PacWest Bancorp Announces Results for the Second Quarter of 2021
07/19/2021 - 04:30 PM
LOS ANGELES, July 19, 2021 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) -
SECOND QUARTER 2021 RESULTS
$180.5M $ 1.52 $154.9M 29.25 % Net Earnings Diluted Earnings per Share PPNR ROATE
SECOND QUARTER 2021 HIGHLIGHTS
Net Earnings of $180.5 Million or $1.52 Per Diluted Share Core Deposits Up $1.5 Billion or 22.9% annualized in 2Q21; Represents 91% of Total Deposits Loan Growth of $527.0 Million or 11.1% annualized, Excluding PPP Loan Activity, Growth of $997.1 Million or 22.3% annualized Civic Loan Production of $423 Million in 2Q21, Compared to $231 Million for Two Months in 1Q21 Provision for Credit Losses Benefit of $88.0 Million in 2Q21 Compared to Benefit of $48.0 Million in 1Q21 Net Interest Income (TE) of $270.1 Million , Compared To $264.6 Million in 1Q21 Noninterest Income of $40.4 Million With Continued Strength in Warrant Income Noninterest Expense of $151.8 Million , Up 1% From 1Q21, Driven By Three Months of Civic Financial Services (“Civic”) Operations Compared to Two Months in 1Q21 and Higher Variable Compensation From Strong Growth Across the Company Classified and Special Mention Loans Fell $15.9 Million and $96.9 Million , Respectively, From 1Q21 ACL Ratio of 1.54% and ALLL Ratio of 1.16% ; Excluding PPP Loans, ACL Ratio of 1.59% and ALLL Ratio of 1.19% Net Recoveries of $5.2 Million (11bps of Average Loans and Leases) Cost of Deposits Decreased 1 bp to 10 bps Loan and Lease Production of $1.7 Billion Up From $1.6 Billion in 1Q21; WAC of 4.55% vs. 4.36% in 1Q21 Strong Capital Position – CET1 Ratio of 10.41% Total Capital Ratio Increased From 13.60% at 1Q21 to 14.99% at 2Q21 Tangible Book Value Per Share Increased From $20.39 at 1Q21 to $21.95 at 2Q21 CEO COMMENTARY $470 million reduction in the PPP loan portfolio due to increased forgiveness activity by the SBA. Excluding PPP loan activity, our loans grew by $997 million or 22.3% annualized.” 2.14% in the first quarter to 1.59% as of the end of the second quarter. Our second quarter results produced a return on average assets of 2.11% and a return on average tangible equity of 29.25% .”
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/0623d789-0178-417f-bc6c-55dc09803da8
FINANCIAL HIGHLIGHTS
At or For the At or For the Three Months Ended Six Months Ended June 30, March 31, Increase June 30, Increase Financial Highlights (1) 2021 2021 (Decrease) 2021 2020 (Decrease) (Dollars in thousands, except per share data) Net earnings (loss) $ 180,512 $ 150,406 $ 30,106 $ 330,918 $ (1,399,907 ) $ 1,730,825 Diluted earnings (loss) per share $ 1.52 $ 1.27 $ 0.25 $ 2.78 $ (11.98 ) $ 14.76 Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") (2) $ 154,929 $ 155,962 $ (1,033 ) $ 310,891 $ 327,049 $ (16,158 ) Return on average assets 2.11 % 1.94 % 0.17 2.03 % (10.48 )% 12.51 PPNR return on average assets (2) 1.81 % 2.01 % (0.20 ) 1.91 % 2.45 % (0.54 ) Return on average tangible equity (2) 29.25 % 25.67 % 3.58 27.51 % 6.64 % 20.87 Yield on average loans and leases (tax equivalent) 5.18 % 5.20 % (0.02 ) 5.19 % 5.27 % (0.08 ) Cost of average total deposits 0.10 % 0.11 % (0.01 ) 0.11 % 0.41 % (0.30 ) Net interest margin ("NIM") (tax equivalent) 3.40 % 3.69 % (0.29 ) 3.53 % 4.26 % (0.73 ) Efficiency ratio 47.9 % 46.4 % 1.5 47.2 % 41.8 % 5.4 Total assets $ 34,867,987 $ 32,856,533 $ 2,011,454 $ 34,867,987 $ 27,365,738 $ 7,502,249 Loans and leases held for investment, net of deferred fees $ 19,506,257 $ 18,979,228 $ 527,029 $ 19,506,257 $ 19,694,631 $ (188,374 ) Noninterest-bearing demand deposits $ 11,252,286 $ 11,017,462 $ 234,824 $ 11,252,286 $ 8,629,543 $ 2,622,743 Core deposits $ 27,038,161 $ 25,576,348 $ 1,461,813 $ 27,038,161 $ 19,535,814 $ 7,502,347 Total deposits $ 29,647,034 $ 28,223,291 $ 1,423,743 $ 29,647,034 $ 22,928,579 $ 6,718,455 As percentage of total deposits: Noninterest-bearing demand deposits 38 % 39 % (1 ) 38 % 38 % - Core deposits 91 % 91 % - 91 % 85 % 6 Equity to assets ratio 11.03 % 11.12 % (0.09 ) 11.03 % 12.62 % (1.59 ) Common equity tier 1 capital ratio 10.41 % 10.39 % 0.02 10.41 % 9.97 % 0.44 Total capital ratio 14.99 % 13.60 % 1.39 14.99 % 13.18 % 1.81 Tangible common equity ratio (2) 7.80 % 7.68 % 0.12 7.80 % 8.93 % (1.13 ) Book value per share $ 32.17 $ 30.68 $ 1.49 $ 32.17 $ 29.17 $ 3.00 Tangible book value per share (2) $ 21.95 $ 20.39 $ 1.56 $ 21.95 $ 19.80 $ 2.15 (1) The operations of Civic are included from its February 1, 2021 acquisition date. (2) Non-GAAP measure.
INCOME STATEMENT HIGHLIGHTS
NET INTEREST INCOME
Net interest income increased by $5.0 million to $266.3 million for the second quarter of 2021 compared to $261.3 million for the first quarter of 2021 due mainly to higher income on investment securities and loans and leases, partially offset by higher interest expense resulting from the $400 million of subordinated debt issued on April 30, 2021. The tax equivalent yield on average loans and leases was 5.18% for the second quarter of 2021 compared to 5.20% for the first quarter of 2021. The decrease in the tax equivalent yield on average loans and leases was primarily due to lower amortized loan fee income of $1.4 million and lower loan discount accretion of $0.4 million .
The tax equivalent NIM was 3.40% for the second quarter of 2021 compared to 3.69% for the first quarter of 2021. The decrease in the NIM was primarily due to the change in the earning assets mix driven by the increase in the investment portfolio and cash at the Federal Reserve as a percentage of earning assets. The average balance of deposits in financial institutions increased by $1.6 billion to $6.3 billion , the average balance of investment securities increased by $1.1 billion to $6.5 billion , and the average balance of loans and leases increased by $130.1 million in the second quarter of 2021. This excess liquidity had a negative impact on the second quarter tax equivalent NIM of approximately 73 basis points.
The cost of average total deposits decreased to 0.10% in the second quarter of 2021 from 0.11% for the first quarter of 2021. The lower cost of average total deposits was due primarily to the increased average balance of noninterest-bearing deposits.
PROVISION FOR CREDIT LOSSES
The following table presents details of the provision for credit losses for the periods indicated:
Three Months Ended June 30, March 31, Increase Provision for Credit Losses 2021 2021 (Decrease) (In thousands) (Reduction in) addition to allowance for loan and lease losses $ (72,000 ) $ (53,000 ) $ (19,000 ) (Reduction in) addition to reserve for unfunded loan commitments (16,000 ) 5,000 (21,000 ) Total provision for credit losses $ (88,000 ) $ (48,000 ) $ (40,000 )
The provision for credit losses decreased by $40.0 million to a benefit of $88.0 million for the second quarter of 2021 compared to a $48.0 million benefit for the first quarter of 2021. This reduction reflected improvement in both macro-economic forecast variables and loan portfolio credit quality metrics along with decreased provisions for individually evaluated loans and leases and for unfunded commitments.
NONINTEREST INCOME
The following table presents details of noninterest income for the periods indicated:
Three Months Ended June 30, March 31, Increase Noninterest Income 2021 2021 (Decrease) (In thousands) Service charges on deposit accounts $ 3,452 $ 2,934 $ 518 Other commissions and fees 10,704 9,158 1,546 Leased equipment income 10,847 11,354 (507 ) Gain on sale of loans and leases 1,422 139 1,283 Gain on sale of securities - 101 (101 ) Other income: Dividends and gains on equity investments 5,394 10,904 (5,510 ) Warrant income 5,650 6,123 (473 ) Other 2,902 4,116 (1,214 ) Total noninterest income $ 40,371 $ 44,829 $ (4,458 )
Noninterest income decreased by $4.5 million to $40.4 million for the second quarter of 2021 compared to $44.8 million for the first quarter of 2021 due primarily to a decrease of $5.5 million in dividends and gains on equity investments and a $1.2 million decrease in other income, offset partially by increases of $1.5 million in other commissions and fees and $1.3 million in gain on sale of loans and leases. The decrease in dividends and gains on equity investments was due primarily to a $10.1 million gain on one equity investment in the first quarter of 2021, offset partially by higher net fair value gains on equity investments still held. The decrease in other income was due primarily to lower foreign currency translation gains and negative fair value adjustments related to servicing assets. The increase in other commissions and fees was due primarily to higher foreign exchange transaction fees and customer success fees. The increase in the gain on sale of loans and leases resulted from the sales of $52.2 million of loans for gains of $1.4 million in the second quarter of 2021 compared to sales of $72.6 million for gains of $0.1 million in the first quarter of 2021. Warrant income decreased slightly in the second quarter of 2021, but remained at elevated levels and was the third highest quarter ever.
NONINTEREST EXPENSE
The following table presents details of noninterest expense for the periods indicated:
Three Months Ended June 30, March 31, Increase Noninterest Expense 2021 2021 (Decrease) (In thousands) Compensation $ 90,807 $ 79,882 $ 10,925 Occupancy 14,784 14,054 730 Data processing 7,758 6,957 801 Other professional services 5,256 5,126 130 Insurance and assessments 3,745 4,903 (1,158 ) Intangible asset amortization 2,889 3,079 (190 ) Leased equipment depreciation 8,614 8,969 (355 ) Foreclosed assets (income) expense, net (119 ) 1 (120 ) Acquisition, integration and reorganization costs 200 3,425 (3,225 ) Customer related expense 4,973 4,818 155 Loan expense 4,031 3,193 838 Other 8,812 15,729 (6,917 ) Total noninterest expense $ 151,750 $ 150,136 $ 1,614
Noninterest expense increased by $1.6 million to $151.8 million for the second quarter of 2021 compared to $150.1 million for the first quarter of 2021 due primarily to an increase of $10.9 million in compensation expense, offset partially by decreases of $6.9 million in other expense, $3.2 million in acquisition, integration and reorganization costs and $1.1 million in insurance and assessments expense. The increase in compensation expense was mostly due to compensation expense related to the Civic operations as a result of three months of activity in the second quarter of 2021 compared to two months of activity in the first quarter of 2021, in addition to increases in loan production across the Company which contributed to an increase in variable compensation during the second quarter of 2021. The decrease in other expense was largely due to a legal settlement accrual in the first quarter of 2021. The decrease in acquisition, integration and reorganization costs was due to lower advisory services and integration expenses related to the closed Civic acquisition and the pending acquisition of MUFG Union Bank’s Homeowners Association Services Division. The decrease in insurance and assessments expense was primarily due to lower FDIC assessment expense resulting from a lower assessment rate partially offset by a higher assessment base.
INCOME TAXES
The effective income tax rate was 25.7% in the second quarter of 2021 compared to 26.3% for the first quarter of 2021. The decrease in the effective tax rate is due mainly to tax benefits resulting from the vesting of restricted stock and return-to-provision adjustments recorded in the second quarter of 2021. The effective income tax rate for the full year 2021 is estimated to be in the range of 25% to 27% .
BALANCE SHEET HIGHLIGHTS
DEPOSITS AND CLIENT INVESTMENT FUNDS
The following table presents the composition of our deposit portfolio as of the dates indicated:
June 30, 2021 March 31, 2021 June 30, 2020 % of % of % of Deposit Composition Balance Total Balance Total Balance Total (Dollars in thousands) Noninterest-bearing demand $ 11,252,286 38 % $ 11,017,462 39 % $ 8,629,543 38 % Interest checking 7,394,472 25 % 6,862,398 25 % 4,858,168 21 % Money market 7,777,199 26 % 7,112,610 25 % 5,498,150 24 % Savings 614,204 2 % 583,878 2 % 549,953 2 % Total core deposits 27,038,161 91 % 25,576,348 91 % 19,535,814 85 % Non-core non-maturity deposits 1,122,971 4 % 1,162,590 4 % 1,217,266 5 % Total non-maturity deposits 28,161,132 95 % 26,738,938 95 % 20,753,080 90 % Time deposits $250,000 and under 913,371 3 % 940,340 3 % 1,522,928 7 % Time deposits over $250,000 572,531 2 % 544,013 2 % 652,571 3 % Total time deposits 1,485,902 5 % 1,484,353 5 % 2,175,499 10 % Total deposits $ 29,647,034 100 % $ 28,223,291 100 % $ 22,928,579 100 %
At June 30, 2021, core deposits totaled $27.0 billion or 91% of total deposits, including $11.3 billion of noninterest-bearing demand deposits or 38% of total deposits. Core deposits increased by $1.5 billion or 22.9% annualized in the second quarter of 2021 driven by continued strong deposit growth from our venture banking clients.
In addition to deposit products, we also offer alternative, non-depository cash investment options for select clients. These alternative options include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds at June 30, 2021 were $1.3 billion , of which $1.0 billion was managed by PWAM.
LOANS AND LEASES
The following table presents roll forwards of loans and leases held for investment, net of deferred fees, for the periods indicated:
Three Months Ended Six Months Ended Roll Forward of Loans and Leases Held June 30, March 31, June 30, for Investment, Net of Deferred Fees (1) 2021 2021 2021 (Dollars in thousands) Balance, beginning of period $ 18,979,228 $ 19,083,377 $ 19,083,377 Additions: Production 1,663,151 1,612,777 3,275,928 Disbursements 1,662,644 1,022,986 2,685,630 Total production and disbursements 3,325,795 2,635,763 5,961,558 Reductions: Payoffs (1,969,118 ) (1,635,264 ) (3,604,382 ) Paydowns (802,222 ) (1,067,418 ) (1,869,640 ) Total payoffs and paydowns (2,771,340 ) (2,702,682 ) (5,474,022 ) Sales (26,610 ) (72,641 ) (99,251 ) Transfers to foreclosed assets - (647 ) (647 ) Charge-offs (816 ) (3,988 ) (4,804 ) Transfers to loans held for sale - (25,554 ) (25,554 ) Total reductions (2,798,766 ) (2,805,512 ) (5,604,278 ) Loans acquired through Civic acquisition - 65,600 65,600 Net increase (decrease) 527,029 (104,149 ) 422,880 Balance, end of period $ 19,506,257 $ 18,979,228 $ 19,506,257 Weighted average rate on production (2) 4.55 % 4.36 % 4.46 % (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 41 basis points to loan yields in 2021.
Loans and leases held for investment, net of deferred fees, increased by $527.0 million or 11.1% annualized in the second quarter of 2021 to $19.5 billion at June 30, 2021. Excluding PPP loan activity, loans grew by $997.1 million or 22.3% annualized. The increase in the loans and leases balance for the second quarter of 2021 was primarily due to increases in the income producing and other residential, asset-based and venture capital portfolios partially offset by a reduction in the other commercial portfolio due to increased PPP loan forgiveness. The PPP forgiveness in the second quarter of 2021 was $506 million , up from $354 million in the first quarter of 2021. Remaining PPP loans total $609 million as of June 30, 2021 with $15.6 million of net fees to amortize over the remaining life of the loans. The weighted average rate on the $1.7 billion of new production for the second quarter of 2021 increased to 4.55% from 4.36% in the first quarter of 2021 due mainly to a lower amount of PPP loan originations in the second quarter compared to the first quarter.
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:
June 30, 2021 March 31, 2021 June 30, 2020 % of % of % of Loan and Lease Portfolio Balance Total Balance Total Balance Total (In thousands) Real estate mortgage: Commercial $ 3,792,198 19 % $ 3,941,610 21 % $ 4,222,075 22 % Income producing and other residential 4,620,822 24 % 4,045,603 21 % 3,733,659 19 % Total real estate mortgage 8,413,020 43 % 7,987,213 42 % 7,955,734 41 % Real estate construction and land: Commercial 930,785 5 % 990,035 5 % 1,167,609 6 % Residential 2,574,799 13 % 2,575,788 14 % 2,172,919 11 % Total real estate construction and land 3,505,584 18 % 3,565,823 19 % 3,340,528 17 % Total real estate 11,918,604 61 % 11,553,036 61 % 11,296,262 58 % Commercial: Asset-based 3,550,903 18 % 3,383,403 18 % 3,412,431 17 % Venture capital 1,749,432 9 % 1,495,798 8 % 1,814,341 9 % Other commercial 1,921,909 10 % 2,206,639 11 % 2,760,278 14 % Total commercial 7,222,244 37 % 7,085,840 37 % 7,987,050 40 % Consumer 365,409 2 % 340,352 2 % 411,319 2 % Total loans and leases held for investment, net of deferred fees $ 19,506,257 100 % $ 18,979,228 100 % $ 19,694,631 100 % Total unfunded loan commitments $ 7,891,875 $ 8,127,999 $ 7,745,921
ALLOWANCE FOR CREDIT LOSSES
The following tables present roll forwards of the allowance for credit losses for the periods indicated:
Three Months Ended June 30, 2021 Allowance for Reserve for Total Allowance for Credit Loan and Unfunded Loan Allowance for Losses Rollforward Lease Losses Commitments Credit Losses (In thousands) Beginning balance $ 292,445 $ 90,571 $ 383,016 Charge-offs (816 ) - (816 ) Recoveries 5,971 - 5,971 Net recoveries 5,155 - 5,155 Provision (72,000 ) (16,000 ) (88,000 ) Ending balance $ 225,600 $ 74,571 $ 300,171 Three Months Ended March 31, 2021 Allowance for Reserve for Total Allowance for Credit Loan and Unfunded Loan Allowance for Losses Rollforward Lease Losses Commitments Credit Losses (In thousands) Beginning balance $ 348,181 $ 85,571 $ 433,752 Charge-offs (3,988 ) - (3,988 ) Recoveries 1,252 - 1,252 Net charge-offs (2,736 ) - (2,736 ) Provision (53,000 ) 5,000 (48,000 ) Ending balance $ 292,445 $ 90,571 $ 383,016
The following table presents allowance for credit losses information as of and for the dates and periods indicated:
June 30, March 31, Increase Allowance for Credit Losses 2021 2021 (Decrease) (Dollars in thousands) Allowance for loan and lease losses $ 225,600 $ 292,445 $ (66,845 ) Reserve for unfunded loan commitments 74,571 90,571 (16,000 ) Allowance for credit losses $ 300,171 $ 383,016 $ (82,845 ) Provision for credit losses (for the quarter) $ (88,000 ) $ (48,000 ) $ (40,000 ) Net (recoveries) charge-offs (for the quarter) $ (5,155 ) $ 2,736 $ (7,891 ) Net (recoveries) charge-offs to average loans and leases (for the quarter) (0.11 )% 0.06 % Allowance for loan and lease losses to loans and leases held for investment 1.16 % 1.54 % Allowance for loan and lease losses to loans and leases held for investment, excluding PPP loans 1.19 % 1.63 % Allowance for credit losses to loans and leases held for investment 1.54 % 2.02 % Allowance for credit losses to loans and leases held for investment, excluding PPP loans 1.59 % 2.14 %
The allowance for credit losses decreased by $82.8 million in the second quarter of 2021 to $300.2 million at June 30, 2021. The decrease in the allowance for credit losses during the second quarter of 2021 was attributable to a provision for credit losses benefit of $88.0 million partially offset by $5.2 million in net recoveries. The allowance for credit losses ratio, excluding PPP loans, of 1.59% remains robust and significantly higher than the pre-pandemic level of 0.97% as of the January 1, 2020 CECL adoption date.
Net recoveries were $5.2 million for the second quarter of 2021. Gross charge-offs of $0.8 million were reduced by recoveries of $6.0 million .
Net charge-offs were $2.7 million for the first quarter of 2021. Gross charge-offs of $4.0 million were reduced by recoveries of $1.3 million .
CREDIT QUALITY
The following table presents loan and lease credit quality metrics as of the dates indicated:
June 30, March 31, Increase Credit Quality Metrics 2021 2021 (Decrease) (Dollars in thousands) NPAs and Performing TDRs: Nonaccrual loans and leases held for investment (1) $ 56,803 $ 67,652 $ (10,849 ) Accruing loans contractually past due 90 days or more - - - Foreclosed assets, net 13,227 14,298 (1,071 ) Total nonperforming assets ("NPAs") $ 70,030 $ 81,950 $ (11,920 ) Performing TDRs held for investment $ 40,129 $ 27,999 $ 12,130 Nonaccrual loans and leases held for investment to loans and leases held for investment 0.29 % 0.36 % Nonperforming assets to loans and leases held for investment and foreclosed assets 0.36 % 0.43 % Allowance for credit losses to nonaccrual loans and leases held for investment 528.4 % 566.2 % Loan and Lease Credit Risk Ratings: Pass $ 18,822,938 $ 18,183,114 $ 639,824 Special mention 536,052 632,997 (96,945 ) Classified 147,267 163,117 (15,850 ) Total loans and leases held for investment, net of deferred fees $ 19,506,257 $ 18,979,228 $ 527,029 Classified loans and leases held for investment to loans and leases held for investment 0.75 % 0.86 % (1) Nonaccrual loans include SBA guaranteed amounts of $24.2 million at June 30, 2021 and $18.4 million at March 31, 2021.
Since pro-actively downgrading certain loans at the onset of the pandemic in the first quarter of 2020, special mention loans and leases have decreased $362.6 million from their peak in the first quarter of 2020, while classified loans and leases have decreased $146.0 million from their peak in the second quarter of 2020, and each have continued their steady decline in the second quarter of 2021. Classified and nonaccrual loans and leases are below their pre-pandemic levels and are at their lowest levels since December 31, 2013.
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:
June 30, 2021 March 31, 2021 Increase (Decrease) Accruing Accruing Accruing and 30-89 and 30-89 and 30-89 Days Past Days Past Days Past Nonaccrual Due Nonaccrual Due Nonaccrual Due (Dollars in thousands) Real estate mortgage: Commercial $ 32,065 $ - $ 46,436 $ 5 $ (14,371 ) $ (5 ) Income producing and other residential 6,133 2,179 2,471 6,339 3,662 (4,160 ) Total real estate mortgage 38,198 2,179 48,907 6,344 (10,709 ) (4,165 ) Real estate construction and land: Commercial 284 - 302 - (18 ) - Residential 1,934 22,714 416 1,241 1,518 21,473 Total real estate construction and land 2,218 22,714 718 1,241 1,500 21,473 Commercial: Asset-based 1,973 - 2,379 - (406 ) - Venture capital 2,717 - 2,432 6,750 285 (6,750 ) Other commercial 11,337 270 12,660 1,251 (1,323 ) (981 ) Total commercial 16,027 270 17,471 8,001 (1,444 ) (7,731 ) Consumer 360 1,454 556 954 (196 ) 500 Total held for investment $ 56,803 $ 26,617 $ 67,652 $ 16,540 $ (10,849 ) $ 10,077
During the second quarter of 2021, nonaccrual loans and leases decreased by $10.8 million due primarily to the payoff of one retail commercial real estate loan.
CAPITAL
The following table presents certain actual capital ratios and ratios excluding PPP loans:
June 30, 2021 Excluding March 31, PPP 2021 Actual (1) Loans (1) Actual PacWest Bancorp Consolidated: Tier 1 leverage capital ratio 7.67 % 7.89 % (3 ) 7.95 % Common equity tier 1 capital ratio 10.41 % 10.41 % 10.39 % Total capital ratio 14.99 % 14.99 % 13.60 % Tangible common equity ratio (2) 7.80 % 7.94 % (3 ) 7.68 % (1) Capital information for June 30, 2021 is preliminary. (2) Non-GAAP measure. (3) PPP loans have been excluded from total assets in denominator as they are zero risk-weighted.
ABOUT PACWEST BANCORP
PacWest Bancorp (“PacWest”) is a bank holding company with over $34 billion in assets headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 70 full-service branches located in California, one branch located in Durham, North Carolina, and one branch located in Denver, Colorado. The Bank provides community banking products including lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank also offers venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States. For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.
FORWARD LOOKING STATEMENTS
This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control. The COVID-19 pandemic has adversely affected PacWest, its employees, customers and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity and prospects is uncertain. The risks from the COVID-19 pandemic have decreased as the pandemic subsides, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our allowance for credit losses and related provision for credit losses. Continued deterioration in general business and economic conditions could adversely affect PacWest’s revenues and the values of its assets, including goodwill, and liabilities, lead to a tightening of credit, and increase stock price volatility. In addition, PacWest’s results could be adversely affected by changes in interest rates, sustained high unemployment rates, deterioration in the credit quality of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment securities, the magnitude of individual loan losses on security monitoring loans, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission.
We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
PACWEST BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET June 30, March 31, June 30, 2021 2021 2020 (Dollars in thousands, except per share data) ASSETS: Cash and due from banks $ 179,505 $ 177,199 $ 174,059 Interest-earning deposits in financial institutions 5,678,587 5,517,667 1,747,077 Total cash and cash equivalents 5,858,092 5,694,866 1,921,136 Securities available-for-sale, at estimated fair value 7,198,608 5,941,690 3,851,141 Federal Home Loan Bank stock, at cost 17,250 17,250 17,250 Total investment securities 7,215,858 5,958,940 3,868,391 Loans held for sale - 25,554 - Gross loans and leases held for investment 19,580,731 19,055,165 19,780,476 Deferred fees, net (74,474 ) (75,937 ) (85,845 ) Total loans and leases held for investment, net of deferred fees 19,506,257 18,979,228 19,694,631 Allowance for loan and lease losses (225,600 ) (292,445 ) (301,050 ) Total loans and leases held for investment, net 19,280,657 18,686,783 19,393,581 Equipment leased to others under operating leases 313,574 327,413 295,191 Premises and equipment, net 39,541 39,622 42,299 Foreclosed assets, net 13,227 14,298 1,449 Goodwill 1,204,118 1,204,092 1,078,670 Core deposit and customer relationship intangibles, net 18,423 21,312 30,564 Other assets 924,497 883,653 734,457 Total assets $ 34,867,987 $ 32,856,533 $ 27,365,738 LIABILITIES: Noninterest-bearing deposits $ 11,252,286 $ 11,017,462 $ 8,629,543 Interest-bearing deposits 18,394,748 17,205,829 14,299,036 Total deposits 29,647,034 28,223,291 22,928,579 Borrowings 6,625 19,750 60,000 Subordinated debentures 861,788 465,814 460,772 Accrued interest payable and other liabilities 505,859 493,541 463,489 Total liabilities 31,021,306 29,202,396 23,912,840 STOCKHOLDERS' EQUITY (1) 3,846,681 3,654,137 3,452,898 Total liabilities and stockholders’ equity $ 34,867,987 $ 32,856,533 $ 27,365,738 Book value per share $ 32.17 $ 30.68 $ 29.17 Tangible book value per share (2) $ 21.95 $ 20.39 $ 19.80 Shares outstanding 119,555,102 119,105,642 118,374,603 (1) Includes net unrealized gain on securities available-for-sale, net $ 145,516 $ 106,381 $ 145,038 (2) Non-GAAP measure.
PACWEST BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, 2021 2021 2020 2021 2020 (Dollars in thousands, except per share data) Interest income: Loans and leases $ 244,529 $ 241,544 $ 247,851 $ 486,073 $ 510,129 Investment securities 33,954 30,265 26,038 64,219 53,484 Deposits in financial institutions 2,022 1,528 186 3,550 1,794 Total interest income 280,505 273,337 274,075 553,842 565,407 Interest expense: Deposits 7,269 7,500 13,075 14,769 41,322 Borrowings 265 193 1,319 458 8,097 Subordinated debentures 6,663 4,375 5,402 11,038 11,962 Total interest expense 14,197 12,068 19,796 26,265 61,381 Net interest income 266,308 261,269 254,279 527,577 504,026 Provision for credit losses (88,000 ) (48,000 ) 120,000 (136,000 ) 232,000 Net interest income after provision for credit losses 354,308 309,269 134,279 663,577 272,026 Noninterest income: Service charges on deposit accounts 3,452 2,934 2,004 6,386 4,662 Other commissions and fees 10,704 9,158 10,111 19,862 19,832 Leased equipment income 10,847 11,354 12,037 22,201 24,288 Gain on sale of loans and leases 1,422 139 346 1,561 433 Gain on sale of securities - 101 7,715 101 7,897 Other income 13,946 21,143 6,645 35,089 10,846 Total noninterest income 40,371 44,829 38,858 85,200 67,958 Noninterest expense: Compensation 90,807 79,882 61,910 170,689 123,192 Occupancy 14,784 14,054 14,494 28,838 28,701 Data processing 7,758 6,957 7,102 14,715 13,556 Other professional services 5,256 5,126 4,146 10,382 8,404 Insurance and assessments 3,745 4,903 9,373 8,648 13,622 Intangible asset amortization 2,889 3,079 3,882 5,968 7,830 Leased equipment depreciation 8,614 8,969 7,102 17,583 14,307 Foreclosed assets (income) expense, net (119 ) 1 (146 ) (118 ) (80 ) Acquisition, integration and reorganization costs 200 3,425 - 3,625 - Customer related expense 4,973 4,818 4,408 9,791 8,340 Loan expense 4,031 3,193 3,379 7,224 6,029 Goodwill impairment - - - - 1,470,000 Other expense 8,812 15,729 11,315 24,541 21,034 Total noninterest expense 151,750 150,136 126,965 301,886 1,714,935 Earnings (loss) before income taxes 242,929 203,962 46,172 446,891 (1,374,951 ) Income tax expense 62,417 53,556 12,968 115,973 24,956 Net earnings (loss) $ 180,512 $ 150,406 $ 33,204 $ 330,918 $ (1,399,907 ) Basic and diluted earnings (loss) per share $ 1.52 $ 1.27 $ 0.28 $ 2.78 $ (11.98 ) Dividends declared and paid per share $ 0.25 $ 0.25 $ 0.25 $ 0.50 $ 0.85
PACWEST BANCORP AND SUBSIDIARIES NET EARNINGS (LOSS) PER SHARE CALCULATIONS Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, 2021 2021 2020 2021 2020 (In thousands, except per share data) Basic Earnings (Loss) Per Share: Net earnings (loss) $ 180,512 $ 150,406 $ 33,204 $ 330,918 $ (1,399,907 ) Less: earnings allocated to unvested restricted stock (1) (3,172 ) (2,355 ) (362 ) (5,495 ) (1,251 ) Net earnings (loss) allocated to common shares $ 177,340 $ 148,051 $ 32,842 $ 325,423 $ (1,401,158 ) Weighted-average basic shares and unvested restricted stock outstanding 119,386 118,852 118,192 119,121 118,484 Less: weighted-average unvested restricted stock outstanding (2,356 ) (2,003 ) (1,606 ) (2,181 ) (1,551 ) Weighted-average basic shares outstanding 117,030 116,849 116,586 116,940 116,933 Basic earnings (loss) per share $ 1.52 $ 1.27 $ 0.28 $ 2.78 $ (11.98 ) Diluted Earnings (Loss) Per Share: Net earnings (loss) allocated to common shares $ 177,340 $ 148,051 $ 32,842 $ 325,423 $ (1,401,158 ) Weighted-average diluted shares outstanding 117,030 116,849 116,586 116,940 116,933 Diluted earnings (loss) per share $ 1.52 $ 1.27 $ 0.28 $ 2.78 $ (11.98 ) (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 June 30, 2021 March 31, 2021 June 30, 2020 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) $ 19,057,420 $ 246,147 5.18 % $ 18,927,314 $ 242,846 5.20 % $ 19,951,603 $ 248,474 5.01 % Investment securities (3) 6,492,721 36,111 2.23 % 5,383,140 32,329 2.44 % 3,846,459 27,430 2.87 % Deposits in financial institutions 6,347,764 2,022 0.13 % 4,790,231 1,528 0.13 % 733,142 186 0.10 % Total interest-earning assets (1) 31,897,905 284,280 3.57 % 29,100,685 276,703 3.86 % 24,531,204 276,090 4.53 % Other assets 2,428,207 2,315,197 2,090,023 Total assets $ 34,326,112 $ 31,415,882 $ 26,621,227 Liabilities and Stockholders' Equity: Interest checking $ 7,235,726 2,394 0.13 % $ 6,401,869 2,232 0.14 % $ 4,001,750 1,573 0.16 % Money market 8,484,933 3,318 0.16 % 7,975,996 3,278 0.17 % 6,114,354 2,856 0.19 % Savings 598,225 36 0.02 % 572,959 35 0.02 % 524,335 33 0.03 % Time 1,498,169 1,521 0.41 % 1,493,267 1,955 0.53 % 2,475,858 8,613 1.40 % Total interest-bearing deposits 17,817,053 7,269 0.16 % 16,444,091 7,500 0.18 % 13,116,297 13,075 0.40 % Borrowings 225,446 265 0.47 % 226,053 193 0.35 % 871,110 1,319 0.61 % Subordinated debentures 735,725 6,663 3.63 % 466,101 4,375 3.81 % 459,466 5,402 4.73 % Total interest-bearing liabilities 18,778,224 14,197 0.30 % 17,136,245 12,068 0.29 % 14,446,873 19,796 0.55 % Noninterest-bearing demand deposits 11,304,757 10,173,459 8,292,151 Other liabilities 504,089 488,930 435,353 Total liabilities 30,587,070 27,798,634 23,174,377 Stockholders' equity 3,739,042 3,617,248 3,446,850 Total liabilities and stockholders' equity $ 34,326,112 $ 31,415,882 $ 26,621,227 Net interest income (1) $ 270,083 $ 264,635 $ 256,294 Net interest spread (1) 3.27 % 3.57 % 3.98 % Net interest margin (1) 3.40 % 3.69 % 4.20 % Total deposits (4) $ 29,121,810 $ 7,269 0.10 % $ 26,617,550 $ 7,500 0.11 % $ 21,408,448 $ 13,075 0.25 % (1) Tax equivalent. (2) Includes net loan premium amortization of $1.5 million and $1.2 million and net loan discount accretion of $1.2 million for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively. (3) Includes tax-equivalent adjustments of $2.2 million , $2.1 million , and $1.4 million for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020 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 June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 (Dollars in thousands, except per share data) ASSETS: Cash and due from banks $ 179,505 $ 177,199 $ 150,464 $ 187,176 $ 174,059 Interest-earning deposits in financial institutions 5,678,587 5,517,667 3,010,197 2,766,020 1,747,077 Total cash and cash equivalents 5,858,092 5,694,866 3,160,661 2,953,196 1,921,136 Securities available-for-sale 7,198,608 5,941,690 5,235,591 4,532,614 3,851,141 Federal Home Loan Bank stock 17,250 17,250 17,250 17,250 17,250 Total investment securities 7,215,858 5,958,940 5,252,841 4,549,864 3,868,391 Loans held for sale - 25,554 - - - Gross loans and leases held for investment 19,580,731 19,055,165 19,153,357 19,101,680 19,780,476 Deferred fees, net (74,474 ) (75,937 ) (69,980 ) (75,480 ) (85,845 ) Total loans and leases held for investment, net of deferred fees 19,506,257 18,979,228 19,083,377 19,026,200 19,694,631 Allowance for loan and lease losses (225,600 ) (292,445 ) (348,181 ) (345,966 ) (301,050 ) Total loans and leases held for investment, net 19,280,657 18,686,783 18,735,196 18,680,234 19,393,581 Equipment leased to others under operating leases 313,574 327,413 333,846 286,425 295,191 Premises and equipment, net 39,541 39,622 39,234 40,544 42,299 Foreclosed assets, net 13,227 14,298 14,027 13,747 1,449 Goodwill 1,204,118 1,204,092 1,078,670 1,078,670 1,078,670 Core deposit and customer relationship intangibles, net 18,423 21,312 23,641 26,813 30,564 Other assets 924,497 883,653 860,326 797,223 734,457 Total assets $ 34,867,987 $ 32,856,533 $ 29,498,442 $ 28,426,716 $ 27,365,738 LIABILITIES: Noninterest-bearing deposits $ 11,252,286 $ 11,017,462 $ 9,193,827 $ 9,346,744 $ 8,629,543 Interest-bearing deposits 18,394,748 17,205,829 15,746,890 14,618,951 14,299,036 Total deposits 29,647,034 28,223,291 24,940,717 23,965,695 22,928,579 Borrowings 6,625 19,750 5,000 60,000 60,000 Subordinated debentures 861,788 465,814 465,812 463,282 460,772 Accrued interest payable and other liabilities 505,859 493,541 491,962 451,508 463,489 Total liabilities 31,021,306 29,202,396 25,903,491 24,940,485 23,912,840 STOCKHOLDERS' EQUITY (1) 3,846,681 3,654,137 3,594,951 3,486,231 3,452,898 Total liabilities and stockholders’ equity $ 34,867,987 $ 32,856,533 $ 29,498,442 $ 28,426,716 $ 27,365,738 Book value per share $ 32.17 $ 30.68 $ 30.36 $ 29.42 $ 29.17 Tangible book value per share (2) $ 21.95 $ 20.39 $ 21.05 $ 20.09 $ 19.80 Shares outstanding 119,555,102 119,105,642 118,414,853 118,489,927 118,374,603 (1) Includes net unrealized gain on securities available-for-sale, net $ 145,516 $ 106,381 $ 172,523 $ 155,474 $ 145,038 (2) Non-GAAP measure.
PACWEST BANCORP AND SUBSIDIARIES FIVE QUARTER STATEMENT OF EARNINGS Three Months Ended June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 (Dollars in thousands, except per share data) Interest income: Loans and leases $ 244,529 $ 241,544 $ 242,198 $ 240,811 $ 247,851 Investment securities 33,954 30,265 28,843 24,443 26,038 Deposits in financial institutions 2,022 1,528 1,135 654 186 Total interest income 280,505 273,337 272,176 265,908 274,075 Interest expense: Deposits 7,269 7,500 8,454 9,887 13,075 Borrowings 265 193 37 27 1,319 Subordinated debentures 6,663 4,375 4,477 4,670 5,402 Total interest expense 14,197 12,068 12,968 14,584 19,796 Net interest income 266,308 261,269 259,208 251,324 254,279 Provision for credit losses (88,000 ) (48,000 ) 10,000 97,000 120,000 Net interest income after provision for credit losses 354,308 309,269 249,208 154,324 134,279 Noninterest income: Service charges on deposit accounts 3,452 2,934 3,119 2,570 2,004 Other commissions and fees 10,704 9,158 9,974 10,541 10,111 Leased equipment income 10,847 11,354 9,440 9,900 12,037 Gain on sale of loans and leases 1,422 139 1,671 35 346 Gain on sale of securities - 101 4 5,270 7,715 Other income 13,946 21,143 15,642 9,936 6,645 Total noninterest income 40,371 44,829 39,850 38,252 38,858 Noninterest expense: Compensation 90,807 79,882 73,171 75,131 61,910 Occupancy 14,784 14,054 14,083 14,771 14,494 Data processing 7,758 6,957 6,718 6,505 7,102 Other professional services 5,256 5,126 6,800 4,713 4,146 Insurance and assessments 3,745 4,903 5,064 3,939 9,373 Intangible asset amortization 2,889 3,079 3,172 3,751 3,882 Leased equipment depreciation 8,614 8,969 7,501 7,057 7,102 Foreclosed assets (income) expense, net (119 ) 1 (272 ) 335 (146 ) Acquisition, integration and reorganization costs 200 3,425 1,060 - - Customer related expense 4,973 4,818 4,430 4,762 4,408 Loan expense 4,031 3,193 3,926 3,499 3,379 Other expense 8,812 15,729 10,029 8,939 11,315 Total noninterest expense 151,750 150,136 135,682 133,402 126,965 Earnings before income taxes 242,929 203,962 153,376 59,174 46,172 Income tax expense 62,417 53,556 36,546 13,671 12,968 Net earnings $ 180,512 $ 150,406 $ 116,830 $ 45,503 $ 33,204 Basic and diluted earnings per share $ 1.52 $ 1.27 $ 0.99 $ 0.38 $ 0.28 Dividends declared and paid per 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 June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 (Dollars in thousands) Performance Ratios: Return on average assets (1) 2.11 % 1.94 % 1.58 % 0.65 % 0.50 % Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") return on average assets (1)(2) 1.81 % 2.01 % 2.22 % 2.22 % 2.51 % Return on average equity (1) 19.36 % 16.86 % 13.14 % 5.18 % 3.87 % Return on average tangible equity (1)(2) 29.25 % 25.67 % 19.63 % 8.20 % 6.39 % Efficiency ratio 47.9 % 46.4 % 43.6 % 45.1 % 42.9 % Noninterest expense as a percentage of average assets (1) 1.77 % 1.94 % 1.84 % 1.90 % 1.92 % Average Yields/Costs (1): Yield on: Average loans and leases (3) 5.18 % 5.20 % 5.15 % 5.01 % 5.01 % Average investment securities (3) 2.23 % 2.44 % 2.50 % 2.52 % 2.87 % Average interest-earning assets (3) 3.57 % 3.86 % 4.02 % 4.13 % 4.53 % Cost of: Average interest-bearing deposits 0.16 % 0.18 % 0.22 % 0.27 % 0.40 % Average total deposits 0.10 % 0.11 % 0.14 % 0.17 % 0.25 % Average interest-bearing liabilities 0.30 % 0.29 % 0.33 % 0.38 % 0.55 % Net interest spread (3) 3.27 % 3.57 % 3.69 % 3.75 % 3.98 % Net interest margin (3) 3.40 % 3.69 % 3.83 % 3.90 % 4.20 % Average Balances: Assets: Loans and leases, net of deferred fees $ 19,057,420 $ 18,927,314 $ 18,769,214 $ 19,195,737 $ 19,951,603 Investment securities 6,492,721 5,383,140 4,888,993 4,107,915 3,846,459 Deposits in financial institutions 6,347,764 4,790,231 3,576,335 2,554,349 733,142 Interest-earning assets 31,897,905 29,100,685 27,234,542 25,858,001 24,531,204 Total assets 34,326,112 31,415,882 29,334,789 27,935,193 26,621,227 Liabilities: Noninterest-bearing deposits 11,304,757 10,173,459 9,589,789 8,812,391 8,292,151 Interest-bearing deposits 17,817,053 16,444,091 15,045,451 14,516,923 13,116,297 Total deposits 29,121,810 26,617,550 24,635,240 23,329,314 21,408,448 Borrowings 225,446 226,053 237,098 181,315 871,110 Subordinated debentures 735,725 466,101 463,951 462,375 459,466 Interest-bearing liabilities 18,778,224 17,136,245 15,746,500 15,160,613 14,446,873 Stockholders' equity 3,739,042 3,617,248 3,536,425 3,497,869 3,446,850 (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 June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 (Dollars in thousands) Credit Quality Ratios: Nonaccrual loans and leases held for investment to loans and leases held for investment 0.29 % 0.36 % 0.48 % 0.45 % 0.84 % Nonperforming assets to loans and leases held for investment and foreclosed assets 0.36 % 0.43 % 0.55 % 0.52 % 0.85 % Classified loans and leases held for investment to loans and leases held for investment 0.75 % 0.86 % 1.39 % 1.44 % 1.49 % Provision for credit losses (for the quarter) to average loans and leases held for investment (annualized) (1.85 )% (1.03 )% 0.21 % 2.01 % 2.42 % Net charge-offs (for the quarter) to average loans and leases held for investment (annualized) (0.11 )% 0.06 % 0.40 % 0.75 % 0.27 % Trailing 12 months net charge-offs to average loans and leases held for investment 0.27 % 0.37 % 0.45 % 0.36 % 0.20 % Allowance for loan and lease losses to loans and leases held for investment 1.16 % 1.54 % 1.82 % 1.82 % 1.53 % Allowance for credit losses to loans and leases held for investment 1.54 % 2.02 % 2.27 % 2.33 % 1.94 % Allowance for credit losses to nonaccrual loans and leases held for investment 528.4 % 566.2 % 475.8 % 516.9 % 229.7 % PacWest Bancorp Consolidated: Tier 1 leverage capital ratio (1) 7.67 % 7.95 % 8.55 % 8.66 % 8.93 % Common equity tier 1 capital ratio (1) 10.41 % 10.39 % 10.53 % 10.45 % 9.97 % Tier 1 capital ratio (1) 10.41 % 10.39 % 10.53 % 10.45 % 9.97 % Total capital ratio (1) 14.99 % 13.60 % 13.76 % 13.74 % 13.18 % Risk-weighted assets (1) $ 24,274,256 $ 23,012,350 $ 22,837,693 $ 22,114,040 $ 22,781,836 Equity to assets ratio 11.03 % 11.12 % 12.19 % 12.26 % 12.62 % Tangible common equity ratio (2) 7.80 % 7.68 % 8.78 % 8.71 % 8.93 % Book value per share $ 32.17 $ 30.68 $ 30.36 $ 29.42 $ 29.17 Tangible book value per share (2) $ 21.95 $ 20.39 $ 21.05 $ 20.09 $ 19.80 Pacific Western Bank: Tier 1 leverage capital ratio (1) 8.47 % 8.83 % 9.53 % 9.70 % 10.03 % Common equity tier 1 capital ratio (1) 11.51 % 11.54 % 11.73 % 11.70 % 11.18 % Tier 1 capital ratio (1) 11.51 % 11.54 % 11.73 % 11.70 % 11.18 % Total capital ratio (1) 14.22 % 12.80 % 12.99 % 12.95 % 12.44 % (1) Capital information for June 30, 2021 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 equity, (4) tangible common equity ratio, and (5) 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, tangible book value per share, and PPNR 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 share.
The tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:
Three Months Ended Six Months Ended PPNR and PPNR Return June 30, March 31, June 30, June 30, on Average Assets 2021 2021 2020 2021 2020 (Dollars in thousands) Net earnings (loss) $ 180,512 $ 150,406 $ 33,204 $ 330,918 $ (1,399,907 ) Add: Provision for credit losses (88,000 ) (48,000 ) 120,000 (136,000 ) 232,000 Add: Goodwill impairment - - - - 1,470,000 Add: Income tax expense 62,417 53,556 12,968 115,973 24,956 Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") $ 154,929 $ 155,962 $ 166,172 $ 310,891 $ 327,049 Average assets $ 34,326,112 $ 31,415,882 $ 26,621,227 $ 32,879,037 $ 26,860,133 Return on average assets (1) 2.11 % 1.94 % 0.50 % 2.03 % (10.48 )% PPNR return on average assets (2) 1.81 % 2.01 % 2.51 % 1.91 % 2.45 % (1) Annualized net earnings (loss) divided by average assets. (2) Annualized PPNR divided by average assets.
Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, Return on Average Tangible Equity 2021 2021 2020 2021 2020 (Dollars in thousands) Net earnings (loss) $ 180,512 $ 150,406 $ 33,204 $ 330,918 $ (1,399,907 ) Add: Intangible asset amortization 2,889 3,079 3,882 5,968 7,830 Add: Goodwill impairment - - - - 1,470,000 Adjusted net earnings $ 183,401 $ 153,485 $ 37,086 $ 336,886 $ 77,923 Average stockholders' equity $ 3,739,042 $ 3,617,248 $ 3,446,850 $ 3,678,481 $ 4,201,814 Less: Average intangible assets 1,224,208 1,192,780 1,111,302 1,208,581 1,840,246 Average tangible common equity $ 2,514,834 $ 2,424,468 $ 2,335,548 $ 2,469,900 $ 2,361,568 Return on average equity (1) 19.36 % 16.86 % 3.87 % 18.14 % (67.00 )% Return on average tangible equity (2) 29.25 % 25.67 % 6.39 % 27.51 % 6.64 % (1) Annualized net earnings divided by average stockholders' equity. (2) Annualized adjusted net earnings divided by average tangible common equity.
Tangible Common Equity Ratio/ June 30, March 31, December 31, September 30, June 30, Tangible Book Value Per Share 2021 2021 2020 2020 2020 (Dollars in thousands, except per share data) Stockholders' equity $ 3,846,681 $ 3,654,137 $ 3,594,951 $ 3,486,231 $ 3,452,898 Less: Intangible assets 1,222,541 1,225,404 1,102,311 1,105,483 1,109,234 Tangible common equity $ 2,624,140 $ 2,428,733 $ 2,492,640 $ 2,380,748 $ 2,343,664 Total assets $ 34,867,987 $ 32,856,533 $ 29,498,442 $ 28,426,716 $ 27,365,738 Less: Intangible assets 1,222,541 1,225,404 1,102,311 1,105,483 1,109,234 Tangible assets $ 33,645,446 $ 31,631,129 $ 28,396,131 $ 27,321,233 $ 26,256,504 Equity to assets ratio 11.03 % 11.12 % 12.19 % 12.26 % 12.62 % Tangible common equity ratio (1) 7.80 % 7.68 % 8.78 % 8.71 % 8.93 % Book value per share $ 32.17 $ 30.68 $ 30.36 $ 29.42 $ 29.17 Tangible book value per share (2) $ 21.95 $ 20.39 $ 21.05 $ 20.09 $ 19.80 Shares outstanding 119,555,102 119,105,642 118,414,853 118,489,927 118,374,603 (1) Tangible common equity divided by tangible assets. (2) Tangible common equity divided by shares outstanding.
CONTACTS Matthew P. Wagner Bart R. Olson William J. Black
