UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 2.02 Results of Operations and Financial Condition.*
On October 19, 2022, PacWest Bancorp (the “Company”) announced its results of operations and financial condition for the three and nine months ended September 30, 2022. The press release announcing the financial results for the three and nine months ended September 30, 2022 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, 2022 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 19, 2022 announcing PacWest’s results of operations and financial condition for the three and nine months ended September 30, 2022. |
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 Financial Officer |
Date: October 19, 2022
Exhibit 99.1
October 19, 2022 |
PACWEST BANCORP ANNOUNCES RESULTS FOR THE THIRD QUARTER 2022
FOR IMMEDIATE RELEASE
THIRD QUARTER 2022 RESULTS
$122.2M | $1.02 | 24.11% | 8.55% |
Net Earnings Available to Common Stockholders | Diluted
Earnings per Common Share |
ROATCE | CET1 |
THIRD QUARTER 2022 HIGHLIGHTS
· | All Regulatory Capital Ratios Increased from 2Q22, With CET1 Increasing from 8.24% to 8.55% |
· | Total Deposits Up $228 Million or 0.7% from 2Q22; Venture Banking Deposits Grew $129 Million to $12.2 Billion |
· | Credit Metrics Remain Steady with Nonperforming Assets Ratio of 34 Basis Points |
· | Loan Growth of $1.2 Billion or 4.4% from 2Q22 |
· | Net Interest Income (TE) of $338.6 Million in 3Q22 vs. $327.8 Million in 2Q22; Up 3.3% |
CEO COMMENTARY
Matt Wagner, CEO, commented, “We are pleased with the growth in our capital ratios during the third quarter of 2022. The increases in the ratios were due to strong earnings, the credit-linked notes transaction completed in late September, and slower growth in loans and loan commitments. Capital remains a primary focus area and we are targeting a CET1 ratio of 10% by the end of 2023.”
“We were also pleased with the stabilization in venture banking deposits, which grew by $129 million to $12.2 billion, contributing to total deposits growing by $228 million in the third quarter of 2022. After exceptionally strong loan growth in the first half of 2022, loan growth slowed in the third quarter of 2022 due to the expected impact from higher interest rates and our decision to slow loan growth as part of managing our balance sheet.”
“Credit quality remains strong as evidenced by credit metrics such as nonperforming assets of 34 basis points and net charge-offs of three basis points for the quarter and one basis point on a year-to-date basis.”
“Lastly, on a macroeconomic level as we assess the current state and direction of the economy we are thinking about and planning for a weaker economic outlook.”
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 (1) | 2022 | 2022 | (Decrease) | 2022 | 2021 | (Decrease) | ||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||||||
Net earnings available to common stockholders | $ | 122,224 | $ | 122,360 | $ | (136 | ) | $ | 364,712 | $ | 470,914 | $ | (106,202 | ) | ||||||||||
Diluted earnings per common share | $ | 1.02 | $ | 1.02 | $ | - | $ | 3.04 | $ | 3.96 | $ | (0.92 | ) | |||||||||||
Pre-provision, pre-tax net revenue ("PPNR") (2) | $ | 178,182 | $ | 174,626 | $ | 3,556 | $ | 514,917 | $ | 478,657 | $ | 36,260 | ||||||||||||
Return on average assets | 1.28 | % | 1.23 | % | 0.05 | 1.24 | % | 1.86 | % | (0.62 | ) | |||||||||||||
PPNR return on average assets (2) | 1.73 | % | 1.75 | % | (0.02 | ) | 1.71 | % | 1.89 | % | (0.18 | ) | ||||||||||||
Return on average tangible common equity (2) | 24.11 | % | 24.42 | % | (0.31 | ) | 23.05 | % | 25.20 | % | (2.15 | ) | ||||||||||||
Yield on average loans and leases (tax equivalent) | 5.12 | % | 4.65 | % | 0.47 | 4.82 | % | 5.13 | % | (0.31 | ) | |||||||||||||
Cost of average total deposits | 0.70 | % | 0.18 | % | 0.52 | 0.32 | % | 0.10 | % | 0.22 | ||||||||||||||
Net interest margin ("NIM") (tax equivalent) | 3.57 | % | 3.56 | % | 0.01 | 3.52 | % | 3.46 | % | 0.06 | ||||||||||||||
Efficiency ratio | 51.0 | % | 49.5 | % | 1.5 | 50.2 | % | 47.2 | % | 3.0 | ||||||||||||||
Total assets | $ | 41,404,592 | $ | 40,950,723 | $ | 453,869 | $ | 41,404,592 | $ | 35,885,676 | $ | 5,518,916 | ||||||||||||
Loans and leases held for investment, net of deferred fees | $ | 27,660,041 | $ | 26,501,137 | $ | 1,158,904 | $ | 27,660,041 | $ | 20,511,020 | $ | 7,149,021 | ||||||||||||
Noninterest-bearing demand deposits | $ | 12,775,756 | $ | 13,338,029 | $ | (562,273 | ) | $ | 12,775,756 | $ | 12,881,806 | $ | (106,050 | ) | ||||||||||
Core deposits | $ | 28,559,310 | $ | 29,218,646 | $ | (659,336 | ) | $ | 28,559,310 | $ | 28,140,708 | $ | 418,602 | |||||||||||
Total deposits | $ | 34,195,872 | $ | 33,968,152 | $ | 227,720 | $ | 34,195,872 | $ | 30,559,745 | $ | 3,636,127 | ||||||||||||
As percentage of total deposits: | ||||||||||||||||||||||||
Noninterest-bearing demand deposits | 37 | % | 39 | % | (2 | ) | 37 | % | 42 | % | (5 | ) | ||||||||||||
Core deposits | 83 | % | 86 | % | (3 | ) | 83 | % | 92 | % | (9 | ) | ||||||||||||
Equity to assets ratio | 9.36 | % | 9.72 | % | (0.36 | ) | 9.36 | % | 10.92 | % | (1.56 | ) | ||||||||||||
Common equity tier 1 capital ratio | 8.55 | % | 8.24 | % | 0.31 | 8.55 | % | 10.15 | % | (1.60 | ) | |||||||||||||
Tier 1 capital ratio | 10.46 | % | 10.15 | % | 0.31 | 10.46 | % | 10.65 | % | (0.19 | ) | |||||||||||||
Total capital ratio | 13.43 | % | 13.12 | % | 0.31 | 13.43 | % | 14.36 | % | (0.93 | ) | |||||||||||||
Tangible common equity ratio (2) | 4.85 | % | 5.15 | % | (0.30 | ) | 4.85 | % | 7.79 | % | (2.94 | ) | ||||||||||||
Tangible book value per common share (2) | $ | 16.11 | $ | 16.93 | $ | (0.82 | ) | $ | 16.11 | $ | 22.57 | $ | (6.46 | ) |
(1) | The operations of the HOA Business are included from its October 8, 2021 acquisition date and the operations of Civic are included from its February 1, 2021 acquisition date. |
(2) | Non-GAAP measure. |
Page 2
INCOME STATEMENT HIGHLIGHTS
NET INTEREST INCOME
Net interest income increased by $11.3 million to $335.2 million for the third quarter of 2022 compared to $323.9 million for the second quarter of 2022. Interest income on loans and leases increased by $53.3 million in the third quarter of 2022 due to a $1.6 billion increase in the average balance of loans and leases and a 47 basis point increase in the tax equivalent yield on average loans and leases compared to the second quarter of 2022. Interest income on deposits in financial institutions increased by $6.0 million in the third quarter of 2022 due to a 139 basis point increase in the yield on average deposits in financial institutions, offset partially by a $175 million decrease in the average balance. The tax equivalent yield on average loans and leases was 5.12% for the third quarter of 2022 compared to 4.65% for the second quarter of 2022. The increase in the tax equivalent yield on average loans and leases was due primarily to higher coupon interest due to increased rates on new production and on existing variable rate loans. Interest expense on deposits increased by $45.9 million in the third quarter of 2022 due mainly to increased market rates and a higher level of wholesale deposits which contributed to a 52 basis point increase in the cost of average total deposits. Interest expense on borrowings and subordinated debt increased by $2.3 million due to a 190 basis points increase in the cost of average borrowings and subordinated debt, partially offset by an $851 million decrease in the average balance.
The tax equivalent NIM was 3.57% for the third quarter of 2022 compared to 3.56% for the second quarter of 2022. The slight increase in the NIM was due mainly to the change in the interest-earning assets mix driven by the increase in the balance of average loans and leases as a percentage of average interest-earning assets from 69% to 72%, the decrease in the balance of average investment securities as a percentage of average interest-earning assets from 26% to 23%, and the balance of average deposits in financial institutions as a percentage of average interest-earning assets remained unchanged at 5%. The balance of average loans and leases increased by $1.6 billion to $27.0 billion, the balance of average investment securities decreased by $685 million to $8.8 billion, and the balance of average deposits in financial institutions decreased by $175 million to $1.8 billion.
The cost of average total deposits was 0.70% for the third quarter of 2022 compared to 0.18% for the second quarter of 2022 due mainly to higher average balances and rates on higher-cost wholesale money market and brokered time deposits, as well as higher market rates on our deposit products.
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 | 2022 | 2022 | (Decrease) | |||||||||
(In thousands) | ||||||||||||
Addition (reduction) in allowance for loan and lease losses | $ | 3,000 | $ | (10,000 | ) | $ | 13,000 | |||||
Addition to reserve for unfunded loan commitments | - | 20,000 | (20,000 | ) | ||||||||
Total loan-related provision | 3,000 | 10,000 | (7,000 | ) | ||||||||
Addition to allowance for held-to-maturity securities | - | 1,500 | (1,500 | ) | ||||||||
Total provision for credit losses | $ | 3,000 | $ | 11,500 | $ | (8,500 | ) |
Page 3
The provision for credit losses was $3.0 million for the third quarter of 2022 compared to $11.5 million for the second quarter of 2022. The $7.0 million decrease in the loan-related provision was due mainly to a lower level of growth in loans and leases and unfunded commitments in the third versus the second quarter of 2022 and a decrease in COVID-related qualitative reserves, partially offset by increased reserves needed due to a less favorable economic forecast in the third versus the second quarter of 2022.
Noninterest Income
The following table presents details of noninterest income for the periods indicated:
Three Months Ended | ||||||||||||
September 30, | June 30, | Increase | ||||||||||
Noninterest Income | 2022 | 2022 | (Decrease) | |||||||||
(In thousands) | ||||||||||||
Service charges on deposit accounts | $ | 3,608 | $ | 3,634 | $ | (26 | ) | |||||
Other commissions and fees | 10,034 | 10,813 | (779 | ) | ||||||||
Leased equipment income | 12,835 | 12,335 | 500 | |||||||||
Gain on sale of loans and leases | 58 | 12 | 46 | |||||||||
Gain (loss) on sale of securities | 86 | (1,209 | ) | 1,295 | ||||||||
Dividends and gains on equity investments | 3,228 | 4,097 | (869 | ) | ||||||||
Warrant income | 292 | 1,615 | (1,323 | ) | ||||||||
Other income | 8,478 | 3,049 | 5,429 | |||||||||
Total noninterest income | $ | 38,619 | $ | 34,346 | $ | 4,273 |
Noninterest income increased by $4.3 million to $38.6 million for the third quarter of 2022 compared to $34.3 million for the second quarter of 2022 due primarily to increases of $5.4 million in other income and $1.3 million in gain on sale of securities, offset partially by a decrease of $1.3 million in warrant income and a decrease of $0.9 million in dividends and gains on equity investments. The increase in other income was due primarily to the receipt of a $5.5 million legal settlement, net of current year legal fees. The increase in gain on sale of securities resulted from the sale of $440.4 million of securities for a net gain of $86,000 compared to sales of $393.4 million of securities for a net loss of $1.2 million for the second quarter of 2022. Warrant income was lower due to a lack of capital market activities. The decrease in dividends and gains on equity investments was due to lower fair value gains on equity investments still held and SBIC investments, partially offset by lower losses on sales of equity investments and increased income distributions on SBIC investments.
Page 4
Noninterest Expense
The following table presents details of noninterest expense for the periods indicated:
Three Months Ended | ||||||||||||
September 30, | June 30, | Increase | ||||||||||
Noninterest Expense | 2022 | 2022 | (Decrease) | |||||||||
(In thousands) | ||||||||||||
Compensation | $ | 105,933 | $ | 102,542 | $ | 3,391 | ||||||
Occupancy | 15,574 | 15,268 | 306 | |||||||||
Data processing | 9,568 | 9,258 | 310 | |||||||||
Other professional services | 10,674 | 6,726 | 3,948 | |||||||||
Insurance and assessments | 7,159 | 5,632 | 1,527 | |||||||||
Intangible asset amortization | 3,649 | 3,649 | - | |||||||||
Leased equipment depreciation | 8,908 | 8,934 | (26 | ) | ||||||||
Foreclosed assets (income) expense, net | (248 | ) | (28 | ) | (220 | ) | ||||||
Customer related expense | 12,673 | 11,748 | 925 | |||||||||
Loan expense | 6,228 | 7,037 | (809 | ) | ||||||||
Other | 15,500 | 12,879 | 2,621 | |||||||||
Total noninterest expense | $ | 195,618 | $ | 183,645 | $ | 11,973 |
Noninterest expense increased by $12.0 million to $195.6 million for the third quarter of 2022 compared to $183.6 million for the second quarter of 2022 due primarily to increases of $3.9 million in other professional services, $3.4 million in compensation expense, $2.6 million in other expense, and $1.5 million in insurance and assessments expense. The increase in other professional services was due mostly to issuance costs of the credit-linked notes transaction. The increase in compensation expense was due mainly to an increase in our headcount by 68 FTEs during the third quarter primarily related to hiring at Civic and for our digital and innovation initiatives. The increase in other expense was due primarily to a legal settlement accrual. The increase in insurance and assessments expense was due to higher FDIC assessment expense due to downward trends in core deposits and capital levels in the first half of 2022. Noninterest expense includes $7.0 million of non-recurring expenses in the third quarter of 2022 related to the issuance costs of the credit-linked notes transaction and a legal settlement accrual.
Income Taxes
The effective income tax rate was 24.9% for the third quarter of 2022 compared to 25.0% for the second quarter of 2022. The effective tax rate for the full year 2022 is currently estimated to be in the range of 25% to 27%.
Page 5
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, 2022 | June 30, 2022 | September 30, 2021 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Deposit Composition | Balance | Total | Balance | Total | Balance | Total | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Noninterest-bearing demand | $ | 12,775,756 | 37 | % | $ | 13,338,029 | 39 | % | $ | 12,881,806 | 42 | % | ||||||||||||
Interest checking | 6,780,900 | 20 | % | 6,197,234 | 18 | % | 7,168,472 | 24 | % | |||||||||||||||
Money market | 8,361,779 | 24 | % | 9,029,433 | 27 | % | 7,463,261 | 24 | % | |||||||||||||||
Savings | 640,875 | 2 | % | 653,950 | 2 | % | 627,169 | 2 | % | |||||||||||||||
Total core deposits | 28,559,310 | 83 | % | 29,218,646 | 86 | % | 28,140,708 | 92 | % | |||||||||||||||
Wholesale non-maturity deposits | 2,367,544 | 7 | % | 2,185,248 | 6 | % | 960,438 | 3 | % | |||||||||||||||
Total non-maturity deposits | 30,926,854 | 90 | % | 31,403,894 | 92 | % | 29,101,146 | 95 | % | |||||||||||||||
Retail time deposits | 1,778,325 | 5 | % | 1,354,198 | 4 | % | 1,262,864 | 4 | % | |||||||||||||||
Brokered time deposits | 1,490,693 | 5 | % | 1,210,060 | 4 | % | 195,735 | 1 | % | |||||||||||||||
Total time deposits (1) | 3,269,018 | 10 | % | 2,564,258 | 8 | % | 1,458,599 | 5 | % | |||||||||||||||
Total deposits | $ | 34,195,872 | 100 | % | $ | 33,968,152 | 100 | % | $ | 30,559,745 | 100 | % |
(1) | Includes time deposits over $250,000 of $1.0 billion, $665.9 million, and $576.0 million at September 30, 2022, June 30, 2022, and September 30, 2021, respectively. |
Total deposits increased by $228 million or 0.7% in the third quarter of 2022 due to a $705 million increase in time deposits and a $182 million increase in wholesale non-maturity deposits, offset partially by a decrease in core deposits. Total venture banking deposits increased from $12.1 billion as of June 30, 2022 to $12.2 billion as of September 30, 2022. At September 30, 2022, core deposits totaled $28.6 billion or 83% of total deposits, including $12.8 billion of noninterest-bearing demand deposits or 37% of total deposits. Core deposits decreased by $659 million or 2.3% in the third quarter of 2022 driven primarily by a $586 million decrease in balances from our community banking clients primarily in September due to client business activity.
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 decreased from $2.1 billion as of June 30, 2022 to $1.8 billion as of September 30, 2022, of which $1.1 billion was managed by PWAM. The decrease of $0.3 billion was primarily attributable to deposit transfers by venture banking clients back onto our balance sheet.
Page 6
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 for Investment, Net of Deferred Fees |
September 30, 2022 |
June 30, 2022 |
September 30, 2022 |
|||||||||
(Dollars in thousands) | ||||||||||||
Balance, beginning of period | $ | 26,501,137 | $ | 24,352,072 | $ | 22,941,548 | ||||||
Additions: | ||||||||||||
Production | 1,758,107 | 2,815,181 | 7,148,148 | |||||||||
Disbursements | 1,677,795 | 1,871,627 | 5,138,574 | |||||||||
Total production and disbursements | 3,435,902 | 4,686,808 | 12,286,722 | |||||||||
Reductions: | ||||||||||||
Payoffs | (977,654 | ) | (1,347,447 | ) | (3,773,781 | ) | ||||||
Paydowns | (1,256,557 | ) | (1,183,178 | ) | (3,704,306 | ) | ||||||
Total payoffs and paydowns | (2,234,211 | ) | (2,530,625 | ) | (7,478,087 | ) | ||||||
Sales | (19,635 | ) | (4,319 | ) | (60,652 | ) | ||||||
Transfers to foreclosed assets | (2,966 | ) | - | (3,271 | ) | |||||||
Charge-offs | (4,652 | ) | (2,799 | ) | (10,685 | ) | ||||||
Transfers to loans held for sale | (15,534 | ) | - | (15,534 | ) | |||||||
Total reductions | (2,276,998 | ) | (2,537,743 | ) | (7,568,229 | ) | ||||||
Net increase | 1,158,904 | 2,149,065 | 4,718,493 | |||||||||
Balance, end of period | $ | 27,660,041 | $ | 26,501,137 | $ | 27,660,041 | ||||||
Weighted average rate on production (1) | 5.92 | % | 4.61 | % | 4.82 | % |
(1) | The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes amortized fees. Amortized fees added approximately 22 basis points to loan yields in 2022. |
Loans and leases held for investment, net of deferred fees, increased by $1.2 billion or 4.4% in the third quarter of 2022 to $27.7 billion at September 30, 2022. The overall increase in the loans and leases balance for the third quarter of 2022 was due primarily to increases in the residential real estate mortgage and residential real estate construction portfolios.
Civic loan production was $831 million for the third quarter of 2022 compared to $847 million for the second quarter of 2022. The Civic loan portfolio as of September 30, 2022 totaled $2.9 billion.
The weighted average rate on the $1.8 billion of production for the third quarter of 2022 increased to 5.92% from 4.61% for the second quarter of 2022 due primarily to the loan mix (lower percentage of multi-family production, no single-family loan pool purchases, and a higher percentage of Civic production) and the increase in market interest rates.
Page 7
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, 2022 | June 30, 2022 | September 30, 2021 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Loan and Lease Portfolio | Balance | Total | Balance | Total | Balance | Total | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Real estate mortgage: | ||||||||||||||||||||||||
Commercial | $ | 3,770,706 | 14 | % | $ | 3,670,515 | 14 | % | $ | 3,694,597 | 18 | % | ||||||||||||
Residential | 10,860,043 | 39 | % | 9,879,131 | 37 | % | 5,886,360 | 29 | % | |||||||||||||||
Total real estate mortgage | 14,630,749 | 53 | % | 13,549,646 | 51 | % | 9,580,957 | 47 | % | |||||||||||||||
Real estate construction and land: | ||||||||||||||||||||||||
Commercial | 843,086 | 3 | % | 837,423 | 3 | % | 992,003 | 5 | % | |||||||||||||||
Residential | 3,450,430 | 12 | % | 3,153,616 | 12 | % | 2,659,870 | 13 | % | |||||||||||||||
Total real estate construction and land | 4,293,516 | 15 | % | 3,991,039 | 15 | % | 3,651,873 | 18 | % | |||||||||||||||
Total real estate | 18,924,265 | 68 | % | 17,540,685 | 66 | % | 13,232,830 | 65 | % | |||||||||||||||
Commercial: | ||||||||||||||||||||||||
Asset-based | 5,154,654 | 19 | % | 5,068,112 | 19 | % | 3,661,769 | 18 | % | |||||||||||||||
Venture capital | 2,001,086 | 7 | % | 2,179,190 | 8 | % | 1,632,861 | 8 | % | |||||||||||||||
Other commercial | 1,115,442 | 4 | % | 1,229,504 | 5 | % | 1,577,592 | 7 | % | |||||||||||||||
Total commercial | 8,271,182 | 30 | % | 8,476,806 | 32 | % | 6,872,222 | 33 | % | |||||||||||||||
Consumer | 464,594 | 2 | % | 483,646 | 2 | % | 405,968 | 2 | % | |||||||||||||||
Total loans and leases held for | ||||||||||||||||||||||||
investment, net of deferred fees | $ | 27,660,041 | 100 | % | $ | 26,501,137 | 100 | % | $ | 20,511,020 | 100 | % | ||||||||||||
Total unfunded loan commitments | $ | 11,227,234 | $ | 11,866,437 | $ | 8,480,599 |
Allowance for Credit Losses ON LOANS AND LEASES
The following tables present roll forwards of the allowance for credit losses on loans and leases for the periods indicated:
Three Months Ended September 30, 2022 | ||||||||||||
Allowance for | Reserve for | Total | ||||||||||
Loan and | Unfunded Loan | Allowance for | ||||||||||
Allowance for Credit Losses on Loans and Leases Rollforward | Lease Losses | Commitments | Credit Losses | |||||||||
(In thousands) | ||||||||||||
Beginning balance | $ | 188,705 | $ | 95,071 | $ | 283,776 | ||||||
Charge-offs | (4,652 | ) | - | (4,652 | ) | |||||||
Recoveries | 2,274 | - | 2,274 | |||||||||
Net charge-offs | (2,378 | ) | - | (2,378 | ) | |||||||
Provision | 3,000 | - | 3,000 | |||||||||
Ending balance | $ | 189,327 | $ | 95,071 | $ | 284,398 |
Three Months Ended June 30, 2022 | ||||||||||||
Allowance for | Reserve for | Total | ||||||||||
Loan and | Unfunded Loan | Allowance for | ||||||||||
Allowance for Credit Losses on Loans and Leases Rollforward | Lease Losses | Commitments | Credit Losses | |||||||||
(In thousands) | ||||||||||||
Beginning balance | $ | 197,398 | $ | 75,071 | $ | 272,469 | ||||||
Charge-offs | (2,799 | ) | - | (2,799 | ) | |||||||
Recoveries | 4,106 | - | 4,106 | |||||||||
Net recoveries | 1,307 | - | 1,307 | |||||||||
Provision | (10,000 | ) | 20,000 | 10,000 | ||||||||
Ending balance | $ | 188,705 | $ | 95,071 | $ | 283,776 |
Page 8
The following table presents allowance for credit losses information on loans and leases as of and for the dates and periods indicated:
September 30, | June 30, | Increase | ||||||||||
Allowance for Credit Losses on Loans and Leases | 2022 | 2022 | (Decrease) | |||||||||
(Dollars in thousands) | ||||||||||||
Allowance for loan and lease losses | $ | 189,327 | $ | 188,705 | $ | 622 | ||||||
Reserve for unfunded loan commitments | 95,071 | 95,071 | - | |||||||||
Allowance for credit losses | $ | 284,398 | $ | 283,776 | $ | 622 | ||||||
Provision for credit losses (for the quarter) | $ | 3,000 | $ | 10,000 | $ | (7,000 | ) | |||||
Net charge-offs (recoveries) (for the quarter) | $ | 2,378 | $ | (1,307 | ) | $ | 3,685 | |||||
Net charge-offs (recoveries) to average loans and leases (for the quarter) | 0.03 | % | (0.02 | )% | ||||||||
Allowance for loan and lease losses to loans and leases held for investment | 0.68 | % | 0.71 | % | ||||||||
Allowance for credit losses to loans and leases held for investment | 1.03 | % | 1.07 | % |
The allowance for credit losses increased by $0.6 million in the third quarter of 2022 to $284.4 million at September 30, 2022. This increase was attributable mainly to a $3.0 million provision for credit losses, offset partially by $2.4 million in net charge-offs.
Net charge-offs over the trailing twelve months were $2.4 million, which results in net charge-offs to average loans and leases over the trailing twelve months of 0.1%.
Page 9
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 | 2022 | 2022 | (Decrease) | |||||||||
(Dollars in thousands) | ||||||||||||
NPAs and Performing TDRs: | ||||||||||||
Nonaccrual loans and leases held for investment (1) | $ | 89,742 | $ | 78,527 | $ | 11,215 | ||||||
Accruing loans contractually past due 90 days or more | - | - | - | |||||||||
Foreclosed assets, net | 2,967 | - | 2,967 | |||||||||
Total nonperforming assets ("NPAs") | $ | 92,709 | $ | 78,527 | $ | 14,182 | ||||||
Performing TDRs held for investment | $ | 8,106 | $ | 11,723 | $ | (3,617 | ) | |||||
Nonaccrual loans and leases held for investment to loans and leases held for investment | 0.32 | % | 0.30 | % | ||||||||
Nonperforming assets to loans and leases held for investment and foreclosed assets | 0.34 | % | 0.30 | % | ||||||||
Allowance for credit losses to nonaccrual loans and leases held for investment | 316.9 | % | 361.4 | % |
(1) Nonaccrual loans include SBA guaranteed amounts of $17.2 million at September 30, 2022 and $13.8 million at June 30, 2022. |
Nonaccrual loans and leases increased by $11.2 million to $89.7 million in the third quarter of 2022 due primarily to a $15.5 million office building loan.
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, 2022 | June 30, 2022 | 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 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Real estate mortgage: | ||||||||||||||||||||||||
Commercial | $ | 42,772 | $ | 14 | $ | 28,529 | $ | 14 | $ | 14,243 | $ | - | ||||||||||||
Residential | 25,950 | 21,700 | 27,524 | 13,577 | (1,574 | ) | 8,123 | |||||||||||||||||
Total real estate mortgage | 68,722 | 21,714 | 56,053 | 13,591 | 12,669 | 8,123 | ||||||||||||||||||
Real estate construction and land: | ||||||||||||||||||||||||
Commercial | - | - | - | - | - | - | ||||||||||||||||||
Residential | 7,101 | 3,051 | 13,287 | 25,981 | (6,186 | ) | (22,930 | ) | ||||||||||||||||
Total real estate construction and land | 7,101 | 3,051 | 13,287 | 25,981 | (6,186 | ) | (22,930 | ) | ||||||||||||||||
Commercial: | ||||||||||||||||||||||||
Asset-based | 2,127 | - | 1,189 | - | 938 | - | ||||||||||||||||||
Venture capital | 3,809 | - | 3,120 | - | 689 | - | ||||||||||||||||||
Other commercial | 7,616 | 265 | 4,655 | 9,503 | 2,961 | (9,238 | ) | |||||||||||||||||
Total commercial | 13,552 | 265 | 8,964 | 9,503 | 4,588 | (9,238 | ) | |||||||||||||||||
Consumer | 367 | 1,996 | 223 | 1,711 | 144 | 285 | ||||||||||||||||||
Total held for investment | $ | 89,742 | $ | 27,026 | $ | 78,527 | $ | 50,786 | $ | 11,215 | $ | (23,760 | ) |
Loans and leases accruing and 30-89 days past due generally fluctuate from period to period. The $23.8 million decrease in the third quarter of 2022 was primarily in Civic residential construction loans and in the other commercial category, offset partially by an increase in the residential mortgage loans category.
Page 10
CAPITAL
Our CET1, Tier 1, Total capital, and Tier 1 leverage capital ratios increased during the third quarter of 2022 due mainly to strong earnings and the completion of the credit-linked notes transaction on September 29, 2022, which added approximately 20 basis points to the CET1 ratio. The notes sold had an aggregate principal amount of $132.8 million with net proceeds of approximately $128.7 million. The notes are linked to the credit risk of an approximately $2.66 billion reference pool of previously purchased single-family residential mortgage loans. The notes were issued in five classes with a blended interest rate of SOFR plus 11%. The transaction results in a lower risk-weighting on the reference pool of loans for regulatory capital purposes. The following table presents capital ratios as of the dates indicated:
September 30, | June 30, | September 30, | ||||||||||
2022 | 2022 | 2021 | ||||||||||
PacWest Bancorp Consolidated: | ||||||||||||
Common equity tier 1 capital ratio (1) | 8.55 | % | 8.24 | % | 10.15 | % | ||||||
Tier 1 capital ratio (1) | 10.46 | % | 10.15 | % | 10.65 | % | ||||||
Total capital ratio (1) | 13.43 | % | 13.12 | % | 14.36 | % | ||||||
Tier 1 leverage capital ratio (1) | 8.63 | % | 8.52 | % | 8.05 | % | ||||||
Risk-weighted assets (1) (in thousands) | $ | 33,055,996 | $ | 33,009,455 | $ | 26,057,583 | ||||||
Tangible common equity ratio (2) | 4.85 | % | 5.15 | % | 7.79 | % | ||||||
Tangible common equity ratio excluding the impact of AOCI for securities (2) | 6.97 | % | 6.79 | % | 7.50 | % |
(1) Capital information for September 30, 2022 is preliminary. | |||||
(2) Non-GAAP measure. |
CONFERENCE CALL
PacWest Bancorp (“PacWest”) will host a conference call at 8:00 AM PT/ 11:00 AM ET on Thursday, October 20, 2022 to discuss the Company’s performance for the third quarter of 2022.
Participants may access the conference call/webcast at:
Participant Dial-in: (800) 458-4121
Participant Webcast Link: https://event.webcasts.com/starthere.jsp?ei=1562576&tp_key=817f59ebeb
Confirmation Code: 8001555
The call will be recorded and made available for replay on October 20, 2022, after 12:00 PM PT. The recording may be accessed through the link above or at https://www.pacwestbancorp.com/news-market-data/presentations/default.aspx.
Page 11
ABOUT PACWEST BANCORP
PacWest is a bank holding company with over $41 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 is focused on relationship-based business banking to small, middle-market, and venture-backed businesses nationwide. The Bank offers a broad range of loan and lease and deposit products and services through 69 full-service branches located in California, one branch located in Durham, North Carolina, one branch located in Denver, Colorado, and numerous loan production offices across the country. 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 innovation hubs across the United States. The Bank also offers financing of business-purpose, non-owner-occupied investor properties through Civic, a wholly-owned subsidiary. The Bank also provides 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 often use words such as “anticipates,” “targets,” “expects,” “estimates,” “intends,” “plans,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of PacWest’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those expressed in them. The risks and impacts of the COVID-19 pandemic appear to have largely subsided, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our business, financial position, results of operations, liquidity, and our allowance for credit losses and the related provision for credit losses. Continued deterioration in general business and economic conditions, uncertainty in U.S. fiscal monetary policy, including the interest rate policies of the Federal Reserve Board, and volatility and disruptions in credit and capital markets 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, inflation, 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, 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.
All forward-looking statements in this communication are based on information available at the time the statement is made. 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 12
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, | June 30, | September 30, | ||||||||||
2022 | 2022 | 2021 | ||||||||||
(Dollars in thousands, except per share data) | ||||||||||||
ASSETS: | ||||||||||||
Cash and due from banks | $ | 216,436 | $ | 197,027 | $ | 174,585 | ||||||
Interest-earning deposits in financial institutions | 2,244,272 | 2,192,877 | 3,524,613 | |||||||||
Total cash and cash equivalents | 2,460,708 | 2,389,904 | 3,699,198 | |||||||||
Securities available-for-sale, at estimated fair value | 5,891,328 | 6,780,648 | 9,276,926 | |||||||||
Securities held-to-maturity, at amortized cost, net of allowance for credit losses | 2,264,601 | 2,260,367 | - | |||||||||
Federal Home Loan Bank stock, at cost | 36,990 | 33,210 | 17,250 | |||||||||
Total investment securities | 8,192,919 | 9,074,225 | 9,294,176 | |||||||||
Loans held for sale | 15,534 | - | - | |||||||||
Gross loans and leases held for investment | 27,775,962 | 26,608,541 | 20,588,255 | |||||||||
Deferred fees, net | (115,921 | ) | (107,404 | ) | (77,235 | ) | ||||||
Total loans and leases held for investment, net of deferred fees | 27,660,041 | 26,501,137 | 20,511,020 | |||||||||
Allowance for loan and lease losses | (189,327 | ) | (188,705 | ) | (203,733 | ) | ||||||
Total loans and leases held for investment, net | 27,470,714 | 26,312,432 | 20,307,287 | |||||||||
Equipment leased to others under operating leases | 338,691 | 324,233 | 334,275 | |||||||||
Premises and equipment, net | 50,781 | 51,083 | 47,246 | |||||||||
Foreclosed assets, net | 2,967 | - | 13,364 | |||||||||
Goodwill | 1,405,736 | 1,405,736 | 1,204,118 | |||||||||
Core deposit and customer relationship intangibles, net | 34,010 | 37,659 | 15,533 | |||||||||
Other assets | 1,432,532 | 1,355,451 | 970,479 | |||||||||
Total assets | $ | 41,404,592 | $ | 40,950,723 | $ | 35,885,676 | ||||||
LIABILITIES: | ||||||||||||
Noninterest-bearing deposits | $ | 12,775,756 | $ | 13,338,029 | $ | 12,881,806 | ||||||
Interest-bearing deposits | 21,420,116 | 20,630,123 | 17,677,939 | |||||||||
Total deposits | 34,195,872 | 33,968,152 | 30,559,745 | |||||||||
Borrowings | 1,864,815 | 1,592,000 | - | |||||||||
Subordinated debt | 863,379 | 863,756 | 862,447 | |||||||||
Accrued interest payable and other liabilities | 604,581 | 548,412 | 545,050 | |||||||||
Total liabilities | 37,528,647 | 36,972,320 | 31,967,242 | |||||||||
STOCKHOLDERS' EQUITY (1) | 3,875,945 | 3,978,403 | 3,918,434 | |||||||||
Total liabilities and stockholders’ equity | $ | 41,404,592 | $ | 40,950,723 | $ | 35,885,676 | ||||||
Book value per common share | $ | 28.07 | $ | 28.93 | $ | 32.77 | ||||||
Tangible book value per common share (2) | $ | 16.11 | $ | 16.93 | $ | 22.57 | ||||||
Common shares outstanding | 120,314,023 | 120,288,024 | 119,579,566 | |||||||||
(1) Includes net unrealized (loss) gain on: | ||||||||||||
Securities available-for-sale, net | $ | (637,346 | ) | $ | (428,242 | ) | $ | 98,859 | ||||
Securities held to maturity | (210,868 | ) | (216,508 | ) | - | |||||||
Total | $ | (848,214 | ) | $ | (644,750 | ) | $ | 98,859 | ||||
(2) Non-GAAP measure. |
Page 13
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Interest income: | ||||||||||||||||||||
Loans and leases | $ | 346,550 | $ | 293,286 | $ | 246,722 | $ | 907,595 | $ | 732,795 | ||||||||||
Investment securities | 53,135 | 52,902 | 40,780 | 159,459 | 104,999 | |||||||||||||||
Deposits in financial institutions | 10,359 | 4,330 | 2,580 | 16,412 | 6,130 | |||||||||||||||
Total interest income | 410,044 | 350,518 | 290,082 | 1,083,466 | 843,924 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | 61,288 | 15,362 | 6,417 | 82,858 | 21,186 | |||||||||||||||
Borrowings | 3,081 | 2,441 | 101 | 5,683 | 559 | |||||||||||||||
Subordinated debt | 10,494 | 8,790 | 7,722 | 27,102 | 18,760 | |||||||||||||||
Total interest expense | 74,863 | 26,593 | 14,240 | 115,643 | 40,505 | |||||||||||||||
Net interest income | 335,181 | 323,925 | 275,842 | 967,823 | 803,419 | |||||||||||||||
Provision for credit losses | 3,000 | 11,500 | (20,000 | ) | 14,500 | (156,000 | ) | |||||||||||||
Net interest income after provision for credit losses | 332,181 | 312,425 | 295,842 | 953,323 | 959,419 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
Service charges on deposit accounts | 3,608 | 3,634 | 3,407 | 10,813 | 9,793 | |||||||||||||||
Other commissions and fees | 10,034 | 10,813 | 11,792 | 32,427 | 31,654 | |||||||||||||||
Leased equipment income | 12,835 | 12,335 | 10,943 | 38,264 | 33,144 | |||||||||||||||
Gain on sale of loans and leases | 58 | 12 | - | 130 | 1,561 | |||||||||||||||
Gain (loss) on sale of securities | 86 | (1,209 | ) | 515 | (1,019 | ) | 616 | |||||||||||||
Dividends and gains (losses) on equity investments | 3,228 | 4,097 | 8,387 | (4,050 | ) | 24,685 | ||||||||||||||
Warrant income | 292 | 1,615 | 13,578 | 2,536 | 25,351 | |||||||||||||||
Other income | 8,478 | 3,049 | 2,723 | 14,682 | 9,741 | |||||||||||||||
Total noninterest income | 38,619 | 34,346 | 51,345 | 93,783 | 136,545 | |||||||||||||||
Noninterest expense: | ||||||||||||||||||||
Compensation | 105,933 | 102,542 | 98,061 | 300,715 | 268,750 | |||||||||||||||
Occupancy | 15,574 | 15,268 | 14,928 | 46,042 | 43,766 | |||||||||||||||
Data processing | 9,568 | 9,258 | 7,391 | 28,455 | 22,106 | |||||||||||||||
Other professional services | 10,674 | 6,726 | 5,164 | 23,354 | 15,546 | |||||||||||||||
Insurance and assessments | 7,159 | 5,632 | 3,685 | 18,281 | 12,333 | |||||||||||||||
Intangible asset amortization | 3,649 | 3,649 | 2,890 | 10,947 | 8,858 | |||||||||||||||
Leased equipment depreciation | 8,908 | 8,934 | 8,603 | 27,031 | 26,186 | |||||||||||||||
Foreclosed assets (income) expense, net | (248 | ) | (28 | ) | 165 | (3,629 | ) | 47 | ||||||||||||
Acquisition, integration and reorganization costs | - | - | 200 | - | 3,825 | |||||||||||||||
Customer related expense | 12,673 | 11,748 | 4,538 | 37,076 | 14,329 | |||||||||||||||
Loan expense | 6,228 | 7,037 | 4,180 | 18,422 | 11,404 | |||||||||||||||
Other expense | 15,500 | 12,879 | 9,616 | 39,995 | 34,157 | |||||||||||||||
Total noninterest expense | 195,618 | 183,645 | 159,421 | 546,689 | 461,307 | |||||||||||||||
Earnings before income taxes | 175,182 | 163,126 | 187,766 | 500,417 | 634,657 | |||||||||||||||
Income tax expense | 43,566 | 40,766 | 47,770 | 126,313 | 163,743 | |||||||||||||||
Net earnings | 131,616 | 122,360 | 139,996 | 374,104 | 470,914 | |||||||||||||||
Preferred stock dividends | 9,392 | - | - | 9,392 | - | |||||||||||||||
Net earnings available to common stockholders | $ | 122,224 | $ | 122,360 | $ | 139,996 | $ | 364,712 | $ | 470,914 | ||||||||||
Basic and diluted earnings per common share | $ | 1.02 | $ | 1.02 | $ | 1.17 | $ | 3.04 | $ | 3.96 | ||||||||||
Dividends declared and paid per common share | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.75 | $ | 0.75 |
Page 14
PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER COMMON SHARE
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Basic Earnings Per Common Share: | ||||||||||||||||||||
Net earnings | $ | 131,616 | $ | 122,360 | $ | 139,996 | $ | 374,104 | $ | 470,914 | ||||||||||
Less: Preferred stock dividends | (9,392 | ) | - | - | (9,392 | ) | - | |||||||||||||
Net earnings available to common stockholders | 122,224 | 122,360 | 139,996 | 364,712 | 470,914 | |||||||||||||||
Less: Earnings allocated to unvested restricted stock (1) | (2,331 | ) | (2,351 | ) | (2,417 | ) | (6,721 | ) | (7,930 | ) | ||||||||||
Net earnings allocated to common shares | $ | 119,893 | $ | 120,009 | $ | 137,579 | $ | 357,991 | $ | 462,984 | ||||||||||
Weighted average basic shares and unvested restricted stock outstanding | 120,342 | 120,022 | 119,569 | 119,989 | 119,272 | |||||||||||||||
Less: weighted average unvested restricted stock outstanding | (2,556 | ) | (2,460 | ) | (2,340 | ) | (2,422 | ) | (2,235 | ) | ||||||||||
Weighted average basic shares outstanding | 117,786 | 117,562 | 117,229 | 117,567 | 117,037 | |||||||||||||||
Basic earnings per common share | $ | 1.02 | $ | 1.02 | $ | 1.17 | $ | 3.04 | $ | 3.96 | ||||||||||
Diluted Earnings Per Common Share: | ||||||||||||||||||||
Net earnings allocated to common shares | $ | 119,893 | $ | 120,009 | $ | 137,579 | $ | 357,991 | $ | 462,984 | ||||||||||
Weighted average diluted shares outstanding | 117,786 | 117,562 | 117,229 | 117,567 | 117,037 | |||||||||||||||
Diluted earnings per common share | $ | 1.02 | $ | 1.02 | $ | 1.17 | $ | 3.04 | $ | 3.96 |
(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 15
PACWEST BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
Three Months Ended | ||||||||||||||||||||||||||||||||||||
September 30, 2022 | June 30, 2022 | September 30, 2021 | ||||||||||||||||||||||||||||||||||
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) | $ | 27,038,873 | $ | 348,639 | 5.12 | % | $ | 25,449,773 | $ | 295,154 | 4.65 | % | $ | 19,670,671 | $ | 248,485 | 5.01 | % | ||||||||||||||||||
Investment securities (3) | 8,803,349 | 54,423 | 2.45 | % | 9,488,653 | 54,910 | 2.32 | % | 8,047,098 | 42,952 | 2.12 | % | ||||||||||||||||||||||||
Deposits in financial institutions | 1,809,809 | 10,359 | 2.27 | % | 1,984,751 | 4,330 | 0.88 | % | 5,657,768 | 2,580 | 0.18 | % | ||||||||||||||||||||||||
Total interest-earning assets (1) | 37,652,031 | 413,421 | 4.36 | % | 36,923,177 | 354,394 | 3.85 | % | 33,375,537 | 294,017 | 3.50 | % | ||||||||||||||||||||||||
Other assets | 3,189,241 | 3,108,714 | 2,496,127 | |||||||||||||||||||||||||||||||||
Total assets | $ | 40,841,272 | $ | 40,031,891 | $ | 35,871,664 | ||||||||||||||||||||||||||||||
Liabilities and Stockholders' Equity: | ||||||||||||||||||||||||||||||||||||
Interest checking | $ | 6,650,477 | 19,475 | 1.16 | % | $ | 6,517,381 | 3,816 | 0.23 | % | $ | 7,372,859 | 2,042 | 0.11 | % | |||||||||||||||||||||
Money market | 10,914,027 | 31,780 | 1.16 | % | 10,553,942 | 8,448 | 0.32 | % | 8,662,449 | 2,997 | 0.14 | % | ||||||||||||||||||||||||
Savings | 649,574 | 42 | 0.03 | % | 650,479 | 41 | 0.03 | % | 620,079 | 38 | 0.02 | % | ||||||||||||||||||||||||
Time | 3,000,187 | 9,991 | 1.32 | % | 1,939,816 | 3,057 | 0.63 | % | 1,475,307 | 1,340 | 0.36 | % | ||||||||||||||||||||||||
Total interest-bearing deposits | 21,214,265 | 61,288 | 1.15 | % | 19,661,618 | 15,362 | 0.31 | % | 18,130,694 | 6,417 | 0.14 | % | ||||||||||||||||||||||||
Borrowings | 505,482 | 3,081 | 2.42 | % | 1,356,616 | 2,441 | 0.72 | % | 238,335 | 101 | 0.17 | % | ||||||||||||||||||||||||
Subordinated debt | 863,719 | 10,494 | 4.82 | % | 863,653 | 8,790 | 4.08 | % | 862,272 | 7,722 | 3.55 | % | ||||||||||||||||||||||||
Total interest-bearing liabilities | 22,583,466 | 74,863 | 1.32 | % | 21,881,887 | 26,593 | 0.49 | % | 19,231,301 | 14,240 | 0.29 | % | ||||||||||||||||||||||||
Noninterest-bearing demand deposits | 13,653,177 | 13,987,398 | 12,198,313 | |||||||||||||||||||||||||||||||||
Other liabilities | 593,450 | 510,238 | 525,429 | |||||||||||||||||||||||||||||||||
Total liabilities | 36,830,093 | 36,379,523 | 31,955,043 | |||||||||||||||||||||||||||||||||
Stockholders' equity | 4,011,179 | 3,652,368 | 3,916,621 | |||||||||||||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 40,841,272 | $ | 40,031,891 | $ | 35,871,664 | ||||||||||||||||||||||||||||||
Net interest income (1) | $ | 338,558 | $ | 327,801 | $ | 279,777 | ||||||||||||||||||||||||||||||
Net interest spread (1) | 3.04 | % | 3.36 | % | 3.21 | % | ||||||||||||||||||||||||||||||
Net interest margin (1) | 3.57 | % | 3.56 | % | 3.33 | % | ||||||||||||||||||||||||||||||
Total deposits (4) | $ | 34,867,442 | $ | 61,288 | 0.70 | % | $ | 33,649,016 | $ | 15,362 | 0.18 | % | $ | 30,329,007 | $ | 6,417 | 0.08 | % |
(1) | Tax equivalent. |
(2) | Includes net loan premium amortization of $3.8 million, $5.8 million, and $2.4 million for the three months ended September 30, 2022, June 30, 2022, and September 30, 2021, respectively. |
(3) | Includes tax-equivalent adjustments of $1.3 million, $2.0 million, and $2.2 million for the three months ended September 30, 2022, June 30, 2022, and September 30, 2021 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 16
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER BALANCE SHEET
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
2022 | 2022 | 2022 | 2021 | 2021 | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
ASSETS: | ||||||||||||||||||||
Cash and due from banks | $ | 216,436 | $ | 197,027 | $ | 205,446 | $ | 112,548 | $ | 174,585 | ||||||||||
Interest-earning deposits in financial institutions | 2,244,272 | 2,192,877 | 1,865,235 | 3,944,686 | 3,524,613 | |||||||||||||||
Total cash and cash equivalents | 2,460,708 | 2,389,904 | 2,070,681 | 4,057,234 | 3,699,198 | |||||||||||||||
Securities available-for-sale | 5,891,328 | 6,780,648 | 9,975,109 | 10,694,458 | 9,276,926 | |||||||||||||||
Securities held-to-maturity | 2,264,601 | 2,260,367 | - | - | - | |||||||||||||||
Federal Home Loan Bank stock | 36,990 | 33,210 | 17,250 | 17,250 | 17,250 | |||||||||||||||
Total investment securities | 8,192,919 | 9,074,225 | 9,992,359 | 10,711,708 | 9,294,176 | |||||||||||||||
Loans held for sale | 15,534 | - | - | - | - | |||||||||||||||
Gross loans and leases held for investment | 27,775,962 | 26,608,541 | 24,439,749 | 23,026,308 | 20,588,255 | |||||||||||||||
Deferred fees, net | (115,921 | ) | (107,404 | ) | (87,677 | ) | (84,760 | ) | (77,235 | ) | ||||||||||
Total loans and leases held for investment, net of deferred fees | 27,660,041 | 26,501,137 | 24,352,072 | 22,941,548 | 20,511,020 | |||||||||||||||
Allowance for loan and lease losses | (189,327 | ) | (188,705 | ) | (197,398 | ) | (200,564 | ) | (203,733 | ) | ||||||||||
Total loans and leases held for investment, net | 27,470,714 | 26,312,432 | 24,154,674 | 22,740,984 | 20,307,287 | |||||||||||||||
Equipment leased to others under operating leases | 338,691 | 324,233 | 325,305 | 339,150 | 334,275 | |||||||||||||||
Premises and equipment, net | 50,781 | 51,083 | 51,011 | 46,740 | 47,246 | |||||||||||||||
Foreclosed assets, net | 2,967 | - | 304 | 12,843 | 13,364 | |||||||||||||||
Goodwill | 1,405,736 | 1,405,736 | 1,405,736 | 1,405,736 | 1,204,118 | |||||||||||||||
Core deposit and customer relationship intangibles, net | 34,010 | 37,659 | 41,308 | 44,957 | 15,533 | |||||||||||||||
Other assets | 1,432,532 | 1,355,451 | 1,208,261 | 1,083,992 | 970,479 | |||||||||||||||
Total assets | $ | 41,404,592 | $ | 40,950,723 | $ | 39,249,639 | $ | 40,443,344 | $ | 35,885,676 | ||||||||||
LIABILITIES: | ||||||||||||||||||||
Noninterest-bearing deposits | $ | 12,775,756 | $ | 13,338,029 | $ | 14,057,051 | $ | 14,543,133 | $ | 12,881,806 | ||||||||||
Interest-bearing deposits | 21,420,116 | 20,630,123 | 19,167,844 | 20,454,624 | 17,677,939 | |||||||||||||||
Total deposits | 34,195,872 | 33,968,152 | 33,224,895 | 34,997,757 | 30,559,745 | |||||||||||||||
Borrowings | 1,864,815 | 1,592,000 | 991,000 | - | - | |||||||||||||||
Subordinated debt | 863,379 | 863,756 | 863,880 | 863,283 | 862,447 | |||||||||||||||
Accrued interest payable and other liabilities | 604,581 | 548,412 | 519,269 | 582,674 | 545,050 | |||||||||||||||
Total liabilities | 37,528,647 | 36,972,320 | 35,599,044 | 36,443,714 | 31,967,242 | |||||||||||||||
STOCKHOLDERS' EQUITY (1) | 3,875,945 | 3,978,403 | 3,650,595 | 3,999,630 | 3,918,434 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 41,404,592 | $ | 40,950,723 | $ | 39,249,639 | $ | 40,443,344 | $ | 35,885,676 | ||||||||||
Book value per common share | $ | 28.07 | $ | 28.93 | $ | 30.52 | $ | 33.45 | $ | 32.77 | ||||||||||
Tangible book value per common share (2) | $ | 16.11 | $ | 16.93 | $ | 18.42 | $ | 21.31 | $ | 22.57 | ||||||||||
Common shares outstanding | 120,314,023 | 120,288,024 | 119,601,766 | 119,584,854 | 119,579,566 | |||||||||||||||
(1) Includes net unrealized (loss) gain on: | ||||||||||||||||||||
Securities available-for-sale, net | $ | (637,346 | ) | $ | (428,242 | ) | $ | (376,475 | ) | $ | 65,968 | $ | 98,859 | |||||||
Securities held to maturity | (210,868 | ) | (216,508 | ) | - | - | - | |||||||||||||
Total | $ | (848,214 | ) | $ | (644,750 | ) | $ | (376,475 | ) | $ | 65,968 | $ | 98,859 | |||||||
(2) Non-GAAP measure. |
Page 17
PACWEST BANCORP AND SUBSIDIARIES | |||||||||
FIVE QUARTER STATEMENT OF EARNINGS |
Three Months Ended | ||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
2022 | 2022 | 2022 | 2021 | 2021 | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Interest income: | ||||||||||||||||||||
Loans and leases | $ | 346,550 | $ | 293,286 | $ | 267,759 | $ | 263,662 | $ | 246,722 | ||||||||||
Investment securities | 53,135 | 52,902 | 53,422 | 48,469 | 40,780 | |||||||||||||||
Deposits in financial institutions | 10,359 | 4,330 | 1,723 | 2,674 | 2,580 | |||||||||||||||
Total interest income | 410,044 | 350,518 | 322,904 | 314,805 | 290,082 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | 61,288 | 15,362 | 6,208 | 6,622 | 6,417 | |||||||||||||||
Borrowings | 3,081 | 2,441 | 161 | 64 | 101 | |||||||||||||||
Subordinated debt | 10,494 | 8,790 | 7,818 | 7,714 | 7,722 | |||||||||||||||
Total interest expense | 74,863 | 26,593 | 14,187 | 14,400 | 14,240 | |||||||||||||||
Net interest income | 335,181 | 323,925 | 308,717 | 300,405 | 275,842 | |||||||||||||||
Provision for credit losses | 3,000 | 11,500 | - | (6,000 | ) | (20,000 | ) | |||||||||||||
Net interest income after provision for credit losses | 332,181 | 312,425 | 308,717 | 306,405 | 295,842 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
Service charges on deposit accounts | 3,608 | 3,634 | 3,571 | 3,476 | 3,407 | |||||||||||||||
Other commissions and fees | 10,034 | 10,813 | 11,580 | 10,633 | 11,792 | |||||||||||||||
Leased equipment income | 12,835 | 12,335 | 13,094 | 12,602 | 10,943 | |||||||||||||||
Gain on sale of loans and leases | 58 | 12 | 60 | 172 | - | |||||||||||||||
Gain (loss) on sale of securities | 86 | (1,209 | ) | 104 | 999 | 515 | ||||||||||||||
Dividends and gains (losses) on equity investments | 3,228 | 4,097 | (11,375 | ) | (1,570 | ) | 8,387 | |||||||||||||
Warrant income | 292 | 1,615 | 629 | 23,990 | 13,578 | |||||||||||||||
Other income | 8,478 | 3,049 | 3,155 | 7,080 | 2,723 | |||||||||||||||
Total noninterest income | 38,619 | 34,346 | 20,818 | 57,382 | 51,345 | |||||||||||||||
Noninterest expense: | ||||||||||||||||||||
Compensation | 105,933 | 102,542 | 92,240 | 99,700 | 98,061 | |||||||||||||||
Occupancy | 15,574 | 15,268 | 15,200 | 14,656 | 14,928 | |||||||||||||||
Data processing | 9,568 | 9,258 | 9,629 | 8,171 | 7,391 | |||||||||||||||
Other professional services | 10,674 | 6,726 | 5,954 | 5,946 | 5,164 | |||||||||||||||
Insurance and assessments | 7,159 | 5,632 | 5,490 | 5,032 | 3,685 | |||||||||||||||
Intangible asset amortization | 3,649 | 3,649 | 3,649 | 3,876 | 2,890 | |||||||||||||||
Leased equipment depreciation | 8,908 | 8,934 | 9,189 | 9,569 | 8,603 | |||||||||||||||
Foreclosed assets (income) expense, net | (248 | ) | (28 | ) | (3,353 | ) | (260 | ) | 165 | |||||||||||
Acquisition, integration and reorganization costs | - | - | - | 5,590 | 200 | |||||||||||||||
Customer related expense | 12,673 | 11,748 | 12,655 | 6,175 | 4,538 | |||||||||||||||
Loan expense | 6,228 | 7,037 | 5,157 | 5,627 | 4,180 | |||||||||||||||
Other expense | 15,500 | 12,879 | 11,616 | 12,028 | 9,616 | |||||||||||||||
Total noninterest expense | 195,618 | 183,645 | 167,426 | 176,110 | 159,421 | |||||||||||||||
Earnings before income taxes | 175,182 | 163,126 | 162,109 | 187,677 | 187,766 | |||||||||||||||
Income tax expense | 43,566 | 40,766 | 41,981 | 51,632 | 47,770 | |||||||||||||||
Net earnings | 131,616 | 122,360 | 120,128 | 136,045 | 139,996 | |||||||||||||||
Preferred stock dividends | 9,392 | - | - | - | - | |||||||||||||||
Net earnings available to common stockholders | $ | 122,224 | $ | 122,360 | $ | 120,128 | $ | 136,045 | $ | 139,996 | ||||||||||
Basic and diluted earnings per common share | $ | 1.02 | $ | 1.02 | $ | 1.01 | $ | 1.14 | $ | 1.17 | ||||||||||
Dividends declared and paid per common share | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.25 |
Page 18
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, | ||||||||||||||||
2022 | 2022 | 2022 | 2021 | 2021 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Performance Ratios: | ||||||||||||||||||||
Return on average assets (1) | 1.28 | % | 1.23 | % | 1.22 | % | 1.34 | % | 1.55 | % | ||||||||||
Pre-provision, pre-tax net revenue ("PPNR") return | ||||||||||||||||||||
on average assets (1)(2) | 1.73 | % | 1.75 | % | 1.65 | % | 1.79 | % | 1.86 | % | ||||||||||
Return on average equity (1) | 13.02 | % | 13.44 | % | 12.66 | % | 13.65 | % | 14.18 | % | ||||||||||
Return on average tangible common equity (1)(2) | 24.11 | % | 24.42 | % | 20.93 | % | 22.06 | % | 21.03 | % | ||||||||||
Efficiency ratio | 51.0 | % | 49.5 | % | 50.1 | % | 46.2 | % | 47.2 | % | ||||||||||
Noninterest expense as a percentage of average assets (1) | 1.90 | % | 1.84 | % | 1.70 | % | 1.73 | % | 1.76 | % | ||||||||||
Average Yields/Costs (1): | ||||||||||||||||||||
Yield on: | ||||||||||||||||||||
Average loans and leases (3) | 5.12 | % | 4.65 | % | 4.66 | % | 4.93 | % | 5.01 | % | ||||||||||
Average investment securities (3) | 2.45 | % | 2.32 | % | 2.17 | % | 2.02 | % | 2.12 | % | ||||||||||
Average interest-earning assets (3) | 4.36 | % | 3.85 | % | 3.59 | % | 3.39 | % | 3.50 | % | ||||||||||
Cost of: | ||||||||||||||||||||
Average interest-bearing deposits | 1.15 | % | 0.31 | % | 0.13 | % | 0.13 | % | 0.14 | % | ||||||||||
Average total deposits | 0.70 | % | 0.18 | % | 0.07 | % | 0.08 | % | 0.08 | % | ||||||||||
Average interest-bearing liabilities | 1.32 | % | 0.49 | % | 0.27 | % | 0.27 | % | 0.29 | % | ||||||||||
Net interest spread (3) | 3.04 | % | 3.36 | % | 3.32 | % | 3.12 | % | 3.21 | % | ||||||||||
Net interest margin (3) | 3.57 | % | 3.56 | % | 3.43 | % | 3.24 | % | 3.33 | % | ||||||||||
Average Balances: | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Loans and leases, net of deferred fees | $ | 27,038,873 | $ | 25,449,773 | $ | 23,433,019 | $ | 21,367,665 | $ | 19,670,671 | ||||||||||
Investment securities | 8,803,349 | 9,488,653 | 10,397,709 | 9,964,568 | 8,047,098 | |||||||||||||||
Deposits in financial institutions | 1,809,809 | 1,984,751 | 3,083,159 | 5,961,104 | 5,657,768 | |||||||||||||||
Interest-earning assets | 37,652,031 | 36,923,177 | 36,913,887 | 37,293,337 | 33,375,537 | |||||||||||||||
Total assets | 40,841,272 | 40,031,891 | 39,883,304 | 40,358,147 | 35,871,664 | |||||||||||||||
Liabilities: | ||||||||||||||||||||
Noninterest-bearing deposits | 13,653,177 | 13,987,398 | 14,463,667 | 14,713,385 | 12,198,313 | |||||||||||||||
Interest-bearing deposits | 21,214,265 | 19,661,618 | 19,868,395 | 20,050,310 | 18,130,694 | |||||||||||||||
Total deposits | 34,867,442 | 33,649,016 | 34,332,062 | 34,763,695 | 30,329,007 | |||||||||||||||
Borrowings | 505,482 | 1,356,616 | 298,444 | 234,391 | 238,335 | |||||||||||||||
Subordinated debt | 863,719 | 863,653 | 863,572 | 862,777 | 862,272 | |||||||||||||||
Interest-bearing liabilities | 22,583,466 | 21,881,887 | 21,030,411 | 21,147,478 | 19,231,301 | |||||||||||||||
Stockholders' equity | 4,011,179 | 3,652,368 | 3,847,481 | 3,954,267 | 3,916,621 |
(1) Annualized. | |||||||||
(2) Non-GAAP measure. | |||||||||
(3) Tax equivalent. |
Page 19
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, | ||||||||||||||||
2022 | 2022 | 2022 | 2021 | 2021 | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Credit Quality Metrics for Loans and Leases Held for Investment: | ||||||||||||||||||||
Nonaccrual loans and leases | $ | 89,742 | $ | 78,527 | $ | 66,538 | $ | 61,174 | $ | 64,507 | ||||||||||
Nonperforming assets | 92,709 | 78,527 | 66,842 | 74,017 | 77,871 | |||||||||||||||
Special mention loans and leases | 463,994 | 480,261 | 377,315 | 391,611 | 496,366 | |||||||||||||||
Classified loans and leases | 96,685 | 104,264 | 82,068 | 116,104 | 141,604 | |||||||||||||||
Allowance for loan and lease losses | 189,327 | 188,705 | 197,398 | 200,564 | 203,733 | |||||||||||||||
Allowance for credit losses | 284,398 | 283,776 | 272,469 | 273,635 | 279,804 | |||||||||||||||
For the quarter: | ||||||||||||||||||||
Provision for credit losses | 3,000 | 10,000 | - | (6,000 | ) | (20,000 | ) | |||||||||||||
Net charge-offs (recoveries) | 2,378 | (1,307 | ) | 1,166 | 169 | 367 | ||||||||||||||
Nonaccrual loans and leases to loans and leases | 0.32 | % | 0.30 | % | 0.27 | % | 0.27 | % | 0.31 | % | ||||||||||
Nonperforming assets to loans and leases and foreclosed assets | 0.34 | % | 0.30 | % | 0.27 | % | 0.32 | % | 0.38 | % | ||||||||||
Special mention loans and leases to loans and leases | 1.68 | % | 1.81 | % | 1.55 | % | 1.71 | % | 2.42 | % | ||||||||||
Classified loans and leases to loans and leases | 0.35 | % | 0.39 | % | 0.34 | % | 0.51 | % | 0.69 | % | ||||||||||
Allowance for loan and lease losses to loans and leases | 0.68 | % | 0.71 | % | 0.81 | % | 0.87 | % | 0.99 | % | ||||||||||
Allowance for credit losses to loans and leases | 1.03 | % | 1.07 | % | 1.12 | % | 1.19 | % | 1.36 | % | ||||||||||
Allowance for credit losses to nonaccrual loans and leases | 316.91 | % | 361.37 | % | 409.49 | % | 447.31 | % | 433.76 | % | ||||||||||
Net charge-offs (recoveries) to average loans and leases | 0.03 | % | (0.02 | )% | 0.02 | % | 0.00 | % | 0.01 | % | ||||||||||
Trailing 12 months net charge-offs (recoveries) to average loans and leases | 0.01 | % | 0.00 | % | (0.02 | )% | (0.01 | )% | 0.09 | % | ||||||||||
PacWest Bancorp Consolidated: | ||||||||||||||||||||
Common equity tier 1 capital ratio (1) | 8.55 | % | 8.24 | % | 8.64 | % | 8.86 | % | 10.15 | % | ||||||||||
Tier 1 capital ratio (1) | 10.46 | % | 10.15 | % | 9.07 | % | 9.32 | % | 10.65 | % | ||||||||||
Total capital ratio (1) | 13.43 | % | 13.12 | % | 12.27 | % | 12.69 | % | 14.36 | % | ||||||||||
Tier 1 leverage capital ratio (1) | 8.63 | % | 8.52 | % | 7.11 | % | 6.84 | % | 8.05 | % | ||||||||||
Risk-weighted assets (1) | $ | 33,055,996 | $ | 33,009,455 | $ | 30,297,312 | $ | 28,508,808 | $ | 26,057,583 | ||||||||||
Equity to assets ratio | 9.36 | % | 9.72 | % | 9.30 | % | 9.89 | % | 10.92 | % | ||||||||||
Tangible common equity ratio (2) | 4.85 | % | 5.15 | % | 5.83 | % | 6.54 | % | 7.79 | % | ||||||||||
Book value per common share | $ | 28.07 | $ | 28.93 | $ | 30.52 | $ | 33.45 | $ | 32.77 | ||||||||||
Tangible book value per common share (2) | $ | 16.11 | $ | 16.93 | $ | 18.42 | $ | 21.31 | $ | 22.57 | ||||||||||
Pacific Western Bank: | ||||||||||||||||||||
Common equity tier 1 capital ratio (1) | 10.17 | % | 9.78 | % | 9.32 | % | 9.56 | % | 11.12 | % | ||||||||||
Tier 1 capital ratio (1) | 10.17 | % | 9.78 | % | 9.32 | % | 9.56 | % | 11.12 | % | ||||||||||
Total capital ratio (1) | 12.16 | % | 11.77 | % | 11.45 | % | 11.80 | % | 13.59 | % | ||||||||||
Tier 1 leverage capital ratio (1) | 8.39 | % | 8.21 | % | 7.31 | % | 7.00 | % | 8.40 | % |
(1) Capital information for September 30, 2022 is preliminary. | |||||||||
(2) Non-GAAP measure. |
Page 20
GAAP TO NON-GAAP RECONCILIATIONS
This press release contains certain non-GAAP financial disclosures for: (1) Pre-provision, pre-tax net revenue (“PPNR”), (2) PPNR return on average assets (3) return on average tangible common equity, (4) tangible common equity ratio, and (5) tangible book value per common 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 PPNR, return on average tangible common equity, tangible common equity ratio, and tangible book value per common 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) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, and (5) book value per common 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, | |||||||||||||||||
PPNR and PPNR Return on Average Assets | 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Net earnings | $ | 131,616 | $ | 122,360 | $ | 139,996 | $ | 374,104 | $ | 470,914 | ||||||||||
Net interest income | $ | 335,181 | $ | 323,925 | $ | 275,842 | $ | 967,823 | $ | 803,419 | ||||||||||
Noninterest income | 38,619 | 34,346 | 51,345 | 93,783 | 136,545 | |||||||||||||||
Noninterest expense | (195,618 | ) | (183,645 | ) | (159,421 | ) | (546,689 | ) | (461,307 | ) | ||||||||||
Pre-provision, pre-tax net revenue ("PPNR") | $ | 178,182 | $ | 174,626 | $ | 167,766 | $ | 514,917 | $ | 478,657 | ||||||||||
Average assets | $ | 40,841,272 | $ | 40,031,891 | $ | 35,871,664 | $ | 40,255,665 | $ | 33,887,541 | ||||||||||
Return on average assets (1) | 1.28 | % | 1.23 | % | 1.55 | % | 1.24 | % | 1.86 | % | ||||||||||
PPNR return on average assets (2) | 1.73 | % | 1.75 | % | 1.86 | % | 1.71 | % | 1.89 | % |
(1) Annualized net earnings divided by average assets. |
(2) Annualized PPNR divided by average assets. |
Page 21
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
Return on Average Tangible Common Equity | 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Net earnings | $ | 131,616 | $ | 122,360 | $ | 139,996 | $ | 374,104 | $ | 470,914 | ||||||||||
Less: Preferred stock dividends | (9,392 | ) | - | - | (9,392 | ) | - | |||||||||||||
Net earnings available to common stockholders | 122,224 | 122,360 | 139,996 | 364,712 | 470,914 | |||||||||||||||
Add: Intangible asset amortization | 3,649 | 3,649 | 2,890 | 10,947 | 8,858 | |||||||||||||||
Adjusted net earnings | $ | 125,873 | $ | 126,009 | $ | 142,886 | $ | 375,659 | $ | 479,772 | ||||||||||
Average stockholders' equity | $ | 4,011,179 | $ | 3,652,368 | $ | 3,916,621 | $ | 3,837,609 | $ | 3,758,733 | ||||||||||
Less: Average intangible assets | 1,441,689 | 1,445,333 | 1,221,253 | 1,445,332 | 1,212,851 | |||||||||||||||
Less: Average preferred stock | 498,516 | 137,100 | - | 213,698 | - | |||||||||||||||
Average tangible common equity | $ | 2,070,974 | $ | 2,069,935 | $ | 2,695,368 | $ | 2,178,579 | $ | 2,545,882 | ||||||||||
Return on average equity (1) | 13.02 | % | 13.44 | % | 14.18 | % | 13.03 | % | 16.75 | % | ||||||||||
Return on average tangible common equity (2) | 24.11 | % | 24.42 | % | 21.03 | % | 23.05 | % | 25.20 | % |
(1) Annualized net earnings divided by average stockholders' equity. | |
(2) Annualized adjusted net earnings divided by average tangible common equity. |
Tangible Common Equity Ratio/ Tangible Book | September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
Value Per Common Share | 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Stockholders' equity | $ | 3,875,945 | $ | 3,978,403 | $ | 3,650,595 | $ | 3,999,630 | $ | 3,918,434 | ||||||||||
Less: Preferred stock | 498,516 | 498,516 | - | - | - | |||||||||||||||
Total common equity | 3,377,429 | 3,479,887 | 3,650,595 | 3,999,630 | 3,918,434 | |||||||||||||||
Less: Intangible assets | 1,439,746 | 1,443,395 | 1,447,044 | 1,450,693 | 1,219,651 | |||||||||||||||
Tangible common equity | $ | 1,937,683 | $ | 2,036,492 | $ | 2,203,551 | $ | 2,548,937 | $ | 2,698,783 | ||||||||||
Total assets | $ | 41,404,592 | $ | 40,950,723 | $ | 39,249,639 | $ | 40,443,344 | $ | 35,885,676 | ||||||||||
Less: Intangible assets | 1,439,746 | 1,443,395 | 1,447,044 | 1,450,693 | 1,219,651 | |||||||||||||||
Tangible assets | $ | 39,964,846 | $ | 39,507,328 | $ | 37,802,595 | $ | 38,992,651 | $ | 34,666,025 | ||||||||||
Equity to assets ratio | 9.36 | % | 9.72 | % | 9.30 | % | 9.89 | % | 10.92 | % | ||||||||||
Tangible common equity ratio (1) | 4.85 | % | 5.15 | % | 5.83 | % | 6.54 | % | 7.79 | % | ||||||||||
Book value per common share (2) | $ | 28.07 | $ | 28.93 | $ | 30.52 | $ | 33.45 | $ | 32.77 | ||||||||||
Tangible book value per common share (3) | $ | 16.11 | $ | 16.93 | $ | 18.42 | $ | 21.31 | $ | 22.57 | ||||||||||
Common shares outstanding | 120,314,023 | 120,288,024 | 119,601,766 | 119,584,854 | 119,579,566 |
(1) Tangible common equity divided by tangible assets. | |||||
(2) Total common equity divided by common shares outstanding. | |||||
(3) Tangible common equity divided by common shares outstanding. |
CONTACTS
Bart R. Olson EVP and CFO 714.989.4149 |
William J. Black EVP Strategy and Corporate Development 919.597.7466 |
Page 22
Exhibit 99.2
Third Quarter 2022 Results Earnings Release Presentation October 19, 2022
Third Quarter 2022 | PACW | p. 2 Key Third Quarter Takeaways » Regulatory capital ratios increased with CET1 increasing from 8.24% at 2Q22 to 8.55% » Total deposits grew $228 million; Venture Banking deposits stabilized and grew $129 million to $12.2 billion » Credit quality remains strong; nonperforming assets of 34bps, provision of $3.0 million and ACL ratio of 1.03% » Net loan growth of $1.2 billion, broad based across business lines » Net interest income (TE) of $338.6 million in 3Q22 vs. $327.8 million in 2Q22; up 3.3%
Third Quarter 2022 | PACW | p. 3 $ in thousands except per share amounts 3Q22 2Q22 Key Drivers Interest Income 410,044$ 350,518$ Higher average balances of loans/leases and higher rates Interest Expense 74,863 26,593 Higher market rates and higher average balances on wholesale deposits Net Interest Income 335,181 323,925 Provision for Credit Losses 3,000 11,500 Slower loan growth and lower COVID qualitative reserves offset by less favorable economic forecast Noninterest Income 38,619 34,346 Legal settlement gain Noninterest Expense 195,618 183,645 Higher professional expenses, compensation expense, FDIC assessments and legal settlement accrual Earnings before income taxes 175,182 163,126 Income Taxes 43,566 40,766 Effective tax rate of 24.9% vs. 25.0% Net earnings 131,616 122,360 Preferred stock dividends 9,392 - $513 million preferred stock issuance in June 2022 Net earnings avail. to common stockholders 122,224$ 122,360$ EPS 1.02$ 1.02$ Condensed Quarterly Income Statements
Third Quarter 2022 | PACW | p. 4 $22.57 $21.31 $18.42 $16.93 $16.11 10.15% 8.86% 8.64% 8.24% 8.55% 10.65% 9.32% 9.07% 10.15% 10.46% 14.36% 12.69% 12.27% 13.12% 13.43% 3Q21 4Q21 1Q22 2Q22 3Q22 Tangible BV and Capital Ratios (1) Tangible BV per Share CET1 Capital Tier 1 Capital Total Capital Regulatory Capital Ratios Capital Change Drivers ▪ 3Q22 increase due to earnings and credit - linked notes transaction partially offset by increase in risk - weighted assets of $47 million ▪ 2Q22 increase due to $513mm preferred stock issued partially offset by increase in risk - weighted assets of $2.7 billion due primarily to growth in loans and unfunded commitments ▪ 1Q22 decrease due to increase in risk - weighted assets of $1.8bn due primarily to growth in loans and unfunded commitments ▪ 4Q21 decrease due to increase in goodwill from HOA acquisition and deployment of approximately $3.8bn in excess cash into higher risk - weighted assets ▪ 3Q22 dividend of $0.25 per share, consistent since May 2020 ▪ CET1 target of 10% by end of 2023 ▪ Tangible book value per share would be $21.74, $20.76, $21.57, $22.29 and $23.16 without the impact of AOCI for securities 8.00% 6.00% 4.50% 10.50% 8.50% 7.00% 13.43% 10.46% 8.55% Total Capital Tier 1 capital CET1 Capital Minimum Capital Conservation Buffer PACW Capital Levels $513mm $647mm $967mm Capital in Excess of Conservation Buffer (1) See “Non - GAAP Measurements” slides starting on page 29.
Third Quarter 2022 | PACW | p. 5 $275.8mm $300.4mm $308.7mm $323.9mm $335.2mm 3.33% 3.24% 3.43% 3.56% 3.57% 2.92% 2.88% 2.90% 3.19% 3Q21 4Q21 1Q22 2Q22 3Q22 Net Interest Income and NIM (TE) NII PACW Reported TE NIM KRX Median NIM 1.55% 1.34% 1.22% 1.23% 1.28% 21.03% 22.06% 20.93% 24.42% 24.11% 3Q21 4Q21 1Q22 2Q22 3Q22 3Q21 4Q21 1Q22 2Q22 3Q22 ROAA ROATCE (2) Profitability Highlights $140.0mm $136.0mm $120.1mm $122.4mm $122.2mm $1.17 $1.14 $1.01 $1.02 $1.02 3Q21 4Q21 1Q22 2Q22 3Q22 Net Earnings (1) & EPS (1) Net earnings available to common stockholders. (2) See “Non - GAAP Measurements” slides starting on page 29. Source: S&P Global Market Intelligence. Peer data is through 2Q22. Peer group is banks in the KBW Nasdaq Regional Bank Index – “KRX ”. 5.01% 4.93% 4.66% 4.65% 5.12% 3.97% 3.95% 3.84% 4.01% 3Q21 4Q21 1Q22 2Q22 3Q22 Loan and Lease Yield (TE) PACW TE Avg. KRX Median
Third Quarter 2022 | PACW | p. 6 $2.3bn $2.3bn $9.3bn $10.7bn $10.0bn $9.1bn $8.2bn 2.12% 2.02% 2.17% 2.32% 2.45% 3Q21 4Q21 1Q22 2Q22 3Q22 Total Investments and Yield (3)(4) $30.6bn $35.0bn $33.2bn $34.0bn $34.2bn 0.08% 0.08% 0.07% 0.18% 0.70% 3Q21 4Q21 1Q22 2Q22 3Q22 Core and Total Deposits (5)(6) $20.5bn $22.9bn $24.4bn $26.5bn $27.7bn 1.01% 0.88% 0.81% 0.71% 0.68% 3Q21 4Q21 1Q22 2Q22 3Q22 Loans and Leases, Net of Deferred Fees (1) $279.8mm $273.6mm $272.5mm $283.8mm $284.4mm 1.38% 1.20% 1.12% 1.07% 1.03% 3Q21 4Q21 1Q22 2Q22 3Q22 Allowance for Credit Losses (2) Balance Sheet Highlights (1) Line is ALLL as % of loans and leases, excluding PPP loans (2) Line is ACL as % of loans and leases, excluding PPP loans (3) ■ AFS securities ■ HTM securities (4) Line is quarterly yield on average investment securities (5) ■ Core Deposits ■ Non - core Deposits (6) Line is quarterly cost of average total deposits
Third Quarter 2022 | PACW | p. 7 $2,406 $3,373 $2,575 $2,815 $1,758 $1,349 $1,917 $1,589 $1,872 $1,678 $1,733 $2,000 $1,449 $1,347 $978 $1,014 $845 $1,265 $1,183 $1,257 $3,755 $5,290 $4,164 $4,687 $3,436 $2,747 $2,845 $2,714 $2,530 $2,235 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 3Q21 4Q21 1Q22 2Q22 3Q22 Avg. Rate on Production Millions Production Disbursements Payoffs Paydowns Rate on Production ($ in millions) Production/ Disbursements Payoffs/ Paydowns Net Difference Rate on Production (1) ($ in millions) Loans Beginning Balance (2) Loans Ending Balance (2) Net Loan Growth (3) 3Q22 3,436$ 2,235$ 1,201$ 5.92% 3Q22 26,501$ 27,660$ 1,159$ 2Q22 4,687 2,530 2,157 4.61% 2Q22 24,352 26,501 2,149 1Q22 4,164 2,714 1,450 4.31% 1Q22 22,942 24,352 1,410 4Q21 5,290 2,845 2,445 3.89% 4Q21 20,511 22,942 2,431 3Q21 3,755 2,747 1,008 4.24% 3Q21 19,506 20,511 1,005 Loan and Lease Production of $1.8 Billion in 3Q22 (1) The weighted average TE rate on production presents contractual rates and does not include amortized fees. Amortized fees add ed approximately 22 basis points to loan yields in 2022 and 38 basis points in 2021. (2) Net of deferred fees and costs. (3) “Net Loan Growth” equals “Net Difference” plus transfers to loans held for sale, transfers to OREO, charge - offs, loan sales and loans acquired through acquisitions.
Third Quarter 2022 | PACW | p. 8 New Loan and Lease Production 3Q22 Multi - family , $350mm , 20% SBA real estate , $18mm , 1% Other asset based , $4mm , 0% Construction , $104mm , 6% Lender Finance , $96mm ,5% Home equity , $16mm , 1% CRE , $141mm , 8% Equipment Finance , $63mm , 4% Civic , $831mm , 47% Equity Funds , $25mm , 2% Venture Lending , $23mm , 1% Other commercial , $76mm , 4% $1.8 Billion 3Q22 Loan Production $11mm, Premium Finance, 1%
Third Quarter 2022 | PACW | p. 9 - $20.0mm - $6.0mm $0.0mm $10.0mm $3.0mm 3Q21 4Q21 1Q22 2Q22(3) 3Q22 Provision for Credit Losses $0.4mm $0.2mm $1.2mm ($1.3mm) $2.4mm 0.09% - 0.01% - 0.02% 0.00% 0.01% 0.01% 0.00% 0.02% - 0.02% 0.03% 3Q21 4Q21 1Q22 2Q22 3Q22 Net Charge - offs/(Recoveries) (2) Asset Quality $64.5mm $61.2mm $66.5mm $78.5mm $89.7mm $141.6mm $116.1mm $82.1mm $104.3mm $96.7mm 0.31% 0.27% 0.27% 0.30% 0.32% 0.69% 0.51% 0.34% 0.39% 0.35% 3Q21 4Q21 1Q22 2Q22 3Q22 Nonaccrual and Classified Loans and Leases (1) (1) ■ Nonaccrual ■ Classified ■ Nonaccrual as a % of total loans and lease ■ Classified as a % of total loans and lease (2) ■ Net charge - offs/(recoveries) for quarter ■ Trailing 12 months net C/O % ■ Net C/O as a % of average loans land leases (annualized) (3) Excludes $1.5mm provision for HFS securities (4) ■ ALLL as % of loans and leases, excluding PPP loans ■ ACL as % of loans and leases, excluding PPP loans $279.8mm $273.6mm $272.5mm $283.8mm $284.4mm 1.38% 1.20% 1.12% 1.07% 1.03% 1.01% 0.88% 0.81% 0.71% 0.68% 3Q21 4Q21 1Q22 2Q22 3Q22 Allowance for Credit Losses (4)
Third Quarter 2022 | PACW | p. 10 Venture Banking Deposit Balances $3.8 $5.3 $6.1 $6.9 $7.1 $11.0 $13.6 $14.8 $15.3 $15.5 $14.0 $12.1 $12.2 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 10/6/2015 4Q16 4Q17 4Q18 4Q19 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 $(MM) Growth of 41 % in 2021 Growth of 55% in 2020 Note: Excludes off - balance sheet deposits at Pacific Western Asset Management; balance at 3Q22 was $1.8 billion. Balance at Acquisition Date - Robust capital markets drove increases in 2020/2021 - Lack of capital market activity and client balance sheet management drove decreases in first half of 2022
Third Quarter 2022 | PACW | p. 11 » Capital – targeting a CET1 ratio of 10% by the end of 2023 » Loan activity – expect slower loan growth in 4Q22 » Deposit activity – flat to up depending on venture banking activity » ACL ratio – generally flat depending on economic conditions/forecasts and credit quality trends » Net interest income – continues to increase modestly » Noninterest income – in line with historical averages, excluding warrants, mid $30’s on a quarterly basis » Noninterest expense – low $190’s on a quarterly basis with continuing investment in digital and innovation initiatives General Outlook Ahead
Third Quarter 2022 | PACW | p. 12 Additional Information
Third Quarter 2022 | PACW | p. 13 ($ in millions) $ Mix $ Mix $ Mix Real Estate Mortgage: Commercial RE 3,771$ 14% 3,671$ 14% 3,695$ 18% Residential RE 10,860 39% 9,879 37% 5,886 29% Total Real Estate Mortgage 14,631 53% 13,550 51% 9,581 47% RE Construction & Land: Commercial 843 3% 837 3% 992 5% Residential 3,450 12% 3,154 12% 2,660 13% Total RE Construction & Land 4,293 15% 3,991 15% 3,652 18% Total Real Estate 18,924 68% 17,541 66% 13,233 65% Commercial: Asset-based 5,155 19% 5,068 19% 3,662 18% Venture capital 2,001 7% 2,179 8% 1,633 8% Other commercial 1,115 4% 1,229 5% 1,577 7% Total Commercial 8,271 30% 8,476 32% 6,872 33% Consumer 465 2% 484 2% 406 2% Total Loans HFI (1) 27,660$ 100% 26,501$ 100% 20,511$ 100% Unfunded commitments 11,227$ 11,866$ 8,481$ 6/30/2022 9/30/20219/30/2022 Commercial RE 14% Residential RE 39% Commercial construction 3% Residential construction 12% Asset - based 19% Venture capital 7% Other commercial 4% Consumer 2% As of September 30, 2022 Diversified Loan and Lease Portfolio (1) Net of deferred fees and costs
Third Quarter 2022 | PACW | p. 14 ($ in millions) $ Mix $ Mix $ Mix Real Estate: Multi-family 5,511$ 29% 5,062$ 29% 4,165$ 31% Construction - Res. & Coml. (1) 3,759 20% 3,442 20% 3,035 23% Residential mortgage loans 2,942 16% 2,978 17% 1,324 10% Commercial RE (2) 2,523 13% 2,498 14% 2,560 19% Investor-owned residential 2,407 13% 1,839 10% 665 5% Hotel 627 3% 551 3% 506 4% SBA 621 3% 621 4% 628 5% Construction - Renovation 534 3% 550 3% 350 3% Total Real Estate 18,924$ 100% 17,541$ 100% 13,233$ 100% 9/30/2022 9/30/20216/30/2022 Commercial RE, $2,523mm, 13% SBA , $621mm , 3% Hotel , $627mm , 3% Multi - family, $5,511mm, 29% Investor - owned residential , $2,407mm , 13% Residential mortgage loans , $2,942mm , 16% Construction - renovation , $534mm , 3% Construction & Land , $3,759mm , 20% Real Estate ($18.9B) Lender Finance $3,201mm , 62% Equipment Finance $924mm , 18% Premium Finance $816mm , 16% Other $214mm , 4% Asset - Based ($5.2B) ($ in millions) $ Mix $ Mix $ Mix Asset-Based: Lender Finance 3,201$ 62% 3,181$ 63% 2,374$ 65% Equipment finance (1) 924 18% 856 17% 575 16% Premium Finance 816 16% 781 15% 522 14% Other 214 4% 250 5% 191 5% Total Asset-Based 5,155$ 100% 5,068$ 100% 3,662$ 100% 9/30/2022 9/30/20216/30/2022 Diversified Loan and Lease Portfolio (1) Of which land represents $151mm, $116mm and $145mm at 9/30/22, 6/30/22 and 9/30/21. (2) Comprised of 32% office, 20% industrial, 20% retail and 28% other at 9/30/22. (1) Amount excludes equipment leased to others under operating leases which is included in Other Assets.
Third Quarter 2022 | PACW | p. 15 ($ in millions) $ Mix $ Mix $ Mix Venture Capital: Equity Fund Loans 1,398$ 70% 1,618$ 74% 1,114$ 68% Venture Lending 603 30% 561 26% 519 32% Total Venture Capital 2,001$ 100% 2,179$ 100% 1,633$ 100% 9/30/2022 9/30/20216/30/2022 ($ in millions) $ Mix $ Mix $ Mix Other Commercial: Secured Business Loans 384$ 35% 501$ 41% 472$ 30% Unsecured Business Loans 347 31% 325 26% 261 17% Municipal 212 19% 213 17% 254 16% Paycheck Protection Program 13 1% 33 3% 272 17% Security Monitoring 3 0% 12 1% 160 10% Other 156 14% 145 12% 158 10% Total Other Commercial 1,115$ 100% 1,229$ 100% 1,577$ 100% 9/30/2022 6/30/20216/30/2022 Paycheck Protection Program , $13mm , 1% Secured Business Loans , $384mm , 35% Security Monitoring , $3mm , 0% Unsecured Business Loans , $347mm , 31% Municipal , $212mm , 19% Other , $156mm , 14% Other Commercial ($1.1B) Equity Fund Loans , $1,398mm , 70% Venture Lending , $603mm , 30% Venture Capital ($2.0B) Diversified Loan and Lease Portfolio
Third Quarter 2022 | PACW | p. 16 California, 44% Colorado , 12% Florida , 6% Virginia , 3% Arizona , 4% New York , 10% Washington , 3% Others , 12% New Jersey , 3% Wash. DC , 3% $7.3bn (1) MF Construction Commitments Multi - Family Loans Principal Balance Amount Count 9/30/22 Tota l 9/30/22 % of Tota l $0 ~ $5mm 837 1,720mm 31% $5mm ~ $10mm 176 1,179mm 22% $10mm ~ $30mm 70 1,104mm 20% $30mm ~ $171mm 25 1,508mm 27% Total 1,108 $ 5,511mm California , 72% Colorado , 2% Florida , 6% Arizona , 2% Washington , 6% Other , 1% Nevada , 3% Oregon , 3% Texas , 5% $5.5bn (2) Multi - family Residential Portfolio By State Multi - family Residential (1) MF construction commitments have an average loan - to - cost ratio of 64% as of September 30, 2022. (2) $1.8bn, or approximately 33%, of MF portfolio is 50% risk - weighted. (3) Included in MF construction commitments are $2.0bn of commitments to build low income housing MF projects with a weighted average LTC of 72%. LTC > 70% , 18% LTC 40% - 50%, 4% LTC 50% - 60% , 31% LTC 60% - 70% , 47% MF Construction Commitments By Loan - To - Cost Range (3) Risk Rating Count 9/30/22 Tota l Pass/Watch 1,105 $ 5,494mm Special Mention 1 13mm Classified 2 4mm Total 1,108 $ 5,511mm
Third Quarter 2022 | PACW | p. 17 Multi - Family Apts, 70% Condominiums , 3% Hotel , 5% Office, 4% Industrial , 3% Retail , 1% Mixed - Use, 2% Land & Other, 4% SFR , 8% Commitments by Property Type Construction & Land Loans California , 45% Colorado , 11% Florida , 5% Virginia , 2% Arizona , 4% New York , 11% Washington , 2% Other , 14% Wash. DC , 3% New Jersey , 3% Commitments by State Commitment Amount Count 9/30/22 Commitment 9/30/22 Outstanding 9/30/22 % of Tota l Civic 1,025 $ 595mm $ 534mm 12% $0 ~ $10mm 108 423mm 234mm 6% $10mm ~ $25mm 72 1,190mm 589mm 14% $25mm ~ $50mm 71 2,670mm 1,140mm 27% $50mm ~ $100mm 51 3,541mm 1,003mm 23% $100mm ~ $181mm 16 2,022mm 793mm 18% Total 1,343 $ 10,441mm $ 4,293mm LTC 40% - 50%, 6% LTC 50% - 60%, 34% LTC 60% - 70%, 44% LTC > 70%, 16% (2) Commitments By Loan - To - Cost Range (1) Risk Rating Count 9/30/22 Tota l Pass/Watch 1,300 $ 4,259mm Special Mention 29 24mm Classified 14 10mm Total 1,343 $ 4,293mm (1) Excludes land and Civic commitments. (2) 79% of commitments with LTC > 70% are for low income housing projects.
Third Quarter 2022 | PACW | p. 18 For - rent Residential , $514mm , 62% Residential Bridge , $163mm , 20% Construction - Renovation , $137mm , 16% Multi - family , $17mm , 2% Loan Production in 3Q22 – $831 Million (1) Civic Loan Portfolio 9/30/22 6/30/22 $ % $ % For - rent residential $ 1,826mm 62% $ 1,359mm 57% Residential - bridge 447mm 15% 361mm 15% Multi - family 134mm 5% 119mm 5% Total investor - owned residential 2,407mm 1,839mm Construction - renovation 534mm 18% 550mm 23% Total Civic $ 2,941mm 100% $ 2,389mm 100% Risk Rating Count 9/30/22 Tota l Pass/Watch 8,026 $ 2,874mm Special Mention 65 39mm Classified 72 28mm Total 8,163 $ 2,941mm (1) WAC on new production, excluding fees was 6.95% Credit Quality 9/30/22 12/31/21 Accruing and 30 - 89 days past due $ 17.5mm $ 27.7mm Non - accrual $ 26.9mm $ 15.9mm YTD net charge - offs $ 1.7mm $ 87k Foreclosed Assets $ 3.0mm $ --- $481mm $480mm $559mm $847mm $831mm $1,305mm $1,562mm $1,844mm $2,389mm $2,941mm 3Q21 4Q21 1Q22 2Q22 3Q22 Loan Production & Portfolio Balance Production Ending Balance Portfolio Composition (1) (1) At June 30, 2022 average loan size is $358,000 and average LTV is approximately 71.5%.
Third Quarter 2022 | PACW | p. 19 Forecasted September 30, 2022 Forecasted Forecasted Net Interest Preliminary Net Interest Percentage Net Interest Margin NII Income Change Margin Change Interest Rate Scenario (Tax Equivalent) From Base (Tax Equivalent) From Base (In millions) Up 300 basis points 1,518.1$ 6.39% 3.87% 0.24% Up 200 basis points 1,487.6$ 4.25% 3.79% 0.16% Up 100 basis points 1,456.0$ 2.04% 3.71% 0.08% BASE CASE 1,426.9$ 0.00% 3.63% —% Down 25 basis points 1,426.1$ -0.06% 3.63% —% Down 50 basis points 1,413.1$ -0.97% 3.60% (0.03)% Down 100 basis points 1,400.5$ -1.85% 3.57% (0.06)% • Base case above is based on static balances applying forward rate curve as of 09/30/22 (which assumes 5.4 25bps rate hikes over the next 12 months) • Up/down scenarios above are based on instantaneous rate shocks • Trailing 12 months NII (TE) is $1.28 billion with a corresponding NIM of 3.45% • YTD net interest income up $164.4 million or 20% • Forecasted 12 - month deposit betas of 50% for interest - bearing deposits and 31% for total deposits • Actual YTD 2022 deposit betas were 41% for interest - bearing deposits and 26% for total deposits • Loan portfolio composition – 42% variable, 21% hybrid, 37% fixed • Variable rate loans below their floors at 9/30/22 equals $48 million • Variable rate loans by index – SOFR 39%, Prime 30%, LIBOR 23%, Other 8% Loans 61% AFS Investments 28% Cash & Cash Equivalents 11% Interest Earnings Assets 9/30/2021 Loans , 72% AFS Investments , 15% HTM Investments , 6% Cash & Cash Equivalents , 7% Interest - Earning Assets 9/30/2022 Interest Rate Sensitivity Balance Sheet Positioning Business Model Balance Sheet Positioning & Interest Rate Sensitivity $1,324mm $1,012mm $4,992mm $8,834mm 1 Year 2 Years 3 - 5 Years > 5 Years Fixed/Hybrid Years to Maturity/Repricing
Third Quarter 2022 | PACW | p. 20 ($ in millions) Deposit Category Average $ Quarter-End $ Mix Average $ Quarter-End $ Mix Noninterest-bearing demand 13,653$ 12,776$ 37% 12,198$ 12,882$ 42% Interest checking 6,287 6,781 20% 7,313 7,169 24% Money market 8,720 8,362 24% 7,681 7,463 24% Savings 650 641 2% 620 627 2% Total core deposits 29,310 28,560 83% 27,812 28,141 92% Wholesale non-maturity deposits 2,557 2,367 7% 1,042 960 3% Total non-maturity deposits 31,867 30,927 90% 28,854 29,101 95% Retail time deposits 1,541 1,778 5% 1,279 1,263 4% Brokered time deposits 1,459 1,491 5% 196 196 1% Total time deposits 3,000 3,269 10% 1,475 1,459 5% Total deposits (1) 34,867$ 34,196$ 100% 30,329$ 30,560$ 100% At or For the Quarter Ended September 30, 2022 At or For the Quarter Ended September 30, 2021 Noninterest - bearing demand Interest checking Money market Savings deposits Wholesale non - maturity deposits Retail time deposits Brokered time deposits September 30, 2022 Noninterest - bearing demand Interest checking Money market Savings deposits Wholesale non - maturity deposits Retail time deposits Brokered time deposits September 30, 2021 Deposit Detail (1) Does not include $1.8bn and $1.4bn of client investment funds held at September 30, 2022 and September 30, 2021, respectively . Core: 83% Core: 92%
Third Quarter 2022 | PACW | p. 21 $9.3bn $10.7bn $10.0bn $9.1bn $8.2bn 2.12% 2.02% 2.17% 2.32% 2.45% 6.2 5.9 6.9 7.7 7.6 4.8 4.8 5.7 6.2 6.1 3Q21 4Q21 1Q22 2Q22 3Q22 TE Yield, Avg. Life & Effective Duration AFS Securities HTM Secruties TE Yield Average Life (Yrs) Effective Duration (Yrs) Diversified Investment Portfolio (1) Fair value at 9/30/22 (2) Amortized cost at 9/30/22 (3) Yield is for 3Q22 Asset - backed Securities , $32mm , 1% Agency Residential MBS , $2,291mm , 39% Agency Residential CMOs , $736mm , 13% Agency Commercial MBS , $808mm , 14% Private Residential CMOs , $198mm , 3% Corporate Securities , $346mm , 6% Municipal Securities , $415mm , 7% Collateralized Loan Obligations , $354mm , 6% Other, $19mm , 0% Private Commercial MBS , $29mm , 1% U.S. Treasuries , $663mm ,10% $5.9 Billion AFS Investment Portfolio (1) 2.45% overall portfolio tax equivalent yield (3) Third Quarter Activity: ▪ Sold $440.4mm in 3 Q22 at a net gain of $86,000 ▪ AOCI decreased from a net loss of $644.8mm to a net loss of $848.2mm; No impact to regulatory capital ratios Agency Commercial MBS , $426mm , 19% Private Label Commercial MBS , $345mm , 15% Corporate Securities , $70mm , 3% Municipal Securities , $1,242mm , 55% U.S. Treasuries , $183mm , 8% $2.3 Billion HTM Investment Portfolio (2)
Third Quarter 2022 | PACW | p. 22 $16.9bn $18.0bn $18.8bn $19.1bn $22.9bn $27.7bn 2017 2018 2019 2020 2021 3Q22 Loans and Leases, Net (1) 10.91% 10.01% 9.78% 10.53% 8.86% 8.55% 10.91% 10.01% 9.78% 10.53% 9.32% 10.46% 13.75% 12.72% 12.41% 13.76% 12.69% 13.43% 2017 2018 2019 2020 2021 3Q22 Consolidated CET 1, Tier 1 & Total Capital Ratios (3)(4) $15.9bn $16.3bn $16.2bn $22.3bn $32.7bn $28.6bn $18.9bn $18.9bn $19.2bn $24.9bn $35.0bn $34.2bn 2017 2018 2019 2020 2021 3Q22 Core and Total Deposits (2) Historical Balance Sheet Trends $25.0bn $25.7bn $26.8bn $29.5bn $40.4bn $41.4bn 2017 2018 2019 2020 2021 3Q22 Total Assets (1) Net of deferred fees (2) ■ Core deposits (3) ■ CET 1 capital ratio, ■ Tier 1 capital ratio, ■ Total capital ratio (4) CET 1 ratio equaled Tier 1 ratio prior to 2021
Third Quarter 2022 | PACW | p. 23 Historical Financial Trends $18.24 $18.02 $19.77 $21.05 $21.31 $16.11 2017 2018 2019 2020 2021 3Q22(2) Tangible Book Value Per Common Share (2) Decrease due to AOCI loss of $7.60 in 2022 $2.91 $3.72 $3.90 $1.97 $5.10 $3.04 2017 2018 2019 2020 2021 YTD '22 Earnings Per Common Share (1) 15.75% 22.25% 21.49% 10.36% 24.41% 23.05% 2017 2018 2019 2020 2021 YTD '22 Return on Average Tangible Common Equity (1)(2) (1) 2020 excludes goodwill impairment of $1.47bn (2) See “Non - GAAP Measurements” slides starting on slide 29 $357.8mm $465.3mm $468.6mm $232.4mm $607.0mm $364.7mm 2017 2018 2019 2020 2021 YTD '22 Net Earnings (1) Decrease due to $339.0mm provision during COVID
Third Quarter 2022 | PACW | p. 24 $ Digital Innovation CLIENT - CENTRIC DIGITAL EXPERIENCE Simplified Digital Account Opening • Reimagined Experience Leveraging Data - driven Insights • Electronic Signatures and Records • Digital Forms Stronger Client Relationships Increased Cross - Selling Opportunities Seamless and Contextual Client Experience Accelerated Innovation Streamlined API Connectivity provides Flexibility and Choice • Accounting and ERP Platform Connectivity • HOA Platform Connectivity Delivers Segment Depth • Enhanced Payment Capability via Connectivity Solutions Modernized and Intuitive Digital Experience Across the Client Journey • Online and Mobile Banking • Merchant Services • Virtual Cards • Foreign Exchange ONBOARD | CONNECT | TRANSACT Leverage FinTech Partnerships to Deliver Digital Solutions Across the Client Journey
Third Quarter 2022 | PACW | p. 25 Update on Our ESG Journey » Issued our second annual ESG Report on April 7, 2022 » ESG Report included the SASB disclosure matrix and the GRI content index matrix » Expanded the ESG disclosures in our 2022 Proxy Statement » Board Oversight, Executive Management ESG Committee and working groups continue to drive enhancements in our program and reporting » Comprehensive Enterprise Risk Management program with mature BSA, cybersecurity and data privacy programs » Strong corporate governance with 10 of our 12 directors independent, separate Chairman and CEO roles and all board committees chaired by independent directors » Monitoring new SEC climate risk disclosure proposal » Expect to complete a climate risk impact assessment in 2022
Third Quarter 2022 | PACW | p. 26 Product Offerings Community Banking National Lending Venture Banking • Attractive branch network with 69 full service branches in California and one in Denver, Colorado • Offers a full suite of deposit products and services, including on - line banking • Business lending products: includes secured business, asset - based and tax - exempt loans • Real estate lending products: includes multi - family, commercial real estate and construction loans • Limited consumer loan offerings • Borrower relationships generally include a deposit relationship • Specialized suite of products for HOA industry • Diversified by loan and lease type, geography and industry o Asset - Based Lending (ABL) ▪ Lender Finance, Equipment Financing and Premium Finance o Commercial Real Estate ▪ Multi - family , Hotel, Office, Retail, Industrial, SBA and Construction • Focus on small to middle - market businesses nationally • Expertise in niche segments (aviation lending and corporate finance) limits new competitors • Borrower relationships may include deposit accounts and treasury services • Four product offerings: Technology, Life Sciences, Fund Finance, Structured Finance • National business with offices located in key innovative hubs across the United States • Offers a comprehensive suite of financial services for venture - backed companies and their venture capital and private equity investors • Provides comprehensive treasury management solutions, including credit cards, international - related products and asset management services to clients • Borrower relationships almost always include a deposit relationship • Branch office in Durham, North Carolina Civic Financial Services • Four product offerings: Construction – Renovation, Residential – Bridge, For - Rent Residential, Multi - family • Lends to investors who want to renovate and “flip” property or rent property • Offices located in 11 states; make loans in 28 states and the District of Columbia • Headquartered in Redondo Beach, CA • Subsidiary of Pacific Western Bank
Third Quarter 2022 | PACW | p. 27 Durham, NC Los Angeles, CA Nationwide Lender Combined with California Branch Network Chevy Chase, MD Chicago, IL Denver, CO New York, NY Boston, MA Minneapolis, MN Campbell, CA Menlo Park, CA San Francisco, CA National Lending office Venture Banking office Community Banking branch Primary offices in 14 states San Diego, CA Austin, TX
Third Quarter 2022 | PACW | p. 28 Company History of Quality Growth Below is a timeline showing the Company’s 31 acquisitions over its history along with its related growth in asset size.
Third Quarter 2022 | PACW | p. 29 ($ in thousands, except per share amounts) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Tangible Common Equity Ratio & Tangible Book Value Per Common Share Stockholders' equity 3,875,945$ 3,978,403$ 3,650,595$ 3,999,630$ 3,918,434$ Less: Preferred stock 498,516 498,516 - - - Total common equity 3,377,429 3,479,887$ 3,650,595$ 3,999,630$ 3,918,434$ Less: Intangible assets 1,439,746 1,443,395 1,447,044 1,450,693 1,219,651 Tangible common equity 1,937,683$ 2,036,492$ 2,203,551$ 2,548,937$ 2,698,783$ Total assets 41,404,592$ 40,950,723$ 39,249,639$ 40,443,344$ 35,885,676$ Less: Intangible assets 1,439,746 1,443,395 1,447,044 1,450,693 1,219,651 Tangible assets 39,964,846$ 39,507,328$ 37,802,595$ 38,992,651$ 34,666,025$ Equity to assets ratio 9.36% 9.72% 9.30% 9.89% 10.92% Tangible common equity ratio (1) 4.85% 5.15% 5.83% 6.54% 7.79% Book value per common share 28.07$ 28.93$ 30.52$ 33.45$ 32.77$ Tangible book value per common share (2) 16.11$ 16.93$ 18.42$ 21.31$ 22.57$ Shares outstanding 120,314,023 120,288,024 119,610,766 119,584,854 119,579,566 Return on Average Tangible Common Equity Net earnings available to common stockholders 122,224$ 122,360$ 120,128$ 136,045$ 139,996$ Add: intangible amortization 3,649 3,649 3,649 3,876 2,890 Adjusted net earnings 125,873$ 126,009$ 123,777$ 139,921$ 142,886$ Average stockholders' equity 4,011,179$ 3,652,368$ 3,847,481$ 3,954,267$ 3,916,621$ Less: Average intangible assets 1,441,689 1,445,333 1,449,056 1,437,780 1,221,253 Less: Average preferred stock 498,516 137,100 - - - Average tangible common equity 2,070,974$ 2,069,935$ 2,398,425$ 2,516,487$ 2,695,368$ Return on average equity 13.02% 13.44% 12.66% 13.65% 14.18% Return on average tangible equity (3) 24.11% 24.42% 20.93% 22.06% 21.03% (1) Tangible common equity divided by tangible assets (2) Tangible common equity divided by shares outstanding (3) Annualized adjusted 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:
Third Quarter 2022 | PACW | p. 30 ($ in thousands) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 PPNR and PPNR Return on Average Assets Net earnings 131,616$ 122,360$ 120,128$ 136,045$ 139,996$ Net interrest income 335,181$ 323,925$ 308,717$ 300,405$ 275,842$ Noninterest income 38,619 34,346 20,818 57,382 51,345 Noninterest expense (195,618) (183,645) (167,426) (176,110) (159,421) Pre-provision, pre-tax revenue ("PPNR") 178,182$ 174,626$ 162,109$ 181,677$ 167,766$ Average assets 40,841,272$ 40,031,891$ 39,883,304$ 40,358,147$ 35,871,664$ Return on average assets (1) 1.28% 1.23% 1.22% 1.34% 1.55% PPNR return on average assets (2) 1.73% 1.75% 1.65% 1.79% 1.86% (1) Annualized net earnings divided by average assets (2) Annualized PPNR divided by average asets Three Months Ended Non - GAAP Measurements The table below presents reconciliations of certain GAAP to non - GAAP financial measures. PPNR represents pre - provision, pre - tax net revenue.
Third Quarter 2022 | PACW | p. 31 Bank Holding Companies and Banks in the KRX Index Total Assets ( in billions ) Source: S&P Global Market Intelligence. Total assets as of June 30, 2022. Banks in the KRX Index as of September 30, 2022. 1 Popular, Inc. BPOP $ 71.502 26 Bank OZK OZK $ 25.920 2 Webster Financial Corporation WBS $ 67.595 27 First Hawaiian Inc. FHB $ 25.378 3 New York Community Bancorp, Inc. NYCB $ 63.093 28 Fulton Financial Corporation FULT $ 25.253 4 Synovus Financial Corp. SNV $ 57.383 29 Home Bancshares, Inc. HOMB $ 24.253 5 Valley National Bancorp VLY $ 54.439 30 United Community Banks, Inc. UCBI $ 24.213 6 Cullen/Frost Bankers, Inc. CFR $ 51.785 31 Ameris Bancorp ABCB $ 23.687 7 Wintrust Financial Corporation WTFC $ 50.969 32 Bank of Hawaii Corporation BOH $ 23.233 8 Cadence Bank CADE $ 47.748 33 Eastern Bankshares , Inc. EBC $ 22.351 9 South State Corporation SSB $ 46.207 34 Pacific Premier Bancorp, Inc. PPBI $ 21.994 10 Old National Bancorp ONB $ 45.748 35 Cathay General Bancorp CATY $ 21.236 11 BOK Financial Corporation BOKF $ 45.377 36 Columbia Banking Systems, Inc. COLB $ 20.564 12 F.N.B. Corporation FNB $ 41.681 37 WSFS Financial Corporation WSFS $ 20.550 13 PacWest Bancorp PACW $ 40.951 38 Washington Federal, Inc. WAFD $ 20.159 14 Pinnacle Financial Partners, Inc. PNFP $ 40.121 39 Independent Bank Corp INDB $ 19.982 15 UMB Financial Corporation UMBF $ 37.508 40 Atlantic Union Bankshares AUB $ 19.662 16 Prosperity Bancshares, Inc. PB $ 37.387 41 First Bancorp FBP $ 19.532 17 Associated Banc - Corp ASB $ 37.236 42 Hope Bancorp, Inc. HOPE $ 18.089 18 BankUnited , Inc. BKU $ 36.551 43 Trustmark Corporation TRMK $ 16.952 19 Hancock Whitney Corporation HWC $ 34.638 44 CVB Financial Corp. CVBF $ 16.760 20 Commerce Bankshares , Inc. CBSH $ 33.435 45 First Financial Bancorp FFBC $ 16.244 21 Texas Capital Bankshares , Inc. TCBI $ 32.339 46 Community Bank Systems, Inc. CBU $ 15.488 22 First Interstate Bancsystem , Inc. FIBK $ 32.039 47 Provident Financial Services, Inc. PFS $ 13.716 23 United Bankshares , Inc. UBSI $ 28.778 48 First Financial Bankshares , Inc. FFIN $ 13.260 24 Simmons First National Corporation SFNC $ 27.219 49 First Commonwealth Financial Corporation FCF $ 9.526 25 Glacier Bancorp, Inc. GBCI $ 26.690 50 Brookline Bancorp, Inc. BRKL $ 8.514
Third Quarter 2022 | PACW | p. 32 This communication contains certain forward - looking information about PacWest Bancorp (“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, exp ect ations, or intentions are forward - looking statements. Such statements often use words such as “anticipates,” “targets,” “expects,” “estimates,” intends,” “plans,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “ wil l,” “may,” “might,” “should,” “would” and “could.” Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of the PacWest’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those expressed in them. The risks and impacts of the COVID - 19 pandemic appear to have largely subsided, however, new variants may continue to impact key macro - economic indicators such as unemployment and GDP and may have a material impact on our business, financial position, results of operations, liquidity, and our allowance for c red it losses and the related provision for credit losses. Continued deterioration in general business and economic conditions, uncertainty in U.S. fiscal monetary policy, including the interest rate policies of the Federal Reserve Board, and volatility an d disruptions in credit and capital markets 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 result s c ould be adversely affected by changes in interest rates, inflation, sustained high unemployment rates, deterioration in the credit qu ali ty of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment secur iti es, 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. All forward - looking statements in this communication are based on information available at the time the statement is made. 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
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