PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2022
01/26/2023 - 04:20 PM
LOS ANGELES, Jan. 26, 2023 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) -
FOURTH QUARTER 2022 RESULTS
$39.6M $ 0.33 14.39 % 8.70 % Net Earnings Available to Common Stockholders Diluted Earnings ROATCE CET1
FOURTH QUARTER 2022 HIGHLIGHTS
Announced leadership transition with Paul Taylor as President and CEO and Kevin Thompson as CFO Strategically sold $1 billion of available-for-sale securities for a loss of $49 million to pay down FHLB borrowings and to improve the capital and liquidity position of the Bank Recorded goodwill impairment of $29 million related to Civic as part of a strategy to restructure this lending subsidiary Shut down Premium Finance and Multi-Family lending groups as part of a strategy to focus on relationship-based community banking, which will result in cost savings and improved capital Recorded early retirement benefits and severance expense of $5.7 million as a first step in operational efficiency initiative All risk-based capital ratios increased from 3Q22, with CET1 increasing from 8.56% to 8.70% Credit metrics remain steady with nonperforming assets ratio of 38 basis points FULL YEAR 2022 RESULTS
$404.3M $ 3.37 21.04 % 51.0 % Net Earnings Available to Common Stockholders Diluted Earnings ROATCE Efficiency Ratio
FULL YEAR 2022 HIGHLIGHTS
Loan growth of $5.7 billion ; up 24.7% from 2021 Net interest income (TE) of $1.3 billion in 2022 vs. $1.1 billion in 2021; up 16.6% Strong earnings allowed us to return $140 million to our stockholders through dividends CEO COMMENTARY
Paul Taylor, President and CEO, commented, “In the fourth quarter, we initiated a new strategic plan designed to maximize shareholder value by strengthening our community bank focus, exiting non-core products, and improving our operational efficiency. The first strategic step we took was to sell $1 billion of available-for-sale securities, resulting in a loss on sale of $49 million . The proceeds were used to pay down FHLB borrowings and to improve the capital and liquidity position of the Bank going forward. Secondly, we recorded goodwill impairment of $29 million related to Civic as part of a strategy to restructure this lending subsidiary. Goodwill is a non-cash charge and has no impact on our regulatory capital ratios, cash flows, or liquidity position. We believe these actions will result in an improvement in the profitability and risk profile of Civic going forward. Next, we are slowing loan growth to preserve capital and strengthen our balance sheet, including shutting down our operations in our Premium Finance and Multi-Family lending groups. Finally, we are working to improve the overall operational efficiency of the Bank. As a first step in this initiative, we recorded early retirement benefits and severance expense of $5.7 million .”
“PacWest is a strong organization with extraordinary clients and has a talented and loyal team. Credit quality remains strong as evidenced by credit metrics such as nonperforming assets of 38 basis points and net charge-offs of four basis points for the quarter and two basis points for the year. As we head into 2023, our priority is to refocus on core relationship-based community banking, which is expected to result in increased core deposits, increased capital ratios, and an improved efficiency ratio, and allow us to maintain our credit quality at the current favorable levels.”
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 (1) 2022 2022 (Decrease) 2022 2021 (Decrease) (Dollars in thousands, except per share data) Net earnings available to common stockholders $ 39,562 $ 122,224 $ (82,662 ) $ 404,274 $ 606,959 $ (202,685 ) Diluted earnings per common share $ 0.33 $ 1.02 $ (0.69 ) $ 3.37 $ 5.10 $ (1.73 ) Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") (2) $ 106,151 $ 178,182 $ (72,031 ) $ 621,068 $ 660,334 $ (39,266 ) Return on average assets 0.48 % 1.28 % (0.80 ) 1.05 % 1.71 % (0.66 ) PPNR return on average assets (2) 1.02 % 1.73 % (0.71 ) 1.53 % 1.86 % (0.33 ) Return on average tangible common equity (2) 14.39 % 24.11 % (9.72 ) 21.04 % 24.41 % (3.37 ) Yield on average loans and leases (tax equivalent) 5.73 % 5.12 % 0.61 5.07 % 5.08 % (0.01 ) Cost of average total deposits 1.37 % 0.70 % 0.67 0.59 % 0.09 % 0.50 Net interest margin ("NIM") (tax equivalent) 3.41 % 3.57 % (0.16 ) 3.49 % 3.40 % 0.09 Efficiency ratio 53.3 % 51.0 % 2.3 51.0 % 46.9 % 4.1 Total assets $ 41,228,936 $ 41,404,592 $ (175,656 ) $ 41,228,936 $ 40,443,344 $ 785,592 Loans and leases held for investment, net of deferred fees $ 28,609,129 $ 27,660,041 $ 949,088 $ 28,609,129 $ 22,941,548 $ 5,667,581 Noninterest-bearing demand deposits $ 11,212,357 $ 12,775,756 $ (1,563,399 ) $ 11,212,357 $ 14,543,133 $ (3,330,776 ) Core deposits $ 26,561,129 $ 28,559,310 $ (1,998,181 ) $ 26,561,129 $ 32,734,949 $ (6,173,820 ) Total deposits $ 33,936,334 $ 34,195,872 $ (259,538 ) $ 33,936,334 $ 34,997,757 $ (1,061,423 ) As percentage of total deposits: Noninterest-bearing demand deposits 33 % 37 % (4 ) 33 % 41 % (8 ) Core deposits 78 % 83 % (5 ) 78 % 93 % (15 ) Equity to assets ratio 9.58 % 9.36 % 0.22 9.58 % 9.89 % (0.31 ) Common equity tier 1 capital ratio 8.70 % 8.56 % 0.14 8.70 % 8.86 % (0.16 ) Tier 1 capital ratio 10.60 % 10.46 % 0.14 10.60 % 9.32 % 1.28 Total capital ratio 13.61 % 13.43 % 0.18 13.61 % 12.69 % 0.92 Tangible common equity ratio (2) 5.13 % 4.85 % 0.28 5.13 % 6.54 % (1.41 ) Tangible book value per common share (2) $ 17.00 $ 16.11 $ 0.89 $ 17.00 $ 21.31 $ (4.31 ) (1) The operations of the HOA Business are included from its October 8, 2021 acquisition date and the operations of Civic are included from its February 1, 2021 acquisition date. (2) Non-GAAP measure.
INCOME STATEMENT HIGHLIGHTS
NET INTEREST INCOME
Net interest income decreased by $12.2 million to $322.9 million for the fourth quarter of 2022 compared to $335.2 million for the third quarter of 2022 due mainly to higher interest expense on deposits and borrowings, offset partially by higher interest income on loans and leases and deposits in financial institutions. Interest income on loans and leases increased by $58.4 million in the fourth quarter of 2022 due to a 61 basis points increase in the tax equivalent yield on average loans and leases and a $1.2 billion increase in the average balance of loans and leases compared to the third quarter of 2022. Interest income on deposits in financial institutions increased by $7.4 million in the fourth quarter of 2022 due mainly to a 147 basis points increase in the yield on average deposits in financial institutions. The tax equivalent yield on average loans and leases was 5.73% for the fourth quarter of 2022 compared to 5.12% for the third quarter of 2022. The increase in the tax equivalent yield on average loans and leases was due primarily to higher coupon interest attributable to increased rates on production and on existing variable rate loans. Interest expense on deposits increased by $56.3 million in the fourth quarter of 2022 due mainly to increased market rates that contributed to a 67 basis points increase in the cost of average total deposits. Interest expense on borrowings increased by $16.9 million due to a $1.2 billion increase in the average balance and a 231 basis points increase in the cost of average borrowings attributable mainly to having a full quarter of the higher-cost credit-linked notes outstanding.
The tax equivalent NIM was 3.41% for the fourth quarter of 2022 compared to 3.57% for the third quarter of 2022. The decrease in the NIM was due mainly to a higher cost of average interest-bearing liabilities due primarily to a $1.7 billion decrease in the average balance of core deposits and an increase in average time deposits, offset partially by higher yields on average loans and leases and deposits in financial institutions.
The cost of average total deposits was 1.37% for the fourth quarter of 2022 compared to 0.70% for the third quarter of 2022 due mainly to higher market interest rates and an increase in the average balance of time deposits.
PROVISION FOR CREDIT LOSSES
The following table presents details of the provision for credit losses for the periods indicated:
Three Months Ended December 31, September 30, Increase Provision for Credit Losses 2022 2022 (Decrease) (In thousands) Addition to allowance for loan and lease losses $ 14,000 $ 3,000 $ 11,000 Reduction in reserve for unfunded loan commitments (4,000 ) - (4,000 ) Total loan-related provision 10,000 3,000 7,000 Addition to allowance for held-to-maturity securities - - - Total provision for credit losses $ 10,000 $ 3,000 $ 7,000
The provision for credit losses was $10.0 million for the fourth quarter of 2022 compared to $3.0 million for the third quarter of 2022. The $7.0 million increase in the loan-related provision was due mainly to net loan growth in portfolios with a higher loss rate, a slight increase in the levels of special mention and classified loans and leases, and an updated economic forecast reflecting management’s expectation of a mild recession ahead.
NONINTEREST INCOME
The following table presents details of noninterest income for the periods indicated:
Three Months Ended December 31, September 30, Increase Noninterest Income 2022 2022 (Decrease) (In thousands) Service charges on deposit accounts $ 3,178 $ 3,608 $ (430 ) Other commissions and fees 11,208 10,034 1,174 Leased equipment income 12,322 12,835 (513 ) Gain on sale of loans and leases 388 58 330 (Loss) gain on sale of securities (49,302 ) 86 (49,388 ) Dividends and gains on equity investments 661 3,228 (2,567 ) Warrant (loss) income (46 ) 292 (338 ) Other income 2,635 8,478 (5,843 ) Total noninterest (loss) income $ (18,956 ) $ 38,619 $ (57,575 )
Noninterest income decreased by $57.6 million to a loss of $19.0 million for the fourth quarter of 2022 compared to income of $38.6 million for the third quarter of 2022 due primarily to decreases of $49.4 million in gain on sale of securities, $5.8 million in other income, and $2.6 million in dividends and gains on equity investments. The decrease in gain on sale of securities resulted from the sales of $1.0 billion of securities for a net loss of $49.3 million compared to sales of $440.4 million of securities for a net gain of $86,000 for the third quarter of 2022. The decrease in other income was due primarily to the receipt of a $5.5 million legal settlement, net of current year legal fees, in the third quarter of 2022. The decrease in dividends and gains on equity investments was due mainly to lower fair value gains on SBIC investments and income distributions on equity investments.
NONINTEREST EXPENSE
The following table presents details of noninterest expense for the periods indicated:
Three Months Ended December 31, September 30, Increase Noninterest Expense 2022 2022 (Decrease) (In thousands) Compensation $ 106,124 $ 105,933 $ 191 Occupancy 14,922 15,574 (652 ) Data processing 9,722 9,568 154 Other professional services 6,924 10,674 (3,750 ) Insurance and assessments 7,205 7,159 46 Intangible asset amortization 2,629 3,649 (1,020 ) Leased equipment depreciation 8,627 8,908 (281 ) Foreclosed assets (income) expense, net (108 ) (248 ) 140 Acquisition, integration and reorganization costs 5,703 - 5,703 Customer related expense 18,197 12,673 5,524 Loan expense 6,150 6,228 (78 ) Other 11,737 15,500 (3,763 ) Total operating expense 197,832 195,618 2,214 Goodwill impairment 29,000 - 29,000 Total noninterest expense $ 226,832 $ 195,618 $ 31,214
Noninterest expense increased by $31.2 million to $226.8 million for the fourth quarter 2022 compared to $195.6 million for the third quarter of 2022 due primarily to a $29.0 million goodwill impairment charge related to Civic. Excluding the goodwill impairment, noninterest expense increased by $2.2 million to $197.8 million . The $2.2 million increase was due mainly to increases of $5.7 million in acquisition, integration and reorganization costs and $5.5 million in customer related expense, offset partially by decreases of $3.8 million in other expense, $3.8 million in other professional services, and $1.0 million in intangible asset amortization. The increase in acquisition, integration and reorganization costs was due to early retirement benefits and severance expense in the fourth quarter. The increase in customer related expense was due mostly to higher third-party payments for deposit customers on account analysis. The decrease in other expense was due primarily to a non-recurring legal settlement accrual in the third quarter of 2022. The decrease in other professional services was due mostly to non-recurring issuance costs of the credit-linked notes transaction in the third quarter of 2022. The decrease in intangible asset amortization was due primarily to declining amortization expense on the intangible assets added from acquisitions prior to 2021.
INCOME TAXES
The effective income tax rate was 26.3% for the fourth quarter of 2022 compared to 24.9% for the third quarter of 2022. The increase from the third quarter of 2022 was primarily due to a tax benefit recorded in the third quarter resulting from a lapsed statute. The effective tax rate for the full year 2022 was 25.4% . The effective tax rate for the full year 2023 is currently estimated to be in the range of 26% to 28% .
BALANCE SHEET HIGHLIGHTS
DEPOSITS AND CLIENT INVESTMENT FUNDS
The following table presents the composition of our deposit portfolio as of the dates indicated:
December 31, 2022 September 30, 2022 December 31, 2021 % of % of % of Deposit Composition Balance Total Balance Total Balance Total (Dollars in thousands) Noninterest-bearing demand $ 11,212,357 33 % $ 12,775,756 37 % $ 14,543,133 41 % Interest checking 6,990,377 20 % 6,780,900 20 % 7,319,898 21 % Money market 7,780,758 23 % 8,361,779 24 % 10,241,265 29 % Savings 577,637 2 % 640,875 2 % 630,653 2 % Total core deposits 26,561,129 78 % 28,559,310 83 % 32,734,949 93 % Wholesale non-maturity deposits 2,637,362 8 % 2,367,544 7 % 889,976 3 % Total non-maturity deposits 29,198,491 86 % 30,926,854 90 % 33,624,925 96 % Retail time deposits 2,434,414 7 % 1,778,325 5 % 1,177,147 3 % Brokered time deposits 2,303,429 7 % 1,490,693 5 % 195,685 1 % Total time deposits (1) 4,737,843 14 % 3,269,018 10 % 1,372,832 4 % Total deposits $ 33,936,334 100 % $ 34,195,872 100 % $ 34,997,757 100 % (1) Includes time deposits over $250,000 of $1.5 billion , $1.0 billion , and $486.9 million at December 31, 2022, September 30, 2022, and December 31, 2021, respectively.
Total deposits decreased by $259.5 million or 0.8% in the fourth quarter of 2022 due primarily to a $2.0 billion or 7.0% decrease in core deposits, offset partially by a $1.5 billion increase in time deposits and a $269.8 million increase in wholesale non-maturity deposits. At December 31, 2022, core deposits totaled $26.6 billion or 78% of total deposits, including $11.2 billion of noninterest-bearing demand deposits or 33% of total deposits.
In addition to deposit products, we also offer alternative, non-depository cash investment options for select clients. These alternative options include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds decreased from $1.8 billion as of September 30, 2022 to $1.4 billion as of December 31, 2022, of which $0.9 billion was managed by PWAM.
LOANS AND LEASES
The following table presents roll forwards of loans and leases held for investment, net of deferred fees, for the periods indicated:
Three Months Ended Year Ended Roll Forward of Loans and Leases Held December 31, September 30, December 31, for Investment, Net of Deferred Fees 2022 2022 2022 (Dollars in thousands) Balance, beginning of period $ 27,660,041 $ 26,501,137 $ 22,941,548 Additions: Production 1,287,248 1,758,107 8,435,396 Disbursements 1,919,979 1,677,795 7,058,553 Total production and disbursements 3,207,227 3,435,902 15,493,949 Reductions: Payoffs (1,136,016 ) (977,654 ) (4,909,797 ) Paydowns (1,050,727 ) (1,256,557 ) (4,755,033 ) Total payoffs and paydowns (2,186,743 ) (2,234,211 ) (9,664,830 ) Sales (2,611 ) (19,635 ) (63,263 ) Transfers to foreclosed assets (4,714 ) (2,966 ) (7,985 ) Charge-offs (3,352 ) (4,652 ) (14,037 ) Transfers to loans held for sale (60,719 ) (15,534 ) (76,253 ) Total reductions (2,258,139 ) (2,276,998 ) (9,826,368 ) Net increase 949,088 1,158,904 5,667,581 Balance, end of period $ 28,609,129 $ 27,660,041 $ 28,609,129 Weighted average rate on production (1) 7.55 % 5.92 % 5.24 % (1) The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes amortized fees. Amortized fees added approximately 21 basis points to loan yields in 2022.
Loans and leases held for investment, net of deferred fees, increased by $949.1 million or 3.4% in the fourth quarter of 2022 to $28.6 billion at December 31, 2022. The overall increase in the loans and leases balance for the fourth quarter of 2022 was due primarily to increases in the residential real estate mortgage and residential real estate construction portfolios.
Civic loan production was $713 million for the fourth quarter of 2022 compared to $831 million for the third quarter of 2022. The Civic loan portfolio as of December 31, 2022 totaled $3.3 billion .
The weighted average rate on the $1.3 billion of production for the fourth quarter of 2022 increased to 7.55% from 5.92% for the third quarter of 2022 due primarily to the loan mix (lower percentage of multi-family production and a higher percentage of Civic production) and the increase in market interest rates.
The following table presents the composition of loans and leases held for investment by loan portfolio segment and class, net of deferred fees, as of the dates indicated:
December 31, 2022 September 30, 2022 December 31, 2021 % of % of % of Loan and Lease Portfolio Balance Total Balance Total Balance Total (Dollars in thousands) Real estate mortgage: Commercial $ 3,846,831 13 % $ 3,770,706 14 % $ 3,762,299 17 % Residential 11,396,781 40 % 10,860,043 39 % 7,416,421 32 % Total real estate mortgage 15,243,612 53 % 14,630,749 53 % 11,178,720 49 % Real estate construction and land: Commercial 898,592 3 % 843,086 3 % 832,591 4 % Residential 3,740,292 13 % 3,450,430 12 % 2,604,536 11 % Total real estate construction and land 4,638,884 16 % 4,293,516 15 % 3,437,127 15 % Total real estate 19,882,496 69 % 18,924,265 68 % 14,615,847 64 % Commercial: Asset-based 5,140,209 18 % 5,154,654 19 % 4,075,477 18 % Venture capital 2,033,302 7 % 2,001,086 7 % 2,320,593 10 % Other commercial 1,108,451 4 % 1,115,442 4 % 1,471,981 6 % Total commercial 8,281,962 29 % 8,271,182 30 % 7,868,051 34 % Consumer 444,671 2 % 464,594 2 % 457,650 2 % Total loans and leases held for investment, net of deferred fees $ 28,609,129 100 % $ 27,660,041 100 % $ 22,941,548 100 % Total unfunded loan commitments $ 11,110,264 $ 11,227,234 $ 9,006,350
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES
The following tables present roll forwards of the allowance for credit losses on loans and leases for the periods indicated:
Three Months Ended December 31, 2022 Allowance for Credit Allowance for Reserve for Total Losses on Loans and Loan and Unfunded Loan Allowance for Leases Rollforward Lease Losses Commitments Credit Losses (In thousands) Beginning balance $ 189,327 $ 95,071 $ 284,398 Charge-offs (3,352 ) - (3,352 ) Recoveries 757 - 757 Net charge-offs (2,595 ) - (2,595 ) Provision 14,000 (4,000 ) 10,000 Ending balance $ 200,732 $ 91,071 $ 291,803 Three Months Ended September 30, 2022 Allowance for Credit Allowance for Reserve for Total Losses on Loans and Loan and Unfunded Loan Allowance for Leases Rollforward Lease Losses Commitments Credit Losses (In thousands) Beginning balance $ 188,705 $ 95,071 $ 283,776 Charge-offs (4,652 ) - (4,652 ) Recoveries 2,274 - 2,274 Net charge-offs (2,378 ) - (2,378 ) Provision 3,000 - 3,000 Ending balance $ 189,327 $ 95,071 $ 284,398 Allowance for Credit Losses on Loans and Year Ended December 31, Leases Rollforward 2022 2021 (In thousands) Beginning balance $ 273,635 $ 433,752 Charge-offs (14,037 ) (10,715 ) Recoveries 9,205 12,598 Net (charge-offs) recoveries (4,832 ) 1,883 Provision 23,000 (162,000 ) Ending balance $ 291,803 $ 273,635
The following table presents allowance for credit losses information on loans and leases as of and for the dates and periods indicated:
Allowance for Credit Losses December 31, September 30, Increase on Loans and Leases 2022 2022 (Decrease) (Dollars in thousands) Allowance for loan and lease losses $ 200,732 $ 189,327 $ 11,405 Reserve for unfunded loan commitments 91,071 95,071 (4,000 ) Allowance for credit losses $ 291,803 $ 284,398 $ 7,405 Provision for credit losses (for the quarter) $ 10,000 $ 3,000 $ 7,000 Net charge-offs (for the quarter) $ 2,595 $ 2,378 $ 217 Net charge-offs to average loans and leases (for the quarter) 0.04 % 0.03 % Allowance for loan and lease losses to loans and leases held for investment 0.70 % 0.68 % Allowance for credit losses to loans and leases held for investment 1.02 % 1.03 %
The allowance for credit losses increased by $7.4 million in the fourth quarter of 2022 to $291.8 million at December 31, 2022. This increase was attributable mainly to a $10.0 million provision for credit losses, offset partially by $2.6 million in net charge-offs.
Net charge-offs over the trailing twelve months were $4.8 million , which results in net charge-offs to average loans and leases over the trailing twelve months of 0.2% .
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 2022 2022 (Decrease) (Dollars in thousands) NPAs and Performing TDRs: Nonaccrual loans and leases held for investment (1) $ 103,778 $ 89,742 $ 14,036 Accruing loans contractually past due 90 days or more - - - Foreclosed assets, net 5,022 2,967 2,055 Total nonperforming assets ("NPAs") $ 108,800 $ 92,709 $ 16,091 Performing TDRs held for investment $ 7,141 $ 8,106 $ (965 ) Nonaccrual loans and leases held for investment to loans and leases held for investment 0.36 % 0.32 % Nonperforming assets to loans and leases held for investment and foreclosed assets 0.38 % 0.34 % Allowance for credit losses to nonaccrual loans and leases held for investment 281.2 % 316.9 % Loan and Lease Credit Risk Ratings: Pass $ 27,924,599 $ 27,099,362 $ 825,237 Special mention 566,259 463,994 102,265 Classified 118,271 96,685 21,586 Total loans and leases held for investment, net of deferred fees $ 28,609,129 $ 27,660,041 $ 949,088 Special mention loans and leases held for investment to loans and leases held for investment 1.98 % 1.68 % Classified loans and leases held for investment to loans and leases held for investment 0.41 % 0.35 % (1) Nonaccrual loans include SBA guaranteed amounts of $14.3 million at December 31, 2022 and $17.2 million at September 30, 2022.
Nonaccrual loans and leases increased by $14.0 million to $103.8 million in the fourth quarter of 2022 due primarily to an increase in nonaccrual Civic loans.
The following table presents nonaccrual loans and leases and accruing loans and leases past due between 30 and 89 days by loan portfolio segment and class as of the dates indicated:
December 31, 2022 September 30, 2022 Increase (Decrease) Accruing Accruing Accruing and 30-89 and 30-89 and 30-89 Days Past Days Past Days Past Nonaccrual Due Nonaccrual Due Nonaccrual Due (In thousands) Real estate mortgage: Commercial $ 42,509 $ 1,047 $ 42,772 $ 14 $ (263 ) $ 1,033 Residential 45,272 69,397 25,950 21,700 19,322 47,697 Total real estate mortgage 87,781 70,444 68,722 21,714 19,059 48,730 Real estate construction and land: Commercial - - - - - - Residential 10,621 26,257 7,101 3,051 3,520 23,206 Total real estate construction and land 10,621 26,257 7,101 3,051 3,520 23,206 Commercial: Asset-based 865 - 2,127 - (1,262 ) - Venture capital - - 3,809 - (3,809 ) - Other commercial 4,345 385 7,616 265 (3,271 ) 120 Total commercial 5,210 385 13,552 265 (8,342 ) 120 Consumer 166 1,935 367 1,996 (201 ) (61 ) Total held for investment $ 103,778 $ 99,021 $ 89,742 $ 27,026 $ 14,036 $ 71,995
Loans and leases accruing and 30-89 days past due generally fluctuate from period to period. The $72.0 million increase to $99.0 million in the fourth quarter of 2022 was due mainly to an increase in Civic delinquent loans. This was due primarily to an increase in matured loans and an increase in the dollar amount of delinquent loans which correlates with the continued growth in the Civic loan portfolio balance.
CAPITAL
The following table presents capital ratios as of the dates indicated:
December 31, September 30, December 31, 2022 2022 2021 PacWest Bancorp Consolidated: Common equity tier 1 capital ratio (1) 8.70 % 8.56 % 8.86 % Tier 1 capital ratio (1) 10.60 % 10.46 % 9.32 % Total capital ratio (1) 13.61 % 13.43 % 12.69 % Tier 1 leverage capital ratio (1) 8.61 % 8.63 % 6.84 % Risk-weighted assets (1) (in thousands) $ 33,033,597 $ 33,042,173 $ 28,508,808 Tangible common equity ratio (2) 5.13 % 4.85 % 6.54 % Tangible common equity ratio excluding the impact of AOCI for securities (2) 7.12 % 6.97 % 6.37 % (1) Capital information for December 31, 2022 is preliminary. (2) Non-GAAP measure.
CONFERENCE CALL
PacWest Bancorp (“PacWest”) will host a conference call at 8:00 AM PT/ 11:00 AM ET on Friday, January 27, 2023, to discuss the Company’s performance for the fourth quarter of 2022.
Participants may access the conference call/webcast at: https://event.webcasts.com/starthere.jsp?ei=1590835&tp key=aedee87ee7
The call will be recorded and made available for replay on January 27, 2023, after 12:00 PM PT. The recording may be accessed through the link above or at https://www.pacwestbancorp.com/news-market-data/presentations/default.aspx .
ABOUT PACWEST BANCORP
PacWest is a bank holding company with over $41 billion in assets headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). Pacific Western Bank is a relationship-based community bank focused on providing business banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and lease and deposit products and services through full-service branches throughout California and in Durham, North Carolina and Denver, Colorado, and loan production offices around the country. For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com .
FORWARD-LOOKING STATEMENTS
This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements often use words such as “anticipates,” “targets,” “expects,” “estimates,” “intends,” “plans,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of PacWest’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those expressed in them. Continued deterioration in general business, economic, and political conditions, geopolitical tensions, uncertainty in U.S. fiscal monetary policy, including the interest rate policies of the Federal Reserve Board, and volatility and disruptions in credit and capital markets could lead to a tightening of credit and an increase of credit losses, adversely affect PacWest’s revenues and the values of our assets, including goodwill, and liabilities, and increase stock price volatility. The risks and impacts of the COVID-19 pandemic appear to have largely subsided, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our business, financial position, and results of operations. In addition, PacWest’s results could be adversely affected by changes in interest rates, inflation, and unemployment rates, our ability to attract deposits and other sources of funding and liquidity, deterioration in the credit quality of our loan portfolio or in the value of the collateral securing those loans, deterioration in the value of our investment securities, our ability to successfully execute on our digital and innovation initiatives, the effectiveness of our risk management framework and quantitative models, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission.
All forward-looking statements in this communication are based on information available at the time the statement is made. We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
PACWEST BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET December 31, September 30, December 31, 2022 2022 2021 (Dollars in thousands, except per share data) ASSETS: Cash and due from banks $ 212,273 $ 216,436 $ 112,548 Interest-earning deposits in financial institutions 2,027,949 2,244,272 3,944,686 Total cash and cash equivalents 2,240,222 2,460,708 4,057,234 Securities available-for-sale, at estimated fair value 4,843,487 5,891,328 10,694,458 Securities held-to-maturity, at amortized cost, net of allowance for credit losses 2,269,135 2,264,601 - Federal Home Loan Bank stock, at cost 34,290 36,990 17,250 Total investment securities 7,146,912 8,192,919 10,711,708 Loans held for sale 65,076 15,534 - Gross loans and leases held for investment 28,726,016 27,775,962 23,026,308 Deferred fees, net (116,887 ) (115,921 ) (84,760 ) Total loans and leases held for investment, net of deferred fees 28,609,129 27,660,041 22,941,548 Allowance for loan and lease losses (200,732 ) (189,327 ) (200,564 ) Total loans and leases held for investment, net 28,408,397 27,470,714 22,740,984 Equipment leased to others under operating leases 404,245 338,691 339,150 Premises and equipment, net 54,315 50,781 46,740 Foreclosed assets, net 5,022 2,967 12,843 Goodwill 1,376,736 1,405,736 1,405,736 Core deposit and customer relationship intangibles, net 31,381 34,010 44,957 Other assets 1,496,630 1,432,532 1,083,992 Total assets $ 41,228,936 $ 41,404,592 $ 40,443,344 LIABILITIES: Noninterest-bearing deposits $ 11,212,357 $ 12,775,756 $ 14,543,133 Interest-bearing deposits 22,723,977 21,420,116 20,454,624 Total deposits 33,936,334 34,195,872 34,997,757 Borrowings 1,764,030 1,864,815 - Subordinated debt 867,087 863,379 863,283 Accrued interest payable and other liabilities 710,954 604,581 582,674 Total liabilities 37,278,405 37,528,647 36,443,714 STOCKHOLDERS' EQUITY (1) 3,950,531 3,875,945 3,999,630 Total liabilities and stockholders’ equity $ 41,228,936 $ 41,404,592 $ 40,443,344 Book value per common share $ 28.71 $ 28.07 $ 33.45 Tangible book value per common share (2) $ 17.00 $ 16.11 $ 21.31 Common shares outstanding 120,222,057 120,314,023 119,584,854 (1) Includes net unrealized (loss) gain on: Securities available-for-sale, net $ (586,450 ) $ (637,346 ) $ 65,968 Securities held to maturity (204,453 ) (210,868 ) - Total $ (790,903 ) $ (848,214 ) $ 65,968 (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, 2022 2022 2021 2022 2021 (In thousands, except per share data) Interest income: Loans and leases $ 404,985 $ 346,550 $ 263,662 $ 1,312,580 $ 996,457 Investment securities 50,292 53,135 48,469 209,751 153,468 Deposits in financial institutions 17,746 10,359 2,674 34,158 8,804 Total interest income 473,023 410,044 314,805 1,556,489 1,158,729 Interest expense: Deposits 117,591 61,288 6,622 200,449 27,808 Borrowings 19,962 3,081 64 25,645 623 Subordinated debt 12,531 10,494 7,714 39,633 26,474 Total interest expense 150,084 74,863 14,400 265,727 54,905 Net interest income 322,939 335,181 300,405 1,290,762 1,103,824 Provision for credit losses 10,000 3,000 (6,000 ) 24,500 (162,000 ) Net interest income after provision for credit losses 312,939 332,181 306,405 1,266,262 1,265,824 Noninterest income: Service charges on deposit accounts 3,178 3,608 3,476 13,991 13,269 Other commissions and fees 11,208 10,034 10,633 43,635 42,287 Leased equipment income 12,322 12,835 12,602 50,586 45,746 Gain on sale of loans and leases 388 58 172 518 1,733 (Loss) gain on sale of securities (49,302 ) 86 999 (50,321 ) 1,615 Dividends and gains (losses) on equity investments 661 3,228 (1,570 ) (3,389 ) 23,115 Warrant (loss) income (46 ) 292 23,990 2,490 49,341 Other income 2,635 8,478 7,080 17,317 16,821 Total noninterest (loss) income (18,956 ) 38,619 57,382 74,827 193,927 Noninterest expense: Compensation 106,124 105,933 99,700 406,839 368,450 Occupancy 14,922 15,574 14,656 60,964 58,422 Data processing 9,722 9,568 8,171 38,177 30,277 Other professional services 6,924 10,674 5,946 30,278 21,492 Insurance and assessments 7,205 7,159 5,032 25,486 17,365 Intangible asset amortization 2,629 3,649 3,876 13,576 12,734 Leased equipment depreciation 8,627 8,908 9,569 35,658 35,755 Foreclosed assets (income) expense, net (108 ) (248 ) (260 ) (3,737 ) (213 ) Acquisition, integration and reorganization costs 5,703 - 5,590 5,703 9,415 Customer related expense 18,197 12,673 6,175 55,273 20,504 Loan expense 6,150 6,228 5,627 24,572 17,031 Goodwill impairment 29,000 - - 29,000 - Other expense 11,737 15,500 12,028 51,732 46,185 Total noninterest expense 226,832 195,618 176,110 773,521 637,417 Earnings before income taxes 67,151 175,182 187,677 567,568 822,334 Income tax expense 17,642 43,566 51,632 143,955 215,375 Net earnings 49,509 131,616 136,045 423,613 606,959 Preferred stock dividends 9,947 9,392 - 19,339 - Net earnings available to common stockholders $ 39,562 $ 122,224 $ 136,045 $ 404,274 $ 606,959 Basic and diluted earnings per common share $ 0.33 $ 1.02 $ 1.14 $ 3.37 $ 5.10 Dividends declared and paid per common share $ 0.25 $ 0.25 $ 0.25 $ 1.00 $ 1.00
PACWEST BANCORP AND SUBSIDIARIES NET EARNINGS PER COMMON SHARE Three Months Ended Year Ended December 31, September 30, December 31, December 31, 2022 2022 2021 2022 2021 (Dollars in thousands, except per share data) Basic Earnings Per Common Share: Net earnings $ 49,509 $ 131,616 $ 136,045 $ 423,613 $ 606,959 Less: Preferred stock dividends (9,947 ) (9,392 ) - (19,339 ) - Net earnings available to common stockholders 39,562 122,224 136,045 404,274 606,959 Less: Earnings allocated to unvested restricted stock (1) (714 ) (2,331 ) (2,311 ) (7,474 ) (10,248 ) Net earnings allocated to common shares $ 38,848 $ 119,893 $ 133,734 $ 396,800 $ 596,711 Weighted average basic shares and unvested restricted stock outstanding 120,314 120,342 119,577 120,071 119,349 Less: weighted average unvested restricted stock outstanding (2,503 ) (2,556 ) (2,314 ) (2,442 ) (2,255 ) Weighted average basic shares outstanding 117,811 117,786 117,263 117,629 117,094 Basic earnings per common share $ 0.33 $ 1.02 $ 1.14 $ 3.37 $ 5.10 Diluted Earnings Per Common Share: Net earnings allocated to common shares $ 38,848 $ 119,893 $ 133,734 $ 396,800 $ 596,711 Weighted average diluted shares outstanding 117,811 117,786 117,263 117,629 117,094 Diluted earnings per common share $ 0.33 $ 1.02 $ 1.14 $ 3.37 $ 5.10 (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, 2022 September 30, 2022 December 31, 2021 Interest Average Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Balance Expense Cost Balance Expense Cost Balance Expense Cost (Dollars in thousands) Assets: Loans and leases (1)(2) $ 28,192,953 $ 407,135 5.73 % $ 27,038,873 $ 348,639 5.12 % $ 21,367,665 $ 265,549 4.93 % Investment securities (3) 7,824,915 50,697 2.57 % 8,803,349 54,423 2.45 % 9,964,568 50,710 2.02 % Deposits in financial institutions 1,881,950 17,746 3.74 % 1,809,809 10,359 2.27 % 5,961,104 2,674 0.18 % Total interest-earning assets (1) 37,899,818 475,578 4.98 % 37,652,031 413,421 4.36 % 37,293,337 318,933 3.39 % Other assets 3,252,145 3,189,241 3,064,810 Total assets $ 41,151,963 $ 40,841,272 $ 40,358,147 Liabilities and Stockholders' Equity: Interest checking $ 7,146,333 41,427 2.30 % $ 6,650,477 19,475 1.16 % $ 7,767,211 2,041 0.10 % Money market 10,088,641 51,687 2.03 % 10,914,027 31,780 1.16 % 10,226,366 3,400 0.13 % Savings 616,298 66 0.04 % 649,574 42 0.03 % 634,874 39 0.02 % Time 3,909,130 24,411 2.48 % 3,000,187 9,991 1.32 % 1,421,859 1,142 0.32 % Total interest-bearing deposits 21,760,402 117,591 2.14 % 21,214,265 61,288 1.15 % 20,050,310 6,622 0.13 % Borrowings 1,675,738 19,962 4.73 % 505,482 3,081 2.42 % 234,391 64 0.11 % Subordinated debt 864,581 12,531 5.75 % 863,719 10,494 4.82 % 862,777 7,714 3.55 % Total interest-bearing liabilities 24,300,721 150,084 2.45 % 22,583,466 74,863 1.32 % 21,147,478 14,400 0.27 % Noninterest-bearing demand deposits 12,325,902 13,653,177 14,713,385 Other liabilities 626,540 593,450 543,017 Total liabilities 37,253,163 36,830,093 36,403,880 Stockholders' equity 3,898,800 4,011,179 3,954,267 Total liabilities and stockholders' equity $ 41,151,963 $ 40,841,272 $ 40,358,147 Net interest income (1) $ 325,494 $ 338,558 $ 304,533 Net interest spread (1) 2.53 % 3.04 % 3.12 % Net interest margin (1) 3.41 % 3.57 % 3.24 % Total deposits (4) $ 34,086,304 $ 117,591 1.37 % $ 34,867,442 $ 61,288 0.70 % $ 34,763,695 $ 6,622 0.08 % (1) Tax equivalent. (2) Includes net loan premium amortization of $2.5 million , $3.8 million , and $6.4 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively. (3) Includes tax-equivalent adjustments of $0.4 million , $1.3 million , and $2.2 million for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021 related to tax-exempt income on investment securities. The federal statutory tax rate utilized was 21% . (4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.
PACWEST BANCORP AND SUBSIDIARIES FIVE QUARTER BALANCE SHEET December 31, September 30, June 30, March 31, December 31, 2022 2022 2022 2022 2021 (Dollars in thousands, except per share data) ASSETS: Cash and due from banks $ 212,273 $ 216,436 $ 197,027 $ 205,446 $ 112,548 Interest-earning deposits in financial institutions 2,027,949 2,244,272 2,192,877 1,865,235 3,944,686 Total cash and cash equivalents 2,240,222 2,460,708 2,389,904 2,070,681 4,057,234 Securities available-for-sale 4,843,487 5,891,328 6,780,648 9,975,109 10,694,458 Securities held-to-maturity 2,269,135 2,264,601 2,260,367 - - Federal Home Loan Bank stock 34,290 36,990 33,210 17,250 17,250 Total investment securities 7,146,912 8,192,919 9,074,225 9,992,359 10,711,708 Loans held for sale 65,076 15,534 - - - Gross loans and leases held for investment 28,726,016 27,775,962 26,608,541 24,439,749 23,026,308 Deferred fees, net (116,887 ) (115,921 ) (107,404 ) (87,677 ) (84,760 ) Total loans and leases held for investment, net of deferred fees 28,609,129 27,660,041 26,501,137 24,352,072 22,941,548 Allowance for loan and lease losses (200,732 ) (189,327 ) (188,705 ) (197,398 ) (200,564 ) Total loans and leases held for investment, net 28,408,397 27,470,714 26,312,432 24,154,674 22,740,984 Equipment leased to others under operating leases 404,245 338,691 324,233 325,305 - 339,150 Premises and equipment, net 54,315 50,781 51,083 51,011 46,740 Foreclosed assets, net 5,022 2,967 - 304 12,843 Goodwill 1,376,736 1,405,736 1,405,736 1,405,736 1,405,736 Core deposit and customer relationship intangibles, net 31,381 34,010 37,659 41,308 44,957 Other assets 1,496,630 1,432,532 1,355,451 1,208,261 1,083,992 Total assets $ 41,228,936 $ 41,404,592 $ 40,950,723 $ 39,249,639 $ 40,443,344 LIABILITIES: Noninterest-bearing deposits $ 11,212,357 $ 12,775,756 $ 13,338,029 $ 14,057,051 $ 14,543,133 Interest-bearing deposits 22,723,977 21,420,116 20,630,123 19,167,844 20,454,624 Total deposits 33,936,334 34,195,872 33,968,152 33,224,895 34,997,757 Borrowings 1,764,030 1,864,815 1,592,000 991,000 - Subordinated debt 867,087 863,379 863,756 863,880 863,283 Accrued interest payable and other liabilities 710,954 604,581 548,412 519,269 582,674 Total liabilities 37,278,405 37,528,647 36,972,320 35,599,044 36,443,714 STOCKHOLDERS' EQUITY (1) 3,950,531 3,875,945 3,978,403 3,650,595 3,999,630 Total liabilities and stockholders’ equity $ 41,228,936 $ 41,404,592 $ 40,950,723 $ 39,249,639 $ 40,443,344 Book value per common share $ 28.71 $ 28.07 $ 28.93 $ 30.52 $ 33.45 Tangible book value per common share (2) $ 17.00 $ 16.11 $ 16.93 $ 18.42 $ 21.31 Common shares outstanding 120,222,057 120,314,023 120,288,024 119,601,766 119,584,854 (1) Includes net unrealized (loss) gain on: Securities available-for-sale, net $ (586,450 ) $ (637,346 ) $ (428,242 ) $ (376,475 ) $ 65,968 Securities held to maturity (204,453 ) (210,868 ) (216,508 ) - - Total $ (790,903 ) $ (848,214 ) $ (644,750 ) $ (376,475 ) $ 65,968 (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, 2022 2022 2022 2022 2021 (In thousands, except per share data) Interest income: Loans and leases $ 404,985 $ 346,550 $ 293,286 $ 267,759 $ 263,662 Investment securities 50,292 53,135 52,902 53,422 48,469 Deposits in financial institutions 17,746 10,359 4,330 1,723 2,674 Total interest income 473,023 410,044 350,518 322,904 314,805 Interest expense: Deposits 117,591 61,288 15,362 6,208 6,622 Borrowings 19,962 3,081 2,441 161 64 Subordinated debt 12,531 10,494 8,790 7,818 7,714 Total interest expense 150,084 74,863 26,593 14,187 14,400 Net interest income 322,939 335,181 323,925 308,717 300,405 Provision for credit losses 10,000 3,000 11,500 - (6,000 ) Net interest income after provision for credit losses 312,939 332,181 312,425 308,717 306,405 Noninterest income: Service charges on deposit accounts 3,178 3,608 3,634 3,571 3,476 Other commissions and fees 11,208 10,034 10,813 11,580 10,633 Leased equipment income 12,322 12,835 12,335 13,094 12,602 Gain on sale of loans and leases 388 58 12 60 172 (Loss) gain on sale of securities (49,302 ) 86 (1,209 ) 104 999 Dividends and gains (losses) on equity investments 661 3,228 4,097 (11,375 ) (1,570 ) Warrant (loss) income (46 ) 292 1,615 629 23,990 Other income 2,635 8,478 3,049 3,155 7,080 Total noninterest (loss) income (18,956 ) 38,619 34,346 20,818 57,382 Noninterest expense: Compensation 106,124 105,933 102,542 92,240 99,700 Occupancy 14,922 15,574 15,268 15,200 14,656 Data processing 9,722 9,568 9,258 9,629 8,171 Other professional services 6,924 10,674 6,726 5,954 5,946 Insurance and assessments 7,205 7,159 5,632 5,490 5,032 Intangible asset amortization 2,629 3,649 3,649 3,649 3,876 Leased equipment depreciation 8,627 8,908 8,934 9,189 9,569 Foreclosed assets (income) expense, net (108 ) (248 ) (28 ) (3,353 ) (260 ) Acquisition, integration and reorganization costs 5,703 - - - 5,590 Customer related expense 18,197 12,673 11,748 12,655 6,175 Loan expense 6,150 6,228 7,037 5,157 5,627 Goodwill impairment 29,000 - - - - Other expense 11,737 15,500 12,879 11,616 12,028 Total noninterest expense 226,832 195,618 183,645 167,426 176,110 Earnings before income taxes 67,151 175,182 163,126 162,109 187,677 Income tax expense 17,642 43,566 40,766 41,981 51,632 Net earnings 49,509 131,616 122,360 120,128 136,045 Preferred stock dividends 9,947 9,392 - - - Net earnings available to common stockholders $ 39,562 $ 122,224 $ 122,360 $ 120,128 $ 136,045 Basic and diluted earnings per common share $ 0.33 $ 1.02 $ 1.02 $ 1.01 $ 1.14 Dividends declared and paid per common share $ 0.25 $ 0.25 $ 0.25 $ 0.25 $ 0.25
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, 2022 2022 2022 2022 2021 (Dollars in thousands) Performance Ratios: Return on average assets (1) 0.48 % 1.28 % 1.23 % 1.22 % 1.34 % Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") return on average assets (1)(2) 1.02 % 1.73 % 1.75 % 1.65 % 1.79 % Return on average equity (1) 5.04 % 13.02 % 13.44 % 12.66 % 13.65 % Return on average tangible common equity (1)(2) 14.39 % 24.11 % 24.42 % 20.93 % 22.06 % Efficiency ratio 53.3 % 51.0 % 49.5 % 50.1 % 46.2 % Noninterest expense as a percentage of average assets (1) 2.19 % 1.90 % 1.84 % 1.70 % 1.73 % Average Yields/Costs (1): Yield on: Average loans and leases (3) 5.73 % 5.12 % 4.65 % 4.66 % 4.93 % Average investment securities (3) 2.57 % 2.45 % 2.32 % 2.17 % 2.02 % Average interest-earning assets (3) 4.98 % 4.36 % 3.85 % 3.59 % 3.39 % Cost of: Average interest-bearing deposits 2.14 % 1.15 % 0.31 % 0.13 % 0.13 % Average total deposits 1.37 % 0.70 % 0.18 % 0.07 % 0.08 % Average interest-bearing liabilities 2.45 % 1.32 % 0.49 % 0.27 % 0.27 % Net interest spread (3) 2.53 % 3.04 % 3.36 % 3.32 % 3.12 % Net interest margin (3) 3.41 % 3.57 % 3.56 % 3.43 % 3.24 % Average Balances: Assets: Loans and leases, net of deferred fees $ 28,192,953 $ 27,038,873 $ 25,499,773 $ 23,433,019 $ 21,367,665 Investment securities 7,824,915 8,803,349 9,488,653 10,397,709 9,964,568 Deposits in financial institutions 1,881,950 1,809,809 1,984,751 3,083,159 5,961,104 Interest-earning assets 37,899,818 37,652,031 36,973,177 36,913,887 37,293,337 Total assets 41,151,963 40,841,272 40,031,891 39,883,304 40,358,147 Liabilities: Noninterest-bearing deposits 12,325,902 13,653,177 13,987,398 14,463,667 14,713,385 Interest-bearing deposits 21,760,402 21,214,265 19,661,618 19,868,395 20,050,310 Total deposits 34,086,304 34,867,442 33,649,016 34,332,062 34,763,695 Borrowings 1,675,738 505,482 1,356,616 298,444 234,391 Subordinated debt 864,581 863,719 863,653 863,572 862,777 Interest-bearing liabilities 24,300,721 22,583,466 21,881,887 21,030,411 21,147,478 Stockholders' equity 3,898,800 4,011,179 3,652,368 3,847,481 3,954,267 (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, 2022 2022 2022 2022 2021 (Dollars in thousands, except per share data) Credit Quality Metrics for Loans and Leases Held for Investment: Nonaccrual loans and leases $ 103,778 $ 89,742 $ 78,527 $ 66,538 $ 61,174 Nonperforming assets 108,800 92,709 78,527 66,842 74,017 Special mention loans and leases 566,259 463,994 480,261 377,315 391,611 Classified loans and leases 118,271 96,685 104,264 82,068 116,104 Allowance for loan and lease losses 200,732 189,327 188,705 197,398 200,564 Allowance for credit losses 291,803 284,398 283,776 272,469 273,635 For the quarter: Provision for credit losses 10,000 3,000 10,000 - (6,000 ) Net charge-offs (recoveries) 2,595 2,378 (1,307 ) 1,166 169 Nonaccrual loans and leases to loans and leases 0.36 % 0.32 % 0.30 % 0.27 % 0.27 % Nonperforming assets to loans and leases and foreclosed assets 0.38 % 0.34 % 0.30 % 0.27 % 0.32 % Special mention loans and leases to loans and leases 1.98 % 1.68 % 1.81 % 1.55 % 1.71 % Classified loans and leases to loans and leases 0.41 % 0.35 % 0.39 % 0.34 % 0.51 % Allowance for loan and lease losses to loans and leases 0.70 % 0.68 % 0.71 % 0.81 % 0.87 % Allowance for credit losses to loans and leases 1.02 % 1.03 % 1.07 % 1.12 % 1.19 % Allowance for credit losses to nonaccrual loans and leases 281.18 % 316.91 % 361.37 % 409.49 % 447.31 % Net charge-offs (recoveries) to average loans and leases 0.04 % 0.03 % (0.02 )% 0.02 % 0.00 % Trailing 12 months net charge-offs (recoveries) to average loans and leases 0.02 % 0.01 % 0.00 % (0.02 )% (0.01 )% PacWest Bancorp Consolidated: Common equity tier 1 capital ratio (1) 8.70 % 8.56 % 8.24 % 8.64 % 8.86 % Tier 1 capital ratio (1) 10.60 % 10.46 % 10.15 % 9.07 % 9.32 % Total capital ratio (1) 13.61 % 13.43 % 13.12 % 12.27 % 12.69 % Tier 1 leverage capital ratio (1) 8.61 % 8.63 % 8.52 % 7.11 % 6.84 % Risk-weighted assets (1) $ 33,033,597 $ 33,042,173 $ 33,009,455 $ 30,297,312 $ 28,508,808 Equity to assets ratio 9.58 % 9.36 % 9.72 % 9.30 % 9.89 % Tangible common equity ratio (2) 5.13 % 4.85 % 5.15 % 5.83 % 6.54 % Book value per common share $ 28.71 $ 28.07 $ 28.93 $ 30.52 $ 33.45 Tangible book value per common share (2) $ 17.00 $ 16.11 $ 16.93 $ 18.42 $ 21.31 Pacific Western Bank: Common equity tier 1 capital ratio (1) 10.32 % 10.17 % 9.78 % 9.32 % 9.56 % Tier 1 capital ratio (1) 10.32 % 10.17 % 9.78 % 9.32 % 9.56 % Total capital ratio (1) 12.34 % 12.16 % 11.77 % 11.45 % 11.80 % Tier 1 leverage capital ratio (1) 8.39 % 8.39 % 8.21 % 7.31 % 7.00 % (1) Capital information for December 31, 2022 is preliminary. (2) Non-GAAP measure.
GAAP TO NON-GAAP RECONCILIATION S
This press release contains certain non-GAAP financial disclosures for: (1) Pre-provision, pre-goodwill impairment, pre-tax net revenue (“PPNR”), (2) PPNR return on average assets (3) return on average tangible common equity, (4) tangible common equity ratio, and (5) tangible book value per common share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of PPNR, return on average tangible common equity, tangible common equity ratio, and tangible book value per common share is prevalent among banking regulators, investors, and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, and (5) book value per common share.
The tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:
Three Months Ended Year Ended PPNR and PPNR Return December 31, September 30, December 31, December 31, on Average Assets 2022 2022 2021 2022 2021 (Dollars in thousands) Net earnings $ 49,509 $ 131,616 $ 136,045 $ 423,613 $ 606,959 Net interest income $ 322,939 $ 335,181 $ 300,405 $ 1,290,762 $ 1,103,824 Add: Noninterest (loss) income (18,956 ) 38,619 57,382 74,827 193,927 Less: Noninterest expense (226,832 ) (195,618 ) (176,110 ) (773,521 ) (637,417 ) Add: Goodwill impairment 29,000 - - 29,000 - Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") $ 106,151 $ 178,182 $ 181,677 $ 621,068 $ 660,334 Average assets $ 41,151,963 $ 40,841,272 $ 40,358,147 $ 40,481,581 $ 35,518,488 Return on average assets (1) 0.48 % 1.28 % 1.34 % 1.05 % 1.71 % PPNR return on average assets (2) 1.02 % 1.73 % 1.79 % 1.53 % 1.86 % (1) Annualized net earnings divided by average assets. (2) Annualized PPNR divided by average assets.
Three Months Ended Year Ended Return on Average December 31, September 30, December 31, December 31, Tangible Common Equity 2022 2022 2021 2022 2021 (Dollars in thousands) Net earnings $ 49,509 $ 131,616 $ 136,045 $ 423,613 $ 606,959 Less: Preferred stock dividends (9,947 ) (9,392 ) - (19,339 ) - Net earnings available to common stockholders 39,562 122,224 136,045 404,274 606,959 Add: Intangible asset amortization 2,629 3,649 3,876 13,576 12,734 Add: Goodwill impairment 29,000 - - 29,000 - Adjusted net earnings $ 71,191 $ 125,873 $ 139,921 $ 446,850 $ 619,693 Average stockholders' equity $ 3,898,800 $ 4,011,179 $ 3,954,267 $ 3,853,033 $ 3,808,019 Less: Average intangible assets 1,438,173 1,441,689 1,437,780 1,443,528 1,269,546 Less: Average preferred stock 498,516 498,516 - 285,488 - Average tangible common equity $ 1,962,111 $ 2,070,974 $ 2,516,487 $ 2,124,017 $ 2,538,473 Return on average equity (1) 5.04 % 13.02 % 13.65 % 10.99 % 15.94 % Return on average tangible common equity (2) 14.39 % 24.11 % 22.06 % 21.04 % 24.41 % (1) Annualized net earnings divided by average stockholders' equity. (2) Annualized adjusted net earnings divided by average tangible common equity.
Tangible Common Equity Ratio/ Tangible Book Value Per December 31, September 30, June 30, March 31, December 31, Common Share 2022 2022 2022 2022 2021 (Dollars in thousands, except per share data) Stockholders' equity $ 3,950,531 $ 3,875,945 $ 3,978,403 $ 3,650,595 $ 3,999,630 Less: Preferred stock 498,516 498,516 498,516 - - Total common equity 3,452,015 3,377,429 3,479,887 3,650,595 3,999,630 Less: Intangible assets 1,408,117 1,439,746 1,443,395 1,447,044 1,450,693 Tangible common equity 2,043,898 1,937,683 2,036,492 2,203,551 2,548,937 Add: Accumulated other comprehensive loss (income) 790,903 848,214 644,750 376,475 (65,968 ) Adjusted tangible common equity $ 2,834,801 $ 2,785,897 $ 2,681,242 $ 2,580,026 $ 2,482,969 Total assets $ 41,228,936 $ 41,404,592 $ 40,950,723 $ 39,249,639 $ 40,443,344 Less: Intangible assets 1,408,117 1,439,746 1,443,395 1,447,044 1,450,693 Tangible assets $ 39,820,819 $ 39,964,846 $ 39,507,328 $ 37,802,595 $ 38,992,651 Equity to assets ratio 9.58 % 9.36 % 9.72 % 9.30 % 9.89 % Tangible common equity ratio (1) 5.13 % 4.85 % 5.15 % 5.83 % 6.54 % Tangible common equity ratio, excluding AOCI (2) 7.12 % 6.97 % 6.79 % 6.82 % 6.37 % Book value per common share (3) $ 28.71 $ 28.07 $ 28.93 $ 30.52 $ 33.45 Tangible book value per common share (4) $ 17.00 $ 16.11 $ 16.93 $ 18.42 $ 21.31 Tangible book value per common share, excluding AOCI (5) $ 23.58 $ 23.16 $ 22.29 $ 21.57 $ 20.76 Common shares outstanding 120,222,057 120,314,023 120,288,024 119,601,766 119,584,854 (1) Tangible common equity divided by tangible assets. (2) Adjusted tangible common equity divided by tangible assets. (3) Total common equity divided by common shares outstanding. (4) Tangible common equity divided by common shares outstanding. (5) Adjusted tangible common equity divided by common shares outstanding.
CONTACTS Kevin L. Thompson William J. Black
