×

PacWest Bancorp Announces Results for the Third Quarter 2016 and $400 Million Stock Repurchase Authorization

Highlights

  • Net Earnings of $93.9 Million, or $0.77 Per Diluted Share
  • New Loan and Lease Production of $1.1 Billion for the Quarter; $101 Million of Net Loan Growth
  • Core Deposit Increase of $599 Million during the Quarter Representing 77% of Total Deposits
  • Tax Equivalent Net Interest Margin of 5.26%; Core Tax Equivalent Net Interest Margin of 5.08%

LOS ANGELES, Oct. 18, 2016 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq:PACW) today announced net earnings for the third quarter of 2016 of $93.9 million, or $0.77 per diluted share, compared to net earnings for the second quarter of 2016 of $82.2 million, or $0.68 per diluted share. The increase in net earnings was due to the elimination of FDIC loss sharing expense, a lower provision for credit losses and a lower effective tax rate as compared to the second quarter of 2016.

Matt Wagner, President and CEO, commented, “We are very pleased with our strong third quarter results which produced a return on assets of 1.77% and a return on tangible equity of 16.15%. While the current quarter benefited from lower credit costs and a lower effective tax rate, we continue to demonstrate our sustained earning power.”

Patrick Rusnak, Executive Vice President and CFO stated, “Our third quarter core tax equivalent NIM, which excludes accelerated accretion, decreased three basis points to 5.08% and our NIM excluding all purchase accounting items decreased two basis points to 4.98%. We are pleased with how our NIM has held up during this sustained period of low interest rates.”

Mr. Rusnak continued, “Third quarter loan growth fell below expectations due largely to dramatically higher prepayments in our healthcare real estate portfolio, which totaled approximately $200 million for the quarter, resulting from both refinancings and property sales. The solid originations from other lending groups, in particular Venture Banking and Construction, give us confidence that future-period loan growth will return to more normalized levels. Although nonaccrual loans increased due to the migration of a single, classified loan to nonaccrual status, total classified loans and leases decreased on a linked quarter basis as several previously classified loans paid off in full.”

Mr. Wagner continued, “Over the past few years we have significantly strengthened our company through execution on a strategy focused on profitable growth and prudent risk management. This performance, our initial DFAST stress test submission and robust capital levels have allowed the Board to authorize a stock repurchase program which provides another tool to actively manage capital levels and facilitate improved shareholder returns.”

FINANCIAL HIGHLIGHTS

At or For the Three Months Ended At or For the Nine Months Ended
September 30, June 30, September 30,
2016
2016
Change 2016
2015
Change
(Dollars in thousands, except per share data)
Financial Highlights
Net Earnings $93,895 $82,168 $11,727 $266,519 $227,778 $38,741
Diluted Earnings Per Share $0.77 $0.68 $0.09 $2.19 $2.21 $(0.02)
Return on Average Assets 1.77% 1.57% 0.20 1.69% 1.85% (0.16)
Return on Average
Tangible Equity (1) 16.15% 14.61% 1.54 15.74% 16.82% (1.08)
Net Interest Margin
(tax equivalent) 5.26% 5.33% (0.07) 5.37% 5.76% (0.39)
Core Net Interest Margin
(tax equivalent) (1) 5.08% 5.11% (0.03) 5.09% 5.31% (0.22)
Efficiency Ratio 40.1% 40.6% (0.5) 39.7% 38.1% 1.6
Total Assets $21,315,291 $21,147,139 $168,152 $21,315,291 $16,814,105 $4,501,186
Loans and Leases, Net
of Deferred Fees $14,742,846 $14,641,460 $101,386 $14,742,846 $12,452,205 $2,290,641
Noninterest-Bearing
Deposits $6,521,946 $6,222,696 $299,250 $6,521,946 $3,508,682 $3,013,264
Core Deposits $12,010,639 $11,411,992 $598,647 $12,010,639 $6,815,252 $5,195,387
Total Deposits $15,645,668 $15,148,009 $497,659 $15,645,668 $12,115,763 $3,529,905
Noninterest-Bearing
Deposits as Percentage
of Total Deposits 42% 41% 1 42% 29% 13
Core Deposits as
Percentage of Total
Deposits 77% 75% 2 77% 56% 21
Tangible Common Equity
Ratio (1) 12.19% 12.12% 0.07 12.19% 12.21% (0.02)
Tangible Book Value Per
Share (1) $19.12 $18.83 $0.29 $19.12 $17.86 $1.26
(1) Non-GAAP measure.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased by $0.9 million to $234.6 million in the third quarter of 2016 compared to $233.8 million in the second quarter of 2016 due to the combination of higher average loan and lease balances, higher nonaccrual interest recoveries and one additional day in the period offset by lower discount accretion on acquired loans and a lower loan and lease yield. Total accretion on acquired loans was $14.2 million in the third quarter of 2016 (39 basis points on the loan and lease yield) compared to $16.2 million in the second quarter of 2016 (45 basis points on the loan and lease yield). The loan and lease yield for the third quarter of 2016 was 6.17% compared to 6.24% for the second quarter of 2016. The decrease in the loan and lease yield was due to the lower accretion on acquired loans and a lower yield on new production relative to the current portfolio yield. Excluding accelerated accretion, the core loan and lease yield was 5.94% in the third quarter compared to 5.97% in the second quarter.

The tax equivalent NIM for the third quarter of 2016 was 5.26% compared to 5.33% for the second quarter of 2016. The decrease in the NIM was mostly due to lower accretion on acquired loans. Such accretion contributed 31 basis points to the NIM in the third quarter of 2016 and 36 basis points to the NIM in the second quarter of 2016. Excluding accelerated accretion, the core tax equivalent NIM was 5.08% for the third quarter compared to 5.11% for the second quarter.

Included in net interest income for the third quarter of 2016 was $3.0 million of interest resulting from the payoff in full of a nonperforming loan. This recovery contributed seven basis points to the third quarter 2016 NIM and eight basis points of loan and lease yield for the third quarter of 2016.

The cost of total deposits decreased to 0.19% in the third quarter from 0.20% in the second quarter due to a lower average cost and balance of time deposits.

The tax equivalent NIM and loan and lease yield are impacted by volatility in accelerated accretion of acquisition discounts due to the prepayment of acquired loans and leases. The effects of this item are shown in the following table for the periods indicated:

Three Months Ended Three Months Ended
September 30, 2016 June 30, 2016
Loan and Loan and
NIMLease Yield NIMLease Yield
Reported 5.26% 6.17% 5.33% 6.24%
Less:Accelerated accretion of acquisition
discounts from early payoffs of
acquired loans (0.18)% (0.23)% (0.22)% (0.27)%
Core 5.08% 5.94% 5.11% 5.97%

The impact on the tax equivalent net interest income and NIM from all purchase accounting items is set forth in the table below for the periods indicated:

Three Months Ended Three Months Ended
September 30, 2016 June 30, 2016
Impact on Impact on
AmountNIM AmountNIM
(Dollars in thousands)
Net interest income/NIM$239,473 5.26% $238,667 5.33%
Less:Accelerated accretion of acquisition
discounts from early payoffs of
acquired loans (8,226) (0.18)% (9,780) (0.22)%
Remaining accretion of Non-PCI loan
acquisition discounts (5,997) (0.13)% (6,407) (0.14)%
Total accretion of loan acquisition
discounts (14,223) (0.31)% (16,187) (0.36)%
Amortization of TruPS discount 1,391 0.03% 1,393 0.03%
Accretion of time deposits premium (121) 0.00% (172) 0.00%
(12,953) (0.28)% (14,966) (0.33)%
Net interest income/NIM - excluding purchase
accounting$226,520 4.98% $223,701 5.00%

Noninterest Income

Noninterest income increased by $4.8 million to $26.9 million for the third quarter of 2016 compared to $22.1 million for the second quarter of 2016 due mostly to a $6.5 million decrease in FDIC loss sharing expense and a $1.5 million increase in other commissions and fees offset by decreases in dividends and gains on equity investments and foreign currency translation net gains. The lower FDIC loss sharing expense was due to the early termination of all FDIC loss share agreements for which a $6.0 million pre-tax charge was recognized in the second quarter. Other commissions and fees increased due to higher prepayment and other loan-related fees. These items were offset by lower dividends and gains on equity investments of $1.8 million and lower foreign currency translation net gains of $0.5 million.

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

Three Months Ended
September 30, June 30, Increase
Noninterest Income 2016 2016 (Decrease)
(In thousands)
Service charges on deposit accounts$3,488 $3,633 $(145)
Other commissions and fees 12,528 11,073 1,455
Leased equipment income 8,538 8,523 15
Gain on sale of loans and leases 157 388 (231)
Gain on securities 382 478 (96)
FDIC loss sharing expense, net - (6,502) 6,502
Other income:
Dividends and realized gains on equity investments 377 2,185 (1,808)
Foreign currency translation net (losses) gains (224) 324 (548)
Other 1,674 2,019 (345)
Total noninterest income$26,920 $22,121 $4,799

Noninterest Expense

Noninterest expense increased by $0.6 million to $110.7 million for the third quarter of 2016 compared to $110.1 million for the second quarter of 2016. The expense category with the highest increase was other professional services, which increased $1.2 million primarily due to higher legal expense.

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

Three Months Ended
September 30, June 30, Increase
Noninterest Expense 2016 2016 (Decrease)
(In thousands)
Compensation$62,661 $62,174 $487
Occupancy 12,010 12,193 (183)
Data processing 6,234 5,644 590
Other professional services 4,625 3,401 1,224
Insurance and assessments 4,324 4,951 (627)
Intangible asset amortization 4,224 4,371 (147)
Leased equipment depreciation 5,298 5,286 12
Foreclosed assets income, net (248) (3) (245)
Other expense:
Loan expense 1,931 2,145 (214)
Other 9,651 9,919 (268)
Total noninterest expense$110,710 $110,081 $629

Income Taxes

The overall effective income tax rate was 34.1% in the third quarter of 2016 and 37.7% in the second quarter of 2016. The effective rate for the third quarter was lower due to certain discrete items associated with completion of the 2015 tax returns. The expected effective tax rate for the full year 2016 is approximately 37.5%.

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Total loans and leases increased by $101.4 million in the third quarter to $14.7 billion at September 30, 2016. The net increase was driven by third quarter originations and purchases of $1.1 billion, offset partially by principal repayments of $932.9 million.

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

Three Months Ended
September 30, June 30,
Loan and Lease Roll Forward (1) 2016 2016
(Dollars in thousands)
Beginning balance$14,641,460 $14,483,517
New production 1,071,943 931,423
Existing loans and leases:
Principal repayments, net (2) (932,863) (720,003)
Loan and lease sales (27,239) (51,597)
Charge-offs (10,455) (1,880)
Ending balance$14,742,846 $14,641,460
Weighted average rate on new production 5.11% 4.82%
(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), loan participation sales and other changes within the loan portfolio.

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

September 30, June 30, March 31, September 30,
Loan and Lease Portfolio2016
2016
2016
2015
(In thousands)
Real estate mortgage:
Commercial$4,327,565 $4,519,209 $4,640,419 $4,512,489
Residential 1,242,253 1,164,784 1,149,998 1,177,302
Total real estate mortgage 5,569,818 5,683,993 5,790,417 5,689,791
Real estate construction and land:
Commercial 510,831 417,144 308,192 229,904
Residential 323,104 281,788 269,965 145,262
Total real estate construction and land 833,935 698,932 578,157 375,166
Total real estate loans 6,403,753 6,382,925 6,368,574 6,064,957
Commercial:
Cash flow 3,071,606 3,048,439 3,173,424 2,980,650
Asset-based 2,573,437 2,683,913 2,589,598 2,381,706
Venture capital 1,766,510 1,666,352 1,507,788 -
Equipment finance 670,783 646,940 733,228 894,777
Total commercial 8,082,336 8,045,644 8,004,038 6,257,133
Consumer 256,757 212,891 110,905 130,115
Total loans and leases, net of
deferred fees$14,742,846 $14,641,460 $14,483,517 $12,452,205
Total unfunded loan commitments$4,156,147 $3,888,686 $3,812,554 $2,022,046

Loan growth in the third quarter came primarily from the construction, venture capital and consumer portfolios. These same portfolios also accounted for most of the growth in our unfunded commitments during the quarter.

Deposits and Client Investment Funds

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

September 30, June 30, March 31, September 30,
Deposit Category 2016 2016 2016 2015
(Dollars in thousands)
Noninterest-bearing demand deposits$6,521,946 $6,222,696 $6,139,963 $3,508,682
Interest checking deposits 1,184,350 1,035,395 921,189 693,632
Money market deposits 3,532,050 3,392,811 3,144,843 1,860,983
Savings deposits 772,293 761,090 764,323 751,955
Total core deposits 12,010,639 11,411,992 10,970,318 6,815,252
Brokered non-maturity deposits 1,082,114 972,820 985,784 713,215
Total non-maturity deposits 13,092,753 12,384,812 11,956,102 7,528,467
Time deposits under $100,000 1,180,428 1,114,074 1,357,598 1,951,938
Time deposits of $100,000 and over 1,372,487 1,649,123 2,127,675 2,635,358
Total time deposits 2,552,915 2,763,197 3,485,273 4,587,296
Total deposits$15,645,668 $15,148,009 $15,441,375 $12,115,763
Noninterest-bearing demand deposits
as percentage of total deposits 42% 41% 40% 29%
Core deposits as percentage of total deposits 77% 75% 71% 56%

At September 30, 2016, core deposits totaled $12.0 billion, or 77% of total deposits, including $6.5 billion of noninterest-bearing demand deposits, or 42% of total deposits.

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Square 1 Asset Management, Inc. (“S1AM”), our registered investment advisor subsidiary, and third-party sweep products. Total client investment funds at September 30, 2016 were $1.4 billion, of which $1.1 billion was managed by S1AM.

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

A provision for credit losses of $8.5 million was recorded in the third quarter of 2016 compared to $13.9 million in the second quarter of 2016. The third quarter provision consisted of $8.0 million for non-purchased credit impaired (“Non-PCI”) loans and leases and $0.5 million for PCI loans. The allowance for Non-PCI credit losses to Non-PCI loans and leases coverage ratio increased to 1.05% at September 30, 2016 from 1.03% at June 30, 2016.

The following tables show roll forwards of the allowance for credit losses for the periods indicated:

Three Months Ended September 30, 2016
Non-PCI
Allowance for Credit Loans and Unfunded Total PCI
Losses RollforwardLeases Commitments Non-PCI Loans Total
(In thousands)
Beginning balance$132,000 $17,944 $149,944 $11,289 $161,233
Charge-offs (9,924) - (9,924) (531) (10,455)
Recoveries 6,050 - 6,050 - 6,050
Net charge-offs (3,874) - (3,874) (531) (4,405)
Provision 8,621 (621) 8,000 471 8,471
Ending balance$136,747 $17,323 $154,070 $11,229 $165,299
Three Months Ended June 30, 2016
Non-PCI
Allowance for Credit Loans and Unfunded Total PCI
Losses RollforwardLeases Commitments Non-PCI Loans Total
(In thousands)
Beginning balance$120,807 $17,569 $138,376 $9,554 $147,930
Charge-offs (1,712) - (1,712) (168) (1,880)
Recoveries 1,280 - 1,280 - 1,280
Net charge-offs (432) - (432) (168) (600)
Provision 11,625 375 12,000 1,903 13,903
Ending balance$132,000 $17,944 $149,944 $11,289 $161,233

The lower third quarter 2016 provision was due in part to a $4.8 million increase in recoveries of previously charged off loans. The third quarter 2016 Non-PCI charge-offs included $9.7 million of loans and leases that had specific reserves in the allowance for credit losses at June 30, 2016.

All acquired loans are recorded initially at their estimated fair value including an estimate of credit losses. The table below presents two alternative views of credit risk coverage ratios for Non-PCI loans reflecting adjustments for acquired loans and leases and associated purchase accounting discounts:

September 30, 2016 June 30, 2016
Non-PCI Adjusted Non-PCI Non-PCI
Allowance for Credit LossesLoans andAllowance/Coverage Loans andAllowance/Coverage
to Loans and LeasesLeasesDiscountRatio LeasesDiscountRatio
(Dollars in thousands)
Adjustment for -
Acquired loans and leases
and related allowance:
Ending balance$14,686,206 $154,070 1.05% $14,566,425 $149,944 1.03%
Acquired loans and allowance (4,612,787) (46,039) (1) (5,131,674) (37,440) (1)
Adjusted balance$10,073,419 $108,031 1.07% $9,434,751 $112,504 1.19%
Adjustment for -
Unamortized net discount on
acquired loans and leases:
Ending balance$14,686,206 $154,070 1.05% $14,566,425 $149,944 1.03%
Unamortized net discount 53,041 53,041 (2) 65,391 65,391 (2)
Adjusted balance$14,739,247 $207,111 1.41% $14,631,816 $215,335 1.47%
(1) Allowance attributed to $4.6 billion and $5.1 billion of acquired Non-PCI loans at September 30, 2016 and June 30, 2016,
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 $4.6 billion and $5.1 billion of acquired Non-PCI loans at September 30, 2016 and
June 30, 2016, and is assigned specifically to those loans only. Such discount represents the acquisition date fair value
adjustment based on market, liquidity, interest rate risk and credit risk and is being accreted to interest income
over the remaining life of the respective loans using the interest method. Use of the interest method results in steadily
declining amounts being taken into income in each reporting period. The remaining discount of $53.0 million at
September 30, 2016, is expected to be substantially accreted to income by the end of 2018.

Non-PCI loans and leases at September 30, 2016 included $10.1 billion of originated loans and leases that were not obtained through acquisitions. The related allowance for loan and lease losses totaled $93.2 million, or 0.93% of the outstanding balance.

CREDIT QUALITY

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

September 30, June 30,
Non-PCI Credit Quality Metrics 2016 2016
(Dollars in thousands)
Nonaccrual loans and leases $ 171,085 $ 127,655
Classified loans and leases 417,541 441,035
Performing restructured loans 70,348 71,709
Allowance for credit losses 154,070 149,944
Net charge-offs (for the quarter) 3,874 432
Provision for credit losses (for the quarter) 8,000 12,000
Allowance for credit losses to loans and leases 1.05% 1.03%
Allowance for credit losses to nonaccrual loans
and leases 90.1% 117.5%
Nonaccrual loans and leases to loans and leases 1.16% 0.88%
Nonperforming assets to loans and leases and
foreclosed assets 1.27% 0.99%
Classified loans and leases to loans and leases 2.84% 3.03%

The increase in nonaccrual loans and leases during the third quarter of 2016 was largely the result of a classified $50 million healthcare real estate loan secured by a continuing care retirement facility which migrated to nonaccrual status due to continued weak operating performance and cash flow difficulties. This loan is current with respect to principal and interest payments as of the date of this release and the borrower is actively pursuing viable options for additional liquidity. Total classified loans and leases decreased by $23.5 million in the third quarter as resolutions, including repayment in full of four loans totaling $49.9 million, exceeded new downgrades.

Credit Exposure Affected by Low Oil Prices

At September 30, 2016, we had 14 outstanding loan and lease relationships totaling $101.7 million to borrowers involved in the oil and gas services industry, down from $116.9 million at June 30, 2016. The collateral for this credit exposure includes primarily equipment, such as drilling equipment and transportation vehicles. The reserves related to this credit exposure total approximately 14% of the related balance. At September 30, 2016, two relationships totaling $40.3 million were on nonaccrual status and were classified, down from five relationships totaling $48.5 million at June 30, 2016. The largest of these relationships had an aggregate outstanding balance of $39.9 million at September 30, 2016. Of the $8.2 million decrease in nonaccrual classified oil and gas loans in the third quarter, $6.7 million was charged off (all were fully reserved at June 30, 2016) and $1.5 million was collected.

The following table presents 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:

Non-PCI Nonaccrual Loans and Leases Non-PCI Accruing and
September 30, 2016 June 30, 2016 30-89 Days Past Due
% of % of September 30, June 30,
Loan Loan 2016 2016
AmountCategory AmountCategory Amount Amount
(Dollars in thousands)
Real estate mortgage:
Commercial$74,606 1.7% $29,183 0.7% $2,146 $2,126
Residential 5,089 0.4% 4,238 0.4% - 171
Total real estate mortgage 79,695 1.5% 33,421 0.6% 2,146 2,297
Real estate construction and land:
Commercial 1,245 0.2% - 0.0% - -
Residential 366 0.1% 368 0.1% - -
Total real estate
construction and land 1,611 0.2% 368 0.1% - -
Commercial:
Cash flow 27,831 0.9% 38,146 1.3% 21 389
Asset-based 4,044 0.2% 1,986 0.1% 6,644 -
Venture capital 10,782 0.6% 1,088 0.1% - 3,548
Equipment finance (1) 46,916 7.0% 52,432 8.1% - -
Total commercial 89,573 1.1% 93,652 1.2% 6,665 3,937
Consumer 206 0.1% 214 0.1% - -
Total Non-PCI loans and
leases$171,085 1.2% $127,655 0.9% $8,811 $6,234
(1) Includes nonaccrual leases and loans to companies involved in the oil and gas industries of $40.3 million and $48.5 million at
September 30, 2016 and June 30, 2016, respectively.

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

September 30, June 30,
Nonperforming Assets 2016 2016
(Dollars in thousands)
Nonaccrual Non-PCI loans and leases$171,085 $127,655
Nonaccrual PCI loans 3,478 2,025
Total nonaccrual loans and leases 174,563 129,680
Foreclosed assets, net 15,113 16,181
Total nonperforming assets$189,676 $145,861
Nonaccrual loans and leases to loans and leases 1.18% 0.88%
Nonperforming assets to loans and leases
and foreclosed assets 1.28% 0.99%

SALE OF BRANCHES

On October 3, 2016, the Company announced that Pacific Western Bank had entered into a definitive agreement to sell two branches to First Foundation Bank (the “Transaction”). The branches are located in Laguna Hills and Seal Beach, California (the “Branches”). As of September 30, 2016, the deposits of the Branches totaled approximately $200 million, principally comprised of time deposits. No loans are being sold in connection with the Transaction. The Transaction is expected to be completed during the fourth quarter of 2016 subject to regulatory approval and customary closing conditions.

STOCK REPURCHASE PROGRAM

On October 17, 2016, PacWest’s Board of Directors authorized a stock repurchase program (the “Stock Repurchase Program”), pursuant to which the Company may, from time to time, purchase shares of its common stock for an aggregate purchase price not to exceed $400 million. The common stock repurchases may be effected through open market purchases or in privately negotiated transactions, and may utilize any derivative or similar instrument to effect share repurchase transactions (including without limitation, accelerated share repurchase contracts, equity forward transactions, equity option transactions, equity swap transactions, cap transactions, collar transactions, floor transactions or other similar transactions or any combination of the foregoing transactions).

The Stock Repurchase Program expires on December 31, 2017. The amount and exact timing of any repurchases will depend upon market conditions and other factors. There are no assurances the Company will repurchase any shares during the period and the Stock Repurchase Program may be suspended or discontinued at any time.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $21 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (“Pacific Western”). The Bank has 79 full-service branches located throughout the state of California and one branch in Durham, North Carolina. Pacific Western provides commercial banking services, including real estate, construction, and commercial loans, and comprehensive deposit and treasury management services to small and medium-sized businesses. Pacific Western offers additional products and services under the brands of its business groups, CapitalSource and Square 1 Bank. CapitalSource provides cash flow, asset-based, equipment and real estate loans and treasury management services to established middle market businesses on a national basis. Square 1 Bank offers a comprehensive suite of financial services focused on entrepreneurial businesses and their venture capital and private equity investors, with offices located in key innovation hubs across the United States. 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 profitability, loan and lease portfolio growth, capital management, including reducing excess capital, effective tax rates, and branch sale. 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;
  • loan repayments higher than expected;
  • higher than anticipated delinquencies, charge-offs, and loan and lease losses;
  • compression of spreads on newly originated loans and leases;
  • the impact of asset/liability repricing risk and liquidity risk on net interest margin and the value of investments;
  • higher than anticipated increases in operating expenses;
  • increased costs to manage and sell foreclosed assets;
  • reduced demand for our services due to strategic or regulatory reasons;
  • our inability to grow deposits or access wholesale funding sources;
  • legislative or regulatory requirements or changes could negatively impact our business including an increase to capital requirements;
  • the need to retain capital for strategic or regulatory reasons;
  • the financial performance of the Company;
  • stock price fluctuations;
  • credit quality deterioration or pronounced and sustained reduction in market values or other economic factors which adversely affect our borrowers’ ability to repay loans and leases and/or require an increased provision for loan and lease losses;
  • changes in tax laws or regulations affecting our business;
  • tax planning or disallowance of tax benefits by tax authorities;
  • changes in tax filing jurisdictions or entity classifications;
  • our ability to obtain regulatory approvals and meet other closing conditions to the branch sale on the expected terms and schedule; 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
September 30, June 30, December 31,
2016 2016 2015
(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks$286,371 $226,471 $161,020
Interest-earning deposits in financial institutions 253,994 218,882 235,466
Total cash and cash equivalents 540,365 445,353 396,486
Securities available-for-sale, at estimated fair value 3,341,335 3,347,546 3,559,437
Federal Home Loan Bank stock, at cost 19,386 24,214 19,710
Total investment securities 3,360,721 3,371,760 3,579,147
Non-PCI loans and leases 14,686,206 14,566,425 14,339,070
PCI loans 120,221 136,901 189,095
Total gross loans and leases 14,806,427 14,703,326 14,528,165
Deferred fees, net (63,581) (61,866) (49,911)
Total loans and leases, net of deferred fees 14,742,846 14,641,460 14,478,254
Allowance for loan and lease losses (147,976) (143,289) (115,111)
Total loans and leases, net 14,594,870 14,498,171 14,363,143
Equipment leased to others under operating leases 198,931 204,062 197,452
Premises and equipment, net 38,977 38,718 39,197
Foreclosed assets, net 15,113 16,181 22,120
Deferred tax asset, net 27,073 24,413 126,389
Goodwill 2,173,949 2,175,791 2,176,291
Core deposit and customer
relationship intangibles, net 39,542 43,766 53,220
Other assets 325,750 328,924 335,045
Total assets$21,315,291 $21,147,139 $21,288,490
LIABILITIES:
Noninterest-bearing deposits$6,521,946 $6,222,696 $6,171,455
Interest-bearing deposits 9,123,722 8,925,313 9,494,727
Total deposits 15,645,668 15,148,009 15,666,182
Borrowings 541,011 918,208 621,914
Subordinated debentures 441,112 439,322 436,000
Accrued interest payable and other liabilities 144,905 128,296 166,703
Total liabilities 16,772,696 16,633,835 16,890,799
STOCKHOLDERS' EQUITY (1) 4,542,595 4,513,304 4,397,691
Total liabilities and stockholders’ equity$21,315,291 $21,147,139 $21,288,490
Book value per share$37.29 $37.05 $36.22
Tangible book value per share (2)$19.12 $18.83 $17.86
Shares outstanding 121,817,524 121,819,849 121,413,727
(1) Includes net unrealized gain on securities
available-for-sale, net$72,073 $81,744 $27,828
(2) Non-GAAP measure.


PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
2016 2016 2015 2016 2015
(Dollars in thousands, except per share data)
Interest income:
Loans and leases$ 225,370 $ 224,326 $193,539 $ 686,071 $ 599,417
Investment securities 22,187 22,420 13,955 67,154 40,720
Deposits in financial institutions 298 308 178 914 304
Total interest income 247,855 247,054 207,672 754,139 640,441
Interest expense:
Deposits 7,247 7,823 10,400 24,143 32,112
Borrowings 695 352 72 1,628 395
Subordinated debentures 5,278 5,122 4,680 15,382 13,787
Total interest expense 13,220 13,297 15,152 41,153 46,294
Net interest income 234,635 233,757 192,520 712,986 594,147
Provision for credit losses 8,471 13,903 8,746 42,514 31,709
Net interest income after provision
for credit losses 226,164 219,854 183,774 670,472 562,438
Noninterest income:
Service charges on deposit accounts 3,488 3,633 2,601 10,977 7,787
Other commissions and fees 12,528 11,073 6,376 35,090 18,895
Leased equipment income 8,538 8,523 5,475 25,305 16,232
Gain on sale of loans and leases 157 388 27 790 190
Gain on securities 382 478 655 8,970 3,744
FDIC loss sharing expense, net - (6,502) (4,449) (8,917) (13,955)
Other income 1,827 4,528 5,073 11,365 23,359
Total noninterest income 26,920 22,121 15,758 83,580 56,252
Noninterest expense:
Compensation 62,661 62,174 48,152 185,900 144,922
Occupancy 12,010 12,193 10,762 36,835 31,950
Data processing 6,234 5,644 4,322 17,782 13,032
Other professional services 4,625 3,401 3,396 11,598 9,949
Insurance and assessments 4,324 4,951 3,805 14,240 11,546
Intangible asset amortization 4,224 4,371 1,497 13,341 4,500
Leased equipment depreciation 5,298 5,286 3,162 15,608 9,368
Foreclosed assets (income) expense, net (248) (3) 4,521 (812) 2,517
Acquisition, integration and
reorganization costs - - 747 200 3,647
Other expense 11,582 12,064 9,775 36,787 28,344
Total noninterest expense 110,710 110,081 90,139 331,479 259,775
Earnings before income taxes 142,374 131,894 109,393 422,573 358,915
Income tax expense (48,479) (49,726) (39,777) (156,054) (131,137)
Net earnings$93,895 $ 82,168 $ 69,616 $ 266,519 $ 227,778
Basic and diluted earnings per share$0.77 $ 0.68 $ 0.68 $ 2.19 $ 2.21


PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
2016
2016
2015
2016
2015
(Dollars in thousands, except per share data)
Basic Earnings Per Share:
Net earnings $93,895 $82,168 $69,616 $266,519 $227,778
Less: earnings allocated to unvested
restricted stock (1) (1,048) (863) (649) (2,983) (2,213)
Net earnings allocated to common
shares $92,847 $81,305 $68,967 $263,536 $225,565
Weighted-average basic shares and
unvested restricted stock outstanding 121,818 121,799 103,048 121,739 103,038
Less: weighted-average unvested
restricted stock outstanding (1,401) (1,481) (985) (1,425) (1,055)
Weighted-average basic shares
outstanding 120,417 120,318 102,063 120,314 101,983
Basic earnings per share $0.77 $0.68 $0.68 $2.19 $2.21
Diluted Earnings Per Share:
Net earnings allocated to common
shares $92,847 $81,305 $68,967 $263,536 $225,565
Weighted-average basic shares
outstanding 120,417 120,318 102,063 120,314 101,983
Diluted earnings per share $0.77 $0.68 $0.68 $2.19 $2.21
(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.


PACWEST BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
Three Months Ended
September 30, 2016 June 30, 2016 September 30, 2015
InterestAverage InterestAverage InterestAverage
Average Income/Yield/ Average Income/Yield/ Average Income/Yield/
BalanceExpenseCost BalanceExpenseCost BalanceExpenseCost
(Dollars in thousands)
Assets:
PCI loans$ 117,781 $ 5,868 19.82% $ 147,270 $ 8,484 23.17% $ 193,094 $ 7,505 15.42%
Non-PCI loans and leases 14,417,170 219,502 6.06% 14,321,320 215,842 6.06% 11,919,787 186,034 6.19%
Total loans and leases 14,534,951 225,370 6.17% 14,468,590 224,326 6.24% 12,112,881 193,539 6.34%
Investment securities (1) 3,338,209 27,025 3.22% 3,288,819 27,330 3.34% 1,806,628 16,709 3.67%
Deposits in financial
institutions 238,425 298 0.50% 245,666 308 0.50% 278,973 178 0.25%
Total interest-earning
assets 18,111,585 252,693 5.55% 18,003,075 251,964 5.63% 14,198,482 210,426 5.88%
Other assets 2,960,468 2,996,867 2,491,695
Total assets$ 21,072,053 $ 20,999,942 $ 16,690,177
Liabilities and
Stockholders' Equity:
Interest checking$ 1,161,931 604 0.21% $ 1,024,763 501 0.20% $ 787,271 300 0.15%
Money market 4,514,525 3,303 0.29% 4,321,533 2,886 0.27% 2,417,280 1,218 0.20%
Savings 764,415 341 0.18% 766,309 412 0.22% 746,362 449 0.24%
Time 2,666,434 2,999 0.45% 3,086,492 4,024 0.52% 5,042,768 8,433 0.66%
Total interest-bearing
deposits 9,107,305 7,247 0.32% 9,199,097 7,823 0.34% 8,993,681 10,400 0.46%
Borrowings 583,982 695 0.47% 300,428 352 0.47% 70,171 72 0.41%
Subordinated debentures 439,970 5,278 4.77% 439,081 5,122 4.69% 434,420 4,680 4.27%
Total interest-bearing
liabilities 10,131,257 13,220 0.52% 9,938,606 13,297 0.54% 9,498,272 15,152 0.63%
Noninterest-bearing
demand deposits 6,274,294 6,437,720 3,486,780
Other liabilities 135,801 140,023 132,360
Total liabilities 16,541,352 16,516,349 13,117,412
Stockholders' equity 4,530,701 4,483,593 3,572,765
Total liabilities and
stockholders' equity$ 21,072,053 $ 20,999,942 $ 16,690,177
Net interest income (2) $ 239,473 $ 238,667 $ 195,274
Net interest spread (2) 5.03% 5.09% 5.25%
Net interest margin (2) 5.26% 5.33% 5.46%
Total deposits (3)$ 15,381,599 $ 7,247 0.19% $ 15,636,817 $ 7,823 0.20% $ 12,480,461 $ 10,400 0.33%
Funding sources (4)$ 16,405,551 $ 13,220 0.32% $ 16,376,326 $ 13,297 0.33% $ 12,985,052 $ 15,152 0.46%
(1) Includes tax equivalent adjustments of $4.8 million, $4.9 million, and $2.8 million for the three months ended September 30, 2016, June 30, 2016,
and September 30, 2015 related to tax exempt income on municipal securities. The federal statutory tax rate utilized was 35% for the periods.
(2) Tax equivalent.
(3) 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 deposits divided by average total deposits.
(4) Funding sources is the sum of total 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
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks$286,371 $226,471 $161,977 $161,020 $154,652
Interest-earning deposits in financial
institutions 253,994 218,882 357,541 235,466 81,642
Total cash and cash equivalents 540,365 445,353 519,518 396,486 236,294
Securities available-for-sale 3,341,335 3,347,546 3,240,586 3,559,437 1,809,364
Federal Home Loan Bank stock 19,386 24,214 17,250 19,710 17,250
Total investment securities 3,360,721 3,371,760 3,257,836 3,579,147 1,826,614
Non-PCI loans and leases 14,686,206 14,566,425 14,365,915 14,339,070 12,300,057
PCI loans 120,221 136,901 176,607 189,095 193,340
Total gross loans and leases 14,806,427 14,703,326 14,542,522 14,528,165 12,493,397
Deferred fees, net (63,581) (61,866) (59,005) (49,911) (41,192)
Total loans and leases, net of
deferred fees 14,742,846 14,641,460 14,483,517 14,478,254 12,452,205
Allowance for loan and lease losses (147,976) (143,289) (130,361) (115,111) (103,271)
Total loans and leases, net 14,594,870 14,498,171 14,353,156 14,363,143 12,348,934
Equipment leased to others under
operating leases 198,931 204,062 205,163 197,452 161,508
Premises and equipment, net 38,977 38,718 39,713 39,197 36,475
Foreclosed assets, net 15,113 16,181 18,310 22,120 33,216
Deferred tax asset, net 27,073 24,413 91,126 126,389 169,760
Goodwill 2,173,949 2,175,791 2,175,791 2,176,291 1,728,380
Core deposit and customer
relationship intangibles, net 39,542 43,766 48,137 53,220 12,704
Other assets 325,750 328,924 322,259 335,045 260,220
Total assets$21,315,291 $21,147,139 $21,031,009 $21,288,490 $16,814,105
LIABILITIES:
Noninterest-bearing deposits$6,521,946 $6,222,696 $6,139,963 $6,171,455 $3,508,682
Interest-bearing deposits 9,123,722 8,925,313 9,301,412 9,494,727 8,607,081
Total deposits 15,645,668 15,148,009 15,441,375 15,666,182 12,115,763
Borrowings 541,011 918,208 551,401 621,914 552,497
Subordinated debentures 441,112 439,322 438,723 436,000 435,417
Accrued interest payable and other
liabilities 144,905 128,296 142,918 166,703 128,724
Total liabilities 16,772,696 16,633,835 16,574,417 16,890,799 13,232,401
STOCKHOLDERS' EQUITY (1) 4,542,595 4,513,304 4,456,592 4,397,691 3,581,704
Total liabilities and stockholders’
equity$21,315,291 $21,147,139 $21,031,009 $21,288,490 $16,814,105
Book value per share$37.29 $37.05 $36.60 $36.22 $34.76
Tangible book value per share (2)$19.12 $18.83 $18.33 $17.86 $17.86
Shares outstanding 121,817,524 121,819,849 121,771,252 121,413,727 103,053,694
(1) Includes net unrealized gain on
securities available-for-sale, net$72,073 $81,744 $48,479 $27,828 $24,459
(2) Non-GAAP measure.


PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
(Dollars in thousands, except per share data)
Interest income:
Loans and leases$225,370 $224,326 $236,375 $219,677 $193,539
Investment securities 22,187 22,420 22,547 23,648 13,955
Deposits in financial institutions 298 308 308 172 178
Total interest income 247,855 247,054 259,230 243,497 207,672
Interest expense:
Deposits 7,247 7,823 9,073 9,391 10,400
Borrowings 695 352 581 159 72
Subordinated debentures 5,278 5,122 4,982 4,748 4,680
Total interest expense 13,220 13,297 14,636 14,298 15,152
Net interest income 234,635 233,757 244,594 229,199 192,520
Provision for credit losses 8,471 13,903 20,140 13,772 8,746
Net interest income after provision
for credit losses 226,164 219,854 224,454 215,427 183,774
Noninterest income:
Service charges on deposit accounts 3,488 3,633 3,856 3,901 2,601
Other commissions and fees 12,528 11,073 11,489 12,691 6,376
Leased equipment income 8,538 8,523 8,244 7,791 5,475
Gain on sale of loans and leases 157 388 245 183 27
Gain on securities 382 478 8,110 - 655
FDIC loss sharing expense, net - (6,502) (2,415) (4,291) (4,449)
Other income 1,827 4,528 5,010 7,783 5,073
Total noninterest income 26,920 22,121 34,539 28,058 15,758
Noninterest expense:
Compensation 62,661 62,174 61,065 58,992 48,152
Occupancy 12,010 12,193 12,632 12,194 10,762
Data processing 6,234 5,644 5,904 5,585 4,322
Other professional services 4,625 3,401 3,572 3,811 3,396
Insurance and assessments 4,324 4,951 4,965 5,450 3,805
Intangible asset amortization 4,224 4,371 4,746 4,910 1,497
Leased equipment depreciation 5,298 5,286 5,024 4,235 3,162
Foreclosed assets (income) expense, net (248) (3) (561) (3,185) 4,521
Acquisition, integration and
reorganization costs - - 200 17,600 747
Other expense 11,582 12,064 13,141 12,672 9,775
Total noninterest expense 110,710 110,081 110,688 122,264 90,139
Earnings before income taxes 142,374 131,894 148,305 121,221 109,393
Income tax expense (48,479) (49,726) (57,849) (49,380) (39,777)
Net earnings $93,895 $82,168 $90,456 $71,841 $69,616
Basic and diluted earnings per share$0.77 $0.68 $0.74 $0.60 $0.68


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,
2016 2016 2016 2015 2015
(Dollars in thousands)
Performance Ratios:
Return on average assets (1) 1.77% 1.57% 1.72% 1.37% 1.65%
Return on average equity (1) 8.24% 7.37% 8.20% 6.56% 7.73%
Return on average tangible equity (1)(2) 16.15% 14.61% 16.45% 13.14% 15.09%
Yield on average loans and leases (1) 6.17% 6.24% 6.57% 6.21% 6.34%
Yield on average interest-earning
assets (1)(3) 5.55% 5.63% 5.85% 5.54% 5.88%
Cost of average total deposits (1) 0.19% 0.20% 0.23% 0.24% 0.33%
Cost of average time deposits (1) 0.45% 0.52% 0.61% 0.63% 0.66%
Cost of average interest-bearing
liabilities (1) 0.52% 0.54% 0.57% 0.55% 0.63%
Cost of average funding sources (1) 0.32% 0.33% 0.35% 0.35% 0.46%
Net interest rate spread (1)(3) 5.03% 5.09% 5.28% 4.99% 5.25%
Net interest margin (1)(3) 5.26% 5.33% 5.53% 5.22% 5.46%
Core net interest margin (1)(2)(3) 5.08% 5.11% 5.10% 5.10% 5.19%
Efficiency ratio 40.1% 40.6% 38.5% 39.3% 39.6%
Noninterest expense as a percentage
of average assets (1) 2.09% 2.11% 2.10% 2.33% 2.14%
Average Balances:
Loans and leases$ 14,534,951 $ 14,468,590 $ 14,471,165 $ 14,031,102 $ 12,112,881
Interest-earning assets 18,111,585 18,003,075 18,161,751 17,777,534 14,198,482
Total assets 21,072,053 20,999,942 21,198,594 20,825,248 16,690,177
Noninterest-bearing deposits 6,274,294 6,437,720 6,273,249 6,043,900 3,486,780
Interest-bearing deposits 9,107,305 9,199,097 9,388,652 9,633,393 8,993,681
Total deposits 15,381,599 15,636,817 15,661,901 15,677,293 12,480,461
Borrowings and subordinated
debentures 1,023,952 739,509 931,260 641,529 504,591
Interest-bearing liabilities 10,131,257 9,938,606 10,319,912 10,274,922 9,498,272
Funding sources 16,405,551 16,376,326 16,593,161 16,318,822 12,985,052
Stockholders' equity 4,530,701 4,483,593 4,438,602 4,346,162 3,572,765
(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,
2016 2016 2016 2015 2015
(Dollars in thousands)
Non-PCI Credit Quality:
Allowance for credit losses to loans
and leases 1.05% 1.03% 0.96% 0.85% 0.82%
Allowance for credit losses to
nonaccrual loans and leases 90% 118% 106% 95% 94%
Nonaccrual loans and leases to loans
and leases 1.16% 0.88% 0.91% 0.90% 0.87%
Nonperforming assets to loans and
leases and foreclosed assets 1.27% 0.99% 1.05% 1.06% 1.14%
Nonperforming assets to total assets 0.87% 0.68% 0.72% 0.71% 0.84%
Trailing twelve month net charge-offs
to average loans and leases 0.04% 0.04% 0.03% 0.06% 0.04%
PacWest Bancorp Consolidated
Capital:
Tier 1 leverage ratio (1) 12.13% 11.92% 11.51% 11.67% 12.04%
Common equity tier 1 capital ratio (1) 12.83% 12.72% 12.63% 12.58% 12.74%
Tier 1 capital ratio (1) 12.83% 12.72% 12.63% 12.60% 12.74%
Total capital ratio (1) 16.18% 16.08% 15.96% 15.65% 16.32%
Risk-weighted assets (1)$ 17,713,506 $ 17,520,609 $ 17,226,658 $ 17,170,292 $ 14,038,839
Equity to assets ratio 21.31% 21.34% 21.19% 20.66% 21.30%
Tangible common equity ratio (2) 12.19% 12.12% 11.87% 11.38% 12.21%
Book value per share$ 37.29 $ 37.05 $ 36.60 $ 36.22 $ 34.76
Tangible book value per share (2)$ 19.12 $ 18.83 $ 18.33 $ 17.86 $ 17.86
Pacific Western Bank Capital:
Tier 1 leverage ratio (1) 11.54% 11.38% 11.10% 11.40% 11.56%
Common equity tier 1 capital ratio (1) 12.21% 12.13% 12.18% 12.03% 12.25%
Tier 1 capital ratio (1) 12.21% 12.13% 12.18% 12.03% 12.25%
Total capital ratio (1) 13.15% 13.06% 13.05% 12.80% 13.05%
Equity to assets ratio 20.77% 20.82% 20.70% 20.19% 20.75%
Tangible common equity ratio (2) 11.56% 11.51% 11.27% 10.80% 11.53%
(1) Capital information for September 30, 2016 is preliminary.
(2) Non-GAAP measure.

GAAP TO NON-GAAP RECONCILIATIONS

This press release contains certain non-GAAP financial disclosures for return on average tangible equity, tangible common equity ratio, tangible book value per share, core net interest margin, core loan and lease yield, and adjusted allowance for credit losses to loans and leases. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of return on average tangible equity, tangible common equity ratio, and tangible book value per share is prevalent among banking regulators, investors and analysts. Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of return on average equity, equity to assets ratio, book value per share, net interest margin, loan and lease yield, and allowance for credit losses to loans and leases, respectively.

The reconciliations for the following GAAP financial measures to the non-GAAP financial measures are presented earlier in this press release: (1) net interest margin to core net interest margin, (2) loan and lease yield to core loan and lease yield, and (3) allowance for credit losses to loans and leases to adjusted allowance for credit losses to loans and leases.

The reconciliations for the following GAAP financial measures to the non-GAAP financial measures are presented below: (1) return on average equity to return on average tangible equity, (2) equity to assets ratio to tangible common equity ratio, and (3) book value per share to tangible book value per share.

PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
Return on Average Tangible Equity 2016 2016 2015 2016 2015
(Dollars in thousands)
Net earnings$93,895 $82,168 $69,616 $266,519 $227,778
Average stockholders' equity$4,530,701 $4,483,593 $3,572,765 $4,484,468 $3,551,763
Less: Average intangible assets 2,217,564 2,222,007 1,741,902 2,222,346 1,740,911
Average tangible common equity$2,313,137 $2,261,586 $1,830,863 $2,262,122 $1,810,852
Return on average equity (1) 8.24% 7.37% 7.73% 7.94% 8.57%
Return on average tangible equity (2) 16.15% 14.61% 15.09% 15.74% 16.82%
(1) Annualized net earnings divided by average stockholders' equity.
(2) Annualized net earnings divided by average tangible common equity.


PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
Tangible Common Equity Ratio/September 30, June 30, March 31, December 31, September 30,
Tangible Book Value Per Share 2016 2016 2016 2015 2015
(Dollars in thousands)
PacWest Bancorp Consolidated:
Stockholders' equity$4,542,595 $4,513,304 $4,456,592 $4,397,691 $3,581,704
Less: Intangible assets 2,213,491 2,219,557 2,223,928 2,229,511 1,741,084
Tangible common equity$2,329,104 $2,293,747 $2,232,664 $2,168,180 $1,840,620
Total assets$21,315,291 $21,147,139 $21,031,009 $21,288,490 $16,814,105
Less: Intangible assets 2,213,491 2,219,557 2,223,928 2,229,511 1,741,084
Tangible assets$19,101,800 $18,927,582 $18,807,081 $19,058,979 $15,073,021
Equity to assets ratio 21.31% 21.34% 21.19% 20.66% 21.30%
Tangible common equity ratio (1) 12.19% 12.12% 11.87% 11.38% 12.21%
Book value per share$37.29 $37.05 $36.60 $36.22 $34.76
Tangible book value per share (2)$19.12 $18.83 $18.33 $17.86 $17.86
Shares outstanding 121,817,524 121,819,849 121,771,252 121,413,727 103,053,694
Pacific Western Bank:
Stockholder's equity$4,416,623 $4,390,928 $4,331,841 $4,276,279 $3,466,817
Less: Intangible assets 2,213,491 2,219,557 2,223,928 2,229,511 1,741,084
Tangible common equity$2,203,132 $2,171,371 $2,107,913 $2,046,768 $1,725,733
Total assets$21,266,705 $21,084,950 $20,928,105 $21,180,689 $16,707,072
Less: Intangible assets 2,213,491 2,219,557 2,223,928 2,229,511 1,741,084
Tangible assets$19,053,214 $18,865,393 $18,704,177 $18,951,178 $14,965,988
Equity to assets ratio 20.77% 20.82% 20.70% 20.19% 20.75%
Tangible common equity ratio 11.56% 11.51% 11.27% 10.80% 11.53%
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by shares outstanding.

Contact: Donald D. Destino Executive Vice President Investor Relations and Corporate Development Phone: 310-887-8521

Source:PacWest Bancorp