PacWest Bancorp Announces Results for the Second Quarter of 2021
Figure 1
Well-Positioned Balance Sheet
LOS ANGELES, July 19, 2021 (GLOBE NEWSWIRE) — PacWest Bancorp (Nasdaq: PACW) –
SECOND QUARTER 2021 RESULTS
| $180.5M | $1.52 | $154.9M | 29.25% | ||||||||
| Net Earnings | Diluted Earnings per Share | PPNR | ROATE | ||||||||
SECOND QUARTER 2021 HIGHLIGHTS
- Net Earnings of $180.5 Million or $1.52 Per Diluted Share
- Core Deposits Up $1.5 Billion or 22.9% annualized in 2Q21; Represents 91% of Total Deposits
- Loan Growth of $527.0 Million or 11.1% annualized, Excluding PPP Loan Activity, Growth of $997.1 Million or 22.3% annualized
- Civic Loan Production of $423 Million in 2Q21, Compared to $231 Million for Two Months in 1Q21
- Provision for Credit Losses Benefit of $88.0 Million in 2Q21 Compared to Benefit of $48.0 Million in 1Q21
- Net Interest Income (TE) of $270.1 Million, Compared To $264.6 Million in 1Q21
- Noninterest Income of $40.4 Million With Continued Strength in Warrant Income
- Noninterest Expense of $151.8 Million, Up 1% From 1Q21, Driven By Three Months of Civic Financial Services (“Civic”) Operations Compared to Two Months in 1Q21 and Higher Variable Compensation From Strong Growth Across the Company
- Classified and Special Mention Loans Fell $15.9 Million and $96.9 Million, Respectively, From 1Q21
- ACL Ratio of 1.54% and ALLL Ratio of 1.16%; Excluding PPP Loans, ACL Ratio of 1.59% and ALLL Ratio of 1.19%
- Net Recoveries of $5.2 Million (11bps of Average Loans and Leases)
- Cost of Deposits Decreased 1 bp to 10 bps
- Loan and Lease Production of $1.7 Billion Up From $1.6 Billion in 1Q21; WAC of 4.55% vs. 4.36% in 1Q21
- Strong Capital Position – CET1 Ratio of 10.41%
- Total Capital Ratio Increased From 13.60% at 1Q21 to 14.99% at 2Q21
- Tangible Book Value Per Share Increased From $20.39 at 1Q21 to $21.95 at 2Q21
CEO COMMENTARY
Matt Wagner, President and CEO, commented, “We continued to experience strong deposit growth in the second quarter driven by outstanding growth from our venture banking as well as our commercial banking clients resulting in increased liquidity. The excess liquidity at the Fed continues to be a drag on our net interest margin, which had a negative impact of approximately 73 basis points in the second quarter, however, net interest income is growing as we continue to deploy the excess liquidity.”
“We had significant loan growth in the second quarter as the economy begins to re-open after the pandemic. This loan growth was despite a $470 million reduction in the PPP loan portfolio due to increased forgiveness activity by the SBA. Excluding PPP loan activity, our loans grew by $997 million or 22.3% annualized.”
“The continued improvement in credit quality as evidenced by the net recoveries for the first half of the year and continued decreases in nonaccrual, special mention and classified loans and leases along with improved economic conditions related to the CECL forecast resulted in a provision benefit for the second consecutive quarter. Our ACL ratio, excluding PPP loans, decreased from 2.14% in the first quarter to 1.59% as of the end of the second quarter. Our second quarter results produced a return on average assets of 2.11% and a return on average tangible equity of 29.25%.”
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/0623d789-0178-417f-bc6c-55dc09803da8
FINANCIAL HIGHLIGHTS
| At or For the | At or For the | ||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, | March 31, | Increase | June 30, | Increase | |||||||||||||||||||
| Financial Highlights (1) | 2021 | 2021 | (Decrease) | 2021 | 2020 | (Decrease) | |||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||
| Net earnings (loss) | $ | 180,512 | $ | 150,406 | $ | 30,106 | $ | 330,918 | $ | (1,399,907 | ) | $ | 1,730,825 | ||||||||||
| Diluted earnings (loss) | |||||||||||||||||||||||
| per share | $ | 1.52 | $ | 1.27 | $ | 0.25 | $ | 2.78 | $ | (11.98 | ) | $ | 14.76 | ||||||||||
| Pre-provision, pre-goodwill | |||||||||||||||||||||||
| impairment, pre-tax net | |||||||||||||||||||||||
| revenue (“PPNR”) (2) | $ | 154,929 | $ | 155,962 | $ | (1,033 | ) | $ | 310,891 | $ | 327,049 | $ | (16,158 | ) | |||||||||
| Return on average assets | 2.11 | % | 1.94 | % | 0.17 | 2.03 | % | (10.48 | )% | 12.51 | |||||||||||||
| PPNR return on average | |||||||||||||||||||||||
| assets (2) | 1.81 | % | 2.01 | % | (0.20 | ) | 1.91 | % | 2.45 | % | (0.54 | ) | |||||||||||
| Return on average | |||||||||||||||||||||||
| tangible equity (2) | 29.25 | % | 25.67 | % | 3.58 | 27.51 | % | 6.64 | % | 20.87 | |||||||||||||
| Yield on average loans and | |||||||||||||||||||||||
| leases (tax equivalent) | 5.18 | % | 5.20 | % | (0.02 | ) | 5.19 | % | 5.27 | % | (0.08 | ) | |||||||||||
| Cost of average total | |||||||||||||||||||||||
| deposits | 0.10 | % | 0.11 | % | (0.01 | ) | 0.11 | % | 0.41 | % | (0.30 | ) | |||||||||||
| Net interest margin (“NIM”) | |||||||||||||||||||||||
| (tax equivalent) | 3.40 | % | 3.69 | % | (0.29 | ) | 3.53 | % | 4.26 | % | (0.73 | ) | |||||||||||
| Efficiency ratio | 47.9 | % | 46.4 | % | 1.5 | 47.2 | % | 41.8 | % | 5.4 | |||||||||||||
| Total assets | $ | 34,867,987 | $ | 32,856,533 | $ | 2,011,454 | $ | 34,867,987 | $ | 27,365,738 | $ | 7,502,249 | |||||||||||
| Loans and leases held | |||||||||||||||||||||||
| for investment, | |||||||||||||||||||||||
| net of deferred fees | $ | 19,506,257 | $ | 18,979,228 | $ | 527,029 | $ | 19,506,257 | $ | 19,694,631 | $ | (188,374 | ) | ||||||||||
| Noninterest-bearing | |||||||||||||||||||||||
| demand deposits | $ | 11,252,286 | $ | 11,017,462 | $ | 234,824 | $ | 11,252,286 | $ | 8,629,543 | $ | 2,622,743 | |||||||||||
| Core deposits | $ | 27,038,161 | $ | 25,576,348 | $ | 1,461,813 | $ | 27,038,161 | $ | 19,535,814 | $ | 7,502,347 | |||||||||||
| Total deposits | $ | 29,647,034 | $ | 28,223,291 | $ | 1,423,743 | $ | 29,647,034 | $ | 22,928,579 | $ | 6,718,455 | |||||||||||
| As percentage of total | |||||||||||||||||||||||
| deposits: | |||||||||||||||||||||||
| Noninterest-bearing | |||||||||||||||||||||||
| demand deposits | 38 | % | 39 | % | (1 | ) | 38 | % | 38 | % | – | ||||||||||||
| Core deposits | 91 | % | 91 | % | – | 91 | % | 85 | % | 6 | |||||||||||||
| Equity to assets ratio | 11.03 | % | 11.12 | % | (0.09 | ) | 11.03 | % | 12.62 | % | (1.59 | ) | |||||||||||
| Common equity tier 1 | |||||||||||||||||||||||
| capital ratio | 10.41 | % | 10.39 | % | 0.02 | 10.41 | % | 9.97 | % | 0.44 | |||||||||||||
| Total capital ratio | 14.99 | % | 13.60 | % | 1.39 | 14.99 | % | 13.18 | % | 1.81 | |||||||||||||
| Tangible common equity | |||||||||||||||||||||||
| ratio (2) | 7.80 | % | 7.68 | % | 0.12 | 7.80 | % | 8.93 | % | (1.13 | ) | ||||||||||||
| Book value per share | $ | 32.17 | $ | 30.68 | $ | 1.49 | $ | 32.17 | $ | 29.17 | $ | 3.00 | |||||||||||
| Tangible book value per | |||||||||||||||||||||||
| share (2) | $ | 21.95 | $ | 20.39 | $ | 1.56 | $ | 21.95 | $ | 19.80 | $ | 2.15 | |||||||||||
| (1) 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 $5.0 million to $266.3 million for the second quarter of 2021 compared to $261.3 million for the first quarter of 2021 due mainly to higher income on investment securities and loans and leases, partially offset by higher interest expense resulting from the $400 million of subordinated debt issued on April 30, 2021. The tax equivalent yield on average loans and leases was 5.18% for the second quarter of 2021 compared to 5.20% for the first quarter of 2021. The decrease in the tax equivalent yield on average loans and leases was primarily due to lower amortized loan fee income of $1.4 million and lower loan discount accretion of $0.4 million.
The tax equivalent NIM was 3.40% for the second quarter of 2021 compared to 3.69% for the first quarter of 2021. The decrease in the NIM was primarily due to the change in the earning assets mix driven by the increase in the investment portfolio and cash at the Federal Reserve as a percentage of earning assets. The average balance of deposits in financial institutions increased by $1.6 billion to $6.3 billion, the average balance of investment securities increased by $1.1 billion to $6.5 billion, and the average balance of loans and leases increased by $130.1 million in the second quarter of 2021. This excess liquidity had a negative impact on the second quarter tax equivalent NIM of approximately 73 basis points.
The cost of average total deposits decreased to 0.10% in the second quarter of 2021 from 0.11% for the first quarter of 2021. The lower cost of average total deposits was due primarily to the increased average balance of noninterest-bearing deposits.
PROVISION FOR CREDIT LOSSES
The following table presents details of the provision for credit losses for the periods indicated:
| Three Months Ended | |||||||||||
| June 30, | March 31, | Increase | |||||||||
| Provision for Credit Losses | 2021 | 2021 | (Decrease) | ||||||||
| (In thousands) | |||||||||||
| (Reduction in) addition to allowance for loan | |||||||||||
| and lease losses | $ | (72,000 | ) | $ | (53,000 | ) | $ | (19,000 | ) | ||
| (Reduction in) addition to reserve for | |||||||||||
| unfunded loan commitments | (16,000 | ) | 5,000 | (21,000 | ) | ||||||
| Total provision for credit losses | $ | (88,000 | ) | $ | (48,000 | ) | $ | (40,000 | ) | ||
The provision for credit losses decreased by $40.0 million to a benefit of $88.0 million for the second quarter of 2021 compared to a $48.0 million benefit for the first quarter of 2021. This reduction reflected improvement in both macro-economic forecast variables and loan portfolio credit quality metrics along with decreased provisions for individually evaluated loans and leases and for unfunded commitments.
NONINTEREST INCOME
The following table presents details of noninterest income for the periods indicated:
| Three Months Ended | |||||||||
| June 30, | March 31, | Increase | |||||||
| Noninterest Income | 2021 | 2021 | (Decrease) | ||||||
| (In thousands) | |||||||||
| Service charges on deposit accounts | $ | 3,452 | $ | 2,934 | $ | 518 | |||
| Other commissions and fees | 10,704 | 9,158 | 1,546 | ||||||
| Leased equipment income | 10,847 | 11,354 | (507 | ) | |||||
| Gain on sale of loans and leases | 1,422 | 139 | 1,283 | ||||||
| Gain on sale of securities | – | 101 | (101 | ) | |||||
| Other income: | |||||||||
| Dividends and gains on equity investments | 5,394 | 10,904 | (5,510 | ) | |||||
| Warrant income | 5,650 | 6,123 | (473 | ) | |||||
| Other | 2,902 | 4,116 | (1,214 | ) | |||||
| Total noninterest income | $ | 40,371 | $ | 44,829 | $ | (4,458 | ) | ||
Noninterest income decreased by $4.5 million to $40.4 million for the second quarter of 2021 compared to $44.8 million for the first quarter of 2021 due primarily to a decrease of $5.5 million in dividends and gains on equity investments and a $1.2 million decrease in other income, offset partially by increases of $1.5 million in other commissions and fees and $1.3 million in gain on sale of loans and leases. The decrease in dividends and gains on equity investments was due primarily to a $10.1 million gain on one equity investment in the first quarter of 2021, offset partially by higher net fair value gains on equity investments still held. The decrease in other income was due primarily to lower foreign currency translation gains and negative fair value adjustments related to servicing assets. The increase in other commissions and fees was due primarily to higher foreign exchange transaction fees and customer success fees. The increase in the gain on sale of loans and leases resulted from the sales of $52.2 million of loans for gains of $1.4 million in the second quarter of 2021 compared to sales of $72.6 million for gains of $0.1 million in the first quarter of 2021. Warrant income decreased slightly in the second quarter of 2021, but remained at elevated levels and was the third highest quarter ever.
NONINTEREST EXPENSE
The following table presents details of noninterest expense for the periods indicated:
| Three Months Ended | ||||||||||
| June 30, | March 31, | Increase | ||||||||
| Noninterest Expense | 2021 | 2021 | (Decrease) | |||||||
| (In thousands) | ||||||||||
| Compensation | $ | 90,807 | $ | 79,882 | $ | 10,925 | ||||
| Occupancy | 14,784 | 14,054 | 730 | |||||||
| Data processing | 7,758 | 6,957 | 801 | |||||||
| Other professional services | 5,256 | 5,126 | 130 | |||||||
| Insurance and assessments | 3,745 | 4,903 | (1,158 | ) | ||||||
| Intangible asset amortization | 2,889 | 3,079 | (190 | ) | ||||||
| Leased equipment depreciation | 8,614 | 8,969 | (355 | ) | ||||||
| Foreclosed assets (income) expense, net | (119 | ) | 1 | (120 | ) | |||||
| Acquisition, integration and reorganization costs | 200 | 3,425 | (3,225 | ) | ||||||
| Customer related expense | 4,973 | 4,818 | 155 | |||||||
| Loan expense | 4,031 | 3,193 | 838 | |||||||
| Other | 8,812 | 15,729 | (6,917 | ) | ||||||
| Total noninterest expense | $ | 151,750 | $ | 150,136 | $ | 1,614 | ||||
Noninterest expense increased by $1.6 million to $151.8 million for the second quarter of 2021 compared to $150.1 million for the first quarter of 2021 due primarily to an increase of $10.9 million in compensation expense, offset partially by decreases of $6.9 million in other expense, $3.2 million in acquisition, integration and reorganization costs and $1.1 million in insurance and assessments expense. The increase in compensation expense was mostly due to compensation expense related to the Civic operations as a result of three months of activity in the second quarter of 2021 compared to two months of activity in the first quarter of 2021, in addition to increases in loan production across the Company which contributed to an increase in variable compensation during the second quarter of 2021. The decrease in other expense was largely due to a legal settlement accrual in the first quarter of 2021. The decrease in acquisition, integration and reorganization costs was due to lower advisory services and integration expenses related to the closed Civic acquisition and the pending acquisition of MUFG Union Bank’s Homeowners Association Services Division. The decrease in insurance and assessments expense was primarily due to lower FDIC assessment expense resulting from a lower assessment rate partially offset by a higher assessment base.
INCOME TAXES
The effective income tax rate was 25.7% in the second quarter of 2021 compared to 26.3% for the first quarter of 2021. The decrease in the effective tax rate is due mainly to tax benefits resulting from the vesting of restricted stock and return-to-provision adjustments recorded in the second quarter of 2021. The effective income tax rate for the full year 2021 is estimated to be in the range of 25% to 27%.
BALANCE SHEET HIGHLIGHTS
DEPOSITS AND CLIENT INVESTMENT FUNDS
The following table presents the composition of our deposit portfolio as of the dates indicated:
| June 30, 2021 | March 31, 2021 | June 30, 2020 | ||||||||||||
| % of | % of | % of | ||||||||||||
| Deposit Composition | Balance | Total | Balance | Total | Balance | Total | ||||||||
| (Dollars in thousands) | ||||||||||||||
| Noninterest-bearing demand | $ | 11,252,286 | 38 | % | $ | 11,017,462 | 39 | % | $ | 8,629,543 | 38 | % | ||
| Interest checking | 7,394,472 | 25 | % | 6,862,398 | 25 | % | 4,858,168 | 21 | % | |||||
| Money market | 7,777,199 | 26 | % | 7,112,610 | 25 | % | 5,498,150 | 24 | % | |||||
| Savings | 614,204 | 2 | % | 583,878 | 2 | % | 549,953 | 2 | % | |||||
| Total core deposits | 27,038,161 | 91 | % | 25,576,348 | 91 | % | 19,535,814 | 85 | % | |||||
| Non-core non-maturity deposits | 1,122,971 | 4 | % | 1,162,590 | 4 | % | 1,217,266 | 5 | % | |||||
| Total non-maturity deposits | 28,161,132 | 95 | % | 26,738,938 | 95 | % | 20,753,080 | 90 | % | |||||
| Time deposits $250,000 and under | 913,371 | 3 | % | 940,340 | 3 | % | 1,522,928 | 7 | % | |||||
| Time deposits over $250,000 | 572,531 | 2 | % | 544,013 | 2 | % | 652,571 | 3 | % | |||||
| Total time deposits | 1,485,902 | 5 | % | 1,484,353 | 5 | % | 2,175,499 | 10 | % | |||||
| Total deposits | $ | 29,647,034 | 100 | % | $ | 28,223,291 | 100 | % | $ | 22,928,579 | 100 | % | ||
At June 30, 2021, core deposits totaled $27.0 billion or 91% of total deposits, including $11.3 billion of noninterest-bearing demand deposits or 38% of total deposits. Core deposits increased by $1.5 billion or 22.9% annualized in the second quarter of 2021 driven by continued strong deposit growth from our venture banking clients.
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 June 30, 2021 were $1.3 billion, of which $1.0 billion was managed by PWAM.
LOANS AND LEASES
The following table presents roll forwards of loans and leases held for investment, net of deferred fees, for the periods indicated:
| Three Months Ended | Six Months Ended | ||||||||||
| Roll Forward of Loans and Leases Held | June 30, | March 31, | June 30, | ||||||||
| for Investment, Net of Deferred Fees (1) | 2021 | 2021 | 2021 | ||||||||
| (Dollars in thousands) | |||||||||||
| Balance, beginning of period | $ | 18,979,228 | $ | 19,083,377 | $ | 19,083,377 | |||||
| Additions: | |||||||||||
| Production | 1,663,151 | 1,612,777 | 3,275,928 | ||||||||
| Disbursements | 1,662,644 | 1,022,986 | 2,685,630 | ||||||||
| Total production and disbursements | 3,325,795 | 2,635,763 | 5,961,558 | ||||||||
| Reductions: | |||||||||||
| Payoffs | (1,969,118 | ) | (1,635,264 | ) | (3,604,382 | ) | |||||
| Paydowns | (802,222 | ) | (1,067,418 | ) | (1,869,640 | ) | |||||
| Total payoffs and paydowns | (2,771,340 | ) | (2,702,682 | ) | (5,474,022 | ) | |||||
| Sales | (26,610 | ) | (72,641 | ) | (99,251 | ) | |||||
| Transfers to foreclosed assets | – | (647 | ) | (647 | ) | ||||||
| Charge-offs | (816 | ) | (3,988 | ) | (4,804 | ) | |||||
| Transfers to loans held for sale | – | (25,554 | ) | (25,554 | ) | ||||||
| Total reductions | (2,798,766 | ) | (2,805,512 | ) | (5,604,278 | ) | |||||
| Loans acquired through Civic acquisition | – | 65,600 | 65,600 | ||||||||
| Net increase (decrease) | 527,029 | (104,149 | ) | 422,880 | |||||||
| Balance, end of period | $ | 19,506,257 | $ | 18,979,228 | $ | 19,506,257 | |||||
| Weighted average rate on production (2) | 4.55 | % | 4.36 | % | 4.46 | % | |||||
| (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 41 basis points to loan yields in 2021. | |||||||||||
Loans and leases held for investment, net of deferred fees, increased by $527.0 million or 11.1% annualized in the second quarter of 2021 to $19.5 billion at June 30, 2021. Excluding PPP loan activity, loans grew by $997.1 million or 22.3% annualized. The increase in the loans and leases balance for the second quarter of 2021 was primarily due to increases in the income producing and other residential, asset-based and venture capital portfolios partially offset by a reduction in the other commercial portfolio due to increased PPP loan forgiveness. The PPP forgiveness in the second quarter of 2021 was $506 million, up from $354 million in the first quarter of 2021. Remaining PPP loans total $609 million as of June 30, 2021 with $15.6 million of net fees to amortize over the remaining life of the loans. The weighted average rate on the $1.7 billion of new production for the second quarter of 2021 increased to 4.55% from 4.36% in the first quarter of 2021 due mainly to a lower amount of PPP loan originations in the second quarter compared to the first quarter.
The following table presents the composition of loans and leases held for investment by loan portfolio segment and class, net of deferred fees, as of the dates indicated:
| June 30, 2021 | March 31, 2021 | June 30, 2020 | ||||||||||||
| % of | % of | % of | ||||||||||||
| Loan and Lease Portfolio | Balance | Total | Balance | Total | Balance | Total | ||||||||
| (In thousands) | ||||||||||||||
| Real estate mortgage: | ||||||||||||||
| Commercial | $ | 3,792,198 | 19 | % | $ | 3,941,610 | 21 | % | $ | 4,222,075 | 22 | % | ||
| Income producing and other | ||||||||||||||
| residential | 4,620,822 | 24 | % | 4,045,603 | 21 | % | 3,733,659 | 19 | % | |||||
| Total real estate mortgage | 8,413,020 | 43 | % | 7,987,213 | 42 | % | 7,955,734 | 41 | % | |||||
| Real estate construction and land: | ||||||||||||||
| Commercial | 930,785 | 5 | % | 990,035 | 5 | % | 1,167,609 | 6 | % | |||||
| Residential | 2,574,799 | 13 | % | 2,575,788 | 14 | % | 2,172,919 | 11 | % | |||||
| Total real estate construction | ||||||||||||||
| and land | 3,505,584 | 18 | % | 3,565,823 | 19 | % | 3,340,528 | 17 | % | |||||
| Total real estate | 11,918,604 | 61 | % | 11,553,036 | 61 | % | 11,296,262 | 58 | % | |||||
| Commercial: | ||||||||||||||
| Asset-based | 3,550,903 | 18 | % | 3,383,403 | 18 | % | 3,412,431 | 17 | % | |||||
| Venture capital | 1,749,432 | 9 | % | 1,495,798 | 8 | % | 1,814,341 | 9 | % | |||||
| Other commercial | 1,921,909 | 10 | % | 2,206,639 | 11 | % | 2,760,278 | 14 | % | |||||
| Total commercial | 7,222,244 | 37 | % | 7,085,840 | 37 | % | 7,987,050 | 40 | % | |||||
| Consumer | 365,409 | 2 | % | 340,352 | 2 | % | 411,319 | 2 | % | |||||
| Total loans and leases held for | ||||||||||||||
| investment, net of deferred fees | $ | 19,506,257 | 100 | % | $ | 18,979,228 | 100 | % | $ | 19,694,631 | 100 | % | ||
| Total unfunded loan commitments | $ | 7,891,875 | $ | 8,127,999 | $ | 7,745,921 | ||||||||
ALLOWANCE FOR CREDIT LOSSES
The following tables present roll forwards of the allowance for credit losses for the periods indicated:
| Three Months Ended June 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 | $ | 292,445 | $ | 90,571 | $ | 383,016 | |||||
| Charge-offs | (816 | ) | – | (816 | ) | ||||||
| Recoveries | 5,971 | – | 5,971 | ||||||||
| Net recoveries | 5,155 | – | 5,155 | ||||||||
| Provision | (72,000 | ) | (16,000 | ) | (88,000 | ) | |||||
| Ending balance | $ | 225,600 | $ | 74,571 | $ | 300,171 | |||||
| Three Months Ended March 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 | $ | 348,181 | $ | 85,571 | $ | 433,752 | |||||
| Charge-offs | (3,988 | ) | – | (3,988 | ) | ||||||
| Recoveries | 1,252 | – | 1,252 | ||||||||
| Net charge-offs | (2,736 | ) | – | (2,736 | ) | ||||||
| Provision | (53,000 | ) | 5,000 | (48,000 | ) | ||||||
| Ending balance | $ | 292,445 | $ | 90,571 | $ | 383,016 | |||||
The following table presents allowance for credit losses information as of and for the dates and periods indicated:
| June 30, | March 31, | Increase | |||||||||
| Allowance for Credit Losses | 2021 | 2021 | (Decrease) | ||||||||
| (Dollars in thousands) | |||||||||||
| Allowance for loan and lease losses | $ | 225,600 | $ | 292,445 | $ | (66,845 | ) | ||||
| Reserve for unfunded loan commitments | 74,571 | 90,571 | (16,000 | ) | |||||||
| Allowance for credit losses | $ | 300,171 | $ | 383,016 | $ | (82,845 | ) | ||||
| Provision for credit losses (for the quarter) | $ | (88,000 | ) | $ | (48,000 | ) | $ | (40,000 | ) | ||
| Net (recoveries) charge-offs (for the quarter) | $ | (5,155 | ) | $ | 2,736 | $ | (7,891 | ) | |||
| Net (recoveries) charge-offs to average loans and leases | |||||||||||
| (for the quarter) | (0.11 | )% | 0.06 | % | |||||||
| Allowance for loan and lease losses to loans | |||||||||||
| and leases held for investment | 1.16 | % | 1.54 | % | |||||||
| Allowance for loan and lease losses to loans | |||||||||||
| and leases held for investment, excluding PPP loans | 1.19 | % | 1.63 | % | |||||||
| Allowance for credit losses to loans and leases | |||||||||||
| held for investment | 1.54 | % | 2.02 | % | |||||||
| Allowance for credit losses to loans and leases | |||||||||||
| held for investment, excluding PPP loans | 1.59 | % | 2.14 | % | |||||||
The allowance for credit losses decreased by $82.8 million in the second quarter of 2021 to $300.2 million at June 30, 2021. The decrease in the allowance for credit losses during the second quarter of 2021 was attributable to a provision for credit losses benefit of $88.0 million partially offset by $5.2 million in net recoveries. The allowance for credit losses ratio, excluding PPP loans, of 1.59% remains robust and significantly higher than the pre-pandemic level of 0.97% as of the January 1, 2020 CECL adoption date.
Net recoveries were $5.2 million for the second quarter of 2021. Gross charge-offs of $0.8 million were reduced by recoveries of $6.0 million.
Net charge-offs were $2.7 million for the first quarter of 2021. Gross charge-offs of $4.0 million were reduced by recoveries of $1.3 million.
CREDIT QUALITY
The following table presents loan and lease credit quality metrics as of the dates indicated:
| June 30, | March 31, | Increase | |||||||||
| Credit Quality Metrics | 2021 | 2021 | (Decrease) | ||||||||
| (Dollars in thousands) | |||||||||||
| NPAs and Performing TDRs: | |||||||||||
| Nonaccrual loans and leases held for investment (1) | $ | 56,803 | $ | 67,652 | $ | (10,849 | ) | ||||
| Accruing loans contractually past due 90 days or more | – | – | – | ||||||||
| Foreclosed assets, net | 13,227 | 14,298 | (1,071 | ) | |||||||
| Total nonperforming assets (“NPAs”) | $ | 70,030 | $ | 81,950 | $ | (11,920 | ) | ||||
| Performing TDRs held for investment | $ | 40,129 | $ | 27,999 | $ | 12,130 | |||||
| Nonaccrual loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 0.29 | % | 0.36 | % | |||||||
| Nonperforming assets to loans and leases | |||||||||||
| held for investment and foreclosed assets | 0.36 | % | 0.43 | % | |||||||
| Allowance for credit losses to nonaccrual loans | |||||||||||
| and leases held for investment | 528.4 | % | 566.2 | % | |||||||
| Loan and Lease Credit Risk Ratings: | |||||||||||
| Pass | $ | 18,822,938 | $ | 18,183,114 | $ | 639,824 | |||||
| Special mention | 536,052 | 632,997 | (96,945 | ) | |||||||
| Classified | 147,267 | 163,117 | (15,850 | ) | |||||||
| Total loans and leases held for investment, | |||||||||||
| net of deferred fees | $ | 19,506,257 | $ | 18,979,228 | $ | 527,029 | |||||
| Classified loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 0.75 | % | 0.86 | % | |||||||
| (1) Nonaccrual loans include SBA guaranteed amounts of $24.2 million at June 30, 2021 and $18.4 million at March 31, 2021. | |||||||||||
Since pro-actively downgrading certain loans at the onset of the pandemic in the first quarter of 2020, special mention loans and leases have decreased $362.6 million from their peak in the first quarter of 2020, while classified loans and leases have decreased $146.0 million from their peak in the second quarter of 2020, and each have continued their steady decline in the second quarter of 2021. Classified and nonaccrual loans and leases are below their pre-pandemic levels and are at their lowest levels since December 31, 2013.
The following table presents nonaccrual loans and leases and accruing loans and leases past due between 30 and 89 days by loan portfolio segment and class as of the dates indicated:
| June 30, 2021 | March 31, 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 | $ | 32,065 | $ | – | $ | 46,436 | $ | 5 | $ | (14,371 | ) | $ | (5 | ) | |||||
| Income producing and other | |||||||||||||||||||
| residential | 6,133 | 2,179 | 2,471 | 6,339 | 3,662 | (4,160 | ) | ||||||||||||
| Total real estate mortgage | 38,198 | 2,179 | 48,907 | 6,344 | (10,709 | ) | (4,165 | ) | |||||||||||
| Real estate construction and land: | |||||||||||||||||||
| Commercial | 284 | – | 302 | – | (18 | ) | – | ||||||||||||
| Residential | 1,934 | 22,714 | 416 | 1,241 | 1,518 | 21,473 | |||||||||||||
| Total real estate | |||||||||||||||||||
| construction and land | 2,218 | 22,714 | 718 | 1,241 | 1,500 | 21,473 | |||||||||||||
| Commercial: | |||||||||||||||||||
| Asset-based | 1,973 | – | 2,379 | – | (406 | ) | – | ||||||||||||
| Venture capital | 2,717 | – | 2,432 | 6,750 | 285 | (6,750 | ) | ||||||||||||
| Other commercial | 11,337 | 270 | 12,660 | 1,251 | (1,323 | ) | (981 | ) | |||||||||||
| Total commercial | 16,027 | 270 | 17,471 | 8,001 | (1,444 | ) | (7,731 | ) | |||||||||||
| Consumer | 360 | 1,454 | 556 | 954 | (196 | ) | 500 | ||||||||||||
| Total held for investment | $ | 56,803 | $ | 26,617 | $ | 67,652 | $ | 16,540 | $ | (10,849 | ) | $ | 10,077 | ||||||
During the second quarter of 2021, nonaccrual loans and leases decreased by $10.8 million due primarily to the payoff of one retail commercial real estate loan.
CAPITAL
The following table presents certain actual capital ratios and ratios excluding PPP loans:
| June 30, 2021 | |||||||||
| Excluding | March 31, | ||||||||
| PPP | 2021 | ||||||||
| Actual (1) | Loans (1) | Actual | |||||||
| PacWest Bancorp Consolidated: | |||||||||
| Tier 1 leverage capital ratio | 7.67 | % | 7.89 | % | (3 | ) | 7.95 | % | |
| Common equity tier 1 capital ratio | 10.41 | % | 10.41 | % | 10.39 | % | |||
| Total capital ratio | 14.99 | % | 14.99 | % | 13.60 | % | |||
| Tangible common equity ratio (2) | 7.80 | % | 7.94 | % | (3 | ) | 7.68 | % | |
| (1) Capital information for June 30, 2021 is preliminary. | |||||||||
| (2) Non-GAAP measure. | |||||||||
| (3) PPP loans have been excluded from total assets in denominator as they are zero risk-weighted. | |||||||||
ABOUT PACWEST BANCORP
PacWest Bancorp (“PacWest”) is a bank holding company with over $34 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 70 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 also offers 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. 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 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 | |||||||||||
| June 30, | March 31, | June 30, | |||||||||
| 2021 | 2021 | 2020 | |||||||||
| (Dollars in thousands, except per share data) | |||||||||||
| ASSETS: | |||||||||||
| Cash and due from banks | $ | 179,505 | $ | 177,199 | $ | 174,059 | |||||
| Interest-earning deposits in financial institutions | 5,678,587 | 5,517,667 | 1,747,077 | ||||||||
| Total cash and cash equivalents | 5,858,092 | 5,694,866 | 1,921,136 | ||||||||
| Securities available-for-sale, at estimated fair value | 7,198,608 | 5,941,690 | 3,851,141 | ||||||||
| Federal Home Loan Bank stock, at cost | 17,250 | 17,250 | 17,250 | ||||||||
| Total investment securities | 7,215,858 | 5,958,940 | 3,868,391 | ||||||||
| Loans held for sale | – | 25,554 | – | ||||||||
| Gross loans and leases held for investment | 19,580,731 | 19,055,165 | 19,780,476 | ||||||||
| Deferred fees, net | (74,474 | ) | (75,937 | ) | (85,845 | ) | |||||
| Total loans and leases held for investment, | |||||||||||
| net of deferred fees | 19,506,257 | 18,979,228 | 19,694,631 | ||||||||
| Allowance for loan and lease losses | (225,600 | ) | (292,445 | ) | (301,050 | ) | |||||
| Total loans and leases held for investment, net | 19,280,657 | 18,686,783 | 19,393,581 | ||||||||
| Equipment leased to others under operating leases | 313,574 | 327,413 | 295,191 | ||||||||
| Premises and equipment, net | 39,541 | 39,622 | 42,299 | ||||||||
| Foreclosed assets, net | 13,227 | 14,298 | 1,449 | ||||||||
| Goodwill | 1,204,118 | 1,204,092 | 1,078,670 | ||||||||
| Core deposit and customer relationship intangibles, net | 18,423 | 21,312 | 30,564 | ||||||||
| Other assets | 924,497 | 883,653 | 734,457 | ||||||||
| Total assets | $ | 34,867,987 | $ | 32,856,533 | $ | 27,365,738 | |||||
| LIABILITIES: | |||||||||||
| Noninterest-bearing deposits | $ | 11,252,286 | $ | 11,017,462 | $ | 8,629,543 | |||||
| Interest-bearing deposits | 18,394,748 | 17,205,829 | 14,299,036 | ||||||||
| Total deposits | 29,647,034 | 28,223,291 | 22,928,579 | ||||||||
| Borrowings | 6,625 | 19,750 | 60,000 | ||||||||
| Subordinated debentures | 861,788 | 465,814 | 460,772 | ||||||||
| Accrued interest payable and other liabilities | 505,859 | 493,541 | 463,489 | ||||||||
| Total liabilities | 31,021,306 | 29,202,396 | 23,912,840 | ||||||||
| STOCKHOLDERS’ EQUITY (1) | 3,846,681 | 3,654,137 | 3,452,898 | ||||||||
| Total liabilities and stockholders’ equity | $ | 34,867,987 | $ | 32,856,533 | $ | 27,365,738 | |||||
| Book value per share | $ | 32.17 | $ | 30.68 | $ | 29.17 | |||||
| Tangible book value per share (2) | $ | 21.95 | $ | 20.39 | $ | 19.80 | |||||
| Shares outstanding | 119,555,102 | 119,105,642 | 118,374,603 | ||||||||
| (1) Includes net unrealized gain on securities | |||||||||||
| available-for-sale, net | $ | 145,516 | $ | 106,381 | $ | 145,038 | |||||
| (2) Non-GAAP measure. | |||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS) | |||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Interest income: | |||||||||||||||||||
| Loans and leases | $ | 244,529 | $ | 241,544 | $ | 247,851 | $ | 486,073 | $ | 510,129 | |||||||||
| Investment securities | 33,954 | 30,265 | 26,038 | 64,219 | 53,484 | ||||||||||||||
| Deposits in financial institutions | 2,022 | 1,528 | 186 | 3,550 | 1,794 | ||||||||||||||
| Total interest income | 280,505 | 273,337 | 274,075 | 553,842 | 565,407 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 7,269 | 7,500 | 13,075 | 14,769 | 41,322 | ||||||||||||||
| Borrowings | 265 | 193 | 1,319 | 458 | 8,097 | ||||||||||||||
| Subordinated debentures | 6,663 | 4,375 | 5,402 | 11,038 | 11,962 | ||||||||||||||
| Total interest expense | 14,197 | 12,068 | 19,796 | 26,265 | 61,381 | ||||||||||||||
| Net interest income | 266,308 | 261,269 | 254,279 | 527,577 | 504,026 | ||||||||||||||
| Provision for credit losses | (88,000 | ) | (48,000 | ) | 120,000 | (136,000 | ) | 232,000 | |||||||||||
| Net interest income after provision | |||||||||||||||||||
| for credit losses | 354,308 | 309,269 | 134,279 | 663,577 | 272,026 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Service charges on deposit accounts | 3,452 | 2,934 | 2,004 | 6,386 | 4,662 | ||||||||||||||
| Other commissions and fees | 10,704 | 9,158 | 10,111 | 19,862 | 19,832 | ||||||||||||||
| Leased equipment income | 10,847 | 11,354 | 12,037 | 22,201 | 24,288 | ||||||||||||||
| Gain on sale of loans and leases | 1,422 | 139 | 346 | 1,561 | 433 | ||||||||||||||
| Gain on sale of securities | – | 101 | 7,715 | 101 | 7,897 | ||||||||||||||
| Other income | 13,946 | 21,143 | 6,645 | 35,089 | 10,846 | ||||||||||||||
| Total noninterest income | 40,371 | 44,829 | 38,858 | 85,200 | 67,958 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Compensation | 90,807 | 79,882 | 61,910 | 170,689 | 123,192 | ||||||||||||||
| Occupancy | 14,784 | 14,054 | 14,494 | 28,838 | 28,701 | ||||||||||||||
| Data processing | 7,758 | 6,957 | 7,102 | 14,715 | 13,556 | ||||||||||||||
| Other professional services | 5,256 | 5,126 | 4,146 | 10,382 | 8,404 | ||||||||||||||
| Insurance and assessments | 3,745 | 4,903 | 9,373 | 8,648 | 13,622 | ||||||||||||||
| Intangible asset amortization | 2,889 | 3,079 | 3,882 | 5,968 | 7,830 | ||||||||||||||
| Leased equipment depreciation | 8,614 | 8,969 | 7,102 | 17,583 | 14,307 | ||||||||||||||
| Foreclosed assets (income) expense, net | (119 | ) | 1 | (146 | ) | (118 | ) | (80 | ) | ||||||||||
| Acquisition, integration and | |||||||||||||||||||
| reorganization costs | 200 | 3,425 | – | 3,625 | – | ||||||||||||||
| Customer related expense | 4,973 | 4,818 | 4,408 | 9,791 | 8,340 | ||||||||||||||
| Loan expense | 4,031 | 3,193 | 3,379 | 7,224 | 6,029 | ||||||||||||||
| Goodwill impairment | – | – | – | – | 1,470,000 | ||||||||||||||
| Other expense | 8,812 | 15,729 | 11,315 | 24,541 | 21,034 | ||||||||||||||
| Total noninterest expense | 151,750 | 150,136 | 126,965 | 301,886 | 1,714,935 | ||||||||||||||
| Earnings (loss) before income taxes | 242,929 | 203,962 | 46,172 | 446,891 | (1,374,951 | ) | |||||||||||||
| Income tax expense | 62,417 | 53,556 | 12,968 | 115,973 | 24,956 | ||||||||||||||
| Net earnings (loss) | $ | 180,512 | $ | 150,406 | $ | 33,204 | $ | 330,918 | $ | (1,399,907 | ) | ||||||||
| Basic and diluted earnings (loss) per share | $ | 1.52 | $ | 1.27 | $ | 0.28 | $ | 2.78 | $ | (11.98 | ) | ||||||||
| Dividends declared and paid per share | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.50 | $ | 0.85 | |||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| NET EARNINGS (LOSS) PER SHARE CALCULATIONS | |||||||||||||||||||
| Three Months Ended |
Six Months Ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||
| Basic Earnings (Loss) Per Share: | |||||||||||||||||||
| Net earnings (loss) | $ | 180,512 | $ | 150,406 | $ | 33,204 | $ | 330,918 | $ | (1,399,907 | ) | ||||||||
| Less: earnings allocated to | |||||||||||||||||||
| unvested restricted stock (1) | (3,172 | ) | (2,355 | ) | (362 | ) | (5,495 | ) | (1,251 | ) | |||||||||
| Net earnings (loss) allocated to | |||||||||||||||||||
| common shares | $ | 177,340 | $ | 148,051 | $ | 32,842 | $ | 325,423 | $ | (1,401,158 | ) | ||||||||
| Weighted-average basic shares | |||||||||||||||||||
| and unvested restricted stock | |||||||||||||||||||
| outstanding | 119,386 | 118,852 | 118,192 | 119,121 | 118,484 | ||||||||||||||
| Less: weighted-average unvested | |||||||||||||||||||
| restricted stock outstanding | (2,356 | ) | (2,003 | ) | (1,606 | ) | (2,181 | ) | (1,551 | ) | |||||||||
| Weighted-average basic shares | |||||||||||||||||||
| outstanding | 117,030 | 116,849 | 116,586 | 116,940 | 116,933 | ||||||||||||||
| Basic earnings (loss) per share | $ | 1.52 | $ | 1.27 | $ | 0.28 | $ | 2.78 | $ | (11.98 | ) | ||||||||
| Diluted Earnings (Loss) Per Share: | |||||||||||||||||||
| Net earnings (loss) allocated to | |||||||||||||||||||
| common shares | $ | 177,340 | $ | 148,051 | $ | 32,842 | $ | 325,423 | $ | (1,401,158 | ) | ||||||||
| Weighted-average diluted shares | |||||||||||||||||||
| outstanding | 117,030 | 116,849 | 116,586 | 116,940 | 116,933 | ||||||||||||||
| Diluted earnings (loss) per share | $ | 1.52 | $ | 1.27 | $ | 0.28 | $ | 2.78 | $ | (11.98 | ) | ||||||||
| (1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any. | |||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| AVERAGE BALANCE SHEET AND YIELD ANALYSIS | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| June 30, 2021 | March 31, 2021 | June 30, 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) | $ | 19,057,420 | $ | 246,147 | 5.18 | % | $ | 18,927,314 | $ | 242,846 | 5.20 | % | $ | 19,951,603 | $ | 248,474 | 5.01 | % | ||
| Investment securities (3) | 6,492,721 | 36,111 | 2.23 | % | 5,383,140 | 32,329 | 2.44 | % | 3,846,459 | 27,430 | 2.87 | % | ||||||||
| Deposits in financial | ||||||||||||||||||||
| institutions | 6,347,764 | 2,022 | 0.13 | % | 4,790,231 | 1,528 | 0.13 | % | 733,142 | 186 | 0.10 | % | ||||||||
| Total interest-earning | ||||||||||||||||||||
| assets (1) | 31,897,905 | 284,280 | 3.57 | % | 29,100,685 | 276,703 | 3.86 | % | 24,531,204 | 276,090 | 4.53 | % | ||||||||
| Other assets | 2,428,207 | 2,315,197 | 2,090,023 | |||||||||||||||||
| Total assets | $ | 34,326,112 | $ | 31,415,882 | $ | 26,621,227 | ||||||||||||||
| Liabilities and | ||||||||||||||||||||
| Stockholders’ Equity: | ||||||||||||||||||||
| Interest checking | $ | 7,235,726 | 2,394 | 0.13 | % | $ | 6,401,869 | 2,232 | 0.14 | % | $ | 4,001,750 | 1,573 | 0.16 | % | |||||
| Money market | 8,484,933 | 3,318 | 0.16 | % | 7,975,996 | 3,278 | 0.17 | % | 6,114,354 | 2,856 | 0.19 | % | ||||||||
| Savings | 598,225 | 36 | 0.02 | % | 572,959 | 35 | 0.02 | % | 524,335 | 33 | 0.03 | % | ||||||||
| Time | 1,498,169 | 1,521 | 0.41 | % | 1,493,267 | 1,955 | 0.53 | % | 2,475,858 | 8,613 | 1.40 | % | ||||||||
| Total interest-bearing | ||||||||||||||||||||
| deposits | 17,817,053 | 7,269 | 0.16 | % | 16,444,091 | 7,500 | 0.18 | % | 13,116,297 | 13,075 | 0.40 | % | ||||||||
| Borrowings | 225,446 | 265 | 0.47 | % | 226,053 | 193 | 0.35 | % | 871,110 | 1,319 | 0.61 | % | ||||||||
| Subordinated debentures | 735,725 | 6,663 | 3.63 | % | 466,101 | 4,375 | 3.81 | % | 459,466 | 5,402 | 4.73 | % | ||||||||
| Total interest-bearing | ||||||||||||||||||||
| liabilities | 18,778,224 | 14,197 | 0.30 | % | 17,136,245 | 12,068 | 0.29 | % | 14,446,873 | 19,796 | 0.55 | % | ||||||||
| Noninterest-bearing | ||||||||||||||||||||
| demand deposits | 11,304,757 | 10,173,459 | 8,292,151 | |||||||||||||||||
| Other liabilities | 504,089 | 488,930 | 435,353 | |||||||||||||||||
| Total liabilities | 30,587,070 | 27,798,634 | 23,174,377 | |||||||||||||||||
| Stockholders’ equity | 3,739,042 | 3,617,248 | 3,446,850 | |||||||||||||||||
| Total liabilities and | ||||||||||||||||||||
| stockholders’ equity | $ | 34,326,112 | $ | 31,415,882 | $ | 26,621,227 | ||||||||||||||
| Net interest income (1) | $ | 270,083 | $ | 264,635 | $ | 256,294 | ||||||||||||||
| Net interest spread (1) | 3.27 | % | 3.57 | % | 3.98 | % | ||||||||||||||
| Net interest margin (1) | 3.40 | % | 3.69 | % | 4.20 | % | ||||||||||||||
| Total deposits (4) | $ | 29,121,810 | $ | 7,269 | 0.10 | % | $ | 26,617,550 | $ | 7,500 | 0.11 | % | $ | 21,408,448 | $ | 13,075 | 0.25 | % | ||
| (1) Tax equivalent. | ||||||||||||||||||||
| (2) Includes net loan premium amortization of $1.5 million and $1.2 million and net loan discount accretion of $1.2 million for the three months ended | ||||||||||||||||||||
| June 30, 2021, March 31, 2021, and June 30, 2020, respectively. | ||||||||||||||||||||
| (3) Includes tax-equivalent adjustments of $2.2 million, $2.1 million, and $1.4 million for the three months ended June 30, 2021, | ||||||||||||||||||||
| March 31, 2021, and June 30, 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 | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| ASSETS: | |||||||||||||||||||
| Cash and due from banks | $ | 179,505 | $ | 177,199 | $ | 150,464 | $ | 187,176 | $ | 174,059 | |||||||||
| Interest-earning deposits in financial | |||||||||||||||||||
| institutions | 5,678,587 | 5,517,667 | 3,010,197 | 2,766,020 | 1,747,077 | ||||||||||||||
| Total cash and cash equivalents | 5,858,092 | 5,694,866 | 3,160,661 | 2,953,196 | 1,921,136 | ||||||||||||||
| Securities available-for-sale | 7,198,608 | 5,941,690 | 5,235,591 | 4,532,614 | 3,851,141 | ||||||||||||||
| Federal Home Loan Bank stock | 17,250 | 17,250 | 17,250 | 17,250 | 17,250 | ||||||||||||||
| Total investment securities | 7,215,858 | 5,958,940 | 5,252,841 | 4,549,864 | 3,868,391 | ||||||||||||||
| Loans held for sale | – | 25,554 | – | – | – | ||||||||||||||
| Gross loans and leases held for investment | 19,580,731 | 19,055,165 | 19,153,357 | 19,101,680 | 19,780,476 | ||||||||||||||
| Deferred fees, net | (74,474 | ) | (75,937 | ) | (69,980 | ) | (75,480 | ) | (85,845 | ) | |||||||||
| Total loans and leases held for | |||||||||||||||||||
| investment, net of deferred fees | 19,506,257 | 18,979,228 | 19,083,377 | 19,026,200 | 19,694,631 | ||||||||||||||
| Allowance for loan and lease losses | (225,600 | ) | (292,445 | ) | (348,181 | ) | (345,966 | ) | (301,050 | ) | |||||||||
| Total loans and leases held for | |||||||||||||||||||
| investment, net | 19,280,657 | 18,686,783 | 18,735,196 | 18,680,234 | 19,393,581 | ||||||||||||||
| Equipment leased to others under | |||||||||||||||||||
| operating leases | 313,574 | 327,413 | 333,846 | 286,425 | 295,191 | ||||||||||||||
| Premises and equipment, net | 39,541 | 39,622 | 39,234 | 40,544 | 42,299 | ||||||||||||||
| Foreclosed assets, net | 13,227 | 14,298 | 14,027 | 13,747 | 1,449 | ||||||||||||||
| Goodwill | 1,204,118 | 1,204,092 | 1,078,670 | 1,078,670 | 1,078,670 | ||||||||||||||
| Core deposit and customer relationship | |||||||||||||||||||
| intangibles, net | 18,423 | 21,312 | 23,641 | 26,813 | 30,564 | ||||||||||||||
| Other assets | 924,497 | 883,653 | 860,326 | 797,223 | 734,457 | ||||||||||||||
| Total assets | $ | 34,867,987 | $ | 32,856,533 | $ | 29,498,442 | $ | 28,426,716 | $ | 27,365,738 | |||||||||
| LIABILITIES: | |||||||||||||||||||
| Noninterest-bearing deposits | $ | 11,252,286 | $ | 11,017,462 | $ | 9,193,827 | $ | 9,346,744 | $ | 8,629,543 | |||||||||
| Interest-bearing deposits | 18,394,748 | 17,205,829 | 15,746,890 | 14,618,951 | 14,299,036 | ||||||||||||||
| Total deposits | 29,647,034 | 28,223,291 | 24,940,717 | 23,965,695 | 22,928,579 | ||||||||||||||
| Borrowings | 6,625 | 19,750 | 5,000 | 60,000 | 60,000 | ||||||||||||||
| Subordinated debentures | 861,788 | 465,814 | 465,812 | 463,282 | 460,772 | ||||||||||||||
| Accrued interest payable and other | |||||||||||||||||||
| liabilities | 505,859 | 493,541 | 491,962 | 451,508 | 463,489 | ||||||||||||||
| Total liabilities | 31,021,306 | 29,202,396 | 25,903,491 | 24,940,485 | 23,912,840 | ||||||||||||||
| STOCKHOLDERS’ EQUITY (1) | 3,846,681 | 3,654,137 | 3,594,951 | 3,486,231 | 3,452,898 | ||||||||||||||
| Total liabilities and stockholders’ | |||||||||||||||||||
| equity | $ | 34,867,987 | $ | 32,856,533 | $ | 29,498,442 | $ | 28,426,716 | $ | 27,365,738 | |||||||||
| Book value per share | $ | 32.17 | $ | 30.68 | $ | 30.36 | $ | 29.42 | $ | 29.17 | |||||||||
| Tangible book value per share (2) | $ | 21.95 | $ | 20.39 | $ | 21.05 | $ | 20.09 | $ | 19.80 | |||||||||
| Shares outstanding | 119,555,102 | 119,105,642 | 118,414,853 | 118,489,927 | 118,374,603 | ||||||||||||||
| (1) Includes net unrealized gain on | |||||||||||||||||||
| securities available-for-sale, net | $ | 145,516 | $ | 106,381 | $ | 172,523 | $ | 155,474 | $ | 145,038 | |||||||||
| (2) Non-GAAP measure. | |||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||
| FIVE QUARTER STATEMENT OF EARNINGS | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | ||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||
| Interest income: | ||||||||||||||||||
| Loans and leases | $ | 244,529 | $ | 241,544 | $ | 242,198 | $ | 240,811 | $ | 247,851 | ||||||||
| Investment securities | 33,954 | 30,265 | 28,843 | 24,443 | 26,038 | |||||||||||||
| Deposits in financial institutions | 2,022 | 1,528 | 1,135 | 654 | 186 | |||||||||||||
| Total interest income | 280,505 | 273,337 | 272,176 | 265,908 | 274,075 | |||||||||||||
| Interest expense: | ||||||||||||||||||
| Deposits | 7,269 | 7,500 | 8,454 | 9,887 | 13,075 | |||||||||||||
| Borrowings | 265 | 193 | 37 | 27 | 1,319 | |||||||||||||
| Subordinated debentures | 6,663 | 4,375 | 4,477 | 4,670 | 5,402 | |||||||||||||
| Total interest expense | 14,197 | 12,068 | 12,968 | 14,584 | 19,796 | |||||||||||||
| Net interest income | 266,308 | 261,269 | 259,208 | 251,324 | 254,279 | |||||||||||||
| Provision for credit losses | (88,000 | ) | (48,000 | ) | 10,000 | 97,000 | 120,000 | |||||||||||
| Net interest income after provision | ||||||||||||||||||
| for credit losses | 354,308 | 309,269 | 249,208 | 154,324 | 134,279 | |||||||||||||
| Noninterest income: | ||||||||||||||||||
| Service charges on deposit accounts | 3,452 | 2,934 | 3,119 | 2,570 | 2,004 | |||||||||||||
| Other commissions and fees | 10,704 | 9,158 | 9,974 | 10,541 | 10,111 | |||||||||||||
| Leased equipment income | 10,847 | 11,354 | 9,440 | 9,900 | 12,037 | |||||||||||||
| Gain on sale of loans and leases | 1,422 | 139 | 1,671 | 35 | 346 | |||||||||||||
| Gain on sale of securities | – | 101 | 4 | 5,270 | 7,715 | |||||||||||||
| Other income | 13,946 | 21,143 | 15,642 | 9,936 | 6,645 | |||||||||||||
| Total noninterest income | 40,371 | 44,829 | 39,850 | 38,252 | 38,858 | |||||||||||||
| Noninterest expense: | ||||||||||||||||||
| Compensation | 90,807 | 79,882 | 73,171 | 75,131 | 61,910 | |||||||||||||
| Occupancy | 14,784 | 14,054 | 14,083 | 14,771 | 14,494 | |||||||||||||
| Data processing | 7,758 | 6,957 | 6,718 | 6,505 | 7,102 | |||||||||||||
| Other professional services | 5,256 | 5,126 | 6,800 | 4,713 | 4,146 | |||||||||||||
| Insurance and assessments | 3,745 | 4,903 | 5,064 | 3,939 | 9,373 | |||||||||||||
| Intangible asset amortization | 2,889 | 3,079 | 3,172 | 3,751 | 3,882 | |||||||||||||
| Leased equipment depreciation | 8,614 | 8,969 | 7,501 | 7,057 | 7,102 | |||||||||||||
| Foreclosed assets (income) expense, net | (119 | ) | 1 | (272 | ) | 335 | (146 | ) | ||||||||||
| Acquisition, integration and | ||||||||||||||||||
| reorganization costs | 200 | 3,425 | 1,060 | – | – | |||||||||||||
| Customer related expense | 4,973 | 4,818 | 4,430 | 4,762 | 4,408 | |||||||||||||
| Loan expense | 4,031 | 3,193 | 3,926 | 3,499 | 3,379 | |||||||||||||
| Other expense | 8,812 | 15,729 | 10,029 | 8,939 | 11,315 | |||||||||||||
| Total noninterest expense | 151,750 | 150,136 | 135,682 | 133,402 | 126,965 | |||||||||||||
| Earnings before income taxes | 242,929 | 203,962 | 153,376 | 59,174 | 46,172 | |||||||||||||
| Income tax expense | 62,417 | 53,556 | 36,546 | 13,671 | 12,968 | |||||||||||||
| Net earnings | $ | 180,512 | $ | 150,406 | $ | 116,830 | $ | 45,503 | $ | 33,204 | ||||||||
| Basic and diluted earnings per share | $ | 1.52 | $ | 1.27 | $ | 0.99 | $ | 0.38 | $ | 0.28 | ||||||||
| 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 | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Performance Ratios: | |||||||||||||||||||
| Return on average assets (1) | 2.11 | % | 1.94 | % | 1.58 | % | 0.65 | % | 0.50 | % | |||||||||
| Pre-provision, pre-goodwill impairment, | |||||||||||||||||||
| pre-tax net revenue (“PPNR”) | |||||||||||||||||||
| return on average assets (1)(2) | 1.81 | % | 2.01 | % | 2.22 | % | 2.22 | % | 2.51 | % | |||||||||
| Return on average equity (1) | 19.36 | % | 16.86 | % | 13.14 | % | 5.18 | % | 3.87 | % | |||||||||
| Return on average tangible equity (1)(2) | 29.25 | % | 25.67 | % | 19.63 | % | 8.20 | % | 6.39 | % | |||||||||
| Efficiency ratio | 47.9 | % | 46.4 | % | 43.6 | % | 45.1 | % | 42.9 | % | |||||||||
| Noninterest expense as a percentage | |||||||||||||||||||
| of average assets (1) | 1.77 | % | 1.94 | % | 1.84 | % | 1.90 | % | 1.92 | % | |||||||||
| Average Yields/Costs (1): | |||||||||||||||||||
| Yield on: | |||||||||||||||||||
| Average loans and leases (3) | 5.18 | % | 5.20 | % | 5.15 | % | 5.01 | % | 5.01 | % | |||||||||
| Average investment securities (3) | 2.23 | % | 2.44 | % | 2.50 | % | 2.52 | % | 2.87 | % | |||||||||
| Average interest-earning assets (3) | 3.57 | % | 3.86 | % | 4.02 | % | 4.13 | % | 4.53 | % | |||||||||
| Cost of: | |||||||||||||||||||
| Average interest-bearing deposits | 0.16 | % | 0.18 | % | 0.22 | % | 0.27 | % | 0.40 | % | |||||||||
| Average total deposits | 0.10 | % | 0.11 | % | 0.14 | % | 0.17 | % | 0.25 | % | |||||||||
| Average interest-bearing liabilities | 0.30 | % | 0.29 | % | 0.33 | % | 0.38 | % | 0.55 | % | |||||||||
| Net interest spread (3) | 3.27 | % | 3.57 | % | 3.69 | % | 3.75 | % | 3.98 | % | |||||||||
| Net interest margin (3) | 3.40 | % | 3.69 | % | 3.83 | % | 3.90 | % | 4.20 | % | |||||||||
| Average Balances: | |||||||||||||||||||
| Assets: | |||||||||||||||||||
| Loans and leases, net of deferred fees | $ | 19,057,420 | $ | 18,927,314 | $ | 18,769,214 | $ | 19,195,737 | $ | 19,951,603 | |||||||||
| Investment securities | 6,492,721 | 5,383,140 | 4,888,993 | 4,107,915 | 3,846,459 | ||||||||||||||
| Deposits in financial institutions | 6,347,764 | 4,790,231 | 3,576,335 | 2,554,349 | 733,142 | ||||||||||||||
| Interest-earning assets | 31,897,905 | 29,100,685 | 27,234,542 | 25,858,001 | 24,531,204 | ||||||||||||||
| Total assets | 34,326,112 | 31,415,882 | 29,334,789 | 27,935,193 | 26,621,227 | ||||||||||||||
| Liabilities: | |||||||||||||||||||
| Noninterest-bearing deposits | 11,304,757 | 10,173,459 | 9,589,789 | 8,812,391 | 8,292,151 | ||||||||||||||
| Interest-bearing deposits | 17,817,053 | 16,444,091 | 15,045,451 | 14,516,923 | 13,116,297 | ||||||||||||||
| Total deposits | 29,121,810 | 26,617,550 | 24,635,240 | 23,329,314 | 21,408,448 | ||||||||||||||
| Borrowings | 225,446 | 226,053 | 237,098 | 181,315 | 871,110 | ||||||||||||||
| Subordinated debentures | 735,725 | 466,101 | 463,951 | 462,375 | 459,466 | ||||||||||||||
| Interest-bearing liabilities | 18,778,224 | 17,136,245 | 15,746,500 | 15,160,613 | 14,446,873 | ||||||||||||||
| Stockholders’ equity | 3,739,042 | 3,617,248 | 3,536,425 | 3,497,869 | 3,446,850 | ||||||||||||||
| (1) Annualized. | |||||||||||||||||||
| (2) Non-GAAP measure. | |||||||||||||||||||
| (3) Tax equivalent. | |||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER SELECTED FINANCIAL DATA | |||||||||||||||||||
| At or For the Three Months Ended | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2020 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Credit Quality Ratios: | |||||||||||||||||||
| Nonaccrual loans and leases held for | |||||||||||||||||||
| investment to loans and leases | |||||||||||||||||||
| held for investment | 0.29 | % | 0.36 | % | 0.48 | % | 0.45 | % | 0.84 | % | |||||||||
| Nonperforming assets to loans and | |||||||||||||||||||
| leases held for investment and | |||||||||||||||||||
| foreclosed assets | 0.36 | % | 0.43 | % | 0.55 | % | 0.52 | % | 0.85 | % | |||||||||
| Classified loans and leases held for | |||||||||||||||||||
| investment to loans and leases | |||||||||||||||||||
| held for investment | 0.75 | % | 0.86 | % | 1.39 | % | 1.44 | % | 1.49 | % | |||||||||
| Provision for credit losses (for the | |||||||||||||||||||
| quarter) to average loans and leases | |||||||||||||||||||
| held for investment (annualized) | (1.85 | )% | (1.03 | )% | 0.21 | % | 2.01 | % | 2.42 | % | |||||||||
| Net charge-offs (for the quarter) to | |||||||||||||||||||
| average loans and leases held | |||||||||||||||||||
| for investment (annualized) | (0.11 | )% | 0.06 | % | 0.40 | % | 0.75 | % | 0.27 | % | |||||||||
| Trailing 12 months net charge-offs | |||||||||||||||||||
| to average loans and leases | |||||||||||||||||||
| held for investment | 0.27 | % | 0.37 | % | 0.45 | % | 0.36 | % | 0.20 | % | |||||||||
| Allowance for loan and lease losses to | |||||||||||||||||||
| loans and leases held for investment | 1.16 | % | 1.54 | % | 1.82 | % | 1.82 | % | 1.53 | % | |||||||||
| Allowance for credit losses to loans | |||||||||||||||||||
| and leases held for investment | 1.54 | % | 2.02 | % | 2.27 | % | 2.33 | % | 1.94 | % | |||||||||
| Allowance for credit losses to | |||||||||||||||||||
| nonaccrual loans and leases | |||||||||||||||||||
| held for investment | 528.4 | % | 566.2 | % | 475.8 | % | 516.9 | % | 229.7 | % | |||||||||
| PacWest Bancorp Consolidated: | |||||||||||||||||||
| Tier 1 leverage capital ratio (1) | 7.67 | % | 7.95 | % | 8.55 | % | 8.66 | % | 8.93 | % | |||||||||
| Common equity tier 1 capital ratio (1) | 10.41 | % | 10.39 | % | 10.53 | % | 10.45 | % | 9.97 | % | |||||||||
| Tier 1 capital ratio (1) | 10.41 | % | 10.39 | % | 10.53 | % | 10.45 | % | 9.97 | % | |||||||||
| Total capital ratio (1) | 14.99 | % | 13.60 | % | 13.76 | % | 13.74 | % | 13.18 | % | |||||||||
| Risk-weighted assets (1) | $ | 24,274,256 | $ | 23,012,350 | $ | 22,837,693 | $ | 22,114,040 | $ | 22,781,836 | |||||||||
| Equity to assets ratio | 11.03 | % | 11.12 | % | 12.19 | % | 12.26 | % | 12.62 | % | |||||||||
| Tangible common equity ratio (2) | 7.80 | % | 7.68 | % | 8.78 | % | 8.71 | % | 8.93 | % | |||||||||
| Book value per share | $ | 32.17 | $ | 30.68 | $ | 30.36 | $ | 29.42 | $ | 29.17 | |||||||||
| Tangible book value per share (2) | $ | 21.95 | $ | 20.39 | $ | 21.05 | $ | 20.09 | $ | 19.80 | |||||||||
| Pacific Western Bank: | |||||||||||||||||||
| Tier 1 leverage capital ratio (1) | 8.47 | % | 8.83 | % | 9.53 | % | 9.70 | % | 10.03 | % | |||||||||
| Common equity tier 1 capital ratio (1) | 11.51 | % | 11.54 | % | 11.73 | % | 11.70 | % | 11.18 | % | |||||||||
| Tier 1 capital ratio (1) | 11.51 | % | 11.54 | % | 11.73 | % | 11.70 | % | 11.18 | % | |||||||||
| Total capital ratio (1) | 14.22 | % | 12.80 | % | 12.99 | % | 12.95 | % | 12.44 | % | |||||||||
| (1) Capital information for June 30, 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 | Six Months Ended | ||||||||||||||||||
| PPNR and PPNR Return | June 30, | March 31, | June 30, | June 30, | |||||||||||||||
| on Average Assets | 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Net earnings (loss) | $ | 180,512 | $ | 150,406 | $ | 33,204 | $ | 330,918 | $ | (1,399,907 | ) | ||||||||
| Add: Provision for credit losses | (88,000 | ) | (48,000 | ) | 120,000 | (136,000 | ) | 232,000 | |||||||||||
| Add: Goodwill impairment | – | – | – | – | 1,470,000 | ||||||||||||||
| Add: Income tax expense | 62,417 | 53,556 | 12,968 | 115,973 | 24,956 | ||||||||||||||
| Pre-provision, pre-goodwill impairment, | |||||||||||||||||||
| pre-tax net revenue (“PPNR”) | $ | 154,929 | $ | 155,962 | $ | 166,172 | $ | 310,891 | $ | 327,049 | |||||||||
| Average assets | $ | 34,326,112 | $ | 31,415,882 | $ | 26,621,227 | $ | 32,879,037 | $ | 26,860,133 | |||||||||
| Return on average assets (1) | 2.11 | % | 1.94 | % | 0.50 | % | 2.03 | % | (10.48 | )% | |||||||||
| PPNR return on average assets (2) | 1.81 | % | 2.01 | % | 2.51 | % | 1.91 | % | 2.45 | % | |||||||||
| (1) Annualized net earnings (loss) divided by average assets. | |||||||||||||||||||
| (2) Annualized PPNR divided by average assets. | |||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
| Return on Average Tangible Equity | 2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Net earnings (loss) | $ | 180,512 | $ | 150,406 | $ | 33,204 | $ | 330,918 | $ | (1,399,907 | ) | ||||||||
| Add: Intangible asset amortization | 2,889 | 3,079 | 3,882 | 5,968 | 7,830 | ||||||||||||||
| Add: Goodwill impairment | – | – | – | – | 1,470,000 | ||||||||||||||
| Adjusted net earnings | $ | 183,401 | $ | 153,485 | $ | 37,086 | $ | 336,886 | $ | 77,923 | |||||||||
| Average stockholders’ equity | $ | 3,739,042 | $ | 3,617,248 | $ | 3,446,850 | $ | 3,678,481 | $ | 4,201,814 | |||||||||
| Less: Average intangible assets | 1,224,208 | 1,192,780 | 1,111,302 | 1,208,581 | 1,840,246 | ||||||||||||||
| Average tangible common equity | $ | 2,514,834 | $ | 2,424,468 | $ | 2,335,548 | $ | 2,469,900 | $ | 2,361,568 | |||||||||
| Return on average equity (1) | 19.36 | % | 16.86 | % | 3.87 | % | 18.14 | % | (67.00 | )% | |||||||||
| Return on average tangible equity (2) | 29.25 | % | 25.67 | % | 6.39 | % | 27.51 | % | 6.64 | % | |||||||||
| (1) Annualized net earnings divided by average stockholders’ equity. | |||||||||||||||||||
| (2) Annualized adjusted net earnings divided by average tangible common equity. | |||||||||||||||||||
| Tangible Common Equity Ratio/ | June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||
| Tangible Book Value Per Share | 2021 | 2021 | 2020 | 2020 | 2020 | ||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Stockholders’ equity | $ | 3,846,681 | $ | 3,654,137 | $ | 3,594,951 | $ | 3,486,231 | $ | 3,452,898 | |||||||||
| Less: Intangible assets | 1,222,541 | 1,225,404 | 1,102,311 | 1,105,483 | 1,109,234 | ||||||||||||||
| Tangible common equity | $ | 2,624,140 | $ | 2,428,733 | $ | 2,492,640 | $ | 2,380,748 | $ | 2,343,664 | |||||||||
| Total assets | $ | 34,867,987 | $ | 32,856,533 | $ | 29,498,442 | $ | 28,426,716 | $ | 27,365,738 | |||||||||
| Less: Intangible assets | 1,222,541 | 1,225,404 | 1,102,311 | 1,105,483 | 1,109,234 | ||||||||||||||
| Tangible assets | $ | 33,645,446 | $ | 31,631,129 | $ | 28,396,131 | $ | 27,321,233 | $ | 26,256,504 | |||||||||
| Equity to assets ratio | 11.03 | % | 11.12 | % | 12.19 | % | 12.26 | % | 12.62 | % | |||||||||
| Tangible common equity ratio (1) | 7.80 | % | 7.68 | % | 8.78 | % | 8.71 | % | 8.93 | % | |||||||||
| Book value per share | $ | 32.17 | $ | 30.68 | $ | 30.36 | $ | 29.42 | $ | 29.17 | |||||||||
| Tangible book value per share (2) | $ | 21.95 | $ | 20.39 | $ | 21.05 | $ | 20.09 | $ | 19.80 | |||||||||
| Shares outstanding | 119,555,102 | 119,105,642 | 118,414,853 | 118,489,927 | 118,374,603 | ||||||||||||||
| (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 |
