PacWest Bancorp Announces Results for the Third Quarter 2022

Rhea-AI Summary

PacWest Bancorp (PACW) reported its third quarter 2022 results with net earnings of $122.2 million, maintaining diluted earnings per share at $1.02. Key highlights include a 0.7% increase in total deposits to $34.2 billion, and a 4.4% loan growth totaling $27.7 billion. The Common Equity Tier 1 (CET1) capital ratio improved to 8.55%. Despite a slowdown in loan growth due to rising interest rates, credit quality remained strong with nonperforming assets at 34 basis points. The company anticipates a weaker economic outlook moving forward.

Positive

• Net earnings of $122.2 million for Q3 2022.
• Total deposits increased by $228 million (0.7%) to $34.2 billion.
• Loan growth of $1.2 billion (4.4%) to $27.7 billion.
• CET1 ratio improved to 8.55% from 8.24%.

Negative

• Net earnings decreased by $106.2 million compared to last year.
• Diluted earnings per share decreased by $0.92 year-over-year.
• Core deposits decreased by $659 million (2.3%).
• Allowance for credit losses increased to $284.4 million.

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

THIRD QUARTER 2022 RESULTS

$122.2M	$1.02		24.11%		8.55%
Net Earnings Available to Common Stockholders	Diluted Earnings per Common Share		ROATCE		CET1

THIRD QUARTER 2022 HIGHLIGHTS

All Regulatory Capital Ratios Increased from 2Q22, With CET1 Increasing from 8.24% to 8.55% Total Deposits Up $228 Million or 0.7% from 2Q22; Venture Banking Deposits Grew $129 Million to $12.2 Billion Credit Metrics Remain Steady with Nonperforming Assets Ratio of 34 Basis Points Loan Growth of $1.2 Billion or 4.4% from 2Q22 Net Interest Income (TE) of $338.6 Million in 3Q22 vs. $327.8 Million in 2Q22; Up 3.3%

CEO COMMENTARY

Matt Wagner, CEO, commented, “We are pleased with the growth in our capital ratios during the third quarter of 2022. The increases in the ratios were due to strong earnings, the credit-linked notes transaction completed in late September, and slower growth in loans and loan commitments. Capital remains a primary focus area and we are targeting a CET1 ratio of 10% by the end of 2023.”

“We were also pleased with the stabilization in venture banking deposits, which grew by $129 million to $12.2 billion, contributing to total deposits growing by $228 million in the third quarter of 2022. After exceptionally strong loan growth in the first half of 2022, loan growth slowed in the third quarter of 2022 due to the expected impact from higher interest rates and our decision to slow loan growth as part of managing our balance sheet.”

“Credit quality remains strong as evidenced by credit metrics such as nonperforming assets of 34 basis points and net charge-offs of three basis points for the quarter and one basis point on a year-to-date basis.”

“Lastly, on a macroeconomic level as we assess the current state and direction of the economy we are thinking about and planning for a weaker economic outlook.”

FINANCIAL HIGHLIGHTS

	At or For the												At or For the
	Three Months Ended												Nine Months Ended
	September 30,				June 30,				Increase				September 30,								Increase
Financial Highlights (1)		2022				2022			(Decrease)					2022				2021			(Decrease)
	(Dollars in thousands, except per share data)
Net earnings available to
common stockholders	$	122,224			$	122,360			$	(136	)		$	364,712			$	470,914			$	(106,202	)
Diluted earnings per
common share	$	1.02			$	1.02			$	-			$	3.04			$	3.96			$	(0.92	)
Pre-provision, pre-tax net
revenue ("PPNR") (2)	$	178,182			$	174,626			$	3,556			$	514,917			$	478,657			$	36,260
Return on average assets		1.28	%			1.23	%			0.05				1.24	%			1.86	%			(0.62	)
PPNR return on average
assets (2)		1.73	%			1.75	%			(0.02	)			1.71	%			1.89	%			(0.18	)
Return on average
tangible common equity (2)		24.11	%			24.42	%			(0.31	)			23.05	%			25.20	%			(2.15	)
Yield on average loans and
leases (tax equivalent)		5.12	%			4.65	%			0.47				4.82	%			5.13	%			(0.31	)
Cost of average total
deposits		0.70	%			0.18	%			0.52				0.32	%			0.10	%			0.22
Net interest margin ("NIM")
(tax equivalent)		3.57	%			3.56	%			0.01				3.52	%			3.46	%			0.06
Efficiency ratio		51.0	%			49.5	%			1.5				50.2	%			47.2	%			3.0
Total assets	$	41,404,592			$	40,950,723			$	453,869			$	41,404,592			$	35,885,676			$	5,518,916
Loans and leases held
for investment,
net of deferred fees	$	27,660,041			$	26,501,137			$	1,158,904			$	27,660,041			$	20,511,020			$	7,149,021
Noninterest-bearing
demand deposits	$	12,775,756			$	13,338,029			$	(562,273	)		$	12,775,756			$	12,881,806			$	(106,050	)
Core deposits	$	28,559,310			$	29,218,646			$	(659,336	)		$	28,559,310			$	28,140,708			$	418,602
Total deposits	$	34,195,872			$	33,968,152			$	227,720			$	34,195,872			$	30,559,745			$	3,636,127
As percentage of total
deposits:
Noninterest-bearing
demand deposits		37	%			39	%			(2	)			37	%			42	%			(5	)
Core deposits		83	%			86	%			(3	)			83	%			92	%			(9	)
Equity to assets ratio		9.36	%			9.72	%			(0.36	)			9.36	%			10.92	%			(1.56	)
Common equity tier 1
capital ratio		8.55	%			8.24	%			0.31				8.55	%			10.15	%			(1.60	)
Tier 1 capital ratio		10.46	%			10.15	%			0.31				10.46	%			10.65	%			(0.19	)
Total capital ratio		13.43	%			13.12	%			0.31				13.43	%			14.36	%			(0.93	)
Tangible common equity
ratio (2)		4.85	%			5.15	%			(0.30	)			4.85	%			7.79	%			(2.94	)
Book value per common
share	$	28.07			$	28.93			$	(0.86	)		$	28.07			$	32.77			$	(4.70	)
Tangible book value per
common share (2)	$	16.11			$	16.93			$	(0.82	)		$	16.11			$	22.57			$	(6.46	)
(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 $11.3 million to $335.2 million for the third quarter of 2022 compared to $323.9 million for the second quarter of 2022. Interest income on loans and leases increased by $53.3 million in the third quarter of 2022 due to a $1.6 billion increase in the average balance of loans and leases and a 47 basis point increase in the tax equivalent yield on average loans and leases compared to the second quarter of 2022. Interest income on deposits in financial institutions increased by $6.0 million in the third quarter of 2022 due to a 139 basis point increase in the yield on average deposits in financial institutions, offset partially by a $175 million decrease in the average balance. The tax equivalent yield on average loans and leases was 5.12% for the third quarter of 2022 compared to 4.65% for the second quarter of 2022. The increase in the tax equivalent yield on average loans and leases was due primarily to higher coupon interest due to increased rates on new production and on existing variable rate loans. Interest expense on deposits increased by $45.9 million in the third quarter of 2022 due mainly to increased market rates and a higher level of wholesale deposits which contributed to a 52 basis point increase in the cost of average total deposits. Interest expense on borrowings and subordinated debt increased by $2.3 million due to a 190 basis points increase in the cost of average borrowings and subordinated debt, partially offset by an $851 million decrease in the average balance.

The tax equivalent NIM was 3.57% for the third quarter of 2022 compared to 3.56% for the second quarter of 2022. The slight 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 69% to 72%, the decrease in the balance of average investment securities as a percentage of average interest-earning assets from 26% to 23%, and the balance of average deposits in financial institutions as a percentage of average interest-earning assets remained unchanged at 5%. The balance of average loans and leases increased by $1.6 billion to $27.0 billion, the balance of average investment securities decreased by $685 million to $8.8 billion, and the balance of average deposits in financial institutions decreased by $175 million to $1.8 billion.

The cost of average total deposits was 0.70% for the third quarter of 2022 compared to 0.18% for the second 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.

PROVISION FOR CREDIT LOSSES

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

	Three Months Ended
	September 30,			June 30,				Increase
Provision for Credit Losses	2022				2022			(Decrease)
	(In thousands)
Addition (reduction) in allowance for
loan and lease losses	$	3,000		$	(10,000	)		$	13,000
Addition to reserve for
unfunded loan commitments		-			20,000				(20,000	)
Total loan-related provision		3,000			10,000				(7,000	)
Addition to allowance for
held-to-maturity securities	-			1,500				(1,500		)
Total provision for credit losses	$	3,000		$	11,500			$	(8,500	)

 

The provision for credit losses was $3.0 million for the third quarter of 2022 compared to $11.5 million for the second quarter of 2022. The $7.0 million decrease in the loan-related provision was due mainly to a lower level of growth in loans and leases and unfunded commitments in the third versus the second quarter of 2022 and a decrease in COVID-related qualitative reserves, partially offset by increased reserves needed due to a less favorable economic forecast in the third versus the second quarter of 2022.

NONINTEREST INCOME

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

	Three Months Ended
	September 30,			June 30,				Increase
Noninterest Income	2022				2022			(Decrease)
	(In thousands)
Service charges on deposit accounts	$	3,608		$	3,634			$	(26	)
Other commissions and fees		10,034			10,813				(779	)
Leased equipment income		12,835			12,335				500
Gain on sale of loans and leases		58			12				46
Gain (loss) on sale of securities		86			(1,209	)			1,295
Dividends and gains on equity investments		3,228			4,097				(869	)
Warrant income		292			1,615				(1,323	)
Other income		8,478			3,049				5,429
Total noninterest income	$	38,619		$	34,346			$	4,273

Noninterest income increased by $4.3 million to $38.6 million for the third quarter of 2022 compared to $34.3 million for the second quarter of 2022 due primarily to increases of $5.4 million in other income and $1.3 million in gain on sale of securities, offset partially by a decrease of $1.3 million in warrant income and a decrease of $0.9 million in dividends and gains on equity investments. The increase in other income was due primarily to the receipt of a $5.5 million legal settlement, net of current year legal fees. The increase in gain on sale of securities resulted from the sale of $440.4 million of securities for a net gain of $86,000 compared to sales of $393.4 million of securities for a net loss of $1.2 million for the second quarter of 2022. Warrant income was lower due to a lack of capital market activities. The decrease in dividends and gains on equity investments was due to lower fair value gains on equity investments still held and SBIC investments, partially offset by lower losses on sales of equity investments and increased income distributions on SBIC investments.

NONINTEREST EXPENSE

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

	Three Months Ended
	September 30,				June 30,				Increase
Noninterest Expense		2022				2022			(Decrease)
	(In thousands)
Compensation	$	105,933			$	102,542			$	3,391
Occupancy		15,574				15,268				306
Data processing		9,568				9,258				310
Other professional services		10,674				6,726				3,948
Insurance and assessments		7,159				5,632				1,527
Intangible asset amortization		3,649				3,649				-
Leased equipment depreciation		8,908				8,934				(26	)
Foreclosed assets (income) expense, net		(248	)			(28	)			(220	)
Customer related expense		12,673				11,748				925
Loan expense		6,228				7,037				(809	)
Other		15,500				12,879				2,621
Total noninterest expense	$	195,618			$	183,645			$	11,973

Noninterest expense increased by $12.0 million to $195.6 million for the third quarter of 2022 compared to $183.6 million for the second quarter of 2022 due primarily to increases of $3.9 million in other professional services, $3.4 million in compensation expense, $2.6 million in other expense, and $1.5 million in insurance and assessments expense. The increase in other professional services was due mostly to issuance costs of the credit-linked notes transaction. The increase in compensation expense was due mainly to an increase in our headcount by 68 FTEs during the third quarter primarily related to hiring at Civic and for our digital and innovation initiatives. The increase in other expense was due primarily to a legal settlement accrual. The increase in insurance and assessments expense was due to higher FDIC assessment expense due to downward trends in core deposits and capital levels in the first half of 2022. Noninterest expense includes $7.0 million of non-recurring expenses in the third quarter of 2022 related to the issuance costs of the credit-linked notes transaction and a legal settlement accrual.

INCOME TAXES

The effective income tax rate was 24.9% for the third quarter of 2022 compared to 25.0% for 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:

	September 30, 2022					June 30, 2022					September 30, 2021
			% of					% of					% of
Deposit Composition	Balance		Total			Balance		Total			Balance		Total
	(Dollars in thousands)
Noninterest-bearing demand	$	12,775,756	37	%		$	13,338,029	39	%		$	12,881,806	42	%
Interest checking		6,780,900	20	%			6,197,234	18	%			7,168,472	24	%
Money market		8,361,779	24	%			9,029,433	27	%			7,463,261	24	%
Savings		640,875	2	%			653,950	2	%			627,169	2	%
Total core deposits		28,559,310	83	%			29,218,646	86	%			28,140,708	92	%
Wholesale non-maturity deposits		2,367,544	7	%			2,185,248	6	%			960,438	3	%
Total non-maturity deposits		30,926,854	90	%			31,403,894	92	%			29,101,146	95	%
Retail time deposits		1,778,325	5	%			1,354,198	4	%			1,262,864	4	%
Brokered time deposits		1,490,693	5	%			1,210,060	4	%			195,735	1	%
Total time deposits (1)		3,269,018	10	%			2,564,258	8	%			1,458,599	5	%
Total deposits	$	34,195,872	100	%		$	33,968,152	100	%		$	30,559,745	100	%
(1) Includes time deposits over $250,000 of $1.0 billion, $665.9 million, and $576.0 million at September 30, 2022, June 30, 2022,
and September 30, 2021, respectively.

Total deposits increased by $228 million or 0.7% in the third quarter of 2022 due to a $705 million increase in time deposits and a $182 million increase in wholesale non-maturity deposits, offset partially by a decrease in core deposits. Total venture banking deposits increased from $12.1 billion as of June 30, 2022 to $12.2 billion as of September 30, 2022. At September 30, 2022, core deposits totaled $28.6 billion or 83% of total deposits, including $12.8 billion of noninterest-bearing demand deposits or 37% of total deposits. Core deposits decreased by $659 million or 2.3% in the third quarter of 2022 driven primarily by a $586 million decrease in balances from our community banking clients primarily in September due to client business activity.

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 $2.1 billion as of June 30, 2022 to $1.8 billion as of September 30, 2022, of which $1.1 billion was managed by PWAM. The decrease of $0.3 billion was primarily attributable to deposit transfers by venture banking clients back onto our balance sheet.

LOANS AND LEASES

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

	Three Months Ended								Nine Months Ended
Roll Forward of Loans and Leases Held	September 30,				June 30,				September 30,
for Investment, Net of Deferred Fees		2022				2022				2022
	(Dollars in thousands)
Balance, beginning of period	$	26,501,137			$	24,352,072			$	22,941,548
Additions:
Production		1,758,107				2,815,181				7,148,148
Disbursements		1,677,795				1,871,627				5,138,574
Total production and disbursements		3,435,902				4,686,808				12,286,722
Reductions:
Payoffs		(977,654	)			(1,347,447	)			(3,773,781	)
Paydowns		(1,256,557	)			(1,183,178	)			(3,704,306	)
Total payoffs and paydowns		(2,234,211	)			(2,530,625	)			(7,478,087	)
Sales		(19,635	)			(4,319	)			(60,652	)
Transfers to foreclosed assets		(2,966	)			-				(3,271	)
Charge-offs		(4,652	)			(2,799	)			(10,685	)
Transfers to loans held for sale		(15,534	)			-				(15,534	)
Total reductions		(2,276,998	)			(2,537,743	)			(7,568,229	)
Net increase		1,158,904				2,149,065				4,718,493
Balance, end of period	$	27,660,041			$	26,501,137			$	27,660,041
Weighted average rate on production (1)		5.92	%			4.61	%			4.82	%
(1) The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes
amortized fees. Amortized fees added approximately 22 basis points to loan yields in 2022.

 

Loans and leases held for investment, net of deferred fees, increased by $1.2 billion or 4.4% in the third quarter of 2022 to $27.7 billion at September 30, 2022. The overall increase in the loans and leases balance for the third quarter of 2022 was due primarily to increases in the residential real estate mortgage and residential real estate construction portfolios.

Civic loan production was $831 million for the third quarter of 2022 compared to $847 million for the second quarter of 2022. The Civic loan portfolio as of September 30, 2022 totaled $2.9 billion.

The weighted average rate on the $1.8 billion of production for the third quarter of 2022 increased to 5.92% from 4.61% for the second quarter of 2022 due primarily to the loan mix (lower percentage of multi-family production, no single-family loan pool purchases, 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:

	September 30, 2022					June 30, 2022					September 30, 2021
			% of					% of					% of
Loan and Lease Portfolio	Balance		Total			Balance		Total			Balance		Total
	(Dollars in thousands)
Real estate mortgage:
Commercial	$	3,770,706	14	%		$	3,670,515	14	%		$	3,694,597	18	%
Residential		10,860,043	39	%			9,879,131	37	%			5,886,360	29	%
Total real estate mortgage		14,630,749	53	%			13,549,646	51	%			9,580,957	47	%
Real estate construction and land:
Commercial		843,086	3	%			837,423	3	%			992,003	5	%
Residential		3,450,430	12	%			3,153,616	12	%			2,659,870	13	%
Total real estate construction
and land		4,293,516	15	%			3,991,039	15	%			3,651,873	18	%
Total real estate		18,924,265	68	%			17,540,685	66	%			13,232,830	65	%
Commercial:
Asset-based		5,154,654	19	%			5,068,112	19	%			3,661,769	18	%
Venture capital		2,001,086	7	%			2,179,190	8	%			1,632,861	8	%
Other commercial		1,115,442	4	%			1,229,504	5	%			1,577,592	7	%
Total commercial		8,271,182	30	%			8,476,806	32	%			6,872,222	33	%
Consumer		464,594	2	%			483,646	2	%			405,968	2	%
Total loans and leases held for
investment, net of deferred fees	$	27,660,041	100	%		$	26,501,137	100	%		$	20,511,020	100	%
Total unfunded loan commitments	$	11,227,234				$	11,866,437				$	8,480,599

 

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 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
	Three Months Ended June 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	$	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

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	September 30,				June 30,				Increase
on Loans and Leases		2022				2022			(Decrease)
	(Dollars in thousands)
Allowance for loan and lease losses	$	189,327			$	188,705			$	622
Reserve for unfunded loan commitments		95,071				95,071				-
Allowance for credit losses	$	284,398			$	283,776			$	622
Provision for credit losses (for the quarter)	$	3,000			$	10,000			$	(7,000	)
Net charge-offs (recoveries) (for the quarter)	$	2,378			$	(1,307	)		$	3,685
Net charge-offs (recoveries) to average loans
and leases (for the quarter)		0.03	%			(0.02	)%
Allowance for loan and lease losses to loans
and leases held for investment		0.68	%			0.71	%
Allowance for credit losses to loans and leases
held for investment		1.03	%			1.07	%

 

The allowance for credit losses increased by $0.6 million in the third quarter of 2022 to $284.4 million at September 30, 2022. This increase was attributable mainly to a $3.0 million provision for credit losses, offset partially by $2.4 million in net charge-offs.

Net charge-offs over the trailing twelve months were $2.4 million, which results in net charge-offs to average loans and leases over the trailing twelve months of 0.1%.

CREDIT QUALITY

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

	September 30,				June 30,				Increase
Credit Quality Metrics		2022				2022			(Decrease)
	(Dollars in thousands)
NPAs and Performing TDRs:
Nonaccrual loans and leases held for investment (1)	$	89,742			$	78,527			$	11,215
Accruing loans contractually past due 90 days or more		-				-				-
Foreclosed assets, net		2,967				-				2,967
Total nonperforming assets ("NPAs")	$	92,709			$	78,527			$	14,182
Performing TDRs held for investment	$	8,106			$	11,723			$	(3,617	)
Nonaccrual loans and leases held for investment
to loans and leases held for investment		0.32	%			0.30	%
Nonperforming assets to loans and leases
held for investment and foreclosed assets		0.34	%			0.30	%
Allowance for credit losses to nonaccrual loans
and leases held for investment		316.9	%			361.4	%
(1) Nonaccrual loans include SBA guaranteed amounts of $17.2 million at September 30, 2022 and $13.8 million at June 30, 2022.

 

Nonaccrual loans and leases increased by $11.2 million to $89.7 million in the third quarter of 2022 due primarily to a $15.5 million office building loan.

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:

	September 30, 2022						June 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	$	42,772		$	14		$	28,529		$	14		$	14,243			$	-
Residential		25,950			21,700			27,524			13,577			(1,574	)			8,123
Total real estate mortgage		68,722			21,714			56,053			13,591			12,669				8,123
Real estate construction and land:
Commercial		-			-			-			-			-				-
Residential		7,101			3,051			13,287			25,981			(6,186	)			(22,930	)
Total real estate
construction and land		7,101			3,051			13,287			25,981			(6,186	)			(22,930	)
Commercial:
Asset-based		2,127			-			1,189			-			938				-
Venture capital		3,809			-			3,120			-			689				-
Other commercial		7,616			265			4,655			9,503			2,961				(9,238	)
Total commercial		13,552			265			8,964			9,503			4,588				(9,238	)
Consumer		367			1,996			223			1,711			144				285
Total held for investment	$	89,742		$	27,026		$	78,527		$	50,786		$	11,215			$	(23,760	)

 Loans and leases accruing and 30-89 days past due generally fluctuate from period to period. The $23.8 million decrease in the third quarter of 2022 was primarily in Civic residential construction loans and in the other commercial category, offset partially by an increase in the residential mortgage loans category.

CAPITAL

Our CET1, Tier 1, Total capital, and Tier 1 leverage capital ratios increased during the third quarter of 2022 due mainly to strong earnings and the completion of the credit-linked notes transaction on September 29, 2022, which added approximately 20 basis points to the CET1 ratio. The notes sold had an aggregate principal amount of $132.8 million with net proceeds of approximately $128.7 million. The notes are linked to the credit risk of an approximately $2.66 billion reference pool of previously purchased single-family residential mortgage loans. The notes were issued in five classes with a blended interest rate of SOFR plus 11%. The transaction results in a lower risk-weighting on the reference pool of loans for regulatory capital purposes. The following table presents capital ratios as of the dates indicated:

	September 30,				June 30,				September 30,
		2022				2022				2021
PacWest Bancorp Consolidated:
Common equity tier 1 capital ratio (1)		8.55	%			8.24	%			10.15	%
Tier 1 capital ratio (1)		10.46	%			10.15	%			10.65	%
Total capital ratio (1)		13.43	%			13.12	%			14.36	%
Tier 1 leverage capital ratio (1)		8.63	%			8.52	%			8.05	%
Risk-weighted assets (1) (in thousands)	$	33,055,996			$	33,009,455			$	26,057,583
Tangible common equity ratio (2)		4.85	%			5.15	%			7.79	%
Tangible common equity ratio excluding
the impact of AOCI for securities (2)		6.97	%			6.79	%			7.50	%
(1) Capital information for September 30, 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 Thursday, October 20, 2022 to discuss the Company’s performance for the third quarter of 2022.

Participants may access the conference call/webcast at:
Participant Dial-in: (800) 458-4121
Participant Webcast Link: https://event.webcasts.com/starthere.jsp?ei=1562576&tp_key=817f59ebeb
Confirmation Code: 8001555

The call will be recorded and made available for replay on October 20, 2022, 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”). 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 innovation 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 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. 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, results of operations, liquidity, and our allowance for credit losses and the related provision for credit losses. Continued deterioration in general business and economic conditions, 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 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
	September 30,				June 30,				September 30,
		2022				2022				2021
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	216,436			$	197,027			$	174,585
Interest-earning deposits in financial institutions		2,244,272				2,192,877				3,524,613
Total cash and cash equivalents		2,460,708				2,389,904				3,699,198
Securities available-for-sale, at estimated fair value		5,891,328				6,780,648				9,276,926
Securities held-to-maturity, at amortized cost,
net of allowance for credit losses		2,264,601				2,260,367				-
Federal Home Loan Bank stock, at cost		36,990				33,210				17,250
Total investment securities		8,192,919				9,074,225				9,294,176
Loans held for sale		15,534				-				-
Gross loans and leases held for investment		27,775,962				26,608,541				20,588,255
Deferred fees, net		(115,921	)			(107,404	)			(77,235	)
Total loans and leases held for investment,
net of deferred fees		27,660,041				26,501,137				20,511,020
Allowance for loan and lease losses		(189,327	)			(188,705	)			(203,733	)
Total loans and leases held for investment, net		27,470,714				26,312,432				20,307,287
Equipment leased to others under operating leases		338,691				324,233				334,275
Premises and equipment, net		50,781				51,083				47,246
Foreclosed assets, net		2,967				-				13,364
Goodwill		1,405,736				1,405,736				1,204,118
Core deposit and customer relationship intangibles, net		34,010				37,659				15,533
Other assets		1,432,532				1,355,451				970,479
Total assets	$	41,404,592			$	40,950,723			$	35,885,676
LIABILITIES:
Noninterest-bearing deposits	$	12,775,756			$	13,338,029			$	12,881,806
Interest-bearing deposits		21,420,116				20,630,123				17,677,939
Total deposits		34,195,872				33,968,152				30,559,745
Borrowings		1,864,815				1,592,000				-
Subordinated debt		863,379				863,756				862,447
Accrued interest payable and other liabilities		604,581				548,412				545,050
Total liabilities		37,528,647				36,972,320				31,967,242
STOCKHOLDERS' EQUITY (1)		3,875,945				3,978,403				3,918,434
Total liabilities and stockholders’ equity	$	41,404,592			$	40,950,723			$	35,885,676
Book value per common share	$	28.07			$	28.93			$	32.77
Tangible book value per common share (2)	$	16.11			$	16.93			$	22.57
Common shares outstanding		120,314,023				120,288,024				119,579,566
(1) Includes net unrealized (loss) gain on:
Securities available-for-sale, net	$	(637,346	)		$	(428,242	)		$	98,859
Securities held to maturity		(210,868	)			(216,508	)			-
Total	$	(848,214	)		$	(644,750	)		$	98,859
(2) Non-GAAP measure.

 

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
	Three Months Ended												Nine Months Ended
	September 30,				June 30,				September 30,				September 30,
		2022				2022				2021				2022				2021
	(In thousands, except per share data)
Interest income:
Loans and leases	$	346,550			$	293,286			$	246,722			$	907,595			$	732,795
Investment securities		53,135				52,902				40,780				159,459				104,999
Deposits in financial institutions		10,359				4,330				2,580				16,412				6,130
Total interest income		410,044				350,518				290,082				1,083,466				843,924
Interest expense:
Deposits		61,288				15,362				6,417				82,858				21,186
Borrowings		3,081				2,441				101				5,683				559
Subordinated debt		10,494				8,790				7,722				27,102				18,760
Total interest expense		74,863				26,593				14,240				115,643				40,505
Net interest income		335,181				323,925				275,842				967,823				803,419
Provision for credit losses		3,000				11,500				(20,000	)			14,500				(156,000	)
Net interest income after provision
for credit losses		332,181				312,425				295,842				953,323				959,419
Noninterest income:
Service charges on deposit accounts		3,608				3,634				3,407				10,813				9,793
Other commissions and fees		10,034				10,813				11,792				32,427				31,654
Leased equipment income		12,835				12,335				10,943				38,264				33,144
Gain on sale of loans and leases		58				12				-				130				1,561
Gain (loss) on sale of securities		86				(1,209	)			515				(1,019	)			616
Dividends and gains (losses) on equity investments		3,228				4,097				8,387				(4,050	)			24,685
Warrant income		292				1,615				13,578				2,536				25,351
Other income		8,478				3,049				2,723				14,682				9,741
Total noninterest income		38,619				34,346				51,345				93,783				136,545
Noninterest expense:
Compensation		105,933				102,542				98,061				300,715				268,750
Occupancy		15,574				15,268				14,928				46,042				43,766
Data processing		9,568				9,258				7,391				28,455				22,106
Other professional services		10,674				6,726				5,164				23,354				15,546
Insurance and assessments		7,159				5,632				3,685				18,281				12,333
Intangible asset amortization		3,649				3,649				2,890				10,947				8,858
Leased equipment depreciation		8,908				8,934				8,603				27,031				26,186
Foreclosed assets (income) expense, net		(248	)			(28	)			165				(3,629	)			47
Acquisition, integration and reorganization costs		-				-				200				-				3,825
Customer related expense		12,673				11,748				4,538				37,076				14,329
Loan expense		6,228				7,037				4,180				18,422				11,404
Other expense		15,500				12,879				9,616				39,995				34,157
Total noninterest expense		195,618				183,645				159,421				546,689				461,307
Earnings before income taxes		175,182				163,126				187,766				500,417				634,657
Income tax expense		43,566				40,766				47,770				126,313				163,743
Net earnings		131,616				122,360				139,996				374,104				470,914
Preferred stock dividends		9,392				-				-				9,392				-
Net earnings available to
common stockholders	$	122,224			$	122,360			$	139,996			$	364,712			$	470,914
Basic and diluted earnings per common share	$	1.02			$	1.02			$	1.17			$	3.04			$	3.96
Dividends declared and paid per common share	$	0.25			$	0.25			$	0.25			$	0.75			$	0.75

 

PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER COMMON SHARE
	Three Months Ended												Nine Months Ended
	September 30,				June 30,				September 30,				September 30,
		2022				2022				2021				2022				2021
	(Dollars in thousands, except per share data)
Basic Earnings Per Common Share:
Net earnings	$	131,616			$	122,360			$	139,996			$	374,104			$	470,914
Less: Preferred stock dividends		(9,392	)			-				-				(9,392	)			-
Net earnings available to
common stockholders		122,224				122,360				139,996				364,712				470,914
Less: Earnings allocated to
unvested restricted stock (1)		(2,331	)			(2,351	)			(2,417	)			(6,721	)			(7,930	)
Net earnings allocated to
common shares	$	119,893			$	120,009			$	137,579			$	357,991			$	462,984
Weighted average basic shares
and unvested restricted stock
outstanding		120,342				120,022				119,569				119,989				119,272
Less: weighted average unvested
restricted stock outstanding		(2,556	)			(2,460	)			(2,340	)			(2,422	)			(2,235	)
Weighted average basic shares
outstanding		117,786				117,562				117,229				117,567				117,037
Basic earnings per common share	$	1.02			$	1.02			$	1.17			$	3.04			$	3.96
Diluted Earnings Per Common Share:
Net earnings allocated to
common shares	$	119,893			$	120,009			$	137,579			$	357,991			$	462,984
Weighted average diluted shares
outstanding		117,786				117,562				117,229				117,567				117,037
Diluted earnings per common share	$	1.02			$	1.02			$	1.17			$	3.04			$	3.96
(1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus
undistributed earnings amounts available to holders of unvested restricted stock, if any.

 

PACWEST BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
	Three Months Ended
	September 30, 2022							June 30, 2022							September 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)	$	27,038,873	$	348,639	5.12	%		$	25,449,773	$	295,154	4.65	%		$	19,670,671	$	248,485	5.01	%
Investment securities (3)		8,803,349		54,423	2.45	%			9,488,653		54,910	2.32	%			8,047,098		42,952	2.12	%
Deposits in financial
institutions		1,809,809		10,359	2.27	%			1,984,751		4,330	0.88	%			5,657,768		2,580	0.18	%
Total interest-earning
assets (1)		37,652,031		413,421	4.36	%			36,923,177		354,394	3.85	%			33,375,537		294,017	3.50	%
Other assets		3,189,241							3,108,714							2,496,127
Total assets	$	40,841,272						$	40,031,891						$	35,871,664
Liabilities and
Stockholders' Equity:
Interest checking	$	6,650,477		19,475	1.16	%		$	6,517,381		3,816	0.23	%		$	7,372,859		2,042	0.11	%
Money market		10,914,027		31,780	1.16	%			10,553,942		8,448	0.32	%			8,662,449		2,997	0.14	%
Savings		649,574		42	0.03	%			650,479		41	0.03	%			620,079		38	0.02	%
Time		3,000,187		9,991	1.32	%			1,939,816		3,057	0.63	%			1,475,307		1,340	0.36	%
Total interest-bearing
deposits		21,214,265		61,288	1.15	%			19,661,618		15,362	0.31	%			18,130,694		6,417	0.14	%
Borrowings		505,482		3,081	2.42	%			1,356,616		2,441	0.72	%			238,335		101	0.17	%
Subordinated debt		863,719		10,494	4.82	%			863,653		8,790	4.08	%			862,272		7,722	3.55	%
Total interest-bearing
liabilities		22,583,466		74,863	1.32	%			21,881,887		26,593	0.49	%			19,231,301		14,240	0.29	%
Noninterest-bearing
demand deposits		13,653,177							13,987,398							12,198,313
Other liabilities		593,450							510,238							525,429
Total liabilities		36,830,093							36,379,523							31,955,043
Stockholders' equity		4,011,179							3,652,368							3,916,621
Total liabilities and
stockholders' equity	$	40,841,272						$	40,031,891						$	35,871,664
Net interest income (1)			$	338,558						$	327,801						$	279,777
Net interest spread (1)					3.04	%						3.36	%						3.21	%
Net interest margin (1)					3.57	%						3.56	%						3.33	%
Total deposits (4)	$	34,867,442	$	61,288	0.70	%		$	33,649,016	$	15,362	0.18	%		$	30,329,007	$	6,417	0.08	%
(1) Tax equivalent.
(2) Includes net loan premium amortization of $3.8 million, $5.8 million, and $2.4 million for the three months ended September 30, 2022,
June 30, 2022, and September 30, 2021, respectively.
(3) Includes tax-equivalent adjustments of $1.3 million, $2.0 million, and $2.2 million for the three months ended September 30, 2022,
June 30, 2022, and September 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
	September 30,				June 30,				March 31,				December 31,				September 30,
		2022				2022				2022				2021				2021
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	216,436			$	197,027			$	205,446			$	112,548			$	174,585
Interest-earning deposits in financial
institutions		2,244,272				2,192,877				1,865,235				3,944,686				3,524,613
Total cash and cash equivalents		2,460,708				2,389,904				2,070,681				4,057,234				3,699,198
Securities available-for-sale		5,891,328				6,780,648				9,975,109				10,694,458				9,276,926
Securities held-to-maturity		2,264,601				2,260,367				-				-				-
Federal Home Loan Bank stock		36,990				33,210				17,250				17,250				17,250
Total investment securities		8,192,919				9,074,225				9,992,359				10,711,708				9,294,176
Loans held for sale		15,534				-				-				-				-
Gross loans and leases held for investment		27,775,962				26,608,541				24,439,749				23,026,308				20,588,255
Deferred fees, net		(115,921	)			(107,404	)			(87,677	)			(84,760	)			(77,235	)
Total loans and leases held for
investment, net of deferred fees		27,660,041				26,501,137				24,352,072				22,941,548				20,511,020
Allowance for loan and lease losses		(189,327	)			(188,705	)			(197,398	)			(200,564	)			(203,733	)
Total loans and leases held for
investment, net		27,470,714				26,312,432				24,154,674				22,740,984				20,307,287
Equipment leased to others under
operating leases		338,691				324,233				325,305				339,150		-		334,275
Premises and equipment, net		50,781				51,083				51,011				46,740				47,246
Foreclosed assets, net		2,967				-				304				12,843				13,364
Goodwill		1,405,736				1,405,736				1,405,736				1,405,736				1,204,118
Core deposit and customer relationship
intangibles, net		34,010				37,659				41,308				44,957				15,533
Other assets		1,432,532				1,355,451				1,208,261				1,083,992				970,479
Total assets	$	41,404,592			$	40,950,723			$	39,249,639			$	40,443,344			$	35,885,676
LIABILITIES:
Noninterest-bearing deposits	$	12,775,756			$	13,338,029			$	14,057,051			$	14,543,133			$	12,881,806
Interest-bearing deposits		21,420,116				20,630,123				19,167,844				20,454,624				17,677,939
Total deposits		34,195,872				33,968,152				33,224,895				34,997,757				30,559,745
Borrowings		1,864,815				1,592,000				991,000				-				-
Subordinated debt		863,379				863,756				863,880				863,283				862,447
Accrued interest payable and other
liabilities		604,581				548,412				519,269				582,674				545,050
Total liabilities		37,528,647				36,972,320				35,599,044				36,443,714				31,967,242
STOCKHOLDERS' EQUITY (1)		3,875,945				3,978,403				3,650,595				3,999,630				3,918,434
Total liabilities and stockholders’
equity	$	41,404,592			$	40,950,723			$	39,249,639			$	40,443,344			$	35,885,676
Book value per common share	$	28.07			$	28.93			$	30.52			$	33.45			$	32.77
Tangible book value per common share (2)	$	16.11			$	16.93			$	18.42			$	21.31			$	22.57
Common shares outstanding		120,314,023				120,288,024				119,601,766				119,584,854				119,579,566
(1) Includes net unrealized (loss) gain on:
Securities available-for-sale, net	$	(637,346	)		$	(428,242	)		$	(376,475	)		$	65,968			$	98,859
Securities held to maturity		(210,868	)			(216,508	)			-				-				-
Total	$	(848,214	)		$	(644,750	)		$	(376,475	)		$	65,968			$	98,859
(2) Non-GAAP measure.

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
	Three Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
		2022				2022				2022				2021				2021
	(In thousands, except per share data)
Interest income:
Loans and leases	$	346,550			$	293,286			$	267,759			$	263,662			$	246,722
Investment securities		53,135				52,902				53,422				48,469				40,780
Deposits in financial institutions		10,359				4,330				1,723				2,674				2,580
Total interest income		410,044				350,518				322,904				314,805				290,082
Interest expense:
Deposits		61,288				15,362				6,208				6,622				6,417
Borrowings		3,081				2,441				161				64				101
Subordinated debt		10,494				8,790				7,818				7,714				7,722
Total interest expense		74,863				26,593				14,187				14,400				14,240
Net interest income		335,181				323,925				308,717				300,405				275,842
Provision for credit losses		3,000				11,500				-				(6,000	)			(20,000	)
Net interest income after provision
for credit losses		332,181				312,425				308,717				306,405				295,842
Noninterest income:
Service charges on deposit accounts		3,608				3,634				3,571				3,476				3,407
Other commissions and fees		10,034				10,813				11,580				10,633				11,792
Leased equipment income		12,835				12,335				13,094				12,602				10,943
Gain on sale of loans and leases		58				12				60				172				-
Gain (loss) on sale of securities		86				(1,209	)			104				999				515
Dividends and gains (losses) on equity investments		3,228				4,097				(11,375	)			(1,570	)			8,387
Warrant income		292				1,615				629				23,990				13,578
Other income		8,478				3,049				3,155				7,080				2,723
Total noninterest income		38,619				34,346				20,818				57,382				51,345
Noninterest expense:
Compensation		105,933				102,542				92,240				99,700				98,061
Occupancy		15,574				15,268				15,200				14,656				14,928
Data processing		9,568				9,258				9,629				8,171				7,391
Other professional services		10,674				6,726				5,954				5,946				5,164
Insurance and assessments		7,159				5,632				5,490				5,032				3,685
Intangible asset amortization		3,649				3,649				3,649				3,876				2,890
Leased equipment depreciation		8,908				8,934				9,189				9,569				8,603
Foreclosed assets (income) expense, net		(248	)			(28	)			(3,353	)			(260	)			165
Acquisition, integration and reorganization costs		-				-				-				5,590				200
Customer related expense		12,673				11,748				12,655				6,175				4,538
Loan expense		6,228				7,037				5,157				5,627				4,180
Other expense		15,500				12,879				11,616				12,028				9,616
Total noninterest expense		195,618				183,645				167,426				176,110				159,421
Earnings before income taxes		175,182				163,126				162,109				187,677				187,766
Income tax expense		43,566				40,766				41,981				51,632				47,770
Net earnings		131,616				122,360				120,128				136,045				139,996
Preferred stock dividends		9,392				-				-				-				-
Net earnings available to
common stockholders	$	122,224			$	122,360			$	120,128			$	136,045			$	139,996
Basic and diluted earnings per common share	$	1.02			$	1.02			$	1.01			$	1.14			$	1.17
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
	September 30,				June 30,				March 31,				December 31,				September 30,
		2022				2022				2022				2021				2021
	(Dollars in thousands)
Performance Ratios:
Return on average assets (1)		1.28	%			1.23	%			1.22	%			1.34	%			1.55	%
Pre-provision, pre-tax net revenue
("PPNR") return on average
assets (1)(2)		1.73	%			1.75	%			1.65	%			1.79	%			1.86	%
Return on average equity (1)		13.02	%			13.44	%			12.66	%			13.65	%			14.18	%
Return on average tangible common
equity (1)(2)		24.11	%			24.42	%			20.93	%			22.06	%			21.03	%
Efficiency ratio		51.0	%			49.5	%			50.1	%			46.2	%			47.2	%
Noninterest expense as a percentage
of average assets (1)		1.90	%			1.84	%			1.70	%			1.73	%			1.76	%
Average Yields/Costs (1):
Yield on:
Average loans and leases (3)		5.12	%			4.65	%			4.66	%			4.93	%			5.01	%
Average investment securities (3)		2.45	%			2.32	%			2.17	%			2.02	%			2.12	%
Average interest-earning assets (3)		4.36	%			3.85	%			3.59	%			3.39	%			3.50	%
Cost of:
Average interest-bearing deposits		1.15	%			0.31	%			0.13	%			0.13	%			0.14	%
Average total deposits		0.70	%			0.18	%			0.07	%			0.08	%			0.08	%
Average interest-bearing liabilities		1.32	%			0.49	%			0.27	%			0.27	%			0.29	%
Net interest spread (3)		3.04	%			3.36	%			3.32	%			3.12	%			3.21	%
Net interest margin (3)		3.57	%			3.56	%			3.43	%			3.24	%			3.33	%
Average Balances:
Assets:
Loans and leases, net of deferred fees	$	27,038,873			$	25,449,773			$	23,433,019			$	21,367,665			$	19,670,671
Investment securities		8,803,349				9,488,653				10,397,709				9,964,568				8,047,098
Deposits in financial institutions		1,809,809				1,984,751				3,083,159				5,961,104				5,657,768
Interest-earning assets		37,652,031				36,923,177				36,913,887				37,293,337				33,375,537
Total assets		40,841,272				40,031,891				39,883,304				40,358,147				35,871,664
Liabilities:
Noninterest-bearing deposits		13,653,177				13,987,398				14,463,667				14,713,385				12,198,313
Interest-bearing deposits		21,214,265				19,661,618				19,868,395				20,050,310				18,130,694
Total deposits		34,867,442				33,649,016				34,332,062				34,763,695				30,329,007
Borrowings		505,482				1,356,616				298,444				234,391				238,335
Subordinated debt		863,719				863,653				863,572				862,777				862,272
Interest-bearing liabilities		22,583,466				21,881,887				21,030,411				21,147,478				19,231,301
Stockholders' equity		4,011,179				3,652,368				3,847,481				3,954,267				3,916,621
(1) Annualized.
(2) Non-GAAP measure.
(3) Tax equivalent.

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
	At or For the Three Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
		2022				2022				2022				2021				2021
	(Dollars in thousands, except per share data)
Credit Quality Metrics for Loans
and Leases Held for Investment:
Nonaccrual loans and leases	$	89,742			$	78,527			$	66,538			$	61,174			$	64,507
Nonperforming assets		92,709				78,527				66,842				74,017				77,871
Special mention loans and leases		463,994				480,261				377,315				391,611				496,366
Classified loans and leases		96,685				104,264				82,068				116,104				141,604
Allowance for loan and lease losses		189,327				188,705				197,398				200,564				203,733
Allowance for credit losses		284,398				283,776				272,469				273,635				279,804
For the quarter:
Provision for credit losses		3,000				10,000				-				(6,000	)			(20,000	)
Net charge-offs (recoveries)		2,378				(1,307	)			1,166				169				367
Nonaccrual loans and leases to loans
and leases		0.32	%			0.30	%			0.27	%			0.27	%			0.31	%
Nonperforming assets to loans and
leases and foreclosed assets		0.34	%			0.30	%			0.27	%			0.32	%			0.38	%
Special mention loans and leases to
loans and leases		1.68	%			1.81	%			1.55	%			1.71	%			2.42	%
Classified loans and leases to loans
and leases		0.35	%			0.39	%			0.34	%			0.51	%			0.69	%
Allowance for loan and lease losses
to loans and leases		0.68	%			0.71	%			0.81	%			0.87	%			0.99	%
Allowance for credit losses to loans
and leases		1.03	%			1.07	%			1.12	%			1.19	%			1.36	%
Allowance for credit losses to
nonaccrual loans and leases		316.91	%			361.37	%			409.49	%			447.31	%			433.76	%
Net charge-offs (recoveries)
to average loans and leases		0.03	%			(0.02	)%			0.02	%			0.00	%			0.01	%
Trailing 12 months net charge-offs
(recoveries) to average loans and
leases		0.01	%			0.00	%			(0.02	)%			(0.01	)%			0.09	%
PacWest Bancorp Consolidated:
Common equity tier 1 capital ratio (1)		8.55	%			8.24	%			8.64	%			8.86	%			10.15	%
Tier 1 capital ratio (1)		10.46	%			10.15	%			9.07	%			9.32	%			10.65	%
Total capital ratio (1)		13.43	%			13.12	%			12.27	%			12.69	%			14.36	%
Tier 1 leverage capital ratio (1)		8.63	%			8.52	%			7.11	%			6.84	%			8.05	%
Risk-weighted assets (1)	$	33,055,996			$	33,009,455			$	30,297,312			$	28,508,808			$	26,057,583
Equity to assets ratio		9.36	%			9.72	%			9.30	%			9.89	%			10.92	%
Tangible common equity ratio (2)		4.85	%			5.15	%			5.83	%			6.54	%			7.79	%
Book value per common share	$	28.07			$	28.93			$	30.52			$	33.45			$	32.77
Tangible book value per common share (2)	$	16.11			$	16.93			$	18.42			$	21.31			$	22.57
Pacific Western Bank:
Common equity tier 1 capital ratio (1)		10.17	%			9.78	%			9.32	%			9.56	%			11.12	%
Tier 1 capital ratio (1)		10.17	%			9.78	%			9.32	%			9.56	%			11.12	%
Total capital ratio (1)		12.16	%			11.77	%			11.45	%			11.80	%			13.59	%
Tier 1 leverage capital ratio (1)		8.39	%			8.21	%			7.31	%			7.00	%			8.40	%
(1) Capital information for September 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												Nine Months Ended
PPNR and PPNR Return	September 30,				June 30,				September 30,				September 30,
on Average Assets		2022				2022				2021				2022				2021
	(Dollars in thousands)
Net earnings	$	131,616			$	122,360			$	139,996			$	374,104			$	470,914
Net interest income	$	335,181			$	323,925			$	275,842			$	967,823			$	803,419
Noninterest income		38,619				34,346				51,345				93,783				136,545
Noninterest expense		(195,618	)			(183,645	)			(159,421	)			(546,689	)			(461,307	)
Pre-provision, pre-tax net
revenue ("PPNR")	$	178,182			$	174,626			$	167,766			$	514,917			$	478,657
Average assets	$	40,841,272			$	40,031,891			$	35,871,664			$	40,255,665			$	33,887,541
Return on average assets (1)		1.28	%			1.23	%			1.55	%			1.24	%			1.86	%
PPNR return on average assets (2)		1.73	%			1.75	%			1.86	%			1.71	%			1.89	%
(1) Annualized net earnings divided by average assets.
(2) Annualized PPNR divided by average assets.

	Three Months Ended												Nine Months Ended
Return on Average	September 30,				June 30,				September 30,				September 30,
Tangible Common Equity		2022				2022				2021				2022				2021
	(Dollars in thousands)
Net earnings	$	131,616			$	122,360			$	139,996			$	374,104			$	470,914
Less: Preferred stock dividends		(9,392	)			-				-				(9,392	)			-
Net earnings available to
common stockholders		122,224				122,360				139,996				364,712				470,914
Add: Intangible asset amortization		3,649				3,649				2,890				10,947				8,858
Adjusted net earnings	$	125,873			$	126,009			$	142,886			$	375,659			$	479,772
Average stockholders' equity	$	4,011,179			$	3,652,368			$	3,916,621			$	3,837,609			$	3,758,733
Less: Average intangible assets		1,441,689				1,445,333				1,221,253				1,445,332				1,212,851
Less: Average preferred stock		498,516				137,100				-				213,698				-
Average tangible common equity	$	2,070,974			$	2,069,935			$	2,695,368			$	2,178,579			$	2,545,882
Return on average equity (1)		13.02	%			13.44	%			14.18	%			13.03	%			16.75	%
Return on average tangible
common equity (2)		24.11	%			24.42	%			21.03	%			23.05	%			25.20	%
(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	September 30,				June 30,				March 31,				December 31,				September 30,
Common Share		2022				2022				2022				2021				2021
	(Dollars in thousands, except per share data)
Stockholders' equity	$	3,875,945			$	3,978,403			$	3,650,595			$	3,999,630			$	3,918,434
Less: Preferred stock		498,516				498,516				-				-				-
Total common equity		3,377,429				3,479,887				3,650,595				3,999,630				3,918,434
Less: Intangible assets		1,439,746				1,443,395				1,447,044				1,450,693				1,219,651
Tangible common equity	$	1,937,683			$	2,036,492			$	2,203,551			$	2,548,937			$	2,698,783
Total assets	$	41,404,592			$	40,950,723			$	39,249,639			$	40,443,344			$	35,885,676
Less: Intangible assets		1,439,746				1,443,395				1,447,044				1,450,693				1,219,651
Tangible assets	$	39,964,846			$	39,507,328			$	37,802,595			$	38,992,651			$	34,666,025
Equity to assets ratio		9.36	%			9.72	%			9.30	%			9.89	%			10.92	%
Tangible common equity ratio (1)		4.85	%			5.15	%			5.83	%			6.54	%			7.79	%
Book value per common share (2)	$	28.07			$	28.93			$	30.52			$	33.45			$	32.77
Tangible book value per common share (3)	$	16.11			$	16.93			$	18.42			$	21.31			$	22.57
Common shares outstanding		120,314,023				120,288,024				119,601,766				119,584,854				119,579,566
(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

Bart R. Olson EVP and CFO 714.989.4149

William J. Black EVP Strategy and Corporate Development 919.597.7466

FAQ

What were PacWest Bancorp's earnings for the third quarter of 2022?

PacWest Bancorp reported net earnings of $122.2 million for the third quarter of 2022.

What is the CET1 ratio for PacWest Bancorp as of September 30, 2022?

The Common Equity Tier 1 (CET1) ratio for PacWest Bancorp improved to 8.55%.

How much did total deposits increase for PacWest Bancorp in Q3 2022?

Total deposits increased by $228 million, or 0.7%, reaching $34.2 billion.

What was the loan growth percentage for PacWest Bancorp in Q3 2022?

PacWest Bancorp experienced a loan growth of 4.4%, totaling $27.7 billion.

What is the status of credit quality for PacWest Bancorp?

Credit quality remains stable with nonperforming assets at 34 basis points.