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Highlights

• Net Earnings of $110.0 Million, or $0.92 Per Diluted Share
• Loan and Lease Production of $1.2 Billion; $263 Million of Net Loan Growth
• Core Deposits Growth of $854 million; Represent 84% of Total Deposits
• Net Charge-offs to Average Loans of 10 basis points in Third Quarter; 12 basis points Year-To-Date

LOS ANGELES, Oct. 16, 2019 (GLOBE NEWSWIRE) — PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the third quarter of 2019 of $110.0 million, or $0.92 per diluted share, compared to net earnings for the second quarter of 2019 of $128.1 million, or $1.07 per diluted share. The decrease in net earnings in the third quarter of 2019 was due primarily to a $22.2 million pre-tax gain on the sale of securities in the second quarter of 2019 that contributed $0.13 per diluted share.

Matt Wagner, President and CEO, commented, “We had a solid quarter highlighted by very strong core deposits growth, another quarter of consistent loan production from all of our business groups, and the continuation of our trend of lower credit costs. Our third quarter of 2019 results produced a return on assets of 1.65% and a return on tangible equity of 19.01%.”

Mr. Wagner continued, “In a very competitive market, we achieved our largest core deposit growth quarter ever with growth of $854 million in the third quarter. Core deposits generation, with an emphasis on noninterest-bearing deposits, remains a priority in this declining-rate environment. We achieved solid loan and lease production of $1.2 billion in the third quarter bringing our net loan growth to $778 million, or 6% annualized, for the first nine months of 2019.”

FINANCIAL HIGHLIGHTS

	At or For the												At or For the
	Three Months Ended												Nine Months Ended
		September 30,				June 30,				Increase			September 30,									Increase
Financial Highlights		2019				2019				(Decrease)				2019				2018				(Decrease)
	(Dollars in thousands, except per share data)
Net earnings	$	110,026			$	128,125			$	(18,099	)		$	350,755			$	350,298			$	457
Diluted earnings per share	$	0.92			$	1.07			$	(0.15	)		$	2.91			$	2.79			$	0.12
Return on average assets	1.65		%		1.99		%		(0.34		)		1.80		%		1.94		%		(0.14		)
Return on average
tangible equity (1)	19.01		%		23.15		%		(4.14		)		20.90		%		21.22		%		(0.32		)
Net interest margin (“NIM”)
(tax equivalent)	4.46		%		4.72		%		(0.26		)		4.62		%		5.09		%		(0.47		)
Yield on average loans and
leases (tax equivalent)	5.91		%		6.26		%		(0.35		)		6.11		%		6.20		%		(0.09		)
Cost of average total
deposits	0.83		%		0.81		%		0.02				0.79		%		0.38		%		0.41
Efficiency ratio	42.3		%		41.6		%		0.7				42.1		%		40.8		%		1.3
Total assets	$	26,724,627			$	26,344,414			$	380,213			$	26,724,627			$	24,782,126			$	1,942,501
Loans and leases held
for investment,
net of deferred fees	$	18,735,543			$	18,472,852			$	262,691			$	18,735,543			$	17,230,146			$	1,505,397
Noninterest-bearing
demand deposits	$	7,441,185			$	7,299,213			$	141,972			$	7,441,185			$	7,834,480			$	(393,295	)
Core deposits	$	16,471,264			$	15,617,488			$	853,776			$	16,471,264			$	15,512,742			$	958,522
Total deposits	$	19,733,203			$	18,805,756			$	927,447			$	19,733,203			$	17,879,543			$	1,853,660
As percentage of total
deposits:
Noninterest-bearing
demand deposits	38		%		39		%		(1		)		38		%		44		%		(6		)
Core deposits	84		%		83		%		1				84		%		87		%		(3		)
Equity to assets ratio	18.41		%		18.42		%		(0.01		)		18.41		%		19.13		%		(0.72		)
Tangible common equity
ratio (1)	9.65		%		9.50		%		0.15				9.65		%		9.61		%		0.04
Book value per share	$	41.06			$	40.49			$	0.57			$	41.06			$	38.46			$	2.60
Tangible book value per
share (1)	$	19.43			$	18.83			$	0.60			$	19.43			$	17.28			$	2.15
(1) Non-GAAP measure.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income decreased by $8.7 million to $252.2 million for the third quarter of 2019 compared to $260.9 million for the second quarter of 2019 due mainly to a lower yield on average loans and leases, offset partially by a higher balance of average loans and leases and one more day in the third quarter of 2019. The tax equivalent yield on average loans and leases was 5.91% for the third quarter of 2019 compared to 6.26% for the second quarter of 2019. The decrease in the yield on average loans and leases was due principally to the repricing of variable-rate loans causing lower coupon interest in addition to lower loan prepayment fees in the third quarter compared to the second quarter. The prepayment fees added five basis points to the third quarter loan and lease yield and 14 basis points to the second quarter loan and lease yield.

The tax equivalent NIM was 4.46% for the third quarter of 2019 compared to 4.72% for the second quarter of 2019. The decrease in the NIM was due mainly to lower coupon interest, lower loan prepayment fees, and lower loan fee income.

The cost of average total deposits increased to 0.83% for the third quarter of 2019 from 0.81% for the second quarter of 2019 due to a higher average balance of core interest-bearing deposits combined with a lower average balance of noninterest-bearing deposits. The cost of average interest-bearing deposits declined by one basis point in the third quarter and the cost of average total deposits for the month of September was 0.80%, reflecting actions taken to reduce certain deposit rates in light of the fed funds target rate cuts during the third quarter.

Provision for Credit Losses

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

	Three Months Ended
	September 30,				June 30,				Increase
Provision for Credit Losses	2019				2019				(Decrease)
					(In thousands)
Addition to allowance for loan and lease losses	$	8,000			$	10,000			$	(2,000	)
Reduction to reserve for unfunded loan commitments	(1,000		)		(2,000		)		1,000
Total provision for credit losses	$	7,000			$	8,000			$	(1,000	)

Noninterest Income

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

	Three Months Ended
	September 30,			June 30,				Increase
Noninterest Income	2019			2019				(Decrease)
				(In thousands)
Service charges on deposit accounts	$	3,525		$	3,771			$	(246	)
Other commissions and fees	10,855			11,590				(735		)
Leased equipment income	9,615			9,182				433
Gain on sale of loans and leases	765			326				439
Gain on sale of securities	908			22,192				(21,284		)
Other income:
Dividends and gains (losses) on equity investments	14			(83		)		97
Warrant income	3,936			1,214				2,722
Other	3,811			2,701				1,110
Total noninterest income	$	33,429		$	50,893			$	(17,464	)

Noninterest income decreased by $17.5 million to $33.4 million for the third quarter of 2019 compared to $50.9 million for the second quarter of 2019 due primarily to a $21.3 million decrease in the gain on sale of securities attributable to a $0.9 million net gain on sales of $143 million in the third quarter of 2019 compared to a $22.2 million net gain on sales of $980 million in the second quarter of 2019. We re-positioned a portion of our securities portfolio in the second quarter to shorten the duration of the portfolio and to enhance liquidity. Partially offsetting the decrease in the gain on sale of securities was a $2.7 million increase in warrant income and a $1.1 million increase in other income for the third quarter of 2019. The increase in warrant income was due to higher gains resulting from exercised warrants. The increase in other income was mainly due to higher gains from lease terminations.

Noninterest Expense

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

	Three Months Ended
	September 30,			June 30,				Increase
Noninterest Expense	2019			2019				(Decrease)
				(In thousands)
Compensation	$	71,424		$	68,956			$	2,468
Occupancy	14,089			14,457				(368		)
Data processing	7,044			6,817				227
Other professional services	4,400			4,629				(229		)
Insurance and assessments	4,100			4,098				2
Intangible asset amortization	4,833			4,870				(37		)
Leased equipment depreciation	5,951			5,558				393
Foreclosed assets expense (income), net	8			(146		)		154
Loan expense	3,628			3,451				177
Other	11,332			12,737				(1,405		)
Total noninterest expense	$	126,809		$	125,427			$	1,382

 

Noninterest expense increased by $1.4 million to $126.8 million for the third quarter of 2019 compared to $125.4 million for the second quarter of 2019 attributable primarily to a $2.5 million increase in compensation expense, offset partially by a $1.4 million decrease in other expense. Compensation expense increased due mainly to higher incentives expense and higher stock compensation expense, partially offset by lower payroll taxes and benefits expense. Other expense decreased primarily due to lower business development expense and a loss on the early termination of an office lease in the second quarter.

Income Taxes

The overall effective income tax rate was 27.5% for the third quarter of 2019 and 28.2% for the second quarter of 2019. The effective tax rate for the full year 2019 is estimated to be in the range of 27-28%.

BALANCE SHEET HIGHLIGHTS

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								Nine Months Ended
Roll Forward of Loans and Leases Held	September 30,				June 30,				September 30,
for Investment, Net of Deferred Fees (1)	2019				2019				2019
					(Dollars in thousands)
Balance, beginning of period	$	18,472,852			$	18,307,697			$	17,957,713
Additions:
Production	1,230,817				1,436,299				3,841,954
Disbursements	1,288,111				1,293,747				3,774,830
Total production and disbursements	2,518,928				2,730,046				7,616,784
Reductions:
Payoffs	(1,390,883		)		(1,529,213		)		(3,853,396		)
Paydowns	(837,551		)		(979,987		)		(2,856,502		)
Total payoffs and paydowns	(2,228,434		)		(2,509,200		)		(6,709,898		)
Sales	(21,302		)		(38,054		)		(76,292		)
Transfers to foreclosed assets	–				–				(37		)
Charge-offs	(6,501		)		(17,637		)		(27,603		)
Transfers to loans held for sale	–				–				(25,124		)
Total reductions	(2,256,237		)		(2,564,891		)		(6,838,954		)
Net increase	262,691				165,155				777,830
Balance, end of period	$	18,735,543			$	18,472,852			$	18,735,543
Weighted average rate on production (2)	5.45		%		5.15		%		5.21		%
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.
(2) The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes amortized fees. Amortized fees added approximately 30 basis points to loan yields in 2019 and 31 basis points to loan yields in 2018.

Loans and leases held for investment, net of deferred fees, increased by $262.7 million, or 6% annualized, in the third quarter of 2019 to $18.7 billion at September 30, 2019. The net loan growth in the third quarter was primarily from the asset-based loan portfolio class and residential real estate construction loan portfolio class.

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:

	September 30, 2019					June 30, 2019					September 30, 2018
			% of					% of					% of
Loan and Lease Portfolio	Amount		Total			Amount		Total			Amount		Total
						(In thousands)
Real estate mortgage:
Commercial	$	4,300,566	23	%		$	4,435,274	24	%		$	4,932,823	28	%
Income producing and other
residential	3,596,358		19	%		3,640,752		20	%		2,745,837		16	%
Total real estate mortgage	7,896,924		42	%		8,076,026		44	%		7,678,660		44	%
Real estate construction and land:
Commercial	1,009,362		6	%		972,891		5	%		854,346		5	%
Residential	1,542,112		8	%		1,403,239		8	%		1,146,611		7	%
Total real estate construction
and land	2,551,474		14	%		2,376,130		13	%		2,000,957		12	%
Total real estate	10,448,398		56	%		10,452,156		57	%		9,679,617		56	%
Commercial:
Asset-based	3,810,741		20	%		3,606,007		19	%		3,222,311		19	%
Venture capital	2,209,649		12	%		2,194,743		12	%		2,031,895		12	%
Other commercial	1,858,167		10	%		1,773,564		10	%		1,897,852		11	%
Total commercial	7,878,557		42	%		7,574,314		41	%		7,152,058		42	%
Consumer	408,588		2	%		446,382		2	%		398,471		2	%
Total loans and leases held for
investment, net of deferred fees	$	18,735,543	100	%		$	18,472,852	100	%		$	17,230,146	100	%
Total unfunded loan commitments	$	7,790,796				$	7,610,899				$	7,055,833

Allowance for Credit Losses

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

	Three Months Ended September 30, 2019
	Allowance for				Reserve for				Total
Allowance for Credit	Loan and				Unfunded Loan				Allowance for
Losses Rollforward	Lease Losses				Commitments				Credit Losses
					(In thousands)
Beginning balance	$	135,037			$	34,861			$	169,898
Charge-offs	(6,501		)		–				(6,501		)
Recoveries	2,016				–				2,016
Net charge-offs	(4,485		)		–				(4,485		)
Provision	8,000				(1,000		)		7,000
Ending balance	$	138,552			$	33,861			$	172,413

	Three Months Ended June 30, 2019
	Allowance for				Reserve for				Total
Allowance for Credit	Loan and				Unfunded Loan				Allowance for
Losses Rollforward	Lease Losses				Commitments				Credit Losses
					(In thousands)
Beginning balance	$	136,281			$	36,861			$	173,142
Charge-offs	(17,637		)		–				(17,637		)
Recoveries	6,393				–				6,393
Net charge-offs	(11,244		)		–				(11,244		)
Provision	10,000				(2,000		)		8,000
Ending balance	$	135,037			$	34,861			$	169,898

The allowance for credit losses as a percentage of loans and leases held for investment was 0.92% at both September 30, 2019 and June 30, 2019.

Gross charge-offs for the third quarter of 2019 were $6.5 million and included $4.4 million for venture capital loans and $1.7 million for other commercial loans compared to gross charge-offs for the second quarter of 2019 of $17.6 million that included $11.8 million for a single asset-based loan, $3.7 million for other commercial loans, and $1.5 million for venture capital loans.

Recoveries for the third quarter of 2019 were $2.0 million and included $1.2 million for other commercial loans and $0.4 million for venture capital loans compared to recoveries for the second quarter of 2019 of $6.4 million that included $4.8 million for venture capital loans and $1.0 million for other commercial loans.

For the third quarter of 2019 and second quarter of 2019, annualized net charge-offs to average loans and leases were 0.10% and 0.25%.

Deposits and Client Investment Funds

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

	September 30, 2019					June 30, 2019					September 30, 2018
			% of					% of					% of
Deposit Composition	Amount		Total			Amount		Total			Amount		Total
						(Dollars in thousands)
Noninterest-bearing demand	$	7,441,185	38	%		$	7,299,213	39	%		$	7,834,480	44	%
Interest checking	3,645,660		18	%		3,220,353		17	%		2,277,537		13	%
Money market	4,870,344		25	%		4,578,083		24	%		4,782,724		27	%
Savings	514,075		3	%		519,839		3	%		618,001		3	%
Total core deposits	16,471,264		84	%		15,617,488		83	%		15,512,742		87	%
Non-core non-maturity deposits	479,732		2	%		436,833		2	%		483,528		3	%
Total non-maturity deposits	16,950,996		86	%		16,054,321		85	%		15,996,270		90	%
Time deposits $250,000 and under	2,282,976		12	%		2,284,023		12	%		1,509,214		8	%
Time deposits over $250,000	499,231		2	%		467,412		3	%		374,059		2	%
Total time deposits	2,782,207		14	%		2,751,435		15	%		1,883,273		10	%
Total deposits	$	19,733,203	100	%		$	18,805,756	100	%		$	17,879,543	100	%

At September 30, 2019, core deposits totaled $16.5 billion, or 84% of total deposits, including $7.4 billion of noninterest-bearing demand deposits, or 38% of total deposits. The $854 million increase in core deposits for the third quarter of 2019 included strong growth in both our Venture Banking and Community Banking groups.

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds at September 30, 2019 were $1.8 billion, of which $1.5 billion was managed by PWAM.

CREDIT QUALITY

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

	September 30,				June 30,				Increase
Credit Quality Metrics	2019				2019				(Decrease)
					(Dollars in thousands)
NPAs and Performing TDRs:
Nonaccrual loans and leases held for investment (1)	$	99,113			$	81,265			$	17,848
Accruing loans contractually past due 90 days or more	–				–				–
Foreclosed assets, net	1,366				1,472				(106		)
Total nonperforming assets (“NPAs”)	$	100,479			$	82,737			$	17,742
Nonaccrual loans and leases held for investment
to loans and leases held for investment	0.53		%		0.44		%
Nonperforming assets to loans and leases
held for investment and foreclosed assets	0.54		%		0.45		%
Nonaccrual loans and leases held for investment (1)	$	99,113			$	81,265			$	17,848
Performing TDRs held for investment	16,329				16,464				(135		)
Total impaired loans and leases	$	115,442			$	97,729			$	17,713
Loan and Lease Credit Risk Ratings:
Pass	$	18,279,011			$	18,042,569			$	236,442
Special mention	267,925				239,304				28,621
Classified	188,607				190,979				(2,372		)
Total loans and leases held for investment,
net of deferred fees	$	18,735,543			$	18,472,852			$	262,691
Classified loans and leases held for investment
to loans and leases held for investment	1.01		%		1.03		%
Allowance for Credit Losses:
Allowance for credit losses	$	172,413			$	169,898			$	2,515
Provision for credit losses (for the quarter)	$	7,000			$	8,000			$	(1,000	)
Net charge-offs (for the quarter)	$	4,485			$	11,244			$	(6,759	)
Net charge-offs to average loans and leases
(for the quarter)	0.10		%		0.25		%
Allowance for credit losses to loans and leases
held for investment	0.92		%		0.92		%
Allowance for credit losses to nonaccrual loans
and leases held for investment	174.0		%		209.1		%
(1) Nonaccrual loans include guaranteed amounts of $15.4 million at September 30, 2019 and $13.0 million at June 30, 2019.

Nonaccrual, classified, and special mention loans and leases fluctuate from period to period as a result of loan repayments and our ongoing active portfolio monitoring.

During the third quarter of 2019, nonaccrual loans and leases increased by $17.8 million, while classified loans and leases decreased by $2.4 million and special mention loans and leases increased by $28.6 million. The increase in nonaccrual loans was primarily attributable to one previously classified $14.9 million security monitoring commercial loan. The increase in special mention loans and leases was due primarily to the downgrade of two security monitoring commercial loans totaling $49 million, partially offset by a net decrease from other activity.

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:

	Nonaccrual Loans and Leases										Accruing and
	September 30, 2019					June 30, 2019					30-89 Days Past Due
			% of					% of			September 30,			June 30,
			Loan					Loan			2019			2019
	Amount		Category			Amount		Category			Amount			Amount
						(Dollars in thousands)
Real estate mortgage:
Commercial	$	19,515	0.5	%		$	17,012	0.4	%		$	–		$	3,948
Income producing and other
residential	2,868		0.1	%		2,883		0.1	%		3,750			3,262
Total real estate mortgage	22,383		0.3	%		19,895		0.2	%		3,750			7,210
Real estate construction and land:
Commercial	377		0.0	%		390		0.0	%		–			–
Residential	–		0.0	%		–		0.0	%		2,622			4,672
Total real estate
construction and land	377		0.0	%		390		0.0	%		2,622			4,672
Commercial:
Asset-based	33,015		0.9	%		32,236		0.9	%		48			12,382
Venture capital	20,131		0.9	%		22,501		1.0	%		–			–
Other commercial	22,554		1.2	%		5,799		0.3	%		4,068			439
Total commercial	75,700		1.0	%		60,536		0.8	%		4,116			12,821
Consumer	653		0.2	%		444		0.1	%		795			964
Total held for investment	$	99,113	0.5	%		$	81,265	0.4	%		$	11,283		$	25,667

STOCK REPURCHASE PROGRAM

During the third quarter of 2019, there were no stock repurchases. At September 30, 2019, the remaining amount that could be used to repurchase shares under the $225 million Stock Repurchase Program was $124.7 million.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $26 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 full-service branches located throughout the state of California and one branch in Durham, North Carolina. Our Community Banking group provides lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices. We offer additional products and services through our National Lending and Venture Banking groups. National Lending provides asset-based, equipment, real estate and security monitoring cash flow loans and treasury management services to established middle-market businesses on a national basis. Venture Banking offers a comprehensive suite of financial services focused on entrepreneurial businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States. For more information about PacWest Bancorp, visit www.pacwestbancorp.com, or to learn more about Pacific Western Bank, visit www.pacwest.com.

FORWARD LOOKING STATEMENTS

This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on information available at the time of this communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those set forth in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the Securities and Exchange Commission.

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

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
	September 30,				June 30,				December 31,
	2019				2019				2018
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	252,596			$	185,075			$	175,830
Interest-earning deposits in financial institutions	483,405				422,663				209,937
Total cash and cash equivalents	736,001				607,738				385,767
Securities available-for-sale, at estimated fair value	3,817,348				3,807,244				4,009,431
Federal Home Loan Bank stock, at cost	26,865				43,146				32,103
Total investment securities	3,844,213				3,850,390				4,041,534
Loans held for sale	–				–				–
Gross loans and leases held for investment	18,796,011				18,532,740				18,026,365
Deferred fees, net	(60,468		)		(59,888		)		(68,652		)
Total loans and leases held for investment,
net of deferred fees	18,735,543				18,472,852				17,957,713
Allowance for loan and lease losses	(138,552		)		(135,037		)		(132,472		)
Total loans and leases held for investment, net	18,596,991				18,337,815				17,825,241
Equipment leased to others under operating leases	295,854				300,668				292,677
Premises and equipment, net	37,926				38,162				34,661
Foreclosed assets, net	1,366				1,472				5,299
Deferred tax asset, net	–				–				17,489
Goodwill	2,548,670				2,548,670				2,548,670
Core deposit and customer relationship intangibles, net	42,547				47,380				57,120
Other assets	621,059				612,119				522,896
Total assets	$	26,724,627			$	26,344,414			$	25,731,354
LIABILITIES:
Noninterest-bearing deposits	$	7,441,185			$	7,299,213			$	7,888,915
Interest-bearing deposits	12,292,018				11,506,543				10,981,586
Total deposits	19,733,203				18,805,756				18,870,501
Borrowings	1,253,031				1,913,059				1,371,114
Subordinated debentures	456,145				456,112				453,846
Accrued interest payable and other liabilities	362,140				317,477				210,305
Total liabilities	21,804,519				21,492,404				20,905,766
STOCKHOLDERS’ EQUITY (1)	4,920,108				4,852,010				4,825,588
Total liabilities and stockholders’ equity	$	26,724,627			$	26,344,414			$	25,731,354
Book value per share	$	41.06			$	40.49			$	39.17
Tangible book value per share (2)	$	19.43			$	18.83			$	18.02
Shares outstanding	119,831,192				119,829,104				123,189,833
(1) Includes net unrealized gain (loss) on securities
available-for-sale, net	$	95,887			$	73,066			$	(6,075	)
(2) Non-GAAP measure.

 

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
	Three Months Ended											Nine Months Ended
	September 30,			June 30,				September 30,				September 30,
	2019			2019				2018				2019				2018
	(Dollars in thousands, except per share data)
Interest income:
Loans and leases	$	275,978		$	284,236			$	264,062			$	834,443			$	775,447
Investment securities	28,806			28,948				28,061				87,434				81,929
Deposits in financial institutions	2,424			1,349				519				4,423				1,555
Total interest income	307,208			314,533				292,642				926,300				858,931
Interest expense:
Deposits	40,703			38,720				21,121				113,658				51,306
Borrowings	6,852			7,210				3,814				21,772				7,383
Subordinated debentures	7,417			7,705				7,390				22,860				21,093
Total interest expense	54,972			53,635				32,325				158,290				79,782
Net interest income	252,236			260,898				260,317				768,010				779,149
Provision for credit losses	7,000			8,000				11,500				19,000				33,000
Net interest income after
provision for credit losses	245,236			252,898				248,817				749,010				746,149
Noninterest income:
Service charges on deposit accounts	3,525			3,771				3,979				11,026				12,418
Other commissions and fees	10,855			11,590				12,397				33,453				34,429
Leased equipment income	9,615			9,182				9,120				28,079				28,497
Gain on sale of loans and leases	765			326				–				1,091				4,675
Gain on sale of securities	908			22,192				826				25,261				7,390
Other income	7,761			3,832				10,590				16,476				27,700
Total noninterest income	33,429			50,893				36,912				115,386				115,109
Noninterest expense:
Compensation	71,424			68,956				72,333				211,225				213,269
Occupancy	14,089			14,457				13,069				42,866				39,867
Data processing	7,044			6,817				6,740				20,786				20,295
Other professional services	4,400			4,629				6,058				13,542				15,754
Insurance and assessments	4,100			4,098				5,446				12,236				16,503
Intangible asset amortization	4,833			4,870				5,587				14,573				17,520
Leased equipment depreciation	5,951			5,558				5,001				17,160				15,613
Foreclosed assets expense (income), net	8			(146		)		(257		)		(109		)		(440		)
Acquisition, integration and
reorganization costs	–			–				800				618				800
Loan expense	3,628			3,451				2,249				9,964				7,578
Other expense	11,332			12,737				11,127				35,662				35,238
Total noninterest expense	126,809			125,427				128,153				378,523				381,997
Earnings before income taxes	151,856			178,364				157,576				485,873				479,261
Income tax expense	41,830			50,239				41,289				135,118				128,963
Net earnings	$	110,026		$	128,125			$	116,287			$	350,755			$	350,298
Basic and diluted earnings per share	$	0.92		$	1.07			$	0.94			$	2.91			$	2.79
Dividends declared and paid per share	$	0.60		$	0.60			$	0.60			$	1.80			$	1.70



PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS
	Three Months Ended												Nine Months Ended
	September 30,				June 30,				September 30,				September 30,
	2019				2019				2018				2019				2018
	(In thousands, except per share data)
Basic Earnings Per Share:
Net earnings	$	110,026			$	128,125			$	116,287			$	350,755			$	350,298
Less: earnings allocated to unvested
restricted stock (1)	(1,369		)		(1,190		)		(1,428		)		(3,725		)		(3,899		)
Net earnings allocated to common
shares	$	108,657			$	126,935			$	114,859			$	347,030			$	346,399
Weighted-average basic shares and
unvested restricted stock outstanding	119,831				120,042				123,657				120,691				125,728
Less: weighted-average unvested
restricted stock outstanding	(1,622		)		(1,462		)		(1,537		)		(1,480		)		(1,473		)
Weighted-average basic shares
outstanding	118,209				118,580				122,120				119,211				124,255
Basic earnings per share	$	0.92			$	1.07			$	0.94			$	2.91			$	2.79
Diluted Earnings Per Share:
Net earnings allocated to common
shares	$	108,657			$	126,935			$	114,859			$	347,030			$	346,399
Weighted-average basic shares
outstanding	118,209				118,580				122,120				119,211				124,255
Diluted earnings per share	$	0.92			$	1.07			$	0.94			$	2.91			$	2.79
(1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus
undistributed earnings amounts available to holders of unvested restricted stock, if any.

PACWEST BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
	Three Months Ended
	September 30, 2019							June 30, 2019							September 30, 2018
			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)	$	18,539,281	$	276,309	5.91	%		$	18,239,690	$	284,513	6.26	%		$	16,913,792	$	264,371	6.20	%
Investment securities (3)	3,809,243		32,213		3.36	%		3,790,436		29,462		3.12	%		3,844,201		29,711		3.07	%
Deposits in financial
institutions	445,152		2,424		2.16	%		228,702		1,349		2.37	%		108,485		519		1.90	%
Total interest-earning
assets (1)	22,793,676		310,946		5.41	%		22,258,828		315,324		5.68	%		20,866,478		294,601		5.60	%
Other assets	3,612,927							3,590,361							3,491,293
Total assets	$	26,406,603						$	25,849,189						$	24,357,771
Liabilities and
Stockholders’ Equity:
Interest checking	$	3,598,698	11,942		1.32	%		$	3,242,960	10,644		1.32	%		$	2,433,837	5,135		0.84	%
Money market	5,121,856		14,807		1.15	%		5,046,021		14,604		1.16	%		5,270,297		10,689		0.80	%
Savings	515,649		218		0.17	%		525,648		227		0.17	%		629,241		233		0.15	%
Time	2,795,573		13,736		1.95	%		2,731,156		13,245		1.95	%		1,778,552		5,064		1.13	%
Total interest-bearing
deposits	12,031,776		40,703		1.34	%		11,545,785		38,720		1.35	%		10,111,927		21,121		0.83	%
Borrowings	1,181,313		6,852		2.30	%		1,142,223		7,210		2.53	%		720,449		3,814		2.10	%
Subordinated debentures	456,011		7,417		6.45	%		454,901		7,705		6.79	%		452,312		7,390		6.48	%
Total interest-bearing
liabilities	13,669,100		54,972		1.60	%		13,142,909		53,635		1.64	%		11,284,688		32,325		1.14	%
Noninterest-bearing
demand deposits	7,487,555							7,544,027							8,120,306
Other liabilities	359,202							343,364							203,958
Total liabilities	21,515,857							21,030,300							19,608,952
Stockholders’ equity	4,890,746							4,818,889							4,748,819
Total liabilities and
stockholders’ equity	$	26,406,603						$	25,849,189						$	24,357,771
Net interest income (1)			$	255,974						$	261,689						$	262,276
Net interest spread (1)					3.81	%						4.04	%						4.46	%
Net interest margin (1)					4.46	%						4.72	%						4.99	%
Total deposits (4)	$	19,519,331	$	40,703	0.83	%		$	19,089,812	$	38,720	0.81	%		$	18,232,233	$	21,121	0.46	%
(1) Tax equivalent.
(2) Includes discount accretion on acquired loans of $2.6 million, $3.5 million, and $6.1 million for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, respectively.
(3) Includes tax-equivalent adjustments of $3.4 million, $0.5 million, and $1.7 million for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018 related to tax-exempt income on investment securities.
The federal statutory tax rate utilized was 21%.
(4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER BALANCE SHEET
	September 30,				June 30,				March 31,				December 31,				September 30,
	2019				2019				2019				2018				2018
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	252,596			$	185,075			$	224,758			$	175,830			$	196,502
Interest-earning deposits in financial
institutions	483,405				422,663				332,124				209,937				185,284
Total cash and cash equivalents	736,001				607,738				556,882				385,767				381,786
Securities available-for-sale	3,817,348				3,807,244				3,994,708				4,009,431				3,820,333
Federal Home Loan Bank stock	26,865				43,146				29,430				32,103				31,077
Total investment securities	3,844,213				3,850,390				4,024,138				4,041,534				3,851,410
Loans held for sale	–				–				25,124				–				–
Gross loans and leases held for investment	18,796,011				18,532,740				18,371,295				18,026,365				17,295,589
Deferred fees, net	(60,468		)		(59,888		)		(63,598		)		(68,652		)		(65,443		)
Total loans and leases held for
investment, net of deferred fees	18,735,543				18,472,852				18,307,697				17,957,713				17,230,146
Allowance for loan and lease losses	(138,552		)		(135,037		)		(136,281		)		(132,472		)		(141,920		)
Total loans and leases held for
investment, net	18,596,991				18,337,815				18,171,416				17,825,241				17,088,226
Equipment leased to others under
operating leases	295,854				300,668				293,853				292,677				275,707
Premises and equipment, net	37,926				38,162				37,783				34,661				34,012
Foreclosed assets, net	1,366				1,472				3,291				5,299				4,407
Deferred tax asset, net	–				–				–				17,489				41,280
Goodwill	2,548,670				2,548,670				2,548,670				2,548,670				2,548,670
Core deposit and customer relationship
intangibles, net	42,547				47,380				52,250				57,120				62,106
Other assets	621,059				612,119				610,731				522,896				494,522
Total assets	$	26,724,627			$	26,344,414			$	26,324,138			$	25,731,354			$	24,782,126
LIABILITIES:
Noninterest-bearing deposits	$	7,441,185			$	7,299,213			$	7,712,409			$	7,888,915			$	7,834,480
Interest-bearing deposits	12,292,018				11,506,543				11,573,518				10,981,586				10,045,063
Total deposits	19,733,203				18,805,756				19,285,927				18,870,501				17,879,543
Borrowings	1,253,031				1,913,059				1,481,087				1,371,114				1,513,166
Subordinated debentures	456,145				456,112				454,458				453,846				452,944
Accrued interest payable and other
liabilities	362,140				317,477				311,684				210,305				194,788
Total liabilities	21,804,519				21,492,404				21,533,156				20,905,766				20,040,441
STOCKHOLDERS’ EQUITY (1)	4,920,108				4,852,010				4,790,982				4,825,588				4,741,685
Total liabilities and stockholders’
equity	$	26,724,627			$	26,344,414			$	26,324,138			$	25,731,354			$	24,782,126
Book value per share	$	41.06			$	40.49			$	39.86			$	39.17			$	38.46
Tangible book value per share (2)	$	19.43			$	18.83			$	18.22			$	18.02			$	17.28
Shares outstanding	119,831,192				119,829,104				120,201,149				123,189,833				123,283,450
(1) Includes net unrealized gain (loss) on
securities available-for-sale, net	$	95,887			$	73,066			$	37,258			$	(6,075	)		$	(43,854	)
(2) Non-GAAP measure.

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
	Three Months Ended
	September 30,			June 30,				March 31,			December 31,				September 30,
	2019			2019				2019			2018				2018
	(Dollars in thousands, except per share data)
Interest income:
Loans and leases	$	275,978		$	284,236			$	274,229		$	272,522			$	264,062
Investment securities	28,806			28,948				29,680			29,690				28,061
Deposits in financial institutions	2,424			1,349				650			527				519
Total interest income	307,208			314,533				304,559			302,739				292,642
Interest expense:
Deposits	40,703			38,720				34,235			28,834				21,121
Borrowings	6,852			7,210				7,710			4,602				3,814
Subordinated debentures	7,417			7,705				7,738			7,538				7,390
Total interest expense	54,972			53,635				49,683			40,974				32,325
Net interest income	252,236			260,898				254,876			261,765				260,317
Provision for credit losses	7,000			8,000				4,000			12,000				11,500
Net interest income after
provision for credit losses	245,236			252,898				250,876			249,765				248,817
Noninterest income:
Service charges on deposit accounts	3,525			3,771				3,730			4,091				3,979
Other commissions and fees	10,855			11,590				11,008			11,114				12,397
Leased equipment income	9,615			9,182				9,282			9,384				9,120
Gain on sale of loans and leases	765			326				–			–				–
Gain on sale of securities	908			22,192				2,161			786				826
Other income	7,761			3,832				4,883			8,151				10,590
Total noninterest income	33,429			50,893				31,064			33,526				36,912
Noninterest expense:
Compensation	71,424			68,956				70,845			69,299				72,333
Occupancy	14,089			14,457				14,320			13,356				13,069
Data processing	7,044			6,817				6,925			6,930				6,740
Other professional services	4,400			4,629				4,513			6,198				6,058
Insurance and assessments	4,100			4,098				4,038			4,202				5,446
Intangible asset amortization	4,833			4,870				4,870			4,986				5,587
Leased equipment depreciation	5,951			5,558				5,651			5,758				5,001
Foreclosed assets expense (income), net	8			(146		)		29			(311		)		(257		)
Acquisition, integration and
reorganization costs	–			–				618			970				800
Loan expense	3,628			3,451				2,885			2,991				2,249
Other expense	11,332			12,737				11,593			14,856				11,127
Total noninterest expense	126,809			125,427				126,287			129,235				128,153
Earnings before income taxes	151,856			178,364				155,653			154,056				157,576
Income tax expense	41,830			50,239				43,049			39,015				41,289
Net earnings	$	110,026		$	128,125			$	112,604		$	115,041			$	116,287
Basic and diluted earnings per share	$	0.92		$	1.07			$	0.92		$	0.93			$	0.94
Dividends declared and paid per share	$	0.60		$	0.60			$	0.60		$	0.60			$	0.60

 

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
	At or For the Three Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
	2019				2019				2019				2018				2018
	(Dollars in thousands)
Performance Ratios:
Return on average assets (1)	1.65		%		1.99		%		1.77		%		1.84		%		1.89		%
Return on average equity (1)	8.93		%		10.66		%		9.48		%		9.59		%		9.72		%
Return on average tangible equity (1)(2)	19.01		%		23.15		%		20.64		%		21.23		%		21.61		%
Efficiency ratio	42.3		%		41.6		%		42.4		%		41.7		%		40.9		%
Noninterest expense as a percentage
of average assets (1)	1.91		%		1.95		%		1.99		%		2.07		%		2.09		%
Average Yields/Costs (1):
Yield on:
Average loans and leases (3)	5.91		%		6.26		%		6.16		%		6.27		%		6.20		%
Average interest-earning assets (3)	5.41		%		5.68		%		5.60		%		5.68		%		5.60		%
Cost of:
Average interest-bearing deposits	1.34		%		1.35		%		1.24		%		1.10		%		0.83		%
Average total deposits	0.83		%		0.81		%		0.73		%		0.62		%		0.46		%
Average interest-bearing liabilities	1.60		%		1.64		%		1.57		%		1.40		%		1.14		%
Net interest spread (3)	3.81		%		4.04		%		4.03		%		4.28		%		4.46		%
Net interest margin (3)	4.46		%		4.72		%		4.69		%		4.91		%		4.99		%
Average Balances:
Assets:
Loans and leases, net of deferred fees	$	18,539,281			$	18,239,690			$	18,064,230			$	17,275,343			$	16,913,792
Interest-earning assets	22,793,676				22,258,828				22,144,711				21,269,363				20,866,478
Total assets	26,406,603				25,849,189				25,775,949				24,784,462				24,357,771
Liabilities:
Noninterest-bearing deposits	7,487,555				7,544,027				7,783,652				8,163,699				8,120,306
Interest-bearing deposits	12,031,776				11,545,785				11,156,773				10,422,761				10,111,927
Total deposits	19,519,331				19,089,812				18,940,425				18,586,460				18,232,233
Borrowings	1,181,313				1,142,223				1,218,319				764,039				720,449
Subordinated debentures	456,011				454,901				454,203				452,998				452,312
Interest-bearing liabilities	13,669,100				13,142,909				12,829,295				11,639,798				11,284,688
Stockholders’ equity	4,890,746				4,818,889				4,815,965				4,758,401				4,748,819
(1) Annualized.
(2) Non-GAAP measure.
(3) Tax equivalent.

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
	At or For the Three Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
	2019				2019				2019				2018				2018
	(Dollars in thousands)
Credit Quality Ratios:
Nonaccrual loans and leases held for
investment to loans and leases
held for investment	0.53		%		0.44		%		0.48		%		0.44		%		0.66		%
Nonperforming assets to loans and
leases held for investment and
foreclosed assets	0.54		%		0.45		%		0.50		%		0.47		%		0.68		%
Classified loans and leases held for
investment to loans and leases
held for investment	1.01		%		1.03		%		1.04		%		1.32		%		1.51		%
Provision for credit losses (for the
quarter) to average loans and leases
held for investment (annualized)	0.15		%		0.18		%		0.09		%		0.28		%		0.27		%
Net charge-offs (for the quarter) to
average loans and leases held
for investment (annualized)	0.10		%		0.25		%		0.00		%		0.46		%		0.04		%
Trailing 12 months net charge-offs
to average loans and leases
held for investment	0.20		%		0.18		%		0.22		%		0.26		%		0.28		%
Allowance for credit losses to loans
and leases held for investment	0.92		%		0.92		%		0.95		%		0.94		%		1.03		%
Allowance for credit losses to
nonaccrual loans and leases
held for investment	174.0		%		209.1		%		195.6		%		213.5		%		156.9		%
PacWest Bancorp Consolidated
Capital:
Tier 1 leverage ratio (1)	9.50		%		9.49		%		9.38		%		10.13		%		10.10		%
Common equity tier 1 capital ratio (1)	9.55		%		9.53		%		9.48		%		10.01		%		10.18		%
Tier 1 capital ratio (1)	9.55		%		9.53		%		9.48		%		10.01		%		10.18		%
Total capital ratio (1)	12.16		%		12.18		%		12.15		%		12.72		%		13.03		%
Risk-weighted assets (1)	$	23,579,614			$	23,117,199			$	22,939,074			$	22,525,096			$	21,650,542
Equity to assets ratio	18.41		%		18.42		%		18.20		%		18.75		%		19.13		%
Tangible common equity ratio (2)	9.65		%		9.50		%		9.23		%		9.60		%		9.61		%
Book value per share	$	41.06			$	40.49			$	39.86			$	39.17			$	38.46
Tangible book value per share (2)	$	19.43			$	18.83			$	18.22			$	18.02			$	17.28
Pacific Western Bank Capital:
Tier 1 leverage ratio (1)	10.72		%		10.76		%		10.57		%		10.80		%		10.78		%
Common equity tier 1 capital ratio (1)	10.79		%		10.80		%		10.69		%		10.68		%		10.87		%
Tier 1 capital ratio (1)	10.79		%		10.80		%		10.69		%		10.68		%		10.87		%
Total capital ratio (1)	11.52		%		11.53		%		11.45		%		11.44		%		11.69		%
(1) Capital information for September 30, 2019 is preliminary.
(2) Non-GAAP measure.

GAAP TO NON-GAAP RECONCILIATIONS

This press release contains certain non-GAAP financial disclosures for: (1) return on average tangible equity, (2) tangible common equity ratio, and (3) tangible book value per share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of return on average tangible equity, tangible common equity ratio, and tangible book value per share is prevalent among banking regulators, investors and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) return on average equity, (2) equity to assets ratio, and (3) book value per share.

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

	Three Months Ended												Nine Months Ended
	September 30,				June 30,				September 30,				September 30,
Return on Average Tangible Equity	2019				2019				2018				2019				2018
	(Dollars in thousands)
Net earnings	$	110,026			$	128,125			$	116,287			$	350,755			$	350,298
Average stockholders’ equity	$	4,890,746			$	4,818,889			$	4,748,819			$	4,842,140			$	4,826,944
Less: Average intangible assets	2,593,925				2,598,762				2,614,055				2,598,806				2,619,624
Average tangible common equity	$	2,296,821			$	2,220,127			$	2,134,764			$	2,243,334			$	2,207,320
Return on average equity (1)	8.93		%		10.66		%		9.72		%		9.68		%		9.70		%
Return on average tangible equity (2)	19.01		%		23.15		%		21.61		%		20.90		%		21.22		%
(1) Annualized net earnings divided by average stockholders’ equity.
(2) Annualized net earnings divided by average tangible common equity.

Tangible Common Equity Ratio/	September 30,				June 30,				March 31,				December 31,				September 30,
Tangible Book Value Per Share	2019				2019				2019				2018				2018
	(Dollars in thousands, except per share data)
Stockholders’ equity	$	4,920,108			$	4,852,010			$	4,790,982			$	4,825,588			$	4,741,685
Less: Intangible assets	2,591,217				2,596,050				2,600,920				2,605,790				2,610,776
Tangible common equity	$	2,328,891			$	2,255,960			$	2,190,062			$	2,219,798			$	2,130,909
Total assets	$	26,724,627			$	26,344,414			$	26,324,138			$	25,731,354			$	24,782,126
Less: Intangible assets	2,591,217				2,596,050				2,600,920				2,605,790				2,610,776
Tangible assets	$	24,133,410			$	23,748,364			$	23,723,218			$	23,125,564			$	22,171,350
Equity to assets ratio	18.41		%		18.42		%		18.20		%		18.75		%		19.13		%
Tangible common equity ratio (1)	9.65		%		9.50		%		9.23		%		9.60		%		9.61		%
Book value per share	$	41.06			$	40.49			$	39.86			$	39.17			$	38.46
Tangible book value per share (2)	$	19.43			$	18.83			$	18.22			$	18.02			$	17.28
Shares outstanding	119,831,192				119,829,104				120,201,149				123,189,833				123,283,450
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by shares outstanding.

 

Contact:	Matthew P. Wagner	Patrick J. Rusnak
	President and CEO	Executive Vice President and CFO
Phone:	310-887-8520	714-989-4705