,945)  (54,902)
Net earnings $115,735  $118,276  $84,037  $101,466  $93,647 
          
Basic and diluted earnings per share$0.92  $0.93  $0.66  $0.84  $0.77 
                    


         
PACWEST BANCORP AND SUBSIDIARIES        
FIVE QUARTER SELECTED FINANCIAL DATA        
          
 At or For the Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
 2018 2018 2017 2017 2017
          
 (Dollars in thousands)
Performance Ratios:         
Return on average assets (1) 1.93%  1.99%  1.34%  1.82%  1.71%
Return on average equity (1) 9.61%  9.79%  6.78%  8.77%  8.26%
Return on average tangible equity (1)(2) 20.98%  21.08%  13.75%  16.85%  16.06%
          
Yield on average loans and leases (1)(3) 6.30%  6.11%  5.89%  6.01%  6.07%
Yield on average interest-earning         
assets (1)(4) 5.70%  5.53%  5.37%  5.48%  5.57%
Cost of average total deposits (1) 0.37%  0.31%  0.30%  0.31%  0.25%
Cost of average time deposits (1) 0.92%  0.78%  0.68%  0.62%  0.55%
Cost of average interest-bearing         
liabilities (1) 0.98%  0.81%  0.75%  0.73%  0.65%
Cost of average funding sources (1) 0.55%  0.45%  0.44%  0.44%  0.40%
Net interest spread (1)(4) 4.72%  4.72%  4.62%  4.75%  4.92%
Net interest margin (1)(4) 5.18%  5.11%  4.97%  5.08%  5.21%
          
Efficiency ratio 39.8%  41.7%  41.0%  40.4%  40.3%
Noninterest expense as a percentage         
of average assets (1) 2.11%  2.15%  2.29%  2.12%  2.15%
          
Average Balances:         
Loans and leases, net of deferred fees$16,576,361  $16,682,124  $17,426,873  $15,575,030  $15,497,921 
Interest-earning assets 20,492,121   20,514,936   21,414,180   19,257,441   19,030,793 
Total assets 23,999,637   24,071,148   24,789,836   22,137,874   21,936,602 
Noninterest-bearing deposits 8,253,413   8,311,104   8,190,134   6,858,816   6,646,349 
Interest-bearing deposits 9,703,611   9,959,243   10,578,568   10,024,554   9,692,352 
Total deposits 17,957,024   18,270,347   18,768,702   16,883,370   16,338,701 
Borrowings and subordinated         
debentures 1,001,638   700,941   903,375   508,083   901,530 
Interest-bearing liabilities 10,705,249   10,660,184   11,481,943   10,532,637   10,593,882 
Funding sources 18,958,662   18,971,288   19,672,077   17,391,453   17,240,231 
Stockholders' equity 4,832,480   4,901,207   4,920,498   4,592,489   4,545,276 
          
(1) Annualized.         
(2) Non-GAAP measure.         
(3) Tax equivalent starting with the third quarter of 2017.        
(4) Tax equivalent.         
          


         
PACWEST BANCORP AND SUBSIDIARIES        
FIVE QUARTER SELECTED FINANCIAL DATA        
          
 At or For the Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
 2018 2018 2017 2017 2017
          
 (Dollars in thousands)
Credit Quality Ratios (1):         
Allowance for credit losses to loans         
and leases held for investment 0.99%  1.02%  0.96%  1.11%  1.03%
Allowance for credit losses to         
nonaccrual loans and leases held         
for investment 147.3%  161.1%  103.8%  110.1%  92.2%
Nonaccrual loans and leases held for         
investment to loans and leases held         
for investment 0.67%  0.63%  0.92%  1.01%  1.12%
Nonperforming assets to loans and         
leases held for investment and         
foreclosed assets 0.69%  0.64%  0.93%  1.08%  1.20%
Nonperforming assets to total assets 0.47%  0.44%  0.63%  0.76%  0.84%
Trailing 12 months net charge-offs         
to average loans and leases         
held for investment 0.28%  0.31%  0.40%  0.35%  0.37%
          
PacWest Bancorp Consolidated          
Capital:         
Tier 1 leverage ratio (2) 10.33%  10.66%  10.66%  12.02%  11.90%
Common equity tier 1 capital ratio (2) 10.61%  11.16%  10.91%  12.52%  12.28%
Tier 1 capital ratio (2) 10.61%  11.16%  10.91%  12.52%  12.28%
Total capital ratio (2) 13.51%  14.11%  13.75%  15.74%  15.42%
Risk-weighted assets (2)$20,887,678  $20,523,487  $21,657,591  $19,086,798  $19,084,823 
          
Equity to assets ratio 19.48%  20.16%  19.91%  20.73%  20.50%
Tangible common equity ratio (3) 9.86%  10.43%  10.50%  12.02%  11.75%
Book value per share$38.36  $38.47  $38.65  $37.96  $37.55 
Tangible book value per share (3)$17.35  $17.75  $18.24  $19.84  $19.40 
          
Pacific Western Bank Capital:         
Tier 1 leverage ratio (2) 11.11%  11.33%  11.75%  11.46%  11.41%
Common equity tier 1 capital ratio (2) 11.40%  11.86%  11.91%  11.95%  11.79%
Tier 1 capital ratio (2) 11.40%  11.86%  11.91%  11.95%  11.79%
Total capital ratio (2) 12.21%  12.67%  12.69%  12.89%  12.66%
          
                    
(1) Ratios related to 2018 periods are for total loans and leases.  Ratios related to 2017 periods are for Non-PCI loans and leases.
(2) Capital information for June 30, 2018 is preliminary.        
(3) Non-GAAP measure.         
          

GAAP TO NON-GAAP RECONCILIATIONS

This press release contains certain non-GAAP financial disclosures for: (1) return on average tangible equity, (2) tangible common equity ratio, and (3) 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, and tangible book value per share is prevalent among banking regulators, investors and analysts.  Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) return on average equity, (2) equity to assets ratio, and (3) book value per share.   

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

          
 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30,
Return on Average Tangible Equity2018
 2018
 2017
 2018
 2017
                    
 (Dollars in thousands)
Net earnings$115,735  $118,276  $93,647  $234,011  $172,315 
          
Average stockholders' equity$4,832,480  $4,901,207  $4,545,276  $4,866,654  $4,524,591 
Less: Average intangible assets 2,619,351   2,625,593   2,205,814   2,622,455   2,207,454 
Average tangible common equity$2,213,129  $2,275,614  $2,339,462  $2,244,199  $2,317,137 
          
Return on average equity (1) 9.61%  9.79%  8.26%  9.70%  7.68%
Return on average tangible equity (2) 20.98%  21.08%  16.06%  21.03%  15.00%
          
              
(1) Annualized net earnings divided by average stockholders' equity.      
(2) Annualized net earnings divided by average tangible common equity.      
       


          
Tangible Common Equity Ratio/June 30, March 31, December 31, September 30, June 30,
Tangible Book Value Per Share2018 2018 2017 2017 2017
          
 (Dollars in thousands, except per share data)
Stockholders' equity$4,777,959  $4,867,490  $4,977,598  $4,610,668  $4,559,905 
Less: Intangible assets 2,616,363   2,621,950   2,628,296   2,201,137   2,204,186 
Tangible common equity$2,161,596  $2,245,540  $2,349,302  $2,409,531  $2,355,719 
          
Total assets$24,529,557  $24,149,330  $24,994,876  $22,242,932  $22,246,877 
Less: Intangible assets 2,616,363   2,621,950   2,628,296   2,201,137   2,204,186 
Tangible assets$21,913,194  $21,527,380  $22,366,580  $20,041,795  $20,042,691 
          
Equity to assets ratio 19.48%  20.16%  19.91%  20.73%  20.50%
Tangible common equity ratio (1) 9.86%  10.43%  10.50%  12.02%  11.75%
          
Book value per share$38.36  $38.47  $38.65  $37.96  $37.55 
Tangible book value per share (2)$17.35  $17.75  $18.24  $19.84  $19.40 
Shares outstanding 124,567,950   126,537,871   128,782,878   121,449,794   121,448,321 
          
            
(1) Tangible common equity divided by tangible assets.        
(2) Tangible common equity divided by shares outstanding.        
         


Contact:Matthew P. WagnerPatrick J. Rusnak
 President and CEOExecutive Vice President and CFO
Phone:310-887-8520
714-989-4705
   
Contact:Donald D. Destino
 
 Executive Vice President 
 Corporate Development and Investor Relations 
 Relations
 
Phone:310-887-8521