PacWest Bancorp Announces Results for the Second Quarter 2022

Rhea-AI Summary

PacWest Bancorp (PACW) reported a net earnings increase of $122.4 million, with diluted earnings per share at $1.02 for Q2 2022, reflecting a 4.8% rise in net interest income to $327.8 million. Loan growth surged by 8.8% to $26.5 billion, although core deposits fell by 7.8%. The provision for credit losses stood at $11.5 million, primarily due to rising unfunded commitments. Capital ratios improved, with a Tier 1 ratio of 10.15% after a preferred stock issuance. Noninterest income rose significantly to $34.3 million. However, overall net recoveries declined amidst market volatility.

Positive

• Net earnings increased by $2.2 million from Q1 2022.
• Loan portfolio growth of $2.1 billion or 8.8% in Q2 2022.
• Noninterest income increased by $13.5 million, driven by better equity investment performance.

Negative

• Core deposits declined by $2.5 billion or 7.8%, affecting liquidity.
• Provision for credit losses increased to $11.5 million due to higher unfunded commitments.
• Credit quality metrics showed an uptick in nonaccrual loans.

LOS ANGELES, July 20, 2022 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) -

SECOND QUARTER 2022 RESULTS

$122.4M		$1.02				$174.6M	24.42%
Net Earnings		Diluted Earnings per Common Share				PPNR	ROATCE

SECOND QUARTER 2022 HIGHLIGHTS Net Earnings of $122.4 Million or $1.02 Per Diluted Share Net Interest Income (TE) of $327.8 Million in 2Q22 vs. $312.7 Million in 1Q22; Up 4.8% Provision for Credit Losses of $11.5 Million in 2Q22, of Which $1.5 Million Related to Held-to-Maturity Securities (HTM), vs. No Provision for Credit Losses in 1Q22 Noninterest Income of $34.3 Million in 2Q22 vs. $20.8 Million in 1Q22 Noninterest Expense of $183.6 Million in 2Q22 vs. $167.4 Million in 1Q22; Driven by Loan Growth Loan Growth of $2.1 Billion or 8.8% from Prior Quarter

ACL Ratio of 1.07% and ALLL Ratio of 0.71% at 2Q22 vs. 1.12% and 0.81% at 1Q22, Respectively Core Deposits Down $2.5 Billion or 7.8%, of Which $1.9 Billion related to Venture Banking Tier 1 and Total Capital Ratios Increased Due to Preferred Stock Offering Offset by Growth in Risk-Weighted Assets – Tier 1 Ratio of 10.15% and Total Capital Ratio of 13.12% at 2Q22 Available-for-Sale Securities (AFS) Decreased from $10.0 Billion at 1Q22 to $6.8 Billion at 2Q22; $2.3 Billion was Reclassified to HTM on June 1; AOCI Net Unrealized Loss on the AFS Portfolio Increased from $376.5 Million at 1Q22 to $428.2 Million at 2Q22; Total AOCI Net Unrealized Loss of $644.8 Million at 2Q22

CEO COMMENTARY

Matt Wagner, CEO, commented, “Our organic loan growth during the second quarter was exceptionally strong as we continued to see high demand from our clients. Loans grew by $2.1 billion in the second quarter to an all-time high of $26.5 billion. Given the high level of economic uncertainty and interest rate volatility, we are taking a cautious approach and expect slower loan growth in the second half of the year. On the deposits side, we continued to see net outflows in the venture banking business as private fundraising and capital market activities for late stage companies continues to be muted. With venture banking deposits down $1.9 billion during the quarter, we used wholesale deposits to fund the loan growth, which increased deposit costs.”

“Credit quality remains strong as evidenced by net recoveries of two basis points and a slight net recovery on a year-to-date basis, and most credit metrics remain at historically low levels. We recorded a provision for credit losses on loans of $10.0 million during the quarter primarily as a result of the $2.0 billion increase in unfunded commitments. Our ACL ratio of 1.07% remains above the CECL adoption level of 0.97%.”

“Our Tier 1 and Total capital ratios increased during the second quarter of 2022 due to the preferred stock issuance in early June. The increase was partially offset by an increase in risk-weighted assets of $2.7 billion primarily as a result of continued loan growth and increases in unfunded commitments. Capital and balance sheet optimization remain a focus area as we look to grow our capital levels to those more similar to the first half of 2021.”

FINANCIAL HIGHLIGHTS

`	At or For the												At or For the
	Three Months Ended												Six Months Ended
	June 30,				March 31,				Increase				June 30,								Increase
Financial Highlights (1)	2022				2022				(Decrease)				2022				2021				(Decrease)
	(Dollars in thousands, except per share data)
Net earnings	$	122,360			$	120,128			$	2,232			$	242,488			$	330,918			$	(88,430	)
Diluted earnings per
common share	$	1.02			$	1.01			$	0.01			$	2.03			$	2.78			-$	0.75
Pre-provision, pre-tax net
revenue ("PPNR") (2)	$	174,626			$	162,109			$	12,517			$	336,735			$	310,891			$	25,844
Return on average assets		1.23	%			1.22	%			0.01				1.22	%			2.03	%			(0.81	)
PPNR return on average
assets (2)		1.75	%			1.65	%			0.10				1.70	%			1.91	%			(0.21	)
Return on average
tangible common equity (2)		24.42	%			20.93	%			3.49				22.55	%			27.51	%			(4.96	)
Yield on average loans and
leases (tax equivalent)		4.65	%			4.66	%			(0.01	)			4.66	%			5.19	%			(0.53	)
Cost of average total
deposits		0.18	%			0.07	%			0.11				0.13	%			0.11	%			0.02
Net interest margin ("NIM")
(tax equivalent)		3.56	%			3.43	%			0.13				3.50	%			3.53	%			(0.03	)
Efficiency ratio		49.5	%			50.1	%			(0.6	)			49.8	%			47.2	%			2.6
Total assets	$	40,950,723			$	39,249,639			$	1,701,084			$	40,950,723			$	34,867,987			$	6,082,736
Loans and leases held
for investment,
net of deferred fees	$	26,501,137			$	24,352,072			$	2,149,065			$	26,501,137			$	19,506,257			$	6,994,880
Noninterest-bearing
demand deposits	$	13,338,029			$	14,057,051			$	(719,022	)		$	13,338,029			$	11,252,286			$	2,085,743
Core deposits	$	29,218,646			$	31,676,404			$	(2,457,758	)		$	29,218,646			$	27,038,161			$	2,180,485
Total deposits	$	33,968,152			$	33,224,895			$	743,257			$	33,968,152			$	29,647,034			$	4,321,118
As percentage of total
deposits:
Noninterest-bearing
demand deposits		39	%			42	%			(3	)			39	%			38	%			1
Core deposits		86	%			95	%			(9	)			86	%			91	%			(5	)
Equity to assets ratio		9.72	%			9.30	%			0.42				9.72	%			11.03	%			(1.31	)
Common equity tier 1
capital ratio		8.24	%			8.64	%			(0.40	)			8.24	%			10.41	%			(2.17	)
Tier 1 capital ratio		10.15	%			9.07	%			1.08				10.15	%			10.41	%			(0.26	)
Total capital ratio		13.12	%			12.27	%			0.85				13.12	%			14.99	%			(1.87	)
Tangible common equity
ratio (2)		5.15	%			5.83	%			(0.68	)			5.15	%			7.80	%			(2.65	)
Book value per common
share	$	28.93			$	30.52			$	(1.59	)		$	28.93			$	32.17			$	(3.24	)
Tangible book value per
common share (2)	$	16.93			$	18.42			$	(1.49	)		$	16.93			$	21.95			$	(5.02	)
(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 increased by $15.2 million to $323.9 million for the second quarter of 2022 compared to $308.7 million for the first quarter of 2022 due mainly to higher income on loans and leases resulting primarily from higher average balances and higher income on deposits in financial institutions, offset partially by higher interest expense on deposits and borrowings. Income on loans and leases increased by $25.5 million in the second quarter of 2022 due to a $2.0 billion increase in the balance of average loans and leases and one more day compared to the first quarter of 2022. Income on deposits in financial institutions increased by $2.6 million in the second quarter of 2022 due to a 65 basis point increase in the yield on average deposits in financial institutions, offset partially by a $909.1 million decrease in the average balance. The tax equivalent yield on average loans and leases was 4.65% for the second quarter of 2022 compared to 4.66% for the first quarter of 2022. The slight decrease in the tax equivalent yield on average loans and leases was due primarily to interest recapture on nonaccrual loans being lower by $2.3 million and amortized loan fees being lower by $1.3 million. Interest expense on deposits increased by $9.2 million in the second quarter of 2022 due mainly to a higher level of wholesale deposits which contributed to an 11 basis points increase in the cost of deposits. Interest expense on borrowings increased by $2.3 million due to a $1.1 billion increase in average balance and 50 basis points increase in cost of average borrowings.

The tax equivalent NIM was 3.56% for the second quarter of 2022 compared to 3.43% for the first quarter of 2022. The increase in the NIM was due mainly to the change in the interest-earning assets mix driven by the increase in the balance of average loans and leases as a percentage of average interest-earning assets from 64% to 69%, the decrease in the balance of average investment securities as a percentage of average interest-earning assets from 28% to 26%, and the decrease in the balance of average deposits in financial institutions as a percentage of average interest-earning assets from 8% to 5%. The balance of average loans and leases increased by $2.0 billion to $25.4 billion, the balance of average investment securities decreased by $909.1 million to $9.5 billion, and the balance of average deposits in financial institutions decreased by $1.1 billion to $2.0 billion. The increase in the balance of average loans and leases was the result of the Company’s strong organic loan growth.

The cost of average total deposits was 0.18% in the second quarter of 2022 compared to 0.07% in the first quarter of 2022 due mainly to higher average balances and rates on higher-cost wholesale money market and brokered time deposits, as well as higher market rates on our deposit products. Given strong loan growth and declines in core deposits, wholesale deposits increased by $2.9 billion during the second quarter from $0.5 billion to $3.4 billion.

PROVISION FOR CREDIT LOSSES

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

	Three Months Ended
	June 30,				March 31,				Increase
Provision for Credit Losses	2022				2022				(Decrease)
	(In thousands)
Reduction in allowance for
loan and lease losses	$	(10,000	)		$	(2,000	)		$	(8,000	)
Addition to reserve for
unfunded loan commitments		20,000				2,000				18,000
Total loan-related provision		10,000				-				10,000
Addition to allowance for
held-to-maturity securities		1,500				-				1,500
Total provision for credit losses	$	11,500			$	-			$	11,500

The provision for credit losses was $11.5 million for the second quarter of 2022 compared to no provision for credit losses for the first quarter of 2022. The $10.0 million increase in the loan-related provision was due mainly to the growth in unfunded commitments of $2.0 billion during the second quarter of 2022. The $1.5 million provision for credit losses on held-to-maturity securities is related to our $2.3 billion transfer from available-for-sale securities in the second quarter of 2022 and the estimated current expected credit loss on those held-to-maturity securities.

NONINTEREST INCOME

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

	Three Months Ended
	June 30,				March 31,				Increase
Noninterest Income	2022				2022				(Decrease)
	(In thousands)
Service charges on deposit accounts	$	3,634			$	3,571			$	63
Other commissions and fees		10,813				11,580				(767	)
Leased equipment income		12,335				13,094				(759	)
Gain on sale of loans and leases		12				60				(48	)
(Loss) gain on sale of securities		(1,209	)			104				(1,313	)
Dividends and gains (losses) on equity investments		4,097				(11,375	)			15,472
Warrant income		1,615				629				986
Other income		3,049				3,155				(106	)
Total noninterest income	$	34,346			$	20,818			$	13,528

Noninterest income increased by $13.5 million to $34.3 million for the second quarter of 2022 compared to $20.8 million for the first quarter of 2022 due primarily to an increase of $15.5 million in dividends and gains on equity investments, offset partially by an increase in loss on sale of securities. Dividends and gains on equity investments increased to $4.1 million for the second quarter of 2022 compared to a negative $11.4 million in the first quarter of 2022 due primarily to higher fair value gains on equity investments still held and lower fair value marks and losses on sales of equity investments. The increase in loss on sale of securities resulted from the sale of $393.4 million of securities for a net loss of $1.2 million for the second quarter of 2022 compared to sales of $206.1 million of securities for a net gain of $0.1 million for the first quarter of 2022. Warrant income was higher due primarily to merger and acquisition activities of three underlying companies.

NONINTEREST EXPENSE

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

	Three Months Ended
	June 30,				March 31,				Increase
Noninterest Expense		2022				2022			(Decrease)
	(In thousands)
Compensation	$	102,542			$	92,240			$	10,302
Occupancy		15,268				15,200				68
Data processing		9,258				9,629				(371	)
Other professional services		6,726				5,954				772
Insurance and assessments		5,632				5,490				142
Intangible asset amortization		3,649				3,649				-
Leased equipment depreciation		8,934				9,189				(255	)
Foreclosed assets (income) expense, net		(28	)			(3,353	)			3,325
Customer related expense		11,748				12,655				(907	)
Loan expense		7,037				5,157				1,880
Other		12,879				11,616				1,263
Total noninterest expense	$	183,645			$	167,426			$	16,219

Noninterest expense increased by $16.2 million to $183.6 million for the second quarter of 2022 compared to $167.4 million for the first quarter of 2022 due primarily to an increase of $10.3 million in compensation expense, a decrease of $3.3 million in foreclosed assets income, an increase of $1.9 million in loan expense, and an increase of $1.3 million in other expense. The increase in compensation expense was due mainly to higher commissions, salaries, and bonus expense attributable mostly to strong loan growth and a full quarter of annual merit increases along with higher headcount which increased by 95 FTEs. The decrease in foreclosed assets income was due to a $3.2 million gain on the sale of our largest foreclosed property in the first quarter of 2022. The increase in loan expense was due mainly to higher loan-related legal expenses related to higher loan production. The increase in other expense was due mostly to higher employee costs for business travel.

INCOME TAXES

The effective income tax rate was 25.0% for the second quarter of 2022 compared to 25.9% for the first quarter of 2022. The decrease was due primarily to higher tax credits in the second quarter of 2022. 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:

	June 30, 2022						March 31, 2022						June 30, 2021
				% of						% of						% of
Deposit Composition	Balance			Total			Balance			Total			Balance			Total
	(Dollars in thousands)
Noninterest-bearing demand	$	13,338,029		39	%		$	14,057,051		42	%		$	11,252,286		38	%
Interest checking		6,197,234		18	%			6,673,696		20	%			7,394,472		25	%
Money market		9,029,433		27	%			10,301,996		31	%			7,777,199		26	%
Savings		653,950		2	%			643,661		2	%			614,204		2	%
Total core deposits		29,218,646		86	%			31,676,404		95	%			27,038,161		91	%
Non-core non-maturity deposits		2,185,248		6	%			322,732		1	%			1,122,971		4	%
Total non-maturity deposits		31,403,894		92	%			31,999,136		96	%			28,161,132		95	%
Time deposits $250,000 and under		1,898,312		6	%			878,383		3	%			913,371		3	%
Time deposits over $250,000		665,946		2	%			347,376		1	%			572,531		2	%
Total time deposits		2,564,258		8	%			1,225,759		4	%			1,485,902		5	%
Total deposits	$	33,968,152		100	%		$	33,224,895		100	%		$	29,647,034		100	%

At June 30, 2022, core deposits totaled $29.2 billion or 86% of total deposits, including $13.3 billion of noninterest-bearing demand deposits or 39% of total deposits. Core deposits decreased by $2.5 billion or 7.8% in the second quarter of 2022 driven primarily by a $1.9 billion decrease in balances from our venture banking clients. Total deposits increased by $743.3 million or 2.2% in the second quarter of 2022 due to a $1.9 billion increase in non-core non-maturity deposits and a $1.3 billion increase in time deposits, offset partially by the decrease in core deposits. Total venture banking deposits decreased from $14.0 billion as of March 31, 2022 to $12.1 billion as of June 30, 2022.

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 increased from $1.7 billion as of March 31, 2022 to $2.1 billion as of June 30, 2022, of which $1.5 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								Six Months Ended
Roll Forward of Loans and Leases Held	June 30,				March 31,				June 30,
for Investment, Net of Deferred Fees	2022				2022				2022
	(Dollars in thousands)
Balance, beginning of period	$	24,352,072			$	22,941,548			$	22,941,548
Additions:
Production		2,815,181				2,574,860				5,390,041
Disbursements		1,871,627				1,589,152				3,460,779
Total production and disbursements		4,686,808				4,164,012				8,850,820
Reductions:
Payoffs		(1,347,447	)			(1,448,680	)			(2,796,127	)
Paydowns		(1,183,178	)			(1,264,571	)			(2,447,749	)
Total payoffs and paydowns		(2,530,625	)			(2,713,251	)			(5,243,876	)
Sales		(4,319	)			(36,698	)			(41,017	)
Transfers to foreclosed assets		-				(305	)			(305	)
Charge-offs		(2,799	)			(3,234	)			(6,033	)
Total reductions		(2,537,743	)			(2,753,488	)			(5,291,231	)
Net increase (decrease)		2,149,065				1,410,524				3,559,589
Balance, end of period	$	26,501,137			$	24,352,072			$	26,501,137
Weighted average rate on production (1)		4.61	%			4.31	%			4.46	%
(1) The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes amortized fees. Amortized fees added approximately 23 basis points to loan yields in 2022.

Loans and leases held for investment, net of deferred fees, increased by $2.1 billion or 8.8% in the second quarter of 2022 to $26.5 billion at June 30, 2022. The overall increase in the loans and leases balance for the second quarter of 2022 was due primarily to increases in the residential real estate mortgage, asset-based, and residential real estate construction portfolios.

Civic loan production was $847 million for the second quarter of 2022 compared to $559 million for the first quarter of 2022. The Civic loan portfolio as of June 30, 2022 totaled $2.4 billion.

The weighted average rate on the $2.8 billion of production for the second quarter of 2022 increased to 4.61% from 4.31% in the first quarter of 2022 due primarily to the loan mix (lower levels of single-family loan pool purchases and higher level of Civic fundings). In the second quarter of 2022, we purchased $69 million of single-family loan pools compared to $587 million in the first quarter of 2022. The single-family loan pool purchase portfolio as of June 30, 2022 totaled $2.9 billion. Purchases of single-family loan pools ceased in April 2022.

PPP loans declined by $37.4 million in the second quarter of 2022, as the program continues to wind down. Net fees for PPP loans were $1.0 million in the second quarter of 2022, down from $2.5 million in the first quarter of 2022. Remaining PPP loans totaled $33.0 million as of June 30, 2022, with $0.6 million of net fees to amortize over the remaining life of the loans.

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

	June 30, 2022					March 31, 2022					June 30, 2021
			% of					% of					% of
Loan and Lease Portfolio	Balance		Total			Balance		Total			Balance		Total
	(Dollars in thousands)
Real estate mortgage:
Commercial	$	3,670,515	14	%		$	3,669,741	15	%		$	3,792,198	19	%
Residential		9,879,131	37	%			8,369,550	35	%			4,620,822	24	%
Total real estate mortgage		13,549,646	51	%			12,039,291	50	%			8,413,020	43	%
Real estate construction and land:
Commercial		837,423	3	%			802,022	3	%			930,785	5	%
Residential		3,153,616	12	%			2,891,467	12	%			2,574,799	13	%
Total real estate construction
and land		3,991,039	15	%			3,693,489	15	%			3,505,584	18	%
Total real estate		17,540,685	66	%			15,732,780	65	%			11,918,604	61	%
Commercial:
Asset-based		5,068,112	19	%			4,739,220	19	%			3,550,903	18	%
Venture capital		2,179,190	8	%			2,077,339	9	%			1,749,432	9	%
Other commercial		1,229,504	5	%			1,298,136	5	%			1,921,909	10	%
Total commercial		8,476,806	32	%			8,114,695	33	%			7,222,244	37	%
Consumer		483,646	2	%			504,597	2	%			365,409	2	%
Total loans and leases held for
investment, net of deferred fees	$	26,501,137	100	%		$	24,352,072	100	%		$	19,506,257	100	%
Total unfunded loan commitments	$	11,866,437				$	9,899,345				$	7,891,875

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

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

	Three Months Ended June 30, 2022
	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	$	197,398			$	75,071			$	272,469
Charge-offs		(2,799	)			-				(2,799	)
Recoveries		4,106				-				4,106
Net recoveries		1,307				-				1,307
Provision		(10,000	)			20,000				10,000
Ending balance	$	188,705			$	95,071			$	283,776
	Three Months Ended March 31, 2022
	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	$	200,564			$	73,071			$	273,635
Charge-offs		(3,234	)			-				(3,234	)
Recoveries		2,068				-				2,068
Net charge-offs		(1,166	)			-				(1,166	)
Provision		(2,000	)			2,000				-
Ending balance	$	197,398			$	75,071			$	272,469

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

	June 30,				March 31,				Increase
Allowance for Credit Losses	2022				2022				(Decrease)
	(Dollars in thousands)
Allowance for loan and lease losses	$	188,705			$	197,398			$	(8,693	)
Reserve for unfunded loan commitments		95,071				75,071				20,000
Allowance for credit losses	$	283,776			$	272,469			$	11,307
Provision for credit losses (for the quarter)	$	10,000			$	-			$	10,000
Net (recoveries) charge-offs (for the quarter)	$	(1,307	)		$	1,166			$	(2,473	)
Net (recoveries) charge-offs to average loans
and leases (for the quarter)		(0.02	)%			0.02	%
Allowance for loan and lease losses to loans
and leases held for investment		0.71	%			0.81	%
Allowance for credit losses to loans and leases
held for investment		1.07	%			1.12	%

The allowance for credit losses increased by $11.3 million in the second quarter of 2022 to $283.8 million at June 30, 2022. The increase in the allowance for credit losses during the second quarter of 2022 was attributable to a $10.0 million provision for credit losses and $1.3 million in net recoveries.

Net recoveries were $1.3 million for the second quarter of 2022 as gross charge-offs of $2.8 million were reduced by recoveries of $4.1 million.

Net charge-offs were $1.2 million for the first quarter of 2022 as gross charge-offs of $3.2 million were reduced by recoveries of $2.0 million.

CREDIT QUALITY

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

	June 30,				March 31,				Increase
Credit Quality Metrics	2022				2022				(Decrease)
	(Dollars in thousands)
NPAs and Performing TDRs:
Nonaccrual loans and leases held for investment (1)	$	78,527			$	66,538			$	11,989
Accruing loans contractually past due 90 days or more		-				-				-
Foreclosed assets, net		-				304				(304	)
Total nonperforming assets ("NPAs")	$	78,527			$	66,842			$	11,685
Performing TDRs held for investment	$	11,723			$	16,781			$	(5,058	)
Nonaccrual loans and leases held for investment
to loans and leases held for investment		0.30	%			0.27	%
Nonperforming assets to loans and leases
held for investment and foreclosed assets		0.30	%			0.27	%
Allowance for credit losses to nonaccrual loans
and leases held for investment		361.4	%			409.5	%
Loan and Lease Credit Risk Ratings:
Pass	$	25,916,612			$	23,892,689			$	2,023,923
Special mention		480,261				377,315				102,946
Classified		104,264				82,068				22,196
Total loans and leases held for investment,
net of deferred fees	$	26,501,137			$	24,352,072			$	2,149,065
Special mention loans and leases held for investment
to loans and leases held for investment		1.81	%			1.55	%
Classified loans and leases held for investment
to loans and leases held for investment		0.39	%			0.34	%
(1) Nonaccrual loans include SBA guaranteed amounts of $13.8 million at June 30, 2022 and $13.4 million at March 31, 2022.

Classified loans and leases were at historically low levels as of the end of the first quarter of 2022 but saw an increase of $22.2 million during the second quarter due mainly to a $10.7 million increase in classified commercial real estate mortgage loans and a $9.6 million increase in classified residential real estate mortgage loans. Special mention loans and leases increased by $102.9 million during the second quarter due mostly to an $86.9 million increase in special mention commercial real estate construction loans and a $23.6 million increase in special mention residential real estate construction loans. Nonaccrual loans and leases increased by $12.0 million to $78.5 million in the second quarter of 2022 due primarily to a $17.2 million increase in nonaccrual Civic residential mortgage and residential renovation loans partially offset by declines in nonaccrual loans in all other portfolios.

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

	June 30, 2022						March 31, 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	$	28,529		$	14		$	32,071		$	2,090		$	(3,542	)		$	(2,076	)
Residential		27,524			13,577			17,463			31,103			10,061				(17,526	)
Total real estate mortgage		56,053			13,591			49,534			33,193			6,519				(19,602	)
Real estate construction and land:
Commercial		-			-			-			-			-				-
Residential		13,287			25,981			6,215			21,413			7,072				4,568
Total real estate
construction and land		13,287			25,981			6,215			21,413			7,072				4,568
Commercial:
Asset-based		1,189			-			1,323			-			(134	)			-
Venture capital		3,120			-			3,659			-			(539	)			-
Other commercial		4,655			9,503			5,420			47			(765	)			9,456
Total commercial		8,964			9,503			10,402			47			(1,438	)			9,456
Consumer		223			1,711			387			994			(164	)			717
Total held for investment	$	78,527		$	50,786		$	66,538		$	55,647		$	11,989			$	(4,861	)

Loans and leases accruing and 30-89 days past due generally fluctuate from period to period. The $4.9 million decrease in the second quarter of 2022 was primarily in Civic residential mortgage loans, offset partially by a $9.5 million increase in the other commercial category due primarily to five PPP loans that are under review by the SBA for forgiveness, of which $6.2 million was forgiven in July 2022.

CAPITAL

Our Tier 1, Total capital, and Tier 1 leverage capital ratios increased during the second quarter of 2022 due mainly to the $513.2 million preferred stock issuance in June 2022. The net proceeds of $498.5 million increased stockholders’ equity, offset partially by an increase in risk-weighted assets of $2.7 billion primarily as a result of loan growth and the increase in unfunded commitments. We continue to consider additional capital enhancing strategies, such as a credit risk transfer transaction, to increase capital given our loan growth during the first half of the year. The following table presents capital ratios as of the dates indicated: 

	June 30,				March 31,
	2022				2022
PacWest Bancorp Consolidated:
Tier 1 leverage capital ratio (1)		8.52	%			7.11	%
Common equity tier 1 capital ratio (1)		8.24	%			8.64	%
Tier 1 capital ratio (1)		10.15	%			9.07	%
Total capital ratio (1)		13.12	%			12.27	%
Risk-weighted assets (1)(in thousands)	$	33,011,062			$	30,297,312
Tangible common equity ratio (2)		5.15	%			5.83	%
(1) Capital information for June 30, 2022 is preliminary.
(2) Non-GAAP measure.

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 is focused on relationship-based business banking to small, middle-market, and venture-backed businesses nationwide. The Bank offers a broad range of loan and lease and deposit products and services through 69 full-service branches located in California, one branch located in Durham, North Carolina, one branch located in Denver, Colorado, and numerous loan production offices across the country. 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 business-purpose, non-owner-occupied investor properties through Civic, a wholly-owned subsidiary. The Bank also provides 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 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 the Company’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. The ongoing COVID-19 pandemic continues to affect 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 due in part to the new variants of COVID-19. 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, inflation, 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, 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
	June 30,				March 31,				June 30,
	2022				2022				2021
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	197,027			$	205,446			$	179,505
Interest-earning deposits in financial institutions		2,192,877				1,865,235				5,678,587
Total cash and cash equivalents		2,389,904				2,070,681				5,858,092
Securities available-for-sale, at estimated fair value		6,780,648				9,975,109				7,198,608
Securities held-to-maturity, at amortized cost,
net of allowance for credit losses		2,260,367				-				-
Federal Home Loan Bank stock, at cost		33,210				17,250				17,250
Total investment securities		9,074,225				9,992,359				7,215,858
Gross loans and leases held for investment		26,608,541				24,439,749				19,580,731
Deferred fees, net		(107,404	)			(87,677	)			(74,474	)
Total loans and leases held for investment,
net of deferred fees		26,501,137				24,352,072				19,506,257
Allowance for loan and lease losses		(188,705	)			(197,398	)			(225,600	)
Total loans and leases held for investment, net		26,312,432				24,154,674				19,280,657
Equipment leased to others under operating leases		324,233				325,305				313,574
Premises and equipment, net		51,083				51,011				39,541
Foreclosed assets, net		-				304				13,227
Goodwill		1,405,736				1,405,736				1,204,118
Core deposit and customer relationship intangibles, net		37,659				41,308				18,423
Other assets		1,355,451				1,208,261				924,497
Total assets	$	40,950,723			$	39,249,639			$	34,867,987
LIABILITIES:
Noninterest-bearing deposits	$	13,338,029			$	14,057,051			$	11,252,286
Interest-bearing deposits		20,630,123				19,167,844				18,394,748
Total deposits		33,968,152				33,224,895				29,647,034
Borrowings		1,592,000				991,000				6,625
Subordinated debt		863,756				863,880				861,788
Accrued interest payable and other liabilities		548,412				519,269				505,859
Total liabilities		36,972,320				35,599,044				31,021,306
STOCKHOLDERS' EQUITY (1)		3,978,403				3,650,595				3,846,681
Total liabilities and stockholders’ equity	$	40,950,723			$	39,249,639			$	34,867,987
Book value per common share	$	28.93			$	30.52			$	32.17
Tangible book value per common share (2)	$	16.93			$	18.42			$	21.95
Common shares outstanding		120,288,024				119,601,766				119,555,102
(1) Includes net unrealized (loss) gain on:
Securities available-for-sale, net	$	(428,242	)		$	(376,475	)		$	145,516
Securities transferred from available-for-sale
to held-to-maturity	$	(216,508	)		$	-			$	-
(2) Non-GAAP measure.

 

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
	Three Months Ended												Six Months Ended
	June 30,				March 31,				June 30,				June 30,
	2022				2022				2021				2022				2021
	(In thousands, except per share data)
Interest income:
Loans and leases	$	293,286			$	267,759			$	244,529			$	561,045			$	486,073
Investment securities		52,902				53,422				33,954				106,324				64,219
Deposits in financial institutions		4,330				1,723				2,022				6,053				3,550
Total interest income		350,518				322,904				280,505				673,422				553,842
Interest expense:
Deposits		15,362				6,208				7,269				21,570				14,769
Borrowings		2,441				161				265				2,602				458
Subordinated debt		8,790				7,818				6,663				16,608				11,038
Total interest expense		26,593				14,187				14,197				40,780				26,265
Net interest income		323,925				308,717				266,308				632,642				527,577
Provision for credit losses		11,500				-				(88,000	)			11,500				(136,000	)
Net interest income after provision
for credit losses		312,425				308,717				354,308				621,142				663,577
Noninterest income:
Service charges on deposit accounts		3,634				3,571				3,452				7,205				6,386
Other commissions and fees		10,813				11,580				10,704				22,393				19,862
Leased equipment income		12,335				13,094				10,847				25,429				22,201
Gain on sale of loans and leases		12				60				1,422				72				1,561
(Loss) gain on sale of securities		(1,209	)			104				-				(1,105	)			101
Dividends and gains (losses) on equity investments		4,097				(11,375	)			5,394				(7,278	)			16,298
Warrant income		1,615				629				5,650				2,244				11,773
Other income		3,049				3,155				2,902				6,204				7,018
Total noninterest income		34,346				20,818				40,371				55,164				85,200
Noninterest expense:
Compensation		102,542				92,240				90,807				194,782				170,689
Occupancy		15,268				15,200				14,784				30,468				28,838
Data processing		9,258				9,629				7,758				18,887				14,715
Other professional services		6,726				5,954				5,256				12,680				10,382
Insurance and assessments		5,632				5,490				3,745				11,122				8,648
Intangible asset amortization		3,649				3,649				2,889				7,298				5,968
Leased equipment depreciation		8,934				9,189				8,614				18,123				17,583
Foreclosed assets (income) expense, net		(28	)			(3,353	)			(119	)			(3,381	)			(118	)
Acquisition, integration and reorganization costs		-				-				200				-				3,625
Customer related expense		11,748				12,655				4,973				24,403				9,791
Loan expense		7,037				5,157				4,031				12,194				7,224
Other expense		12,879				11,616				8,812				24,495				24,541
Total noninterest expense		183,645				167,426				151,750				351,071				301,886
Earnings before income taxes		163,126				162,109				242,929				325,235				446,891
Income tax expense		40,766				41,981				62,417				82,747				115,973
Net earnings		122,360				120,128				180,512				242,488				330,918
Basic and diluted earnings per common share	$	1.02			$	1.01			$	1.52			$	2.03			$	2.78
Dividends declared and paid per common share	$	0.25			$	0.25			$	0.25			$	0.50			$	0.50

 

PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER COMMON SHARE
	Three Months Ended												Six Months Ended
	June 30,				March 31,				June 30,				June 30,
	2022				2022				2021				2022				2021
	(Dollars in thousands, except per share data)
Basic Earnings Per Common Share:
Net earnings	$	122,360			$	120,128			$	180,512			$	242,488			$	330,918
Less: earnings allocated to
unvested restricted stock (1)		(2,351	)			(2,037	)			(3,172	)			(4,389	)			(5,495	)
Net earnings allocated to
common shares	$	120,009			$	118,091			$	177,340			$	238,099			$	325,423
Weighted average basic shares
and unvested restricted stock
outstanding		120,022				119,595				119,386				119,810				119,121
Less: weighted average unvested
restricted stock outstanding		(2,460	)			(2,246	)			(2,356	)			(2,354	)			(2,181	)
Weighted average basic shares
outstanding		117,562				117,349				117,030				117,456				116,940
Basic earnings per common share	$	1.02			$	1.01			$	1.52			$	2.03			$	2.78
Diluted Earnings Per Common Share:
Net earnings allocated to
common shares	$	120,009			$	118,091			$	177,340			$	238,099			$	325,423
Weighted average diluted shares
outstanding		117,562				117,349				117,030				117,456				116,940
Diluted earnings per common share	$	1.02			$	1.01			$	1.52			$	2.03			$	2.78
(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
	June 30, 2022				March 31, 2022				June 30, 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)	$ 25,449,773	$ 295,154	4.65%		$ 23,433,019	$ 269,521	4.66%		$ 19,057,420	$ 246,147	5.18%
Investment securities (3)	9,488,653	54,910	2.32%		10,397,709	55,594	2.17%		6,492,721	36,111	2.23%
Deposits in financial
institutions	1,984,751	4,330	0.88%		3,083,159	1,723	0.23%		6,347,764	2,022	0.13%
Total interest-earning
assets (1)	36,923,177	354,394	3.85%		36,913,887	326,838	3.59%		31,897,905	284,280	3.57%
Other assets	3,108,714				2,969,417				2,428,207
Total assets	$ 40,031,891				$ 39,883,304				$ 34,326,112
Liabilities and
Stockholders' Equity:
Interest checking	$ 6,517,381	3,816	0.23%		$ 7,094,623	1,776	0.10%		$ 7,235,726	2,394	0.13%
Money market	10,553,942	8,448	0.32%		10,852,454	3,461	0.13%		8,484,933	3,318	0.16%
Savings	650,479	41	0.03%		642,709	39	0.02%		598,225	36	0.02%
Time	1,939,816	3,057	0.63%		1,278,609	932	0.30%		1,498,169	1,521	0.41%
Total interest-bearing
deposits	19,661,618	15,362	0.31%		19,868,395	6,208	0.13%		17,817,053	7,269	0.16%
Borrowings	1,356,616	2,441	0.72%		298,444	161	0.22%		225,446	265	0.47%
Subordinated debt	863,653	8,790	4.08%		863,572	7,818	3.67%		735,725	6,663	3.63%
Total interest-bearing
liabilities	21,881,887	26,593	0.49%		21,030,411	14,187	0.27%		18,778,224	14,197	0.30%
Noninterest-bearing
demand deposits	13,987,398				14,463,667				11,304,757
Other liabilities	510,238				541,745				504,089
Total liabilities	36,379,523				36,035,823				30,587,070
Stockholders' equity	3,652,368				3,847,481				3,739,042
Total liabilities and
stockholders' equity	$ 40,031,891				$ 39,883,304				$ 34,326,112
Net interest income (1)		$ 327,801				$ 312,651				$ 270,083
Net interest spread (1)			3.36%				3.32%				3.27%
Net interest margin (1)			3.56%				3.43%				3.40%
Total deposits (4)	$ 33,649,016	$ 15,362	0.18%		$ 34,332,062	$ 6,208	0.07%		$ 29,121,810	$ 7,269	0.10%
(1) Tax equivalent.
(2) Includes net loan premium amortization of $5.8 million, $5.7 million, and $1.5 million for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively.
(3) Includes tax-equivalent adjustments of $2.0 million, $2.2 million, and $2.2 million for the three months ended June 30, 2022, March 31, 2022, and June 30, 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
	June 30,				March 31,				December 31,				September 30,				June 30,
	2022				2022				2021				2021				2021
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	197,027			$	205,446			$	112,548			$	174,585			$	179,505
Interest-earning deposits in financial
institutions		2,192,877				1,865,235				3,944,686				3,524,613				5,678,587
Total cash and cash equivalents		2,389,904				2,070,681				4,057,234				3,699,198				5,858,092
Securities available-for-sale		6,780,648				9,975,109				10,694,458				9,276,926				7,198,608
Securities held-to-maturity		2,260,367				-				-				-				-
Federal Home Loan Bank stock		33,210				17,250				17,250				17,250				17,250
Total investment securities		9,074,225				9,992,359				10,711,708				9,294,176				7,215,858
Gross loans and leases held for investment		26,608,541				24,439,749				23,026,308				20,588,255				19,580,731
Deferred fees, net		(107,404	)			(87,677	)			(84,760	)			(77,235	)			(74,474	)
Total loans and leases held for
investment, net of deferred fees		26,501,137				24,352,072				22,941,548				20,511,020				19,506,257
Allowance for loan and lease losses		(188,705	)			(197,398	)			(200,564	)			(203,733	)			(225,600	)
Total loans and leases held for
investment, net		26,312,432				24,154,674				22,740,984				20,307,287				19,280,657
Equipment leased to others under
operating leases		324,233				325,305				339,150				334,275		-		313,574
Premises and equipment, net		51,083				51,011				46,740				47,246				39,541
Foreclosed assets, net		-				304				12,843				13,364				13,227
Goodwill		1,405,736				1,405,736				1,405,736				1,204,118				1,204,118
Core deposit and customer relationship
intangibles, net		37,659				41,308				44,957				15,533				18,423
Other assets		1,355,451				1,208,261				1,083,992				970,479				924,497
Total assets	$	40,950,723			$	39,249,639			$	40,443,344			$	35,885,676			$	34,867,987
LIABILITIES:
Noninterest-bearing deposits	$	13,338,029			$	14,057,051			$	14,543,133			$	12,881,806			$	11,252,286
Interest-bearing deposits		20,630,123				19,167,844				20,454,624				17,677,939				18,394,748
Total deposits		33,968,152				33,224,895				34,997,757				30,559,745				29,647,034
Borrowings		1,592,000				991,000				-				-				6,625
Subordinated debt		863,756				863,880				863,283				862,447				861,788
Accrued interest payable and other
liabilities		548,412				519,269				582,674				545,050				505,859
Total liabilities		36,972,320				35,599,044				36,443,714				31,967,242				31,021,306
STOCKHOLDERS' EQUITY (1)		3,978,403				3,650,595				3,999,630				3,918,434				3,846,681
Total liabilities and stockholders’
equity	$	40,950,723			$	39,249,639			$	40,443,344			$	35,885,676			$	34,867,987
Book value per common share	$	28.93			$	30.52			$	33.45			$	32.77			$	32.17
Tangible book value per common share (2)	$	16.93			$	18.42			$	21.31			$	22.57			$	21.95
Common shares outstanding		120,288,024				119,601,766				119,584,854				119,579,566				119,555,102
(1) Includes net unrealized (loss) gain on:
Securities available-for-sale, net	$	(428,242	)		$	(376,475	)		$	65,968			$	98,859			$	145,516
Securities transferred from
available-for-sale to held-to-maturity	$	(216,508	)		$	-			$	-			$	-			$	-
(2) Non-GAAP measure.

 

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
	Three Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
	2022				2022				2021				2021				2021
	(In thousands, except per share data)
Interest income:
Loans and leases	$	293,286			$	267,759			$	263,662			$	246,722			$	244,529
Investment securities		52,902				53,422				48,469				40,780				33,954
Deposits in financial institutions		4,330				1,723				2,674				2,580				2,022
Total interest income		350,518				322,904				314,805				290,082				280,505
Interest expense:
Deposits		15,362				6,208				6,622				6,417				7,269
Borrowings		2,441				161				64				101				265
Subordinated debt		8,790				7,818				7,714				7,722				6,663
Total interest expense		26,593				14,187				14,400				14,240				14,197
Net interest income		323,925				308,717				300,405				275,842				266,308
Provision for credit losses		11,500				-				(6,000	)			(20,000	)			(88,000	)
Net interest income after provision
for credit losses		312,425				308,717				306,405				295,842				354,308
Noninterest income:
Service charges on deposit accounts		3,634				3,571				3,476				3,407				3,452
Other commissions and fees		10,813				11,580				10,633				11,792				10,704
Leased equipment income		12,335				13,094				12,602				10,943				10,847
Gain on sale of loans and leases		12				60				172				-				1,422
(Loss) gain on sale of securities		(1,209	)			104				999				515				-
Dividends and gains (losses) on equity investments		4,097				(11,375	)			(1,570	)			8,387				5,394
Warrant income		1,615				629				23,990				13,578				5,650
Other income		3,049				3,155				7,080				2,723				2,902
Total noninterest income		34,346				20,818				57,382				51,345				40,371
Noninterest expense:
Compensation		102,542				92,240				99,700				98,061				90,807
Occupancy		15,268				15,200				14,656				14,928				14,784
Data processing		9,258				9,629				8,171				7,391				7,758
Other professional services		6,726				5,954				5,946				5,164				5,256
Insurance and assessments		5,632				5,490				5,032				3,685				3,745
Intangible asset amortization		3,649				3,649				3,876				2,890				2,889
Leased equipment depreciation		8,934				9,189				9,569				8,603				8,614
Foreclosed assets (income) expense, net		(28	)			(3,353	)			(260	)			165				(119	)
Acquisition, integration and reorganization costs		-				-				5,590				200				200
Customer related expense		11,748				12,655				6,175				4,538				4,973
Loan expense		7,037				5,157				5,627				4,180				4,031
Other expense		12,879				11,616				12,028				9,616				8,812
Total noninterest expense		183,645				167,426				176,110				159,421				151,750
Earnings before income taxes		163,126				162,109				187,677				187,766				242,929
Income tax expense		40,766				41,981				51,632				47,770				62,417
Net earnings		122,360				120,128				136,045				139,996				180,512
Basic and diluted earnings per common share	$	1.02			$	1.01			$	1.14			$	1.17			$	1.52
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
	June 30,				March 31,				December 31,				September 30,				June 30,
	2022				2022				2021				2021				2021
	(Dollars in thousands)
Performance Ratios:
Return on average assets (1)		1.23	%			1.22	%			1.34	%			1.55	%			2.11	%
Pre-provision, pre-tax net revenue
("PPNR") return on average
assets (1)(2)		1.75	%			1.65	%			1.79	%			1.86	%			1.81	%
Return on average equity (1)		13.44	%			12.66	%			13.65	%			14.18	%			19.36	%
Return on average tangible common
equity (1)(2)		24.42	%			20.93	%			22.06	%			21.03	%			29.25	%
Efficiency ratio		49.5	%			50.1	%			46.2	%			47.2	%			47.9	%
Noninterest expense as a percentage
of average assets (1)		1.84	%			1.70	%			1.73	%			1.76	%			1.77	%
Average Yields/Costs (1):
Yield on:
Average loans and leases (3)		4.65	%			4.66	%			4.93	%			5.01	%			5.18	%
Average investment securities (3)		2.32	%			2.17	%			2.02	%			2.12	%			2.23	%
Average interest-earning assets (3)		3.85	%			3.59	%			3.39	%			3.50	%			3.57	%
Cost of:
Average interest-bearing deposits		0.31	%			0.13	%			0.13	%			0.14	%			0.16	%
Average total deposits		0.18	%			0.07	%			0.08	%			0.08	%			0.10	%
Average interest-bearing liabilities		0.49	%			0.27	%			0.27	%			0.29	%			0.30	%
Net interest spread (3)		3.36	%			3.32	%			3.12	%			3.21	%			3.27	%
Net interest margin (3)		3.56	%			3.43	%			3.24	%			3.33	%			3.40	%
Average Balances:
Assets:
Loans and leases, net of deferred fees	$	25,449,773			$	23,433,019			$	21,367,665			$	19,670,671			$	19,057,420
Investment securities		9,488,653				10,397,709				9,964,568				8,047,098				6,492,721
Deposits in financial institutions		1,984,751				3,083,159				5,961,104				5,657,768				6,347,764
Interest-earning assets		36,923,177				36,913,887				37,293,337				33,375,537				31,897,905
Total assets		40,031,891				39,883,304				40,358,147				35,871,664				34,326,112
Liabilities:
Noninterest-bearing deposits		13,987,398				14,463,667				14,713,385				12,198,313				11,304,757
Interest-bearing deposits		19,661,618				19,868,395				20,050,310				18,130,694				17,817,053
Total deposits		33,649,016				34,332,062				34,763,695				30,329,007				29,121,810
Borrowings		1,356,616				298,444				234,391				238,335				225,446
Subordinated debt		863,653				863,572				862,777				862,272				735,725
Interest-bearing liabilities		21,881,887				21,030,411				21,147,478				19,231,301				18,778,224
Stockholders' equity		3,652,368				3,847,481				3,954,267				3,916,621				3,739,042
(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
	June 30,				March 31,				December 31,				September 30,				June 30,
	2022				2022				2021				2021				2021
	(Dollars in thousands, except per share data)
Credit Quality Ratios:
Nonaccrual loans and leases held for
investment to loans and leases
held for investment		0.30	%			0.27	%			0.27	%			0.31	%			0.29	%
Nonperforming assets to loans and
leases held for investment and
foreclosed assets		0.30	%			0.27	%			0.32	%			0.38	%			0.36	%
Classified loans and leases held for
investment to loans and leases
held for investment		0.39	%			0.34	%			0.51	%			0.69	%			0.75	%
Provision for credit losses (for the
quarter) to average loans and leases
held for investment (annualized)		0.16	%			0.00	%			(0.11	)%			(0.40	)%			(1.85	)%
Net charge-offs (for the quarter) to
average loans and leases held
for investment (annualized)		(0.02	)%			0.02	%			0.00	%			0.01	%			(0.11	)%
Trailing 12 months net charge-offs
to average loans and leases
held for investment		0.00	%			(0.02	)%			(0.01	)%			0.09	%			0.27	%
Allowance for loan and lease losses to
loans and leases held for investment		0.71	%			0.81	%			0.87	%			0.99	%			1.16	%
Allowance for credit losses to loans
and leases held for investment		1.07	%			1.12	%			1.19	%			1.36	%			1.54	%
Allowance for credit losses to
nonaccrual loans and leases
held for investment		361.4	%			409.5	%			447.3	%			433.8	%			528.4	%
PacWest Bancorp Consolidated:
Tier 1 leverage capital ratio (1)		8.52	%			7.11	%			6.84	%			8.05	%			7.67	%
Common equity tier 1 capital ratio (1)		8.24	%			8.64	%			8.86	%			10.15	%			10.41	%
Tier 1 capital ratio (1)		10.15	%			9.07	%			9.32	%			10.65	%			10.41	%
Total capital ratio (1)		13.12	%			12.27	%			12.69	%			14.36	%			14.99	%
Risk-weighted assets (1)	$	33,011,062			$	30,297,312			$	28,508,808			$	26,057,583			$	24,274,256
Equity to assets ratio		9.72	%			9.30	%			9.89	%			10.92	%			11.03	%
Tangible common equity ratio (2)		5.15	%			5.83	%			6.54	%			7.79	%			7.80	%
Book value per common share	$	28.93			$	30.52			$	33.45			$	32.77			$	32.17
Tangible book value per common share (2)	$	16.93			$	18.42			$	21.31			$	22.57			$	21.95
Pacific Western Bank:
Tier 1 leverage capital ratio (1)		8.21	%			7.31	%			7.00	%			8.40	%			8.47	%
Common equity tier 1 capital ratio (1)		9.78	%			9.32	%			9.56	%			11.12	%			11.51	%
Tier 1 capital ratio (1)		9.78	%			9.32	%			9.56	%			11.12	%			11.51	%
Total capital ratio (1)		11.77	%			11.45	%			11.80	%			13.59	%			14.22	%
(1) Capital information for June 30, 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-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												Six Months Ended
PPNR and PPNR Return	June 30,				March 31,				June 30,				June 30,
on Average Assets	2022				2022				2021				2022				2021
	(Dollars in thousands)
Net earnings	$	122,360			$	120,128			$	180,512			$	242,488			$	330,918
Add: Provision for credit losses		11,500				-				(88,000	)			11,500				(136,000	)
Add: Income tax expense		40,766				41,981				62,417				82,747				115,973
Pre-provision, pre-tax net
revenue ("PPNR")	$	174,626			$	162,109			$	154,929			$	336,735			$	310,891
Average assets	$	40,031,891			$	39,883,304			$	34,326,112			$	39,958,008			$	32,879,037
Return on average assets (1)		1.23	%			1.22	%			2.11	%			1.22	%			2.03	%
PPNR return on average assets (2)		1.75	%			1.65	%			1.81	%			1.70	%			1.91	%
(1) Annualized net earnings divided by average assets.
(2) Annualized PPNR divided by average assets.

 

	Three Months Ended												Six Months Ended
Return on Average	June 30,				March 31,				June 30,				June 30,
Tangible Common Equity	2022				2022				2021				2022				2021
	(Dollars in thousands)
Net earnings	$	122,360			$	120,128			$	180,512			$	242,488			$	330,918
Add: Intangible asset amortization		3,649				3,649				2,889				7,298				5,968
Adjusted net earnings	$	126,009			$	123,777			$	183,401			$	249,786			$	336,886
Average stockholders' equity	$	3,652,368			$	3,847,481			$	3,739,042			$	3,749,386			$	3,678,481
Less: Average intangible assets		1,445,333				1,449,056				1,224,208				1,447,184				1,208,581
Less: Average preferred stock		137,100				-				-				68,929				-
Average tangible common equity	$	2,069,935			$	2,398,425			$	2,514,834			$	2,233,273			$	2,469,900
Return on average equity (1)		13.44	%			12.66	%			19.36	%			13.04	%			18.14	%
Return on average tangible common
equity (2)		24.42	%			20.93	%			29.25	%			22.55	%			27.51	%
(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	June 30,				March 31,				December 31,				September 30,				June 30,
Common Share	2022				2022				2021				2021				2021
	(Dollars in thousands, except per share data)
Stockholders' equity	$	3,978,403			$	3,650,595			$	3,999,630			$	3,918,434			$	3,846,681
Less: Preferred stock		498,516				-				-				-				-
Total common equity		3,479,887				3,650,595				3,999,630				3,918,434				3,846,681
Less: Intangible assets		1,443,395				1,447,044				1,450,693				1,219,651				1,222,541
Tangible common equity	$	2,036,492			$	2,203,551			$	2,548,937			$	2,698,783			$	2,624,140
Total assets	$	40,950,723			$	39,249,639			$	40,443,344			$	35,885,676			$	34,867,987
Less: Intangible assets		1,443,395				1,447,044				1,450,693				1,219,651				1,222,541
Tangible assets	$	39,507,328			$	37,802,595			$	38,992,651			$	34,666,025			$	33,645,446
Equity to assets ratio		9.72	%			9.30	%			9.89	%			10.92	%			11.03	%
Tangible common equity ratio (1)		5.15	%			5.83	%			6.54	%			7.79	%			7.80	%
Book value per common share (2)	$	28.93			$	30.52			$	33.45			$	32.77			$	32.17
Tangible book value per common share (3)	$	16.93			$	18.42			$	21.31			$	22.57			$	21.95
Common shares outstanding		120,288,024				119,601,766				119,584,854				119,579,566				119,555,102
(1) Tangible common equity divided by tangible assets.
(2) Total common equity divided by common shares outstanding.
(3) Tangible common equity divided by common shares outstanding.

CONTACTS

Matthew P. Wagner 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 the net earnings for PACW in Q2 2022?

PacWest Bancorp reported net earnings of $122.4 million for Q2 2022.

How much did PACW's loan growth increase in Q2 2022?

PACW's loans grew by $2.1 billion or 8.8% in Q2 2022.

What was the Tier 1 capital ratio for PACW in Q2 2022?

The Tier 1 capital ratio for PACW was 10.15% as of Q2 2022.

How did PACW's core deposits change in Q2 2022?

Core deposits decreased by $2.5 billion or 7.8% in Q2 2022.

What was the provision for credit losses for PACW in Q2 2022?

The provision for credit losses for PACW was $11.5 million in Q2 2022.