PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2022

Rhea-AI Summary

PacWest Bancorp (PACW) reported its fourth quarter 2022 results, showing net earnings of $39.6 million, or $0.33 per share, reflecting a significant decline from the previous quarter's earnings of $122.2 million. The bank strategically sold $1 billion in available-for-sale securities at a loss of $49 million and incurred a goodwill impairment of $29 million. Despite these challenges, core capital ratios improved, with CET1 increasing from 8.56% to 8.70%. Total deposits decreased by $259.5 million, primarily due to a reduction in core deposits. The bank aims to focus on relationship-based community banking, which is expected to enhance profitability going forward.

Positive

• Core capital ratios improved with CET1 rising to 8.70%
• Loan growth of $5.7 billion, a 24.7% increase from 2021
• Strong credit metrics maintained with nonperforming assets at 38 basis points
• Return on average tangible common equity recorded at 14.39%

Negative

• Net earnings declined significantly from $122.2 million in Q3 to $39.6 million in Q4 2022
• Loss of $49 million from the sale of securities impacts overall profitability
• Goodwill impairment of $29 million related to Civic
• Total deposits decreased by $259.5 million, primarily due to a large drop in core deposits

LOS ANGELES, Jan. 26, 2023 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) -

FOURTH QUARTER 2022 RESULTS

$39.6M	$0.33		14.39%	8.70%
Net Earnings Available to Common Stockholders	Diluted Earnings per Common Share		ROATCE	CET1

FOURTH QUARTER 2022 HIGHLIGHTS 

• Announced leadership transition with Paul Taylor as President and CEO and Kevin Thompson as CFO
• Strategically sold $1 billion of available-for-sale securities for a loss of $49 million to pay down FHLB borrowings and to improve the capital and liquidity position of the Bank
• Recorded goodwill impairment of $29 million related to Civic as part of a strategy to restructure this lending subsidiary
• Shut down Premium Finance and Multi-Family lending groups as part of a strategy to focus on relationship-based community banking, which will result in cost savings and improved capital
• Recorded early retirement benefits and severance expense of $5.7 million as a first step in operational efficiency initiative
• All risk-based capital ratios increased from 3Q22, with CET1 increasing from 8.56% to 8.70%
• Credit metrics remain steady with nonperforming assets ratio of 38 basis points

FULL YEAR 2022 RESULTS

$404.3M	$3.37		21.04%	51.0%
Net Earnings Available to Common Stockholders	Diluted Earnings per Common Share		ROATCE	Efficiency Ratio

FULL YEAR 2022 HIGHLIGHTS

• Loan growth of $5.7 billion; up 24.7% from 2021
• Net interest income (TE) of $1.3 billion in 2022 vs. $1.1 billion in 2021; up 16.6%
• Strong earnings allowed us to return $140 million to our stockholders through dividends

CEO COMMENTARY

Paul Taylor, President and CEO, commented, “In the fourth quarter, we initiated a new strategic plan designed to maximize shareholder value by strengthening our community bank focus, exiting non-core products, and improving our operational efficiency. The first strategic step we took was to sell $1 billion of available-for-sale securities, resulting in a loss on sale of $49 million. The proceeds were used to pay down FHLB borrowings and to improve the capital and liquidity position of the Bank going forward. Secondly, we recorded goodwill impairment of $29 million related to Civic as part of a strategy to restructure this lending subsidiary. Goodwill is a non-cash charge and has no impact on our regulatory capital ratios, cash flows, or liquidity position. We believe these actions will result in an improvement in the profitability and risk profile of Civic going forward. Next, we are slowing loan growth to preserve capital and strengthen our balance sheet, including shutting down our operations in our Premium Finance and Multi-Family lending groups. Finally, we are working to improve the overall operational efficiency of the Bank. As a first step in this initiative, we recorded early retirement benefits and severance expense of $5.7 million.”

“PacWest is a strong organization with extraordinary clients and has a talented and loyal team. Credit quality remains strong as evidenced by credit metrics such as nonperforming assets of 38 basis points and net charge-offs of four basis points for the quarter and two basis points for the year. As we head into 2023, our priority is to refocus on core relationship-based community banking, which is expected to result in increased core deposits, increased capital ratios, and an improved efficiency ratio, and allow us to maintain our credit quality at the current favorable levels.”

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)		2022				2022			(Decrease)					2022				2021			(Decrease)
	(Dollars in thousands, except per share data)
Net earnings available to
common stockholders	$	39,562			$	122,224			$	(82,662	)		$	404,274			$	606,959			$	(202,685	)
Diluted earnings per
common share	$	0.33			$	1.02			$	(0.69	)		$	3.37			$	5.10			$	(1.73	)
Pre-provision, pre-goodwill
impairment, pre-tax net
revenue ("PPNR") (2)	$	106,151			$	178,182			$	(72,031	)		$	621,068			$	660,334			$	(39,266	)
Return on average assets		0.48	%			1.28	%			(0.80	)			1.05	%			1.71	%			(0.66	)
PPNR return on average
assets (2)		1.02	%			1.73	%			(0.71	)			1.53	%			1.86	%			(0.33	)
Return on average
tangible common equity (2)		14.39	%			24.11	%			(9.72	)			21.04	%			24.41	%			(3.37	)
Yield on average loans and
leases (tax equivalent)		5.73	%			5.12	%			0.61				5.07	%			5.08	%			(0.01	)
Cost of average total
deposits		1.37	%			0.70	%			0.67				0.59	%			0.09	%			0.50
Net interest margin ("NIM")
(tax equivalent)		3.41	%			3.57	%			(0.16	)			3.49	%			3.40	%			0.09
Efficiency ratio		53.3	%			51.0	%			2.3				51.0	%			46.9	%			4.1
Total assets	$	41,228,936			$	41,404,592			$	(175,656	)		$	41,228,936			$	40,443,344			$	785,592
Loans and leases held
for investment,
net of deferred fees	$	28,609,129			$	27,660,041			$	949,088			$	28,609,129			$	22,941,548			$	5,667,581
Noninterest-bearing
demand deposits	$	11,212,357			$	12,775,756			$	(1,563,399	)		$	11,212,357			$	14,543,133			$	(3,330,776	)
Core deposits	$	26,561,129			$	28,559,310			$	(1,998,181	)		$	26,561,129			$	32,734,949			$	(6,173,820	)
Total deposits	$	33,936,334			$	34,195,872			$	(259,538	)		$	33,936,334			$	34,997,757			$	(1,061,423	)
As percentage of total
deposits:
Noninterest-bearing
demand deposits		33	%			37	%			(4	)			33	%			41	%			(8	)
Core deposits		78	%			83	%			(5	)			78	%			93	%			(15	)
Equity to assets ratio		9.58	%			9.36	%			0.22				9.58	%			9.89	%			(0.31	)
Common equity tier 1
capital ratio		8.70	%			8.56	%			0.14				8.70	%			8.86	%			(0.16	)
Tier 1 capital ratio		10.60	%			10.46	%			0.14				10.60	%			9.32	%			1.28
Total capital ratio		13.61	%			13.43	%			0.18				13.61	%			12.69	%			0.92
Tangible common equity
ratio (2)		5.13	%			4.85	%			0.28				5.13	%			6.54	%			(1.41	)
Tangible book value per
common share (2)	$	17.00			$	16.11			$	0.89			$	17.00			$	21.31			$	(4.31	)
(1) The operations of the HOA 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 decreased by $12.2 million to $322.9 million for the fourth quarter of 2022 compared to $335.2 million for the third quarter of 2022 due mainly to higher interest expense on deposits and borrowings, offset partially by higher interest income on loans and leases and deposits in financial institutions. Interest income on loans and leases increased by $58.4 million in the fourth quarter of 2022 due to a 61 basis points increase in the tax equivalent yield on average loans and leases and a $1.2 billion increase in the average balance of loans and leases compared to the third quarter of 2022. Interest income on deposits in financial institutions increased by $7.4 million in the fourth quarter of 2022 due mainly to a 147 basis points increase in the yield on average deposits in financial institutions. The tax equivalent yield on average loans and leases was 5.73% for the fourth quarter of 2022 compared to 5.12% for the third quarter of 2022. The increase in the tax equivalent yield on average loans and leases was due primarily to higher coupon interest attributable to increased rates on production and on existing variable rate loans. Interest expense on deposits increased by $56.3 million in the fourth quarter of 2022 due mainly to increased market rates that contributed to a 67 basis points increase in the cost of average total deposits. Interest expense on borrowings increased by $16.9 million due to a $1.2 billion increase in the average balance and a 231 basis points increase in the cost of average borrowings attributable mainly to having a full quarter of the higher-cost credit-linked notes outstanding.

The tax equivalent NIM was 3.41% for the fourth quarter of 2022 compared to 3.57% for the third quarter of 2022. The decrease in the NIM was due mainly to a higher cost of average interest-bearing liabilities due primarily to a $1.7 billion decrease in the average balance of core deposits and an increase in average time deposits, offset partially by higher yields on average loans and leases and deposits in financial institutions.

The cost of average total deposits was 1.37% for the fourth quarter of 2022 compared to 0.70% for the third quarter of 2022 due mainly to higher market interest rates and an increase in the average balance of time deposits.

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		2022				2022			(Decrease)
	(In thousands)
Addition to allowance for
loan and lease losses	$	14,000			$	3,000			$	11,000
Reduction in reserve for
unfunded loan commitments		(4,000	)			-				(4,000	)
Total loan-related provision		10,000				3,000				7,000
Addition to allowance for
held-to-maturity securities		-				-				-
Total provision for credit losses	$	10,000			$	3,000			$	7,000

The provision for credit losses was $10.0 million for the fourth quarter of 2022 compared to $3.0 million for the third quarter of 2022. The $7.0 million increase in the loan-related provision was due mainly to net loan growth in portfolios with a higher loss rate, a slight increase in the levels of special mention and classified loans and leases, and an updated economic forecast reflecting management’s expectation of a mild recession ahead.

NONINTEREST INCOME

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

	Three Months Ended
	December 31,				September 30,				Increase
Noninterest Income		2022				2022			(Decrease)
	(In thousands)
Service charges on deposit accounts	$	3,178			$	3,608			$	(430	)
Other commissions and fees		11,208				10,034				1,174
Leased equipment income		12,322				12,835				(513	)
Gain on sale of loans and leases		388				58				330
(Loss) gain on sale of securities		(49,302	)			86				(49,388	)
Dividends and gains on equity investments		661				3,228				(2,567	)
Warrant (loss) income		(46	)			292				(338	)
Other income		2,635				8,478				(5,843	)
Total noninterest (loss) income	$	(18,956	)		$	38,619			$	(57,575	)

Noninterest income decreased by $57.6 million to a loss of $19.0 million for the fourth quarter of 2022 compared to income of $38.6 million for the third quarter of 2022 due primarily to decreases of $49.4 million in gain on sale of securities, $5.8 million in other income, and $2.6 million in dividends and gains on equity investments. The decrease in gain on sale of securities resulted from the sales of $1.0 billion of securities for a net loss of $49.3 million compared to sales of $440.4 million of securities for a net gain of $86,000 for the third quarter of 2022. The decrease in other income was due primarily to the receipt of a $5.5 million legal settlement, net of current year legal fees, in the third quarter of 2022. The decrease in dividends and gains on equity investments was due mainly to lower fair value gains on SBIC investments and income distributions on equity 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		2022				2022			(Decrease)
	(In thousands)
Compensation	$	106,124			$	105,933			$	191
Occupancy		14,922				15,574				(652	)
Data processing		9,722				9,568				154
Other professional services		6,924				10,674				(3,750	)
Insurance and assessments		7,205				7,159				46
Intangible asset amortization		2,629				3,649				(1,020	)
Leased equipment depreciation		8,627				8,908				(281	)
Foreclosed assets (income) expense, net		(108	)			(248	)			140
Acquisition, integration and reorganization costs		5,703				-				5,703
Customer related expense		18,197				12,673				5,524
Loan expense		6,150				6,228				(78	)
Other		11,737				15,500				(3,763	)
Total operating expense		197,832				195,618				2,214
Goodwill impairment		29,000				-				29,000
Total noninterest expense	$	226,832			$	195,618			$	31,214

Noninterest expense increased by $31.2 million to $226.8 million for the fourth quarter 2022 compared to $195.6 million for the third quarter of 2022 due primarily to a $29.0 million goodwill impairment charge related to Civic. Excluding the goodwill impairment, noninterest expense increased by $2.2 million to $197.8 million. The $2.2 million increase was due mainly to increases of $5.7 million in acquisition, integration and reorganization costs and $5.5 million in customer related expense, offset partially by decreases of $3.8 million in other expense, $3.8 million in other professional services, and $1.0 million in intangible asset amortization. The increase in acquisition, integration and reorganization costs was due to early retirement benefits and severance expense in the fourth quarter. The increase in customer related expense was due mostly to higher third-party payments for deposit customers on account analysis. The decrease in other expense was due primarily to a non-recurring legal settlement accrual in the third quarter of 2022. The decrease in other professional services was due mostly to non-recurring issuance costs of the credit-linked notes transaction in the third quarter of 2022. The decrease in intangible asset amortization was due primarily to declining amortization expense on the intangible assets added from acquisitions prior to 2021.

INCOME TAXES

The effective income tax rate was 26.3% for the fourth quarter of 2022 compared to 24.9% for the third quarter of 2022. The increase from the third quarter of 2022 was primarily due to a tax benefit recorded in the third quarter resulting from a lapsed statute. The effective tax rate for the full year 2022 was 25.4%. The effective tax rate for the full year 2023 is currently estimated to be in the range of 26% to 28%.

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, 2022						September 30, 2022						December 31, 2021
				% of						% of						% of
Deposit Composition	Balance			Total			Balance			Total			Balance			Total
	(Dollars in thousands)
Noninterest-bearing demand	$	11,212,357		33	%		$	12,775,756		37	%		$	14,543,133		41	%
Interest checking		6,990,377		20	%			6,780,900		20	%			7,319,898		21	%
Money market		7,780,758		23	%			8,361,779		24	%			10,241,265		29	%
Savings		577,637		2	%			640,875		2	%			630,653		2	%
Total core deposits		26,561,129		78	%			28,559,310		83	%			32,734,949		93	%
Wholesale non-maturity deposits		2,637,362		8	%			2,367,544		7	%			889,976		3	%
Total non-maturity deposits		29,198,491		86	%			30,926,854		90	%			33,624,925		96	%
Retail time deposits		2,434,414		7	%			1,778,325		5	%			1,177,147		3	%
Brokered time deposits		2,303,429		7	%			1,490,693		5	%			195,685		1	%
Total time deposits (1)		4,737,843		14	%			3,269,018		10	%			1,372,832		4	%
Total deposits	$	33,936,334		100	%		$	34,195,872		100	%		$	34,997,757		100	%
(1) Includes time deposits over $250,000 of $1.5 billion, $1.0 billion, and $486.9 million at December 31, 2022, September 30, 2022, and December 31, 2021, respectively.

Total deposits decreased by $259.5 million or 0.8% in the fourth quarter of 2022 due primarily to a $2.0 billion or 7.0% decrease in core deposits, offset partially by a $1.5 billion increase in time deposits and a $269.8 million increase in wholesale non-maturity deposits. At December 31, 2022, core deposits totaled $26.6 billion or 78% of total deposits, including $11.2 billion of noninterest-bearing demand deposits or 33% of total deposits.

In addition to deposit products, we also offer alternative, non-depository cash investment options for select clients. These alternative options include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds decreased from $1.8 billion as of September 30, 2022 to $1.4 billion as of December 31, 2022, 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		2022				2022				2022
	(Dollars in thousands)
Balance, beginning of period	$	27,660,041			$	26,501,137			$	22,941,548
Additions:
Production		1,287,248				1,758,107				8,435,396
Disbursements		1,919,979				1,677,795				7,058,553
Total production and disbursements		3,207,227				3,435,902				15,493,949
Reductions:
Payoffs		(1,136,016	)			(977,654	)			(4,909,797	)
Paydowns		(1,050,727	)			(1,256,557	)			(4,755,033	)
Total payoffs and paydowns		(2,186,743	)			(2,234,211	)			(9,664,830	)
Sales		(2,611	)			(19,635	)			(63,263	)
Transfers to foreclosed assets		(4,714	)			(2,966	)			(7,985	)
Charge-offs		(3,352	)			(4,652	)			(14,037	)
Transfers to loans held for sale		(60,719	)			(15,534	)			(76,253	)
Total reductions		(2,258,139	)			(2,276,998	)			(9,826,368	)
Net increase		949,088				1,158,904				5,667,581
Balance, end of period	$	28,609,129			$	27,660,041			$	28,609,129
Weighted average rate on production (1)		7.55	%			5.92	%			5.24	%
(1) The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes amortized fees. Amortized fees added approximately 21 basis points to loan yields in 2022.

Loans and leases held for investment, net of deferred fees, increased by $949.1 million or 3.4% in the fourth quarter of 2022 to $28.6 billion at December 31, 2022. The overall increase in the loans and leases balance for the fourth quarter of 2022 was due primarily to increases in the residential real estate mortgage and residential real estate construction portfolios.

Civic loan production was $713 million for the fourth quarter of 2022 compared to $831 million for the third quarter of 2022. The Civic loan portfolio as of December 31, 2022 totaled $3.3 billion.

The weighted average rate on the $1.3 billion of production for the fourth quarter of 2022 increased to 7.55% from 5.92% for the third quarter of 2022 due primarily to the loan mix (lower percentage of multi-family production and a higher percentage of Civic production) and the increase in market interest rates.

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, 2022					September 30, 2022					December 31, 2021
			% of					% of					% of
Loan and Lease Portfolio	Balance		Total			Balance		Total			Balance		Total
	(Dollars in thousands)
Real estate mortgage:
Commercial	$	3,846,831	13	%		$	3,770,706	14	%		$	3,762,299	17	%
Residential		11,396,781	40	%			10,860,043	39	%			7,416,421	32	%
Total real estate mortgage		15,243,612	53	%			14,630,749	53	%			11,178,720	49	%
Real estate construction and land:
Commercial		898,592	3	%			843,086	3	%			832,591	4	%
Residential		3,740,292	13	%			3,450,430	12	%			2,604,536	11	%
Total real estate construction
and land		4,638,884	16	%			4,293,516	15	%			3,437,127	15	%
Total real estate		19,882,496	69	%			18,924,265	68	%			14,615,847	64	%
Commercial:
Asset-based		5,140,209	18	%			5,154,654	19	%			4,075,477	18	%
Venture capital		2,033,302	7	%			2,001,086	7	%			2,320,593	10	%
Other commercial		1,108,451	4	%			1,115,442	4	%			1,471,981	6	%
Total commercial		8,281,962	29	%			8,271,182	30	%			7,868,051	34	%
Consumer		444,671	2	%			464,594	2	%			457,650	2	%
Total loans and leases held for
investment, net of deferred fees	$	28,609,129	100	%		$	27,660,041	100	%		$	22,941,548	100	%
Total unfunded loan commitments	$	11,110,264				$	11,227,234				$	9,006,350

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

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

	Three Months Ended December 31, 2022
Allowance for Credit	Allowance for				Reserve for				Total
Losses on Loans and	Loan and				Unfunded Loan				Allowance for
Leases Rollforward	Lease Losses				Commitments				Credit Losses
	(In thousands)
Beginning balance	$	189,327			$	95,071			$	284,398
Charge-offs		(3,352	)			-				(3,352	)
Recoveries		757				-				757
Net charge-offs		(2,595	)			-				(2,595	)
Provision		14,000				(4,000	)			10,000
Ending balance	$	200,732			$	91,071			$	291,803
	Three Months Ended September 30, 2022
Allowance for Credit	Allowance for				Reserve for				Total
Losses on Loans and	Loan and				Unfunded Loan				Allowance for
Leases Rollforward	Lease Losses				Commitments				Credit Losses
	(In thousands)
Beginning balance	$	188,705			$	95,071			$	283,776
Charge-offs		(4,652	)			-				(4,652	)
Recoveries		2,274				-				2,274
Net charge-offs		(2,378	)			-				(2,378	)
Provision		3,000				-				3,000
Ending balance	$	189,327			$	95,071			$	284,398
Allowance for Credit
Losses on Loans and	Year Ended December 31,
Leases Rollforward		2022				2021
	(In thousands)
Beginning balance	$	273,635			$	433,752
Charge-offs		(14,037	)			(10,715	)
Recoveries		9,205				12,598
Net (charge-offs) recoveries		(4,832	)			1,883
Provision		23,000				(162,000	)
Ending balance	$	291,803			$	273,635

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

Allowance for Credit Losses	December 31,				September 30,				Increase
on Loans and Leases		2022				2022			(Decrease)
	(Dollars in thousands)
Allowance for loan and lease losses	$	200,732			$	189,327			$	11,405
Reserve for unfunded loan commitments		91,071				95,071				(4,000	)
Allowance for credit losses	$	291,803			$	284,398			$	7,405
Provision for credit losses (for the quarter)	$	10,000			$	3,000			$	7,000
Net charge-offs (for the quarter)	$	2,595			$	2,378			$	217
Net charge-offs to average loans
and leases (for the quarter)		0.04	%			0.03	%
Allowance for loan and lease losses to loans
and leases held for investment		0.70	%			0.68	%
Allowance for credit losses to loans and leases
held for investment		1.02	%			1.03	%

The allowance for credit losses increased by $7.4 million in the fourth quarter of 2022 to $291.8 million at December 31, 2022. This increase was attributable mainly to a $10.0 million provision for credit losses, offset partially by $2.6 million in net charge-offs.

Net charge-offs over the trailing twelve months were $4.8 million, which results in net charge-offs to average loans and leases over the trailing twelve months of 0.2%.

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		2022				2022			(Decrease)
	(Dollars in thousands)
NPAs and Performing TDRs:
Nonaccrual loans and leases held for investment (1)	$	103,778			$	89,742			$	14,036
Accruing loans contractually past due 90 days or more		-				-				-
Foreclosed assets, net		5,022				2,967				2,055
Total nonperforming assets ("NPAs")	$	108,800			$	92,709			$	16,091
Performing TDRs held for investment	$	7,141			$	8,106			$	(965	)
Nonaccrual loans and leases held for investment
to loans and leases held for investment		0.36	%			0.32	%
Nonperforming assets to loans and leases
held for investment and foreclosed assets		0.38	%			0.34	%
Allowance for credit losses to nonaccrual loans
and leases held for investment		281.2	%			316.9	%
Loan and Lease Credit Risk Ratings:
Pass	$	27,924,599			$	27,099,362			$	825,237
Special mention		566,259				463,994				102,265
Classified		118,271				96,685				21,586
Total loans and leases held for investment,
net of deferred fees	$	28,609,129			$	27,660,041			$	949,088
Special mention loans and leases held for investment
to loans and leases held for investment		1.98	%			1.68	%
Classified loans and leases held for investment
to loans and leases held for investment		0.41	%			0.35	%
(1) Nonaccrual loans include SBA guaranteed amounts of $14.3 million at December 31, 2022 and $17.2 million at September 30, 2022.

Nonaccrual loans and leases increased by $14.0 million to $103.8 million in the fourth quarter of 2022 due primarily to an increase in nonaccrual Civic loans.

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, 2022							September 30, 2022							Increase (Decrease)
				Accruing							Accruing								Accruing
				and 30-89							and 30-89								and 30-89
				Days Past							Days Past								Days Past
	Nonaccrual			Due				Nonaccrual			Due				Nonaccrual				Due
	(In thousands)
Real estate mortgage:
Commercial	$	42,509		$	1,047			$	42,772		$	14			$	(263	)		$	1,033
Residential		45,272			69,397				25,950			21,700				19,322				47,697
Total real estate mortgage		87,781			70,444				68,722			21,714				19,059				48,730
Real estate construction and land:
Commercial		-			-				-			-				-				-
Residential		10,621			26,257				7,101			3,051				3,520				23,206
Total real estate
construction and land		10,621			26,257				7,101			3,051				3,520				23,206
Commercial:
Asset-based		865			-				2,127			-				(1,262	)			-
Venture capital		-			-				3,809			-				(3,809	)			-
Other commercial		4,345			385				7,616			265				(3,271	)			120
Total commercial		5,210			385				13,552			265				(8,342	)			120
Consumer		166			1,935				367			1,996				(201	)			(61	)
Total held for investment	$	103,778		$	99,021			$	89,742		$	27,026			$	14,036			$	71,995

Loans and leases accruing and 30-89 days past due generally fluctuate from period to period. The $72.0 million increase to $99.0 million in the fourth quarter of 2022 was due mainly to an increase in Civic delinquent loans. This was due primarily to an increase in matured loans and an increase in the dollar amount of delinquent loans which correlates with the continued growth in the Civic loan portfolio balance.

CAPITAL

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

	December 31,				September 30,					December 31,
		2022				2022					2021
PacWest Bancorp Consolidated:
Common equity tier 1 capital ratio (1)		8.70	%			8.56	%				8.86	%
Tier 1 capital ratio (1)		10.60	%			10.46	%				9.32	%
Total capital ratio (1)		13.61	%			13.43	%				12.69	%
Tier 1 leverage capital ratio (1)		8.61	%			8.63	%				6.84	%
Risk-weighted assets (1) (in thousands)	$	33,033,597			$	33,042,173				$	28,508,808
Tangible common equity ratio (2)		5.13	%			4.85	%				6.54	%
Tangible common equity ratio excluding
the impact of AOCI for securities (2)		7.12	%			6.97	%				6.37	%
(1) Capital information for December 31, 2022 is preliminary.
(2) Non-GAAP measure.

CONFERENCE CALL

PacWest Bancorp (“PacWest”) will host a conference call at 8:00 AM PT/ 11:00 AM ET on Friday, January 27, 2023, to discuss the Company’s performance for the fourth quarter of 2022.

Participants may access the conference call/webcast at:
Participant Dial-in: (888) 204-4368
Participant Webcast Link: https://event.webcasts.com/starthere.jsp?ei=1590835&tp key=aedee87ee7
Confirmation Code: 2205611

The call will be recorded and made available for replay on January 27, 2023, after 12:00 PM PT. The recording may be accessed through the link above or at https://www.pacwestbancorp.com/news-market-data/presentations/default.aspx.

ABOUT PACWEST BANCORP

PacWest is a bank holding company with over $41 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”). Pacific Western Bank is a relationship-based community bank focused on providing business banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and lease and deposit products and services through full-service branches throughout California and in Durham, North Carolina and Denver, Colorado, and loan production offices around the country. For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.

FORWARD-LOOKING STATEMENTS

This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements often use words such as “anticipates,” “targets,” “expects,” “estimates,” “intends,” “plans,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of PacWest’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those expressed in them. Continued deterioration in general business, economic, and political conditions, geopolitical tensions, uncertainty in U.S. fiscal monetary policy, including the interest rate policies of the Federal Reserve Board, and volatility and disruptions in credit and capital markets could lead to a tightening of credit and an increase of credit losses, adversely affect PacWest’s revenues and the values of our assets, including goodwill, and liabilities, and increase stock price volatility. The risks and impacts of the COVID-19 pandemic appear to have largely subsided, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our business, financial position, and results of operations. In addition, PacWest’s results could be adversely affected by changes in interest rates, inflation, and unemployment rates, our ability to attract deposits and other sources of funding and liquidity, deterioration in the credit quality of our loan portfolio or in the value of the collateral securing those loans, deterioration in the value of our investment securities, our ability to successfully execute on our digital and innovation initiatives, the effectiveness of our risk management framework and quantitative models, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission.

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

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
	December 31,				September 30,				December 31,
		2022				2022				2021
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	212,273			$	216,436			$	112,548
Interest-earning deposits in financial institutions		2,027,949				2,244,272				3,944,686
Total cash and cash equivalents		2,240,222				2,460,708				4,057,234
Securities available-for-sale, at estimated fair value		4,843,487				5,891,328				10,694,458
Securities held-to-maturity, at amortized cost,
net of allowance for credit losses		2,269,135				2,264,601				-
Federal Home Loan Bank stock, at cost		34,290				36,990				17,250
Total investment securities		7,146,912				8,192,919				10,711,708
Loans held for sale		65,076				15,534				-
Gross loans and leases held for investment		28,726,016				27,775,962				23,026,308
Deferred fees, net		(116,887	)			(115,921	)			(84,760	)
Total loans and leases held for investment,
net of deferred fees		28,609,129				27,660,041				22,941,548
Allowance for loan and lease losses		(200,732	)			(189,327	)			(200,564	)
Total loans and leases held for investment, net		28,408,397				27,470,714				22,740,984
Equipment leased to others under operating leases		404,245				338,691				339,150
Premises and equipment, net		54,315				50,781				46,740
Foreclosed assets, net		5,022				2,967				12,843
Goodwill		1,376,736				1,405,736				1,405,736
Core deposit and customer relationship intangibles, net		31,381				34,010				44,957
Other assets		1,496,630				1,432,532				1,083,992
Total assets	$	41,228,936			$	41,404,592			$	40,443,344
LIABILITIES:
Noninterest-bearing deposits	$	11,212,357			$	12,775,756			$	14,543,133
Interest-bearing deposits		22,723,977				21,420,116				20,454,624
Total deposits		33,936,334				34,195,872				34,997,757
Borrowings		1,764,030				1,864,815				-
Subordinated debt		867,087				863,379				863,283
Accrued interest payable and other liabilities		710,954				604,581				582,674
Total liabilities		37,278,405				37,528,647				36,443,714
STOCKHOLDERS' EQUITY (1)		3,950,531				3,875,945				3,999,630
Total liabilities and stockholders’ equity	$	41,228,936			$	41,404,592			$	40,443,344
Book value per common share	$	28.71			$	28.07			$	33.45
Tangible book value per common share (2)	$	17.00			$	16.11			$	21.31
Common shares outstanding		120,222,057				120,314,023				119,584,854
(1) Includes net unrealized (loss) gain on:
Securities available-for-sale, net	$	(586,450	)		$	(637,346	)		$	65,968
Securities held to maturity		(204,453	)			(210,868	)			-
Total	$	(790,903	)		$	(848,214	)		$	65,968
(2) Non-GAAP measure.

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
	Three Months Ended												Year Ended
	December 31,				September 30,				December 31,				December 31,
		2022				2022				2021				2022				2021
	(In thousands, except per share data)
Interest income:
Loans and leases	$	404,985			$	346,550			$	263,662			$	1,312,580			$	996,457
Investment securities		50,292				53,135				48,469				209,751				153,468
Deposits in financial institutions		17,746				10,359				2,674				34,158				8,804
Total interest income		473,023				410,044				314,805				1,556,489				1,158,729
Interest expense:
Deposits		117,591				61,288				6,622				200,449				27,808
Borrowings		19,962				3,081				64				25,645				623
Subordinated debt		12,531				10,494				7,714				39,633				26,474
Total interest expense		150,084				74,863				14,400				265,727				54,905
Net interest income		322,939				335,181				300,405				1,290,762				1,103,824
Provision for credit losses		10,000				3,000				(6,000	)			24,500				(162,000	)
Net interest income after provision
for credit losses		312,939				332,181				306,405				1,266,262				1,265,824
Noninterest income:
Service charges on deposit accounts		3,178				3,608				3,476				13,991				13,269
Other commissions and fees		11,208				10,034				10,633				43,635				42,287
Leased equipment income		12,322				12,835				12,602				50,586				45,746
Gain on sale of loans and leases		388				58				172				518				1,733
(Loss) gain on sale of securities		(49,302	)			86				999				(50,321	)			1,615
Dividends and gains (losses) on equity investments		661				3,228				(1,570	)			(3,389	)			23,115
Warrant (loss) income		(46	)			292				23,990				2,490				49,341
Other income		2,635				8,478				7,080				17,317				16,821
Total noninterest (loss) income		(18,956	)			38,619				57,382				74,827				193,927
Noninterest expense:
Compensation		106,124				105,933				99,700				406,839				368,450
Occupancy		14,922				15,574				14,656				60,964				58,422
Data processing		9,722				9,568				8,171				38,177				30,277
Other professional services		6,924				10,674				5,946				30,278				21,492
Insurance and assessments		7,205				7,159				5,032				25,486				17,365
Intangible asset amortization		2,629				3,649				3,876				13,576				12,734
Leased equipment depreciation		8,627				8,908				9,569				35,658				35,755
Foreclosed assets (income) expense, net		(108	)			(248	)			(260	)			(3,737	)			(213	)
Acquisition, integration and reorganization costs		5,703				-				5,590				5,703				9,415
Customer related expense		18,197				12,673				6,175				55,273				20,504
Loan expense		6,150				6,228				5,627				24,572				17,031
Goodwill impairment		29,000				-				-				29,000				-
Other expense		11,737				15,500				12,028				51,732				46,185
Total noninterest expense		226,832				195,618				176,110				773,521				637,417
Earnings before income taxes		67,151				175,182				187,677				567,568				822,334
Income tax expense		17,642				43,566				51,632				143,955				215,375
Net earnings		49,509				131,616				136,045				423,613				606,959
Preferred stock dividends		9,947				9,392				-				19,339				-
Net earnings available to
common stockholders	$	39,562			$	122,224			$	136,045			$	404,274			$	606,959
Basic and diluted earnings per common share	$	0.33			$	1.02			$	1.14			$	3.37			$	5.10
Dividends declared and paid per common share	$	0.25			$	0.25			$	0.25			$	1.00			$	1.00

PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER COMMON SHARE
	Three Months Ended												Year Ended
	December 31,				September 30,				December 31,				December 31,
		2022				2022				2021				2022				2021
	(Dollars in thousands, except per share data)
Basic Earnings Per Common Share:
Net earnings	$	49,509			$	131,616			$	136,045			$	423,613			$	606,959
Less: Preferred stock dividends		(9,947	)			(9,392	)			-				(19,339	)			-
Net earnings available to
common stockholders		39,562				122,224				136,045				404,274				606,959
Less: Earnings allocated to
unvested restricted stock (1)		(714	)			(2,331	)			(2,311	)			(7,474	)			(10,248	)
Net earnings allocated to
common shares	$	38,848			$	119,893			$	133,734			$	396,800			$	596,711
Weighted average basic shares
and unvested restricted stock
outstanding		120,314				120,342				119,577				120,071				119,349
Less: weighted average unvested
restricted stock outstanding		(2,503	)			(2,556	)			(2,314	)			(2,442	)			(2,255	)
Weighted average basic shares
outstanding		117,811				117,786				117,263				117,629				117,094
Basic earnings per common share	$	0.33			$	1.02			$	1.14			$	3.37			$	5.10
Diluted Earnings Per Common Share:
Net earnings allocated to
common shares	$	38,848			$	119,893			$	133,734			$	396,800			$	596,711
Weighted average diluted shares
outstanding		117,811				117,786				117,263				117,629				117,094
Diluted earnings per common share	$	0.33			$	1.02			$	1.14			$	3.37			$	5.10
(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, 2022									September 30, 2022									December 31, 2021
				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)	$	28,192,953		$	407,135		5.73	%		$	27,038,873		$	348,639		5.12	%		$	21,367,665		$	265,549		4.93	%
Investment securities (3)		7,824,915			50,697		2.57	%			8,803,349			54,423		2.45	%			9,964,568			50,710		2.02	%
Deposits in financial
institutions		1,881,950			17,746		3.74	%			1,809,809			10,359		2.27	%			5,961,104			2,674		0.18	%
Total interest-earning
assets (1)		37,899,818			475,578		4.98	%			37,652,031			413,421		4.36	%			37,293,337			318,933		3.39	%
Other assets		3,252,145									3,189,241									3,064,810
Total assets	$	41,151,963								$	40,841,272								$	40,358,147
Liabilities and
Stockholders' Equity:
Interest checking	$	7,146,333			41,427		2.30	%		$	6,650,477			19,475		1.16	%		$	7,767,211			2,041		0.10	%
Money market		10,088,641			51,687		2.03	%			10,914,027			31,780		1.16	%			10,226,366			3,400		0.13	%
Savings		616,298			66		0.04	%			649,574			42		0.03	%			634,874			39		0.02	%
Time		3,909,130			24,411		2.48	%			3,000,187			9,991		1.32	%			1,421,859			1,142		0.32	%
Total interest-bearing
deposits		21,760,402			117,591		2.14	%			21,214,265			61,288		1.15	%			20,050,310			6,622		0.13	%
Borrowings		1,675,738			19,962		4.73	%			505,482			3,081		2.42	%			234,391			64		0.11	%
Subordinated debt		864,581			12,531		5.75	%			863,719			10,494		4.82	%			862,777			7,714		3.55	%
Total interest-bearing
liabilities		24,300,721			150,084		2.45	%			22,583,466			74,863		1.32	%			21,147,478			14,400		0.27	%
Noninterest-bearing
demand deposits		12,325,902									13,653,177									14,713,385
Other liabilities		626,540									593,450									543,017
Total liabilities		37,253,163									36,830,093									36,403,880
Stockholders' equity		3,898,800									4,011,179									3,954,267
Total liabilities and
stockholders' equity	$	41,151,963								$	40,841,272								$	40,358,147
Net interest income (1)				$	325,494								$	338,558								$	304,533
Net interest spread (1)							2.53	%								3.04	%								3.12	%
Net interest margin (1)							3.41	%								3.57	%								3.24	%
Total deposits (4)	$	34,086,304		$	117,591		1.37	%		$	34,867,442		$	61,288		0.70	%		$	34,763,695		$	6,622		0.08	%
(1) Tax equivalent.
(2) Includes net loan premium amortization of $2.5 million, $3.8 million, and $6.4 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively.
(3) Includes tax-equivalent adjustments of $0.4 million, $1.3 million, and $2.2 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021 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,
		2022				2022				2022				2022				2021
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	212,273			$	216,436			$	197,027			$	205,446			$	112,548
Interest-earning deposits in financial
institutions		2,027,949				2,244,272				2,192,877				1,865,235				3,944,686
Total cash and cash equivalents		2,240,222				2,460,708				2,389,904				2,070,681				4,057,234
Securities available-for-sale		4,843,487				5,891,328				6,780,648				9,975,109				10,694,458
Securities held-to-maturity		2,269,135				2,264,601				2,260,367				-				-
Federal Home Loan Bank stock		34,290				36,990				33,210				17,250				17,250
Total investment securities		7,146,912				8,192,919				9,074,225				9,992,359				10,711,708
Loans held for sale		65,076				15,534				-				-				-
Gross loans and leases held for investment		28,726,016				27,775,962				26,608,541				24,439,749				23,026,308
Deferred fees, net		(116,887	)			(115,921	)			(107,404	)			(87,677	)			(84,760	)
Total loans and leases held for
investment, net of deferred fees		28,609,129				27,660,041				26,501,137				24,352,072				22,941,548
Allowance for loan and lease losses		(200,732	)			(189,327	)			(188,705	)			(197,398	)			(200,564	)
Total loans and leases held for
investment, net		28,408,397				27,470,714				26,312,432				24,154,674				22,740,984
Equipment leased to others under
operating leases		404,245				338,691				324,233				325,305		-		339,150
Premises and equipment, net		54,315				50,781				51,083				51,011				46,740
Foreclosed assets, net		5,022				2,967				-				304				12,843
Goodwill		1,376,736				1,405,736				1,405,736				1,405,736				1,405,736
Core deposit and customer relationship
intangibles, net		31,381				34,010				37,659				41,308				44,957
Other assets		1,496,630				1,432,532				1,355,451				1,208,261				1,083,992
Total assets	$	41,228,936			$	41,404,592			$	40,950,723			$	39,249,639			$	40,443,344
LIABILITIES:
Noninterest-bearing deposits	$	11,212,357			$	12,775,756			$	13,338,029			$	14,057,051			$	14,543,133
Interest-bearing deposits		22,723,977				21,420,116				20,630,123				19,167,844				20,454,624
Total deposits		33,936,334				34,195,872				33,968,152				33,224,895				34,997,757
Borrowings		1,764,030				1,864,815				1,592,000				991,000				-
Subordinated debt		867,087				863,379				863,756				863,880				863,283
Accrued interest payable and other
liabilities		710,954				604,581				548,412				519,269				582,674
Total liabilities		37,278,405				37,528,647				36,972,320				35,599,044				36,443,714
STOCKHOLDERS' EQUITY (1)		3,950,531				3,875,945				3,978,403				3,650,595				3,999,630
Total liabilities and stockholders’
equity	$	41,228,936			$	41,404,592			$	40,950,723			$	39,249,639			$	40,443,344
Book value per common share	$	28.71			$	28.07			$	28.93			$	30.52			$	33.45
Tangible book value per common share (2)	$	17.00			$	16.11			$	16.93			$	18.42			$	21.31
Common shares outstanding		120,222,057				120,314,023				120,288,024				119,601,766				119,584,854
(1) Includes net unrealized (loss) gain on:
Securities available-for-sale, net	$	(586,450	)		$	(637,346	)		$	(428,242	)		$	(376,475	)		$	65,968
Securities held to maturity		(204,453	)			(210,868	)			(216,508	)			-				-
Total	$	(790,903	)		$	(848,214	)		$	(644,750	)		$	(376,475	)		$	65,968
(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,
		2022				2022				2022				2022				2021
	(In thousands, except per share data)
Interest income:
Loans and leases	$	404,985			$	346,550			$	293,286			$	267,759			$	263,662
Investment securities		50,292				53,135				52,902				53,422				48,469
Deposits in financial institutions		17,746				10,359				4,330				1,723				2,674
Total interest income		473,023				410,044				350,518				322,904				314,805
Interest expense:
Deposits		117,591				61,288				15,362				6,208				6,622
Borrowings		19,962				3,081				2,441				161				64
Subordinated debt		12,531				10,494				8,790				7,818				7,714
Total interest expense		150,084				74,863				26,593				14,187				14,400
Net interest income		322,939				335,181				323,925				308,717				300,405
Provision for credit losses		10,000				3,000				11,500				-				(6,000	)
Net interest income after provision
for credit losses		312,939				332,181				312,425				308,717				306,405
Noninterest income:
Service charges on deposit accounts		3,178				3,608				3,634				3,571				3,476
Other commissions and fees		11,208				10,034				10,813				11,580				10,633
Leased equipment income		12,322				12,835				12,335				13,094				12,602
Gain on sale of loans and leases		388				58				12				60				172
(Loss) gain on sale of securities		(49,302	)			86				(1,209	)			104				999
Dividends and gains (losses) on equity investments		661				3,228				4,097				(11,375	)			(1,570	)
Warrant (loss) income		(46	)			292				1,615				629				23,990
Other income		2,635				8,478				3,049				3,155				7,080
Total noninterest (loss) income		(18,956	)			38,619				34,346				20,818				57,382
Noninterest expense:
Compensation		106,124				105,933				102,542				92,240				99,700
Occupancy		14,922				15,574				15,268				15,200				14,656
Data processing		9,722				9,568				9,258				9,629				8,171
Other professional services		6,924				10,674				6,726				5,954				5,946
Insurance and assessments		7,205				7,159				5,632				5,490				5,032
Intangible asset amortization		2,629				3,649				3,649				3,649				3,876
Leased equipment depreciation		8,627				8,908				8,934				9,189				9,569
Foreclosed assets (income) expense, net		(108	)			(248	)			(28	)			(3,353	)			(260	)
Acquisition, integration and reorganization costs		5,703				-				-				-				5,590
Customer related expense		18,197				12,673				11,748				12,655				6,175
Loan expense		6,150				6,228				7,037				5,157				5,627
Goodwill impairment		29,000				-				-				-				-
Other expense		11,737				15,500				12,879				11,616				12,028
Total noninterest expense		226,832				195,618				183,645				167,426				176,110
Earnings before income taxes		67,151				175,182				163,126				162,109				187,677
Income tax expense		17,642				43,566				40,766				41,981				51,632
Net earnings		49,509				131,616				122,360				120,128				136,045
Preferred stock dividends		9,947				9,392				-				-				-
Net earnings available to
common stockholders	$	39,562			$	122,224			$	122,360			$	120,128			$	136,045
Basic and diluted earnings per common share	$	0.33			$	1.02			$	1.02			$	1.01			$	1.14
Dividends declared and paid per common 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,
		2022				2022				2022				2022				2021
	(Dollars in thousands)
Performance Ratios:
Return on average assets (1)		0.48	%			1.28	%			1.23	%			1.22	%			1.34	%
Pre-provision, pre-goodwill impairment,
pre-tax net revenue ("PPNR") return
on average assets (1)(2)		1.02	%			1.73	%			1.75	%			1.65	%			1.79	%
Return on average equity (1)		5.04	%			13.02	%			13.44	%			12.66	%			13.65	%
Return on average tangible common
equity (1)(2)		14.39	%			24.11	%			24.42	%			20.93	%			22.06	%
Efficiency ratio		53.3	%			51.0	%			49.5	%			50.1	%			46.2	%
Noninterest expense as a percentage
of average assets (1)		2.19	%			1.90	%			1.84	%			1.70	%			1.73	%
Average Yields/Costs (1):
Yield on:
Average loans and leases (3)		5.73	%			5.12	%			4.65	%			4.66	%			4.93	%
Average investment securities (3)		2.57	%			2.45	%			2.32	%			2.17	%			2.02	%
Average interest-earning assets (3)		4.98	%			4.36	%			3.85	%			3.59	%			3.39	%
Cost of:
Average interest-bearing deposits		2.14	%			1.15	%			0.31	%			0.13	%			0.13	%
Average total deposits		1.37	%			0.70	%			0.18	%			0.07	%			0.08	%
Average interest-bearing liabilities		2.45	%			1.32	%			0.49	%			0.27	%			0.27	%
Net interest spread (3)		2.53	%			3.04	%			3.36	%			3.32	%			3.12	%
Net interest margin (3)		3.41	%			3.57	%			3.56	%			3.43	%			3.24	%
Average Balances:
Assets:
Loans and leases, net of deferred fees	$	28,192,953			$	27,038,873			$	25,499,773			$	23,433,019			$	21,367,665
Investment securities		7,824,915				8,803,349				9,488,653				10,397,709				9,964,568
Deposits in financial institutions		1,881,950				1,809,809				1,984,751				3,083,159				5,961,104
Interest-earning assets		37,899,818				37,652,031				36,973,177				36,913,887				37,293,337
Total assets		41,151,963				40,841,272				40,031,891				39,883,304				40,358,147
Liabilities:
Noninterest-bearing deposits		12,325,902				13,653,177				13,987,398				14,463,667				14,713,385
Interest-bearing deposits		21,760,402				21,214,265				19,661,618				19,868,395				20,050,310
Total deposits		34,086,304				34,867,442				33,649,016				34,332,062				34,763,695
Borrowings		1,675,738				505,482				1,356,616				298,444				234,391
Subordinated debt		864,581				863,719				863,653				863,572				862,777
Interest-bearing liabilities		24,300,721				22,583,466				21,881,887				21,030,411				21,147,478
Stockholders' equity		3,898,800				4,011,179				3,652,368				3,847,481				3,954,267
(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,
		2022				2022				2022				2022				2021
	(Dollars in thousands, except per share data)
Credit Quality Metrics for Loans
and Leases Held for Investment:
Nonaccrual loans and leases	$	103,778			$	89,742			$	78,527			$	66,538			$	61,174
Nonperforming assets		108,800				92,709				78,527				66,842				74,017
Special mention loans and leases		566,259				463,994				480,261				377,315				391,611
Classified loans and leases		118,271				96,685				104,264				82,068				116,104
Allowance for loan and lease losses		200,732				189,327				188,705				197,398				200,564
Allowance for credit losses		291,803				284,398				283,776				272,469				273,635
For the quarter:
Provision for credit losses		10,000				3,000				10,000				-				(6,000	)
Net charge-offs (recoveries)		2,595				2,378				(1,307	)			1,166				169
Nonaccrual loans and leases to loans
and leases		0.36	%			0.32	%			0.30	%			0.27	%			0.27	%
Nonperforming assets to loans and
leases and foreclosed assets		0.38	%			0.34	%			0.30	%			0.27	%			0.32	%
Special mention loans and leases to
loans and leases		1.98	%			1.68	%			1.81	%			1.55	%			1.71	%
Classified loans and leases to loans
and leases		0.41	%			0.35	%			0.39	%			0.34	%			0.51	%
Allowance for loan and lease losses
to loans and leases		0.70	%			0.68	%			0.71	%			0.81	%			0.87	%
Allowance for credit losses to loans
and leases		1.02	%			1.03	%			1.07	%			1.12	%			1.19	%
Allowance for credit losses to
nonaccrual loans and leases		281.18	%			316.91	%			361.37	%			409.49	%			447.31	%
Net charge-offs (recoveries)
to average loans and leases		0.04	%			0.03	%			(0.02	)%			0.02	%			0.00	%
Trailing 12 months net charge-offs
(recoveries) to average loans and
leases		0.02	%			0.01	%			0.00	%			(0.02	)%			(0.01	)%
PacWest Bancorp Consolidated:
Common equity tier 1 capital ratio (1)		8.70	%			8.56	%			8.24	%			8.64	%			8.86	%
Tier 1 capital ratio (1)		10.60	%			10.46	%			10.15	%			9.07	%			9.32	%
Total capital ratio (1)		13.61	%			13.43	%			13.12	%			12.27	%			12.69	%
Tier 1 leverage capital ratio (1)		8.61	%			8.63	%			8.52	%			7.11	%			6.84	%
Risk-weighted assets (1)	$	33,033,597			$	33,042,173			$	33,009,455			$	30,297,312			$	28,508,808
Equity to assets ratio		9.58	%			9.36	%			9.72	%			9.30	%			9.89	%
Tangible common equity ratio (2)		5.13	%			4.85	%			5.15	%			5.83	%			6.54	%
Book value per common share	$	28.71			$	28.07			$	28.93			$	30.52			$	33.45
Tangible book value per common share (2)	$	17.00			$	16.11			$	16.93			$	18.42			$	21.31
Pacific Western Bank:
Common equity tier 1 capital ratio (1)		10.32	%			10.17	%			9.78	%			9.32	%			9.56	%
Tier 1 capital ratio (1)		10.32	%			10.17	%			9.78	%			9.32	%			9.56	%
Total capital ratio (1)		12.34	%			12.16	%			11.77	%			11.45	%			11.80	%
Tier 1 leverage capital ratio (1)		8.39	%			8.39	%			8.21	%			7.31	%			7.00	%
(1) Capital information for December 31, 2022 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 common equity, (4) tangible common equity ratio, and (5) tangible book value per common share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of PPNR, return on average tangible common equity, tangible common equity ratio, and tangible book value per common share is prevalent among banking regulators, investors, and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, and (5) book value per common 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		2022				2022				2021				2022				2021
	(Dollars in thousands)
Net earnings	$	49,509			$	131,616			$	136,045			$	423,613			$	606,959
Net interest income	$	322,939			$	335,181			$	300,405			$	1,290,762			$	1,103,824
Add: Noninterest (loss) income		(18,956	)			38,619				57,382				74,827				193,927
Less: Noninterest expense		(226,832	)			(195,618	)			(176,110	)			(773,521	)			(637,417	)
Add: Goodwill impairment		29,000				-				-				29,000				-
Pre-provision, pre-goodwill impairment,
pre-tax net revenue ("PPNR")	$	106,151			$	178,182			$	181,677			$	621,068			$	660,334
Average assets	$	41,151,963			$	40,841,272			$	40,358,147			$	40,481,581			$	35,518,488
Return on average assets (1)		0.48	%			1.28	%			1.34	%			1.05	%			1.71	%
PPNR return on average assets (2)		1.02	%			1.73	%			1.79	%			1.53	%			1.86	%
(1) Annualized net earnings divided by average assets.
(2) Annualized PPNR divided by average assets.

	Three Months Ended												Year Ended
Return on Average	December 31,				September 30,				December 31,				December 31,
Tangible Common Equity		2022				2022				2021				2022				2021
	(Dollars in thousands)
Net earnings	$	49,509			$	131,616			$	136,045			$	423,613			$	606,959
Less: Preferred stock dividends		(9,947	)			(9,392	)			-				(19,339	)			-
Net earnings available to
common stockholders		39,562				122,224				136,045				404,274				606,959
Add: Intangible asset amortization		2,629				3,649				3,876				13,576				12,734
Add: Goodwill impairment		29,000				-				-				29,000				-
Adjusted net earnings	$	71,191			$	125,873			$	139,921			$	446,850			$	619,693
Average stockholders' equity	$	3,898,800			$	4,011,179			$	3,954,267			$	3,853,033			$	3,808,019
Less: Average intangible assets		1,438,173				1,441,689				1,437,780				1,443,528				1,269,546
Less: Average preferred stock		498,516				498,516				-				285,488				-
Average tangible common equity	$	1,962,111			$	2,070,974			$	2,516,487			$	2,124,017			$	2,538,473
Return on average equity (1)		5.04	%			13.02	%			13.65	%			10.99	%			15.94	%
Return on average tangible
common equity (2)		14.39	%			24.11	%			22.06	%			21.04	%			24.41	%
(1) Annualized net earnings divided by average stockholders' equity.
(2) Annualized adjusted net earnings divided by average tangible common equity.

Tangible Common Equity Ratio/
Tangible Book Value Per	December 31,				September 30,				June 30,				March 31,				December 31,
Common Share		2022				2022				2022				2022				2021
	(Dollars in thousands, except per share data)
Stockholders' equity	$	3,950,531			$	3,875,945			$	3,978,403			$	3,650,595			$	3,999,630
Less: Preferred stock		498,516				498,516				498,516				-				-
Total common equity		3,452,015				3,377,429				3,479,887				3,650,595				3,999,630
Less: Intangible assets		1,408,117				1,439,746				1,443,395				1,447,044				1,450,693
Tangible common equity		2,043,898				1,937,683				2,036,492				2,203,551				2,548,937
Add: Accumulated other
comprehensive loss (income)		790,903				848,214				644,750				376,475				(65,968	)
Adjusted tangible common equity	$	2,834,801			$	2,785,897			$	2,681,242			$	2,580,026			$	2,482,969
Total assets	$	41,228,936			$	41,404,592			$	40,950,723			$	39,249,639			$	40,443,344
Less: Intangible assets		1,408,117				1,439,746				1,443,395				1,447,044				1,450,693
Tangible assets	$	39,820,819			$	39,964,846			$	39,507,328			$	37,802,595			$	38,992,651
Equity to assets ratio		9.58	%			9.36	%			9.72	%			9.30	%			9.89	%
Tangible common equity ratio (1)		5.13	%			4.85	%			5.15	%			5.83	%			6.54	%
Tangible common equity ratio,
excluding AOCI (2)		7.12	%			6.97	%			6.79	%			6.82	%			6.37	%
Book value per common share (3)	$	28.71			$	28.07			$	28.93			$	30.52			$	33.45
Tangible book value per common share (4)	$	17.00			$	16.11			$	16.93			$	18.42			$	21.31
Tangible book value per common share,
excluding AOCI (5)	$	23.58			$	23.16			$	22.29			$	21.57			$	20.76
Common shares outstanding		120,222,057				120,314,023				120,288,024				119,601,766				119,584,854
(1) Tangible common equity divided by tangible assets.
(2) Adjusted tangible common equity divided by tangible assets.
(3) Total common equity divided by common shares outstanding.
(4) Tangible common equity divided by common shares outstanding.
(5) Adjusted tangible common equity divided by common shares outstanding.

CONTACTS
Kevin L. Thompson Executive Vice President, Chief Financial Officer 303.802.8934	William J. Black Executive Vice President, Strategy and Corporate Development 919.597.7466

FAQ

What were the fourth quarter 2022 results for PacWest Bancorp (PACW)?

PacWest reported net earnings of $39.6 million, or $0.33 per share, for Q4 2022.

How did PacWest Bancorp improve its capital ratios in Q4 2022?

PacWest's CET1 ratio increased from 8.56% to 8.70% in Q4 2022.

What strategic actions did PacWest take in Q4 2022?

PacWest sold $1 billion of securities at a loss of $49 million and restructured its lending subsidiary, Civic.

What is the current state of deposits for PacWest Bancorp (PACW)?

Total deposits decreased by $259.5 million in Q4 2022, largely due to a reduction in core deposits.

What challenges did PacWest Bancorp face in the fourth quarter of 2022?

Significant declines in net earnings, a goodwill impairment of $29 million, and losses from securities sales were key challenges.