0001104659-23-083854.txt : 20230725 0001104659-23-083854.hdr.sgml : 20230725 20230725162824 ACCESSION NUMBER: 0001104659-23-083854 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20230725 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20230725 DATE AS OF CHANGE: 20230725 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACWEST BANCORP CENTRAL INDEX KEY: 0001102112 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 330885320 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-36408 FILM NUMBER: 231108905 BUSINESS ADDRESS: STREET 1: 130 S. STATE COLLEGE BLVD. CITY: BREA STATE: CA ZIP: 92821 BUSINESS PHONE: (310) 887-8500 MAIL ADDRESS: STREET 1: 130 S. STATE COLLEGE BLVD. CITY: BREA STATE: CA ZIP: 92821 FORMER COMPANY: FORMER CONFORMED NAME: FIRST COMMUNITY BANCORP /CA/ DATE OF NAME CHANGE: 19991229 8-K 1 tm2322040d1_8k.htm FORM 8-K
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) July 25, 2023

 

PacWest Bancorp

(Exact name of registrant as specified in its charter)

 

Delaware   001-36408   33-0885320
(State of   (Commission File Number)   (IRS Employer
Incorporation)       Identification No.)

 

9701 Wilshire Blvd., Suite 700, Beverly Hills, California 90212

(Address of principal executive offices and zip code)

 

(310) 887-8500

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Common Stock, par value $0.01 per share

  PACW  

The Nasdaq Stock Market, LLC

         

Depositary Shares, each representing a 1/40th interest in a share of 7.75% fixed rate reset non-cumulative perpetual preferred stock, Series A

 

PACWP

  The Nasdaq Stock Market, LLC
(Title of Each Class)   (Trading Symbol)   (Name of Exchange on Which Registered)

 

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 (see General Instruction A.2. below):

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230-425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

  

 

 

 

Item 2.02 Results of Operations and Financial Condition.*

 

On July 25, 2023, PacWest Bancorp (the “Company”) announced its results of operations and financial condition for the three and six months ended June 30, 2023. The press release announcing the financial results for the three and six months ended June 30, 2023 is furnished as Exhibit 99.1 and incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.*

 

(d) Exhibits.

 

Exhibit
Number
Description

 

99.1 Press release dated July 25, 2023 announcing PacWest’s results of operations and financial condition for the three and six months ended June 30, 2023.
104 Cover page interactive data file (embedded within the Inline XBRL document)

 

*The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of PacWest Bancorp under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

 

 

 

 

SIGNATURE

 

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 hereunto duly authorized.

 

  PacWest Bancorp
   
  By: /s/ Kevin L. Thompson
  Name: Kevin L. Thompson
  Title: Executive Vice President
    Chief Financial Officer

 

Date: July 25, 2023

 

 

EX-99.1 2 tm2322040d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1 

 

 

 

July 25, 2023

PACWEST BANCORP ANNOUNCES RESULTS FOR THE SECOND QUARTER 2023 

FOR IMMEDIATE RELEASE

 

SECOND Quarter 2023 Highlights

 

·Net loss available to common stockholders of $207.4 million, or a loss of $1.75 per diluted share as the quarter was impacted by items related to loan sales and restructuring of our Civic subsidiary

 

·Adjusted earnings of $36.0 million and adjusted diluted earnings per common share of $0.22, which exclude the effect of loan sales, lower of cost or market held for sale (“LOCOM HFS”) adjustments, and reorganization costs as detailed below

 

·Executed on strategic plan to divest non-core loan portfolios including selling

 

·National Construction portfolio, including $2.6 billion of loans and $2.3 billion of unfunded commitments

 

·Lender Finance portfolio, including $2.1 billion of loans and $0.2 billion of unfunded commitments

 

·A portion of the Civic portfolio, including $521 million of loans and $24 million of unfunded commitments

 

·Second quarter results were marked by enhanced liquidity and capital

 

·Immediately-available liquidity (on-balance sheet liquidity and unused borrowing capacity) of $17.9 billion, which exceeded uninsured deposits of $5.3 billion, with a coverage ratio of 335% at June 30, 2023

 

·Total insured deposits represented approximately 81% of total deposits as of June 30, 2023, up from 48% at December 31, 2022

 

·All risk-based capital ratios increased from March 31, 2023, with CET1 increasing from 9.21% to 11.16%

 

·Loans to deposits ratio decreased to 81.5% at June 30, 2023 from 101.0% at March 31, 2023

 

·Operational efficiency initiative is ongoing with continued optimization of resources, contracts, facilities, and processes

 

ADJUSTED eARNINGS AND RELATED METRICS

 

   Three Months Ended 
   June 30,   March 31,   June 30, 
   2023   2023   2022 
             
   (Dollars in thousands, except per share amounts) 
Earnings Summary:               
Net (loss) earnings  $(197,414)  $(1,195,424)  $122,360 
Diluted earnings per common share  $(1.75)  $(10.22)  $1.02 
Return on average assets   (1.84)%   (11.34)%   1.23%
Return on average tangible common equity (1)   (37.62)%   14.45%   24.24%
Efficiency ratio   527.0%   58.2%   49.5%
                
Adjusted Earnings Summary (1):               
Adjusted earnings  $35,957   $89,436   $122,360 
Adjusted diluted earnings per common share  $0.22   $0.66   $1.02 
Adjusted return on average assets   0.34%   0.85%   1.23%
Adjusted return on average tangible common equity   5.08%   15.62%   24.24%
Adjusted efficiency ratio   86.9%   58.2%   49.5%

 

 

(1) Non-GAAP measure.          

 

Page 1 

 

 

Financial results for the second quarter of 2023 were impacted by $277.7 million of losses on the sale of loans and unfunded commitments and LOCOM HFS adjustments, Civic loan sale charge-offs of $22.4 million, and $12.4 million of reorganization costs. Financial results for the first quarter of 2023 were impacted by a goodwill impairment of $1.38 billion and reorganization costs of $8.5 million. Excluding these amounts, adjusted earnings were $36.0 million, or $0.22 per diluted share, for the second quarter of 2023 and $89.4 million, or $0.66 per diluted share, for the first quarter of 2023. A reconciliation of adjusted earnings to net (loss) earnings according to generally accepted accounting principles in the United States (“GAAP”) is provided in the financial tables at the end of this press release.

 

CEO COMMENTARY

 

Paul Taylor, President and CEO, commented, “At the end of the first quarter, we communicated our strategic plan to exit non-core products and services and strengthen our community banking business which would improve our capital ratios, liquidity, and operational efficiency. We expected to execute this plan over several quarters, however, given that market conditions changed, we pivoted to shrink the balance sheet through the sale of three significant non-core loan portfolios. These loan sales accelerated our balance sheet restructuring, reducing risk in our loan portfolio, and improving our capital ratios and liquidity. The significant reduction in risk-weighted assets resulted in much improved capital ratios, and our CET1 capital ratio improved from 9.21% at March 31, 2023 to 11.16% at June 30, 2023.”

 

Mr. Taylor continued, “We are continuing the work we started last year to improve the overall efficiency of the Bank, which resulted in severance, asset write-off, and contract termination expense of $12.4 million in the second quarter of 2023. Since the beginning of the year, we have reduced our employee count by 560 employees, primarily at our Civic subsidiary. We have identified many other areas to improve efficiency across the Bank and will be executing on these measures in the coming months.”

 

Mr. Taylor concluded, “Due to the competitive marketplace for deposits, we are introducing new products and technology solutions to successfully grow customer deposits. At the end of the second quarter, we introduced a digital account opening tool to efficiently gather new deposits. In the third quarter, we expect to implement a new on-line channel for gathering deposits directly from consumers.”

 

Page 2 

 

 

FINANCIAL HIGHLIGHTS

 

   At or For the       At or For the     
   Three Months Ended       Six Months Ended     
   June 30,   March 31,   Increase   June 30,   Increase 
Financial Highlights  2023   2023   (Decrease)   2023   2022   (Decrease) 
                         
   (Dollars in thousands, except per share amounts) 
Net (loss) earnings available to common stockholders  $(207,361)  $(1,205,371)  $998,010   $(1,412,732)  $242,488   $(1,655,220)
Diluted (loss) earnings per common share  $(1.75)  $(10.22)  $8.47   $(11.96)  $2.03   $(13.99)
Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") (1)  $(262,443)  $119,396   $(381,839)  $(143,047)  $336,735   $(479,782)
Return on average assets   (1.84)%   (11.34)%   9.50    (6.55)%   1.22%   (7.77)
PPNR return on average assets (1)   (2.45)%   1.13%   (3.58)   (0.67)%   1.70%   (2.37)
Return on average tangible common equity (1)   (37.62)%   14.45%   (52.07)   (11.00)%   22.40%   (33.40)
                               
Yield on average loans and leases (tax equivalent)   6.08%   6.14%   (0.06)   6.11%   4.66%   1.45 
Cost of average total deposits   2.62%   1.98%   0.64    2.27%   0.13%   2.14 
Net interest margin ("NIM") (tax equivalent)   1.82%   2.89%   (1.07)   2.34%   3.50%   (1.16)
Efficiency ratio   527.0%   58.2%   468.8    130.5%   49.8%   80.7 
                               
Total assets  $38,337,250   $44,302,981   $(5,965,731)  $38,337,250   $40,950,723   $(2,613,473)
Loans and leases held for investment, net of deferred fees  $22,258,210   $25,672,381   $(3,414,171)  $22,258,210   $26,501,137   $(4,242,927)
Noninterest-bearing demand deposits  $6,055,358   $7,030,759   $(975,401)  $6,055,358   $13,338,029   $(7,282,671)
Interest-bearing deposits  $21,841,725   $21,156,802   $684,923   $21,841,725   $20,630,123   $1,211,602 
Total deposits  $27,897,083   $28,187,561   $(290,478)  $27,897,083   $33,968,152   $(6,071,069)
                               
As percentage of total deposits:                              
Noninterest-bearing demand deposits   22%   25%   (3)   22%   39%   (17)
Interest-bearing deposits   78%   75%   3    78%   61%   17 
                               
Equity to assets ratio   6.61%   6.26%   0.35    6.61%   9.72%   (3.11)
Common equity tier 1 capital ratio   11.16%   9.21%   1.95    11.16%   8.24%   2.92 
Tier 1 capital ratio   13.70%   11.15%   2.55    13.70%   10.15%   3.55 
Total capital ratio   17.61%   14.21%   3.40    17.61%   13.12%   4.49 
Tangible common equity ratio (1)   5.24%   5.07%   0.17    5.24%   5.15%   0.09 
Tangible book value per                              
common share (1)  $16.71   $18.66   $(1.95)  $16.71   $16.93   $(0.22)

 

 

(1) Non-GAAP measure.                                                

 

Page 3 

 

 

INCOME STATEMENT HIGHLIGHTS

 

NET INTEREST INCOME

 

Net interest income decreased by $93.2 million to $186.1 million for the second quarter of 2023 compared to $279.3 million for the first quarter of 2023 due mainly to higher interest expense on deposits and borrowings and lower interest income on loans and leases, offset partially by higher interest income on deposits in financial institutions. Interest income on deposits in financial institutions increased by $43.9 million in the second quarter of 2023 due mainly to a $3.2 billion increase in the average balance of deposits in financial institutions and a 37 basis points increase in the yield. Interest income on loans and leases decreased by $21.7 million in the second quarter of 2023 due to a $1.6 billion decrease in the average balance of loans and leases and a six basis points decrease in the tax equivalent yield on loans and leases compared to the first quarter of 2023. The tax equivalent yield on loans and leases was 6.08% in the second quarter of 2023 compared to 6.14% in the first quarter of 2023. The decrease in the tax equivalent yield on loans and leases was due primarily to lower levels of higher-yielding Civic and construction loans and a smaller tax equivalent adjustment in the second quarter. Interest expense on deposits increased by $22.9 million in the second quarter of 2023 due mainly to increased market rates and an increased use of brokered deposits that contributed to a 44 basis points increase in the cost of total deposits. Interest expense on borrowings increased by $91.8 million due to a $6.2 billion increase in the average balance and a 34 basis points increase in the cost of borrowings attributable mainly to the result of the borrowings under the Bank Term Funding Program and repurchase agreement being in effect for a full quarter, as these borrowings were entered into in March 2023.

 

The tax equivalent NIM was 1.82% for the second quarter of 2023 compared to 2.89% for the first quarter of 2023. The decrease in the NIM was due mainly to a shift in our funding mix during the second quarter of 2023. Average borrowings as a percentage of average interest-bearing liabilities was 34% for the second quarter of 2023 compared to 19% for the first quarter of 2023. The tax-equivalent NIM was further impacted by a higher cost of total deposits and borrowings and a lower yield on loans and leases, offset partially by a higher yield on deposits in financial institutions.

 

The cost of total deposits was 2.62% for the second quarter of 2023 compared to 1.98% for the first quarter of 2023 due mainly to higher market interest rates and a higher average balance of brokered deposits.

 

PROVISION FOR CREDIT LOSSES

 

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

 

   Three Months Ended     
   June 30,   March 31,   Increase 
Provision for Credit Losses  2023   2023   (Decrease) 
             
   (In thousands) 
Addition to allowance for loan and lease losses  $40,000   $18,500   $21,500 
Reduction in reserve for unfunded loan commitments   (38,000)   (15,500)   (22,500)
Total loan-related provision   2,000    3,000    (1,000)
Addition to allowance for held-to-maturity securities   -    -    - 
Total provision for credit losses  $2,000   $3,000   $(1,000)

 

The provision for credit losses was $2.0 million for the second quarter of 2023 compared to $3.0 million for the first quarter of 2023. The provision for the second quarter of 2023 reflected the impact of an updated forecast, higher net charge-offs and higher reserves for downgraded loans largely offset by lower reserves needed for lower loan and unfunded commitment balances. During the first quarter of 2023, while loans and leases held for investment and unfunded loan commitments declined, a $3.0 million provision was recognized due to an increase in qualitative reserves for loans secured by commercial real estate and higher net charge-offs.

Page 4 

 

 

Noninterest Income

 

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

 

   Three Months Ended     
   June 30,   March 31,   Increase 
Noninterest Income  2023   2023   (Decrease) 
             
   (In thousands) 
Service charges on deposit accounts  $4,315   $3,573   $742 
Other commissions and fees   11,241    10,344    897 
Leased equipment income   22,387    13,857    8,530 
(Loss) gain on sale of loans and leases   (158,881)   2,962    (161,843)
Gain (loss) on sale of securities   -    -    - 
Dividends and gains on equity investments   2,658    1,098    1,560 
Warrant loss   (124)   (333)   209 
LOCOM HFS adjustment   (11,943)   -    (11,943)
Other income   2,265    4,890    (2,625)
Total noninterest (loss) income  $(128,082)  $36,391   $(164,473)

 

Noninterest income decreased by $164.5 million to a loss of $128.1 million for the second quarter of 2023 compared to income of $36.4 million for the first quarter of 2023 due primarily to a decrease of $161.8 million in gain on sale of loans and leases and a $11.9 million LOCOM HFS loss adjustment, offset partially by an increase of $8.5 million in leased equipment income. The second quarter loss on sale of loans and leases resulted from the sale of $5.2 billion of loans for a net loss of $158.9 million in the second quarter of 2023 compared to the sale of $287.3 million of loans for a net gain of $3.0 million in the first quarter of 2023. The $11.9 million LOCOM HFS loss adjustment was related to the lower of cost or market adjustment that we made to our $478.1 million loans held for sale at June 30, 2023. The increase in leased equipment income was due mainly to $8.8 million of early lease termination gains recognized in the second quarter of 2023 compared to the linked quarter.

 

Page 5 

 

 

Noninterest Expense

 

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

 

   Three Months Ended     
   June 30,   March 31,   Increase 
Noninterest Expense  2023   2023   (Decrease) 
             
   (In thousands) 
Compensation  $82,881   $88,476   $(5,595)
Occupancy   15,383    15,067    316 
Data processing   10,963    10,938    25 
Other professional services   9,973    6,073    3,900 
Insurance and assessments   25,635    11,717    13,918 
Intangible asset amortization   2,389    2,411    (22)
Leased equipment depreciation   9,088    9,375    (287)
Foreclosed assets expense, net   2    363    (361)
Customer related expense   27,302    24,005    3,297 
Loan expense   5,245    6,524    (1,279)
Other   119,182    12,804    106,378 
Total operating expense   308,043    187,753    120,290 
Acquisition, integration and reorganization costs   12,394    8,514    3,880 
Goodwill impairment   -    1,376,736    (1,376,736)
Total noninterest expense  $320,437   $1,573,003   $(1,252,566)

 

Noninterest expense decreased by $1.25 billion to $320.4 million in the second quarter of 2023 compared to $1.57 billion for the first quarter of 2023 due primarily to the $1.38 billion goodwill impairment charge recorded in the first quarter of 2023. Excluding the goodwill impairment and acquisition, integration and reorganization costs, operating expense increased by $120.3 million to $308.0 million. The $120.3 million increase was due mainly to an increase of $106.4 million in other expense and an increase of $13.9 million in insurance and assessments expense. The increase in other expense was due mainly to $106.8 million of unfunded commitments fair value loss adjustments in the second quarter of 2023. The increase in insurance and assessments was due mainly to higher FDIC assessment expense attributable to an increased assessment rate due to lower core earnings, lower core deposits, and a higher level of criticized loans and leases.

 

Income Taxes

 

The effective income tax rate was 25.3% for the second quarter of 2023 compared to 5.2% for the first quarter of 2023. Excluding goodwill impairment, the effective income tax rate for the first quarter of 2023 was 28.4%. The decrease from the first quarter of 2023 adjusted rate was due primarily to higher disallowed interest expense, higher disallowed FDIC assessment expense, and higher shortfalls from restricted stock vesting in the second quarter of 2023. Excluding goodwill impairment, the effective tax rate for the full year 2023 is currently estimated to be in the range of 22% to 24%.

 

Page 6 

 

 

BALANCE SHEET HIGHLIGHTS

 

Deposits and Client Investment Funds

 

The following tables present the composition of our deposit portfolio as of the dates indicated:

 

   June 30, 2023   March 31, 2023   June 30, 2022 
       % of       % of       % of 
Deposits By Account Type  Balance   Total   Balance   Total   Balance   Total 
                         
   (Dollars in thousands) 
Noninterest-bearing  $6,055,358    22%  $7,030,759    25%  $13,338,029    39%
Interest-bearing:                              
Transaction (NOW)   7,112,807    26%   5,360,622    19%   6,372,460    19%
Money market   5,678,323    20%   8,195,670    29%   11,039,455    32%
Savings   897,277    3%   671,918    2%   653,950    2%
Time deposits (1)   8,153,318    29%   6,928,592    25%   2,564,258    8%
Total interest-bearing   21,841,725    78%   21,156,802    75%   20,630,123    61%
Total deposits  $27,897,083    100%  $28,187,561    100%  $33,968,152    100%

 

(1) Includes time deposits over $250,000 of $853.4 million, $1.1 billion, and $665.9 million at June 30, 2023, March 31, 2023, and June 30, 2022, respectively.

 

     June 30, 2023     March 31, 2023     June 30, 2022 
         % of          % of          % of  
Deposits By Customer Type   Balance    Total    Balance    Total    Balance    Total 
                               
    (Dollars in thousands) 
Noninterest-bearing  $6,055,358    22%  $7,030,759    25%  $13,338,029    39%
Interest-bearing:                              
Consumer and commercial:                              
Reciprocal   7,935,479    29%   6,744,447    24%   3,447,382    10%
Non-reciprocal   6,257,971    22%   7,958,001    28%   13,787,432    41%
Brokered   7,648,275    27%   6,454,354    23%   3,395,309    10%
Total interest-bearing   21,841,725    78%   21,156,802    75%   20,630,123    61%
Total deposits  $27,897,083    100%  $28,187,561    100%  $33,968,152    100%

 

Total deposits decreased by $290.5 million or 1.0% in the second quarter of 2023 due to a $975.4 million decrease in noninterest-bearing deposits, offset partially by a $684.9 million increase in interest-bearing deposits. At June 30, 2023, noninterest-bearing deposits totaled $6.1 billion or 22% of total deposits and interest-bearing deposits totaled $21.8 billion or 78% of total deposits.

 

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

 

   June 30, 2023   March 31, 2023     
       % of       % of   Increase 
Deposits By Division  Balance   Total   Balance   Total   (Decrease) 
                     
   (Dollars in thousands) 
Community Banking  $14,353,851    51%  $14,917,027    53%  $(563,176)
Venture Banking   5,764,220    21%   6,584,554    23%   (820,334)
Wholesale Deposits   7,779,012    28%   6,685,980    24%   1,093,032 
Total deposits  $27,897,083    100%  $28,187,561    100%  $(290,478)

 

As of June 30, 2023, FDIC-insured deposits represented approximately 81% of total deposits and FDIC-insured venture-specific deposits accounted for approximately 83% of total venture-specific deposits. The Bank’s spot deposit rates increased from 2.32% at March 31, 2023 to 2.71% at June 30, 2023. Since May 10, 2023 (the date of our last deposit disclosure in our March 31, 2023 Form 10-Q filing) through July 21, 2023, our total non-brokered deposits were up approximately $1.0 billion.

 

Page 7 

 

 

 

In addition to deposit products, we also offer alternative, non-depository cash investment options for select clients. These alternative options include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds decreased from $1.2 billion as of March 31, 2023 to $0.8 billion at June 30, 2023, of which $0.4 billion was managed by PWAM.

 

BORROWINGS

 

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

 

   June 30, 2023   March 31, 2023     
       Weighted       Weighted     
       Average       Average   Increase 
Borrowing Type  Balance   Rate   Balance   Rate   (Decrease) 
                     
   (Dollars in thousands) 
FHLB secured advances  $-    -   $5,450,000    5.07%  $(5,450,000)
Bank Term Funding Program   4,910,000    4.38%   4,910,000    4.38%   - 
Repurchase agreement (1)   1,324,273    8.50%   1,393,337    8.50%   (69,064)
Credit-linked notes   123,065    15.77%   128,375    15.24%   (5,310)
Total borrowings  $6,357,338    5.46%  $11,881,712    5.30%  $(5,524,374)

 

 

(1) Balance is net of unamortized issuance costs of $14.3 million and $2.7 million of accrued exit fees.

Rate calculation does not include the effects of issuance costs and exit fees.      

 

The $5.5 billion decrease in borrowings in the second quarter of 2023 was due mainly to the payoff of FHLB secured advances with the proceeds of the loan sales. Available borrowing capacity was approximately $11.4 billion at June 30, 2023.

 

Page 8 

 

 

Loans and Leases

 

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

 

   Three Months Ended   Six Months Ended 
Roll Forward of Loans and Leases Held  June 30,   March 31,   June 30, 
for Investment, Net of Deferred Fees  2023   2023   2023 
             
   (Dollars in thousands) 
Balance, beginning of period  $25,672,381   $28,609,129   $28,609,129 
Additions:               
Production   189,201    468,671    657,872 
Disbursements   1,143,347    1,622,898    2,766,245 
Total production and disbursements   1,332,548    2,091,569    3,424,117 
Reductions:               
Payoffs   (942,962)   (1,021,652)   (1,964,614)
Paydowns   (817,033)   (965,537)   (1,782,570)
Total payoffs and paydowns   (1,759,995)   (1,987,189)   (3,747,184)
Sales   (3,038,672)   (231,798)   (3,270,470)
Transfers to foreclosed assets   (6,657)   (2,568)   (9,225)
Charge-offs   (31,708)   (10,397)   (42,105)
Transfers to loans held for sale   (280,062)   (2,796,365)   (3,076,427)
Total reductions   (5,117,094)   (5,028,317)   (10,145,411)
Transfers from loans held for sale   370,375    -    370,375 
Net (decrease) increase   (3,414,171)   (2,936,748)   (6,350,919)
Balance, end of period  $22,258,210   $25,672,381   $21,887,835 
                
Weighted average rate on production (1)   7.64%   8.44%   8.21%

 

 

(1) The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes amortized fees. Amortized fees added approximately 17 basis points to loan yields in 2023.

 

Loans and leases held for investment, net of deferred fees, decreased by $3.4 billion, or 13.3% in the second quarter of 2023 to $22.3 billion at June 30, 2023. The overall decrease in the loans and leases balance for the second quarter of 2023 was due primarily to the sale of the $2.6 billion National Construction portfolio and $521 million of the Civic portfolio in the second quarter.

 

The weighted average rate on the $189.2 million of production for the second quarter of 2023 decreased to 7.64% from 8.44% for the first quarter of 2023 due primarily to the loan mix (lower percentage of Civic production).

 

Page 9 

 

 

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

 

   June 30, 2023   March 31, 2023   June 30, 2022 
       % of       % of       % of 
Loan and Lease Portfolio  Balance   Total   Balance   Total   Balance   Total 
                         
   (Dollars in thousands) 
Real estate mortgage:                              
Commercial  $3,610,320    16%  $3,808,751    15%  $3,670,515    14%
Multi-family   5,304,544    24%   5,523,320    21%   5,062,422    19%
Other residential   5,373,178    24%   6,075,540    24%   5,321,148    20%
Total real estate mortgage   14,288,042    64%   15,407,611    60%   14,054,085    53%
Real estate construction and land:                              
Commercial   415,997    2%   910,327    4%   837,423    3%
Residential   2,049,526    9%   3,698,113    14%   2,649,177    10%
Total real estate construction and land   2,465,523    11%   4,608,440    18%   3,486,600    13%
Total real estate   16,753,565    75%   20,016,051    78%   17,540,685    66%
Commercial:                              
Asset-based   2,357,098    11%   2,068,327    8%   5,068,112    19%
Venture capital   1,723,476    8%   2,058,237    8%   2,179,190    8%
Other commercial   1,014,212    4%   1,102,543    4%   1,229,504    5%
Total commercial   5,094,786    23%   5,229,107    20%   8,476,806    32%
Consumer   409,859    2%   427,223    2%   483,646    2%
Total loans and leases held for investment, net of deferred fees  $22,258,210    100%  $25,672,381    100%  $26,501,137    100%
                               
Total unfunded loan commitments  $5,845,375        $9,776,789        $11,866,437      

 

Allowance for Credit Losses ON LOANS AND LEASES

 

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

 

   Three Months Ended June 30, 2023 
Allowance for Credit  Allowance for   Reserve for   Total 
Losses on Loans and  Loan and   Unfunded Loan   Allowance for 
Leases Rollforward  Lease Losses   Commitments   Credit Losses 
             
   (In thousands) 
Beginning balance  $210,055   $75,571   $285,626 
Civic loan sale charge-offs   (22,446)   -    (22,446)
Other charge-offs   (9,262)   -    (9,262)
Total charge-offs   (31,708)   -    (31,708)
Recoveries   887    -    887 
Net charge-offs   (30,821)   -    (30,821)
Provision   40,000    (38,000)   2,000 
Ending balance  $219,234   $37,571   $256,805 

 

Page 10 

 

 

   Three Months Ended March 31, 2023 
Allowance for Credit  Allowance for   Reserve for   Total 
Losses on Loans and  Loan and   Unfunded Loan   Allowance for 
Leases Rollforward  Lease Losses   Commitments   Credit Losses 
             
   (In thousands) 
Beginning balance  $200,732   $91,071   $291,803 
Charge-offs   (10,397)   -    (10,397)
Recoveries   1,220    -    1,220 
Net charge-offs   (9,177)   -    (9,177)
Provision   18,500    (15,500)   3,000 
Ending balance  $210,055   $75,571   $285,626 

 

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

 

Allowance for Credit Losses  June 30,   March 31,   Increase 
on Loans and Leases  2023   2023   (Decrease) 
             
   (Dollars in thousands) 
Allowance for loan and lease losses  $219,234   $210,055   $9,179 
Reserve for unfunded loan commitments   37,571    75,571    (38,000)
Allowance for credit losses  $256,805   $285,626   $(28,821)
                
Provision for credit losses (for the quarter)  $2,000   $3,000   $(1,000)
Net charge-offs (for the quarter)  $30,821   $9,177   $21,644 
Net charge-offs to average loans and leases (for the quarter)   0.46%   0.13%     
Allowance for loan and lease losses to loans and leases held for investment   0.98%   0.82%     
Allowance for credit losses to loans and leases held for investment   1.15%   1.11%     

 

The allowance for credit losses decreased by $28.8 million in the second quarter of 2023 to $256.8 million at June 30, 2023. This decrease was attributable mainly to lower reserves needed due to the decrease in loans and leases held for investment and unfunded loan commitments and $22.4 million of charge-offs related to Civic loan sales, offset partially by the impact of an updated forecast and higher reserves needed for downgraded loans.

 

Net charge-offs over the trailing twelve months were $45.0 million, which resulted in net charge-offs to average loans and leases over the trailing twelve months of 0.17%.

 

Page 11 

 

 

CREDIT QUALITY

 

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

 

   June 30,   March 31,   Increase 
Credit Quality Metrics  2023   2023   (Decrease) 
             
   (Dollars in thousands) 
Nonperforming Assets:               
Nonaccrual loans and leases held for investment (1)  $104,886   $87,124   $17,762 
Accruing loans contractually past due 90 days or more   -    -    - 
Foreclosed assets, net   8,426    2,135    6,291 
Total nonperforming assets (“NPAs”)  $113,312   $89,259   $24,053 
                
Nonaccrual loans and leases held for investment to loans and leases held for investment   0.47%   0.34%     
Nonperforming assets to loans and leases held for investment and foreclosed assets   0.51%   0.35%     
Allowance for credit losses to nonaccrual loans and leases held for investment   244.8%   327.8%     
                
Loan and Lease Credit Risk Ratings:               
Pass  $21,679,908   $24,959,805   $(3,279,897)
Special mention   366,368    580,153    (213,785)
Classified   211,934    132,423    79,511 
Total loans and leases held for investment, net of deferred fees  $22,258,210   $25,672,381   $(3,414,171)
                
Special mention loans and leases held for investment to loans and leases held for investment   1.65%   2.26%     
Classified loans and leases held for investment to loans and leases held for investment   0.95%   0.52%     

 

 

(1) Nonaccrual loans include SBA guaranteed amounts of $14.8 million at June 30, 2023 and $11.8 million at March 31, 2023.          

 

Nonaccrual loans and leases increased by $17.8 million to $104.9 million in the second quarter of 2023 due primarily to an increase in nonaccrual Civic loans and nonaccrual SBA guarantied real estate loans. The increase in classified loans (and subsequent decrease in special mention) was driven by downgrades in Multifamily loans as the result of rising interest rates and the related stress on debt service.  All of the Multifamily loans downgraded remain well collateralized and current at quarter-end.

 

Page 12 

 

 

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

 

   June 30, 2023   March 31, 2023   Increase (Decrease) 
       Accruing       Accruing       Accruing 
       and 30-89       and 30-89       and 30-89 
       Days Past       Days Past       Days Past 
   Nonaccrual   Due   Nonaccrual   Due   Nonaccrual   Due 
                         
   (In thousands) 
Real estate mortgage:                              
Commercial  $37,191   $-   $32,996   $1,650   $4,195   $(1,650)
Multi-family   -    -    -    -    -    - 
Other residential   63,626    45,805    50,060    125,458    13,566    (79,653)
Total real estate mortgage   100,817    45,805    83,056    127,108    17,761    (81,303)
Real estate construction and land:                              
Commercial   -    -    -    -    -    - 
Residential   -    -    -    -    -    - 
Total real estate construction and land   -    -    -    -    -    - 
Commercial:                              
Asset-based   385    -    420    -    (35)   - 
Venture capital   -    1,845    -    -    -    1,845 
Other commercial   3,479    147    3,123    618    356    (471)
Total commercial   3,864    1,992    3,543    618    321    1,374 
Consumer   205    2,024    525    1,593    (320)   431 
Total held for investment  $104,886   $49,821   $87,124   $129,319   $17,762   $(79,498)

 

Loans and leases accruing and 30-89 days past due generally fluctuate from period to period. The $79.5 million decrease to $49.8 million in the second quarter of 2023 was due mainly to a decrease in Civic delinquent loans which included $46.5 million being transferred to held for sale in the second quarter.

 

CAPITAL

 

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

 

   June 30,   March 31,   June 30, 
   2023   2023   2022 
PacWest Bancorp Consolidated:               
Common equity tier 1 capital ratio (1)   11.16%   9.21%   8.24%
Tier 1 capital ratio (1)   13.70%   11.15%   10.15%
Total capital ratio (1)   17.61%   14.21%   13.12%
Tier 1 leverage capital ratio (1)   7.76%   8.33%   8.52%
Risk-weighted assets (1) (in thousands)  $24,768,687   $32,507,454   $33,009,455 
Tangible common equity ratio (2)   5.24%   5.07%   5.15%
Tangible common equity ratio excluding the impact of AOCI for securities (2)   7.26%   6.73%   6.79%

 

 

(1) Capital information for June 30, 2023 is preliminary.

(2) Non-GAAP measure.          

 

Page 13 

 

 

CHANGE IN CONFERENCE CALL

 

As a result of today’s merger announcement, the previously announced PacWest Bancorp conference call scheduled for 8:00 AM PT/ 11:00 AM ET on Wednesday, July 26, 2023, to discuss the Company’s performance for the second quarter of 2023 has been cancelled. PacWest Bancorp and Banc of California, Inc. will conduct a live conference call and webcast to discuss the transaction later today at 2:30 PM PT/ 5:30 PM ET. To listen to the live call, please dial 888-317-6003 and enter 2706567 for the conference ID. The webcast, along with the related slides, will be available on both the PacWest website (www.pacwestbancorp.com) and the Banc of California, Inc. website (www.bancofcal.com). A replay of the conference call will also be available via these websites.

 

PACWEST BANCORP

 

PacWest is a bank holding company headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). Pacific Western Bank is a relationship-based community bank focused on providing business banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and lease and deposit products and services through full-service branches throughout California and in Durham, North Carolina and Denver, Colorado, and loan production offices around the country. For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.

 

Page 14 

 

 

FORWARD-LOOKING STATEMENTS

 

This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements often use words such as “anticipates,” “targets,” “expects,” “estimates,” “intends,” “plans,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of PacWest’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those expressed in them. Continued deterioration in general business, economic, and political conditions, geopolitical tensions, uncertainty in U.S. fiscal monetary policy, including the interest rate policies of the Federal Reserve Board, and volatility and disruptions in credit and capital markets could lead to a tightening of credit and an increase in credit losses, adversely affect PacWest’s revenues and the values of our assets and liabilities, increase stock price volatility, and adversely impact our ability to raise capital. In addition, PacWest and its results could be adversely affected by changes in interest rates, continued high inflation, and unemployment rates, our ability to attract and retain deposits and other sources of funding and liquidity particularly in a rising or high interest rate environment, the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks, the safety of deposits, and depositor behavior, the quality and composition of our deposits, deterioration in the credit quality of our loan portfolio or in the value of the collateral securing those loans, especially the risks associated with concentrations in real estate related loans, deterioration in the value of our investment securities as a result of rising interest rates or otherwise, our ability to successfully execute on our strategic plan and digital and innovation initiatives, the effectiveness of our risk management framework and quantitative models, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission.

 

All forward-looking statements in this communication are based on information available at the time the statement is made. We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

Page 15 

 

 

PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

 

   June 30,   March 31,   June 30, 
   2023   2023   2022 
             
   (Dollars in thousands, except per share amounts) 
ASSETS:            
Cash and due from banks  $208,300   $218,830   $197,027 
Interest-earning deposits in financial institutions   6,489,847    6,461,306    2,192,877 
Total cash and cash equivalents   6,698,147    6,680,136    2,389,904 
                
Securities available-for-sale, at estimated fair value   4,708,519    4,848,607    6,780,648 
Securities held-to-maturity, at amortized cost, net of allowance for credit losses   2,278,202    2,273,650    2,260,367 
Federal Home Loan Bank stock, at cost   17,250    147,150    33,210 
Total investment securities   7,003,971    7,269,407    9,074,225 
                
Loans held for sale   478,146    2,796,208    - 
                
Gross loans and leases held for investment   22,311,292    25,770,912    26,608,541 
Deferred fees, net   (53,082)   (98,531)   (107,404)
Total loans and leases held for investment, net of deferred fees   22,258,210    25,672,381    26,501,137 
Allowance for loan and lease losses   (219,234)   (210,055)   (188,705)
Total loans and leases held for investment, net   22,038,976    25,462,326    26,312,432 
                
Equipment leased to others under operating leases   380,022    399,972    324,233 
Premises and equipment, net   57,078    60,358    51,083 
Foreclosed assets, net   8,426    2,135    - 
Goodwill   -    -    1,405,736 
Core deposit and customer relationship intangibles, net   26,581    28,970    37,659 
Deferred tax asset, net   426,304    342,557    254,090 
Other assets   1,219,599    1,260,912    1,101,361 
Total assets  $38,337,250   $44,302,981   $40,950,723 
                
LIABILITIES:               
Noninterest-bearing deposits  $6,055,358   $7,030,759   $13,338,029 
Interest-bearing deposits   21,841,725    21,156,802    20,630,123 
Total deposits   27,897,083    28,187,561    33,968,152 
Borrowings   6,357,338    11,881,712    1,592,000 
Subordinated debt   870,378    868,815    863,756 
Accrued interest payable and other liabilities   679,256    593,416    548,412 
Total liabilities   35,804,055    41,531,504    36,972,320 
STOCKHOLDERS' EQUITY (1)   2,533,195    2,771,477    3,978,403 
Total liabilities and stockholders’ equity  $38,337,250   $44,302,981   $40,950,723 
                
Book value per common share  $16.93   $18.90   $28.93 
Tangible book value per common share (2)  $16.71   $18.66   $16.93 
Common shares outstanding   120,169,012    120,244,214    120,288,024 
                
(1) Includes net unrealized loss on:               
Securities available-for-sale, net  $(583,684)  $(537,307)  $(428,242)
Securities held to maturity  $(193,058)  $(198,753)  $(216,508)
(2) Non-GAAP measure.               

 

Page 16 

 

 

PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS)

 

   Three Months Ended   Six Months Ended 
   June 30,   March 31,   June 30,   June 30, 
   2023   2023   2022   2023   2022 
                     
   (In thousands, except per share amounts) 
Interest income:                         
Loans and leases  $408,972   $430,685   $293,286   $839,657   $561,045 
Investment securities   44,153    44,237    52,902    88,390    106,324 
Deposits in financial institutions   86,763    42,866    4,330    129,629    6,053 
Total interest income   539,888    517,788    350,518    1,057,676    673,422 
                          
Interest expense:                         
Deposits   178,789    155,892    15,362    334,681    21,570 
Borrowings   160,914    69,122    2,441    230,036    2,602 
Subordinated debt   14,109    13,502    8,790    27,611    16,608 
Total interest expense   353,812    238,516    26,593    592,328    40,780 
                          
Net interest income   186,076    279,272    323,925    465,348    632,642 
Provision for credit losses   2,000    3,000    11,500    5,000    11,500 
Net interest income after provision for credit losses   184,076    276,272    312,425    460,348    621,142 
                          
Noninterest income:                         
Service charges on deposit accounts   4,315    3,573    3,634    7,888    7,205 
Other commissions and fees   11,241    10,344    10,813    21,585    22,393 
Leased equipment income   22,387    13,857    12,335    36,244    25,429 
(Loss) gain on sale of loans and leases   (158,881)   2,962    12    (155,919)   72 
Loss on sale of securities   -    -    (1,209)   -    (1,105)
Dividends and gains (losses) on equity investments   2,658    1,098    4,097    3,756    (7,278)
Warrant (loss) income   (124)   (333)   1,615    (457)   2,244 
LOCOM HFS adjustment   (11,943)   -    -    (11,943)   - 
Other income   2,265    4,890    3,049    7,155    6,204 
Total noninterest (loss) income   (128,082)   36,391    34,346    (91,691)   55,164 
                          
Noninterest expense:                         
Compensation   82,881    88,476    102,542    171,357    194,782 
Occupancy   15,383    15,067    15,268    30,450    30,468 
Data processing   10,963    10,938    9,258    21,901    18,887 
Other professional services   9,973    6,073    6,726    16,046    12,680 
Insurance and assessments   25,635    11,717    5,632    37,352    11,122 
Intangible asset amortization   2,389    2,411    3,649    4,800    7,298 
Leased equipment depreciation   9,088    9,375    8,934    18,463    18,123 
Foreclosed assets expense (income), net   2    363    (28)   365    (3,381)
Acquisition, integration and reorganization costs   12,394    8,514    -    20,908    - 
Customer related expense   27,302    24,005    11,748    51,307    24,403 
Loan expense   5,245    6,524    7,037    11,769    12,194 
Goodwill impairment   -    1,376,736    -    1,376,736    - 
Other expense   119,182    12,804    12,879    131,986    24,495 
Total noninterest expense   320,437    1,573,003    183,645    1,893,440    351,071 
                          
(Loss) earnings before income taxes   (264,443)   (1,260,340)   163,126    (1,524,783)   325,235 
Income tax (benefit) expense   (67,029)   (64,916)   40,766    (131,945)   82,747 
Net (loss) earnings   (197,414)   (1,195,424)   122,360    (1,392,838)   242,488 
Preferred stock dividends   9,947    9,947    -    19,894    - 
Net (loss) earnings available to common stockholders  $(207,361)  $(1,205,371)  $122,360   $(1,412,732)  $242,488 
                          
Basic and diluted (loss) earnings per common share  $(1.75)  $(10.22)  $1.02   $(11.96)  $2.03 
Dividends declared and paid per common share  $0.01   $0.25   $0.25   $0.26   $0.50 

 

Page 17 

 

 

PACWEST BANCORP AND SUBSIDIARIES

AVERAGE BALANCE SHEET AND YIELD ANALYSIS

 

   Three Months Ended 
   June 30, 2023   March 31, 2023   June 30, 2022 
       Interest   Average       Interest   Average       Interest   Average 
   Average   Income/   Yield/   Average   Income/   Yield/   Average   Income/   Yield/ 
   Balance   Expense   Cost   Balance   Expense   Cost   Balance   Expense   Cost 
                                     
   (Dollars in thousands) 
Assets:                                             
Loans and leases (1)(2)(3)  $26,992,283   $408,972    6.08%  $28,583,265   $433,029    6.14%  $25,449,773   $295,154    4.65%
Investment securities (3)   7,183,986    44,153    2.47%   7,191,362    44,237    2.49%   9,488,653    54,910    2.32%
Deposits in financial institutions   6,835,075    86,763    5.09%   3,682,228    42,866    4.72%   1,984,751    4,330    0.88%
Total interest-earning assets (1)   41,011,344    539,888    5.28%   39,456,855    520,132    5.35%   36,923,177    354,394    3.85%
Other assets   2,028,985              3,311,859              3,108,714           
Total assets  $43,040,329             $42,768,714             $40,031,891           
                                             
Liabilities and Stockholders' Equity:                                             
Interest checking  $6,601,034    46,798    2.84%  $7,089,102    55,957    3.20%  $6,517,381    3,816    0.23%
Money market   6,590,615    47,008    2.86%   8,932,059    56,224    2.55%   10,553,942    8,448    0.32%
Savings   733,818    3,678    2.01%   597,287    599    0.41%   650,479    41    0.03%
Time   7,492,094    81,305    4.35%   5,123,955    43,112    3.41%   1,939,816    3,057    0.63%
Total interest-bearing deposits   21,417,561    178,789    3.35%   21,742,403    155,892    2.91%   19,661,618    15,362    0.31%
Borrowings   11,439,742    160,914    5.64%   5,289,429    69,122    5.30%   1,356,616    2,441    0.72%
Subordinated debt   869,419    14,109    6.51%   867,637    13,502    6.31%   863,653    8,790    4.08%
Total interest-bearing liabilities   33,726,722    353,812    4.21%   27,899,469    238,516    3.47%   21,881,887    26,593    0.49%
Noninterest-bearing demand deposits   5,968,625              10,233,434              13,987,398           
Other liabilities   625,610              637,124              510,238           
Total liabilities   40,320,957              38,770,027              36,379,523           
Stockholders' equity   2,719,372              3,998,687              3,652,368           
Total liabilities and stockholders' equity  $43,040,329             $42,768,714             $40,031,891           
Net interest income (1)       $186,076             $281,616             $327,801      
Net interest spread (1)             1.07%             1.88%             3.36%
Net interest margin (1)             1.82%             2.89%             3.56%
                                              
Total deposits (4)  $27,386,186   $178,789    2.62%  $31,975,837   $155,892    1.98%  $33,649,016   $15,362    0.18%

 

 

(1)Tax equivalent.
(2)Includes net loan premium amortization of $1.6 million, $2.8 million, and $5.8 million for the three months ended June 30, 2023,March 31, 2023, and June 30, 2022, respectively.
(3)Includes tax-equivalent adjustments of $0.0 million, $2.3 million, and $1.9 million for the three months ended June 30, 2023, March 31, 2023, and June 30, 2022 related to tax-exempt income on loans. Includes tax-equivalent adjustments of $0.0 million, $0.0 million, and $2.0 million for the three months ended June 30, 2023, March 31, 2023, and June 30, 2022 related to tax-exempt income on investment securities. The federal statutory tax rate utilized was 21%.
(4)Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.

 

Page 18 

 

 

PACWEST BANCORP AND SUBSIDIARIES

FIVE QUARTER BALANCE SHEET

 

   June 30,   March 31,   December 31,   September 30,   June 30, 
   2023   2023   2022   2022   2022 
                     
   (Dollars in thousands, except per share amounts) 
ASSETS:                         
Cash and due from banks  $208,300   $218,830   $212,273   $216,436   $197,027 
Interest-earning deposits in financial institutions   6,489,847    6,461,306    2,027,949    2,244,272    2,192,877 
Total cash and cash equivalents   6,698,147    6,680,136    2,240,222    2,460,708    2,389,904 
                          
Securities available-for-sale   4,708,519    4,848,607    4,843,487    5,891,328    6,780,648 
Securities held-to-maturity   2,278,202    2,273,650    2,269,135    2,264,601    2,260,367 
Federal Home Loan Bank stock   17,250    147,150    34,290    36,990    33,210 
Total investment securities   7,003,971    7,269,407    7,146,912    8,192,919    9,074,225 
                          
Loans held for sale   478,146    2,796,208    65,076    15,534    - 
                          
Gross loans and leases held for investment   22,311,292    25,770,912    28,726,016    27,775,962    26,608,541 
Deferred fees, net   (53,082)   (98,531)   (116,887)   (115,921)   (107,404)
Total loans and leases held for investment, net of deferred fees   22,258,210    25,672,381    28,609,129    27,660,041    26,501,137 
Allowance for loan and lease losses   (219,234)   (210,055)   (200,732)   (189,327)   (188,705)
Total loans and leases held for investment, net   22,038,976    25,462,326    28,408,397    27,470,714    26,312,432 
                          
Equipment leased to others under operating leases   380,022    399,972    404,245    338,691    324,233 
Premises and equipment, net   57,078    60,358    54,315    50,781    51,083 
Foreclosed assets, net   8,426    2,135    5,022    2,967    - 
Goodwill   -    -    1,376,736    1,405,736    1,405,736 
Core deposit and customer relationship intangibles, net   26,581    28,970    31,381    34,010    37,659 
Deferred tax asset, net   426,304    342,557    281,848    321,650    254,090 
Other assets   1,219,599    1,260,912    1,214,782    1,110,882    1,101,361 
Total assets  $38,337,250   $44,302,981   $41,228,936   $41,404,592   $40,950,723 
                          
LIABILITIES:                         
Noninterest-bearing deposits  $6,055,358   $7,030,759   $11,212,357   $12,775,756   $13,338,029 
Interest-bearing deposits   21,841,725    21,156,802    22,723,977    21,420,116    20,630,123 
Total deposits   27,897,083    28,187,561    33,936,334    34,195,872    33,968,152 
Borrowings   6,357,338    11,881,712    1,764,030    1,864,815    1,592,000 
Subordinated debt   870,378    868,815    867,087    863,379    863,756 
Accrued interest payable and other liabilities   679,256    593,416    710,954    604,581    548,412 
Total liabilities   35,804,055    41,531,504    37,278,405    37,528,647    36,972,320 
STOCKHOLDERS' EQUITY (1)   2,533,195    2,771,477    3,950,531    3,875,945    3,978,403 
Total liabilities and stockholders’ equity  $38,337,250   $44,302,981   $41,228,936   $41,404,592   $40,950,723 
                          
Book value per common share  $16.93   $18.90   $28.71   $28.07   $28.93 
Tangible book value per common share (2)  $16.71   $18.66   $17.00   $16.11   $16.93 
Common shares outstanding   120,169,012    120,244,214    120,222,057    120,314,023    120,288,024 
 
 
                         
(1) Includes net unrealized loss on:                    
Securities available-for-sale, net  $(583,684)  $(537,307)  $(586,450)  $(637,346)  $(428,242)
Securities held to maturity  $(193,058)  $(198,753)  $(204,453)  $(210,868)  $(216,508)
(2) Non-GAAP measure.                         

 

Page 19 

 

 

PACWEST BANCORP AND SUBSIDIARIES

FIVE QUARTER STATEMENT OF EARNINGS (LOSS)

 

   Three Months Ended 
   June 30,   March 31,   December 31,   September 30,   June 30, 
   2023   2023   2022   2022   2022 
                     
   (In thousands, except per share amounts) 
Interest income:                         
Loans and leases  $408,972   $430,685   $404,985   $346,550   $293,286 
Investment securities   44,153    44,237    50,292    53,135    52,902 
Deposits in financial institutions   86,763    42,866    17,746    10,359    4,330 
Total interest income   539,888    517,788    473,023    410,044    350,518 
                          
Interest expense:                         
Deposits   178,789    155,892    117,591    61,288    15,362 
Borrowings   160,914    69,122    19,962    3,081    2,441 
Subordinated debt   14,109    13,502    12,531    10,494    8,790 
Total interest expense   353,812    238,516    150,084    74,863    26,593 
                          
Net interest income   186,076    279,272    322,939    335,181    323,925 
Provision for credit losses   2,000    3,000    10,000    3,000    11,500 
Net interest income after provision for credit losses   184,076    276,272    312,939    332,181    312,425 
                          
Noninterest income:                         
Service charges on deposit accounts   4,315    3,573    3,178    3,608    3,634 
Other commissions and fees   11,241    10,344    11,208    10,034    10,813 
Leased equipment income   22,387    13,857    12,322    12,835    12,335 
(Loss) gain on sale of loans and leases   (158,881)   2,962    388    58    12 
(Loss) gain on sale of securities   -    -    (49,302)   86    (1,209)
Dividends and gains on equity investments   2,658    1,098    661    3,228    4,097 
Warrant (loss) income   (124)   (333)   (46)   292    1,615 
LOCOM HFS adjustment   (11,943)   -    -    -    - 
Other income   2,265    4,890    2,635    8,478    3,049 
Total noninterest (loss) income   (128,082)   36,391    (18,956)   38,619    34,346 
                          
Noninterest expense:                         
Compensation   82,881    88,476    106,124    105,933    102,542 
Occupancy   15,383    15,067    14,922    15,574    15,268 
Data processing   10,963    10,938    9,722    9,568    9,258 
Other professional services   9,973    6,073    6,924    10,674    6,726 
Insurance and assessments   25,635    11,717    7,205    7,159    5,632 
Intangible asset amortization   2,389    2,411    2,629    3,649    3,649 
Leased equipment depreciation   9,088    9,375    8,627    8,908    8,934 
Foreclosed assets expense (income), net   2    363    (108)   (248)   (28)
Acquisition, integration and reorganization costs   12,394    8,514    5,703    -    - 
Customer related expense   27,302    24,005    18,197    12,673    11,748 
Loan expense   5,245    6,524    6,150    6,228    7,037 
Goodwill impairment   -    1,376,736    29,000    -    - 
Other expense   119,182    12,804    11,737    15,500    12,879 
Total noninterest expense   320,437    1,573,003    226,832    195,618    183,645 
                          
(Loss) earnings before income taxes   (264,443)   (1,260,340)   67,151    175,182    163,126 
Income tax (benefit) expense   (67,029)   (64,916)   17,642    43,566    40,766 
Net (loss) earnings   (197,414)   (1,195,424)   49,509    131,616    122,360 
Preferred stock dividends   9,947    9,947    9,947    9,392    - 
Net (loss) earnings available to common stockholders  $(207,361)  $(1,205,371)  $39,562   $122,224   $122,360 
                          
Basic and diluted (loss) earnings per common share  $(1.75)  $(10.22)  $0.33   $1.02   $1.02 
Dividends declared and paid per common share  $0.01   $0.25   $0.25   $0.25   $0.25 

 

Page 20 

 

 

PACWEST BANCORP AND SUBSIDIARIES

FIVE QUARTER SELECTED FINANCIAL DATA

 

   At or For the Three Months Ended 
   June 30,   March 31,   December 31,   September 30,   June 30, 
   2023   2023   2022   2022   2022 
                     
   (Dollars in thousands) 
Performance Ratios:                         
Return on average assets (1)   (1.84)%   (11.34)%   0.48%   1.28%   1.23%
Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") return on average assets (1)(2)   (2.45)%   1.13%   1.02%   1.73%   1.75%
Return on average equity (1)   (29.12)%   (121.24)%   5.04%   13.02%   13.44%
Return on average tangible common equity (1)(2)   (37.62)%   14.45%   12.71%   23.93%   24.24%
Efficiency ratio   527.0%   58.2%   53.3%   51.0%   49.5%
Noninterest expense as a percentage of average assets (1)   2.99%   14.92%   2.19%   1.90%   1.84%
                          
Average Yields/Costs (1):                         
Yield on:                         
Average loans and leases (3)   6.08%   6.14%   5.73%   5.12%   4.65%
Average investment securities (3)   2.47%   2.49%   2.57%   2.45%   2.32%
Average interest-earning assets (3)   5.28%   5.35%   4.98%   4.36%   3.85%
Cost of:                         
Average interest-bearing deposits   3.35%   2.91%   2.14%   1.15%   0.31%
Average total deposits   2.62%   1.98%   1.37%   0.70%   0.18%
Average interest-bearing liabilities   4.21%   3.47%   2.45%   1.32%   0.49%
Net interest spread (3)   1.07%   1.88%   2.53%   3.04%   3.36%
Net interest margin (3)   1.82%   2.89%   3.41%   3.57%   3.56%
                          
Average Balances:                         
Assets:                         
Loans and leases, net of deferred fees  $26,992,283   $28,583,265   $28,192,953   $27,038,873   $25,449,773 
Investment securities   7,183,986    7,191,362    7,824,915    8,803,349    9,488,653 
Deposits in financial institutions   6,835,075    3,682,228    1,881,950    1,809,809    1,984,751 
Interest-earning assets   41,011,344    39,456,855    37,899,818    37,652,031    36,923,177 
Total assets   43,040,329    42,768,714    41,151,963    40,841,272    40,031,891 
Liabilities:                         
Noninterest-bearing deposits   5,968,625    10,233,434    12,325,902    13,653,177    13,987,398 
Interest-bearing deposits   21,417,561    21,742,403    21,760,402    21,214,265    19,661,618 
Total deposits   27,386,186    31,975,837    34,086,304    34,867,442    33,649,016 
Borrowings   11,439,742    5,289,429    1,675,738    505,482    1,356,616 
Subordinated debt   869,419    867,637    864,581    863,719    863,653 
Interest-bearing liabilities   33,726,722    27,899,469    24,300,721    22,583,466    21,881,887 
Stockholders' equity   2,719,372    3,998,687    3,898,800    4,011,179    3,652,368 

 

 

(1) Annualized.

(2) Non-GAAP measure.

(3) Tax equivalent.                                        

 

Page 21 

 

 

PACWEST BANCORP AND SUBSIDIARIES

FIVE QUARTER SELECTED FINANCIAL DATA

 

   At or For the Three Months Ended 
   June 30,   March 31,   December 31,   September 30,   June 30, 
   2023   2023   2022   2022   2022 
                     
   (Dollars in thousands, except per share amounts) 
Credit Quality Metrics for Loans and Leases Held for Investment:                         
Nonaccrual loans and leases  $104,886   $87,124   $103,778   $89,742   $78,527 
Nonperforming assets   113,312    89,259    108,800    92,709    78,527 
Special mention loans and leases   366,368    580,153    566,259    463,994    480,261 
Classified loans and leases   211,934    132,423    118,271    96,685    104,264 
Allowance for loan and lease losses   219,234    210,055    200,732    189,327    188,705 
Allowance for credit losses   256,805    285,626    291,803    284,398    283,776 
For the quarter:                         
Provision for credit losses   2,000    3,000    10,000    3,000    10,000 
Net charge-offs (recoveries)   30,821    9,177    2,595    2,378    (1,307)
                          
Nonaccrual loans and leases to loans and leases   0.47%   0.34%   0.36%   0.32%   0.30%
Nonperforming assets to loans and leases and foreclosed assets   0.51%   0.35%   0.38%   0.34%   0.30%
Special mention loans and leases to loans and leases   1.65%   2.26%   1.98%   1.68%   1.81%
Classified loans and leases to loans and leases   0.95%   0.52%   0.41%   0.35%   0.39%
Allowance for loan and lease losses to loans and leases   0.98%   0.82%   0.70%   0.68%   0.71%
Allowance for credit losses to loans and leases   1.15%   1.11%   1.02%   1.03%   1.07%
Allowance for credit losses to nonaccrual loans and leases   244.84%   327.84%   281.18%   316.91%   361.37%
Net charge-offs (recoveries) to average loans and leases   0.46%   0.13%   0.04%   0.03%   (0.02)%
Trailing 12 months net charge-offs (recoveries) to average loans and leases   0.17%   0.05%   0.02%   0.01%   0.00%
                          
PacWest Bancorp Consolidated:                         
Common equity tier 1 capital ratio (1)   11.16%   9.21%   8.70%   8.56%   8.24%
Tier 1 capital ratio (1)   13.70%   11.15%   10.61%   10.46%   10.15%
Total capital ratio (1)   17.61%   14.21%   13.61%   13.43%   13.12%
Tier 1 leverage capital ratio (1)   7.76%   8.33%   8.61%   8.63%   8.52%
Risk-weighted assets (1)  $24,768,687   $32,507,454   $33,030,960   $33,042,173   $33,009,455 
                          
Equity to assets ratio   6.61%   6.26%   9.58%   9.36%   9.72%
Tangible common equity ratio (2)   5.24%   5.07%   5.13%   4.85%   5.15%
Book value per common share  $16.93   $18.90   $28.71   $28.07   $28.93 
Tangible book value per common share (2)  $16.71   $18.66   $17.00   $16.11   $16.93 
                          
Pacific Western Bank:                         
Common equity tier 1 capital ratio (1)   13.48%   10.89%   10.32%   10.17%   9.78%
Tier 1 capital ratio (1)   13.48%   10.89%   10.32%   10.17%   9.78%
Total capital ratio (1)   16.07%   12.94%   12.34%   12.16%   11.77%
Tier 1 leverage capital ratio (1)   7.62%   8.14%   8.39%   8.39%   8.21%

 

 

(1) Capital information for June 30, 2023 is preliminary.

(2) Non-GAAP measure.                                        

 

Page 22 

 

 

GAAP TO NON-GAAP RECONCILIATIONS

 

This press release contains certain non-GAAP financial disclosures for: (1) Pre-provision, pre-goodwill impairment, pre-tax net revenue (“PPNR”), (2) PPNR return on average assets (3) return on average tangible common equity, (4) tangible common equity ratio, and (5) tangible book value per common share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of PPNR, return on average tangible common equity, tangible common equity ratio, and tangible book value per common share is prevalent among banking regulators, investors, and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures (or those calculated from GAAP measures) of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, (5) book value per common share, and (6) efficiency ratio.

 

The Company recorded significant non-operating charges in the three months ended June 30, 2023 and March 31, 2023 and six months ended June 30, 2023. Thus, to supplement information regarding the Company’s operational performance and to enhance investors’ overall understanding of such performance, this press release includes non-GAAP financial measures for (1) adjusted return on average tangible common equity, (2) adjusted earnings, (3) adjusted earnings per share, (4) adjusted return on average assets, and (5) adjusted efficiency ratio. These measures help the reader to compare the recent periods with the historical periods more readily. These non-GAAP financial measures should not be considered a substitute for financial measures presented in accordance with GAAP and may be different from the non-GAAP financial measures used by other companies.

 

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

 

   Three Months Ended   Six Months Ended 
PPNR and PPNR Return  June 30,   March 31,   June 30,   June 30, 
on Average Assets  2023   2023   2022   2023   2022 
                     
   (Dollars in thousands) 
Net (loss) earnings  $(197,414)  $(1,195,424)  $122,360   $(1,392,838)  $242,488 
                          
Net interest income  $186,076   $279,272   $323,925   $465,348   $632,642 
Add: Noninterest (loss) income   (128,082)   36,391    34,346    (91,691)   55,164 
Less: Noninterest expense   (320,437)   (1,573,003)   (183,645)   (1,893,440)   (351,071)
Add: Goodwill impairment   -    1,376,736    -    1,376,736    - 
Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR")  $(262,443)  $119,396   $174,626   $(143,047)  $336,735 
                          
Average assets  $43,040,329   $42,768,714   $40,031,891   $42,905,272   $39,958,008 
                          
Return on average assets (1)   (1.84)%   (11.34)%   1.23%   (6.55)%   1.22%
PPNR return on average assets (2)   (2.45)%   1.13%   1.75%   (0.67)%   1.70%

 

 

(1) Annualized net earnings divided by average assets.  

(2) Annualized PPNR divided by average assets.  

 

Page 23 

 

 

   Three Months Ended   Six Months Ended 
Return on Average  June 30,   March 31,   June 30,   June 30, 
Tangible Common Equity  2023   2023   2022   2023   2022 
                     
   (Dollars in thousands) 
Net (loss) earnings  $(197,414)  $(1,195,424)  $122,360   $(1,392,838)  $242,488 
                          
(Loss) earnings before income taxes  $(264,443)  $(1,260,340)  $163,126   $(1,524,783)  $325,235 
Add: Goodwill impairment   -    1,376,736    -    1,376,736    - 
Add: Intangible asset amortization   2,389    2,411    3,649    4,800    7,298 
Adjusted earnings before income taxes   (262,054)   118,807    166,775    (143,247)   332,533 
Adjusted income tax expense (1)   (66,300)   33,741    41,694    (45,839)   84,463 
Adjusted net earnings   (195,754)   85,066    125,081    (97,408)   248,070 
Less: Preferred stock dividends   9,947    9,947    -    19,894    - 
Adjusted net earnings available to common stockholders  $(205,701)  $75,119   $125,081   $(117,302)  $248,070 
                          
Average stockholders' equity  $2,719,372   $3,998,687   $3,652,368   $3,355,495   $3,749,386 
Less: Average intangible assets   27,824    1,391,857    1,445,333    706,072    1,447,184 
Less: Average preferred stock   498,516    498,516    137,100    498,516    68,929 
Average tangible common equity  $2,193,032   $2,108,314   $2,069,935   $2,150,907   $2,233,273 
                          
Return on average equity (2)   (29.12)%   (121.24)%   13.44%   (83.71)%   13.04%
Return on average tangible common equity (3)   (37.62)%   14.45%   24.24%   (11.00)%   22.40%

 

 

(1)Effective tax rates of 25.3% and 25.0% used for three months ended June 30, 2023 and June 30, 2022; adjusted effective tax rate of 28.4% used to normalize the effect of goodwill impairment for three months ended March 31, 2023. Adjusted effective tax rate of 32.0% used to normalize the effect of goodwill impairment for six months ended June 30, 2023; effective tax rate of 25.4% used for six months ended June 30, 2022.
(2)Annualized net (loss) earnings divided by average stockholders' equity.
(3)Annualized adjusted net earnings available to common stockholders divided by average tangible common equity.

 

Page 24 

 

 

   Three Months Ended   Six Months Ended 
Adjusted Return on Average  June 30,   March 31,   June 30,   June 30, 
Tangible Common Equity  2023   2023   2022   2023   2022 
                     
   (Dollars in thousands) 
(Loss) earnings before income taxes  $(264,443)  $(1,260,340)  $163,126   $(1,524,783)  $325,235 
Add: Goodwill impairment   -    1,376,736    -    1,376,736    - 
Add: Intangible asset amortization   2,389    2,411    3,649    4,800    7,298 
Add: Acquisition, integration, and reorganization costs   12,394    8,514    -    20,908    - 
Add: Loan fair value loss adjustments   170,971    -    -    170,971    - 
Add: Unfunded commitments fair value loss adjustments   106,767    -    -    106,767    - 
Add: Civic loan sale charge-offs   22,446    -    -    22,446    - 
Adjusted earnings before income taxes   50,524    127,321    166,775    177,845    332,533 
Adjusted income tax expense (1)   12,783    36,159    41,694    56,910    84,463 
Adjusted net earnings   37,741    91,162    125,081    120,935    248,070 
Less: Preferred stock dividends   9,947    9,947    -    19,894    - 
Adjusted net earnings available to common stockholders  $27,794   $81,215   $125,081   $101,041   $248,070 
                          
Average stockholders' equity  $2,719,372   $3,998,687   $3,652,368   $3,355,495   $3,749,386 
Less: Average intangible assets   27,824    1,391,857    1,445,333    706,072    1,447,184 
Less: Average preferred stock   498,516    498,516    137,100    498,516    68,929 
Average tangible common equity  $2,193,032   $2,108,314   $2,069,935   $2,150,907   $2,233,273 
                          
Adjusted return on average tangible common equity (2)   5.08%   15.62%   24.24%   9.47%   22.40%

 

 

(1)Effective tax rates of 25.3% and 25.0% used for three months ended June 30, 2023 and June 30, 2022; adjusted effective tax rate of 28.4% used to normalize the effect of goodwill impairment for three months ended March 31, 2023. Adjusted effective tax rate of 32.0% used to normalize the effect of goodwill impairment for six months ended June 30, 2023; effective tax rate of 25.4% used for six months ended June 30, 2022.
(2)Annualized adjusted net earnings available to common stockholders divided by average tangible common equity.

 

Page 25 

 

 

Tangible Common Equity Ratio/                    
Tangible Book Value Per  June 30,   March 31,   December 31,   September 30,   June 30, 
Common Share  2023   2023   2022   2022   2022 
                     
   (Dollars in thousands, except per share amounts)  
Stockholders' equity  $2,533,195   $2,771,477   $3,950,531   $3,875,945   $3,978,403 
Less: Preferred stock   498,516    498,516    498,516    498,516    498,516 
Total common equity   2,034,679    2,272,961    3,452,015    3,377,429    3,479,887 
Less: Intangible assets   26,581    28,970    1,408,117    1,439,746    1,443,395 
Tangible common equity   2,008,098    2,243,991    2,043,898    1,937,683    2,036,492 
Add: Accumulated other comprehensive loss   773,803    736,060    790,903    848,214    644,750 
Adjusted tangible common equity  $2,781,901   $2,980,051   $2,834,801   $2,785,897   $2,681,242 
                          
Total assets  $38,337,250   $44,302,981   $41,228,936   $41,404,592   $40,950,723 
Less: Intangible assets   26,581    28,970    1,408,117    1,439,746    1,443,395 
Tangible assets  $38,310,669   $44,274,011   $39,820,819   $39,964,846   $39,507,328 
                          
Equity to assets ratio   6.61%   6.26%   9.58%   9.36%   9.72%
Tangible common equity ratio (1)   5.24%   5.07%   5.13%   4.85%   5.15%
Tangible common equity ratio, excluding AOCI (2)   7.26%   6.73%   7.12%   6.97%   6.79%
Book value per common share (3)  $16.93   $18.90   $28.71   $28.07   $28.93 
Tangible book value per common share (4)  $16.71   $18.66   $17.00   $16.11   $16.93 
Tangible book value per common share, excluding AOCI (5)  $23.15   $24.78   $23.58   $23.16   $22.29 
Common shares outstanding   120,169,012    120,244,214    120,222,057    120,314,023    120,288,024 

 

 

(1)Tangible common equity divided by tangible assets.
(2)Adjusted tangible common equity divided by tangible assets.
(3)Total common equity divided by common shares outstanding.
(4)Tangible common equity divided by common shares outstanding.
(5)Adjusted tangible common equity divided by common shares outstanding.

 

Page 26 

 

 

   Three Months Ended   Six Months Ended 
Adjusted Earnings, Earnings Per  June 30,   March 31,   June 30,   June 30, 
Share, and Return on Average Assets  2023   2023   2022   2023   2022 
                     
   (In thousands, except per share amounts) 
(Loss) earnings before income taxes  $(264,443)  $(1,260,340)  $163,126   $(1,524,783)  $325,235 
Add: Goodwill impairment   -    1,376,736    -    1,376,736    - 
Add: Acquisition, integration, and reorganization costs   12,394    8,514    -    20,908    - 
Add: Loan fair value loss adjustments   170,971    -    -    170,971    - 
Add: Unfunded commitments fair value loss adjustments   106,767    -    -    106,767    - 
Add: Civic loan sale charge-offs   22,446    -    -    22,446    - 
Adjusted earnings before income taxes   48,135    124,910    163,126    173,045    325,235 
Adjusted income tax expense (1)   12,178    35,474    40,766    55,374    82,747 
Adjusted earnings   35,957    89,436    122,360    117,671    242,488 
Less: Preferred stock dividends   (9,947)   (9,947)   -    (19,894)   - 
Adjusted earnings available to common stockholders   26,010    79,489    122,360    97,777    242,488 
Less: Earnings allocated to unvested restricted stock   (313)   (1,210)   (2,351)   (1,372)   (4,389)
Adjusted earnings allocated to common shares  $25,697   $78,279   $120,009   $96,405   $238,099 
                          
Weighted average shares outstanding   118,255    117,930    117,562    118,094    117,456 
                          
Adjusted diluted earnings per common share (2)  $0.22   $0.66   $1.02   $0.82   $2.03 
                          
Average assets  $43,040,329   $42,768,714   $40,031,891   $42,905,272   $39,958,008 
                          
Adjusted return on average assets (3)   0.34%   0.85%   1.23%   0.55%   1.22%

 

 

(1)Effective tax rates of 25.3% and 25.0% used for three months ended June 30, 2023 and June 30, 2022; adjusted effective tax rate of 28.4% used to normalize the effect of goodwill impairment for three months ended March 31, 2023. Adjusted effective tax rate of 32.0% used to normalize the effect of goodwill impairment for six months ended June 30, 2023; effective tax rate of 25.4% used for six months ended June 30, 2022.
(2)Adjusted earnings allocated to common shares divided by weighted average shares outstanding.
(3)Annualized adjusted earnings divided by average assets.

 

Page 27 

 

 

   Three Months Ended   Six Months Ended 
   June 30,   March 31,   June 30,   June 30, 
Adjusted Efficiency Ratio  2023   2023   2022   2023   2022 
                     
   (Dollars in thousands) 
Noninterest expense  $320,437   $1,573,003   $183,645   $1,893,440   $351,071 
Less: Intangible asset amortization   2,389    2,411    3,649    4,800    7,298 
Less: Foreclosed assets expense (income), net   2    363    (28)   365    (3,381)
Less: Goodwill impairment   -    1,376,736    -    1,376,736    - 
Less: Acquisition, integration, and reorganization costs   12,394    8,514    -    20,908    - 
Noninterest expense used for efficiency ratio   305,652    184,979    180,024    490,631    347,154 
Less: Unfunded commitments fair value loss adjustments   106,767    -    -    106,767    - 
Noninterest expense used for adjusted efficiency ratio  $198,885   $184,979   $180,024   $383,864   $347,154 
                          
Net interest income (tax equivalent)  $186,076   $281,616   $327,801   $467,692   $640,452 
Noninterest income (loss)   (128,082)   36,391    34,346    (91,691)   55,164 
Net revenues   57,994    318,007    362,147    376,001    695,616 
Less: Gain (loss) on sale of securities   -    -    (1,209)   -    (1,105)
Net revenues used for efficiency ratio   57,994    318,007    363,356    376,001    696,721 
Add: Loan fair value loss adjustments   170,971    -    -    170,971    - 
Net revenues used for adjusted efficiency ratio  $228,965   $318,007   $363,356   $546,972   $696,721 
                          
Efficiency ratio (1)   527.0%   58.2%   49.5%   130.5%   49.8%
Adusted efficiency ratio (2)   86.9%   58.2%   49.5%   70.2%   49.8%

 

 

(1)Noninterest expense used for efficiency ratio divided by net revenues used for efficiency ratio.
(2)Noninterest expense used for adjusted efficiency ratio divided by net revenues used for adjusted efficiency ratio.

 

Non-GAAP Adjustment   Location on Income Statement
Loan fair value loss adjustments   (Loss) gain on sale of loans and leases/LOCOM HFS adjustment
     
Civic loan sale charge-offs   Provision for credit losses
     
Acquisition, integration, and reorganization costs   Acquisition, integration, and reorganization costs
     
Unfunded commitments fair value loss adjustments   Other expense

 

CONTACTS

 

Kevin L. Thompson

Executive Vice President, Chief Financial Officer

303.802.8934

William J. Black

Executive Vice President,

Strategy and Corporate Development

919.597.7466

 

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Cover
Jul. 25, 2023
Document Information [Line Items]  
Document Type 8-K
Amendment Flag false
Document Period End Date Jul. 25, 2023
Entity File Number 001-36408
Entity Registrant Name PacWest Bancorp
Entity Central Index Key 0001102112
Entity Tax Identification Number 33-0885320
Entity Incorporation, State or Country Code DE
Entity Address, Address Line One 9701 Wilshire Blvd.
Entity Address, Address Line Two Suite 700
Entity Address, City or Town Beverly Hills
Entity Address, State or Province CA
Entity Address, Postal Zip Code 90212
City Area Code 310
Local Phone Number 887-8500
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Common Stock [Member]  
Document Information [Line Items]  
Title of 12(b) Security Common Stock, par value $0.01 per share
Trading Symbol PACW
Security Exchange Name NASDAQ
Depositary Shares, Each Representing a 1/40th Interest in a Share of 7.75% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A  
Document Information [Line Items]  
Title of 12(b) Security Depositary Shares, each representing a 1/40th interest in a share of 7.75% fixed rate reset non-cumulative perpetual preferred stock, Series A
Trading Symbol PACWP
Security Exchange Name NASDAQ
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