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Section 1: 8-K (FORM 8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest
event reported) October 16, 2019

 

PacWest Bancorp

(Exact name of registrant as specified in its charter)

 

 

Delaware   001-36408   33-0885320
(State of   (Commission File Number)   (IRS Employer
Incorporation)       Identification No.)

 

9701 Wilshire Blvd., Suite 700, Beverly Hills, California 90212

(Address of principal executive offices and zip code)

 

(310) 887-8500

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Common Stock, par value $0.01 per share   PACW   The Nasdaq Stock Market, LLC
(Title of Each Class)   (Trading Symbol)   (Name of Exchange on Which Registered)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230-425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

 

 

 

 

Item 2.02 Results of Operations and Financial Condition.*

 

On October 16, 2019, PacWest Bancorp announced its results of operations and financial condition for the three and nine months ended September 30, 2019. The press release announcing the financial results for the three and nine months ended September 30, 2019 is furnished as Exhibit 99.1 and incorporated herein by reference. A presentation regarding the Company’s financial results for the three and nine months ended September 30, 2019 is furnished as Exhibit 99.2 and incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.*

 

(d) Exhibits.

 

Exhibit

Number

  Description
99.1   Press release dated October 16, 2019 announcing PacWest’s results of operations and financial condition for the three and nine months ended September 30, 2019.
99.2   Earnings Release Presentation
104   Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

*The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of PacWest Bancorp under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

 

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  PacWest Bancorp
   
  By: /s/ Bart R. Olson
  Name:   Bart R. Olson
  Title: Executive Vice President Chief Accounting Officer 

 

Date: October 16, 2019

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

PRESS RELEASE  
                      
PacWest Bancorp  
(Nasdaq: PACW)              
   
Contact: Matthew P. Wagner Patrick J. Rusnak
  President and CEO Executive Vice President and CFO
Phone: 310-887-8520 714-989-4705
     
FOR IMMEDIATE RELEASE             October 16, 2019

 

 

PACWEST BANCORP ANNOUNCES RESULTS

FOR THE THIRD QUARTER 2019

 

Highlights

 

·Net Earnings of $110.0 Million, or $0.92 Per Diluted Share
·Loan and Lease Production of $1.2 Billion; $263 Million of Net Loan Growth
·Core Deposits Growth of $854 million; Represent 84% of Total Deposits
·Net Charge-offs to Average Loans of 10 basis points in Third Quarter; 12 basis points Year-To-Date

 

Los Angeles, California . . . PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the third quarter of 2019 of $110.0 million, or $0.92 per diluted share, compared to net earnings for the second quarter of 2019 of $128.1 million, or $1.07 per diluted share. The decrease in net earnings in the third quarter of 2019 was due primarily to a $22.2 million pre-tax gain on the sale of securities in the second quarter of 2019 that contributed $0.13 per diluted share.

 

Matt Wagner, President and CEO, commented, “We had a solid quarter highlighted by very strong core deposits growth, another quarter of consistent loan production from all of our business groups, and the continuation of our trend of lower credit costs. Our third quarter of 2019 results produced a return on assets of 1.65% and a return on tangible equity of 19.01%.”

 

Mr. Wagner continued, “In a very competitive market, we achieved our largest core deposit growth quarter ever with growth of $854 million in the third quarter. Core deposits generation, with an emphasis on noninterest-bearing deposits, remains a priority in this declining-rate environment. We achieved solid loan and lease production of $1.2 billion in the third quarter bringing our net loan growth to $778 million, or 6% annualized, for the first nine months of 2019.”

 

Page 1

 

 

FINANCIAL HIGHLIGHTS

 

   At or For the       At or For the     
   Three Months Ended       Nine Months Ended     
   September 30,   June 30,   Increase   September 30,   Increase 
Financial Highlights  2019   2019   (Decrease)   2019   2018   (Decrease) 
   (Dollars in thousands, except per share data) 
Net earnings  $110,026   $128,125   $(18,099)  $350,755   $350,298   $457 
Diluted earnings per share  $0.92   $1.07   $(0.15)  $2.91   $2.79   $0.12 
Return on average assets   1.65%   1.99%   (0.34)   1.80%   1.94%   (0.14)
Return on average tangible equity (1)   19.01%   23.15%   (4.14)   20.90%   21.22%   (0.32)
                               
Net interest margin ("NIM") (tax equivalent)   4.46%   4.72%   (0.26)   4.62%   5.09%   (0.47)
Yield on average loans and leases (tax equivalent)   5.91%   6.26%   (0.35)   6.11%   6.20%   (0.09)
Cost of average total deposits   0.83%   0.81%   0.02    0.79%   0.38%   0.41 
Efficiency ratio   42.3%   41.6%   0.7    42.1%   40.8%   1.3 
                               
Total assets  $26,724,627   $26,344,414   $380,213   $26,724,627   $24,782,126   $1,942,501 
Loans and leases held for investment, net of deferred fees  $18,735,543   $18,472,852   $262,691   $18,735,543   $17,230,146   $1,505,397 
Noninterest-bearing demand deposits  $7,441,185   $7,299,213   $141,972   $7,441,185   $7,834,480   $(393,295)
Core deposits  $16,471,264   $15,617,488   $853,776   $16,471,264   $15,512,742   $958,522 
Total deposits  $19,733,203   $18,805,756   $927,447   $19,733,203   $17,879,543   $1,853,660 
                               
As percentage of total deposits:                              
Noninterest-bearing demand deposits   38%   39%   (1)   38%   44%   (6)
Core deposits   84%   83%   1    84%   87%   (3)
                               
Equity to assets ratio   18.41%   18.42%   (0.01)   18.41%   19.13%   (0.72)
Tangible common equity ratio (1)   9.65%   9.50%   0.15    9.65%   9.61%   0.04 
Book value per share  $41.06   $40.49   $0.57   $41.06   $38.46   $2.60 
Tangible book value per share (1)  $19.43   $18.83   $0.60   $19.43   $17.28   $2.15 

 

 

(1) Non-GAAP measure.

 

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INCOME STATEMENT HIGHLIGHTS

 

Net Interest Income

 

Net interest income decreased by $8.7 million to $252.2 million for the third quarter of 2019 compared to $260.9 million for the second quarter of 2019 due mainly to a lower yield on average loans and leases, offset partially by a higher balance of average loans and leases and one more day in the third quarter of 2019. The tax equivalent yield on average loans and leases was 5.91% for the third quarter of 2019 compared to 6.26% for the second quarter of 2019. The decrease in the yield on average loans and leases was due principally to the repricing of variable-rate loans causing lower coupon interest in addition to lower loan prepayment fees in the third quarter compared to the second quarter. The prepayment fees added five basis points to the third quarter loan and lease yield and 14 basis points to the second quarter loan and lease yield.

 

The tax equivalent NIM was 4.46% for the third quarter of 2019 compared to 4.72% for the second quarter of 2019. The decrease in the NIM was due mainly to lower coupon interest, lower loan prepayment fees, and lower loan fee income.

 

The cost of average total deposits increased to 0.83% for the third quarter of 2019 from 0.81% for the second quarter of 2019 due to a higher average balance of core interest-bearing deposits combined with a lower average balance of noninterest-bearing deposits. The cost of average interest-bearing deposits declined by one basis point in the third quarter and the cost of average total deposits for the month of September was 0.80%, reflecting actions taken to reduce certain deposit rates in light of the fed funds target rate cuts during the third quarter.

 

Provision for Credit Losses

 

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

   Three Months Ended     
   September 30,   June 30,   Increase 
Provision for Credit Losses  2019   2019   (Decrease) 
   (In thousands) 
Addition to allowance for loan and lease losses  $8,000   $10,000   $(2,000)
Reduction to reserve for unfunded loan commitments   (1,000)   (2,000)   1,000 
Total provision for credit losses  $7,000   $8,000   $(1,000)

 

Page 3

 

 

Noninterest Income

 

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

 

   Three Months Ended     
   September 30,   June 30,   Increase 
Noninterest Income  2019   2019   (Decrease) 
   (In thousands) 
Service charges on deposit accounts  $3,525   $3,771   $(246)
Other commissions and fees   10,855    11,590    (735)
Leased equipment income   9,615    9,182    433 
Gain on sale of loans and leases   765    326    439 
Gain on sale of securities   908    22,192    (21,284)
Other income:               
Dividends and gains (losses) on equity investments   14    (83)   97 
Warrant income   3,936    1,214    2,722 
Other   3,811    2,701    1,110 
Total noninterest income  $33,429   $50,893   $(17,464)

 

Noninterest income decreased by $17.5 million to $33.4 million for the third quarter of 2019 compared to $50.9 million for the second quarter of 2019 due primarily to a $21.3 million decrease in the gain on sale of securities attributable to a $0.9 million net gain on sales of $143 million in the third quarter of 2019 compared to a $22.2 million net gain on sales of $980 million in the second quarter of 2019. We re-positioned a portion of our securities portfolio in the second quarter to shorten the duration of the portfolio and to enhance liquidity. Partially offsetting the decrease in the gain on sale of securities was a $2.7 million increase in warrant income and a $1.1 million increase in other income for the third quarter of 2019. The increase in warrant income was due to higher gains resulting from exercised warrants. The increase in other income was mainly due to higher gains from lease terminations.

 

Noninterest Expense

 

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

 

   Three Months Ended     
   September 30,   June 30,   Increase 
Noninterest Expense  2019   2019   (Decrease) 
   (In thousands) 
Compensation  $71,424   $68,956   $2,468 
Occupancy   14,089    14,457    (368)
Data processing   7,044    6,817    227 
Other professional services   4,400    4,629    (229)
Insurance and assessments   4,100    4,098    2 
Intangible asset amortization   4,833    4,870    (37)
Leased equipment depreciation   5,951    5,558    393 
Foreclosed assets expense (income), net   8    (146)   154 
Loan expense   3,628    3,451    177 
Other   11,332    12,737    (1,405)
Total noninterest expense  $126,809   $125,427   $1,382 

 

Page 4

 

 

 

Noninterest expense increased by $1.4 million to $126.8 million for the third quarter of 2019 compared to $125.4 million for the second quarter of 2019 attributable primarily to a $2.5 million increase in compensation expense, offset partially by a $1.4 million decrease in other expense. Compensation expense increased due mainly to higher incentives expense and higher stock compensation expense, partially offset by lower payroll taxes and benefits expense. Other expense decreased primarily due to lower business development expense and a loss on the early termination of an office lease in the second quarter.

 

Income Taxes

 

The overall effective income tax rate was 27.5% for the third quarter of 2019 and 28.2% for the second quarter of 2019. The effective tax rate for the full year 2019 is estimated to be in the range of 27-28%.

 

BALANCE SHEET HIGHLIGHTS

 

Loans and Leases

 

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

 

   Three Months Ended   Nine Months Ended 
Roll Forward of Loans and Leases Held  September 30,   June 30,   September 30, 
for Investment, Net of Deferred Fees (1)  2019   2019   2019 
   (Dollars in thousands) 
Balance, beginning of period  $18,472,852   $18,307,697   $17,957,713 
Additions:               
Production   1,230,817    1,436,299    3,841,954 
Disbursements   1,288,111    1,293,747    3,774,830 
Total production and disbursements   2,518,928    2,730,046    7,616,784 
Reductions:               
Payoffs   (1,390,883)   (1,529,213)   (3,853,396)
Paydowns   (837,551)   (979,987)   (2,856,502)
Total payoffs and paydowns   (2,228,434)   (2,509,200)   (6,709,898)
Sales   (21,302)   (38,054)   (76,292)
Transfers to foreclosed assets   -    -    (37)
Charge-offs   (6,501)   (17,637)   (27,603)
Transfers to loans held for sale   -    -    (25,124)
Total reductions   (2,256,237)   (2,564,891)   (6,838,954)
Net increase   262,691    165,155    777,830 
Balance, end of period  $18,735,543   $18,472,852   $18,735,543 
                
Weighted average rate on production (2)   5.45%   5.15%   5.21%

 

 

 

(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 30 basis points to loan yields in 2019 and 31 basis points to loan yields in 2018.

 

Loans and leases held for investment, net of deferred fees, increased by $262.7 million, or 6% annualized, in the third quarter of 2019 to $18.7 billion at September 30, 2019. The net loan growth in the third quarter was primarily from the asset-based loan portfolio class and residential real estate construction loan portfolio class.

 

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

 

   September 30, 2019   June 30, 2019   September 30, 2018 
       % of       % of       % of 
Loan and Lease Portfolio  Amount   Total   Amount   Total   Amount   Total 
   (In thousands) 
Real estate mortgage:                              
Commercial  $4,300,566    23%  $4,435,274    24%  $4,932,823    28%
Income producing and other residential       3,596,358           19  %        3,640,752           20  %        2,745,837           16  %
Total real estate mortgage   7,896,924    42%   8,076,026    44%   7,678,660    44%
Real estate construction and land:                              
Commercial   1,009,362    6%   972,891    5%   854,346    5%
Residential   1,542,112    8%   1,403,239    8%   1,146,611    7%
Total real estate construction and land        2,551,474           14  %        2,376,130           13  %        2,000,957           12  %
Total real estate   10,448,398    56%   10,452,156    57%   9,679,617    56%
Commercial:                              
Asset-based   3,810,741    20%   3,606,007    19%   3,222,311    19%
Venture capital   2,209,649    12%   2,194,743    12%   2,031,895    12%
Other commercial   1,858,167    10%   1,773,564    10%   1,897,852    11%
Total commercial   7,878,557    42%   7,574,314    41%   7,152,058    42%
Consumer   408,588    2%   446,382    2%   398,471    2%
Total loans and leases held for investment, net of deferred fees     $ 18,735,543           100  %     $  18,472,852           100  %     $  17,230,146           100  %
                               
Total unfunded loan commitments  $7,790,796        $7,610,899        $7,055,833      

 

Allowance for Credit Losses

 

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

 

   Three Months Ended September 30, 2019 
   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  $135,037   $34,861   $169,898 
Charge-offs   (6,501)   -    (6,501)
Recoveries   2,016    -    2,016 
Net charge-offs   (4,485)   -    (4,485)
Provision   8,000    (1,000)   7,000 
Ending balance  $138,552   $33,861   $172,413 

 

   Three Months Ended June 30, 2019 
   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  $136,281   $36,861   $173,142 
Charge-offs   (17,637)   -    (17,637)
Recoveries   6,393    -    6,393 
Net charge-offs   (11,244)   -    (11,244)
Provision   10,000    (2,000)   8,000 
Ending balance  $135,037   $34,861   $169,898 

 

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The allowance for credit losses as a percentage of loans and leases held for investment was 0.92% at both September 30, 2019 and June 30, 2019.

 

Gross charge-offs for the third quarter of 2019 were $6.5 million and included $4.4 million for venture capital loans and $1.7 million for other commercial loans compared to gross charge-offs for the second quarter of 2019 of $17.6 million that included $11.8 million for a single asset-based loan, $3.7 million for other commercial loans, and $1.5 million for venture capital loans.

 

Recoveries for the third quarter of 2019 were $2.0 million and included $1.2 million for other commercial loans and $0.4 million for venture capital loans compared to recoveries for the second quarter of 2019 of $6.4 million that included $4.8 million for venture capital loans and $1.0 million for other commercial loans.

 

For the third quarter of 2019 and second quarter of 2019, annualized net charge-offs to average loans and leases were 0.10% and 0.25%.

 

Deposits and Client Investment Funds

 

The following table presents the composition of our deposit portfolio as of the dates indicated:

 

   September 30, 2019   June 30, 2019   September 30, 2018 
       % of       % of       % of 
Deposit Composition  Amount   Total   Amount   Total   Amount   Total 
   (Dollars in thousands) 
Noninterest-bearing demand  $7,441,185    38%  $7,299,213    39%  $7,834,480    44%
Interest checking   3,645,660    18%   3,220,353    17%   2,277,537    13%
Money market   4,870,344    25%   4,578,083    24%   4,782,724    27%
Savings   514,075    3%   519,839    3%   618,001    3%
Total core deposits   16,471,264    84%   15,617,488    83%   15,512,742    87%
Non-core non-maturity deposits   479,732    2%   436,833    2%   483,528    3%
Total non-maturity deposits   16,950,996    86%   16,054,321    85%   15,996,270    90%
Time deposits $250,000 and under   2,282,976    12%   2,284,023    12%   1,509,214    8%
Time deposits over $250,000   499,231    2%   467,412    3%   374,059    2%
Total time deposits   2,782,207    14%   2,751,435    15%   1,883,273    10%
Total deposits  $19,733,203    100%  $18,805,756    100%  $17,879,543    100%

 

At September 30, 2019, core deposits totaled $16.5 billion, or 84% of total deposits, including $7.4 billion of noninterest-bearing demand deposits, or 38% of total deposits. The $854 million increase in core deposits for the third quarter of 2019 included strong growth in both our Venture Banking and Community Banking groups.

 

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives 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 September 30, 2019 were $1.8 billion, of which $1.5 billion was managed by PWAM.

 

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CREDIT QUALITY

 

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

 

   September 30,   June 30,   Increase 
Credit Quality Metrics  2019   2019   (Decrease) 
   (Dollars in thousands) 
NPAs and Performing TDRs:               
Nonaccrual loans and leases held for investment (1)  $99,113   $81,265   $17,848 
Accruing loans contractually past due 90 days or more   -    -    - 
Foreclosed assets, net   1,366    1,472    (106)
Total nonperforming assets ("NPAs")  $100,479   $82,737   $17,742 
                
Nonaccrual loans and leases held for investment to loans and leases held for investment   0.53%   0.44%     
Nonperforming assets to loans and leases held for investment and foreclosed assets   0.54%   0.45%     
                
Nonaccrual loans and leases held for investment (1)  $99,113   $81,265   $17,848 
Performing TDRs held for investment   16,329    16,464    (135)
Total impaired loans and leases  $115,442   $97,729   $17,713 
                
Loan and Lease Credit Risk Ratings:               
Pass  $18,279,011   $18,042,569   $236,442 
Special mention   267,925    239,304    28,621 
Classified   188,607    190,979    (2,372)
Total loans and leases held for investment, net of deferred fees  $18,735,543   $18,472,852   $262,691 
                
Classified loans and leases held for investment to loans and leases held for investment   1.01%   1.03%     
                
Allowance for Credit Losses:               
Allowance for credit losses  $172,413   $169,898   $2,515 
Provision for credit losses (for the quarter)  $7,000   $8,000   $(1,000)
Net charge-offs (for the quarter)  $4,485   $11,244   $(6,759)
Net charge-offs to average loans and leases (for the quarter)   0.10%   0.25%     
Allowance for credit losses to loans and leases held for investment   0.92%   0.92%     
Allowance for credit losses to nonaccrual loans and leases held for investment   174.0%   209.1%     

 

 

(1) Nonaccrual loans include guaranteed amounts of $15.4 million at September 30, 2019 and $13.0 million at June 30, 2019.

 

Page 8

 

 

Nonaccrual, classified, and special mention loans and leases fluctuate from period to period as a result of loan repayments and our ongoing active portfolio monitoring.

 

During the third quarter of 2019, nonaccrual loans and leases increased by $17.8 million, while classified loans and leases decreased by $2.4 million and special mention loans and leases increased by $28.6 million. The increase in nonaccrual loans was primarily attributable to one previously classified $14.9 million security monitoring commercial loan. The increase in special mention loans and leases was due primarily to the downgrade of two security monitoring commercial loans totaling $49 million, partially offset by a net decrease from other activity.

 

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:

 

   Nonaccrual Loans and Leases   Accruing and 
   September 30, 2019   June 30, 2019   30-89 Days Past Due 
       % of       % of   September 30,   June 30, 
       Loan       Loan   2019   2019 
   Amount   Category   Amount   Category   Amount   Amount 
   (Dollars in thousands) 
Real estate mortgage:                              
Commercial  $19,515    0.5%  $17,012    0.4%  $-   $3,948 
Income producing and other residential   2,868    0.1%   2,883    0.1%   3,750    3,262 
Total real estate mortgage   22,383    0.3%   19,895    0.2%   3,750    7,210 
Real estate construction and land:                              
Commercial   377    0.0%   390    0.0%   -    - 
Residential   -    0.0%   -    0.0%   2,622    4,672 
Total real estate construction and land   377    0.0%   390    0.0%   2,622    4,672 
Commercial:                              
Asset-based   33,015    0.9%   32,236    0.9%   48    12,382 
Venture capital   20,131    0.9%   22,501    1.0%   -    - 
Other commercial   22,554    1.2%   5,799    0.3%   4,068    439 
Total commercial   75,700    1.0%   60,536    0.8%   4,116    12,821 
Consumer   653    0.2%   444    0.1%   795    964 
Total held for investment  $99,113    0.5%  $81,265    0.4%  $11,283   $25,667 

 

Page 9

 

 

STOCK REPURCHASE PROGRAM

 

During the third quarter of 2019, there were no stock repurchases. At September 30, 2019, the remaining amount that could be used to repurchase shares under the $225 million Stock Repurchase Program was $124.7 million.

 

ABOUT PACWEST BANCORP

 

PacWest Bancorp (“PacWest”) is a bank holding company with over $26 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 full-service branches located throughout the state of California and one branch in Durham, North Carolina. Our Community Banking group provides lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices. We offer additional products and services through our National Lending and Venture Banking groups. National Lending provides asset-based, equipment, real estate and security monitoring cash flow loans and treasury management services to established middle-market businesses on a national basis. Venture Banking offers a comprehensive suite of financial services focused on entrepreneurial 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, visit www.pacwestbancorp.com, or to learn more about 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. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on information available at the time of this 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. Actual results may differ materially from those set forth in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the 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.

 

Page 10

 

 

 

PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

 

   September 30,   June 30,   December 31, 
   2019   2019   2018 
   (Dollars in thousands, except per share data) 
ASSETS:            
Cash and due from banks  $252,596   $185,075   $175,830 
Interest-earning deposits in financial institutions   483,405    422,663    209,937 
Total cash and cash equivalents   736,001    607,738    385,767 
                
Securities available-for-sale, at estimated fair value   3,817,348    3,807,244    4,009,431 
Federal Home Loan Bank stock, at cost   26,865    43,146    32,103 
Total investment securities   3,844,213    3,850,390    4,041,534 
                
Loans held for sale   -    -    - 
                
Gross loans and leases held for investment   18,796,011    18,532,740    18,026,365 
Deferred fees, net   (60,468)   (59,888)   (68,652)
Total loans and leases held for investment, net of deferred fees   18,735,543    18,472,852    17,957,713 
Allowance for loan and lease losses   (138,552)   (135,037)   (132,472)
Total loans and leases held for investment, net   18,596,991    18,337,815    17,825,241 
                
Equipment leased to others under operating leases   295,854    300,668    292,677 
Premises and equipment, net   37,926    38,162    34,661 
Foreclosed assets, net   1,366    1,472    5,299 
Deferred tax asset, net   -    -    17,489 
Goodwill   2,548,670    2,548,670    2,548,670 
Core deposit and customer relationship intangibles, net   42,547    47,380    57,120 
Other assets   621,059    612,119    522,896 
Total assets  $26,724,627   $26,344,414   $25,731,354 
                
LIABILITIES:               
Noninterest-bearing deposits  $7,441,185   $7,299,213   $7,888,915 
Interest-bearing deposits   12,292,018    11,506,543    10,981,586 
Total deposits   19,733,203    18,805,756    18,870,501 
Borrowings   1,253,031    1,913,059    1,371,114 
Subordinated debentures   456,145    456,112    453,846 
Accrued interest payable and other liabilities   362,140    317,477    210,305 
Total liabilities   21,804,519    21,492,404    20,905,766 
STOCKHOLDERS' EQUITY (1)   4,920,108    4,852,010    4,825,588 
Total liabilities and stockholders’ equity  $26,724,627   $26,344,414   $25,731,354 
                
Book value per share  $41.06   $40.49   $39.17 
Tangible book value per share (2)  $19.43   $18.83   $18.02 
Shares outstanding   119,831,192    119,829,104    123,189,833 

 

 

               
(1) Includes net unrealized gain (loss) on securities available-for-sale, net  $95,887   $73,066   $(6,075)
(2) Non-GAAP measure.               

 

Page 11

 

 

PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS              

 

   Three Months Ended   Nine Months Ended 
   September 30,   June 30,   September 30,   September 30, 
   2019   2019   2018   2019   2018 
   (Dollars in thousands, except per share data) 
Interest income:                         
Loans and leases  $275,978   $284,236   $264,062   $834,443   $775,447 
Investment securities   28,806    28,948    28,061    87,434    81,929 
Deposits in financial institutions   2,424    1,349    519    4,423    1,555 
Total interest income   307,208    314,533    292,642    926,300    858,931 
                          
Interest expense:                         
Deposits   40,703    38,720    21,121    113,658    51,306 
Borrowings   6,852    7,210    3,814    21,772    7,383 
Subordinated debentures   7,417    7,705    7,390    22,860    21,093 
Total interest expense   54,972    53,635    32,325    158,290    79,782 
                          
Net interest income   252,236    260,898    260,317    768,010    779,149 
Provision for credit losses   7,000    8,000    11,500    19,000    33,000 
                         
Net interest income after provision for credit losses   245,236    252,898    248,817    749,010    746,149 
                          
Noninterest income:                         
Service charges on deposit accounts   3,525    3,771    3,979    11,026    12,418 
Other commissions and fees   10,855    11,590    12,397    33,453    34,429 
Leased equipment income   9,615    9,182    9,120    28,079    28,497 
Gain on sale of loans and leases   765    326    -    1,091    4,675 
Gain on sale of securities   908    22,192    826    25,261    7,390 
Other income   7,761    3,832    10,590    16,476    27,700 
Total noninterest income   33,429    50,893    36,912    115,386    115,109 
                          
Noninterest expense:                         
Compensation   71,424    68,956    72,333    211,225    213,269 
Occupancy   14,089    14,457    13,069    42,866    39,867 
Data processing   7,044    6,817    6,740    20,786    20,295 
Other professional services   4,400    4,629    6,058    13,542    15,754 
Insurance and assessments   4,100    4,098    5,446    12,236    16,503 
Intangible asset amortization   4,833    4,870    5,587    14,573    17,520 
Leased equipment depreciation   5,951    5,558    5,001    17,160    15,613 
Foreclosed assets expense (income), net   8    (146)   (257)   (109)   (440)
Acquisition, integration and reorganization costs   -    -    800    618    800 
Loan expense   3,628    3,451    2,249    9,964    7,578 
Other expense   11,332    12,737    11,127    35,662    35,238 
Total noninterest expense   126,809    125,427    128,153    378,523    381,997 
                          
Earnings before income taxes   151,856    178,364    157,576    485,873    479,261 
Income tax expense   41,830    50,239    41,289    135,118    128,963 
Net earnings  $110,026   $128,125   $116,287   $350,755   $350,298 
                          
Basic and diluted earnings per share  $0.92   $1.07   $0.94   $2.91   $2.79 
Dividends declared and paid per share  $0.60   $0.60   $0.60   $1.80   $1.70 

 

Page 12

 

 

PACWEST BANCORP AND SUBSIDIARIES

NET EARNINGS PER SHARE CALCULATIONS 

 

   Three Months Ended   Nine Months Ended 
   September 30,   June 30,   September 30,   September 30, 
   2019   2019   2018   2019   2018 
    

(In thousands, except per share data)

 
Basic Earnings Per Share:                         
Net earnings  $110,026   $128,125   $116,287   $350,755   $350,298 
Less: earnings allocated to unvested restricted stock (1)   (1,369)   (1,190)   (1,428)   (3,725)   (3,899)
Net earnings allocated to common shares  $108,657   $126,935   $114,859   $347,030   $346,399 
                          
Weighted-average basic shares and unvested restricted stock outstanding   119,831    120,042    123,657    120,691    125,728 
Less: weighted-average unvested restricted stock outstanding   (1,622)   (1,462)   (1,537)   (1,480)   (1,473)
Weighted-average basic shares outstanding   118,209    118,580    122,120    119,211    124,255 
                          
Basic earnings per share  $0.92   $1.07   $0.94   $2.91   $2.79 
                          
Diluted Earnings Per Share:                         
Net earnings allocated to common shares  $108,657   $126,935   $114,859   $347,030   $346,399 
                          
Weighted-average basic shares outstanding   118,209    118,580    122,120    119,211    124,255 
                          
Diluted earnings per share  $0.92   $1.07   $0.94   $2.91   $2.79 

 

 

(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.

 

Page 13

 

 

 

PACWEST BANCORP AND SUBSIDIARIES

AVERAGE BALANCE SHEET AND YIELD ANALYSIS

 

   Three Months Ended 
   September 30, 2019   June 30, 2019   September 30, 2018 
       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)  $18,539,281   $276,309    5.91%  $18,239,690   $284,513    6.26%  $16,913,792   $264,371    6.20%
Investment securities (3)   3,809,243    32,213    3.36%   3,790,436    29,462    3.12%   3,844,201    29,711    3.07%
Deposits in financial institutions   445,152    2,424    2.16%   228,702    1,349    2.37%   108,485    519    1.90%
Total interest-earning assets (1)   22,793,676    310,946    5.41%   22,258,828    315,324    5.68%   20,866,478    294,601    5.60%
Other assets   3,612,927              3,590,361              3,491,293           
Total assets  $26,406,603             $25,849,189             $24,357,771           
                                              
Liabilities and Stockholders' Equity:                                             
Interest checking  $3,598,698    11,942    1.32%  $3,242,960    10,644    1.32%  $2,433,837    5,135    0.84%
Money market   5,121,856    14,807    1.15%   5,046,021    14,604    1.16%   5,270,297    10,689    0.80%
Savings   515,649    218    0.17%   525,648    227    0.17%   629,241    233    0.15%
Time   2,795,573    13,736    1.95%   2,731,156    13,245    1.95%   1,778,552    5,064    1.13%
Total interest-bearing deposits   12,031,776    40,703    1.34%   11,545,785    38,720    1.35%   10,111,927    21,121    0.83%
Borrowings   1,181,313    6,852    2.30%   1,142,223    7,210    2.53%   720,449    3,814    2.10%
Subordinated debentures   456,011    7,417    6.45%   454,901    7,705    6.79%   452,312    7,390    6.48%
Total interest-bearing liabilities   13,669,100    54,972    1.60%   13,142,909    53,635    1.64%   11,284,688    32,325    1.14%
Noninterest-bearing demand deposits   7,487,555              7,544,027              8,120,306           
Other liabilities   359,202              343,364              203,958           
Total liabilities   21,515,857              21,030,300              19,608,952           
Stockholders' equity   4,890,746              4,818,889              4,748,819           
Total liabilities and stockholders' equity  $26,406,603             $25,849,189             $24,357,771           
Net interest income (1)       $255,974             $261,689             $262,276      
Net interest spread (1)             3.81%             4.04%             4.46%
Net interest margin (1)             4.46%             4.72%             4.99%
                                              
Total deposits (4)  $19,519,331   $40,703    0.83%  $19,089,812   $38,720    0.81%  $18,232,233   $21,121    0.46%

 

 

(1)Tax equivalent.

 

(2)Includes discount accretion on acquired loans of $2.6 million, $3.5 million, and $6.1 million for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, respectively.

 

(3)Includes tax-equivalent adjustments of $3.4 million, $0.5 million, and $1.7 million for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018 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.

 

Page 14

 

 

PACWEST BANCORP AND SUBSIDIARIES

FIVE QUARTER BALANCE SHEET

 

   September 30,   June 30,   March 31,   December 31,   September 30, 
   2019   2019   2019   2018   2018 
   (Dollars in thousands, except per share data) 
ASSETS:                    
Cash and due from banks  $252,596   $185,075   $224,758   $175,830   $196,502 
Interest-earning deposits in financial institutions   483,405    422,663    332,124    209,937    185,284 
Total cash and cash equivalents   736,001    607,738    556,882    385,767    381,786 
                          
Securities available-for-sale   3,817,348    3,807,244    3,994,708    4,009,431    3,820,333 
Federal Home Loan Bank stock   26,865    43,146    29,430    32,103    31,077 
Total investment securities   3,844,213    3,850,390    4,024,138    4,041,534    3,851,410 
                          
Loans held for sale   -    -    25,124    -    - 
                          
Gross loans and leases held for investment   18,796,011    18,532,740    18,371,295    18,026,365    17,295,589 
Deferred fees, net   (60,468)   (59,888)   (63,598)   (68,652)   (65,443)
Total loans and leases held for investment, net of deferred fees   18,735,543    18,472,852    18,307,697    17,957,713    17,230,146 
Allowance for loan and lease losses   (138,552)   (135,037)   (136,281)   (132,472)   (141,920)
Total loans and leases held for investment, net   18,596,991    18,337,815    18,171,416    17,825,241    17,088,226 
                          
Equipment leased to others under operating leases   295,854    300,668    293,853    292,677    275,707 
Premises and equipment, net   37,926    38,162    37,783    34,661    34,012 
Foreclosed assets, net   1,366    1,472    3,291    5,299    4,407 
Deferred tax asset, net   -    -    -    17,489    41,280 
Goodwill   2,548,670    2,548,670    2,548,670    2,548,670    2,548,670 
Core deposit and customer relationship intangibles, net   42,547    47,380    52,250    57,120    62,106 
Other assets   621,059    612,119    610,731    522,896    494,522 
Total assets  $26,724,627   $26,344,414   $26,324,138   $25,731,354   $24,782,126 
                          
LIABILITIES:                         
Noninterest-bearing deposits  $7,441,185   $7,299,213   $7,712,409   $7,888,915   $7,834,480 
Interest-bearing deposits   12,292,018    11,506,543    11,573,518    10,981,586    10,045,063 
Total deposits   19,733,203    18,805,756    19,285,927    18,870,501    17,879,543 
Borrowings   1,253,031    1,913,059    1,481,087    1,371,114    1,513,166 
Subordinated debentures   456,145    456,112    454,458    453,846    452,944 
Accrued interest payable and other liabilities   362,140    317,477    311,684    210,305    194,788 
Total liabilities   21,804,519    21,492,404    21,533,156    20,905,766    20,040,441 
STOCKHOLDERS' EQUITY (1)   4,920,108    4,852,010    4,790,982    4,825,588    4,741,685 
Total liabilities and stockholders’ equity  $26,724,627   $26,344,414   $26,324,138   $25,731,354   $24,782,126 
                          
Book value per share  $41.06   $40.49   $39.86   $39.17   $38.46 
Tangible book value per share (2)  $19.43   $18.83   $18.22   $18.02   $17.28 
Shares outstanding   119,831,192    119,829,104    120,201,149    123,189,833    123,283,450 

 

 

(1) Includes net unrealized gain (loss) on securities available-for-sale, net  $95,887   $73,066   $37,258   $(6,075)  $(43,854)
(2) Non-GAAP measure.                         

 

Page 15

 

 

PACWEST BANCORP AND SUBSIDIARIES

FIVE QUARTER STATEMENT OF EARNINGS

 

   Three Months Ended 
   September 30,   June 30,   March 31,   December 31,   September 30, 
   2019   2019   2019   2018   2018 
   (Dollars in thousands, except per share data) 
Interest income:                         
Loans and leases  $275,978   $284,236   $274,229   $272,522   $264,062 
Investment securities   28,806    28,948    29,680    29,690    28,061 
Deposits in financial institutions   2,424    1,349    650    527    519 
Total interest income   307,208    314,533    304,559    302,739    292,642 
                          
Interest expense:                         
Deposits   40,703    38,720    34,235    28,834    21,121 
Borrowings   6,852    7,210    7,710    4,602    3,814 
Subordinated debentures   7,417    7,705    7,738    7,538    7,390 
Total interest expense   54,972    53,635    49,683    40,974    32,325 
                          
Net interest income   252,236    260,898    254,876    261,765    260,317 
Provision for credit losses   7,000    8,000    4,000    12,000    11,500 
Net interest income after provision for credit losses   245,236    252,898    250,876    249,765    248,817 
                          
Noninterest income:                         
Service charges on deposit accounts   3,525    3,771    3,730    4,091    3,979 
Other commissions and fees   10,855    11,590    11,008    11,114    12,397 
Leased equipment income   9,615    9,182    9,282    9,384    9,120 
Gain on sale of loans and leases   765    326    -    -    - 
Gain on sale of securities   908    22,192    2,161    786    826 
Other income   7,761    3,832    4,883    8,151    10,590 
Total noninterest income   33,429    50,893    31,064    33,526    36,912 
                          
Noninterest expense:                         
Compensation   71,424    68,956    70,845    69,299    72,333 
Occupancy   14,089    14,457    14,320    13,356    13,069 
Data processing   7,044    6,817    6,925    6,930    6,740 
Other professional services   4,400    4,629    4,513    6,198    6,058 
Insurance and assessments   4,100    4,098    4,038    4,202    5,446 
Intangible asset amortization   4,833    4,870    4,870    4,986    5,587 
Leased equipment depreciation   5,951    5,558    5,651    5,758    5,001 
Foreclosed assets expense (income), net   8    (146)   29    (311)   (257)
Acquisition, integration and reorganization costs   -    -    618    970    800 
Loan expense   3,628    3,451    2,885    2,991    2,249 
Other expense   11,332    12,737    11,593    14,856    11,127 
Total noninterest expense   126,809    125,427    126,287    129,235    128,153 
                          
Earnings before income taxes   151,856    178,364    155,653    154,056    157,576 
Income tax expense   41,830    50,239    43,049    39,015    41,289 
Net earnings  $110,026   $128,125   $112,604   $115,041   $116,287 
                          
Basic and diluted earnings per share  $0.92   $1.07   $0.92   $0.93   $0.94 
Dividends declared and paid per share  $0.60   $0.60   $0.60   $0.60   $0.60 

 

Page 16

 

 

 

PACWEST BANCORP AND SUBSIDIARIES

FIVE QUARTER SELECTED FINANCIAL DATA

 

   At or For the Three Months Ended 
   September 30,   June 30,   March 31,   December 31,   September 30, 
   2019   2019   2019   2018   2018 
   (Dollars in thousands) 
Performance Ratios:                         
Return on average assets (1)   1.65%   1.99%   1.77%   1.84%   1.89%
Return on average equity (1)   8.93%   10.66%   9.48%   9.59%   9.72%
Return on average tangible equity (1)(2)   19.01%   23.15%   20.64%   21.23%   21.61%
Efficiency ratio   42.3%   41.6%   42.4%   41.7%   40.9%
Noninterest expense as a percentage of average assets (1)   1.91%   1.95%   1.99%   2.07%   2.09%
                          
Average Yields/Costs (1):                         
Yield on:                         
Average loans and leases (3)   5.91%   6.26%   6.16%   6.27%   6.20%
Average interest-earning assets (3)   5.41%   5.68%   5.60%   5.68%   5.60%
Cost of:                         
Average interest-bearing deposits   1.34%   1.35%   1.24%   1.10%   0.83%
Average total deposits   0.83%   0.81%   0.73%   0.62%   0.46%
Average interest-bearing liabilities   1.60%   1.64%   1.57%   1.40%   1.14%
Net interest spread (3)   3.81%   4.04%   4.03%   4.28%   4.46%
Net interest margin (3)   4.46%   4.72%   4.69%   4.91%   4.99%
                          
Average Balances:                         
Assets:                         
Loans and leases, net of deferred fees  $18,539,281   $18,239,690   $18,064,230   $17,275,343   $16,913,792 
Interest-earning assets   22,793,676    22,258,828    22,144,711    21,269,363    20,866,478 
Total assets   26,406,603    25,849,189    25,775,949    24,784,462    24,357,771 
Liabilities:                         
Noninterest-bearing deposits   7,487,555    7,544,027    7,783,652    8,163,699    8,120,306 
Interest-bearing deposits   12,031,776    11,545,785    11,156,773    10,422,761    10,111,927 
Total deposits   19,519,331    19,089,812    18,940,425    18,586,460    18,232,233 
Borrowings   1,181,313    1,142,223    1,218,319    764,039    720,449 
Subordinated debentures   456,011    454,901    454,203    452,998    452,312 
Interest-bearing liabilities   13,669,100    13,142,909    12,829,295    11,639,798    11,284,688 
Stockholders' equity   4,890,746    4,818,889    4,815,965    4,758,401    4,748,819 

 

 

(1) Annualized.

(2) Non-GAAP measure.

(3) Tax equivalent.

 

Page 17

 

 

PACWEST BANCORP AND SUBSIDIARIES

FIVE QUARTER SELECTED FINANCIAL DATA

 

   At or For the Three Months Ended 
   September 30,   June 30,   March 31,   December 31,   September 30, 
   2019   2019   2019   2018   2018 
   (Dollars in thousands) 
Credit Quality Ratios:                         
Nonaccrual loans and leases held for investment to loans and leases held for investment   0.53%   0.44%   0.48%   0.44%   0.66%
Nonperforming assets to loans and leases held for investment and foreclosed assets   0.54%   0.45%   0.50%   0.47%   0.68%
Classified loans and leases held for investment to loans and leases held for investment   1.01%   1.03%   1.04%   1.32%   1.51%
Provision for credit losses (for the quarter) to average loans and leases held for investment (annualized)   0.15%   0.18%   0.09%   0.28%   0.27%
Net charge-offs (for the quarter) to average loans and leases held for investment (annualized)   0.10%   0.25%   0.00%   0.46%   0.04%
Trailing 12 months net charge-offs to average loans and leases held for investment   0.20%   0.18%   0.22%   0.26%   0.28%
Allowance for credit losses to loans and leases held for investment   0.92%   0.92%   0.95%   0.94%   1.03%
Allowance for credit losses to nonaccrual loans and leases held for investment   174.0%   209.1%   195.6%   213.5%   156.9%
                          
PacWest Bancorp Consolidated Capital:                         
Tier 1 leverage ratio (1)   9.50%   9.49%   9.38%   10.13%   10.10%
Common equity tier 1 capital ratio (1)   9.55%   9.53%   9.48%   10.01%   10.18%
Tier 1 capital ratio (1)   9.55%   9.53%   9.48%   10.01%   10.18%
Total capital ratio (1)   12.16%   12.18%   12.15%   12.72%   13.03%
Risk-weighted assets (1)  $23,579,614   $23,117,199   $22,939,074   $22,525,096   $21,650,542 
                          
Equity to assets ratio   18.41%   18.42%   18.20%   18.75%   19.13%
Tangible common equity ratio (2)   9.65%   9.50%   9.23%   9.60%   9.61%
Book value per share  $41.06   $40.49   $39.86   $39.17   $38.46 
Tangible book value per share (2)  $19.43   $18.83   $18.22   $18.02   $17.28 
                          
Pacific Western Bank Capital:                         
Tier 1 leverage ratio (1)   10.72%   10.76%   10.57%   10.80%   10.78%
Common equity tier 1 capital ratio (1)   10.79%   10.80%   10.69%   10.68%   10.87%
Tier 1 capital ratio (1)   10.79%   10.80%   10.69%   10.68%   10.87%
Total capital ratio (1)   11.52%   11.53%   11.45%   11.44%   11.69%

 

 

 

(1) Capital information for September 30, 2019 is preliminary.

(2) Non-GAAP measure.

 

Page 18

 

 

GAAP TO NON-GAAP RECONCILIATIONS

 

This press release contains certain non-GAAP financial disclosures for: (1) return on average tangible equity, (2) tangible common equity ratio, and (3) 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, and tangible book value per share is prevalent among banking regulators, investors and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) return on average equity, (2) equity to assets ratio, and (3) 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   Nine Months Ended 
   September 30,   June 30,   September 30,   September 30, 
Return on Average Tangible Equity  2019   2019   2018   2019   2018 
 (Dollars in thousands) 
Net earnings  $110,026   $128,125   $116,287   $350,755   $350,298 
                          
Average stockholders' equity  $4,890,746   $4,818,889   $4,748,819   $4,842,140   $4,826,944 
Less: Average intangible assets   2,593,925    2,598,762    2,614,055    2,598,806    2,619,624 
Average tangible common equity  $2,296,821   $2,220,127   $2,134,764   $2,243,334   $2,207,320 
                          
Return on average equity (1)   8.93%   10.66%   9.72%   9.68%   9.70%
Return on average tangible equity (2)   19.01%   23.15%   21.61%   20.90%   21.22%

 

 

(1) Annualized net earnings divided by average stockholders' equity.

(2) Annualized net earnings divided by average tangible common equity.

 

 

Tangible Common Equity Ratio/  September 30,   June 30,   March 31,   December 31,   September 30, 
Tangible Book Value Per Share  2019   2019   2019   2018   2018 
   (Dollars in thousands, except per share data) 
Stockholders' equity  $4,920,108   $4,852,010   $4,790,982   $4,825,588   $4,741,685 
Less: Intangible assets   2,591,217    2,596,050    2,600,920    2,605,790    2,610,776 
Tangible common equity  $2,328,891   $2,255,960   $2,190,062   $2,219,798   $2,130,909 
                          
Total assets  $26,724,627   $26,344,414   $26,324,138   $25,731,354   $24,782,126 
Less: Intangible assets   2,591,217    2,596,050    2,600,920    2,605,790    2,610,776 
Tangible assets  $24,133,410   $23,748,364   $23,723,218   $23,125,564   $22,171,350 
                          
Equity to assets ratio   18.41%   18.42%   18.20%   18.75%   19.13%
Tangible common equity ratio (1)   9.65%   9.50%   9.23%   9.60%   9.61%
                          
Book value per share  $41.06   $40.49   $39.86   $39.17   $38.46 
Tangible book value per share (2)  $19.43   $18.83   $18.22   $18.02   $17.28 
Shares outstanding   119,831,192    119,829,104    120,201,149    123,189,833    123,283,450 

 

 

(1) Tangible common equity divided by tangible assets.

(2) Tangible common equity divided by shares outstanding.

 

Page 19

 

(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

 

Exhibit 99.2

 

2019 Third Quarter Results Earnings Release Presentation October 16, 2019

 

 

Third Quarter 2019 | PACW | p. 2 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. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. 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. 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 the Company 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 . Forward - Looking Statements

 

 

Third Quarter 2019 | PACW | p. 3 Presentation Index Third Quarter Highlights 4 Loans and Leases 9 Credit Quality 13 Deposits 17 Investment Securities 19 Controlled Expenses 20 Non - GAAP Measurements 21

 

 

Third Quarter 2019 | PACW | p. 4 Third Quarter Highlights • Net earnings of $110.0 million • Earnings per share of $0.92 • ROAA of 1.65% • ROATE of 19.01% Robust Earnings High Performing • Net interest margin of 4.46% • Loan and lease yield of 5.91% • Cost of deposits of 83 bps • Efficiency ratio of 42.3% • Noninterest expense to average assets of 1.91% Loan Growth & Credit Quality • Loan production of $1.2 billion • Annualized loan growth of 6% • Classified loans to total loans of 1.01% • Net charge - offs of $4.5 million; 10bps of average loans and leases • Provision for credit losses of $7.0 million Strong Deposit Base & Capital • Record core deposits growth of $854 million • Core deposits at 84% of total deposits • Noninterest - bearing demand deposits at 38% of total deposits • Tangible common equity ratio of 9.65% • CET1 ratio of 9.55%

 

 

Third Quarter 2019 | PACW | p. 5 ∆ ($ in millions, except per share amounts) 3Q19 2Q19 Q / Q Total Assets 26,725$ 26,344$ 1% Loans and Leases HFI, net of deferred fees 18,736$ 18,473$ 1% Total Deposits 19,733$ 18,806$ 5% Core Deposits 16,471$ 15,617$ 5% Net Earnings 110.0$ 128.1$ -14% Earnings Per Share 0.92$ 1.07$ -14% Return on Average Assets ("ROAA") (1) 1.65% 1.99% -0.34 Return on Average Tangible Equity ("ROATE") (1)(2) 19.01% 23.15% -4.14 Tangible Common Equity Ratio (2) 9.65% 9.50% 0.15 Tangible Book Value Per Share (2) 19.43$ 18.83$ 3% Tax Equivalent Net Interest Margin 4.46% 4.72% -0.26 Efficiency Ratio 42.3% 41.6% 0.7 Quarter - Over - Quarter Financial Highlights (1) ROAA of 1.74% and ROATE of 20.26% in 2Q19 if securities gains are excluded. (2) See “Non - GAAP Measurements” slide on page 21.

 

 

Third Quarter 2019 | PACW | p. 6 ∆ ($ in millions, except per share amounts) 3Q19 3Q18 Y / Y Total Assets 26,725$ 24,782$ 8% Loans and Leases HFI, net of deferred fees 18,736$ 17,230$ 9% Total Deposits 19,733$ 17,880$ 10% Core Deposits 16,471$ 15,513$ 6% Net Earnings 110.0$ 116.3$ -5% Earnings Per Share 0.92$ 0.94$ -2% Return on Average Assets ("ROAA") 1.65% 1.89% -0.24 Return on Average Tangible Equity ("ROATE") (1) 19.01% 21.61% -2.60 Tangible Common Equity Ratio (1) 9.65% 9.61% 0.04 Tangible Book Value Per Share (1) 19.43$ 17.28$ 12% Tax Equivalent Net Interest Margin 4.46% 4.99% -0.53 Efficiency Ratio 42.3% 40.9% 1.4 Year - Over - Year Financial Highlights (1) See “Non - GAAP Measurements” slide on page 21.

 

 

Third Quarter 2019 | PACW | p. 7 ($ in millions, except Diluted EPS) 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 (1) 3Q19 Net Earnings 101.5$ 84.0$ 118.3$ 115.7$ 116.3$ 115.0$ 112.6$ 128.1$ 110.0$ Diluted EPS 0.84$ 0.66$ 0.93$ 0.92$ 0.94$ 0.93$ 0.92$ 1.07$ 0.92$ $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $1.10 $1.20 $0 $20 $40 $60 $80 $100 $120 $140 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Diluted EPS Millions Net Earnings Diluted EPS Solid Earnings Track Record CUB acquisition (1) 2Q19 includes $22.2 million of pre - tax gains on the sale of securities or $0.13 per diluted share.

 

 

Third Quarter 2019 | PACW | p. 8 12.02% 10.50% 10.43% 9.86% 9.61% 9.60% 9.23% 9.50% 9.65% 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 TCE / TA PACW KRX 12.02% 10.66% 10.66% 10.33% 10.10% 10.13% 9.38% 9.49% 9.50% 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 T1 Leverage PACW KRX 15.74% 13.75% 14.11% 13.48% 13.03% 12.72% 12.15% 12.18% 12.16% 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Total Capital PACW KRX 12.52% 10.91% 11.16% 10.59% 10.18% 10.01% 9.48% 9.53% 9.55% 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 CET1 PACW KRX Solid Capital Position – 3Q19 (Preliminary) Source: S&P Global Market Intelligence. Peer data through 2Q19. Peer group is banks in the KBW Regional Bank Index – “KRX”

 

 

Third Quarter 2019 | PACW | p. 9 Commercial mortgage Income producing and other residential Commercial construction Residential construction Asset - based Venture capital Other commercial Consumer As of September 30, 2019 ($ in millions) $ Mix $ Mix Real Estate Mortgage: Commercial 4,301$ 23% 4,933$ 28% Income producing and other residential 3,596 19% 2,746 16% Total Real Estate Mortgage 7,897 42% 7,679 44% RE Construction & Land: Commercial 1,009 6% 854 5% Residential 1,542 8% 1,147 7% Total RE Construction & Land 2,551 14% 2,001 12% Total Real Estate 10,448 56% 9,680 56% Commercial: Asset-based 3,810 20% 3,222 19% Venture capital 2,210 12% 2,032 12% Other commercial 1,858 10% 1,898 11% Total Commercial 7,878 42% 7,152 42% Consumer 409 2% 398 2% Total Loans HFI (1) 18,735$ 100% 17,230$ 100% Unfunded commitments 7,791$ 7,056$ 9/30/2019 9/30/2018 Diversified Loan and Lease Portfolio (1) Net of deferred fees and costs

 

 

Third Quarter 2019 | PACW | p. 10 ($ in millions) $ Mix $ Mix Asset-Based: Lender Finance & Timeshare 2,234$ 59% 1,817$ 56% Equipment Finance 785 21% 683 21% Premium Finance 436 11% 315 10% Other 355 9% 407 13% Total Asset-Based 3,810$ 100% 3,222$ 100% 9/30/2019 9/30/2018 ($ in millions) $ Mix $ Mix Real Estate: Income Producing Residential 3,490$ 34% 2,619$ 27% Other Commercial 2,858 27% 3,310 34% Construction & Land (1) 2,551 25% 2,001 21% SBA 556 5% 551 6% Hospitality 542 5% 552 6% Healthcare 345 3% 483 5% Other Residential 106 1% 127 1% Total Real Estate 10,448$ 100% 9,680$ 100% 9/30/2019 9/30/2018 Other Commercial, $2,858mm, 27% SBA , $556mm , 5% Hospitality , $542mm , 5% Income Producing Residential, $3,490mm, 34% Healthcare , $345mm , 3% Other Residential , $106mm , 1% Construction & Land , $2,551mm , 25% Real Estate ($10.4B) Lender Finance & Timeshare, $2,234mm, 59% Equipment Finance, $785mm, 21% Premium Finance, $436mm, 11% Other, $355mm, 9% Asset - Based ($3.8B) Diversified Loan and Lease Portfolio (1) Of which land represents $170 million and $186 million as of 9/30/19 and 9/30/18.

 

 

Third Quarter 2019 | PACW | p. 11 ($ in millions) $ Mix $ Mix Venture Capital: Equity Fund Loans 1,247$ 56% 628$ 31% Expansion Stage 675 31% 975 48% Early Stage 203 9% 293 14% Late Stage 85 4% 136 7% Total Venture Capital 2,210$ 100% 2,032$ 100% 9/30/2019 9/30/2018 ($ in millions) $ Mix $ Mix Other Commercial: Security Monitoring 618$ 33% 607$ 32% Secured Business Loans 550 30% 693 38% Unsecured Business Loans 305 16% 223 12% Municipal 162 9% 115 6% SBA 80 4% 109 6% Cash Flow 73 4% 83 4% HOA Loans 70 4% 68 3% Total Other Commercial 1,858$ 100% 1,898$ 101% 9/30/2019 9/30/2018 Security Monitoring , $618mm , 33% Municipal , $162mm , 9% Cash Flow , $73mm , 4% SBA , $80mm , 4% Secured Business Loans , $550mm , 30% HOA Loans , $70mm , 4% Unsecured Business Loans , $305mm , 16% Other Commercial ($1.9B) Equity Fund Loans, $1,247mm, 56% Expansion Stage, $675mm, 31% Early Stage, $203mm, 9% Late Stage, $85mm, 4% Venture Capital ($2.2B) Diversified Loan and Lease Portfolio

 

 

Third Quarter 2019 | PACW | p. 12 ($ in millions) Production/ Disbursements Payoffs/ Paydowns Net Difference Rate on Production (1) ($ in millions) Loans Beginning Balance (2) Loans Ending Balance (2) Quarterly Change (3) 3Q19 2,519$ 2,229$ 290$ 5.45% 3Q19 18,473$ 18,736$ 263$ 2Q19 2,730 2,509 221 5.15% 2Q19 18,308 18,473 165 1Q19 2,368 1,972 396 5.11% 1Q19 17,958 18,308 350 4Q18 2,758 1,991 767 5.38% 4Q18 17,230 17,958 727 3Q18 2,283 1,928 355 5.17% 3Q18 16,885 17,230 345 $1,316 $1,572 $1,175 $1,436 $1,231 $967 $1,186 $1,193 $1,294 $1,288 $1,133 $1,071 $933 $1,529 $1,391 $795 $921 $1,039 $980 $838 $2,283 $2,758 $2,368 $2,730 $2,519 $1,928 $1,991 $1,972 $2,509 $2,229 4.0% 4.5% 5.0% 5.5% 6.0% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 3Q18 4Q18 1Q19 2Q19 3Q19 Avg. Rate on Production Millions Production Disbursements Payoffs Paydowns Rate on Production Loan and Lease Production of $ 1.2 Billion in 3Q19 (1) The weighted average rate on production presents contractual rates and does not include amortized fees. Amortized fees added approximately 30 basis points to loan yields in 2019 and 31 basis points in 2018. (2) Net of deferred fees and costs (3) Quarterly change equals “Net Difference” plus transfers to loans held for sale, transfers to OREO, charge - offs and loan sales.

 

 

Third Quarter 2019 | PACW | p. 13 ($ in thousands) 3Q18 4Q18 1Q19 2Q19 3Q19 Nonaccrual Loans and Leases HFI $ 112,972 79,333 88,527 81,265 99,113 As a % of Loans and Leases HFI % 0.66% 0.44% 0.48% 0.44% 0.53% Nonperforming Assets $ 117,379 84,632 91,818 82,737 100,479 As a % of Loans and Leases & Foreclosed Assets % 0.68% 0.47% 0.50% 0.45% 0.54% Classified Loans and Leases HFI (1) $ 260,459 237,110 190,305 190,979 188,607 As a % of Loans and Leases HFI % 1.51% 1.32% 1.04% 1.03% 1.01% Credit Loss Provision $ 11,500 12,000 4,000 8,000 7,000 As a % of Average Loans and Leases (annualized) % 0.27% 0.28% 0.09% 0.18% 0.15% Net Charge-offs $ 1,719 19,948 191 11,244 4,485 As a % of Average Loans and Leases (annualized) % 0.04% 0.46% 0.00% 0.25% 0.10% Trailing Twelve Months Net Charge-offs $ 46,568 43,758 38,994 33,102 35,868 As a % of Average Loans and Leases % 0.28% 0.26% 0.22% 0.18% 0.20% Allowance for Credit Losses (ACL) (2) $ 177,281 169,333 173,142 169,898 172,413 As a % of Loans and Leases HFI % 1.03% 0.94% 0.95% 0.92% 0.92% ACL / Nonaccrual Loans and Leases HFI % 156.92% 213.45% 195.58% 209.07% 173.96% Quarterly Credit Quality Trends (1) Classified loans and leases are those with a credit risk rating of substandard or doubtful. (2) Allowance for credit losses includes allowance for loan and lease losses and reserve for unfunded loan commitments.

 

 

Third Quarter 2019 | PACW | p. 14 0.28% 0.26% 0.22% 0.18% 0.20% 3Q18 4Q18 1Q19 2Q19 3Q19 Trailing Twelve Months Net Charge - offs / Average Loans and Leases Key Credit Trends – Loans HFI 0.66% 0.44% 0.48% 0.44% 0.53% 3Q18 4Q18 1Q19 2Q19 3Q19 Nonaccrual Loans and Leases / Loans and Leases 1.03% 0.94% 0.95% 0.92% 0.92% 3Q18 4Q18 1Q19 2Q19 3Q19 ACL / Loans and Leases 1.51% 1.32% 1.04% 1.03% 1.01% 3Q18 4Q18 1Q19 2Q19 3Q19 Classified Loans and Leases/ Loans and Leases

 

 

Third Quarter 2019 | PACW | p. 15 ($ in thousands) 2016 2017 2018 YTD 2019 Nonaccrual Loans and Leases HFI $ 170,599 155,784 79,333 99,113 As a % of Loans and Leases HFI % 1.11% 0.92% 0.44% 0.53% Nonperforming Assets $ 183,575 157,113 84,632 100,479 As a % of Loans and Leases & Foreclosed Assets % 1.20% 0.93% 0.47% 0.54% Classified Loans and Leases HFI (2) $ 409,645 278,405 237,110 188,607 As a % of Loans and Leases HFI % 2.67% 1.65% 1.32% 1.01% Credit Loss Provision $ 61,000 59,000 (3) 45,000 19,000 As a % of Average Loans and Leases (annualized) % 0.42% 0.37% 0.27% 0.14% Net Charge-offs $ 21,990 62,957 43,758 15,920 As a % of Average Loans and Leases (annualized) % 0.15% 0.40% 0.26% 0.12% Allowance for Credit Losses (ACL) (4) $ 161,278 161,647 169,333 172,413 As a % of Loans and Leases HFI % 1.05% 0.96% 0.94% 0.92% ACL / Nonaccrual Loans and Leases HFI % 94.54% 103.76% 213.45% 173.96% Credit Quality Trends (1) (1) Amounts and ratios related to 2019 and 2018 periods are for total loans and leases. Amounts and ratios for 2017 and 2016 are for Non - PCI loans and leases. (2) Classified loans and leases are those with a credit risk rating of substandard or doubtful. (3) Net of $14.1 million negative provision recorded in conjunction with the sale of $1.5 billion of cash flow loans. (4) Allowance for credit losses includes allowance for loan and lease losses and reserve for unfunded loan commitments.

 

 

Third Quarter 2019 | PACW | p. 16 % of Loan % of Loan 9/30/2019 6/30/2019 ($ in thousands) Balance Category Balance Category Balance Balance Real estate mortgage: Commercial 19,515$ 0.5% 17,012$ 0.4% -$ 3,948$ Income producing and other residential 2,868 0.1% 2,883 0.1% 3,750 3,262 Total real estate mortgage 22,383 0.3% 19,895 0.2% 3,750 7,210 Real estate construction and land: Commercial 377 0.0% 390 0.0% - - Residential - 0.0% - 0.0% 2,622 4,672 Total R.E. construction and land 377 0.0% 390 0.0% 2,622 4,672 Commercial: Asset-based 33,015 0.9% 32,236 0.9% 48 12,382 Venture capital 20,131 0.9% 22,501 1.0% - - Other commercial 22,554 1.2% 5,799 0.3% 4,068 439 Total commercial 75,700 1.0% 60,536 0.8% 4,116 12,821 Consumer 653 0.2% 444 0.1% 795 964 Total 99,113$ 0.5% 81,265$ 0.4% 11,283$ 25,667$ 9/30/2019 Nonaccrual Loans and Leases 6/30/2019 Accruing and 30 -89 Days Past Due Nonaccrual & Delinquent Loan and Lease Detail

 

 

Third Quarter 2019 | PACW | p. 17 Noninterest - bearing demand Interest checking Money market Savings deposits Non - core non - maturity deposits Time deposits $250,000 and under Time deposits over $250,000 September 30, 2019 Noninterest - bearing demand Interest checking Money market Savings deposits Non - core non - maturity deposits Time deposits $250,000 and under Time deposits over $250,000 September 30, 2018 ($ in millions) Deposit Category Average $ Quarter-End $ Mix Average $ Quarter-End $ Mix Noninterest-bearing demand 7,488$ 7,441$ 38% 8,120$ 7,834$ 44% Interest checking 3,557 3,646 18% 2,306 2,278 13% Money market 4,718 4,870 25% 4,895 4,783 27% Savings 516 514 3% 629 618 3% Total core deposits 16,279 16,471 84% 15,950 15,513 87% Non-core non-maturity deposits 445 480 2% 503 484 3% Total non-maturity deposits 16,724 16,951 86% 16,453 15,997 90% Time deposits $250,000 and under 2,316 2,283 12% 1,427 1,509 8% Time deposits over $250,000 479 499 2% 352 374 2% Total time deposits 2,795 2,782 14% 1,779 1,883 10% Total deposits (1) 19,519$ 19,733$ 100% 18,232$ 17,880$ 100% At or For the Quarter Ended September 30, 2019 At or For the Quarter Ended September 30, 2018 Deposit Detail (1) Does not include $1.8 billion and $2.0 billion of client investment funds held at September 30, 2019 and September 30, 2018, respectively. Core: 84% Core: 87%

 

 

Third Quarter 2019 | PACW | p. 18 $17.9 $18.9 $19.3 $18.8 $19.7 0.83% 1.10% 1.24% 1.35% 1.34% 0.46% 0.62% 0.73% 0.81% 0.83% 0.00% 0.50% 1.00% 1.50% 2.00% 0.0 5.0 10.0 15.0 20.0 25.0 3Q18 4Q18 1Q19 2Q19 3Q19 Cost Balance ($ in Billions) Core Deposits Non-Core Deposits Cost of Average Interest-Bearing Deposits Cost of Average Total Deposits ($ in millions) Time Deposits Time Deposits Total Time Maturities $250,000 and Under Over $250,000 Deposits Due in three months or less 1,004$ 223$ 1,227$ Due in over three months through six months 680 143 823 Due in over six months through twelve months 502 110 612 Due in over 12 months through 24 months 78 20 98 Due in over 24 months 19 3 22 Total 2,283$ (1) 499$ 2,782$ September 30, 2019 Deposit Portfolio (1) Includes brokered deposits of $1.3 billion with a weighted average maturity of 4 months and a weighted average cost of 2.13%.

 

 

Third Quarter 2019 | PACW | p. 19 Diversified Investment Portfolio (1) Fair value at 9/30/19 (2) Yield is for 3Q19 (3) Not rated category comprised primarily of not rated revenue bonds backed by an underlying agency security or CRA - related revenue bon ds. Asset - backed Securities , $214mm , 6% Agency Residential MBS , $325mm , 8% Agency Residential CMOs , $1,173mm , 31% Agency Commercial MBS , $1,100mm , 29% Private CMOs , $94mm , 2% Municipal Securities , $722mm , 19% Collateralized Loan Obligations , $114mm , 3% Other , $76mm , 2% $3.8 Billion Total Investment Portfolio (1) 6.3 5.8 5.6 6.0 6.3 5.3 5.2 5.0 4.5 4.4 4 5 6 7 3Q18 4Q18 1Q19 2Q19 3Q19 Years Average Life and Effective Duration Average Life Effective Duration S&P Ratings % Total Issue Type % Total AAA 8% G.O. Limited 5% AA 79% G.O . Unlimited 44% A 3% Revenue 51% BBB 1% Not Rated (3) 9% 100% 100% 3.36% overall portfolio tax equivalent yield (2) Municipal Securities Composition

 

 

Third Quarter 2019 | PACW | p. 20 40.4% 41.0% 41.7% 39.8% 40.9% 41.7% 42.4% 41.6% 42.3% 55.3% 54.4% 56.3% 54.8% 53.6% 54.1% 54.3% 54.3% 35.0% 40.0% 45.0% 50.0% 55.0% 60.0% 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 PACW Efficiency Ratio Median Efficiency Ratio Banks in KRX Index Efficiency Ratio Trend

 

 

Third Quarter 2019 | PACW | p. 21 ($ in thousands, except per share amounts) September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018 Tangible Common Equity Ratio & Tangible Book Value Per Share Stockholders' equity 4,920,108$ 4,852,010$ 4,790,982$ 4,825,588$ 4,741,685$ Less: Intangible assets 2,591,217 2,596,050 2,600,920 2,605,790 2,610,776 Tangible common equity 2,328,891$ 2,255,960$ 2,190,062$ 2,219,798$ 2,130,909$ Total assets 26,724,627$ 26,344,414$ 26,324,138$ 25,731,354$ 24,782,126$ Less: Intangible assets 2,591,217 2,596,050 2,600,920 2,605,790 2,610,776 Tangible assets 24,133,410$ 23,748,364$ 23,723,218$ 23,125,564$ 22,171,350$ Equity to assets ratio 18.41% 18.42% 18.20% 18.75% 19.13% Tangible common equity ratio (1) 9.65% 9.50% 9.23% 9.60% 9.61% Book value per share 41.06$ 40.49$ 39.86$ 39.17$ 38.46$ Tangible book value per share (2) 19.43$ 18.83$ 18.22$ 18.02$ 17.28$ Shares outstanding 119,831,192 119,829,104 120,201,149 123,189,833 123,283,450 Return on Average Tangible Equity Net earnings 110,026$ 128,125$ 112,604$ 115,041$ 116,287$ Average stockholders' equity 4,890,746$ 4,818,889$ 4,815,965$ 4,758,401$ 4,748,819$ Less: Average intangible assets 2,593,925 2,598,762 2,603,842 2,608,497 2,614,055 Average tangible common equity 2,296,821$ 2,220,127$ 2,212,123$ 2,149,904$ 2,134,764$ Return on average equity 8.93% 10.66% 9.48% 9.59% 9.72% Return on average tangible equity (3) 19.01% 23.15% 20.64% 21.23% 21.61% (1) Tangible common equity divided by tangible assets (2) Tangible common equity divided by shares outstanding (3) Annualized net earnings divided by average tangible common equity. Non - GAAP Measurements The Company uses certain 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. These non - GAAP financial measures should not be considered a substitute for financial measures presented in accordance with GAAP and may be different from non - GAAP financial measures used by other companies. The table below presents reconciliations of certain GAAP to non - GAAP financial measures:

 

 

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