UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 22, 2015 (April 7, 2014)
PACWEST BANCORP
(Exact name of registrant as specified in its charter)
Delaware |
|
00-30747 |
|
33-0885320 |
(State or other jurisdiction of incorporation) |
|
(Commission File Number) |
|
(I.R.S. Employer Identification No.) |
10250 Constellation Blvd., Suite 1640
Los Angeles, CA 90067
(Address of principal executive offices) (Zip Code)
(310) 286-1144
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Explanatory Note
This Amendment No. 2 on Form 8-K/A (Amendment No. 2) amends the Current Report on Form 8-K filed by PacWest Bancorp (the Company) on April 9, 2014 (the Original 8-K), as amended by the Current Report on Form 8-K/A filed by the Company on June 6, 2014 (Amendment No. 1). The Original 8-K and Amendment No. 1 were filed in connection with the completion of the Companys acquisition of CapitalSource Inc. (CSE). This Amendment No. 2 is being filed to update the financial statements of CapitalSource Inc. and pro forma financial statements of the Company previously provided in Amendment No. 1 in order to comply with age of financial statements requirements under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
The unaudited consolidated statements of operations and comprehensive income for each of the three-month periods ended March 31, 2014 and 2013 and the unaudited consolidated statements of cash flows for each of the three-month periods ended March 31, 2014 and 2013, are attached hereto as Exhibit 99.1 and incorporated herein by reference.
(b) Pro Forma Financial Information
Unaudited pro forma combined condensed consolidated statement of earnings of the Company and CSE, for the year ended December 31, 2014, reflecting the merger of the Company and CSE, as well as the accompanying notes thereto, are attached hereto as Exhibit 99.2 and incorporated herein by reference.
(d) Exhibits
Exhibit No. |
|
Description |
|
|
|
99.1 |
|
Unaudited consolidated statements of operations and comprehensive income for CapitalSource Inc. for each of the three-month periods ended March 31, 3014 and 2013 and the unaudited consolidated statements of cash flows for each of the three-month periods ended March 31, 2014 and 2013. |
|
|
|
99.2 |
|
Unaudited pro forma combined condensed consolidated statement of earnings of PacWest Bancorp and CapitalSource Inc., for the year ended December 31, 2014, as well as the accompanying notes thereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
PACWEST BANCORP | |
Dated: April 22, 2015 |
| |
|
By: |
/s/ Lynn M. Hopkins |
|
Name: |
Lynn M. Hopkins |
|
Title: |
Executive Vice President |
EXHIBIT 99.1
CapitalSource Inc.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
|
For the Three Months Ended March 31, |
| ||||
|
|
2014 |
|
2013 |
| ||
|
|
($ in thousands, except per share data) |
| ||||
Net interest income: |
|
|
|
|
| ||
Interest income: |
|
|
|
|
| ||
Loans and leases |
|
$ |
101,836 |
|
$ |
102,889 |
|
Investment securities |
|
5,595 |
|
9,893 |
| ||
Other |
|
576 |
|
313 |
| ||
Total interest income |
|
108,007 |
|
113,095 |
| ||
Interest expense: |
|
|
|
|
| ||
Deposits |
|
13,683 |
|
12,106 |
| ||
Borrowings |
|
4,954 |
|
6,057 |
| ||
Total interest expense |
|
18,637 |
|
18,163 |
| ||
Net interest income |
|
89,370 |
|
94,932 |
| ||
Provision for loan and lease losses |
|
(1,657 |
) |
12,505 |
| ||
Net interest income after provision for loan and lease losses |
|
91,027 |
|
82,427 |
| ||
|
|
|
|
|
| ||
Non-interest income: |
|
|
|
|
| ||
Loan fees |
|
2,364 |
|
3,112 |
| ||
Leased equipment income |
|
6,181 |
|
4,825 |
| ||
Gain (loss) on investments, net |
|
(7,063 |
) |
1,878 |
| ||
Gain on derivatives |
|
1,499 |
|
814 |
| ||
Other non-interest income, net |
|
1,732 |
|
2,589 |
| ||
Total non-interest income |
|
4,713 |
|
13,218 |
| ||
|
|
|
|
|
| ||
Non-interest expenses: |
|
|
|
|
| ||
Compensation and benefits |
|
23,489 |
|
24,982 |
| ||
Professional fees |
|
1,473 |
|
1,468 |
| ||
Occupancy expenses |
|
5,538 |
|
4,215 |
| ||
FDIC fees and assessments |
|
983 |
|
1,554 |
| ||
General depreciation and amortization |
|
1,550 |
|
1,526 |
| ||
Loan servicing expense |
|
599 |
|
1,469 |
| ||
Other administrative expenses |
|
6,897 |
|
6,810 |
| ||
Total operating expenses |
|
40,529 |
|
42,024 |
| ||
Leased equipment depreciation |
|
4,244 |
|
3,400 |
| ||
Net expense of real estate owned and other foreclosed assets |
|
3,894 |
|
(62 |
) | ||
Other non-interest expense, net |
|
466 |
|
(707 |
) | ||
Total non-interest expenses |
|
49,133 |
|
44,655 |
| ||
|
|
|
|
|
| ||
Net income before income taxes |
|
46,607 |
|
50,990 |
| ||
Income tax expense (benefit) |
|
23,104 |
|
21,642 |
| ||
Net income |
|
23,503 |
|
29,348 |
| ||
|
|
|
|
|
| ||
Other comprehensive (loss) income, net of tax |
|
|
|
|
| ||
Unrealized (loss) gain on available-for-sale securities, net of tax |
|
2,039 |
|
(1,629 |
) | ||
Other comprehensive (loss) income |
|
2,039 |
|
(1,629 |
) | ||
Comprehensive income |
|
$ |
25,542 |
|
$ |
27,719 |
|
|
|
|
|
|
| ||
Net income per share: |
|
|
|
|
| ||
Basic |
|
$ |
0.12 |
|
$ |
0.15 |
|
Diluted |
|
$ |
0.12 |
|
$ |
0.14 |
|
Average shares outstanding: |
|
|
|
|
| ||
Basic |
|
194,415,939 |
|
201,408,526 |
| ||
Diluted |
|
199,433,816 |
|
206,240,213 |
| ||
|
|
|
|
|
| ||
Dividends declared per share |
|
$ |
0.01 |
|
$ |
0.01 |
|
CapitalSource Inc.
Consolidated Statements of Cash Flows
(Unaudited)
|
|
For the Three Months Ended March 31, |
| ||||
|
|
2014 |
|
2013 |
| ||
|
|
($ in thousands, except per share data) |
| ||||
Operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
23,503 |
|
$ |
29,348 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Stock option expense |
|
436 |
|
540 |
| ||
Restricted stock expense |
|
2,770 |
|
2,530 |
| ||
Amortization of deferred loan fees and discounts |
|
(5,438 |
) |
(8,614 |
) | ||
Paid-in-kind interest on loans |
|
(61 |
) |
5,273 |
| ||
(Negative provision) provision for loan and lease losses |
|
(1,657 |
) |
12,505 |
| ||
Amortization of deferred financing fees and discounts |
|
93 |
|
533 |
| ||
Depreciation and amortization |
|
6,132 |
|
4,334 |
| ||
Loss (gain) on foreclosed assets and other property and equipment disposals |
|
3,387 |
|
(467 |
) | ||
Provision for deferred income taxes |
|
16,017 |
|
17,699 |
| ||
Loss (gain) on investments, net |
|
7,176 |
|
(922 |
) | ||
Unrealized loss (gain) on derivatives and foreign currencies, net |
|
383 |
|
(634 |
) | ||
Decrease in interest receivable |
|
1,035 |
|
2,225 |
| ||
Decrease (increase) in loans held-for-sale, net |
|
|
|
(2,591 |
) | ||
Decrease in other assets |
|
6,810 |
|
9,630 |
| ||
Decrease in other liabilities |
|
(22,925 |
) |
(12,981 |
) | ||
Cash provided by operating activities |
|
37,661 |
|
58,408 |
| ||
Investing activities: |
|
|
|
|
| ||
Decrease (increase) in restricted cash |
|
46,289 |
|
(424 |
) | ||
Increase in loans, net |
|
(246,776 |
) |
(41,349 |
) | ||
Sale of investment securities, available for sale |
|
45,187 |
|
103,568 |
| ||
Sale or call of investment securities, held to maturity |
|
25 |
|
28,653 |
| ||
Purchase of investment securities, held to maturity |
|
|
|
(22,868 |
) | ||
Reduction of other investments, net |
|
4,222 |
|
734 |
| ||
Acquisition of property and equipment, net |
|
(24,031 |
) |
(8,217 |
) | ||
Cash (used in) provided by investing activities |
|
(175,084 |
) |
60,097 |
| ||
Financing activities: |
|
|
|
|
| ||
Deposits accepted, net of repayments |
|
102,256 |
|
153,680 |
| ||
Proceeds of other borrowings |
|
90,000 |
|
5,000 |
| ||
Repayments and extinguishment of term debt |
|
|
|
(103,035 |
) | ||
Repurchase of common stock |
|
|
|
(137,988 |
) | ||
Proceeds from exercise of options |
|
6,253 |
|
1,565 |
| ||
Payment of dividends |
|
(1,943 |
) |
(1,980 |
) | ||
Cash provided by (used in) financing activities |
|
196,566 |
|
(82,758 |
) | ||
Increase in cash and cash equivalents |
|
59,143 |
|
35,747 |
| ||
Cash and cash equivalents as of beginning of period |
|
455,799 |
|
299,086 |
| ||
Cash and cash equivalents as of end of period |
|
$ |
514,942 |
|
$ |
334,833 |
|
|
|
|
|
|
| ||
Noncash transactions from investing activities: |
|
|
|
|
| ||
Assets acquired through foreclosure |
|
$ |
34 |
|
$ |
728 |
|
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS OF PACWEST BANCORP AND CAPITALSOURCE INC.
The following unaudited pro forma combined condensed consolidated statement of earnings is based on the separate historical statements of earnings of PacWest Bancorp (PacWest or the Company) and CapitalSource Inc. (CSE) and give effect to the merger of PacWest and CSE which closed on April 7, 2014 (which we refer to as the merger), including pro forma assumptions and adjustments related to the merger, as described in the accompanying notes to the unaudited pro forma combined condensed consolidated statement of earnings. The PacWest historical results were derived from PacWests Annual Report on Form 10-K for the year ended December 31, 2014. The CSE historical results were derived from CSEs books and records for the period from January 1, 2014 to April 7, 2014. The unaudited pro forma combined condensed consolidated statement of earnings for the year ended December 31, 2014 is presented as if the merger had occurred on January 1, 2014. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and expected to have a continuing impact on consolidated results of operations.
The unaudited pro forma combined condensed consolidated financial information has been prepared using the acquisition method of accounting for business combinations under generally accepted accounting principles. PacWest is the acquirer for accounting purposes. Certain reclassifications have been made to the historical financial statements of CSE to conform to the presentation in PacWests financial statements.
In connection with the integration of the operations of CSE following the completion of the merger, PacWest incurred nonrecurring charges, such as costs associated with systems implementation, severance, professional fees and other costs directly related to the merger. These charges affected the results of operations of PacWest and CSE, as well as those of the combined company following the completion of the merger, in the period in which they were recorded. Such transaction-related pre-tax expenses for PacWest of $101.0 million and $53.6 million for CSE are not included in the unaudited pro forma condensed consolidated statement of earnings. Additionally, the unaudited pro forma adjustments do not give effect to any nonrecurring or unusual charges that were incurred as a result of any disposition of assets or prepayment of liabilities that resulted from such integration.
The actual amounts recorded may differ materially from the information presented in this pro forma condensed consolidated statement of earnings as a result of:
· the methodology required to be used to prepare the pro forma statement; and
· revenue enhancements and/or expense savings achieved by the combined company.
The unaudited pro forma combined condensed consolidated statement of earnings is provided for informational purposes only. The unaudited pro forma combined condensed consolidated statement of earnings is not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the merger been completed as of the date indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined condensed consolidated statement of earnings and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined condensed consolidated statement of earnings should be read together with:
· the accompanying notes to the unaudited pro forma combined condensed consolidated statement of earnings;
· PacWests separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2014, included in PacWests Annual Report on Form 10-K for the year ended December 31, 2014;
· PacWests separate unaudited historical consolidated financial statements and accompanying notes as of and for the three months ended March 31, 2014 included in PacWests Quarterly Report on Form 10-Q for the quarter ended March 31, 2014;
· CSEs separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2013, included in CSEs Annual Report on Form 10-K for the year ended December 31, 2013; and
· CSEs separate unaudited consolidated statements of operations and comprehensive income for each of the three-month periods ended March 31, 2014 and 2013 and the unaudited consolidated statements of cash flows for each of the three-month periods ended March 31, 2014 and 2013 included in this Current Report on Form 8-K/A as Exhibit 99.1.
The following table presents the unaudited pro forma condensed consolidated statement of earnings for the year ended December 31, 2014 giving pro forma effect to the following transactions as if they had occurred as of January 1, 2014:
· Full year impact of CSEs statement of earnings, including pro forma amortization and accretion of purchase accounting adjustments on investment securities, loans and leases, intangible assets, time deposits, and subordinated debentures; and
· The issuance of additional PacWest common stock applying the 0.2837 exchange ratio to the outstanding CSE shares in determining pro forma earnings per share.
Unaudited Pro Forma Combined Condensed Consolidated Statement of Earnings
Twelve Months Ended December 31, 2014
(In thousands, except per share amounts)
|
|
|
|
CapitalSource Inc. (1) |
|
PacWest and CSE |
| |||||||||
|
|
PacWest As |
|
Historical |
|
Pro Forma |
|
Pro Forma |
|
Pro Forma |
| |||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
| |||||
Loans and leases |
|
$ |
657,097 |
|
$ |
110,334 |
|
$ |
11,181 |
(a) |
$ |
121,515 |
|
$ |
778,612 |
|
Deposits in financial institutions |
|
333 |
|
578 |
|
|
|
578 |
|
911 |
| |||||
Investment securities |
|
47,345 |
|
6,097 |
|
(183 |
)(b) |
5,914 |
|
53,259 |
| |||||
Total interest income |
|
704,775 |
|
117,009 |
|
10,998 |
|
128,007 |
|
832,782 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest expense: |
|
|
|
|
|
|
|
|
|
|
| |||||
Deposits |
|
27,332 |
|
14,754 |
|
(1,180 |
)(c) |
13,574 |
|
40,906 |
| |||||
Borrowings and subordinated debentures |
|
15,066 |
|
5,329 |
|
1,191 |
(d) |
6,520 |
|
21,586 |
| |||||
Total interest expense |
|
42,398 |
|
20,083 |
|
11 |
|
20,094 |
|
62,492 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income |
|
662,377 |
|
96,926 |
|
10,987 |
|
107,913 |
|
770,290 |
| |||||
Provision for credit losses |
|
11,499 |
|
(1,792 |
) |
|
|
(1,792 |
) |
9,707 |
| |||||
Net interest income after provision for credit losses |
|
650,878 |
|
98,718 |
|
10,987 |
|
109,705 |
|
760,583 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
| |||||
Service charges, commissions and fees |
|
29,835 |
|
2,546 |
|
|
|
2,546 |
|
32,381 |
| |||||
Leased equipment income |
|
16,669 |
|
6,679 |
|
648 |
(e) |
7,327 |
|
23,996 |
| |||||
Net gain on sales of loans and leases |
|
601 |
|
|
|
|
|
|
|
601 |
| |||||
Net gain (loss) on sales of securities |
|
4,841 |
|
(9,938 |
) |
|
|
(9,938 |
) |
(5,097 |
) | |||||
FDIC loss sharing expense |
|
(31,730 |
) |
|
|
|
|
|
|
(31,730 |
) | |||||
Other income |
|
21,971 |
|
3,748 |
|
|
|
3,748 |
|
25,719 |
| |||||
Total noninterest income |
|
42,187 |
|
3,035 |
|
648 |
|
3,683 |
|
45,870 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
| |||||
Compensation |
|
165,499 |
|
29,722 |
|
|
|
29,722 |
|
195,221 |
| |||||
Occupancy |
|
40,606 |
|
5,706 |
|
|
|
5,706 |
|
46,312 |
| |||||
Other |
|
95,355 |
|
20,990 |
|
|
|
20,990 |
|
116,345 |
| |||||
Acquisition and integration |
|
101,016 |
|
53,647 |
|
(154,663 |
)(f) |
(101,016 |
) |
|
| |||||
Intangible asset amortization |
|
6,268 |
|
|
|
318 |
(g) |
318 |
|
6,586 |
| |||||
Total noninterest expense |
|
408,744 |
|
110,065 |
|
(154,345 |
) |
(44,280 |
) |
364,464 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings from continuing operations before income taxes |
|
284,321 |
|
(8,312 |
) |
165,980 |
|
157,668 |
|
441,989 |
| |||||
Income tax expense |
|
(113,853 |
) |
(587 |
) |
(69,711 |
)(h) |
(70,298 |
) |
(184,151 |
) | |||||
Net earnings from continuing operations |
|
$ |
170,468 |
|
$ |
(8,899 |
) |
$ |
96,269 |
|
$ |
87,370 |
|
$ |
257,838 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings from continuing operations |
|
$ |
1.94 |
|
$ |
(0.05 |
) |
|
|
|
|
$ |
2.51 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings from continuing operations |
|
$ |
1.94 |
|
$ |
(0.04 |
) |
|
|
|
|
$ |
2.51 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Weighted average shares: |
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
|
86,852.5 |
|
194,415.9 |
|
15,042.2 |
(i) |
|
|
101,894.7 |
| |||||
Diluted |
|
86,852.5 |
|
199,433.8 |
|
15,042.2 |
(i) |
|
|
101,894.7 |
|
Notes:
(1) PacWest acquired CapitalSource Inc. (CSE) on April 7, 2014 in a cash and stock transaction. The CSE historical results are for the 97 days ended April 7, 2014. The pro forma adjustments and operating results are to reflect this acquisition as if it occurred on January 1, 2014.
Unaudited Pro Forma Condensed Consolidated Statement of Earnings Adjustments
Pro Forma Adjustments:
a) Accretion of $223.6 million discount on loans over the estimated weighted average life of the acquired loan portfolio of 60 months.
b) Amortization of the $3.9 million fair value adjustment on investment securities over 64 months.
c) Accretion of $17.2 million time deposit premium over 60 months using an accelerated method.
d) Amortization of the $111.2 million subordinated debenture fair value adjustment over 280 months.
e) Accretion of $10.4 million discount on operating leases over the estimated weighted average life of the acquired portfolio of 48 months.
f) Elimination of nonrecurring acquisition and integration costs directly related to the CSE acquisition incurred by PacWest and CSE.
g) Amortization of the $6.7 million core deposit intangible asset over its estimated life of 84 months.
h) Represents income taxes on the pro forma adjustments at a combined Federal and California effective tax rate of approximately 42 percent.
i) Adjustment represents the exchange ratio of 0.2837 multiplied by the actual shares outstanding of CSE common stock to arrive at incremental increase in average PacWest shares outstanding for 2014.