Exhibit 99.1
PRESS RELEASE
PacWest Bancorp
(Nasdaq: PACW)
Contact: | Matthew P. Wagner | Patrick J. Rusnak |
| President and CEO | Executive Vice President and CFO |
Phone: | 310-887-8520 | 714-989-4705 |
FOR IMMEDIATE RELEASE | April 16, 2019 |
PACWEST BANCORP ANNOUNCES RESULTS
FOR THE FIRST QUARTER 2019
Highlights
· Net Earnings of $112.6 Million, or $0.92 Per Diluted Share
· Tax Equivalent Net Interest Margin of 4.69%
· Loan and Lease Production of $1.2 Billion; $350 Million of Net Loan Growth
· Net Charge-offs Less Than $200 Thousand
· Provision for Credit Losses Decreases 67% to $4.0 Million
· Core Deposits Represent 84% of Total Deposits
Los Angeles, California . . . PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the first quarter of 2019 of $112.6 million, or $0.92 per diluted share, compared to net earnings for the fourth quarter of 2018 of $115.0 million, or $0.93 per diluted share.
Matt Wagner, President and CEO, commented, “We continue to see the results of our credit de-risking strategy with continued downward trends in net charge-offs and credit loss provision and continued improvement in our credit quality metrics. Our first quarter of 2019 results produced a return on assets of 1.77% and a return on tangible equity of 20.64%.”
Mr. Wagner continued, “We had one of our strongest first quarters in terms of loan production and net loan growth and will work to continue that momentum into the rest of 2019 with an emphasis on core deposit generation. We also received approval to open a full-service branch office in Denver, Colorado and will continue to execute our expansion plans in that market.”
1
FINANCIAL HIGHLIGHTS
| | At or For the | | | | At or For the | | | |
| | Three Months Ended | | | | Three Months Ended | | | |
| | March 31, | | December 31, | | Increase | | March 31, | | Increase | |
Financial Highlights | | 2019 | | 2018 | | (Decrease) | | 2019 | | 2018 | | (Decrease) | |
| | (Dollars in thousands, except per share data) | |
Net earnings | | $ | 112,604 | | $ | 115,041 | | $ | (2,437 | ) | $ | 112,604 | | $ | 118,276 | | $ | (5,672 | ) |
Diluted earnings per share | | $ | 0.92 | | $ | 0.93 | | $ | (0.01 | ) | $ | 0.92 | | $ | 0.93 | | $ | (0.01 | ) |
Return on average assets | | 1.77 | % | 1.84 | % | (0.07 | ) | 1.77 | % | 1.99 | % | (0.22 | ) |
Return on average tangible equity (1) | | 20.64 | % | 21.23 | % | (0.59 | ) | 20.64 | % | 21.08 | % | (0.44 | ) |
| | | | | | | | | | | | | |
Net interest margin (“NIM”) (tax equivalent) | | 4.69 | % | 4.91 | % | (0.22 | ) | 4.69 | % | 5.11 | % | (0.42 | ) |
Yield on average loans and leases (tax equivalent) | | 6.16 | % | 6.27 | % | (0.11 | ) | 6.16 | % | 6.11 | % | 0.05 | |
Cost of average total deposits | | 0.73 | % | 0.62 | % | 0.11 | | 0.73 | % | 0.31 | % | 0.42 | |
Efficiency ratio | | 42.4 | % | 41.7 | % | 0.7 | | 42.4 | % | 41.7 | % | 0.7 | |
| | | | | | | | | | | | | |
Total assets | | $ | 26,324,138 | | $ | 25,731,354 | | $ | 592,784 | | $ | 26,324,138 | | $ | 24,149,330 | | $ | 2,174,808 | |
Loans and leases held for investment, net of deferred fees | | $ | 18,307,697 | | $ | 17,957,713 | | $ | 349,984 | | $ | 18,307,697 | | $ | 16,455,285 | | $ | 1,852,412 | |
Noninterest-bearing demand deposits | | $ | 7,712,409 | | $ | 7,888,915 | | $ | (176,506 | ) | $ | 7,712,409 | | $ | 8,232,140 | | $ | (519,731 | ) |
Core deposits | | $ | 16,127,638 | | $ | 16,346,671 | | $ | (219,033 | ) | $ | 16,127,638 | | $ | 15,661,529 | | $ | 466,109 | |
Total deposits | | $ | 19,285,927 | | $ | 18,870,501 | | $ | 415,426 | | $ | 19,285,927 | | $ | 18,078,788 | | $ | 1,207,139 | |
| | | | | | | | | | | | | |
As percentage of total deposits: | | | | | | | | | | | | | |
Noninterest-bearing demand deposits | | 40 | % | 42 | % | (2 | ) | 40 | % | 46 | % | (6 | ) |
Core deposits | | 84 | % | 87 | % | (3 | ) | 84 | % | 87 | % | (3 | ) |
| | | | | | | | | | | | | |
Equity to assets ratio | | 18.20 | % | 18.75 | % | (0.55 | ) | 18.20 | % | 20.16 | % | (1.96 | ) |
Tangible common equity ratio (1) | | 9.23 | % | 9.60 | % | (0.37 | ) | 9.23 | % | 10.43 | % | (1.20 | ) |
Book value per share | | $ | 39.86 | | $ | 39.17 | | $ | 0.69 | | $ | 39.86 | | $ | 38.47 | | $ | 1.39 | |
Tangible book value per share (1) | | $ | 18.22 | | $ | 18.02 | | $ | 0.20 | | $ | 18.22 | | $ | 17.75 | | $ | 0.47 | |
(1) Non-GAAP measure.
2
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income decreased by $6.9 million to $254.9 million for the first quarter of 2019 compared to $261.8 million for the fourth quarter of 2018 due to interest expense growth exceeding interest income growth and two less days in the first quarter compared to the fourth quarter. Interest expense increased by $8.7 million due mainly to higher deposit costs, offset partially by two less days in the first quarter of 2019. Interest income increased by $1.8 million due primarily to a higher balance of average loans and leases, offset partially by a lower yield on average loans and leases and two less days in the first quarter of 2019. The tax equivalent yield on average loans and leases was 6.16% for the first quarter of 2019 compared to 6.27% for the fourth quarter of 2018. The decrease in the yield on average loans and leases was due principally to lower discount accretion on acquired loans (seven basis points in the first quarter versus 16 basis points in the fourth quarter).
The tax equivalent NIM was 4.69% for the first quarter of 2019 compared to 4.91% for the fourth quarter of 2018. The decrease in the NIM was due mainly to higher deposit and borrowing costs and a lower yield on average loans and leases.
The cost of average total deposits increased to 0.73% for the first quarter of 2019 from 0.62% for the fourth quarter of 2018. The increase was driven primarily by a shift in our deposit mix with increases in time and money market deposits and lower noninterest-bearing demand deposits along with higher rates paid on deposits in conjunction with the Federal Reserve December rate move.
Provision for Credit Losses
The following table presents details of the provision for credit losses for the periods indicated:
| | Three Months Ended | | | |
| | March 31, | | December 31, | | Increase | |
Provision for Credit Losses | | 2019 | | 2018 | | (Decrease) | |
| | (In thousands) | |
Addition to allowance for loan and lease losses | | $ | 4,000 | | $ | 10,500 | | $ | (6,500 | ) |
Addition to reserve for unfunded loan commitments | | — | | 1,500 | | (1,500 | ) |
Total provision for credit losses | | $ | 4,000 | | $ | 12,000 | | $ | (8,000 | ) |
Noninterest Income
The following table presents details of noninterest income for the periods indicated:
| | Three Months Ended | | | |
| | March 31, | | December 31, | | Increase | |
Noninterest Income | | 2019 | | 2018 | | (Decrease) | |
| | (In thousands) | |
Service charges on deposit accounts | | $ | 3,730 | | $ | 4,091 | | $ | (361 | ) |
Other commissions and fees | | 11,008 | | 11,114 | | (106 | ) |
Leased equipment income | | 9,282 | | 9,384 | | (102 | ) |
Gain on sale of securities | | 2,161 | | 786 | | 1,375 | |
Other income: | | | | | | | |
Dividends and gains (losses) on equity investments | | 296 | | (1,331 | ) | 1,627 | |
Warrant income | | 2,279 | | 2,187 | | 92 | |
Other | | 2,308 | | 7,295 | | (4,987 | ) |
Total noninterest income | | $ | 31,064 | | $ | 33,526 | | $ | (2,462 | ) |
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Noninterest income decreased by $2.5 million to $31.1 million for the first quarter of 2019 compared to $33.5 million for the fourth quarter of 2018 due mainly to a $5.0 million decrease in other income, offset partially by an increase of $1.6 million in dividends and gains on equity investments and a $1.4 million increase in gain on sale of securities. Other income decreased due primarily to lower miscellaneous income from borrower settlements and lower BOLI income attributable to a death benefit received in the fourth quarter of 2018. Dividends and gains on equity investments increased mainly due to negative mark-to-market valuation adjustments in the fourth quarter on equity investments arising from exercised warrants. The increase in gain on sale of securities was attributable to a net gain of $2.2 million on sales of $405.8 million of securities in the first quarter of 2019 as part of a partial portfolio repositioning compared to a net gain of $0.8 million on sales of $70.9 million of securities in the fourth quarter of 2018.
Noninterest Expense
The following table presents details of noninterest expense for the periods indicated:
| | Three Months Ended | | | |
| | March 31, | | December 31, | | Increase | |
Noninterest Expense | | 2019 | | 2018 | | (Decrease) | |
| | (In thousands) | |
Compensation | | $ | 70,845 | | $ | 69,299 | | $ | 1,546 | |
Occupancy | | 14,320 | | 13,356 | | 964 | |
Data processing | | 6,925 | | 6,930 | | (5 | ) |
Other professional services | | 4,513 | | 6,198 | | (1,685 | ) |
Insurance and assessments | | 4,038 | | 4,202 | | (164 | ) |
Intangible asset amortization | | 4,870 | | 4,986 | | (116 | ) |
Leased equipment depreciation | | 5,651 | | 5,758 | | (107 | ) |
Foreclosed assets expense (income), net | | 29 | | (311 | ) | 340 | |
Acquisition, integration and reorganization costs | | 618 | | 970 | | (352 | ) |
Loan expense | | 2,885 | | 2,991 | | (106 | ) |
Other | | 11,593 | | 14,856 | | (3,263 | ) |
Total noninterest expense | | $ | 126,287 | | $ | 129,235 | | $ | (2,948 | ) |
Noninterest expense decreased by $2.9 million to $126.3 million for the first quarter of 2019 compared to $129.2 million for the fourth quarter of 2018 attributable primarily to a $3.3 million decrease in other expense and a $1.7 million decrease in other professional services, offset partially by a $1.5 million increase in compensation expense. The decrease in other expense was mainly due to the $2.1 million write-off of the Square 1 Bank trademark asset in the fourth quarter of 2018 as a result of our plan to retire the Square 1 Bank name and increased employee expense in the fourth quarter of 2018 due to executive relocation costs. Other professional services expense decreased due to lower legal and consulting expenses. Compensation expense increased due to normal seasonal increases in payroll tax and other employee benefit expenses and higher bonus expense, offset partially by lower stock compensation expense, due to an increase in forfeitures, and lower commissions expense.
Income Taxes
The overall effective income tax rate was 27.7% for the first quarter of 2019 and 25.3% for the fourth quarter of 2018. The fourth quarter 2018 effective tax rate was lower due primarily to a change in the state apportionment method applied by the state of Maryland. The effective tax rate for the full year 2019 is estimated to be in the range of 27-28%.
4
BALANCE SHEET HIGHLIGHTS
Loans and Leases
The following table presents roll forwards of loans and leases held for investment, net of deferred fees, for the periods indicated:
| | Three Months Ended | |
Roll Forward of Loans and Leases Held | | March 31, | | December 31, | |
for Investment, Net of Deferred Fees (1) | | 2019 | | 2018 | |
| | (Dollars in thousands) | |
Balance, beginning of period | | $ | 17,957,713 | | $ | 17,230,146 | |
Additions: | | | | | |
Production | | 1,174,838 | | 1,571,565 | |
Disbursements | | 1,192,972 | | 1,186,351 | |
Total production and disbursements | | 2,367,810 | | 2,757,916 | |
Reductions: | | | | | |
Payoffs | | (933,300 | ) | (1,070,691 | ) |
Paydowns | | (1,038,964 | ) | (920,633 | ) |
Total payoffs and paydowns | | (1,972,264 | ) | (1,991,324 | ) |
Sales | | (16,936 | ) | — | |
Transfers to foreclosed assets | | (37 | ) | (13,679 | ) |
Charge-offs | | (3,465 | ) | (25,346 | ) |
Transfers to loans held for sale | | (25,124 | ) | — | |
Total reductions | | (2,017,826 | ) | (2,030,349 | ) |
Balance, end of period | | $ | 18,307,697 | | $ | 17,957,713 | |
| | | | | |
Weighted average rate on production (2) | | 5.11 | % | 5.38 | % |
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.
(2) The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes amortized fees. Amortized fees added approximately 24 basis points to loan yields in 2019 and 31 basis points to loan yields in 2018.
Loans and leases held for investment, net of deferred fees, increased by $350.0 million, or 8% annualized, in the first quarter of 2019 to $18.3 billion at March 31, 2019. The net loan growth in the first quarter was primarily from the real estate construction loan class and income producing and other residential loan class, which included $285 million of multi-family loan pool purchases.
5
The following table presents the composition of loans and leases held for investment, net of deferred fees, as of the dates indicated:
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 | |
| | | | % of | | | | % of | | | | % of | |
Loan and Lease Portfolio (1) | | Amount | | Total | | Amount | | Total | | Amount | | Total | |
| | (In thousands) | |
Real estate mortgage: | | | | | | | | | | | | | |
Commercial | | $ | 4,640,510 | | 25 | % | $ | 4,824,298 | | 27 | % | $ | 5,033,006 | | 31 | % |
Income producing and other residential | | 3,518,948 | | 19 | % | 3,093,843 | | 17 | % | 2,521,237 | | 15 | % |
Total real estate mortgage | | 8,159,458 | | 44 | % | 7,918,141 | | 44 | % | 7,554,243 | | 46 | % |
Real estate construction and land: | | | | | | | | | | | | | |
Commercial | | 943,596 | | 5 | % | 912,583 | | 5 | % | 789,892 | | 5 | % |
Residential | | 1,408,128 | | 8 | % | 1,321,073 | | 8 | % | 887,110 | | 5 | % |
Total real estate construction and land | | 2,351,724 | | 13 | % | 2,233,656 | | 13 | % | 1,677,002 | | 10 | % |
Total real estate | | 10,511,182 | | 57 | % | 10,151,797 | | 57 | % | 9,231,245 | | 56 | % |
Commercial: | | | | | | | | | | | | | |
Asset-based | | 3,422,202 | | 19 | % | 3,305,421 | | 18 | % | 2,957,890 | | 18 | % |
Venture capital | | 2,027,450 | | 11 | % | 2,038,748 | | 11 | % | 1,920,643 | | 12 | % |
Other commercial | | 1,974,702 | | 11 | % | 2,060,426 | | 12 | % | 1,947,590 | | 12 | % |
Total commercial | | 7,424,354 | | 41 | % | 7,404,595 | | 41 | % | 6,826,123 | | 42 | % |
Consumer | | 372,161 | | 2 | % | 401,321 | | 2 | % | 397,917 | | 2 | % |
Total loans and leases held for investment, net of deferred fees | | $ | 18,307,697 | | 100 | % | $ | 17,957,713 | | 100 | % | $ | 16,455,285 | | 100 | % |
| | | | | | | | | | | | | |
Total unfunded loan commitments | | $ | 7,465,392 | | | | $ | 7,528,248 | | | | $ | 6,352,803 | | | |
(1) Excludes loans held for sale carried at lower of cost or fair value at March 31, 2019.
Allowance for Credit Losses
The following tables present roll forwards of the allowance for credit losses for the periods indicated:
| | Three Months Ended March 31, 2019 | |
| | Allowance for | | Reserve for | | Total | |
Allowance for Credit | | Loan and | | Unfunded Loan | | Allowance for | |
Losses Rollforward | | Lease Losses | | Commitments | | Credit Losses | |
| | (In thousands) | |
Beginning balance | | $ | 132,472 | | $ | 36,861 | | $ | 169,333 | |
Charge-offs | | (3,465 | ) | — | | (3,465 | ) |
Recoveries | | 3,274 | | — | | 3,274 | |
Net charge-offs | | (191 | ) | — | | (191 | ) |
Provision | | 4,000 | | — | | 4,000 | |
Ending balance | | $ | 136,281 | | $ | 36,861 | | $ | 173,142 | |
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| | Three Months Ended December 31, 2018 | |
| | Allowance for | | Reserve for | | Total | |
Allowance for Credit | | Loan and | | Unfunded Loan | | Allowance for | |
Losses Rollforward | | Lease Losses | | Commitments | | Credit Losses | |
| | (In thousands) | |
Beginning balance | | $ | 141,920 | | $ | 35,361 | | $ | 177,281 | |
Charge-offs | | (25,346 | ) | — | | (25,346 | ) |
Recoveries | | 5,398 | | — | | 5,398 | |
Net charge-offs | | (19,948 | ) | — | | (19,948 | ) |
Provision | | 10,500 | | 1,500 | | 12,000 | |
Ending balance | | $ | 132,472 | | $ | 36,861 | | $ | 169,333 | |
The allowance for credit losses as a percentage of loans and leases held for investment increased to 0.95% at March 31, 2019 from 0.94% at December 31, 2018.
Gross charge-offs for the first quarter of 2019 were $3.5 million and were primarily for other commercial loans. Gross charge-offs for the fourth quarter of 2018 were $25.3 million and included $23.4 million for venture capital loans, of which $20.0 million related to two loans, and $1.7 million for other commercial loans. Recoveries for the first quarter of 2019 were $3.3 million and included $2.3 million for venture capital loans and $0.8 million for other commercial loans. Recoveries for the fourth quarter of 2018 were $5.4 million and included $3.1 million for venture capital loans and $1.7 million for other commercial loans.
For the first quarter of 2019 and fourth quarter of 2018, annualized net charge-offs to average loans and leases were 0.00% and 0.46%.
Deposits and Client Investment Funds
The following table presents the composition of our deposit portfolio as of the dates indicated:
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 | |
| | | | % of | | | | % of | | | | % of | |
Deposit Composition | | Amount | | Total | | Amount | | Total | | Amount | | Total | |
| | (Dollars in thousands) | |
Noninterest-bearing demand | | $ | 7,712,409 | | 40 | % | $ | 7,888,915 | | 42 | % | $ | 8,232,140 | | 46 | % |
Interest checking | | 3,163,228 | | 16 | % | 2,842,463 | | 15 | % | 2,076,152 | | 11 | % |
Money market | | 4,714,078 | | 25 | % | 5,043,871 | | 27 | % | 4,676,734 | | 26 | % |
Savings | | 537,923 | | 3 | % | 571,422 | | 3 | % | 676,503 | | 4 | % |
Total core deposits | | 16,127,638 | | 84 | % | 16,346,671 | | 87 | % | 15,661,529 | | 87 | % |
Non-core non-maturity deposits | | 454,277 | | 2 | % | 518,192 | | 3 | % | 585,399 | | 3 | % |
Total non-maturity deposits | | 16,581,915 | | 86 | % | 16,864,863 | | 90 | % | 16,246,928 | | 90 | % |
Time deposits $250,000 and under | | 2,258,989 | | 12 | % | 1,593,453 | | 8 | % | 1,482,118 | | 8 | % |
Time deposits over $250,000 | | 445,023 | | 2 | % | 412,185 | | 2 | % | 349,742 | | 2 | % |
Total time deposits | | 2,704,012 | | 14 | % | 2,005,638 | | 10 | % | 1,831,860 | | 10 | % |
Total deposits | | $ | 19,285,927 | | 100 | % | $ | 18,870,501 | | 100 | % | $ | 18,078,788 | | 100 | % |
At March 31, 2019, core deposits totaled $16.1 billion, or 84% of total deposits, including $7.7 billion of noninterest-bearing demand deposits, or 40% of total deposits.
7
In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Square 1 Asset Management, Inc. (“S1AM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds at March 31, 2019 were $2.2 billion, of which $1.6 billion was managed by S1AM.
CREDIT QUALITY
The following table presents loan and lease credit quality metrics as of the dates indicated:
| | March 31, | | December 31, | | Increase | |
Credit Quality Metrics | | 2019 | | 2018 | | (Decrease) | |
| | (Dollars in thousands) | |
NPAs and Performing TDRs: | | | | | | | |
Nonaccrual loans and leases held for investment (1)(2) | | $ | 88,527 | | $ | 79,333 | | $ | 9,194 | |
Accruing loans contractually past due 90 days or more | | — | | — | | — | |
Foreclosed assets, net | | 3,291 | | 5,299 | | (2,008 | ) |
Total nonperforming assets (“NPAs”) | | $ | 91,818 | | $ | 84,632 | | $ | 7,186 | |
| | | | | | | |
Nonaccrual loans and leases held for investment to loans and leases held for investment | | 0.48 | % | 0.44 | % | | |
Nonperforming assets to loans and leases held for investment and foreclosed assets | | 0.50 | % | 0.47 | % | | |
| | | | | | | |
Nonaccrual loans and leases held for investment (1)(2) | | $ | 88,527 | | $ | 79,333 | | $ | 9,194 | |
Performing TDRs held for investment | | 17,027 | | 17,701 | | (674 | ) |
Total impaired loans and leases | | $ | 105,554 | | $ | 97,034 | | $ | 8,520 | |
| | | | | | | |
Loan and Lease Credit Risk Ratings: | | | | | | | |
Pass | | $ | 17,824,612 | | $ | 17,459,205 | | $ | 365,407 | |
Special mention | | 292,780 | | 261,398 | | 31,382 | |
Classified (1) | | 190,305 | | 237,110 | | (46,805 | ) |
Total loans and leases held for investment, net of deferred fees | | $ | 18,307,697 | | $ | 17,957,713 | | $ | 349,984 | |
| | | | | | | |
Classified loans and leases held for investment to loans and leases held for investment | | 1.04 | % | 1.32 | % | | |
| | | | | | | |
Allowance for Credit Losses: | | | | | | | |
Allowance for credit losses | | $ | 173,142 | | $ | 169,333 | | $ | 3,809 | |
Provision for credit losses (for the quarter) | | $ | 4,000 | | $ | 12,000 | | $ | (8,000 | ) |
Net charge-offs (for the quarter) | | $ | 191 | | $ | 19,948 | | $ | (19,757 | ) |
Net charge-offs to average loans and leases (for the quarter) | | 0.00 | % | 0.46 | % | | |
Allowance for credit losses to loans and leases held for investment | | 0.95 | % | 0.94 | % | | |
Allowance for credit losses to nonaccrual loans and leases held for investment | | 195.6 | % | 213.5 | % | | |
(1) Excludes loans held for sale carried at lower of cost or fair value at March 31, 2019.
(2) Nonaccrual loans include guaranteed amounts of $10.2 million at March 31, 2019 and $11.2 million at December 31, 2018.
8
Nonaccrual, classified, and special mention loans and leases fluctuate from period to period as a result of loan repayments and our ongoing active portfolio monitoring.
During the first quarter of 2019, nonaccrual loans and leases increased $9.2 million from what was a five-year low as of December 31, 2018, while classified loans and leases decreased by $46.8 million driven primarily by the payoff of a $30 million commercial real estate mortgage loan.
The following table presents nonaccrual loans and leases and accruing loans and leases past due between 30 and 89 days by portfolio segment and class as of the dates indicated:
| | Nonaccrual Loans and Leases (1) | | Accruing and | |
| | March 31, 2019 | | December 31, 2018 | | 30-89 Days Past Due | |
| | | | % of | | | | % of | | March 31, | | December 31, | |
| | | | Loan | | | | Loan | | 2019 | | 2018 | |
| | Amount | | Category | | Amount | | Category | | Amount | | Amount | |
| | (Dollars in thousands) | |
Real estate mortgage: | | | | | | | | | | | | | |
Commercial | | $ | 12,750 | | 0.3 | % | $ | 15,321 | | 0.3 | % | $ | 6,863 | | $ | 3,276 | |
Income producing and other residential | | 2,444 | | 0.1 | % | 2,524 | | 0.1 | % | 1,853 | | 1,557 | |
Total real estate mortgage | | 15,194 | | 0.2 | % | 17,845 | | 0.2 | % | 8,716 | | 4,833 | |
Real estate construction and land: | | | | | | | | | | | | | |
Commercial | | 430 | | 0.0 | % | 442 | | 0.0 | % | — | | — | |
Residential | | — | | 0.0 | % | — | | 0.0 | % | 8,949 | | 1,527 | |
Total real estate construction and land | | 430 | | 0.0 | % | 442 | | 0.0 | % | 8,949 | | 1,527 | |
Commercial: | | | | | | | | | | | | | |
Asset-based | | 43,406 | | 1.3 | % | 32,324 | | 1.0 | % | 3,750 | | 47 | |
Venture capital | | 20,437 | | 1.0 | % | 20,299 | | 1.0 | % | 4,500 | | 1,028 | |
Other commercial | | 8,633 | | 0.4 | % | 7,380 | | 0.4 | % | 1,694 | | 2,467 | |
Total commercial | | 72,476 | | 1.0 | % | 60,003 | | 0.8 | % | 9,944 | | 3,542 | |
Consumer | | 427 | | 0.1 | % | 1,043 | | 0.3 | % | 614 | | 581 | |
Total held for investment | | $ | 88,527 | | 0.5 | % | $ | 79,333 | | 0.4 | % | $ | 28,223 | | $ | 10,483 | |
(1) Excludes loans held for sale carried at lower of cost or fair value at March 31, 2019.
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STOCK REPURCHASE PROGRAM
In February 2019, the Company announced a new stock repurchase program with an authorized repurchase amount not to exceed $225 million and with a program maturity of February 29, 2020. During the first quarter of 2019, we repurchased 3,070,676 shares at an average price of $38.94 and a total cost of $119.6 million, of which $65.4 million was under the new plan, leaving $159.6 million remaining under the plan as of March 31, 2019.
ABOUT PACWEST BANCORP
PacWest Bancorp (“PacWest”) is a bank holding company with over $26 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 full-service branches located throughout the state of California and one branch in Durham, North Carolina. Our Community Banking group provides lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices. We offer additional products and services through our National Lending and Venture Banking groups. National Lending provides asset-based, equipment, real estate and security cash flow loans and treasury management services to established middle-market businesses on a national basis. Venture Banking offers a comprehensive suite of financial services focused on entrepreneurial businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States. For more information about PacWest Bancorp, visit www.pacwestbancorp.com, or to learn more about Pacific Western Bank, visit www.pacificwesternbank.com.
FORWARD LOOKING STATEMENTS
This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on information available at the time of this communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those set forth in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the Securities and Exchange Commission.
We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
10
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
| | March 31, | | December 31, | |
| | 2019 | | 2018 | |
| | (Dollars in thousands, except per share data) | |
ASSETS: | | | | | |
Cash and due from banks | | $ | 224,758 | | $ | 175,830 | |
Interest-earning deposits in financial institutions | | 332,124 | | 209,937 | |
Total cash and cash equivalents | | 556,882 | | 385,767 | |
| | | | | |
Securities available-for-sale, at estimated fair value | | 3,994,708 | | 4,009,431 | |
Federal Home Loan Bank stock, at cost | | 29,430 | | 32,103 | |
Total investment securities | | 4,024,138 | | 4,041,534 | |
| | | | | |
Loans held for sale | | 25,124 | | — | |
| | | | | |
Gross loans and leases held for investment | | 18,371,295 | | 18,026,365 | |
Deferred fees, net | | (63,598 | ) | (68,652 | ) |
Total loans and leases held for investment, net of deferred fees | | 18,307,697 | | 17,957,713 | |
Allowance for loan and lease losses | | (136,281 | ) | (132,472 | ) |
Total loans and leases held for investment, net | | 18,171,416 | | 17,825,241 | |
| | | | | |
Equipment leased to others under operating leases | | 293,853 | | 292,677 | |
Premises and equipment, net | | 37,783 | | 34,661 | |
Foreclosed assets, net | | 3,291 | | 5,299 | |
Deferred tax asset, net | | — | | 17,489 | |
Goodwill | | 2,548,670 | | 2,548,670 | |
Core deposit and customer relationship intangibles, net | | 52,250 | | 57,120 | |
Other assets | | 610,731 | | 522,896 | |
Total assets | | $ | 26,324,138 | | $ | 25,731,354 | |
| | | | | |
LIABILITIES: | | | | | |
Noninterest-bearing deposits | | $ | 7,712,409 | | $ | 7,888,915 | |
Interest-bearing deposits | | 11,573,518 | | 10,981,586 | |
Total deposits | | 19,285,927 | | 18,870,501 | |
Borrowings | | 1,481,087 | | 1,371,114 | |
Subordinated debentures | | 454,458 | | 453,846 | |
Accrued interest payable and other liabilities | | 311,684 | | 210,305 | |
Total liabilities | | 21,533,156 | | 20,905,766 | |
STOCKHOLDERS’ EQUITY (1) | | 4,790,982 | | 4,825,588 | |
Total liabilities and stockholders’ equity | | $ | 26,324,138 | | $ | 25,731,354 | |
| | | | | |
Book value per share | | $ | 39.86 | | $ | 39.17 | |
Tangible book value per share (2) | | $ | 18.22 | | $ | 18.02 | |
Shares outstanding | | 120,201,149 | | 123,189,833 | |
|
(1) Includes net unrealized gain (loss) on securities available-for-sale, net | | $ | 37,258 | | $ | (6,075 | ) |
(2) Non-GAAP measure. | | | | | |
11
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
| | Three Months Ended | |
| | March 31, | | December 31, | | March 31, | |
| | 2019 | | 2018 | | 2018 | |
| | (Dollars in thousands, except per share data) | |
Interest income: | | | | | | | |
Loans and leases | | $ | 274,229 | | $ | 272,522 | | $ | 251,085 | |
Investment securities | | 29,680 | | 29,690 | | 26,138 | |
Deposits in financial institutions | | 650 | | 527 | | 552 | |
Total interest income | | 304,559 | | 302,739 | | 277,775 | |
| | | | | | | |
Interest expense: | | | | | | | |
Deposits | | 34,235 | | 28,834 | | 13,818 | |
Borrowings | | 7,710 | | 4,602 | | 920 | |
Subordinated debentures | | 7,738 | | 7,538 | | 6,537 | |
Total interest expense | | 49,683 | | 40,974 | | 21,275 | |
| | | | | | | |
Net interest income | | 254,876 | | 261,765 | | 256,500 | |
Provision for credit losses | | 4,000 | | 12,000 | | 4,000 | |
Net interest income after provision for credit losses | | 250,876 | | 249,765 | | 252,500 | |
| | | | | | | |
Noninterest income: | | | | | | | |
Service charges on deposit accounts | | 3,730 | | 4,091 | | 4,174 | |
Other commissions and fees | | 11,008 | | 11,114 | | 10,265 | |
Leased equipment income | | 9,282 | | 9,384 | | 9,587 | |
Gain on sale of loans and leases | | — | | — | | 4,569 | |
Gain on sale of securities | | 2,161 | | 786 | | 6,311 | |
Other income | | 4,883 | | 8,151 | | 3,653 | |
Total noninterest income | | 31,064 | | 33,526 | | 38,559 | |
| | | | | | | |
Noninterest expense: | | | | | | | |
Compensation | | 70,845 | | 69,299 | | 71,023 | |
Occupancy | | 14,320 | | 13,356 | | 13,223 | |
Data processing | | 6,925 | | 6,930 | | 6,659 | |
Other professional services | | 4,513 | | 6,198 | | 4,439 | |
Insurance and assessments | | 4,038 | | 4,202 | | 5,727 | |
Intangible asset amortization | | 4,870 | | 4,986 | | 6,346 | |
Leased equipment depreciation | | 5,651 | | 5,758 | | 5,375 | |
Foreclosed assets expense (income), net | | 29 | | (311 | ) | (122 | ) |
Acquisition, integration and reorganization costs | | 618 | | 970 | | — | |
Loan expense | | 2,885 | | 2,991 | | 2,271 | |
Other expense | | 11,593 | | 14,856 | | 12,454 | |
Total noninterest expense | | 126,287 | | 129,235 | | 127,395 | |
| | | | | | | |
Earnings before income taxes | | 155,653 | | 154,056 | | 163,664 | |
Income tax expense | | 43,049 | | 39,015 | | 45,388 | |
Net earnings | | $ | 112,604 | | $ | 115,041 | | $ | 118,276 | |
| | | | | | | |
Basic and diluted earnings per share | | $ | 0.92 | | $ | 0.93 | | $ | 0.93 | |
Dividends declared and paid per share | | $ | 0.60 | | $ | 0.60 | | $ | 0.50 | |
12
PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS
| | Three Months Ended | |
| | March 31, | | December 31, | | March 31, | |
| | 2019 | | 2018 | | 2018 | |
| | (In thousands, except per share data) | |
Basic Earnings Per Share: | | | | | | | |
Net earnings | | $ | 112,604 | | $ | 115,041 | | $ | 118,276 | |
Less: earnings allocated to unvested restricted stock (1) | | (1,163 | ) | (1,219 | ) | (1,115 | ) |
Net earnings allocated to common shares | | $ | 111,441 | | $ | 113,822 | | $ | 117,161 | |
| | | | | | | |
Weighted-average basic shares and unvested restricted stock outstanding | | 122,227 | | 123,238 | | 127,487 | |
Less: weighted-average unvested restricted stock outstanding | | (1,352 | ) | (1,426 | ) | (1,413 | ) |
Weighted-average basic shares outstanding | | 120,875 | | 121,812 | | 126,074 | |
| | | | | | | |
Basic earnings per share | | $ | 0.92 | | $ | 0.93 | | $ | 0.93 | |
| | | | | | | |
Diluted Earnings Per Share: | | | | | | | |
Net earnings allocated to common shares | | $ | 111,441 | | $ | 113,822 | | $ | 117,161 | |
| | | | | | | |
Weighted-average basic shares outstanding | | 120,875 | | 121,812 | | 126,074 | |
| | | | | | | |
Diluted earnings per share | | $ | 0.92 | | $ | 0.93 | | $ | 0.93 | |
(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.
13
PACWEST BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
| | Three Months Ended | |
| | March 31, 2019 | | December 31, 2018 | | March 31, 2018 | |
| | | | Interest | | Average | | | | Interest | | Average | | | | Interest | | Average | |
| | Average | | Income/ | | Yield/ | | Average | | Income/ | | Yield/ | | Average | | Income/ | | Yield/ | |
| | Balance | | Expense | | Cost | | Balance | | Expense | | Cost | | Balance | | Expense | | Cost | |
| | (Dollars in thousands) | |
Assets: | | | | | | | | | | | | | | | | | | | |
Loans and leases (1)(2) | | $ | 18,064,230 | | $ | 274,513 | | 6.16 | % | $ | 17,275,343 | | $ | 272,824 | | 6.27 | % | $ | 16,682,124 | | $ | 251,260 | | 6.11 | % |
Investment securities (3) | | 3,968,531 | | 30,572 | | 3.12 | % | 3,899,520 | | 30,992 | | 3.15 | % | 3,682,138 | | 27,935 | | 3.08 | % |
Deposits in financial institutions | | 111,950 | | 650 | | 2.35 | % | 94,500 | | 527 | | 2.21 | % | 150,674 | | 552 | | 1.49 | % |
Total interest-earning assets (1) | | 22,144,711 | | 305,735 | | 5.60 | % | 21,269,363 | | 304,343 | | 5.68 | % | 20,514,936 | | 279,747 | | 5.53 | % |
Other assets | | 3,631,238 | | | | | | 3,515,099 | | | | | | 3,556,212 | | | | | |
Total assets | | $ | 25,775,949 | | | | | | $ | 24,784,462 | | | | | | $ | 24,071,148 | | | | | |
| | | | | | | | | | | | | | | | | | | |
Liabilities and Stockholders’ Equity: | | | | | | | | | | | | | | | | | | | |
Interest checking | | $ | 3,041,822 | | 9,321 | | 1.24 | % | $ | 2,785,702 | | 7,932 | | 1.13 | % | $ | 2,311,988 | | 3,050 | | 0.54 | % |
Money market | | 5,274,987 | | 14,908 | | 1.15 | % | 5,107,468 | | 13,621 | | 1.06 | % | 5,038,119 | | 6,812 | | 0.55 | % |
Savings | | 553,032 | | 242 | | 0.18 | % | 597,259 | | 273 | | 0.18 | % | 685,173 | | 258 | | 0.15 | % |
Time | | 2,286,932 | | 9,764 | | 1.73 | % | 1,932,332 | | 7,008 | | 1.44 | % | 1,923,963 | | 3,698 | | 0.78 | % |
Total interest-bearing deposits | | 11,156,773 | | 34,235 | | 1.24 | % | 10,422,761 | | 28,834 | | 1.10 | % | 9,959,243 | | 13,818 | | 0.56 | % |
Borrowings | | 1,218,319 | | 7,710 | | 2.57 | % | 764,039 | | 4,602 | | 2.39 | % | 239,293 | | 920 | | 1.56 | % |
Subordinated debentures | | 454,203 | | 7,738 | | 6.91 | % | 452,998 | | 7,538 | | 6.60 | % | 461,648 | | 6,537 | | 5.74 | % |
Total interest-bearing liabilities | | 12,829,295 | | 49,683 | | 1.57 | % | 11,639,798 | | 40,974 | | 1.40 | % | 10,660,184 | | 21,275 | | 0.81 | % |
Noninterest-bearing demand deposits | | 7,783,652 | | | | | | 8,163,699 | | | | | | 8,311,104 | | | | | |
Other liabilities | | 347,037 | | | | | | 222,564 | | | | | | 198,653 | | | | | |
Total liabilities | | 20,959,984 | | | | | | 20,026,061 | | | | | | 19,169,941 | | | | | |
Stockholders’ equity | | 4,815,965 | | | | | | 4,758,401 | | | | | | 4,901,207 | | | | | |
Total liabilities and stockholders’ equity | | $ | 25,775,949 | | | | | | $ | 24,784,462 | | | | | | $ | 24,071,148 | | | | | |
Net interest income (1) | | | | $ | 256,052 | | | | | | $ | 263,369 | | | | | | $ | 258,472 | | | |
Net interest spread (1) | | | | | | 4.03 | % | | | | | 4.28 | % | | | | | 4.72 | % |
Net interest margin (1) | | | | | | 4.69 | % | | | | | 4.91 | % | | | | | 5.11 | % |
| | | | | | | | | | | | | | | | | | | |
Total deposits (4) | | $ | 18,940,425 | | $ | 34,235 | | 0.73 | % | $ | 18,586,460 | | $ | 28,834 | | 0.62 | % | $ | 18,270,347 | | $ | 13,818 | | 0.31 | % |
(1) Tax equivalent.
(2) Includes discount accretion on acquired loans of $3.0 million, $6.9 million, and $7.6 million for the three months ended March 31, 2019, December 31, 2018, and March 31, 2018, respectively.
(3) Includes tax-equivalent adjustments of $0.9 million, $1.3 million, and $1.8 million for the three months ended March 31, 2019, December 31, 2018, and March 31, 2018 related to tax-exempt income on investment securities. The federal statutory tax rate utilized was 21%.
(4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.
14
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER BALANCE SHEET
| | March 31, | | December 31, | | September 30, | | June 30, | | March 31, | |
| | 2019 | | 2018 | | 2018 | | 2018 | | 2018 | |
| | (Dollars in thousands, except per share data) | |
ASSETS: | | | | | | | | | | | |
Cash and due from banks | | $ | 224,758 | | $ | 175,830 | | $ | 196,502 | | $ | 245,998 | | $ | 235,061 | |
Interest-earning deposits in financial institutions | | 332,124 | | 209,937 | | 185,284 | | 205,567 | | 312,735 | |
Total cash and cash equivalents | | 556,882 | | 385,767 | | 381,786 | | 451,565 | | 547,796 | |
| | | | | | | | | | | |
Securities available-for-sale | | 3,994,708 | | 4,009,431 | | 3,820,333 | | 3,857,788 | | 3,801,986 | |
Federal Home Loan Bank stock | | 29,430 | | 32,103 | | 31,077 | | 26,271 | | 17,250 | |
Total investment securities | | 4,024,138 | | 4,041,534 | | 3,851,410 | | 3,884,059 | | 3,819,236 | |
| | | | | | | | | | | |
Loans held for sale | | 25,124 | | — | | — | | — | | — | |
| | | | | | | | | | | |
Gross loans and leases held for investment | | 18,371,295 | | 18,026,365 | | 17,295,589 | | 16,947,502 | | 16,516,627 | |
Deferred fees, net | | (63,598 | ) | (68,652 | ) | (65,443 | ) | (62,310 | ) | (61,342 | ) |
Total loans and leases held for investment, net of deferred fees | | 18,307,697 | | 17,957,713 | | 17,230,146 | | 16,885,192 | | 16,455,285 | |
Allowance for loan and lease losses | | (136,281 | ) | (132,472 | ) | (141,920 | ) | (132,139 | ) | (134,275 | ) |
Total loans and leases held for investment, net | | 18,171,416 | | 17,825,241 | | 17,088,226 | | 16,753,053 | | 16,321,010 | |
| | | | | | | | | | | |
Equipment leased to others under operating leases | | 293,853 | | 292,677 | | 275,707 | | 266,576 | | 280,648 | |
Premises and equipment, net | | 37,783 | | 34,661 | | 34,012 | | 34,513 | | 33,686 | |
Foreclosed assets, net | | 3,291 | | 5,299 | | 4,407 | | 2,231 | | 1,236 | |
Deferred tax asset, net | | — | | 17,489 | | 41,280 | | 25,551 | | 12,584 | |
Goodwill | | 2,548,670 | | 2,548,670 | | 2,548,670 | | 2,548,670 | | 2,548,670 | |
Core deposit and customer relationship intangibles, net | | 52,250 | | 57,120 | | 62,106 | | 67,693 | | 73,280 | |
Other assets | | 610,731 | | 522,896 | | 494,522 | | 495,646 | | 511,184 | |
Total assets | | $ | 26,324,138 | | $ | 25,731,354 | | $ | 24,782,126 | | $ | 24,529,557 | | $ | 24,149,330 | |
| | | | | | | | | | | |
LIABILITIES: | | | | | | | | | | | |
Noninterest-bearing deposits | | $ | 7,712,409 | | $ | 7,888,915 | | $ | 7,834,480 | | $ | 8,126,153 | | $ | 8,232,140 | |
Interest-bearing deposits | | 11,573,518 | | 10,981,586 | | 10,045,063 | | 9,803,039 | | 9,846,648 | |
Total deposits | | 19,285,927 | | 18,870,501 | | 17,879,543 | | 17,929,192 | | 18,078,788 | |
Borrowings | | 1,481,087 | | 1,371,114 | | 1,513,166 | | 1,187,226 | | 575,284 | |
Subordinated debentures | | 454,458 | | 453,846 | | 452,944 | | 451,878 | | 452,223 | |
Accrued interest payable and other liabilities | | 311,684 | | 210,305 | | 194,788 | | 183,302 | | 175,545 | |
Total liabilities | | 21,533,156 | | 20,905,766 | | 20,040,441 | | 19,751,598 | | 19,281,840 | |
STOCKHOLDERS’ EQUITY (1) | | 4,790,982 | | 4,825,588 | | 4,741,685 | | 4,777,959 | | 4,867,490 | |
Total liabilities and stockholders’ equity | | $ | 26,324,138 | | $ | 25,731,354 | | $ | 24,782,126 | | $ | 24,529,557 | | $ | 24,149,330 | |
| | | | | | | | | | | |
Book value per share | | $ | 39.86 | | $ | 39.17 | | $ | 38.46 | | $ | 38.36 | | $ | 38.47 | |
Tangible book value per share (2) | | $ | 18.22 | | $ | 18.02 | | $ | 17.28 | | $ | 17.35 | | $ | 17.75 | |
Shares outstanding | | 120,201,149 | | 123,189,833 | | 123,283,450 | | 124,567,950 | | 126,537,871 | |
(1) Includes net unrealized gain (loss) on securities available-for-sale, net | | $ | 37,258 | | $ | (6,075 | ) | $ | (43,854 | ) | $ | (22,340 | ) | $ | (11,936 | ) |
(2) Non-GAAP measure. | | | | | | | | | | | |
15
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
| | Three Months Ended | |
| | March 31, | | December 31, | | September 30, | | June 30, | | March 31, | |
| | 2019 | | 2018 | | 2018 | | 2018 | | 2018 | |
| | (Dollars in thousands, except per share data) | |
Interest income: | | | | | | | | | | | |
Loans and leases | | $ | 274,229 | | $ | 272,522 | | $ | 264,062 | | $ | 260,300 | | $ | 251,085 | |
Investment securities | | 29,680 | | 29,690 | | 28,061 | | 27,730 | | 26,138 | |
Deposits in financial institutions | | 650 | | 527 | | 519 | | 484 | | 552 | |
Total interest income | | 304,559 | | 302,739 | | 292,642 | | 288,514 | | 277,775 | |
| | | | | | | | | | | |
Interest expense: | | | | | | | | | | | |
Deposits | | 34,235 | | 28,834 | | 21,121 | | 16,367 | | 13,818 | |
Borrowings | | 7,710 | | 4,602 | | 3,814 | | 2,649 | | 920 | |
Subordinated debentures | | 7,738 | | 7,538 | | 7,390 | | 7,166 | | 6,537 | |
Total interest expense | | 49,683 | | 40,974 | | 32,325 | | 26,182 | | 21,275 | |
| | | | | | | | | | | |
Net interest income | | 254,876 | | 261,765 | | 260,317 | | 262,332 | | 256,500 | |
Provision for credit losses | | 4,000 | | 12,000 | | 11,500 | | 17,500 | | 4,000 | |
Net interest income after provision for credit losses | | 250,876 | | 249,765 | | 248,817 | | 244,832 | | 252,500 | |
| | | | | | | | | | | |
Noninterest income: | | | | | | | | | | | |
Service charges on deposit accounts | | 3,730 | | 4,091 | | 3,979 | | 4,265 | | 4,174 | |
Other commissions and fees | | 11,008 | | 11,114 | | 12,397 | | 11,767 | | 10,265 | |
Leased equipment income | | 9,282 | | 9,384 | | 9,120 | | 9,790 | | 9,587 | |
Gain on sale of loans and leases | | — | | — | | — | | 106 | | 4,569 | |
Gain on sale of securities | | 2,161 | | 786 | | 826 | | 253 | | 6,311 | |
Other income | | 4,883 | | 8,151 | | 10,590 | | 13,457 | | 3,653 | |
Total noninterest income | | 31,064 | | 33,526 | | 36,912 | | 39,638 | | 38,559 | |
| | | | | | | | | | | |
Noninterest expense: | | | | | | | | | | | |
Compensation | | 70,845 | | 69,299 | | 72,333 | | 69,913 | | 71,023 | |
Occupancy | | 14,320 | | 13,356 | | 13,069 | | 13,575 | | 13,223 | |
Data processing | | 6,925 | | 6,930 | | 6,740 | | 6,896 | | 6,659 | |
Other professional services | | 4,513 | | 6,198 | | 6,058 | | 5,257 | | 4,439 | |
Insurance and assessments | | 4,038 | | 4,202 | | 5,446 | | 5,330 | | 5,727 | |
Intangible asset amortization | | 4,870 | | 4,986 | | 5,587 | | 5,587 | | 6,346 | |
Leased equipment depreciation | | 5,651 | | 5,758 | | 5,001 | | 5,237 | | 5,375 | |
Foreclosed assets expense (income), net | | 29 | | (311 | ) | (257 | ) | (61 | ) | (122 | ) |
Acquisition, integration and reorganization costs | | 618 | | 970 | | 800 | | — | | — | |
Loan expense | | 2,885 | | 2,991 | | 2,249 | | 3,058 | | 2,271 | |
Other expense | | 11,593 | | 14,856 | | 11,127 | | 11,657 | | 12,454 | |
Total noninterest expense | | 126,287 | | 129,235 | | 128,153 | | 126,449 | | 127,395 | |
| | | | | | | | | | | |
Earnings before income taxes | | 155,653 | | 154,056 | | 157,576 | | 158,021 | | 163,664 | |
Income tax expense | | 43,049 | | 39,015 | | 41,289 | | 42,286 | | 45,388 | |
Net earnings | | $ | 112,604 | | $ | 115,041 | | $ | 116,287 | | $ | 115,735 | | $ | 118,276 | |
| | | | | | | | | | | |
Basic and diluted earnings per share | | $ | 0.92 | | $ | 0.93 | | $ | 0.94 | | $ | 0.92 | | $ | 0.93 | |
Dividends declared and paid per share | | $ | 0.60 | | $ | 0.60 | | $ | 0.60 | | $ | 0.60 | | $ | 0.50 | |
16
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
| | At or For the Three Months Ended | |
| | March 31, | | December 31, | | September 30, | | June 30, | | March 31, | |
| | 2019 | | 2018 | | 2018 | | 2018 | | 2018 | |
| | (Dollars in thousands) | |
Performance Ratios: | | | | | | | | | | | |
Return on average assets (1) | | 1.77 | % | 1.84 | % | 1.89 | % | 1.93 | % | 1.99 | % |
Return on average equity (1) | | 9.48 | % | 9.59 | % | 9.72 | % | 9.61 | % | 9.79 | % |
Return on average tangible equity (1)(2) | | 20.64 | % | 21.23 | % | 21.61 | % | 20.98 | % | 21.08 | % |
| | | | | | | | | | | |
Yield on average loans and leases (1)(3) | | 6.16 | % | 6.27 | % | 6.20 | % | 6.30 | % | 6.11 | % |
Yield on average interest-earning assets (1)(3) | | 5.60 | % | 5.68 | % | 5.60 | % | 5.70 | % | 5.53 | % |
Cost of average interest-bearing deposits (1) | | 1.24 | % | 1.10 | % | 0.83 | % | 0.68 | % | 0.56 | % |
Cost of average total deposits (1) | | 0.73 | % | 0.62 | % | 0.46 | % | 0.37 | % | 0.31 | % |
Cost of average interest-bearing liabilities (1) | | 1.57 | % | 1.40 | % | 1.14 | % | 0.98 | % | 0.81 | % |
Net interest spread (1)(3) | | 4.03 | % | 4.28 | % | 4.46 | % | 4.72 | % | 4.72 | % |
Net interest margin (1)(3) | | 4.69 | % | 4.91 | % | 4.99 | % | 5.18 | % | 5.11 | % |
| | | | | | | | | | | |
Efficiency ratio | | 42.4 | % | 41.7 | % | 40.9 | % | 39.8 | % | 41.7 | % |
Noninterest expense as a percentage of average assets (1) | | 1.99 | % | 2.07 | % | 2.09 | % | 2.11 | % | 2.15 | % |
| | | | | | | | | | | |
Average Balances: | | | | | | | | | | | |
Loans and leases, net of deferred fees | | $ | 18,064,230 | | $ | 17,275,343 | | $ | 16,913,792 | | $ | 16,576,361 | | $ | 16,682,124 | |
Interest-earning assets | | 22,144,711 | | 21,269,363 | | 20,866,478 | | 20,492,121 | | 20,514,936 | |
Total assets | | 25,775,949 | | 24,784,462 | | 24,357,771 | | 23,999,637 | | 24,071,148 | |
Noninterest-bearing deposits | | 7,783,652 | | 8,163,699 | | 8,120,306 | | 8,253,413 | | 8,311,104 | |
Interest-bearing deposits | | 11,156,773 | | 10,422,761 | | 10,111,927 | | 9,703,611 | | 9,959,243 | |
Total deposits | | 18,940,425 | | 18,586,460 | | 18,232,233 | | 17,957,024 | | 18,270,347 | |
Borrowings | | 1,218,319 | | 764,039 | | 720,449 | | 549,665 | | 239,293 | |
Subordinated debentures | | 454,203 | | 452,998 | | 452,312 | | 451,973 | | 461,648 | |
Interest-bearing liabilities | | 12,829,295 | | 11,639,798 | | 11,284,688 | | 10,705,249 | | 10,660,184 | |
Stockholders’ equity | | 4,815,965 | | 4,758,401 | | 4,748,819 | | 4,832,480 | | 4,901,207 | |
| | | | | | | | | | | | | | | | |
(1) Annualized.
(2) Non-GAAP measure.
(3) Tax equivalent.
17
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
| | At or For the Three Months Ended | |
| | March 31, | | December 31, | | September 30, | | June 30, | | March 31, | |
| | 2019 | | 2018 | | 2018 | | 2018 | | 2018 | |
| | (Dollars in thousands) | |
Credit Quality Ratios: | | | | | | | | | | | |
Nonaccrual loans and leases held for investment to loans and leases held for investment | | 0.48 | % | 0.44 | % | 0.66 | % | 0.67 | % | 0.63 | % |
Nonperforming assets to loans and leases held for investment and foreclosed assets | | 0.50 | % | 0.47 | % | 0.68 | % | 0.69 | % | 0.64 | % |
Classified loans and leases held for investment to loans and leases held for investment | | 1.04 | % | 1.32 | % | 1.51 | % | 1.40 | % | 1.26 | % |
Trailing 12 months net charge-offs to average loans and leases held for investment | | 0.22 | % | 0.26 | % | 0.28 | % | 0.28 | % | 0.31 | % |
Allowance for credit losses to loans and leases held for investment | | 0.95 | % | 0.94 | % | 1.03 | % | 0.99 | % | 1.02 | % |
Allowance for credit losses to nonaccrual loans and leases held for investment | | 195.6 | % | 213.5 | % | 156.9 | % | 147.3 | % | 161.1 | % |
| | | | | | | | | | | |
PacWest Bancorp Consolidated | | | | | | | | | | | |
Capital: | | | | | | | | | | | |
Tier 1 leverage ratio (1) | | 9.38 | % | 10.13 | % | 10.10 | % | 10.33 | % | 10.66 | % |
Common equity tier 1 capital ratio (1) | | 9.48 | % | 10.01 | % | 10.18 | % | 10.59 | % | 11.16 | % |
Tier 1 capital ratio (1) | | 9.48 | % | 10.01 | % | 10.18 | % | 10.59 | % | 11.16 | % |
Total capital ratio (1) | | 12.15 | % | 12.72 | % | 13.03 | % | 13.48 | % | 14.11 | % |
Risk-weighted assets (1) | | $ | 22,939,074 | | $ | 22,525,096 | | $ | 21,650,542 | | $ | 20,929,325 | | $ | 20,523,487 | |
| | | | | | | | | | | |
Equity to assets ratio | | 18.20 | % | 18.75 | % | 19.13 | % | 19.48 | % | 20.16 | % |
Tangible common equity ratio (2) | | 9.23 | % | 9.60 | % | 9.61 | % | 9.86 | % | 10.43 | % |
Book value per share | | $ | 39.86 | | $ | 39.17 | | $ | 38.46 | | $ | 38.36 | | $ | 38.47 | |
Tangible book value per share (2) | | $ | 18.22 | | $ | 18.02 | | $ | 17.28 | | $ | 17.35 | | $ | 17.75 | |
| | | | | | | | | | | |
Pacific Western Bank Capital: | | | | | | | | | | | |
Tier 1 leverage ratio (1) | | 10.57 | % | 10.80 | % | 10.78 | % | 11.11 | % | 11.33 | % |
Common equity tier 1 capital ratio (1) | | 10.69 | % | 10.68 | % | 10.87 | % | 11.40 | % | 11.86 | % |
Tier 1 capital ratio (1) | | 10.69 | % | 10.68 | % | 10.87 | % | 11.40 | % | 11.86 | % |
Total capital ratio (1) | | 11.45 | % | 11.44 | % | 11.69 | % | 12.21 | % | 12.67 | % |
(1) Capital information for March 31, 2019 is preliminary.
(2) Non-GAAP measure.
18
GAAP TO NON-GAAP RECONCILIATIONS
This press release contains certain non-GAAP financial disclosures for: (1) return on average tangible equity, (2) tangible common equity ratio, and (3) tangible book value per share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of return on average tangible equity, tangible common equity ratio, and tangible book value per share is prevalent among banking regulators, investors and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) return on average equity, (2) equity to assets ratio, and (3) book value per share.
The tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:
| | Three Months Ended | |
| | March 31, | | December 31, | | March 31, | |
Return on Average Tangible Equity | | 2019 | | 2018 | | 2018 | |
| | (Dollars in thousands) | |
Net earnings | | $ | 112,604 | | $ | 115,041 | | $ | 118,276 | |
| | | | | | | |
Average stockholders’ equity | | $ | 4,815,965 | | $ | 4,758,401 | | $ | 4,901,207 | |
Less: Average intangible assets | | 2,603,842 | | 2,608,497 | | 2,625,593 | |
Average tangible common equity | | $ | 2,212,123 | | $ | 2,149,904 | | $ | 2,275,614 | |
| | | | | | | |
Return on average equity (1) | | 9.48 | % | 9.59 | % | 9.79 | % |
Return on average tangible equity (2) | | 20.64 | % | 21.23 | % | 21.08 | % |
(1) Annualized net earnings divided by average stockholders’ equity.
(2) Annualized net earnings divided by average tangible common equity.
Tangible Common Equity Ratio/ | | March 31, | | December 31, | | September 30, | | June 30, | | March 31, | |
Tangible Book Value Per Share | | 2019 | | 2018 | | 2018 | | 2018 | | 2018 | |
| | (Dollars in thousands, except per share data) | |
Stockholders’ equity | | $ | 4,790,982 | | $ | 4,825,588 | | $ | 4,741,685 | | $ | 4,777,959 | | $ | 4,867,490 | |
Less: Intangible assets | | 2,600,920 | | 2,605,790 | | 2,610,776 | | 2,616,363 | | 2,621,950 | |
Tangible common equity | | $ | 2,190,062 | | $ | 2,219,798 | | $ | 2,130,909 | | $ | 2,161,596 | | $ | 2,245,540 | |
| | | | | | | | | | | |
Total assets | | $ | 26,324,138 | | $ | 25,731,354 | | $ | 24,782,126 | | $ | 24,529,557 | | $ | 24,149,330 | |
Less: Intangible assets | | 2,600,920 | | 2,605,790 | | 2,610,776 | | 2,616,363 | | 2,621,950 | |
Tangible assets | | $ | 23,723,218 | | $ | 23,125,564 | | $ | 22,171,350 | | $ | 21,913,194 | | $ | 21,527,380 | |
| | | | | | | | | | | |
Equity to assets ratio | | 18.20 | % | 18.75 | % | 19.13 | % | 19.48 | % | 20.16 | % |
Tangible common equity ratio (1) | | 9.23 | % | 9.60 | % | 9.61 | % | 9.86 | % | 10.43 | % |
| | | | | | | | | | | |
Book value per share | | $ | 39.86 | | $ | 39.17 | | $ | 38.46 | | $ | 38.36 | | $ | 38.47 | |
Tangible book value per share (2) | | $ | 18.22 | | $ | 18.02 | | $ | 17.28 | | $ | 17.35 | | $ | 17.75 | |
Shares outstanding | | 120,201,149 | | 123,189,833 | | 123,283,450 | | 124,567,950 | | 126,537,871 | |
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by shares outstanding.
19
