PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2021

Rhea-AI Summary

PacWest Bancorp (Nasdaq: PACW) reported robust fourth-quarter 2021 results, with net earnings of $136 million or $1.14 per diluted share. Core deposits surged by $4.6 billion (16.3%), primarily from the HOA acquisition, while total loans grew by $2.4 billion (11.8%). Noninterest income rose to $57.4 million, driven by strong warrant income. However, noninterest expenses increased by 10.5% to $176.1 million, mainly due to HOA acquisition costs. The company ended 2021 with total assets of $40.4 billion and net recoveries of $1.9 million, reflecting improved credit quality.

Positive

• Net earnings up to $136 million or $1.14 per diluted share.
• Core deposits increased by $4.6 billion or 16.3%, primarily from HOA acquisition.
• Total loans rose by $2.4 billion or 11.8%, reaching $22.9 billion.
• Noninterest income improved to $57.4 million, boosted by strong warrant income.
• Strong capital position with CET1 ratio at 8.86%.

Negative

• Noninterest expenses increased by 10.5% to $176.1 million due to acquisition costs.
• Tangible Book Value per share decreased from $22.57 to $21.31.

LOS ANGELES, Jan. 19, 2022 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) - 

FOURTH QUARTER 2021 RESULTS

$136.0M	$1.14	$181.7M	22.06%
Net Earnings	Diluted Earnings per Share	PPNR	ROATE

FOURTH QUARTER 2021 HIGHLIGHTS

• Net Earnings of $136.0 Million or $1.14 Per Diluted Share
• Core Deposits Up $4.6 Billion or 16.3% of which $4.1 Billion Related to the Acquisition of the HOA Business in October; Represents 93% of Total Deposits
• Loan Growth of $2.4 Billion or 11.8%
• Civic Loan Production of $480 Million in 4Q21, Compared to $481 Million in 3Q21
• PPNR of $181.7 Million, Up 8.3% Compared to 3Q21
• Provision for Credit Losses Benefit of $6.0 Million in 4Q21 Compared to Benefit of $20.0 Million in 3Q21
• Net Interest Income (TE) of $304.5 Million in 4Q21, Compared to $279.8 Million in 3Q21
• Noninterest Income of $57.4 Million in 4Q21, Compared to $51.3 Million in 3Q21, With Continued Strength in Warrant Income
• Noninterest Expense of $176.1 Million in 4Q21, Up 10.5% From 3Q21, Due Mainly to First Quarter of Operating Expenses Related to Acquired HOA Business plus Acquisition Costs of $5.6 Million
• Classified and Special Mention Loans Fell $25.5 Million and $104.8 Million, Respectively, From 3Q21
• ACL Ratio of 1.19% and ALLL Ratio of 0.87%
• Net Charge-offs of $169 Thousand
• Cost of Deposits Remained at 8bps
• Loan and Lease Production of $3.4 Billion, Up From $2.4 Billion in 3Q21; WAC of 3.89% vs. 4.24% in 3Q21
• Strong Capital Position – CET1 Ratio of 8.86% and Total Capital Ratio of 12.69% at 4Q21
• Tangible Book Value Per Share Decreased From $22.57 at 3Q21 to $21.31 at 4Q21 Due Mainly to Cash Used for the HOA Acquisition

FULL YEAR 2021 RESULTS

$607.0M	$5.10	$660.3M	24.41%
Net Earnings	Diluted Earnings per Share	PPNR	ROATE

FULL YEAR 2021 HIGHLIGHTS

• Net Earnings of $607.0 Million or $5.10 Per Diluted Share
• Core Deposits Up $10.5 Billion or 47.0% in 2021; Venture Banking Up $4.5 Billion; HOA Acquisition Added $4.1 Billion
• Loan Growth of $3.9 Billion or 20.2%
• PPNR of $660.3 Million, Up 2.1% Compared to 2020
• Provision for Credit Losses Benefit of $162.0 Million in 2021 Compared to Provision of $339.0 Million in 2020
• Net Interest Income (TE) of $1.1 Billion in 2021, Compared to $1.0 Billion in 2020
• Classified and Special Mention Loans Fell $149.2 Million and $329.7 Million, Respectively, From 2020
• Net Recoveries of $1.9 Million
• Cost of Deposits 9bps for 2021 Down From 27 bps in 2020
• Loan and Lease Production of $9.1 Billion, Up From $4.2 Billion in 2020; WAC of 4.19% vs. 3.57% in 2020
• Tangible Book Value Per Share Increased From $21.05 at the End of 2020 to $21.31 at the End of 2021
• Noninterest Income of $193.9 Million in 2021, Compared to $146.1 Million in 2020, With Record Warrant Income of $49.3 Million in 2021

CEO COMMENTARY

Matt Wagner, President and CEO, commented, “We are very pleased to deliver another strong quarter. We deployed approximately $3.8 billion of excess liquidity into higher-yielding securities and loans during the fourth quarter which resulted in a $24.6 million increase in net interest income and helped drive a $13.9 million increase in our pre-tax pre-provision net revenue compared to the third quarter. Loans grew by $2.4 billion in the fourth quarter to an all-time high of $22.9 billion.”

“We continued to experience strong deposit growth as core deposits increased by $4.6 billion during the fourth quarter driven by the $4.1 billion of deposits acquired with the HOA business.”

“Credit quality continues the improvement seen throughout 2021 with net recoveries of $1.9 million for the year and continued decreases in special mention (down 46% in 2021) and classified loans and leases (down 56% in 2021) which resulted in a provision benefit for the fourth consecutive quarter.”

“We had a strong year in 2021 and produced record net earnings of over $600 million, ended the year with record high balances for loans and deposits and crossed the $40 billion total assets milestone. We completed two strategic acquisitions with Civic Financial Services in February and the HOA business in October which expanded our product offerings and position us well for a rising rate environment. ”

“Our strategy of prioritizing a strong balance sheet, followed by profitability and growth, in that order, served us well in 2021 and we are well positioned as we begin 2022.”

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/be14ae62-9832-453c-9087-7d077d54bfcc

FINANCIAL HIGHLIGHTS

`		At or For the												At or For the
		Three Months Ended												Year Ended
		December 31,				September 30,				Increase				December 31,								Increase
Financial Highlights (1)			2021				2021			(Decrease)					2021				2020			(Decrease)
		(Dollars in thousands, except per share data)
Net earnings (loss)		$	136,045			$	139,996			$	(3,951	)		$	606,959			$	(1,237,574	)		$	1,844,533
Diluted earnings (loss) per share		$	1.14			$	1.17			$	(0.03	)		$	5.10			$	(10.61	)		$	15.71
Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") (2)		$	181,677			$	167,766			$	13,911			$	660,334			$	646,599			$	13,735
Return on average assets			1.34	%			1.55	%			(0.21	)			1.71	%			(4.46	)%			6.17
PPNR return on average assets (2)			1.79	%			1.86	%			(0.07	)			1.86	%			2.33	%			(0.47	)
Return on average tangible equity (2)			22.06	%			21.03	%			1.03				24.41	%			10.36	%			14.05
Yield on average loans and leases (tax equivalent)			4.93	%			5.01	%			(0.08	)			5.08	%			5.18	%			(0.10	)
Cost of average total deposits			0.08	%			0.08	%			-				0.09	%			0.27	%			(0.18	)
Net interest margin ("NIM") (tax equivalent)			3.24	%			3.33	%			(0.09	)			3.40	%			4.05	%			(0.65	)
Efficiency ratio			46.2	%			47.2	%			(1.0	)			46.9	%			43.1	%			3.8
Total assets		$	40,443,344			$	35,885,676			$	4,557,668			$	40,443,344			$	29,498,442			$	10,944,902
Loans and leases held for investment, net of deferred fees		$	22,941,548			$	20,511,020			$	2,430,528			$	22,941,548			$	19,083,377			$	3,858,171
Noninterest-bearing demand deposits		$	14,543,133			$	12,881,806			$	1,661,327			$	14,543,133			$	9,193,827			$	5,349,306
Core deposits		$	32,734,949			$	28,140,708			$	4,594,241			$	32,734,949			$	22,264,480			$	10,470,469
Total deposits		$	34,997,757			$	30,559,745			$	4,438,012			$	34,997,757			$	24,940,717			$	10,057,040
As percentage of total deposits:
Noninterest-bearing demand deposits			41	%			42	%			(1	)			41	%			37	%			4
Core deposits			93	%			92	%			1				93	%			89	%			4
Equity to assets ratio			9.89	%			10.92	%			(1.03	)			9.89	%			12.19	%			(2.30	)
Common equity tier 1 capital ratio			8.86	%			10.15	%			(1.29	)			8.86	%			10.53	%			(1.67	)
Total capital ratio			12.69	%			14.36	%			(1.67	)			12.69	%			13.76	%			(1.07	)
Tangible common equity ratio (2)			6.54	%			7.79	%			(1.25	)			6.54	%			8.78	%			(2.24	)
Book value per share		$	33.45			$	32.77			$	0.68			$	33.45			$	30.36			$	3.09
Tangible book value per share (2)		$	21.31			$	22.57			$	(1.26	)		$	21.31			$	21.05			$	0.26
(1) The operations of the Homeowners Association Services business are included from its October 8, 2021 acquisition date and the operations of Civic are included from its February 1, 2021 acquisition date.
(2) Non-GAAP measure.

INCOME STATEMENT HIGHLIGHTS

NET INTEREST INCOME

Net interest income increased by $24.6 million to $300.4 million for the fourth quarter of 2021 compared to $275.8 million for the third quarter of 2021 due mainly to higher income on investment securities and loans and leases primarily resulting from higher average balances as we deployed our excess liquidity. Income on investment securities increased by $7.7 million in the fourth quarter of 2021 due to a $1.9 billion increase in the average balance of investment securities, offset partially by a 10 basis point decrease in the yield on average investment securities. Income on loans and leases increased by $16.9 million in the fourth quarter of 2021 due to a $1.7 billion increase in the average balance of loans and leases, offset partially by an eight basis point decrease in the yield on average loans and leases. The tax equivalent yield on average loans and leases was 4.93% for the fourth quarter of 2021 compared to 5.01% for the third quarter of 2021. The decrease in the tax equivalent yield on average loans and leases was due primarily to the purchases of lower yielding single-family loans and higher loan premium amortization of $4.1 million.

The tax equivalent NIM was 3.24% for the fourth quarter of 2021 compared to 3.33% for the third quarter of 2021. The decrease in the NIM was due primarily to the change in the earning assets mix driven by the increase in the balance of average investment securities as a percentage of average earning assets and the decrease in the balance of average loans and leases as a percentage of average earning assets, as well as lower yields on average loans and leases and average investment securities. The average balance of investment securities increased by $1.9 billion to $10.0 billion, the average balance of deposits in financial institutions increased by $303.3 million to $6.0 billion, and the average balance of loans and leases increased by $1.7 billion to $21.4 billion in the fourth quarter of 2021. The increase in average balances of investment securities and loans and leases was the result of deploying some of our excess liquidity ahead of the closing of the acquisition of the HOA Services Division of MUFG Union Bank that added approximately $4.1 billion of deposits on October 8, 2021.

The cost of average total deposits was 0.08% in the fourth quarter of 2021, unchanged from 0.08% in the third quarter of 2021.

PROVISION FOR CREDIT LOSSES

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

		Three Months Ended
		December 31,				September 30,				Increase
Provision for Credit Losses			2021				2021			(Decrease)
		(In thousands)
(Reduction in) addition to allowance for loan and lease losses		$	(3,000	)		$	(21,500	)		$	18,500
(Reduction in) addition to reserve for unfunded loan commitments			(3,000	)			1,500				(4,500	)
Total provision for credit losses		$	(6,000	)		$	(20,000	)		$	14,000

The provision for credit losses benefit was $6.0 million for the fourth quarter of 2021 compared to a benefit of $20.0 million for the third quarter of 2021. The fourth quarter benefit was primarily impacted by changes in the qualitative component and a slightly improved economic forecast offset by an increased provision for loan growth.

NONINTEREST INCOME

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

		Three Months Ended
		December 31,				September 30,				Increase
Noninterest Income			2021				2021			(Decrease)
		(In thousands)
Service charges on deposit accounts		$	3,476			$	3,407			$	69
Other commissions and fees			10,633				11,792				(1,159	)
Leased equipment income			12,602				10,943				1,659
Gain on sale of loans and leases			172				-				172
Gain on sale of securities			999				515				484
Other income:
Dividends and gains on equity investments			(1,570	)			8,387				(9,957	)
Warrant income			23,990				13,578				10,412
Other			7,080				2,723				4,357
Total noninterest income		$	57,382			$	51,345			$	6,037

Noninterest income increased by $6.0 million to $57.4 million for the fourth quarter of 2021 compared to $51.3 million for the third quarter of 2021 due primarily to increases of $10.4 million in warrant income, $4.4 million in other income, and $1.7 million in leased equipment income, offset partially by a $10.0 million decrease in dividends and gains on equity investments. Warrant income increased due to continued strength in the capital markets activity including our single largest warrant gain ever of $13.6 million along with a second warrant gain of $5.2 million. Other income increased due primarily to higher gains from early lease terminations of $4.5 million. Leased equipment income increased due to a higher average balance of leased equipment and the return of one large lease to accrual status in December 2021. Dividends and gains on equity investments decreased due primarily to lower gains on sales of equity investments, higher fair value losses on equity investments still held, and lower income distributions and fair value marks on SBIC investments.

NONINTEREST EXPENSE

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

		Three Months Ended
		December 31,				September 30,				Increase
Noninterest Expense			2021				2021			(Decrease)
		(In thousands)
Compensation		$	99,700			$	98,061			$	1,639
Occupancy			14,656				14,928				(272	)
Data processing			8,171				7,391				780
Other professional services			5,946				5,164				782
Insurance and assessments			5,032				3,685				1,347
Intangible asset amortization			3,876				2,890				986
Leased equipment depreciation			9,569				8,603				966
Foreclosed assets (income) expense, net			(260	)			165				(425	)
Acquisition, integration and reorganization costs			5,590				200				5,390
Customer related expense			6,175				4,538				1,637
Loan expense			5,627				4,180				1,447
Other			12,028				9,616				2,412
Total noninterest expense		$	176,110			$	159,421			$	16,689

Noninterest expense increased by $16.7 million to $176.1 million for the fourth quarter of 2021 compared to $159.4 million for the third quarter of 2021 due primarily to increases in several expense categories such as compensation expense by $1.6 million, data processing by $0.8 million, insurance and assessments by $1.3 million, intangible asset amortization by $1.0 million, acquisition, integration and reorganization costs by $5.4 million, and customer related expense by $1.6 million. The increases related primarily to the acquisition of the HOA business on October 8, 2021. Total operating expenses for the quarter, excluding the acquisition, integration and reorganization costs of $5.6 million, were $170.5 million including $5.9 million of operating expenses for the acquired HOA business.

INCOME TAXES

The effective income tax rate was 27.5% in the fourth quarter of 2021 compared to 25.4% in the third quarter of 2021. The increase was due primarily to an increase in state tax rates for fiscal year 2021 caused by a shift in apportionment and a tax benefit from the release of a valuation allowance recorded in the third quarter. The effective income tax rate for the full year 2021 was 26.2%. The effective tax rate for the full year 2022 is currently estimated to be in the range of 25% to 27%.

BALANCE SHEET HIGHLIGHTS

DEPOSITS AND CLIENT INVESTMENT FUNDS

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

		December 31, 2021						September 30, 2021						December 31, 2020
					% of						% of						% of
Deposit Composition		Balance			Total			Balance			Total			Balance			Total
		(Dollars in thousands)
Noninterest-bearing demand		$	14,543,133		41	%		$	12,881,806		42	%		$	9,193,827		37	%
Interest checking			7,319,898		21	%			7,168,472		24	%			5,974,910		24	%
Money market			10,241,265		29	%			7,463,261		24	%			6,532,917		26	%
Savings			630,653		2	%			627,169		2	%			562,826		2	%
Total core deposits			32,734,949		93	%			28,140,708		92	%			22,264,480		89	%
Non-core non-maturity deposits			889,976		3	%			960,438		3	%			1,149,467		5	%
Total non-maturity deposits			33,624,925		96	%			29,101,146		95	%			23,413,947		94	%
Time deposits $250,000 and under			885,938		3	%			882,551		3	%			994,197		4	%
Time deposits over $250,000			486,894		1	%			576,048		2	%			532,573		2	%
Total time deposits			1,372,832		4	%			1,458,599		5	%			1,526,770		6	%
Total deposits		$	34,997,757		100	%		$	30,559,745		100	%		$	24,940,717		100	%

At December 31, 2021, core deposits totaled $32.7 billion or 93% of total deposits, including $14.5 billion of noninterest-bearing demand deposits or 41% of total deposits. Core deposits increased by $4.6 billion or 16.3% in the fourth quarter of 2021 driven primarily by the $4.1 billion of core deposits acquired with the HOA business on October 8, 2021.

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 at December 31, 2021 were $1.4 billion, of which $0.9 billion was managed by PWAM.

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								Year Ended
Roll Forward of Loans and Leases Held		December 31,				September 30,				December 31,
for Investment, Net of Deferred Fees (1)			2021				2021				2021
		(Dollars in thousands)
Balance, beginning of period		$	20,511,020			$	19,506,257			$	19,083,377
Additions:
Production			3,372,815				2,406,024				9,054,767
Disbursements			1,917,195				1,349,333				5,952,158
Total production and disbursements			5,290,010				3,755,357				15,006,925
Reductions:
Payoffs			(2,000,293	)			(1,732,621	)			(7,337,296	)
Paydowns			(845,443	)			(1,013,867	)			(3,728,950	)
Total payoffs and paydowns			(2,845,736	)			(2,746,488	)			(11,066,246	)
Sales			(15,837	)			(2,175	)			(117,263	)
Transfers to foreclosed assets			-				(415	)			(1,062	)
Charge-offs			(4,395	)			(1,516	)			(10,715	)
Transfers to loans held for sale			-				-				(25,554	)
Total reductions			(2,865,968	)			(2,750,594	)			(11,220,840	)
Loans acquired through acquisitions			6,486				-				72,086
Net increase (decrease)			2,430,528				1,004,763				3,858,171
Balance, end of period		$	22,941,548			$	20,511,020			$	22,941,548
Weighted average rate on production (2)			3.89	%			4.24	%			4.19	%
(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 38 basis points to loan yields in 2021.

Loans and leases held for investment, net of deferred fees, increased by $2.4 billion or 11.8% in the fourth quarter of 2021 to $22.9 billion at December 31, 2021. Excluding PPP loan activity, loans grew by $2.5 billion or 12.6%. The overall increase in the loans and leases balance for the fourth quarter of 2021 was due primarily to increases in the income producing and other residential, venture capital, and asset-based portfolios, offset partially by a reduction in the commercial real estate construction portfolio. Civic loan production was $480 million in the fourth quarter of 2021 compared to $481 million in the third quarter of 2021. The total outstanding balance of the Civic loan portfolio as of December 31, 2021 was $1.4 billion. The PPP loan forgiveness in the fourth quarter of 2021 was $111 million, down from $338 million in the third quarter of 2021. Net fees for PPP loans were $3.6 million in the fourth quarter of 2021, down from the $7.9 million in the third quarter of 2021. Remaining PPP loans totaled $157 million as of December 31, 2021 with $4.2 million of net fees to amortize over the remaining life of the loans. The weighted average rate on the $3.4 billion of new production for the fourth quarter of 2021 decreased to 3.89% from 4.24% in the third quarter of 2021 due primarily to the loan mix (higher levels of single-family loan pool purchases and equity fund loans). In the fourth quarter of 2021, we purchased $1.1 billion in single-family loan pools compared to $1.0 billion in the third quarter of 2021. The total of the single-family loan pool purchase portfolio as of December 31, 2021 was $2.3 billion.

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:

		December 31, 2021						September 30, 2021						December 31, 2020
					% of						% of						% of
Loan and Lease Portfolio		Balance			Total			Balance			Total			Balance			Total
		(In thousands)
Real estate mortgage:
Commercial		$	3,762,299		17	%		$	3,694,597		18	%		$	4,096,671		21	%
Income producing and other residential			7,416,421		32	%			6,153,662		30	%			3,803,265		20	%
Total real estate mortgage			11,178,720		49	%			9,848,259		48	%			7,899,936		41	%
Real estate construction and land:
Commercial			832,591		4	%			992,003		5	%			1,117,121		6	%
Residential			2,604,536		11	%			2,392,568		12	%			2,243,160		12	%
Total real estate construction and land			3,437,127		15	%			3,384,571		17	%			3,360,281		18	%
Total real estate			14,615,847		64	%			13,232,830		65	%			11,260,217		59	%
Commercial:
Asset-based			4,075,477		18	%			3,661,769		18	%			3,429,283		18	%
Venture capital			2,320,593		10	%			1,632,861		8	%			1,698,508		9	%
Other commercial			1,471,981		6	%			1,577,592		7	%			2,375,114		12	%
Total commercial			7,868,051		34	%			6,872,222		33	%			7,502,905		39	%
Consumer			457,650		2	%			405,968		2	%			320,255		2	%
Total loans and leases held for investment, net of deferred fees		$	22,941,548		100	%		$	20,511,020		100	%		$	19,083,377		100	%
Total unfunded loan commitments		$	9,006,350					$	8,480,599					$	7,601,390

ALLOWANCE FOR CREDIT LOSSES

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

		Three Months Ended December 31, 2021
		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		$	203,733			$	76,071			$	279,804
Charge-offs			(4,395	)			-				(4,395	)
Recoveries			4,226				-				4,226
Net charge-offs			(169	)			-				(169	)
Provision			(3,000	)			(3,000	)			(6,000	)
Ending balance		$	200,564			$	73,071			$	273,635
		Three Months Ended September 30, 2021
		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		$	225,600			$	74,571			$	300,171
Charge-offs			(1,516	)			-				(1,516	)
Recoveries			1,149				-				1,149
Net charge-offs			(367	)			-				(367	)
Provision			(21,500	)			1,500				(20,000	)
Ending balance		$	203,733			$	76,071			$	279,804

Allowance for Credit		Year Ended December 31,
Losses Rollforward			2021				2020
		(In thousands)
Beginning balance		$	433,752			$	174,646
Cumulative effect of change in accounting principle - CECL			-				7,327
Balance, January 1			433,752				181,973
Charge-offs			(10,715	)			(93,589	)
Recoveries			12,598				6,368
Net recoveries (charge-offs)			1,883				(87,221	)
Provision			(162,000	)			339,000
Ending balance		$	273,635			$	433,752

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

		December 31,				September 30,				Increase
Allowance for Credit Losses			2021				2021			(Decrease)
		(Dollars in thousands)
Allowance for loan and lease losses		$	200,564			$	203,733			$	(3,169	)
Reserve for unfunded loan commitments			73,071				76,071				(3,000	)
Allowance for credit losses		$	273,635			$	279,804			$	(6,169	)
Provision for credit losses (for the quarter)		$	(6,000	)		$	(20,000	)		$	14,000
Net charge-offs (recoveries) (for the quarter)		$	169			$	367			$	(198	)
Net charge-offs (recoveries) to average loans and leases (for the quarter)			0.00	%			0.01	%
Allowance for loan and lease losses to loans and leases held for investment			0.87	%			0.99	%
Allowance for loan and lease losses to loans and leases held for investment, excluding PPP loans			0.88	%			1.01	%
Allowance for credit losses to loans and leases held for investment			1.19	%			1.36	%
Allowance for credit losses to loans and leases held for investment, excluding PPP loans			1.20	%			1.38	%

The allowance for credit losses decreased by $6.2 million in the fourth quarter of 2021 to $273.6 million at December 31, 2021. The decrease in the allowance for credit losses during the fourth quarter of 2021 was attributable to a provision for credit losses benefit of $6.0 million and $0.2 million in net charge-offs. The allowance for credit losses ratio, excluding PPP loans, of 1.20% remains robust and moderately higher than the pre-pandemic level of 0.97% as of the January 1, 2020 CECL adoption date.

Net charge-offs were $0.2 million for the fourth quarter of 2021 as gross charge-offs of $4.4 million were reduced by recoveries of $4.2 million.

Net charge-offs were $0.4 million for the third quarter of 2021 as gross charge-offs of $1.5 million were reduced by recoveries of $1.1 million.

On a year-to-date basis for the year ended December 31, 2021, net recoveries were $1.9 million as gross charge-offs of $10.7 million were reduced by recoveries of $12.6 million.

CREDIT QUALITY

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

		December 31,				September 30,				Increase
Credit Quality Metrics			2021				2021			(Decrease)
		(Dollars in thousands)
NPAs and Performing TDRs:
Nonaccrual loans and leases held for investment (1)		$	61,174			$	64,507			$	(3,333	)
Accruing loans contractually past due 90 days or more			-				-				-
Foreclosed assets, net			12,843				13,364				(521	)
Total nonperforming assets ("NPAs")		$	74,017			$	77,871			$	(3,854	)
Performing TDRs held for investment		$	24,430			$	36,750			$	(12,320	)
Nonaccrual loans and leases held for investment to loans and leases held for investment			0.27	%			0.31	%
Nonperforming assets to loans and leases held for investment and foreclosed assets			0.32	%			0.38	%
Allowance for credit losses to nonaccrual loans and leases held for investment			447.3	%			433.8	%
Loan and Lease Credit Risk Ratings:
Pass		$	22,433,833			$	19,873,050			$	2,560,783
Special mention			391,611				496,366				(104,755	)
Classified			116,104				141,604				(25,500	)
Total loans and leases held for investment, net of deferred fees		$	22,941,548			$	20,511,020			$	2,430,528
Classified loans and leases held for investment to loans and leases held for investment			0.51	%			0.69	%
(1) Nonaccrual loans include SBA guaranteed amounts of $22.1 million at December 31, 2021 and $20.1 million at September 30, 2021.

Since downgrading certain loans at the onset of the pandemic in the first quarter of 2020 given all the uncertainty at the time, special mention loans and leases have decreased by $507.0 million or 56% from their peak in the first quarter of 2020, while classified loans and leases have decreased by $177.1 million or 60% from their peak in the second quarter of 2020, and each have significantly declined in the fourth quarter of 2021. Classified loans and leases are now below pre-pandemic levels while special mention loans and leases are also approaching pre-pandemic levels. Nonaccrual loans and leases decreased by $3.3 million to $61.2 million in the fourth quarter of 2021 due primarily to a decrease in nonaccrual short-term, single-family residential renovation loans as a result of payoffs during the quarter.

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:

		December 31, 2021								September 30, 2021								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
		(Dollars in thousands)
Real estate mortgage:
Commercial		$	27,540			$	2,165			$	25,615			$	676			$	1,925			$	1,489
Income producing and other residential			12,292				39,929				7,547				3,760				4,745				36,169
Total real estate mortgage			39,832				42,094				33,162				4,436				6,670				37,658
Real estate construction and land:
Commercial			-				-				-				-				-				-
Residential			4,715				5,031				19,918				12,809				(15,203	)			(7,778	)
Total real estate construction and land			4,715				5,031				19,918				12,809				(15,203	)			(7,778	)
Commercial:
Asset-based			1,464				-				1,605				-				(141	)			-
Venture capital			2,799				-				2,348				1,670				451				(1,670	)
Other commercial			11,950				630				6,979				340				4,971				290
Total commercial			16,213				630				10,932				2,010				5,281				(1,380	)
Consumer			414				1,004				495				1,042				(81	)			(38	)
Total held for investment		$	61,174			$	48,759			$	64,507			$	20,297			$	(3,333	)		$	28,462

The increase in accruing and 30-89 days past due loans is primarily due to $19.3 million in past due purchased single-family loans. As of January 14, 2022, $5.9 million of these loans remained over 30 days past due. The delinquency related to these loans was attributable to delayed payment application stemming from servicing being transferred following our purchase of the loans. The increase in this category was also due to an increase of $9.1 million in single-family residential loans originated by Civic.

CAPITAL

The following table presents certain actual capital ratios and ratios excluding PPP loans:

		December 31, 2021
						Excluding				September 30,
						PPP					2021
		Actual (1)				Loans (1)				Actual
PacWest Bancorp Consolidated:
Tier 1 leverage capital ratio			6.84	%			6.88	%	(3)		8.05	%
Common equity tier 1 capital ratio			8.86	%			8.86	%			10.15	%
Tier 1 capital ratio			9.32	%			9.32	%			10.65	%
Total capital ratio			12.69	%			12.69	%			14.36	%
Risk-weighted assets		$	28,508,808			$	28,508,808			$	26,057,583
Tangible common equity ratio (2)			6.54	%			6.56	%	(3)		7.79	%
(1) Capital information for December 31, 2021 is preliminary.
(2) Non-GAAP measure.
(3) PPP loans have been excluded from total assets in the denominator as they are zero risk-weighted.

The decreases in the capital ratios during the fourth quarter of 2021 were due primarily to the increase in goodwill related to the HOA acquisition combined with an increase in risk-weighted assets as we deployed $3.8 billion of excess liquidity into securities and loans and leases during the quarter.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $40 billion in assets headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 69 full-service branches located in California, one branch located in Durham, North Carolina, and one branch located in Denver, Colorado. The Bank provides community banking products including lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank provides venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States. The Bank also offers financing of non-owner-occupied investor properties through Civic Financial Services a wholly-owned subsidiary. The Bank also offers a specialized suite of services for the HOA industry. For more information about PacWest Bancorp or 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. 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 are based on information available at the time of the 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. The ongoing COVID-19 pandemic has adversely affected PacWest, its employees, customers and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity and prospects is uncertain. The risks from the COVID-19 pandemic have decreased as the pandemic subsides, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our allowance for credit losses and related provision for credit losses. Continued deterioration in general business and economic conditions could adversely affect PacWest’s revenues and the values of its assets, including goodwill, and liabilities, lead to a tightening of credit, and increase stock price volatility. In addition, PacWest’s results could be adversely affected by changes in interest rates, sustained high unemployment rates, deterioration in the credit quality of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment securities, the magnitude of individual loan losses on security monitoring loans, 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.

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
		December 31,				September 30,				December 31,
			2021				2021				2020
		(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks		$	112,548			$	174,585			$	150,464
Interest-earning deposits in financial institutions			3,944,686				3,524,613				3,010,197
Total cash and cash equivalents			4,057,234				3,699,198				3,160,661
Securities available-for-sale, at estimated fair value			10,694,458				9,276,926				5,235,591
Federal Home Loan Bank stock, at cost			17,250				17,250				17,250
Total investment securities			10,711,708				9,294,176				5,252,841
Loans held for sale			-				-				-
Gross loans and leases held for investment			23,026,308				20,588,255				19,153,357
Deferred fees, net			(84,760	)			(77,235	)			(69,980	)
Total loans and leases held for investment, net of deferred fees			22,941,548				20,511,020				19,083,377
Allowance for loan and lease losses			(200,564	)			(203,733	)			(348,181	)
Total loans and leases held for investment, net			22,740,984				20,307,287				18,735,196
Equipment leased to others under operating leases			339,150				334,275				333,846
Premises and equipment, net			46,740				47,246				39,234
Foreclosed assets, net			12,843				13,364				14,027
Goodwill			1,405,736				1,204,118				1,078,670
Core deposit and customer relationship intangibles, net			44,957				15,533				23,641
Other assets			1,083,992				970,479				860,326
Total assets		$	40,443,344			$	35,885,676			$	29,498,442
LIABILITIES:
Noninterest-bearing deposits		$	14,543,133			$	12,881,806			$	9,193,827
Interest-bearing deposits			20,454,624				17,677,939				15,746,890
Total deposits			34,997,757				30,559,745				24,940,717
Borrowings			-				-				5,000
Subordinated debt			863,283				862,447				465,812
Accrued interest payable and other liabilities			582,674				545,050				491,962
Total liabilities			36,443,714				31,967,242				25,903,491
STOCKHOLDERS' EQUITY (1)			3,999,630				3,918,434				3,594,951
Total liabilities and stockholders’ equity		$	40,443,344			$	35,885,676			$	29,498,442
Book value per share		$	33.45			$	32.77			$	30.36
Tangible book value per share (2)		$	21.31			$	22.57			$	21.05
Shares outstanding			119,584,854				119,579,566				118,414,853
(1) Includes net unrealized gain on securities available-for-sale, net		$	65,968			$	98,859			$	172,523
(2) Non-GAAP measure.

 

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS)
		Three Months Ended												Year Ended
		December 31,				September 30,				December 31,				December 31,
			2021				2021				2020				2021				2020
		(Dollars in thousands, except per share data)
Interest income:
Loans and leases		$	263,662			$	246,722			$	242,198			$	996,457			$	993,138
Investment securities			48,469				40,780				28,843				153,468				106,770
Deposits in financial institutions			2,674				2,580				1,135				8,804				3,583
Total interest income			314,805				290,082				272,176				1,158,729				1,103,491
Interest expense:
Deposits			6,622				6,417				8,454				27,808				59,663
Borrowings			64				101				37				623				8,161
Subordinated debt			7,714				7,722				4,477				26,474				21,109
Total interest expense			14,400				14,240				12,968				54,905				88,933
Net interest income			300,405				275,842				259,208				1,103,824				1,014,558
Provision for credit losses			(6,000	)			(20,000	)			10,000				(162,000	)			339,000
Net interest income after provision for credit losses			306,405				295,842				249,208				1,265,824				675,558
Noninterest income:
Service charges on deposit accounts			3,476				3,407				3,119				13,269				10,351
Other commissions and fees			10,633				11,792				9,974				42,287				40,347
Leased equipment income			12,602				10,943				9,440				45,746				43,628
Gain on sale of loans and leases			172				-				1,671				1,733				2,139
Gain on sale of securities			999				515				4				1,615				13,171
Other income			29,500				24,688				15,642				89,277				36,424
Total noninterest income			57,382				51,345				39,850				193,927				146,060
Noninterest expense:
Compensation			99,700				98,061				73,171				368,450				271,494
Occupancy			14,656				14,928				14,083				58,422				57,555
Data processing			8,171				7,391				6,718				30,277				26,779
Other professional services			5,946				5,164				6,800				21,492				19,917
Insurance and assessments			5,032				3,685				5,064				17,365				22,625
Intangible asset amortization			3,876				2,890				3,172				12,734				14,753
Leased equipment depreciation			9,569				8,603				7,501				35,755				28,865
Foreclosed assets (income) expense, net			(260	)			165				(272	)			(213	)			(17	)
Acquisition, integration and reorganization costs			5,590				200				1,060				9,415				1,060
Customer related expense			6,175				4,538				4,430				20,504				17,532
Loan expense			5,627				4,180				3,926				17,031				13,454
Goodwill impairment			-				-				-				-				1,470,000
Other expense			12,028				9,616				10,029				46,185				40,002
Total noninterest expense			176,110				159,421				135,682				637,417				1,984,019
Earnings (loss) before income taxes			187,677				187,766				153,376				822,334				(1,162,401	)
Income tax expense			51,632				47,770				36,546				215,375				75,173
Net earnings (loss)		$	136,045			$	139,996			$	116,830			$	606,959			$	(1,237,574	)
Basic and diluted earnings (loss) per share		$	1.14			$	1.17			$	0.99			$	5.10			$	(10.61	)
Dividends declared and paid per share		$	0.25			$	0.25			$	0.25			$	1.00			$	1.35

 

PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS (LOSS) PER SHARE CALCULATIONS
		Three Months Ended
		December 31,				September 30,				December 31,				December 31,
			2021				2021				2020				2021				2020
		(In thousands, except per share data)
Basic Earnings (Loss) Per Share:
Net earnings (loss)		$	136,045			$	139,996			$	116,830			$	606,959			$	(1,237,574	)
Less: earnings allocated to unvested restricted stock (1)			(2,311	)			(2,417	)			(1,398	)			(10,248	)			(1,782	)
Net earnings (loss) allocated to common shares		$	133,734			$	137,579			$	115,432			$	596,711			$	(1,239,356	)
Weighted average basic shares and unvested restricted stock outstanding			119,577				119,569				118,446				119,349				118,463
Less: weighted average unvested restricted stock outstanding			(2,314	)			(2,340	)			(1,652	)			(2,255	)			(1,610	)
Weighted average basic shares outstanding			117,263				117,229				116,794				117,094				116,853
Basic earnings (loss) per share		$	1.14			$	1.17			$	0.99			$	5.10			$	(10.61	)
Diluted Earnings (Loss) Per Share:
Net earnings (loss) allocated to common shares		$	133,734			$	137,579			$	115,432			$	596,711			$	(1,239,356	)
Weighted average diluted shares outstanding			117,263				117,229				116,794				117,094				116,853
Diluted earnings (loss) per share		$	1.14			$	1.17			$	0.99			$	5.10			$	(10.61	)
(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
	December 31, 2021							September 30, 2021							December 31, 2020
			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)	$	21,367,665	$	265,549	4.93	%		$	19,670,671	$	248,485	5.01	%		$	18,769,214	$	243,188	5.15	%
Investment securities (3)		9,964,568		50,710	2.02	%			8,047,098		42,952	2.12	%			4,888,993		30,757	2.50	%
Deposits in financial institutions		5,961,104		2,674	0.18	%			5,657,768		2,580	0.18	%			3,576,335		1,135	0.13	%
Total interest-earning assets (1)		37,293,337		318,933	3.39	%			33,375,537		294,017	3.50	%			27,234,542		275,080	4.02	%
Other assets		3,064,810							2,496,127							2,100,247
Total assets	$	40,358,147						$	35,871,664						$	29,334,789
Liabilities and Stockholders' Equity:
Interest checking	$	7,767,211		2,041	0.10	%		$	7,372,859		2,042	0.11	%		$	5,191,435		2,064	0.16	%
Money market		10,226,366		3,400	0.13	%			8,662,449		2,997	0.14	%			7,636,220		3,225	0.17	%
Savings		634,874		39	0.02	%			620,079		38	0.02	%			567,646		35	0.02	%
Time		1,421,859		1,142	0.32	%			1,475,307		1,340	0.36	%			1,650,150		3,130	0.75	%
Total interest-bearing deposits		20,050,310		6,622	0.13	%			18,130,694		6,417	0.14	%			15,045,451		8,454	0.22	%
Borrowings		234,391		64	0.11	%			238,335		101	0.17	%			237,098		37	0.06	%
Subordinated debt		862,777		7,714	3.55	%			862,272		7,722	3.55	%			463,951		4,477	3.84	%
Total interest-bearing liabilities		21,147,478		14,400	0.27	%			19,231,301		14,240	0.29	%			15,746,500		12,968	0.33	%
Noninterest-bearing demand deposits		14,713,385							12,198,313							9,589,789
Other liabilities		543,017							525,429							462,075
Total liabilities		36,403,880							31,955,043							25,798,364
Stockholders' equity		3,954,267							3,916,621							3,536,425
Total liabilities and stockholders' equity	$	40,358,147						$	35,871,664						$	29,334,789
Net interest income (1)			$	304,533						$	279,777						$	262,112
Net interest spread (1)					3.12	%						3.21	%						3.69	%
Net interest margin (1)					3.24	%						3.33	%						3.83	%
Total deposits (4)	$	34,763,695	$	6,622	0.08	%		$	30,329,007	$	6,417	0.08	%		$	24,635,240	$	8,454	0.14	%
(1) Tax equivalent.
(2) Includes net loan premium amortization of $6.4 million and $2.4 million and net loan discount accretion of $1.2 for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively.
(3) Includes tax-equivalent adjustments of $2.2 million, $2.2 million, and $1.9 million for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020 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
		December 31,				September 30,				June 30,				March 31,				December 31,
			2021				2021				2021				2021				2020
		(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks		$	112,548			$	174,585			$	179,505			$	177,199			$	150,464
Interest-earning deposits in financial institutions			3,944,686				3,524,613				5,678,587				5,517,667				3,010,197
Total cash and cash equivalents			4,057,234				3,699,198				5,858,092				5,694,866				3,160,661
Securities available-for-sale			10,694,458				9,276,926				7,198,608				5,941,690				5,235,591
Federal Home Loan Bank stock			17,250				17,250				17,250				17,250				17,250
Total investment securities			10,711,708				9,294,176				7,215,858				5,958,940				5,252,841
Loans held for sale			-				-				-				25,554				-
Gross loans and leases held for investment			23,026,308				20,588,255				19,580,731				19,055,165				19,153,357
Deferred fees, net			(84,760	)			(77,235	)			(74,474	)			(75,937	)			(69,980	)
Total loans and leases held for investment, net of deferred fees			22,941,548				20,511,020				19,506,257				18,979,228				19,083,377
Allowance for loan and lease losses			(200,564	)			(203,733	)			(225,600	)			(292,445	)			(348,181	)
Total loans and leases held for investment, net			22,740,984				20,307,287				19,280,657				18,686,783				18,735,196
Equipment leased to others under operating leases			339,150				334,275				313,574				327,413				333,846
Premises and equipment, net			46,740				47,246				39,541				39,622				39,234
Foreclosed assets, net			12,843				13,364				13,227				14,298				14,027
Goodwill			1,405,736				1,204,118				1,204,118				1,204,092				1,078,670
Core deposit and customer relationship intangibles, net			44,957				15,533				18,423				21,312				23,641
Other assets			1,083,992				970,479				924,497				883,653				860,326
Total assets		$	40,443,344			$	35,885,676			$	34,867,987			$	32,856,533			$	29,498,442
LIABILITIES:
Noninterest-bearing deposits		$	14,543,133			$	12,881,806			$	11,252,286			$	11,017,462			$	9,193,827
Interest-bearing deposits			20,454,624				17,677,939				18,394,748				17,205,829				15,746,890
Total deposits			34,997,757				30,559,745				29,647,034				28,223,291				24,940,717
Borrowings			-				-				6,625				19,750				5,000
Subordinated debt			863,283				862,447				861,788				465,814				465,812
Accrued interest payable and other liabilities			582,674				545,050				505,859				493,541				491,962
Total liabilities			36,443,714				31,967,242				31,021,306				29,202,396				25,903,491
STOCKHOLDERS' EQUITY (1)			3,999,630				3,918,434				3,846,681				3,654,137				3,594,951
Total liabilities and stockholders’ equity		$	40,443,344			$	35,885,676			$	34,867,987			$	32,856,533			$	29,498,442
Book value per share		$	33.45			$	32.77			$	32.17			$	30.68			$	30.36
Tangible book value per share (2)		$	21.31			$	22.57			$	21.95			$	20.39			$	21.05
Shares outstanding			119,584,854				119,579,566				119,555,102				119,105,642				118,414,853
(1) Includes net unrealized gain on securities available-for-sale, net		$	65,968			$	98,859			$	145,516			$	106,381			$	172,523
(2) Non-GAAP measure.

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
		Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
			2021				2021				2021				2021				2020
		(Dollars in thousands, except per share data)
Interest income:
Loans and leases		$	263,662			$	246,722			$	244,529			$	241,544			$	242,198
Investment securities			48,469				40,780				33,954				30,265				28,843
Deposits in financial institutions			2,674				2,580				2,022				1,528				1,135
Total interest income			314,805				290,082				280,505				273,337				272,176
Interest expense:
Deposits			6,622				6,417				7,269				7,500				8,454
Borrowings			64				101				265				193				37
Subordinated debt			7,714				7,722				6,663				4,375				4,477
Total interest expense			14,400				14,240				14,197				12,068				12,968
Net interest income			300,405				275,842				266,308				261,269				259,208
Provision for credit losses			(6,000	)			(20,000	)			(88,000	)			(48,000	)			10,000
Net interest income after provision for credit losses			306,405				295,842				354,308				309,269				249,208
Noninterest income:
Service charges on deposit accounts			3,476				3,407				3,452				2,934				3,119
Other commissions and fees			10,633				11,792				10,704				9,158				9,974
Leased equipment income			12,602				10,943				10,847				11,354				9,440
Gain on sale of loans and leases			172				-				1,422				139				1,671
Gain on sale of securities			999				515				-				101				4
Other income			29,500				24,688				13,946				21,143				15,642
Total noninterest income			57,382				51,345				40,371				44,829				39,850
Noninterest expense:
Compensation			99,700				98,061				90,807				79,882				73,171
Occupancy			14,656				14,928				14,784				14,054				14,083
Data processing			8,171				7,391				7,758				6,957				6,718
Other professional services			5,946				5,164				5,256				5,126				6,800
Insurance and assessments			5,032				3,685				3,745				4,903				5,064
Intangible asset amortization			3,876				2,890				2,889				3,079				3,172
Leased equipment depreciation			9,569				8,603				8,614				8,969				7,501
Foreclosed assets (income) expense, net			(260	)			165				(119	)			1				(272	)
Acquisition, integration and reorganization costs			5,590				200				200				3,425				1,060
Customer related expense			6,175				4,538				4,973				4,818				4,430
Loan expense			5,627				4,180				4,031				3,193				3,926
Other expense			12,028				9,616				8,812				15,729				10,029
Total noninterest expense			176,110				159,421				151,750				150,136				135,682
Earnings before income taxes			187,677				187,766				242,929				203,962				153,376
Income tax expense			51,632				47,770				62,417				53,556				36,546
Net earnings		$	136,045			$	139,996			$	180,512			$	150,406			$	116,830
Basic and diluted earnings per share		$	1.14			$	1.17			$	1.52			$	1.27			$	0.99
Dividends declared and paid per share		$	0.25			$	0.25			$	0.25			$	0.25			$	0.25

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
		At or For the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
			2021				2021				2021				2021				2020
		(Dollars in thousands)
Performance Ratios:
Return on average assets (1)			1.34	%			1.55	%			2.11	%			1.94	%			1.58	%
Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") return on average assets (1)(2)			1.79	%			1.86	%			1.81	%			2.01	%			2.22	%
Return on average equity (1)			13.65	%			14.18	%			19.36	%			16.86	%			13.14	%
Return on average tangible equity (1)(2)			22.06	%			21.03	%			29.25	%			25.67	%			19.63	%
Efficiency ratio			46.2	%			47.2	%			47.9	%			46.4	%			43.6	%
Noninterest expense as a percentage of average assets (1)			1.73	%			1.76	%			1.77	%			1.94	%			1.84	%
Average Yields/Costs (1):
Yield on:
Average loans and leases (3)			4.93	%			5.01	%			5.18	%			5.20	%			5.15	%
Average investment securities (3)			2.02	%			2.12	%			2.23	%			2.44	%			2.50	%
Average interest-earning assets (3)			3.39	%			3.50	%			3.57	%			3.86	%			4.02	%
Cost of:
Average interest-bearing deposits			0.13	%			0.14	%			0.16	%			0.18	%			0.22	%
Average total deposits			0.08	%			0.08	%			0.10	%			0.11	%			0.14	%
Average interest-bearing liabilities			0.27	%			0.29	%			0.30	%			0.29	%			0.33	%
Net interest spread (3)			3.12	%			3.21	%			3.27	%			3.57	%			3.69	%
Net interest margin (3)			3.24	%			3.33	%			3.40	%			3.69	%			3.83	%
Average Balances:
Assets:
Loans and leases, net of deferred fees		$	21,367,665			$	19,670,671			$	19,057,420			$	18,927,314			$	18,769,214
Investment securities			9,964,568				8,047,098				6,492,721				5,383,140				4,888,993
Deposits in financial institutions			5,961,104				5,657,768				6,347,764				4,790,231				3,576,335
Interest-earning assets			37,293,337				33,375,537				31,897,905				29,100,685				27,234,542
Total assets			40,358,147				35,871,664				34,326,112				31,415,882				29,334,789
Liabilities:
Noninterest-bearing deposits			14,713,385				12,198,313				11,304,757				10,173,459				9,589,789
Interest-bearing deposits			20,050,310				18,130,694				17,817,053				16,044,091				15,045,451
Total deposits			34,763,695				30,329,007				29,121,810				26,217,550				24,635,240
Borrowings			234,391				238,335				225,446				226,053				237,098
Subordinated debt			862,777				862,272				735,725				466,101				463,951
Interest-bearing liabilities			21,147,478				19,231,301				18,778,224				17,136,245				15,746,500
Stockholders' equity			3,954,267				3,916,621				3,739,042				3,617,248				3,536,425
(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
		December 31,				September 30,				June 30,				March 31,				December 31,
			2021				2021				2021				2021				2020
		(Dollars in thousands)
Credit Quality Ratios:
Nonaccrual loans and leases held for investment to loans and leases held for investment			0.27	%			0.31	%			0.29	%			0.36	%			0.48	%
Nonperforming assets to loans and leases held for investment and foreclosed assets			0.32	%			0.38	%			0.36	%			0.43	%			0.55	%
Classified loans and leases held for investment to loans and leases held for investment			0.51	%			0.69	%			0.75	%			0.86	%			1.39	%
Provision for credit losses (for the quarter) to average loans and leases held for investment (annualized)			(0.11	)%			(0.40	)%			(1.85	)%			(1.03	)%			0.21	%
Net charge-offs (for the quarter) to average loans and leases held for investment (annualized)			0.00	%			0.01	%			(0.11	)%			0.06	%			0.40	%
Trailing 12 months net charge-offs to average loans and leases held for investment			(0.01	)%			0.09	%			0.27	%			0.37	%			0.45	%
Allowance for loan and lease losses to loans and leases held for investment			0.87	%			0.99	%			1.16	%			1.54	%			1.82	%
Allowance for credit losses to loans and leases held for investment			1.19	%			1.36	%			1.54	%			2.02	%			2.27	%
Allowance for credit losses to nonaccrual loans and leases held for investment			447.3	%			433.8	%			528.4	%			566.2	%			475.8	%
PacWest Bancorp Consolidated:
Tier 1 leverage capital ratio (1)			6.84	%			8.05	%			7.67	%			7.95	%			8.55	%
Common equity tier 1 capital ratio (1)			8.86	%			10.15	%			10.41	%			10.39	%			10.53	%
Tier 1 capital ratio (1)			9.32	%			10.65	%			10.41	%			10.39	%			10.53	%
Total capital ratio (1)			12.69	%			14.36	%			14.99	%			13.60	%			13.76	%
Risk-weighted assets (1)		$	28,508,808			$	26,057,583			$	24,274,256			$	23,012,350			$	22,837,693
Equity to assets ratio			9.89	%			10.92	%			11.03	%			11.12	%			12.19	%
Tangible common equity ratio (2)			6.54	%			7.79	%			7.80	%			7.68	%			8.78	%
Book value per share		$	33.45			$	32.77			$	32.17			$	30.68			$	30.36
Tangible book value per share (2)		$	21.31			$	22.57			$	21.95			$	20.39			$	21.05
Pacific Western Bank:
Tier 1 leverage capital ratio (1)			7.00	%			8.40	%			8.47	%			8.83	%			9.53	%
Common equity tier 1 capital ratio (1)			9.56	%			11.12	%			11.51	%			11.54	%			11.73	%
Tier 1 capital ratio (1)			9.56	%			11.12	%			11.51	%			11.54	%			11.73	%
Total capital ratio (1)			11.80	%			13.59	%			14.22	%			12.80	%			12.99	%
(1) Capital information for December 31, 2021 is preliminary.
(2) Non-GAAP measure.

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 equity, (4) tangible common equity ratio, and (5) 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, tangible book value per share, and PPNR is prevalent among banking regulators, investors, and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, and (5) 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												Year Ended
PPNR and PPNR Return		December 31,				September 30,				December 31,				December 31,
on Average Assets			2021				2021				2020				2021				2020
		(Dollars in thousands)
Net earnings (loss)		$	136,045			$	139,996			$	116,830			$	606,959			$	(1,237,574	)
Add: Provision for credit losses			(6,000	)			(20,000	)			10,000				(162,000	)			339,000
Add: Goodwill impairment			-				-				-				-				1,470,000
Add: Income tax expense			51,632				47,770				36,546				215,375				75,173
Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR")		$	181,677			$	167,766			$	163,376			$	660,334			$	646,599
Average assets		$	40,358,147			$	35,871,664			$	29,334,789			$	35,518,488			$	27,752,412
Return on average assets (1)			1.34	%			1.55	%			1.58	%			1.71	%			(4.46	)%
PPNR return on average assets (2)			1.79	%			1.86	%			2.22	%			1.86	%			2.33	%
(1) Annualized net earnings (loss) divided by average assets.
(2) Annualized PPNR divided by average assets.

		Three Months Ended												Year Ended
		December 31,				September 30,				December 31,				December 31,
Return on Average Tangible Equity			2021				2021				2020				2021				2020
		(Dollars in thousands)
Net earnings (loss)		$	136,045			$	139,996			$	116,830			$	606,959			$	(1,237,574	)
Add: Intangible asset amortization			3,876				2,890				3,172				12,734				14,753
Add: Goodwill impairment			-				-				-				-				1,470,000
Adjusted net earnings		$	139,921			$	142,886			$	120,002			$	619,693			$	247,179
Average stockholders' equity		$	3,954,267			$	3,916,621			$	3,536,425			$	3,808,019			$	3,857,610
Less: Average intangible assets			1,437,780				1,221,253				1,103,945				1,269,546				1,470,989
Average tangible common equity		$	2,516,487			$	2,695,368			$	2,432,480			$	2,538,473			$	2,386,621
Return on average equity (1)			13.65	%			14.18	%			13.14	%			15.94	%			(32.08	)%
Return on average tangible equity (2)			22.06	%			21.03	%			19.63	%			24.41	%			10.36	%
(1) Annualized net earnings divided by average stockholders' equity.
(2) Annualized adjusted net earnings divided by average tangible common equity.

Tangible Common Equity Ratio/		December 31,				September 30,				June 30,				March 31,				December 31,
Tangible Book Value Per Share			2021				2021				2021				2021				2020
		(Dollars in thousands, except per share data)
Stockholders' equity		$	3,999,630			$	3,918,434			$	3,846,681			$	3,654,137			$	3,594,951
Less: Intangible assets			1,450,693				1,219,651				1,222,541				1,225,404				1,102,311
Tangible common equity		$	2,548,937			$	2,698,783			$	2,624,140			$	2,428,733			$	2,492,640
Total assets		$	40,443,344			$	35,885,676			$	34,867,987			$	32,856,533			$	29,498,442
Less: Intangible assets			1,450,693				1,219,651				1,222,541				1,225,404				1,102,311
Tangible assets		$	38,992,651			$	34,666,025			$	33,645,446			$	31,631,129			$	28,396,131
Equity to assets ratio			9.89	%			10.92	%			11.03	%			11.12	%			12.19	%
Tangible common equity ratio (1)			6.54	%			7.79	%			7.80	%			7.68	%			8.78	%
Book value per share		$	33.45			$	32.77			$	32.17			$	30.68			$	30.36
Tangible book value per share (2)		$	21.31			$	22.57			$	21.95			$	20.39			$	21.05
Shares outstanding			119,584,854				119,579,566				119,555,102				119,105,642				118,414,853
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by shares outstanding.

CONTACTS

Matthew P. Wagner President and CEO 303.802.8900

Bart R. Olson EVP and CFO 714.989.4149

William J. Black EVP Strategy and Corporate Development 919.597.7466

FAQ

What were PacWest's fourth-quarter net earnings for 2021?

PacWest reported net earnings of $136 million or $1.14 per diluted share in the fourth quarter of 2021.

How much did PacWest's core deposits increase in Q4 2021?

Core deposits increased by $4.6 billion or 16.3% in the fourth quarter of 2021.

What was the total loan growth reported by PacWest for Q4 2021?

Total loans grew by $2.4 billion or 11.8% to reach $22.9 billion in the fourth quarter of 2021.

What is the current CET1 ratio for PacWest as of the fourth quarter of 2021?

The CET1 ratio for PacWest was reported at 8.86% at the end of the fourth quarter of 2021.

How did noninterest expenses change in the fourth quarter of 2021 for PacWest?

Noninterest expenses rose by 10.5% to $176.1 million in the fourth quarter of 2021.