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PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2017

Fourth Quarter 2017 Highlights

  • CU Bancorp (“CUB”) Acquisition Closed October 20, 2017
  • Sold $1.5 Billion of Cash Flow Loans
  • Net Earnings of $84.0 Million, or $0.66 Per Diluted Share
  • New Loan and Lease Production of $1.6 Billion and Annualized Growth Excluding Acquired and Sold Loans of 17%
  • Classified Loans and Leases Reduced by 19%
  • Tax Benefit of $1.2 Million from Enactment of Tax Cuts and Jobs Act

Full Year 2017 Highlights

  • Net Earnings of $357.8 Million, or $2.91 Per Diluted Share
  • New Loan and Lease Production of $4.7 Billion and Growth Excluding Acquired and Sold Loans of 7%
  • Core Deposits Growth of $3.4 Billion, Including $2.7 Billion from CUB Acquisition
  • Tax Equivalent Net Interest Margin of 5.10%
  • Classified Loans and Leases Reduced by 32%

LOS ANGELES, Jan. 18, 2018 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq:PACW) today announced net earnings for the fourth quarter of 2017 of $84.0 million, or $0.66 per diluted share, compared to net earnings for the third quarter of 2017 of $101.5 million, or $0.84 per diluted share. Net earnings for the full year 2017 were $357.8 million, or $2.91 per diluted share, compared to net earnings for the full year 2016 of $352.2 million, or $2.90 per diluted share.

The decrease in net earnings from the prior quarter was due primarily to higher noninterest expense, higher income tax expense and lower noninterest income offset by higher net interest income and a lower provision for credit losses. Noninterest expense for the fourth quarter of 2017 was higher mainly due to an increase in acquisition, integration and reorganization costs of $14.6 million related to the CUB acquisition and integration. Income tax expense for the fourth quarter of 2017 was higher as the third quarter of 2017 reflected a $13.6 million reversal of a valuation allowance related to tax credits, while the fourth quarter reflected a $2.0 million increase in the valuation allowance. Noninterest income for the fourth quarter of 2017 declined mainly due to the tax-related decision to sell certain securities resulting in a loss for the quarter of $3.3 million.

Matt Wagner, President and CEO, commented, “Although the fourth quarter included several significant items, the benefits of the CUB acquisition for our future profitability were apparent in our fourth quarter results. Interest income on loans and leases increased 10% over the prior quarter, core deposits increased to 85% of total deposits, and the CUB integration as well as the vast majority of cost save initiatives were achieved in December. We are on track to achieve the remainder of our targeted expense savings during the first quarter of 2018.”

Mr. Wagner continued, “Our organic loan growth of $684 million in the fourth quarter was the strongest of the year. The fourth quarter sale of $1.5 billion in cash flow loans and the exit from the CapitalSource Division origination operations related to general, technology, and healthcare cash flow loans allows us to focus on profitably growing our other businesses.”

Mr. Wagner added, “The strong fourth quarter capped a year of profitable growth and continued our solid operating performance resulting in a 2017 return on assets of 1.58% and return on tangible equity of 15.15%. These outstanding operating results allowed us to return $347 million to our stockholders in 2017 through stock repurchases and dividends, including $100 million of stock repurchases in the fourth quarter.”

FINANCIAL HIGHLIGHTS

At or For the Three Months Ended At or For the Year Ended
December 31, September 30, December 31,
Financial Highlights (1) 2017 2017 Change 2017 2016 Change
(Dollars in thousands, except per share data)
Net earnings$84,037 $101,466 $(17,429) $357,818 $352,166 $5,652
Diluted earnings per share$0.66 $0.84 $(0.18) $2.91 $2.90 $0.01
Return on average assets 1.34% 1.82% (0.48) 1.58% 1.66% (0.08)
Return on average
tangible equity (2) 13.75% 16.85% (3.10) 15.15% 15.52% (0.37)
Net interest margin
(tax equivalent) 4.97% 5.08% (0.11) 5.10% 5.40% (0.30)
Efficiency ratio 41.0% 40.4% 0.6 40.8% 39.8% 1.0
Total assets $24,994,876 $22,242,932 $2,751,944 $24,994,876 $21,869,767 $3,125,109
Loans and leases held
for investment, net of
deferred fees$16,972,743 $15,690,517 $1,282,226 $16,972,743 $15,455,954 $1,516,789
Noninterest-bearing
deposits $8,508,044 $6,911,874 $1,596,170 $8,508,044 $6,659,016 $1,849,028
Core deposits$15,937,012 $13,531,300 $2,405,712 $15,937,012 $12,523,834 $3,413,178
Total deposits$18,865,536 $16,773,245 $2,092,291 $18,865,536 $15,870,611 $2,994,925
Noninterest-bearing
deposits as percentage
of total deposits 45% 41% 4 45% 42% 3
Core deposits as
percentage of total
deposits 85% 81% 4 85% 79% 6
Equity to assets ratio 19.91% 20.73% (0.82) 19.91% 20.48% (0.57)
Tangible common equity
ratio (2) 10.50% 12.02% (1.52) 10.50% 11.54% (1.04)
Book value per share$38.65 $37.96 $0.69 $38.65 $36.93 $1.72
Tangible book value per
share (2) $18.24 $19.84 $(1.60) $18.24 $18.71 $(0.47)
(1) The operations of CU Bancorp are included from its October 20, 2017 acquisition date.
(2) Non-GAAP measure.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased by $21.3 million to $263.0 million for the fourth quarter of 2017 compared to $241.7 million for the third quarter of 2017 due mainly to higher average loan and lease balances primarily from the CUB acquisition. The loan and lease yield was 5.89% for the fourth quarter of 2017 compared to 6.01% for the third quarter of 2017. The decrease in the loan and lease yield was principally due to a lower yield on the acquired CUB loans, offset partially by an increase in discount accretion on acquired loans. Total discount accretion on acquired loans was $6.8 million for the fourth quarter of 2017 (15 basis points on the loan and lease yield) compared to $5.5 million for the third quarter of 2017 (14 basis points on the loan and lease yield). A total discount of $37.0 million was recorded in connection with the acquired CUB loan portfolio, of which $2.9 million was accreted during the fourth quarter. The total remaining acquired loan discount as of December 31, 2017 was $56.9 million.

The tax equivalent NIM was 4.97% for the fourth quarter of 2017 compared to 5.08% for the third quarter of 2017. The decrease in the NIM was mostly due to the lower yield on the CUB loans and securities and a higher cost of average interest-bearing liabilities, offset partially by the increase in discount accretion on acquired loans. Total discount accretion on acquired loans contributed 13 basis points to the NIM for the fourth quarter of 2017 and 11 basis points for the third quarter of 2017.

The cost of average total deposits decreased to 0.30% for the fourth quarter of 2017 from 0.31% for the third quarter of 2017 due to the lower cost of the deposits acquired from CUB.

Noninterest Income

Noninterest income decreased by $4.6 million to $26.8 million for the fourth quarter of 2017 compared to $31.4 million for the third quarter of 2017 due mainly to a $4.6 million decrease in the gain on sale of securities. In light of the reduction in the statutory federal income tax rate effective January 1, 2018, we sold approximately $173 million of securities during the fourth quarter of 2017 resulting in a realized loss for the quarter of $3.3 million. The proceeds will be reinvested into higher yielding securities that are expected to recoup the realized loss in approximately one year. In addition, dividends and gains on equity investments decreased by $1.5 million and service charges on deposit accounts increased by $1.1 million primarily due to the increased number of accounts from the CUB acquisition.

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

Three Months Ended
December 31, September 30, Increase
Noninterest Income 2017 2017 (Decrease)
(In thousands)
Service charges on deposit accounts$4,574 $3,465 $1,109
Other commissions and fees 10,505 9,944 561
Leased equipment income 8,258 8,332 (74)
Gain on sale of loans and leases 1,988 2,848 (860)
(Loss) gain on sale of securities (3,329) 1,236 (4,565)
FDIC loss sharing expense, net - - -
Other income:
Dividends and realized gains on equity investments 342 1,845 (1,503)
Warrant income 831 731 100
Other 3,626 2,981 645
Total noninterest income$26,795 $31,382 $(4,587)

Noninterest Expense

Noninterest expense increased by $24.3 million to $142.9 million for the fourth quarter of 2017 compared to $118.5 million for the third quarter of 2017 due mostly to an increase in acquisition, integration and reorganization costs of $14.6 million related to the CUB acquisition and integration. Almost all operating expense categories were higher quarter over quarter due mainly to the CUB acquisition. Compensation expense also includes $2.9 million for separation costs in connection with exiting the origination operations related to general, technology, and healthcare cash flow loans. Intangible asset amortization increased $2.0 million as a result of the CUB acquisition partially offset by scheduled reductions in amortization for previous acquisitions. The intangible asset amortization for 2018 is expected to be approximately $24 million. During the fourth quarter of 2017, a foreclosed property that represented approximately 90% of the total foreclosed property balance was sold for a nominal gain. This property was subject to a valuation write-down of $2.1 million in the third quarter of 2017.

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

Three Months Ended
December 31, September 30, Increase
Noninterest Expense 2017 2017 (Decrease)
(In thousands)
Compensation$71,986 $64,413 $7,573
Occupancy 12,715 12,729 (14)
Data processing 6,764 6,459 305
Other professional services 5,786 4,213 1,573
Insurance and assessments 5,384 4,702 682
Intangible asset amortization 5,062 3,049 2,013
Leased equipment depreciation 5,048 4,862 186
Foreclosed assets (income) expense, net (475) 2,191 (2,666)
Acquisition, integration and reorganization costs 16,085 1,450 14,635
Loan expense 3,140 3,421 (281)
Other 11,373 11,053 320
Total noninterest expense$142,868 $118,542 $24,326

Income Taxes

The overall effective income tax rate was 40.2% for the fourth quarter of 2017 and 27.2% for the third quarter of 2017. The effective tax rate for the fourth quarter of 2017 was higher mainly due to the fourth quarter tax provision including a $2.0 million increase in the foreign tax credit valuation allowance due to the sale of certain foreign loans, whereas the prior quarter included a $13.6 million reversal of a valuation allowance related to foreign tax credits which were deemed more likely than not to be utilized before they expire. The fourth quarter tax provision also included $2.4 million of income tax expense related to non-deductible merger costs and other adjustments offset by a $1.2 million benefit from remeasuring the deferred federal tax assets and liabilities as a result of the Tax Cuts and Jobs Act. This adjustment to deferred federal tax liabilities is management’s best estimate based on the information available as of this earnings release and is subject to change as final tax calculations are completed in conjunction with the filing of the Form 10-K. The effective tax rate for the full year 2017 was 35.5%. While the analysis on the impact of the Tax Cuts and Jobs Act is still ongoing at this time, we expect the 2018 effective tax rate to be in the range of 27% to 29%.

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Total loans and leases held for investment, net of deferred fees, increased by $1.3 billion in the fourth quarter of 2017 to $17.0 billion at December 31, 2017. The net increase was driven mainly by the acquisition of CUB loans of $2.1 billion, fourth quarter new production of $1.6 billion, and disbursements of $724 million, partially offset by loan sales of $1.0 billion, payoffs of $729 million, paydowns of $813 million, and transfers to loans held for sale of $481 million. For the year ended December 31, 2017, loans and leases held for investment, net of deferred fees, increased by $1.5 billion. Excluding the effect of the acquired CUB loans and the two portfolio sales in 2017, the annualized loan growth rate for the fourth quarter of 2017 was 17% and the growth rate for the full year 2017 was 7%.

The following table presents a roll forward of loans and leases held for investment, net of deferred fees, for the periods indicated:

Three Months Ended Year Ended
Loans and Leases December 31, September 30, December 31,
Held for Investment Roll Forward (1)2017 2017 2017
(Dollars in thousands)
Balance, beginning of period$15,690,517 $15,543,457 $15,455,954
New production 1,556,257 1,002,887 4,685,763
Existing loans and leases:
Payoffs (728,628) (903,395) (3,801,592)
Paydowns (812,726) (637,674) (2,769,309)
Disbursements 723,914 722,777 3,203,796
Sales (2) (1,026,660) (31,528) (1,140,625)
Transfers to foreclosed assets - - (580)
Charge-offs (24,721) (6,007) (80,296)
Transfers to loans held for sale (481,100) - (656,258)
Loans acquired through CUB acquisition 2,075,890 - 2,075,890
Balance, end of period$16,972,743 $15,690,517 $16,972,743
Weighted average rate on new production (3) 4.95% 5.04% 4.96%
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.
(2) Sales for the three months ended December 31, 2017 exclude loans held for sale of $481.1 million at December 31, 2017.
Sales for the three months ended September 30, 2017 exclude sales of loans that were transferred to loans held for sale
of $175.2 million at June 30, 2017.
(3) The weighted average rate on new production presents contractual rates and does not include amortized fees.
Amortized fees added approximately 30 basis points to loan yields in 2017.

Cash Flow Loan Sale

During the fourth quarter of 2017, the Company sold $1.5 billion of cash flow loans, of which none were on nonaccrual and $4.7 million were classified, and exited its CapitalSource Division origination operations related to general, technology, and healthcare cash flow loans. These actions were taken to lower the Company’s credit risk profile and improve its funding mix by allowing the majority of our wholesale deposits to run off. As of December 31, 2017, $1.0 billion of the loans sold had settled while $481 million were classified as held for sale. As of January 17, 2018, 99% of the year-end loans held for sale balance was settled.

The impact of the loan sale and decision to exit the above-mentioned origination operations affected various components of our statement of earnings as follows:

Three Months Ended
December 31,
2017
(In thousands)
Gain on sale of loans $ 1,988
Negative provision for credit losses 14,132
Other commissions and fees (1,155)
Other income (113)
Compensation expense (2,854)
Other expense (586)
Total increase in pre-tax earnings $ 11,412

The following table presents the composition of loans and leases held for investment, net of deferred fees, as of the dates indicated:

December 31, September 30, June 30, December 31,
Loan and Lease Portfolio2017 2017 2017 2016
(In thousands)
Real estate mortgage:
Commercial$5,385,724 $4,338,933 $4,418,463 $4,396,696
Residential 2,466,894 1,850,324 1,719,269 1,314,036
Total real estate mortgage 7,852,618 6,189,257 6,137,732 5,710,732
Real estate construction and land:
Commercial 769,075 680,950 691,828 581,246
Residential 822,154 568,273 473,282 384,001
Total real estate construction and land 1,591,229 1,249,223 1,165,110 965,247
Total real estate 9,443,847 7,438,480 7,302,842 6,675,979
Commercial:
Asset-based 3,011,770 2,577,470 2,392,203 2,611,796
Venture capital 2,122,735 1,959,489 2,001,427 1,987,900
Cash flow 1,327,595 2,734,454 2,834,966 3,112,890
Equipment finance 656,995 594,473 613,550 691,967
Total commercial 7,119,095 7,865,886 7,842,146 8,404,553
Consumer 409,801 386,151 398,469 375,422
Total loans and leases held for
investment, net of deferred fees (1)$16,972,743 $15,690,517 $15,543,457 $15,455,954
Total unfunded loan commitments$6,234,061 $5,037,084 $4,926,743 $4,166,703
(1) Excludes loans held for sale carried at lower of cost or fair value at December 31, 2017 and June 30, 2017.

Included in total loans as of December 31, 2017 were $2.0 billion acquired from CUB, of which $1.3 billion were real estate mortgage loans, $518 million were commercial loans, and $210 million were real estate construction and land loans. In addition, the total unfunded loan commitments as of December 31, 2017 included $914 million associated with loans acquired from CUB.

Deposits and Client Investment Funds

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

December 31, September 30, June 30, December 31,
Deposit Category2017 2017 2017 2016
(Dollars in thousands)
Noninterest-bearing demand deposits$8,508,044 $6,911,874 $6,701,039 $6,659,016
Interest checking deposits 2,226,885 1,957,485 1,762,016 1,448,394
Money market deposits 4,511,730 3,967,224 4,033,471 3,705,385
Savings deposits 690,353 694,717 721,048 711,039
Total core deposits 15,937,012 13,531,300 13,217,574 12,523,834
Non-core non-maturity deposits 863,202 1,118,694 1,329,324 1,174,487
Total non-maturity deposits 16,800,214 14,649,994 14,546,898 13,698,321
Time deposits $250,000 and under 1,709,980 1,770,439 1,940,872 1,758,434
Time deposits over $250,000 355,342 352,812 387,207 413,856
Total time deposits 2,065,322 2,123,251 2,328,079 2,172,290
Total deposits$18,865,536 $16,773,245 $16,874,977 $15,870,611
Noninterest-bearing demand deposits
as percentage of total deposits 45% 41% 40% 42%
Core deposits as percentage of total deposits 85% 81% 78% 79%

At December 31, 2017, core deposits totaled $15.9 billion, or 85% of total deposits, including $8.5 billion of noninterest-bearing demand deposits, or 45% of total deposits. Core deposits obtained in the CUB acquisition totaled $2.7 billion.

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 off-balance sheet client investment funds at December 31, 2017 were $2.1 billion, of which $1.7 billion was managed by S1AM.

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

A provision for credit losses of $6.4 million was recorded in the fourth quarter of 2017 compared to $15.1 million in the third quarter of 2017. The fourth quarter provision consisted of $6.5 million for non-purchased credit impaired (“Non-PCI”) loans and leases and a $0.1 million negative provision for PCI loans; this compares to a third quarter provision of $15.5 million and a $0.4 million negative provision, respectively. The lower provision for the fourth quarter of 2017 was due mainly to releasing $14.1 million in general reserves relating to the cash flow loan sale. The allowance for Non-PCI credit losses to Non-PCI loans and leases held for investment coverage ratio declined to 0.95% at December 31, 2017 from 1.11% at September 30, 2017. The lower coverage ratio was principally due to the purchase accounting for the CUB acquired loan portfolio, which was not subject to the allowance for credit losses at the time of acquisition.

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

Three Months Ended December 31, 2017
Non-PCI
Allowance for Credit Loans and Unfunded Total PCI
Losses RollforwardLeases Commitments Non-PCI Loans Total
(In thousands)
Beginning balance$152,770 $20,809 $173,579 $6,836 $180,415
Charge-offs (24,335) - (24,335) (386) (24,721)
Recoveries 1,577 - 1,577 88 1,665
Net charge-offs (22,758) - (22,758) (298) (23,056)
Provision 3,000 3,500 6,500 (94) 6,406
Fair value of acquired reserve
for unfunded commitments - 4,326 4,326 - 4,326
Ending balance$133,012 $28,635 $161,647 $6,444 $168,091
Three Months Ended September 30, 2017
Non-PCI
Allowance for Credit Loans and Unfunded Total PCI
Losses RollforwardLeases Commitments Non-PCI Loans Total
(In thousands)
Beginning balance$138,879 $20,263 $159,142 $7,079 $166,221
Charge-offs (5,928) - (5,928) (79) (6,007)
Recoveries 4,865 - 4,865 217 5,082
Net charge-offs (1,063) - (1,063) 138 (925)
Provision 14,954 546 15,500 (381) 15,119
Ending balance$152,770 $20,809 $173,579 $6,836 $180,415

Gross charge-offs for the fourth quarter of 2017 included $20.1 million for venture capital loans while gross charge-offs for the third quarter of 2017 included $3.4 million for venture capital loans.

Mr. Wagner remarked, “We have taken action to remedy the unacceptably high level of venture capital credit losses during 2017, including adjustments to delegated lending authorities and portfolio management. In addition, significant progress has been made on our initiative to grow the lower-risk capital call line segment of the venture capital loan portfolio.”

The annualized ratio of total net charge-offs to total average loans was 0.52% for the quarter ended December 31, 2017 and 0.43% for the year ended December 31, 2017.

CREDIT QUALITY

Despite the elevated charge-offs on venture capital loans, the Company’s credit quality metrics showed significant improvement during the fourth quarter of 2017.

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

December 31, September 30, Increase
Non-PCI Credit Quality Metrics 2017 2017 (Decrease)
(Dollars in thousands)
Nonaccrual loans and leases held for investment (1)(2)$155,784 $157,697 $(1,913)
Classified loans and leases held for investment (1)(3) 278,405 344,777 (66,372)
Performing troubled debt restructured loans
held for investment 56,838 56,552 286
Allowance for credit losses 161,647 173,579 (11,932)
Provision for credit losses (for the quarter) 6,500 15,500 (9,000)
Net charge-offs (for the quarter) 22,758 1,063 21,695
Net charge-offs to average loans and leases
(for the quarter) 0.52% 0.03%
Allowance for credit losses to loans and leases
held for investment 0.95% 1.11%
Allowance for credit losses to nonaccrual loans
and leases held for investment 103.8% 110.1%
Nonaccrual loans and leases held for investment
to loans and leases held for investment 0.92% 1.00%
Nonperforming assets to loans and leases
held for investment and foreclosed assets 0.93% 1.08%
Classified loans and leases held for investment
to loans and leases held for investment 1.64% 2.20%
(1) Excludes loans held for sale carried at lower of cost or fair value at December 31, 2017.
(2) Nonaccrual loans include guaranteed amounts of $11.6 million and $9.1 million at December 31, 2017
and September 30, 2017.
(3) Classified loans include guaranteed amounts of $11.6 million and $9.1 million at December 31, 2017
and September 30, 2017.

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
December 31, 2017 September 30, 2017 30-89 Days Past Due
% of % of December 31, September 30,
Loan Loan 2017 2017
AmountCategory AmountCategory Amount Amount
(Dollars in thousands)
Real estate mortgage:
Commercial$65,5631.2% $63,0961.5% $27,234 $1,446
Residential 3,3500.1% 3,1860.2% 6,629 282
Total real estate mortgage 68,9130.9% 66,2821.1% 33,863 1,728
Real estate construction and land:
Commercial -0.0% -0.0% - -
Residential -0.0% -0.0% 2,081 -
Total real estate
construction and land -0.0% -0.0% 2,081 -
Commercial:
Asset-based 3,1740.1% 3,9770.2% 1,512 -
Venture capital 29,4241.4% 22,6861.2% 5,959 2,720
Cash flow 23,3151.8% 33,5141.2% 924 72
Equipment finance 30,9384.7% 30,9425.2% 344 -
Total commercial 86,8511.2% 91,1191.2% 8,739 2,792
Consumer 200.0% 2960.1% 562 286
Total held for investment (1)$155,7840.9% $157,6971.0% $45,245 $4,806
(1) Excludes loans held for sale carried at lower of cost or fair value at December 31, 2017.

The majority of the loans representing the increase in Non-PCI accruing and 30-89 days past due loans have subsequently been brought current, renewed or are subject to guarantees.

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

December 31, September 30, Increase
Nonperforming Assets 2017 2017 (Decrease)
(Dollars in thousands)
Nonaccrual Non-PCI loans and leases
held for investment (1)$ 155,784 $ 157,697 $ (1,913)
Nonaccrual PCI loans held for investment 1,761 1,761 -
Total nonaccrual loans and leases 157,545 159,458 (1,913)
Non-PCI accruing loan contractually past due -
90 days or more - - -
Foreclosed assets, net 1,329 11,630 (10,301)
Total nonperforming assets$ 158,874 $ 171,088 $ (12,214)
Nonaccrual loans and leases held for investment
to loans and leases held for investment 0.92% 1.01%
Nonperforming assets to loans and leases
held for investment and foreclosed assets 0.93% 1.09%
(1) Excludes loans held for sale carried at lower of cost or fair value at December 31, 2017.

STOCK REPURCHASE PROGRAM

During the fourth quarter of 2017, the Company amended its existing stock repurchase program to reduce the authorized repurchase amount from $400 million to $150 million and extend the program maturity to December 31, 2018. The Company expects that, subject to market conditions and other factors, the current $150 million share repurchase authorization will be completed during the first quarter of 2018. The Company anticipates an additional repurchase program will be authorized by the Board of Directors in 2018. During the fourth quarter of 2017, we repurchased 2,081,227 shares at an average cost of $47.89 and a total cost of $99.7 million.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with approximately $25 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 76 full-service branches located throughout the state of California and one branch in Durham, North Carolina. We provide commercial banking services, including real estate, construction, and commercial loans, and comprehensive deposit and treasury management services to small and medium-sized businesses. We offer additional products and services through our CapitalSource and Square 1 Bank divisions. Our CapitalSource Division provides asset-based, equipment, real estate and security cash flow loans and treasury management services to established middle market businesses on a national basis. Our Square 1 Bank Division 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 forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results and metrics and including statements about our expectations regarding our future effective tax rate. 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. These risks and uncertainties include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; the impact of changes in interest rates or levels of market activity, especially on our loan and investment portfolios; deterioration, weaker than expected improvement, or other changes in the state of the economy or the markets in which we conduct business (including the levels of IPOs and M&A activities); changes in credit quality and the effect of credit quality on our provision for loan and lease losses and allowance for loan and leases losses; our ability to attract deposits and other sources of funding or liquidity; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the impact of adverse judgments or settlements in litigation, the initiation and resolution of regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; the Company’s ability to complete future acquisitions and to successfully integrate such acquired entities or achieve expected beneficial synergies and/or operating efficiencies, in each case within expected timeframes or at all; the impact of the Tax Cuts and Jobs Act on our future effective tax rate and our success at managing the risks involved in the foregoing items and all other factors set forth in the Company’s public reports, including the Annual Report on Form 10-K for the year ended December 31, 2016, and particularly the discussion of risk factors within that document.

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,
2017 2017 2016
(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks$233,215 $147,579 $337,965
Interest-earning deposits in financial institutions 165,222 122,439 81,705
Total cash and cash equivalents 398,437 270,018 419,670
Securities available-for-sale, at estimated fair value 3,774,431 3,532,230 3,223,830
Federal Home Loan Bank stock, at cost 20,790 17,250 21,870
Total investment securities 3,795,221 3,549,480 3,245,700
Loans held for sale 481,100 - -
Non-PCI loans and leases 16,974,171 15,693,776 15,412,092
PCI loans 58,050 62,509 108,445
Total gross loans and leases held for investment 17,032,221 15,756,285 15,520,537
Deferred fees, net (59,478) (65,768) (64,583)
Total loans and leases held for investment,
net of deferred fees 16,972,743 15,690,517 15,455,954
Allowance for loan and lease losses (139,456) (159,606) (157,238)
Total loans and leases held for investment, net 16,833,287 15,530,911 15,298,716
Equipment leased to others under operating leases 284,631 233,866 229,905
Premises and equipment, net 31,852 28,910 38,594
Foreclosed assets, net 1,329 11,630 12,976
Deferred tax asset, net - 65,321 94,112
Goodwill 2,548,670 2,173,949 2,173,949
Core deposit and customer relationship intangibles, net 79,626 27,188 36,366
Other assets 540,723 351,659 319,779
Total assets$24,994,876 $22,242,932 $21,869,767
LIABILITIES:
Noninterest-bearing deposits$8,508,044 $6,911,874 $6,659,016
Interest-bearing deposits 10,357,492 9,861,371 9,211,595
Total deposits 18,865,536 16,773,245 15,870,611
Borrowings 467,342 250,399 905,812
Subordinated debentures 462,437 448,126 440,744
Accrued interest payable and other liabilities 221,963 160,494 173,545
Total liabilities 20,017,278 17,632,264 17,390,712
STOCKHOLDERS' EQUITY (1) 4,977,598 4,610,668 4,479,055
Total liabilities and stockholders’ equity$24,994,876 $22,242,932 $21,869,767
Book value per share$38.65 $37.96 $36.93
Tangible book value per share (2)$18.24 $19.84 $18.71
Shares outstanding 128,782,878 121,449,794 121,283,669
(1) Includes net unrealized gain on securities
available-for-sale, net$31,171 $33,613 $5,982
(2) Non-GAAP measure.


PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
2017 2017 2016 2017 2016
(Dollars in thousands, except per share data)
Interest income:
Loans and leases$258,309 $235,666 $238,223 $952,771 $924,294
Investment securities 25,712 24,762 23,403 98,202 90,557
Deposits in financial institutions 576 538 147 1,543 1,061
Total interest income 284,597 260,966 261,773 1,052,516 1,015,912
Interest expense:
Deposits 14,041 13,071 7,369 45,694 31,512
Borrowings 1,366 188 631 3,638 2,259
Subordinated debentures 6,234 6,017 5,468 23,613 20,850
Total interest expense 21,641 19,276 13,468 72,945 54,621
Net interest income 262,956 241,690 248,305 979,571 961,291
Provision for credit losses 6,406 15,119 23,215 57,752 65,729
Net interest income after provision
for credit losses 256,550 226,571 225,090 921,819 895,562
Noninterest income:
Service charges on deposit accounts 4,574 3,465 3,557 15,307 14,534
Other commissions and fees 10,505 9,944 12,036 41,422 47,126
Leased equipment income 8,258 8,332 8,614 37,700 33,919
Gain on sale of loans and leases 1,988 2,848 119 6,197 909
(Loss) gain on sale of securities (3,329) 1,236 515 (541) 9,485
FDIC loss sharing expense, net - - - - (8,917)
Other income 4,799 5,557 4,054 28,488 15,419
Total noninterest income 26,795 31,382 28,895 128,573 112,475
Noninterest expense:
Compensation 71,986 64,413 66,013 266,567 251,913
Occupancy 12,715 12,729 12,076 48,863 48,911
Data processing 6,764 6,459 6,574 26,575 24,356
Other professional services 5,786 4,213 4,880 17,353 16,478
Insurance and assessments 5,384 4,702 4,124 19,733 18,364
Intangible asset amortization 5,062 3,049 3,176 14,240 16,517
Leased equipment depreciation 5,048 4,862 5,291 20,767 20,899
Foreclosed assets (income) expense, net (475) 2,191 2,693 1,702 1,881
Acquisition, integration and
reorganization costs 16,085 1,450 - 19,735 200
Loan expense 3,140 3,421 3,140 13,832 9,371
Other expense 11,373 11,053 10,655 46,294 41,211
Total noninterest expense 142,868 118,542 118,622 495,661 450,101
Earnings before income taxes 140,477 139,411 135,363 554,731 557,936
Income tax expense (56,440) (37,945) (49,716) (196,913) (205,770)
Net earnings $84,037 $101,466 $85,647 $357,818 $352,166
Basic and diluted earnings per share$0.66 $0.84 $0.71 $2.91 $2.90


PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS
Three Months Ended Year Ended
December 31, September 30, December 31, December 31,
2017 2017 2016 2017 2016
(In thousands, except per share data)
Basic Earnings Per Share:
Net earnings$84,037 $101,466 $85,647 $357,818 $352,166
Less: earnings allocated to unvested
restricted stock (1) (951) (1,149) (1,004) (4,184) (3,988)
Net earnings allocated to common
shares$83,086 $100,317 $84,643 $353,634 $348,178
Weighted-average basic shares and
unvested restricted stock outstanding 127,971 121,447 121,464 123,060 121,670
Less: weighted-average unvested
restricted stock outstanding (1,440) (1,394) (1,450) (1,447) (1,431)
Weighted-average basic shares
outstanding 126,531 120,053 120,014 121,613 120,239
Basic earnings per share$0.66 $0.84 $0.71 $2.91 $2.90
Diluted Earnings Per Share:
Net earnings allocated to common
shares$83,086 $100,317 $84,643 $353,634 $348,178
Weighted-average basic shares
outstanding 126,531 120,053 120,014 121,613 120,239
Diluted earnings per share$0.66 $0.84 $0.71 $2.91 $2.90
(1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus
undistributed earnings amounts available to holders of unvested restricted stock, if any.


PACWEST BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
Three Months Ended
December 31, 2017 September 30, 2017 December 31, 2016
InterestAverage InterestAverage InterestAverage
Average Income/Yield/ Average Income/Yield/ Average Income/Yield/
BalanceExpenseCost BalanceExpenseCost BalanceExpenseCost
(Dollars in thousands)
Assets:
PCI loans$52,782$2,536 19.06% $60,126 $3,308 21.83% $104,234$17,481 66.72%
Non-PCI loans and leases 17,374,091 256,0505.85% 15,514,904 232,5105.95% 14,904,034 220,7425.89%
Total loans and leases (1) 17,426,873 258,5865.89% 15,575,030 235,8186.01% 15,008,268 238,2236.31%
Investment securities (2) 3,807,928 30,7093.20% 3,510,956 29,4953.33% 3,293,003 28,2293.41%
Deposits in financial
institutions 179,379 5761.27% 171,455 5381.24% 111,918 1470.52%
Total interest-earning
assets 21,414,180 289,8715.37% 19,257,441 265,8515.48% 18,413,189 266,5995.76%
Other assets 3,375,656 2,880,433 3,014,761
Total assets$24,789,836 $22,137,874 $21,427,950
Liabilities and
Stockholders' Equity:
Interest checking$2,340,166 2,8910.49% $2,146,125 2,9600.55% $1,449,346 9510.26%
Money market 5,415,630 7,2140.53% 4,914,803 6,3070.51% 4,740,944 3,6720.31%
Savings 702,023 2790.16% 707,367 2890.16% 751,817 3310.18%
Time 2,120,749 3,6570.68% 2,256,259 3,5150.62% 2,384,973 2,4150.40%
Total interest-bearing
deposits 10,578,568 14,0410.53% 10,024,554 13,0710.52% 9,327,080 7,3690.31%
Borrowings 445,106 1,3661.22% 61,071 1881.22% 505,567 6310.50%
Subordinated debentures 458,269 6,2345.40% 447,012 6,0175.34% 440,907 5,4684.93%
Total interest-bearing
liabilities 11,481,943 21,6410.75% 10,532,637 19,2760.73% 10,273,554 13,4680.52%
Noninterest-bearing
demand deposits 8,190,134 6,858,816 6,496,221
Discontinued operations 8,016 9,456 12,742
Total other liabilities 189,245 144,476 143,485
Other liabilities 197,261 153,932 156,227
Total liabilities 19,869,338 17,545,385 16,926,002
Stockholders' equity 4,920,498 4,592,489 4,501,948
Total liabilities and
stockholders' equity$24,789,836 $22,137,874 $21,427,950
Net interest income (3) $268,230 $246,575 $253,131
Net interest spread (3) 4.62% 4.75% 5.24%
Net interest margin (3) 4.97% 5.08% 5.47%
Total deposits (4)$18,768,702 $14,0410.30% $16,883,370$13,0710.31% $15,823,301$7,3690.19%
Funding sources (5)$19,672,077$21,6410.44% $17,391,453$19,2760.44% $16,769,775$13,4680.32%
(1) Starting with the third quarter of 2017, includes tax-equivalent adjustments related to tax-exempt interest on loans.
(2) Includes tax-equivalent adjustments of $5.0 million, $4.7 million, and $4.8 million for the three months ended December 31, 2017,
September 30, 2017, and December 31, 2016 related to tax-exempt income on municipal securities. The federal statutory tax-rate utilized
was 35% for the periods.
(3) Tax equivalent.
(4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as
annualized interest expense on deposits divided by average total deposits.
(5) 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
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks$233,215 $147,579 $180,330 $184,608 $337,965
Interest-earning deposits in financial
institutions 165,222 122,439 107,150 111,892 81,705
Total cash and cash equivalents 398,437 270,018 287,480 296,500 419,670
Securities available-for-sale 3,774,431 3,532,230 3,474,560 3,336,992 3,223,830
Federal Home Loan Bank stock 20,790 17,250 22,059 17,901 21,870
Total investment securities 3,795,221 3,549,480 3,496,619 3,354,893 3,245,700
Loans held for sale 481,100 - 175,158 - -
Non-PCI loans and leases 16,974,171 15,693,776 15,536,735 15,526,518 15,412,092
PCI loans 58,050 62,509 72,445 96,353 108,445
Total gross loans and leases
held for investment 17,032,221 15,756,285 15,609,180 15,622,871 15,520,537
Deferred fees, net (59,478) (65,768) (65,723) (66,182) (64,583)
Total loans and leases held for
investment, net of deferred fees 16,972,743 15,690,517 15,543,457 15,556,689 15,455,954
Allowance for loan and lease losses (139,456) (159,606) (145,958) (161,307) (157,238)
Total loans and leases held for
investment, net 16,833,287 15,530,911 15,397,499 15,395,382 15,298,716
Equipment leased to others under
operating leases 284,631 233,866 203,212 224,580 - 229,905
Premises and equipment, net 31,852 28,910 29,108 28,908 38,594
Foreclosed assets, net 1,329 11,630 13,278 12,842 12,976
Deferred tax asset, net - 65,321 70,354 88,765 94,112
Goodwill 2,548,670 2,173,949 2,173,949 2,173,949 2,173,949
Core deposit and customer
relationship intangibles, net 79,626 27,188 30,237 33,302 36,366
Other assets 540,723 351,659 369,983 318,133 319,779
Total assets$24,994,876 $22,242,932 $22,246,877 $21,927,254 $21,869,767
LIABILITIES:
Noninterest-bearing deposits$8,508,044 $6,911,874 $6,701,039 $6,789,808 $6,659,016
Interest-bearing deposits 10,357,492 9,861,371 10,173,938 9,541,200 9,211,595
Total deposits 18,865,536 16,773,245 16,874,977 16,331,008 15,870,611
Borrowings 467,342 250,399 217,454 460,609 905,812
Subordinated debentures 462,437 448,126 445,743 442,516 440,744
Accrued interest payable and other
liabilities 221,963 160,494 148,798 185,015 173,545
Total liabilities 20,017,278 17,632,264 17,686,972 17,419,148 17,390,712
STOCKHOLDERS' EQUITY (1) 4,977,598 4,610,668 4,559,905 4,508,106 4,479,055
Total liabilities and stockholders’
equity$24,994,876 $22,242,932 $22,246,877 $21,927,254 $21,869,767
Book value per share$38.65 $37.96 $37.55 $37.13 $36.93
Tangible book value per share (2)$18.24 $19.84 $19.40 $18.95 $18.71
Shares outstanding 128,782,878 121,449,794 121,448,321 121,408,133 121,283,669
(1) Includes net unrealized gain on
securities available-for-sale, net$31,171 $33,613 $29,729 $12,718 $5,982
(2) Non-GAAP measure.


PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
(Dollars in thousands, except per share data)
Interest income:
Loans and leases$258,309 $235,666 $234,618 $224,178 $238,223
Investment securities 25,712 24,762 24,689 23,039 23,403
Deposits in financial institutions 576 538 237 192 147
Total interest income 284,597 260,966 259,544 247,409 261,773
Interest expense:
Deposits 14,041 13,071 10,205 8,377 7,369
Borrowings 1,366 188 1,066 1,018 631
Subordinated debentures 6,234 6,017 5,800 5,562 5,468
Total interest expense 21,641 19,276 17,071 14,957 13,468
Net interest income 262,956 241,690 242,473 232,452 248,305
Provision for credit losses 6,406 15,119 11,499 24,728 23,215
Net interest income after provision
for credit losses 256,550 226,571 230,974 207,724 225,090
Noninterest income:
Service charges on deposit accounts 4,574 3,465 3,510 3,758 3,557
Other commissions and fees 10,505 9,944 10,583 10,390 12,036
Leased equipment income 8,258 8,332 11,635 9,475 8,614
Gain on sale of loans and leases 1,988 2,848 649 712 119
(Loss) gain on sale of securities (3,329) 1,236 1,651 (99) 515
Other income 4,799 5,557 7,254 10,878 4,054
Total noninterest income 26,795 31,382 35,282 35,114 28,895
Noninterest expense:
Compensation 71,986 64,413 65,288 64,880 66,013
Occupancy 12,715 12,729 11,811 11,608 12,076
Data processing 6,764 6,459 6,337 7,015 6,574
Other professional services 5,786 4,213 3,976 3,378 4,880
Insurance and assessments 5,384 4,702 4,856 4,791 4,124
Intangible asset amortization 5,062 3,049 3,065 3,064 3,176
Leased equipment depreciation 5,048 4,862 5,232 5,625 5,291
Foreclosed assets (income) expense, net (475) 2,191 (157) 143 2,693
Acquisition, integration and
reorganization costs 16,085 1,450 1,700 500 -
Loan expense 3,140 3,421 3,884 3,387 3,140
Other expense 11,373 11,053 11,715 12,153 10,655
Total noninterest expense 142,868 118,542 117,707 116,544 118,622
Earnings before income taxes 140,477 139,411 148,549 126,294 135,363
Income tax expense (56,440) (37,945) (54,902) (47,626) (49,716)
Net earnings $84,037 $101,466 $93,647 $78,668 $85,647
Basic and diluted earnings per share$0.66 $0.84 $0.77 $0.65 $0.71


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,
2017 2017 2017 2017 2016
(Dollars in thousands)
Performance Ratios:
Return on average assets (1) 1.34% 1.82% 1.71% 1.47% 1.59%
Return on average equity (1) 6.78% 8.77% 8.26% 7.08% 7.57%
Return on average tangible equity (1)(2) 13.75% 16.85% 16.06% 13.90% 14.88%
Yield on average loans and leases (1)(3) 5.89% 6.01% 6.07% 5.94% 6.31%
Yield on average interest-earning
assets (1)(4) 5.37% 5.48% 5.57% 5.48% 5.76%
Cost of average total deposits (1) 0.30% 0.31% 0.25% 0.21% 0.19%
Cost of average time deposits (1) 0.68% 0.62% 0.55% 0.45% 0.40%
Cost of average interest-bearing
liabilities (1) 0.75% 0.73% 0.65% 0.59% 0.52%
Cost of average funding sources (1) 0.44% 0.44% 0.40% 0.36% 0.32%
Net interest spread (1)(4) 4.62% 4.75% 4.92% 4.89% 5.24%
Net interest margin (1)(4) 4.97% 5.08% 5.21% 5.16% 5.47%
Efficiency ratio 41.0% 40.4% 40.3% 41.4% 40.1%
Noninterest expense as a percentage
of average assets (1) 2.29% 2.12% 2.15% 2.18% 2.20%
Average Balances:
Loans and leases, net of deferred fees$ 17,426,873 $ 15,575,030 $ 15,497,921 $ 15,297,044 $ 15,008,268
Interest-earning assets 21,414,180 19,257,441 19,030,793 18,655,243 18,413,189
Total assets 24,789,836 22,137,874 21,936,602 21,645,534 21,427,950
Noninterest-bearing deposits 8,190,134 6,858,816 6,646,349 6,595,346 6,496,221
Interest-bearing deposits 10,578,568 10,024,554 9,692,352 9,330,235 9,327,080
Total deposits 18,768,702 16,883,370 16,338,701 15,925,581 15,823,301
Borrowings and subordinated
debentures 903,375 508,083 901,530 1,038,424 946,474
Interest-bearing liabilities 11,481,943 10,532,637 10,593,882 10,368,659 10,273,554
Funding sources 19,672,077 17,391,453 17,240,231 16,964,005 16,769,775
Stockholders' equity 4,920,498 4,592,489 4,545,276 4,503,675 4,501,948
(1) Annualized.
(2) Non-GAAP measure.
(3) Tax equivalent starting with the third quarter of 2017.
(4) Tax equivalent.


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,
2017 2017 2017 2017 2016
(Dollars in thousands)
Non-PCI Credit Quality:
Allowance for credit losses to loans
and leases held for investment 0.95% 1.11% 1.02% 1.08% 1.05%
Allowance for credit losses to
nonaccrual loans and leases held
for investment 103.8% 110.1% 92.2% 96.9% 94.5%
Nonaccrual loans and leases held for
investment to loans and leases held
for investment 0.92% 1.00% 1.11% 1.11% 1.11%
Nonperforming assets to loans and
leases held for investment and
foreclosed assets 0.93% 1.08% 1.20% 1.20% 1.19%
Nonperforming assets to total assets 0.63% 0.76% 0.84% 0.85% 0.84%
Trailing twelve month net charge-offs
to average loans and leases
held for investment 0.40% 0.35% 0.37% 0.24% 0.15%
PacWest Bancorp Consolidated
Capital:
Tier 1 leverage ratio (1) 10.66% 12.02% 11.90% 11.87% 11.91%
Common equity tier 1 capital ratio (1) 10.92% 12.52% 12.28% 12.31% 12.31%
Tier 1 capital ratio (1) 10.92% 12.52% 12.28% 12.31% 12.31%
Total capital ratio (1) 13.77% 15.74% 15.42% 15.56% 15.56%
Risk-weighted assets (1)$21,637,503 $19,086,798 $19,084,823 $18,732,723 $18,568,622
Equity to assets ratio 19.91% 20.73% 20.50% 20.56% 20.48%
Tangible common equity ratio (2) 10.50% 12.02% 11.75% 11.67% 11.54%
Book value per share$38.65 $37.96 $37.55 $37.13 $36.93
Tangible book value per share (2)$18.24 $19.84 $19.40 $18.95 $18.71
Pacific Western Bank Capital:
Tier 1 leverage ratio (1) 11.75% 11.46% 11.41% 11.36% 11.40%
Common equity tier 1 capital ratio (1) 11.92% 11.95% 11.79% 11.79% 11.78%
Tier 1 capital ratio (1) 11.92% 11.95% 11.79% 11.79% 11.78%
Total capital ratio (1) 12.70% 12.89% 12.66% 12.74% 12.72%
(1) Capital information for December 31, 2017 is preliminary.
(2) Non-GAAP measure.

GAAP TO NON-GAAP RECONCILIATIONS

This press release contains certain non-GAAP financial disclosures for: (1) return on average tangible equity, (2) tangible common equity ratio, and (3) tangible book value per share. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. In particular, the use of return on average tangible equity, tangible common equity ratio, 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: (1) return on average equity, (2) equity to assets ratio, and (3) book value per share.

The tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:

December 31, September 30, December 31, December 31,
Return on Average Tangible Equity 2017 2017 2016 2017 2016
(Dollars in thousands)
Net earnings$84,037 $101,466 $85,647 $357,818 $352,166
Average stockholders' equity$4,920,498 $4,592,489 $4,501,948 $4,641,495 $4,488,862
Less: Average intangible assets 2,495,876 2,202,922 2,212,042 2,279,010 2,219,756
Average tangible common equity$2,424,622 $2,389,567 $2,289,906 $2,362,485 $2,269,106
Return on average equity (1) 6.78% 8.77% 7.57% 7.71% 7.85%
Return on average tangible equity (2) 13.75% 16.85% 14.88% 15.15% 15.52%
(1) Annualized net earnings divided by average stockholders' equity.
(2) Annualized net earnings divided by average tangible common equity.


Tangible Common Equity Ratio/December 31, September 30, June 30, March 31, December 31,
Tangible Book Value Per Share 2017 2017 2017 2017 2016
(Dollars in thousands, except per share data)
Stockholders' equity$4,977,598 $4,610,668 $4,559,905 $4,508,106 $4,479,055
Less: Intangible assets 2,628,296 2,201,137 2,204,186 2,207,251 2,210,315
Tangible common equity$2,349,302 $2,409,531 $2,355,719 $2,300,855 $2,268,740
Total assets$24,994,876 $22,242,932 $22,246,877 $21,927,254 $21,869,767
Less: Intangible assets 2,628,296 2,201,137 2,204,186 2,207,251 2,210,315
Tangible assets$22,366,580 $20,041,795 $20,042,691 $19,720,003 $19,659,452
Equity to assets ratio 19.91% 20.73% 20.50% 20.56% 20.48%
Tangible common equity ratio (1) 10.50% 12.02% 11.75% 11.67% 11.54%
Book value per share$38.65 $37.96 $37.55 $37.13 $36.93
Tangible book value per share (2)$18.24 $19.84 $19.40 $18.95 $18.71
Shares outstanding 128,782,878 121,449,794 121,448,321 121,408,133 121,283,669
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by shares outstanding.


Contact: Matthew P. Wagner Patrick J. Rusnak
President and CEO Executive Vice President and CFO
Phone:310-887-8520 714-989-4705
Contact:Donald D. Destino
Executive Vice President
Corporate Development and Investor
Relations
Phone:310-887-8521


Source:PacWest Bancorp

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