EX-99.1 2 a14-10998_1ex99d1.htm EX-99.1

Exhibit 99.1

 

PRESS RELEASE

 

PacWest Bancorp

(NASDAQ: PACW)

 

Contact:

 

Matthew P. Wagner
President and CEO
10250 Constellation Boulevard
Suite 1640
Los Angeles, CA 90067

 

Victor R. Santoro
Executive Vice President and CFO
10250 Constellation Boulevard
Suite 1640
Los Angeles, CA 90067

 

 

 

 

 

Phone:

 

310-728-1020

 

310-728-1021

Fax:

 

310-201-0498

 

310-201-0498

 

FOR IMMEDIATE RELEASE

 

April 23, 2014

 

PACWEST BANCORP ANNOUNCES RESULTS

FOR THE FIRST QUARTER OF 2014

 

Highlights

 

·                  Net Earnings of $25.1 Million or $0.55 Per Diluted Share

·                  Net Interest Margin at 5.95%

·                  Credit Loss Reserve at 1.75% of Loans and Leases (excludes PCI loans)

·                  Credit Loss Reserve at 115% of Nonaccrual Loans and Leases (excludes PCI loans)

·                  Demand Deposits Reach 45% of Total Deposits

·                  Core Deposits at 88% of Total Deposits

·                  CapitalSource Merger Closed April 7, 2014; Deposit System Converted April 12, 2014

 

Los Angeles, California . . . PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the first quarter of 2014 of $25.1 million, or $0.55 per diluted share, compared to net earnings for the fourth quarter of 2013 of $3.1 million, or $0.06 per diluted share.  For the fourth quarter of 2013, net earnings included a $12.2 million, or $0.28 per diluted share, after-tax charge for accelerated restricted stock vesting.

 

This press release contains certain non-GAAP financial disclosures for adjusted earnings from continuing operations before income taxes, adjusted efficiency ratio, adjusted allowance for credit losses to loans and leases, return on average tangible equity, and tangible common equity ratio.  The Company uses certain 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.  As analysts and investors view adjusted earnings from continuing operations before income taxes as an indicator of the Company’s ability to both generate earnings and absorb credit losses, we disclose this amount in addition to pre-tax earnings.  We disclose the adjusted efficiency ratio as it shows the trend in

 

1


 

recurring overhead-related noninterest expense relative to recurring net revenues.  As the allowance for credit losses takes into account credit deterioration on acquired loans and leases, which include an estimate of credit losses in their initial fair values, we disclose the adjusted allowance for credit losses to loans and leases in addition to the allowance for credit losses to loans and leases.  The adjusted allowance for credit losses to loans and leases excludes acquired loans and leases and the related allowance.  Given that the use of return on average tangible equity, tangible common equity amounts and ratios, and tangible book value per share is prevalent among banking regulators, investors and analysts, we disclose our return on average tangible equity in addition to return on average equity, our tangible common equity ratio in addition to the equity-to-assets ratio, and tangible book value per share in addition to book value per share.  Please refer to the tables at the end of this release for a presentation of performance ratios in accordance with GAAP and a reconciliation of the non-GAAP financial measures to the GAAP financial measures.

 

The comparability of financial information is affected by our acquisitions.  Operating results include the operations of acquired entities from the dates of acquisition.  The operations of First California Financial Group, Inc. (“FCAL”) have been included since its acquisition date of May 31, 2013. The CapitalSource merger closed on April 7, 2014.  Accordingly, CapitalSource operations will be included in second quarter 2014 results from that date.

 

2


 

FIRST QUARTER RESULTS

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(Dollars in thousands, except per share data)

 

Financial Highlights:

 

 

 

 

 

Net earnings from continuing operations

 

$

25,905

 

$

3,447

 

Net earnings

 

$

25,080

 

$

3,109

 

Diluted earnings per share from continuing operations

 

$

0.57

 

$

0.07

 

Diluted earnings per share

 

$

0.55

 

$

0.06

 

Adjusted earnings from continuing operations before income taxes (1)

 

$

45,284

 

$

38,213

 

Annualized return on average assets

 

1.56

%

0.19

%

Annualized return on average equity

 

12.40

%

1.51

%

Annualized return on average tangible equity (2)

 

17.10

%

2.11

%

Net interest margin

 

5.95

%

5.41

%

Core net interest margin (3)

 

5.42

%

5.31

%

Efficiency ratio

 

56.1

%

85.5

%

Adjusted efficiency ratio (4)

 

52.7

%

56.7

%

 

 

 

 

 

 

At Quarter End:

 

 

 

 

 

Allowance for credit losses to loans and leases (excludes PCI loans) (5)

 

1.75

%

1.73

%

Allowance for credit losses to nonaccrual loans and leases (excludes PCI loans) (5) 

 

115

%

145

%

Equity to assets ratios:

 

 

 

 

 

PacWest Bancorp Consolidated

 

12.79

%

12.38

%

Pacific Western Bank

 

13.99

%

13.97

%

Tangible common equity ratios:

 

 

 

 

 

PacWest Bancorp Consolidated

 

9.68

%

9.24

%

Pacific Western Bank

 

10.92

%

10.88

%

 

(1)  Represents pre-tax earnings from continuing operations excluding net credit costs, securities gains and losses, gain on sale of owned office building, accelerated vesting of restricted stock, and acquisition and integration costs.  See GAAP to Non-GAAP Reconciliation table.

(2)  Calculation reduces average equity by average intangible assets. See GAAP to Non-GAAP Reconciliation table.

(3)  Excludes impact of accelerated accretion of acquisition discounts resulting from PCI loan payoffs.

(4)  Excludes FDIC loss sharing expense, securities gains and losses, gain on sale of owned office building, accelerated vesting of restricted stock, OREO expenses, and acquisition and integration costs.  See GAAP to Non-GAAP Reconciliation table.

(5)  PCI refers to purchased credit impaired loans, which includes acquired loans that are impaired on the purchase date.

 

The quarter-over-quarter increase in net earnings of $22.0 million was due mostly to: (a) the $12.4 million ($12.2 million after tax) accelerated vesting of restricted stock that occurred during the fourth quarter of 2013 and not repeated in the first quarter of 2014; (b) the $4.7 million ($2.8 million after tax) increase in net interest income; (c) the $5.0 million ($2.9 million after tax) increase in gain on sale of securities; and (d) the $5.4 million ($3.1 million after tax) increase in other income.

 

3


 

Matt Wagner, President and CEO, commented “We had a very successful first quarter, posting net earnings of $25.1 million and a net interest margin of 5.95%.  Although loan and lease growth was moderated in the first quarter to augment liquidity in anticipation of the CapitalSource merger, we were able to maintain our core loan yield at 6.68% due to the structure and mix of new loan originations.  Our credit quality metrics remain at high levels. The slight increase in classified and nonaccrual non-PCI loans and leases results from our conservative evaluations and presents no expected loss content.  The Company’s allowance for credit loss coverage ratio increased 2 basis points to 1.75% at the end of March.”

 

Mr. Wagner continued, “Crowning the end of the first quarter was final regulatory approval of our merger with CapitalSource in early April and closing on April 7.  The branch office consolidation, core deposit system conversion and general ledger cutover were completed flawlessly over the April 12 weekend.  We have already begun executing on our business plan for the new Company, which focuses on loan growth in all markets and attracting and retaining low-cost core deposits.  We welcome all of our new customers, employees, and directors and look forward to a successful 2014 and beyond.”

 

Vic Santoro, Executive Vice President and CFO, stated “The hallmark of this Company has been its earning power supported by its net interest margin and expense control.  Our adjusted net earnings reached $28.2 million in the first quarter, exceeding reported net earnings of $25.1 million that included $4.1 million in after-tax gains from asset sales.  Our core net interest margin remains strong, reaching 5.42% for the first quarter from a combination of higher interest income on loans and leases and a low all-in deposit cost of 9 basis points.  Our efficiency ratios, both reported and adjusted, declined quarter-over-quarter, with the adjusted efficiency ratio reaching 52.7%.  This earning power, along with a strong capital base, positions us well to integrate the CapitalSource operation and be successful in 2014.”

 

BALANCE SHEET CHANGES

 

Total assets decreased $15.5 million during the first quarter of 2014 to $6.5 billion due mainly to decreases in total loans and leases, securities available-for-sale, the FDIC loss sharing asset, and other assets, offset partially by an increase in cash and cash equivalents.  At March 31, 2014, gross loans and leases totaled $4.2 billion, a decrease of $152.3 million since December 31, 2013.  The gross Non-PCI loan and lease portfolio totaled $3.8 billion, a decrease of $102.0 million during the first quarter reflecting $320.2 million in net pay downs offset by $168.0 million in originations and purchases.  The PCI loan portfolio, which is mostly covered loans, totaled $332.5 million, down $50.3 million during the first quarter due to repayments and resolution activities.  Securities available-for-sale declined $17.3 million, due mainly to the sale of $137.3 million in government sponsored enterprise (“GSE”) pass through securities that resulted in a net gain of $4.8 million.  Cash and cash equivalents increased $194.7 million to $342.1 million at quarter-end in anticipation of the CapitalSource merger, which closed April 7, 2014.

 

4


 

The following tables present our loan portfolio activity for the first quarter of 2014 and the fourth quarter of 2013:

 

 

 

 

 

Originated

 

 

 

 

 

 

 

December 31,

 

and

 

Net

 

March 31,

 

 

 

2013

 

Purchased (1)

 

Paydowns

 

2014

 

 

 

(In thousands)

 

Non-PCI loans, excluding Asset Financing Segment

 

$

3,458,342

 

$

139,735

 

$

(219,818

)(2)

$

3,378,259

 

Asset Financing Segment

 

472,197

 

28,251

 

(50,138

)

450,310

 

Total Non-PCI loans and leases

 

3,930,539

 

167,986

 

(269,956

)

3,828,569

 

PCI loans

 

382,796

 

—

 

(50,280

)

332,516

 

Total

 

$

4,313,335

 

$

167,986

 

$

(320,236

)

$

4,161,085

 

 

(1) Includes loan purchases of $17.4 million.

(2) Includes two loan payoffs for $26.6 million and $23.2 million.

 

 

 

 

 

Originated

 

 

 

 

 

 

 

September 30,

 

and

 

Net

 

December 31,

 

 

 

2013

 

Purchased (1)

 

Paydowns

 

2013

 

 

 

(In thousands)

 

Non-PCI loans, excluding Asset Financing Segment

 

$

3,483,866

 

$

167,691

 

$

(193,215

)(2)

$

3,458,342

 

Asset Financing Segment

 

467,689

 

68,725

 

(64,217

)

472,197

 

Total Non-PCI loans and leases

 

3,951,555

 

236,416

 

(257,432

)

3,930,539

 

PCI loans

 

432,757

 

—

 

(49,961

)

382,796

 

Total

 

$

4,384,312

 

$

236,416

 

$

(307,393

)

$

4,313,335

 

 

(1) Includes loan purchases of $20.9 million.

(2) Includes two loans of a single lending relationship for $31.8 million that repaid on December 31, 2013.

 

Total liabilities decreased $40.1 million during the first quarter of 2014 to $5.7 billion due to decreases in FHLB advances, liabilities of discontinued operations, and accrued interest payable and other liabilities, offset partially by an increase in total deposits.  The increase in total deposits of $88.4 million was represented by an increase in core deposits of $103.2 million, offset partially by a decrease of $14.8 million in time deposits.  The increase in core deposits was composed of increases of $73.2 million, $30.2 million, and $7.4 million in noninterest-bearing demand deposits, money market deposits, and savings deposits, respectively, offset by a decrease of $7.5 million in interest checking deposits.  At March 31, 2014, core deposits totaled $4.7 billion, or 88% of total deposits, and noninterest-bearing demand deposits totaled $2.4 billion, or 45% of total deposits.

 

5


 

SECURITIES AVAILABLE-FOR-SALE

 

The following table presents the components, yields, and durations of our securities available-for-sale as of the date indicated:

 

 

 

March 31, 2014

 

 

 

Amortized

 

Carrying

 

 

 

Duration

 

Security Type

 

Cost

 

Value

 

Yield (1)

 

(in years)

 

 

 

(Dollars in thousands)

 

Residential mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Government agency and government-sponsored enterprise pass through securities

 

$

560,004

 

$

574,669

 

2.63

%

3.9

 

Government agency and government-sponsored enterprise collateralized mortgage obligations

 

272,832

 

269,637

 

2.40

%

5.2

 

Covered private label collateralized mortgage obligations

 

29,649

 

37,594

 

6.99

%

2.9

 

Municipal securities (2)

 

455,437

 

447,933

 

2.79

%

6.0

 

Corporate debt securities

 

84,210

 

84,211

 

2.58

%

2.6

 

Government-sponsored enterprise debt securities

 

36,180

 

36,054

 

2.22

%

5.9

 

Other securities

 

27,393

 

27,375

 

0.64

%

0.1

 

Total securities available-for-sale (2)

 

$

1,465,705

 

$

1,477,473

 

3.06

%

4.6

 

 

(1) Represents the yield for the month of March 2014.

(2) The tax equivalent yield was 4.18% and 3.47% for municipal securities and total securities available-for-sale, respectively.

 

The following table shows the geographic composition of the majority of our municipal securities portfolio as of the date indicated:

 

 

 

March 31, 2014

 

 

 

Carrying

 

% of

 

 

 

Value

 

Total

 

 

 

(In thousands)

 

 

 

Municipal Securities by State:

 

 

 

 

 

Texas

 

$

84,273

 

19

%

Washington

 

42,991

 

10

%

New York

 

32,867

 

8

%

Colorado

 

25,881

 

6

%

Illinois

 

24,766

 

6

%

Ohio

 

22,739

 

5

%

California

 

19,799

 

4

%

Hawaii

 

15,469

 

3

%

Florida

 

15,308

 

3

%

Massachusetts

 

15,370

 

3

%

Total of 10 largest states

 

299,463

 

67

%

All other states

 

148,470

 

33

%

Total municipal securities

 

$

447,933

 

100

%

 

6


 

COVERED ASSETS

 

We are party to four loss sharing agreements with the FDIC.  Such agreements cover a substantial portion of losses incurred on covered loans, other real estate owned, and certain investment securities.

 

A summary of covered assets is shown in the following table as of the dates indicated:

 

 

 

March 31,

 

December 31,

 

Covered Assets

 

2014

 

2013

 

 

 

(In thousands)

 

Loans, net of allowance

 

$

377,435

 

$

426,625

 

Investment securities

 

37,594

 

37,904

 

Other real estate owned, net

 

6,177

 

9,036

 

Total covered assets

 

$

421,206

 

$

473,565

 

 

 

 

 

 

 

Percentage of total assets

 

6.5

%

7.2

%

 

NET INTEREST INCOME

 

Net interest income increased by $4.7 million to $86.0 million for the first quarter of 2014 compared to $81.3 million for the fourth quarter of 2013 due primarily to higher interest income on loans and leases.  Interest income on loans and leases increased $4.1 million due mostly to higher accelerated accretion of acquisition discounts resulting from PCI loan payoffs, offset partially by two fewer days in the current quarter.  Interest income on investment securities increased $401,000 due to purchases of higher yielding securities during the first quarter, offset partially by the sale of $137.3 million in lower yielding GSE securities and reduced discount accretion on our covered private label mortgage-backed securities due to slower prepayments.  Interest expense declined by $253,000 due mainly to a lower average rate and average balance for time deposits, as well as a lower average balance for money market deposits and two fewer days in the current quarter.

 

NET INTEREST MARGIN

 

Our net interest margin (“NIM”) for the first quarter of 2014 was 5.95%, compared to 5.41% for the fourth quarter of 2013.  The 54 basis point increase in NIM was driven by a 53 basis point increase in our earning asset yield.  The increase in the earning asset yield was due to the 65 basis point increase in the loan and lease yield.

 

7


 

The NIM and loan and lease yield are impacted by accelerated accretion of acquisition discounts resulting from PCI loan payoffs that cause volatility.  The effects of this item on the NIM and loan yield are shown in the following table for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

NIM

 

Loan Yield

 

NIM

 

Loan Yield

 

Increase in NIM and loan and lease yield due to accelerated accretion of acquisition discounts resulting from PCI loan payoffs

 

0.53

%

0.74

%

0.10

%

0.13

%

As reported

 

5.95

%

7.42

%

5.41

%

6.77

%

Core

 

5.42

%

6.68

%

5.31

%

6.64

%

 

The following table presents the loan and lease yields and related average balances for our Non-PCI loans and leases, PCI loans, and total loan and lease portfolio for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(Dollars in thousands)

 

Yields:

 

 

 

 

 

Non-PCI loans and leases

 

6.17

%

6.14

%

PCI loans

 

21.83

%

13.15

%

Total loans and leases

 

7.42

%

6.77

%

 

 

 

 

 

 

Average Balances:

 

 

 

 

 

Non-PCI loans and leases

 

$

3,891,990

 

$

3,916,650

 

PCI loans

 

339,329

 

384,727

 

Total loans and leases

 

$

4,231,319

 

$

4,301,377

 

 

The yield on loans and leases increased to 7.42% for the first quarter of 2014 from 6.77% for the fourth quarter of 2013 due to higher accelerated accretion of acquisition discounts resulting from PCI loan payoffs.  The accelerated accretion of acquisition discounts resulting from PCI loan payoffs totaled $7.7 million for the first quarter and $1.4 million for the fourth quarter.  When accelerated accretion is excluded, the core yield on loans and leases was 6.68% for the first quarter and 6.64% for the fourth quarter.

 

The yield on PCI loans increased to 21.83% for the first quarter of 2014 from 13.15% for the fourth quarter of 2013 due mainly to the $6.3 million increase in accelerated accretion of acquisition discounts resulting from PCI loan payoffs.  When accelerated accretion is excluded, the core yield on PCI loans increased to 12.68% for the first quarter from 11.67% for the fourth quarter due to improved performance on the underlying loans.

 

The cost of average funding sources declined one basis point to 0.17% for the first quarter of 2014 from 0.18% for the fourth quarter of 2013.  This includes all-in deposit cost which declined two basis points to 0.09% for the current quarter compared to the prior quarter.  The cost of total interest-bearing deposits and total interest-bearing liabilities each declined two basis points to 0.17% and 0.30% for the first quarter.  Such declines are due mainly to a lower average rate on time deposits.

 

8


 

NONINTEREST INCOME

 

Noninterest income increased by $8.6 million to a positive $4.7 million for the first quarter of 2014 from a negative $3.9 million for the fourth quarter of 2013.  The increase was due mostly to the $5.0 million increase in gain on sales of securities during the first quarter and a $5.4 million increase in other income, offset by an increase of $837,000 in FDIC loss sharing expense and a decrease of $577,000 in gain on sales of leases.  During the first quarter we sold $137.3 million in GSE pass through securities that resulted in a gain of $4.8 million.  We sold these securities to take advantage of favorable market conditions for premium coupon seasoned GSE securities, and redeployed the proceeds into single-maturity investments that are expected to perform better under current market conditions.  During the fourth quarter we sold $10.0 million in collateralized loan obligation (“CLO”) securities, which resulted in a net loss of $272,000.  We sold the CLO securities in order to minimize our risk in holding these securities subject to the then proposed regulations referred to as the Volcker rule.  The increase in other income was due to $3.5 million in income recognized on the early repayment of leases and a $1.6 million gain on the sale of an owned office building.  The increase in FDIC loss sharing expense was due to lower covered OREO expense attributable mainly to higher gain on sales of covered OREO and higher losses on the FDIC loss sharing asset.

 

The following table presents the details of FDIC loss sharing income (expense), net for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

Increase

 

 

 

2014

 

2013

 

(Decrease)

 

 

 

(In thousands)

 

FDIC Loss Sharing Income (Expense), Net:

 

 

 

 

 

 

 

Gain (loss) on FDIC loss sharing asset (1)

 

$

(2,206

)

$

(1,909

)

$

(297

)

FDIC loss sharing asset amortization, net

 

(7,912

)

(8,111

)

199

 

Net reimbursement (to) from FDIC for covered OREOs (2)

 

(1,224

)

(508

)

(716

)

Other

 

(88

)

(65

)

(23

)

FDIC loss sharing income (expense), net

 

$

(11,430

)

$

(10,593

)

$

(837

)

 

(1) Includes increases related to covered loan loss provisions and decreases for: (a) write-offs for covered loans expected to be resolved at amounts higher than their carrying values, and (b) amounts to be reimbursed to the FDIC for covered loans resolved at amounts higher than their carrying values.

(2) Represents amounts to be reimbursed to the FDIC for gains on covered OREO sales and due from the FDIC for covered OREO write-downs.

 

9


 

NONINTEREST EXPENSE

 

Noninterest expense decreased by $15.2 million to $50.9 million for the first quarter of 2014 compared to $66.1 million for the fourth quarter of 2013.  The decline was due to the $12.4 million of expense from accelerated vesting of restricted stock incurred in the fourth quarter and not repeated in the first quarter, as well as decreases of $2.1 million and $1.0 million in acquisition and integration costs and covered OREO expense, respectively.  The decrease in covered OREO expense was due mainly to a higher gain on sales of covered OREO of $650,000, lower write-downs of $244,000, and lower maintenance costs of $127,000.  Compensation expense increased $930,000 due mainly to the timing of payroll taxes and lower cost deferral on loan originations, offset partially by lower restricted stock amortization, excluding the accelerated vesting of restricted stock.

 

Noninterest expense includes: (a) amortization of restricted stock, which is included in compensation, and (b) intangible asset amortization.  Amortization of restricted stock, excluding the accelerated vesting of restricted stock, totaled $1.6 million for the first quarter of 2014 and $2.3 million for the fourth quarter of 2013.  Intangible asset amortization totaled $1.4 million for each of the first quarter and fourth quarter.

 

In December 2013, the Company accelerated the vesting of certain restricted stock awards that resulted in a pre-tax charge of $12.4 million ($12.2 million after tax). This action was taken by the Company in order to eliminate an additional $21.0 million of compensation and tax expense related to change in control payments that the Company would have otherwise incurred upon consummation of the CapitalSource merger. Such eliminated expenses relate to tax gross-up payments and the value of lost tax deductions, in each case due to the impact of Sections 280G and 4999 of the Internal Revenue Code as they apply to change in control payments that would have become payable to certain PacWest employees in conjunction with the CapitalSource merger. The restricted stock awards that were vested on an accelerated basis in 2013 would have otherwise vested upon consummation of the CapitalSource merger, and the $12.2 million after-tax charge to earnings that we recorded in December 2013 would have been incurred at that time.

 

INCOME TAXES

 

Our overall effective income tax rate was 35.8% for the first quarter of 2014 and 74.1% for the fourth quarter of 2013.  The fourth quarter effective tax rate was driven higher than normal by the non-deductibility of most of the $12.4 million accelerated vesting of restricted stock. When this item is excluded, our adjusted effective tax rate was 36.4% for the fourth quarter.

 

10


 

NET CREDIT COSTS

 

Net credit costs on a pre-tax basis are shown in the following table:

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(In thousands)

 

Negative provision for credit losses

 

$

(644

)

$

(1,338

)

Non-covered OREO (income) expense, net

 

(246

)

25

 

Covered OREO (income) expense, net

 

(1,615

)

(594

)

Less: FDIC loss sharing expense, net

 

11,430

 

10,593

 

Total net credit costs

 

$

8,925

 

$

8,686

 

 

CREDIT QUALITY

 

Credit quality metrics declined somewhat quarter over quarter due to slightly elevated levels of classified and nonaccrual loans and leases.  Economic trends in our markets will cause periodic movements in nonaccrual and classified loan and lease balances.  However, losses on such nonaccrual and classified loans and leases are not expected to be material.

 

The following table presents our Non-PCI credit quality metrics as of the dates indicated:

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(Dollars in thousands)

 

Non-PCI Credit Quality Metrics:

 

 

 

 

 

Allowance for credit losses

 

$

66,955

 

$

67,816

 

Nonaccrual loans and leases

 

58,121

 

46,774

 

Classified loans and leases (1)

 

150,517

 

127,311

 

Performing restructured loans

 

35,101

 

41,648

 

Net charge-offs (recoveries) (for the quarter)

 

861

 

(15

)

Provision for credit losses (for the quarter)

 

—

 

—

 

Allowance for credit losses to loans and leases

 

1.75

%

1.73

%

Allowance for credit losses to nonaccrual loans and leases

 

115.2

%

145.0

%

Nonperforming assets to loans and leases and other real estate owned

 

2.71

%

2.48

%

 

(1) Classified loans and leases are those with a credit risk rating of substandard or doubtful.

 

Non-PCI loans and leases at March 31, 2014, include $1.0 billion in loans and leases acquired in acquisitions.  These acquired loans and leases were initially recorded at their estimated fair values and such initial fair values included an estimate of credit losses.  The allowance calculation for Non-PCI loans and leases includes an amount for credit deterioration on acquired loans and leases since their acquisition dates.  At March 31, 2014, the allowance for credit losses includes $737,000 attributed to these acquired loans and leases. When these acquired loans and leases are excluded from the total of Non-PCI loans and leases and the related allowance of $737,000 is excluded from the allowance for credit losses, the result is an adjusted coverage ratio of our allowance for credit losses for Non-PCI loans and leases of 2.34% at March 31, 2014; the comparable ratio at December 31, 2013 was 2.34%.

 

11


 

Credit Loss Provisions

 

The Company recorded a negative provision for credit losses of $644,000 for the first quarter of 2014 compared to a negative provision for credit losses of $1.3 million for the fourth quarter of 2013; such provisions relate to PCI loans only.

 

The provision, or negative provision, for credit losses on PCI loans results from decreases, or increases, in expected cash flows on such loans compared to those previously estimated.  Cash flows on PCI loans are estimated quarterly and are subject to change based on varying conditions with the underlying borrowers and collateral.  The negative provisions for credit losses on PCI loans in the first and fourth quarters were due to increases in both actual cash flows from early pay-offs and expected cash flows on PCI loans generally.

 

The provision level on Non-PCI loans and leases is generated by our allowance methodology, which reflects the level and trends of net charge-offs, the levels of nonaccrual and classified loans and leases, the migration of loans and leases into various risk classifications, and the level of outstanding loans and leases.  Based on such methodology, there was no provision for credit losses on Non-PCI loans and leases for the first quarter of 2014 and fourth quarter of 2013.

 

Nonperforming Assets

 

Nonperforming assets include nonaccrual loans and leases (excluding PCI loans, which are accounted for based on expected cash flows and considered accruing regardless of the payment status of the underlying loans) and OREO and totaled $105.0 million at March 31, 2014 compared to $98.6 million at December 31, 2013.  The ratio of nonperforming assets to Non-PCI loans and leases and OREO increased to 2.71% at March 31, 2014 from 2.48% at December 31, 2013.

 

12


 

The following table presents our Non-PCI 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

 

 

 

March 31, 2014

 

December 31, 2013

 

30 - 89 Days Past Due

 

 

 

 

 

% of

 

 

 

% of

 

March 31,

 

December 31,

 

 

 

 

 

Loan

 

 

 

Loan

 

2014

 

2013

 

 

 

Balance

 

Category

 

Balance

 

Category

 

Balance

 

Balance

 

 

 

(Dollars in thousands)

 

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospitality

 

$

6,639

 

3.9

%

$

6,723

 

3.7

%

$

—

 

$

—

 

SBA 504

 

2,519

 

6.0

%

2,602

 

5.8

%

1,092

 

2,155

 

Other (1)

 

29,701

 

1.4

%

18,648

 

0.8

%

1,831

 

11,270

 

Total real estate mortgage

 

38,859

 

1.7

%

27,973

 

1.2

%

2,923

 

13,425

 

Real estate construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

387

 

0.6

%

389

 

0.7

%

—

 

—

 

Commercial

 

3,353

 

1.9

%

2,830

 

1.9

%

—

 

—

 

Total real estate construction

 

3,740

 

1.6

%

3,219

 

1.5

%

—

 

—

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateralized

 

7,797

 

1.3

%

9,991

 

1.7

%

140

 

119

 

Unsecured

 

411

 

0.3

%

458

 

0.3

%

—

 

82

 

Asset-based

 

558

 

0.3

%

1,070

 

0.5

%

—

 

—

 

SBA 7(a) 

 

2,993

 

10.9

%

3,037

 

10.6

%

387

 

459

 

Total commercial

 

11,759

 

1.2

%

14,556

 

1.5

%

527

 

660

 

Leases

 

220

 

0.1

%

632

 

0.2

%

4,075

 

2,273

 

Consumer (2)

 

3,543

 

5.3

%

394

 

0.7

%

307

 

3,313

 

Total non-PCI loans and leases

 

$

58,121

 

1.5

%

$

46,774

 

1.2

%

$

7,832

 

$

19,671

 

 

(1) Of the $11.3 million in accruing and 30-89 days past due at December 31, 2013, one loan for $5.9 million moved to nonaccrual status at March 31, 2014.

(2) Of the $3.3 million in accruing and 30-89 days past due at December 31, 2013, one loan for $3.2 million moved to nonaccrual status at March 31, 2014.

 

The $11.3 million increase in nonaccrual loans and leases (excluding PCI loans) during the first quarter of 2014 was attributable to (a) additions of $18.4 million, (b) charge-offs of $1.5 million, and (c) other reductions, payoffs and returns to accrual status of $5.6 million.

 

13


 

Below is a summary of the ten largest Non-PCI lending relationships on nonaccrual status, excluding SBA-related loans, as of the date indicated:

 

March 31,

 

 

2014

 

 

Nonaccrual

 

 

Amount

 

Description

(In thousands)

 

 

 

 

 

$

6,723

 

Two loans, each secured by a hotel in San Diego County. The borrower is paying according to the restructured terms of each loan.

 

 

 

5,904

 

Loan secured by 2nd trust deeds on two single family residences in Los Angeles County. (1)

 

 

 

5,324

 

Three loans to a contractor, one of which is secured by equipment, one of which is secured by an industrial building in San Diego County, and one of which is unsecured. The borrower is paying according to the restructured terms of each loan.

 

 

 

3,521

 

Two loans secured by 19 properties located predominantly in San Luis Obispo County. Collateral consists of five undeveloped residential properties, two single family residences, two commercial buildings, and 10 undeveloped commercial properties. The borrower is paying according to the restructured terms of each loan. (1)

 

 

 

3,154

 

Loan secured by an industrial building in Santa Barbara County. (1)

 

 

 

2,704

 

Two loans that are both unsecured. The borrower is paying according to the restructured terms of each loan.

 

 

 

2,428

 

Loan secured by a single retail building located in San Bernardino County. (1)

 

 

 

1,494

 

Loan secured by industrial zoned land in Ventura County.

 

 

 

1,468

 

Loan secured by an industrial building in San Diego County. The borrower is paying according to the restructured terms of the loan. (1)

 

 

 

1,320

 

Loan secured by an office building in Maricopa County, Arizona. Subsequent to quarter-end, the loan was paid off in full.

$

34,040

 

Total

 

(1) New nonaccrual in first quarter of 2014.

 

The following table presents the details of OREO as of the dates indicated:

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

Non-

 

 

 

Non-

 

 

 

 

 

Covered

 

Covered

 

Covered

 

Covered

 

Property Type

 

OREO

 

OREO

 

OREO

 

OREO

 

 

 

(In thousands)

 

Commercial real estate

 

$

10,050

 

$

3,111

 

$

10,672

 

$

5,081

 

Construction and land development

 

30,464

 

2,218

 

31,950

 

3,113

 

Multi-family

 

—

 

835

 

—

 

835

 

Single family residence

 

179

 

13

 

179

 

7

 

Total OREO, net

 

$

40,693

 

$

6,177

 

$

42,801

 

$

9,036

 

 

14


 

The following table presents OREO activity for the period indicated:

 

 

 

Three Months Ended

 

 

 

March 31, 2014

 

 

 

Non-Covered

 

Covered

 

Total

 

 

 

OREO

 

OREO

 

OREO

 

 

 

(In thousands)

 

Beginning of period

 

$

42,801

 

$

9,036

 

$

51,837

 

Foreclosures

 

—

 

13

 

13

 

Provision for losses

 

—

 

(94

)

(94

)

Reductions related to sales

 

(2,108

)

(2,778

)

(4,886

)

End of period

 

$

40,693

 

$

6,177

 

$

46,870

 

 

 

 

 

 

 

 

 

Net gain on sale

 

$

699

 

$

1,624

 

$

2,323

 

 

REGULATORY CAPITAL MEASURES ARE ABOVE THE WELL-CAPITALIZED MINIMUMS

 

PacWest Bancorp and its wholly-owned banking subsidiary, Pacific Western Bank, each remained well capitalized as of the date indicated as shown in the following table:

 

 

 

March 31, 2014

 

 

 

Well

 

Pacific

 

PacWest

 

 

 

Capitalized

 

Western

 

Bancorp

 

 

 

Requirement

 

Bank

 

Consolidated

 

Tier 1 leverage capital ratio

 

5.00

%

10.88

%

11.73

%

Tier 1 risk-based capital ratio

 

6.00

%

15.00

%

16.16

%

Total risk-based capital ratio

 

10.00

%

16.25

%

17.42

%

Tangible common equity ratio

 

N/A

 

10.92

%

9.68

%

 

CAPITALSOURCE MERGER

 

On April 7, 2014, PacWest Bancorp (“PacWest”) completed the merger with CapitalSource Inc. (“CapitalSource”). The combined company is called PacWest Bancorp.  As part of the merger, CapitalSource Bank, (“CSB”), a wholly-owned subsidiary of CapitalSource, merged with and into PacWest’s wholly-owned banking subsidiary, Pacific Western Bank, and the combined subsidiary bank is called Pacific Western Bank.

 

The merger, which was first announced on July 22, 2013, was concluded following receipt of shareholder approval from both institutions and all required regulatory approvals.  As of March 31, 2014, CapitalSource had $9.1 billion in assets and PacWest had $6.5 billion in assets.  On a pro forma combined basis with CapitalSource and excluding purchase accounting adjustments, PacWest would have had approximately $15.6 billion in assets as of March 31, 2014.

 

Upon closing, PacWest created the CapitalSource division of Pacific Western Bank.  This division, which will operate under the CapitalSource name, will continue to serve businesses nationwide with a full spectrum of middle-market lending.  Pacific Western Bank, through its combined network of 81 branches throughout California, will continue to serve small and medium-sized businesses with financing solutions, cash management and deposit services.

 

15


 

In the merger with CapitalSource, each share of CapitalSource common stock was converted into the right to receive $2.47 in cash and 0.2837 of a share of PacWest Bancorp common stock. PacWest issued an aggregate of approximately 56.7 million shares of PacWest common stock to CapitalSource stockholders.  Based on the closing price of PacWest’s common stock on April 7, 2014 of $45.83 per share, the aggregate consideration paid to CapitalSource common stockholders and holders of equity awards to acquire CapitalSource common stock was approximately $3.1 billion.

 

Former holders of CapitalSource common stock and equity awards to acquire CapitalSource common stock as a group received shares of PacWest common stock in the merger constituting approximately 55% of the outstanding shares of PacWest common stock immediately after the merger. As a result, holders of PacWest common stock immediately prior to the merger, as a group, own approximately 45% of the outstanding shares of the PacWest common stock immediately after the merger.

 

The integration of CapitalSource Bank’s deposit system and the conversion of CapitalSource Bank’s branches to Pacific Western Bank’s operating platform were completed over the weekend of April 12, 2014. CapitalSource had 21 branches, 12 of which were closed in the consolidation with Pacific Western Bank at the close of business on April 11, 2014.  One overlapping Pacific Western branch was closed at the close of business on April 11, 2014 as well.  All remaining branches re-opened on Monday April 14, 2014 as Pacific Western Bank branches.

 

Summary unaudited financial information for CapitalSource for the first quarter of 2014 follows:

 

 

 

Three Months Ended

 

 

 

March 31, 2014

 

 

 

(Dollars in thousands)

 

Net interest income

 

$

89,370

 

Negative provision for loan and lease losses

 

(1,657

)

Noninterest income

 

4,713

 

Noninterest expense

 

49,133

 

Income taxes

 

23,104

 

Net income

 

$

23,503

 

 

 

 

 

New loan and lease originations

 

$

557,743

 

 

 

 

 

Loan yield

 

6.07

%

Deposit cost

 

0.90

%

Net interest margin

 

4.59

%

 

CapitalSource’s consolidated net income for the first quarter of 2014 was negatively impacted compared to its prior quarter by several items including a lease abandonment charge of $6.3 million ($3.2 million after-tax), a $9.3 million write-down of equity investments due to the Volcker Rule (no tax benefit due to full tax valuation allowance on capital losses) and a $3.5 million valuation charge on an REO property ($1.7 million after-tax).  Additionally, these items were offset partially by a $2.1 million gain on the sale of equity investments (no tax expense due to full tax valuation allowance on capital losses) and $1.7 million negative provision for loan and lease losses ($836,000 after-tax).  Excluding these items, adjusted net income for the first quarter of 2014 would have been $34.8 million.  At March 31, 2014, total assets were $9.1 billion, gross loans were $7.1 billion, and total deposits were $6.2 billion.  Net loan growth at CapitalSource Bank was $288 million or 4.2% for the first quarter of 2014.

 

16


 

ABOUT PACWEST BANCORP

 

PacWest Bancorp (“PacWest”) is a bank holding company with $6.5 billion in assets as of March 31, 2014, with one wholly-owned banking subsidiary.  On a pro forma combined basis with CapitalSource and excluding purchase accounting adjustments, PacWest would have had approximately $15.6 billion in assets as of March 31, 2014. Pacific Western provides commercial banking services, including real estate, construction, and commercial loans, to small and medium-sized businesses through 81 full-service branches, including the nine retained CapitalSource Bank branches, located throughout the state of California. Pacific Western’s divisions (CapitalSource, First Community Financial and Pacific Western Equipment Finance), and subsidiaries (BFI Business Finance and Celtic Capital Corporation), deliver the full spectrum of financing solutions nationwide across all industries and property types.  Additional information regarding PacWest Bancorp is available on the Internet at www.pacwestbancorp.com. Information regarding Pacific Western Bank is also available on the Internet at www.pacificwesternbank.com.

 

FORWARD-LOOKING STATEMENTS

 

This press release 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. All statements other than statements of historical fact are forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements.

 

Risks and uncertainties include, but are not limited to: failure to obtain regulatory or other required approvals; an inability to achieve expected cost savings in the amounts or timeframes discussed if at all, or the costs associated with transactions or the time needed to complete transactions being greater than expected;  lower than expected revenues; credit quality deterioration or a reduction in real estate values could cause an increase in the allowance for credit losses and a reduction in net earnings; increased competitive pressure among depository institutions; the Company’s ability to complete future acquisitions, successfully integrate such acquired entities, or achieve expected beneficial synergies and/or operating efficiencies within expected time-frames or at all; settlements with the FDIC related to our four loss-sharing arrangements; the possibility that personnel changes will not proceed as planned; the cost of additional capital is more than expected; a change in the interest rate environment reduces net interest margins; asset/liability repricing risks and liquidity risks; pending legal matters may take longer or cost more to resolve or may be resolved adversely to the Company; general economic conditions, either nationally or in the market areas in which the Company does or anticipates doing business, are less favorable than expected; environmental conditions, including natural disasters, may disrupt our business, impede our operations, negatively impact the values of collateral securing the Company’s loans and leases or impair the ability of our borrowers to support their debt obligations; the economic and regulatory effects of the continuing war on

 

17


 

terrorism and other events of war, including the conflicts in the Middle East; legislative or regulatory requirements or changes adversely affecting the Company’s business; changes in the securities markets; regulatory approvals for any capital activities cannot be obtained on the terms expected or on the anticipated schedule; and, other risks that are described in PacWest’s public filings with the U.S. Securities and Exchange Commission (the “SEC”).

 

Additional risks and uncertainties relating to the transaction with CapitalSource include, but are not limited to the ability to successfully integrate the two institutions and achieve expected synergies and operating efficiencies on the expected timeframe.  For a discussion of risks and uncertainties relating to PacWest’s and CapitalSource’s businesses, investors and security holders are urged to read PacWest’s annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by PacWest with the SEC.

 

If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, PacWest’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. PacWest assumes no obligation to update such forward-looking statements.

 

The documents filed by PacWest with the SEC may be obtained at PacWest Bancorp’s website at www.pacwestbancorp.com or at the SEC’s website at www.sec.gov.  These documents may also be obtained free of charge from PacWest by directing a request to: PacWest Bancorp c/o Pacific Western Bank, 275 North Brea Boulevard, Brea, CA 92821.  Attention: Investor Relations. Telephone 714-671-6800.

 

18


 

PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(In thousands, except per share and share data)

 

ASSETS

 

 

 

 

 

Cash and due from banks

 

$

113,508

 

$

96,424

 

Interest-earning deposits in financial institutions

 

228,579

 

50,998

 

Total cash and cash equivalents

 

342,087

 

147,422

 

 

 

 

 

 

 

Non-covered securities available-for-sale

 

1,439,879

 

1,456,841

 

Covered securities available-for-sale

 

37,594

 

37,904

 

Total securities available-for-sale, at estimated fair value

 

1,477,473

 

1,494,745

 

Federal Home Loan Bank stock, at cost

 

25,000

 

27,939

 

Total investment securities

 

1,502,473

 

1,522,684

 

 

 

 

 

 

 

Non-covered loans and leases

 

3,762,720

 

3,864,917

 

Covered loans

 

398,365

 

448,418

 

Gross loans and leases

 

4,161,085

 

4,313,335

 

Unearned income

 

(18

)

(983

)

Allowance for loan and lease losses

 

(81,180

)

(82,034

)

Total loans and leases, net

 

4,079,887

 

4,230,318

 

 

 

 

 

 

 

Non-covered other real estate owned, net

 

40,693

 

42,801

 

Covered other real estate owned, net

 

6,177

 

9,036

 

Total other real estate owned, net

 

46,870

 

51,837

 

 

 

 

 

 

 

Premises and equipment, net

 

29,908

 

32,435

 

FDIC loss sharing asset

 

34,628

 

45,524

 

Cash surrender value of life insurance

 

77,955

 

77,489

 

Goodwill

 

208,743

 

208,743

 

Core deposit and customer relationship intangibles, net

 

15,884

 

17,248

 

Other assets

 

179,418

 

199,663

 

Total assets

 

$

6,517,853

 

$

6,533,363

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

2,391,609

 

$

2,318,446

 

Interest-bearing deposits

 

2,977,799

 

2,962,541

 

Total deposits

 

5,369,408

 

5,280,987

 

Borrowings

 

5,748

 

113,726

 

Subordinated debentures

 

132,790

 

132,645

 

Discontinued operations

 

112,432

 

123,028

 

Accrued interest payable and other liabilities

 

63,773

 

73,884

 

Total liabilities

 

5,684,151

 

5,724,270

 

STOCKHOLDERS’ EQUITY (1)

 

833,702

 

809,093

 

Total liabilities and stockholders’ equity

 

$

6,517,853

 

$

6,533,363

 

 

(1) Includes net unrealized gain (loss) on securities available-for-sale, net

 

$

 6,825

 

$

 (3,347

)

 

 

 

 

 

 

Book value per share

 

$

 18.21

 

$

 17.66

 

Tangible book value per share

 

$

 13.31

 

$

 12.73

 

 

 

 

 

 

 

Shares outstanding (includes unvested restricted shares of 1,087,436 at March 31, 2014 and 1,216,524 at December 31, 2013)

 

45,777,580

 

45,822,834

 

 

19


 

PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

2014

 

2013

 

2013

 

 

 

(In thousands, except per share data)

 

Interest income:

 

 

 

 

 

 

 

Loans and leases

 

$

77,463

 

$

73,352

 

$

61,010

 

Investment securities

 

10,823

 

10,422

 

8,216

 

Deposits in financial institutions

 

74

 

82

 

43

 

Total interest income

 

88,360

 

83,856

 

69,269

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

Deposits

 

1,225

 

1,450

 

2,649

 

Borrowings

 

79

 

86

 

144

 

Subordinated debentures

 

1,041

 

1,062

 

783

 

Total interest expense

 

2,345

 

2,598

 

3,576

 

 

 

 

 

 

 

 

 

Net interest income

 

86,015

 

81,258

 

65,693

 

 

 

 

 

 

 

 

 

Provision (negative provision) for credit losses

 

(644

)

(1,338

)

3,137

 

 

 

 

 

 

 

 

 

Net interest income after provision for credit losses

 

86,659

 

82,596

 

62,556

 

 

 

 

 

 

 

 

 

Noninterest income (expense):

 

 

 

 

 

 

 

Service charges on deposit accounts

 

3,002

 

3,197

 

2,863

 

Other commissions and fees

 

1,932

 

2,125

 

1,933

 

Gain on sale of leases

 

106

 

683

 

225

 

Gain (loss) on sale of securities

 

4,752

 

(272

)

409

 

Increase in cash surrender value of life insurance

 

466

 

448

 

433

 

FDIC loss sharing expense, net

 

(11,430

)

(10,593

)

(3,137

)

Other income

 

5,863

 

486

 

114

 

Total noninterest income (expense)

 

4,691

 

(3,926

)

2,840

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

Compensation

 

28,627

 

27,697

 

25,350

 

Accelerated vesting of restricted stock

 

—

 

12,420

 

—

 

Occupancy

 

7,595

 

7,553

 

6,598

 

Data processing

 

2,540

 

2,216

 

2,233

 

Other professional services

 

2,286

 

2,314

 

2,097

 

Business development

 

934

 

992

 

736

 

Communications

 

737

 

860

 

613

 

Insurance and assessments

 

1,593

 

1,572

 

1,261

 

Non-covered other real estate owned, net

 

(246

)

25

 

313

 

Covered other real estate owned, net

 

(1,615

)

(594

)

(813

)

Intangible asset amortization

 

1,364

 

1,430

 

1,176

 

Acquisition and integration

 

2,200

 

4,253

 

692

 

Other expenses

 

4,854

 

5,350

 

3,927

 

Total noninterest expense

 

50,869

 

66,088

 

44,183

 

 

 

 

 

 

 

 

 

Earnings from continuing operations before income taxes

 

40,481

 

12,582

 

21,213

 

Income tax expense

 

(14,576

)

(9,135

)

(7,719

)

Net earnings from continuing operations

 

25,905

 

3,447

 

13,494

 

 

 

 

 

 

 

 

 

Loss from discontinued operations before income taxes

 

(1,413

)

(578

)

—

 

Income tax benefit

 

588

 

240

 

—

 

Net loss from discontinued operations

 

(825

)

(338

)

—

 

Net earnings

 

$

25,080

 

$

3,109

 

$

13,494

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

 

 

 

 

 

 

Net earnings from continuing operations

 

$

0.57

 

$

0.07

 

$

0.37

 

Net earnings

 

$

0.55

 

$

0.06

 

$

0.37

 

 

20


 

PACWEST BANCORP AND SUBSIDIARIES

AVERAGE BALANCE SHEETS AND YIELD ANALYSIS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

2014

 

2013

 

2013

 

 

 

(Dollars in thousands)

 

Average Assets:

 

 

 

 

 

 

 

Loans and leases, net of unearned income

 

$

4,231,319

 

$

4,301,377

 

$

3,500,895

 

Investment securities

 

1,512,694

 

1,531,335

 

1,365,210

 

Interest-earning deposits in financial institutions

 

118,682

 

129,716

 

69,056

 

Average interest-earning assets

 

5,862,695

 

5,962,428

 

4,935,161

 

Other assets

 

650,681

 

670,302

 

440,990

 

Average total assets

 

$

6,513,376

 

$

6,632,730

 

$

5,376,151

 

 

 

 

 

 

 

 

 

Average liabilities:

 

 

 

 

 

 

 

Interest checking deposits

 

$

627,493

 

$

627,256

 

$

523,503

 

Money market deposits

 

1,451,964

 

1,512,369

 

1,207,332

 

Savings deposits

 

223,074

 

220,331

 

155,687

 

Time deposits

 

666,463

 

694,924

 

796,644

 

Average interest-bearing deposits

 

2,968,994

 

3,054,880

 

2,683,166

 

Borrowings

 

18,176

 

9,861

 

12,561

 

Subordinated debentures

 

132,696

 

132,560

 

108,250

 

Average interest-bearing liabilities

 

3,119,866

 

3,197,301

 

2,803,977

 

Noninterest-bearing demand deposits

 

2,374,325

 

2,397,642

 

1,940,435

 

Other liabilities

 

198,937

 

218,852

 

42,532

 

Average total liabilities

 

5,693,128

 

5,813,795

 

4,786,944

 

Average stockholders’ equity

 

820,248

 

818,935

 

589,207

 

Average liabilities and stockholders’ equity

 

$

6,513,376

 

$

6,632,730

 

$

5,376,151

 

 

 

 

 

 

 

 

 

Average deposits

 

$

5,343,319

 

$

5,452,522

 

$

4,623,601

 

Average funding sources (1) 

 

$

5,494,191

 

$

5,594,943

 

$

4,744,412

 

 

 

 

 

 

 

 

 

Yield on:

 

 

 

 

 

 

 

Average loans and leases

 

7.42

%

6.77

%

7.07

%

Average investment securities

 

2.90

%

2.70

%

2.44

%

Average investment securities - tax-equivalent yield

 

3.35

%

3.14

%

2.79

%

Average interest-earning deposits

 

0.25

%

0.25

%

0.25

%

Average interest-earning assets

 

6.11

%

5.58

%

5.69

%

 

 

 

 

 

 

 

 

Cost of:

 

 

 

 

 

 

 

Average deposits/all-in deposit cost (2)

 

0.09

%

0.11

%

0.23

%

Average interest-bearing deposits

 

0.17

%

0.19

%

0.40

%

Average borrowings

 

1.76

%

3.46

%

4.65

%

Average subordinated debentures

 

3.18

%

3.18

%

2.93

%

Average interest-bearing liabilities

 

0.30

%

0.32

%

0.52

%

 

 

 

 

 

 

 

 

Net interest rate spread (3)

 

5.81

%

5.26

%

5.17

%

Net interest margin (4)

 

5.95

%

5.41

%

5.40

%

 

 

 

 

 

 

 

 

Cost of average funding sources (5)

 

0.17

%

0.18

%

0.31

%

 

(1) Average funding sources is the sum of average interest-bearing liabilities plus average noninterest-bearing demand deposits.

(2) Cost of average deposits/all-in deposit cost is calculated as annualized interest expense on deposits divided by average deposits.

(3) Net interest rate spread is calculated as the yield on average interest-earning assets less the cost of average interest-bearing liabilities.

(4) Net interest margin is calculated as annualized net interest income divided by average interest-earning assets.

(5) Cost of average funding sources is calculated as annualized total interest expense divided by average funding sources.

 

21


 

PACWEST BANCORP AND SUBSIDIARIES

LOAN CONCENTRATION BY PORTFOLIO SEGMENT

(Unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(In thousands)

 

Non-Covered Loans and Leases

 

 

 

 

 

Real estate mortgage

 

$

2,273,159

 

$

2,378,025

 

Real estate construction

 

232,882

 

201,723

 

Commercial

 

942,687

 

963,152

 

Leases

 

249,736

 

269,769

 

Consumer

 

64,256

 

52,248

 

Total gross non-covered loans and leases

 

$

3,762,720

 

$

3,864,917

 

 

 

 

 

 

 

Covered Loans

 

 

 

 

 

Real estate mortgage

 

$

368,945

 

$

417,973

 

Real estate construction

 

17,037

 

17,794

 

Commercial

 

9,592

 

9,829

 

Consumer

 

2,791

 

2,822

 

Total gross covered loans

 

$

398,365

 

$

448,418

 

 

 

 

 

 

 

Total Loans and Leases

 

 

 

 

 

Real estate mortgage

 

$

2,642,104

 

$

2,795,998

 

Real estate construction

 

249,919

 

219,517

 

Commercial

 

952,279

 

972,981

 

Leases

 

249,736

 

269,769

 

Consumer

 

67,047

 

55,070

 

Total gross loans and leases

 

$

4,161,085

 

$

4,313,335

 

 

22


 

PACWEST BANCORP AND SUBSIDIARIES

LOAN PORTFOLIO COMPOSITION

(Unaudited)

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

Non-PCI

 

PCI

 

Total

 

Non-PCI

 

PCI

 

Total

 

 

 

Loans (1)

 

Loans (2)

 

Loans

 

Loans

 

Loans

 

Loans

 

 

 

(In thousands)

 

Non-Covered Loans and Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate mortgage

 

$

2,257,853

 

$

15,306

 

$

2,273,159

 

$

2,359,125

 

$

18,900

 

$

2,378,025

 

Real estate construction

 

231,351

 

1,531

 

232,882

 

200,332

 

1,391

 

201,723

 

Commercial

 

942,687

 

—

 

942,687

 

963,152

 

—

 

963,152

 

Leases

 

249,736

 

—

 

249,736

 

269,769

 

—

 

269,769

 

Consumer

 

64,222

 

34

 

64,256

 

52,213

 

35

 

52,248

 

Total gross non-covered loans and leases

 

$

3,745,849

 

$

16,871

 

$

3,762,720

 

$

3,844,591

 

$

20,326

 

$

3,864,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covered Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate mortgage

 

$

62,719

 

$

306,226

 

$

368,945

 

$

65,739

 

$

352,234

 

$

417,973

 

Real estate construction

 

8,722

 

8,315

 

17,037

 

8,758

 

9,036

 

17,794

 

Commercial

 

8,719

 

873

 

9,592

 

8,855

 

974

 

9,829

 

Consumer

 

2,560

 

231

 

2,791

 

2,596

 

226

 

2,822

 

Total gross covered loans

 

$

82,720

 

$

315,645

 

$

398,365

 

$

85,948

 

$

362,470

 

$

448,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Loans and Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate mortgage

 

$

2,320,572

 

$

321,532

 

$

2,642,104

 

$

2,424,864

 

$

371,134

 

$

2,795,998

 

Real estate construction

 

240,073

 

9,846

 

249,919

 

209,090

 

10,427

 

219,517

 

Commercial

 

951,406

 

873

 

952,279

 

972,007

 

974

 

972,981

 

Leases

 

249,736

 

—

 

249,736

 

269,769

 

—

 

269,769

 

Consumer

 

66,782

 

265

 

67,047

 

54,809

 

261

 

55,070

 

Total gross loans and leases

 

$

3,828,569

 

$

332,516

 

$

4,161,085

 

$

3,930,539

 

$

382,796

 

$

4,313,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and Leases, Net of Allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-covered loans and leases

 

$

3,745,849

 

$

16,871

 

$

3,762,720

 

$

3,844,591

 

$

20,326

 

$

3,864,917

 

Allowance for credit losses

 

(66,955

)

(270

)

(67,225

)

(67,816

)

—

 

(67,816

)

Non-covered loans and leases, net

 

$

3,678,894

 

$

16,601

 

$

3,695,495

 

$

3,776,775

 

$

20,326

 

$

3,797,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covered loans

 

$

82,720

 

$

315,645

 

$

398,365

 

$

85,948

 

$

362,470

 

$

448,418

 

Allowance for credit losses

 

—

 

(20,930

)

(20,930

)

—

 

(21,793

)

(21,793

)

Covered loans, net

 

$

82,720

 

$

294,715

 

$

377,435

 

$

85,948

 

$

340,677

 

$

426,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases

 

$

3,828,569

 

$

332,516

 

$

4,161,085

 

$

3,930,539

 

$

382,796

 

$

4,313,335

 

Allowance for credit losses

 

(66,955

)

(21,200

)

(88,155

)

(67,816

)

(21,793

)

(89,609

)

Total loans and leases, net

 

$

3,761,614

 

$

311,316

 

$

4,072,930

 

$

3,862,723

 

$

361,003

 

$

4,223,726

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses to loans and leases

 

1.75

%

6.38

%

2.12

%

1.73

%

5.69

%

2.08

%

 

(1) Non-PCI loans include loans originated by Pacific Western Bank and acquired loans that were not impaired on their acquisition date.

(2) PCI loans include loans acquired by Pacific Western Bank in an FDIC-assisted acquisition and loans acquired in the FCAL acquisition that were impaired on the acquisition date.

 

23


 

PACWEST BANCORP AND SUBSIDIARIES

NON-PCI NONCLASSIFIED AND CLASSIFIED LOANS AND LEASES

(Unaudited)

 

 

 

March 31, 2014

 

 

 

Nonclassified

 

Classified

 

Total

 

 

 

(In thousands)

 

Real estate mortgage:

 

 

 

 

 

 

 

Hospitality

 

$

159,966

 

$

10,907

 

$

170,873

 

SBA 504

 

37,143

 

5,175

 

42,318

 

Other

 

2,043,877

 

63,504

 

2,107,381

 

Total real estate mortgage

 

2,240,986

 

79,586

 

2,320,572

 

Real estate construction:

 

 

 

 

 

 

 

Residential

 

59,795

 

747

 

60,542

 

Commercial

 

173,294

 

6,237

 

179,531

 

Total real estate construction

 

233,089

 

6,984

 

240,073

 

Commercial:

 

 

 

 

 

 

 

Collateralized (1)

 

535,547

 

44,437

 

579,984

 

Unsecured

 

141,532

 

1,977

 

143,509

 

Asset-based

 

196,802

 

3,772

 

200,574

 

SBA 7(a) 

 

21,729

 

5,610

 

27,339

 

Total commercial

 

895,610

 

55,796

 

951,406

 

Leases (2)

 

245,936

 

3,800

 

249,736

 

Consumer

 

62,431

 

4,351

 

66,782

 

Total non-PCI loans and leases

 

$

3,678,052

 

$

150,517

 

$

3,828,569

 

 

 

 

December 31, 2013

 

 

 

Nonclassified

 

Classified

 

Total

 

 

 

(In thousands)

 

Real estate mortgage:

 

 

 

 

 

 

 

Hospitality

 

$

168,216

 

$

12,337

 

$

180,553

 

SBA 504

 

39,869

 

5,297

 

45,166

 

Other

 

2,134,866

 

64,279

 

2,199,145

 

Total real estate mortgage

 

2,342,951

 

81,913

 

2,424,864

 

Real estate construction:

 

 

 

 

 

 

 

Residential

 

58,131

 

750

 

58,881

 

Commercial

 

143,918

 

6,291

 

150,209

 

Total real estate construction

 

202,049

 

7,041

 

209,090

 

Commercial:

 

 

 

 

 

 

 

Collateralized

 

568,348

 

18,838

 

587,186

 

Unsecured

 

151,896

 

1,856

 

153,752

 

Asset-based

 

195,569

 

6,859

 

202,428

 

SBA 7(a) 

 

22,880

 

5,761

 

28,641

 

Total commercial

 

938,693

 

33,314

 

972,007

 

Leases

 

269,137

 

632

 

269,769

 

Consumer

 

50,398

 

4,411

 

54,809

 

Total non-PCI loans and leases

 

$

3,803,228

 

$

127,311

 

$

3,930,539

 

 

(1) The $25.6 million increase in classified loans during the three months ended March 31, 2014 was due mainly to the downgrading of one loan for $27.9 million.

(2) The $3.2 million increase in classified loans during the three months ended March 31, 2014 was due mainly to the downgrading of two loans totaling $3.7 million.

Note: Nonclassified loans and leases are those with a credit risk rating of either pass or special mention, while classified loans and leases are those with a credit risk rating of either substandard or doubtful.

 

24


 

PACWEST BANCORP AND SUBSIDIARIES

LOAN CONCENTRATION

(Unaudited)

 

 

 

March 31, 2014

 

 

 

Non-Covered Loans

 

 

 

Total Loans

 

 

 

and Leases

 

Covered Loans

 

and Leases

 

 

 

 

 

% of

 

 

 

% of

 

 

 

% of

 

 

 

Amount

 

Total

 

Amount

 

Total

 

Amount

 

Total

 

 

 

(Dollars in thousands)

 

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospitality

 

$

169,678

 

4

%

$

2,334

 

1

%

$

172,012

 

4

%

SBA 504

 

42,318

 

1

%

—

 

—

 

42,318

 

1

%

Other

 

2,061,163

 

55

%

366,611

 

92

%

2,427,774

 

58

%

Total real estate mortgage

 

2,273,159

 

60

%

368,945

 

93

%

2,642,104

 

63

%

Real estate construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

60,542

 

2

%

1,573

 

—

 

62,115

 

1

%

Commercial

 

172,340

 

4

%

15,464

 

4

%

187,804

 

5

%

Total real estate construction

 

232,882

 

6

%

17,037

 

4

%

249,919

 

6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total real estate loans

 

2,506,041

 

66

%

385,982

 

97

%

2,892,023

 

69

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateralized

 

574,058

 

15

%

6,684

 

1

%

580,742

 

14

%

Unsecured

 

140,716

 

4

%

2,908

 

1

%

143,624

 

3

%

Asset-based

 

200,574

 

5

%

—

 

—

 

200,574

 

5

%

SBA 7(a) 

 

27,339

 

1

%

—

 

—

 

27,339

 

1

%

Total commercial

 

942,687

 

25

%

9,592

 

2

%

952,279

 

23

%

Leases

 

249,736

 

7

%

—

 

—

 

249,736

 

6

%

Consumer

 

64,256

 

2

%

2,791

 

1

%

67,047

 

2

%

Total gross loans and leases

 

$

3,762,720

 

100

%

$

398,365

 

100

%

$

4,161,085

 

100

%

 

 

 

December 31, 2013

 

 

 

Non-Covered Loans

 

 

 

 

 

Total Loans

 

 

 

and Leases

 

Covered Loans

 

and Leases

 

 

 

 

 

% of

 

 

 

% of

 

 

 

% of

 

 

 

Amount

 

Total

 

Amount

 

Total

 

Amount

 

Total

 

 

 

(Dollars in thousands)

 

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospitality

 

$

179,340

 

5

%

$

2,395

 

1

%

$

181,735

 

4

%

SBA 504

 

45,166

 

1

%

—

 

—

 

45,166

 

1

%

Other

 

2,153,519

 

56

%

415,578

 

92

%

2,569,097

 

60

%

Total real estate mortgage

 

2,378,025

 

62

%

417,973

 

93

%

2,795,998

 

65

%

Real estate construction:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

58,881

 

1

%

17

 

—

 

58,898

 

1

%

Commercial

 

142,842

 

4

%

17,777

 

4

%

160,619

 

4

%

Total real estate construction

 

201,723

 

5

%

17,794

 

4

%

219,517

 

5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total real estate loans

 

2,579,748

 

67

%

435,767

 

97

%

3,015,515

 

70

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateralized

 

581,097

 

15

%

6,934

 

1

%

588,031

 

13

%

Unsecured

 

150,985

 

4

%

2,895

 

1

%

153,880

 

4

%

Asset-based

 

202,428

 

5

%

—

 

—

 

202,428

 

5

%

SBA 7(a) 

 

28,642

 

1

%

—

 

—

 

28,642

 

1

%

Total commercial

 

963,152

 

25

%

9,829

 

2

%

972,981

 

23

%

Leases

 

269,769

 

7

%

—

 

—

 

269,769

 

6

%

Consumer

 

52,248

 

1

%

2,822

 

1

%

55,070

 

1

%

Total gross loans and leases

 

$

3,864,917

 

100

%

$

448,418

 

100

%

$

4,313,335

 

100

%

 

25


 

PACWEST BANCORP AND SUBSIDIARIES

LOAN CONCENTRATION

REAL ESTATE MORTGAGE LOANS

(Unaudited)

 

 

 

Non-Covered Loans

 

Covered Loans

 

 

 

March 31, 2014

 

December 31, 2013

 

March 31, 2014

 

December 31, 2013

 

 

 

 

 

% of

 

 

 

% of

 

 

 

% of

 

 

 

% of

 

Loan Category

 

Amount

 

Total

 

Amount

 

Total

 

Amount

 

Total

 

Amount

 

Total

 

 

 

(Dollars in thousands)

 

Commercial real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial/warehouse

 

$

334,833

 

15

%

$

336,648

 

14

%

$

17,407

 

5

%

$

17,697

 

4

%

Retail

 

270,661

 

12

%

281,739

 

12

%

50,314

 

14

%

64,631

 

16

%

Office buildings

 

385,391

 

17

%

392,921

 

16

%

36,341

 

10

%

42,040

 

10

%

Owner-occupied

 

207,777

 

9

%

218,786

 

9

%

13,763

 

4

%

14,409

 

3

%

Hotel

 

169,678

 

7

%

179,340

 

8

%

2,334

 

—

 

2,395

 

1

%

Healthcare

 

180,132

 

8

%

180,957

 

8

%

7,503

 

2

%

8,780

 

2

%

Mixed use

 

36,080

 

2

%

63,218

 

3

%

2,641

 

1

%

5,748

 

1

%

Gas station

 

28,855

 

1

%

31,421

 

1

%

3,714

 

1

%

3,803

 

1

%

Self storage

 

44,032

 

2

%

47,762

 

2

%

19,376

 

5

%

25,998

 

6

%

Restaurant

 

19,910

 

1

%

20,617

 

1

%

854

 

—

 

893

 

—

 

Land acquisition/development

 

4,402

 

—

 

4,420

 

—

 

—

 

—

 

—

 

—

 

Unimproved land

 

11,920

 

1

%

12,043

 

1

%

496

 

—

 

474

 

—

 

Other

 

166,366

 

7

%

167,356

 

7

%

6,839

 

2

%

7,424

 

2

%

Total commercial real estate mortgage

 

1,860,037

 

82

%

1,937,228

 

82

%

161,582

 

44

%

194,292

 

46

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

 

193,651

 

9

%

211,360

 

9

%

104,756

 

28

%

118,869

 

29

%

Single family owner-occupied

 

139,326

 

6

%

149,917

 

6

%

61,105

 

17

%

62,591

 

15

%

Single family nonowner-occupied

 

17,075

 

1

%

16,084

 

1

%

17,379

 

5

%

17,657

 

4

%

HELOCs

 

52,480

 

2

%

53,206

 

2

%

23,667

 

6

%

24,093

 

6

%

Mixed use

 

10,590

 

—

 

10,230

 

—

 

456

 

—

 

471

 

—

 

Total residential real estate mortgage

 

413,122

 

18

%

440,797

 

18

%

207,363

 

56

%

223,681

 

54

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross real estate mortgage loans

 

$

2,273,159

 

100

%

$

2,378,025

 

100

%

$

368,945

 

100

%

$

417,973

 

100

%

 

26


 

PACWEST BANCORP AND SUBSIDIARIES

ALLOWANCE FOR LOAN AND LEASE LOSSES,

ALLOWANCE FOR CREDIT LOSSES, NONPERFORMING

ASSETS AND CREDIT QUALITY RATIOS

(Unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(Dollars in thousands)

 

Allowance for loan and lease losses:

 

 

 

 

 

Non-PCI loans

 

$

59,980

 

$

60,241

 

PCI loans

 

21,200

 

21,793

 

Total allowance for loan and lease losses

 

81,180

 

82,034

 

Reserve for unfunded loan commitments on non-PCI loans

 

6,975

 

7,575

 

Total allowance for credit losses

 

$

88,155

 

$

89,609

 

 

 

 

 

 

 

Allowance for credit losses on Non-PCI loans and leases (1)

 

$

66,955

 

$

67,816

 

 

 

 

 

 

 

Nonaccrual loans and leases (2) 

 

$

58,121

 

$

46,774

 

Other real estate owned

 

46,870

 

51,837

 

Total nonperforming assets

 

$

104,991

 

$

98,611

 

 

 

 

 

 

 

Performing restructured loans (2)

 

$

35,101

 

$

41,648

 

 

 

 

 

 

 

Nonaccrual loans and leases (excluding PCI loans):

 

 

 

 

 

Non-covered

 

$

52,131

 

$

41,529

 

Covered

 

5,990

 

5,245

 

Total nonaccrual loans and leases (excludes PCI loans)

 

$

58,121

 

$

46,774

 

 

 

 

 

 

 

Non-PCI Credit Quality Ratios:

 

 

 

 

 

Allowance for credit losses to loans and leases

 

1.75

%

1.73

%

Adjusted allowance for credit losses to loans and leases (3)

 

2.34

%

2.34

%

Allowance for credit losses to nonaccrual loans and leases

 

115.2

%

145.0

%

Nonperforming assets to loans and leases and other real estate owned

 

2.71

%

2.48

%

Nonperforming assets to total assets

 

1.61

%

1.51

%

Nonaccrual loans and leases to loans and leases

 

1.52

%

1.19

%

 

(1) Calculated as sum of: (a) allowance for loan and lease losses on Non-PCI loans, and (b) reserve for unfunded loan commitments on Non-PCI loans.

(2) Applies only to non-PCI loans and leases.

(3) Excludes allowance related to acquired loans and leases and the related balance of acquired loans and leases.

 

27


 

PACWEST BANCORP AND SUBSIDIARIES

ALLOWANCE FOR LOAN AND LEASE LOSSES  ROLLFORWARD

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

2014

 

2013

 

2013

 

 

 

(Dollars in thousands)

 

Allowance for loan losses on non-PCI loans and leases, beginning of period

 

$

60,241

 

$

60,551

 

$

65,899

 

Loans and leases charged-off:

 

 

 

 

 

 

 

Real estate mortgage

 

(94

)

(712

)

(322

)

Commercial

 

(1,069

)

(1,778

)

(708

)

Leases

 

(372

)

—

 

(114

)

Consumer

 

(15

)

(87

)

(9

)

Total loans and leases charged off

 

(1,550

)

(2,577

)

(1,153

)

Recoveries on loans charged-off:

 

 

 

 

 

 

 

Real estate mortgage

 

261

 

842

 

177

 

Real estate construction

 

24

 

1,140

 

323

 

Commercial

 

377

 

593

 

407

 

Consumer

 

27

 

17

 

23

 

Total recoveries on loans charged off

 

689

 

2,592

 

930

 

Net (charge-offs) recoveries

 

(861

)

15

 

(223

)

Provision (negative provision) for loan and lease losses

 

600

 

(325

)

(460

)

Allowance for loan losses on non-PCI loans and leases, end of period

 

$

59,980

 

$

60,241

 

$

65,216

 

 

 

 

 

 

 

 

 

Annualized net charge-offs to average non-PCI loans and leases

 

0.09

%

—

 

0.03

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses on PCI loans, beginning of period

 

$

21,793

 

$

23,235

 

$

26,069

 

(Negative provision) provision for credit losses

 

(644

)

(1,338

)

3,137

 

Net (charge-offs) recoveries

 

51

 

(104

)

97

 

Allowance for loan losses on PCI loans, end of period

 

$

21,200

 

$

21,793

 

$

29,303

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Components of Provision (Negative Provision) for Credit Losses

 

 

 

 

 

 

 

Non-PCI loans and leases:

 

 

 

 

 

 

 

Allowance for loan and lease losses

 

$

600

 

$

(325

)

$

(460)

 

Reserve for unfunded commitments

 

(600

)

325

 

460

 

Allowance for loan losses on PCI loans

 

(644

)

(1,338

)

3,137

 

Total (negative provision) provision for credit losses

 

$

(644)

 

$

(1,338)

 

$

3,137

 

 

28


 

PACWEST BANCORP AND SUBSIDIARIES

DEPOSITS

(Unaudited)

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

 

 

% of

 

 

 

% of

 

Deposit Category

 

Amount

 

Total

 

Amount

 

Total

 

 

 

(Dollars in thousands)

 

Noninterest-bearing demand deposits

 

$

2,391,609

 

45

%

$

2,318,446

 

44

%

Interest checking deposits

 

613,144

 

11

%

620,622

 

12

%

Money market deposits

 

1,489,068

 

28

%

1,458,910

 

28

%

Savings deposits

 

226,012

 

4

%

218,638

 

4

%

Total core deposits

 

4,719,833

 

88

%

4,616,616

 

88

%

Time deposits under $100,000

 

209,512

 

4

%

225,360

 

4

%

Time deposits of $100,000 and over

 

440,063

 

8

%

439,011

 

8

%

Total time deposits

 

649,575

 

12

%

664,371

 

12

%

Total deposits

 

$

5,369,408

 

100

%

$

5,280,987

 

100

%

 

PACWEST BANCORP AND SUBSIDIARIES

TIME DEPOSITS

(Unaudited)

 

 

 

March 31, 2014

 

 

 

Time

 

Time

 

 

 

 

 

 

 

Deposits

 

Deposits

 

Total

 

 

 

 

 

Under

 

$100,000

 

Time

 

 

 

Maturity

 

$100,000

 

or More

 

Deposits

 

Rate

 

 

 

(Dollars in thousands)

 

Due in three months or less

 

$

66,507

 

$

135,183

 

$

201,690

 

0.38

%

Due in over three months through six months

 

43,178

 

131,913

 

175,091

 

0.37

%

Due in over six months through twelve months

 

44,978

 

74,391

 

119,369

 

0.38

%

Due in over 12 months through 24 months

 

20,734

 

38,291

 

59,025

 

0.72

%

Due in over 24 months

 

34,115

 

60,285

 

94,400

 

0.77

%

Total

 

$

209,512

 

$

440,063

 

$

649,575

 

0.46

%

 

29


 

 

PACWEST BANCORP AND SUBSIDIARIES

EARNINGS PER SHARE CALCULATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

2014

 

2013

 

2013

 

 

 

(In thousands, except per share data)

 

Basic Earnings Per Share:

 

 

 

 

 

 

 

Net earnings from continuing operations

 

$

25,905

 

$

3,447

 

$

13,494

 

Less: earnings allocated to unvested restricted stock (1)

 

(500

)

(280

)

(326

)

Net earnings from continuing operations allocated to common shares

 

25,405

 

3,167

 

13,168

 

Net earnings (loss) from discontinued operations allocated to common shares

 

(804

)

(338

)

—

 

Net earnings allocated to common shares

 

$

24,601

 

$

2,829

 

$

13,168

 

 

 

 

 

 

 

 

 

Weighted-average basic shares and unvested restricted stock outstanding

 

45,799

 

46,069

 

37,391

 

Less: weighted-average unvested restricted stock outstanding

 

(1,148

)

(1,743

)

(1,594

)

Weighted-average basic shares outstanding

 

44,651

 

44,326

 

35,797

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

Net earnings from continuing operations

 

$

0.57

 

$

0.07

 

$

0.37

 

Net earnings from discontinued operations

 

(0.02

)

(0.01

)

—

 

Net earnings

 

$

0.55

 

$

0.06

 

$

0.37

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share:

 

 

 

 

 

 

 

Net earnings from continuing operations allocated to common shares

 

$

25,405

 

$

3,167

 

$

13,168

 

Net earnings (loss) from discontinued operations allocated to common shares

 

(804

)

(338

)

—

 

Net earnings allocated to common shares

 

$

24,601

 

$

2,829

 

$

13,168

 

 

 

 

 

 

 

 

 

Weighted-average basic shares outstanding

 

44,651

 

44,326

 

35,797

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

Net earnings from continuing operations

 

$

0.57

 

$

0.07

 

$

0.37

 

Net earnings from discontinued operations

 

(0.02

)

(0.01

)

—

 

Net earnings

 

$

0.55

 

$

0.06

 

$

0.37

 

 

(1)                                 Represents cash dividends paid to holders of unvested restricted stock, net of estimated forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any.

 

30


 

PACWEST BANCORP AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATIONS

(Unaudited)

 

 

 

Three Months Ended

 

Adjusted Earnings From Continuing 

 

March 31,

 

December 31,

 

March 31,

 

Operations Before Income Taxes

 

2014

 

2013

 

2013

 

 

 

(In thousands)

 

Earnings from continuing operations before income taxes

 

$

40,481

 

$

12,582

 

$

21,213

 

Plus:

Provision (negative provision) for credit losses

 

(644

)

(1,338

)

3,137

 

 

Accelerated vesting of restricted stock

 

—

 

12,420

 

—

 

 

Non-covered OREO expense, net

 

(246

)

25

 

313

 

 

Covered OREO (income) expense, net

 

(1,615

)

(594

)

(813

)

 

Acquisition and integration costs

 

2,200

 

4,253

 

692

 

Less:

FDIC loss sharing expense, net

 

(11,430

)

(10,593

)

(3,137

)

 

Gain (loss) on sale of securities

 

4,752

 

(272

)

409

 

 

Gain on sale of owned office building

 

1,570

 

—

 

—

 

 

Adjusted earnings from continuing operations before income taxes

 

$

45,284

 

$

38,213

 

$

27,270

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

Adjusted Efficiency Ratio

 

2014

 

2013

 

2013

 

 

 

(Dollars in thousands)

 

Noninterest expense

 

$

50,869

 

$

66,088

 

$

44,183

 

Less:

Accelerated vesting of restricted stock

 

—

 

12,420

 

—

 

 

Non-covered OREO expense (income), net

 

(246

)

25

 

313

 

 

Covered OREO (income) expense, net

 

(1,615

)

(594

)

(813

)

 

Acquisition and integration costs

 

2,200

 

4,253

 

692

 

 

Adjusted noninterest expense

 

$

50,530

 

$

49,984

 

$

43,991

 

 

 

 

 

 

 

 

 

Net interest income

 

$

86,015

 

$

81,258

 

$

65,693

 

Noninterest income (expense)

 

4,691

 

(3,926

)

2,840

 

 

Net revenues

 

90,706

 

77,332

 

68,533

 

Less:

FDIC loss sharing expense, net

 

(11,430

)

(10,593

)

(3,137

)

 

Gain (loss) on sale of securities

 

4,752

 

(272

)

409

 

 

Gain on sale of owned office building

 

1,570

 

—

 

—

 

 

Adjusted net revenues

 

$

95,814

 

$

88,197

 

$

71,261

 

 

 

 

 

 

 

 

 

Base efficiency ratio (1)

 

56.1

%

85.5

%

64.5

%

Adjusted efficiency ratio (2)

 

52.7

%

56.7

%

61.7

%

 

(1)  Noninterest expense divided by net revenues.

(2)  Adjusted noninterest expense divided by adjusted net revenues.

 

31


 

PACWEST BANCORP AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATIONS

(Unaudited)

 

 

Adjusted Allowance for Credit Losses to 

 

March 31,

 

December 31,

 

Loans and Leases (Excludes PCI Loans)

 

2014

 

2013

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

Allowance for credit losses

 

$

66,955

 

$

67,816

 

Less:

Allowance related to acquired loans and leases

 

737

 

607

 

 

Adjusted allowance for credit losses

 

$

66,218

 

$

67,209

 

 

 

 

 

 

 

Gross loans and leases

 

$

3,828,569

 

$

3,930,539

 

Less:

Carrying value of acquired Non-PCI loans and leases

 

1,001,248

 

1,060,172

 

 

Adjusted loans and leases

 

$

2,827,321

 

$

2,870,367

 

 

 

 

 

 

 

 

 

Allowance for credit losses to loans and leases (1)

 

1.75

%

1.73

%

 

Adjusted allowance for credit losses to loans and leases (2)

 

2.34

%

2.34

%

 

(1) Allowance for credit losses divided by gross loans and leases.

(2) Adjusted allowance for credit losses divided by adjusted loans and leases.

 

PACWEST BANCORP AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

March 31,

 

Return on Average Tangible Equity

 

2014

 

2013

 

2013

 

 

 

(Dollars in thousands)

 

PacWest Bancorp Consolidated:

 

 

 

 

 

 

 

Net earnings

 

$

25,080

 

$

3,109

 

$

13,494

 

 

 

 

 

 

 

 

 

Average stockholders’ equity

 

$

820,248

 

$

818,935

 

$

589,207

 

Less:

Average intangible assets

 

225,294

 

233,628

 

93,786

 

 

Average tangible common equity

 

$

594,954

 

$

585,307

 

$

495,421

 

 

 

 

 

 

 

 

 

 

 

Annualized return on average equity (1)

 

12.40

%

1.51

%

9.29

%

 

Annualized return on average tangible equity (2)

 

17.10

%

2.11

%

11.05

%

 

(1) Annualized net earnings divided by average stockholders’ equity.

(2) Annualized net earnings divided by average tangible common equity.

 

32


 

PACWEST BANCORP AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATIONS

(Unaudited)

 

 

 

 

March 31,

 

December 31,

 

Tangible Common Equity Ratio

 

2014

 

2013

 

 

 

(Dollars in thousands)

 

PacWest Bancorp Consolidated:

 

 

 

 

 

Stockholders’ equity

 

$

833,702

 

$

809,093

 

Less:

Intangible assets

 

224,627

 

225,991

 

 

Tangible common equity

 

$

609,075

 

$

583,102

 

 

 

 

 

 

 

Total assets

 

$

6,517,853

 

$

6,533,363

 

Less:

Intangible assets

 

224,627

 

225,991

 

 

Tangible assets

 

$

6,293,226

 

$

6,307,372

 

 

 

 

 

 

 

 

 

Equity to assets ratio

 

12.79

%

12.38

%

 

Tangible common equity ratio (1)

 

9.68

%

9.24

%

 

 

 

 

 

 

Book value per share

 

$

18.21

 

$

17.66

 

Tangible book value per share (2)

 

$

13.31

 

$

12.73

 

Shares outstanding

 

45,777,580

 

45,822,834

 

 

 

 

 

 

 

Pacific Western Bank:

 

 

 

 

 

Stockholders’ equity

 

$

910,644

 

$

911,200

 

Less:

Intangible assets

 

224,627

 

225,991

 

 

Tangible common equity

 

$

686,017

 

$

685,209

 

 

 

 

 

 

 

Total assets

 

$

6,507,288

 

$

6,523,742

 

Less:

Intangible assets

 

224,627

 

225,991

 

 

Tangible assets

 

$

6,282,661

 

$

6,297,751

 

 

 

 

 

 

 

 

Equity to assets ratio

 

13.99

%

13.97

%

 

Tangible common equity ratio (1)

 

10.92

%

10.88

%

 

(1) Tangible common equity divided by tangible assets.

(2) Tangible common equity divided by shares outstanding.

 

Contact information:

Matt Wagner, Chief Executive Officer, (310) 728-1020

Vic Santoro, Executive Vice President and CFO, (310) 728-1021

 

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