Fourth Quarter 2018 Highlights
- Net Earnings of $115.0 Million, or $0.93 Per Diluted Share
- Tax Equivalent Net Interest Margin of 4.91%
- Loan and Lease Production of $1.6 Billion; $728 Million of Net Loan Growth
- Core Deposits Increase of $834 Million and Represent 87% of Total Deposits
Full Year 2018 Highlights
- Net Earnings of $465.3 Million, or $3.72 Per Diluted Share
- Tax Equivalent Net Interest Margin of 5.05%
- Loan and Lease Production of $4.9 Billion; $985 Million of Net Loan Growth
- Net Charge-offs 36% Lower for 2018 Compared to 2017
- Core Deposits Growth of $410 Million
LOS ANGELES, Jan. 17, 2019 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the fourth quarter of 2018 of $115.0 million, or $0.93 per diluted share, compared to net earnings for the third quarter of 2018 of $116.3 million, or $0.94 per diluted share. Net earnings for the full year 2018 were $465.3 million, or $3.72 per diluted share, compared to net earnings for the full year 2017 of $357.8 million, or $2.91 per diluted share.
Matt Wagner, President and CEO, commented, “We finished the year with strong growth in both loans and deposits and continued improvement in our credit quality metrics. Our fourth quarter results produced a return on assets of 1.84% and a return on tangible equity of 21.23%.”
Mr. Wagner continued, “Our net earnings for the full year 2018 increased 30% over the prior year to $465.3 million. The increase was driven largely by the benefits of tax reform and lower credit costs, while revenue growth significantly outpaced noninterest expense growth. Our tax equivalent net interest margin remained above 5% for the full year 2018 and continued cost controls resulted in our efficiency ratio being unchanged from the prior year at 41%.”
Mr. Wagner continued, “We are pleased with the fourth quarter’s organic loan and core deposit growth and will work to carry that momentum into 2019. We will also retire the division names and branding of CapitalSource and Square 1 Bank and replace them with the National Lending and Venture Banking groups under one brand as Pacific Western Bank.”
FINANCIAL HIGHLIGHTS
| At or For the | At or For the | ||||||||||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||||||||||
| December 31, | September 30, | Increase | December 31, | Increase | |||||||||||||||||||
| Financial Highlights | 2018 | 2018 | (Decrease) | 2018 | 2017 | (Decrease) | |||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||
| Net earnings | $ | 115,041 | $ | 116,287 | $ | (1,246 | ) | $ | 465,339 | $ | 357,818 | $ | 107,521 | ||||||||||
| Diluted earnings per share | $ | 0.93 | $ | 0.94 | $ | (0.01 | ) | $ | 3.72 | $ | 2.91 | $ | 0.81 | ||||||||||
| Return on average assets | 1.84 | % | 1.89 | % | (0.05 | ) | 1.91 | % | 1.58 | % | 0.33 | ||||||||||||
| Return on average | |||||||||||||||||||||||
| tangible equity (1) | 21.23 | % | 21.61 | % | (0.38 | ) | 21.22 | % | 15.15 | % | 6.07 | ||||||||||||
| Net interest margin ("NIM") | |||||||||||||||||||||||
| (tax equivalent) | 4.91 | % | 4.99 | % | (0.08 | ) | 5.05 | % | 5.10 | % | (0.05 | ) | |||||||||||
| Yield on average loans and | |||||||||||||||||||||||
| leases (tax equivalent) | 6.27 | % | 6.20 | % | 0.07 | 6.22 | % | 5.97 | % | 0.25 | |||||||||||||
| Cost of average total deposits | 0.62 | % | 0.46 | % | 0.16 | 0.44 | % | 0.27 | % | 0.17 | |||||||||||||
| Efficiency ratio | 41.7 | % | 40.9 | % | 0.8 | 41.0 | % | 40.8 | % | 0.2 | |||||||||||||
| Total assets | $ | 25,731,354 | $ | 24,782,126 | $ | 949,228 | $ | 25,731,354 | $ | 24,994,876 | $ | 736,478 | |||||||||||
| Loans and leases held | |||||||||||||||||||||||
| for investment, | |||||||||||||||||||||||
| net of deferred fees | $ | 17,957,713 | $ | 17,230,146 | $ | 727,567 | $ | 17,957,713 | $ | 16,972,743 | $ | 984,970 | |||||||||||
| Noninterest-bearing deposits | $ | 7,888,915 | $ | 7,834,480 | $ | 54,435 | $ | 7,888,915 | $ | 8,508,044 | $ | (619,129 | ) | ||||||||||
| Core deposits | $ | 16,346,671 | $ | 15,512,742 | $ | 833,929 | $ | 16,346,671 | $ | 15,937,012 | $ | 409,659 | |||||||||||
| Total deposits | $ | 18,870,501 | $ | 17,879,543 | $ | 990,958 | $ | 18,870,501 | $ | 18,865,536 | $ | 4,965 | |||||||||||
| Noninterest-bearing | |||||||||||||||||||||||
| deposits as percentage | |||||||||||||||||||||||
| of total deposits | 42 | % | 44 | % | (2 | ) | 42 | % | 45 | % | (3 | ) | |||||||||||
| Core deposits as | |||||||||||||||||||||||
| percentage of total | |||||||||||||||||||||||
| deposits | 87 | % | 87 | % | (0 | ) | 87 | % | 85 | % | 2 | ||||||||||||
| Equity to assets ratio | 18.75 | % | 19.13 | % | (0.38 | ) | 18.75 | % | 19.91 | % | (1.16 | ) | |||||||||||
| Tangible common equity | |||||||||||||||||||||||
| ratio (1) | 9.60 | % | 9.61 | % | (0.01 | ) | 9.60 | % | 10.50 | % | (0.90 | ) | |||||||||||
| Book value per share | $ | 39.17 | $ | 38.46 | $ | 0.71 | $ | 39.17 | $ | 38.65 | $ | 0.52 | |||||||||||
| Tangible book value per | |||||||||||||||||||||||
| share (1) | $ | 18.02 | $ | 17.28 | $ | 0.74 | $ | 18.02 | $ | 18.24 | $ | (0.22 | ) | ||||||||||
| (1) Non-GAAP measure. | |||||||||||||||||||||||
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income increased by $1.4 million to $261.8 million for the fourth quarter of 2018 compared to $260.3 million for the third quarter of 2018 due to a higher yield on average loans and leases and a higher balance of average loans and leases, offset partially by higher deposit costs. The tax equivalent yield on average loans and leases was 6.27% for the fourth quarter of 2018 compared to 6.20% for the third quarter of 2018. The increase in the yield on average loans and leases was due principally to higher coupon interest.
The tax equivalent NIM was 4.91% in the fourth quarter of 2018 compared to 4.99% for the third quarter of 2018. The decrease in the NIM was due mainly to higher deposit and borrowing costs, partially offset by a higher yield on average loans and leases and a higher yield on investment securities.
The cost of average total deposits increased to 0.62% for the fourth quarter of 2018 from 0.46% for the third quarter of 2018 due to higher rates paid on deposits in conjunction with increased market interest rates.
Provision for Credit Losses
The provision for credit losses increased by $0.5 million to $12.0 million for the fourth quarter of 2018 compared to $11.5 million for the third quarter of 2018.
The following table presents details of the provision for credit losses for the periods indicated:
| Three Months Ended | Year Ended | |||||||||||
| December 31, | September 30, | Increase | December 31, | |||||||||
| Provision for Credit Losses | 2018 | 2018 | (Decrease) | 2018 | ||||||||
| (In thousands) | ||||||||||||
| Addition to allowance for loan | ||||||||||||
| and lease losses | $ | 10,500 | $ | 11,500 | $ | (1,000 | ) | $ | 36,774 | |||
| Addition to reserve for unfunded | ||||||||||||
| loan commitments | 1,500 | - | 1,500 | 8,226 | ||||||||
| Total provision for credit losses | $ | 12,000 | $ | 11,500 | $ | 500 | $ | 45,000 | ||||
Noninterest Income
Noninterest income decreased by $3.4 million to $33.5 million for the fourth quarter of 2018 compared to $36.9 million for the third quarter of 2018 due mainly to a $4.2 million decrease in dividends and gains on equity investments, a $1.6 million decrease in warrant income, and a $1.3 million decrease in other commissions and fees, offset partially by a $3.4 million increase in other income. Dividends and gains on equity investments decreased mainly due to lower realized gains on investments sold and decreased fair values of investments still held. Warrant income decreased due to lower realized gains on exercised warrants as the third quarter included a $3.1 million gain on a warrant in a company that completed an IPO. Other commissions and fees decreased mostly due to lower prepayment and other loan-related fees. Other income increased primarily due to higher miscellaneous income from borrower settlements and higher BOLI income from a death benefit received.
The following table presents details of noninterest income for the periods indicated:
| Three Months Ended | ||||||||||
| December 31, | September 30, | Increase | ||||||||
| Noninterest Income | 2018 | 2018 | (Decrease) | |||||||
| (In thousands) | ||||||||||
| Service charges on deposit accounts | $ | 4,091 | $ | 3,979 | $ | 112 | ||||
| Other commissions and fees | 11,114 | 12,397 | (1,283 | ) | ||||||
| Leased equipment income | 9,384 | 9,120 | 264 | |||||||
| Gain on sale of loans and leases | - | - | - | |||||||
| Gain on sale of securities | 786 | 826 | (40 | ) | ||||||
| Other income: | ||||||||||
| Dividends and (losses) gains on equity investments | (1,331 | ) | 2,895 | (4,226 | ) | |||||
| Warrant income | 2,187 | 3,818 | (1,631 | ) | ||||||
| Other | 7,295 | 3,877 | 3,418 | |||||||
| Total noninterest income | $ | 33,526 | $ | 36,912 | $ | (3,386 | ) | |||
Noninterest Expense
Noninterest expense increased by $1.1 million to $129.2 million for the fourth quarter of 2018 compared to $128.1 million for the third quarter of 2018 attributable primarily to a $3.7 million increase in other expense, offset partially by a $3.0 million decrease in compensation expense. Other expense increased due to the $2.1 million write-off of the Square 1 trademark asset as a result of our plan to retire the Square 1 Bank name and increased employee expense due to executive relocation costs. Compensation expense decreased due mostly to lower stock compensation expense, lower bonus expense, and lower commissions expense as a result of the decreased warrant income.
The following table presents details of noninterest expense for the periods indicated:
| Three Months Ended | |||||||||||
| December 31, | September 30, | Increase | |||||||||
| Noninterest Expense | 2018 | 2018 | (Decrease) | ||||||||
| (In thousands) | |||||||||||
| Compensation | $ | 69,299 | $ | 72,333 | $ | (3,034 | ) | ||||
| Occupancy | 13,356 | 13,069 | 287 | ||||||||
| Data processing | 6,930 | 6,740 | 190 | ||||||||
| Other professional services | 6,198 | 6,058 | 140 | ||||||||
| Insurance and assessments | 4,202 | 5,446 | (1,244 | ) | |||||||
| Intangible asset amortization | 4,986 | 5,587 | (601 | ) | |||||||
| Leased equipment depreciation | 5,758 | 5,001 | 757 | ||||||||
| Foreclosed assets income, net | (311 | ) | (257 | ) | (54 | ) | |||||
| Acquisition, integration and reorganization costs | 970 | 800 | 170 | ||||||||
| Loan expense | 2,991 | 2,249 | 742 | ||||||||
| Other | 14,856 | 11,127 | 3,729 | ||||||||
| Total noninterest expense | $ | 129,235 | $ | 128,153 | $ | 1,082 | |||||
Income Taxes
The overall effective income tax rate was 25.3% for the fourth quarter of 2018 and 26.2% for the third quarter of 2018. The decrease in the fourth quarter effective tax rate was due primarily to a change in the state apportionment method applied by the state of Maryland. The effective tax rate for the year ended December 31, 2018 was 26.5% while the full year 2019 is estimated to be in the range of 27-28%.
BALANCE SHEET HIGHLIGHTS
Loans and Leases
Loans and leases held for investment, net of deferred fees, increased by $727.6 million in the fourth quarter of 2018 to $18.0 billion at December 31, 2018. The net increase was driven mainly by production of $1.6 billion and disbursements of $1.2 billion, offset partially by payoffs of $1.1 billion and paydowns of $920.6 million. For the year ended December 31, 2018 loans and leases held for investment, net of deferred fees, increased by $985.0 million or 5.8%.
The following table presents a roll forward of loans and leases held for investment, net of deferred fees, for the periods indicated:
| Three Months Ended | Year Ended | ||||||||||
| Loans and Leases | December 31, | September 30, | December 31, | ||||||||
| Held for Investment Roll Forward (1) | 2018 | 2018 | 2018 | ||||||||
| (Dollars in thousands) | |||||||||||
| Balance, beginning of period | $ | 17,230,146 | $ | 16,885,192 | $ | 16,972,743 | |||||
| Additions: | |||||||||||
| Production | 1,571,565 | 1,315,572 | 4,888,614 | ||||||||
| Disbursements | 1,186,351 | 966,668 | 4,104,335 | ||||||||
| Total production and disbursements | 2,757,916 | 2,282,240 | 8,992,949 | ||||||||
| Reductions: | |||||||||||
| Payoffs | (1,070,691 | ) | (1,133,233 | ) | (4,289,297 | ) | |||||
| Paydowns | (920,633 | ) | (795,243 | ) | (3,480,997 | ) | |||||
| Total payoffs and paydowns | (1,991,324 | ) | (1,928,476 | ) | (7,770,294 | ) | |||||
| Sales | - | (3,326 | ) | (161,729 | ) | ||||||
| Transfers to foreclosed assets | (13,679 | ) | (2,176 | ) | (16,914 | ) | |||||
| Charge-offs | (25,346 | ) | (3,308 | ) | (59,042 | ) | |||||
| Total reductions | (2,030,349 | ) | (1,937,286 | ) | (8,007,979 | ) | |||||
| Balance, end of period | $ | 17,957,713 | $ | 17,230,146 | $ | 17,957,713 | |||||
| Weighted average rate on production (2) | 5.38 | % | 5.17 | % | 5.23 | % | |||||
| (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 31 basis points to loan yields in 2018. | |||||||||||
The following table presents the composition of loans and leases held for investment, net of deferred fees, as of the dates indicated:
| December 31, | September 30, | June 30, | December 31, | ||||||||
| Loan and Lease Portfolio | 2018 | 2018 | 2018 | 2017 | |||||||
| (In thousands) | |||||||||||
| Real estate mortgage: | |||||||||||
| Commercial | $ | 4,824,298 | $ | 4,932,823 | $ | 5,010,680 | $ | 5,385,740 | |||
| Residential | 3,093,843 | 2,745,837 | 2,555,695 | 2,466,894 | |||||||
| Total real estate mortgage | 7,918,141 | 7,678,660 | 7,566,375 | 7,852,634 | |||||||
| Real estate construction and land: | |||||||||||
| Commercial | 912,583 | 854,346 | 831,462 | 769,075 | |||||||
| Residential | 1,321,073 | 1,146,611 | 1,042,564 | 822,154 | |||||||
| Total real estate construction and land | 2,233,656 | 2,000,957 | 1,874,026 | 1,591,229 | |||||||
| Total real estate | 10,151,797 | 9,679,617 | 9,440,401 | 9,443,863 | |||||||
| Commercial: | |||||||||||
| Asset-based | 3,305,421 | 3,222,311 | 3,184,300 | 2,924,950 | |||||||
| Venture capital | 2,038,748 | 2,031,895 | 2,008,205 | 2,122,735 | |||||||
| Other commercial | 2,060,426 | 1,897,852 | 1,873,607 | 2,071,394 | |||||||
| Total commercial | 7,404,595 | 7,152,058 | 7,066,112 | 7,119,079 | |||||||
| Consumer | 401,321 | 398,471 | 378,679 | 409,801 | |||||||
| Total loans and leases held for | |||||||||||
| investment, net of deferred fees | $ | 17,957,713 | $ | 17,230,146 | $ | 16,885,192 | $ | 16,972,743 | |||
| Total unfunded loan commitments | $ | 7,528,248 | $ | 7,055,833 | $ | 6,429,587 | $ | 6,234,061 | |||
Allowance for Credit Losses
The following tables show roll forwards of the allowance for credit losses for the periods indicated:
| 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 | ||||
| Three Months Ended September 30, 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 | $ | 132,139 | $ | 35,361 | $ | 167,500 | ||||
| Charge-offs | (3,308 | ) | - | (3,308 | ) | |||||
| Recoveries | 1,589 | - | 1,589 | |||||||
| Net charge-offs | (1,719 | ) | - | (1,719 | ) | |||||
| Provision | 11,500 | - | 11,500 | |||||||
| Ending balance | $ | 141,920 | $ | 35,361 | $ | 177,281 | ||||
The allowance for credit losses as a percentage of loans and leases held for investment decreased to 0.94% at December 31, 2018 from 1.03% at September 30, 2018 as certain specific reserves in place at September 30, 2018 were charged off during the fourth quarter, lowering the specific reserves on impaired loans at December 31, 2018 compared to September 30, 2018.
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. Gross charge-offs for the third quarter of 2018 were $3.3 million and included $1.1 million for venture capital loans, $0.7 million for real estate mortgage loans, and $0.7 million for asset-based 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. Recoveries for the third quarter of 2018 were $1.6 million and included $1.0 million for venture capital loans.
For the full year 2018, net charge-offs were $43.8 million and included $24.2 million for venture capital loans, a decrease from the full year 2017 net charge-offs of $68.7 million that included $36.0 million for venture capital loans. This resulted in a decrease in net charge-offs to average loans for the venture capital portfolio from 1.77% in 2017 to 1.17% in 2018.
For the fourth quarter of 2018 and third quarter of 2018, annualized net charge-offs to average loans and leases were 0.46% and 0.04%. For the full years 2018 and 2017, net charge-offs to average loans and leases were 0.26% and 0.43%.
Deposits and Client Investment Funds
The following table presents the composition of our deposit portfolio as of the dates indicated:
| December 31, | September 30, | June 30, | December 31, | ||||||||||||
| Deposit Category | 2018 | 2018 | 2018 | 2017 | |||||||||||
| (Dollars in thousands) | |||||||||||||||
| Noninterest-bearing demand deposits | $ | 7,888,915 | $ | 7,834,480 | $ | 8,126,153 | $ | 8,508,044 | |||||||
| Interest checking deposits | 2,842,463 | 2,277,537 | 2,184,785 | 2,226,885 | |||||||||||
| Money market deposits | 5,043,871 | 4,782,724 | 4,631,658 | 4,511,730 | |||||||||||
| Savings deposits | 571,422 | 618,001 | 643,642 | 690,353 | |||||||||||
| Total core deposits | 16,346,671 | 15,512,742 | 15,586,238 | 15,937,012 | |||||||||||
| Non-core non-maturity deposits | 518,192 | 483,528 | 607,388 | 863,202 | |||||||||||
| Total non-maturity deposits | 16,864,863 | 15,996,270 | 16,193,626 | 16,800,214 | |||||||||||
| Time deposits $250,000 and under | 1,593,453 | 1,509,214 | 1,394,117 | 1,709,980 | |||||||||||
| Time deposits over $250,000 | 412,185 | 374,059 | 341,449 | 355,342 | |||||||||||
| Total time deposits | 2,005,638 | 1,883,273 | 1,735,566 | 2,065,322 | |||||||||||
| Total deposits | $ | 18,870,501 | $ | 17,879,543 | $ | 17,929,192 | $ | 18,865,536 | |||||||
| Noninterest-bearing demand deposits | |||||||||||||||
| as percentage of total deposits | 42 | % | 44 | % | 45 | % | 45 | % | |||||||
| Core deposits as percentage of total deposits | 87 | % | 87 | % | 87 | % | 85 | % | |||||||
At December 31, 2018, core deposits totaled $16.3 billion, or 87% of total deposits, including $7.9 billion of noninterest-bearing demand deposits, or 42% of total deposits.
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 December 31, 2018 were $1.9 billion, of which $1.5 billion was managed by S1AM.
CREDIT QUALITY
The following table presents loan and lease credit quality metrics as of the dates indicated:
| December 31, | September 30, | Increase | |||||||||
| Credit Quality Metrics | 2018 | 2018 | (Decrease) | ||||||||
| (Dollars in thousands) | |||||||||||
| Nonaccrual loans and leases held for investment (1) | $ | 79,333 | $ | 112,972 | $ | (33,639 | ) | ||||
| Accruing loans contractually past due 90 days or more | - | - | - | ||||||||
| Foreclosed assets, net | 5,299 | 4,407 | 892 | ||||||||
| Total nonperforming assets | $ | 84,632 | $ | 117,379 | $ | (32,747 | ) | ||||
| Nonaccrual loans and leases held for investment (1) | $ | 79,333 | $ | 112,972 | $ | (33,639 | ) | ||||
| Performing troubled debt restructured loans | |||||||||||
| held for investment | 17,701 | 22,106 | (4,405 | ) | |||||||
| Total impaired loans and leases | $ | 97,034 | $ | 135,078 | $ | (38,044 | ) | ||||
| Nonaccrual loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 0.44 | % | 0.66 | % | |||||||
| Nonperforming assets to loans and leases | |||||||||||
| held for investment and foreclosed assets | 0.47 | % | 0.68 | % | |||||||
| Pass | $ | 17,459,205 | $ | 16,609,629 | $ | 849,576 | |||||
| Special mention | 261,398 | 360,058 | (98,660 | ) | |||||||
| Classified | 237,110 | 260,459 | (23,349 | ) | |||||||
| Total loans and leases held for investment, | |||||||||||
| net of deferred fees | $ | 17,957,713 | $ | 17,230,146 | $ | 727,567 | |||||
| Classified loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 1.32 | % | 1.51 | % | |||||||
| Allowance for credit losses | $ | 169,333 | $ | 177,281 | $ | (7,948 | ) | ||||
| Provision for credit losses (for the quarter) | $ | 12,000 | $ | 11,500 | $ | 500 | |||||
| Net charge-offs (for the quarter) | $ | 19,948 | $ | 1,719 | $ | 18,229 | |||||
| Net charge-offs to average loans and leases | |||||||||||
| (for the quarter) | 0.46 | % | 0.04 | % | |||||||
| Allowance for credit losses to loans and leases | |||||||||||
| held for investment | 0.94 | % | 1.03 | % | |||||||
| Allowance for credit losses to nonaccrual loans | |||||||||||
| and leases held for investment | 213.5 | % | 156.9 | % | |||||||
| (1) Nonaccrual loans include guaranteed amounts of $11.2 million at December 31, 2018 and $13.5 million | |||||||||||
| at September 30, 2018. | |||||||||||
During the fourth quarter of 2018, nonaccrual loans decreased by $33.6 million and classified loans decreased by $23.3 million. These decreases were primarily due to the foreclosure and sale during the quarter of a $12.2 million commercial real estate loan (which was our only exposure to traditional malls) and the charge-off of two venture capital loans carried at $22.5 million that were classified and on nonaccrual status at September 30, 2018.
Special mention loans and leases decreased by $98.7 million in the fourth quarter due primarily to the payoff of two loans totaling $50 million and a $36 million loan being upgraded to pass status.
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 | Accruing and | ||||||||||||||
| December 31, 2018 | September 30, 2018 | 30-89 Days Past Due | |||||||||||||
| % of | % of | December 31, | September 30, | ||||||||||||
| Loan | Loan | 2018 | 2018 | ||||||||||||
| Amount | Category | Amount | Category | Amount | Amount | ||||||||||
| (Dollars in thousands) | |||||||||||||||
| Real estate mortgage: | |||||||||||||||
| Commercial | $ | 15,321 | 0.3 | % | $ | 29,723 | 0.6 | % | $ | 3,276 | $ | 824 | |||
| Residential | 2,524 | 0.1 | % | 3,259 | 0.1 | % | 1,557 | 5,436 | |||||||
| Total real estate mortgage | 17,845 | 0.2 | % | 32,982 | 0.4 | % | 4,833 | 6,260 | |||||||
| Real estate construction and land: | |||||||||||||||
| Commercial | 442 | 0.0 | % | - | 0.0 | % | - | - | |||||||
| Residential | - | 0.0 | % | - | 0.0 | % | 1,527 | 8,498 | |||||||
| Total real estate | |||||||||||||||
| construction and land | 442 | 0.0 | % | - | 0.0 | % | 1,527 | 8,498 | |||||||
| Commercial: | |||||||||||||||
| Asset-based | 32,324 | 1.0 | % | 34,619 | 1.1 | % | 47 | - | |||||||
| Venture capital | 20,299 | 1.0 | % | 35,520 | 1.7 | % | 1,028 | 1,028 | |||||||
| Other commercial | 7,380 | 0.4 | % | 9,579 | 0.5 | % | 2,467 | 222 | |||||||
| Total commercial | 60,003 | 0.8 | % | 79,718 | 1.1 | % | 3,542 | 1,250 | |||||||
| Consumer | 1,043 | 0.3 | % | 272 | 0.1 | % | 581 | 605 | |||||||
| Total held for investment | $ | 79,333 | 0.4 | % | $ | 112,972 | 0.7 | % | $ | 10,483 | $ | 16,613 | |||
STOCK REPURCHASE PROGRAM
During the fourth quarter of 2018, no shares were repurchased. For the year ended December 31, 2018, we repurchased 5,849,234 shares at an average price of $52.38 and a total cost of $306.4 million. At December 31, 2018, the remaining amount that could be used to repurchase shares under the $350 million Stock Repurchase Program was $110.1 million.
ABOUT PACWEST BANCORP
PacWest Bancorp (“PacWest”) is a bank holding company with over $25 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.
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||||
| December 31, | September 30, | December 31, | |||||||||
| 2018 | 2018 | 2017 | |||||||||
| (Dollars in thousands, except per share data) | |||||||||||
| ASSETS: | |||||||||||
| Cash and due from banks | $ | 175,830 | $ | 196,502 | $ | 233,215 | |||||
| Interest-earning deposits in financial institutions | 209,937 | 185,284 | 165,222 | ||||||||
| Total cash and cash equivalents | 385,767 | 381,786 | 398,437 | ||||||||
| Securities available-for-sale, at estimated fair value | 4,009,431 | 3,820,333 | 3,774,431 | ||||||||
| Federal Home Loan Bank stock, at cost | 32,103 | 31,077 | 20,790 | ||||||||
| Total investment securities | 4,041,534 | 3,851,410 | 3,795,221 | ||||||||
| Loans held for sale | - | - | 481,100 | ||||||||
| Gross loans and leases held for investment | 18,026,365 | 17,295,589 | 17,032,221 | ||||||||
| Deferred fees, net | (68,652 | ) | (65,443 | ) | (59,478 | ) | |||||
| Total loans and leases held for investment, | |||||||||||
| net of deferred fees | 17,957,713 | 17,230,146 | 16,972,743 | ||||||||
| Allowance for loan and lease losses | (132,472 | ) | (141,920 | ) | (139,456 | ) | |||||
| Total loans and leases held for investment, net | 17,825,241 | 17,088,226 | 16,833,287 | ||||||||
| Equipment leased to others under operating leases | 292,677 | 275,707 | 284,631 | ||||||||
| Premises and equipment, net | 34,661 | 34,012 | 31,852 | ||||||||
| Foreclosed assets, net | 5,299 | 4,407 | 1,329 | ||||||||
| Deferred tax asset, net | 17,489 | 41,280 | - | ||||||||
| Goodwill | 2,548,670 | 2,548,670 | 2,548,670 | ||||||||
| Core deposit and customer relationship intangibles, net | 57,120 | 62,106 | 79,626 | ||||||||
| Other assets | 522,896 | 494,522 | 540,723 | ||||||||
| Total assets | $ | 25,731,354 | $ | 24,782,126 | $ | 24,994,876 | |||||
| LIABILITIES: | |||||||||||
| Noninterest-bearing deposits | $ | 7,888,915 | $ | 7,834,480 | $ | 8,508,044 | |||||
| Interest-bearing deposits | 10,981,586 | 10,045,063 | 10,357,492 | ||||||||
| Total deposits | 18,870,501 | 17,879,543 | 18,865,536 | ||||||||
| Borrowings | 1,371,114 | 1,513,166 | 467,342 | ||||||||
| Subordinated debentures | 453,846 | 452,944 | 462,437 | ||||||||
| Accrued interest payable and other liabilities | 210,305 | 194,788 | 221,963 | ||||||||
| Total liabilities | 20,905,766 | 20,040,441 | 20,017,278 | ||||||||
| STOCKHOLDERS' EQUITY (1) | 4,825,588 | 4,741,685 | 4,977,598 | ||||||||
| Total liabilities and stockholders’ equity | $ | 25,731,354 | $ | 24,782,126 | $ | 24,994,876 | |||||
| Book value per share | $ | 39.17 | $ | 38.46 | $ | 38.65 | |||||
| Tangible book value per share (2) | $ | 18.02 | $ | 17.28 | $ | 18.24 | |||||
| Shares outstanding | 123,189,833 | 123,283,450 | 128,782,878 | ||||||||
| (1) Includes net unrealized (loss) gain on securities | |||||||||||
| available-for-sale, net | $ | (6,075 | ) | $ | (43,854 | ) | $ | 31,171 | |||
| (2) Non-GAAP measure. | |||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF EARNINGS | |||||||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
| 2018 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Interest income: | |||||||||||||||||||
| Loans and leases | $ | 272,522 | $ | 264,062 | $ | 258,309 | $ | 1,047,969 | $ | 952,771 | |||||||||
| Investment securities | 29,690 | 28,061 | 25,712 | 111,619 | 98,202 | ||||||||||||||
| Deposits in financial institutions | 527 | 519 | 576 | 2,082 | 1,543 | ||||||||||||||
| Total interest income | 302,739 | 292,642 | 284,597 | 1,161,670 | 1,052,516 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 28,834 | 21,121 | 14,041 | 80,140 | 45,694 | ||||||||||||||
| Borrowings | 4,602 | 3,814 | 1,366 | 11,985 | 3,638 | ||||||||||||||
| Subordinated debentures | 7,538 | 7,390 | 6,234 | 28,631 | 23,613 | ||||||||||||||
| Total interest expense | 40,974 | 32,325 | 21,641 | 120,756 | 72,945 | ||||||||||||||
| Net interest income | 261,765 | 260,317 | 262,956 | 1,040,914 | 979,571 | ||||||||||||||
| Provision for credit losses | 12,000 | 11,500 | 6,406 | 45,000 | 57,752 | ||||||||||||||
| Net interest income after | |||||||||||||||||||
| provision for credit losses | 249,765 | 248,817 | 256,550 | 995,914 | 921,819 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Service charges on deposit accounts | 4,091 | 3,979 | 4,574 | 16,509 | 15,307 | ||||||||||||||
| Other commissions and fees | 11,114 | 12,397 | 10,505 | 45,543 | 41,422 | ||||||||||||||
| Leased equipment income | 9,384 | 9,120 | 8,258 | 37,881 | 37,700 | ||||||||||||||
| Gain on sale of loans and leases | - | - | 1,988 | 4,675 | 6,197 | ||||||||||||||
| Gain (loss) on sale of securities | 786 | 826 | (3,329 | ) | 8,176 | (541 | ) | ||||||||||||
| Other income | 8,151 | 10,590 | 4,799 | 35,851 | 28,488 | ||||||||||||||
| Total noninterest income | 33,526 | 36,912 | 26,795 | 148,635 | 128,573 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Compensation | 69,299 | 72,333 | 71,986 | 282,568 | 266,567 | ||||||||||||||
| Occupancy | 13,356 | 13,069 | 12,715 | 53,223 | 48,863 | ||||||||||||||
| Data processing | 6,930 | 6,740 | 6,764 | 27,225 | 26,575 | ||||||||||||||
| Other professional services | 6,198 | 6,058 | 5,786 | 21,952 | 17,353 | ||||||||||||||
| Insurance and assessments | 4,202 | 5,446 | 5,384 | 20,705 | 19,733 | ||||||||||||||
| Intangible asset amortization | 4,986 | 5,587 | 5,062 | 22,506 | 14,240 | ||||||||||||||
| Leased equipment depreciation | 5,758 | 5,001 | 5,048 | 21,371 | 20,767 | ||||||||||||||
| Foreclosed assets (income) expense, net | (311 | ) | (257 | ) | (475 | ) | (751 | ) | 1,702 | ||||||||||
| Acquisition, integration and | |||||||||||||||||||
| reorganization costs | 970 | 800 | 16,085 | 1,770 | 19,735 | ||||||||||||||
| Loan expense | 2,991 | 2,249 | 3,140 | 10,569 | 13,832 | ||||||||||||||
| Other expense | 14,856 | 11,127 | 11,373 | 50,094 | 46,294 | ||||||||||||||
| Total noninterest expense | 129,235 | 128,153 | 142,868 | 511,232 | 495,661 | ||||||||||||||
| Earnings before income taxes | 154,056 | 157,576 | 140,477 | 633,317 | 554,731 | ||||||||||||||
| Income tax expense | (39,015 | ) | (41,289 | ) | (56,440 | ) | (167,978 | ) | (196,913 | ) | |||||||||
| Net earnings | $ | 115,041 | $ | 116,287 | $ | 84,037 | $ | 465,339 | $ | 357,818 | |||||||||
| Basic and diluted earnings per share | $ | 0.93 | $ | 0.94 | $ | 0.66 | $ | 3.72 | $ | 2.91 | |||||||||
| Dividends declared and paid per share | $ | 0.60 | $ | 0.60 | $ | 0.50 | $ | 2.30 | $ | 2.00 | |||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| NET EARNINGS PER SHARE CALCULATIONS | |||||||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
| 2018 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||
| Basic Earnings Per Share: | |||||||||||||||||||
| Net earnings | $ | 115,041 | $ | 116,287 | $ | 84,037 | $ | 465,339 | $ | 357,818 | |||||||||
| Less: earnings allocated to unvested | |||||||||||||||||||
| restricted stock (1) | (1,219 | ) | (1,428 | ) | (951 | ) | (5,119 | ) | (4,184 | ) | |||||||||
| Net earnings allocated to common | |||||||||||||||||||
| shares | $ | 113,822 | $ | 114,859 | $ | 83,086 | $ | 460,220 | $ | 353,634 | |||||||||
| Weighted-average basic shares and | |||||||||||||||||||
| unvested restricted stock outstanding | 123,238 | 123,657 | 127,971 | 125,100 | 123,060 | ||||||||||||||
| Less: weighted-average unvested | |||||||||||||||||||
| restricted stock outstanding | (1,426 | ) | (1,537 | ) | (1,440 | ) | (1,460 | ) | (1,447 | ) | |||||||||
| Weighted-average basic shares | |||||||||||||||||||
| outstanding | 121,812 | 122,120 | 126,531 | 123,640 | 121,613 | ||||||||||||||
| Basic earnings per share | $ | 0.93 | $ | 0.94 | $ | 0.66 | $ | 3.72 | $ | 2.91 | |||||||||
| Diluted Earnings Per Share: | |||||||||||||||||||
| Net earnings allocated to common | |||||||||||||||||||
| shares | $ | 113,822 | $ | 114,859 | $ | 83,086 | $ | 460,220 | $ | 353,634 | |||||||||
| Weighted-average basic shares | |||||||||||||||||||
| outstanding | 121,812 | 122,120 | 126,531 | 123,640 | 121,613 | ||||||||||||||
| Diluted earnings per share | $ | 0.93 | $ | 0.94 | $ | 0.66 | $ | 3.72 | $ | 2.91 | |||||||||
| (1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus | |||||||||||||||||||
| undistributed earnings amounts available to holders of unvested restricted stock, if any. | |||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| AVERAGE BALANCE SHEET AND YIELD ANALYSIS | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||||||||
| 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) | $ | 17,275,343 | $ | 272,824 | 6.27 | % | $ | 16,913,792 | $ | 264,371 | 6.20 | % | $ | 17,426,873 | $ | 258,586 | 5.89 | % | ||
| Investment securities (3) | 3,899,520 | 30,992 | 3.15 | % | 3,844,201 | 29,711 | 3.07 | % | 3,807,928 | 30,709 | 3.20 | % | ||||||||
| Deposits in financial | ||||||||||||||||||||
| institutions | 94,500 | 527 | 2.21 | % | 108,485 | 519 | 1.90 | % | 179,379 | 576 | 1.27 | % | ||||||||
| Total interest-earning | ||||||||||||||||||||
| assets (1) | 21,269,363 | 304,343 | 5.68 | % | 20,866,478 | 294,601 | 5.60 | % | 21,414,180 | 289,871 | 5.37 | % | ||||||||
| Other assets | 3,515,099 | 3,491,293 | 3,375,656 | |||||||||||||||||
| Total assets | $ | 24,784,462 | $ | 24,357,771 | $ | 24,789,836 | ||||||||||||||
| Liabilities and | ||||||||||||||||||||
| Stockholders' Equity: | ||||||||||||||||||||
| Interest checking | $ | 2,785,702 | 7,932 | 1.13 | % | $ | 2,433,837 | 5,135 | 0.84 | % | $ | 2,340,166 | 2,891 | 0.49 | % | |||||
| Money market | 5,107,468 | 13,621 | 1.06 | % | 5,270,297 | 10,689 | 0.80 | % | 5,415,630 | 7,214 | 0.53 | % | ||||||||
| Savings | 597,259 | 273 | 0.18 | % | 629,241 | 233 | 0.15 | % | 702,023 | 279 | 0.16 | % | ||||||||
| Time | 1,932,332 | 7,008 | 1.44 | % | 1,778,552 | 5,064 | 1.13 | % | 2,120,749 | 3,657 | 0.68 | % | ||||||||
| Total interest-bearing | ||||||||||||||||||||
| deposits | 10,422,761 | 28,834 | 1.10 | % | 10,111,927 | 21,121 | 0.83 | % | 10,578,568 | 14,041 | 0.53 | % | ||||||||
| Borrowings | 764,039 | 4,602 | 2.39 | % | 720,449 | 3,814 | 2.10 | % | 445,106 | 1,366 | 1.22 | % | ||||||||
| Subordinated debentures | 452,998 | 7,538 | 6.60 | % | 452,312 | 7,390 | 6.48 | % | 458,269 | 6,234 | 5.40 | % | ||||||||
| Total interest-bearing | ||||||||||||||||||||
| liabilities | 11,639,798 | 40,974 | 1.40 | % | 11,284,688 | 32,325 | 1.14 | % | 11,481,943 | 21,641 | 0.75 | % | ||||||||
| Noninterest-bearing | ||||||||||||||||||||
| demand deposits | 8,163,699 | 8,120,306 | 8,190,134 | |||||||||||||||||
| Other liabilities | 222,564 | 203,958 | 197,261 | |||||||||||||||||
| Total liabilities | 20,026,061 | 19,608,952 | 19,869,338 | |||||||||||||||||
| Stockholders' equity | 4,758,401 | 4,748,819 | 4,920,498 | |||||||||||||||||
| Total liabilities and | ||||||||||||||||||||
| stockholders' equity | $ | 24,784,462 | $ | 24,357,771 | $ | 24,789,836 | ||||||||||||||
| Net interest income (1) | $ | 263,369 | $ | 262,276 | $ | 268,230 | ||||||||||||||
| Net interest spread (1) | 4.28 | % | 4.46 | % | 4.62 | % | ||||||||||||||
| Net interest margin (1) | 4.91 | % | 4.99 | % | 4.97 | % | ||||||||||||||
| Total deposits (4) | $ | 18,586,460 | $ | 28,834 | 0.62 | % | $ | 18,232,233 | $ | 21,121 | 0.46 | % | $ | 18,768,702 | $ | 14,041 | 0.30 | % | ||
| Funding sources (5) | $ | 19,803,497 | $ | 40,974 | 0.82 | % | $ | 19,404,994 | $ | 32,325 | 0.66 | % | $ | 19,672,077 | $ | 21,641 | 0.44 | % | ||
| (1) Tax equivalent. | ||||||||||||||||||||
| (2) Includes discount accretion on acquired loans of $6.9 million, $6.1 million, and $6.8 million for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017, respectively. | ||||||||||||||||||||
| (3) Includes tax-equivalent adjustments of $1.1 million, $1.5 million, and $5.0 million for the three months ended December 31, 2018, September 30, 2018, and December 31, 2017 related to tax-exempt income on municipal securities. The federal statutory tax-rate utilized was 21% for the 2018 periods and 35% for the 2017 period. | ||||||||||||||||||||
| (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 deposits divided by average total deposits. | ||||||||||||||||||||
| (5) Funding sources is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of funding sources is calculated as annualized total interest expense divided by average funding sources. | ||||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER BALANCE SHEET | |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
| 2018 | 2018 | 2018 | 2018 | 2017 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| ASSETS: | |||||||||||||||||||
| Cash and due from banks | $ | 175,830 | $ | 196,502 | $ | 245,998 | $ | 235,061 | $ | 233,215 | |||||||||
| Interest-earning deposits in financial | |||||||||||||||||||
| institutions | 209,937 | 185,284 | 205,567 | 312,735 | 165,222 | ||||||||||||||
| Total cash and cash equivalents | 385,767 | 381,786 | 451,565 | 547,796 | 398,437 | ||||||||||||||
| Securities available-for-sale | 4,009,431 | 3,820,333 | 3,857,788 | 3,801,986 | 3,774,431 | ||||||||||||||
| Federal Home Loan Bank stock | 32,103 | 31,077 | 26,271 | 17,250 | 20,790 | ||||||||||||||
| Total investment securities | 4,041,534 | 3,851,410 | 3,884,059 | 3,819,236 | 3,795,221 | ||||||||||||||
| Loans held for sale | - | - | - | - | 481,100 | ||||||||||||||
| Gross loans and leases held for investment | 18,026,365 | 17,295,589 | 16,947,502 | 16,516,627 | 17,032,221 | ||||||||||||||
| Deferred fees, net | (68,652 | ) | (65,443 | ) | (62,310 | ) | (61,342 | ) | (59,478 | ) | |||||||||
| Total loans and leases held for | |||||||||||||||||||
| investment, net of deferred fees | 17,957,713 | 17,230,146 | 16,885,192 | 16,455,285 | 16,972,743 | ||||||||||||||
| Allowance for loan and lease losses | (132,472 | ) | (141,920 | ) | (132,139 | ) | (134,275 | ) | (139,456 | ) | |||||||||
| Total loans and leases held for | |||||||||||||||||||
| investment, net | 17,825,241 | 17,088,226 | 16,753,053 | 16,321,010 | 16,833,287 | ||||||||||||||
| Equipment leased to others under | |||||||||||||||||||
| operating leases | 292,677 | 275,707 | 266,576 | 280,648 | 284,631 | ||||||||||||||
| Premises and equipment, net | 34,661 | 34,012 | 34,513 | 33,686 | 31,852 | ||||||||||||||
| Foreclosed assets, net | 5,299 | 4,407 | 2,231 | 1,236 | 1,329 | ||||||||||||||
| 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 | 57,120 | 62,106 | 67,693 | 73,280 | 79,626 | ||||||||||||||
| Other assets | 522,896 | 494,522 | 495,646 | 511,184 | 540,723 | ||||||||||||||
| Total assets | $ | 25,731,354 | $ | 24,782,126 | $ | 24,529,557 | $ | 24,149,330 | $ | 24,994,876 | |||||||||
| LIABILITIES: | |||||||||||||||||||
| Noninterest-bearing deposits | $ | 7,888,915 | $ | 7,834,480 | $ | 8,126,153 | $ | 8,232,140 | $ | 8,508,044 | |||||||||
| Interest-bearing deposits | 10,981,586 | 10,045,063 | 9,803,039 | 9,846,648 | 10,357,492 | ||||||||||||||
| Total deposits | 18,870,501 | 17,879,543 | 17,929,192 | 18,078,788 | 18,865,536 | ||||||||||||||
| Borrowings | 1,371,114 | 1,513,166 | 1,187,226 | 575,284 | 467,342 | ||||||||||||||
| Subordinated debentures | 453,846 | 452,944 | 451,878 | 452,223 | 462,437 | ||||||||||||||
| Accrued interest payable and other | |||||||||||||||||||
| liabilities | 210,305 | 194,788 | 183,302 | 175,545 | 221,963 | ||||||||||||||
| Total liabilities | 20,905,766 | 20,040,441 | 19,751,598 | 19,281,840 | 20,017,278 | ||||||||||||||
| STOCKHOLDERS' EQUITY (1) | 4,825,588 | 4,741,685 | 4,777,959 | 4,867,490 | 4,977,598 | ||||||||||||||
| Total liabilities and stockholders’ | |||||||||||||||||||
| equity | $ | 25,731,354 | $ | 24,782,126 | $ | 24,529,557 | $ | 24,149,330 | $ | 24,994,876 | |||||||||
| Book value per share | $ | 39.17 | $ | 38.46 | $ | 38.36 | $ | 38.47 | $ | 38.65 | |||||||||
| Tangible book value per share (2) | $ | 18.02 | $ | 17.28 | $ | 17.35 | $ | 17.75 | $ | 18.24 | |||||||||
| Shares outstanding | 123,189,833 | 123,283,450 | 124,567,950 | 126,537,871 | 128,782,878 | ||||||||||||||
| (1) Includes net unrealized (loss) gain on | |||||||||||||||||||
| securities available-for-sale, net | $ | (6,075 | ) | $ | (43,854 | ) | $ | (22,340 | ) | $ | (11,936 | ) | $ | 31,171 | |||||
| (2) Non-GAAP measure. | |||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER STATEMENT OF EARNINGS | |||||||||||||||||||
| Three Months Ended | |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
| 2018 | 2018 | 2018 | 2018 | 2017 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Interest income: | |||||||||||||||||||
| Loans and leases | $ | 272,522 | $ | 264,062 | $ | 260,300 | $ | 251,085 | $ | 258,309 | |||||||||
| Investment securities | 29,690 | 28,061 | 27,730 | 26,138 | 25,712 | ||||||||||||||
| Deposits in financial institutions | 527 | 519 | 484 | 552 | 576 | ||||||||||||||
| Total interest income | 302,739 | 292,642 | 288,514 | 277,775 | 284,597 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 28,834 | 21,121 | 16,367 | 13,818 | 14,041 | ||||||||||||||
| Borrowings | 4,602 | 3,814 | 2,649 | 920 | 1,366 | ||||||||||||||
| Subordinated debentures | 7,538 | 7,390 | 7,166 | 6,537 | 6,234 | ||||||||||||||
| Total interest expense | 40,974 | 32,325 | 26,182 | 21,275 | 21,641 | ||||||||||||||
| Net interest income | 261,765 | 260,317 | 262,332 | 256,500 | 262,956 | ||||||||||||||
| Provision for credit losses | 12,000 | 11,500 | 17,500 | 4,000 | 6,406 | ||||||||||||||
| Net interest income after | |||||||||||||||||||
| provision for credit losses | 249,765 | 248,817 | 244,832 | 252,500 | 256,550 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Service charges on deposit accounts | 4,091 | 3,979 | 4,265 | 4,174 | 4,574 | ||||||||||||||
| Other commissions and fees | 11,114 | 12,397 | 11,767 | 10,265 | 10,505 | ||||||||||||||
| Leased equipment income | 9,384 | 9,120 | 9,790 | 9,587 | 8,258 | ||||||||||||||
| Gain on sale of loans and leases | - | - | 106 | 4,569 | 1,988 | ||||||||||||||
| Gain (loss) on sale of securities | 786 | 826 | 253 | 6,311 | (3,329 | ) | |||||||||||||
| Other income | 8,151 | 10,590 | 13,457 | 3,653 | 4,799 | ||||||||||||||
| Total noninterest income | 33,526 | 36,912 | 39,638 | 38,559 | 26,795 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Compensation | 69,299 | 72,333 | 69,913 | 71,023 | 71,986 | ||||||||||||||
| Occupancy | 13,356 | 13,069 | 13,575 | 13,223 | 12,715 | ||||||||||||||
| Data processing | 6,930 | 6,740 | 6,896 | 6,659 | 6,764 | ||||||||||||||
| Other professional services | 6,198 | 6,058 | 5,257 | 4,439 | 5,786 | ||||||||||||||
| Insurance and assessments | 4,202 | 5,446 | 5,330 | 5,727 | 5,384 | ||||||||||||||
| Intangible asset amortization | 4,986 | 5,587 | 5,587 | 6,346 | 5,062 | ||||||||||||||
| Leased equipment depreciation | 5,758 | 5,001 | 5,237 | 5,375 | 5,048 | ||||||||||||||
| Foreclosed assets (income) expense, net | (311 | ) | (257 | ) | (61 | ) | (122 | ) | (475 | ) | |||||||||
| Acquisition, integration and | |||||||||||||||||||
| reorganization costs | 970 | 800 | - | - | 16,085 | ||||||||||||||
| Loan expense | 2,991 | 2,249 | 3,058 | 2,271 | 3,140 | ||||||||||||||
| Other expense | 14,856 | 11,127 | 11,657 | 12,454 | 11,373 | ||||||||||||||
| Total noninterest expense | 129,235 | 128,153 | 126,449 | 127,395 | 142,868 | ||||||||||||||
| Earnings before income taxes | 154,056 | 157,576 | 158,021 | 163,664 | 140,477 | ||||||||||||||
| Income tax expense | (39,015 | ) | (41,289 | ) | (42,286 | ) | (45,388 | ) | (56,440 | ) | |||||||||
| Net earnings | $ | 115,041 | $ | 116,287 | $ | 115,735 | $ | 118,276 | $ | 84,037 | |||||||||
| Basic and diluted earnings per share | $ | 0.93 | $ | 0.94 | $ | 0.92 | $ | 0.93 | $ | 0.66 | |||||||||
| Dividends declared and paid per share | $ | 0.60 | $ | 0.60 | $ | 0.60 | $ | 0.50 | $ | 0.50 | |||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER SELECTED FINANCIAL DATA | |||||||||||||||||||
| At or For the Three Months Ended | |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
| 2018 | 2018 | 2018 | 2018 | 2017 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Performance Ratios: | |||||||||||||||||||
| Return on average assets (1) | 1.84 | % | 1.89 | % | 1.93 | % | 1.99 | % | 1.34 | % | |||||||||
| Return on average equity (1) | 9.59 | % | 9.72 | % | 9.61 | % | 9.79 | % | 6.78 | % | |||||||||
| Return on average tangible equity (1)(2) | 21.23 | % | 21.61 | % | 20.98 | % | 21.08 | % | 13.75 | % | |||||||||
| Yield on average loans and leases (1)(3) | 6.27 | % | 6.20 | % | 6.30 | % | 6.11 | % | 5.89 | % | |||||||||
| Yield on average interest-earning | |||||||||||||||||||
| assets (1)(3) | 5.68 | % | 5.60 | % | 5.70 | % | 5.53 | % | 5.37 | % | |||||||||
| Cost of average total deposits (1) | 0.62 | % | 0.46 | % | 0.37 | % | 0.31 | % | 0.30 | % | |||||||||
| Cost of average time deposits (1) | 1.44 | % | 1.13 | % | 0.92 | % | 0.78 | % | 0.62 | % | |||||||||
| Cost of average interest-bearing | |||||||||||||||||||
| liabilities (1) | 1.40 | % | 1.14 | % | 0.98 | % | 0.81 | % | 0.75 | % | |||||||||
| Cost of average funding sources (1) | 0.82 | % | 0.66 | % | 0.55 | % | 0.45 | % | 0.44 | % | |||||||||
| Net interest spread (1)(3) | 4.28 | % | 4.46 | % | 4.72 | % | 4.72 | % | 4.62 | % | |||||||||
| Net interest margin (1)(3) | 4.91 | % | 4.99 | % | 5.18 | % | 5.11 | % | 4.97 | % | |||||||||
| Efficiency ratio | 41.7 | % | 40.9 | % | 39.8 | % | 41.7 | % | 41.0 | % | |||||||||
| Noninterest expense as a percentage | |||||||||||||||||||
| of average assets (1) | 2.07 | % | 2.09 | % | 2.11 | % | 2.15 | % | 2.29 | % | |||||||||
| Average Balances: | |||||||||||||||||||
| Loans and leases, net of deferred fees | $ | 17,275,343 | $ | 16,913,792 | $ | 16,576,361 | $ | 16,682,124 | $ | 17,426,873 | |||||||||
| Interest-earning assets | 21,269,363 | 20,866,478 | 20,492,121 | 20,514,936 | 21,414,180 | ||||||||||||||
| Total assets | 24,784,462 | 24,357,771 | 23,999,637 | 24,071,148 | 24,789,836 | ||||||||||||||
| Noninterest-bearing deposits | 8,163,699 | 8,120,306 | 8,253,413 | 8,311,104 | 8,190,134 | ||||||||||||||
| Interest-bearing deposits | 10,422,761 | 10,111,927 | 9,703,611 | 9,959,243 | 10,578,568 | ||||||||||||||
| Total deposits | 18,586,460 | 18,232,233 | 17,957,024 | 18,270,347 | 18,768,702 | ||||||||||||||
| Borrowings and subordinated | |||||||||||||||||||
| debentures | 1,217,037 | 1,172,761 | 1,001,638 | 700,941 | 903,375 | ||||||||||||||
| Interest-bearing liabilities | 11,639,798 | 11,284,688 | 10,705,249 | 10,660,184 | 11,481,943 | ||||||||||||||
| Funding sources | 19,803,497 | 19,404,994 | 18,958,662 | 18,971,288 | 19,672,077 | ||||||||||||||
| Stockholders' equity | 4,758,401 | 4,748,819 | 4,832,480 | 4,901,207 | 4,920,498 | ||||||||||||||
| (1) Annualized. | |||||||||||||||||||
| (2) Non-GAAP measure. | |||||||||||||||||||
| (3) Tax equivalent. | |||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER SELECTED FINANCIAL DATA | |||||||||||||||||||
| At or For the Three Months Ended | |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
| 2018 | 2018 | 2018 | 2018 | 2017 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Credit Quality Ratios (1): | |||||||||||||||||||
| Nonaccrual loans and leases held for | |||||||||||||||||||
| investment to loans and leases held | |||||||||||||||||||
| for investment | 0.44 | % | 0.66 | % | 0.67 | % | 0.63 | % | 0.92 | % | |||||||||
| Nonperforming assets to loans and | |||||||||||||||||||
| leases held for investment and | |||||||||||||||||||
| foreclosed assets | 0.47 | % | 0.68 | % | 0.69 | % | 0.64 | % | 0.93 | % | |||||||||
| Classified loans and leases held for | |||||||||||||||||||
| investment to loans and leases held | |||||||||||||||||||
| for investment | 1.32 | % | 1.51 | % | 1.40 | % | 1.26 | % | 1.65 | % | |||||||||
| Trailing 12 months net charge-offs | |||||||||||||||||||
| to average loans and leases | |||||||||||||||||||
| held for investment | 0.26 | % | 0.28 | % | 0.28 | % | 0.31 | % | 0.40 | % | |||||||||
| Allowance for credit losses to loans | |||||||||||||||||||
| and leases held for investment | 0.94 | % | 1.03 | % | 0.99 | % | 1.02 | % | 0.96 | % | |||||||||
| Allowance for credit losses to | |||||||||||||||||||
| nonaccrual loans and leases held | |||||||||||||||||||
| for investment | 213.5 | % | 156.9 | % | 147.3 | % | 161.1 | % | 103.8 | % | |||||||||
| PacWest Bancorp Consolidated | |||||||||||||||||||
| Capital: | |||||||||||||||||||
| Tier 1 leverage ratio (2) | 10.13 | % | 10.10 | % | 10.33 | % | 10.66 | % | 10.66 | % | |||||||||
| Common equity tier 1 capital ratio (2) | 10.01 | % | 10.18 | % | 10.59 | % | 11.16 | % | 10.91 | % | |||||||||
| Tier 1 capital ratio (2) | 10.01 | % | 10.18 | % | 10.59 | % | 11.16 | % | 10.91 | % | |||||||||
| Total capital ratio (2) | 12.72 | % | 13.03 | % | 13.48 | % | 14.11 | % | 13.75 | % | |||||||||
| Risk-weighted assets (2) | $ | 22,525,096 | $ | 21,650,542 | $ | 20,929,325 | $ | 20,523,487 | $ | 21,657,591 | |||||||||
| Equity to assets ratio | 18.75 | % | 19.13 | % | 19.48 | % | 20.16 | % | 19.91 | % | |||||||||
| Tangible common equity ratio (3) | 9.60 | % | 9.61 | % | 9.86 | % | 10.43 | % | 10.50 | % | |||||||||
| Book value per share | $ | 39.17 | $ | 38.46 | $ | 38.36 | $ | 38.47 | $ | 38.65 | |||||||||
| Tangible book value per share (3) | $ | 18.02 | $ | 17.28 | $ | 17.35 | $ | 17.75 | $ | 18.24 | |||||||||
| Pacific Western Bank Capital: | |||||||||||||||||||
| Tier 1 leverage ratio (2) | 10.80 | % | 10.78 | % | 11.11 | % | 11.33 | % | 11.75 | % | |||||||||
| Common equity tier 1 capital ratio (2) | 10.68 | % | 10.87 | % | 11.40 | % | 11.86 | % | 11.91 | % | |||||||||
| Tier 1 capital ratio (2) | 10.68 | % | 10.87 | % | 11.40 | % | 11.86 | % | 11.91 | % | |||||||||
| Total capital ratio (2) | 11.44 | % | 11.69 | % | 12.21 | % | 12.67 | % | 12.69 | % | |||||||||
| (1) Ratios related to 2018 periods are for total loans and leases. Ratios related to the 2017 period are for Non-PCI loans and leases. | |||||||||||||||||||
| (2) Capital information for December 31, 2018 is preliminary. | |||||||||||||||||||
| (3) Non-GAAP measure. | |||||||||||||||||||
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 | Year Ended | ||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | ||||||||||||||||
| Return on Average Tangible Equity | 2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Net earnings | $ | 115,041 | $ | 116,287 | $ | 84,037 | $ | 465,339 | $ | 357,818 | |||||||||
| Average stockholders' equity | $ | 4,758,401 | $ | 4,748,819 | $ | 4,920,498 | $ | 4,809,667 | $ | 4,641,495 | |||||||||
| Less: Average intangible assets | 2,608,497 | 2,614,055 | 2,495,876 | 2,616,820 | 2,279,010 | ||||||||||||||
| Average tangible common equity | $ | 2,149,904 | $ | 2,134,764 | $ | 2,424,622 | $ | 2,192,847 | $ | 2,362,485 | |||||||||
| Return on average equity (1) | 9.59 | % | 9.72 | % | 6.78 | % | 9.68 | % | 7.71 | % | |||||||||
| Return on average tangible equity (2) | 21.23 | % | 21.61 | % | 13.75 | % | 21.22 | % | 15.15 | % | |||||||||
| (1) Annualized net earnings divided by average stockholders' equity. | |||||||||||||||||||
| (2) Annualized net earnings divided by average tangible common equity. | |||||||||||||||||||
| Tangible Common Equity Ratio/ | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||
| Tangible Book Value Per Share | 2018 | 2018 | 2018 | 2018 | 2017 | ||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Stockholders' equity | $ | 4,825,588 | $ | 4,741,685 | $ | 4,777,959 | $ | 4,867,490 | $ | 4,977,598 | |||||||||
| Less: Intangible assets | 2,605,790 | 2,610,776 | 2,616,363 | 2,621,950 | 2,628,296 | ||||||||||||||
| Tangible common equity | $ | 2,219,798 | $ | 2,130,909 | $ | 2,161,596 | $ | 2,245,540 | $ | 2,349,302 | |||||||||
| Total assets | $ | 25,731,354 | $ | 24,782,126 | $ | 24,529,557 | $ | 24,149,330 | $ | 24,994,876 | |||||||||
| Less: Intangible assets | 2,605,790 | 2,610,776 | 2,616,363 | 2,621,950 | 2,628,296 | ||||||||||||||
| Tangible assets | $ | 23,125,564 | $ | 22,171,350 | $ | 21,913,194 | $ | 21,527,380 | $ | 22,366,580 | |||||||||
| Equity to assets ratio | 18.75 | % | 19.13 | % | 19.48 | % | 20.16 | % | 19.91 | % | |||||||||
| Tangible common equity ratio (1) | 9.60 | % | 9.61 | % | 9.86 | % | 10.43 | % | 10.50 | % | |||||||||
| Book value per share | $ | 39.17 | $ | 38.46 | $ | 38.36 | $ | 38.47 | $ | 38.65 | |||||||||
| Tangible book value per share (2) | $ | 18.02 | $ | 17.28 | $ | 17.35 | $ | 17.75 | $ | 18.24 | |||||||||
| Shares outstanding | 123,189,833 | 123,283,450 | 124,567,950 | 126,537,871 | 128,782,878 | ||||||||||||||
| (1) Tangible common equity divided by tangible assets. | |||||||||||||||||||
| (2) Tangible common equity divided by shares outstanding. | |||||||||||||||||||
| Contact: | Matthew P. Wagner | Patrick J. Rusnak | |
| President and CEO | Executive Vice President and CFO | ||
| Phone: | 310-887-8520 | 714-989-4705 |