PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2021
Figure 1
Strong Performance
LOS ANGELES, Jan. 19, 2022 (GLOBE NEWSWIRE) — PacWest Bancorp (Nasdaq: PACW) –
FOURTH QUARTER 2021 RESULTS
| $136.0M | $1.14 | $181.7M | 22.06% |
| Net Earnings | Diluted Earnings per Share |
PPNR | ROATE |
FOURTH QUARTER 2021 HIGHLIGHTS
- Net Earnings of $136.0 Million or $1.14 Per Diluted Share
- Core Deposits Up $4.6 Billion or 16.3% of which $4.1 Billion Related to the Acquisition of the HOA Business in October; Represents 93% of Total Deposits
- Loan Growth of $2.4 Billion or 11.8%
- Civic Loan Production of $480 Million in 4Q21, Compared to $481 Million in 3Q21
- PPNR of $181.7 Million, Up 8.3% Compared to 3Q21
- Provision for Credit Losses Benefit of $6.0 Million in 4Q21 Compared to Benefit of $20.0 Million in 3Q21
- Net Interest Income (TE) of $304.5 Million in 4Q21, Compared to $279.8 Million in 3Q21
- Noninterest Income of $57.4 Million in 4Q21, Compared to $51.3 Million in 3Q21, With Continued Strength in Warrant Income
- Noninterest Expense of $176.1 Million in 4Q21, Up 10.5% From 3Q21, Due Mainly to First Quarter of Operating Expenses Related to Acquired HOA Business plus Acquisition Costs of $5.6 Million
- Classified and Special Mention Loans Fell $25.5 Million and $104.8 Million, Respectively, From 3Q21
- ACL Ratio of 1.19% and ALLL Ratio of 0.87%
- Net Charge-offs of $169 Thousand
- Cost of Deposits Remained at 8bps
- Loan and Lease Production of $3.4 Billion, Up From $2.4 Billion in 3Q21; WAC of 3.89% vs. 4.24% in 3Q21
- Strong Capital Position – CET1 Ratio of 8.86% and Total Capital Ratio of 12.69% at 4Q21
- Tangible Book Value Per Share Decreased From $22.57 at 3Q21 to $21.31 at 4Q21 Due Mainly to Cash Used for the HOA Acquisition
FULL YEAR 2021 RESULTS
| $607.0M | $5.10 | $660.3M | 24.41% |
| Net Earnings | Diluted Earnings per Share |
PPNR | ROATE |
FULL YEAR 2021 HIGHLIGHTS
- Net Earnings of $607.0 Million or $5.10 Per Diluted Share
- Core Deposits Up $10.5 Billion or 47.0% in 2021; Venture Banking Up $4.5 Billion; HOA Acquisition Added $4.1 Billion
- Loan Growth of $3.9 Billion or 20.2%
- PPNR of $660.3 Million, Up 2.1% Compared to 2020
- Provision for Credit Losses Benefit of $162.0 Million in 2021 Compared to Provision of $339.0 Million in 2020
- Net Interest Income (TE) of $1.1 Billion in 2021, Compared to $1.0 Billion in 2020
- Classified and Special Mention Loans Fell $149.2 Million and $329.7 Million, Respectively, From 2020
- Net Recoveries of $1.9 Million
- Cost of Deposits 9bps for 2021 Down From 27 bps in 2020
- Loan and Lease Production of $9.1 Billion, Up From $4.2 Billion in 2020; WAC of 4.19% vs. 3.57% in 2020
- Tangible Book Value Per Share Increased From $21.05 at the End of 2020 to $21.31 at the End of 2021
- Noninterest Income of $193.9 Million in 2021, Compared to $146.1 Million in 2020, With Record Warrant Income of $49.3 Million in 2021
CEO COMMENTARY
Matt Wagner, President and CEO, commented, “We are very pleased to deliver another strong quarter. We deployed approximately $3.8 billion of excess liquidity into higher-yielding securities and loans during the fourth quarter which resulted in a $24.6 million increase in net interest income and helped drive a $13.9 million increase in our pre-tax pre-provision net revenue compared to the third quarter. Loans grew by $2.4 billion in the fourth quarter to an all-time high of $22.9 billion.”
“We continued to experience strong deposit growth as core deposits increased by $4.6 billion during the fourth quarter driven by the $4.1 billion of deposits acquired with the HOA business.”
“Credit quality continues the improvement seen throughout 2021 with net recoveries of $1.9 million for the year and continued decreases in special mention (down 46% in 2021) and classified loans and leases (down 56% in 2021) which resulted in a provision benefit for the fourth consecutive quarter.”
“We had a strong year in 2021 and produced record net earnings of over $600 million, ended the year with record high balances for loans and deposits and crossed the $40 billion total assets milestone. We completed two strategic acquisitions with Civic Financial Services in February and the HOA business in October which expanded our product offerings and position us well for a rising rate environment. ”
“Our strategy of prioritizing a strong balance sheet, followed by profitability and growth, in that order, served us well in 2021 and we are well positioned as we begin 2022.”
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/be14ae62-9832-453c-9087-7d077d54bfcc
FINANCIAL HIGHLIGHTS
| ` | At or For the | At or For the | ||||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||||||
| December 31, | September 30, | Increase | December 31, | Increase | ||||||||||||||||||||
| Financial Highlights (1) | 2021 | 2021 | (Decrease) | 2021 | 2020 | (Decrease) | ||||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||||
| Net earnings (loss) | $ | 136,045 | $ | 139,996 | $ | (3,951 | ) | $ | 606,959 | $ | (1,237,574 | ) | $ | 1,844,533 | ||||||||||
| Diluted earnings (loss) per share | $ | 1.14 | $ | 1.17 | $ | (0.03 | ) | $ | 5.10 | $ | (10.61 | ) | $ | 15.71 | ||||||||||
| Pre-provision, pre-goodwill impairment, pre-tax net revenue (“PPNR”) (2) | $ | 181,677 | $ | 167,766 | $ | 13,911 | $ | 660,334 | $ | 646,599 | $ | 13,735 | ||||||||||||
| Return on average assets | 1.34 | % | 1.55 | % | (0.21 | ) | 1.71 | % | (4.46 | )% | 6.17 | |||||||||||||
| PPNR return on average assets (2) | 1.79 | % | 1.86 | % | (0.07 | ) | 1.86 | % | 2.33 | % | (0.47 | ) | ||||||||||||
| Return on average tangible equity (2) | 22.06 | % | 21.03 | % | 1.03 | 24.41 | % | 10.36 | % | 14.05 | ||||||||||||||
| Yield on average loans and leases (tax equivalent) | 4.93 | % | 5.01 | % | (0.08 | ) | 5.08 | % | 5.18 | % | (0.10 | ) | ||||||||||||
| Cost of average total deposits | 0.08 | % | 0.08 | % | – | 0.09 | % | 0.27 | % | (0.18 | ) | |||||||||||||
| Net interest margin (“NIM”) (tax equivalent) | 3.24 | % | 3.33 | % | (0.09 | ) | 3.40 | % | 4.05 | % | (0.65 | ) | ||||||||||||
| Efficiency ratio | 46.2 | % | 47.2 | % | (1.0 | ) | 46.9 | % | 43.1 | % | 3.8 | |||||||||||||
| Total assets | $ | 40,443,344 | $ | 35,885,676 | $ | 4,557,668 | $ | 40,443,344 | $ | 29,498,442 | $ | 10,944,902 | ||||||||||||
| Loans and leases held for investment, net of deferred fees | $ | 22,941,548 | $ | 20,511,020 | $ | 2,430,528 | $ | 22,941,548 | $ | 19,083,377 | $ | 3,858,171 | ||||||||||||
| Noninterest-bearing demand deposits | $ | 14,543,133 | $ | 12,881,806 | $ | 1,661,327 | $ | 14,543,133 | $ | 9,193,827 | $ | 5,349,306 | ||||||||||||
| Core deposits | $ | 32,734,949 | $ | 28,140,708 | $ | 4,594,241 | $ | 32,734,949 | $ | 22,264,480 | $ | 10,470,469 | ||||||||||||
| Total deposits | $ | 34,997,757 | $ | 30,559,745 | $ | 4,438,012 | $ | 34,997,757 | $ | 24,940,717 | $ | 10,057,040 | ||||||||||||
| As percentage of total deposits: | ||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 41 | % | 42 | % | (1 | ) | 41 | % | 37 | % | 4 | |||||||||||||
| Core deposits | 93 | % | 92 | % | 1 | 93 | % | 89 | % | 4 | ||||||||||||||
| Equity to assets ratio | 9.89 | % | 10.92 | % | (1.03 | ) | 9.89 | % | 12.19 | % | (2.30 | ) | ||||||||||||
| Common equity tier 1 capital ratio | 8.86 | % | 10.15 | % | (1.29 | ) | 8.86 | % | 10.53 | % | (1.67 | ) | ||||||||||||
| Total capital ratio | 12.69 | % | 14.36 | % | (1.67 | ) | 12.69 | % | 13.76 | % | (1.07 | ) | ||||||||||||
| Tangible common equity ratio (2) | 6.54 | % | 7.79 | % | (1.25 | ) | 6.54 | % | 8.78 | % | (2.24 | ) | ||||||||||||
| Book value per share | $ | 33.45 | $ | 32.77 | $ | 0.68 | $ | 33.45 | $ | 30.36 | $ | 3.09 | ||||||||||||
| Tangible book value per share (2) | $ | 21.31 | $ | 22.57 | $ | (1.26 | ) | $ | 21.31 | $ | 21.05 | $ | 0.26 | |||||||||||
| (1) The operations of the Homeowners Association Services business are included from its October 8, 2021 acquisition date and the operations of Civic are included from its February 1, 2021 acquisition date. | ||||||||||||||||||||||||
| (2) Non-GAAP measure. | ||||||||||||||||||||||||
INCOME STATEMENT HIGHLIGHTS
NET INTEREST INCOME
Net interest income increased by $24.6 million to $300.4 million for the fourth quarter of 2021 compared to $275.8 million for the third quarter of 2021 due mainly to higher income on investment securities and loans and leases primarily resulting from higher average balances as we deployed our excess liquidity. Income on investment securities increased by $7.7 million in the fourth quarter of 2021 due to a $1.9 billion increase in the average balance of investment securities, offset partially by a 10 basis point decrease in the yield on average investment securities. Income on loans and leases increased by $16.9 million in the fourth quarter of 2021 due to a $1.7 billion increase in the average balance of loans and leases, offset partially by an eight basis point decrease in the yield on average loans and leases. The tax equivalent yield on average loans and leases was 4.93% for the fourth quarter of 2021 compared to 5.01% for the third quarter of 2021. The decrease in the tax equivalent yield on average loans and leases was due primarily to the purchases of lower yielding single-family loans and higher loan premium amortization of $4.1 million.
The tax equivalent NIM was 3.24% for the fourth quarter of 2021 compared to 3.33% for the third quarter of 2021. The decrease in the NIM was due primarily to the change in the earning assets mix driven by the increase in the balance of average investment securities as a percentage of average earning assets and the decrease in the balance of average loans and leases as a percentage of average earning assets, as well as lower yields on average loans and leases and average investment securities. The average balance of investment securities increased by $1.9 billion to $10.0 billion, the average balance of deposits in financial institutions increased by $303.3 million to $6.0 billion, and the average balance of loans and leases increased by $1.7 billion to $21.4 billion in the fourth quarter of 2021. The increase in average balances of investment securities and loans and leases was the result of deploying some of our excess liquidity ahead of the closing of the acquisition of the HOA Services Division of MUFG Union Bank that added approximately $4.1 billion of deposits on October 8, 2021.
The cost of average total deposits was 0.08% in the fourth quarter of 2021, unchanged from 0.08% in the third quarter of 2021.
PROVISION FOR CREDIT LOSSES
The following table presents details of the provision for credit losses for the periods indicated:
| Three Months Ended | ||||||||||||
| December 31, | September 30, | Increase | ||||||||||
| Provision for Credit Losses | 2021 | 2021 | (Decrease) | |||||||||
| (In thousands) | ||||||||||||
| (Reduction in) addition to allowance for loan and lease losses | $ | (3,000 | ) | $ | (21,500 | ) | $ | 18,500 | ||||
| (Reduction in) addition to reserve for unfunded loan commitments | (3,000 | ) | 1,500 | (4,500 | ) | |||||||
| Total provision for credit losses | $ | (6,000 | ) | $ | (20,000 | ) | $ | 14,000 | ||||
The provision for credit losses benefit was $6.0 million for the fourth quarter of 2021 compared to a benefit of $20.0 million for the third quarter of 2021. The fourth quarter benefit was primarily impacted by changes in the qualitative component and a slightly improved economic forecast offset by an increased provision for loan growth.
NONINTEREST INCOME
The following table presents details of noninterest income for the periods indicated:
| Three Months Ended | ||||||||||||
| December 31, | September 30, | Increase | ||||||||||
| Noninterest Income | 2021 | 2021 | (Decrease) | |||||||||
| (In thousands) | ||||||||||||
| Service charges on deposit accounts | $ | 3,476 | $ | 3,407 | $ | 69 | ||||||
| Other commissions and fees | 10,633 | 11,792 | (1,159 | ) | ||||||||
| Leased equipment income | 12,602 | 10,943 | 1,659 | |||||||||
| Gain on sale of loans and leases | 172 | – | 172 | |||||||||
| Gain on sale of securities | 999 | 515 | 484 | |||||||||
| Other income: | ||||||||||||
| Dividends and gains on equity investments | (1,570 | ) | 8,387 | (9,957 | ) | |||||||
| Warrant income | 23,990 | 13,578 | 10,412 | |||||||||
| Other | 7,080 | 2,723 | 4,357 | |||||||||
| Total noninterest income | $ | 57,382 | $ | 51,345 | $ | 6,037 | ||||||
Noninterest income increased by $6.0 million to $57.4 million for the fourth quarter of 2021 compared to $51.3 million for the third quarter of 2021 due primarily to increases of $10.4 million in warrant income, $4.4 million in other income, and $1.7 million in leased equipment income, offset partially by a $10.0 million decrease in dividends and gains on equity investments. Warrant income increased due to continued strength in the capital markets activity including our single largest warrant gain ever of $13.6 million along with a second warrant gain of $5.2 million. Other income increased due primarily to higher gains from early lease terminations of $4.5 million. Leased equipment income increased due to a higher average balance of leased equipment and the return of one large lease to accrual status in December 2021. Dividends and gains on equity investments decreased due primarily to lower gains on sales of equity investments, higher fair value losses on equity investments still held, and lower income distributions and fair value marks on SBIC investments.
NONINTEREST EXPENSE
The following table presents details of noninterest expense for the periods indicated:
| Three Months Ended | ||||||||||||
| December 31, | September 30, | Increase | ||||||||||
| Noninterest Expense | 2021 | 2021 | (Decrease) | |||||||||
| (In thousands) | ||||||||||||
| Compensation | $ | 99,700 | $ | 98,061 | $ | 1,639 | ||||||
| Occupancy | 14,656 | 14,928 | (272 | ) | ||||||||
| Data processing | 8,171 | 7,391 | 780 | |||||||||
| Other professional services | 5,946 | 5,164 | 782 | |||||||||
| Insurance and assessments | 5,032 | 3,685 | 1,347 | |||||||||
| Intangible asset amortization | 3,876 | 2,890 | 986 | |||||||||
| Leased equipment depreciation | 9,569 | 8,603 | 966 | |||||||||
| Foreclosed assets (income) expense, net | (260 | ) | 165 | (425 | ) | |||||||
| Acquisition, integration and reorganization costs | 5,590 | 200 | 5,390 | |||||||||
| Customer related expense | 6,175 | 4,538 | 1,637 | |||||||||
| Loan expense | 5,627 | 4,180 | 1,447 | |||||||||
| Other | 12,028 | 9,616 | 2,412 | |||||||||
| Total noninterest expense | $ | 176,110 | $ | 159,421 | $ | 16,689 | ||||||
Noninterest expense increased by $16.7 million to $176.1 million for the fourth quarter of 2021 compared to $159.4 million for the third quarter of 2021 due primarily to increases in several expense categories such as compensation expense by $1.6 million, data processing by $0.8 million, insurance and assessments by $1.3 million, intangible asset amortization by $1.0 million, acquisition, integration and reorganization costs by $5.4 million, and customer related expense by $1.6 million. The increases related primarily to the acquisition of the HOA business on October 8, 2021. Total operating expenses for the quarter, excluding the acquisition, integration and reorganization costs of $5.6 million, were $170.5 million including $5.9 million of operating expenses for the acquired HOA business.
INCOME TAXES
The effective income tax rate was 27.5% in the fourth quarter of 2021 compared to 25.4% in the third quarter of 2021. The increase was due primarily to an increase in state tax rates for fiscal year 2021 caused by a shift in apportionment and a tax benefit from the release of a valuation allowance recorded in the third quarter. The effective income tax rate for the full year 2021 was 26.2%. The effective tax rate for the full year 2022 is currently estimated to be in the range of 25% to 27%.
BALANCE SHEET HIGHLIGHTS
DEPOSITS AND CLIENT INVESTMENT FUNDS
The following table presents the composition of our deposit portfolio as of the dates indicated:
| December 31, 2021 | September 30, 2021 | December 31, 2020 | ||||||||||||||||
| % of | % of | % of | ||||||||||||||||
| Deposit Composition | Balance | Total | Balance | Total | Balance | Total | ||||||||||||
| (Dollars in thousands) | ||||||||||||||||||
| Noninterest-bearing demand | $ | 14,543,133 | 41 | % | $ | 12,881,806 | 42 | % | $ | 9,193,827 | 37 | % | ||||||
| Interest checking | 7,319,898 | 21 | % | 7,168,472 | 24 | % | 5,974,910 | 24 | % | |||||||||
| Money market | 10,241,265 | 29 | % | 7,463,261 | 24 | % | 6,532,917 | 26 | % | |||||||||
| Savings | 630,653 | 2 | % | 627,169 | 2 | % | 562,826 | 2 | % | |||||||||
| Total core deposits | 32,734,949 | 93 | % | 28,140,708 | 92 | % | 22,264,480 | 89 | % | |||||||||
| Non-core non-maturity deposits | 889,976 | 3 | % | 960,438 | 3 | % | 1,149,467 | 5 | % | |||||||||
| Total non-maturity deposits | 33,624,925 | 96 | % | 29,101,146 | 95 | % | 23,413,947 | 94 | % | |||||||||
| Time deposits $250,000 and under | 885,938 | 3 | % | 882,551 | 3 | % | 994,197 | 4 | % | |||||||||
| Time deposits over $250,000 | 486,894 | 1 | % | 576,048 | 2 | % | 532,573 | 2 | % | |||||||||
| Total time deposits | 1,372,832 | 4 | % | 1,458,599 | 5 | % | 1,526,770 | 6 | % | |||||||||
| Total deposits | $ | 34,997,757 | 100 | % | $ | 30,559,745 | 100 | % | $ | 24,940,717 | 100 | % | ||||||
At December 31, 2021, core deposits totaled $32.7 billion or 93% of total deposits, including $14.5 billion of noninterest-bearing demand deposits or 41% of total deposits. Core deposits increased by $4.6 billion or 16.3% in the fourth quarter of 2021 driven primarily by the $4.1 billion of core deposits acquired with the HOA business on October 8, 2021.
In addition to deposit products, we also offer alternative, non-depository cash investment options for select clients. These alternative options include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds at December 31, 2021 were $1.4 billion, of which $0.9 billion was managed by PWAM.
LOANS AND LEASES
The following table presents roll forwards of loans and leases held for investment, net of deferred fees, for the periods indicated:
| Three Months Ended | Year Ended | |||||||||||
| Roll Forward of Loans and Leases Held | December 31, | September 30, | December 31, | |||||||||
| for Investment, Net of Deferred Fees (1) | 2021 | 2021 | 2021 | |||||||||
| (Dollars in thousands) | ||||||||||||
| Balance, beginning of period | $ | 20,511,020 | $ | 19,506,257 | $ | 19,083,377 | ||||||
| Additions: | ||||||||||||
| Production | 3,372,815 | 2,406,024 | 9,054,767 | |||||||||
| Disbursements | 1,917,195 | 1,349,333 | 5,952,158 | |||||||||
| Total production and disbursements | 5,290,010 | 3,755,357 | 15,006,925 | |||||||||
| Reductions: | ||||||||||||
| Payoffs | (2,000,293 | ) | (1,732,621 | ) | (7,337,296 | ) | ||||||
| Paydowns | (845,443 | ) | (1,013,867 | ) | (3,728,950 | ) | ||||||
| Total payoffs and paydowns | (2,845,736 | ) | (2,746,488 | ) | (11,066,246 | ) | ||||||
| Sales | (15,837 | ) | (2,175 | ) | (117,263 | ) | ||||||
| Transfers to foreclosed assets | – | (415 | ) | (1,062 | ) | |||||||
| Charge-offs | (4,395 | ) | (1,516 | ) | (10,715 | ) | ||||||
| Transfers to loans held for sale | – | – | (25,554 | ) | ||||||||
| Total reductions | (2,865,968 | ) | (2,750,594 | ) | (11,220,840 | ) | ||||||
| Loans acquired through acquisitions | 6,486 | – | 72,086 | |||||||||
| Net increase (decrease) | 2,430,528 | 1,004,763 | 3,858,171 | |||||||||
| Balance, end of period | $ | 22,941,548 | $ | 20,511,020 | $ | 22,941,548 | ||||||
| Weighted average rate on production (2) | 3.89 | % | 4.24 | % | 4.19 | % | ||||||
| (1) Includes direct financing leases but excludes equipment leased to others under operating leases. | ||||||||||||
| (2) The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes amortized fees. Amortized fees added approximately 38 basis points to loan yields in 2021. | ||||||||||||
Loans and leases held for investment, net of deferred fees, increased by $2.4 billion or 11.8% in the fourth quarter of 2021 to $22.9 billion at December 31, 2021. Excluding PPP loan activity, loans grew by $2.5 billion or 12.6%. The overall increase in the loans and leases balance for the fourth quarter of 2021 was due primarily to increases in the income producing and other residential, venture capital, and asset-based portfolios, offset partially by a reduction in the commercial real estate construction portfolio. Civic loan production was $480 million in the fourth quarter of 2021 compared to $481 million in the third quarter of 2021. The total outstanding balance of the Civic loan portfolio as of December 31, 2021 was $1.4 billion. The PPP loan forgiveness in the fourth quarter of 2021 was $111 million, down from $338 million in the third quarter of 2021. Net fees for PPP loans were $3.6 million in the fourth quarter of 2021, down from the $7.9 million in the third quarter of 2021. Remaining PPP loans totaled $157 million as of December 31, 2021 with $4.2 million of net fees to amortize over the remaining life of the loans. The weighted average rate on the $3.4 billion of new production for the fourth quarter of 2021 decreased to 3.89% from 4.24% in the third quarter of 2021 due primarily to the loan mix (higher levels of single-family loan pool purchases and equity fund loans). In the fourth quarter of 2021, we purchased $1.1 billion in single-family loan pools compared to $1.0 billion in the third quarter of 2021. The total of the single-family loan pool purchase portfolio as of December 31, 2021 was $2.3 billion.
The following table presents the composition of loans and leases held for investment by loan portfolio segment and class, net of deferred fees, as of the dates indicated:
| December 31, 2021 | September 30, 2021 | December 31, 2020 | ||||||||||||||||
| % of | % of | % of | ||||||||||||||||
| Loan and Lease Portfolio | Balance | Total | Balance | Total | Balance | Total | ||||||||||||
| (In thousands) | ||||||||||||||||||
| Real estate mortgage: | ||||||||||||||||||
| Commercial | $ | 3,762,299 | 17 | % | $ | 3,694,597 | 18 | % | $ | 4,096,671 | 21 | % | ||||||
| Income producing and other residential | 7,416,421 | 32 | % | 6,153,662 | 30 | % | 3,803,265 | 20 | % | |||||||||
| Total real estate mortgage | 11,178,720 | 49 | % | 9,848,259 | 48 | % | 7,899,936 | 41 | % | |||||||||
| Real estate construction and land: | ||||||||||||||||||
| Commercial | 832,591 | 4 | % | 992,003 | 5 | % | 1,117,121 | 6 | % | |||||||||
| Residential | 2,604,536 | 11 | % | 2,392,568 | 12 | % | 2,243,160 | 12 | % | |||||||||
| Total real estate construction and land | 3,437,127 | 15 | % | 3,384,571 | 17 | % | 3,360,281 | 18 | % | |||||||||
| Total real estate | 14,615,847 | 64 | % | 13,232,830 | 65 | % | 11,260,217 | 59 | % | |||||||||
| Commercial: | ||||||||||||||||||
| Asset-based | 4,075,477 | 18 | % | 3,661,769 | 18 | % | 3,429,283 | 18 | % | |||||||||
| Venture capital | 2,320,593 | 10 | % | 1,632,861 | 8 | % | 1,698,508 | 9 | % | |||||||||
| Other commercial | 1,471,981 | 6 | % | 1,577,592 | 7 | % | 2,375,114 | 12 | % | |||||||||
| Total commercial | 7,868,051 | 34 | % | 6,872,222 | 33 | % | 7,502,905 | 39 | % | |||||||||
| Consumer | 457,650 | 2 | % | 405,968 | 2 | % | 320,255 | 2 | % | |||||||||
| Total loans and leases held for investment, net of deferred fees | $ | 22,941,548 | 100 | % | $ | 20,511,020 | 100 | % | $ | 19,083,377 | 100 | % | ||||||
| Total unfunded loan commitments | $ | 9,006,350 | $ | 8,480,599 | $ | 7,601,390 | ||||||||||||
ALLOWANCE FOR CREDIT LOSSES
The following tables present roll forwards of the allowance for credit losses for the periods indicated:
| Three Months Ended December 31, 2021 | ||||||||||||
| Allowance for | Reserve for | Total | ||||||||||
| Allowance for Credit | Loan and | Unfunded Loan | Allowance for | |||||||||
| Losses Rollforward | Lease Losses | Commitments | Credit Losses | |||||||||
| (In thousands) | ||||||||||||
| Beginning balance | $ | 203,733 | $ | 76,071 | $ | 279,804 | ||||||
| Charge-offs | (4,395 | ) | – | (4,395 | ) | |||||||
| Recoveries | 4,226 | – | 4,226 | |||||||||
| Net charge-offs | (169 | ) | – | (169 | ) | |||||||
| Provision | (3,000 | ) | (3,000 | ) | (6,000 | ) | ||||||
| Ending balance | $ | 200,564 | $ | 73,071 | $ | 273,635 | ||||||
| Three Months Ended September 30, 2021 | ||||||||||||
| Allowance for | Reserve for | Total | ||||||||||
| Allowance for Credit | Loan and | Unfunded Loan | Allowance for | |||||||||
| Losses Rollforward | Lease Losses | Commitments | Credit Losses | |||||||||
| (In thousands) | ||||||||||||
| Beginning balance | $ | 225,600 | $ | 74,571 | $ | 300,171 | ||||||
| Charge-offs | (1,516 | ) | – | (1,516 | ) | |||||||
| Recoveries | 1,149 | – | 1,149 | |||||||||
| Net charge-offs | (367 | ) | – | (367 | ) | |||||||
| Provision | (21,500 | ) | 1,500 | (20,000 | ) | |||||||
| Ending balance | $ | 203,733 | $ | 76,071 | $ | 279,804 | ||||||
| Allowance for Credit | Year Ended December 31, | |||||||
| Losses Rollforward | 2021 | 2020 | ||||||
| (In thousands) | ||||||||
| Beginning balance | $ | 433,752 | $ | 174,646 | ||||
| Cumulative effect of change in accounting principle – CECL | – | 7,327 | ||||||
| Balance, January 1 | 433,752 | 181,973 | ||||||
| Charge-offs | (10,715 | ) | (93,589 | ) | ||||
| Recoveries | 12,598 | 6,368 | ||||||
| Net recoveries (charge-offs) | 1,883 | (87,221 | ) | |||||
| Provision | (162,000 | ) | 339,000 | |||||
| Ending balance | $ | 273,635 | $ | 433,752 | ||||
The following table presents allowance for credit losses information as of and for the dates and periods indicated:
| December 31, | September 30, | Increase | ||||||||||
| Allowance for Credit Losses | 2021 | 2021 | (Decrease) | |||||||||
| (Dollars in thousands) | ||||||||||||
| Allowance for loan and lease losses | $ | 200,564 | $ | 203,733 | $ | (3,169 | ) | |||||
| Reserve for unfunded loan commitments | 73,071 | 76,071 | (3,000 | ) | ||||||||
| Allowance for credit losses | $ | 273,635 | $ | 279,804 | $ | (6,169 | ) | |||||
| Provision for credit losses (for the quarter) | $ | (6,000 | ) | $ | (20,000 | ) | $ | 14,000 | ||||
| Net charge-offs (recoveries) (for the quarter) | $ | 169 | $ | 367 | $ | (198 | ) | |||||
| Net charge-offs (recoveries) to average loans and leases (for the quarter) | 0.00 | % | 0.01 | % | ||||||||
| Allowance for loan and lease losses to loans and leases held for investment | 0.87 | % | 0.99 | % | ||||||||
| Allowance for loan and lease losses to loans and leases held for investment, excluding PPP loans | 0.88 | % | 1.01 | % | ||||||||
| Allowance for credit losses to loans and leases held for investment | 1.19 | % | 1.36 | % | ||||||||
| Allowance for credit losses to loans and leases held for investment, excluding PPP loans | 1.20 | % | 1.38 | % | ||||||||
The allowance for credit losses decreased by $6.2 million in the fourth quarter of 2021 to $273.6 million at December 31, 2021. The decrease in the allowance for credit losses during the fourth quarter of 2021 was attributable to a provision for credit losses benefit of $6.0 million and $0.2 million in net charge-offs. The allowance for credit losses ratio, excluding PPP loans, of 1.20% remains robust and moderately higher than the pre-pandemic level of 0.97% as of the January 1, 2020 CECL adoption date.
Net charge-offs were $0.2 million for the fourth quarter of 2021 as gross charge-offs of $4.4 million were reduced by recoveries of $4.2 million.
Net charge-offs were $0.4 million for the third quarter of 2021 as gross charge-offs of $1.5 million were reduced by recoveries of $1.1 million.
On a year-to-date basis for the year ended December 31, 2021, net recoveries were $1.9 million as gross charge-offs of $10.7 million were reduced by recoveries of $12.6 million.
CREDIT QUALITY
The following table presents loan and lease credit quality metrics as of the dates indicated:
| December 31, | September 30, | Increase | ||||||||||
| Credit Quality Metrics | 2021 | 2021 | (Decrease) | |||||||||
| (Dollars in thousands) | ||||||||||||
| NPAs and Performing TDRs: | ||||||||||||
| Nonaccrual loans and leases held for investment (1) | $ | 61,174 | $ | 64,507 | $ | (3,333 | ) | |||||
| Accruing loans contractually past due 90 days or more | – | – | – | |||||||||
| Foreclosed assets, net | 12,843 | 13,364 | (521 | ) | ||||||||
| Total nonperforming assets (“NPAs”) | $ | 74,017 | $ | 77,871 | $ | (3,854 | ) | |||||
| Performing TDRs held for investment | $ | 24,430 | $ | 36,750 | $ | (12,320 | ) | |||||
| Nonaccrual loans and leases held for investment to loans and leases held for investment | 0.27 | % | 0.31 | % | ||||||||
| Nonperforming assets to loans and leases held for investment and foreclosed assets | 0.32 | % | 0.38 | % | ||||||||
| Allowance for credit losses to nonaccrual loans and leases held for investment | 447.3 | % | 433.8 | % | ||||||||
| Loan and Lease Credit Risk Ratings: | ||||||||||||
| Pass | $ | 22,433,833 | $ | 19,873,050 | $ | 2,560,783 | ||||||
| Special mention | 391,611 | 496,366 | (104,755 | ) | ||||||||
| Classified | 116,104 | 141,604 | (25,500 | ) | ||||||||
| Total loans and leases held for investment, net of deferred fees | $ | 22,941,548 | $ | 20,511,020 | $ | 2,430,528 | ||||||
| Classified loans and leases held for investment to loans and leases held for investment | 0.51 | % | 0.69 | % | ||||||||
| (1) Nonaccrual loans include SBA guaranteed amounts of $22.1 million at December 31, 2021 and $20.1 million at September 30, 2021. | ||||||||||||
Since downgrading certain loans at the onset of the pandemic in the first quarter of 2020 given all the uncertainty at the time, special mention loans and leases have decreased by $507.0 million or 56% from their peak in the first quarter of 2020, while classified loans and leases have decreased by $177.1 million or 60% from their peak in the second quarter of 2020, and each have significantly declined in the fourth quarter of 2021. Classified loans and leases are now below pre-pandemic levels while special mention loans and leases are also approaching pre-pandemic levels. Nonaccrual loans and leases decreased by $3.3 million to $61.2 million in the fourth quarter of 2021 due primarily to a decrease in nonaccrual short-term, single-family residential renovation loans as a result of payoffs during the quarter.
The following table presents nonaccrual loans and leases and accruing loans and leases past due between 30 and 89 days by loan portfolio segment and class as of the dates indicated:
| December 31, 2021 | September 30, 2021 | Increase (Decrease) | ||||||||||||||||||||||
| Accruing | Accruing | Accruing | ||||||||||||||||||||||
| and 30-89 | and 30-89 | and 30-89 | ||||||||||||||||||||||
| Days Past | Days Past | Days Past | ||||||||||||||||||||||
| Nonaccrual | Due | Nonaccrual | Due | Nonaccrual | Due | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Real estate mortgage: | ||||||||||||||||||||||||
| Commercial | $ | 27,540 | $ | 2,165 | $ | 25,615 | $ | 676 | $ | 1,925 | $ | 1,489 | ||||||||||||
| Income producing and other residential | 12,292 | 39,929 | 7,547 | 3,760 | 4,745 | 36,169 | ||||||||||||||||||
| Total real estate mortgage | 39,832 | 42,094 | 33,162 | 4,436 | 6,670 | 37,658 | ||||||||||||||||||
| Real estate construction and land: | ||||||||||||||||||||||||
| Commercial | – | – | – | – | – | – | ||||||||||||||||||
| Residential | 4,715 | 5,031 | 19,918 | 12,809 | (15,203 | ) | (7,778 | ) | ||||||||||||||||
| Total real estate construction and land | 4,715 | 5,031 | 19,918 | 12,809 | (15,203 | ) | (7,778 | ) | ||||||||||||||||
| Commercial: | ||||||||||||||||||||||||
| Asset-based | 1,464 | – | 1,605 | – | (141 | ) | – | |||||||||||||||||
| Venture capital | 2,799 | – | 2,348 | 1,670 | 451 | (1,670 | ) | |||||||||||||||||
| Other commercial | 11,950 | 630 | 6,979 | 340 | 4,971 | 290 | ||||||||||||||||||
| Total commercial | 16,213 | 630 | 10,932 | 2,010 | 5,281 | (1,380 | ) | |||||||||||||||||
| Consumer | 414 | 1,004 | 495 | 1,042 | (81 | ) | (38 | ) | ||||||||||||||||
| Total held for investment | $ | 61,174 | $ | 48,759 | $ | 64,507 | $ | 20,297 | $ | (3,333 | ) | $ | 28,462 | |||||||||||
The increase in accruing and 30-89 days past due loans is primarily due to $19.3 million in past due purchased single-family loans. As of January 14, 2022, $5.9 million of these loans remained over 30 days past due. The delinquency related to these loans was attributable to delayed payment application stemming from servicing being transferred following our purchase of the loans. The increase in this category was also due to an increase of $9.1 million in single-family residential loans originated by Civic.
CAPITAL
The following table presents certain actual capital ratios and ratios excluding PPP loans:
| December 31, 2021 | ||||||||||||
| Excluding | September 30, | |||||||||||
| PPP | 2021 | |||||||||||
| Actual (1) | Loans (1) | Actual | ||||||||||
| PacWest Bancorp Consolidated: | ||||||||||||
| Tier 1 leverage capital ratio | 6.84 | % | 6.88 | % | (3) | 8.05 | % | |||||
| Common equity tier 1 capital ratio | 8.86 | % | 8.86 | % | 10.15 | % | ||||||
| Tier 1 capital ratio | 9.32 | % | 9.32 | % | 10.65 | % | ||||||
| Total capital ratio | 12.69 | % | 12.69 | % | 14.36 | % | ||||||
| Risk-weighted assets | $ | 28,508,808 | $ | 28,508,808 | $ | 26,057,583 | ||||||
| Tangible common equity ratio (2) | 6.54 | % | 6.56 | % | (3) | 7.79 | % | |||||
| (1) Capital information for December 31, 2021 is preliminary. | ||||||||||||
| (2) Non-GAAP measure. | ||||||||||||
| (3) PPP loans have been excluded from total assets in the denominator as they are zero risk-weighted. | ||||||||||||
The decreases in the capital ratios during the fourth quarter of 2021 were due primarily to the increase in goodwill related to the HOA acquisition combined with an increase in risk-weighted assets as we deployed $3.8 billion of excess liquidity into securities and loans and leases during the quarter.
ABOUT PACWEST BANCORP
PacWest Bancorp (“PacWest”) is a bank holding company with over $40 billion in assets headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 69 full-service branches located in California, one branch located in Durham, North Carolina, and one branch located in Denver, Colorado. The Bank provides community banking products including lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank provides venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States. The Bank also offers financing of non-owner-occupied investor properties through Civic Financial Services a wholly-owned subsidiary. The Bank also offers a specialized suite of services for the HOA industry. For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.
FORWARD LOOKING STATEMENTS
This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control. The ongoing COVID-19 pandemic has adversely affected PacWest, its employees, customers and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity and prospects is uncertain. The risks from the COVID-19 pandemic have decreased as the pandemic subsides, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our allowance for credit losses and related provision for credit losses. Continued deterioration in general business and economic conditions could adversely affect PacWest’s revenues and the values of its assets, including goodwill, and liabilities, lead to a tightening of credit, and increase stock price volatility. In addition, PacWest’s results could be adversely affected by changes in interest rates, sustained high unemployment rates, deterioration in the credit quality of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment securities, the magnitude of individual loan losses on security monitoring loans, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission.
We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | ||||||||||||
| December 31, | September 30, | December 31, | ||||||||||
| 2021 | 2021 | 2020 | ||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||
| ASSETS: | ||||||||||||
| Cash and due from banks | $ | 112,548 | $ | 174,585 | $ | 150,464 | ||||||
| Interest-earning deposits in financial institutions | 3,944,686 | 3,524,613 | 3,010,197 | |||||||||
| Total cash and cash equivalents | 4,057,234 | 3,699,198 | 3,160,661 | |||||||||
| Securities available-for-sale, at estimated fair value | 10,694,458 | 9,276,926 | 5,235,591 | |||||||||
| Federal Home Loan Bank stock, at cost | 17,250 | 17,250 | 17,250 | |||||||||
| Total investment securities | 10,711,708 | 9,294,176 | 5,252,841 | |||||||||
| Loans held for sale | – | – | – | |||||||||
| Gross loans and leases held for investment | 23,026,308 | 20,588,255 | 19,153,357 | |||||||||
| Deferred fees, net | (84,760 | ) | (77,235 | ) | (69,980 | ) | ||||||
| Total loans and leases held for investment, net of deferred fees | 22,941,548 | 20,511,020 | 19,083,377 | |||||||||
| Allowance for loan and lease losses | (200,564 | ) | (203,733 | ) | (348,181 | ) | ||||||
| Total loans and leases held for investment, net | 22,740,984 | 20,307,287 | 18,735,196 | |||||||||
| Equipment leased to others under operating leases | 339,150 | 334,275 | 333,846 | |||||||||
| Premises and equipment, net | 46,740 | 47,246 | 39,234 | |||||||||
| Foreclosed assets, net | 12,843 | 13,364 | 14,027 | |||||||||
| Goodwill | 1,405,736 | 1,204,118 | 1,078,670 | |||||||||
| Core deposit and customer relationship intangibles, net | 44,957 | 15,533 | 23,641 | |||||||||
| Other assets | 1,083,992 | 970,479 | 860,326 | |||||||||
| Total assets | $ | 40,443,344 | $ | 35,885,676 | $ | 29,498,442 | ||||||
| LIABILITIES: | ||||||||||||
| Noninterest-bearing deposits | $ | 14,543,133 | $ | 12,881,806 | $ | 9,193,827 | ||||||
| Interest-bearing deposits | 20,454,624 | 17,677,939 | 15,746,890 | |||||||||
| Total deposits | 34,997,757 | 30,559,745 | 24,940,717 | |||||||||
| Borrowings | – | – | 5,000 | |||||||||
| Subordinated debt | 863,283 | 862,447 | 465,812 | |||||||||
| Accrued interest payable and other liabilities | 582,674 | 545,050 | 491,962 | |||||||||
| Total liabilities | 36,443,714 | 31,967,242 | 25,903,491 | |||||||||
| STOCKHOLDERS’ EQUITY (1) | 3,999,630 | 3,918,434 | 3,594,951 | |||||||||
| Total liabilities and stockholders’ equity | $ | 40,443,344 | $ | 35,885,676 | $ | 29,498,442 | ||||||
| Book value per share | $ | 33.45 | $ | 32.77 | $ | 30.36 | ||||||
| Tangible book value per share (2) | $ | 21.31 | $ | 22.57 | $ | 21.05 | ||||||
| Shares outstanding | 119,584,854 | 119,579,566 | 118,414,853 | |||||||||
| (1) Includes net unrealized gain on securities available-for-sale, net | $ | 65,968 | $ | 98,859 | $ | 172,523 | ||||||
| (2) Non-GAAP measure. | ||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS) | ||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| Interest income: | ||||||||||||||||||||
| Loans and leases | $ | 263,662 | $ | 246,722 | $ | 242,198 | $ | 996,457 | $ | 993,138 | ||||||||||
| Investment securities | 48,469 | 40,780 | 28,843 | 153,468 | 106,770 | |||||||||||||||
| Deposits in financial institutions | 2,674 | 2,580 | 1,135 | 8,804 | 3,583 | |||||||||||||||
| Total interest income | 314,805 | 290,082 | 272,176 | 1,158,729 | 1,103,491 | |||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Deposits | 6,622 | 6,417 | 8,454 | 27,808 | 59,663 | |||||||||||||||
| Borrowings | 64 | 101 | 37 | 623 | 8,161 | |||||||||||||||
| Subordinated debt | 7,714 | 7,722 | 4,477 | 26,474 | 21,109 | |||||||||||||||
| Total interest expense | 14,400 | 14,240 | 12,968 | 54,905 | 88,933 | |||||||||||||||
| Net interest income | 300,405 | 275,842 | 259,208 | 1,103,824 | 1,014,558 | |||||||||||||||
| Provision for credit losses | (6,000 | ) | (20,000 | ) | 10,000 | (162,000 | ) | 339,000 | ||||||||||||
| Net interest income after provision for credit losses | 306,405 | 295,842 | 249,208 | 1,265,824 | 675,558 | |||||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Service charges on deposit accounts | 3,476 | 3,407 | 3,119 | 13,269 | 10,351 | |||||||||||||||
| Other commissions and fees | 10,633 | 11,792 | 9,974 | 42,287 | 40,347 | |||||||||||||||
| Leased equipment income | 12,602 | 10,943 | 9,440 | 45,746 | 43,628 | |||||||||||||||
| Gain on sale of loans and leases | 172 | – | 1,671 | 1,733 | 2,139 | |||||||||||||||
| Gain on sale of securities | 999 | 515 | 4 | 1,615 | 13,171 | |||||||||||||||
| Other income | 29,500 | 24,688 | 15,642 | 89,277 | 36,424 | |||||||||||||||
| Total noninterest income | 57,382 | 51,345 | 39,850 | 193,927 | 146,060 | |||||||||||||||
| Noninterest expense: | ||||||||||||||||||||
| Compensation | 99,700 | 98,061 | 73,171 | 368,450 | 271,494 | |||||||||||||||
| Occupancy | 14,656 | 14,928 | 14,083 | 58,422 | 57,555 | |||||||||||||||
| Data processing | 8,171 | 7,391 | 6,718 | 30,277 | 26,779 | |||||||||||||||
| Other professional services | 5,946 | 5,164 | 6,800 | 21,492 | 19,917 | |||||||||||||||
| Insurance and assessments | 5,032 | 3,685 | 5,064 | 17,365 | 22,625 | |||||||||||||||
| Intangible asset amortization | 3,876 | 2,890 | 3,172 | 12,734 | 14,753 | |||||||||||||||
| Leased equipment depreciation | 9,569 | 8,603 | 7,501 | 35,755 | 28,865 | |||||||||||||||
| Foreclosed assets (income) expense, net | (260 | ) | 165 | (272 | ) | (213 | ) | (17 | ) | |||||||||||
| Acquisition, integration and reorganization costs | 5,590 | 200 | 1,060 | 9,415 | 1,060 | |||||||||||||||
| Customer related expense | 6,175 | 4,538 | 4,430 | 20,504 | 17,532 | |||||||||||||||
| Loan expense | 5,627 | 4,180 | 3,926 | 17,031 | 13,454 | |||||||||||||||
| Goodwill impairment | – | – | – | – | 1,470,000 | |||||||||||||||
| Other expense | 12,028 | 9,616 | 10,029 | 46,185 | 40,002 | |||||||||||||||
| Total noninterest expense | 176,110 | 159,421 | 135,682 | 637,417 | 1,984,019 | |||||||||||||||
| Earnings (loss) before income taxes | 187,677 | 187,766 | 153,376 | 822,334 | (1,162,401 | ) | ||||||||||||||
| Income tax expense | 51,632 | 47,770 | 36,546 | 215,375 | 75,173 | |||||||||||||||
| Net earnings (loss) | $ | 136,045 | $ | 139,996 | $ | 116,830 | $ | 606,959 | $ | (1,237,574 | ) | |||||||||
| Basic and diluted earnings (loss) per share | $ | 1.14 | $ | 1.17 | $ | 0.99 | $ | 5.10 | $ | (10.61 | ) | |||||||||
| Dividends declared and paid per share | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 1.00 | $ | 1.35 | ||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| NET EARNINGS (LOSS) PER SHARE CALCULATIONS | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
| Basic Earnings (Loss) Per Share: | ||||||||||||||||||||
| Net earnings (loss) | $ | 136,045 | $ | 139,996 | $ | 116,830 | $ | 606,959 | $ | (1,237,574 | ) | |||||||||
| Less: earnings allocated to unvested restricted stock (1) | (2,311 | ) | (2,417 | ) | (1,398 | ) | (10,248 | ) | (1,782 | ) | ||||||||||
| Net earnings (loss) allocated to common shares | $ | 133,734 | $ | 137,579 | $ | 115,432 | $ | 596,711 | $ | (1,239,356 | ) | |||||||||
| Weighted average basic shares and unvested restricted stock outstanding | 119,577 | 119,569 | 118,446 | 119,349 | 118,463 | |||||||||||||||
| Less: weighted average unvested restricted stock outstanding | (2,314 | ) | (2,340 | ) | (1,652 | ) | (2,255 | ) | (1,610 | ) | ||||||||||
| Weighted average basic shares outstanding | 117,263 | 117,229 | 116,794 | 117,094 | 116,853 | |||||||||||||||
| Basic earnings (loss) per share | $ | 1.14 | $ | 1.17 | $ | 0.99 | $ | 5.10 | $ | (10.61 | ) | |||||||||
| Diluted Earnings (Loss) Per Share: | ||||||||||||||||||||
| Net earnings (loss) allocated to common shares | $ | 133,734 | $ | 137,579 | $ | 115,432 | $ | 596,711 | $ | (1,239,356 | ) | |||||||||
| Weighted average diluted shares outstanding | 117,263 | 117,229 | 116,794 | 117,094 | 116,853 | |||||||||||||||
| Diluted earnings (loss) per share | $ | 1.14 | $ | 1.17 | $ | 0.99 | $ | 5.10 | $ | (10.61 | ) | |||||||||
| (1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any. | ||||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| AVERAGE BALANCE SHEET AND YIELD ANALYSIS | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| December 31, 2021 | September 30, 2021 | December 31, 2020 | ||||||||||||||||||
| Interest | Average | Interest | Average | Interest | Average | |||||||||||||||
| Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | ||||||||||||
| Balance | Expense | Cost | Balance | Expense | Cost | Balance | Expense | Cost | ||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Assets: | ||||||||||||||||||||
| Loans and leases (1)(2) | $ | 21,367,665 | $ | 265,549 | 4.93 | % | $ | 19,670,671 | $ | 248,485 | 5.01 | % | $ | 18,769,214 | $ | 243,188 | 5.15 | % | ||
| Investment securities (3) | 9,964,568 | 50,710 | 2.02 | % | 8,047,098 | 42,952 | 2.12 | % | 4,888,993 | 30,757 | 2.50 | % | ||||||||
| Deposits in financial institutions | 5,961,104 | 2,674 | 0.18 | % | 5,657,768 | 2,580 | 0.18 | % | 3,576,335 | 1,135 | 0.13 | % | ||||||||
| Total interest-earning assets (1) | 37,293,337 | 318,933 | 3.39 | % | 33,375,537 | 294,017 | 3.50 | % | 27,234,542 | 275,080 | 4.02 | % | ||||||||
| Other assets | 3,064,810 | 2,496,127 | 2,100,247 | |||||||||||||||||
| Total assets | $ | 40,358,147 | $ | 35,871,664 | $ | 29,334,789 | ||||||||||||||
| Liabilities and Stockholders’ Equity: | ||||||||||||||||||||
| Interest checking | $ | 7,767,211 | 2,041 | 0.10 | % | $ | 7,372,859 | 2,042 | 0.11 | % | $ | 5,191,435 | 2,064 | 0.16 | % | |||||
| Money market | 10,226,366 | 3,400 | 0.13 | % | 8,662,449 | 2,997 | 0.14 | % | 7,636,220 | 3,225 | 0.17 | % | ||||||||
| Savings | 634,874 | 39 | 0.02 | % | 620,079 | 38 | 0.02 | % | 567,646 | 35 | 0.02 | % | ||||||||
| Time | 1,421,859 | 1,142 | 0.32 | % | 1,475,307 | 1,340 | 0.36 | % | 1,650,150 | 3,130 | 0.75 | % | ||||||||
| Total interest-bearing deposits | 20,050,310 | 6,622 | 0.13 | % | 18,130,694 | 6,417 | 0.14 | % | 15,045,451 | 8,454 | 0.22 | % | ||||||||
| Borrowings | 234,391 | 64 | 0.11 | % | 238,335 | 101 | 0.17 | % | 237,098 | 37 | 0.06 | % | ||||||||
| Subordinated debt | 862,777 | 7,714 | 3.55 | % | 862,272 | 7,722 | 3.55 | % | 463,951 | 4,477 | 3.84 | % | ||||||||
| Total interest-bearing liabilities | 21,147,478 | 14,400 | 0.27 | % | 19,231,301 | 14,240 | 0.29 | % | 15,746,500 | 12,968 | 0.33 | % | ||||||||
| Noninterest-bearing demand deposits | 14,713,385 | 12,198,313 | 9,589,789 | |||||||||||||||||
| Other liabilities | 543,017 | 525,429 | 462,075 | |||||||||||||||||
| Total liabilities | 36,403,880 | 31,955,043 | 25,798,364 | |||||||||||||||||
| Stockholders’ equity | 3,954,267 | 3,916,621 | 3,536,425 | |||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 40,358,147 | $ | 35,871,664 | $ | 29,334,789 | ||||||||||||||
| Net interest income (1) | $ | 304,533 | $ | 279,777 | $ | 262,112 | ||||||||||||||
| Net interest spread (1) | 3.12 | % | 3.21 | % | 3.69 | % | ||||||||||||||
| Net interest margin (1) | 3.24 | % | 3.33 | % | 3.83 | % | ||||||||||||||
| Total deposits (4) | $ | 34,763,695 | $ | 6,622 | 0.08 | % | $ | 30,329,007 | $ | 6,417 | 0.08 | % | $ | 24,635,240 | $ | 8,454 | 0.14 | % | ||
| (1) Tax equivalent. | ||||||||||||||||||||
| (2) Includes net loan premium amortization of $6.4 million and $2.4 million and net loan discount accretion of $1.2 for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively. | ||||||||||||||||||||
| (3) Includes tax-equivalent adjustments of $2.2 million, $2.2 million, and $1.9 million for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020 related to tax-exempt income on investment securities The federal statutory tax rate utilized was 21%. | ||||||||||||||||||||
| (4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits. | ||||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| FIVE QUARTER BALANCE SHEET | ||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2020 | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| ASSETS: | ||||||||||||||||||||
| Cash and due from banks | $ | 112,548 | $ | 174,585 | $ | 179,505 | $ | 177,199 | $ | 150,464 | ||||||||||
| Interest-earning deposits in financial institutions | 3,944,686 | 3,524,613 | 5,678,587 | 5,517,667 | 3,010,197 | |||||||||||||||
| Total cash and cash equivalents | 4,057,234 | 3,699,198 | 5,858,092 | 5,694,866 | 3,160,661 | |||||||||||||||
| Securities available-for-sale | 10,694,458 | 9,276,926 | 7,198,608 | 5,941,690 | 5,235,591 | |||||||||||||||
| Federal Home Loan Bank stock | 17,250 | 17,250 | 17,250 | 17,250 | 17,250 | |||||||||||||||
| Total investment securities | 10,711,708 | 9,294,176 | 7,215,858 | 5,958,940 | 5,252,841 | |||||||||||||||
| Loans held for sale | – | – | – | 25,554 | – | |||||||||||||||
| Gross loans and leases held for investment | 23,026,308 | 20,588,255 | 19,580,731 | 19,055,165 | 19,153,357 | |||||||||||||||
| Deferred fees, net | (84,760 | ) | (77,235 | ) | (74,474 | ) | (75,937 | ) | (69,980 | ) | ||||||||||
| Total loans and leases held for investment, net of deferred fees | 22,941,548 | 20,511,020 | 19,506,257 | 18,979,228 | 19,083,377 | |||||||||||||||
| Allowance for loan and lease losses | (200,564 | ) | (203,733 | ) | (225,600 | ) | (292,445 | ) | (348,181 | ) | ||||||||||
| Total loans and leases held for investment, net | 22,740,984 | 20,307,287 | 19,280,657 | 18,686,783 | 18,735,196 | |||||||||||||||
| Equipment leased to others under operating leases | 339,150 | 334,275 | 313,574 | 327,413 | 333,846 | |||||||||||||||
| Premises and equipment, net | 46,740 | 47,246 | 39,541 | 39,622 | 39,234 | |||||||||||||||
| Foreclosed assets, net | 12,843 | 13,364 | 13,227 | 14,298 | 14,027 | |||||||||||||||
| Goodwill | 1,405,736 | 1,204,118 | 1,204,118 | 1,204,092 | 1,078,670 | |||||||||||||||
| Core deposit and customer relationship intangibles, net | 44,957 | 15,533 | 18,423 | 21,312 | 23,641 | |||||||||||||||
| Other assets | 1,083,992 | 970,479 | 924,497 | 883,653 | 860,326 | |||||||||||||||
| Total assets | $ | 40,443,344 | $ | 35,885,676 | $ | 34,867,987 | $ | 32,856,533 | $ | 29,498,442 | ||||||||||
| LIABILITIES: | ||||||||||||||||||||
| Noninterest-bearing deposits | $ | 14,543,133 | $ | 12,881,806 | $ | 11,252,286 | $ | 11,017,462 | $ | 9,193,827 | ||||||||||
| Interest-bearing deposits | 20,454,624 | 17,677,939 | 18,394,748 | 17,205,829 | 15,746,890 | |||||||||||||||
| Total deposits | 34,997,757 | 30,559,745 | 29,647,034 | 28,223,291 | 24,940,717 | |||||||||||||||
| Borrowings | – | – | 6,625 | 19,750 | 5,000 | |||||||||||||||
| Subordinated debt | 863,283 | 862,447 | 861,788 | 465,814 | 465,812 | |||||||||||||||
| Accrued interest payable and other liabilities | 582,674 | 545,050 | 505,859 | 493,541 | 491,962 | |||||||||||||||
| Total liabilities | 36,443,714 | 31,967,242 | 31,021,306 | 29,202,396 | 25,903,491 | |||||||||||||||
| STOCKHOLDERS’ EQUITY (1) | 3,999,630 | 3,918,434 | 3,846,681 | 3,654,137 | 3,594,951 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 40,443,344 | $ | 35,885,676 | $ | 34,867,987 | $ | 32,856,533 | $ | 29,498,442 | ||||||||||
| Book value per share | $ | 33.45 | $ | 32.77 | $ | 32.17 | $ | 30.68 | $ | 30.36 | ||||||||||
| Tangible book value per share (2) | $ | 21.31 | $ | 22.57 | $ | 21.95 | $ | 20.39 | $ | 21.05 | ||||||||||
| Shares outstanding | 119,584,854 | 119,579,566 | 119,555,102 | 119,105,642 | 118,414,853 | |||||||||||||||
| (1) Includes net unrealized gain on securities available-for-sale, net | $ | 65,968 | $ | 98,859 | $ | 145,516 | $ | 106,381 | $ | 172,523 | ||||||||||
| (2) Non-GAAP measure. | ||||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| FIVE QUARTER STATEMENT OF EARNINGS | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2020 | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| Interest income: | ||||||||||||||||||||
| Loans and leases | $ | 263,662 | $ | 246,722 | $ | 244,529 | $ | 241,544 | $ | 242,198 | ||||||||||
| Investment securities | 48,469 | 40,780 | 33,954 | 30,265 | 28,843 | |||||||||||||||
| Deposits in financial institutions | 2,674 | 2,580 | 2,022 | 1,528 | 1,135 | |||||||||||||||
| Total interest income | 314,805 | 290,082 | 280,505 | 273,337 | 272,176 | |||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Deposits | 6,622 | 6,417 | 7,269 | 7,500 | 8,454 | |||||||||||||||
| Borrowings | 64 | 101 | 265 | 193 | 37 | |||||||||||||||
| Subordinated debt | 7,714 | 7,722 | 6,663 | 4,375 | 4,477 | |||||||||||||||
| Total interest expense | 14,400 | 14,240 | 14,197 | 12,068 | 12,968 | |||||||||||||||
| Net interest income | 300,405 | 275,842 | 266,308 | 261,269 | 259,208 | |||||||||||||||
| Provision for credit losses | (6,000 | ) | (20,000 | ) | (88,000 | ) | (48,000 | ) | 10,000 | |||||||||||
| Net interest income after provision for credit losses | 306,405 | 295,842 | 354,308 | 309,269 | 249,208 | |||||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Service charges on deposit accounts | 3,476 | 3,407 | 3,452 | 2,934 | 3,119 | |||||||||||||||
| Other commissions and fees | 10,633 | 11,792 | 10,704 | 9,158 | 9,974 | |||||||||||||||
| Leased equipment income | 12,602 | 10,943 | 10,847 | 11,354 | 9,440 | |||||||||||||||
| Gain on sale of loans and leases | 172 | – | 1,422 | 139 | 1,671 | |||||||||||||||
| Gain on sale of securities | 999 | 515 | – | 101 | 4 | |||||||||||||||
| Other income | 29,500 | 24,688 | 13,946 | 21,143 | 15,642 | |||||||||||||||
| Total noninterest income | 57,382 | 51,345 | 40,371 | 44,829 | 39,850 | |||||||||||||||
| Noninterest expense: | ||||||||||||||||||||
| Compensation | 99,700 | 98,061 | 90,807 | 79,882 | 73,171 | |||||||||||||||
| Occupancy | 14,656 | 14,928 | 14,784 | 14,054 | 14,083 | |||||||||||||||
| Data processing | 8,171 | 7,391 | 7,758 | 6,957 | 6,718 | |||||||||||||||
| Other professional services | 5,946 | 5,164 | 5,256 | 5,126 | 6,800 | |||||||||||||||
| Insurance and assessments | 5,032 | 3,685 | 3,745 | 4,903 | 5,064 | |||||||||||||||
| Intangible asset amortization | 3,876 | 2,890 | 2,889 | 3,079 | 3,172 | |||||||||||||||
| Leased equipment depreciation | 9,569 | 8,603 | 8,614 | 8,969 | 7,501 | |||||||||||||||
| Foreclosed assets (income) expense, net | (260 | ) | 165 | (119 | ) | 1 | (272 | ) | ||||||||||||
| Acquisition, integration and reorganization costs | 5,590 | 200 | 200 | 3,425 | 1,060 | |||||||||||||||
| Customer related expense | 6,175 | 4,538 | 4,973 | 4,818 | 4,430 | |||||||||||||||
| Loan expense | 5,627 | 4,180 | 4,031 | 3,193 | 3,926 | |||||||||||||||
| Other expense | 12,028 | 9,616 | 8,812 | 15,729 | 10,029 | |||||||||||||||
| Total noninterest expense | 176,110 | 159,421 | 151,750 | 150,136 | 135,682 | |||||||||||||||
| Earnings before income taxes | 187,677 | 187,766 | 242,929 | 203,962 | 153,376 | |||||||||||||||
| Income tax expense | 51,632 | 47,770 | 62,417 | 53,556 | 36,546 | |||||||||||||||
| Net earnings | $ | 136,045 | $ | 139,996 | $ | 180,512 | $ | 150,406 | $ | 116,830 | ||||||||||
| Basic and diluted earnings per share | $ | 1.14 | $ | 1.17 | $ | 1.52 | $ | 1.27 | $ | 0.99 | ||||||||||
| Dividends declared and paid per share | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.25 | ||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| FIVE QUARTER SELECTED FINANCIAL DATA | ||||||||||||||||||||
| At or For the Three Months Ended | ||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2020 | ||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||
| Performance Ratios: | ||||||||||||||||||||
| Return on average assets (1) | 1.34 | % | 1.55 | % | 2.11 | % | 1.94 | % | 1.58 | % | ||||||||||
| Pre-provision, pre-goodwill impairment, pre-tax net revenue (“PPNR”) return on average assets (1)(2) | 1.79 | % | 1.86 | % | 1.81 | % | 2.01 | % | 2.22 | % | ||||||||||
| Return on average equity (1) | 13.65 | % | 14.18 | % | 19.36 | % | 16.86 | % | 13.14 | % | ||||||||||
| Return on average tangible equity (1)(2) | 22.06 | % | 21.03 | % | 29.25 | % | 25.67 | % | 19.63 | % | ||||||||||
| Efficiency ratio | 46.2 | % | 47.2 | % | 47.9 | % | 46.4 | % | 43.6 | % | ||||||||||
| Noninterest expense as a percentage of average assets (1) | 1.73 | % | 1.76 | % | 1.77 | % | 1.94 | % | 1.84 | % | ||||||||||
| Average Yields/Costs (1): | ||||||||||||||||||||
| Yield on: | ||||||||||||||||||||
| Average loans and leases (3) | 4.93 | % | 5.01 | % | 5.18 | % | 5.20 | % | 5.15 | % | ||||||||||
| Average investment securities (3) | 2.02 | % | 2.12 | % | 2.23 | % | 2.44 | % | 2.50 | % | ||||||||||
| Average interest-earning assets (3) | 3.39 | % | 3.50 | % | 3.57 | % | 3.86 | % | 4.02 | % | ||||||||||
| Cost of: | ||||||||||||||||||||
| Average interest-bearing deposits | 0.13 | % | 0.14 | % | 0.16 | % | 0.18 | % | 0.22 | % | ||||||||||
| Average total deposits | 0.08 | % | 0.08 | % | 0.10 | % | 0.11 | % | 0.14 | % | ||||||||||
| Average interest-bearing liabilities | 0.27 | % | 0.29 | % | 0.30 | % | 0.29 | % | 0.33 | % | ||||||||||
| Net interest spread (3) | 3.12 | % | 3.21 | % | 3.27 | % | 3.57 | % | 3.69 | % | ||||||||||
| Net interest margin (3) | 3.24 | % | 3.33 | % | 3.40 | % | 3.69 | % | 3.83 | % | ||||||||||
| Average Balances: | ||||||||||||||||||||
| Assets: | ||||||||||||||||||||
| Loans and leases, net of deferred fees | $ | 21,367,665 | $ | 19,670,671 | $ | 19,057,420 | $ | 18,927,314 | $ | 18,769,214 | ||||||||||
| Investment securities | 9,964,568 | 8,047,098 | 6,492,721 | 5,383,140 | 4,888,993 | |||||||||||||||
| Deposits in financial institutions | 5,961,104 | 5,657,768 | 6,347,764 | 4,790,231 | 3,576,335 | |||||||||||||||
| Interest-earning assets | 37,293,337 | 33,375,537 | 31,897,905 | 29,100,685 | 27,234,542 | |||||||||||||||
| Total assets | 40,358,147 | 35,871,664 | 34,326,112 | 31,415,882 | 29,334,789 | |||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Noninterest-bearing deposits | 14,713,385 | 12,198,313 | 11,304,757 | 10,173,459 | 9,589,789 | |||||||||||||||
| Interest-bearing deposits | 20,050,310 | 18,130,694 | 17,817,053 | 16,044,091 | 15,045,451 | |||||||||||||||
| Total deposits | 34,763,695 | 30,329,007 | 29,121,810 | 26,217,550 | 24,635,240 | |||||||||||||||
| Borrowings | 234,391 | 238,335 | 225,446 | 226,053 | 237,098 | |||||||||||||||
| Subordinated debt | 862,777 | 862,272 | 735,725 | 466,101 | 463,951 | |||||||||||||||
| Interest-bearing liabilities | 21,147,478 | 19,231,301 | 18,778,224 | 17,136,245 | 15,746,500 | |||||||||||||||
| Stockholders’ equity | 3,954,267 | 3,916,621 | 3,739,042 | 3,617,248 | 3,536,425 | |||||||||||||||
| (1) Annualized. | ||||||||||||||||||||
| (2) Non-GAAP measure. | ||||||||||||||||||||
| (3) Tax equivalent. | ||||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| FIVE QUARTER SELECTED FINANCIAL DATA | ||||||||||||||||||||
| At or For the Three Months Ended | ||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2020 | ||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||
| Credit Quality Ratios: | ||||||||||||||||||||
| Nonaccrual loans and leases held for investment to loans and leases held for investment | 0.27 | % | 0.31 | % | 0.29 | % | 0.36 | % | 0.48 | % | ||||||||||
| Nonperforming assets to loans and leases held for investment and foreclosed assets | 0.32 | % | 0.38 | % | 0.36 | % | 0.43 | % | 0.55 | % | ||||||||||
| Classified loans and leases held for investment to loans and leases held for investment | 0.51 | % | 0.69 | % | 0.75 | % | 0.86 | % | 1.39 | % | ||||||||||
| Provision for credit losses (for the quarter) to average loans and leases held for investment (annualized) | (0.11 | )% | (0.40 | )% | (1.85 | )% | (1.03 | )% | 0.21 | % | ||||||||||
| Net charge-offs (for the quarter) to average loans and leases held for investment (annualized) | 0.00 | % | 0.01 | % | (0.11 | )% | 0.06 | % | 0.40 | % | ||||||||||
| Trailing 12 months net charge-offs to average loans and leases held for investment | (0.01 | )% | 0.09 | % | 0.27 | % | 0.37 | % | 0.45 | % | ||||||||||
| Allowance for loan and lease losses to loans and leases held for investment | 0.87 | % | 0.99 | % | 1.16 | % | 1.54 | % | 1.82 | % | ||||||||||
| Allowance for credit losses to loans and leases held for investment | 1.19 | % | 1.36 | % | 1.54 | % | 2.02 | % | 2.27 | % | ||||||||||
| Allowance for credit losses to nonaccrual loans and leases held for investment | 447.3 | % | 433.8 | % | 528.4 | % | 566.2 | % | 475.8 | % | ||||||||||
| PacWest Bancorp Consolidated: | ||||||||||||||||||||
| Tier 1 leverage capital ratio (1) | 6.84 | % | 8.05 | % | 7.67 | % | 7.95 | % | 8.55 | % | ||||||||||
| Common equity tier 1 capital ratio (1) | 8.86 | % | 10.15 | % | 10.41 | % | 10.39 | % | 10.53 | % | ||||||||||
| Tier 1 capital ratio (1) | 9.32 | % | 10.65 | % | 10.41 | % | 10.39 | % | 10.53 | % | ||||||||||
| Total capital ratio (1) | 12.69 | % | 14.36 | % | 14.99 | % | 13.60 | % | 13.76 | % | ||||||||||
| Risk-weighted assets (1) | $ | 28,508,808 | $ | 26,057,583 | $ | 24,274,256 | $ | 23,012,350 | $ | 22,837,693 | ||||||||||
| Equity to assets ratio | 9.89 | % | 10.92 | % | 11.03 | % | 11.12 | % | 12.19 | % | ||||||||||
| Tangible common equity ratio (2) | 6.54 | % | 7.79 | % | 7.80 | % | 7.68 | % | 8.78 | % | ||||||||||
| Book value per share | $ | 33.45 | $ | 32.77 | $ | 32.17 | $ | 30.68 | $ | 30.36 | ||||||||||
| Tangible book value per share (2) | $ | 21.31 | $ | 22.57 | $ | 21.95 | $ | 20.39 | $ | 21.05 | ||||||||||
| Pacific Western Bank: | ||||||||||||||||||||
| Tier 1 leverage capital ratio (1) | 7.00 | % | 8.40 | % | 8.47 | % | 8.83 | % | 9.53 | % | ||||||||||
| Common equity tier 1 capital ratio (1) | 9.56 | % | 11.12 | % | 11.51 | % | 11.54 | % | 11.73 | % | ||||||||||
| Tier 1 capital ratio (1) | 9.56 | % | 11.12 | % | 11.51 | % | 11.54 | % | 11.73 | % | ||||||||||
| Total capital ratio (1) | 11.80 | % | 13.59 | % | 14.22 | % | 12.80 | % | 12.99 | % | ||||||||||
| (1) Capital information for December 31, 2021 is preliminary. | ||||||||||||||||||||
| (2) Non-GAAP measure. | ||||||||||||||||||||
GAAP TO NON-GAAP RECONCILIATIONS
This press release contains certain non-GAAP financial disclosures for: (1) Pre-provision, pre-goodwill impairment, pre-tax net revenue (“PPNR”), (2) PPNR return on average assets (3) return on average tangible equity, (4) tangible common equity ratio, and (5) tangible book value per share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of return on average tangible equity, tangible common equity ratio, tangible book value per share, and PPNR is prevalent among banking regulators, investors, and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, and (5) book value per share.
The tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:
| Three Months Ended | Year Ended | |||||||||||||||||||
| PPNR and PPNR Return | December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
| on Average Assets | 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Net earnings (loss) | $ | 136,045 | $ | 139,996 | $ | 116,830 | $ | 606,959 | $ | (1,237,574 | ) | |||||||||
| Add: Provision for credit losses | (6,000 | ) | (20,000 | ) | 10,000 | (162,000 | ) | 339,000 | ||||||||||||
| Add: Goodwill impairment | – | – | – | – | 1,470,000 | |||||||||||||||
| Add: Income tax expense | 51,632 | 47,770 | 36,546 | 215,375 | 75,173 | |||||||||||||||
| Pre-provision, pre-goodwill impairment, pre-tax net revenue (“PPNR”) | $ | 181,677 | $ | 167,766 | $ | 163,376 | $ | 660,334 | $ | 646,599 | ||||||||||
| Average assets | $ | 40,358,147 | $ | 35,871,664 | $ | 29,334,789 | $ | 35,518,488 | $ | 27,752,412 | ||||||||||
| Return on average assets (1) | 1.34 | % | 1.55 | % | 1.58 | % | 1.71 | % | (4.46 | )% | ||||||||||
| PPNR return on average assets (2) | 1.79 | % | 1.86 | % | 2.22 | % | 1.86 | % | 2.33 | % | ||||||||||
| (1) Annualized net earnings (loss) divided by average assets. | ||||||||||||||||||||
| (2) Annualized PPNR divided by average assets. | ||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
| Return on Average Tangible Equity | 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Net earnings (loss) | $ | 136,045 | $ | 139,996 | $ | 116,830 | $ | 606,959 | $ | (1,237,574 | ) | |||||||||
| Add: Intangible asset amortization | 3,876 | 2,890 | 3,172 | 12,734 | 14,753 | |||||||||||||||
| Add: Goodwill impairment | – | – | – | – | 1,470,000 | |||||||||||||||
| Adjusted net earnings | $ | 139,921 | $ | 142,886 | $ | 120,002 | $ | 619,693 | $ | 247,179 | ||||||||||
| Average stockholders’ equity | $ | 3,954,267 | $ | 3,916,621 | $ | 3,536,425 | $ | 3,808,019 | $ | 3,857,610 | ||||||||||
| Less: Average intangible assets | 1,437,780 | 1,221,253 | 1,103,945 | 1,269,546 | 1,470,989 | |||||||||||||||
| Average tangible common equity | $ | 2,516,487 | $ | 2,695,368 | $ | 2,432,480 | $ | 2,538,473 | $ | 2,386,621 | ||||||||||
| Return on average equity (1) | 13.65 | % | 14.18 | % | 13.14 | % | 15.94 | % | (32.08 | )% | ||||||||||
| Return on average tangible equity (2) | 22.06 | % | 21.03 | % | 19.63 | % | 24.41 | % | 10.36 | % | ||||||||||
| (1) Annualized net earnings divided by average stockholders’ equity. | ||||||||||||||||||||
| (2) Annualized adjusted net earnings divided by average tangible common equity. | ||||||||||||||||||||
| Tangible Common Equity Ratio/ | December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
| Tangible Book Value Per Share | 2021 | 2021 | 2021 | 2021 | 2020 | |||||||||||||||
| (Dollars in thousands, except per share data) |
||||||||||||||||||||
| Stockholders’ equity | $ | 3,999,630 | $ | 3,918,434 | $ | 3,846,681 | $ | 3,654,137 | $ | 3,594,951 | ||||||||||
| Less: Intangible assets | 1,450,693 | 1,219,651 | 1,222,541 | 1,225,404 | 1,102,311 | |||||||||||||||
| Tangible common equity | $ | 2,548,937 | $ | 2,698,783 | $ | 2,624,140 | $ | 2,428,733 | $ | 2,492,640 | ||||||||||
| Total assets | $ | 40,443,344 | $ | 35,885,676 | $ | 34,867,987 | $ | 32,856,533 | $ | 29,498,442 | ||||||||||
| Less: Intangible assets | 1,450,693 | 1,219,651 | 1,222,541 | 1,225,404 | 1,102,311 | |||||||||||||||
| Tangible assets | $ | 38,992,651 | $ | 34,666,025 | $ | 33,645,446 | $ | 31,631,129 | $ | 28,396,131 | ||||||||||
| Equity to assets ratio | 9.89 | % | 10.92 | % | 11.03 | % | 11.12 | % | 12.19 | % | ||||||||||
| Tangible common equity ratio (1) | 6.54 | % | 7.79 | % | 7.80 | % | 7.68 | % | 8.78 | % | ||||||||||
| Book value per share | $ | 33.45 | $ | 32.77 | $ | 32.17 | $ | 30.68 | $ | 30.36 | ||||||||||
| Tangible book value per share (2) | $ | 21.31 | $ | 22.57 | $ | 21.95 | $ | 20.39 | $ | 21.05 | ||||||||||
| Shares outstanding | 119,584,854 | 119,579,566 | 119,555,102 | 119,105,642 | 118,414,853 | |||||||||||||||
| (1) Tangible common equity divided by tangible assets. | ||||||||||||||||||||
| (2) Tangible common equity divided by shares outstanding. | ||||||||||||||||||||
CONTACTS
| Matthew P. Wagner President and CEO 303.802.8900 |
Bart R. Olson EVP and CFO 714.989.4149 |
William J. Black EVP Strategy and Corporate Development 919.597.7466 |
