LOS ANGELES, July 20, 2022 (GLOBE NEWSWIRE) — PacWest Bancorp (Nasdaq: PACW) –
SECOND QUARTER 2022 RESULTS
| $122.4M | $1.02 | $174.6M | 24.42% | ||||
| Net Earnings | Diluted Earnings per Common Share |
PPNR | ROATCE | ||||
SECOND QUARTER 2022 HIGHLIGHTS
|
|
CEO COMMENTARY
Matt Wagner, CEO, commented, “Our organic loan growth during the second quarter was exceptionally strong as we continued to see high demand from our clients. Loans grew by $2.1 billion in the second quarter to an all-time high of $26.5 billion. Given the high level of economic uncertainty and interest rate volatility, we are taking a cautious approach and expect slower loan growth in the second half of the year. On the deposits side, we continued to see net outflows in the venture banking business as private fundraising and capital market activities for late stage companies continues to be muted. With venture banking deposits down $1.9 billion during the quarter, we used wholesale deposits to fund the loan growth, which increased deposit costs.”
“Credit quality remains strong as evidenced by net recoveries of two basis points and a slight net recovery on a year-to-date basis, and most credit metrics remain at historically low levels. We recorded a provision for credit losses on loans of $10.0 million during the quarter primarily as a result of the $2.0 billion increase in unfunded commitments. Our ACL ratio of 1.07% remains above the CECL adoption level of 0.97%.”
“Our Tier 1 and Total capital ratios increased during the second quarter of 2022 due to the preferred stock issuance in early June. The increase was partially offset by an increase in risk-weighted assets of $2.7 billion primarily as a result of continued loan growth and increases in unfunded commitments. Capital and balance sheet optimization remain a focus area as we look to grow our capital levels to those more similar to the first half of 2021.”
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) | 2022 | 2022 | (Decrease) | 2022 | 2021 | (Decrease) | |||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||
| Net earnings | $ | 122,360 | $ | 120,128 | $ | 2,232 | $ | 242,488 | $ | 330,918 | $ | (88,430 | ) | ||||||||||
| Diluted earnings per | |||||||||||||||||||||||
| common share | $ | 1.02 | $ | 1.01 | $ | 0.01 | $ | 2.03 | $ | 2.78 | -$ | 0.75 | |||||||||||
| Pre-provision, pre-tax net | |||||||||||||||||||||||
| revenue ("PPNR") (2) | $ | 174,626 | $ | 162,109 | $ | 12,517 | $ | 336,735 | $ | 310,891 | $ | 25,844 | |||||||||||
| Return on average assets | 1.23 | % | 1.22 | % | 0.01 | 1.22 | % | 2.03 | % | (0.81 | ) | ||||||||||||
| PPNR return on average | |||||||||||||||||||||||
| assets (2) | 1.75 | % | 1.65 | % | 0.10 | 1.70 | % | 1.91 | % | (0.21 | ) | ||||||||||||
| Return on average | |||||||||||||||||||||||
| tangible common equity (2) | 24.42 | % | 20.93 | % | 3.49 | 22.55 | % | 27.51 | % | (4.96 | ) | ||||||||||||
| Yield on average loans and | |||||||||||||||||||||||
| leases (tax equivalent) | 4.65 | % | 4.66 | % | (0.01 | ) | 4.66 | % | 5.19 | % | (0.53 | ) | |||||||||||
| Cost of average total | |||||||||||||||||||||||
| deposits | 0.18 | % | 0.07 | % | 0.11 | 0.13 | % | 0.11 | % | 0.02 | |||||||||||||
| Net interest margin ("NIM") | |||||||||||||||||||||||
| (tax equivalent) | 3.56 | % | 3.43 | % | 0.13 | 3.50 | % | 3.53 | % | (0.03 | ) | ||||||||||||
| Efficiency ratio | 49.5 | % | 50.1 | % | (0.6 | ) | 49.8 | % | 47.2 | % | 2.6 | ||||||||||||
| Total assets | $ | 40,950,723 | $ | 39,249,639 | $ | 1,701,084 | $ | 40,950,723 | $ | 34,867,987 | $ | 6,082,736 | |||||||||||
| Loans and leases held | |||||||||||||||||||||||
| for investment, | |||||||||||||||||||||||
| net of deferred fees | $ | 26,501,137 | $ | 24,352,072 | $ | 2,149,065 | $ | 26,501,137 | $ | 19,506,257 | $ | 6,994,880 | |||||||||||
| Noninterest-bearing | |||||||||||||||||||||||
| demand deposits | $ | 13,338,029 | $ | 14,057,051 | $ | (719,022 | ) | $ | 13,338,029 | $ | 11,252,286 | $ | 2,085,743 | ||||||||||
| Core deposits | $ | 29,218,646 | $ | 31,676,404 | $ | (2,457,758 | ) | $ | 29,218,646 | $ | 27,038,161 | $ | 2,180,485 | ||||||||||
| Total deposits | $ | 33,968,152 | $ | 33,224,895 | $ | 743,257 | $ | 33,968,152 | $ | 29,647,034 | $ | 4,321,118 | |||||||||||
| As percentage of total | |||||||||||||||||||||||
| deposits: | |||||||||||||||||||||||
| Noninterest-bearing | |||||||||||||||||||||||
| demand deposits | 39 | % | 42 | % | (3 | ) | 39 | % | 38 | % | 1 | ||||||||||||
| Core deposits | 86 | % | 95 | % | (9 | ) | 86 | % | 91 | % | (5 | ) | |||||||||||
| Equity to assets ratio | 9.72 | % | 9.30 | % | 0.42 | 9.72 | % | 11.03 | % | (1.31 | ) | ||||||||||||
| Common equity tier 1 | |||||||||||||||||||||||
| capital ratio | 8.24 | % | 8.64 | % | (0.40 | ) | 8.24 | % | 10.41 | % | (2.17 | ) | |||||||||||
| Tier 1 capital ratio | 10.15 | % | 9.07 | % | 1.08 | 10.15 | % | 10.41 | % | (0.26 | ) | ||||||||||||
| Total capital ratio | 13.12 | % | 12.27 | % | 0.85 | 13.12 | % | 14.99 | % | (1.87 | ) | ||||||||||||
| Tangible common equity | |||||||||||||||||||||||
| ratio (2) | 5.15 | % | 5.83 | % | (0.68 | ) | 5.15 | % | 7.80 | % | (2.65 | ) | |||||||||||
| Book value per common | |||||||||||||||||||||||
| share | $ | 28.93 | $ | 30.52 | $ | (1.59 | ) | $ | 28.93 | $ | 32.17 | $ | (3.24 | ) | |||||||||
| Tangible book value per | |||||||||||||||||||||||
| common share (2) | $ | 16.93 | $ | 18.42 | $ | (1.49 | ) | $ | 16.93 | $ | 21.95 | $ | (5.02 | ) | |||||||||
| (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 increased by $15.2 million to $323.9 million for the second quarter of 2022 compared to $308.7 million for the first quarter of 2022 due mainly to higher income on loans and leases resulting primarily from higher average balances and higher income on deposits in financial institutions, offset partially by higher interest expense on deposits and borrowings. Income on loans and leases increased by $25.5 million in the second quarter of 2022 due to a $2.0 billion increase in the balance of average loans and leases and one more day compared to the first quarter of 2022. Income on deposits in financial institutions increased by $2.6 million in the second quarter of 2022 due to a 65 basis point increase in the yield on average deposits in financial institutions, offset partially by a $909.1 million decrease in the average balance. The tax equivalent yield on average loans and leases was 4.65% for the second quarter of 2022 compared to 4.66% for the first quarter of 2022. The slight decrease in the tax equivalent yield on average loans and leases was due primarily to interest recapture on nonaccrual loans being lower by $2.3 million and amortized loan fees being lower by $1.3 million. Interest expense on deposits increased by $9.2 million in the second quarter of 2022 due mainly to a higher level of wholesale deposits which contributed to an 11 basis points increase in the cost of deposits. Interest expense on borrowings increased by $2.3 million due to a $1.1 billion increase in average balance and 50 basis points increase in cost of average borrowings.
The tax equivalent NIM was 3.56% for the second quarter of 2022 compared to 3.43% for the first quarter of 2022. The increase in the NIM was due mainly to the change in the interest-earning assets mix driven by the increase in the balance of average loans and leases as a percentage of average interest-earning assets from 64% to 69%, the decrease in the balance of average investment securities as a percentage of average interest-earning assets from 28% to 26%, and the decrease in the balance of average deposits in financial institutions as a percentage of average interest-earning assets from 8% to 5%. The balance of average loans and leases increased by $2.0 billion to $25.4 billion, the balance of average investment securities decreased by $909.1 million to $9.5 billion, and the balance of average deposits in financial institutions decreased by $1.1 billion to $2.0 billion. The increase in the balance of average loans and leases was the result of the Company’s strong organic loan growth.
The cost of average total deposits was 0.18% in the second quarter of 2022 compared to 0.07% in the first quarter of 2022 due mainly to higher average balances and rates on higher-cost wholesale money market and brokered time deposits, as well as higher market rates on our deposit products. Given strong loan growth and declines in core deposits, wholesale deposits increased by $2.9 billion during the second quarter from $0.5 billion to $3.4 billion.
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 | 2022 | 2022 | (Decrease) | ||||||||
| (In thousands) | |||||||||||
| Reduction in allowance for | |||||||||||
| loan and lease losses | $ | (10,000 | ) | $ | (2,000 | ) | $ | (8,000 | ) | ||
| Addition to reserve for | |||||||||||
| unfunded loan commitments | 20,000 | 2,000 | 18,000 | ||||||||
| Total loan-related provision | 10,000 | – | 10,000 | ||||||||
| Addition to allowance for | |||||||||||
| held-to-maturity securities | 1,500 | – | 1,500 | ||||||||
| Total provision for credit losses | $ | 11,500 | $ | – | $ | 11,500 | |||||
The provision for credit losses was $11.5 million for the second quarter of 2022 compared to no provision for credit losses for the first quarter of 2022. The $10.0 million increase in the loan-related provision was due mainly to the growth in unfunded commitments of $2.0 billion during the second quarter of 2022. The $1.5 million provision for credit losses on held-to-maturity securities is related to our $2.3 billion transfer from available-for-sale securities in the second quarter of 2022 and the estimated current expected credit loss on those held-to-maturity securities.
NONINTEREST INCOME
The following table presents details of noninterest income for the periods indicated:
| Three Months Ended | |||||||||||
| June 30, | March 31, | Increase | |||||||||
| Noninterest Income | 2022 | 2022 | (Decrease) | ||||||||
| (In thousands) | |||||||||||
| Service charges on deposit accounts | $ | 3,634 | $ | 3,571 | $ | 63 | |||||
| Other commissions and fees | 10,813 | 11,580 | (767 | ) | |||||||
| Leased equipment income | 12,335 | 13,094 | (759 | ) | |||||||
| Gain on sale of loans and leases | 12 | 60 | (48 | ) | |||||||
| (Loss) gain on sale of securities | (1,209 | ) | 104 | (1,313 | ) | ||||||
| Dividends and gains (losses) on equity investments | 4,097 | (11,375 | ) | 15,472 | |||||||
| Warrant income | 1,615 | 629 | 986 | ||||||||
| Other income | 3,049 | 3,155 | (106 | ) | |||||||
| Total noninterest income | $ | 34,346 | $ | 20,818 | $ | 13,528 | |||||
Noninterest income increased by $13.5 million to $34.3 million for the second quarter of 2022 compared to $20.8 million for the first quarter of 2022 due primarily to an increase of $15.5 million in dividends and gains on equity investments, offset partially by an increase in loss on sale of securities. Dividends and gains on equity investments increased to $4.1 million for the second quarter of 2022 compared to a negative $11.4 million in the first quarter of 2022 due primarily to higher fair value gains on equity investments still held and lower fair value marks and losses on sales of equity investments. The increase in loss on sale of securities resulted from the sale of $393.4 million of securities for a net loss of $1.2 million for the second quarter of 2022 compared to sales of $206.1 million of securities for a net gain of $0.1 million for the first quarter of 2022. Warrant income was higher due primarily to merger and acquisition activities of three underlying companies.
NONINTEREST EXPENSE
The following table presents details of noninterest expense for the periods indicated:
| Three Months Ended | |||||||||||
| June 30, | March 31, | Increase | |||||||||
| Noninterest Expense | 2022 | 2022 | (Decrease) | ||||||||
| (In thousands) | |||||||||||
| Compensation | $ | 102,542 | $ | 92,240 | $ | 10,302 | |||||
| Occupancy | 15,268 | 15,200 | 68 | ||||||||
| Data processing | 9,258 | 9,629 | (371 | ) | |||||||
| Other professional services | 6,726 | 5,954 | 772 | ||||||||
| Insurance and assessments | 5,632 | 5,490 | 142 | ||||||||
| Intangible asset amortization | 3,649 | 3,649 | – | ||||||||
| Leased equipment depreciation | 8,934 | 9,189 | (255 | ) | |||||||
| Foreclosed assets (income) expense, net | (28 | ) | (3,353 | ) | 3,325 | ||||||
| Customer related expense | 11,748 | 12,655 | (907 | ) | |||||||
| Loan expense | 7,037 | 5,157 | 1,880 | ||||||||
| Other | 12,879 | 11,616 | 1,263 | ||||||||
| Total noninterest expense | $ | 183,645 | $ | 167,426 | $ | 16,219 | |||||
Noninterest expense increased by $16.2 million to $183.6 million for the second quarter of 2022 compared to $167.4 million for the first quarter of 2022 due primarily to an increase of $10.3 million in compensation expense, a decrease of $3.3 million in foreclosed assets income, an increase of $1.9 million in loan expense, and an increase of $1.3 million in other expense. The increase in compensation expense was due mainly to higher commissions, salaries, and bonus expense attributable mostly to strong loan growth and a full quarter of annual merit increases along with higher headcount which increased by 95 FTEs. The decrease in foreclosed assets income was due to a $3.2 million gain on the sale of our largest foreclosed property in the first quarter of 2022. The increase in loan expense was due mainly to higher loan-related legal expenses related to higher loan production. The increase in other expense was due mostly to higher employee costs for business travel.
INCOME TAXES
The effective income tax rate was 25.0% for the second quarter of 2022 compared to 25.9% for the first quarter of 2022. The decrease was due primarily to higher tax credits in the second quarter of 2022. The effective tax rate for the full year 2022 is currently estimated to be in the range of 25% to 27%.
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, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||
| % of | % of | % of | |||||||||||||||
| Deposit Composition | Balance | Total | Balance | Total | Balance | Total | |||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Noninterest-bearing demand | $ | 13,338,029 | 39 | % | $ | 14,057,051 | 42 | % | $ | 11,252,286 | 38 | % | |||||
| Interest checking | 6,197,234 | 18 | % | 6,673,696 | 20 | % | 7,394,472 | 25 | % | ||||||||
| Money market | 9,029,433 | 27 | % | 10,301,996 | 31 | % | 7,777,199 | 26 | % | ||||||||
| Savings | 653,950 | 2 | % | 643,661 | 2 | % | 614,204 | 2 | % | ||||||||
| Total core deposits | 29,218,646 | 86 | % | 31,676,404 | 95 | % | 27,038,161 | 91 | % | ||||||||
| Non-core non-maturity deposits | 2,185,248 | 6 | % | 322,732 | 1 | % | 1,122,971 | 4 | % | ||||||||
| Total non-maturity deposits | 31,403,894 | 92 | % | 31,999,136 | 96 | % | 28,161,132 | 95 | % | ||||||||
| Time deposits $250,000 and under | 1,898,312 | 6 | % | 878,383 | 3 | % | 913,371 | 3 | % | ||||||||
| Time deposits over $250,000 | 665,946 | 2 | % | 347,376 | 1 | % | 572,531 | 2 | % | ||||||||
| Total time deposits | 2,564,258 | 8 | % | 1,225,759 | 4 | % | 1,485,902 | 5 | % | ||||||||
| Total deposits | $ | 33,968,152 | 100 | % | $ | 33,224,895 | 100 | % | $ | 29,647,034 | 100 | % | |||||
At June 30, 2022, core deposits totaled $29.2 billion or 86% of total deposits, including $13.3 billion of noninterest-bearing demand deposits or 39% of total deposits. Core deposits decreased by $2.5 billion or 7.8% in the second quarter of 2022 driven primarily by a $1.9 billion decrease in balances from our venture banking clients. Total deposits increased by $743.3 million or 2.2% in the second quarter of 2022 due to a $1.9 billion increase in non-core non-maturity deposits and a $1.3 billion increase in time deposits, offset partially by the decrease in core deposits. Total venture banking deposits decreased from $14.0 billion as of March 31, 2022 to $12.1 billion as of June 30, 2022.
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 increased from $1.7 billion as of March 31, 2022 to $2.1 billion as of June 30, 2022, of which $1.5 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 | 2022 | 2022 | 2022 | ||||||||
| (Dollars in thousands) | |||||||||||
| Balance, beginning of period | $ | 24,352,072 | $ | 22,941,548 | $ | 22,941,548 | |||||
| Additions: | |||||||||||
| Production | 2,815,181 | 2,574,860 | 5,390,041 | ||||||||
| Disbursements | 1,871,627 | 1,589,152 | 3,460,779 | ||||||||
| Total production and disbursements | 4,686,808 | 4,164,012 | 8,850,820 | ||||||||
| Reductions: | |||||||||||
| Payoffs | (1,347,447 | ) | (1,448,680 | ) | (2,796,127 | ) | |||||
| Paydowns | (1,183,178 | ) | (1,264,571 | ) | (2,447,749 | ) | |||||
| Total payoffs and paydowns | (2,530,625 | ) | (2,713,251 | ) | (5,243,876 | ) | |||||
| Sales | (4,319 | ) | (36,698 | ) | (41,017 | ) | |||||
| Transfers to foreclosed assets | – | (305 | ) | (305 | ) | ||||||
| Charge-offs | (2,799 | ) | (3,234 | ) | (6,033 | ) | |||||
| Total reductions | (2,537,743 | ) | (2,753,488 | ) | (5,291,231 | ) | |||||
| Net increase (decrease) | 2,149,065 | 1,410,524 | 3,559,589 | ||||||||
| Balance, end of period | $ | 26,501,137 | $ | 24,352,072 | $ | 26,501,137 | |||||
| Weighted average rate on production (1) | 4.61 | % | 4.31 | % | 4.46 | % | |||||
| (1) The weighted average rate on production presents contractual rates on a tax equivalent basis and excludes amortized fees. Amortized fees added approximately 23 basis points to loan yields in 2022. | |||||||||||
Loans and leases held for investment, net of deferred fees, increased by $2.1 billion or 8.8% in the second quarter of 2022 to $26.5 billion at June 30, 2022. The overall increase in the loans and leases balance for the second quarter of 2022 was due primarily to increases in the residential real estate mortgage, asset-based, and residential real estate construction portfolios.
Civic loan production was $847 million for the second quarter of 2022 compared to $559 million for the first quarter of 2022. The Civic loan portfolio as of June 30, 2022 totaled $2.4 billion.
The weighted average rate on the $2.8 billion of production for the second quarter of 2022 increased to 4.61% from 4.31% in the first quarter of 2022 due primarily to the loan mix (lower levels of single-family loan pool purchases and higher level of Civic fundings). In the second quarter of 2022, we purchased $69 million of single-family loan pools compared to $587 million in the first quarter of 2022. The single-family loan pool purchase portfolio as of June 30, 2022 totaled $2.9 billion. Purchases of single-family loan pools ceased in April 2022.
PPP loans declined by $37.4 million in the second quarter of 2022, as the program continues to wind down. Net fees for PPP loans were $1.0 million in the second quarter of 2022, down from $2.5 million in the first quarter of 2022. Remaining PPP loans totaled $33.0 million as of June 30, 2022, with $0.6 million of net fees to amortize over the remaining life of the loans.
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, 2022 | March 31, 2022 | June 30, 2021 | ||||||||||||
| % of | % of | % of | ||||||||||||
| Loan and Lease Portfolio | Balance | Total | Balance | Total | Balance | Total | ||||||||
| (Dollars in thousands) | ||||||||||||||
| Real estate mortgage: | ||||||||||||||
| Commercial | $ | 3,670,515 | 14 | % | $ | 3,669,741 | 15 | % | $ | 3,792,198 | 19 | % | ||
| Residential | 9,879,131 | 37 | % | 8,369,550 | 35 | % | 4,620,822 | 24 | % | |||||
| Total real estate mortgage | 13,549,646 | 51 | % | 12,039,291 | 50 | % | 8,413,020 | 43 | % | |||||
| Real estate construction and land: | ||||||||||||||
| Commercial | 837,423 | 3 | % | 802,022 | 3 | % | 930,785 | 5 | % | |||||
| Residential | 3,153,616 | 12 | % | 2,891,467 | 12 | % | 2,574,799 | 13 | % | |||||
| Total real estate construction | ||||||||||||||
| and land | 3,991,039 | 15 | % | 3,693,489 | 15 | % | 3,505,584 | 18 | % | |||||
| Total real estate | 17,540,685 | 66 | % | 15,732,780 | 65 | % | 11,918,604 | 61 | % | |||||
| Commercial: | ||||||||||||||
| Asset-based | 5,068,112 | 19 | % | 4,739,220 | 19 | % | 3,550,903 | 18 | % | |||||
| Venture capital | 2,179,190 | 8 | % | 2,077,339 | 9 | % | 1,749,432 | 9 | % | |||||
| Other commercial | 1,229,504 | 5 | % | 1,298,136 | 5 | % | 1,921,909 | 10 | % | |||||
| Total commercial | 8,476,806 | 32 | % | 8,114,695 | 33 | % | 7,222,244 | 37 | % | |||||
| Consumer | 483,646 | 2 | % | 504,597 | 2 | % | 365,409 | 2 | % | |||||
| Total loans and leases held for | ||||||||||||||
| investment, net of deferred fees | $ | 26,501,137 | 100 | % | $ | 24,352,072 | 100 | % | $ | 19,506,257 | 100 | % | ||
| Total unfunded loan commitments | $ | 11,866,437 | $ | 9,899,345 | $ | 7,891,875 | ||||||||
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 June 30, 2022 | |||||||||||
| 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 | $ | 197,398 | $ | 75,071 | $ | 272,469 | |||||
| Charge-offs | (2,799 | ) | – | (2,799 | ) | ||||||
| Recoveries | 4,106 | – | 4,106 | ||||||||
| Net recoveries | 1,307 | – | 1,307 | ||||||||
| Provision | (10,000 | ) | 20,000 | 10,000 | |||||||
| Ending balance | $ | 188,705 | $ | 95,071 | $ | 283,776 | |||||
| Three Months Ended March 31, 2022 | |||||||||||
| 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 | $ | 200,564 | $ | 73,071 | $ | 273,635 | |||||
| Charge-offs | (3,234 | ) | – | (3,234 | ) | ||||||
| Recoveries | 2,068 | – | 2,068 | ||||||||
| Net charge-offs | (1,166 | ) | – | (1,166 | ) | ||||||
| Provision | (2,000 | ) | 2,000 | – | |||||||
| Ending balance | $ | 197,398 | $ | 75,071 | $ | 272,469 | |||||
The following table presents allowance for credit losses information on loans and leases as of and for the dates and periods indicated:
| June 30, | March 31, | Increase | |||||||||
| Allowance for Credit Losses | 2022 | 2022 | (Decrease) | ||||||||
| (Dollars in thousands) | |||||||||||
| Allowance for loan and lease losses | $ | 188,705 | $ | 197,398 | $ | (8,693 | ) | ||||
| Reserve for unfunded loan commitments | 95,071 | 75,071 | 20,000 | ||||||||
| Allowance for credit losses | $ | 283,776 | $ | 272,469 | $ | 11,307 | |||||
| Provision for credit losses (for the quarter) | $ | 10,000 | $ | – | $ | 10,000 | |||||
| Net (recoveries) charge-offs (for the quarter) | $ | (1,307 | ) | $ | 1,166 | $ | (2,473 | ) | |||
| Net (recoveries) charge-offs to average loans | |||||||||||
| and leases (for the quarter) | (0.02 | )% | 0.02 | % | |||||||
| Allowance for loan and lease losses to loans | |||||||||||
| and leases held for investment | 0.71 | % | 0.81 | % | |||||||
| Allowance for credit losses to loans and leases | |||||||||||
| held for investment | 1.07 | % | 1.12 | % | |||||||
The allowance for credit losses increased by $11.3 million in the second quarter of 2022 to $283.8 million at June 30, 2022. The increase in the allowance for credit losses during the second quarter of 2022 was attributable to a $10.0 million provision for credit losses and $1.3 million in net recoveries.
Net recoveries were $1.3 million for the second quarter of 2022 as gross charge-offs of $2.8 million were reduced by recoveries of $4.1 million.
Net charge-offs were $1.2 million for the first quarter of 2022 as gross charge-offs of $3.2 million were reduced by recoveries of $2.0 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 | 2022 | 2022 | (Decrease) | ||||||||
| (Dollars in thousands) | |||||||||||
| NPAs and Performing TDRs: | |||||||||||
| Nonaccrual loans and leases held for investment (1) | $ | 78,527 | $ | 66,538 | $ | 11,989 | |||||
| Accruing loans contractually past due 90 days or more | – | – | – | ||||||||
| Foreclosed assets, net | – | 304 | (304 | ) | |||||||
| Total nonperforming assets ("NPAs") | $ | 78,527 | $ | 66,842 | $ | 11,685 | |||||
| Performing TDRs held for investment | $ | 11,723 | $ | 16,781 | $ | (5,058 | ) | ||||
| Nonaccrual loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 0.30 | % | 0.27 | % | |||||||
| Nonperforming assets to loans and leases | |||||||||||
| held for investment and foreclosed assets | 0.30 | % | 0.27 | % | |||||||
| Allowance for credit losses to nonaccrual loans | |||||||||||
| and leases held for investment | 361.4 | % | 409.5 | % | |||||||
| Loan and Lease Credit Risk Ratings: | |||||||||||
| Pass | $ | 25,916,612 | $ | 23,892,689 | $ | 2,023,923 | |||||
| Special mention | 480,261 | 377,315 | 102,946 | ||||||||
| Classified | 104,264 | 82,068 | 22,196 | ||||||||
| Total loans and leases held for investment, | |||||||||||
| net of deferred fees | $ | 26,501,137 | $ | 24,352,072 | $ | 2,149,065 | |||||
| Special mention loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 1.81 | % | 1.55 | % | |||||||
| Classified loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 0.39 | % | 0.34 | % | |||||||
| (1) Nonaccrual loans include SBA guaranteed amounts of $13.8 million at June 30, 2022 and $13.4 million at March 31, 2022. | |||||||||||
Classified loans and leases were at historically low levels as of the end of the first quarter of 2022 but saw an increase of $22.2 million during the second quarter due mainly to a $10.7 million increase in classified commercial real estate mortgage loans and a $9.6 million increase in classified residential real estate mortgage loans. Special mention loans and leases increased by $102.9 million during the second quarter due mostly to an $86.9 million increase in special mention commercial real estate construction loans and a $23.6 million increase in special mention residential real estate construction loans. Nonaccrual loans and leases increased by $12.0 million to $78.5 million in the second quarter of 2022 due primarily to a $17.2 million increase in nonaccrual Civic residential mortgage and residential renovation loans partially offset by declines in nonaccrual loans in all other portfolios.
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, 2022 | March 31, 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 | $ | 28,529 | $ | 14 | $ | 32,071 | $ | 2,090 | $ | (3,542 | ) | $ | (2,076 | ) | |||||
| Residential | 27,524 | 13,577 | 17,463 | 31,103 | 10,061 | (17,526 | ) | ||||||||||||
| Total real estate mortgage | 56,053 | 13,591 | 49,534 | 33,193 | 6,519 | (19,602 | ) | ||||||||||||
| Real estate construction and land: | |||||||||||||||||||
| Commercial | – | – | – | – | – | – | |||||||||||||
| Residential | 13,287 | 25,981 | 6,215 | 21,413 | 7,072 | 4,568 | |||||||||||||
| Total real estate | |||||||||||||||||||
| construction and land | 13,287 | 25,981 | 6,215 | 21,413 | 7,072 | 4,568 | |||||||||||||
| Commercial: | |||||||||||||||||||
| Asset-based | 1,189 | – | 1,323 | – | (134 | ) | – | ||||||||||||
| Venture capital | 3,120 | – | 3,659 | – | (539 | ) | – | ||||||||||||
| Other commercial | 4,655 | 9,503 | 5,420 | 47 | (765 | ) | 9,456 | ||||||||||||
| Total commercial | 8,964 | 9,503 | 10,402 | 47 | (1,438 | ) | 9,456 | ||||||||||||
| Consumer | 223 | 1,711 | 387 | 994 | (164 | ) | 717 | ||||||||||||
| Total held for investment | $ | 78,527 | $ | 50,786 | $ | 66,538 | $ | 55,647 | $ | 11,989 | $ | (4,861 | ) | ||||||
Loans and leases accruing and 30-89 days past due generally fluctuate from period to period. The $4.9 million decrease in the second quarter of 2022 was primarily in Civic residential mortgage loans, offset partially by a $9.5 million increase in the other commercial category due primarily to five PPP loans that are under review by the SBA for forgiveness, of which $6.2 million was forgiven in July 2022.
CAPITAL
Our Tier 1, Total capital, and Tier 1 leverage capital ratios increased during the second quarter of 2022 due mainly to the $513.2 million preferred stock issuance in June 2022. The net proceeds of $498.5 million increased stockholders’ equity, offset partially by an increase in risk-weighted assets of $2.7 billion primarily as a result of loan growth and the increase in unfunded commitments. We continue to consider additional capital enhancing strategies, such as a credit risk transfer transaction, to increase capital given our loan growth during the first half of the year. The following table presents capital ratios as of the dates indicated:
| June 30, | March 31, | ||||||
| 2022 | 2022 | ||||||
| PacWest Bancorp Consolidated: | |||||||
| Tier 1 leverage capital ratio (1) | 8.52 | % | 7.11 | % | |||
| Common equity tier 1 capital ratio (1) | 8.24 | % | 8.64 | % | |||
| Tier 1 capital ratio (1) | 10.15 | % | 9.07 | % | |||
| Total capital ratio (1) | 13.12 | % | 12.27 | % | |||
| Risk-weighted assets (1)(in thousands) | $ | 33,011,062 | $ | 30,297,312 | |||
| Tangible common equity ratio (2) | 5.15 | % | 5.83 | % | |||
| (1) Capital information for June 30, 2022 is preliminary. | |||||||
| (2) Non-GAAP measure. | |||||||
ABOUT PACWEST BANCORP
PacWest Bancorp (“PacWest”) is a bank holding company with over $40 billion in assets headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank is focused on relationship-based business banking to small, middle-market, and venture-backed businesses nationwide. The Bank offers a broad range of loan and lease and deposit products and services through 69 full-service branches located in California, one branch located in Durham, North Carolina, one branch located in Denver, Colorado, and numerous loan production offices across the country. The Bank provides community banking products including lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank provides venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States. The Bank also offers financing of business-purpose, non-owner-occupied investor properties through Civic, a wholly-owned subsidiary. The Bank also provides a specialized suite of services for the HOA industry. For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.
FORWARD LOOKING STATEMENTS
This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements often use words such as “anticipates,” “targets,” “expects,” “estimates,” “intends,” “plans,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those expressed in them. The ongoing COVID-19 pandemic continues to affect 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 due in part to the new variants of COVID-19. 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, inflation, sustained high unemployment rates, deterioration in the credit quality of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment securities, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission.
All forward-looking statements in this communication are based on information available at the time the statement is made. We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||||
| June 30, | March 31, | June 30, | |||||||||
| 2022 | 2022 | 2021 | |||||||||
| (Dollars in thousands, except per share data) | |||||||||||
| ASSETS: | |||||||||||
| Cash and due from banks | $ | 197,027 | $ | 205,446 | $ | 179,505 | |||||
| Interest-earning deposits in financial institutions | 2,192,877 | 1,865,235 | 5,678,587 | ||||||||
| Total cash and cash equivalents | 2,389,904 | 2,070,681 | 5,858,092 | ||||||||
| Securities available-for-sale, at estimated fair value | 6,780,648 | 9,975,109 | 7,198,608 | ||||||||
| Securities held-to-maturity, at amortized cost, | |||||||||||
| net of allowance for credit losses | 2,260,367 | – | – | ||||||||
| Federal Home Loan Bank stock, at cost | 33,210 | 17,250 | 17,250 | ||||||||
| Total investment securities | 9,074,225 | 9,992,359 | 7,215,858 | ||||||||
| Gross loans and leases held for investment | 26,608,541 | 24,439,749 | 19,580,731 | ||||||||
| Deferred fees, net | (107,404 | ) | (87,677 | ) | (74,474 | ) | |||||
| Total loans and leases held for investment, | |||||||||||
| net of deferred fees | 26,501,137 | 24,352,072 | 19,506,257 | ||||||||
| Allowance for loan and lease losses | (188,705 | ) | (197,398 | ) | (225,600 | ) | |||||
| Total loans and leases held for investment, net | 26,312,432 | 24,154,674 | 19,280,657 | ||||||||
| Equipment leased to others under operating leases | 324,233 | 325,305 | 313,574 | ||||||||
| Premises and equipment, net | 51,083 | 51,011 | 39,541 | ||||||||
| Foreclosed assets, net | – | 304 | 13,227 | ||||||||
| Goodwill | 1,405,736 | 1,405,736 | 1,204,118 | ||||||||
| Core deposit and customer relationship intangibles, net | 37,659 | 41,308 | 18,423 | ||||||||
| Other assets | 1,355,451 | 1,208,261 | 924,497 | ||||||||
| Total assets | $ | 40,950,723 | $ | 39,249,639 | $ | 34,867,987 | |||||
| LIABILITIES: | |||||||||||
| Noninterest-bearing deposits | $ | 13,338,029 | $ | 14,057,051 | $ | 11,252,286 | |||||
| Interest-bearing deposits | 20,630,123 | 19,167,844 | 18,394,748 | ||||||||
| Total deposits | 33,968,152 | 33,224,895 | 29,647,034 | ||||||||
| Borrowings | 1,592,000 | 991,000 | 6,625 | ||||||||
| Subordinated debt | 863,756 | 863,880 | 861,788 | ||||||||
| Accrued interest payable and other liabilities | 548,412 | 519,269 | 505,859 | ||||||||
| Total liabilities | 36,972,320 | 35,599,044 | 31,021,306 | ||||||||
| STOCKHOLDERS’ EQUITY (1) | 3,978,403 | 3,650,595 | 3,846,681 | ||||||||
| Total liabilities and stockholders’ equity | $ | 40,950,723 | $ | 39,249,639 | $ | 34,867,987 | |||||
| Book value per common share | $ | 28.93 | $ | 30.52 | $ | 32.17 | |||||
| Tangible book value per common share (2) | $ | 16.93 | $ | 18.42 | $ | 21.95 | |||||
| Common shares outstanding | 120,288,024 | 119,601,766 | 119,555,102 | ||||||||
| (1) Includes net unrealized (loss) gain on: | |||||||||||
| Securities available-for-sale, net | $ | (428,242 | ) | $ | (376,475 | ) | $ | 145,516 | |||
| Securities transferred from available-for-sale | |||||||||||
| to held-to-maturity | $ | (216,508 | ) | $ | – | $ | – | ||||
| (2) Non-GAAP measure. | |||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF EARNINGS | |||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||
| Interest income: | |||||||||||||||||||
| Loans and leases | $ | 293,286 | $ | 267,759 | $ | 244,529 | $ | 561,045 | $ | 486,073 | |||||||||
| Investment securities | 52,902 | 53,422 | 33,954 | 106,324 | 64,219 | ||||||||||||||
| Deposits in financial institutions | 4,330 | 1,723 | 2,022 | 6,053 | 3,550 | ||||||||||||||
| Total interest income | 350,518 | 322,904 | 280,505 | 673,422 | 553,842 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 15,362 | 6,208 | 7,269 | 21,570 | 14,769 | ||||||||||||||
| Borrowings | 2,441 | 161 | 265 | 2,602 | 458 | ||||||||||||||
| Subordinated debt | 8,790 | 7,818 | 6,663 | 16,608 | 11,038 | ||||||||||||||
| Total interest expense | 26,593 | 14,187 | 14,197 | 40,780 | 26,265 | ||||||||||||||
| Net interest income | 323,925 | 308,717 | 266,308 | 632,642 | 527,577 | ||||||||||||||
| Provision for credit losses | 11,500 | – | (88,000 | ) | 11,500 | (136,000 | ) | ||||||||||||
| Net interest income after provision | |||||||||||||||||||
| for credit losses | 312,425 | 308,717 | 354,308 | 621,142 | 663,577 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Service charges on deposit accounts | 3,634 | 3,571 | 3,452 | 7,205 | 6,386 | ||||||||||||||
| Other commissions and fees | 10,813 | 11,580 | 10,704 | 22,393 | 19,862 | ||||||||||||||
| Leased equipment income | 12,335 | 13,094 | 10,847 | 25,429 | 22,201 | ||||||||||||||
| Gain on sale of loans and leases | 12 | 60 | 1,422 | 72 | 1,561 | ||||||||||||||
| (Loss) gain on sale of securities | (1,209 | ) | 104 | – | (1,105 | ) | 101 | ||||||||||||
| Dividends and gains (losses) on equity investments | 4,097 | (11,375 | ) | 5,394 | (7,278 | ) | 16,298 | ||||||||||||
| Warrant income | 1,615 | 629 | 5,650 | 2,244 | 11,773 | ||||||||||||||
| Other income | 3,049 | 3,155 | 2,902 | 6,204 | 7,018 | ||||||||||||||
| Total noninterest income | 34,346 | 20,818 | 40,371 | 55,164 | 85,200 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Compensation | 102,542 | 92,240 | 90,807 | 194,782 | 170,689 | ||||||||||||||
| Occupancy | 15,268 | 15,200 | 14,784 | 30,468 | 28,838 | ||||||||||||||
| Data processing | 9,258 | 9,629 | 7,758 | 18,887 | 14,715 | ||||||||||||||
| Other professional services | 6,726 | 5,954 | 5,256 | 12,680 | 10,382 | ||||||||||||||
| Insurance and assessments | 5,632 | 5,490 | 3,745 | 11,122 | 8,648 | ||||||||||||||
| Intangible asset amortization | 3,649 | 3,649 | 2,889 | 7,298 | 5,968 | ||||||||||||||
| Leased equipment depreciation | 8,934 | 9,189 | 8,614 | 18,123 | 17,583 | ||||||||||||||
| Foreclosed assets (income) expense, net | (28 | ) | (3,353 | ) | (119 | ) | (3,381 | ) | (118 | ) | |||||||||
| Acquisition, integration and reorganization costs | – | – | 200 | – | 3,625 | ||||||||||||||
| Customer related expense | 11,748 | 12,655 | 4,973 | 24,403 | 9,791 | ||||||||||||||
| Loan expense | 7,037 | 5,157 | 4,031 | 12,194 | 7,224 | ||||||||||||||
| Other expense | 12,879 | 11,616 | 8,812 | 24,495 | 24,541 | ||||||||||||||
| Total noninterest expense | 183,645 | 167,426 | 151,750 | 351,071 | 301,886 | ||||||||||||||
| Earnings before income taxes | 163,126 | 162,109 | 242,929 | 325,235 | 446,891 | ||||||||||||||
| Income tax expense | 40,766 | 41,981 | 62,417 | 82,747 | 115,973 | ||||||||||||||
| Net earnings | 122,360 | 120,128 | 180,512 | 242,488 | 330,918 | ||||||||||||||
| Basic and diluted earnings per common share | $ | 1.02 | $ | 1.01 | $ | 1.52 | $ | 2.03 | $ | 2.78 | |||||||||
| Dividends declared and paid per common share | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.50 | $ | 0.50 | |||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| NET EARNINGS PER COMMON SHARE | |||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Basic Earnings Per Common Share: | |||||||||||||||||||
| Net earnings | $ | 122,360 | $ | 120,128 | $ | 180,512 | $ | 242,488 | $ | 330,918 | |||||||||
| Less: earnings allocated to | |||||||||||||||||||
| unvested restricted stock (1) | (2,351 | ) | (2,037 | ) | (3,172 | ) | (4,389 | ) | (5,495 | ) | |||||||||
| Net earnings allocated to | |||||||||||||||||||
| common shares | $ | 120,009 | $ | 118,091 | $ | 177,340 | $ | 238,099 | $ | 325,423 | |||||||||
| Weighted average basic shares | |||||||||||||||||||
| and unvested restricted stock | |||||||||||||||||||
| outstanding | 120,022 | 119,595 | 119,386 | 119,810 | 119,121 | ||||||||||||||
| Less: weighted average unvested | |||||||||||||||||||
| restricted stock outstanding | (2,460 | ) | (2,246 | ) | (2,356 | ) | (2,354 | ) | (2,181 | ) | |||||||||
| Weighted average basic shares | |||||||||||||||||||
| outstanding | 117,562 | 117,349 | 117,030 | 117,456 | 116,940 | ||||||||||||||
| Basic earnings per common share | $ | 1.02 | $ | 1.01 | $ | 1.52 | $ | 2.03 | $ | 2.78 | |||||||||
| Diluted Earnings Per Common Share: | |||||||||||||||||||
| Net earnings allocated to | |||||||||||||||||||
| common shares | $ | 120,009 | $ | 118,091 | $ | 177,340 | $ | 238,099 | $ | 325,423 | |||||||||
| Weighted average diluted shares | |||||||||||||||||||
| outstanding | 117,562 | 117,349 | 117,030 | 117,456 | 116,940 | ||||||||||||||
| Diluted earnings per common share | $ | 1.02 | $ | 1.01 | $ | 1.52 | $ | 2.03 | $ | 2.78 | |||||||||
| (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, 2022 | March 31, 2022 | June 30, 2021 | ||||||||||
| Interest | Average | Interest | Average | Interest | Average | |||||||
| Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | ||||
| Balance | Expense | Cost | Balance | Expense | Cost | Balance | Expense | Cost | ||||
| (Dollars in thousands) | ||||||||||||
| Assets: | ||||||||||||
| Loans and leases (1)(2) | $ 25,449,773 | $ 295,154 | 4.65% | $ 23,433,019 | $ 269,521 | 4.66% | $ 19,057,420 | $ 246,147 | 5.18% | |||
| Investment securities (3) | 9,488,653 | 54,910 | 2.32% | 10,397,709 | 55,594 | 2.17% | 6,492,721 | 36,111 | 2.23% | |||
| Deposits in financial | ||||||||||||
| institutions | 1,984,751 | 4,330 | 0.88% | 3,083,159 | 1,723 | 0.23% | 6,347,764 | 2,022 | 0.13% | |||
| Total interest-earning | ||||||||||||
| assets (1) | 36,923,177 | 354,394 | 3.85% | 36,913,887 | 326,838 | 3.59% | 31,897,905 | 284,280 | 3.57% | |||
| Other assets | 3,108,714 | 2,969,417 | 2,428,207 | |||||||||
| Total assets | $ 40,031,891 | $ 39,883,304 | $ 34,326,112 | |||||||||
| Liabilities and | ||||||||||||
| Stockholders’ Equity: | ||||||||||||
| Interest checking | $ 6,517,381 | 3,816 | 0.23% | $ 7,094,623 | 1,776 | 0.10% | $ 7,235,726 | 2,394 | 0.13% | |||
| Money market | 10,553,942 | 8,448 | 0.32% | 10,852,454 | 3,461 | 0.13% | 8,484,933 | 3,318 | 0.16% | |||
| Savings | 650,479 | 41 | 0.03% | 642,709 | 39 | 0.02% | 598,225 | 36 | 0.02% | |||
| Time | 1,939,816 | 3,057 | 0.63% | 1,278,609 | 932 | 0.30% | 1,498,169 | 1,521 | 0.41% | |||
| Total interest-bearing | ||||||||||||
| deposits | 19,661,618 | 15,362 | 0.31% | 19,868,395 | 6,208 | 0.13% | 17,817,053 | 7,269 | 0.16% | |||
| Borrowings | 1,356,616 | 2,441 | 0.72% | 298,444 | 161 | 0.22% | 225,446 | 265 | 0.47% | |||
| Subordinated debt | 863,653 | 8,790 | 4.08% | 863,572 | 7,818 | 3.67% | 735,725 | 6,663 | 3.63% | |||
| Total interest-bearing | ||||||||||||
| liabilities | 21,881,887 | 26,593 | 0.49% | 21,030,411 | 14,187 | 0.27% | 18,778,224 | 14,197 | 0.30% | |||
| Noninterest-bearing | ||||||||||||
| demand deposits | 13,987,398 | 14,463,667 | 11,304,757 | |||||||||
| Other liabilities | 510,238 | 541,745 | 504,089 | |||||||||
| Total liabilities | 36,379,523 | 36,035,823 | 30,587,070 | |||||||||
| Stockholders’ equity | 3,652,368 | 3,847,481 | 3,739,042 | |||||||||
| Total liabilities and | ||||||||||||
| stockholders’ equity | $ 40,031,891 | $ 39,883,304 | $ 34,326,112 | |||||||||
| Net interest income (1) | $ 327,801 | $ 312,651 | $ 270,083 | |||||||||
| Net interest spread (1) | 3.36% | 3.32% | 3.27% | |||||||||
| Net interest margin (1) | 3.56% | 3.43% | 3.40% | |||||||||
| Total deposits (4) | $ 33,649,016 | $ 15,362 | 0.18% | $ 34,332,062 | $ 6,208 | 0.07% | $ 29,121,810 | $ 7,269 | 0.10% | |||
| (1) Tax equivalent. | ||||||||||||
| (2) Includes net loan premium amortization of $5.8 million, $5.7 million, and $1.5 million for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively. | ||||||||||||
| (3) Includes tax-equivalent adjustments of $2.0 million, $2.2 million, and $2.2 million for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021 related to tax-exempt income on investment securities. The federal statutory tax rate utilized was 21%. | ||||||||||||
| (4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits. | ||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER BALANCE SHEET | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| 2022 | 2022 | 2021 | 2021 | 2021 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| ASSETS: | |||||||||||||||||||
| Cash and due from banks | $ | 197,027 | $ | 205,446 | $ | 112,548 | $ | 174,585 | $ | 179,505 | |||||||||
| Interest-earning deposits in financial | |||||||||||||||||||
| institutions | 2,192,877 | 1,865,235 | 3,944,686 | 3,524,613 | 5,678,587 | ||||||||||||||
| Total cash and cash equivalents | 2,389,904 | 2,070,681 | 4,057,234 | 3,699,198 | 5,858,092 | ||||||||||||||
| Securities available-for-sale | 6,780,648 | 9,975,109 | 10,694,458 | 9,276,926 | 7,198,608 | ||||||||||||||
| Securities held-to-maturity | 2,260,367 | – | – | – | – | ||||||||||||||
| Federal Home Loan Bank stock | 33,210 | 17,250 | 17,250 | 17,250 | 17,250 | ||||||||||||||
| Total investment securities | 9,074,225 | 9,992,359 | 10,711,708 | 9,294,176 | 7,215,858 | ||||||||||||||
| Gross loans and leases held for investment | 26,608,541 | 24,439,749 | 23,026,308 | 20,588,255 | 19,580,731 | ||||||||||||||
| Deferred fees, net | (107,404 | ) | (87,677 | ) | (84,760 | ) | (77,235 | ) | (74,474 | ) | |||||||||
| Total loans and leases held for | |||||||||||||||||||
| investment, net of deferred fees | 26,501,137 | 24,352,072 | 22,941,548 | 20,511,020 | 19,506,257 | ||||||||||||||
| Allowance for loan and lease losses | (188,705 | ) | (197,398 | ) | (200,564 | ) | (203,733 | ) | (225,600 | ) | |||||||||
| Total loans and leases held for | |||||||||||||||||||
| investment, net | 26,312,432 | 24,154,674 | 22,740,984 | 20,307,287 | 19,280,657 | ||||||||||||||
| Equipment leased to others under | |||||||||||||||||||
| operating leases | 324,233 | 325,305 | 339,150 | 334,275 | – | 313,574 | |||||||||||||
| Premises and equipment, net | 51,083 | 51,011 | 46,740 | 47,246 | 39,541 | ||||||||||||||
| Foreclosed assets, net | – | 304 | 12,843 | 13,364 | 13,227 | ||||||||||||||
| Goodwill | 1,405,736 | 1,405,736 | 1,405,736 | 1,204,118 | 1,204,118 | ||||||||||||||
| Core deposit and customer relationship | |||||||||||||||||||
| intangibles, net | 37,659 | 41,308 | 44,957 | 15,533 | 18,423 | ||||||||||||||
| Other assets | 1,355,451 | 1,208,261 | 1,083,992 | 970,479 | 924,497 | ||||||||||||||
| Total assets | $ | 40,950,723 | $ | 39,249,639 | $ | 40,443,344 | $ | 35,885,676 | $ | 34,867,987 | |||||||||
| LIABILITIES: | |||||||||||||||||||
| Noninterest-bearing deposits | $ | 13,338,029 | $ | 14,057,051 | $ | 14,543,133 | $ | 12,881,806 | $ | 11,252,286 | |||||||||
| Interest-bearing deposits | 20,630,123 | 19,167,844 | 20,454,624 | 17,677,939 | 18,394,748 | ||||||||||||||
| Total deposits | 33,968,152 | 33,224,895 | 34,997,757 | 30,559,745 | 29,647,034 | ||||||||||||||
| Borrowings | 1,592,000 | 991,000 | – | – | 6,625 | ||||||||||||||
| Subordinated debt | 863,756 | 863,880 | 863,283 | 862,447 | 861,788 | ||||||||||||||
| Accrued interest payable and other | |||||||||||||||||||
| liabilities | 548,412 | 519,269 | 582,674 | 545,050 | 505,859 | ||||||||||||||
| Total liabilities | 36,972,320 | 35,599,044 | 36,443,714 | 31,967,242 | 31,021,306 | ||||||||||||||
| STOCKHOLDERS’ EQUITY (1) | 3,978,403 | 3,650,595 | 3,999,630 | 3,918,434 | 3,846,681 | ||||||||||||||
| Total liabilities and stockholders’ | |||||||||||||||||||
| equity | $ | 40,950,723 | $ | 39,249,639 | $ | 40,443,344 | $ | 35,885,676 | $ | 34,867,987 | |||||||||
| Book value per common share | $ | 28.93 | $ | 30.52 | $ | 33.45 | $ | 32.77 | $ | 32.17 | |||||||||
| Tangible book value per common share (2) | $ | 16.93 | $ | 18.42 | $ | 21.31 | $ | 22.57 | $ | 21.95 | |||||||||
| Common shares outstanding | 120,288,024 | 119,601,766 | 119,584,854 | 119,579,566 | 119,555,102 | ||||||||||||||
| (1) Includes net unrealized (loss) gain on: | |||||||||||||||||||
| Securities available-for-sale, net | $ | (428,242 | ) | $ | (376,475 | ) | $ | 65,968 | $ | 98,859 | $ | 145,516 | |||||||
| Securities transferred from | |||||||||||||||||||
| available-for-sale to held-to-maturity | $ | (216,508 | ) | $ | – | $ | – | $ | – | $ | – | ||||||||
| (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, | |||||||||||||||
| 2022 | 2022 | 2021 | 2021 | 2021 | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||
| Interest income: | |||||||||||||||||||
| Loans and leases | $ | 293,286 | $ | 267,759 | $ | 263,662 | $ | 246,722 | $ | 244,529 | |||||||||
| Investment securities | 52,902 | 53,422 | 48,469 | 40,780 | 33,954 | ||||||||||||||
| Deposits in financial institutions | 4,330 | 1,723 | 2,674 | 2,580 | 2,022 | ||||||||||||||
| Total interest income | 350,518 | 322,904 | 314,805 | 290,082 | 280,505 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 15,362 | 6,208 | 6,622 | 6,417 | 7,269 | ||||||||||||||
| Borrowings | 2,441 | 161 | 64 | 101 | 265 | ||||||||||||||
| Subordinated debt | 8,790 | 7,818 | 7,714 | 7,722 | 6,663 | ||||||||||||||
| Total interest expense | 26,593 | 14,187 | 14,400 | 14,240 | 14,197 | ||||||||||||||
| Net interest income | 323,925 | 308,717 | 300,405 | 275,842 | 266,308 | ||||||||||||||
| Provision for credit losses | 11,500 | – | (6,000 | ) | (20,000 | ) | (88,000 | ) | |||||||||||
| Net interest income after provision | |||||||||||||||||||
| for credit losses | 312,425 | 308,717 | 306,405 | 295,842 | 354,308 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Service charges on deposit accounts | 3,634 | 3,571 | 3,476 | 3,407 | 3,452 | ||||||||||||||
| Other commissions and fees | 10,813 | 11,580 | 10,633 | 11,792 | 10,704 | ||||||||||||||
| Leased equipment income | 12,335 | 13,094 | 12,602 | 10,943 | 10,847 | ||||||||||||||
| Gain on sale of loans and leases | 12 | 60 | 172 | – | 1,422 | ||||||||||||||
| (Loss) gain on sale of securities | (1,209 | ) | 104 | 999 | 515 | – | |||||||||||||
| Dividends and gains (losses) on equity investments | 4,097 | (11,375 | ) | (1,570 | ) | 8,387 | 5,394 | ||||||||||||
| Warrant income | 1,615 | 629 | 23,990 | 13,578 | 5,650 | ||||||||||||||
| Other income | 3,049 | 3,155 | 7,080 | 2,723 | 2,902 | ||||||||||||||
| Total noninterest income | 34,346 | 20,818 | 57,382 | 51,345 | 40,371 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Compensation | 102,542 | 92,240 | 99,700 | 98,061 | 90,807 | ||||||||||||||
| Occupancy | 15,268 | 15,200 | 14,656 | 14,928 | 14,784 | ||||||||||||||
| Data processing | 9,258 | 9,629 | 8,171 | 7,391 | 7,758 | ||||||||||||||
| Other professional services | 6,726 | 5,954 | 5,946 | 5,164 | 5,256 | ||||||||||||||
| Insurance and assessments | 5,632 | 5,490 | 5,032 | 3,685 | 3,745 | ||||||||||||||
| Intangible asset amortization | 3,649 | 3,649 | 3,876 | 2,890 | 2,889 | ||||||||||||||
| Leased equipment depreciation | 8,934 | 9,189 | 9,569 | 8,603 | 8,614 | ||||||||||||||
| Foreclosed assets (income) expense, net | (28 | ) | (3,353 | ) | (260 | ) | 165 | (119 | ) | ||||||||||
| Acquisition, integration and reorganization costs | – | – | 5,590 | 200 | 200 | ||||||||||||||
| Customer related expense | 11,748 | 12,655 | 6,175 | 4,538 | 4,973 | ||||||||||||||
| Loan expense | 7,037 | 5,157 | 5,627 | 4,180 | 4,031 | ||||||||||||||
| Other expense | 12,879 | 11,616 | 12,028 | 9,616 | 8,812 | ||||||||||||||
| Total noninterest expense | 183,645 | 167,426 | 176,110 | 159,421 | 151,750 | ||||||||||||||
| Earnings before income taxes | 163,126 | 162,109 | 187,677 | 187,766 | 242,929 | ||||||||||||||
| Income tax expense | 40,766 | 41,981 | 51,632 | 47,770 | 62,417 | ||||||||||||||
| Net earnings | 122,360 | 120,128 | 136,045 | 139,996 | 180,512 | ||||||||||||||
| Basic and diluted earnings per common share | $ | 1.02 | $ | 1.01 | $ | 1.14 | $ | 1.17 | $ | 1.52 | |||||||||
| 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 | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| 2022 | 2022 | 2021 | 2021 | 2021 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Performance Ratios: | |||||||||||||||||||
| Return on average assets (1) | 1.23 | % | 1.22 | % | 1.34 | % | 1.55 | % | 2.11 | % | |||||||||
| Pre-provision, pre-tax net revenue | |||||||||||||||||||
| ("PPNR") return on average | |||||||||||||||||||
| assets (1)(2) | 1.75 | % | 1.65 | % | 1.79 | % | 1.86 | % | 1.81 | % | |||||||||
| Return on average equity (1) | 13.44 | % | 12.66 | % | 13.65 | % | 14.18 | % | 19.36 | % | |||||||||
| Return on average tangible common | |||||||||||||||||||
| equity (1)(2) | 24.42 | % | 20.93 | % | 22.06 | % | 21.03 | % | 29.25 | % | |||||||||
| Efficiency ratio | 49.5 | % | 50.1 | % | 46.2 | % | 47.2 | % | 47.9 | % | |||||||||
| Noninterest expense as a percentage | |||||||||||||||||||
| of average assets (1) | 1.84 | % | 1.70 | % | 1.73 | % | 1.76 | % | 1.77 | % | |||||||||
| Average Yields/Costs (1): | |||||||||||||||||||
| Yield on: | |||||||||||||||||||
| Average loans and leases (3) | 4.65 | % | 4.66 | % | 4.93 | % | 5.01 | % | 5.18 | % | |||||||||
| Average investment securities (3) | 2.32 | % | 2.17 | % | 2.02 | % | 2.12 | % | 2.23 | % | |||||||||
| Average interest-earning assets (3) | 3.85 | % | 3.59 | % | 3.39 | % | 3.50 | % | 3.57 | % | |||||||||
| Cost of: | |||||||||||||||||||
| Average interest-bearing deposits | 0.31 | % | 0.13 | % | 0.13 | % | 0.14 | % | 0.16 | % | |||||||||
| Average total deposits | 0.18 | % | 0.07 | % | 0.08 | % | 0.08 | % | 0.10 | % | |||||||||
| Average interest-bearing liabilities | 0.49 | % | 0.27 | % | 0.27 | % | 0.29 | % | 0.30 | % | |||||||||
| Net interest spread (3) | 3.36 | % | 3.32 | % | 3.12 | % | 3.21 | % | 3.27 | % | |||||||||
| Net interest margin (3) | 3.56 | % | 3.43 | % | 3.24 | % | 3.33 | % | 3.40 | % | |||||||||
| Average Balances: | |||||||||||||||||||
| Assets: | |||||||||||||||||||
| Loans and leases, net of deferred fees | $ | 25,449,773 | $ | 23,433,019 | $ | 21,367,665 | $ | 19,670,671 | $ | 19,057,420 | |||||||||
| Investment securities | 9,488,653 | 10,397,709 | 9,964,568 | 8,047,098 | 6,492,721 | ||||||||||||||
| Deposits in financial institutions | 1,984,751 | 3,083,159 | 5,961,104 | 5,657,768 | 6,347,764 | ||||||||||||||
| Interest-earning assets | 36,923,177 | 36,913,887 | 37,293,337 | 33,375,537 | 31,897,905 | ||||||||||||||
| Total assets | 40,031,891 | 39,883,304 | 40,358,147 | 35,871,664 | 34,326,112 | ||||||||||||||
| Liabilities: | |||||||||||||||||||
| Noninterest-bearing deposits | 13,987,398 | 14,463,667 | 14,713,385 | 12,198,313 | 11,304,757 | ||||||||||||||
| Interest-bearing deposits | 19,661,618 | 19,868,395 | 20,050,310 | 18,130,694 | 17,817,053 | ||||||||||||||
| Total deposits | 33,649,016 | 34,332,062 | 34,763,695 | 30,329,007 | 29,121,810 | ||||||||||||||
| Borrowings | 1,356,616 | 298,444 | 234,391 | 238,335 | 225,446 | ||||||||||||||
| Subordinated debt | 863,653 | 863,572 | 862,777 | 862,272 | 735,725 | ||||||||||||||
| Interest-bearing liabilities | 21,881,887 | 21,030,411 | 21,147,478 | 19,231,301 | 18,778,224 | ||||||||||||||
| Stockholders’ equity | 3,652,368 | 3,847,481 | 3,954,267 | 3,916,621 | 3,739,042 | ||||||||||||||
| (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, | |||||||||||||||
| 2022 | 2022 | 2021 | 2021 | 2021 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Credit Quality Ratios: | |||||||||||||||||||
| Nonaccrual loans and leases held for | |||||||||||||||||||
| investment to loans and leases | |||||||||||||||||||
| held for investment | 0.30 | % | 0.27 | % | 0.27 | % | 0.31 | % | 0.29 | % | |||||||||
| Nonperforming assets to loans and | |||||||||||||||||||
| leases held for investment and | |||||||||||||||||||
| foreclosed assets | 0.30 | % | 0.27 | % | 0.32 | % | 0.38 | % | 0.36 | % | |||||||||
| Classified loans and leases held for | |||||||||||||||||||
| investment to loans and leases | |||||||||||||||||||
| held for investment | 0.39 | % | 0.34 | % | 0.51 | % | 0.69 | % | 0.75 | % | |||||||||
| Provision for credit losses (for the | |||||||||||||||||||
| quarter) to average loans and leases | |||||||||||||||||||
| held for investment (annualized) | 0.16 | % | 0.00 | % | (0.11 | )% | (0.40 | )% | (1.85 | )% | |||||||||
| Net charge-offs (for the quarter) to | |||||||||||||||||||
| average loans and leases held | |||||||||||||||||||
| for investment (annualized) | (0.02 | )% | 0.02 | % | 0.00 | % | 0.01 | % | (0.11 | )% | |||||||||
| Trailing 12 months net charge-offs | |||||||||||||||||||
| to average loans and leases | |||||||||||||||||||
| held for investment | 0.00 | % | (0.02 | )% | (0.01 | )% | 0.09 | % | 0.27 | % | |||||||||
| Allowance for loan and lease losses to | |||||||||||||||||||
| loans and leases held for investment | 0.71 | % | 0.81 | % | 0.87 | % | 0.99 | % | 1.16 | % | |||||||||
| Allowance for credit losses to loans | |||||||||||||||||||
| and leases held for investment | 1.07 | % | 1.12 | % | 1.19 | % | 1.36 | % | 1.54 | % | |||||||||
| Allowance for credit losses to | |||||||||||||||||||
| nonaccrual loans and leases | |||||||||||||||||||
| held for investment | 361.4 | % | 409.5 | % | 447.3 | % | 433.8 | % | 528.4 | % | |||||||||
| PacWest Bancorp Consolidated: | |||||||||||||||||||
| Tier 1 leverage capital ratio (1) | 8.52 | % | 7.11 | % | 6.84 | % | 8.05 | % | 7.67 | % | |||||||||
| Common equity tier 1 capital ratio (1) | 8.24 | % | 8.64 | % | 8.86 | % | 10.15 | % | 10.41 | % | |||||||||
| Tier 1 capital ratio (1) | 10.15 | % | 9.07 | % | 9.32 | % | 10.65 | % | 10.41 | % | |||||||||
| Total capital ratio (1) | 13.12 | % | 12.27 | % | 12.69 | % | 14.36 | % | 14.99 | % | |||||||||
| Risk-weighted assets (1) | $ | 33,011,062 | $ | 30,297,312 | $ | 28,508,808 | $ | 26,057,583 | $ | 24,274,256 | |||||||||
| Equity to assets ratio | 9.72 | % | 9.30 | % | 9.89 | % | 10.92 | % | 11.03 | % | |||||||||
| Tangible common equity ratio (2) | 5.15 | % | 5.83 | % | 6.54 | % | 7.79 | % | 7.80 | % | |||||||||
| Book value per common share | $ | 28.93 | $ | 30.52 | $ | 33.45 | $ | 32.77 | $ | 32.17 | |||||||||
| Tangible book value per common share (2) | $ | 16.93 | $ | 18.42 | $ | 21.31 | $ | 22.57 | $ | 21.95 | |||||||||
| Pacific Western Bank: | |||||||||||||||||||
| Tier 1 leverage capital ratio (1) | 8.21 | % | 7.31 | % | 7.00 | % | 8.40 | % | 8.47 | % | |||||||||
| Common equity tier 1 capital ratio (1) | 9.78 | % | 9.32 | % | 9.56 | % | 11.12 | % | 11.51 | % | |||||||||
| Tier 1 capital ratio (1) | 9.78 | % | 9.32 | % | 9.56 | % | 11.12 | % | 11.51 | % | |||||||||
| Total capital ratio (1) | 11.77 | % | 11.45 | % | 11.80 | % | 13.59 | % | 14.22 | % | |||||||||
| (1) Capital information for June 30, 2022 is preliminary. | |||||||||||||||||||
| (2) Non-GAAP measure. | |||||||||||||||||||
GAAP TO NON-GAAP RECONCILIATIONS
This press release contains certain non-GAAP financial disclosures for: (1) Pre-provision, pre-tax net revenue (“PPNR”), (2) PPNR return on average assets (3) return on average tangible common equity, (4) tangible common equity ratio, and (5) tangible book value per common share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of PPNR, return on average tangible common equity, tangible common equity ratio, and tangible book value per common share is prevalent among banking regulators, investors, and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, and (5) book value per common share.
The tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| PPNR and PPNR Return | June 30, | March 31, | June 30, | June 30, | |||||||||||||||
| on Average Assets | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Net earnings | $ | 122,360 | $ | 120,128 | $ | 180,512 | $ | 242,488 | $ | 330,918 | |||||||||
| Add: Provision for credit losses | 11,500 | – | (88,000 | ) | 11,500 | (136,000 | ) | ||||||||||||
| Add: Income tax expense | 40,766 | 41,981 | 62,417 | 82,747 | 115,973 | ||||||||||||||
| Pre-provision, pre-tax net | |||||||||||||||||||
| revenue ("PPNR") | $ | 174,626 | $ | 162,109 | $ | 154,929 | $ | 336,735 | $ | 310,891 | |||||||||
| Average assets | $ | 40,031,891 | $ | 39,883,304 | $ | 34,326,112 | $ | 39,958,008 | $ | 32,879,037 | |||||||||
| Return on average assets (1) | 1.23 | % | 1.22 | % | 2.11 | % | 1.22 | % | 2.03 | % | |||||||||
| PPNR return on average assets (2) | 1.75 | % | 1.65 | % | 1.81 | % | 1.70 | % | 1.91 | % | |||||||||
| (1) Annualized net earnings divided by average assets. | |||||||||||||||||||
| (2) Annualized PPNR divided by average assets. | |||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| Return on Average | June 30, | March 31, | June 30, | June 30, | |||||||||||||||
| Tangible Common Equity | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Net earnings | $ | 122,360 | $ | 120,128 | $ | 180,512 | $ | 242,488 | $ | 330,918 | |||||||||
| Add: Intangible asset amortization | 3,649 | 3,649 | 2,889 | 7,298 | 5,968 | ||||||||||||||
| Adjusted net earnings | $ | 126,009 | $ | 123,777 | $ | 183,401 | $ | 249,786 | $ | 336,886 | |||||||||
| Average stockholders’ equity | $ | 3,652,368 | $ | 3,847,481 | $ | 3,739,042 | $ | 3,749,386 | $ | 3,678,481 | |||||||||
| Less: Average intangible assets | 1,445,333 | 1,449,056 | 1,224,208 | 1,447,184 | 1,208,581 | ||||||||||||||
| Less: Average preferred stock | 137,100 | – | – | 68,929 | – | ||||||||||||||
| Average tangible common equity | $ | 2,069,935 | $ | 2,398,425 | $ | 2,514,834 | $ | 2,233,273 | $ | 2,469,900 | |||||||||
| Return on average equity (1) | 13.44 | % | 12.66 | % | 19.36 | % | 13.04 | % | 18.14 | % | |||||||||
| Return on average tangible common | |||||||||||||||||||
| equity (2) | 24.42 | % | 20.93 | % | 29.25 | % | 22.55 | % | 27.51 | % | |||||||||
| (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 | June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||
| Common Share | 2022 | 2022 | 2021 | 2021 | 2021 | ||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Stockholders’ equity | $ | 3,978,403 | $ | 3,650,595 | $ | 3,999,630 | $ | 3,918,434 | $ | 3,846,681 | |||||||||
| Less: Preferred stock | 498,516 | – | – | – | – | ||||||||||||||
| Total common equity | 3,479,887 | 3,650,595 | 3,999,630 | 3,918,434 | 3,846,681 | ||||||||||||||
| Less: Intangible assets | 1,443,395 | 1,447,044 | 1,450,693 | 1,219,651 | 1,222,541 | ||||||||||||||
| Tangible common equity | $ | 2,036,492 | $ | 2,203,551 | $ | 2,548,937 | $ | 2,698,783 | $ | 2,624,140 | |||||||||
| Total assets | $ | 40,950,723 | $ | 39,249,639 | $ | 40,443,344 | $ | 35,885,676 | $ | 34,867,987 | |||||||||
| Less: Intangible assets | 1,443,395 | 1,447,044 | 1,450,693 | 1,219,651 | 1,222,541 | ||||||||||||||
| Tangible assets | $ | 39,507,328 | $ | 37,802,595 | $ | 38,992,651 | $ | 34,666,025 | $ | 33,645,446 | |||||||||
| Equity to assets ratio | 9.72 | % | 9.30 | % | 9.89 | % | 10.92 | % | 11.03 | % | |||||||||
| Tangible common equity ratio (1) | 5.15 | % | 5.83 | % | 6.54 | % | 7.79 | % | 7.80 | % | |||||||||
| Book value per common share (2) | $ | 28.93 | $ | 30.52 | $ | 33.45 | $ | 32.77 | $ | 32.17 | |||||||||
| Tangible book value per common share (3) | $ | 16.93 | $ | 18.42 | $ | 21.31 | $ | 22.57 | $ | 21.95 | |||||||||
| Common shares outstanding | 120,288,024 | 119,601,766 | 119,584,854 | 119,579,566 | 119,555,102 | ||||||||||||||
| (1) Tangible common equity divided by tangible assets. | |||||||||||||||||||
| (2) Total common equity divided by common shares outstanding. | |||||||||||||||||||
| (3) Tangible common equity divided by common shares outstanding. | |||||||||||||||||||
CONTACTS
| Matthew P. Wagner CEO 303.802.8900 |
Bart R. Olson EVP and CFO 714.989.4149 |
William J. Black EVP Strategy and Corporate Development 919.597.7466 |
