PacWest Bancorp Announces Results for the First Quarter of 2021

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PacWest Bancorp
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Figure 1

Well-Positioned Balance Sheet
Well-Positioned Balance Sheet
Well-Positioned Balance Sheet

LOS ANGELES, April 20, 2021 (GLOBE NEWSWIRE) --

FIRST QUARTER 2021 RESULTS

$150.4M

$1.27

$156.0M

25.67%

Net Earnings

Diluted Earnings
per Share

PPNR

ROATE

FIRST QUARTER 2021 HIGHLIGHTS

  • Net Earnings of $150.4 Million or $1.27 Per Diluted Share

  • Core Deposits Up $3.3 Billion or 15% in 1Q21; Represents 91% of Total Deposits

  • Provision for Credit Losses Benefit of $48.0 Million in 1Q21 Compared to Provision of $10.0 Million in 4Q20

  • Net Interest Income (TE) of $264.6 Million, Compared With $262.1 Million in 4Q20

  • Noninterest Income of $44.8 Million, Up 12% From 4Q20, With Continued Strength in Warrant Income As Well As a $10.1 Million Gain on an Equity Investment

  • Noninterest Expense of $150.1 Million, Up 11% From 4Q20, Driven By Two Months of Civic Financial Services (“Civic”) Operations, Higher Acquisition Costs, and a Legal Settlement

  • Classified and Special Mention Loans Fell $102.1 Million and $88.3 Million, Respectively, From 4Q20

  • ACL Ratio of 2.02% and ALLL Ratio of 1.54%; Excluding PPP Loans, ACL Ratio of 2.14% and ALLL Ratio of 1.63%

  • Net Charge-offs to Average Loans/Leases of 6 bps

  • Cost of Deposits Decreased 3 bps to 11 bps

  • Loan and Lease Production of $1.6 Billion Up From $1.1 Billion in 4Q20; WAC of 5.39% (Excluding PPP Loans) vs. 4.41% in 4Q20

  • Net Loans and Leases of $19.0 Billion, Down Slightly From 4Q20 As Production Was Offset With Payoffs and Paydowns As Well As Further Reduction in the Security Monitoring Portfolio

  • Originated $381 Million of PPP Loans in 1Q21

  • Strong Capital Position – CET1 Ratio of 10.41%

  • Civic Acquisition Completed on February 1, 2021

  • On March 31, 2021, Signed Agreement to Purchase the Homeowners Association Business from MUFG Union Bank, N.A. With Approximately $4.0 Billion of Deposits With a Cost of 8 bps; Close Expected in 4Q21

CEO COMMENTARY
Matt Wagner, President and CEO, commented, “Our continued focus on growing net interest income produced strong first quarter earnings boosted by continued deposit driven balance sheet growth and improved credit costs as a result of improved economic conditions. Our first quarter results produced a return on assets of 1.94% and a return on tangible equity of 25.67%.”

“We experienced strong deposit growth again in the first quarter driven by outstanding growth from our venture banking clients as well as our commercial bank. This increasing liquidity has expanded our average balance of deposits at the Fed, which grew to $4.8 billion in the first quarter with a yield of 13 basis points. While our focus is on managing net interest income, this excess liquidity continues to be a drag on our net interest margin, which had a negative impact of 61 basis points in the first quarter.”

“Credit quality continued to improve as we experienced decreases in nonaccrual, special mention, and classified loans and leases in the first quarter, while net charge-offs were $2.7 million.”

“We closed the Civic acquisition on February 1, 2021 and in two months Civic originated $231 million of loans. We expect Civic loan production to remain strong and, as their loan portfolio continues to grow, it will help sustain our loan yields and drive loan growth.”

A chart accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/03fbe6a3-20e1-45c9-905b-ab7513e2ee6b

FINANCIAL HIGHLIGHTS

At or For the

At or For the

Three Months Ended

Three Months Ended

March 31,

December 31,

Increase

March 31,

Increase

Financial Highlights (1)

2021

2020

(Decrease)

2021

2020

(Decrease)

(Dollars in thousands, except per share data)

Net earnings (loss)

$

150,406

$

116,830

$

33,576

$

150,406

$

(1,433,111

)

$

1,583,517

Diluted earnings (loss)

per share

$

1.27

$

0.99

$

0.28

$

1.27

$

(12.23

)

$

13.50

Pre-provision, pre-goodwill

impairment, pre-tax net

revenue ("PPNR") (2)

$

155,962

$

163,376

$

(7,414

)

$

155,962

$

160,877

$

(4,915

)

Return on average assets

1.94

%

1.58

%

0.36

1.94

%

(21.27

)%

23.21

PPNR return on average

assets (2)

2.01

%

2.22

%

(0.21

)

2.01

%

2.39

%

(0.38

)

Return on average

tangible equity (2)

25.67

%

19.63

%

6.04

25.67

%

6.88

%

18.79

Yield on average loans and

leases (tax equivalent)

5.20

%

5.15

%

0.05

5.20

%

5.54

%

(0.34

)

Cost of average total

deposits

0.11

%

0.14

%

(0.03

)

0.11

%

0.59

%

(0.48

)

Net interest margin ("NIM")

(tax equivalent)

3.69

%

3.83

%

(0.14

)

3.69

%

4.31

%

(0.62

)

Efficiency ratio

46.4

%

43.6

%

2.8

46.4

%

40.6

%

5.8

Total assets

$

32,856,533

$

29,498,442

$

3,358,091

$

32,856,533

$

26,143,267

$

6,713,266

Loans and leases held

for investment,

net of deferred fees

$

18,979,228

$

19,083,377

$

(104,149

)

$

18,979,228

$

19,745,305

$

(766,077

)

Noninterest-bearing

demand deposits

$

11,017,462

$

9,193,827

$

1,823,635

$

11,017,462

$

7,510,218

$

3,507,244

Core deposits

$

25,576,348

$

22,264,480

$

3,311,868

$

25,576,348

$

16,050,522

$

9,525,826

Total deposits

$

28,223,291

$

24,940,717

$

3,282,574

$

28,223,291

$

19,575,837

$

8,647,454

As percentage of total

deposits:

Noninterest-bearing

demand deposits

39

%

37

%

2

39

%

38

%

1

Core deposits

91

%

89

%

2

91

%

82

%

9

Equity to assets ratio

11.12

%

12.19

%

(1.07

)

11.12

%

12.97

%

(1.85

)

Common equity tier 1

capital ratio

10.41

%

10.53

%

(0.12

)

10.41

%

9.22

%

1.19

Total capital ratio

13.63

%

13.76

%

(0.13

)

13.63

%

12.07

%

1.56

Tangible common equity

ratio (2)

7.68

%

8.78

%

(1.10

)

7.68

%

9.10

%

(1.42

)

Book value per share

$

30.68

$

30.36

$

0.32

$

30.68

$

28.75

$

1.93

Tangible book value per

share (2)

$

20.39

$

21.05

$

(0.66

)

$

20.39

$

19.31

$

1.08

(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 $2.1 million to $261.3 million for the first quarter of 2021 compared to $259.2 million for the fourth quarter of 2020 due mainly to higher income on investment securities and lower interest expense, partially offset by lower income on loans and leases and the negative impact on net interest income due to the change in the earning assets mix. The tax equivalent yield on average loans and leases was 5.20% for the first quarter of 2021 compared to 5.15% for the fourth quarter of 2020. The increase in the tax equivalent yield on average loans and leases was primarily due to higher loan discount accretion of $1.5 million and higher amortized loan fee income of $2.9 million mainly from higher PPP loan forgiveness in the first quarter of 2021 as compared to the fourth quarter of 2020.

The tax equivalent NIM was 3.69% for the first quarter of 2021 compared to 3.83% for the fourth quarter of 2020. The decrease in the NIM was primarily due to the change in the earning assets mix. The average balance of deposits in financial institutions increased by $1.2 billion, the average balance of investment securities increased by $494.1 million, and the average balance of loans and leases increased by $158.1 million in the first quarter of 2021. This excess liquidity had a negative impact on the first quarter tax equivalent NIM of 61 basis points.

The cost of average total deposits decreased to 0.11% in the first quarter of 2021 from 0.14% for the fourth quarter of 2020. The lower cost of average total deposits was due primarily to the repricing of maturing brokered time deposits and 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

March 31,

December 31,

Increase

Provision for Credit Losses

2021

2020

(Decrease)

(In thousands)

(Reduction in) addition to allowance for loan

and lease losses

$

(53,000

)

$

21,000

$

(74,000

)

Addition to (reduction in) reserve for

unfunded loan commitments

5,000

(11,000

)

16,000

Total provision for credit losses

$

(48,000

)

$

10,000

$

(58,000

)

The provision for credit losses decreased by $58.0 million to a benefit of $48.0 million for the first quarter of 2021 compared to a $10.0 million provision for the fourth quarter of 2020. This reduction reflected improvement in certain key macro-economic forecast variables and decreased provisions for individually evaluated loans and leases, partially offset by a higher provision for unfunded commitments which grew by $526.6 million.

NONINTEREST INCOME

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

Three Months Ended

March 31,

December 31,

Increase

Noninterest Income

2021

2020

(Decrease)

(In thousands)

Service charges on deposit accounts

$

2,934

$

3,119

$

(185

)

Other commissions and fees

9,158

9,974

(816

)

Leased equipment income

11,354

9,440

1,914

Gain on sale of loans and leases

139

1,671

(1,532

)

Gain on sale of securities

101

4

97

Other income:

Dividends and gains on equity investments

10,904

5,064

5,840

Warrant income

6,123

7,299

(1,176

)

Other

4,116

3,279

837

Total noninterest income

$

44,829

$

39,850

$

4,979

Noninterest income increased by $5.0 million to $44.8 million for the first quarter of 2021 compared to $39.9 million for the fourth quarter of 2020 due primarily to an increase of $5.8 million in dividends and gains on equity investments and a $1.9 million increase in leased equipment income, offset partially by decreases of $1.5 million in gain on sale of loans and leases and $1.2 million in warrant income. The increase in dividends and gains on equity investments was due primarily to a $10.1 million gain on one equity investment, offset partially by lower net fair value gains on equity investments still held. The increase in leased equipment income was due primarily to a higher average balance of equipment leased to others under operating leases. The decrease in the gain on sale of loans and leases resulted from the sales of $72.6 million of loans for gains of $0.1 million in the first quarter of 2021 compared to sales of $119.9 million for gains of $1.7 million in the fourth quarter of 2020. The decrease in warrant income was primarily attributable to lower gains from exercised warrants after record gains in the fourth quarter of 2020.

NONINTEREST EXPENSE

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

Three Months Ended

March 31,

December 31,

Increase

Noninterest Expense

2021

2020

(Decrease)

(In thousands)

Compensation

$

79,882

$

73,171

$

6,711

Occupancy

14,054

14,083

(29

)

Data processing

6,957

6,718

239

Other professional services

5,126

6,800

(1,674

)

Insurance and assessments

4,903

5,064

(161

)

Intangible asset amortization

3,079

3,172

(93

)

Leased equipment depreciation

8,969

7,501

1,468

Foreclosed assets (income) expense, net

1

(272

)

273

Acquisition, integration and reorganization costs

3,425

1,060

2,365

Customer related expense

4,818

4,430

388

Loan expense

3,193

3,926

(733

)

Other

15,729

10,029

5,700

Total operating expense

150,136

135,682

14,454

Goodwill impairment

-

-

-

Total noninterest expense

$

150,136

$

135,682

$

14,454

Noninterest expense increased by $14.5 million to $150.1 million for the first quarter of 2021 compared to $135.7 million for the fourth quarter of 2020 due primarily to increases of $6.7 million in compensation expense, $5.7 million in other expense, $2.4 million in acquisition, integration and reorganization costs, and $1.5 million in leased equipment depreciation, offset partially by a decrease of $1.7 million in other professional expense. The increase in compensation expense was mostly due to compensation expense related to the Civic operations, while, in total, Civic’s noninterest expenses added $10.8 million to total noninterest expense. The increase in other expense was largely due to a legal settlement in excess of amounts previously accrued. The increase in acquisition, integration and reorganization costs was due to 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 increase in leased equipment depreciation was due primarily to an increase in the average balance of equipment leased to others under operating leases. The decrease in other professional expense was due primarily to lower consulting expense.

INCOME TAXES

The effective income tax rate was 26.3% in the first quarter of 2021 compared to 23.8% for the fourth quarter of 2020. The increase was primarily due to higher pre-tax income in relation to discrete items for the quarter. The effective income tax rate for the full year 2021 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:

March 31, 2021

December 31, 2020

March 31, 2020

% of

% of

% of

Deposit Composition

Balance

Total

Balance

Total

Balance

Total

(Dollars in thousands)

Noninterest-bearing demand

$

11,017,462

39

%

$

9,193,827

37

%

$

7,510,218

38

%

Interest checking

6,862,398

25

%

5,974,910

24

%

3,333,147

17

%

Money market

7,112,610

25

%

6,532,917

26

%

4,712,118

24

%

Savings

583,878

2

%

562,826

2

%

495,039

3

%

Total core deposits

25,576,348

91

%

22,264,480

89

%

16,050,522

82

%

Non-core non-maturity deposits

1,162,590

4

%

1,149,467

5

%

836,157

4

%

Total non-maturity deposits

26,738,938

95

%

23,413,947

94

%

16,886,679

86

%

Time deposits $250,000 and under

940,340

3

%

994,197

4

%

2,086,188

11

%

Time deposits over $250,000

544,013

2

%

532,573

2

%

602,970

3

%

Total time deposits

1,484,353

5

%

1,526,770

6

%

2,689,158

14

%

Total deposits

$

28,223,291

100

%

$

24,940,717

100

%

$

19,575,837

100

%

At March 31, 2021, core deposits totaled $25.6 billion or 91% of total deposits, including $11.0 billion of noninterest-bearing demand deposits or 39% of total deposits. Core deposits increased by $3.3 billion or 15% in the first 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 March 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

Roll Forward of Loans and Leases Held

March 31,

December 31,

for Investment, Net of Deferred Fees (1)

2021

2020

(Dollars in thousands)

Balance, beginning of period

$

19,083,377

$

19,026,200

Additions:

Production

1,612,777

1,131,165

Disbursements

1,022,986

1,354,038

Total production and disbursements

2,635,763

2,485,203

Reductions:

Payoffs

(1,635,264

)

(1,330,321

)

Paydowns

(1,067,418

)

(957,075

)

Total payoffs and paydowns

(2,702,682

)

(2,287,396

)

Sales

(72,641

)

(119,931

)

Transfers to foreclosed assets

(647

)

(385

)

Charge-offs

(3,988

)

(20,314

)

Transfers to loans held for sale

(25,554

)

-

Total reductions

(2,805,512

)

(2,428,026

)

Loans acquired through Civic acquisition

65,600

-

Net increase (decrease)

(104,149

)

57,177

Balance, end of period

$

18,979,228

$

19,083,377

Weighted average rate on production (2)

4.36

%

4.41

%

(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 43 basis points to loan yields in 2021.

Loans and leases held for investment, net of deferred fees, decreased by $104.1 million in the first quarter of 2021 to $19.0 billion at March 31, 2021. The decrease in the loans and leases balance for the first quarter of 2021 was primarily due to a $123.5 million decrease in the security monitoring portfolio, for which new originations have been discontinued since the fourth quarter of 2019. The weighted average rate on first quarter of 2021 production decreased to 4.36% due to first quarter production including $381 million of PPP loans at a coupon rate of 1%, while the fourth quarter of 2020 included no PPP loan production. Excluding PPP loans, the weighted average rate on new production for the first quarter of 2021 was 5.39%.

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:

March 31, 2021

December 31, 2020

March 31, 2020

% of

% of

% of

Loan and Lease Portfolio

Balance

Total

Balance

Total

Balance

Total

(In thousands)

Real estate mortgage:

Commercial

$

3,941,610

21

%

$

4,096,671

21

%

$

4,220,649

21

%

Income producing and other

residential

4,045,603

21

%

3,803,265

20

%

3,788,295

19

%

Total real estate mortgage

7,987,213

42

%

7,899,936

41

%

8,008,944

40

%

Real estate construction and land:

Commercial

990,035

5

%

1,117,121

6

%

1,087,505

6

%

Residential

2,575,788

14

%

2,243,160

12

%

1,792,748

9

%

Total real estate construction

and land

3,565,823

19

%

3,360,281

18

%

2,880,253

15

%

Total real estate

11,553,036

61

%

11,260,217

59

%

10,889,197

55

%

Commercial:

Asset-based

3,383,403

18

%

3,429,283

18

%

3,938,402

20

%

Venture capital

1,495,798

8

%

1,698,508

9

%

2,715,837

14

%

Other commercial

2,206,639

11

%

2,375,114

12

%

1,771,985

9

%

Total commercial

7,085,840

37

%

7,502,905

39

%

8,426,224

43

%

Consumer

340,352

2

%

320,255

2

%

429,884

2

%

Total loans and leases held for

investment, net of deferred fees

$

18,979,228

100

%

$

19,083,377

100

%

$

19,745,305

100

%

Total unfunded loan commitments

$

8,127,999

$

7,601,390

$

7,697,724

ALLOWANCE FOR CREDIT LOSSES

The following tables present roll forwards of the allowance for credit losses for the periods indicated:

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

Three Months Ended December 31, 2020

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

$

345,966

$

96,571

$

442,537

Charge-offs

(20,314

)

-

(20,314

)

Recoveries

1,529

-

1,529

Net charge-offs

(18,785

)

-

(18,785

)

Provision

21,000

(11,000

)

10,000

Ending balance

$

348,181

$

85,571

$

433,752


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

March 31,

December 31,

Increase

Allowance for Credit Losses

2021

2020

(Decrease)

(Dollars in thousands)

Allowance for loan and lease losses

$

292,445

$

348,181

$

(55,736

)

Reserve for unfunded loan commitments

90,571

85,571

5,000

Allowance for credit losses

$

383,016

$

433,752

$

(50,736

)

Provision for credit losses (for the quarter)

$

(48,000

)

$

10,000

$

(58,000

)

Net charge-offs (for the quarter)

$

2,736

$

18,785

$

(16,049

)

Net charge-offs to average loans and leases

(for the quarter)

%

0.40

%

Allowance for loan and lease losses to loans

and leases held for investment

1.54

%

1.82

%

Allowance for loan and lease losses to loans

and leases held for investment, excluding PPP loans

1.63

%

1.93

%

Allowance for credit losses to loans and leases

held for investment

2.02

%

2.27

%

Allowance for credit losses to loans and leases

held for investment, excluding PPP loans

2.14

%

2.41

%

The allowance for credit losses decreased by $50.7 million in the first quarter of 2021 to $383.0 million at March 31, 2021. The decrease in the allowance for credit losses during the first quarter of 2021 was attributable to a provision for credit losses benefit of $48.0 million and $2.7 million in net charge-offs.

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.

Net charge-offs were $18.8 million for the fourth quarter of 2020. Gross charge-offs of $20.3 million were reduced by recoveries of $1.5 million. The most significant charge-off was $15.5 million related to a security monitoring loan.

Security monitoring loans decreased by 38% from $329.3 million as of December 31, 2020 to $205.8 million as of March 31, 2021, as the Company continues to actively reduce the remaining loans. As of March 31, 2021, $172.1 million or 84% of these security monitoring loans are performing and pass-rated, while $33.7 million are classified, of which $6.1 million are on nonaccrual.

CREDIT QUALITY

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

March 31,

December 31,

Increase

Credit Quality Metrics

2021

2020

(Decrease)

(Dollars in thousands)

NPAs and Performing TDRs:

Nonaccrual loans and leases held for investment (1)

$

67,652

$

91,163

$

(23,511

)

Accruing loans contractually past due 90 days or more

-

-

-

Foreclosed assets, net

14,298

14,027

271

Total nonperforming assets ("NPAs")

$

81,950

$

105,190

$

(23,240

)

Performing TDRs held for investment

$

27,999

$

14,254

$

13,745

Nonaccrual loans and leases held for investment

to loans and leases held for investment

0.36

%

0.48

%

Nonperforming assets to loans and leases

held for investment and foreclosed assets

0.43

%

0.55

%

Allowance for credit losses to nonaccrual loans

and leases held for investment

566.2

%

475.8

%

Loan and Lease Credit Risk Ratings:

Pass

$

18,183,114

$

18,096,830

$

86,284

Special mention

632,997

721,285

(88,288

)

Classified

163,117

265,262

(102,145

)

Total loans and leases held for investment,

net of deferred fees

$

18,979,228

$

19,083,377

$

(104,149

)

Classified loans and leases held for investment

to loans and leases held for investment

0.86

%

1.39

%

(1) Nonaccrual loans include guaranteed amounts of $18.4 million at March 31, 2021 and $13.9 million at December 31, 2020.

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 $265.7 million from their peak in the first quarter of 2020, while classified loans and leases have decreased $130.1 million from their peak in the second quarter of 2020, and each have continued their decline in the first quarter of 2021.

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:

March 31, 2021

December 31, 2020

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

$

46,436

$

5

$

43,731

$

3,636

$

2,705

$

(3,631

)

Income producing and other

residential

2,471

6,339

1,826

600

645

5,739

Total real estate mortgage

48,907

6,344

45,557

4,236

3,350

2,108

Real estate construction and land:

Commercial

302

-

315

-

(13

)

-

Residential

416

1,241

-

759

416

482

Total real estate

construction and land

718

1,241

315

759

403

482

Commercial:

Asset-based

2,379

-

2,679

-

(300

)

-

Venture capital

2,432

6,750

1,980

540

452

6,210

Other commercial

12,660

1,251

40,243

2,078

(27,583

)

(827

)

Total commercial

17,471

8,001

44,902

2,618

(27,431

)

5,383

Consumer

556

954

389

1,260

167

(306

)

Total held for investment

$

67,652

$

16,540

$

91,163

$

8,873

$

(23,511

)

$

7,667

During the first quarter of 2021, nonaccrual loans and leases decreased by $23.5 million due primarily to one security monitoring loan for $25.6 million being moved to held for sale at March 31, 2021. The sale of this loan was completed in early April 2021 and resulted in a gain of $1.4 million.

CAPITAL

The following table presents certain actual capital ratios and ratios excluding PPP loans:

March 31, 2021

Excluding

December 31,

PPP

2020

Actual (1)

Loans (1)

Actual

PacWest Bancorp Consolidated:

Tier 1 leverage capital ratio

7.95

%

8.25

%

(3

)

8.55

%

Common equity tier 1 capital ratio

10.41

%

10.41

%

10.53

%

Total capital ratio

13.63

%

13.63

%

13.76

%

Tangible common equity ratio (2)

7.68

%

7.95

%

(3

)

8.78

%

(1) Capital information for March 31, 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 $32 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 is adversely affecting 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 length of the COVID-19 pandemic and the severity of its impact on key macro-economic indicators such as unemployment and GDP 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

March 31,

December 31,

March 31,

2021

2020

2020

(Dollars in thousands, except per share data)

ASSETS:

Cash and due from banks

$

177,199

$

150,464

$

172,570

Interest-earning deposits in financial institutions

5,517,667

3,010,197

439,690

Total cash and cash equivalents

5,694,866

3,160,661

612,260

Securities available-for-sale, at estimated fair value

5,941,690

5,235,591

3,757,663

Federal Home Loan Bank stock, at cost

17,250

17,250

54,244

Total investment securities

5,958,940

5,252,841

3,811,907

Loans held for sale

25,554

-

-

Gross loans and leases held for investment

19,055,165

19,153,357

19,806,394

Deferred fees, net

(75,937

)

(69,980

)

(61,089

)

Total loans and leases held for investment,

net of deferred fees

18,979,228

19,083,377

19,745,305

Allowance for loan and lease losses

(292,445

)

(348,181

)

(221,292

)

Total loans and leases held for investment, net

18,686,783

18,735,196

19,524,013

Equipment leased to others under operating leases

327,413

333,846

306,530

Premises and equipment, net

39,622

39,234

39,799

Foreclosed assets, net

14,298

14,027

1,701

Goodwill

1,204,092

1,078,670

1,078,670

Core deposit and customer relationship intangibles, net

21,312

23,641

34,446

Other assets

883,653

860,326

733,941

Total assets

$

32,856,533

$

29,498,442

$

26,143,267

LIABILITIES:

Noninterest-bearing deposits

$

11,017,462

$

9,193,827

$

7,510,218

Interest-bearing deposits

17,205,829

15,746,890

12,065,619

Total deposits

28,223,291

24,940,717

19,575,837

Borrowings

19,750

5,000

2,295,000

Subordinated debentures

465,814

465,812

458,994

Accrued interest payable and other liabilities

493,541

491,962

423,047

Total liabilities

29,202,396

25,903,491

22,752,878

STOCKHOLDERS' EQUITY (1)

3,654,137

3,594,951

3,390,389

Total liabilities and stockholders’ equity

$

32,856,533

$

29,498,442

$

26,143,267

Book value per share

$

30.68

$

30.36

$

28.75

Tangible book value per share (2)

$

20.39

$

21.05

$

19.31

Shares outstanding

119,105,642

118,414,853

117,916,789

(1) Includes net unrealized gain on securities

available-for-sale, net

$

106,381

$

172,523

$

90,916

(2) Non-GAAP measure.



PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS)

Three Months Ended

March 31,

December 31,

March 31,

2021

2020

2020

(Dollars in thousands, except per share data)

Interest income:

Loans and leases

$

241,544

$

242,198

$

262,278

Investment securities

30,265

28,843

27,446

Deposits in financial institutions

1,528

1,135

1,608

Total interest income

273,337

272,176

291,332

Interest expense:

Deposits

7,500

8,454

28,247

Borrowings

193

37

6,778

Subordinated debentures

4,375

4,477

6,560

Total interest expense

12,068

12,968

41,585

Net interest income

261,269

259,208

249,747

Provision for credit losses

(48,000

)

10,000

112,000

Net interest income after provision

for credit losses

309,269

249,208

137,747

Noninterest income:

Service charges on deposit accounts

2,934

3,119

2,658

Other commissions and fees

9,158

9,974

9,721

Leased equipment income

11,354

9,440

12,251

Gain on sale of loans and leases

139

1,671

87

Gain on sale of securities

101

4

182

Other income

21,143

15,642

4,201

Total noninterest income

44,829

39,850

29,100

Noninterest expense:

Compensation

79,882

73,171

61,282

Occupancy

14,054

14,083

14,207

Data processing

6,957

6,718

6,454

Other professional services

5,126

6,800

4,258

Insurance and assessments

4,903

5,064

4,249

Intangible asset amortization

3,079

3,172

3,948

Leased equipment depreciation

8,969

7,501

7,205

Foreclosed assets (income) expense, net

1

(272

)

66

Acquisition, integration and

reorganization costs

3,425

1,060

-

Customer related expense

4,818

4,430

3,932

Loan expense

3,193

3,926

2,650

Goodwill impairment

-

-

1,470,000

Other expense

15,729

10,029

9,719

Total noninterest expense

150,136

135,682

1,587,970

Earnings (loss) before income taxes

203,962

153,376

(1,421,123

)

Income tax expense

53,556

36,546

11,988

Net earnings (loss)

$

150,406

$

116,830

$

(1,433,111

)

Basic and diluted earnings (loss) per share

$

1.27

$

0.99

$

(12.23

)

Dividends declared and paid per share

$

0.25

$

0.25

$

0.60



PACWEST BANCORP AND SUBSIDIARIES

NET EARNINGS (LOSS) PER SHARE CALCULATIONS

Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

(In thousands, except per share data)

Basic Earnings (Loss) Per Share:

Net earnings (loss)

$

150,406

$

116,830

$

45,503

$

33,204

$

(1,433,111

)

Less: earnings allocated to

unvested restricted stock (1)

(2,355

)

(1,398

)

(578

)

(362

)

(939

)

Net earnings (loss) allocated to

common shares

$

148,051

$

115,432

$

44,925

$

32,842

$

(1,434,050

)

Weighted-average basic shares

and unvested restricted stock

outstanding

118,852

118,446

118,438

118,192

118,775

Less: weighted-average unvested

restricted stock outstanding

(2,003

)

(1,652

)

(1,684

)

(1,606

)

(1,495

)

Weighted-average basic shares

outstanding

116,849

116,794

116,754

116,586

117,280

Basic earnings (loss) per share

$

1.27

$

0.99

$

0.38

$

0.28

$

(12.23

)

Diluted Earnings (Loss) Per Share:

Net earnings (loss) allocated to

common shares

$

148,051

$

115,432

$

44,925

$

32,842

$

(1,434,050

)

Weighted-average diluted shares

outstanding

116,849

116,794

116,754

116,586

117,280

Diluted earnings (loss) per share

$

1.27

$

0.99

$

0.38

$

0.28

$

(12.23

)

(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

March 31, 2021

December 31, 2020

March 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)

$

18,927,314

$

242,846

5.20

%

$

18,769,214

$

243,188

5.15

%

$

19,065,035

$

262,764

5.54

%

Investment securities (3)

5,383,140

32,329

2.44

%

4,888,993

30,757

2.50

%

3,853,217

28,641

2.99

%

Deposits in financial

institutions

4,790,231

1,528

0.13

%

3,576,335

1,135

0.13

%

537,384

1,608

1.20

%

Total interest-earning

assets (1)

29,100,685

276,703

3.86

%

27,234,542

275,080

4.02

%

23,455,636

293,013

5.02

%

Other assets

2,315,197

2,100,247

3,643,404

Total assets

$

31,415,882

$

29,334,789

$

27,099,040

Liabilities and

Stockholders' Equity:

Interest checking

$

6,401,869

2,232

0.14

%

$

5,191,435

2,064

0.16

%

$

3,466,812

7,135

0.83

%

Money market

7,975,996

3,278

0.17

%

7,636,220

3,225

0.17

%

5,247,866

10,016

0.77

%

Savings

572,959

35

0.02

%

567,646

35

0.02

%

497,959

160

0.13

%

Time

1,493,267

1,955

0.53

%

1,650,150

3,130

0.75

%

2,684,143

10,936

1.64

%

Total interest-bearing

deposits

16,444,091

7,500

0.18

%

15,045,451

8,454

0.22

%

11,896,780

28,247

0.95

%

Borrowings

226,053

193

0.35

%

237,098

37

0.06

%

2,026,749

6,778

1.35

%

Subordinated debentures

466,101

4,375

3.81

%

463,951

4,477

3.84

%

458,399

6,560

5.76

%

Total interest-bearing

liabilities

17,136,245

12,068

0.29

%

15,746,500

12,968

0.33

%

14,381,928

41,585

1.16

%

Noninterest-bearing

demand deposits

10,173,459

9,589,789

7,357,717

Discontinued operations

-

-

1,583

Total other liabilities

488,930

462,075

401,034

Other liabilities

488,930

462,075

402,617

Total liabilities

27,798,634

25,798,364

22,142,262

Stockholders' equity

3,617,248

3,536,425

4,956,778

Total liabilities and

stockholders' equity

$

31,415,882

$

29,334,789

$

27,099,040

Net interest income (1)

$

264,635

$

262,112

$

251,428

Net interest spread (1)

3.57

%

3.69

%

3.86

%

Net interest margin (1)

3.69

%

3.83

%

4.31

%

Total deposits (4)

$

26,617,550

$

7,500

0.11

%

$

24,635,240

$

8,454

0.14

%

$

19,254,497

$

28,247

0.59

%

(1) Tax equivalent.

(2) Includes discount accretion on acquired loans of $5.4 million, $3.8 million, and $4.8 million for the three months ended March 31, 2021,

December 31, 2020, and March 31, 2020, respectively.

(3) Includes tax-equivalent adjustments of $2.1 million, $1.9 million, and $1.2 million for the three months ended March 31, 2021,

December 31, 2020, and March 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

March 31,

December 31,

September 30,

June 30,

March 31,

2021

2020

2020

2020

2020

(Dollars in thousands, except per share data)

ASSETS:

Cash and due from banks

$

177,199

$

150,464

$

187,176

$

174,059

$

172,570

Interest-earning deposits in financial

institutions

5,517,667

3,010,197

2,766,020

1,747,077

439,690

Total cash and cash equivalents

5,694,866

3,160,661

2,953,196

1,921,136

612,260

Securities available-for-sale

5,941,690

5,235,591

4,532,614

3,851,141

3,757,663

Federal Home Loan Bank stock

17,250

17,250

17,250

17,250

54,244

Total investment securities

5,958,940

5,252,841

4,549,864

3,868,391

3,811,907

Loans held for sale

25,554

-

-

-

-

Gross loans and leases held for investment

19,055,165

19,153,357

19,101,680

19,780,476

19,806,394

Deferred fees, net

(75,937

)

(69,980

)

(75,480

)

(85,845

)

(61,089

)

Total loans and leases held for

investment, net of deferred fees

18,979,228

19,083,377

19,026,200

19,694,631

19,745,305

Allowance for loan and lease losses

(292,445

)

(348,181

)

(345,966

)

(301,050

)

(221,292

)

Total loans and leases held for

investment, net

18,686,783

18,735,196

18,680,234

19,393,581

19,524,013

Equipment leased to others under

operating leases

327,413

333,846

286,425

295,191

-

306,530

Premises and equipment, net

39,622

39,234

40,544

42,299

39,799

Foreclosed assets, net

14,298

14,027

13,747

1,449

1,701

Goodwill

1,204,092

1,078,670

1,078,670

1,078,670

1,078,670

Core deposit and customer relationship

intangibles, net

21,312

23,641

26,813

30,564

34,446

Other assets

883,653

860,326

797,223

734,457

733,941

Total assets

$

32,856,533

$

29,498,442

$

28,426,716

$

27,365,738

$

26,143,267

LIABILITIES:

Noninterest-bearing deposits

$

11,017,462

$

9,193,827

$

9,346,744

$

8,629,543

$

7,510,218

Interest-bearing deposits

17,205,829

15,746,890

14,618,951

14,299,036

12,065,619

Total deposits

28,223,291

24,940,717

23,965,695

22,928,579

19,575,837

Borrowings

19,750

5,000

60,000

60,000

2,295,000

Subordinated debentures

465,814

465,812

463,282

460,772

458,994

Accrued interest payable and other

liabilities

493,541

491,962

451,508

463,489

423,047

Total liabilities

29,202,396

25,903,491

24,940,485

23,912,840

22,752,878

STOCKHOLDERS' EQUITY (1)

3,654,137

3,594,951

3,486,231

3,452,898

3,390,389

Total liabilities and stockholders’

equity

$

32,856,533

$

29,498,442

$

28,426,716

$

27,365,738

$

26,143,267

Book value per share

$

30.68

$

30.36

$

29.42

$

29.17

$

28.75

Tangible book value per share (2)

$

20.39

$

21.05

$

20.09

$

19.80

$

19.31

Shares outstanding

119,105,642

118,414,853

118,489,927

118,374,603

117,916,789

(1) Includes net unrealized gain on

securities available-for-sale, net

$

106,381

$

172,523

$

155,474

$

145,038

$

90,916

(2) Non-GAAP measure.



PACWEST BANCORP AND SUBSIDIARIES