PacWest Bancorp Announces Results for the Second Quarter 2017


Highlights

  • Net Earnings of $93.6 Million, or $0.77 Per Diluted Share
  • New Loan and Lease Production of $1.1 Billion
  • Core Deposits Increase of $449 Million and Represent 78% of Total Deposits
  • Tax Equivalent Net Interest Margin Increased Five Basis Points to 5.21%
  • Classified Loans and Leases Reduced by 20%  

LOS ANGELES, July 18, 2017 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq:PACW) today announced net earnings for the second quarter of 2017 of $93.6 million, or $0.77 per diluted share, compared to net earnings for first quarter of 2017 of $78.7 million, or $0.65 per diluted share. The increase in net earnings from the prior quarter was primarily due to an increase in interest income from higher average balances of interest-earning assets and a lower provision for credit losses.

Matt Wagner, President and CEO, commented, “We delivered outstanding performance in the second quarter and continued to demonstrate our earning power. Our strong second quarter results produced a return on assets of 1.71% and a return on tangible equity of 16.06%. We also continue to proactively manage credit risk. During the second quarter we sold or contracted to sell loans totaling $221.1 million, including $159.4 million of healthcare cash flow loans. All of these sales have since closed. As a result, our healthcare cash flow loan portfolio today includes only one non-pass rated loan.”

Patrick Rusnak, Executive Vice President and CFO stated, “Our second quarter tax equivalent NIM increased five basis points to 5.21%. While the NIM benefitted from the repricing of variable-rate loans, this was partially offset by higher rates on non-core interest-bearing deposits and borrowings.”

Mr. Wagner continued, “We continue to look forward to closing the CU Bancorp acquisition in the fourth quarter of 2017, as we expect regulatory and shareholder approvals to come in the normal course. The date of the CU Bancorp special shareholders meeting has been set and management of both organizations are working on the integration plan.”

FINANCIAL HIGHLIGHTS

              
 At or For the Three Months Ended At or For the Six Months Ended  
 June 30, March 31,   June 30,    
Financial Highlights 2017   2017  Change  2017   2016  Change  
 (Dollars in thousands, except per share data)  
Net earnings$  93,647  $  78,668  $  14,979  $  172,315  $  172,624  $  (309)  
Diluted earnings per share$  0.77  $  0.65  $  0.12  $  1.42  $  1.42  $  -    
Return on average assets 1.71%  1.47%    0.24   1.59%  1.65%    (0.06)  
Return on average             
tangible equity (1)  16.06%  13.90%    2.16   15.00%  15.52%    (0.52)  
              
Net interest margin             
(tax equivalent) 5.21%  5.16%    0.05   5.19%  5.43%    (0.24)  
Efficiency ratio 40.3%  41.4%    (1.1)  40.8%  39.5%    1.3   
              
Total assets$  22,246,877  $  21,927,254  $  319,623  $  22,246,877  $  21,147,139  $  1,099,738   
Loans and leases held              
for investment, net of             
deferred fees$  15,543,457  $  15,556,689  $  (13,232) $  15,543,457  $  14,641,460  $  901,997   
Noninterest-bearing              
deposits$  6,701,039  $  6,789,808  $  (88,769) $  6,701,039  $  6,222,696  $  478,343   
Core deposits$  13,217,574  $  12,769,073  $  448,501  $  13,217,574  $  11,411,992  $  1,805,582   
Total deposits$  16,874,977  $  16,331,008  $  543,969  $  16,874,977  $  15,148,009  $  1,726,968   
              
Noninterest-bearing              
deposits as percentage              
of total deposits 40%  42%    (2)  40%  41%    (1)  
Core deposits as              
percentage of total             
deposits 78%  78%    -   78%  75%    3   
              
Equity to assets ratio  20.50%  20.56%    (0.06)  20.50%  21.34%    (0.84)  
Tangible common equity              
ratio (1) 11.75%  11.67%    0.08   11.75%  12.12%    (0.37)  
Book value per share$  37.55  $  37.13  $  0.42  $  37.55  $  37.05  $  0.50   
Tangible book value per              
share (1)$  19.40  $  18.95  $  0.45  $  19.40  $  18.83  $  0.57   
              
(1) Non-GAAP measure.             
              

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased by $10.0 million to $242.5 million in the second quarter of 2017 compared to $232.5 million in the first quarter of 2017 due to higher average yields and balances of loans and leases. The loan and lease yield for the second quarter of 2017 was 6.07% compared to 5.94% for the first quarter of 2017. The increase in the loan and lease yield was principally due to the higher yields on average loans and leases as a result of the repricing of variable-rate loans due to the increase in market rates during the first half of 2017.

The tax equivalent NIM for the second quarter of 2017 was 5.21% compared to 5.16% for the first quarter of 2017. The increase in the NIM was mostly due to higher yields on loans and leases due to the upward repricing of variable-rate loans, partially offset by a higher cost of interest-bearing liabilities.

The cost of total deposits increased to 0.25% in the second quarter of 2017 from 0.21% in the first quarter of 2017 due to a higher cost and average balance of non-core deposits.

Noninterest Income

Noninterest income increased by $0.2 million to $35.3 million in the second quarter of 2017 compared to $35.1 million in the first quarter of 2017 due mainly to a $2.2 million increase in leased equipment income due to higher gains on early lease terminations, a $1.8 million increase in gain on sale of securities, and a $0.7 million increase in warrant income, offset by a $4.5 million decrease in other income attributable mainly to a $5.0 million legal settlement with a former borrower recorded in the first quarter of 2017.   

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

       
 Three Months Ended 
 June 30, March 31, Increase 
Noninterest Income 2017   2017  (Decrease) 
 (In thousands)     
Service charges on deposit accounts$  3,510  $  3,758  $  (248) 
Other commissions and fees   10,583     10,390     193  
Leased equipment income   11,635     9,475     2,160  
Gain on sale of loans and leases   649     712     (63) 
Gain (loss) on sale of securities   1,651     (99)    1,750  
Other income:      
Dividends and realized gains on equity investments   1,587     1,345     242  
Warrant income   815     155     660  
Other   4,852     9,378     (4,526) 
Total noninterest income $  35,282  $  35,114  $  168  
       

Noninterest Expense

Noninterest expense increased by $1.2 million to $117.7 million in the second quarter of 2017 compared to $116.5 million in the first quarter of 2017 due mostly to a $1.2 million increase in acquisition, integration, and reorganization costs and a $1.1 million charge related to the sale of the unfunded commitments portion of the healthcare loan sale. 

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

        
 Three Months Ended  
 June 30, March 31, Increase  
Noninterest Expense 2017   2017  (Decrease)  
 (In thousands)      
Compensation$  65,288  $  64,880  $  408   
Occupancy    11,811     11,608     203   
Data processing   6,337     7,015     (678)  
Other professional services   3,976     3,378     598   
Insurance and assessments   4,856     4,791     65   
Intangible asset amortization   3,065     3,064     1   
Leased equipment depreciation   5,232     5,625     (393)  
Foreclosed assets (income) expense, net   (157)    143     (300)  
Acquisition, integration and reorganization costs   1,700     500     1,200   
Other expense:       
Loan expense   3,884     3,387     497   
Other   11,715     12,153     (438)  
Total noninterest expense$  117,707  $  116,544  $  1,163   
        

Income Taxes

The overall effective income tax rate was 37.0% in the second quarter of 2017 and 37.7% in the first quarter of 2017. The estimated effective tax rate for the full year 2017 is approximately 38%. 

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Total loans and leases held for investment decreased by $13.2 million in the second quarter to $15.5 billion at June 30, 2017. The net decrease was driven by principal repayments of $843.1 million, an increase in loans held for sale of $175.2 million, and loan sales of $46.0 million, partially offset by second quarter new production of $1.1 billion. In the second quarter, we sold $46.0 million of loans consisting primarily of loans from our healthcare portfolios. Additionally, we entered into two agreements to sell loans with balances totaling $175.2 million and the associated unfunded commitments of $19.3 million, primarily from our healthcare portfolios. The $175.2 million of loans were reported as held for sale at June 30, 2017 and the sales were completed in July. As a result of the second quarter loan sales and transfers to loans held for sale, our healthcare cash flow portfolio held for investment decreased from $740.6 million at March 31, 2017 to $514.7 million, including one non-pass rated credit of $19.2 million, at June 30, 2017.

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

       
 Three Months Ended   
 June 30, March 31,   
Loan and Lease Roll Forward (1) 2017   2017    
 (Dollars in thousands)  
Loans and leases held for investment, start of period$  15,556,689  $  15,455,954    
New production   1,077,929     1,048,841    
Existing loans and leases:      
Principal repayments, net (2)   (843,115)    (888,409)   
Loan sales    (45,976)    (36,461)   
Transfers to foreclosed assets   (502)    (78)   
Charge-offs   (26,410)    (23,158)   
Transfers to loans held for sale   (175,158)    -    
Loans and leases held for investment, end of period$  15,543,457  $  15,556,689    
       
Weighted average rate on new production  4.93%  4.91%   
       
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.   
(2) Includes principal disbursements/repayments on existing loans, changes in revolving lines of credit (repayments and draws), loan participation sales and other changes within the loan portfolio.    
       

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

        
 June 30, March 31, December 31, June 30,
Loan and Lease Portfolio 2017  2017  2016  2016
 (In thousands)
Real estate mortgage:       
Commercial$  4,418,463 $  4,420,923 $  4,396,696 $  4,519,209
Residential   1,719,269    1,554,946    1,314,036    1,164,784
Total real estate mortgage   6,137,732    5,975,869    5,710,732    5,683,993
Real estate construction and land:       
Commercial   691,828    668,510    581,246    417,144
Residential   473,282    442,051    384,001    281,788
Total real estate construction and land   1,165,110    1,110,561    965,247    698,932
Total real estate loans   7,302,842    7,086,430    6,675,979    6,382,925
Commercial:       
Cash flow   2,834,966    3,138,196    3,112,890    3,048,439
Asset-based   2,392,203    2,391,161    2,611,796    2,683,913
Venture capital   2,001,427    1,934,949    1,987,900    1,666,352
Equipment finance   613,550    623,237    691,967    646,940
Total commercial   7,842,146    8,087,543    8,404,553    8,045,644
Consumer   398,469    382,716    375,422    212,891
Total loans and leases held for        
investment, net of deferred fees$  15,543,457 $  15,556,689 $  15,455,954 $  14,641,460
        
Total unfunded loan commitments$  4,926,743 $  4,497,373 $  4,166,703 $  3,888,686
        

Deposits and Client Investment Funds

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

         
         
 June 30, March 31, December 31, June 30, 
Deposit Category 2017   2017   2016   2016  
 (Dollars in thousands) 
Noninterest-bearing demand deposits$  6,701,039  $  6,789,808  $  6,659,016  $  6,222,696  
Interest checking deposits   1,762,016     1,509,902     1,448,394     1,035,395  
Money market deposits   4,033,471     3,758,962     3,705,385     3,392,811  
Savings deposits   721,048     710,401     711,039     761,090  
Total core deposits   13,217,574     12,769,073     12,523,834     11,411,992  
Non-core non-maturity deposits   1,329,324     1,154,070     1,174,487     972,820  
Total non-maturity deposits   14,546,898     13,923,143     13,698,321     12,384,812  
Time deposits $250,000 and under   1,940,872     1,998,597     1,758,434     2,226,066  
Time deposits over $250,000   387,207     409,268     413,856     537,131  
Total time deposits   2,328,079     2,407,865     2,172,290     2,763,197  
Total deposits$  16,874,977  $  16,331,008  $  15,870,611  $  15,148,009  
         
Noninterest-bearing demand deposits         
as percentage of total deposits 40%  42%  42%  41% 
Core deposits as percentage of total deposits 78%  78%  79%  75% 
         

At June 30, 2017, core deposits totaled $13.2 billion, or 78% of total deposits, including $6.7 billion of noninterest-bearing demand deposits, or 40% of total deposits. 

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Square 1 Asset Management, Inc. (“S1AM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds at June 30, 2017 were $1.8 billion, of which $1.6 billion was managed by S1AM.

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

A provision for credit losses of $11.5 million was recorded in the second quarter of 2017 compared to $24.7 million in the first quarter of 2017. The second quarter provision consisted of $12.5 million for non-purchased credit impaired (“Non-PCI”) loans and leases and a $1.0 negative provision for PCI loans; this compares to provisions of $24.5 million and $0.2 million, respectively, for the first quarter of 2017. The lower provision for the second quarter of 2017 was mainly attributable to lower general reserves being required because of the decreased levels of classified loans and healthcare cash flow loans, both of which carry greater than average general reserve levels due to charge-off experience. In addition, the prior quarter provision was higher due to general provisions from increased general reserve loss factors which were influenced by net charge-off experience. The allowance for Non-PCI credit losses to Non-PCI loans and leases held for investment coverage ratio was 1.02% and 1.08% at June 30, 2017 and March 31, 2017.

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

           
 Three Months Ended June 30, 2017 
 Non-PCI          
Allowance for Credit Loans and  Unfunded  Total  PCI   
Losses RollforwardLeases Commitments Non-PCI Loans Total 
 (In thousands) 
Beginning balance$  149,826  $  17,763 $  167,589  $  11,481  $  179,070  
  Charge-offs   (22,951)    -    (22,951)    (3,459)    (26,410) 
  Recoveries   2,004     -    2,004     58     2,062  
Net charge-offs   (20,947)    -    (20,947)    (3,401)    (24,348) 
  Provision    10,000     2,500    12,500     (1,001)    11,499  
Ending balance$  138,879  $  20,263 $  159,142  $  7,079  $  166,221  
           
           
    
 Three Months Ended March 31, 2017 
 Non-PCI          
Allowance for Credit Loans and  Unfunded  Total  PCI   
Losses RollforwardLeases Commitments Non-PCI Loans Total 
 (In thousands) 
Beginning balance$  143,755  $  17,523 $  161,278  $  13,483  $  174,761  
  Charge-offs   (20,928)    -    (20,928)    (2,230)    (23,158) 
  Recoveries   2,739     -    2,739     -     2,739  
Net charge-offs   (18,189)    -    (18,189)    (2,230)    (20,419) 
  Provision   24,260     240    24,500     228     24,728  
Ending balance$  149,826  $  17,763 $  167,589  $  11,481  $  179,070  
           

The gross charge-offs for the second quarter of 2017 included approximately $10.9 million for venture capital loans and $7.2 million related to the recording of the healthcare portfolio loans at the lower of cost or market value at the time of transfer to loans held for sale. The transfer of loans to held for sale also decreased reported nonaccrual loans by $5.3 million and classified loans by $44.8 million. The annualized ratio of net charge-offs to total average loans for the quarter ended June 30, 2017 was 0.54%.   

CREDIT QUALITY

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

      
 June 30, March 31,  
Non-PCI Credit Quality Metrics 2017   2017   
 (Dollars in thousands)  
Nonaccrual loans and leases (1)$  172,576  $  173,030   
Classified loans and leases (1)   339,977     424,399   
Performing troubled debt restructured loans   55,910     56,501   
Allowance for credit losses   159,142     167,589   
Net charge-offs (for the quarter)   20,947     18,189   
Provision for credit losses (for the quarter)   12,500     24,500   
Allowance for credit losses to loans and leases     
held for investment 1.02%  1.08%  
Allowance for credit losses to nonaccrual loans      
and leases held for investment 92.2%  96.9%  
Nonaccrual loans and leases held for investment      
to loans and leases held for investment 1.11%  1.11%  
Nonperforming assets to loans and leases      
held for investment and foreclosed assets 1.20%  1.20%  
Classified loans and leases held for investment      
to loans and leases held for investment 2.19%  2.73%  
      
(1) Includes loans and leases held for investment; excludes loans held for sale carried at lower of cost or fair value.  
      

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  
 June 30, 2017 March 31, 2017 30-89 Days Past Due   
  % of   % of  June 30, March 31,  
  Loan   Loan   2017  2017  
 AmountCategory AmountCategory Amount Amount  
 (Dollars in thousands)  
Real estate mortgage:           
Commercial$  65,5991.5% $  66,2161.5% $  3,734 $  7,383  
Residential   5,2290.3%    5,8260.4%    46    640  
Total real estate mortgage   70,8281.2%    72,0421.2%    3,780    8,023  
Real estate construction and land:           
Commercial   -0.0%    -0.0%    -    -  
Residential   -0.0%    3620.1%    -    -  
Total real estate            
construction and land   -0.0%    3620.0%    -    -  
Commercial:           
Cash flow   43,1691.5%    53,6111.7%    201    394  
Asset-based   1,7180.1%    1,1650.0%    -    -  
Venture capital   25,2781.3%    15,2890.8%    23,171    13,265  
Equipment finance    31,1115.1%    30,3884.9%    -    115  
Total commercial   101,2761.3%    100,4531.2%    23,372    13,774  
Consumer   4720.1%    1730.0%    -    49  
Total (1)$  172,5761.1% $  173,0301.1% $  27,152 $  21,846  
            
(1) Includes loans and leases held for investment; excludes loans held for sale carried at lower of cost or fair value.  
            

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

     
 June 30, March 31, 
Nonperforming Assets 2017   2017  
 (Dollars in thousands) 
Nonaccrual Non-PCI loans and leases (1)$  172,576  $  173,030  
Nonaccrual PCI loans    1,980     2,404  
  Total nonaccrual loans and leases   174,556     175,434  
Foreclosed assets, net   13,278     12,842  
  Total nonperforming assets$  187,834  $  188,276  
     
Nonaccrual loans and leases held for investment     
to loans and leases held for investment 1.12%  1.12% 
Nonperforming assets to loans and leases     
held for investment and foreclosed assets 1.20%  1.20% 
     
(1) Includes loans and leases held for investment; excludes loans held for sale carried at lower of cost or fair value. 
     

CU BANCORP MERGER ANNOUNCEMENT

On April 6, 2017, PacWest announced the signing of a definitive agreement and plan of merger (the “Agreement”) whereby PacWest will acquire CU Bancorp in a transaction valued at approximately $705 million. 

CU Bancorp, headquartered in Los Angeles, California, is the parent of California United Bank, a California state-chartered non-member bank, with approximately $3.1 billion in assets and nine branches located in Los Angeles, Orange, Ventura, and San Bernardino counties at March 31, 2017. In connection with the transaction, California United Bank will be merged into Pacific Western Bank, the principal operating subsidiary of PacWest Bancorp.

The transaction, which was approved by the PacWest and CU Bancorp boards of directors, is expected to close in the fourth quarter of 2017 and is subject to customary closing conditions, including obtaining approval by CU Bancorp’s shareholders and bank regulatory authorities.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $22 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 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 cash flow, asset-based, equipment and real estate 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 pending merger between the Company and CU Bancorp. 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 the proposed CU Bancorp transaction, including by obtaining regulatory approvals and approval by the shareholders of CU Bancorp, or any future transaction, successfully integrate such acquired entities, or achieve expected beneficial synergies and/or operating efficiencies, in each case within expected timeframes or at all; changes in the Company’s stock price before completion of the CU Bancorp merger, including as a result of the financial performance of the Company or CU Bancorp before closing; 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.

ADDITIONAL INFORMATION ABOUT THE PROPOSED TRANSACTION AND WHERE TO FIND IT

Investors and security holders are urged to carefully review and consider each of PacWest’s and CU Bancorp’s public filings with the SEC, including but not limited to their Annual Reports on Form 10-K, their proxy statements, their Current Reports on Form 8-K and their Quarterly Reports on Form 10-Q. The documents filed by PacWest with the SEC may be obtained free of charge at PacWest’s website at www.pacwestbancorp.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from PacWest by requesting them in writing to PacWest Bancorp, 9701 Wilshire Boulevard, Suite 700, Beverly Hills, CA 90212; Attention: Investor Relations, by submitting an email request to investor-relations@pacwestbancorp.com or by telephone at (310) 887-8521.

The documents filed by CU Bancorp with the SEC may be obtained free of charge at CU Bancorp’s website at www.cubancorp.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from CU Bancorp by requesting them in writing to CU Bancorp, 818 W. 7th Street, Suite 220, Los Angeles, CA 90017; Attention: Investor Relations, or by telephone at 818-257-7700.

PacWest has filed a registration statement with the SEC which includes a proxy statement of CU Bancorp and a prospectus of PacWest, and each party will file other documents regarding the proposed transaction with the SEC. Before making any voting or investment decision, investors and security holders of CU Bancorp are urged to carefully read the entire registration statement and proxy statement/prospectus, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction. A definitive proxy statement/prospectus will be sent to the shareholders of CU Bancorp seeking any required shareholder approvals. Investors and security holders are able to obtain the registration statement and the proxy statement/prospectus free of charge from the SEC’s website or from PacWest or CU Bancorp by writing to the addresses provided for each company set forth in the paragraphs above.

PacWest, CU Bancorp, their directors, executive officers and certain other persons may be deemed to be participants in the solicitation of proxies from CU Bancorp shareholders in favor of the approval of the transaction. Information about the directors and executive officers of PacWest and their ownership of PacWest common stock is set forth in the proxy statement for PacWest’s 2017 annual meeting of stockholders, as previously filed with the SEC. Information about the directors and executive officers of CU Bancorp and their ownership of CU Bancorp common shares is set forth in the proxy statement for CU Bancorp’s 2016 annual meeting of shareholders, as previously filed with the SEC. Shareholders may obtain additional information regarding the interests of such participants by reading the registration statement and the proxy statement/prospectus.

PACWEST BANCORP AND SUBSIDIARIES       
CONDENSED CONSOLIDATED BALANCE SHEET       
        
 June 30, March 31, December 31,  
  2017   2017   2016   
 (Dollars in thousands, except per share data)  
ASSETS:       
Cash and due from banks$  180,330  $  184,608  $  337,965   
Interest-earning deposits in financial institutions   107,150     111,892     81,705   
  Total cash and cash equivalents    287,480     296,500     419,670   
        
Securities available-for-sale, at estimated fair value   3,474,560     3,336,992     3,223,830   
Federal Home Loan Bank stock, at cost   22,059     17,901     21,870   
  Total investment securities   3,496,619     3,354,893     3,245,700   
        
Loans held for sale   175,158     -     -   
        
Non-PCI loans and leases   15,536,735     15,526,518     15,412,092   
PCI loans   72,445     96,353     108,445   
  Total gross loans and leases held for investment   15,609,180     15,622,871     15,520,537   
Deferred fees, net   (65,723)    (66,182)    (64,583)  
Total loans and leases held for investment,       
net of deferred fees   15,543,457     15,556,689     15,455,954   
Allowance for loan and lease losses   (145,958)    (161,307)    (157,238)  
  Total loans and leases held for investment, net   15,397,499     15,395,382     15,298,716   
        
Equipment leased to others under operating leases   203,212     224,580     229,905   
Premises and equipment, net   29,108     28,908     38,594   
Foreclosed assets, net   13,278     12,842     12,976   
Deferred tax asset, net   70,354     88,765     94,112   
Goodwill   2,173,949     2,173,949     2,173,949   
Core deposit and customer       
relationship intangibles, net   30,237     33,302     36,366   
Other assets   369,983     318,133     319,779   
  Total assets$  22,246,877  $  21,927,254  $  21,869,767   
        
LIABILITIES:       
Noninterest-bearing deposits$  6,701,039  $  6,789,808  $  6,659,016   
Interest-bearing deposits   10,173,938     9,541,200     9,211,595   
  Total deposits   16,874,977     16,331,008     15,870,611   
Borrowings   217,454     460,609     905,812   
Subordinated debentures   445,743     442,516     440,744   
Accrued interest payable and other liabilities   148,798     185,015     173,545   
  Total liabilities   17,686,972     17,419,148     17,390,712   
STOCKHOLDERS' EQUITY (1)   4,559,905     4,508,106     4,479,055   
  Total liabilities and stockholders’ equity$  22,246,877  $  21,927,254  $  21,869,767   
        
Book value per share$  37.55  $  37.13  $  36.93   
Tangible book value per share (2)$  19.40  $  18.95  $  18.71   
Shares outstanding    121,448,321     121,408,133     121,283,669   
        
(1) Includes net unrealized gain on securities       
available-for-sale, net$  29,729  $  12,718  $  5,982   
(2) Non-GAAP measure.       
        

 

PACWEST BANCORP AND SUBSIDIARIES         
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS       
           
 Three Months Ended Six Months Ended 
 June 30, March 31, June 30, June 30, 
  2017   2017   2016   2017   2016  
 (Dollars in thousands, except per share data) 
Interest income:          
Loans and leases$  234,618  $  224,178  $  224,326  $  458,796  $  460,701  
Investment securities   24,689     23,039     22,420     47,728     44,967  
Deposits in financial institutions   237     192     308     429     616  
Total interest income   259,544     247,409     247,054     506,953     506,284  
           
Interest expense:          
Deposits   10,205     8,377     7,823     18,582     16,896  
Borrowings   1,066     1,018     352     2,084     933  
Subordinated debentures   5,800     5,562     5,122     11,362     10,104  
Total interest expense   17,071     14,957     13,297     32,028     27,933  
           
Net interest income   242,473     232,452     233,757     474,925     478,351  
Provision for credit losses   11,499     24,728     13,903     36,227     34,043  
Net interest income after provision           
for credit losses   230,974     207,724     219,854     438,698     444,308  
           
Noninterest income:          
Service charges on deposit accounts   3,510     3,758     3,633     7,268     7,489  
Other commissions and fees   10,583     10,390     11,073     20,973     22,562  
Leased equipment income   11,635     9,475     8,523     21,110     16,767  
Gain on sale of loans and leases   649     712     388     1,361     633  
Gain (loss) on sale of securities   1,651     (99)    478     1,552     8,588  
FDIC loss sharing expense, net   -     -     (6,502)    -     (8,917) 
Other income   7,254     10,878     4,528     18,132     9,538  
Total noninterest income   35,282     35,114     22,121     70,396     56,660  
           
Noninterest expense:          
Compensation    65,288     64,880     62,174     130,168     123,239  
Occupancy   11,811     11,608     12,193     23,419     24,825  
Data processing   6,337     7,015     5,644     13,352     11,548  
Other professional services   3,976     3,378     3,401     7,354     6,973  
Insurance and assessments   4,856     4,791     4,951     9,647     9,916  
Intangible asset amortization   3,065     3,064     4,371     6,129     9,117  
Leased equipment depreciation   5,232     5,625     5,286     10,857     10,310  
Foreclosed assets (income) expense, net   (157)    143     (3)    (14)    (564) 
Acquisition, integration and           
reorganization costs    1,700     500     -     2,200     200  
Other expense   15,599     15,540     12,064     31,139     25,205  
Total noninterest expense   117,707     116,544     110,081     234,251     220,769  
           
Earnings before income taxes   148,549     126,294     131,894     274,843     280,199  
Income tax expense    (54,902)    (47,626)    (49,726)    (102,528)    (107,575) 
Net earnings $  93,647  $  78,668  $  82,168  $  172,315  $  172,624  
           
Basic and diluted earnings per share$  0.77  $  0.65  $  0.68  $  1.42  $  1.42  
           


PACWEST BANCORP AND SUBSIDIARIES         
NET EARNINGS PER SHARE CALCULATIONS         
           
 Three Months Ended Six Months Ended 
 June 30, March 31, June 30, June 30, 
  2017   2017   2016   2017   2016  
 (In thousands, except per share data) 
Basic Earnings Per Share:          
Net earnings $  93,647  $  78,668  $  82,168  $  172,315  $  172,624  
Less: earnings allocated to unvested           
restricted stock (1)   (1,080)    (999)    (863)    (2,082)    (1,933) 
Net earnings allocated to common           
shares$  92,567  $  77,669  $  81,305  $  170,233  $  170,691  
           
Weighted-average basic shares and           
unvested restricted stock outstanding   121,422     121,346     121,799     121,384     121,698  
Less: weighted-average unvested           
restricted stock outstanding   (1,455)    (1,503)    (1,481)    (1,479)    (1,436) 
Weighted-average basic shares           
outstanding   119,967     119,843     120,318     119,905     120,262  
           
Basic earnings per share$  0.77  $  0.65  $  0.68  $  1.42  $  1.42  
           
Diluted Earnings Per Share:          
Net earnings allocated to common           
shares$  92,567  $  77,669  $  81,305  $  170,233  $  170,691  
           
Weighted-average basic shares           
outstanding   119,967     119,843     120,318     119,905     120,262  
           
Diluted earnings per share$  0.77  $  0.65  $  0.68  $  1.42  $  1.42  
           
(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  
 June 30, 2017 March 31, 2017 June 30, 2016  
  InterestAverage  InterestAverage  InterestAverage  
 Average Income/Yield/ Average Income/Yield/ Average Income/Yield/  
 BalanceExpenseCost BalanceExpenseCost BalanceExpenseCost  
 (Dollars in thousands)  
Assets:             
PCI loans$  68,759 $  4,643 27.08% $  89,335 $  4,250 19.29% $  147,270 $  8,484 23.17%  
Non-PCI loans and leases   15,429,162    229,975 5.98%    15,207,709    219,928 5.86%    14,321,320    215,842 6.06%  
Total loans and leases   15,497,921    234,618 6.07%    15,297,044    224,178 5.94%    14,468,590    224,326 6.24%  
Investment securities (1)   3,436,785    29,538 3.45%    3,257,448    27,822 3.46%    3,288,819    27,330 3.34%  
Deposits in financial              
institutions   96,087    237 0.99%    100,751    192 0.77%    245,666    308 0.50%  
Total interest-earning             
assets   19,030,793    264,393 5.57%    18,655,243    252,192 5.48%    18,003,075    251,964 5.63%  
Other assets   2,905,809       2,990,291       2,996,867     
Total assets$ 21,936,602    $ 21,645,534    $ 20,999,942     
              
Liabilities and              
Stockholders' Equity:            
Interest checking$  1,709,699    1,697 0.40% $  1,505,439    1,167 0.31% $  1,024,763    501 0.20%  
Money market   4,907,865    4,993 0.41%    4,866,720    4,410 0.37%    4,321,533    2,886 0.27%  
Savings   708,389    296 0.17%    711,529    298 0.17%    766,309    412 0.22%  
Time   2,366,399    3,219 0.55%    2,246,547    2,502 0.45%    3,086,492    4,024 0.52%  
Total interest-bearing             
deposits   9,692,352    10,205 0.42%    9,330,235    8,377 0.36%    9,199,097    7,823 0.34%  
Borrowings   457,774    1,066 0.93%    596,903    1,018 0.69%    300,428    352 0.47%  
Subordinated debentures   443,756    5,800 5.24%    441,521    5,562 5.11%    439,081    5,122 4.69%  
Total interest-bearing             
liabilities   10,593,882    17,071 0.65%    10,368,659    14,957 0.59%    9,938,606    13,297 0.54%  
Noninterest-bearing              
demand deposits   6,646,349       6,595,346       6,437,720     
Other liabilities   151,095       177,854       140,023     
Total liabilities   17,391,326       17,141,859       16,516,349     
Stockholders' equity   4,545,276       4,503,675       4,483,593     
Total liabilities and              
stockholders' equity$ 21,936,602    $ 21,645,534    $ 20,999,942     
Net interest income (2) $  247,322    $  237,235    $  238,667    
Net interest spread (2)  4.92%   4.89%   5.09%  
Net interest margin (2)  5.21%   5.16%   5.33%  
              
Total deposits (3)$ 16,338,701 $  10,205 0.25% $ 15,925,581 $  8,377 0.21% $ 15,636,817 $  7,823 0.20%  
Funding sources (4)$ 17,240,231 $  17,071 0.40% $ 16,964,005 $  14,957 0.36% $ 16,376,326 $  13,297 0.33%  
              
(1) Includes tax equivalent adjustments of $4.9 million, $4.8 million, and $4.9 million for the three months ended June 30, 2017, March 31, 2017, and June 30, 2016 related to tax exempt income on municipal securities.  The federal statutory tax rate utilized was 35% for the periods. 
(2) Tax equivalent.             
(3) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits.  The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits. 
(4) Funding sources is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of funding sources is calculated as annualized total interest expense divided by average funding sources. 
         


PACWEST BANCORP AND SUBSIDIARIES         
FIVE QUARTER BALANCE SHEET          
           
 June 30, March 31, December 31, September 30, June 30, 
  2017   2017   2016   2016   2016  
 (Dollars in thousands, except per share data) 
ASSETS:          
Cash and due from banks$  180,330  $  184,608  $  337,965  $  286,371  $  226,471  
Interest-earning deposits in financial           
institutions   107,150     111,892     81,705     253,994     218,882  
  Total cash and cash equivalents    287,480     296,500     419,670     540,365     445,353  
           
Securities available-for-sale   3,474,560     3,336,992     3,223,830     3,341,335     3,347,546  
Federal Home Loan Bank stock   22,059     17,901     21,870     19,386     24,214  
  Total investment securities   3,496,619     3,354,893     3,245,700     3,360,721     3,371,760  
           
Loans held for sale   175,158     -     -     -     -  
           
Non-PCI loans and leases   15,536,735     15,526,518     15,412,092     14,686,206     14,566,425  
PCI loans   72,445     96,353     108,445     120,221     136,901  
  Total gross loans and leases           
held for investment   15,609,180     15,622,871     15,520,537     14,806,427     14,703,326  
Deferred fees, net   (65,723)    (66,182)    (64,583)    (63,581)    (61,866) 
Total loans and leases held for          
investment, net of deferred fees   15,543,457     15,556,689     15,455,954     14,742,846     14,641,460  
Allowance for loan and lease losses   (145,958)    (161,307)    (157,238)    (147,976)    (143,289) 
  Total loans and leases held for          
investment, net   15,397,499     15,395,382     15,298,716     14,594,870     14,498,171  
           
Equipment leased to others under           
operating leases   203,212     224,580     229,905     198,931     204,062  
Premises and equipment, net   29,108     28,908     38,594     38,977     38,718  
Foreclosed assets, net   13,278     12,842     12,976     15,113     16,181  
Deferred tax asset, net   70,354     88,765     94,112     27,073     24,413  
Goodwill   2,173,949     2,173,949     2,173,949     2,173,949     2,175,791  
Core deposit and customer           
relationship intangibles, net   30,237     33,302     36,366     39,542     43,766  
Other assets   369,983     318,133     319,779     325,750     328,924  
  Total assets$  22,246,877  $  21,927,254  $  21,869,767  $  21,315,291  $  21,147,139  
           
LIABILITIES:          
Noninterest-bearing deposits$  6,701,039  $  6,789,808  $  6,659,016  $  6,521,946  $  6,222,696  
Interest-bearing deposits   10,173,938     9,541,200     9,211,595     9,123,722     8,925,313  
  Total deposits   16,874,977     16,331,008     15,870,611     15,645,668     15,148,009  
Borrowings   217,454     460,609     905,812     541,011     918,208  
Subordinated debentures   445,743     442,516     440,744     441,112     439,322  
Accrued interest payable and other          
liabilities   148,798     185,015     173,545     144,905     128,296  
  Total liabilities   17,686,972     17,419,148     17,390,712     16,772,696     16,633,835  
STOCKHOLDERS' EQUITY (1)   4,559,905     4,508,106     4,479,055     4,542,595     4,513,304  
  Total liabilities and stockholders’           
  equity$  22,246,877  $  21,927,254  $  21,869,767  $  21,315,291  $  21,147,139  
           
Book value per share$  37.55  $  37.13  $  36.93  $  37.29  $  37.05  
Tangible book value per share (2)$  19.40  $  18.95  $  18.71  $  19.12  $  18.83  
Shares outstanding   121,448,321     121,408,133     121,283,669     121,817,524     121,819,849  
           
(1) Includes net unrealized gain on           
securities available-for-sale, net$  29,729  $  12,718  $  5,982  $  72,073  $  81,744  
(2) Non-GAAP measure.          
           

 

PACWEST BANCORP AND SUBSIDIARIES         
FIVE QUARTER STATEMENT OF EARNINGS         
           
 Three Months Ended 
 June 30, March 31, December 31, September 30, June 30, 
  2017   2017   2016   2016   2016  
 (Dollars in thousands, except per share data) 
Interest income:          
Loans and leases$  234,618  $  224,178  $  238,223  $  225,370  $  224,326  
Investment securities   24,689     23,039     23,403     22,187     22,420  
Deposits in financial institutions   237     192     147     298     308  
Total interest income   259,544     247,409     261,773     247,855     247,054  
           
Interest expense:          
Deposits   10,205     8,377     7,369     7,247     7,823  
Borrowings   1,066     1,018     631     695     352  
Subordinated debentures   5,800     5,562     5,468     5,278     5,122  
Total interest expense   17,071     14,957     13,468     13,220     13,297  
           
Net interest income   242,473     232,452     248,305     234,635     233,757  
Provision for credit losses   11,499     24,728     23,215     8,471     13,903  
Net interest income after provision           
for credit losses   230,974     207,724     225,090     226,164     219,854  
           
Noninterest income:          
Service charges on deposit accounts   3,510     3,758     3,557     3,488     3,633  
Other commissions and fees   10,583     10,390     12,036     12,528     11,073  
Leased equipment income   11,635     9,475     8,614     8,538     8,523  
Gain on sale of loans and leases   649     712     119     157     388  
Gain (loss) on sale of securities   1,651     (99)    515     382     478  
FDIC loss sharing expense, net   -     -     -     -     (6,502) 
Other income   7,254     10,878     4,054     1,827     4,528  
Total noninterest income   35,282     35,114     28,895     26,920     22,121  
           
Noninterest expense:          
Compensation    65,288     64,880     66,013     62,661     62,174  
Occupancy   11,811     11,608     12,076     12,010     12,193  
Data processing   6,337     7,015     6,574     6,234     5,644  
Other professional services   3,976     3,378     4,880     4,625     3,401  
Insurance and assessments   4,856     4,791     4,124     4,324     4,951  
Intangible asset amortization   3,065     3,064     3,176     4,224     4,371  
Leased equipment depreciation   5,232     5,625     5,291     5,298     5,286  
Foreclosed assets (income) expense, net   (157)    143     2,693     (248)    (3) 
Acquisition, integration and           
reorganization costs    1,700     500     -     -     -   
Other expense   15,599     15,540     13,795     11,582     12,064  
Total noninterest expense   117,707     116,544     118,622     110,710     110,081  
           
Earnings before income taxes   148,549     126,294     135,363     142,374     131,894  
Income tax expense    (54,902)    (47,626)    (49,716)    (48,479)    (49,726) 
Net earnings $  93,647  $  78,668  $  85,647  $  93,895  $  82,168  
           
Basic and diluted earnings per share$  0.77  $  0.65  $  0.71  $  0.77  $  0.68  
           


PACWEST BANCORP AND SUBSIDIARIES        
FIVE QUARTER SELECTED FINANCIAL DATA        
          
 At or For the Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
  2017   2017   2016   2016   2016 
 (Dollars in thousands)        
Performance Ratios:         
Return on average assets (1) 1.71%  1.47%  1.59%  1.77%  1.57%
Return on average equity (1) 8.26%  7.08%  7.57%  8.24%  7.37%
Return on average tangible equity (1)(2) 16.06%  13.90%  14.88%  16.15%  14.61%
          
Yield on average loans and leases (1) 6.07%  5.94%  6.31%  6.17%  6.24%
Yield on average interest-earning          
assets (1)(3) 5.57%  5.48%  5.76%  5.55%  5.63%
Cost of average total deposits (1) 0.25%  0.21%  0.19%  0.19%  0.20%
Cost of average time deposits (1) 0.55%  0.45%  0.40%  0.45%  0.52%
Cost of average interest-bearing          
liabilities (1) 0.65%  0.59%  0.52%  0.52%  0.54%
Cost of average funding sources (1) 0.40%  0.36%  0.32%  0.32%  0.33%
Net interest rate spread (1)(3) 4.92%  4.89%  5.24%  5.03%  5.09%
Net interest margin (1)(3) 5.21%  5.16%  5.47%  5.26%  5.33%
          
Efficiency ratio 40.3%  41.4%  40.1%  40.1%  40.6%
Noninterest expense as a percentage         
of average assets (1) 2.15%  2.18%  2.20%  2.09%  2.11%
          
Average Balances:         
Loans and leases$  15,497,921  $  15,297,044  $  15,008,268  $  14,534,951  $  14,468,590 
Interest-earning assets   19,030,793     18,655,243     18,413,189     18,111,585     18,003,075 
Total assets   21,936,602     21,645,534     21,427,950     21,072,053     20,999,942 
Noninterest-bearing deposits   6,646,349     6,595,346     6,496,221     6,274,294     6,437,720 
Interest-bearing deposits   9,692,352     9,330,235     9,327,080     9,107,305     9,199,097 
Total deposits   16,338,701     15,925,581     15,823,301     15,381,599     15,636,817 
Borrowings and subordinated          
debentures   901,530     1,038,424     946,474     1,023,952     739,509 
Interest-bearing liabilities   10,593,882     10,368,659     10,273,554     10,131,257     9,938,606 
Funding sources   17,240,231     16,964,005     16,769,775     16,405,551     16,376,326 
Stockholders' equity   4,545,276     4,503,675     4,501,948     4,530,701     4,483,593 
          
(1) Annualized.         
(2) Non-GAAP measure.         
(3) Tax equivalent.         
          


PACWEST BANCORP AND SUBSIDIARIES          
FIVE QUARTER SELECTED FINANCIAL DATA          
            
 At or For the Three Months Ended  
 June 30, March 31, December 31, September 30, June 30,  
  2017   2017   2016   2016   2016   
 (Dollars in thousands)          
Non-PCI Credit Quality:           
Allowance for credit losses to loans            
and leases held for investment 1.02%  1.08%  1.05%  1.05%  1.03%  
Allowance for credit losses to            
nonaccrual loans and leases held            
for investment 92.2%  96.9%  94.5%  90.1%  117.5%  
Nonaccrual loans and leases held for            
investment to loans and leases held           
for investment 1.11%  1.11%  1.11%  1.16%  0.88%  
Nonperforming assets to loans and            
leases held for investment and            
foreclosed assets 1.20%  1.20%  1.19%  1.27%  0.99%  
Nonperforming assets to total assets 0.84%  0.85%  0.84%  0.87%  0.68%  
Trailing twelve month net charge-offs            
to average loans and leases           
held for investment 0.37%  0.24%  0.15%  0.04%  0.04%  
            
PacWest Bancorp Consolidated            
Capital:           
Tier 1 leverage ratio (1) 11.90%  11.87%  11.91%  12.13%  11.92%  
Common equity tier 1 capital ratio (1) 12.28%  12.31%  12.31%  12.83%  12.72%  
Tier 1 capital ratio (1) 12.28%  12.31%  12.31%  12.83%  12.72%  
Total capital ratio (1) 15.42%  15.56%  15.56%  16.18%  16.08%  
Risk-weighted assets (1)$  19,084,824  $  18,732,723  $  18,568,622  $  17,713,506  $  17,520,609   
            
Equity to assets ratio  20.50%  20.56%  20.48%  21.31%  21.34%  
Tangible common equity ratio (2) 11.75%  11.67%  11.54%  12.19%  12.12%  
Book value per share$  37.55  $  37.13  $  36.93  $  37.29  $  37.05   
Tangible book value per share (2)$  19.40  $  18.95  $  18.71  $  19.12  $  18.83   
            
Pacific Western Bank Capital:           
Tier 1 leverage ratio (1) 11.41%  11.36%  11.40%  11.54%  11.38%  
Common equity tier 1 capital ratio (1) 11.79%  11.79%  11.78%  12.21%  12.13%  
Tier 1 capital ratio (1) 11.79%  11.79%  11.78%  12.21%  12.13%  
Total capital ratio (1) 12.66%  12.74%  12.72%  13.15%  13.06%  
            
Equity to assets ratio  20.07%  20.11%  20.02%  20.77%  20.82%  
Tangible common equity ratio (2) 11.27%  11.16%  11.02%  11.56%  11.51%  
            
(1) Capital information for June 30, 2017 is preliminary.          
(2) Non-GAAP measure.           
            

GAAP TO NON-GAAP RECONCILIATION

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

PACWEST BANCORP AND SUBSIDIARIES         
GAAP TO NON-GAAP RECONCILIATION         
            
  Three Months Ended Six Months Ended 
  June 30, March 31, June 30, June 30, 
Return on Average Tangible Equity 2017   2017   2016   2017   2016  
  (Dollars in thousands) 
Net earnings$  93,647  $  78,668  $  82,168  $  172,315  $  172,624  
            
Average stockholders' equity$  4,545,276  $  4,503,675  $  4,483,593  $  4,524,591  $  4,461,097  
Less: Average intangible assets   2,205,814     2,209,112     2,222,007     2,207,454     2,224,764  
Average tangible common equity$  2,339,462  $  2,294,563  $  2,261,586  $  2,317,137  $  2,236,333  
            
Return on average equity (1) 8.26%  7.08%  7.37%  7.68%  7.78% 
Return on average tangible equity (2) 16.06%  13.90%  14.61%  15.00%  15.52% 
            
(1) Annualized net earnings divided by average stockholders' equity.       
(2) Annualized net earnings divided by average tangible common equity.       
            


PACWEST BANCORP AND SUBSIDIARIES         
GAAP TO NON-GAAP RECONCILIATION         
           
           
Tangible Common Equity Ratio/June 30, March 31, December 31, September 30, June 30, 
Tangible Book Value Per Share 2017   2017   2016   2016   2016  
 (Dollars in thousands, except per share data)         
PacWest Bancorp Consolidated:          
Stockholders' equity$  4,559,905  $  4,508,106  $  4,479,055  $  4,542,595  $  4,513,304  
Less: Intangible assets   2,204,186     2,207,251     2,210,315     2,213,491     2,219,557  
Tangible common equity$  2,355,719  $  2,300,855  $  2,268,740  $  2,329,104  $  2,293,747  
           
Total assets$  22,246,877  $  21,927,254  $  21,869,767  $  21,315,291  $  21,147,139  
Less: Intangible assets   2,204,186     2,207,251     2,210,315     2,213,491     2,219,557  
Tangible assets$  20,042,691  $  19,720,003  $  19,659,452  $  19,101,800  $  18,927,582  
           
Equity to assets ratio 20.50%  20.56%  20.48%  21.31%  21.34% 
Tangible common equity ratio (1) 11.75%  11.67%  11.54%  12.19%  12.12% 
           
Book value per share$  37.55  $  37.13  $  36.93  $  37.29  $  37.05  
Tangible book value per share (2)$  19.40  $  18.95  $  18.71  $  19.12  $  18.83  
Shares outstanding   121,448,321     121,408,133     121,283,669     121,817,524     121,819,849  
           
           
Pacific Western Bank:          
Stockholder's equity$  4,460,911  $  4,405,770  $  4,374,478  $  4,416,623  $  4,390,928  
Less: Intangible assets   2,204,186     2,207,251     2,210,315     2,213,491     2,219,557  
Tangible common equity$  2,256,725  $  2,198,519  $  2,164,163  $  2,203,132  $  2,171,371  
           
Total assets$  22,223,320  $  21,910,720  $  21,848,644  $  21,266,705  $  21,084,950  
Less: Intangible assets   2,204,186     2,207,251     2,210,315     2,213,491     2,219,557  
Tangible assets$  20,019,134  $  19,703,469  $  19,638,329  $  19,053,214  $  18,865,393  
           
Equity to assets ratio 20.07%  20.11%  20.02%  20.77%  20.82% 
Tangible common equity ratio (1) 11.27%  11.16%  11.02%  11.56%  11.51% 
           
(1) Tangible common equity divided by tangible assets.         
(2) Tangible common equity divided by shares outstanding.         
           



            

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