- Net Operating Earnings of $12.8 Million or $0.47 Per Diluted
Share - SAN DIEGO, July 17 /PRNewswire-FirstCall/ -- PacWest
Bancorp (NASDAQ:PACW) today announced net operating earnings for
the second quarter of 2008 of $12.8 million, or $0.47 per diluted
share, compared to net operating earnings of $2.3 million, or $0.08
per diluted share, for the first quarter of 2008. The increase in
net operating earnings for the second quarter of 2008 compared to
the first quarter of 2008 is due mainly to a lower credit loss
provision. Net operating earnings for these quarters do not include
charges for goodwill write-offs and the second quarter legal
settlement and reorganization costs. When these items are included,
the net losses for the second and first quarters of 2008 were
$474.5 million, or $17.47 per diluted share, and $272.7 million, or
$10.05 per diluted share. As previously announced on July 8, 2008,
PacWest Bancorp's Board of Directors declared a cash dividend of
$0.32 per common share payable on August 29, 2008, to shareholders
of record at the close of business on August 15, 2008. The
discussion in this release of net earnings, earnings per share,
performance ratios and comparisons to prior periods will be based
on net operating earnings as described above and as shown in the
following table. 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. These non-GAAP
financial measures are presented for supplemental informational
purposes only for understanding the Company's operating results and
should not be considered a substitute for financial information
presented in accordance with United States generally accepted
accounting principles (GAAP). Please refer to the table at the end
of this release for a presentation of performance ratios in
accordance with GAAP and a reconciliation of the non-GAAP financial
measurements to the GAAP financial measurements. SECOND QUARTER
RESULTS Second First In thousands, except per share data and
percentages Quarter Quarter 2008 2008 Net loss as reported
($474,514) $272,723) Legal settlement, net of tax 452 -
Reorganization costs, net of tax 150 - Goodwill write-off 486,701
275,000 Net operating earnings $12,789 $2,277 Diluted loss per
share $(17.47) $(10.05) Diluted net operating earnings per share
$0.47 $0.08 Net interest margin 5.44% 5.58% Total risk-based
capital ratios at quarter end: Consolidated Company 12.14% 11.80%
Pacific Western 11.47% 10.87% The increase in net operating
earnings for the second quarter of 2008 over the first quarter of
2008 is due to the combination of a lower provision for credit
losses, lower net interest income, lower noninterest income, and
higher operating noninterest expense. Matt Wagner, Chief Executive
Officer, stated, "The strong quarterly results reflect our ongoing
management of problem credits and commitment to our core operating
principles: credit quality, expense management and maintenance of
low cost deposits. In terms of credit quality, while nonaccrual
loans increased in the quarter as expected, we continue to
meaningfully reduce our exposure to non-owner occupied residential
construction loans." Mr. Wagner continued, "Our net operating
earnings also reflect our constant attention to the liability side
of our balance sheet. While average deposit balances declined, we
maintained a high percentage of noninterest bearing deposits to
total deposits and resisted growing deposits based on rate,
preferring to continue our focus on relationships, service and
stability. Finally, we are financially strong. While we remain
cautious about the current business climate, our healthy capital
and coverage ratios enable us to operate comfortably in this
environment." Vic Santoro, Executive Vice President and Chief
Financial Officer, commented, "During the quarter, we wrote-off the
remainder of our goodwill due to the further decline in our market
capitalization. This goodwill write-off is required by GAAP and has
no effect on either our cash position or regulatory capital ratios.
Our high capital ratios coupled with the Company's significant cash
generation capabilities position us well to take advantage of
opportunities that may be presented." Mr. Santoro also stated, "Our
net interest margin held up nicely in the second quarter, reaching
5.55% in June when the effect of nonaccrual loan interest is
excluded. We'll continue to focus on net interest margin and
expense management in succeeding quarters as these two items are
the basis for the Company's net operating earnings level." YEAR TO
DATE RESULTS Six months ended June 30, In thousands, except per
share data and percentages 2008 2007 Net (loss) earnings as
reported ($747,237) $51,071 Legal settlement, net of tax 452 -
Reorganization costs, net of tax 150 778 Goodwill write-off 761,701
- Net operating earnings $15,066 $51,849 Diluted (loss) earnings
per share $(27.52) $1.76 Diluted net operating earnings per share
$0.55 $1.79 Net interest margin 5.51% 6.40% The decreases in net
operating earnings and diluted net operating earnings per share
were due mostly to decreased net interest income from lower market
interest rates and lower average loans, a higher credit loss
provision, lower gain on sale of loans and higher expenses. BALANCE
SHEET CHANGES Total loans, including loans held for sale and net of
unearned income, decreased $61.3 million to $3.9 billion at June
30, 2008, from March 31, 2008. Commercial and industrial loans
declined $24.5 million, construction loans declined $38.2 million
and all other loan categories remained approximately the same.
Deposits decreased $126.9 million to $3.2 billion at June 30, 2008,
from March 31, 2008. During the second quarter of 2008, demand
deposits decreased $38.2 million to $1.2 billion at June 30, 2008,
and represented 39% of total deposits at that date. NET INTEREST
INCOME Net interest income totaled $55.8 million for the second
quarter of 2008 compared to $57.9 million for the first quarter of
2008. The decrease in net interest income was due mainly to lower
loan yields from reductions in our base lending rate, lower average
construction loan balances and increased nonaccrual loans. The
Federal Reserve lowered the Federal funds rate by 225 basis points
since year end 2007 and our base lending rate was reduced by the
same amount. On the funding side, interest expense decreased $3.9
million compared to the first quarter of 2008 due mostly to the
effect declining market interest rates had on our deposit pricing
and the cost of wholesale funding through Federal Home Loan Bank
("FHLB") advances. Net interest income decreased $22.3 million to
$113.6 million for the six months ended June 30, 2008 compared to
the same period of 2007. This decrease was mainly a result of lower
average loan balances and lower loan yields as market rates have
declined. The lower average loan balances resulted mostly from the
sale of a participating interest of approximately $353 million in
commercial real estate mortgage loans in March 2007 combined with
our efforts to reduce our nonowner-occupied residential
construction loan exposure. Interest expense decreased due to a
combination of lower funding costs and higher average FHLB
borrowings. NET INTEREST MARGIN Our net interest margin for the
second quarter of 2008 was 5.44%, a decrease of 14 basis points
when compared to the first quarter of 2008. The decrease in the net
interest margin is due mostly to lower loan yields. The lower loan
yield is due to the level of market interest rates and higher
nonaccrual loans. The declines in the net interest margin were
tempered by lower funding costs. The net interest margin was 5.47%
in April, 5.53% in May and 5.32% in June, all down from our March
2008 net interest margin of 5.56%. When net reversals of interest
income on nonaccrual loans are excluded, the net interest margin
for the month of June was 5.55%. The yield on average earning
assets was 6.97% for the second quarter of 2008 compared to 7.47%
for the first quarter of 2008. The yield on average loans was 7.04%
for the second quarter of 2008 compared to 7.57% for the first
quarter of 2008. Our average loan yield was 7.15% in April, 7.05%
in May and 6.93% in June, all down from our March 2008 loan yield
of 7.37%. When net reversals of interest income on nonaccrual loans
are excluded, the loan yield for June was 7.17%. The cost of
deposits and other funding has declined steadily with the decline
in market interest rates. During the second quarter, we continued
to adjust our deposit rates downward as market rates declined. The
average cost of deposits was 1.11% for the second quarter of 2008
compared to 1.46% for the first quarter of 2008. On a monthly
basis, deposit cost declined steadily to 1.08% in June 2008 from
1.14% in April 2008 and 1.35% in March 2008. Our relatively low
cost of deposits is driven by demand deposit balances, which
averaged 39% of average total deposits during the second quarter of
2008. The overall cost of interest-bearing liabilities decreased to
2.32% for the second quarter of 2008 from 2.87% for the first
quarter of 2008 due mostly to lower market interest rates. In line
with deposit cost trends, the cost of interest bearing liabilities
declined to 2.29% in June 2008 from 2.67% in March 2008. Our net
interest margin for the six months ended June 30, 2008 was 5.51%, a
decrease of 89 basis points when compared to the same period of
2007. The decrease in the net interest margin is primarily the
result of lower loan yields and lower average demand deposits.
NONINTEREST INCOME Noninterest income for the second quarter of
2008 totaled $5.4 million compared to $6.6 million in the first
quarter of 2008. The decrease compared to the first quarter of 2008
is due mostly to lower SBA loan sale activity. The net loss on sale
of SBA loans was $572,000 for the second quarter of 2008 compared
to a net gain of $269,000 for the first quarter of 2008. Due to the
depressed SBA loan sale market, we suspended the SBA loan sale
operation during the second quarter of 2008. Accordingly, the SBA
loans held for sale at the end of March 2008 were either
transferred to the regular loan portfolio or sold during the second
quarter. Other income for the first quarter of 2008 includes
$444,000 related to the payoff of certain acquired loans and a
$200,000 income item related to the sale in 2003 of a merchant
bankcard portfolio; there are no such items in the second quarter.
Noninterest income declined $9.9 million for the six months ended
June 30, 2008 to $12.0 million from the $21.9 million earned during
the same period in 2007. The decrease in noninterest income
resulted largely from lower gain on sale of loans and lower other
income. The 2007 period included a $6.6 million gain related to the
sale of a participating interest in certain commercial real estate
mortgage loans and net gains of $2.7 million on the sale of SBA
loans; this compares to net losses of $303,000 on the sale of SBA
loans recognized in 2008. The 2007 other income category included a
$1.9 million gain related to recognizing an unearned discount on
the payoff of an acquired loan; this compares to the $444,000
recognized during 2008. NONINTEREST EXPENSE Operating noninterest
expense (defined as reported noninterest expense excluding goodwill
write-offs, the legal settlement and reorganization costs) for
second quarter of 2008 totaled $36.3 million compared to $35.3
million for the first quarter of 2008. The increase in operating
noninterest expense is due mostly to higher professional services,
insurance and assessments and other operating noninterest expense.
Professional services increased in the second quarter due to higher
litigation costs and consulting fees related to the goodwill
write-off. Increased insurance and assessment relates to higher
regulatory fees. The increase in other noninterest expense resulted
from higher costs to workout nonperforming assets and other problem
credits. Noninterest expense includes amortization of time-based
and performance-based restricted stock, which is included in
compensation, and intangible asset amortization. Restricted stock
amortization totaled $1.5 million for the second quarter of 2008
compared to $952,000 for the first quarter of 2008. In the fourth
quarter of 2007 we suspended amortization of certain
performance-based restricted stock awards whose vesting is
dependent on the attainment of specific long-term financial
targets. At that time, we concluded that attainment of these
financial targets was less than probable. If and when the
attainment of such financial targets is deemed probable in future
periods, a catch-up adjustment will be recorded and amortization of
such performance-based restricted stock will recommence.
Amortization expense for all time-based and performance-based
restricted stock awards is estimated to be $5.0 million for 2008.
Intangible asset amortization totaled $2.5 million for the second
quarter of 2008 and is estimated to be $9.4 million for 2008. The
2008 estimates of both restricted stock award expense and
intangible asset amortization are subject to change. Operating
noninterest expense for the six months ended June 30, 2008 totaled
$71.7 million compared to $70.0 million for the same period in
2007. The increase is across most operating expense categories and
is due largely to the BFI acquisition completed in June 2007.
GOODWILL WRITE-OFF In response to the volatility in the banking
industry and the effect such volatility has had on banking stocks
since the beginning of 2008, including PacWest Bancorp's common
stock, we wrote-off $275.0 million of goodwill in the first quarter
of 2008 and wrote-off the remaining balance of our goodwill
totaling $486.7 million in the second quarter of 2008. These
goodwill write-offs are non-cash charges and had no effect on the
Company's or the Bank's cash balances or liquidity. In addition,
because goodwill and other intangible assets are not included in
the calculation of regulatory capital, the Company's and the Bank's
well-capitalized regulatory ratios have not been affected by these
non-cash expenses. TAXES The effective tax rate on net operating
earnings for the second quarter of 2008 was 39.9% compared to 26.9%
for the first quarter of 2008. While both quarters' effective rates
reflect reductions for credits on certain investments and
tax-exempt income, such amounts were a higher proportion of taxable
income in the first quarter than in the second quarter. The
goodwill write-offs are not deductible for tax purposes. CREDIT
QUALITY The credit loss provision for the second quarter of 2008
was $3.5 million and was based on our reserve methodology and
considered, among other factors, net charge-offs, the level and
trends of classified, criticized, and nonaccrual loans, general
market conditions and portfolio concentrations, including the
transfer into the regular portfolio of SBA loans previously held
for sale. At June 30, 2008, the allowance for credit losses totaled
$67.4 million and represented 1.73% of loans net of unearned income
compared to $68.9 million and 1.76% at the end of March. The
transfer into the regular portfolio of SBA loans held for sale is
the principal reason behind the decline in the allowance for credit
losses coverage ratio. Net loan chargeoffs declined significantly
in the second quarter compared to the first quarter. The first
quarter included a chargeoff of $16.2 million related to the sale
of certain construction loans; there were no similar chargeoffs in
the second quarter. Second quarter commercial loan chargeoffs
include $2.2 million related to one loan whose borrower became
significantly over-extended and was forced into bankruptcy by other
lenders. Our exposure to nonowner-occupied residential construction
loans was reduced by $28.2 million to $259.3 million at the end of
June from $287.5 million at the end of March 2008. The reduction
was due to repayments of $23.6 million and foreclosures of $4.6
million. The details of the nonowner-occupied residential
construction loan portfolio as of the dates indicated follow: As of
June 30, 2008 As of Number of Average loan March 31, 2008 Loan
Category Balance loans balance Balance (Dollars in thousands)
Residential land acquisition and development $59,352 39 $1,522
$57,174 Residential nonowner-occupied single family 97,525 46 2,120
96,381 Unimproved residential land 42,653 13 3,281 49,761
Residential multifamily 59,812 14 4,272 84,215 $259,342 112 $2,316
$287,531 The increases in the residential land and
nonowner-occupied single family categories represent disbursements
under existing lending commitments and do not represent new loan
originations. The types of loans included in the nonaccrual
category and accruing loans past due between 30 and 89 days as of
June 30, 2008 and March 31, 2008 follow: Accruing and over 30
Nonaccrual loans days past due Balance as of Loan category 6/30/08
3/31/08 6/30/08 3/31/08 (Dollars in thousands) SBA 504 $2,493
$2,493 $1,898 $2,540 SBA 7(a) and Express 13,006 11,011 551 1,913
Residential construction 10,762 7,857 - 6,715 Commercial real
estate 25,322 6,722 2,309 4,411 Commercial construction 6,228 - - -
Commercial 2,966 3,213 2,821 6,089 Commercial land 1,519 - - -
Residential other 284 295 1,045 1,299 Residential land 518 220
1,058 518 Other, including foreign 1,018 144 3,657 841 $64,116
$31,955 $13,339 $24,326 Included in the nonaccrual loans at the end
of June are $15.5 million of SBA related loans representing 24% of
total nonaccrual loans at that date. The SBA 504 loans are secured
by first trust deeds on owner-occupied business real estate with
loan-to-value ratios of generally 50% or less at the time of
origination. The 7(a) loans are secured by the borrower's real
estate and/or business assets and are covered by a guarantee of the
Small Business Administration of up to 85% of the amount of the
loan. The SBA guaranteed portion on the 7(a) and Express loans
shown above is $10.8 million. The increases in the commercial real
estate and commercial construction categories are due mostly to
five loans totaling $19.8 million that were previously reported as
part of our June 30, 2008 SBA-related nonaccrual loans. These five
loans were underwritten with separate first and second trust deeds
with the expectation that the SBA would pay-off our second trust
deed by issuing a subordinated debenture. These loans were,
however, placed on nonaccrual status prior to the pay-off of the
second trust deeds by the SBA and are now reported as secured
commercial real estate or commercial construction loans. As
nonaccrual loans, these loans were evaluated individually and the
change in their reporting category did not change the credit loss
reserve allocated to any of them as of quarter end. At June 30,
2008, the SBA loan portfolio totaled $168.5 million and was
composed of $119.1 million in SBA 504 loans and $49.4 million in
SBA 7(a) and Express loans. Nonperforming assets include nonaccrual
loans and other real estate owned (OREO) and totaled $74.0 million
at the end of June compared to $38.0 million at the end of March.
OREO totaled $9.9 million at the end of June compared to $6.1
million at the end of March. The increase in OREO is due mostly to
foreclosure on a condominium project in San Diego. The ratio of
nonperforming assets to loans and real estate owned was 1.89% at
June 30, 2008 compared to 0.96% at March 31, 2008. REGULATORY
CAPITAL MEASURES ARE ABOVE THE WELL-CAPITALIZED MINIMUMS PacWest
and its wholly-owned banking subsidiary, Pacific Western Bank, each
remained well capitalized at June 30, 2008 as shown in the
following table. Minimum Regulatory Requirements Actual Well
Pacific Company Capitalized Western Consolidated Tier 1 leverage
capital ratio 5.00% 9.17% 9.77% Tier 1 risk-based capital ratio
6.00% 10.22% 10.89% Total risk-based capital 10.00% 11.47% 12.14%
ABOUT PACWEST BANCORP PacWest Bancorp is a bank holding company
with $4.3 billion in assets as of June 30, 2008, with one
wholly-owned banking subsidiary, Pacific Western Bank. Through 60
full-service community banking branches, Pacific Western provides
commercial banking services, including real estate, construction
and commercial loans, to small and medium-sized businesses. Pacific
Western's branches are located in Los Angeles, Orange, Riverside,
San Diego and San Bernardino Counties. Through its subsidiary BFI
Business Finance and its divisions First Community Financial and
Pacific Western SBA Lending, Pacific Western also provides working
capital financing to growing companies located throughout the
Southwest, primarily in the states of Arizona, California and
Texas. Additional information regarding PacWest Bancorp is
available on the Internet at http://www.pacwestbancorp.com/.
Information regarding Pacific Western Bank is also available on the
Internet at http://www.pacificwesternbank.com/. FORWARD-LOOKING
STATEMENTS This press release contains certain forward-looking
information about PacWest that is intended to be covered by the
safe harbor for "forward-looking statements" provided by the
Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical fact are forward-looking
statements. Such statements involve inherent risks and
uncertainties, many of which are difficult to predict and are
generally beyond the control of the Company. We caution readers
that a number of important factors could cause actual results to
differ materially from those expressed in, implied or projected by,
such forward-looking statements. Risks and uncertainties include,
but are not limited to: planned acquisitions and related cost
savings cannot be realized or realized within the expected time
frame; lower than expected revenues; credit quality deterioration
which could cause an increase in the allowance for credit losses
and a reduction in net earnings; increased competitive pressure
among depository institutions; the Company's ability to complete
announced acquisitions, to successfully integrate acquired
entities, or to achieve expected synergies and operating
efficiencies within expected time-frames or at all; the integration
of acquired businesses costs more, takes longer or is less
successful than expected; the possibility that personnel changes
will not proceed as planned; the cost of additional capital is more
than expected; a change in the interest rate environment reduces
interest margins; asset/liability repricing risks and liquidity
risks; pending legal matters may take longer or cost more to
resolve or may be resolved adversely to the Company; general
economic conditions, either nationally or in the market areas in
which the Company does or anticipates doing business, are less
favorable than expected; environmental conditions, including
natural disasters, may disrupt our business, impede our operations,
negatively impact the values of collateral securing the Company's
loans or impair the ability of our borrowers to support their debt
obligations; the economic and regulatory effects of the continuing
war on terrorism and other events of war, including the war in
Iraq; legislative or regulatory requirements or changes adversely
affecting the Company's business; changes in the securities
markets; regulatory approvals for any acquisitions cannot be
obtained on the terms expected or on the anticipated schedule; and,
other risks that are described in PacWest's public filings with the
U.S. Securities and Exchange Commission (the "SEC"). If any of
these risks or uncertainties materializes or if any of the
assumptions underlying such forward-looking statements proves to be
incorrect, PacWest's results could differ materially from those
expressed in, implied or projected by such forward-looking
statements. PacWest assumes no obligation to update such
forward-looking statements. For a more complete discussion of risks
and uncertainties, investors and security holders are urged to read
PacWest Bancorp's annual report on Form 10-K, quarterly reports on
Form 10-Q and other reports filed by PacWest with the SEC. The
documents filed by PacWest with the SEC may be obtained at PacWest
Bancorp's website at http://www.pacwestbancorp.com/ or at the SEC's
website at http://www.sec.gov/. These documents may also be
obtained free of charge from PacWest by directing a request to:
PacWest Bancorp c/o Pacific Western Bank, 275 North Brea Boulevard,
Brea, CA 92821. Attention: Investor Relations. Telephone
714-671-6800. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS June
30, March 31, December 31, 2008 2008 2007 (In thousands, except
share date) Assets: Cash and due from banks $117,862 $129,653
$99,363 Federal funds sold 9,000 - 2,000 Total cash and cash
equivalents 126,862 129,653 101,363 Interest-bearing deposits in
financial institutions 253 286 420 Federal Home Loan Bank stock, at
cost 33,944 32,768 26,649 Securities available-for-sale, at
estimated fair value 109,460 117,696 106,888 Total securities
143,404 150,464 133,537 Loans, held for sale - 57,309 63,565 Loans,
net of unearned income 3,905,056 3,909,007 3,949,218 Allowance for
loan losses (59,777) (60,199) (52,557) Net loans 3,845,279
3,848,808 3,896,661 Premises and equipment 25,718 25,702 26,327
Other real estate owned, net 9,886 6,055 2,736 Intangible assets
38,771 528,171 805,775 Cash surrender value of life insurance
69,340 68,598 67,846 Other assets 83,811 77,670 80,810 Total assets
$4,343,324 $4,892,716 $5,179,040 Liabilities and Shareholders'
Equity: Liabilities: Noninterest-bearing deposits $1,239,098
$1,277,302 $1,211,946 Interest-bearing deposits 1,953,115 2,041,842
2,033,200 Total deposits 3,192,213 3,319,144 3,245,146 Accrued
interest payable and other liabilities 44,960 45,286 45,054
Borrowings 601,300 539,800 612,000 Subordinated debentures 130,107
130,173 138,488 Total liabilities 3,968,580 4,034,403 4,040,688
Shareholders' Equity: Common stock 282 281 280 Capital surplus
929,416 937,278 936,328 Retained earnings (accumulated deficit)
(554,848) (80,333) 201,220 Accumulated other comprehensive income
(loss): Unrealized gain (loss) on securities available-for-sale,
net (106) 1,087 524 Total Shareholders' Equity 374,744 858,313
1,138,352 Total Liabilities and Shareholders' Equity $4,343,324
$4,892,716 $5,179,040 Shares outstanding (including 1,010,288
shares at June 30, 2008, 999,189 at March 31, 2008, and 861,269
shares at December 31, 2007, underlying unvested stock awards)
28,184,978 28,147,608 28,002,382 Tangible book value per share
$11.92 $11.73 $11.88 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS (LOSS) Six Months Ended Quarters Ended June 30, 6/30/08
3/31/08 2008 2007 (In thousands, except per share data) Interest
income: Interest and fees on loans $69,536 $75,653 $145,189
$175,226 Interest on federal funds sold 23 40 63 1,123 Interest on
time deposits in other financial institutions 2 3 5 12 Interest on
investment securities 1,861 1,701 3,562 2,738 Total interest income
71,422 77,397 148,819 179,099 Interest expense: Interest expense on
deposits 8,919 11,821 20,740 27,156 Interest expense on borrowings
4,680 5,307 9,987 10,166 Interest expense on subordinated
debentures 2,051 2,409 4,460 5,888 Total interest expense 15,650
19,537 35,187 43,210 Net interest income before provision for
credit losses 55,772 57,860 113,632 135,889 Provision for credit
losses 3,500 26,000 29,500 - Net interest income after provision
for credit losses 52,272 31,860 84,132 135,889 Noninterest income:
Service charges on deposit accounts 3,205 3,224 6,429 5,667 Other
commissions and fees 1,812 1,519 3,331 3,299 Gain (loss) on sale of
loans (572) 269 (303) 9,304 Increase in cash surrender value of
life insurance 617 587 1,204 1,243 Other income 339 968 1,307 2,367
Total noninterest income 5,401 6,567 11,968 21,880 Noninterest
expense: Compensation 18,919 18,846 37,765 37,189 Occupancy 4,884
4,731 9,615 9,486 Furniture and equipment 1,046 1,139 2,185 2,488
Data processing 1,604 1,543 3,147 3,025 Other professional services
1,669 1,415 3,084 3,232 Business development 849 756 1,605 1,556
Communications 816 824 1,640 1,673 Insurance and assessments 810
540 1,350 791 Intangible asset amortization 2,484 2,530 5,014 4,479
Reorganization charges 258 - 258 1,341 Legal settlement 780 - 780 -
Goodwill write-off 486,701 275,000 761,701 - Other 3,264 2,986
6,250 6,130 Total noninterest expense 524,084 310,310 834,394
71,390 (Loss) earnings before income taxes (466,411) (271,883)
(738,294) 86,379 Income taxes 8,103 840 8,943 35,308 Net (loss)
earnings $(474,514 $(272,723) $(747,237) $51,071 Per share
information Number of diluted shares outstanding (weighted
average): Net (loss) earnings 27,166.8 27,145.2 27,156.0 29,007.4
Net operating earnings 27,178.3 27,163.3 27,178.0 29,007.4 Diluted
(loss) earnings per share: $(17.47) $(10.05) $(27.52) $1.76 Diluted
net operating earnings per share: $0.47 $0.08 $0.55 $1.79 UNAUDITED
AVERAGE Six Months Ended BALANCE SHEETS Quarters Ended June 30,
6/30/08 3/31/08 2008 2007 (Dollars in thousands) Average Assets:
Loans, net of unearned income $3,970,704 $4,019,224 $3,994,964
$4,129,896 Investment securities 146,840 143,379 145,110 108,616
Federal funds sold 4,549 5,032 4,791 43,234 Interest-bearing
deposits in financial institutions 326 324 325 492 Average earning
assets 4,122,419 4,167,959 4,145,190 4,282,238 Other assets 748,146
1,030,130 889,137 1,047,120 Average total assets $4,870,565
$5,198,089 $5,034,327 $5,329,358 Average Liabilities and
Shareholders' Equity: Average liabilities Noninterest-bearing
deposits $1,256,794 $1,273,173 $1,264,984 $1,497,120 Interest
checking 373,382 369,841 371,611 296,365 Money market accounts
1,085,945 1,089,672 1,087,809 1,075,930 Savings 100,779 104,905
102,842 134,300 Time deposits 426,654 413,712 420,183 539,367
Interest-bearing deposits 1,986,760 1,978,130 1,982,445 2,045,962
Average deposits 3,243,554 3,251,303 3,247,429 3,543,082
Subordinated debentures 130,149 137,829 133,989 148,778 Borrowings
592,966 620,349 606,658 401,071 Other liabilities 48,801 50,207
49,503 58,787 Average liabilities 4,015,470 4,059,688 4,037,579
4,151,718 Average equity 855,095 1,138,401 996,748 1,177,640
Average liabilities and shareholders' equity $4,870,565 $5,198,089
$5,034,327 $5,329,358 Yield Analysis: Average earning assets
$4,122,419 $4,167,959 $4,145,190 $4,282,238 Yield 6.97% 7.47% 7.22%
8.43% Average interest-bearing deposits $1,986,760 $1,978,130
$1,982,445 $2,045,962 Yield 1.81% 2.40% 2.10% 2.68% Average
deposits $3,243,554 $3,251,303 $3,247,429 $3,543,082 Cost 1.11%
1.46% 1.28% 1.55% Average interest-bearing liabilities $2,709,875
$2,736,308 $2,723,092 $2,595,811 Cost 2.32% 2.87% 2.60% 3.36%
Average subordinated debentures 130,149 137,829 133,989 148,778
Cost 6.34% 7.03% 6.69% 7.98% Average borrowings 592,966 620,349
606,658 401,071 Cost 3.17% 3.44% 3.31% 5.11% Average interest
sensitive liabilities $3,966,669 $4,009,481 $3,988,076 $4,092,931
Cost 1.59% 1.96% 1.77% 2.13% Interest spread 4.65% 4.60% 4.62%
5.07% Net interest margin 5.44% 5.58% 5.51% 6.40% DEPOSITS
(unaudited) As of the Dates Indicated 6/30/08 3/31/08 12/31/07
(Dollars in thousands) Transaction accounts: Demand deposits
$1,239,098 $1,277,302 $1,211,946 Interest checking 355,754 373,145
366,191 Total transaction accounts 1,594,852 1,650,447 1,578,137
Non-transaction accounts: Money market 1,050,726 1,165,337
1,135,307 Savings 100,422 100,505 108,223 Time deposits under
$100,000 207,621 136,476 138,750 Time deposits over $100,000
238,592 266,379 284,729 Total non-transaction accounts 1,597,361
1,668,697 1,667,009 Total deposits $3,192,213 $3,319,144 $3,245,146
LOAN CONCENTRATION (unaudited) As of the Dates Indicated 6/30/08
3/31/2008* 12/31/2007* 9/30/2007* 6/30/2007* (Dollars in thousands)
Loan Category: Domestic: Commercial $833,376 $855,228 $861,708
$864,114 $882,426 Real estate- construction 623,605 661,782 717,419
795,272 839,564 Commercial real estate- mortgage 2,361,529
2,361,365 2,335,099 2,144,323 2,124,225 Consumer 47,500 47,506
49,943 48,550 46,355 Foreign: Commercial 46,096 48,737 56,916
57,538 69,236 Other 1,861 906 1,206 5,879 5,848 Total gross loans,
including loans held for sale $3,913,967 $3,975,524 $4,022,291
$3,915,676 $3,967,654 * Commercial and commercial real
estate-mortgage categories include loans held for sale. COMPONENTS
OF ALLOWANCE FOR CREDIT LOSSES, NONPERFORMING ASSETS AND CREDIT
QUALITY MEASURES (Unaudited) As of or for the: Quarter Ended Year
Ended 6/30/08 3/31/08 12/31/07 (Dollars in thousands) ALLOWANCE FOR
CREDIT LOSSES: Allowance for loan losses $59,777 $60,199 $52,557
Reserve for unfunded loan commitments 7,671 8,671 8,471 Allowance
for credit losses $67,448 $68,870 $61,028 NONPERFORMING ASSETS:
Nonaccrual loans $64,116 $31,955 $22,473 Other real estate owned
9,886 6,055 2,736 Total nonperforming assets $74,002 $38,010
$25,209 Allowance for credit losses to loans, net of unearned
income 1.73% 1.76% 1.55% Allowance for credit losses to nonaccrual
loans 105.20% 215.5% 271.6% Allowance for credit losses to
nonperforming assets 91.14% 181.2% 242.1% Nonperforming assets to
total loans, including loans held for sale, and other real estate
owned 1.89% 0.96% 0.63% Nonaccrual loans to total loans, including
loans held for sale 1.64% 0.81% 0.56% ALLOWANCE FOR CREDIT LOSSES
ROLLFORWARD AND NET CHARGE-OFF MEASUREMENT (unaudited) As of or for
the: Quarter Ended Year Ended 6/30/08 3/31/08 12/31/07 (Dollars in
thousands) Balance at beginning of period $68,870 $61,028 $61,179
Loans charged-off: Commercial (3,420) (108) (2,091) Real
estate-construction (1,417) 18,335) (660) Real estate-mortgage
(159) (68) (454) Consumer (97) (38) (166) Foreign (39) - (1,414)
Total loans charged-off (5,132) (18,549) (4,785) Recoveries on
loans charged-off: Commercial 151 356 1,591 Real estate-mortgage 46
26 163 Consumer 10 9 122 Foreign 3 - 73 Total recoveries on loans
charged-off 210 391 1,949 Net charge-offs (4,922) (18,158) (2,836)
Provision for credit losses 3,500 26,000 3,000 Reduction for loans
sold - - (2,461) Additions due to acquisitions - - 2,146 Balance at
end of period $67,448 $68,870 $61,028 Annualized net charge-offs to
average loans (0.50%) (1.82%) (0.07%) The Company has disclosed in
this release certain non-GAAP financial measures to provide
meaningful supplemental information regarding the Company's
operational performance and to enhance investor's overall
understanding of the Company's operating financial performance.
Management believes that these non-GAAP financial measures allow
for additional transparency and are used by some investors,
analysts and other users of the Company's financial information as
performance measures. These non-GAAP financial measures are
presented for supplemental informational purposes only for
understanding the Company's operating results and should not be
considered a substitute for financial information presented in
accordance with GAAP. These non-GAAP financial measurers presented
by the Company may be different from non-GAAP financial measures
used by other companies. The following table presents performance
ratios in accordance with GAAP and a reconciliation of the non-GAAP
financial measurements to the GAAP financial measurements. Non GAAP
Measurements (Unaudited) Quarter Ended Six Months Ended In
thousands, except per June 30, March 31, June 30, share data and
percentages 2008 2008 2008 2007 Net (loss) earnings as reported
$(474,514) $(272,723) $(747,237) $51,071 Legal settlement, net of
tax 452 - 452 - Reorganization costs, net of tax 150 - 150 778
Goodwill write-off 486,701 275,000 761,701 - Net operating earnings
$12,789 $2,277 $15,066 $51,849 GAAP basic shares outstanding
27,166.8 27,145.2 27,156.0 28,876.6 Effect of restricted stock and
dilutive stock options (a) - - - 130.8 GAAP diluted shares
outstanding 27,166.8 27,145.2 27,156.0 29,007.4 Operating earnings
basic shares outstanding 27,166.8 27,145.2 27,156.0 28,876.6 Effect
of restricted stock and dilutive stock options 11.5 18.1 22.0 130.8
Operating earnings diluted shares outstanding 27,178.3 27,163.3
27,178.0 29,007.4 GAAP basic and diluted earnings (loss) per share
$(17.47) $(10.05) $(27.52) $1.76 Net operating diluted earnings per
share $0.47 $0.08 $0.55 $1.79 GAAP return on average assets
(39.18%) (21.10%) (29.85%) 1.93% Net operating return on average
assets 1.06% 0.18% 0.60% 1.96% GAAP return on average equity
(223.19%) (96.35%) (150.76%) 8.75% Net operating return on average
equity 6.02% 0.80% 3.04% 8.88% Noninterest expense as reported
$524,084 $310,310 $834,394 $71,390 Legal settlement (780) - (780) -
Reorganization costs (258) - (258) (1,341) Goodwill write-off
(486,701) (275,000) (761,701) - Operating noninterest expense
$36,345 $35,310 $71,655 $70,049 GAAP efficiency ratio 856.7% 481.6%
664.3% 45.3% Net operating efficiency ratio 59.4% 54.8% 57.1% 44.4%
(a) Anti-dilutive for the quarters and year ended June 30, 2008 and
March 31, 2008. DATASOURCE: PacWest Bancorp CONTACT: Matthew P.
Wagner, Chief Executive Officer, +1-310-728-1020, Fax,
+1-310-201-0498, or Victor R. Santoro, Executive Vice President and
Chief Financial Officer, +1-310-728-1021, or Fax, +1-310-201-0498,
both of PacWest Bancorp Web site: http://www.pacwestbancorp.com/
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