THIRD QUARTER 2023 HIGHLIGHTS
- Net loss available to common stockholders of $33.3 million, or a loss of $0.28 per diluted share
- Pending merger with Banc of California, Inc. is on track with all regulatory approvals received and is expected to close on or about November 30, 2023
- The Bank put in place a large liquidity base to cautiously navigate the end of the first quarter of 2023 through the third quarter of 2023. The excess borrowings, including $1.4 billion of brokered deposits (at a rate of 5.19%) and the $1.3 billion repurchase agreement facility (at a rate of 8.50%), are expected to roll off in the fourth quarter of 2023. We believe this will accelerate the Bank’s return to more normalized funding levels and improved profitability, with significantly lower interest and FDIC insurance expenses
- We continue to execute on our profitability initiatives by optimizing resources, contracts, facilities, and processes, the benefits of which we anticipate realizing in the quarters ahead. Third quarter noninterest expense had notable movement, with compensation expense down 14% over the prior quarter to $71.6 million, with a higher than usual FDIC insurance expense that we expect will normalize over time, and with $9.9 million of non-recurring merger-related costs
- Adjusted loss available to common stockholders of $37.3 million and adjusted diluted loss per common share of $0.31, which exclude the effect of $9.9 million of merger-related costs related to the pending merger with Banc of California, Inc. and a $14.5 million credit related to a legal settlement gain (see GAAP to non-GAAP reconciliation financial tables at the end of this press release)
- Allowance for loan and lease losses ratio increased from 0.98% to 1.01%
- Third quarter results were marked by enhanced capital and liquidity
- All capital ratios increased from June 30, 2023, with CET1 increasing from 11.16% to 11.23%
- Immediately available liquidity (on-balance sheet liquidity and unused borrowing capacity) of $16.7 billion, with $5.9 billion of available cash on hand at September 30, 2023
- Community Banking deposits grew by 2% in the quarter as a result of strategic efforts to attract and retain customers
- Brokered deposits continue to mature, with balances decreasing by $1.9 billion in the quarter. $1.4 billion more are scheduled to mature in the fourth quarter of 2023
- The repurchase agreement facility interest expense was $35 million in the quarter and the facility will be repaid in December 2023
LOS ANGELES, Oct. 24, 2023 (GLOBE NEWSWIRE) —
CEO COMMENTARY
Paul Taylor, President and CEO, commented, “The integration planning for our merger with Banc of California, Inc. continues to progress very well. We expect the closing of the merger to occur on or about November 30, 2023, subject to receipt of stockholder approvals. We all look forward to completing the merger so we can begin to execute on a successful business plan for the combined company that we expect will drive significant value for PacWest’s stockholders, customers, communities, and employees.”
Mr. Taylor concluded, “As we work toward the completion of the merger, our primary strategic focus is adding new deposit customers and continuing to provide outstanding customer service to our existing customers. Our credit quality continues to be stable. Our funding profile improved in the third quarter as we strategically reduced higher-cost brokered deposits and we are pleased to see growth in the Community Bank return. We strategically put in place a high-cost liquidity buffer over the past few quarters to safely navigate the turmoil in the regional banking market. We created this buffer by selling loans and adding customer deposits and wholesale funding. We expect our profitability to improve as we continue to wind down wholesale funding, benefit from lower FDIC insurance expense, and execute on our profitability initiatives.”
FINANCIAL HIGHLIGHTS
| At or For the | At or For the | ||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | June 30, | Increase | September 30, | Increase | |||||||||||||||||||
| Financial Highlights | 2023 | 2023 | (Decrease) | 2023 | 2022 | (Decrease) | |||||||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||||||||||
| Net (loss) earnings available | |||||||||||||||||||||||
| to common stockholders | $ | (33,291 | ) | $ | (207,361 | ) | $ | 174,070 | $ | (1,446,023 | ) | $ | 364,712 | $ | (1,810,735 | ) | |||||||
| Diluted (loss) earnings per | |||||||||||||||||||||||
| common share | $ | (0.28 | ) | $ | (1.75 | ) | $ | 1.47 | $ | (12.23 | ) | $ | 3.04 | $ | (15.27 | ) | |||||||
| Pre-provision, pre-goodwill | |||||||||||||||||||||||
| impairment, pre-tax net | |||||||||||||||||||||||
| revenue ("PPNR") (1) | $ | (26,566 | ) | $ | (262,443 | ) | $ | 235,877 | $ | (169,613 | ) | $ | 514,917 | $ | (684,530 | ) | |||||||
| Return on average assets | (0.24 | )% | (1.84 | )% | 1.60 | (4.60 | )% | 1.24 | % | (5.84 | ) | ||||||||||||
| PPNR return on average | |||||||||||||||||||||||
| assets (1) | (0.28 | )% | (2.45 | )% | 2.17 | (0.55 | )% | 1.71 | % | (2.26 | ) | ||||||||||||
| Return on average | |||||||||||||||||||||||
| tangible common equity (1) | (6.33 | )% | (37.62 | )% | 31.29 | (8.49 | )% | 22.90 | % | (31.39 | ) | ||||||||||||
| Yield on average loans and | |||||||||||||||||||||||
| leases (tax equivalent) | 5.54 | % | 6.08 | % | (0.54 | ) | 5.95 | % | 4.82 | % | 1.13 | ||||||||||||
| Cost of average total | |||||||||||||||||||||||
| deposits | 2.98 | % | 2.62 | % | 0.36 | 2.50 | % | 0.32 | % | 2.18 | |||||||||||||
| Net interest margin ("NIM") | |||||||||||||||||||||||
| (tax equivalent) | 1.45 | % | 1.82 | % | (0.37 | ) | 2.07 | % | 3.52 | % | (1.45 | ) | |||||||||||
| Efficiency ratio | 108.5 | % | 527.0 | % | (418.5 | ) | 123.5 | % | 50.2 | % | 73.3 | ||||||||||||
| Total assets | $ | 36,877,833 | $ | 38,337,250 | $ | (1,459,417 | ) | $ | 36,877,833 | $ | 41,404,592 | $ | (4,526,759 | ) | |||||||||
| Loans and leases held | |||||||||||||||||||||||
| for investment, | |||||||||||||||||||||||
| net of deferred fees | $ | 21,920,946 | $ | 22,258,210 | $ | (337,264 | ) | $ | 21,920,946 | $ | 27,660,041 | $ | (5,739,095 | ) | |||||||||
| Noninterest-bearing | |||||||||||||||||||||||
| demand deposits | $ | 5,579,033 | $ | 6,055,358 | $ | (476,325 | ) | $ | 5,579,033 | $ | 12,775,756 | $ | (7,196,723 | ) | |||||||||
| Interest-bearing deposits | $ | 21,019,648 | $ | 21,841,725 | $ | (822,077 | ) | $ | 21,019,648 | $ | 21,420,116 | $ | (400,468 | ) | |||||||||
| Total deposits | $ | 26,598,681 | $ | 27,897,083 | $ | (1,298,402 | ) | $ | 26,598,681 | $ | 34,195,872 | $ | (7,597,191 | ) | |||||||||
| As percentage of total | |||||||||||||||||||||||
| deposits: | |||||||||||||||||||||||
| Noninterest-bearing | |||||||||||||||||||||||
| demand deposits | 21 | % | 22 | % | (1 | ) | 21 | % | 37 | % | (16 | ) | |||||||||||
| Interest-bearing deposits | 79 | % | 78 | % | 1 | 79 | % | 63 | % | 16 | |||||||||||||
| Equity to assets ratio | 6.51 | % | 6.61 | % | (0.10 | ) | 6.51 | % | 9.36 | % | (2.85 | ) | |||||||||||
| Common equity tier 1 | |||||||||||||||||||||||
| capital ratio | 11.23 | % | 11.16 | % | 0.07 | 11.23 | % | 8.56 | % | 2.67 | |||||||||||||
| Tier 1 capital ratio | 13.84 | % | 13.70 | % | 0.14 | 13.84 | % | 10.46 | % | 3.38 | |||||||||||||
| Total capital ratio | 17.83 | % | 17.61 | % | 0.22 | 17.83 | % | 13.43 | % | 4.40 | |||||||||||||
| Tangible common equity | |||||||||||||||||||||||
| ratio (1) | 5.09 | % | 5.24 | % | (0.15 | ) | 5.09 | % | 4.85 | % | 0.24 | ||||||||||||
| Tangible book value per | |||||||||||||||||||||||
| common share (1) | $ | 15.64 | $ | 16.71 | $ | (1.07 | ) | $ | 15.64 | $ | 16.11 | $ | (0.47 | ) | |||||||||
| (1) Non-GAAP measure. | |||||||||||||||||||||||
INCOME STATEMENT HIGHLIGHTS
NET INTEREST INCOME
Net interest income decreased by $55.3 million to $130.7 million for the third quarter of 2023 compared to $186.1 million for the second quarter of 2023 due mainly to lower interest income on loans and leases and higher interest expense on deposits, offset partially by lower interest expense on borrowings. Interest income on loans and leases decreased by $98.6 million in the third quarter of 2023 due to a $4.8 billion decrease in the average balance of loans and leases and a 54 basis points decrease in the tax equivalent yield on loans and leases compared to the second quarter of 2023. The tax equivalent yield on loans and leases was 5.54% in the third quarter of 2023 compared to 6.08% in the second quarter of 2023. The decrease in the tax equivalent yield on loans and leases was due primarily to lower levels of higher-yielding Civic and construction loans. Interest expense on deposits increased by $27.2 million in the third quarter of 2023 due mainly to increased market rates that contributed to a 36 basis points increase in the cost of total deposits. Interest expense on borrowings decreased by $66.7 million due mainly to a $5.1 billion decrease in the average balance. Interest expense on the repurchase agreement facility is at 8.50% and totaled $35 million in the third quarter. This interest expense will decrease in the fourth quarter, as we intend to pay off this borrowing in mid-December with existing balance sheet liquidity, and be eliminated by the first quarter of 2024.
The tax equivalent NIM was 1.45% for the third quarter of 2023 compared to 1.82% for the second quarter of 2023. The decrease in the NIM was due mainly to the lower yield on loans and leases and a higher cost of total deposits.
The cost of total deposits was 2.98% for the third quarter of 2023 compared to 2.62% for the second quarter of 2023 due mainly to higher market interest rates.
PROVISION FOR CREDIT LOSSES
The following table presents details of the provision for credit losses for the periods indicated:
| Three Months Ended | |||||||||||
| September 30, | June 30, | Increase | |||||||||
| Provision for Credit Losses | 2023 | 2023 | (Decrease) | ||||||||
| (In thousands) | |||||||||||
| Addition to allowance for | |||||||||||
| loan and lease losses | $ | 8,000 | $ | 40,000 | $ | (32,000 | ) | ||||
| Reduction in reserve for | |||||||||||
| unfunded loan commitments | (8,000 | ) | (38,000 | ) | 30,000 | ||||||
| Total loan-related provision | – | 2,000 | (2,000 | ) | |||||||
| Addition to allowance for | |||||||||||
| held-to-maturity securities | – | – | – | ||||||||
| Total provision for credit losses | $ | – | $ | 2,000 | $ | (2,000 | ) | ||||
There was no provision for credit losses for the third quarter of 2023 compared to $2.0 million for the second quarter of 2023. The provision for the third quarter of 2023 reflected an addition to the allowance for loan and lease losses, primarily due to an increase in qualitative reserves for loans secured by office properties, which was offset by a reduction in the reserve for unfunded commitments due to lower unfunded commitments. The provision for the second quarter of 2023 reflected the impact of an updated economic forecast, higher net charge-offs and higher reserves for downgraded loans largely offset by lower reserves needed for lower loan and unfunded commitment balances.
NONINTEREST INCOME
The following table presents details of noninterest income for the periods indicated:
| Three Months Ended | |||||||||||
| September 30, | June 30, | Increase | |||||||||
| Noninterest Income | 2023 | 2023 | (Decrease) | ||||||||
| (In thousands) | |||||||||||
| Service charges on deposit accounts | $ | 4,018 | $ | 4,315 | $ | (297 | ) | ||||
| Other commissions and fees | 7,641 | 11,241 | (3,600 | ) | |||||||
| Leased equipment income | 14,554 | 22,387 | (7,833 | ) | |||||||
| Loss on sale of loans and leases | (1,901 | ) | (158,881 | ) | 156,980 | ||||||
| Dividends and gains on equity investments | 3,837 | 2,658 | 1,179 | ||||||||
| Warrant loss | (88 | ) | (124 | ) | 36 | ||||||
| LOCOM HFS adjustment | 307 | (11,943 | ) | 12,250 | |||||||
| Other income | 15,440 | 2,265 | 13,175 | ||||||||
| Total noninterest income (loss) | $ | 43,808 | $ | (128,082 | ) | $ | 171,890 | ||||
Noninterest income increased by $171.9 million to an income of $43.8 million for the third quarter of 2023 compared to a loss of $128.1 million for the second quarter of 2023 due primarily to a $157.0 million decrease in the loss on sale of loans and leases, the $12.3 million increase in the lower of cost or market held for sale (“LOCOM HFS”) adjustment and a $13.2 million increase in other income, partially offset by a $7.8 million decrease in leased equipment income and a $3.6 million decrease in other commissions and fees. The decrease in the loss on sale of loans and leases was due to the $158.9 million of losses recorded in the second quarter of 2023 related to the sale of three significant non-core loan portfolios. The increase in the LOCOM HFS adjustment was due to the negative $11.9 million LOCOM adjustment made in the second quarter of 2023 related to the $478.1 million of loans held for sale at June 30, 2023. The increase in other income is primarily due to a $14.5 million recovery of a prior year legal settlement. The decrease in leased equipment income was due primarily to lower early lease termination gains and rental income compared to the second quarter of 2023. The decrease in other commissions and fees was due primarily to lower loan-related fee income and lower customer success fees.
NONINTEREST EXPENSE
The following table presents details of noninterest expense for the periods indicated:
| Three Months Ended | ||||||||||
| September 30, | June 30, | Increase | ||||||||
| Noninterest Expense | 2023 | 2023 | (Decrease) | |||||||
| (In thousands) | ||||||||||
| Compensation | $ | 71,642 | $ | 82,881 | $ | (11,239 | ) | |||
| Occupancy | 15,293 | 15,383 | (90 | ) | ||||||
| Data processing | 11,104 | 10,963 | 141 | |||||||
| Other professional services | 5,597 | 9,973 | (4,376 | ) | ||||||
| Insurance and assessments | 38,298 | 25,635 | 12,663 | |||||||
| Intangible asset amortization | 2,389 | 2,389 | – | |||||||
| Leased equipment depreciation | 8,333 | 9,088 | (755 | ) | ||||||
| Foreclosed assets (income) expense, net | (609 | ) | 2 | (611 | ) | |||||
| Customer related expense | 26,971 | 27,302 | (331 | ) | ||||||
| Loan expense | 4,243 | 5,245 | (1,002 | ) | ||||||
| Other | 7,917 | 119,182 | (111,265 | ) | ||||||
| Acquisition, integration and reorganization costs | 9,925 | 12,394 | (2,469 | ) | ||||||
| Total noninterest expense | $ | 201,103 | $ | 320,437 | $ | (119,334 | ) | |||
Noninterest expense decreased by $119.3 million to $201.1 million in the third quarter of 2023 compared to $320.4 million in the second quarter of 2023 due primarily to a decrease of $111.3 million in other expense and a decrease of $11.2 million in compensation expense, offset partially by a $12.7 million increase in insurance and assessments expense. The decrease in other expense was due mainly to $106.8 million of unfunded commitments fair value loss adjustments in the second quarter of 2023. The decrease in compensation expense was due mostly to lower salary expense, stock compensation, and commissions expense. The increase in insurance and assessments was due primarily to higher FDIC assessment expense attributable to an increased assessment rate due to lower core earnings and lower core deposits.
INCOME TAXES
The effective income tax rate was 12.1% for the third quarter of 2023 compared to 25.3% for the second quarter of 2023. The decrease from the second quarter of 2023 was due primarily to higher disallowed FDIC assessment expense in the third quarter of 2023.
BALANCE SHEET HIGHLIGHTS
DEPOSITS AND CLIENT INVESTMENT FUNDS
The following tables present the composition of our deposit portfolio as of the dates indicated:
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||
| % of | % of | % of | ||||||||||||
| Deposits By Account Type | Balance | Total | Balance | Total | Balance | Total | ||||||||
| (Dollars in thousands) | ||||||||||||||
| Noninterest-bearing | $ | 5,579,033 | 21 | % | $ | 6,055,358 | 22 | % | $ | 12,775,756 | 37 | % | ||
| Interest-bearing: | ||||||||||||||
| Transaction (NOW) | 7,038,808 | 27 | % | 7,112,807 | 26 | % | 7,070,021 | 21 | % | |||||
| Money market | 5,424,347 | 20 | % | 5,678,323 | 20 | % | 10,440,202 | 30 | % | |||||
| Savings | 1,441,700 | 5 | % | 897,277 | 3 | % | 640,875 | 2 | % | |||||
| Time deposits (1) | 7,114,793 | 27 | % | 8,153,318 | 29 | % | 3,269,018 | 10 | % | |||||
| Total interest-bearing | 21,019,648 | 79 | % | 21,841,725 | 78 | % | 21,420,116 | 63 | % | |||||
| Total deposits | $ | 26,598,681 | 100 | % | $ | 27,897,083 | 100 | % | $ | 34,195,872 | 100 | % | ||
| (1) Includes time deposits over $250,000 of $979.1 million, $853.4 million, and $1.0 billion at September 30, 2023, June 30, 2023, and September 30, 2022, respectively. | ||||||||||||||
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||
| % of | % of | % of | ||||||||||||
| Deposits By Customer Type | Balance | Total | Balance | Total | Balance | Total | ||||||||
| (Dollars in thousands) | ||||||||||||||
| Noninterest-bearing | $ | 5,579,033 | 21 | % | $ | 6,055,358 | 22 | % | $ | 12,775,756 | 37 | % | ||
| Interest-bearing: | ||||||||||||||
| Consumer and commercial: | ||||||||||||||
| Reciprocal | 7,839,052 | 30 | % | 7,935,479 | 29 | % | 3,916,768 | 11 | % | |||||
| Non-reciprocal | 7,442,635 | 27 | % | 6,257,971 | 22 | % | 13,645,111 | 41 | % | |||||
| Brokered | 5,737,961 | 22 | % | 7,648,275 | 27 | % | 3,858,237 | 11 | % | |||||
| Total interest-bearing | 21,019,648 | 79 | % | 21,841,725 | 78 | % | 21,420,116 | 63 | % | |||||
| Total deposits | $ | 26,598,681 | 100 | % | $ | 27,897,083 | 100 | % | $ | 34,195,872 | 100 | % | ||
Total deposits decreased by $1.3 billion or 4.7% in the third quarter of 2023 due primarily to the $1.9 billion strategic reduction of higher-cost brokered deposits, partially offset by growth in customer deposits. At September 30, 2023, noninterest-bearing deposits totaled $5.6 billion or 21% of total deposits and interest-bearing deposits totaled $21.0 billion or 79% of total deposits.
The following table presents the composition of our deposit portfolio by division as of the dates indicated:
| September 30, 2023 | June 30, 2023 | ||||||||||||
| % of | % of | Increase | |||||||||||
| Deposits By Division | Balance | Total | Balance | Total | (Decrease) | ||||||||
| (Dollars in thousands) | |||||||||||||
| Community Banking | $ | 14,631,092 | 55 | % | $ | 14,353,851 | 51 | % | $ | 277,241 | |||
| Venture Banking | 5,662,435 | 21 | % | 5,764,220 | 21 | % | (101,785 | ) | |||||
| Brokered/Other | 6,305,154 | 24 | % | 7,779,012 | 28 | % | (1,473,858 | ) | |||||
| Total deposits | $ | 26,598,681 | 100 | % | $ | 27,897,083 | 100 | % | $ | (1,298,402 | ) | ||
As of September 30, 2023, FDIC-insured deposits represented approximately 81% of total deposits and FDIC-insured venture-specific deposits accounted for approximately 90% of total venture-specific deposits. The Bank’s spot deposit rate increased from 2.71% at June 30, 2023 to 2.97% at September 30, 2023.
In addition to deposit products, we also offer alternative, non-depository cash investment options for select clients. These alternative options include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds decreased from $0.8 billion as of June 30, 2023 to $0.7 billion at September 30, 2023, of which $0.3 billion was managed by PWAM.
BORROWINGS
The following table presents the composition of our borrowings as of the dates indicated:
| September 30, 2023 | June 30, 2023 | ||||||||||||
| Weighted | Weighted | ||||||||||||
| Average | Average | Increase | |||||||||||
| Borrowing Type | Balance | Rate | Balance | Rate | (Decrease) | ||||||||
| (Dollars in thousands) | |||||||||||||
| FHLB secured advances | $ | – | – | $ | – | – | $ | – | |||||
| Bank Term Funding Program | 4,910,000 | 4.38 | % | 4,910,000 | 4.38 | % | – | ||||||
| Repurchase agreement (1) | 1,260,743 | 8.50 | % | 1,324,273 | 8.50 | % | (63,530 | ) | |||||
| Credit-linked notes | 123,782 | 16.00 | % | 123,065 | 15.77 | % | 717 | ||||||
| Total borrowings | $ | 6,294,525 | 5.43 | % | $ | 6,357,338 | 5.46 | % | $ | (62,813 | ) | ||
| (1) Balance is net of unamortized issuance costs of $10.9 million and $4.8 million of accrued exit fees. | |||||||||||||
| Rate calculation does not include the effects of issuance costs and exit fees. | |||||||||||||
The $62.8 million decrease in borrowings in the third quarter of 2023 was due mainly to paydowns of the repurchase agreement facility. Available borrowing capacity was approximately $10.8 billion at September 30, 2023.
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 | Nine Months Ended | ||||||||||
| Roll Forward of Loans and Leases Held | September 30, | June 30, | September 30, | ||||||||
| for Investment, Net of Deferred Fees | 2023 | 2023 | 2023 | ||||||||
| (Dollars in thousands) | |||||||||||
| Balance, beginning of period | $ | 22,258,210 | $ | 25,672,381 | $ | 28,609,129 | |||||
| Additions: | |||||||||||
| Production | 81,402 | 189,201 | 739,274 | ||||||||
| Disbursements | 1,495,471 | 1,143,347 | 4,261,716 | ||||||||
| Total production and disbursements | 1,576,873 | 1,332,548 | 5,000,990 | ||||||||
| Reductions: | |||||||||||
| Payoffs | (1,245,502 | ) | (942,962 | ) | (3,210,116 | ) | |||||
| Paydowns | (663,939 | ) | (817,033 | ) | (2,446,509 | ) | |||||
| Total payoffs and paydowns | (1,909,441 | ) | (1,759,995 | ) | (5,656,625 | ) | |||||
| Sales | (15,617 | ) | (3,038,672 | ) | (3,286,087 | ) | |||||
| Transfers to foreclosed assets | (6,725 | ) | (6,657 | ) | (15,950 | ) | |||||
| Charge-offs | (6,695 | ) | (31,708 | ) | (48,800 | ) | |||||
| Transfers to loans held for sale | – | (280,062 | ) | (3,076,427 | ) | ||||||
| Total reductions | (1,938,478 | ) | (5,117,094 | ) | (12,083,889 | ) | |||||
| Transfers from loans held for sale | 24,341 | 370,375 | 394,716 | ||||||||
| Net (decrease) increase | (337,264 | ) | (3,414,171 | ) | (6,688,183 | ) | |||||
| Balance, end of period | $ | 21,920,946 | $ | 22,258,210 | $ | 21,920,946 | |||||
| Weighted average rate on production (1) | 7.48 | % | 7.64 | % | 8.13 | % | |||||
| (1) The weighted average rate on production presents contractual rates on a tax equivalent basis | |||||||||||
| and excludes amortized fees. Amortized fees added approximately 15 basis points to loan | |||||||||||
| yields in 2023. | |||||||||||
Loans and leases held for investment, net of deferred fees, decreased by $337.3 million, or 1.5% in the third quarter of 2023 to $21.9 billion at September 30, 2023. The overall decrease in the loans and leases balance for the third quarter of 2023 was due primarily to a decrease in commercial loans led by decreases in venture capital loans and asset-based 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:
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||
| % of | % of | % of | ||||||||||||
| Loan and Lease Portfolio | Balance | Total | Balance | Total | Balance | Total | ||||||||
| (Dollars in thousands) | ||||||||||||||
| Real estate mortgage: | ||||||||||||||
| Commercial | $ | 3,526,308 | 16 | % | $ | 3,610,320 | 16 | % | $ | 3,770,706 | 14 | % | ||
| Multi-family | 5,279,659 | 24 | % | 5,304,544 | 24 | % | 5,510,876 | 20 | % | |||||
| Other residential | 5,228,524 | 24 | % | 5,373,178 | 24 | % | 5,883,182 | 21 | % | |||||
| Total real estate mortgage | 14,034,491 | 64 | % | 14,288,042 | 64 | % | 15,164,764 | 55 | % | |||||
| Real estate construction and land: | ||||||||||||||
| Commercial | 465,266 | 2 | % | 415,997 | 2 | % | 843,086 | 3 | % | |||||
| Residential | 2,272,271 | 10 | % | 2,049,526 | 9 | % | 2,916,415 | 10 | % | |||||
| Total real estate construction | ||||||||||||||
| and land | 2,737,537 | 12 | % | 2,465,523 | 11 | % | 3,759,501 | 13 | % | |||||
| Total real estate | 16,772,028 | 76 | % | 16,753,565 | 75 | % | 18,924,265 | 68 | % | |||||
| Commercial: | ||||||||||||||
| Asset-based | 2,287,893 | 10 | % | 2,357,098 | 11 | % | 5,154,654 | 19 | % | |||||
| Venture capital | 1,464,160 | 7 | % | 1,723,476 | 8 | % | 2,001,086 | 7 | % | |||||
| Other commercial | 1,002,377 | 5 | % | 1,014,212 | 4 | % | 1,115,442 | 4 | % | |||||
| Total commercial | 4,754,430 | 22 | % | 5,094,786 | 23 | % | 8,271,182 | 30 | % | |||||
| Consumer | 394,488 | 2 | % | 409,859 | 2 | % | 464,594 | 2 | % | |||||
| Total loans and leases held for | ||||||||||||||
| investment, net of deferred fees | $ | 21,920,946 | 100 | % | $ | 22,258,210 | 100 | % | $ | 27,660,041 | 100 | % | ||
| Total unfunded loan commitments | $ | 5,289,221 | $ | 5,845,375 | $ | 11,227,234 | ||||||||
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 September 30, 2023 | |||||||||||
| Allowance for Credit | Allowance for | Reserve for | Total | ||||||||
| Losses on Loans and | Loan and | Unfunded Loan | Allowance for | ||||||||
| Leases Rollforward | Lease Losses | Commitments | Credit Losses | ||||||||
| (In thousands) | |||||||||||
| Beginning balance | $ | 219,234 | $ | 37,571 | $ | 256,805 | |||||
| Charge-offs | (6,695 | ) | – | (6,695 | ) | ||||||
| Recoveries | 1,758 | – | 1,758 | ||||||||
| Net charge-offs | (4,937 | ) | – | (4,937 | ) | ||||||
| Provision | 8,000 | (8,000 | ) | – | |||||||
| Ending balance | $ | 222,297 | $ | 29,571 | $ | 251,868 | |||||
| Three Months Ended June 30, 2023 | |||||||||||
| Allowance for Credit | Allowance for | Reserve for | Total | ||||||||
| Losses on Loans and | Loan and | Unfunded Loan | Allowance for | ||||||||
| Leases Rollforward | Lease Losses | Commitments | Credit Losses | ||||||||
| (In thousands) | |||||||||||
| Beginning balance | $ | 210,055 | $ | 75,571 | $ | 285,626 | |||||
| Civic loan sale charge-offs | (22,446 | ) | – | (22,446 | ) | ||||||
| Other charge-offs | (9,262 | ) | – | (9,262 | ) | ||||||
| Total charge-offs | (31,708 | ) | – | (31,708 | ) | ||||||
| Recoveries | 887 | – | 887 | ||||||||
| Net charge-offs | (30,821 | ) | – | (30,821 | ) | ||||||
| Provision | 40,000 | (38,000 | ) | 2,000 | |||||||
| Ending balance | $ | 219,234 | $ | 37,571 | $ | 256,805 | |||||
The following table presents allowance for credit losses information on loans and leases as of and for the dates and periods indicated:
| Allowance for Credit Losses | September 30, | June 30, | Increase | ||||||||
| on Loans and Leases | 2023 | 2023 | (Decrease) | ||||||||
| (Dollars in thousands) | |||||||||||
| Allowance for loan and lease losses | $ | 222,297 | $ | 219,234 | $ | 3,063 | |||||
| Reserve for unfunded loan commitments | 29,571 | 37,571 | (8,000 | ) | |||||||
| Allowance for credit losses | $ | 251,868 | $ | 256,805 | $ | (4,937 | ) | ||||
| Provision for credit losses (for the quarter) | $ | – | $ | 2,000 | $ | (2,000 | ) | ||||
| Net charge-offs (for the quarter) | $ | 4,937 | $ | 30,821 | $ | (25,884 | ) | ||||
| Net charge-offs to average loans | |||||||||||
| and leases (for the quarter) | 0.09 | % | 0.46 | % | |||||||
| Allowance for loan and lease losses to loans | |||||||||||
| and leases held for investment | 1.01 | % | 0.98 | % | |||||||
| Allowance for credit losses to loans and leases | |||||||||||
| held for investment | 1.15 | % | 1.15 | % | |||||||
The allowance for credit losses decreased by $4.9 million in the third quarter of 2023 to $251.9 million at September 30, 2023. This decrease was attributable mainly to lower reserves needed due to the decrease in loans and leases held for investment and unfunded loan commitments.
Net charge-offs over the trailing twelve months were $47.5 million, which resulted in net charge-offs to average loans and leases over the trailing twelve months of 0.19%.
CREDIT QUALITY
The following table presents loan and lease credit quality metrics as of the dates indicated:
| September 30, | June 30, | Increase | |||||||||
| Credit Quality Metrics | 2023 | 2023 | (Decrease) | ||||||||
| (Dollars in thousands) | |||||||||||
| Nonperforming Assets: | |||||||||||
| Nonaccrual loans and leases held for investment (1) | $ | 125,396 | $ | 104,886 | $ | 20,510 | |||||
| Accruing loans contractually past due 90 days or more | – | – | – | ||||||||
| Foreclosed assets, net | 6,829 | 8,426 | (1,597 | ) | |||||||
| Total nonperforming assets ("NPAs") | $ | 132,225 | $ | 113,312 | $ | 18,913 | |||||
| Nonaccrual loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 0.57 | % | 0.47 | % | |||||||
| Nonperforming assets to loans and leases | |||||||||||
| held for investment and foreclosed assets | 0.60 | % | 0.51 | % | |||||||
| Allowance for credit losses to nonaccrual loans | |||||||||||
| and leases held for investment | 200.9 | % | 244.8 | % | |||||||
| Loan and Lease Credit Risk Ratings: | |||||||||||
| Pass | $ | 21,349,720 | $ | 21,679,908 | $ | (330,188 | ) | ||||
| Special mention | 360,131 | 366,368 | (6,237 | ) | |||||||
| Classified | 211,095 | 211,934 | (839 | ) | |||||||
| Total loans and leases held for investment, | |||||||||||
| net of deferred fees | $ | 21,920,946 | $ | 22,258,210 | $ | (337,264 | ) | ||||
| Special mention loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 1.64 | % | 1.65 | % | |||||||
| Classified loans and leases held for investment | |||||||||||
| to loans and leases held for investment | 0.96 | % | 0.95 | % | |||||||
| (1) Nonaccrual loans include SBA guaranteed amounts of $13.7 million at September 30, 2023 and $14.8 million | |||||||||||
| at June 30, 2023. | |||||||||||
Nonaccrual loans and leases increased by $20.5 million in the third quarter of 2023 to $125.4 million at September 30, 2023, due primarily to an increase in nonaccrual Civic loans. The increase is primarily due to a sale of non-performing Civic loans in the second quarter which made the balance at June 30, 2023, lower than normal.
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:
| September 30, 2023 | June 30, 2023 | 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 | $ | 31,465 | $ | 13 | $ | 37,191 | $ | – | $ | (5,726 | ) | $ | 13 | ||||||
| Multi-family | – | – | – | – | – | – | |||||||||||||
| Other residential | 88,329 | 35,349 | 63,626 | 45,805 | 24,703 | (10,456 | ) | ||||||||||||
| Total real estate mortgage | 119,794 | 35,362 | 100,817 | 45,805 | 18,977 | (10,443 | ) | ||||||||||||
| Real estate construction and land: | |||||||||||||||||||
| Commercial | – | – | – | – | – | – | |||||||||||||
| Residential | – | – | – | – | – | – | |||||||||||||
| Total real estate | |||||||||||||||||||
| construction and land | – | – | – | – | – | – | |||||||||||||
| Commercial: | |||||||||||||||||||
| Asset-based | 363 | – | 385 | – | (22 | ) | – | ||||||||||||
| Venture capital | 2,001 | – | – | 1,845 | 2,001 | (1,845 | ) | ||||||||||||
| Other commercial | 3,031 | 411 | 3,479 | 147 | (448 | ) | 264 | ||||||||||||
| Total commercial | 5,395 | 411 | 3,864 | 1,992 | 1,531 | (1,581 | ) | ||||||||||||
| Consumer | 207 | 2,254 | 205 | 2,024 | 2 | 230 | |||||||||||||
| Total held for investment | $ | 125,396 | $ | 38,027 | $ | 104,886 | $ | 49,821 | $ | 20,510 | $ | (11,794 | ) | ||||||
Loans and leases accruing and 30-89 days past due generally fluctuate from period to period. The $11.8 million decrease to $38.0 million in the third quarter of 2023 was due mainly to a decrease in Civic delinquent loans.
CAPITAL
The following table presents capital ratios as of the dates indicated:
| September 30, | June 30, | September 30, | |||||||||
| 2023 | 2023 | 2022 | |||||||||
| PacWest Bancorp Consolidated: | |||||||||||
| Common equity tier 1 capital ratio (1) | 11.23 | % | 11.16 | % | 8.56 | % | |||||
| Tier 1 capital ratio (1) | 13.84 | % | 13.70 | % | 10.46 | % | |||||
| Total capital ratio (1) | 17.83 | % | 17.61 | % | 13.43 | % | |||||
| Tier 1 leverage capital ratio (1) | 8.65 | % | 7.76 | % | 8.63 | % | |||||
| Risk-weighted assets (1) (in thousands) | $ | 24,127,271 | $ | 24,771,837 | $ | 33,042,173 | |||||
| Tangible common equity ratio (2) | 5.09 | % | 5.24 | % | 4.85 | % | |||||
| (1) Capital information for September 30, 2023 is preliminary. | |||||||||||
| (2) Non-GAAP measure. | |||||||||||
PACWEST BANCORP
PacWest is a bank holding company headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). Pacific Western Bank is a relationship-based community bank focused on providing business banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and lease and deposit products and services through full-service branches throughout California and in Durham, North Carolina and Denver, Colorado, and loan production offices around the country. For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.
FORWARD-LOOKING STATEMENTS
This communication contains certain forward-looking information about PacWest (the “Company”) 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.” These forward-looking statements include, but are not limited to, statements regarding the proposed transaction between PacWest and Banc of California, Inc. (“Banc of California”) including statements as to the expected timing, completion and effects of the proposed transaction. Such statements are based on information available at the time of the communication and are based on current beliefs and expectations of PacWest’s and Banc of California’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond the control of PacWest and Banc of California, which may cause actual results, performance, or achievements to differ materially from those expressed in them. Continued deterioration in general business, economic, and political conditions, geopolitical tensions, uncertainty in U.S. fiscal monetary policy, including the interest rate policies of the Federal Reserve Board, and volatility and disruptions in credit and capital markets could lead to a tightening of credit and an increase in credit losses, adversely affect PacWest’s revenues and the values of our assets and liabilities, increase stock price volatility, and adversely impact our ability to raise capital. In addition, PacWest and its results could be adversely affected by changes in interest rates, continued high inflation, and unemployment rates, our ability to attract and retain deposits and other sources of funding and liquidity particularly in a rising or high interest rate environment, the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks, the safety of deposits, and depositor behavior, the quality and composition of our deposits, deterioration in the credit quality of our loan portfolio or in the value of the collateral securing those loans, especially the risks associated with concentrations in real estate related loans, deterioration in the value of our investment securities as a result of rising interest rates or otherwise, our ability to successfully execute on our strategic plan and digital and innovation initiatives, the effectiveness of our risk management framework and quantitative models, legal and regulatory developments, the ability to complete, or any delays in completing, the proposed transaction between us and Banc of California, any failure to realize the anticipated benefits of the transaction when expected or at all, certain restrictions during the pendency of the proposed transaction that may impact our ability to pursue certain business opportunities or strategic transactions, the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management’s attention from ongoing business operations and opportunities, and potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the transaction and integration of the companies. We also caution that the amount and timing of any future common stock dividends will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company’s Board of Directors, and may be subject to regulatory approval or conditions. 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 (the “SEC”).
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.
NO OFFER OR SOLICITATION
This communication is not a proxy statement or solicitation or a proxy, consent or authorization with respect to any securities or in respect of the proposed transaction and shall not constitute an offer to sell or a solicitation of an offer to buy the securities of PacWest, Banc of California, or the combined company, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be deemed to be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act, and otherwise in accordance with applicable law.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication includes information relating to the proposed transaction between PacWest and Banc of California and the proposed investment in Banc of California by Warburg Pincus LLC and Centerbridge Partners, L.P. Banc of California filed a registration statement on Form S-4 with the SEC on August 28, 2023 (as amended on September 29, 2023, and further amended on October 16, 2023, and October 19, 2023) that the SEC declared effective on October 20, 2023, and in connection with PacWest’s and Banc of California’s solicitation of proxies for the vote by PacWest’s stockholders and Banc of California’s stockholders with respect to the proposed transaction, on October 23, 2023, PacWest and Banc of California commenced mailing of a definitive joint proxy statement/prospectus to holders of PacWest’s common stock and Banc of California’s common stock who, as of the applicable record date, are entitled to vote on the matters being considered at the PacWest stockholder meeting and at the Banc of California stockholder meeting, as applicable. PacWest or Banc of California may also file other documents with the SEC regarding the proposed transaction.
BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO CAREFULLY READ THE ENTIRE REGISTRATION STATEMENT AND THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO), AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO SUCH DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders are able to obtain free copies of the registration statement, the definitive joint proxy statement/prospectus and all other relevant documents filed or that will be filed with the SEC by PacWest or Banc of California through the website maintained by the SEC at www.sec.gov.
The documents filed by PacWest or Banc of California with the SEC also may be obtained free of charge at PacWest’s or Banc of California’s website at www.pacwestbancorp.com, under the heading “SEC Filings,” or https://investors.bancofcal.com, under the heading “Financials and Filings,” respectively, or upon written request to PacWest, Attention: Investor Relations, 9701 Wilshire Boulevard, Suite 700, Beverly Hills, CA 90212 or Banc of California, Attention: Investor Relations, 3 MacArthur Place, Santa Ana, CA 92707, respectively.
PARTICIPANTS IN SOLICITATION
PacWest and Banc of California and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from PacWest’s stockholders or Banc of California’s stockholders in connection with the proposed transaction under the rules of the SEC. PacWest’s stockholders, Banc of California’s stockholders, and other interested persons are able to obtain, without charge, more detailed information regarding the names, affiliations and interests of directors and executive officers of PacWest and Banc of California in Banc of California’s registration statement on Form S-4, as well other documents filed by PacWest or Banc of California from time to time with the SEC. Other information regarding persons who may, under the rules of the SEC, be deemed the participants in the proxy solicitation of PacWest’s or Banc of California’s stockholders in connection with the proposed transaction and a description of their direct and indirect interests, by security holdings or otherwise, is included in the definitive joint proxy statement/prospectus filed with the SEC and may be contained in other relevant materials to be filed with the SEC regarding the proposed transaction. You may obtain free copies of these documents at the SEC’s website at www.sec.gov. Copies of documents filed with the SEC by PacWest or Banc of California will also be available free of charge from PacWest or Banc of California using the contact information above.
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||||
| September 30, | June 30, | September 30, | |||||||||
| 2023 | 2023 | 2022 | |||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||
| ASSETS: | |||||||||||
| Cash and due from banks | $ | 182,261 | $ | 208,300 | $ | 216,436 | |||||
| Interest-earning deposits in financial institutions | 5,887,406 | 6,489,847 | 2,244,272 | ||||||||
| Total cash and cash equivalents | 6,069,667 | 6,698,147 | 2,460,708 | ||||||||
| Securities available-for-sale, at estimated fair value | 4,487,172 | 4,708,519 | 5,891,328 | ||||||||
| Securities held-to-maturity, at amortized cost, | |||||||||||
| net of allowance for credit losses | 2,282,586 | 2,278,202 | 2,264,601 | ||||||||
| Federal Home Loan Bank stock, at cost | 17,250 | 17,250 | 36,990 | ||||||||
| Total investment securities | 6,787,008 | 7,003,971 | 8,192,919 | ||||||||
| Loans held for sale | 188,866 | 478,146 | 15,534 | ||||||||
| Gross loans and leases held for investment | 21,969,789 | 22,311,292 | 27,775,962 | ||||||||
| Deferred fees, net | (48,843 | ) | (53,082 | ) | (115,921 | ) | |||||
| Total loans and leases held for investment, | |||||||||||
| net of deferred fees | 21,920,946 | 22,258,210 | 27,660,041 | ||||||||
| Allowance for loan and lease losses | (222,297 | ) | (219,234 | ) | (189,327 | ) | |||||
| Total loans and leases held for investment, net | 21,698,649 | 22,038,976 | 27,470,714 | ||||||||
| Equipment leased to others under operating leases | 352,330 | 380,022 | 338,691 | ||||||||
| Premises and equipment, net | 50,236 | 57,078 | 50,781 | ||||||||
| Foreclosed assets, net | 6,829 | 8,426 | 2,967 | ||||||||
| Goodwill | – | – | 1,405,736 | ||||||||
| Core deposit and customer relationship intangibles, net | 24,192 | 26,581 | 34,010 | ||||||||
| Deferred tax asset, net | 506,248 | 426,304 | 321,650 | ||||||||
| Other assets | 1,193,808 | 1,219,599 | 1,110,882 | ||||||||
| Total assets | $ | 36,877,833 | $ | 38,337,250 | $ | 41,404,592 | |||||
| LIABILITIES: | |||||||||||
| Noninterest-bearing deposits | $ | 5,579,033 | $ | 6,055,358 | $ | 12,775,756 | |||||
| Interest-bearing deposits | 21,019,648 | 21,841,725 | 21,420,116 | ||||||||
| Total deposits | 26,598,681 | 27,897,083 | 34,195,872 | ||||||||
| Borrowings | 6,294,525 | 6,357,338 | 1,864,815 | ||||||||
| Subordinated debt | 870,896 | 870,378 | 863,379 | ||||||||
| Accrued interest payable and other liabilities | 714,454 | 679,256 | 604,581 | ||||||||
| Total liabilities | 34,478,556 | 35,804,055 | 37,528,647 | ||||||||
| STOCKHOLDERS’ EQUITY (1) | 2,399,277 | 2,533,195 | 3,875,945 | ||||||||
| Total liabilities and stockholders’ equity | $ | 36,877,833 | $ | 38,337,250 | $ | 41,404,592 | |||||
| Book value per common share | $ | 15.84 | $ | 16.93 | $ | 28.07 | |||||
| Tangible book value per common share (2) | $ | 15.64 | $ | 16.71 | $ | 16.11 | |||||
| Common shares outstanding | 119,967,984 | 120,169,012 | 120,314,023 | ||||||||
| (1) Includes net unrealized loss on: | |||||||||||
| Securities available-for-sale, net | $ | (691,557 | ) | $ | (583,684 | ) | $ | (637,346 | ) | ||
| Securities held to maturity | $ | (187,275 | ) | $ | (193,058 | ) | $ | (210,868 | ) | ||
| (2) Non-GAAP measure. | |||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||||||
| 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||
| Interest income: | |||||||||||||||||||
| Loans and leases | $ | 310,392 | $ | 408,972 | $ | 346,550 | $ | 1,150,049 | $ | 907,595 | |||||||||
| Investment securities | 45,326 | 44,153 | 53,135 | 133,716 | 159,459 | ||||||||||||||
| Deposits in financial institutions | 90,366 | 86,763 | 10,359 | 219,995 | 16,412 | ||||||||||||||
| Total interest income | 446,084 | 539,888 | 410,044 | 1,503,760 | 1,083,466 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 205,982 | 178,789 | 61,288 | 540,663 | 82,858 | ||||||||||||||
| Borrowings | 94,234 | 160,914 | 3,081 | 324,270 | 5,683 | ||||||||||||||
| Subordinated debt | 15,139 | 14,109 | 10,494 | 42,750 | 27,102 | ||||||||||||||
| Total interest expense | 315,355 | 353,812 | 74,863 | 907,683 | 115,643 | ||||||||||||||
| Net interest income | 130,729 | 186,076 | 335,181 | 596,077 | 967,823 | ||||||||||||||
| Provision for credit losses | – | 2,000 | 3,000 | 5,000 | 14,500 | ||||||||||||||
| Net interest income after provision | |||||||||||||||||||
| for credit losses | 130,729 | 184,076 | 332,181 | 591,077 | 953,323 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Service charges on deposit accounts | 4,018 | 4,315 | 3,608 | 11,906 | 10,813 | ||||||||||||||
| Other commissions and fees | 7,641 | 11,241 | 10,034 | 29,226 | 32,427 | ||||||||||||||
| Leased equipment income | 14,554 | 22,387 | 12,835 | 50,798 | 38,264 | ||||||||||||||
| (Loss) gain on sale of loans and leases | (1,901 | ) | (158,881 | ) | 58 | (157,820 | ) | 130 | |||||||||||
| Gain (loss) on sale of securities | – | – | 86 | – | (1,019 | ) | |||||||||||||
| Dividends and gains (losses) on equity investments | 3,837 | 2,658 | 3,228 | 7,593 | (4,050 | ) | |||||||||||||
| Warrant (loss) income | (88 | ) | (124 | ) | 292 | (545 | ) | 2,536 | |||||||||||
| LOCOM HFS adjustment | 307 | (11,943 | ) | – | (11,636 | ) | – | ||||||||||||
| Other income | 15,440 | 2,265 | 8,478 | 22,595 | 14,682 | ||||||||||||||
| Total noninterest income (loss) | 43,808 | (128,082 | ) | 38,619 | (47,883 | ) | 93,783 | ||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Compensation | 71,642 | 82,881 | 105,933 | 242,999 | 300,715 | ||||||||||||||
| Occupancy | 15,293 | 15,383 | 15,574 | 45,743 | 46,042 | ||||||||||||||
| Data processing | 11,104 | 10,963 | 9,568 | 33,005 | 28,455 | ||||||||||||||
| Other professional services | 5,597 | 9,973 | 10,674 | 21,643 | 23,354 | ||||||||||||||
| Insurance and assessments | 38,298 | 25,635 | 7,159 | 75,650 | 18,281 | ||||||||||||||
| Intangible asset amortization | 2,389 | 2,389 | 3,649 | 7,189 | 10,947 | ||||||||||||||
| Leased equipment depreciation | 8,333 | 9,088 | 8,908 | 26,796 | 27,031 | ||||||||||||||
| Foreclosed assets (income) expense, net | (609 | ) | 2 | (248 | ) | (244 | ) | (3,629 | ) | ||||||||||
| Acquisition, integration and reorganization costs | 9,925 | 12,394 | – | 30,833 | – | ||||||||||||||
| Customer related expense | 26,971 | 27,302 | 12,673 | 78,278 | 37,076 | ||||||||||||||
| Loan expense | 4,243 | 5,245 | 6,228 | 16,012 | 18,422 | ||||||||||||||
| Goodwill impairment | – | – | – | 1,376,736 | – | ||||||||||||||
| Other expense | 7,917 | 119,182 | 15,500 | 139,903 | 39,995 | ||||||||||||||
| Total noninterest expense | 201,103 | 320,437 | 195,618 | 2,094,543 | 546,689 | ||||||||||||||
| (Loss) earnings before income taxes | (26,566 | ) | (264,443 | ) | 175,182 | (1,551,349 | ) | 500,417 | |||||||||||
| Income tax (benefit) expense | (3,222 | ) | (67,029 | ) | 43,566 | (135,167 | ) | 126,313 | |||||||||||
| Net (loss) earnings | (23,344 | ) | (197,414 | ) | 131,616 | (1,416,182 | ) | 374,104 | |||||||||||
| Preferred stock dividends | 9,947 | 9,947 | 9,392 | 29,841 | 9,392 | ||||||||||||||
| Net (loss) earnings available to | |||||||||||||||||||
| common stockholders | $ | (33,291 | ) | $ | (207,361 | ) | $ | 122,224 | $ | (1,446,023 | ) | $ | 364,712 | ||||||
| Basic and diluted (loss) earnings per | |||||||||||||||||||
| common share | $ | (0.28 | ) | $ | (1.75 | ) | $ | 1.02 | $ | (12.23 | ) | $ | 3.04 | ||||||
| Dividends declared and paid per common share | $ | 0.01 | $ | 0.01 | $ | 0.25 | $ | 0.27 | $ | 0.75 | |||||||||
| PACWEST BANCORP AND SUBSIDIARIES | ||||||||||||||||||||
| AVERAGE BALANCE SHEET AND YIELD ANALYSIS | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| September 30, 2023 | June 30, 2023 | September 30, 2022 | ||||||||||||||||||
| 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)(3) | $ | 22,226,390 | $ | 310,392 | 5.54 | % | $ | 26,992,283 | $ | 408,972 | 6.08 | % | $ | 27,038,873 | $ | 348,639 | 5.12 | % | ||
| Investment securities (3) | 6,919,948 | 45,326 | 2.60 | % | 7,183,986 | 44,153 | 2.47 | % | 8,803,349 | 54,423 | 2.45 | % | ||||||||
| Deposits in financial | ||||||||||||||||||||
| institutions | 6,645,335 | 90,366 | 5.40 | % | 6,835,075 | 86,763 | 5.09 | % | 1,809,809 | 10,359 | 2.27 | % | ||||||||
| Total interest-earning | ||||||||||||||||||||
| assets (1) | 35,791,673 | 446,084 | 4.94 | % | 41,011,344 | 539,888 | 5.28 | % | 37,652,031 | 413,421 | 4.36 | % | ||||||||
| Other assets | 2,016,085 | 2,028,985 | 3,189,241 | |||||||||||||||||
| Total assets | $ | 37,807,758 | $ | 43,040,329 | $ | 40,841,272 | ||||||||||||||
| Liabilities and | ||||||||||||||||||||
| Stockholders’ Equity: | ||||||||||||||||||||
| Interest checking | $ | 6,983,013 | 57,237 | 3.25 | % | $ | 6,601,034 | 46,798 | 2.84 | % | $ | 6,650,477 | 19,475 | 1.16 | % | |||||
| Money market | 5,662,980 | 42,516 | 2.98 | % | 6,590,615 | 47,008 | 2.86 | % | 10,914,027 | 31,780 | 1.16 | % | ||||||||
| Savings | 1,163,827 | 10,255 | 3.50 | % | 733,818 | 3,678 | 2.01 | % | 649,574 | 42 | 0.03 | % | ||||||||
| Time | 7,801,880 | 95,974 | 4.88 | % | 7,492,094 | 81,305 | 4.35 | % | 3,000,187 | 9,991 | 1.32 | % | ||||||||
| Total interest-bearing | ||||||||||||||||||||
| deposits | 21,611,700 | 205,982 | 3.78 | % | 21,417,561 | 178,789 | 3.35 | % | 21,214,265 | 61,288 | 1.15 | % | ||||||||
| Borrowings | 6,325,537 | 94,234 | 5.91 | % | 11,439,742 | 160,914 | 5.64 | % | 505,482 | 3,081 | 2.42 | % | ||||||||
| Subordinated debt | 870,968 | 15,139 | 6.90 | % | 869,419 | 14,109 | 6.51 | % | 863,719 | 10,494 | 4.82 | % | ||||||||
| Total interest-bearing | ||||||||||||||||||||
| liabilities | 28,808,205 | 315,355 | 4.34 | % | 33,726,722 | 353,812 | 4.21 | % | 22,583,466 | 74,863 | 1.32 | % | ||||||||
| Noninterest-bearing | ||||||||||||||||||||
| demand deposits | 5,817,488 | 5,968,625 | 13,653,177 | |||||||||||||||||
| Other liabilities | 701,355 | 625,610 | 593,450 | |||||||||||||||||
| Total liabilities | 35,327,048 | 40,320,957 | 36,830,093 | |||||||||||||||||
| Stockholders’ equity | 2,480,710 | 2,719,372 | 4,011,179 | |||||||||||||||||
| Total liabilities and | ||||||||||||||||||||
| stockholders’ equity | $ | 37,807,758 | $ | 43,040,329 | $ | 40,841,272 | ||||||||||||||
| Net interest income (1) | $ | 130,729 | $ | 186,076 | $ | 338,558 | ||||||||||||||
| Net interest spread (1) | 0.60 | % | 1.07 | % | 3.04 | % | ||||||||||||||
| Net interest margin (1) | 1.45 | % | 1.82 | % | 3.57 | % | ||||||||||||||
| Total deposits (4) | $ | 27,429,188 | $ | 205,982 | 2.98 | % | $ | 27,386,186 | $ | 178,789 | 2.62 | % | $ | 34,867,442 | $ | 61,288 | 0.70 | % | ||
| (1) Tax equivalent. | ||||||||||||||||||||
| (2) Includes net loan premium amortization of $1.7 million, $1.6 million, and $3.8 million for the three months ended September 30, 2023, | ||||||||||||||||||||
| June 30, 2023, and September 30, 2022, respectively. | ||||||||||||||||||||
| (3) Includes tax-equivalent adjustments of $0.0 million, $0.0 million, and $2.1 million for the three months ended September 30, 2023, | ||||||||||||||||||||
| June 30, 2023, and September 30, 2022 related to tax-exempt income on loans. | ||||||||||||||||||||
| Includes tax-equivalent adjustments of $0.0 million, $0.0 million, and $1.3 million for the three months ended September 30, 2023, | ||||||||||||||||||||
| June 30, 2023, and September 30, 2022 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 | |||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||||||
| ASSETS: | |||||||||||||||||||
| Cash and due from banks | $ | 182,261 | $ | 208,300 | $ | 218,830 | $ | 212,273 | $ | 216,436 | |||||||||
| Interest-earning deposits in financial | |||||||||||||||||||
| institutions | 5,887,406 | 6,489,847 | 6,461,306 | 2,027,949 | 2,244,272 | ||||||||||||||
| Total cash and cash equivalents | 6,069,667 | 6,698,147 | 6,680,136 | 2,240,222 | 2,460,708 | ||||||||||||||
| Securities available-for-sale | 4,487,172 | 4,708,519 | 4,848,607 | 4,843,487 | 5,891,328 | ||||||||||||||
| Securities held-to-maturity | 2,282,586 | 2,278,202 | 2,273,650 | 2,269,135 | 2,264,601 | ||||||||||||||
| Federal Home Loan Bank stock | 17,250 | 17,250 | 147,150 | 34,290 | 36,990 | ||||||||||||||
| Total investment securities | 6,787,008 | 7,003,971 | 7,269,407 | 7,146,912 | 8,192,919 | ||||||||||||||
| Loans held for sale | 188,866 | 478,146 | 2,796,208 | 65,076 | 15,534 | ||||||||||||||
| Gross loans and leases held for investment | 21,969,789 | 22,311,292 | 25,770,912 | 28,726,016 | 27,775,962 | ||||||||||||||
| Deferred fees, net | (48,843 | ) | (53,082 | ) | (98,531 | ) | (116,887 | ) | (115,921 | ) | |||||||||
| Total loans and leases held for | |||||||||||||||||||
| investment, net of deferred fees | 21,920,946 | 22,258,210 | 25,672,381 | 28,609,129 | 27,660,041 | ||||||||||||||
| Allowance for loan and lease losses | (222,297 | ) | (219,234 | ) | (210,055 | ) | (200,732 | ) | (189,327 | ) | |||||||||
| Total loans and leases held for | |||||||||||||||||||
| investment, net | 21,698,649 | 22,038,976 | 25,462,326 | 28,408,397 | 27,470,714 | ||||||||||||||
| Equipment leased to others under | |||||||||||||||||||
| operating leases | 352,330 | 380,022 | 399,972 | 404,245 | – | 338,691 | |||||||||||||
| Premises and equipment, net | 50,236 | 57,078 | 60,358 | 54,315 | 50,781 | ||||||||||||||
| Foreclosed assets, net | 6,829 | 8,426 | 2,135 | 5,022 | 2,967 | ||||||||||||||
| Goodwill | – | – | – | 1,376,736 | 1,405,736 | ||||||||||||||
| Core deposit and customer relationship | |||||||||||||||||||
| intangibles, net | 24,192 | 26,581 | 28,970 | 31,381 | 34,010 | ||||||||||||||
| Deferred tax asset, net | 506,248 | 426,304 | 342,557 | 281,848 | 321,650 | ||||||||||||||
| Other assets | 1,193,808 | 1,219,599 | 1,260,912 | 1,214,782 | 1,110,882 | ||||||||||||||
| Total assets | $ | 36,877,833 | $ | 38,337,250 | $ | 44,302,981 | $ | 41,228,936 | $ | 41,404,592 | |||||||||
| LIABILITIES: | |||||||||||||||||||
| Noninterest-bearing deposits | $ | 5,579,033 | $ | 6,055,358 | $ | 7,030,759 | $ | 11,212,357 | $ | 12,775,756 | |||||||||
| Interest-bearing deposits | 21,019,648 | 21,841,725 | 21,156,802 | 22,723,977 | 21,420,116 | ||||||||||||||
| Total deposits | 26,598,681 | 27,897,083 | 28,187,561 | 33,936,334 | 34,195,872 | ||||||||||||||
| Borrowings | 6,294,525 | 6,357,338 | 11,881,712 | 1,764,030 | 1,864,815 | ||||||||||||||
| Subordinated debt | 870,896 | 870,378 | 868,815 | 867,087 | 863,379 | ||||||||||||||
| Accrued interest payable and other | |||||||||||||||||||
| liabilities | 714,454 | 679,256 | 593,416 | 710,954 | 604,581 | ||||||||||||||
| Total liabilities | 34,478,556 | 35,804,055 | 41,531,504 | 37,278,405 | 37,528,647 | ||||||||||||||
| STOCKHOLDERS’ EQUITY (1) | 2,399,277 | 2,533,195 | 2,771,477 | 3,950,531 | 3,875,945 | ||||||||||||||
| Total liabilities and stockholders’ | |||||||||||||||||||
| equity | $ | 36,877,833 | $ | 38,337,250 | $ | 44,302,981 | $ | 41,228,936 | $ | 41,404,592 | |||||||||
| Book value per common share | $ | 15.84 | $ | 16.93 | $ | 18.90 | $ | 28.71 | $ | 28.07 | |||||||||
| Tangible book value per common share (2) | $ | 15.64 | $ | 16.71 | $ | 18.66 | $ | 17.00 | $ | 16.11 | |||||||||
| Common shares outstanding | 119,967,984 | 120,169,012 | 120,244,214 | 120,222,057 | 120,314,023 | ||||||||||||||
| (1) Includes net unrealized loss on: | |||||||||||||||||||
| Securities available-for-sale, net | $ | (691,557 | ) | $ | (583,684 | ) | $ | (537,307 | ) | $ | (586,450 | ) | $ | (637,346 | ) | ||||
| Securities held to maturity | $ | (187,275 | ) | $ | (193,058 | ) | $ | (198,753 | ) | $ | (204,453 | ) | $ | (210,868 | ) | ||||
| (2) Non-GAAP measure. | |||||||||||||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER STATEMENT OF EARNINGS (LOSS) | |||||||||||||||||||
| Three Months Ended | |||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||
| Interest income: | |||||||||||||||||||
| Loans and leases | $ | 310,392 | $ | 408,972 | $ | 430,685 | $ | 404,985 | $ | 346,550 | |||||||||
| Investment securities | 45,326 | 44,153 | 44,237 | 50,292 | 53,135 | ||||||||||||||
| Deposits in financial institutions | 90,366 | 86,763 | 42,866 | 17,746 | 10,359 | ||||||||||||||
| Total interest income | 446,084 | 539,888 | 517,788 | 473,023 | 410,044 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 205,982 | 178,789 | 155,892 | 117,591 | 61,288 | ||||||||||||||
| Borrowings | 94,234 | 160,914 | 69,122 | 19,962 | 3,081 | ||||||||||||||
| Subordinated debt | 15,139 | 14,109 | 13,502 | 12,531 | 10,494 | ||||||||||||||
| Total interest expense | 315,355 | 353,812 | 238,516 | 150,084 | 74,863 | ||||||||||||||
| Net interest income | 130,729 | 186,076 | 279,272 | 322,939 | 335,181 | ||||||||||||||
| Provision for credit losses | – | 2,000 | 3,000 | 10,000 | 3,000 | ||||||||||||||
| Net interest income after provision | |||||||||||||||||||
| for credit losses | 130,729 | 184,076 | 276,272 | 312,939 | 332,181 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Service charges on deposit accounts | 4,018 | 4,315 | 3,573 | 3,178 | 3,608 | ||||||||||||||
| Other commissions and fees | 7,641 | 11,241 | 10,344 | 11,208 | 10,034 | ||||||||||||||
| Leased equipment income | 14,554 | 22,387 | 13,857 | 12,322 | 12,835 | ||||||||||||||
| (Loss) gain on sale of loans and leases | (1,901 | ) | (158,881 | ) | 2,962 | 388 | 58 | ||||||||||||
| (Loss) gain on sale of securities | – | – | – | (49,302 | ) | 86 | |||||||||||||
| Dividends and gains on equity investments | 3,837 | 2,658 | 1,098 | 661 | 3,228 | ||||||||||||||
| Warrant (loss) income | (88 | ) | (124 | ) | (333 | ) | (46 | ) | 292 | ||||||||||
| LOCOM HFS adjustment | 307 | (11,943 | ) | – | – | – | |||||||||||||
| Other income | 15,440 | 2,265 | 4,890 | 2,635 | 8,478 | ||||||||||||||
| Total noninterest income (loss) | 43,808 | (128,082 | ) | 36,391 | (18,956 | ) | 38,619 | ||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Compensation | 71,642 | 82,881 | 88,476 | 106,124 | 105,933 | ||||||||||||||
| Occupancy | 15,293 | 15,383 | 15,067 | 14,922 | 15,574 | ||||||||||||||
| Data processing | 11,104 | 10,963 | 10,938 | 9,722 | 9,568 | ||||||||||||||
| Other professional services | 5,597 | 9,973 | 6,073 | 6,924 | 10,674 | ||||||||||||||
| Insurance and assessments | 38,298 | 25,635 | 11,717 | 7,205 | 7,159 | ||||||||||||||
| Intangible asset amortization | 2,389 | 2,389 | 2,411 | 2,629 | 3,649 | ||||||||||||||
| Leased equipment depreciation | 8,333 | 9,088 | 9,375 | 8,627 | 8,908 | ||||||||||||||
| Foreclosed assets (income) expense, net | (609 | ) | 2 | 363 | (108 | ) | (248 | ) | |||||||||||
| Acquisition, integration and reorganization costs | 9,925 | 12,394 | 8,514 | 5,703 | – | ||||||||||||||
| Customer related expense | 26,971 | 27,302 | 24,005 | 18,197 | 12,673 | ||||||||||||||
| Loan expense | 4,243 | 5,245 | 6,524 | 6,150 | 6,228 | ||||||||||||||
| Goodwill impairment | – | – | 1,376,736 | 29,000 | – | ||||||||||||||
| Other expense | 7,917 | 119,182 | 12,804 | 11,737 | 15,500 | ||||||||||||||
| Total noninterest expense | 201,103 | 320,437 | 1,573,003 | 226,832 | 195,618 | ||||||||||||||
| (Loss) earnings before income taxes | (26,566 | ) | (264,443 | ) | (1,260,340 | ) | 67,151 | 175,182 | |||||||||||
| Income tax (benefit) expense | (3,222 | ) | (67,029 | ) | (64,916 | ) | 17,642 | 43,566 | |||||||||||
| Net (loss) earnings | (23,344 | ) | (197,414 | ) | (1,195,424 | ) | 49,509 | 131,616 | |||||||||||
| Preferred stock dividends | 9,947 | 9,947 | 9,947 | 9,947 | 9,392 | ||||||||||||||
| Net (loss) earnings available to | |||||||||||||||||||
| common stockholders | $ | (33,291 | ) | $ | (207,361 | ) | $ | (1,205,371 | ) | $ | 39,562 | $ | 122,224 | ||||||
| Basic and diluted (loss) earnings per | |||||||||||||||||||
| common share | $ | (0.28 | ) | $ | (1.75 | ) | $ | (10.22 | ) | $ | 0.33 | $ | 1.02 | ||||||
| Dividends declared and paid per common share | $ | 0.01 | $ | 0.01 | $ | 0.25 | $ | 0.25 | $ | 0.25 | |||||||||
| PACWEST BANCORP AND SUBSIDIARIES | |||||||||||||||||||
| FIVE QUARTER SELECTED FINANCIAL DATA | |||||||||||||||||||
| At or For the Three Months Ended | |||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Performance Ratios: | |||||||||||||||||||
| Return on average assets (1) | (0.24 | )% | (1.84 | )% | (11.34 | )% | 0.48 | % | 1.28 | % | |||||||||
| Pre-provision, pre-goodwill impairment, | |||||||||||||||||||
| pre-tax net revenue ("PPNR") return | |||||||||||||||||||
| on average assets (1)(2) | (0.28 | )% | (2.45 | )% | 1.13 | % | 1.02 | % | 1.73 | % | |||||||||
| Return on average equity (1) | (3.73 | )% | (29.12 | )% | (121.24 | )% | 5.04 | % | 13.02 | % | |||||||||
| Return on average tangible common | |||||||||||||||||||
| equity (1)(2) | (6.33 | )% | (37.62 | )% | 14.45 | % | 12.71 | % | 23.93 | % | |||||||||
| Efficiency ratio | 108.5 | % | 527.0 | % | 58.2 | % | 53.3 | % | 51.0 | % | |||||||||
| Noninterest expense as a percentage | |||||||||||||||||||
| of average assets (1) | 2.11 | % | 2.99 | % | 14.92 | % | 2.19 | % | 1.90 | % | |||||||||
| Average Yields/Costs (1): | |||||||||||||||||||
| Yield on: | |||||||||||||||||||
| Average loans and leases (3) | 5.54 | % | 6.08 | % | 6.14 | % | 5.73 | % | 5.12 | % | |||||||||
| Average investment securities (3) | 2.60 | % | 2.47 | % | 2.49 | % | 2.57 | % | 2.45 | % | |||||||||
| Average interest-earning assets (3) | 4.94 | % | 5.28 | % | 5.35 | % | 4.98 | % | 4.36 | % | |||||||||
| Cost of: | |||||||||||||||||||
| Average interest-bearing deposits | 3.78 | % | 3.35 | % | 2.91 | % | 2.14 | % | 1.15 | % | |||||||||
| Average total deposits | 2.98 | % | 2.62 | % | 1.98 | % | 1.37 | % | 0.70 | % | |||||||||
| Average interest-bearing liabilities | 4.34 | % | 4.21 | % | 3.47 | % | 2.45 | % | 1.32 | % | |||||||||
| Net interest spread (3) | 0.60 | % | 1.07 | % | 1.88 | % | 2.53 | % | 3.04 | % | |||||||||
| Net interest margin (3) | 1.45 | % | 1.82 | % | 2.89 | % | 3.41 | % | 3.57 | % | |||||||||
| Average Balances: | |||||||||||||||||||
| Assets: | |||||||||||||||||||
| Loans and leases, net of deferred fees | $ | 22,226,390 | $ | 26,992,283 | $ | 28,583,265 | $ | 28,192,953 | $ | 27,038,873 | |||||||||
| Investment securities | 6,919,948 | 7,183,986 | 7,191,362 | 7,824,915 | 8,803,349 | ||||||||||||||
| Deposits in financial institutions | 6,645,335 | 6,835,075 | 3,682,228 | 1,881,950 | 1,809,809 | ||||||||||||||
| Interest-earning assets | 35,791,673 | 41,011,344 | 39,456,855 | 37,899,818 | 37,652,031 | ||||||||||||||
| Total assets | 37,807,758 | 43,040,329 | 42,768,714 | 41,151,963 | 40,841,272 | ||||||||||||||
| Liabilities: | |||||||||||||||||||
| Noninterest-bearing deposits | 5,817,488 | 5,968,625 | 10,233,434 | 12,325,902 | 13,653,177 | ||||||||||||||
| Interest-bearing deposits | 21,611,700 | 21,417,561 | 21,742,403 | 21,760,402 | 21,214,265 | ||||||||||||||
| Total deposits | 27,429,188 | 27,386,186 | 31,975,837 | 34,086,304 | 34,867,442 | ||||||||||||||
| Borrowings | 6,325,537 | 11,439,742 | 5,289,429 | 1,675,738 | 505,482 | ||||||||||||||
| Subordinated debt | 870,968 | 869,419 | 867,637 | 864,581 | 863,719 | ||||||||||||||
| Interest-bearing liabilities | 28,808,205 | 33,726,722 | 27,899,469 | 24,300,721 | 22,583,466 | ||||||||||||||
| Stockholders’ equity | 2,480,710 | 2,719,372 | 3,998,687 | 3,898,800 | 4,011,179 | ||||||||||||||
| (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 | |||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||||||
| Credit Quality Metrics for Loans | |||||||||||||||||||
| and Leases Held for Investment: | |||||||||||||||||||
| Nonaccrual loans and leases | $ | 125,396 | $ | 104,886 | $ | 87,124 | $ | 103,778 | $ | 89,742 | |||||||||
| Nonperforming assets | 132,225 | 113,312 | 89,259 | 108,800 | 92,709 | ||||||||||||||
| Special mention loans and leases | 360,131 | 366,368 | 580,153 | 566,259 | 463,994 | ||||||||||||||
| Classified loans and leases | 211,095 | 211,934 | 132,423 | 118,271 | 96,685 | ||||||||||||||
| Allowance for loan and lease losses | 222,297 | 219,234 | 210,055 | 200,732 | 189,327 | ||||||||||||||
| Allowance for credit losses | 251,868 | 256,805 | 285,626 | 291,803 | 284,398 | ||||||||||||||
| For the quarter: | |||||||||||||||||||
| Provision for credit losses | – | 2,000 | 3,000 | 10,000 | 3,000 | ||||||||||||||
| Net charge-offs | 4,937 | 30,821 | 9,177 | 2,595 | 2,378 | ||||||||||||||
| Nonaccrual loans and leases to loans | |||||||||||||||||||
| and leases | 0.57 | % | 0.47 | % | 0.34 | % | 0.36 | % | 0.32 | % | |||||||||
| Nonperforming assets to loans and | |||||||||||||||||||
| leases and foreclosed assets | 0.60 | % | 0.51 | % | 0.35 | % | 0.38 | % | 0.34 | % | |||||||||
| Special mention loans and leases to | |||||||||||||||||||
| loans and leases | 1.64 | % | 1.65 | % | 2.26 | % | 1.98 | % | 1.68 | % | |||||||||
| Classified loans and leases to loans | |||||||||||||||||||
| and leases | 0.96 | % | 0.95 | % | 0.52 | % | 0.41 | % | 0.35 | % | |||||||||
| Allowance for loan and lease losses | |||||||||||||||||||
| to loans and leases | 1.01 | % | 0.98 | % | 0.82 | % | 0.70 | % | 0.68 | % | |||||||||
| Allowance for credit losses to loans | |||||||||||||||||||
| and leases | 1.15 | % | 1.15 | % | 1.11 | % | 1.02 | % | 1.03 | % | |||||||||
| Allowance for credit losses to | |||||||||||||||||||
| nonaccrual loans and leases | 200.86 | % | 244.84 | % | 327.84 | % | 281.18 | % | 316.91 | % | |||||||||
| Net charge-offs to average | |||||||||||||||||||
| loans and leases | 0.09 | % | 0.46 | % | 0.13 | % | 0.04 | % | 0.03 | % | |||||||||
| Trailing 12 months net charge-offs | |||||||||||||||||||
| to average loans and leases | 0.19 | % | 0.17 | % | 0.05 | % | 0.02 | % | 0.01 | % | |||||||||
| PacWest Bancorp Consolidated: | |||||||||||||||||||
| Common equity tier 1 capital ratio (1) | 11.23 | % | 11.16 | % | 9.21 | % | 8.70 | % | 8.56 | % | |||||||||
| Tier 1 capital ratio (1) | 13.84 | % | 13.70 | % | 11.15 | % | 10.61 | % | 10.46 | % | |||||||||
| Total capital ratio (1) | 17.83 | % | 17.61 | % | 14.21 | % | 13.61 | % | 13.43 | % | |||||||||
| Tier 1 leverage capital ratio (1) | 8.65 | % | 7.76 | % | 8.33 | % | 8.61 | % | 8.63 | % | |||||||||
| Risk-weighted assets (1) | $ | 24,127,271 | $ | 24,771,837 | $ | 32,507,454 | $ | 33,030,960 | $ | 33,042,173 | |||||||||
| Equity to assets ratio | 6.51 | % | 6.61 | % | 6.26 | % | 9.58 | % | 9.36 | % | |||||||||
| Tangible common equity ratio (2) | 5.09 | % | 5.24 | % | 5.07 | % | 5.13 | % | 4.85 | % | |||||||||
| Book value per common share | $ | 15.84 | $ | 16.93 | $ | 18.90 | $ | 28.71 | $ | 28.07 | |||||||||
| Tangible book value per common share (2) | $ | 15.64 | $ | 16.71 | $ | 18.66 | $ | 17.00 | $ | 16.11 | |||||||||
| Pacific Western Bank: | |||||||||||||||||||
| Common equity tier 1 capital ratio (1) | 13.73 | % | 13.48 | % | 10.89 | % | 10.32 | % | 10.17 | % | |||||||||
| Tier 1 capital ratio (1) | 13.73 | % | 13.48 | % | 10.89 | % | 10.32 | % | 10.17 | % | |||||||||
| Total capital ratio (1) | 16.37 | % | 16.07 | % | 12.94 | % | 12.34 | % | 12.16 | % | |||||||||
| Tier 1 leverage capital ratio (1) | 8.57 | % | 7.62 | % | 8.14 | % | 8.39 | % | 8.39 | % | |||||||||
| (1) Capital information for September 30, 2023 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-goodwill impairment, pre-tax net revenue (“PPNR”), (2) PPNR return on average assets (3) return on average tangible common equity, (4) tangible common equity ratio, and (5) tangible book value per common share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of PPNR, return on average tangible common equity, tangible common equity ratio, and tangible book value per common share is prevalent among banking regulators, investors, and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures (or those calculated from GAAP measures) of: (1) net earnings, (2) return on average assets, (3) return on average equity, (4) equity to assets ratio, (5) book value per common share, and (6) efficiency ratio.
The Company recorded significant non-operating charges in the three months ended September 30, 2023, June 30, 2023, and March 31, 2023, and nine months ended September 30, 2023. Thus, to supplement information regarding the Company’s operational performance and to enhance investors’ overall understanding of such performance, this press release includes non-GAAP financial measures for (1) adjusted return on average tangible common equity, (2) adjusted earnings, (3) adjusted earnings per share, (4) adjusted return on average assets, and (5) adjusted efficiency ratio. These measures help the reader to compare the recent periods with the historical periods more readily. These non-GAAP financial measures should not be considered a substitute for financial measures presented in accordance with GAAP and may be different from the non-GAAP financial measures used by other companies.
The tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| PPNR and PPNR Return | September 30, | June 30, | September 30, | September 30, | |||||||||||||||
| on Average Assets | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Net (loss) earnings | $ | (23,344 | ) | $ | (197,414 | ) | $ | 131,616 | $ | (1,416,182 | ) | $ | 374,104 | ||||||
| Net interest income | $ | 130,729 | $ | 186,076 | $ | 335,181 | $ | 596,077 | $ | 967,823 | |||||||||
| Add: Noninterest income (loss) | 43,808 | (128,082 | ) | 38,619 | (47,883 | ) | 93,783 | ||||||||||||
| Less: Noninterest expense | (201,103 | ) | (320,437 | ) | (195,618 | ) | (2,094,543 | ) | (546,689 | ) | |||||||||
| Add: Goodwill impairment | – | – | – | 1,376,736 | – | ||||||||||||||
| Pre-provision, pre-goodwill impairment, | |||||||||||||||||||
| pre-tax net revenue ("PPNR") | $ | (26,566 | ) | $ | (262,443 | ) | $ | 178,182 | $ | (169,613 | ) | $ | 514,917 | ||||||
| Average assets | $ | 37,807,758 | $ | 43,040,329 | $ | 40,841,272 | $ | 41,187,428 | $ | 40,255,665 | |||||||||
| Return on average assets (1) | (0.24 | )% | (1.84 | )% | 1.28 | % | (4.60 | )% | 1.24 | % | |||||||||
| PPNR return on average assets (2) | (0.28 | )% | (2.45 | )% | 1.73 | % | (0.55 | )% | 1.71 | % | |||||||||
| (1) Annualized net (loss) earnings divided by average assets. | |||||||||||||||||||
| (2) Annualized PPNR divided by average assets. | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| Return on Average | September 30, | June 30, | September 30, | September 30, | |||||||||||||||
| Tangible Common Equity | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Net (loss) earnings | $ | (23,344 | ) | $ | (197,414 | ) | $ | 131,616 | $ | (1,416,182 | ) | $ | 374,104 | ||||||
| (Loss) earnings before income taxes | $ | (26,566 | ) | $ | (264,443 | ) | $ | 175,182 | $ | (1,551,349 | ) | $ | 500,417 | ||||||
| Add: Goodwill impairment | – | – | – | 1,376,736 | – | ||||||||||||||
| Add: Intangible asset amortization | 2,389 | 2,389 | 3,649 | 7,189 | 10,947 | ||||||||||||||
| Adjusted (loss) earnings before | |||||||||||||||||||
| income taxes | (24,177 | ) | (262,054 | ) | 178,831 | (167,424 | ) | 511,364 | |||||||||||
| Adjusted income tax expense (1) | (2,925 | ) | (66,300 | ) | 44,529 | (64,793 | ) | 128,864 | |||||||||||
| Adjusted net (loss) earnings | (21,252 | ) | (195,754 | ) | 134,302 | (102,631 | ) | 382,500 | |||||||||||
| Less: Preferred stock dividends | 9,947 | 9,947 | 9,392 | 29,841 | 9,392 | ||||||||||||||
| Adjusted net (loss) earnings available | |||||||||||||||||||
| to common stockholders | $ | (31,199 | ) | $ | (205,701 | ) | $ | 124,910 | $ | (132,472 | ) | $ | 373,108 | ||||||
| Average stockholders’ equity | $ | 2,480,710 | $ | 2,719,372 | $ | 4,011,179 | $ | 3,060,696 | $ | 3,837,609 | |||||||||
| Less: Average intangible assets | 25,499 | 27,824 | 1,441,689 | 476,721 | 1,445,332 | ||||||||||||||
| Less: Average preferred stock | 498,516 | 498,516 | 498,516 | 498,516 | 213,698 | ||||||||||||||
| Average tangible common equity | $ | 1,956,695 | $ | 2,193,032 | $ | 2,070,974 | $ | 2,085,459 | $ | 2,178,579 | |||||||||
| Return on average equity (2) | (3.73 | )% | (29.12 | )% | 13.02 | % | (61.86 | )% | 13.03 | % | |||||||||
| Return on average tangible | |||||||||||||||||||
| common equity (3) | (6.33 | )% | (37.62 | )% | 23.93 | % | (8.49 | )% | 22.90 | % | |||||||||
| (1) Effective tax rates of 12.1%, 25.3%, and 24.9% used for three months ended September 30, 2023, June 30, 2023, and | |||||||||||||||||||
| September 30, 2022. | |||||||||||||||||||
| Adjusted effective tax rate of 38.7% used to normalize the effect of goodwill impairment for nine months ended | |||||||||||||||||||
| September 30, 2023; effective tax rate of 25.2% used for nine months ended September 30, 2022. | |||||||||||||||||||
| (2) Annualized net (loss) earnings divided by average stockholders’ equity. | |||||||||||||||||||
| (3) Annualized adjusted net (loss) earnings available to common stockholders divided by average | |||||||||||||||||||
| tangible common equity. | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| Adjusted Return on Average | September 30, | June 30, | September 30, | September 30, | |||||||||||||||
| Tangible Common Equity | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| (Loss) earnings before income taxes | $ | (26,566 | ) | $ | (264,443 | ) | $ | 175,182 | $ | (1,551,349 | ) | $ | 500,417 | ||||||
| Add: Goodwill impairment | – | – | – | 1,376,736 | – | ||||||||||||||
| Add: Intangible asset amortization | 2,389 | 2,389 | 3,649 | 7,189 | 10,947 | ||||||||||||||
| Add: Acquisition, integration, and | |||||||||||||||||||
| reorganization costs | 9,925 | 12,394 | – | 30,833 | – | ||||||||||||||
| Less: Legal recovery | (14,500 | ) | – | – | (14,500 | ) | – | ||||||||||||
| Add: Loan fair value loss adjustments | – | 170,971 | – | 170,971 | – | ||||||||||||||
| Add: Unfunded commitments fair value | |||||||||||||||||||
| loss adjustments | – | 106,767 | – | 106,767 | – | ||||||||||||||
| Add: Civic loan sale charge-offs | – | 22,446 | – | 22,446 | – | ||||||||||||||
| Adjusted (loss) earnings before | |||||||||||||||||||
| income taxes | (28,752 | ) | 50,524 | 178,831 | 149,093 | 511,364 | |||||||||||||
| Adjusted income tax expense (1) | (3,479 | ) | 12,783 | 44,529 | 57,699 | 128,864 | |||||||||||||
| Adjusted (loss) net earnings | (25,273 | ) | 37,741 | 134,302 | 91,394 | 382,500 | |||||||||||||
| Less: Preferred stock dividends | 9,947 | 9,947 | 9,392 | 29,841 | 9,392 | ||||||||||||||
| Adjusted net (loss) earnings available | |||||||||||||||||||
| to common stockholders | $ | (35,220 | ) | $ | 27,794 | $ | 124,910 | $ | 61,553 | $ | 373,108 | ||||||||
| Average stockholders’ equity | $ | 2,480,710 | $ | 2,719,372 | $ | 4,011,179 | $ | 3,060,696 | $ | 3,837,609 | |||||||||
| Less: Average intangible assets | 25,499 | 27,824 | 1,441,689 | 476,721 | 1,445,332 | ||||||||||||||
| Less: Average preferred stock | 498,516 | 498,516 | 498,516 | 498,516 | 213,698 | ||||||||||||||
| Average tangible common equity | $ | 1,956,695 | $ | 2,193,032 | $ | 2,070,974 | $ | 2,085,459 | $ | 2,178,579 | |||||||||
| Adjusted return on average tangible | |||||||||||||||||||
| common equity (2) | (7.14 | )% | 5.08 | % | 23.93 | % | 3.95 | % | 22.90 | % | |||||||||
| (1) Effective tax rates of 12.1%, 25.3%, and 24.9% used for three months ended September 30, 2023, June 30, 2023, and | |||||||||||||||||||
| September 30, 2022. | |||||||||||||||||||
| Adjusted effective tax rate of 38.7% used to normalize the effect of goodwill impairment for nine months ended | |||||||||||||||||||
| September 30, 2023; effective tax rate of 25.2% used for nine months ended September 30, 2022. | |||||||||||||||||||
| (2) Annualized adjusted net (loss) earnings available to common stockholders divided by average | |||||||||||||||||||
| tangible common equity. | |||||||||||||||||||
| Tangible Common Equity Ratio/ | |||||||||||||||||||
| Tangible Book Value Per | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||
| Common Share | 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||||||
| Stockholders’ equity | $ | 2,399,277 | $ | 2,533,195 | $ | 2,771,477 | $ | 3,950,531 | $ | 3,875,945 | |||||||||
| Less: Preferred stock | 498,516 | 498,516 | 498,516 | 498,516 | 498,516 | ||||||||||||||
| Total common equity | 1,900,761 | 2,034,679 | 2,272,961 | 3,452,015 | 3,377,429 | ||||||||||||||
| Less: Intangible assets | 24,192 | 26,581 | 28,970 | 1,408,117 | 1,439,746 | ||||||||||||||
| Tangible common equity | $ | 1,876,569 | $ | 2,008,098 | $ | 2,243,991 | $ | 2,043,898 | $ | 1,937,683 | |||||||||
| Total assets | $ | 36,877,833 | $ | 38,337,250 | $ | 44,302,981 | $ | 41,228,936 | $ | 41,404,592 | |||||||||
| Less: Intangible assets | 24,192 | 26,581 | 28,970 | 1,408,117 | 1,439,746 | ||||||||||||||
| Tangible assets | $ | 36,853,641 | $ | 38,310,669 | $ | 44,274,011 | $ | 39,820,819 | $ | 39,964,846 | |||||||||
| Equity to assets ratio | 6.51 | % | 6.61 | % | 6.26 | % | 9.58 | % | 9.36 | % | |||||||||
| Tangible common equity ratio (1) | 5.09 | % | 5.24 | % | 5.07 | % | 5.13 | % | 4.85 | % | |||||||||
| Book value per common share (2) | $ | 15.84 | $ | 16.93 | $ | 18.90 | $ | 28.71 | $ | 28.07 | |||||||||
| Tangible book value per common share (3) | $ | 15.64 | $ | 16.71 | $ | 18.66 | $ | 17.00 | $ | 16.11 | |||||||||
| Common shares outstanding | 119,967,984 | 120,169,012 | 120,244,214 | 120,222,057 | 120,314,023 | ||||||||||||||
| (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. | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| Adjusted Earnings, Earnings Per | September 30, | June 30, | September 30, | September 30, | |||||||||||||||
| Share, and Return on Average Assets | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||
| (Loss) earnings before income taxes | $ | (26,566 | ) | $ | (264,443 | ) | $ | 175,182 | $ | (1,551,349 | ) | $ | 500,417 | ||||||
| Add: Goodwill impairment | – | – | – | 1,376,736 | – | ||||||||||||||
| Add: Acquisition, integration, and | |||||||||||||||||||
| reorganization costs | 9,925 | 12,394 | – | 30,833 | – | ||||||||||||||
| Add: Loan fair value loss adjustments | – | 170,971 | – | 170,971 | – | ||||||||||||||
| Add: Unfunded commitments fair value | |||||||||||||||||||
| loss adjustments | – | 106,767 | – | 106,767 | – | ||||||||||||||
| Add: Civic loan sale charge-offs | – | 22,446 | – | 22,446 | – | ||||||||||||||
| Less: Legal recovery | (14,500 | ) | – | – | (14,500 | ) | – | ||||||||||||
| Adjusted (loss) earnings before | |||||||||||||||||||
| income taxes | (31,141 | ) | 48,135 | 175,182 | 141,904 | 500,417 | |||||||||||||
| Adjusted income tax expense (1) | (3,768 | ) | 12,178 | 43,566 | 54,917 | 126,313 | |||||||||||||
| Adjusted (loss) earnings | (27,373 | ) | 35,957 | 131,616 | 86,987 | 374,104 | |||||||||||||
| Less: Preferred stock dividends | (9,947 | ) | (9,947 | ) | (9,392 | ) | (29,841 | ) | (9,392 | ) | |||||||||
| Adjusted (loss) earnings available to | |||||||||||||||||||
| common stockholders | (37,320 | ) | 26,010 | 122,224 | 57,146 | 364,712 | |||||||||||||
| Less: Earnings allocated to unvested | |||||||||||||||||||
| restricted stock | 374 | (313 | ) | (2,331 | ) | (249 | ) | (6,721 | ) | ||||||||||
| Adjusted (loss) earnings allocated | |||||||||||||||||||
| to common shares | $ | (36,946 | ) | $ | 25,697 | $ | 119,893 | $ | 56,897 | $ | 357,991 | ||||||||
| Weighted average shares outstanding | 118,558 | 118,255 | 117,786 | 118,250 | 117,567 | ||||||||||||||
| Adjusted diluted (loss) earnings per | |||||||||||||||||||
| common share (2) | $ | (0.31 | ) | $ | 0.22 | $ | 1.02 | $ | 0.48 | $ | 3.04 | ||||||||
| Average assets | $ | 37,807,758 | $ | 43,040,329 | $ | 40,841,272 | $ | 41,187,428 | $ | 40,255,665 | |||||||||
| Adjusted return on average assets (3) | (0.29 | )% | 0.34 | % | 1.28 | % | 0.28 | % | 1.24 | % | |||||||||
| (1) Effective tax rates of 12.1%, 25.3%, and 24.9% used for three months ended September 30, 2023, June 30, 2023, and | |||||||||||||||||||
| September 30, 2022. | |||||||||||||||||||
| Adjusted effective tax rate of 38.7% used to normalize the effect of goodwill impairment for nine months ended | |||||||||||||||||||
| September 30, 2023; effective tax rate of 25.2% used for nine months ended September 30, 2022. | |||||||||||||||||||
| (2) Adjusted (loss) earnings allocated to common shares divided by weighted average shares outstanding. | |||||||||||||||||||
| (3) Annualized adjusted (loss) earnings divided by average assets. | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||||||
| Adjusted Efficiency Ratio | 2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Noninterest expense | $ | 201,103 | $ | 320,437 | $ | 195,618 | $ | 2,094,543 | $ | 546,689 | |||||||||
| Less: Intangible asset amortization | 2,389 | 2,389 | 3,649 | 7,189 | 10,947 | ||||||||||||||
| Less: Foreclosed assets expense | |||||||||||||||||||
| (income), net | (609 | ) | 2 | (248 | ) | (244 | ) | (3,629 | ) | ||||||||||
| Less: Goodwill impairment | – | – | – | 1,376,736 | – | ||||||||||||||
| Less: Acquisition, integration, and | |||||||||||||||||||
| reorganization costs | 9,925 | 12,394 | – | 30,833 | – | ||||||||||||||
| Noninterest expense used for | |||||||||||||||||||
| efficiency ratio | 189,398 | 305,652 | 192,217 | 680,029 | 539,371 | ||||||||||||||
| Less: Unfunded commitments fair value | |||||||||||||||||||
| loss adjustments | – | 106,767 | – | 106,767 | – | ||||||||||||||
| Noninterest expense used for | |||||||||||||||||||
| adjusted efficiency ratio | $ | 189,398 | $ | 198,885 | $ | 192,217 | $ | 573,262 | $ | 539,371 | |||||||||
| Net interest income (tax equivalent) | $ | 130,729 | $ | 186,076 | $ | 338,558 | $ | 598,421 | $ | 979,010 | |||||||||
| Noninterest income (loss) | 43,808 | (128,082 | ) | 38,619 | (47,883 | ) | 93,783 | ||||||||||||
| Net revenues | 174,537 | 57,994 | 377,177 | 550,538 | 1,072,793 | ||||||||||||||
| Less: Gain (loss) on sale of securities | – | – | 86 | – | (1,019 | ) | |||||||||||||
| Net revenues used for efficiency ratio | 174,537 | 57,994 | 377,091 | 550,538 | 1,073,812 | ||||||||||||||
| Less: Legal recovery | (14,500 | ) | – | – | (14,500 | ) | – | ||||||||||||
| Add: Loan fair value loss adjustments | – | 170,971 | – | 170,971 | – | ||||||||||||||
| Net revenues used for adjusted | |||||||||||||||||||
| efficiency ratio | $ | 160,037 | $ | 228,965 | $ | 377,091 | $ | 707,009 | $ | 1,073,812 | |||||||||
| Efficiency ratio (1) | 108.5 | % | 527.0 | % | 51.0 | % | 123.5 | % | 50.2 | % | |||||||||
| Adjusted efficiency ratio (2) | 118.3 | % | 86.9 | % | 51.0 | % | 81.1 | % | 50.2 | % | |||||||||
| (1) Noninterest expense used for efficiency ratio divided by net revenues used for efficiency ratio. | |||||||||||||||||||
| (2) Noninterest expense used for adjusted efficiency ratio divided by net revenues used for adjusted efficiency ratio. | |||||||||||||||||||
| Non-GAAP Adjustment | Location on Income Statement | |
| Legal recovery | Other income | |
| Loan fair value loss adjustments | (Loss) gain on sale of loans and leases/LOCOM HFS adjustment | |
| Civic loan sale charge-offs | Provision for credit losses | |
| Acquisition, integration, and reorganization costs | Acquisition, integration, and reorganization costs | |
| Unfunded commitments fair value loss adjustments | Other expense |
| CONTACTS | |
| Kevin L. Thompson Executive Vice President, Chief Financial Officer 303.802.8934 |
William J. Black Executive Vice President, Strategy and Corporate Development 919.597.7466 |
