PACW PacWest Bancorp

-Net Operating Earnings of $9.6 Million or $0.35 Per Diluted Share- SAN DIEGO, Oct. 16 /PRNewswire-FirstCall/ -- PacWest Bancorp (NASDAQ:PACW) today announced net operating earnings for the third quarter of 2008 of $9.6 million, or $0.35 per diluted share, compared to net operating earnings of $12.8 million, or $0.47 per diluted share, for the second quarter of 2008. The decrease in net operating earnings for the third quarter of 2008 compared to the second quarter of 2008 is due mainly to a higher credit loss provision. Net operating earnings for the second quarter do not include charges for the goodwill write-off, a legal settlement and reorganization costs; there were no such charges in the third quarter of 2008. When these items are included, the net loss for the second quarter of 2008 was $474.5 million, or $17.47 per diluted share. Net operating earnings for the nine months ended September 30, 2008, were $24.6 million, or $0.90 per diluted share, compared to net operating earnings of $74.0 million, or $2.55 per diluted share, for same period of 2007. The decrease in net operating earnings was due mainly to lower net interest income and higher credit loss provisions. Net operating earnings for the periods do not include charges for goodwill write-offs, a 2008 legal settlement and reorganization costs. When these items are included, the net loss for the nine months ended September 30, 2008 was $737.7 million, or $27.15 per diluted share, compared to net earnings of $73.3 million, or $2.53 per diluted share, for the same period of 2007. The discussion in this release of net earnings, earnings per share, performance ratios and comparisons to prior periods includes information 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. THIRD QUARTER RESULTS Third Second In thousands, except per share data and Quarter Quarter percentages 2008 2008 Net earnings (loss) as reported $9,551 ($474,514) Legal settlement, net of tax - 452 Reorganization costs, net of tax - 150 Goodwill write-off - 486,701 Net operating earnings $9,551 $12,789 Diluted loss per share $0.35 $(17.47) Diluted net operating earnings per share $0.35 $0.47 Net interest margin 5.42% 5.44% Allowance for credit losses to loans, net of unearned income 1.72% 1.73% Total risk-based capital ratios at quarter end: Consolidated Company 12.18% 12.14% Pacific Western 11.79% 11.47% The decrease in net operating earnings for the third quarter of 2008 from the second quarter of 2008 is due to the combination of a higher provision for credit losses, lower net interest income, higher noninterest income, and higher operating noninterest expense. Matt Wagner, Chief Executive Officer, commented, "We had a strong third quarter during which we continued to focus on credit fundamentals and capital building. Nonaccrual loans, nonperforming assets and past due loans all declined during the quarter and we further reduced our exposure to nonowner-occupied residential construction loans. Our efforts over the last several quarters have resulted in a balance sheet that includes a very manageable credit portfolio and very strong capital levels." Mr. Wagner continued, "Our balance sheet will be further strengthened by the equity infusion of $100 million from CapGen Financial announced on September 2, 2008 and which is expected to close late in the fourth quarter. This additional capital, combined with our focus on credit quality and cost control, positions us well to seek growth opportunities over the next twelve months." Vic Santoro, Executive Vice President and Chief Financial Officer, stated, "Despite the challenges of the current environment, we continue to generate positive operating earnings, have been able to maintain our capital at very high levels even before the planned equity infusion, and have developed additional liquidity sources. Our healthy allowance for credit losses and our ability to maintain the allowance coverage ratio on par with the second quarter allow us to operate comfortably. We have positioned ourselves for future success by ensuring high capital levels, reduced credit exposures, and positive operating earnings." YEAR TO DATE RESULTS Nine Months Ended In thousands, except per share data September 30, and percentages 2008 2007 Net (loss) earnings as reported ($737,686) $73,267 Legal settlement, net of tax 452 - Reorganization costs, net of tax 150 778 Goodwill write-off 761,701 - Net operating earnings $24,617 $74,045 Diluted (loss) earnings per share $(27.15) $2.53 Diluted net operating earnings per share $0.90 $2.55 Net interest margin 5.48% 6.41% 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 operating costs. BALANCE SHEET CHANGES Total loans, net of unearned income, increased $29.3 million to $3.9 billion at September 30, 2008, from June 30, 2008. Real estate loans increased $76.5 million, commercial and industrial loans declined $26.6 million, construction loans declined $14.6 million and consumer loans declined $5.8 million. Deposit growth totaled $859,000 for the third quarter. Although demand deposits decreased during the third quarter by $20.6 million to $1.2 billion at September 30, 2008, they continue to represent a substantial 38% of total deposits at that date. Third quarter loan growth and deposit flows were funded with a combination of brokered deposits and overnight Federal Home Loan Bank borrowings. During the third quarter, brokered deposits increased $93.0 million to $163.5 million at September 30, 2008, and represented 5.1% of total deposits at that date. We augmented our liquidity sources by securing a line of credit from the Federal Reserve Bank with a borrowing capacity of $659 million. NET INTEREST INCOME Net interest income totaled $55.0 million for the third quarter of 2008 compared to $55.8 million for the second quarter of 2008. Loan interest income declined $824,000 in the third quarter due mostly to lower average construction and commercial loan balances. Interest expense was $81,000 lower in the third quarter due to lower average borrowings. Net interest income decreased $33.6 million to $168.6 million for the nine months ended September 30, 2008 compared to the same period of 2007. This decrease was due mainly to lower loan yields from reductions in our base lending rate, lower average construction loan balances and increased nonaccrual loans. NET INTEREST MARGIN Our net interest margin for the third quarter of 2008 was 5.42%, a decrease of 2 basis points when compared to the second quarter of 2008. There was virtually no effect from nonaccrual loans on the third quarter net interest margin and the net interest margin for the month of September was 5.39%. The yield on average loans was 7.02% for the third quarter of 2008 compared to 7.04% for the second quarter of 2008; the loan yield for the month of September was 7.05%. The yield on average earning assets was 6.95% for the third quarter of 2008 compared to 6.97% for the second quarter of 2008. Deposit pricing caused the cost of interest bearing deposits to increase 3 basis points to 1.84% and all-in deposit cost to increase 1 basis point to 1.12%. The cost of deposits crept up during the third quarter from 1.07% in July to 1.15% in September due to the competition for liquidity and the use of certificates of deposit, both Bank-promoted and wholesale, to fund loan growth and deposit flows. Our relatively low cost of deposits is driven by demand deposit balances, which averaged 39% of average total deposits during the third quarter of 2008. The overall cost of interest-bearing liabilities was 2.34% for the third quarter of 2008, up 2 basis points from the second quarter of 2008 due mostly to higher deposit costs. Our net interest margin for the nine months ended September 30, 2008 was 5.48%, a decrease of 93 basis points when compared to the same period of 2007. The decrease in the net interest margin results primarily from lower loan yields and lower average demand deposits. NONINTEREST INCOME Noninterest income for the third quarter of 2008 totaled $6.0 million compared to $5.4 million in the second quarter of 2008. During the quarter, $16.5 million of Fannie Mae and Freddie Mac debt obligations were sold at a gain of $81,000. The suspension of the SBA loan sale operation resulted in no loan sale losses or gains in the third quarter; second quarter losses were $572,000. Of the increase in other income, $242,000 related to miscellaneous SBA items. Noninterest income declined $9.6 million for the nine months ended September 30, 2008 to $18.0 million from the $27.6 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 third quarter of 2008 totaled $37.8 million compared to $36.3 million for the second quarter of 2008. The increase in operating noninterest expense is due mostly to higher compensation, occupancy, insurance and assessments and foreclosed real estate expense. The suspension of the SBA loan sale operation and lower SBA loan volume resulted in employee terminations during the third quarter and $165,000 in severance payments. The second quarter experienced a $675,000 credit from the true-up of accruals for the discretionary bonus plan and the various incentive plans; there was no such item in the third quarter. Restricted stock amortization expense was lower by $273,000 due to employee terminations and departures. Occupancy increased $391,000 due to lease buyout costs, seasonally high utilities, upgraded landscaping, and higher commissions paid to our facilities outsourcer. We expensed $300,000 in the second quarter for a payment made to protect the Bank's position on a real estate loan; there was no such item in the third quarter. Expenses related to other real estate owned and other repossessed collateral increased $1.2 million to $1.4 million in the third quarter. Maintenance expenses were $241,000 higher and writedowns totaled $1.1 million. Insurance and assessments increased due to $202,000 in FDIC credits that were exhausted in the second quarter. 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 $1.2 million for the third quarter of 2008 compared to $1.5 million for the second 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 $4.9 million for 2008. Intangible asset amortization totaled $2.3 million for the third 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 nine months ended September 30, 2008 totaled $109.5 million compared to $104.6 million for the same period in 2007. The increase is due largely to the BFI acquisition completed in June 2007, higher compensation and higher costs to workout nonperforming assets and other problem credits. 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 third quarter of 2008 was 39.0% compared to 39.9% for the second quarter of 2008. The goodwill write-offs are not deductible for tax purposes. CREDIT QUALITY The credit loss provision for the third quarter of 2008 of $7.5 million 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. At September 30, 2008, the allowance for credit losses totaled $67.5 million and represented 1.72% of loans net of unearned income compared to $67.4 million and 1.73% at the end of June. Nonperforming assets include nonaccrual loans and other real estate owned (OREO) and totaled $70.2 million at the end of September compared to $74.0 million at the end of June. OREO totaled $13.3 million at the end of September compared to $9.9 million at the end of June. The increase in OREO is due to six foreclosures totaling $4.7 million and writedowns of $1.1 million offset by one sale for $263,000. The ratio of nonperforming assets to loans and real estate owned declined to 1.78% at September 30, 2008 compared to 1.89% at June 30, 2008. The types of loans included in the nonaccrual category and accruing loans past due between 30 and 89 days as of September 30, 2008 and June 30, 2008 follow: Accruing and over 30 Nonaccrual loans days past due Balance as of Loan category 9/30/08 6/30/08 9/30/08 6/30/08 (Dollars in thousands) SBA 504 $6,570 $2,493 $636 $1,898 SBA 7(a) and Express 4,161 13,006 340 551 Residential construction 7,401 10,762 - - Commercial real estate 22,852 25,322 5,558 2,309 Commercial construction 5,925 6,228 - - Commercial 4,153 2,966 1,495 2,821 Commercial land 881 1,519 - - Residential other 281 284 - 1,045 Residential land 1,988 518 - 1,058 Other, including foreign 2,706 1,018 202 3,657 $56,918 $64,116 $8,231 $13,339 Included in the nonaccrual loans at the end of September are $10.7 million of SBA related loans representing 19% 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. SBA 7(a) loans are secured by borrowers' real estate and/or business assets and are covered by an SBA guarantee of up to 85% of the loan amount. The SBA guaranteed portion on the 7(a) and Express loans shown above is $2.4 million. At September 30, 2008, the SBA loan portfolio totaled $152.6 million and was composed of $114.0 million in SBA 504 loans and $38.6 million in SBA 7(a) and Express loans. The commercial real estate nonaccrual loans are represented by six relationships that are well secured and in the process of collection. The net decrease in nonaccrual loans during the third quarter is composed of additions of $17.7 million, repayments and payoffs of $17.3 million, charge-offs of $4.2 million, and foreclosures of $3.4 million. Our exposure to nonowner-occupied residential construction loans was reduced by $25.4 million to $234.9 million at the end of September from $260.4 million at the end of June. The reduction was due to net repayments of $23.4 million and foreclosures of $2.0 million. The details of the nonowner-occupied residential construction loan portfolio as of the dates indicated follow: As of September 30, 2008 As of June 30, 2008 Number Average loan Loan Category Balance of loans balance Balance (Dollars in thousands) Residential land acquisition and development $58,569 32 $1,830 $58,537 Residential nonowner-occupied single family 84,885 40 2,122 97,525 Unimproved residential land 43,880 15 2,925 44,489 Residential multifamily 47,585 11 4,326 59,812 $234,919 98 $2,397 $260,363 REGULATORY CAPITAL MEASURES ARE ABOVE THE WELL-CAPITALIZED MINIMUMS PacWest and its wholly-owned banking subsidiary, Pacific Western Bank, each remained well capitalized at September 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% 10.74% 11.14% Tier 1 risk-based capital ratio 6.00% 10.53% 10.92% Total risk-based capital 10.00% 11.79% 12.18% ABOUT PACWEST BANCORP PacWest Bancorp is a bank holding company with $4.4 billion in assets as of September 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 Second 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: lower than expected revenues; credit quality deterioration or pronounced and sustained reduction in real estate values 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 future acquisitions, to successfully integrate such acquired entities, or to achieve expected benefits synergies and/or operating efficiencies within expected time-frames or at all; 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; and changes in the securities markets; regulatory approvals for any capital activities 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. Contact information: Matt Wagner, Chief Executive Officer, (310) 728-1020 Vic Santoro, Executive Vice President and CFO, (310) 728-1021 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS September 30, June 30, December 31, 2008 2008 2007 (In thousands, except share date) Assets: Cash and due from banks $124,692 $117,862 $99,363 Federal funds sold 5,500 9,000 2,000 Total cash and cash equivalents 130,192 126,862 101,363 Interest-bearing deposits in financial institutions 303 253 420 Federal Home Loan Bank stock, at cost 33,458 33,944 26,649 Securities available-for-sale, at estimated fair value 97,572 109,460 106,888 Total securities 131,030 143,404 133,537 Loans, held for sale - - 63,565 Loans, net of unearned income 3,934,321 3,905,056 3,949,218 Allowance for loan losses (61,075) (59,777) (52,557) Net loans 3,873,246 3,845,279 3,896,661 Premises and equipment 25,471 25,718 26,327 Other real estate owned, net 13,284 9,886 2,736 Intangible assets 36,497 38,771 805,775 Cash surrender value of life insurance 69,972 69,340 67,846 Other assets 83,222 83,811 80,810 Total assets $4,363,217 $4,343,324 $5,179,040 Liabilities and Shareholders' Equity: Liabilities: Noninterest-bearing deposits $1,218,486 $1,239,098 $1,211,946 Interest-bearing deposits 1,974,586 1,953,115 2,033,200 Total deposits 3,193,072 3,192,213 3,245,146 Accrued interest payable and other liabilities 43,115 44,960 45,054 Borrowings 620,700 601,300 612,000 Subordinated debentures 130,043 130,107 138,488 Total liabilities 3,986,930 3,968,580 4,040,688 Shareholders' Equity 376,287 374,744 1,138,352 Total Liabilities and Shareholders' Equity $4,363,217 $4,343,324 $5,179,040 Shares outstanding (including 962,410 shares at September 30, 2008, 1,010,288 at June 30, 2008, and 861,269 shares at December 31, 2007, underlying unvested stock awards) 28,159,263 28,184,978 28,002,382 Tangible book value per share $12.07 $11.92 $11.88 Book value per share $13.36 $13.30 $40.65 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) Nine Months Ended Quarters Ended September 30, 9/30/08 6/30/08 9/30/07 2008 2007 (In thousands, except per share data) Interest income: Interest and fees on loans $68,712 $69,536 $85,649 $213,901 $260,875 Interest on federal funds sold 23 23 605 86 1,728 Interest on time deposits in other financial institutions 1 2 5 6 17 Interest on investment securities 1,808 1,861 1,268 5,370 4,006 Total interest income 70,544 71,422 87,527 219,363 266,626 Interest expense: Interest expense on deposits 9,001 8,919 14,924 29,741 42,080 Interest expense on borrowings 4,538 4,680 3,562 14,525 13,728 Interest expense on subordinated debentures 2,030 2,051 2,758 6,490 8,646 Total interest expense 15,569 15,650 21,244 50,756 64,454 Net interest income before provision for credit losses 54,975 55,772 66,283 168,607 202,172 Provision for credit losses 7,500 3,500 - 37,000 - Net interest income after provision for credit losses 47,475 52,272 66,283 131,607 202,172 Noninterest income: Service charges on deposit accounts 3,165 3,205 2,877 9,594 8,544 Other commissions and fees 1,884 1,812 1,903 5,215 5,202 Gain (loss) on sale of loans - (572) (323) (303) 8,981 Gain on sale of securities, net 81 - - 81 - Increase in cash surrender value of life insurance 632 617 597 1,836 1,840 Other income 281 339 628 1,588 2,995 Total noninterest income 6,043 5,401 5,682 18,011 27,562 Noninterest expense: Compensation 19,332 18,919 17,582 57,097 54,771 Occupancy and FF&E 6,321 5,930 6,057 18,121 18,031 Data processing 1,495 1,604 1,507 4,642 4,532 Other professional services 1,768 1,669 1,574 4,852 4,806 Business development 650 849 780 2,255 2,336 Communications 745 816 825 2,385 2,498 Insurance and assessments 1,025 810 468 2,375 1,259 OREO expense 1,360 164 7 1,596 66 Intangible asset amortization 2,274 2,484 2,574 7,288 7,053 Reorganization charges - 258 - 258 1,341 Legal settlement - 780 - 780 - Goodwill write-off - 486,701 - 761,701 - Other 2,878 3,100 3,150 8,892 9,221 Total noninterest expense 37,848 524,084 34,524 872,242 105,914 (Loss) earnings before income taxes 15,670 (466,411) 37,441 (722,624) 123,820 Income taxes 6,119 8,103 15,245 15,062 50,553 Net (loss) earnings $9,551 $(474,514) $22,196 $(737,686) $73,267 Per share information Number of diluted shares outstanding (weighted average): Net (loss) earnings 27,203.8 27,166.8 28,988.0 27,167.8 29,001.9 Net operating earnings 27,203.8 27,178.3 28,988.0 27,206.2 29,001.9 Diluted (loss) earnings per share: $0.35 $(17.47) $0.77 $(27.15) $2.53 Diluted net operating earnings per share: $0.35 $0.47 $0.77 $0.90 $2.55 UNAUDITED AVERAGE Nine Months Ended BALANCE SHEETS Quarters Ended September 30, 9/30/08 6/30/08 9/30/07 2008 2007 (Dollars in thousands) Average Assets: Loans, net of unearned income $3,893,836 $3,970,704 $3,938,511 $3,961,008 $4,065,400 Investment securities 136,383 146,840 96,672 142,179 104,591 Federal funds sold 4,837 4,549 47,931 4,806 44,817 Interest-bearing deposits in financial institutions 235 326 436 295 473 Average earning assets 4,035,291 4,122,419 4,083,550 4,108,288 4,215,281 Other assets 267,643 748,146 1,042,212 680,462 1,045,266 Average total assets $4,302,934 $4,870,565 $5,125,762 $4,788,750 $5,260,547 Average Liabilities and Shareholders' Equity: Average liabilities Noninterest- bearing deposits $1,232,660 $1,256,794 $1,383,407 $1,254,130 $1,458,799 Interest checking 351,863 373,382 355,303 364,981 316,227 Money market accounts 995,617 1,085,945 1,136,201 1,056,854 1,096,241 Savings 100,720 100,779 120,484 102,130 129,644 Time deposits 502,456 426,654 451,900 447,807 509,891 Interest- bearing deposits 1,950,656 1,986,760 2,063,888 1,971,772 2,052,003 Average deposits 3,183,316 3,243,554 3,447,295 3,225,902 3,510,802 Subordinated debentures 130,082 130,149 138,650 132,677 145,365 Borrowings 566,049 592,966 279,782 593,023 360,197 Other liabilities 47,233 48,801 55,386 48,741 57,641 Average liabilities 3,926,680 4,015,470 3,921,113 4,000,343 4,074,005 Average equity 376,254 855,095 1,204,649 788,407 1,186,742 Average liabilities and shareholders' equity $4,302,934 $4,870,565 $5,125,762 $4,788,750 $5,260,747 Yield Analysis: Average earning assets $4,035,291 $4,122,419 $4,083,550 $4,108,288 $4,215,281 Yield 6.95% 6.97% 8.50% 7.13% 8.46% Average interest- bearing deposits $1,950,656 $1,986,760 $2,063,888 $1,971,772 $2,052,003 Yield 1.84% 1.81% 2.87% 2.01% 2.74% Average deposits $3,183,316 $3,243,554 $3,447,295 $3,225,902 $3,510,802 Cost 1.12% 1.11% 1.72% 1.23% 1.60% Average interest -bearing liabilities $2,646,787 $2,709,875 $2,482,320 $2,697,472 $2,557,565 Cost 2.34% 2.32% 3.40% 2.51% 3.37% Average subordinated debentures 130,082 130,149 138,650 132,677 145,365 Cost 6.21% 6.34% 7.89% 6.53% 7.95% Average borrowings 566,049 592,966 279,782 593,023 360,197 Cost 3.19% 3.17% 5.05% 3.27% 5.10% Average interest sensitive liabilities $3,879,447 $3,966,669 $3,865,727 $3,951,602 $4,016,364 Cost 1.60% 1.59% 2.18% 1.72% 2.15% Interest spread 4.61% 4.65% 5.10% 4.62% 5.09% Net interest margin 5.42% 5.44% 6.44% 5.48% 6.41% DEPOSITS (unaudited) As of the Dates Indicated 9/30/08 6/30/08 12/31/07 (Dollars in thousands) Transaction accounts: Demand deposits $1,218,486 $1,239,098 $1,211,946 Interest checking 344,618 355,754 366,191 Total transaction accounts 1,563,104 1,594,852 1,578,137 Non-transaction accounts: Money market 903,033 1,050,726 1,135,307 Savings 98,362 100,422 108,223 Time deposits under $100,000 362,886 207,621 138,750 Time deposits over $100,000 265,687 238,592 284,729 Total non-transaction accounts 1,629,968 1,597,361 1,667,009 Total deposits $3,193,072 $3,192,213 $3,245,146 LOAN CONCENTRATION (unaudited) As of the Dates Indicated 9/30/08 6/30/08 03/31/08* 12/31/2007* 9/30/2007* (Dollars in thousands) Loan Category: Domestic: Commercial $803,717 $833,376 $855,228 $861,708 $864,114 Real estate- construction 608,968 623,605 661,782 717,419 795,272 Commercial real estate-mortgage 2,437,593 2,361,529 2,361,365 2,335,099 2,144,323 Consumer 41,671 47,500 47,506 49,943 48,550 Foreign: Commercial 49,153 46,096 48,737 56,916 57,538 Other 2,323 1,861 906 1,206 5,879 Total gross loans, including loans held for sale $3,943,425 $3,913,967 $3,975,524 $4,022,291 $3,915,676 *Commercial and commercial real estate-mortgage categories include loans held COMPONENTS OF ALLOWANCE FOR CREDIT LOSSES, NONPERFORMING ASSETS AND CREDIT QUALITY MEASURES (Unaudited) As of or for the: Quarter Ended Year Ended 9/30/08 6/30/08 3/31/08 12/31/07 (Dollars in thousands) ALLOWANCE FOR CREDIT LOSSES: Allowance for loan losses $61,075 $59,777 $60,199 $52,557 Reserve for unfunded loan commitments 6,471 7,671 8,671 8,471 Allowance for credit losses $67,546 $67,448 $68,870 $61,028 NONPERFORMING ASSETS: Nonaccrual loans $56,918 $64,116 $31,955 $22,473 Other real estate owned 13,285 9,886 6,055 2,736 Total nonperforming assets $70,203 $74,002 $38,010 $25,209 Allowance for credit losses to loans, net of unearned income 1.72% 1.73% 1.76% 1.55% Allowance for credit losses to nonaccrual loans 118.67% 105.20% 215.5% 271.6% Nonperforming assets to total loans, including loans held for sale, and other real estate owned 1.78% 1.89% 0.96% 0.63% Nonaccrual loans to total loans, including loans held for sale 1.45% 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 9/30/08 6/30/08 3/31/08 12/31/07 (Dollars in thousands) Balance at beginning of period $67,448 $68,870 $61,028 $61,179 Loans charged-off: Commercial (1,551) (3,420) (108) (2,091) Real estate-construction (1,184) (1,417) (18,335) (660) Real estate-mortgage (1,990) (159) (68) (454) Consumer (3,028) (97) (38) (166) Foreign - (39) - (1,414) Total loans charged-off (7,753) (5,132) (18,549) (4,785) Recoveries on loans charged-off: Commercial 251 151 356 1,591 Real estate-construction 2 - - - Real estate-mortgage 80 46 26 163 Consumer 16 10 9 122 Foreign 2 3 - 73 Total recoveries on loans charged-off 351 210 391 1,949 Net charge-offs (7,402) (4,922) (18,158) (2,836) Provision for credit losses 7,500 3,500 26,000 3,000 Reduction for loans sold - - - (2,461) Additions due to acquisitions - - - 2,146 Balance at end of period $67,546 $67,448 $68,870 $61,028 Annualized net charge-offs to average loans (0.76%) (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 Nine Months Ended In thousands, except September 30, June 30, September 30, per share data and 2008 2008 2008 2007 percentages Net (loss) earnings as reported $9,551 $(474,514) $(737,686) $73,267 Legal settlement, net of tax - 452 452 - Reorganization costs, net of tax - 150 150 778 Goodwill write-off - 486,701 761,701 - Net operating earnings $9,551 $12,789 $24,617 $74,045 GAAP basic shares outstanding 27,191.1 27,166.8 27,167.8 28,884.2 Effect of restricted stock and dilutive stock options (a) 12.7 - - 117.7 GAAP diluted shares outstanding 27,203.8 27,166.8 27,167.8 29,001.9 Operating earnings basic shares outstanding 27,191.1 27,166.8 27,167.8 28,884.2 Effect of restricted stock and dilutive stock options 12.7 11.5 38.4 117.7 Operating earnings diluted shares outstanding 27,203.8 27,178.3 27,206.2 29,001.9 GAAP basic and diluted earnings (loss) per share $0.35 $(17.47) $(27.15) $2.53 Net operating diluted earnings per share $0.35 $0.47 $0.90 $2.55 GAAP return on average assets 0.88% (39.18%) (20.58%) 1.86% Net operating return on average assets 0.88% 1.06% 0.69% 1.88% GAAP return on average equity 10.10% (223.19%) (124.98%) 8.25% Net operating return on average equity 10.10% 6.02% 4.17% 8.34% Noninterest expense as reported $37,848 $524,084 $872,242 $105,914 Legal settlement - (780) (780) - Reorganization costs - (258) (258) (1,341) Goodwill write-off - (486,701) (761,701) - Operating noninterest expense $37,848 $36,345 $109,503 $104,573 (a) Anti-dilutive for the quarter ended June 30, 2008 and nine months ended September 30, 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, fax, +1-310-201-0498, both of PacWest Bancorp Web site: http://www.pacificwesternbank.com/

Copyright