U.S. markets closed
  • S&P 500

    4,538.43
    -38.67 (-0.84%)
     
  • Dow 30

    34,580.08
    -59.71 (-0.17%)
     
  • Nasdaq

    15,085.47
    -295.85 (-1.92%)
     
  • Russell 2000

    2,159.31
    -47.02 (-2.13%)
     
  • Crude Oil

    66.22
    -0.28 (-0.42%)
     
  • Gold

    1,783.90
    +21.20 (+1.20%)
     
  • Silver

    22.45
    +0.17 (+0.76%)
     
  • EUR/USD

    1.1317
    +0.0012 (+0.10%)
     
  • 10-Yr Bond

    1.3430
    -0.1050 (-7.25%)
     
  • GBP/USD

    1.3235
    -0.0067 (-0.50%)
     
  • USD/JPY

    112.8000
    -0.4090 (-0.36%)
     
  • BTC-USD

    52,400.29
    -4,262.95 (-7.52%)
     
  • CMC Crypto 200

    1,367.14
    -74.62 (-5.18%)
     
  • FTSE 100

    7,122.32
    -6.89 (-0.10%)
     
  • Nikkei 225

    28,029.57
    +276.20 (+1.00%)
     

PacWest Bancorp Announces Results for the Third Quarter Of 2021

  • Oops!
    Something went wrong.
    Please try again later.
·29 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Figure 1

Strong Performance
Strong Performance
Strong Performance

LOS ANGELES, Oct. 18, 2021 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) -

THIRD QUARTER 2021 RESULTS

$140.0M

$1.17

$167.8M

21.03%

Net Earnings

Diluted Earnings
per Share

PPNR

ROATE

THIRD QUARTER 2021 HIGHLIGHTS

  • Net Earnings of $140.0 Million or $1.17 Per Diluted Share

  • Core Deposits Up $1.1 Billion or 4.1% in 3Q21; Represents 92% of Total Deposits

  • Loan Growth of $1.0 Billion or 5.2%; Excluding PPP Loan Activity, Loan Growth of $1.3 Billion or 7.1%

  • Civic Loan Production of $481 Million in 3Q21, Compared to $423 Million in 2Q21

  • PPNR of $167.8 Million, Up 8.3% Compared to 2Q21

  • Provision for Credit Losses Benefit of $20.0 Million in 3Q21 Compared to Benefit of $88.0 Million in 2Q21

  • Net Interest Income (TE) of $279.8 Million in 3Q21, Compared to $270.1 Million in 2Q21

  • Noninterest Income of $51.3 Million in 3Q21, Compared to $40.4 Million in 2Q21, With Continued Strength in Warrant Income

  • Noninterest Expense of $159.4 Million in 3Q21, Up 5% From 2Q21, Driven Mainly By Higher Compensation Expense

  • Classified and Special Mention Loans Fell $5.7 Million and $39.7 Million, Respectively, From 2Q21

  • ACL Ratio of 1.36% and ALLL Ratio of 0.99%; Excluding PPP Loans, ACL Ratio of 1.38% and ALLL Ratio of 1.01%

  • Net Charge-offs of $0.4 Million (1 bp of Average Loans and Leases)

  • Cost of Deposits Decreased 2 bps to 8 bps

  • Loan and Lease Production of $2.4 Billion, Up From $1.7 Billion in 2Q21; WAC of 4.24% vs. 4.55% in 2Q21

  • Strong Capital Position – CET1 Ratio of 10.15% and Total Capital Ratio of 14.36% at 3Q21

  • Tangible Book Value Per Share Increased From $21.95 at 2Q21 to $22.57 at 3Q21

CEO COMMENTARY

Matt Wagner, President and CEO, commented, “For the second consecutive quarter, we experienced significant loan growth as loans grew $1.0 billion to an all-time high of $20.5 billion. Deploying approximately $3 billion of excess liquidity into higher-yielding securities and loans during the third quarter resulted in a $9.5 million increase in net interest income and helped drive a $12.8 million increase in our pre-tax pre-provision net revenue compared to the second quarter.”

“We continued to experience strong deposit growth as core deposits grew by $1.1 billion during the third quarter while our cost of average total deposits moved into the single digits at 8 basis points.”

“Credit quality continues to improve with net recoveries year-to-date and continued decreases in special mention and classified loans and leases, along with improved economic conditions related to the CECL forecast which resulted in a provision benefit for the third consecutive quarter.”

“We are excited about the acquisition of the Homeowners Association Services Division of MUFG Union Bank, N.A. which closed on October 8th. The approximately $4.1 billion of stable, low-cost deposits enhances our franchise value, further diversifies our deposit portfolio, and will become more valuable in a rising rate environment.”

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/60516d02-d69d-4910-aaa9-0d9ace006bd6

FINANCIAL HIGHLIGHTS

`

At or For the

At or For the

Three Months Ended

Nine Months Ended

September 30,

June 30,

Increase

September 30,

Increase

Financial Highlights (1)

2021

2021

(Decrease)

2021

2020

(Decrease)

(Dollars in thousands, except per share data)

Net earnings (loss)

$

139,996

$

180,512

$

(40,516)

$

470,914

$

(1,354,404)

$

1,825,318

Diluted earnings (loss)

per share

$

1.17

$

1.52

$

(0.35)

$

3.96

$

(11.60)

$

15.56

Pre-provision, pre-goodwill

impairment, pre-tax net

revenue ("PPNR") (2)

$

167,766

$

154,929

$

12,837

$

478,657

$

483,223

$

(4,566)

Return on average assets

1.55%

2.11%

(0.56)

1.86%

(6.65)%

8.51

PPNR return on average

assets (2)

1.86%

1.81%

0.05

1.89%

2.37%

(0.48)

Return on average

tangible equity (2)

21.03%

29.25%

(8.22)

25.20%

7.16%

18.04

Yield on average loans and

leases (tax equivalent)

5.01%

5.18%

(0.17)

5.13%

5.18%

(0.05)

Cost of average total

deposits

0.08%

0.10%

(0.02)

0.10%

0.32%

(0.22)

Net interest margin ("NIM")

(tax equivalent)

3.33%

3.40%

(0.07)

3.46%

4.13%

(0.67)

Efficiency ratio

47.2%

47.9%

(0.7)

47.2%

42.9%

4.3

Total assets

$

35,885,676

$

34,867,987

$

1,017,689

$

35,885,676

$

28,426,716

$

7,458,960

Loans and leases held

for investment,

net of deferred fees

$

20,511,020

$

19,506,257

$

1,004,763

$

20,511,020

$

19,026,200

$

1,484,820

Noninterest-bearing

demand deposits

$

12,881,806

$

11,252,286

$

1,629,520

$

12,881,806

$

9,346,744

$

3,535,062

Core deposits

$

28,140,708

$

27,038,161

$

1,102,547

$

28,140,708

$

21,117,629

$

7,023,079

Total deposits

$

30,559,745

$

29,647,034

$

912,711

$

30,559,745

$

23,965,695

$

6,594,050

As percentage of total

deposits:

Noninterest-bearing

demand deposits

42%

38%

4

42%

39%

3

Core deposits

92%

91%

1

92%

88%

4

Equity to assets ratio

10.92%

11.03%

(0.11)

10.92%

12.26%

(1.34)

Common equity tier 1

capital ratio

10.15%

10.41%

(0.26)

10.15%

10.45%

(0.30)

Total capital ratio

14.36%

14.99%

(0.63)

14.36%

13.74%

0.62

Tangible common equity

ratio (2)

7.79%

7.80%

(0.01)

7.79%

8.71%

(0.92)

Book value per share

$

32.77

$

32.17

$

0.60

$

32.77

$

29.42

$

3.35

Tangible book value per

share (2)

$

22.57

$

21.95

$

0.62

$

22.57

$

20.09

$

2.48

(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 $9.5 million to $275.8 million for the third quarter of 2021 compared to $266.3 million for the second quarter of 2021 due mainly to higher income on investment securities and loans and leases primarily resulting from higher average balances as we deploy our excess liquidity. Income on investment securities increased by $6.8 million in the third quarter of 2021 due to a $1.6 billion increase in the average balance of investment securities, partially offset by an 11 basis point decrease in the yield on average investment securities. Income on loans and leases increased $2.2 million in the third quarter of 2021 due to a $613.3 million increase in the average balance of loans and leases, partially offset by a 17 basis point decrease in the yield on average loans and leases. The tax equivalent yield on average loans and leases was 5.01% for the third quarter of 2021 compared to 5.18% for the second quarter of 2021. The decrease in the tax equivalent yield on average loans and leases was due primarily to lower nonaccrual interest recapture of $2.6 million, lower loan prepayment fees of $1.7 million, and higher loan premium amortization of $0.8 million.

The tax equivalent NIM was 3.33% for the third quarter of 2021 compared to 3.40% for the second quarter of 2021. The decrease in the NIM was due primarily to the change in the earning assets mix driven by the increase in the investment portfolio as a percentage of earning assets. The average balance of investment securities increased by $1.6 billion to $8.0 billion, the average balance of deposits in financial institutions decreased by $690.0 million to $5.7 billion, and the average balance of loans and leases increased by $613.3 million in the third quarter of 2021. The increase in average balances of investment securities and loans and leases was the result of prudently deploying some of our excess liquidity ahead of the closing of the acquisition of the HOA Services Division of MUFG Union Bank that added approximately $4.1 billion of deposits on October 8th. Excess liquidity continues to negatively impact the tax equivalent NIM, however, we saw the impact decrease from approximately 73 basis points in the second quarter of 2021 to approximately 57 basis points in the third quarter of 2021.

The cost of average total deposits decreased to 0.08% in the third quarter of 2021 from 0.10% in the second quarter of 2021. The lower cost of average total deposits was due primarily to the $894 million increase in the 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

September 30,

June 30,

Increase

Provision for Credit Losses

2021

2021

(Decrease)

(In thousands)

(Reduction in) addition to allowance for loan

and lease losses

$

(21,500)

$

(72,000)

$

50,500

Addition to (reduction in) reserve for

unfunded loan commitments

1,500

(16,000)

17,500

Total provision for credit losses

$

(20,000)

$

(88,000)

$

68,000

The provision for credit losses benefit was $20.0 million for the third quarter of 2021 compared to a benefit of $88.0 million for the second quarter of 2021. The third quarter benefit reflected improvement in both macro-economic forecast variables and loan portfolio credit quality metrics, partially offset by increased provisions for unfunded commitments and loan growth.

Noninterest Income

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

Three Months Ended

September 30,

June 30,

Increase

Noninterest Income

2021

2021

(Decrease)

(In thousands)

Service charges on deposit accounts

$

3,407

$

3,452

$

(45)

Other commissions and fees

11,792

10,704

1,088

Leased equipment income

10,943

10,847

96

Gain on sale of loans and leases

-

1,422

(1,422)

Gain on sale of securities

515

-

515

Other income:

Dividends and gains on equity investments

8,387

5,394

2,993

Warrant income

13,578

5,650

7,928

Other

2,723

2,902

(179)

Total noninterest income

$

51,345

$

40,371

$

10,974

Noninterest income increased by $11.0 million to $51.3 million for the third quarter of 2021 compared to $40.4 million for the second quarter of 2021 due primarily to increases of $7.9 million in warrant income and $3.0 million in dividends and gains on equity investments. Warrant income increased due to a higher number of and dollar amount of gains on warrant exercises given the active capital markets. Dividends and gains on equity investments increased due primarily to higher gains on sales of equity investments and higher income distributions on SBIC investments, offset partially by lower net fair value gains on equity investments still held.

Noninterest Expense

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

Three Months Ended

September 30,

June 30,

Increase

Noninterest Expense

2021

2021

(Decrease)

(In thousands)

Compensation

$

98,061

$

90,807

$

7,254

Occupancy

14,928

14,784

144

Data processing

7,391

7,758

(367)

Other professional services

5,164

5,256

(92)

Insurance and assessments

3,685

3,745

(60)

Intangible asset amortization

2,890

2,889

1

Leased equipment depreciation

8,603

8,614

(11)

Foreclosed assets expense (income), net

165

(119)

284

Acquisition, integration and reorganization costs

200

200

-

Customer related expense

4,538

4,973

(435)

Loan expense

4,180

4,031

149

Other

9,616

8,812

804

Total noninterest expense

$

159,421

$

151,750

$

7,671

Noninterest expense increased by $7.7 million to $159.4 million for the third quarter of 2021 compared to $151.8 million for the second quarter of 2021 due primarily to an increase of $7.3 million in compensation expense attributable mainly to higher bonus and incentives expense related to increased warrant income, the growth in loans and deposits in the third quarter of 2021, and overall year-to-date performance.

Income Taxes

The effective income tax rate was 25.4% in the third quarter of 2021 compared to 25.7% in the second quarter of 2021. The effective income tax rate for the full year 2021 is estimated to be in the range of 25% to 27%.

BALANCE SHEET HIGHLIGHTS

Deposits and Client Investment Funds

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

September 30, 2021

June 30, 2021

September 30, 2020

% of

% of

% of

Deposit Composition

Balance

Total

Balance

Total

Balance

Total

(Dollars in thousands)

Noninterest-bearing demand

$

12,881,806

42%

$

11,252,286

38%

$

9,346,744

39%

Interest checking

7,168,472

24%

7,394,472

25%

4,657,511

20%

Money market

7,463,261

24%

7,777,199

26%

6,539,313

27%

Savings

627,169

2%

614,204

2%

574,061

2%

Total core deposits

28,140,708

92%

27,038,161

91%

21,117,629

88%

Non-core non-maturity deposits

960,438

3%

1,122,971

4%

1,123,909

5%

Total non-maturity deposits

29,101,146

95%

28,161,132

95%

22,241,538

93%

Time deposits $250,000 and under

882,551

3%

913,371

3%

1,047,621

4%

Time deposits over $250,000

576,048

2%

572,531

2%

676,536

3%

Total time deposits

1,458,599

5%

1,485,902

5%

1,724,157

7%

Total deposits

$

30,559,745

100%

$

29,647,034

100%

$

23,965,695

100%

At September 30, 2021, core deposits totaled $28.1 billion or 92% of total deposits, including $12.9 billion of noninterest-bearing demand deposits or 42% of total deposits. Core deposits increased by $1.1 billion or 4.1% in the third quarter of 2021 driven by continued strong deposit growth from our venture banking and community 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 September 30, 2021 were $1.4 billion, of which $1.0 billion was managed by PWAM.

Loans and Leases

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

Three Months Ended

Nine Months Ended

Roll Forward of Loans and Leases Held

September 30,

June 30,

September 30,

for Investment, Net of Deferred Fees (1)

2021

2021

2021

(Dollars in thousands)

Balance, beginning of period

$

19,506,257

$

18,979,228

$

19,083,377

Additions:

Production

2,406,024

1,663,151

5,681,952

Disbursements

1,349,333

1,662,644

4,034,963

Total production and disbursements

3,755,357

3,325,795

9,716,915

Reductions:

Payoffs

(1,732,621)

(1,969,118)

(5,337,003)

Paydowns

(1,013,867)

(802,222)

(2,883,507)

Total payoffs and paydowns

(2,746,488)

(2,771,340)

(8,220,510)

Sales

(2,175)

(26,610)

(101,426)

Transfers to foreclosed assets

(415)

-

(1,062)

Charge-offs

(1,516)

(816)

(6,320)

Transfers to loans held for sale

-

-

(25,554)

Total reductions

(2,750,594)

(2,798,766)

(8,354,872)

Loans acquired through Civic acquisition

-

-

65,600

Net increase (decrease)

1,004,763

527,029

1,427,643

Balance, end of period

$

20,511,020

$

19,506,257

$

20,511,020

Weighted average rate on production (2)

4.24%

4.55%

4.37%

(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 40 basis points to loan yields in 2021.

Loans and leases held for investment, net of deferred fees, increased by $1.0 billion or 5.2% in the third quarter of 2021 to $20.5 billion at September 30, 2021. Excluding PPP loan activity, loans grew by $1.3 billion or 7.1%. The overall increase in the loans and leases balance for the third quarter of 2021 was primarily due to increases in the income producing and other residential, real estate construction and land and asset-based portfolios partially offset by a reduction in the venture capital portfolio and other commercial portfolio due to PPP loan forgiveness. The PPP forgiveness in the third quarter of 2021 was $338 million, down from $506 million in the second quarter of 2021. Net fees for PPP loans were $7.9 million in the third quarter of 2021 down slightly from the $8.8 million in the second quarter of 2021. Remaining PPP loans totaled $272 million as of September 30, 2021 with $7.7 million of net fees to amortize over the remaining life of the loans. The weighted average rate on the $2.4 billion of new production for the third quarter of 2021 decreased to 4.24% from 4.55% in the second quarter of 2021 due to the loan mix.

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, 2021

June 30, 2021

September 30, 2020

% of

% of

% of

Loan and Lease Portfolio

Balance

Total

Balance

Total

Balance

Total

(In thousands)

Real estate mortgage:

Commercial

$

3,694,597

18%

$

3,792,198

19%

$

4,192,466

22%

Income producing and other

residential

5,886,360

29%

4,620,822

24%

3,684,579

19%

Total real estate mortgage

9,580,957

47%

8,413,020

43%

7,877,045

41%

Real estate construction and land:

Commercial

992,003

5%

930,785

5%

1,241,647

7%

Residential

2,659,870

13%

2,574,799

13%

2,182,100

11%

Total real estate construction

and land

3,651,873

18%

3,505,584

18%

3,423,747

18%

Total real estate

13,232,830

65%

11,918,604

61%

11,300,792

59%

Commercial:

Asset-based

3,661,769

18%

3,550,903

18%

3,153,048

17%

Venture capital

1,632,861

8%

1,749,432

9%

1,637,132

9%

Other commercial

1,577,592

7%

1,921,909

10%

2,572,994

13%

Total commercial

6,872,222

33%

7,222,244

37%

7,363,174

39%

Consumer

405,968

2%

365,409

2%

362,234

2%

Total loans and leases held for

investment, net of deferred fees

$

20,511,020

100%

$

19,506,257

100%

$

19,026,200

100%

Total unfunded loan commitments

$

8,480,599

$

7,891,875

$

7,178,506

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, 2021

Allowance for

Reserve for

Total

Allowance for Credit

Loan and

Unfunded Loan

Allowance for

Losses Rollforward

Lease Losses

Commitments

Credit Losses

(In thousands)

Beginning balance

$

225,600

$

74,571

$

300,171

Charge-offs

(1,516)

-

(1,516)

Recoveries

1,149

-

1,149

Net charge-offs

(367)

-

(367)

Provision

(21,500)

1,500

(20,000)

Ending balance

$

203,733

$

76,071

$

279,804

Net recoveries

Three Months Ended June 30, 2021

Allowance for

Reserve for

Total

Allowance for Credit

Loan and

Unfunded Loan

Allowance for

Losses Rollforward

Lease Losses

Commitments

Credit Losses

(In thousands)

Beginning balance

$

292,445

$

90,571

$

383,016

Charge-offs

(816)

-

(816)

Recoveries

5,971

-

5,971

Net recoveries

5,155

-

5,155

Provision

(72,000)

(16,000)

(88,000)

Ending balance

$

225,600

$

74,571

$

300,171

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

September 30,

June 30,

Increase

Allowance for Credit Losses

2021

2021

(Decrease)

(Dollars in thousands)

Allowance for loan and lease losses

$

203,733

$

225,600

$

(21,867)

Reserve for unfunded loan commitments

76,071

74,571

1,500

Allowance for credit losses

$

279,804

$

300,171

$

(20,367)

Provision for credit losses (for the quarter)

$

(20,000)

$

(88,000)

$

68,000

Net charge-offs (recoveries) (for the quarter)

$

367

$

(5,155)

$

5,522

Net charge-offs (recoveries) to average loans

and leases (for the quarter)

0.01%

(0.11)%

Allowance for loan and lease losses to loans

and leases held for investment

0.99%

1.16%

Allowance for loan and lease losses to loans

and leases held for investment, excluding PPP loans

1.01%

1.19%

Allowance for credit losses to loans and leases

held for investment

1.36%

1.54%

Allowance for credit losses to loans and leases

held for investment, excluding PPP loans

1.38%

1.59%

The allowance for credit losses decreased by $20.4 million in the third quarter of 2021 to $279.8 million at September 30, 2021. The decrease in the allowance for credit losses during the third quarter of 2021 was attributable to a provision for credit losses benefit of $20.0 million and $0.4 million in net charge-offs. The allowance for credit losses ratio, excluding PPP loans, of 1.38% remains robust and significantly higher than the pre-pandemic level of 0.97% as of the January 1, 2020 CECL adoption date.

Net charge-offs were $0.4 million for the third quarter of 2021. Gross charge-offs of $1.5 million were reduced by recoveries of $1.1 million.

Net recoveries were $5.2 million for the second quarter of 2021. Gross charge-offs of $0.8 million were reduced by recoveries of $6.0 million.

On a year-to-date basis for the nine months ended September 30, 2021, net recoveries were $2.1 million. Gross charge-offs of $6.3 million were reduced by recoveries of $8.4 million.

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

2021

2021

(Decrease)

(Dollars in thousands)

NPAs and Performing TDRs:

Nonaccrual loans and leases held for investment (1)

$

64,507

$

56,803

$

7,704

Accruing loans contractually past due 90 days or more

-

-

-

Foreclosed assets, net

13,364

13,227

137

Total nonperforming assets ("NPAs")

$

77,871

$

70,030

$

7,841

Performing TDRs held for investment

$

36,750

$

40,129

$

(3,379)

Nonaccrual loans and leases held for investment

to loans and leases held for investment

0.31%

0.29%

Nonperforming assets to loans and leases

held for investment and foreclosed assets

0.38%

0.36%

Allowance for credit losses to nonaccrual loans

and leases held for investment

433.8%

528.4%

Loan and Lease Credit Risk Ratings:

Pass

$

19,873,050

$

18,822,938

$

1,050,112

Special mention

496,366

536,052

(39,686)

Classified

141,604

147,267

(5,663)

Total loans and leases held for investment,

net of deferred fees

$

20,511,020

$

19,506,257

$

1,004,763

Classified loans and leases held for investment

to loans and leases held for investment

0.69%

0.75%

(1) Nonaccrual loans include SBA guaranteed amounts of $20.1 million at September 30, 2021 and $24.2 million at June 30, 2021.

Since pro-actively downgrading certain loans at the onset of the pandemic in the first quarter of 2020, special mention loans and leases have decreased by $402.3 million from their peak in the first quarter of 2020, while classified loans and leases have decreased by $151.6 million from their peak in the second quarter of 2020, and each have continued a steady decline in the third quarter of 2021. Nonaccrual loans and leases increased by $7.7 million to $64.5 million in the third quarter of 2021 due primarily to an increase in nonaccrual short-term, single-family residential renovation loans, however $7.5 million of such nonaccrual loans paid off in the first week of October.

The following table presents nonaccrual loans and leases and accruing loans and leases past due between 30 and 89 days by loan portfolio segment and class as of the dates indicated:

September 30, 2021

June 30, 2021

Increase (Decrease)

Accruing

Accruing

Accruing

and 30-89

and 30-89

and 30-89

Days Past

Days Past

Days Past

Nonaccrual

Due

Nonaccrual

Due

Nonaccrual

Due

(Dollars in thousands)

Real estate mortgage:

Commercial

$

25,615

$

676

$

32,065

$ -

$

(6,450)

$

676

Income producing and other

residential

7,547

3,760

6,133

2,179

1,414

1,581

Total real estate mortgage

33,162

4,436

38,198

2,179

(5,036)

2,257

Real estate construction and land:

Commercial

-

-

284

-

(284)

-

Residential

19,918

12,809

1,934

22,714

17,984

(9,905)

Total real estate

construction and land

19,918

12,809

2,218

22,714

17,700

(9,905)

Commercial:

Asset-based

1,605

-

1,973

-

(368)

-

Venture capital

2,348

1,670

2,717

-

(369)

1,670

Other commercial

6,979

340

11,337

270

(4,358)

70

Total commercial

10,932

2,010

16,027

270

(5,095)

1,740

Consumer

495

1,042

360

1,454

135

(412)

Total held for investment

$

64,507

$

20,297

$

56,803

$

26,617

$

7,704

$

(6,320)

CAPITAL

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

September 30, 2021

Excluding

June 30,

PPP

2021

Actual (1)

Loans (1)

Actual

PacWest Bancorp Consolidated:

Tier 1 leverage capital ratio

8.05%

(3)

8.15%

(4)

7.67%

Common equity tier 1 capital ratio

10.15%

10.15%

10.41%

Tier 1 capital ratio

10.65%

(3)

10.65%

10.41%

Total capital ratio

14.36%

14.36%

14.99%

Tangible common equity ratio (2)

7.79%

7.85%

(4)

7.80%

(1) Capital information for September 30, 2021 is preliminary.

(2) Non-GAAP measure.

(3) The increase in our consolidated Tier 1 capital ratio during the third quarter of 2021 was due in part to a reassessment of a Basel III implementation rule that permitted the grandfathering of certain trust preferred securities as Tier 1 capital. As a result, $131 million of trust preferred securities were reclassified from Tier 2 capital to Tier 1 capital during the third quarter of 2021. This change increased the Tier 1 leverage capital ratio by approximately 38 basis points and increased the Tier 1 capital ratio by approximately 50 basis points.

(4) PPP loans have been excluded from total assets in the denominator as they are zero risk-weighted.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $35 billion in assets headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 69 full-service branches located in California, one branch located in Durham, North Carolina, and one branch located in Denver, Colorado. The Bank provides community banking products including lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank provides venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States. The Bank also offers financing of non-owner-occupied investor properties through Civic Financial Services a wholly-owned subsidiary. The Bank also offers a specialized suite of services for the HOA industry. For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.

FORWARD LOOKING STATEMENTS

This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control. The ongoing COVID-19 pandemic has adversely affected PacWest, its employees, customers and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity and prospects is uncertain. The risks from the COVID-19 pandemic have decreased as the pandemic subsides, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our allowance for credit losses and related provision for credit losses. Continued deterioration in general business and economic conditions could adversely affect PacWest’s revenues and the values of its assets, including goodwill, and liabilities, lead to a tightening of credit, and increase stock price volatility. In addition, PacWest’s results could be adversely affected by changes in interest rates, sustained high unemployment rates, deterioration in the credit quality of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment securities, the magnitude of individual loan losses on security monitoring loans, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission.

We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

September 30,

June 30,

September 30,

2021

2021

2020

(Dollars in thousands, except per share data)

ASSETS:

Cash and due from banks

$

174,585

$

179,505

$

187,176

Interest-earning deposits in financial institutions

3,524,613

5,678,587

2,766,020

Total cash and cash equivalents

3,699,198

5,858,092

2,953,196

Securities available-for-sale, at estimated fair value

9,276,926

7,198,608

4,532,614

Federal Home Loan Bank stock, at cost

17,250

17,250

17,250

Total investment securities

9,294,176

7,215,858

4,549,864

Loans held for sale

-

-

-

Gross loans and leases held for investment

20,588,255

19,580,731

19,101,680

Deferred fees, net

(77,235)

(74,474)

(75,480)

Total loans and leases held for investment,

net of deferred fees

20,511,020

19,506,257

19,026,200

Allowance for loan and lease losses

(203,733)

(225,600)

(345,966)

Total loans and leases held for investment, net

20,307,287

19,280,657

18,680,234

Equipment leased to others under operating leases

334,275

313,574

286,425

Premises and equipment, net

47,246

39,541

40,544

Foreclosed assets, net

13,364

13,227

13,747

Goodwill

1,204,118

1,204,118

1,078,670

Core deposit and customer relationship intangibles, net

15,533

18,423

26,813

Other assets

970,479

924,497

797,223

Total assets

$

35,885,676

$

34,867,987

$

28,426,716

LIABILITIES:

Noninterest-bearing deposits

$

12,881,806

$

11,252,286

$

9,346,744

Interest-bearing deposits

17,677,939

18,394,748

14,618,951

Total deposits

30,559,745

29,647,034

23,965,695

Borrowings

-

6,625

60,000

Subordinated debt

862,447

861,788

463,282

Accrued interest payable and other liabilities

545,050

505,859

451,508

Total liabilities

31,967,242

31,021,306

24,940,485

STOCKHOLDERS' EQUITY (1)

3,918,434

3,846,681

3,486,231

Total liabilities and stockholders’ equity

$

35,885,676

$

34,867,987

$

28,426,716

Book value per share

$

32.77

$

32.17

$

29.42

Tangible book value per share (2)

$

22.57

$

21.95

$

20.09

Shares outstanding

119,579,566

119,555,102

118,489,927

(1) Includes net unrealized gain on securities

available-for-sale, net

$

98,859

$

145,516

$

155,474

(2) Non-GAAP measure.

PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

2021

2021

2020

2021

2020

(Dollars in thousands, except per share data)

Interest income:

Loans and leases

$

246,722

$

244,529

$

240,811

$

732,795

$

750,940

Investment securities

40,780

33,954

24,443

104,999

77,927

Deposits in financial institutions

2,580

2,022

654

6,130

2,448

Total interest income

290,082

280,505

265,908

843,924

831,315

Interest expense:

Deposits

6,417

7,269

9,887

21,186

51,209

Borrowings

101

265

27

559

8,124

Subordinated debt

7,722

6,663

4,670

18,760

16,632

Total interest expense

14,240

14,197

14,584

40,505

75,965

Net interest income

275,842

266,308

251,324

803,419

755,350

Provision for credit losses

(20,000)

(88,000)

97,000

(156,000)

329,000

Net interest income after provision

for credit losses

295,842

354,308

154,324

959,419

426,350

Noninterest income:

Service charges on deposit accounts

3,407

3,452

2,570

9,793

7,232

Other commissions and fees

11,792

10,704

10,541

31,654

30,373

Leased equipment income

10,943

10,847

9,900

33,144

34,188

Gain on sale of loans and leases

-

1,422

35

1,561

468

Gain on sale of securities

515

-

5,270

616

13,167

Other income

24,688

13,946

9,936

59,777

20,782

Total noninterest income

51,345

40,371

38,252

136,545

106,210

Noninterest expense:

Compensation

98,061

90,807

75,131

268,750

198,323

Occupancy

14,928

14,784

14,771

43,766

43,472

Data processing

7,391

7,758

6,505

22,106

20,061

Other professional services

5,164

5,256

4,713

15,546

13,117

Insurance and assessments

3,685

3,745

3,939

12,333

17,561

Intangible asset amortization

2,890

2,889

3,751

8,858

11,581

Leased equipment depreciation

8,603

8,614

7,057

26,186

21,364

Foreclosed assets expense (income), net

165

(119)

335

47

255

Acquisition, integration and

reorganization costs

200

200

-

3,825

-

Customer related expense

4,538

4,973

4,762

14,329

13,102

Loan expense

4,180

4,031

3,499

11,404

9,528

Goodwill impairment

-

-

-

-

1,470,000

Other expense

9,616

8,812

8,939

34,157

29,973

Total noninterest expense

159,421

151,750

133,402

461,307

1,848,337

Earnings (loss) before income taxes

187,766

242,929

59,174

(1,315,777)

Income tax expense

47,770