PacWest Bancorp Announces Results for the Third Quarter of 2015

Highlights

• Net Earnings of $69.6 Million, or $0.68 Per Diluted Share; Adjusted Net Earnings of $65.2 Million, or $0.63 Per Diluted Share
• New Loan and Lease Production of $1.1 Billion; Annualized Growth Rate of 14%
• Core Deposits Increased $230.6 Million in the Quarter and Represent 56% of Total Deposits
• Core Tax Equivalent Net Interest Margin of 5.19%
• Square 1 Merger Closed October 6, 2015

LOS ANGELES, Oct. 15, 2015 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq:PACW) (“PacWest”) today announced net earnings for the third quarter of 2015 of $69.6 million, or $0.68 per diluted share, compared to net earnings for the second quarter of 2015 of $85.1 million, or $0.83 per diluted share.  When certain income and expense items described below are excluded, adjusted net earnings were $65.2 million, or $0.63 per diluted share, for the third quarter of 2015 compared to $73.1 million, or $0.71 per diluted share, for the second quarter of 2015.  The decrease in adjusted net earnings is largely the result of higher foreclosed assets expense, lower adjusted noninterest income, and a higher provision for credit losses as compared to the second quarter.

Matt Wagner, President and CEO, commented, “As expected, the loan and lease production and growth rebounded strongly in the third quarter and will have a positive impact on revenues in the fourth quarter. We remain confident with our outlook for upper single-digits annual growth for the near term, bearing in mind there may be some volatility between quarters in the growth rate due to payoff activity.”

“The decline in our adjusted earnings on a linked-quarter basis was mostly due to a few discrete items, including an increase in foreclosed assets expense and a decline in equity investment income. Even with the noise from these items, our profitability levels remained solid with an adjusted ROA and ROTE for the third quarter of 1.55% and 14.1%.”

Mr. Wagner continued, “Our Non-PCI credit metrics improved during the third quarter, with meaningful reductions in the level of classified and nonperforming assets.  In addition, our credit exposure to the oil and gas services industry also improved, with reductions in both outstandings and nonaccrual balances of 14% and 25%, respectively.”

Mr. Wagner commented on the Square 1 merger stating, “With the completion of the Square 1 merger, PacWest has a substantially improved core deposit base and a proven platform for generating profitable loan, deposit and noninterest income growth in the venture capital banking space.  We welcome our new director, Mr. Paul Burke, and all of the Square 1 clients and employees.” 

Patrick Rusnak, Executive Vice President and CFO stated, “Third quarter core deposit growth was very good, totaling over $230 million of which about one third was generated by the CapitalSource Division.  While we have continued to make progress towards our goal of remixing the Bank’s deposit base, the Square 1 merger will significantly accelerate that process.”

Mr. Rusnak continued, “Our core tax equivalent net interest margin remains very strong at 5.19%.  We continue to control operating expenses as shown by the adjusted efficiency ratio of 40.6% in the third quarter.  Our focus for the remainder of 2015 will be loan and lease growth, core deposit growth, expense control and the successful integration of Square 1.” 

FINANCIAL HIGHLIGHTS

	At or For the Three Months Ended									At or For the Nine Months Ended
	September 30,			June 30,						September 30,
		2015			2015		Change				2015			2014		Change
	(Dollars in thousands, except per share data)
Financial Highlights:
Net Earnings	$	69,616		$	85,083		$	(15,467	)	$	227,778		$	97,906		$	129,872
Diluted Earnings Per Share	$	0.68		$	0.83		$	(0.15	)	$	2.21		$	1.18		$	1.03
Return on Average Assets (1)		1.65	%		2.07	%		(0.42	)		1.85	%		1.05	%		0.80
Return on Average
Tangible Equity (1) (2)		15.09	%		18.90	%		(3.81	)		16.82	%		10.01	%		6.81
Adjusted Net Earnings (2)	$	65,167		$	73,088		$	(7,921	)	$	203,821		$	151,683		$	52,138
Adjusted Diluted Earnings
Per Share (2)	$	0.63		$	0.71		$	(0.08	)	$	1.98		$	1.82		$	0.16
Adjusted Return on Average
Assets (1) (2)		1.55	%		1.78	%		(0.23	)		1.65	%		1.63	%		0.02
Adjusted Return on Average
Tangible Equity (1) (2)		14.12	%		16.24	%		(2.12	)		15.05	%		15.51	%		(0.46	)
Net Interest Margin
(tax equivalent)		5.46	%		5.89	%		(0.43	)		5.76	%		6.05	%		(0.29	)
Core Net Interest Margin
(tax equivalent) (2)		5.19	%		5.33	%		(0.14	)		5.31	%		5.70	%		(0.39	)
Efficiency Ratio		39.6	%		38.0	%		1.6			38.1	%		42.9	%		(4.8	)
Adjusted Efficiency Ratio (2)		40.6	%		40.5	%		0.1			40.1	%		42.9	%		(2.8	)
Total Assets	$	16,814,105		$	16,697,020		$	117,085		$	16,814,105		$	15,938,150		$	875,955
Loans and Leases, Net of
Deferred Fees	$	12,452,205		$	12,034,189		$	418,016		$	12,452,205		$	11,574,885		$	877,320
Total Deposits	$	12,115,763		$	12,581,816		$	(466,053	)	$	12,115,763		$	11,523,437		$	592,326
Noninterest-Bearing Deposits
as Percentage of Total
Deposits		29	%		26	%		3			29	%		25	%		4
Core Deposits as Percentage
of Total Deposits		56	%		52	%		4			56	%		52	%		4
Tangible Common Equity
Ratio (2)		12.21	%		12.10	%		0.11			12.21	%		12.24	%		(0.03	)
Tangible Book Value Per
Share (2)	$	17.86		$	17.55		$	0.31		$	17.86		$	16.86		$	1.00
(1) Annualized.
(2) Non-GAAP measure.

ADJUSTED NET EARNINGS

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

		Three Months Ended												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,
			2015				2015				2014				2015				2014
		(Dollars in thousands)
Net earnings		$	69,616			$	85,083			$	62,271			$	227,778			$	97,906
Less: Tax benefit on discontinued operations			-				-				(3	)			-				(1,067	)
Add: Tax expense on continuing operations			39,777				45,287				42,911				131,137				73,744
Pre-tax earnings			109,393				130,370				105,179				358,915				170,583
Add: Acquisition, integration, and
reorganization costs			747				900				5,193				3,647				93,635
Less: FDIC loss sharing expense, net			(4,449	)			(5,107	)			(7,415	)			(13,955	)			(27,370	)
Gain on sale of loans and leases			27				163				973				190				594
Gain (loss) on securities			655				(186	)			-				3,744				4,841
Covered OREO (expense) income, net			(20	)			12				(452	)			11				1,348
Gain on sale of owned office building			-				-				-				-				1,570
Adjusted pre-tax earnings before accelerated
discount accretion			113,927				136,388				117,266				372,572				283,235
Less: Accelerated discount accretion from
early payoffs of acquired loans			9,659				19,447				4,501				46,458				27,446
Adjusted pre-tax earnings			104,268				116,941				112,765				326,114				255,789
Tax expense (1)			(39,101	)			(43,853	)			(45,895	)			(122,293	)			(104,106	)
Adjusted net earnings		$	65,167			$	73,088			$	66,870			$	203,821			$	151,683
Adjusted diluted earnings per share		$	0.63			$	0.71			$	0.65			$	1.98			$	1.82
Adjusted return on average assets			1.55	%			1.78	%			1.69	%			1.65	%			1.63	%
(1) Full-year expected effective rate of 37.5% used for 2015 periods and actual effective rate of 40.7% used for 2014 periods.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income decreased $10.1 million to $192.5 million for the third quarter of 2015 compared to $202.6 million for the second quarter of 2015 due to lower discount accretion on acquired loans and lower FHLB dividends, offset by one more day in the third quarter.  The loan and lease yield for the third quarter of 2015 was 6.34% compared to 6.75% for the second quarter of 2015.  The decrease in the loan and lease yield was due to lower discount accretion on acquired loans and the yield on new originations being lower than the current portfolio yield. Discount accretion on acquired loans was $17.1 million in the third quarter of 2015 (57 basis points on the loan and lease yield) compared to $28.0 million in the second quarter of 2015 (92 basis points on the loan and lease yield). The decrease in discount accretion was due primarily to lower accelerated accretion from early payoffs.

The tax equivalent net interest margin (“NIM”) for the third quarter of 2015 was 5.46% compared to 5.89% for the second quarter of 2015. The decrease in the NIM was due to lower discount accretion on acquired loans, lower FHLB dividends and a higher percentage of average lower-yielding assets in the mix. Discount accretion on acquired loans contributed 48 basis points to the NIM in the third quarter of 2015 and 81 basis points in the second quarter of 2015. A $1.4 million special dividend received from the FHLB in the second quarter of 2015 contributed four basis points to the second quarter NIM.  

The cost of total deposits decreased to 0.33% in the third quarter from 0.37% in the prior quarter due primarily to a lower level of higher-cost time deposits and the increased balance of noninterest-bearing deposits.  The repricing of maturing time deposits at current rates and new time deposit production resulted in the decline in the weighted average contractual interest rate on time deposits to 0.67% at September 30, 2015 from 0.71% at June 30, 2015.

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

	Three Months Ended
	September 30,				June 30,
Net Interest Margin - Tax Equivalent		2015				2015
	(Dollars in thousands)
Average Assets:
Loans and leases	$	12,112,881			$	12,108,016
Investment securities		1,806,628				1,672,590
Deposits in financial institutions		278,973				161,683
Interest-earning assets		14,198,482				13,942,289
Other assets		2,491,695				2,521,022
Total assets	$	16,690,177			$	16,463,311
Average Liabilities and Stockholders' Equity:
Interest-bearing deposits	$	8,993,681			$	9,107,937
Borrowings		70,171				81,164
Subordinated debentures		434,420				432,656
Interest-bearing liabilities		9,498,272				9,621,757
Noninterest-bearing demand deposits		3,486,780				3,157,129
Other liabilities		132,360				135,677
Total liabilities		13,117,412				12,914,563
Stockholders' equity		3,572,765				3,548,748
Liabilities and stockholders' equity	$	16,690,177			$	16,463,311
Time deposits	$	5,042,768			$	5,559,903
Total deposits	$	12,480,461			$	12,265,066
Funding sources	$	12,985,052			$	12,778,886
Yields on Average Assets:
Loans and leases		6.34	%			6.75	%
Investment securities (1)		3.67	%			4.01	%
Interest-earning assets (1)		5.88	%			6.35	%
Costs of Average Liabilities:
Total deposits		0.33	%			0.37	%
Time deposits		0.66	%			0.68	%
Interest-bearing deposits		0.46	%			0.49	%
Borrowings		0.41	%			0.43	%
Subordinated debentures		4.27	%			4.25	%
Interest-bearing liabilities		0.63	%			0.66	%
Funding sources		0.46	%			0.50	%
Net interest rate spread (1)		5.25	%			5.69	%
Net interest margin (1)		5.46	%			5.89	%
(1) Tax equivalent

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, 2015							June 30, 2015
					Loan and							Loan and
		NIM			Lease Yield				NIM			Lease Yield
Reported			5.46	%		6.34	%			5.89	%		6.75	%
Less: Accelerated accretion of acquisition discounts
from early payoffs of acquired loans			(0.27	)%		(0.32	)%			(0.56	)%		(0.64	)%
Core (non-GAAP measure)			5.19	%		6.02	%			5.33	%		6.11	%

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, 2015							June 30, 2015
					Impact on							Impact on
		Amount			NIM				Amount			NIM
		(Dollars in thousands)
Net interest income/NIM (TE)		$	195,274			5.46	%		$	204,721			5.89	%
Less: Accelerated accretion of acquisition discounts
from early payoffs of acquired loans			(9,659	)		(0.27	)%			(19,447	)		(0.56	)%
Remaining accretion of Non-PCI loan
acquisition discounts			(7,485	)		(0.21	)%			(8,575	)		(0.25	)%
Total accretion of loan acquisition discounts			(17,144	)		(0.48	)%			(28,022	)		(0.81	)%
Amortization of TruPS discount			1,399			0.04	%			1,400			0.04	%
Accretion of time deposits premium			(576	)		(0.02	)%			(799	)		(0.02	)%
			(16,321	)		(0.46	)%			(27,421	)		(0.79	)%
Net interest income/NIM - excluding purchase
accounting (non-GAAP measure)		$	178,953			5.00	%		$	177,300			5.10	%

Noninterest Income

Noninterest income decreased by $3.8 million to $15.8 million for the third quarter of 2015 compared to $19.6 million for the second quarter of 2015 due mostly to lower realized gains and dividends on equity investments and lower income recognized as a result of loan and lease prepayments, offset by lower foreign currency translation net losses and higher net gains on sale of securities. Realized gains and dividends on equity investments tend to fluctuate from period to period based upon sales activity and actual dividends received. The second quarter of 2015 included the sale of three equity investments at a net gain of $6.0 million compared to one sale in the third quarter at a gain of $0.1 million and dividends on equity investments increased $2.2 million in the third quarter. Foreign currency translation net losses decreased $1.0 million from the prior quarter as the result of movement of the U.S. Dollar against various foreign currencies, principally the Euro. In June 2015, PacWest hedged its Euro-denominated trust preferred issuance with a cross currency swap to reduce the related foreign currency translation volatility. 

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

	Three Months Ended
	September 30,				June 30,				Increase
Noninterest Income		2015				2015			(Decrease)
	(In thousands)
Service charges on deposit accounts	$	2,601			$	2,612			$	(11	)
Other commissions and fees		6,376				7,123				(747	)
Leased equipment income		5,475				5,375				100
Gain on sale of loans and leases		27				163				(136	)
Gain (loss) on securities		655				(186	)			841
FDIC loss sharing expense, net		(4,449	)			(5,107	)			658
Other income:
Dividends and realized gains on equity investments		4,357				8,169				(3,812	)
Foreign currency translation net losses		(373	)			(1,377	)			1,004
Income recognized on early repayment of leases		12				1,648				(1,636	)
Other		1,077				1,203				(126	)
Total noninterest income	$	15,758			$	19,623			$	(3,865	)

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

	Three Months Ended
	September 30,				June 30,				Increase
FDIC Loss Sharing Expense, Net		2015				2015			(Decrease)
	(In thousands)
Loss on FDIC loss sharing asset	$	(846	)		$	(725	)		$	(121	)
FDIC loss sharing asset amortization, net		(3,484	)			(4,286	)			802
Net reimbursement from (to) FDIC for
covered OREOs		(11	)			7				(18	)
Other		(108	)			(103	)			(5	)
FDIC loss sharing expense, net	$	(4,449	)		$	(5,107	)		$	658

Noninterest Expense

Noninterest expense increased by $4.8 million to $90.1 million for the third quarter of 2015 compared to $85.3 million for the second quarter of 2015.  The increase was due mostly to higher foreclosed assets expense of $6.9 million, offset by lower insurance and assessments expense of $0.9 million and lower compensation expense of $0.9 million.  The increase in foreclosed assets expense was due mostly to a write-down of $4.6 million on an existing foreclosed property in the third quarter, while the second quarter included gains related to foreclosed asset sales of $2.8 million. Insurance and assessments expense decreased due to lower FDIC insurance assessment expense. The reduction in compensation expense was principally due to lower stock-based compensation expense.

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

	Three Months Ended
	September 30,				June 30,				Increase
Noninterest Expense		2015				2015			(Decrease)
	(In thousands)
Compensation	$	48,152			$	49,033			$	(881	)
Occupancy		10,762				10,588				174
Data processing		4,322				4,402				(80	)
Other professional services		3,396				3,332				64
Insurance and assessments		3,805				4,716				(911	)
Intangible asset amortization		1,497				1,502				(5	)
Leased equipment depreciation		3,162				3,103				59
Foreclosed assets expense (income), net		4,521				(2,340	)			6,861
Acquisition, integration and reorganization costs		747				900				(153	)
Other expense:
Loan expense		1,494				1,486				8
Other		8,281				8,554				(273	)
Total noninterest expense	$	90,139			$	85,276			$	4,863

Income Taxes

Our overall effective income tax rate was 36.4% for the third quarter of 2015 and 34.7% for the second quarter of 2015.  The effective rate for the second quarter was lower due to the utilization of a portion of the capital loss carryforward and adjustments to certain deferred tax assets. The effective tax rate for calendar year 2015 is expected to be 37.5%. 

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Total loans and leases increased $418.0 million in the third quarter to $12.5 billion at September 30, 2015.   The net increase was driven by third quarter originations and purchases of $1.1 billion, offset partially by principal repayments of $630.3 million.   For the twelve months ended September 30, 2015, total loans and leases increased $877 million, or approximately 8%.

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)		2015				2015
	(In thousands)
Beginning balance	$	12,034,189			$	12,272,166
New production		1,070,986				658,669
Existing loans and leases:
Principal repayments, net (2)		(630,292	)			(889,708	)
Loan and lease sales		(6,864	)			(3,621	)
Transfers to foreclosed assets		(10,383	)			(2,694	)
Charge-offs		(5,431	)			(623	)
Ending balance	$	12,452,205			$	12,034,189
(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 a roll forward of the loan and lease portfolio by business division for the period indicated:

		Three Months Ended September 30, 2015
		Community			National
Loan and Lease Roll Forward by Division		Banking			Lending			Total
		(In thousands)
Beginning balance		$	3,101,834		$	8,932,355		$	12,034,189
New production			267,560			803,426			1,070,986
Existing loans and leases:
Principal repayments, net			(226,451	)		(403,841	)		(630,292	)
Loan and lease sales			-			(6,864	)		(6,864	)
Transfers to foreclosed assets			(378	)		(10,005	)		(10,383	)
Charge-offs			(989	)		(4,442	)		(5,431	)
Ending balance		$	3,141,576		$	9,310,629		$	12,452,205
Weighted average yields on new production
for the quarters ended:
September 30, 2015			4.33	%		5.47	%		5.16	%
June 30, 2015			5.17	%		6.00	%		5.89	%
March 31, 2015			5.28	%		5.84	%		5.76	%
December 31, 2014			5.09	%		5.76	%		5.67	%

The Company identified an $82 million group of multi-family loans during the third quarter and re-underwrote and acquired them in anticipation of launching a multi-family loan origination group later this year that will initially focus on the Los Angeles, Orange County and Bay Area metropolitan markets.  The Company expects this initiative will reduce its overall portfolio credit risk, especially in an adverse economic environment.

The Company’s portfolio of student loans has repaid rapidly. In order to replace such runoff and to further diversify the loan and lease portfolio by product and geography, the Company purchased a $50 million pool of student loans in the third quarter. These multi-family and student loans, which are included under “Community Banking” in the above table, reduced the third quarter new production yield by 23 basis points.

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

	September 30,				June 30,				December 31,				September 30,
Loan and Lease Portfolio		2015				2015				2014				2014
	(In thousands)
Real estate mortgage:
Hospitality	$	635,160			$	619,510			$	570,634			$	530,628
SBA		402,382				401,832				380,890				357,923
Commercial real estate		2,334,497				2,414,464				2,583,965				2,649,503
Healthcare real estate		1,140,450				1,127,111				1,051,491				1,024,474
Multi-family		992,325				883,083				789,271				906,528
Other		184,977				193,821				220,751				244,059
Total real estate mortgage		5,689,791				5,639,821				5,597,002				5,713,115
Real estate construction and land:
Residential		145,262				119,825				96,749				72,881
Commercial		229,904				213,091				217,297				218,389
Total real estate construction and land		375,166				332,916				314,046				291,270
Total real estate loans		6,064,957				5,972,737				5,911,048				6,004,385
Commercial:
Collateralized		359,214				371,954				439,567				429,011
Unsecured		126,726				120,415				131,939				127,150
Asset-based		2,022,492				1,840,514				1,794,907				1,594,488
Cash flow		2,805,817				2,691,743				2,486,411				2,341,511
Equipment finance		894,777				904,488				969,489				928,460
SBA		48,107				45,769				47,304				41,129
Total commercial		6,257,133				5,974,883				5,869,617				5,461,749
Consumer		130,115				86,569				101,767				108,751
Total loans and leases, net of
deferred fees	$	12,452,205			$	12,034,189			$	11,882,432			$	11,574,885
Total unfunded loan commitments	$	2,022,046			$	2,111,637			$	1,921,067			$	1,818,694

Credit Exposure Affected by Low Oil Prices

At September 30, 2015, PacWest had 27 outstanding loan and lease relationships totaling $152.3 million to borrowers involved in the oil and gas services industry, down from $177.2 million at June 30, 2015.  The collateral for these loans and leases primarily includes equipment, such as drilling equipment and transportation vehicles.  At September 30, 2015, four relationships totaling $47.9 million were on nonaccrual status and were classified, down from $64.2 million at June 30, 2015.   The largest of these relationships had an aggregate outstanding balance of $40 million at September 30, 2015, for which a current collateral appraisal indicated a liquidation value significantly in excess of the carrying value.

Deposits

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

	September 30,				June 30,				December 31,				September 30,
Deposit Category		2015				2015				2014				2014
	(Dollars in thousands)
Noninterest-bearing demand deposits	$	3,508,682			$	3,396,688			$	2,931,352			$	2,842,488
Interest checking deposits		693,632				722,231				732,196				683,014
Money market deposits		1,860,983				1,722,633				1,709,068				1,721,563
Savings deposits		751,955				743,054				762,961				759,893
Total core deposits		6,815,252				6,584,606				6,135,577				6,006,958
Brokered non-maturity deposits		713,215				651,925				120,613				-
Total non-maturity deposits		7,528,467				7,236,531				6,256,190				6,006,958
Time deposits under $100,000		1,951,938				2,328,109				2,467,338				2,267,013
Time deposits of $100,000 and over		2,635,358				3,017,176				3,031,600				3,249,466
Total time deposits		4,587,296				5,345,285				5,498,938				5,516,479
Total deposits	$	12,115,763			$	12,581,816			$	11,755,128			$	11,523,437
Noninterest-bearing demand deposits
as percentage of total deposits		29	%			26	%			25	%			25	%
Core deposits as percentage of total deposits		56	%			52	%			52	%			52	%

At September 30, 2015, core deposits totaled $6.8 billion, or 56% of total deposits, including $3.5 billion of noninterest-bearing demand deposits, or 29% of total deposits.  Deposits obtained from the CapitalSource Division totaled $527.8 million at September 30, 2015, of which $514.1 million were core deposits. 

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

	September 30, 2015
	Time Deposits			Time Deposits			Total						Estimated
	Under			$	100,000		Time			Contractual			Effective
Time Deposit Maturities	$	100,000		or More			Deposits			Rate			Rate
	(Dollars in thousands)
Due in three months or less	$	456,408		$	394,312		$	850,720			0.54	%		0.49	%
Due in over three months through six months		572,782			757,604			1,330,386			0.63	%		0.61	%
Due in over six months through twelve months		745,563			1,258,958			2,004,521			0.74	%		0.72	%
Due in over 12 months through 24 months		136,844			195,105			331,949			0.72	%		0.64	%
Due in over 24 months		40,341			29,379			69,720			1.03	%		0.81	%
Total	$	1,951,938		$	2,635,358		$	4,587,296			0.67	%		0.65	%
At June 30, 2015	$	2,328,109		$	3,017,176		$	5,345,285			0.71	%		0.69	%

The remaining purchase accounting premium on acquired CapitalSource time deposits was $1.2 million at September 30, 2015, of which $0.4 million will be recognized as a reduction of interest expense during the fourth quarter of 2015.   

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

A provision for credit losses of $8.7 million was recorded in the third quarter of 2015 as compared to $6.5 million in the second quarter of 2015. The third quarter provision was comprised of an $11.0 million provision for Non-PCI loans and leases and a negative provision of $2.3 million for PCI loans.  For the Non-PCI portfolio, the $11.0 million provision, combined with net charge-offs of $3.2 million, resulted in an increase in the allowance for credit losses of $7.8 million.  The allowance for Non-PCI credit losses to Non-PCI loans and leases coverage ratio increased to 0.82% at September 30 from 0.78% at June 30.  The negative provision for PCI loans resulted from increases in expected cash flows on such loans, mostly due to payoffs.

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

	Three Months Ended September 30, 2015
	Non-PCI
Allowance for Credit	Loans and				Unfunded				Total				PCI
Losses Rollforward	Leases				Commitments				Non-PCI				Loans				Total
	(In thousands)
Beginning balance	$	85,047			$	7,874			$	92,921			$	14,328			$	107,249
Charge-offs		(4,312	)			-				(4,312	)			(1,119	)			(5,431	)
Recoveries		1,081				-				1,081				-				1,081
Net charge-offs		(3,231	)			-				(3,231	)			(1,119	)			(4,350	)
Provision (negative provision)		10,500				500				11,000				(2,254	)			8,746
Ending balance	$	92,316			$	8,374			$	100,690			$	10,955			$	111,645
	Three Months Ended June 30, 2015
	Non-PCI
Allowance for Credit	Loans and				Unfunded				Total				PCI
Losses Rollforward	Leases				Commitments				Non-PCI				Loans				Total
	(In thousands)
Beginning balance	$	79,680			$	6,874			$	86,554			$	12,698			$	99,252
Charge-offs		(623	)			-				(623	)			-				(623	)
Recoveries		1,990				-				1,990				101				2,091
Net recoveries		1,367				-				1,367				101				1,468
Provision		4,000				1,000				5,000				1,529				6,529
Ending balance	$	85,047			$	7,874			$	92,921			$	14,328			$	107,249

Non-PCI loans and leases at September 30, 2015 included $7.1 billion of originated loans and leases that were not obtained through acquisitions. The allowance for loan and lease losses related to these loans and leases totaled $80.1 million, or 1.13% of the outstanding balance.

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 associated purchase accounting discounts:

	September 30, 2015												June 30, 2015
	Non-PCI												Non-PCI
	Loans and			Allowance/					Coverage				Loans and			Allowance/					Coverage
Credit Risk Coverage Ratios	Leases			Discount					Ratio				Leases			Discount					Ratio
	(Dollars in thousands)
Ending balance	$	12,300,057		$	100,690					0.82	%		$	11,846,314		$	92,921					0.78	%
Acquired loans		(5,180,808	)		(12,173	)  (1)								(5,587,662	)		(12,697	) (1)
Adjusted balance	$	7,119,249		$	88,517					1.24	%		$	6,258,652		$	80,224					1.28	%
Ending balance	$	12,300,057		$	100,690					0.82	%		$	11,846,314		$	92,921					0.78	%
Unamortized net discount		88,690			88,690		(2	)						103,302			103,302		(2	)
Adjusted balance	$	12,388,747		$	189,380					1.53	%		$	11,949,616		$	196,223					1.64	%
(1) Allowance attributed to $5.2 billion and $5.6 billion of acquired Non-PCI loans at September 30, 2015 and June 30, 2015, 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 $5.2 billion and $5.6 billion of acquired Non-PCI loans at September 30, 2015 and June 30, 2015, 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 $88.7 million at September 30, 2015, is expected to be substantially accreted to income by the end of 2018.

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

CREDIT QUALITY

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

	September 30,				June 30,
Non-PCI Credit Quality Metrics		2015				2015
	(Dollars in thousands)
Allowance for credit losses	$	100,690			$	92,921
Nonaccrual loans and leases (1)		107,190				131,178
Classified loans and leases		328,038				379,988
Performing restructured loans		39,956				38,203
Net charge-offs (recoveries) (for the quarter)		3,231				(1,367	)
Provision for credit losses (for the quarter)		11,000				5,000
Allowance for credit losses to loans and leases		0.82	%			0.78	%
Allowance for credit losses to nonaccrual loans
and leases (1)		93.9	%			70.8	%
Nonaccrual loans and leases to loans and leases		0.87	%			1.11	%
Nonperforming assets to loans and leases and
foreclosed assets		1.14	%			1.37	%
Classified loans and leases to loans and leases		2.67	%			3.21	%
(1) At September 30, 2015 and June 30, 2015 includes $54.9 million and $56.1 million of acquired loans and leases with no allowance due to the effects of fair value accounting.

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:

	Nonaccrual Loans and Leases														Accruing and
	September 30, 2015							June 30, 2015							30-89 Days Past Due
				% of							% of				September 30,				June 30,
				Loan							Loan					2015				2015
	Amount			Category				Amount			Category				Amount				Amount
	(Dollars in thousands)
Real estate mortgage:
Hospitality	$	1,845			-			$	7,894			1	%		$	779			$	-
SBA		11,682			3	%			10,141			3	%			233				2,272
Other		18,294			-				16,213			-				2,090				2,482
Total real estate mortgage		31,821			1	%			34,248			1	%			3,102				4,754
Real estate construction and land:
Residential		374			-				377			-				-				-
Commercial		-			-				-			-				-				-
Total real estate
construction and land		374			-				377			-				-				-
Commercial:
Collateralized		2,771			1	%			3,761			1	%			82				131
Unsecured		923			1	%			537			-				11				-
Asset-based		90			-				40			-				-				-
Cash flow		11,761			-				14,605			1	%			-				-
Equipment finance (1)		53,153			6	%			71,130			8	%			-				915
SBA		2,918			6	%			3,068			7	%			-				-
Total commercial		71,616			1	%			93,141			2	%			93				1,046
Consumer		3,379			3	%			3,412			4	%			88				1
Total Non-PCI loans and
leases	$	107,190			1	%		$	131,178			1	%		$	3,283			$	5,801
(1) Includes nonaccrual leases and loans to companies involved in the oil and gas industries of $47.9 million and $64.2 million at September 30, 2015 and June 30, 2015, respectively.

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

	September 30,				June 30,
Nonperforming Assets		2015				2015
	(Dollars in thousands)
Nonaccrual Non-PCI loans and leases	$	107,190			$	131,178
Nonaccrual PCI Loans (1)		4,823				6,016
Total nonaccrual loans and leases		112,013				137,194
Foreclosed assets, net		33,216				31,668
Total nonperforming assets	$	145,229			$	168,862
Nonaccrual loans and leases to loans and leases		0.90	%			1.14	%
Nonperforming assets to loans and leases
and foreclosed assets		1.16	%			1.40	%
(1) Represents legacy CapitalSource borrowing relationships placed on nonaccrual status as of the acquisition date.

SQUARE 1 FINANCIAL, INC. MERGER

On October 6, 2015, PacWest completed the merger with Square 1 Financial, Inc. (“Square 1”) in a transaction valued at approximately $815 million.  The combined company is called PacWest Bancorp and the combined subsidiary bank is called Pacific Western Bank, with the banking operations of Square 1 conducted under the trade name of Square 1 Bank, a division of Pacific Western Bank.

Under the terms of the merger agreement, Square 1 stockholders received 0.5997 shares of PacWest common stock for each share of Square 1 common stock and holders of stock options and restricted stock units received cash consideration as described in the merger agreement. The total value of the per share merger consideration was $26.37, based on the closing price of PacWest common stock of $43.97 on October 6, 2015.

As of September 30, 2015, on a pro forma combined basis with Square 1 and excluding purchase accounting adjustments, PacWest would have had approximately $21 billion in assets with 80 branches throughout California and one in North Carolina.

Summary unaudited financial information for Square 1 for the third quarter of 2015 follows:

	At or For the
	Three Months Ended
	September 30, 2015
	(Dollars in thousands)
Net interest income	$	34,079
Provision for loan and lease losses		4,564
Noninterest income		7,313
Noninterest expense		20,638
Pre-tax earnings	$	16,190
Loans receivable, net (at quarter-end)	$	1,574,357
Deposits (at quarter-end)	$	3,675,805
Client investment funds (at quarter-end)	$	2,264,096
Loan yield		5.81	%
Deposit cost		0.02	%
Net interest margin		3.54	%

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”). With 80 full-service branches located throughout the state of California, 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 through its CapitalSource and Square 1 Bank divisions.  The CapitalSource Division provides cash flow, asset-based, equipment and real estate loans and treasury management services to established middle market businesses on a national basis.  The Square 1 Bank Division, headquartered at Pacific Western’s Durham, North Carolina branch, offers a comprehensive suite of financial services focused on entrepreneurial businesses and their venture capital and private equity investors, with offices located in all 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 merger with Square 1, credit loss exposure, profitability, deposit growth, loan and lease portfolio growth, operating expenses, intentions to expand Pacific Western’s lending business, and effective tax rates. 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:

• the Company’s ability to complete future acquisitions and to successfully integrate such acquired entities or achieve expected benefits, synergies and/or operating efficiencies within expected time frames or at all;
• business disruption following the Square 1 merger;
• the reaction to the Square 1 merger of the companies’ customers, employees and counterparties;
• 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;
• higher than anticipated loan losses;
• continued or worsening credit losses or charge-offs;
• higher than anticipated delinquencies and reserves;
• compression of spreads on newly originated loans;
• asset/liability repricing risks and liquidity risks reduces interest margins and the value of investments;
• increased costs to manage and sell foreclosed assets;
• changes in economic or competitive market conditions could negatively impact investment or lending opportunities or product pricing and services;
• reduced demand for our services due to strategic or regulatory reasons;
• our ability to grow deposits and access wholesale funding sources;
• legislative or regulatory requirements or changes adversely affected the Company’s business including an increase to capital requirements;
• loan repayments higher than expected;
• higher than anticipated increases in operating expenses;
  
• increased litigation;
  
• increased asset workout or loan servicing expenses;
  
• higher compensation costs and professional fees to retain and/or incent employees;
  
• inability to attract qualified professionals;
  
• the success and timing of other business strategies;
  
• changes in tax laws or regulations affecting our business;
  
• our inability to generate sufficient earnings;
  
• tax planning or disallowance of tax benefits by tax authorities;
  
• changes in tax filing jurisdictions or entity classifications; 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,
		2015				2015				2014
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	154,652			$	207,598			$	164,757
Interest-earning deposits in financial institutions		81,642				433,033				148,469
Total cash and cash equivalents		236,294				640,631				313,226
Securities available-for-sale, at estimated fair value		1,809,364				1,698,158				1,567,177
Federal Home Loan Bank stock, at cost		17,250				17,250				40,609
Total investment securities		1,826,614				1,715,408				1,607,786
Non-PCI loans and leases		12,300,057				11,846,314				11,613,832
PCI loans		193,340				222,691				290,852
Total gross loans and leases		12,493,397				12,069,005				11,904,684
Deferred fees and costs		(41,192	)			(34,816	)			(22,252	)
Total loans and leases, net of deferred fees		12,452,205				12,034,189				11,882,432
Allowance for loan and lease losses		(103,271	)			(99,375	)			(84,455	)
Total loans and leases, net		12,348,934				11,934,814				11,797,977
Equipment leased to others under operating leases		161,508				117,182				122,506
Premises and equipment, net		36,475				35,984				36,551
Foreclosed assets, net		33,216				31,668				43,721
Deferred tax asset, net		169,760				211,556				284,411
Goodwill		1,728,380				1,728,380				1,720,479
Core deposit and customer
relationship intangibles, net		12,704				14,201				17,204
Other assets		260,220				267,196				290,744
Total assets	$	16,814,105			$	16,697,020			$	16,234,605
LIABILITIES:
Noninterest-bearing deposits	$	3,508,682			$	3,396,688			$	2,931,352
Interest-bearing deposits		8,607,081				9,185,128				8,823,776
Total deposits		12,115,763				12,581,816				11,755,128
Borrowings		552,497				2,751				383,402
Subordinated debentures		435,417				433,944				433,583
Accrued interest payable and other liabilities		128,724				127,019				156,262
Total liabilities		13,232,401				13,145,530				12,728,375
STOCKHOLDERS' EQUITY (1)		3,581,704				3,551,490				3,506,230
Total liabilities and stockholders’ equity	$	16,814,105			$	16,697,020			$	16,234,605
(1) Includes net unrealized gain on securities
available-for-sale, net	$	24,459			$	16,255			$	26,380
Book value per share	$	34.76			$	34.46			$	34.03
Tangible book value per share	$	17.86			$	17.55			$	17.17
Shares outstanding (includes unvested restricted shares
of 988,825 at September 30, 2015, 990,259 at
June 30, 2015, and 1,108,505 at December 31, 2014)		103,053,694				103,051,989				103,022,017

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
	Three Months Ended												Nine Months Ended
	September 30,				June 30,				September 30,				September 30,
		2015				2015				2014				2015				2014
	(Dollars in thousands, except per share data)
Interest income:
Loans and leases	$	193,539			$	203,781			$	189,961			$	599,417			$	459,625
Investment securities		13,955				14,570				12,331				40,720				35,140
Deposits in financial institutions		178				104				64				304				314
Total interest income		207,672				218,455				202,356				640,441				495,079
Interest expense:
Deposits		10,400				11,233				8,822				32,112				17,360
Borrowings		72				88				74				395				352
Subordinated debentures		4,680				4,582				4,614				13,787				9,973
Total interest expense		15,152				15,903				13,510				46,294				27,685
Net interest income		192,520				202,552				188,846				594,147				467,394
Provision for credit losses		8,746				6,529				5,050				31,709				9,436
Net interest income after provision
for credit losses		183,774				196,023				183,796				562,438				457,958
Noninterest income:
Service charges on deposit accounts		2,601				2,612				2,725				7,787				8,446
Other commissions and fees		6,376				7,123				6,371				18,895				14,046
Leased equipment income		5,475				5,375				5,615				16,232				11,287
Gain on sale of loans and leases		27				163				973				190				594
Gain (loss) on securities		655				(186	)			-				3,744				4,841
FDIC loss sharing expense, net		(4,449	)			(5,107	)			(7,415	)			(13,955	)			(27,370	)
Other income		5,073				9,643				8,045				23,359				17,640
Total noninterest income		15,758				19,623				16,314				56,252				29,484
Noninterest expense:
Compensation		48,152				49,033				45,861				144,922				119,569
Occupancy		10,762				10,588				11,188				31,950				29,861
Data processing		4,322				4,402				3,929				13,032				10,568
Other professional services		3,396				3,332				3,687				9,949				8,053
Insurance and assessments		3,805				4,716				3,020				11,546				7,792
Intangible asset amortization		1,497				1,502				1,608				4,500				4,649
Leased equipment depreciation		3,162				3,103				2,961				9,368				6,056
Foreclosed assets expense (income), net		4,521				(2,340	)			4,827				2,517				3,463
Acquisition, integration and reorganization costs		747				900				5,193				3,647				93,635
Other expense		9,775				10,040				12,649				28,344				30,641
Total noninterest expense		90,139				85,276				94,923				259,775				314,287
Earnings from continuing operations before
taxes		109,393				130,370				105,187				358,915				173,155
Income tax expense		(39,777	)			(45,287	)			(42,911	)			(131,137	)			(73,744	)
Net earnings from continuing operations		69,616				85,083				62,276				227,778				99,411
Loss from discontinued operations before taxes		-				-				(8	)			-				(2,572	)
Income tax benefit		-				-				3				-				1,067
Net loss from discontinued operations		-				-				(5	)			-				(1,505	)
Net earnings	$	69,616			$	85,083			$	62,271			$	227,778			$	97,906
Basic and diluted earnings per share:
Net earnings from continuing operations	$	0.68			$	0.83			$	0.60			$	2.21			$	1.20
Net earnings	$	0.68			$	0.83			$	0.60			$	2.21			$	1.18

PACWEST BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
	Three Months Ended
	September 30, 2015										June 30, 2015										September 30, 2014
				Interest			Average							Interest			Average							Interest			Average
	Average			Income/			Yield/				Average			Income/			Yield/				Average			Income/			Yield/
	Balance			Expense			Cost				Balance			Expense			Cost				Balance			Expense			Cost
	(Dollars in thousands)
Assets:
PCI loans	$	193,094		$	7,505			15.42	%		$	228,217		$	7,894			13.87	%		$	363,049		$	13,490			14.74	%
Non-PCI loans and leases		11,919,787			186,034			6.19	%			11,879,799			195,887			6.61	%			10,922,640			176,471			6.41	%
Total loans and leases		12,112,881			193,539			6.34	%			12,108,016			203,781			6.75	%			11,285,689			189,961			6.68	%
Investment securities (1)		1,806,628			16,709			3.67	%			1,672,590			16,739			4.01	%			1,584,811			13,858			3.47	%
Deposits in financial
institutions		278,973			178			0.25	%			161,683			104			0.26	%			99,276			64			0.26	%
Total interest-earning
assets		14,198,482			210,426			5.88	%			13,942,289			220,624			6.35	%			12,969,776			203,883			6.24	%
Other assets		2,491,695										2,521,022										2,746,763
Total assets	$	16,690,177									$	16,463,311									$	15,716,539
Liabilities and
Stockholders' Equity:
Interest checking	$	787,271			300			0.15	%		$	741,966			202			0.11	%		$	605,288			86			0.06	%
Money market		2,417,280			1,218			0.20	%			2,065,190			1,088			0.21	%			1,733,445			908			0.21	%
Savings		746,362			449			0.24	%			740,878			555			0.30	%			759,177			575			0.30	%
Time		5,042,768			8,433			0.66	%			5,559,903			9,388			0.68	%			5,680,732			7,253			0.51	%
Total interest-bearing
deposits		8,993,681			10,400			0.46	%			9,107,937			11,233			0.49	%			8,778,642			8,822			0.40	%
Borrowings		70,171			72			0.41	%			81,164			88			0.43	%			96,711			74			0.30	%
Subordinated debentures		434,420			4,680			4.27	%			432,656			4,582			4.25	%			434,625			4,614			4.21	%
Total interest-bearing
liabilities		9,498,272			15,152			0.63	%			9,621,757			15,903			0.66	%			9,309,978			13,510			0.58	%
Noninterest-bearing
demand deposits		3,486,780										3,157,129										2,778,260
Other liabilities		132,360										135,677										163,182
Total liabilities		13,117,412										12,914,563										12,251,420
Stockholders' equity		3,572,765										3,548,748										3,465,119
Total liabilities and
stockholders' equity	$	16,690,177									$	16,463,311									$	15,716,539
Net interest income (2)				$	195,274									$	204,721									$	190,373
Net interest spread (2)								5.25	%									5.69	%									5.66	%
Net interest margin (2)								5.46	%									5.89	%									5.82	%
Total deposits (3)	$	12,480,461		$	10,400			0.33	%		$	12,265,066		$	11,233			0.37	%		$	11,556,902		$	8,822			0.30	%
Funding sources (4)	$	12,985,052		$	15,152			0.46	%		$	12,778,886		$	15,903			0.50	%		$	12,088,238		$	13,510			0.44	%
(1) Includes tax equivalent adjustments of $2.8 million, $2.2 million, and $1.5 million for the three months ended September 30, 2015, June 30, 2015, and September 30, 2014 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 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 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,
		2015				2015				2015				2014				2014
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	154,652			$	207,598			$	140,873			$	164,757			$	145,463
Interest-earning deposits in financial
institutions		81,642				433,033				250,981				148,469				115,399
Total cash and cash equivalents		236,294				640,631				391,854				313,226				260,862
Securities available-for-sale		1,809,364				1,698,158				1,595,409				1,567,177				1,539,681
Federal Home Loan Bank stock, at cost		17,250				17,250				28,905				40,609				45,602
Total investment securities		1,826,614				1,715,408				1,624,314				1,607,786				1,585,283
Non-PCI loans and leases		12,300,057				11,846,314				12,047,946				11,613,832				11,239,964
PCI loans		193,340				222,691				254,346				290,852				351,431
Total gross loans and leases		12,493,397				12,069,005				12,302,292				11,904,684				11,591,395
Deferred fees and costs		(41,192	)			(34,816	)			(30,126	)			(22,252	)			(16,510	)
Total loans and leases, net of
deferred fees		12,452,205				12,034,189				12,272,166				11,882,432				11,574,885
Allowance for loan and lease losses		(103,271	)			(99,375	)			(92,378	)			(84,455	)			(81,899	)
Total loans and leases, net		12,348,934				11,934,814				12,179,788				11,797,977				11,492,986
Equipment leased to others under
operating leases		161,508				117,182				119,959				122,506				125,119
Premises and equipment, net		36,475				35,984				36,022				36,551				38,368
Foreclosed assets, net		33,216				31,668				35,940				43,721				40,524
Deferred tax asset, net		169,760				211,556				236,065				284,411				331,176
Goodwill		1,728,380				1,728,380				1,728,380				1,720,479				1,722,129
Core deposit and customer
relationship intangibles, net		12,704				14,201				15,703				17,204				18,823
Other assets		260,220				267,196				275,915				290,744				322,880
Total assets	$	16,814,105			$	16,697,020			$	16,643,940			$	16,234,605			$	15,938,150
LIABILITIES:
Noninterest-bearing deposits	$	3,508,682			$	3,396,688			$	3,029,463			$	2,931,352			$	2,842,488
Interest-bearing deposits		8,607,081				9,185,128				8,904,712				8,823,776				8,680,949
Total deposits		12,115,763				12,581,816				11,934,175				11,755,128				11,523,437
Borrowings		552,497				2,751				618,156				383,402				363,672
Subordinated debentures		435,417				433,944				431,448				433,583				433,545
Accrued interest payable and other
liabilities		128,724				127,019				126,800				156,262				139,445
Total liabilities		13,232,401				13,145,530				13,110,579				12,728,375				12,460,099
STOCKHOLDERS' EQUITY (1)		3,581,704				3,551,490				3,533,361				3,506,230				3,478,051
Total liabilities and stockholders’
equity	$	16,814,105			$	16,697,020			$	16,643,940			$	16,234,605			$	15,938,150
(1) Includes net unrealized gain
on securities available-for-sale, net	$	24,459			$	16,255			$	28,744			$	26,380			$	20,821
Book value per share	$	34.76			$	34.46			$	34.29			$	34.03			$	33.76
Tangible book value per share	$	17.86			$	17.55			$	17.36			$	17.17			$	16.86
Shares outstanding (includes unvested
restricted shares)		103,053,694				103,051,989				103,044,257				103,022,017				103,027,830

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
	Three Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
		2015				2015				2015				2014				2014
	(Dollars in thousands, except per share data)
Interest income:
Loans and leases	$	193,539			$	203,781			$	202,097			$	197,472			$	189,961
Investment securities		13,955				14,570				12,195				12,205				12,331
Deposits in financial institutions		178				104				22				19				64
Total interest income		207,672				218,455				214,314				209,696				202,356
Interest expense:
Deposits		10,400				11,233				10,479				9,972				8,822
Borrowings		72				88				235				144				74
Subordinated debentures		4,680				4,582				4,525				4,597				4,614
Total interest expense		15,152				15,903				15,239				14,713				13,510
Net interest income		192,520				202,552				199,075				194,983				188,846
Provision for credit losses		8,746				6,529				16,434				2,063				5,050
Net interest income after provision
for credit losses		183,774				196,023				182,641				192,920				183,796
Noninterest income:
Service charges on deposit accounts		2,601				2,612				2,574				2,787				2,725
Other commissions and fees		6,376				7,123				5,396				4,556				6,371
Leased equipment income		5,475				5,375				5,382				5,382				5,615
Gain on sale of loans and leases		27				163				-				7				973
Gain (loss) on securities		655				(186	)			3,275				-				-
FDIC loss sharing expense, net		(4,449	)			(5,107	)			(4,399	)			(4,360	)			(7,415	)
Other income		5,073				9,643				8,643				4,331				8,045
Total noninterest income		15,758				19,623				20,871				12,703				16,314
Noninterest expense:
Compensation		48,152				49,033				47,737				45,930				45,861
Occupancy		10,762				10,588				10,600				10,745				11,188
Data processing		4,322				4,402				4,308				4,050				3,929
Other professional services		3,396				3,332				3,221				3,181				3,687
Insurance and assessments		3,805				4,716				3,025				3,115				3,020
Intangible asset amortization		1,497				1,502				1,501				1,619				1,608
Leased equipment depreciation		3,162				3,103				3,103				3,103				2,961
Foreclosed assets expense (income), net		4,521				(2,340	)			336				1,938				4,827
Acquisition, integration and reorganization costs		747				900				2,000				7,381				5,193
Other expense		9,775				10,040				8,529				10,243				12,649
Total noninterest expense		90,139				85,276				84,360				91,305				94,923
Earnings from continuing operations before
taxes		109,393				130,370				119,152				114,318				105,187
Income tax expense		(39,777	)			(45,287	)			(46,073	)			(43,261	)			(42,911	)
Net earnings from continuing operations		69,616				85,083				73,079				71,057				62,276
Loss from discontinued operations before taxes		-				-				-				(105	)			(8	)
Income tax benefit		-				-				-				47				3
Net loss from discontinued operations		-				-				-				(58	)			(5	)
Net earnings	$	69,616			$	85,083			$	73,079			$	70,999			$	62,271
Basic and diluted earnings per share:
Net earnings from continuing operations	$	0.68			$	0.83			$	0.71			$	0.69			$	0.60
Net earnings	$	0.68			$	0.83			$	0.71			$	0.69			$	0.60

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,
		2015				2015				2015				2014				2014
	(Dollars in thousands)
Performance Ratios - GAAP:
Return on average assets (1)		1.65	%			2.07	%			1.82	%			1.77	%			1.57	%
Return on average equity (1)		7.73	%			9.62	%			8.39	%			8.05	%			7.13	%
Yield on average loans and leases		6.34	%			6.75	%			6.80	%			6.76	%			6.68	%
Yield on average interest-earning
assets (2)		5.88	%			6.35	%			6.40	%			6.35	%			6.24	%
Cost of average total deposits		0.33	%			0.37	%			0.36	%			0.34	%			0.30	%
Cost of average time deposits		0.66	%			0.68	%			0.65	%			0.60	%			0.51	%
Cost of average interest-bearing
liabilities		0.63	%			0.66	%			0.64	%			0.63	%			0.58	%
Cost of average funding sources		0.46	%			0.50	%			0.49	%			0.48	%			0.44	%
Net interest rate spread (2)		5.25	%			5.69	%			5.76	%			5.72	%			5.66	%
Net interest margin (2)		5.46	%			5.89	%			5.95	%			5.91	%			5.82	%
Noninterest expense as a percentage
of average assets (1)		2.14	%			2.08	%			2.10	%			2.28	%			2.40	%
Efficiency ratio		39.6	%			38.0	%			36.9	%			38.4	%			40.3	%
Performance Ratios - Non-GAAP:
Adjusted return on average assets (1)		1.55	%			1.78	%			1.62	%			1.70	%			1.69	%
Adjusted return on average equity (1)		7.24	%			8.26	%			7.47	%			7.71	%			7.66	%
Return on average tangible equity (1)		15.09	%			18.90	%			16.50	%			16.00	%			14.36	%
Adjusted return on average
tangible equity (1)		14.12	%			16.24	%			14.69	%			15.33	%			15.42	%
Core net interest margin (2)		5.19	%			5.33	%			5.44	%			5.57	%			5.68	%
Adjusted efficiency ratio		40.6	%			40.5	%			39.2	%			39.7	%			39.7	%
Average Balances:
Loans and leases	$	12,112,881			$	12,108,016			$	12,055,682			$	11,586,573			$	11,285,689
Interest-earning assets		14,198,482				13,942,289				13,701,865				13,205,383				12,969,776
Total assets		16,690,177				16,463,311				16,296,640				15,892,761				15,716,539
Noninterest-bearing deposits		3,486,780				3,157,129				2,949,719				2,900,388				2,778,260
Interest-bearing deposits		8,993,681				9,107,937				8,801,306				8,679,599				8,778,642
Total deposits		12,480,461				12,265,066				11,751,025				11,579,987				11,556,902
Borrowings and subordinated
debentures		504,591				513,820				856,664				647,912				531,336
Interest-bearing liabilities		9,498,272				9,621,757				9,657,970				9,327,511				9,309,978
Funding sources		12,985,052				12,778,886				12,607,689				12,227,899				12,088,238
Stockholders' equity		3,572,765				3,548,748				3,533,343				3,500,291				3,465,119
(1) Annualized.
(2) 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,
		2015				2015				2015				2014				2014
	(Dollars in thousands)
Non-PCI Credit Quality:
Allowance for credit losses to loans
and leases		0.82	%			0.78	%			0.72	%			0.66	%			0.61	%
Allowance for credit losses to
nonaccrual loans and leases		94	%			71	%			62	%			92	%			78	%
Nonaccrual loans and leases to loans
and leases		0.87	%			1.11	%			1.16	%			0.72	%			0.79	%
Nonperforming assets to loans and
leases and foreclosed assets		1.14	%			1.37	%			1.45	%			1.09	%			1.15	%
Nonperforming assets to total assets		0.84	%			0.98	%			1.05	%			0.78	%			0.81	%
Trailing twelve month net charge-offs
to average loans and leases		0.04	%			0.06	%			0.07	%			0.02	%			0.09	%
PacWest Bancorp Consolidated
Capital Ratios:
Tier 1 leverage capital ratio (1)		12.08	%			11.96	%			11.74	%			12.34	%			12.17	%
Common equity tier 1 capital ratio (1)		12.75	%			12.87	%			12.27	%		N/A				N/A
Tier 1 risk-based capital ratio (1)		12.75	%			12.87	%			12.27	%			13.16	%			13.24	%
Total risk-based capital ratio (1)		16.33	%			16.53	%			15.80	%			16.07	%			16.24	%
Tangible common equity ratio
(non-GAAP measure)		12.21	%			12.10	%			12.01	%			12.20	%			12.24	%
Pacific Western Bank Capital Ratios:
Tier 1 leverage capital ratio (1)		11.56	%			11.65	%			11.53	%			11.70	%			11.74	%
Common equity tier 1 capital ratio (1)		12.26	%			12.55	%			12.07	%		N/A				N/A
Tier 1 risk-based capital ratio (1)		12.26	%			12.55	%			12.07	%			12.46	%			12.74	%
Total risk-based capital ratio (1)		13.06	%			13.35	%			12.80	%			13.16	%			13.44	%
Tangible common equity ratio
(non-GAAP measure)		11.53	%			11.46	%			11.32	%			11.51	%			11.60	%
(1) Capital ratios for September 30, 2015 are preliminary.

PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS
	Three Months Ended												Nine Months Ended
	September 30,				June 30,				September 30,				September 30,
		2015				2015				2014				2015				2014
	(Dollars in thousands, except per share data)
Basic Earnings Per Share:
Net earnings from continuing operations	$	69,616			$	85,083			$	62,276			$	227,778			$	99,411
Less: earnings allocated to unvested
restricted stock (1)		(649	)			(807	)			(685	)			(2,213	)			(1,147	)
Net earnings from continuing operations
allocated to common shares		68,967				84,276				61,591				225,565				98,264
Net earnings from discontinued operations
allocated to common shares		-				-				(5	)			-				(1,487	)
Net earnings allocated to common shares	$	68,967			$	84,276			$	61,586			$	225,565			$	96,777
Weighted-average basic shares and
unvested restricted stock outstanding		103,048				103,030				103,029				103,038				82,758
Less: weighted-average unvested
restricted stock outstanding		(985	)			(1,060	)			(1,117	)			(1,055	)			(981	)
Weighted-average basic shares outstanding		102,063				101,970				101,912				101,983				81,777
Basic earnings per share:
Net earnings from continuing operations	$	0.68			$	0.83			$	0.60			$	2.21			$	1.20
Net earnings from discontinued operations		-				-				-				-				(0.02	)
Net earnings	$	0.68			$	0.83			$	0.60			$	2.21			$	1.18
Diluted Earnings Per Share:
Net earnings from continuing operations
allocated to common shares	$	68,967			$	84,276			$	61,591			$	225,565			$	98,264
Net earnings from discontinued operations
allocated to common shares		-				-				(5	)			-				(1,487	)
Net earnings allocated to common shares	$	68,967			$	84,276			$	61,586			$	225,565			$	96,777
Weighted-average basic shares outstanding		102,063				101,970				101,912				101,983				81,777
Diluted earnings per share:
Net earnings from continuing operations	$	0.68			$	0.83			$	0.60			$	2.21			$	1.20
Net earnings from discontinued operations		-				-				-				-				(0.02	)
Net earnings	$	0.68			$	0.83			$	0.60			$	2.21			$	1.18
(1) Represents cash dividends paid to holders of unvested stock, net of estimated forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any.

GAAP TO NON-GAAP RECONCILIATION

This press release contains certain non-GAAP financial disclosures for adjusted net earnings, adjusted return on average assets, adjusted return on average equity, return on average tangible equity, adjusted return on average tangible equity, tangible common equity amounts and ratios, tangible book value per share, adjusted efficiency ratio, core net interest margin, and operating expense as a percentage of average assets. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance:

• Adjusted net earnings: To calculate adjusted net earnings, we exclude from net earnings primarily income statement items for which the related assets or liabilities have been completely resolved and are no longer on the balance sheet.  As analysts and investors view this measure as an indicator of the Company’s ability to generate recurring earnings, we disclose this amount in addition to net earnings.
  
• Adjusted return on average assets, adjusted return on average equity, return on average tangible equity, adjusted return on average tangible equity, tangible common equity amounts and ratios, and tangible book value per share: Given that the use of these measures is prevalent among banking regulators, investors and analysts, we disclose them in addition to return on average assets, return on average equity, equity-to-assets ratio, and book value per share, respectively.
  
• Adjusted efficiency ratio: We disclose this measure in addition to efficiency ratio as it shows the trend in recurring overhead-related noninterest expense relative to recurring net revenues.
  

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

PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
		Three Months Ended												Nine Months Ended
Adjusted Net Earnings and		September 30,				June 30,				September 30,				September 30,
Related Ratios			2015				2015				2014				2015				2014
		(Dollars in thousands)
Net earnings		$	69,616			$	85,083			$	62,271			$	227,778			$	97,906
Less: Tax benefit on discontinued operations			-				-				(3	)			-				(1,067	)
Add: Tax expense on continuing operations			39,777				45,287				42,911				131,137				73,744
Pre-tax earnings			109,393				130,370				105,179				358,915				170,583
Add: Acquisition, integration and
reorganization costs			747				900				5,193				3,647				93,635
Less: FDIC loss sharing expense, net			(4,449	)			(5,107	)			(7,415	)			(13,955	)			(27,370	)
Gain on sale of loans and leases			27				163				973				190				594
Gain (loss) on securities			655				(186	)			-				3,744				4,841
Covered OREO (expense) income, net			(20	)			12				(452	)			11				1,348
Gain on sale of owned office building			-				-				-				-				1,570
Adjusted pre-tax earnings before accelerated
discount accretion			113,927				136,388				117,266				372,572				283,235
Less: Accelerated discount accretion from
early payoffs of acquired loans			9,659				19,447				4,501				46,458				27,446
Adjusted pre-tax earnings			104,268				116,941				112,765				326,114				255,789
Tax expense (1)			(39,101	)			(43,853	)			(45,895	)			(122,293	)			(104,106	)
Adjusted net earnings		$	65,167			$	73,088			$	66,870			$	203,821			$	151,683
Average assets		$	16,690,177			$	16,463,311			$	15,716,539			$	16,484,817			$	12,456,182
Average stockholders' equity		$	3,572,765			$	3,548,748			$	3,465,119			$	3,551,763			$	2,515,506
Less: Average intangible assets			1,741,902				1,743,340				1,744,542				1,740,911				1,208,266
Average tangible common equity		$	1,830,863			$	1,805,408			$	1,720,577			$	1,810,852			$	1,307,240
Return on average assets (2)			1.65	%			2.07	%			1.57	%			1.85	%			1.05	%
Return on average equity (3)			7.73	%			9.62	%			7.13	%			8.57	%			5.20	%
Return on average tangible equity (4)			15.09	%			18.90	%			14.36	%			16.82	%			10.01	%
Adjusted return on average assets (5)			1.55	%			1.78	%			1.69	%			1.65	%			1.63	%
Adjusted return on average equity (6)			7.24	%			8.26	%			7.66	%			7.67	%			8.06	%
Adjusted return on average tangible equity (7)			14.12	%			16.24	%			15.42	%			15.05	%			15.51	%
(1) Full-year expected effective rate of 37.5% used for 2015 periods and actual effective rate of 40.7% used for 2014 periods.
(2) Annualized net earnings divided by average assets.
(3) Annualized net earnings divided by average stockholders' equity.
(4) Annualized net earnings divided by average tangible common equity.
(5) Annualized adjusted net earnings divided by average assets.
(6) Annualized adjusted net earnings divided by average stockholders' equity.
(7) Annualized adjusted net earnings divided by average tangible common equity.

PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
		Three Months Ended												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,
Adjusted Efficiency Ratio			2015				2015				2014				2015				2014
		(Dollars in thousands)
Noninterest expense		$	90,139			$	85,276			$	94,923			$	259,775			$	314,287
Less: Intangible asset amortization			1,497				1,502				1,608				4,500				4,649
Foreclosed assets expense (income), net			4,521				(2,340	)			4,827				2,517				3,463
Acquisition, integration, and
reorganization costs			747				900				5,193				3,647				93,635
Noninterest expense used for efficiency ratio		$	83,374			$	85,214			$	83,295			$	249,111			$	212,540
Net interest income (TE)		$	195,274			$	204,721			$	190,373			$	600,855			$	472,151
Noninterest income			15,758				19,623				16,314				56,252				29,484
Net revenues			211,032				224,344				206,687				657,107				501,635
Less: Gain (loss) on securities			655				(186	)			-				3,744				4,841
Gain on sale of owned office building			-				-				-				-				1,570
Net revenues used for efficiency ratio			210,377				224,530				206,687				653,363				495,224
Less: Accelerated discount accretion from
early payoffs of acquired loans			9,659				19,447				4,501				46,458				27,446
FDIC loss sharing expense, net			(4,449	)			(5,107	)			(7,415	)			(13,955	)			(27,370	)
Adjusted net revenues		$	205,167			$	210,190			$	209,601			$	620,860			$	495,148
Efficiency ratio (1)			39.6	%			38.0	%			40.3	%			38.1	%			42.9	%
Adjusted efficiency ratio (2)			40.6	%			40.5	%			39.7	%			40.1	%			42.9	%
(1) Noninterest expense used for efficiency ratio divided by net revenues used for efficiency ratio.
(2) Noninterest expense used for efficiency ratio divided by adjusted net revenues.

PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
	September 30,				June 30,				March 31,				December 31,				September 30,
Tangible Common Equity Ratio		2015				2015				2015				2014				2014
	(Dollars in thousands)
PacWest Bancorp Consolidated:
Stockholders' equity	$	3,581,704			$	3,551,490			$	3,533,361			$	3,506,230			$	3,478,051
Less: Intangible assets		1,741,084				1,742,581				1,744,083				1,737,683				1,740,952
Tangible common equity	$	1,840,620			$	1,808,909			$	1,789,278			$	1,768,547			$	1,737,099
Total assets	$	16,814,105			$	16,697,020			$	16,643,940			$	16,234,605			$	15,938,150
Less: Intangible assets		1,741,084				1,742,581				1,744,083				1,737,683				1,740,952
Tangible assets	$	15,073,021			$	14,954,439			$	14,899,857			$	14,496,922			$	14,197,198
Equity to assets ratio		21.30	%			21.27	%			21.23	%			21.60	%			21.82	%
Tangible common equity ratio (1)		12.21	%			12.10	%			12.01	%			12.20	%			12.24	%
Book value per share	$	34.76			$	34.46			$	34.29			$	34.03			$	33.76
Tangible book value per share (2)	$	17.86			$	17.55			$	17.36			$	17.17			$	16.86
Shares outstanding		103,053,694				103,051,989				103,044,257				103,022,017				103,027,830
Pacific Western Bank:
Stockholders' equity	$	3,466,817			$	3,440,715			$	3,410,276			$	3,378,879			$	3,356,943
Less: Intangible assets		1,741,084				1,742,581				1,744,083				1,737,683				1,740,952
Tangible common equity	$	1,725,733			$	1,698,134			$	1,666,193			$	1,641,196			$	1,615,991
Total assets	$	16,707,072			$	16,555,610			$	16,458,591			$	15,995,719			$	15,675,291
Less: Intangible assets		1,741,084				1,742,581				1,744,083				1,737,683				1,740,952
Tangible assets	$	14,965,988			$	14,813,029			$	14,714,508			$	14,258,036			$	13,934,339
Equity to assets ratio		20.75	%			20.78	%			20.72	%			21.12	%			21.42	%
Tangible common equity ratio		11.53	%			11.46	%			11.32	%			11.51	%			11.60	%
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by shares outstanding.