PacWest Bancorp Announces Results for the Fourth Quarter and Calendar Year 2014

Fourth Quarter of 2014 Highlights

  • Net Earnings of $71.0 Million, or $0.69 Per Diluted Share; Adjusted Net Earnings of $68.2 Million, or $0.66 Per Diluted Share
  • Core Net Interest Margin at 5.52%
  • $307.5 Million of Loan and Lease Growth in the Quarter Driven by $950.4 Million of Production
  • Demand Deposits Increased $88.9 Million in the Quarter and are 25% of Total Deposits
  • Core Deposits Increased $128.6 Million in the Quarter and are 52% of Total Deposits

Calendar Year 2014 Highlights

  • Net Earnings of $168.9 Million, or $1.92 Per Diluted Share; Adjusted Net Earnings of $220.4 Million, or $2.50 Per Diluted Share
  • Core Net Interest Margin at 5.60%
  • $684.0 Million of Organic Loan and Lease Growth in the Year Driven by $3.0 Billion of Production
  • Demand Deposits Increased $612.9 Million
  • Organic Core Deposit Growth of $700.3 Million

LOS ANGELES, Jan. 22, 2015 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq:PACW) today announced net earnings for the fourth quarter of 2014 of $71.0 million, or $0.69 per diluted share, compared to net earnings for the third quarter of 2014 of $62.3 million, or $0.60 per diluted share. Net earnings for calendar year 2014 are $168.9 million, or $1.92 per diluted share, compared to net earnings of $45.1 million for calendar year 2013, or $1.08 per diluted share. The significant increase in annual net earnings is largely the result of the CapitalSource merger that closed on April 7, 2014.

When certain income and expense items described below are excluded, adjusted net earnings are $68.2 million, or $0.66 per diluted share, for the fourth quarter of 2014 and $67.2 million, or $0.65 per diluted share, for the third quarter of 2014. Adjusted net earnings are $220.4 million, or $2.50 per diluted share, for calendar year 2014 and $77.5 million, or $1.86 per diluted share, for calendar year 2013.

Matt Wagner, President and CEO, commented, "2014 was truly a transformative year for the Company with the completion of the CapitalSource merger on April 7. We more than doubled our asset size and combined a national lending platform with our California-based deposit franchise. Our teams originated $3.0 billion of loans and leases in 2014 and increased core deposits by $700 million, of which $265 million are new accounts from CapitalSource division borrowers. Our 2014 net earnings almost quadrupled to $168.9 million from $45.1 million in 2013, and our adjusted net earnings for 2014 almost tripled to $220.4 million from $77.5 million in 2013. These strong operating results allowed us to distribute more than $114 million of cash dividends to our stockholders in 2014, with last quarter's regular cash dividend being increased 100% to $0.50 per share."

Mr. Wagner continued, "Our loan and lease portfolio has been diversified along product and geographical lines, and overall credit quality has improved as demonstrated by a 1.09% nonperforming asset ratio and a 92% coverage ratio on nonaccruals. The Company's capital position remains quite strong, with tangible capital at 12.2%. We steadily improved tangible book value per share, which increased $4.44 per share during the year and reached $17.17 per share at year end. Overall, the Company and the Bank are well positioned for continued success."

Vic Santoro, Executive Vice President and CFO, stated "Our fourth quarter results are equally as good as those for the full year. Reported and adjusted net earnings of $71.0 million and $68.2 million resulted in returns on tangible equity of 16.0% and 15.4%. Our core net interest margin remains quite strong at 5.52%, and our NIM, when adjusted for all the effects of purchase accounting, increased to 5.10% in the fourth quarter. We continue to closely control operating expenses as shown by the adjusted efficiency ratio, which declined to 42.3% in the fourth quarter. Our focus in 2015 will continue to be on loan and lease growth, core deposit growth and expense control."

FINANCIAL HIGHLIGHTS

At or For the Three Months Ended At or For the Year Ended
December 31, September 30, December 31,
2014 2014 Change 2014 2013 Change
(Dollars in thousands, except per share data)
Financial Highlights: (1)
Total Assets $ 16,234,800 $ 15,938,345 $ 296,455 $ 16,234,800 $ 6,533,363 $ 9,701,437
Loans and Leases, Net of Deferred Fees $ 11,882,432 $ 11,574,885 $ 307,547 $ 11,882,432 $ 4,312,352 $ 7,570,080
Total Deposits $ 11,755,128 $ 11,523,437 $ 231,691 $ 11,755,128 $ 5,280,987 $ 6,474,141
Net Earnings $ 70,999 $ 62,271 $ 8,728 $ 168,905 $ 45,115 $ 123,790
Diluted Earnings Per Share $ 0.69 $ 0.60 $ 0.09 $ 1.92 $ 1.08 $ 0.84
Annualized Return on Average Assets 1.77% 1.57% 0.20 1.27% 0.74% 0.53
Adjusted Net Earnings (2) $ 68,200 $ 67,235 $ 965 $ 220,403 $ 77,466 $ 142,937
Adjusted Diluted Earnings Per Share (2) $ 0.66 $ 0.65 $ 0.01 $ 2.50 $ 1.86 $ 0.64
Annualized Adjusted Return on Average Assets (2) 1.70% 1.70% -- 1.65% 1.27% 0.38
Annualized Return on Average Tangible Equity (2) 16.00% 14.36% 1.64 11.88% 8.25% 3.63
Annualized Adjusted Return on Average Tangible Equity (2) 15.37% 15.50% (0.13) 15.51% 14.17% 1.34
Noninterest-Bearing Deposits as Percentage of Total Deposits 25% 25% -- 25% 44% (19)
Core Deposits as a Percentage of Total Deposits 52% 52% -- 52% 88% (36)
Tangible Common Equity Ratio (2) 12.20% 12.24% (0.04) 12.20% 9.24% 2.96
Tangible Book Value Per Share (2) $ 17.17 $ 16.86 $ 0.31 $ 17.17 $ 12.73 $ 4.44
Net Interest Margin 5.86% 5.78% 0.08 5.95% 5.37% 0.58
Core Net Interest Margin (2) 5.52% 5.64% (0.12) 5.60% 5.29% 0.31
Efficiency Ratio 44.5% 46.6% (2.1) 58.0% 76.4% (18.4)
Adjusted Efficiency Ratio (2) 42.3% 43.4% (1.1) 44.7% 60.6% (15.9)
Annualized Operating Expense as Percentage of Average Assets 2.00% 2.09% (0.09) 2.20% 3.13% (0.93)
(1) Includes the acquisition of First California Financial Group, Inc. on May 31, 2013 and CapitalSource Inc. on April 7, 2014.
(2) Non-GAAP measure

ADJUSTED NET EARNINGS

In evaluating its earnings, the Company removes certain items to arrive at adjusted net earnings and adjusted diluted earnings per share, as detailed below:

Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
2014 2014 2013 2014 2013
(Dollars in thousands)
Reported net earnings $ 70,999 $ 62,271 $ 3,109 $ 168,905 $ 45,115
Less: Tax benefit on discontinued operations (47) (3) (240) (1,114) (258)
Add: Tax expense on continuing operations 42,226 42,205 9,135 113,853 30,003
Reported pre-tax earnings 113,178 104,473 12,004 281,644 74,860
Add: Acquisition, integration, reorganization and severance costs 7,381 5,193 16,673 101,016 40,812
Less: FDIC loss sharing expense, net (4,360) (7,415) (10,593) (31,730) (26,172)
Gain on sale of loans and leases 7 973 683 601 1,791
(Loss) gain on securities -- -- (272) 4,841 5,359
Covered OREO (expense) income, net (176) (452) 594 1,172 1,833
Gain on sale of owned office building -- -- -- 1,570 --
Adjusted pre-tax earnings before accelerated discount accretion 125,088 116,560 38,265 406,206 132,861
Less: Accelerated discount accretion resulting from payoffs of acquired loans 11,421 4,501 1,434 38,867 4,393
Adjusted pre-tax earnings 113,667 112,059 36,831 367,339 128,468
Tax expense (1) (45,467) (44,824) (14,622) (146,936) (51,002)
Adjusted net earnings $ 68,200 $ 67,235 $ 22,209 $ 220,403 $ 77,466
Annualized adjusted return on average assets 1.70% 1.70% 1.33% 1.65% 1.27%
Adjusted diluted earnings per share $ 0.66 $ 0.65 $ 0.49 $ 2.50 $ 1.86
(1) Effective tax rates of 40.0% in 2014 periods and 39.7% in 2013 periods.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased $6.2 million to $195.0 million for the fourth quarter of 2014 compared to $188.8 million for the third quarter of 2014 due to higher accelerated discount accretion resulting from early payoffs of acquired loans. Net interest margin ("NIM") for the fourth quarter of 2014 was 5.86% compared to 5.78% for the third quarter of 2014, and loan yield was 6.76% compared to 6.68% for the third quarter of 2014. The increase in the NIM and loan yield are both due to higher accelerated discount accretion from early payoffs of acquired loans. Accelerated accretion resulting from early payoffs of acquired loans was $11.4 million in the fourth quarter (39 basis points on the loan and lease yield) compared to $4.5 million in the third quarter (16 basis points on the loan and lease yield), an increase of $6.9 million.

The total cost of deposits increased to 0.34% from 0.30% in the prior quarter due primarily to a lower amount of premium accretion on the time deposits acquired in the CapitalSource merger. The outflow of maturing higher-rate time deposits, and the retention of a portion of these deposits at current rates, resulted in the decline in the weighted average contractual rate of time deposits to 0.75% at December 31 from 0.80% at September 30.

Net interest margin information is presented in the following table for the periods indicated:

Three Months Ended
December 31, September 30,
Net Interest Margin 2014 2014
(In thousands)
Average Assets:
Loans and leases $ 11,586,573 $ 11,285,689
Investment securities 1,591,839 1,584,811
Deposits in financial institutions 26,971 99,276
Average interest-earning assets 13,205,383 12,969,776
Other assets 2,687,378 2,746,763
Average total assets $ 15,892,761 $ 15,716,539
Average Liabilities:
Interest-bearing deposits $ 8,679,599 $ 8,778,642
Borrowings 214,053 96,711
Subordinated debentures 433,859 434,625
Average interest-bearing liabilities 9,327,511 9,309,978
Noninterest-bearing demand deposits 2,900,388 2,778,260
Other liabilities 164,571 163,182
Average total liabilities 12,392,470 12,251,420
Average stockholders' equity 3,500,291 3,465,119
Average liabilities and stockholders' equity $ 15,892,761 $ 15,716,539
Average time deposits $ 5,427,687 $ 5,680,732
Average total deposits $ 11,579,987 $ 11,556,902
Average funding sources $ 12,227,899 $ 12,088,238
Yield on:
Average loans and leases 6.76% 6.68%
Average investment securities 3.04% 3.09%
Average interest-earning assets 6.30% 6.19%
Cost of:
Average total deposits 0.34% 0.30%
Average time deposits 0.60% 0.51%
Average interest-bearing deposits 0.46% 0.40%
Average borrowings 0.27% 0.30%
Average subordinated debentures 4.20% 4.21%
Average interest-bearing liabilities 0.63% 0.58%
Average funding sources 0.48% 0.44%
Net interest rate spread 5.67% 5.61%
Net interest margin 5.86% 5.78%

The NIM and loan and lease yield are impacted by volatility caused by accelerated accretion of acquisition discounts resulting from early payoffs of acquired loans. The effects of this item are shown in the following table for the periods indicated:

Three Months Ended Three Months Ended
December 31, 2014 September 30, 2014
Loan and Loan and
NIM Lease Yield NIM Lease Yield
Reported 5.86% 6.76% 5.78% 6.68%
Less: Accelerated accretion of acquisition discounts resulting from acquired loan payoffs (0.34)% (0.39)% (0.14)% (0.16)%
Core (non-GAAP measure) 5.52% 6.37% 5.64% 6.52%

The impact on the NIM from all purchase accounting items is detailed in the table below for the period indicated:

Three Months Ended Three Months Ended
December 31, 2014 September 30, 2014
Impact on Impact on
Amount NIM Amount NIM
(Dollars in thousands)
Net interest income/NIM as reported $ 194,983 5.86% $ 188,846 5.78%
Less: Accelerated accretion of acquisition discounts from early acquired loan payoffs (11,421) (0.34)% (4,501) (0.14)%
Remaining accretion of Non-PCI loan acquisition discounts (13,073) (0.39)% (15,072) (0.46)%
Amortization of TruPS discount 1,401 0.04% 1,402 0.04%
Accretion of time deposits premium (2,469) (0.07)% (5,081) (0.16)%
(25,562) (0.76)% (23,252) (0.72)%
Net interest income/NIM excluding purchase accounting $ 169,421 5.10% $ 165,594 5.06%

Noninterest Income

Noninterest income decreased by $3.6 million to $12.7 million for the fourth quarter of 2014 compared to $16.3 million for the third quarter of 2014 due mostly to lower other commissions and fees, lower dividends and gains on equity investments and lower foreign currency translation net gains, offset by lower FDIC loss sharing expense. The decrease in other commissions and fees is due to lower prepayment fees and other loan-related fees. Dividends and gains on equity investments and foreign currency translation net gains tend to fluctuate from period to period based upon dividends received, sales of equity investments and the movement of the U.S. Dollar against various foreign currencies. FDIC loss sharing expense decreased $3.1 million due mostly to lower amortization of the FDIC loss sharing asset as one of the Bank's loss sharing agreements reached the end of its initial indemnification period during the previous quarter.

The following table presents details of noninterest income for the periods indicated:

Three Months Ended
December 31, September 30, Increase
Noninterest Income 2014 2014 (Decrease)
(In thousands)
Service charges on deposit accounts $ 2,787 $ 2,725 $ 62
Other commissions and fees 4,556 6,371 (1,815)
Leased equipment income 5,382 5,615 (233)
Gain on sale of loans and leases 7 973 (966)
FDIC loss sharing expense, net (4,360) (7,415) 3,055
Other income:
Dividends and realized gains on equity investments 1,924 3,625 (1,701)
Foreign currency translation net gains 854 2,253 (1,399)
Income recognized on early repayment of leases 294 510 (216)
Other 1,259 1,657 (398)
Total noninterest income $ 12,703 $ 16,314 $ (3,611)

The following table presents the details of FDIC loss sharing expense for the periods indicated:

Three Months Ended
December 31, September 30, Increase
FDIC Loss Sharing Expense, Net 2014 2014 (Decrease)
(In thousands)
Loss on FDIC loss sharing asset $ (525) $ (1,735) $ 1,210
FDIC loss sharing asset amortization, net (3,795) (6,074) 2,279
Net reimbursement from FDIC for covered OREOs 63 491 (428)
Other (103) (97) (6)
FDIC loss sharing expense, net $ (4,360) $ (7,415) $ 3,055

Noninterest Expense

Noninterest expense decreased by $3.3 million to $92.3 million for the fourth quarter of 2014 compared to $95.6 million for the third quarter of 2014. The decrease was due mostly to lower foreclosed assets expense of $2.9 million and lower operating expenses of $2.7 million, offset by higher acquisition, integration, reorganization and severance costs of $2.2 million. The decrease in foreclosed assets expense was mostly due to lower write-downs on existing properties.

Operating expenses decreased to $79.9 million for the fourth quarter of 2014 compared to $82.6 million for the third quarter of 2014 due to decreases in other expenses and other professional services. Other expenses decreased due to lower loan-related expenses related to origination and work-out activities and the prior quarter included an accrual for loan-related litigation. Other professional services decreased due to lower legal and consulting expenses.

The following table presents details of noninterest expense for the periods indicated:

Three Months Ended
December 31, September 30, Increase
Noninterest Expense 2014 2014 (Decrease)
(In thousands)
Compensation $ 45,930 $ 45,861 $ 69
Occupancy 10,745 11,188 (443)
Data processing 4,050 3,929 121
Other professional services 3,181 3,687 (506)
Insurance and assessments 3,115 3,020 95
Intangible asset amortization 1,619 1,608 11
Other expense:
Loan expense 2,365 3,711 (1,346)
Communications 1,141 1,369 (228)
Other 7,772 8,275 (503)
Total operating expense 79,918 82,648 (2,730)
Leased equipment depreciation 3,103 2,961 142
Foreclosed assets expense, net 1,938 4,827 (2,889)
Acquisition, integration, reorganization and severance costs 7,381 5,193 2,188
Total noninterest expense $ 92,340 $ 95,629 $ (3,289)

Income Taxes

Our overall effective income tax rate was 37.3% for the fourth quarter of 2014 and 40.4% for the third quarter of 2014.

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Total loans and leases increased $307.5 million in the fourth quarter to $11.9 billion at December 31, 2014. The loan and lease growth in the fourth quarter represents an annualized growth rate of 11%.

The following table presents a roll forward of the loan and lease portfolio for the periods indicated:

Three Months Ended
December 31, September 30,
Loan and Lease Roll Forward (1) 2014 2014
(In thousands)
Beginning balance $ 11,574,885 $ 11,190,105
Loans and leases originated and purchased 950,385 974,658
Existing loans and leases:
Principal repayments, net (2) (620,799) (535,758)
Loan and lease sales (6,388) (13,039)
Transfers to loans held for sale -- (33,125)
Transfers to foreclosed assets (9,139) --
Charge-offs (6,512) (7,956)
Ending balance $ 11,882,432 $ 11,574,885
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.
(2) Includes principal repayments on existing loans, changes in revolving lines of credit (repayments and draws) and other changes within the loan portfolio.

The following table presents a roll forward of the loan and lease portfolio by segment for the period indicated:

Three Months Ended December 31, 2014
Community National
Loan and Lease Roll Forward by Segment Banking Lending Total
(In thousands)
Beginning balance $ 3,482,125 $ 8,092,760 $ 11,574,885
Loans and leases originated and purchased 121,817 828,568 950,385
Existing loans and leases:
Principal repayments, net (181,219) (439,580) (620,799)
Loan and lease sales (6,246) (142) (6,388)
Transfers to foreclosed assets (9,139) -- (9,139)
Charge-offs (6,209) (303) (6,512)
Ending balance $ 3,401,129 $ 8,481,303 $ 11,882,432
Weighted average rate on originations 5.09% 5.76% 5.67%

The following table presents the composition of our loan and lease portfolio as of the dates indicated:

December 31, September 30,
Loan and Lease Portfolio 2014 2014
(In thousands)
Real estate mortgage:
Hospitality $ 570,634 $ 530,628
SBA 380,890 357,923
Commercial real estate 2,428,794 2,492,883
Healthcare real estate 1,030,851 1,006,164
Multi-family 774,710 811,234
Other 411,123 514,283
Total real estate mortgage 5,597,002 5,713,115
Real estate construction:
Residential 96,749 72,881
Commercial 217,297 218,389
Total real estate construction 314,046 291,270
Commercial:
Collateralized 439,567 429,011
Unsecured 131,939 127,150
Asset-based 1,794,907 1,594,488
Cash flow 2,486,411 2,341,511
Equipment finance 969,489 928,460
SBA 47,304 41,129
Total commercial 5,869,617 5,461,749
Consumer 101,767 108,751
Total loans and leases, net of deferred fees $ 11,882,432 $ 11,574,885

Energy-Related Credit Exposure

At December 31, 2014, we had 45 outstanding loan and lease relationships totaling $288.0 million to borrowers broadly involved in the energy industry. The obligors under these loans and leases either conduct mining, quarrying, oil and gas extraction or provide industrial support services to such types of businesses. The collateral for these loans and leases primarily includes equipment, such as drilling and mining equipment and transportation vehicles, used directly and indirectly in these activities. At December 31, 2014, four of these loans totaling $6.8 million were on nonaccrual status. These loans and leases are subject to our normal review procedures and allowance for credit losses methodology.

Deposits

The following table presents the composition of our deposit portfolio as of the dates indicated:

December 31, 2014 September 30, 2014
% of % of
Deposit Category Amount Total Amount Total
(Dollars in thousands)
Noninterest-bearing demand deposits $ 2,931,352 25% $ 2,842,488 25%
Interest checking deposits 732,196 6% 683,014 6%
Money market deposits 1,709,068 15% 1,721,563 15%
Savings deposits 762,961 6% 759,893 6%
Total core deposits 6,135,577 52% 6,006,958 52%
Brokered non-maturity deposits 120,613 1% -- --
Total non-maturity deposits 6,256,190 53% 6,006,958 52%
Time deposits under $100,000 2,467,338 21% 2,267,013 20%
Time deposits of $100,000 and over 3,031,600 26% 3,249,466 28%
Total time deposits 5,498,938 47% 5,516,479 48%
Total deposits $ 11,755,128 100% $ 11,523,437 100%

At December 31, 2014, core deposits totaled $6.1 billion, or 52% of total deposits, and noninterest-bearing demand deposits, which totaled $2.9 billion, were 25% of total deposits. Core deposits obtained from CapitalSource Division borrowers totaled $264.8 million at December 31, 2014, of which $246.1 million were noninterest-bearing.

The following table summarizes the maturities of our time deposits as of the date indicated:

December 31, 2014
Time Deposits Time Deposits Total Estimated
Under $100,000 Time Contractual Effective
Time Deposit Maturities $100,000 or More Deposits Rate Rate
(Dollars in thousands)
Due in three months or less $ 618,024 $ 767,160 $ 1,385,184 0.70% 0.61%
Due in over three months through six months 608,290 700,199 1,308,489 0.70% 0.64%
Due in over six months through twelve months 1,007,390 1,257,397 2,264,787 0.75% 0.71%
Due in over 12 months through 24 months 176,125 248,533 424,658 1.01% 0.88%
Due in over 24 months 57,509 58,311 115,820 0.95% 0.70%
Total $ 2,467,338 $ 3,031,600 $ 5,498,938 0.75% 0.69%
At September 30, 2014 $ 2,267,013 $ 3,249,466 $ 5,516,479 0.80% 0.69%

The remaining purchase accounting premium on acquired CapitalSource time deposits was $3.6 million at December 31, 2014 with a weighted average life of 15 months.

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

We made a provision for credit losses of $2.1 million in the fourth quarter of 2014 and $5.1 million in the third quarter of 2014 in accordance with our loan methodology, which takes into consideration new loan and lease fundings, commitments to make loans and leases, and underlying credit quality trends. The fourth quarter provision is comprised of $2.7 million for Non-PCI loans and a negative provision of $0.6 million for PCI loans. The negative provision for PCI loans results from increases in expected cash flows on such loans, which have a net carrying value of $290.9 million at December 31.

The following tables show roll forwards of the allowance for credit losses for the third and fourth quarters:

Three Months Ended September 30, 2014
Non-PCI
Allowance for Credit Loans and Unfunded Total PCI
Losses Rollforward Leases Commitments Non-PCI Loans Total
(In thousands)
Beginning balance $ 65,523 $ 6,844 $ 72,367 $ 16,626 $ 88,993
Charge-offs (7,848) -- (7,848) (108) (7,956)
Recoveries 1,725 -- 1,725 -- 1,725
Net charge-offs (6,123) -- (6,123) (108) (6,231)
Provision (negative provision) 3,684 (931) 2,753 2,297 5,050
Ending balance $ 63,084 $ 5,913 $ 68,997 $ 18,815 $ 87,812
Three Months Ended December 31, 2014
Non-PCI
Allowance for Credit Loans and Unfunded Total PCI
Losses Rollforward Leases Commitments Non-PCI Loans Total
(In thousands)
Beginning balance $ 63,084 $ 5,913 $ 68,997 $ 18,815 $ 87,812
Charge-offs (1,647) -- (1,647) (4,865) (6,512)
Recoveries 6,688 -- 6,688 715 7,403
Net (charge-offs) recoveries 5,041 -- 5,041 (4,150) 891
Provision (negative provision) 2,331 398 2,729 (666) 2,063
Ending balance $ 70,456 $ 6,311 $ 76,767 $ 13,999 $ 90,766

Non-PCI loans and leases include $5.0 billion of originated loans and leases that were not obtained through acquisitions. The allowance related to these loans and leases totals $66.3 million, or 1.31% of the outstanding balance.

All acquired loans are recorded initially at their estimated fair value with such initial fair value including an estimate of credit losses. The two additional credit coverage ratios shown in the table below are presented to give an indication of overall credit risk coverage:

December 31, 2014 September 30, 2014
Non-PCI Non-PCI
Credit Risk Coverage Ratios Loans and Allowance/ Coverage Loans and Allowance/ Coverage
(Excludes PCI Loans) Leases Discount Ratio Leases Discount Ratio
(Dollars in thousands)
Ending balance $ 11,605,056 $ 76,767 0.66% $ 11,239,964 $ 68,997 0.61%
Acquired loans (6,562,267) (4,184) (1) (7,039,518) (3,038) (1)
Adjusted balance $ 5,042,789 $ 72,583 1.44% $ 4,200,446 $ 65,959 1.57%
Ending balance $ 11,605,056 $ 76,767 0.66% $ 11,239,964 $ 68,997 0.61%
Unamortized net discount 156,428 156,428 (2) 179,424 179,424 (2)
Adjusted balance $ 11,761,484 $ 233,195 1.98% $ 11,419,388 $ 248,421 2.18%
(1) Allowance attributed to $6.6 billion and $7.0 billion of acquired Non-PCI loans at December 31, 2014 and September 30, 2014, based on the allowance calculation that includes an amount for credit deterioration on acquired loans and leases since their acquisition dates.
(2) Unamortized net discount relates to $6.6 billion and $7.0 billion of acquired Non-PCI loans at December 31, 2014 and September 30, 2014, and is assigned specifically to those loans only. Such discount represents the acquisition date fair value adjustment based on market, liquidity, and interest rate risk in addition to credit risk and is being accreted to interest income over the remaining life of the respective loans.

The decrease in coverage ratios results from the combination of newly originated loans being provided for at a rate lower than the current coverage ratio and normal and accelerated accretion of unamortized discount.

CREDIT QUALITY

The following table presents our Non-PCI loan and lease credit quality metrics as of the dates indicated:

December 31, September 30,
Non-PCI Credit Quality Metrics 2014 2014
(Dollars in thousands)
Allowance for credit losses $ 76,767 $ 68,997
Nonaccrual loans and leases (1) 83,621 88,948
Classified loans and leases (2) 242,611 260,986
Performing restructured loans 35,244 34,308
Net charge-offs (recoveries) (for the quarter) (5,041) 6,123
Provision for credit losses (for the quarter) 2,729 2,753
Allowance for credit losses to loans and leases 0.66% 0.61%
Allowance for credit losses to nonaccrual loans and leases 91.8% 77.6%
Nonperforming assets to loans and leases and foreclosed assets 1.09% 1.15%
Classified loans and leases to loans and leases 2.09% 2.32%
(1) At December 31, 2014 and September 30, 2014, includes $22,899 and $24,465, respectively, of acquired loans and leases with no allowance due to fair value accounting.
(2) Classified loans and leases are those with a credit risk rating of substandard or doubtful.

The following table presents our Non-PCI nonaccrual loans and leases and accruing loans and leases past due between 30 and 89 days by portfolio segment and class as of the dates indicated:

Nonaccrual Loans and Leases Accruing and
December 31, 2014 September 30, 2014 30-89 Days Past Due
% of % of December 31, September 30,
Loan Loan 2014 2014
Balance Category Balance Category Balance Balance
(Dollars in thousands)
Real estate mortgage:
Hospitality $ 6,366 1% $ 6,451 1% $ -- $ --
SBA 11,141 3% 7,483 2% 3,339 529
Other 20,105 -- 26,575 1% 4,769 4,014
Total real estate mortgage 37,612 1% 40,509 1% 8,108 4,543
Real estate construction:
Residential 381 -- 925 1% -- --
Commercial 1,178 1% 2,703 1% -- 1,190
Total real estate construction 1,559 1% 3,628 1% -- 1,190
Commercial:
Collateralized 5,450 1% 5,165 1% 93 --
Unsecured 639 -- 226 -- 69 1
Asset-based 4,574 -- 5,003 -- -- --
Cash flow 15,964 1% 15,958 1% -- --
Equipment finance 11,131 1% 12,885 1% 2,339 --
SBA 3,207 7% 2,039 5% 26 --
Total commercial 40,965 1% 41,276 1% 2,527 1
Consumer 3,485 3% 3,535 3% 50 165
Total Non-PCI loans and leases $ 83,621 (1) 1% $ 88,948 (1) 1% $ 10,685 $ 5,899
(1) Includes leases to companies involved in the energy industry of $6.8 million and $8.5 million at December 31 and September 30, 2014, respectively. There were no energy-related leases accruing and 30-89 days past due.

The following table presents our nonperforming assets as of the dates indicated:

December 31, September 30,
Nonperforming Assets 2014 2014
(Dollars in thousands)
Nonaccrual Non-PCI loans and leases $ 83,621 $ 88,948
Nonaccrual PCI Loans(1) 25,264 27,670
Total nonaccrual loans and leases 108,885 116,618
Foreclosed assets, net 43,721 40,524
Total nonperforming assets $ 152,606 $ 157,142
Nonperforming assets to loans and leases and foreclosed assets 1.28% 1.35%
(1) Represents legacy CapitalSource borrowing relationships placed on nonaccrual status as of the acquisition date.

PCI loans, regardless of the underlying payment status of the borrower, are generally considered accruing and performing when reasonably estimable cash flows support the carrying amount of the loans. As of December 31, 2014, there are $25.3 million of PCI loans on nonaccrual status and included in the table above as the timing and amount of future cash flows is not reasonably estimable.

ABOUT PACWEST BANCORP

PacWest Bancorp is a bank holding company with over $16 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank ("Pacific Western"). Through 80 full-service branches located throughout the state of California, Pacific Western provides commercial banking services, including real estate, construction, and commercial loans, to small and medium-sized businesses. Its CapitalSource and Community Banking divisions, and its subsidiary CapitalSource Business Finance Group (formerly known as BFI Business Finance), deliver the full spectrum of financing solutions nationwide across numerous industries and property types. For more information about PacWest Bancorp, visit www.pacwestbancorp.com, or to learn more about Pacific Western Bank, visit www.pacificwesternbank.com.

FORWARD LOOKING STATEMENTS

This release contains certain "forward-looking statements" about the Company and its subsidiaries within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, strategies, goals, and projections and including statements about our expectations regarding our loan and lease portfolio growth and production, deposit growth, and operating expenses. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words "anticipate," "assume," "intend," "believe," "forecast," "expect," "estimate," "plan," "continue," "will," "should," "look forward" and similar expressions are generally intended to identify forward-looking statements. All forward-looking statements (including statements regarding future financial and operating results and future transactions and their results) involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements. Actual results could differ materially from those contained or implied by such forward-looking statements for a variety of factors, including without limitation:

  • changes in economic or competitive market conditions could negatively impact investment or lending opportunities or product pricing and services;
  • legislative or regulatory requirements or changes adversely affected the Company's business, including an increase to capital requirements;
  • loan repayments higher than expected;
  • reduced demand for our services due to strategic or regulatory reasons;
  • our inability to grow deposits and access wholesale funding sources;
  • higher than anticipated increases in operating expenses;
  • increased litigation;
  • higher asset workout or loan servicing expenses;
  • higher compensation costs and professional fees to retain and/or incent employees; and
  • other risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission ("SEC").

All forward-looking statements included in this release are based on information available at the time of the release. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise except as required by law.

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
December 31, September 30, December 31,
2014 2014 2013
(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks $ 164,757 $ 145,463 $ 96,424
Interest-earning deposits in financial institutions 148,469 115,399 50,998
Total cash and cash equivalents 313,226 260,862 147,422
Securities available-for-sale, at estimated fair value 1,567,177 1,539,681 1,494,745
Federal Home Loan Bank stock, at cost 40,609 45,602 27,939
Total investment securities 1,607,786 1,585,283 1,522,684
Non-PCI loans and leases 11,613,832 11,239,964 3,930,539
PCI loans 290,852 351,431 382,796
Total gross loans and leases 11,904,684 11,591,395 4,313,335
Deferred fees and costs (22,252) (16,510) (983)
Total loans and leases, net of deferred fees 11,882,432 11,574,885 4,312,352
Allowance for loan and lease losses (84,455) (81,899) (82,034)
Total loans and leases, net 11,797,977 11,492,986 4,230,318
Equipment leased to others under operating leases 122,506 125,119 --
Premises and equipment, net 36,551 38,368 32,435
Foreclosed assets, net 43,721 40,524 55,891
FDIC loss sharing asset 18,734 22,977 45,524
Deferred tax asset, net 284,411 331,176 79,636
Goodwill 1,720,479 1,722,129 208,743
Core deposit and customer relationship intangibles, net 17,204 18,822 17,248
Other assets 272,205 300,099 193,462
Total assets $ 16,234,800 $ 15,938,345 $ 6,533,363
LIABILITIES:
Noninterest-bearing deposits $ 2,931,352 $ 2,842,488 $ 2,318,446
Interest-bearing deposits 8,823,776 8,680,949 2,962,541
Total deposits 11,755,128 11,523,437 5,280,987
Borrowings 383,402 363,672 113,726
Subordinated debentures 433,583 433,545 132,645
Accrued interest payable and other liabilities 156,262 139,445 196,912
Total liabilities 12,728,375 12,460,099 5,724,270
STOCKHOLDERS' EQUITY (1) 3,506,425 3,478,246 809,093
Total liabilities and shareholders' equity $ 16,234,800 $ 15,938,345 $ 6,533,363
(1) Includes net unrealized gain (loss) on securities available-for-sale, net $ 26,380 $ 20,821 $ (3,347)
Book value per share $ 34.04 $ 33.76 $ 17.66
Tangible book value per share $ 17.17 $ 16.86 $ 12.73
Shares outstanding (includes unvested restricted shares of 1,108,505 at December 31, 2014, 1,115,550 at September 30, 2014 and 1,216,524 at December 31, 2013) 103,022,017 103,027,830 45,822,834
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
2014 2014 2013 2014 2013
(Dollars in thousands, except per share data)
Interest income:
Loans and leases $ 197,472 $ 189,961 $ 73,352 $ 657,097 $ 272,726
Investment securities 12,205 12,331 10,422 47,345 36,923
Deposits in financial institutions 19 64 82 333 265
Total interest income 209,696 202,356 83,856 704,775 309,914
Interest expense:
Deposits 9,972 8,822 1,450 27,332 7,868
Borrowings 144 74 86 496 537
Subordinated debentures 4,597 4,614 1,062 14,570 3,796
Total interest expense 14,713 13,510 2,598 42,398 12,201
Net interest income 194,983 188,846 81,258 662,377 297,713
Provision (negative provision) for credit losses 2,063 5,050 (1,338) 11,499 (4,210)
Net interest income after provision for credit losses 192,920 183,796 82,596 650,878 301,923
Noninterest income:
Service charges on deposit accounts 2,787 2,725 3,197 11,233 11,765
Other commissions and fees 4,556 6,371 2,125 18,602 8,416
Leased equipment income 5,382 5,615 -- 16,669 --
Gain on sale of loans and leases 7 973 683 601 1,791
(Loss) gain on securities -- -- (272) 4,841 5,359
FDIC loss sharing expense, net (4,360) (7,415) (10,593) (31,730) (26,172)
Other income 4,331 8,045 934 21,971 3,085
Total noninterest income 12,703 16,314 (3,926) 42,187 4,244
Noninterest expense:
Compensation 45,930 45,861 27,697 165,499 107,067
Occupancy 10,745 11,188 7,553 40,606 29,459
Data processing 4,050 3,929 2,216 14,618 9,494
Other professional services 3,181 3,687 1,770 11,234 6,754
Insurance and assessments 3,115 3,020 1,572 10,907 5,596
Intangible asset amortization 1,619 1,608 1,430 6,268 5,402
Other expenses 11,278 13,355 7,746 44,036 27,606
Total operating expense 79,918 82,648 49,984 293,168 191,378
Leased equipment depreciation 3,103 2,961 -- 9,159 --
Foreclosed assets expense (income), net 1,938 4,827 (569) 5,401 (1,503)
Acquisition, integration, reorganization and severance costs 7,381 5,193 16,673 101,016 40,812
Total noninterest expense 92,340 95,629 66,088 408,744 230,687
Earnings from continuing operations before taxes 113,283 104,481 12,582 284,321 75,480
Income tax expense (42,226) (42,205) (9,135) (113,853) (30,003)
Net earnings from continuing operations 71,057 62,276 3,447 170,468 45,477
Loss from discontinued operations before taxes (105) (8) (578) (2,677) (620)
Income tax benefit 47 3 240 1,114 258
Net loss from discontinued operations (58) (5) (338) (1,563) (362)
Net earnings $ 70,999 $ 62,271 $ 3,109 $ 168,905 $ 45,115
Basic and diluted earnings per share:
Net earnings from continuing operations $ 0.69 $ 0.60 $ 0.07 $ 1.94 $ 1.09
Net earnings $ 0.69 $ 0.60 $ 0.06 $ 1.92 $ 1.08
PACWEST BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
Three Months Ended
December 31, 2014 September 30, 2014 December 31, 2013
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:
PCI loans $ 311,061 $ 11,247 14.34% $ 363,049 $ 13,490 14.74% $ 384,727 $ 12,754 13.15%
Non-PCI loans and leases 11,275,512 186,225 6.55% 10,922,640 176,471 6.41% 3,916,650 60,598 6.14%
Total loans and leases 11,586,573 197,472 6.76% 11,285,689 189,961 6.68% 4,301,377 73,352 6.77%
Investment securities (1) 1,591,839 12,205 3.04% 1,584,811 12,331 3.09% 1,531,335 10,422 2.70%
Deposits in financial institutions 26,971 19 0.28% 99,276 64 0.26% 129,716 82 0.25%
Total interest-earning assets 13,205,383 209,696 6.30% 12,969,776 202,356 6.19% 5,962,428 83,856 5.58%
Other assets 2,687,378 2,746,763 670,302
Total assets $ 15,892,761 $ 15,716,539 $ 6,632,730
Liabilities and Stockholders' Equity:
Interest checking $ 702,498 194 0.11% $ 605,288 86 0.06% $ 627,256 83 0.05%
Money market 1,788,341 932 0.21% 1,733,445 908 0.21% 1,512,369 654 0.17%
Savings 761,073 572 0.30% 759,177 575 0.30% 220,331 14 0.03%
Time 5,427,687 8,274 0.60% 5,680,732 7,253 0.51% 694,924 699 0.40%
Total interest-bearing deposits 8,679,599 9,972 0.46% 8,778,642 8,822 0.40% 3,054,880 1,450 0.19%
Borrowings 214,053 144 0.27% 96,711 74 0.30% 9,861 86 3.46%
Subordinated debentures 433,859 4,597 4.20% 434,625 4,614 4.21% 132,560 1,062 3.18%
Total interest-bearing liabilities 9,327,511 14,713 0.63% 9,309,978 13,510 0.58% 3,197,301 2,598 0.32%
Noninterest-bearing demand deposits 2,900,388 2,778,260 2,397,642
Other liabilities 164,571 163,182 218,852
Total liabilities 12,392,470 12,251,420 5,813,795
Stockholders' equity 3,500,291 3,465,119 818,935
Total liabilities and stockholders' equity $ 15,892,761 $ 15,716,539 $ 6,632,730
Net interest income $ 194,983 $ 188,846 $ 81,258
Net interest spread 5.67% 5.61% 5.26%
Net interest margin 5.86% 5.78% 5.41%
Total deposits (2) $ 11,579,987 $ 9,972 0.34% $ 11,556,902 $ 8,822 0.30% $ 5,452,522 $ 1,450 0.11%
Funding sources (3) $ 12,227,899 $ 14,713 0.48% $ 12,088,238 $ 13,510 0.44% $ 5,594,943 $ 2,598 0.18%
 
(1) The tax equivalent yield on investment securities was 3.45%, 3.47%, and 3.14% for the three months ended December 31, 2014, September 30, 2014, and December 31, 2013.
(2) Total deposits is the sum of interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.
(3) Funding sources is the sum of interest-bearing liabilities and noninterest-bearing demand deposits. The cost of funding sources is calculated as annualized total interest expense divided by average funding sources.
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER BALANCE SHEET
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks $ 164,757 $ 145,463 $ 243,583 $ 113,508 $ 96,424
Interest-earning deposits in financial institutions 148,469 115,399 119,782 228,579 50,998
Total cash and cash equivalents 313,226 260,862 363,365 342,087 147,422
Securities available-for-sale 1,567,177 1,539,681 1,552,115 1,477,473 1,494,745
Federal Home Loan Bank stock, at cost 40,609 45,602 49,983 25,000 27,939
Total investment securities 1,607,786 1,585,283 1,602,098 1,502,473 1,522,684
Non-PCI loans and leases 11,613,832 11,239,964 10,802,053 3,828,569 3,930,539
PCI loans 290,852 351,431 398,471 332,516 382,796
Total gross loans and leases 11,904,684 11,591,395 11,200,524 4,161,085 4,313,335
Deferred fees and costs (22,252) (16,510) (10,419) (18) (983)
Total loans and leases, net of deferred fees 11,882,432 11,574,885 11,190,105 4,161,067 4,312,352
Allowance for loan and lease losses (84,455) (81,899) (82,149) (81,180) (82,034)
Total loans and leases, net 11,797,977 11,492,986 11,107,956 4,079,887 4,230,318
Equipment leased to others under operating leases 122,506 125,119 127,289 -- --
Premises and equipment, net 36,551 38,368 40,440 29,908 32,435
Foreclosed assets, net 43,721 40,524 53,821 50,895 55,891
FDIC loss sharing asset 18,734 22,977 28,834 34,628 45,524
Deferred tax asset, net 284,411 331,176 342,105 72,683 79,636
Goodwill 1,720,479 1,722,129 1,725,153 208,743 208,743
Core deposit and customer relationship intangibles, net 17,204 18,822 20,431 15,884 17,248
Other assets 272,205 300,099 273,374 180,665 193,462
Total assets $ 16,234,800 $ 15,938,345 $ 15,684,866 $ 6,517,853 $ 6,533,363
LIABILITIES:
Noninterest-bearing deposits $ 2,931,352 $ 2,842,488 $ 2,701,434 $ 2,391,609 $ 2,318,446
Interest-bearing deposits 8,823,776 8,680,949 8,966,363 2,977,799 2,962,541
Total deposits 11,755,128 11,523,437 11,667,797 5,369,408 5,280,987
Borrowings 383,402 363,672 4,596 5,748 113,726
Subordinated debentures 433,583 433,545 434,878 132,790 132,645
Accrued interest payable and other liabilities 156,262 139,445 139,663 176,205 196,912
Total liabilities 12,728,375 12,460,099 12,246,934 5,684,151 5,724,270
STOCKHOLDERS' EQUITY (1) 3,506,425 3,478,246 3,437,932 833,702 809,093
Total liabilities and shareholders' equity $ 16,234,800 $ 15,938,345 $ 15,684,866 $ 6,517,853 $ 6,533,363
(1) Includes net unrealized gain (loss) on securities available-for-sale, net $ 26,380 $ 20,821 $ 20,121 $ 6,825 $ (3,347)
Book value per share $ 34.04 $ 33.76 $ 33.37 $ 18.21 $ 17.66
Tangible book value per share $ 17.17 $ 16.86 $ 16.43 $ 13.31 $ 12.73
Shares outstanding (includes unvested restricted shares) 103,022,017 103,027,830 103,033,449 45,777,580 45,822,834
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
(Dollars in thousands, except per share data)
Interest income:
Loans and leases $ 197,472 $ 189,961 $ 192,201 $ 77,463 $ 73,352
Investment securities 12,205 12,331 11,986 10,823 10,422
Deposits in financial institutions 19 64 176 74 82
Total interest income 209,696 202,356 204,363 88,360 83,856
Interest expense:
Deposits 9,972 8,822 7,313 1,225 1,450
Borrowings 144 74 199 79 86
Subordinated debentures 4,597 4,614 4,318 1,041 1,062
Total interest expense 14,713 13,510 11,830 2,345 2,598
Net interest income 194,983 188,846 192,533 86,015 81,258
Provision (negative provision) for credit losses 2,063 5,050 5,030 (644) (1,338)
Net interest income after provision for credit losses 192,920 183,796 187,503 86,659 82,596
Noninterest income:
Service charges on deposit accounts 2,787 2,725 2,719 3,002 3,197
Other commissions and fees 4,556 6,371 5,743 1,932 2,125
Leased equipment income 5,382 5,615 5,672 -- --
Gain (loss) on sale of loans and leases 7 973 (485) 106 683
Gain (loss) on securities -- -- 89 4,752 (272)
FDIC loss sharing expense, net (4,360) (7,415) (8,525) (11,430) (10,593)
Other income 4,331 8,045 3,266 6,329 934
Total noninterest income 12,703 16,314 8,479 4,691 (3,926)
Noninterest expense:
Compensation 45,930 45,861 45,081 28,627 27,697
Occupancy 10,745 11,188 11,078 7,595 7,553
Data processing 4,050 3,929 4,099 2,540 2,216
Other professional services 3,181 3,687 2,843 1,523 1,770
Insurance and assessments 3,115 3,020 3,179 1,593 1,572
Intangible asset amortization 1,619 1,608 1,677 1,364 1,430
Other expenses 11,278 13,355 12,115 7,288 7,746
Total operating expense 79,918 82,648 80,072 50,530 49,984
Leased equipment depreciation 3,103 2,961 3,095 -- --
Foreclosed assets expense (income), net 1,938 4,827 497 (1,861) (569)
Acquisition, integration, reorganization and severance costs 7,381 5,193 86,242 2,200 16,673
Total noninterest expense 92,340 95,629 169,906 50,869 66,088
Earnings from continuing operations before taxes 113,283 104,481 26,076 40,481 12,582
Income tax expense (42,226) (42,205) (14,846) (14,576) (9,135)
Net earnings from continuing operations 71,057 62,276 11,230 25,905 3,447
Loss from discontinued operations before taxes (105) (8) (1,151) (1,413) (578)
Income tax benefit 47 3 476 588 240
Net loss from discontinued operations (58) (5) (675) (825) (338)
Net earnings $ 70,999 $ 62,271 $ 10,555 $ 25,080 $ 3,109
Basic and diluted earnings per share:
Net earnings from continuing operations $ 0.69 $ 0.60 $ 0.11 $ 0.57 $ 0.07
Net earnings $ 0.69 $ 0.60 $ 0.10 $ 0.55 $ 0.06
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
At or For the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
(Dollars in thousands)
Performance Ratios - GAAP:
Annualized return on average assets 1.77% 1.57% 0.28% 1.56% 0.19%
Annualized return on average equity 8.05% 7.13% 1.31% 12.40% 1.51%
Yield on loans and leases 6.76% 6.68% 7.34% 7.42% 6.77%
Yield on interest-earning assets 6.30% 6.19% 6.62% 6.11% 5.58%
Cost of total deposits 0.34% 0.30% 0.26% 0.09% 0.11%
Cost of time deposits 0.60% 0.51% 0.42% 0.31% 0.40%
Cost of interest-bearing liabilities 0.63% 0.58% 0.52% 0.30% 0.32%
Cost of funding sources 0.48% 0.44% 0.41% 0.17% 0.18%
Net interest rate spread 5.67% 5.61% 6.10% 5.81% 5.26%
Net interest margin 5.86% 5.78% 6.24% 5.95% 5.41%
Annualized operating expense as a percentage of average assets 2.00% 2.09% 2.14% 3.15% 2.99%
Annualized noninterest expense as a percentage of average assets 2.31% 2.41% 4.53% 3.17% 3.95%
Efficiency ratio 44.5% 46.6% 84.5% 56.1% 85.5%
Performance Ratios - Non-GAAP:
Annualized adjusted return on average assets 1.70% 1.70% 1.67% 1.38% 1.33%
Annualized adjusted return on average equity 7.73% 7.70% 7.79% 10.98% 10.76%
Annualized return on average tangible equity 16.00% 14.36% 2.65% 17.10% 2.11%
Annualized adjusted return on average tangible equity 15.37% 15.50% 15.79% 15.13% 15.05%
Core net interest margin 5.52% 5.64% 5.74% 5.42% 5.31%
Adjusted efficiency ratio 42.3% 43.4% 43.1% 57.1% 58.1%
Average Balances:
Average loans and leases $ 11,586,573 $ 11,285,689 $ 10,500,521 $ 4,231,319 $ 4,301,377
Average interest-earning assets 13,205,383 12,969,776 12,383,464 5,862,695 5,962,428
Average total assets 15,892,761 15,716,539 15,037,101 6,513,376 6,632,730
Average noninterest-bearing deposits 2,900,388 2,778,260 2,546,540 2,374,325 2,397,642
Average interest-bearing deposits 8,679,599 8,778,642 8,629,482 2,968,994 3,054,880
Average total deposits 11,579,987 11,556,902 11,176,022 5,343,319 5,452,522
Average borrowings and subordinated debentures 647,912 531,336 449,865 150,872 142,421
Average interest-bearing liabilities 9,327,511 9,309,978 9,079,347 3,119,866 3,197,301
Average funding sources 12,227,899 12,088,238 11,625,887 5,494,191 5,594,943
Average stockholders' equity 3,500,291 3,465,119 3,233,018 820,248 818,935
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
At or For the Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
(Dollars in thousands)
Non-PCI Credit Quality:
Allowance for credit losses to loans and leases 0.66% 0.61% 0.67% 1.75% 1.73%
Allowance for credit losses to nonaccrual loans and leases 92% 78% 75% 115% 145%
Nonaccrual loans and leases to loans and leases 0.72% 0.79% 0.90% 1.52% 1.19%
Nonperforming assets to loans and leases and foreclosed assets 1.09% 1.15% 1.39% 2.81% 2.58%
Nonperforming assets to total assets 0.78% 0.81% 0.96% 1.67% 1.57%
Trailing twelve month net charge-offs to average loans and leases 0.02% 0.09% 0.05% 0.13% 0.12%
PacWest Bancorp Consolidated Capital Ratios:
Tier 1 leverage capital ratio 12.34% 12.17% 12.40% 11.73% 11.22%
Tier 1 risk-based capital ratio 13.16% 13.24% 13.15% 16.16% 15.12%
Total risk-based capital ratio 16.07% 16.24% 16.25% 17.42% 16.38%
Tangible common equity ratio (non-GAAP measure) 12.20% 12.24% 12.14% 9.68% 9.24%
Pacific Western Bank Capital Ratios:
Tier 1 leverage capital ratio 11.70% 11.74% 11.71% 10.88% 10.79%
Tier 1 risk-based capital ratio 12.46% 12.74% 12.58% 15.00% 14.54%
Total risk-based capital ratio 13.16% 13.44% 13.32% 16.25% 15.80%
Tangible common equity ratio (non-GAAP measure) 11.51% 11.60% 11.40% 10.92% 10.88%
PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
2014 2014 2013 2014 2013
(Dollars in thousands, except per share data)
Basic Earnings Per Share:
Net earnings from continuing operations $ 71,057 $ 62,276 $ 3,447 $ 170,468 $ 45,477
Less: earnings allocated to unvested restricted stock (1) (810) (685) (280) (1,959) (1,096)
Net earnings from continuing operations allocated to common shares 70,247 61,591 3,167 168,509 44,381
Net earnings from discontinued operations allocated to common shares (57) (5) (338) (1,545) (348)
Net earnings allocated to common shares $ 70,190 $ 61,586 $ 2,829 $ 166,964 $ 44,033
Weighted-average basic shares and unvested restricted stock outstanding 103,045 103,029 46,069 87,871 42,506
Less: weighted-average unvested restricted stock outstanding (1,132) (1,117) (1,743) (1,018) (1,683)
Weighted-average basic shares outstanding 101,913 101,912 44,326 86,853 40,823
Basic earnings per share:
Net earnings from continuing operations $ 0.69 $ 0.60 $ 0.07 $ 1.94 $ 1.09
Net earnings from discontinued operations -- -- (0.01) (0.02) (0.01)
Net earnings $ 0.69 $ 0.60 $ 0.06 $ 1.92 $ 1.08
Diluted Earnings Per Share:
Net earnings from continuing operations allocated to common shares $ 70,247 $ 61,591 $ 3,167 $ 168,509 $ 44,381
Net earnings from discontinued operations allocated to common shares (57) (5) (338) (1,545) (348)
Net earnings allocated to common shares $ 70,190 $ 61,586 $ 2,829 $ 166,964 $ 44,033
Weighted-average basic shares outstanding 101,913 101,912 44,326 86,853 40,823
Diluted earnings per share:
Net earnings from continuing operations $ 0.69 $ 0.60 $ 0.07 $ 1.94 $ 1.09
Net earnings from discontinued operations -- -- (0.01) (0.02) (0.01)
Net earnings $ 0.69 $ 0.60 $ 0.06 $ 1.92 $ 1.08
 
(1) Represents cash dividends paid to holders of unvested stock, net of estimated forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any.

GAAP TO NON-GAAP RECONCILIATION

This press release contains certain non-GAAP financial disclosures for adjusted net earnings, adjusted return on average assets, adjusted return on average equity, return on average tangible equity, adjusted return on average tangible equity, tangible common equity amounts and ratios, tangible book value per share, adjusted efficiency ratio, core net interest margin, and operating expense as a percentage of average assets. The Company uses certain 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:

  • Adjusted net earnings - as analysts and investors view this measure as an indicator of the Company's ability to both generate earnings and absorb credit losses, we disclose this amount in addition to net earnings.
  • Adjusted return on average assets, adjusted return on average equity, return on average tangible equity, adjusted return on average tangible equity, tangible common equity amounts and ratios, and tangible book value per share - given that the use of these measures is prevalent among banking regulators, investors and analysts, we disclose them in addition to return on average assets, return on average equity, equity-to-assets ratio, and book value per share, respectively.
  • Adjusted efficiency ratio - we disclose this measure in addition to efficiency ratio as it shows the trend in recurring overhead-related noninterest expense relative to recurring net revenues.

Please refer to the tables on the following pages for a presentation of performance ratios in accordance with GAAP and a reconciliation of the non-GAAP financial measures to the GAAP financial measures.

PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
Three Months Ended Year Ended
Adjusted Net Earnings December 31, September 30, December 31, December 31,
and Related Ratios 2014 2014 2013 2014 2013
(Dollars in thousands)
Reported net earnings $ 70,999 $ 62,271 $ 3,109 $ 168,905 $ 45,115
Less: Tax benefit on discontinued operations (47) (3) (240) (1,114) (258)
Add: Tax expense on continuing operations 42,226 42,205 9,135 113,853 30,003
Reported pre-tax earnings 113,178 104,473 12,004 281,644 74,860
Add: Acquisition, integration, reorganization and severance costs 7,381 5,193 16,673 101,016 40,812
Less: FDIC loss sharing expense, net (4,360) (7,415) (10,593) (31,730) (26,172)
Gain on sale of loans and leases 7 973 683 601 1,791
(Loss) gain on securities -- -- (272) 4,841 5,359
Covered OREO (expense) income, net (176) (452) 594 1,172 1,833
Gain on sale of owned office building -- -- -- 1,570 --
Adjusted pre-tax earnings before accelerated discount accretion 125,088 116,560 38,265 406,206 132,861
Less: Accelerated discount accretion resulting from payoffs of acquired loans 11,421 4,501 1,434 38,867 4,393
Adjusted pre-tax earnings 113,667 112,059 36,831 367,339 128,468
Tax expense (1) (45,467) (44,824) (14,622) (146,936) (51,002)
Adjusted net earnings $ 68,200 $ 67,235 $ 22,209 $ 220,403 $ 77,466
Average assets $ 15,892,761 $ 15,716,539 $ 6,632,730 $ 13,322,388 $ 6,116,853
Average stockholders' equity $ 3,500,291 $ 3,465,119 $ 818,935 $ 2,763,726 $ 718,920
Less: Average intangible assets 1,739,977 1,744,542 233,628 1,342,286 172,096
Average tangible common equity $ 1,760,314 $ 1,720,577 $ 585,307 $ 1,421,440 $ 546,824
Annualized return on average assets (2) 1.77% 1.57% 0.19% 1.27% 0.74%
Annualized adjusted return on average assets (3) 1.70% 1.70% 1.33% 1.65% 1.27%
Annualized return on average equity (4) 8.05% 7.13% 1.51% 6.11% 6.28%
Annualized adjusted return on average equity (5) 7.73% 7.70% 10.76% 7.97% 10.78%
Annualized return on average tangible equity (6) 16.00% 14.36% 2.11% 11.88% 8.25%
Annualized adjusted return on average tangible equity (7) 15.37% 15.50% 15.05% 15.51% 14.17%
 
(1) Effective tax rates of40.0% in 2014 periods and 39.7% in 2013 periods.
(2) Annualized net earnings divided by average assets
(3) Annualized adjusted net earnings divided by average assets
(4) Annualized net earnings divided by average stockholders' equity
(5) Annualized adjusted net earnings divided by average stockholders' equity
(6) Annualized net earnings divided by average tangible common equity
(7) Annualized adjusted net earnings divided by average tangible common equity
PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
Adjusted Efficiency Ratio 2014 2014 2013 2014 2013
(Dollars in thousands)
Noninterest expense $ 92,340 $ 95,629 $ 66,088 $ 408,744 $ 230,687
Less: Acquisition, integration, reorganization and severance costs 7,381 5,193 16,673 101,016 40,812
Covered OREO expense (income), net 176 452 (594) (1,172) (1,833)
Adjusted noninterest expense $ 84,783 $ 89,984 $ 50,009 $ 308,900 $ 191,708
Net interest income $ 194,983 $ 188,846 $ 81,258 $ 662,377 $ 297,713
Noninterest income 12,703 16,314 (3,926) 42,187 4,244
Net revenues 207,686 205,160 77,332 704,564 301,957
Less: FDIC loss sharing expense, net (4,360) (7,415) (10,593) (31,730) (26,172)
Gain on sale of loans and leases 7 973 683 601 1,791
(Loss) gain on securities -- -- (272) 4,841 5,359
Gain on sale of owned office building -- -- -- 1,570 --
Accelerated discount accretion resulting from payoffs of acquired loans 11,421 4,501 1,434 38,867 4,393
Adjusted net revenues $ 200,618 $ 207,101 $ 86,080 $ 690,415 $ 316,586
Base efficiency ratio (1) 44.5% 46.6% 85.5% 58.0% 76.4%
Adjusted efficiency ratio (2) 42.3% 43.4% 58.1% 44.7% 60.6%
 
(1) Noninterest expense divided by net revenues
(2) Adjusted noninterest expense divided by adjusted net revenues
PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
December 31, September 30, June 30, March 31, December 31,
Tangible Common Equity Ratio 2014 2014 2014 2014 2013
(Dollars in thousands)
PacWest Bancorp Consolidated:
Stockholders' equity $ 3,506,425 $ 3,478,246 $ 3,437,932 $ 833,702 $ 809,093
Less: Intangible assets 1,737,683 1,740,951 1,745,584 224,627 225,991
Tangible common equity $ 1,768,742 $ 1,737,295 $ 1,692,348 $ 609,075 $ 583,102
Total assets $ 16,234,800 $ 15,938,345 $ 15,684,866 $ 6,517,853 $ 6,533,363
Less: Intangible assets 1,737,683 1,740,951 1,745,584 224,627 225,991
Tangible assets $ 14,497,117 $ 14,197,394 $ 13,939,282 $ 6,293,226 $ 6,307,372
Equity to assets ratio 21.60% 21.82% 21.92% 12.79% 12.38%
Tangible common equity ratio (1) 12.20% 12.24% 12.14% 9.68% 9.24%
Book value per share $ 34.04 $ 33.76 $ 33.37 $ 18.21 $ 17.66
Tangible book value per share (2) $ 17.17 $ 16.86 $ 16.43 $ 13.31 $ 12.73
Shares outstanding 103,022,017 103,027,830 103,033,449 45,777,580 45,822,834
Pacific Western Bank:
Stockholders' equity $ 3,379,074 $ 3,357,138 $ 3,298,908 $ 910,644 $ 911,200
Less: Intangible assets 1,737,682 1,740,951 1,745,584 224,627 225,991
Tangible common equity $ 1,641,392 $ 1,616,187 $ 1,553,324 $ 686,017 $ 685,209
Total assets $ 15,995,914 $ 15,675,486 $ 15,376,440 $ 6,507,288 $ 6,523,742
Less: Intangible assets 1,737,682 1,740,951 1,745,584 224,627 225,991
Tangible assets $ 14,258,232 $ 13,934,535 $ 13,630,856 $ 6,282,661 $ 6,297,751
Equity to assets ratio 21.12% 21.42% 21.45% 13.99% 13.97%
Tangible common equity ratio 11.51% 11.60% 11.40% 10.92% 10.88%
 
(1) Tangible common equity divided by tangible assets
(2) Tangible common equity divided by shares outstanding

CONTACT: Matthew P. Wagner President and CEO 10250 Constellation Boulevard, Suite 1640 Los Angeles, CA 90067 Phone: 310-728-1020 Fax: 310-201-0498 Victor R. Santoro Executive Vice President and CFO 10250 Constellation Boulevard, Suite 1640 Los Angeles, CA 90067 Phone: 310-728-1021 Fax: 310-201-0498Source:PacWest Bancorp