PACW PacWest Bancorp

PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the second quarter of 2019 of $128.1 million, or $1.07 per diluted share, compared to net earnings for the first quarter of 2019 of $112.6 million, or $0.92 per diluted share. The increase in net earnings in the second quarter included a $22.2 million pre-tax gain on the sale of securities which contributed $0.13 per diluted share.

Matt Wagner, President and CEO, commented, “We continue to see favorable results from our credit de-risking strategy with sustained improvement in our credit quality metrics. Year-to-date net charge-offs are 48% lower than the same period in 2018 and year-to-date credit loss provisions are 44% lower than the same period in 2018. Our second quarter of 2019 results produced a return on assets of 1.99% and a return on tangible equity of 23.15%.”

Mr. Wagner continued, “We experienced solid loan production in the second quarter bringing our net loan growth to $515 million for the first half of 2019. However, competition for core deposits and customers desiring higher yields on their funds resulted in total deposits being flat in the first half of 2019. Core deposit generation remains a priority in order to help fund loan growth and maintain our net interest margin.”

FINANCIAL HIGHLIGHTS

	At or For the												At or For the
	Three Months Ended												Six Months Ended
	June 30,				March 31,				Increase				June 30,								Increase
Financial Highlights		2019				2019			(Decrease)					2019				2018			(Decrease)
	(Dollars in thousands, except per share data)
Net earnings	$	128,125			$	112,604			$	15,521			$	240,729			$	234,011			$	6,718
Diluted earnings per share	$	1.07			$	0.92			$	0.15			$	1.99			$	1.85			$	0.14
Return on average assets		1.99	%			1.77	%			0.22				1.88	%			1.96	%			(0.08	)
Return on average
tangible equity (1)		23.15	%			20.64	%			2.51				21.91	%			21.03	%			0.88
Net interest margin ("NIM")
(tax equivalent)		4.72	%			4.69	%			0.03				4.70	%			5.15	%			(0.45	)
Yield on average loans and
leases (tax equivalent)		6.26	%			6.16	%			0.10				6.21	%			6.21	%			-
Cost of average total
deposits		0.81	%			0.73	%			0.08				0.77	%			0.34	%			0.43
Efficiency ratio		41.6	%			42.4	%			(0.8	)			42.0	%			40.7	%			1.3
Total assets	$	26,344,414			$	26,324,138			$	20,276			$	26,344,414			$	24,529,557			$	1,814,857
Loans and leases held
for investment,
net of deferred fees	$	18,472,852			$	18,307,697			$	165,155			$	18,472,852			$	16,885,192			$	1,587,660
Noninterest-bearing
demand deposits	$	7,299,213			$	7,712,409			$	(413,196	)		$	7,299,213			$	8,126,153			$	(826,940	)
Core deposits	$	15,617,488			$	16,127,638			$	(510,150	)		$	15,617,488			$	15,586,238			$	31,250
Total deposits	$	18,805,756			$	19,285,927			$	(480,171	)		$	18,805,756			$	17,929,192			$	876,564
As percentage of total
deposits:
Noninterest-bearing
demand deposits		39	%			40	%			(1	)			39	%			45	%			(6	)
Core deposits		83	%			84	%			(1	)			83	%			87	%			(4	)
Equity to assets ratio		18.42	%			18.20	%			0.22				18.42	%			19.48	%			(1.06	)
Tangible common equity
ratio (1)		9.50	%			9.23	%			0.27				9.50	%			9.86	%			(0.36	)
Book value per share	$	40.49			$	39.86			$	0.63			$	40.49			$	38.36			$	2.13
Tangible book value per
share (1)	$	18.83			$	18.22			$	0.61			$	18.83			$	17.35			$	1.48
(1) Non-GAAP measure.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased by $6.0 million to $260.9 million for the second quarter of 2019 compared to $254.9 million for the first quarter of 2019 due to a higher yield on average loans and leases, a higher balance of average loans and leases, and one more day in the second quarter of 2019, offset partially by higher deposit costs. The tax equivalent yield on average loans and leases was 6.26% for the second quarter of 2019 compared to 6.16% for the first quarter of 2019. The increase in the yield on average loans and leases was due principally to loan prepayment fees being $6.3 million higher in the second quarter compared to the first quarter. The prepayment fees added 11 basis points to the second quarter loan yield and were primarily from two loans.

The tax equivalent NIM was 4.72% for the second quarter of 2019 compared to 4.69% for the first quarter of 2019. The increase in the NIM was due mainly to higher loan prepayment fees, partially offset by higher deposit costs.

The cost of average total deposits increased to 0.81% for the second quarter of 2019 from 0.73% for the first quarter of 2019 due to a lower average balance of noninterest-bearing deposits and higher rates paid on deposits.

Provision for Credit Losses

The following table presents details of the provision for credit losses for the periods indicated:

	Three Months Ended
	June 30,				March 31,				Increase
Provision for Credit Losses		2019				2019			(Decrease)
	(In thousands)
Addition to allowance for loan and lease losses	$	10,000			$	4,000			$	6,000
Reduction to reserve for unfunded loan commitments		(2,000	)			-				(2,000	)
Total provision for credit losses	$	8,000			$	4,000			$	4,000

Noninterest Income

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

	Three Months Ended
	June 30,				March 31,				Increase
Noninterest Income		2019				2019			(Decrease)
	(In thousands)
Service charges on deposit accounts	$	3,771			$	3,730			$	41
Other commissions and fees		11,590				11,008				582
Leased equipment income		9,182				9,282				(100	)
Gain on sale of loans and leases		326				-				326
Gain on sale of securities		22,192				2,161				20,031
Other income:
Dividends and (losses) gains on equity investments		(83	)			296				(379	)
Warrant income		1,214				2,279				(1,065	)
Other		2,701				2,308				393
Total noninterest income	$	50,893			$	31,064			$	19,829

Noninterest income increased by $19.8 million to $50.9 million for the second quarter of 2019 compared to $31.1 million for the first quarter of 2019 due mainly to a $20.0 million increase in the gain on sale of securities attributable to a $22.2 million net gain on sales of $980.4 million in the second quarter of 2019 compared to a net gain of $2.2 million on sales of $405.8 million in the first quarter of 2019. We re-positioned a portion of our securities portfolio in the second quarter to shorten the duration of the portfolio and to enhance liquidity.

Noninterest Expense

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

	Three Months Ended
	June 30,				March 31,				Increase
Noninterest Expense		2019				2019			(Decrease)
	(In thousands)
Compensation	$	68,956			$	70,845			$	(1,889	)
Occupancy		14,457				14,320				137
Data processing		6,817				6,925				(108	)
Other professional services		4,629				4,513				116
Insurance and assessments		4,098				4,038				60
Intangible asset amortization		4,870				4,870				-
Leased equipment depreciation		5,558				5,651				(93	)
Foreclosed assets (income) expense, net		(146	)			29				(175	)
Acquisition, integration and reorganization costs		-				618				(618	)
Loan expense		3,451				2,885				566
Other		12,737				11,593				1,144
Total noninterest expense	$	125,427			$	126,287			$	(860	)

Noninterest expense decreased by $0.9 million to $125.4 million for the second quarter of 2019 compared to $126.3 million for the first quarter of 2019 attributable primarily to a $1.9 million decrease in compensation expense, offset partially by a $1.1 million increase in other expense. Compensation expense decreased due mainly to lower payroll taxes and bonus expense. Other expense increased primarily due to a loss on the early termination of a lease.

Income Taxes

The overall effective income tax rate was 28.2% for the second quarter of 2019 and 27.7% for the first quarter of 2019. The effective tax rate for the full year 2019 is estimated to be in the range of 27-28%.

BALANCE SHEET HIGHLIGHTS

Loans and Leases

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

	Three Months Ended								Six Months Ended
Roll Forward of Loans and Leases Held	June 30,				March 31,				June 30,
for Investment, Net of Deferred Fees (1)		2019				2019				2019
	(Dollars in thousands)
Balance, beginning of period	$	18,307,697			$	17,957,713			$	17,957,713
Additions:
Production		1,436,299				1,174,838				2,611,137
Disbursements		1,293,747				1,192,972				2,486,719
Total production and disbursements		2,730,046				2,367,810				5,097,856
Reductions:
Payoffs		(1,529,213	)			(933,300	)			(2,462,513	)
Paydowns		(979,987	)			(1,038,964	)			(2,018,951	)
Total payoffs and paydowns		(2,509,200	)			(1,972,264	)			(4,481,464	)
Sales		(38,054	)			(16,936	)			(54,990	)
Transfers to foreclosed assets		-				(37	)			(37	)
Charge-offs		(17,637	)			(3,465	)			(21,102	)
Transfers to loans held for sale		-				(25,124	)			(25,124	)
Total reductions		(2,564,891	)			(2,017,826	)			(4,582,717	)
Balance, end of period	$	18,472,852			$	18,307,697			$	18,472,852
Weighted average rate on production (2)		5.15	%			5.11	%			5.13	%
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.
(2) The weighted average rate on production presents contractual rates on a tax equivalent basis
and excludes amortized fees.  Amortized fees added approximately 32 basis points to loan
yields in 2019 and 31 basis points to loan yields in 2018.

Loans and leases held for investment, net of deferred fees, increased by $165.2 million, or 4% annualized, in the second quarter of 2019 to $18.5 billion at June 30, 2019.  The net loan growth in the second quarter was primarily from the income producing and other residential loan class, which included $177 million of multi-family loan pool purchases, and the asset-based loan class.

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

	June 30, 2019					March 31, 2019					June 30, 2018
			% of					% of					% of
Loan and Lease Portfolio (1)	Amount		Total			Amount		Total			Amount		Total
	(In thousands)
Real estate mortgage:
Commercial	$	4,435,274	24%			$	4,640,510	25%			$	5,010,680	30%
Income producing and other
residential		3,640,752	20%				3,518,948	19%				2,555,695	15%
Total real estate mortgage		8,076,026	44%				8,159,458	44%				7,566,375	45%
Real estate construction and land:
Commercial		972,891	5%				943,596	5%				831,462	5%
Residential		1,403,239	8%				1,408,128	8%				1,042,564	6%
Total real estate construction
and land		2,376,130	13%				2,351,724	13%				1,874,026	11%
Total real estate		10,452,156	57%				10,511,182	57%				9,440,401	56%
Commercial:
Asset-based		3,606,007	19%				3,422,202	19%				3,184,300	19%
Venture capital		2,194,743	12%				2,027,450	11%				2,008,205	12%
Other commercial		1,773,564	10%				1,974,702	11%				1,873,607	11%
Total commercial		7,574,314	41%				7,424,354	41%				7,066,112	42%
Consumer		446,382	2%				372,161	2%				378,679	2%
Total loans and leases held for
investment, net of deferred fees	$	18,472,852	100%			$	18,307,697	100%			$	16,885,192	100%
Total unfunded loan commitments	$	7,610,899				$	7,465,392				$	6,429,587
(1) Excludes loans held for sale carried at lower of cost or fair value at March 31, 2019.

Allowance for Credit Losses

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

	Three Months Ended June 30, 2019
	Allowance for				Reserve for				Total
Allowance for Credit	Loan and				Unfunded Loan				Allowance for
Losses Rollforward	Lease Losses				Commitments				Credit Losses
	(In thousands)
Beginning balance	$	136,281			$	36,861			$	173,142
Charge-offs		(17,637	)			-				(17,637	)
Recoveries		6,393				-				6,393
Net charge-offs		(11,244	)			-				(11,244	)
Provision		10,000				(2,000	)			8,000
Ending balance	$	135,037			$	34,861			$	169,898
	Three Months Ended March 31, 2019
	Allowance for				Reserve for				Total
Allowance for Credit	Loan and				Unfunded Loan				Allowance for
Losses Rollforward	Lease Losses				Commitments				Credit Losses
	(In thousands)
Beginning balance	$	132,472			$	36,861			$	169,333
Charge-offs		(3,465	)			-				(3,465	)
Recoveries		3,274				-				3,274
Net charge-offs		(191	)			-				(191	)
Provision		4,000				-				4,000
Ending balance	$	136,281			$	36,861			$	173,142

The allowance for credit losses as a percentage of loans and leases held for investment decreased to 0.92% at June 30, 2019 from 0.95% at March 31, 2019.

Gross charge-offs for the second quarter of 2019 were $17.6 million and included $11.8 million for a single asset-based loan, $3.7 million for other commercial loans, and $1.5 million for venture capital loans compared to gross charge-offs for the first quarter of 2019 of $3.5 million which were primarily for other commercial loans.  Recoveries for the second quarter of 2019 were $6.4 million and included $4.8 million for venture capital loans and $1.0 million for other commercial loans compared to recoveries for the first quarter of 2019 of $3.3 million which included $2.3 million for venture capital loans and $0.8 million for other commercial loans.

For the second quarter of 2019 and first quarter of 2019, annualized net charge-offs to average loans and leases were 0.25% and 0.00%.

Deposits and Client Investment Funds

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

	June 30, 2019						March 31, 2019						June 30, 2018
				% of						% of						% of
Deposit Composition	Amount			Total			Amount			Total			Amount			Total
	(Dollars in thousands)
Noninterest-bearing demand	$	7,299,213		39%			$	7,712,409		40%			$	8,126,153		45%
Interest checking		3,220,353		17%				3,163,228		16%				2,184,785		12%
Money market		4,578,083		24%				4,714,078		25%				4,631,658		26%
Savings		519,839		3%				537,923		3%				643,642		4%
Total core deposits		15,617,488		83%				16,127,638		84%				15,586,238		87%
Non-core non-maturity deposits		436,833		2%				454,277		2%				607,388		3%
Total non-maturity deposits		16,054,321		85%				16,581,915		86%				16,193,626		90%
Time deposits $250,000 and under		2,284,023		12%				2,258,989		12%				1,394,117		8%
Time deposits over $250,000		467,412		3%				445,023		2%				341,449		2%
Total time deposits		2,751,435		15%				2,704,012		14%				1,735,566		10%
Total deposits	$	18,805,756		100%			$	19,285,927		100%			$	17,929,192		100%

At June 30, 2019, core deposits totaled $15.6 billion, or 83% of total deposits, including $7.3 billion of noninterest-bearing demand deposits, or 39% of total deposits. The decrease in core deposits is primarily due to decreases in noninterest-bearing demand deposits across each of our business groups as customers seek out interest-earning accounts in the competitive market environment.

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products.  Total off-balance sheet client investment funds at June 30, 2019 were $2.0 billion, of which $1.6 billion was managed by PWAM.

CREDIT QUALITY

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

	June 30,				March 31,				Increase
Credit Quality Metrics		2019				2019			(Decrease)
	(Dollars in thousands)
NPAs and Performing TDRs:
Nonaccrual loans and leases held for investment (1)(2)	$	81,265			$	88,527			$	(7,262	)
Accruing loans contractually past due 90 days or more		-				-				-
Foreclosed assets, net		1,472				3,291				(1,819	)
Total nonperforming assets ("NPAs")	$	82,737			$	91,818			$	(9,081	)
Nonaccrual loans and leases held for investment
to loans and leases held for investment		0.44	%			0.48	%
Nonperforming assets to loans and leases
held for investment and foreclosed assets		0.45	%			0.50	%
Nonaccrual loans and leases held for investment (1)(2)	$	81,265			$	88,527			$	(7,262	)
Performing TDRs held for investment		16,464				17,027				(563	)
Total impaired loans and leases	$	97,729			$	105,554			$	(7,825	)
Loan and Lease Credit Risk Ratings:
Pass	$	18,042,569			$	17,824,612			$	217,957
Special mention		239,304				292,780				(53,476	)
Classified (1)		190,979				190,305				674
Total loans and leases held for investment,
net of deferred fees	$	18,472,852			$	18,307,697			$	165,155
Classified loans and leases held for investment
to loans and leases held for investment		1.03	%			1.04	%
Allowance for Credit Losses:
Allowance for credit losses	$	169,898			$	173,142			$	(3,244	)
Provision for credit losses (for the quarter)	$	8,000			$	4,000			$	4,000
Net charge-offs (for the quarter)	$	11,244			$	191			$	11,053
Net charge-offs to average loans and leases
(for the quarter)		0.25	%			0.00	%
Allowance for credit losses to loans and leases
held for investment		0.92	%			0.95	%
Allowance for credit losses to nonaccrual loans
and leases held for investment		209.1	%			195.6	%
(1) Excludes loans held for sale carried at lower of cost or fair value at March 31, 2019.
(2) Nonaccrual loans include guaranteed amounts of $13.0 million at June 30, 2019 and $10.2 million
at March 31, 2019.

Nonaccrual, classified, and special mention loans and leases fluctuate from period to period as a result of loan repayments and our ongoing active portfolio monitoring.

During the second quarter of 2019, nonaccrual loans and leases decreased $7.3 million, while classified loans and leases increased by $0.7 million and special mention loans and leases decreased by $53.5 million.

The following table presents nonaccrual loans and leases and accruing loans and leases past due between 30 and 89 days by portfolio segment and class as of the dates indicated:

	Nonaccrual Loans and Leases (1)										Accruing and
	June 30, 2019					March 31, 2019					30-89 Days Past Due
			% of					% of			June 30,			March 31,
			Loan					Loan			2019			2019
	Amount		Category			Amount		Category			Amount			Amount
	(Dollars in thousands)
Real estate mortgage:
Commercial	$	17,012	0.4%			$	12,750	0.3%			$	3,948		$	6,863
Income producing and other
residential		2,883	0.1%				2,444	0.1%				3,262			1,853
Total real estate mortgage		19,895	0.2%				15,194	0.2%				7,210			8,716
Real estate construction and land:
Commercial		390	0.0%				430	0.0%				-			-
Residential		-	0.0%				-	0.0%				4,672			8,949
Total real estate
construction and land		390	0.0%				430	0.0%				4,672			8,949
Commercial:
Asset-based		32,236	0.9%				43,406	1.3%				12,382			3,750
Venture capital		22,501	1.0%				20,437	1.0%				-			4,500
Other commercial		5,799	0.3%				8,633	0.4%				439			1,694
Total commercial		60,536	0.8%				72,476	1.0%				12,821			9,944
Consumer		444	0.1%				427	0.1%				964			614
Total held for investment	$	81,265	0.4%			$	88,527	0.5%			$	25,667		$	28,223
(1) Excludes loans held for sale carried at lower of cost or fair value at March 31, 2019.

STOCK REPURCHASE PROGRAM

During the second quarter of 2019, we repurchased 917,269 shares at an average price of $38.08 and a total cost of $34.9 million. At June 30, 2019, the remaining amount that could be used to repurchase shares under the $225 million Stock Repurchase Program was $124.7 million.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $26 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. Our Community Banking group provides lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices. We offer additional products and services through our National Lending and Venture Banking groups. National Lending provides asset-based, equipment, real estate and security cash flow loans and treasury management services to established middle-market businesses on a national basis. Venture Banking offers a comprehensive suite of financial services focused on entrepreneurial businesses and their venture capital and private equity investors, with offices located in key innovative 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 communication 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. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on information available at the time of this communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those set forth in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the Securities and Exchange Commission.

We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
	June 30,				March 31,				December 31,
		2019				2019				2018
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	185,075			$	224,758			$	175,830
Interest-earning deposits in financial institutions		422,663				332,124				209,937
Total cash and cash equivalents		607,738				556,882				385,767
Securities available-for-sale, at estimated fair value		3,807,244				3,994,708				4,009,431
Federal Home Loan Bank stock, at cost		43,146				29,430				32,103
Total investment securities		3,850,390				4,024,138				4,041,534
Loans held for sale		-				25,124				-
Gross loans and leases held for investment		18,532,740				18,371,295				18,026,365
Deferred fees, net		(59,888	)			(63,598	)			(68,652	)
Total loans and leases held for investment,
net of deferred fees		18,472,852				18,307,697				17,957,713
Allowance for loan and lease losses		(135,037	)			(136,281	)			(132,472	)
Total loans and leases held for investment, net		18,337,815				18,171,416				17,825,241
Equipment leased to others under operating leases		300,668				293,853				292,677
Premises and equipment, net		38,162				37,783				34,661
Foreclosed assets, net		1,472				3,291				5,299
Deferred tax asset, net		-				-				17,489
Goodwill		2,548,670				2,548,670				2,548,670
Core deposit and customer relationship intangibles, net		47,380				52,250				57,120
Other assets		612,119				610,731				522,896
Total assets	$	26,344,414			$	26,324,138			$	25,731,354
LIABILITIES:
Noninterest-bearing deposits	$	7,299,213			$	7,712,409			$	7,888,915
Interest-bearing deposits		11,506,543				11,573,518				10,981,586
Total deposits		18,805,756				19,285,927				18,870,501
Borrowings		1,913,059				1,481,087				1,371,114
Subordinated debentures		456,112				454,458				453,846
Accrued interest payable and other liabilities		317,477				311,684				210,305
Total liabilities		21,492,404				21,533,156				20,905,766
STOCKHOLDERS' EQUITY (1)		4,852,010				4,790,982				4,825,588
Total liabilities and stockholders’ equity	$	26,344,414			$	26,324,138			$	25,731,354
Book value per share	$	40.49			$	39.86			$	39.17
Tangible book value per share (2)	$	18.83			$	18.22			$	18.02
Shares outstanding		119,829,104				120,201,149				123,189,833
(1) Includes net unrealized gain (loss) on securities
available-for-sale, net	$	73,066			$	37,258			$	(6,075	)
(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,
		2019				2019				2018				2019				2018
	(Dollars in thousands, except per share data)
Interest income:
Loans and leases	$	284,236			$	274,229			$	260,300			$	558,465			$	511,385
Investment securities		28,948				29,680				27,730				58,628				53,868
Deposits in financial institutions		1,349				650				484				1,999				1,036
Total interest income		314,533				304,559				288,514				619,092				566,289
Interest expense:
Deposits		38,720				34,235				16,367				72,955				30,185
Borrowings		7,210				7,710				2,649				14,920				3,569
Subordinated debentures		7,705				7,738				7,166				15,443				13,703
Total interest expense		53,635				49,683				26,182				103,318				47,457
Net interest income		260,898				254,876				262,332				515,774				518,832
Provision for credit losses		8,000				4,000				17,500				12,000				21,500
Net interest income after
provision for credit losses		252,898				250,876				244,832				503,774				497,332
Noninterest income:
Service charges on deposit accounts		3,771				3,730				4,265				7,501				8,439
Other commissions and fees		11,590				11,008				11,767				22,598				22,032
Leased equipment income		9,182				9,282				9,790				18,464				19,377
Gain on sale of loans and leases		326				-				106				326				4,675
Gain on sale of securities		22,192				2,161				253				24,353				6,564
Other income		3,832				4,883				13,457				8,715				17,110
Total noninterest income		50,893				31,064				39,638				81,957				78,197
Noninterest expense:
Compensation		68,956				70,845				69,913				139,801				140,936
Occupancy		14,457				14,320				13,575				28,777				26,798
Data processing		6,817				6,925				6,896				13,742				13,555
Other professional services		4,629				4,513				5,257				9,142				9,696
Insurance and assessments		4,098				4,038				5,330				8,136				11,057
Intangible asset amortization		4,870				4,870				5,587				9,740				11,933
Leased equipment depreciation		5,558				5,651				5,237				11,209				10,612
Foreclosed assets (income) expense, net		(146	)			29				(61	)			(117	)			(183	)
Acquisition, integration and
reorganization costs		-				618				-				618				-
Loan expense		3,451				2,885				3,058				6,336				5,329
Other expense		12,737				11,593				11,657				24,330				24,111
Total noninterest expense		125,427				126,287				126,449				251,714				253,844
Earnings before income taxes		178,364				155,653				158,021				334,017				321,685
Income tax expense		50,239				43,049				42,286				93,288				87,674
Net earnings	$	128,125			$	112,604			$	115,735			$	240,729			$	234,011
Basic and diluted earnings per share	$	1.07			$	0.92			$	0.92			$	1.99			$	1.85
Dividends declared and paid per share	$	0.60			$	0.60			$	0.60			$	1.20			$	1.10

PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS
	Three Months Ended												Six Months Ended
	June 30,				March 31,				June 30,				June 30,
		2019				2019				2018				2019				2018
	(In thousands, except per share data)
Basic Earnings Per Share:
Net earnings	$	128,125			$	112,604			$	115,735			$	240,729			$	234,011
Less: earnings allocated to unvested
restricted stock (1)		(1,190	)			(1,163	)			(1,348	)			(2,343	)			(2,469	)
Net earnings allocated to common
shares	$	126,935			$	111,441			$	114,387			$	238,386			$	231,542
Weighted-average basic shares and
unvested restricted stock outstanding		120,042				122,227				126,082				121,128				126,780
Less: weighted-average unvested
restricted stock outstanding		(1,462	)			(1,352	)			(1,466	)			(1,407	)			(1,439	)
Weighted-average basic shares
outstanding		118,580				120,875				124,616				119,721				125,341
Basic earnings per share	$	1.07			$	0.92			$	0.92			$	1.99			$	1.85
Diluted Earnings Per Share:
Net earnings allocated to common
shares	$	126,935			$	111,441			$	114,387			$	238,386			$	231,542
Weighted-average basic shares
outstanding		118,580				120,875				124,616				119,721				125,341
Diluted earnings per share	$	1.07			$	0.92			$	0.92			$	1.99			$	1.85
(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, 2019									March 31, 2019								June 30, 2018
				Interest			Average						Interest		Average						Interest			Average
	Average			Income/			Yield/			Average			Income/		Yield/			Average			Income/			Yield/
	Balance			Expense			Cost			Balance			Expense		Cost			Balance			Expense			Cost
	(Dollars in thousands)
Assets:
Loans and leases (1)(2)	$	18,239,690		$	284,513		6.26%			$	18,064,230		$	274,513	6.16%			$	16,576,361		$	260,529		6.30%
Investment securities (3)		3,790,436			29,462		3.12%				3,968,531			30,572	3.12%				3,803,590			29,967		3.16%
Deposits in financial
institutions		228,702			1,349		2.37%				111,950			650	2.35%				112,170			484		1.73%
Total interest-earning
assets (1)		22,258,828			315,324		5.68%				22,144,711			305,735	5.60%				20,492,121			290,980		5.70%
Other assets		3,590,361									3,631,238								3,507,516
Total assets	$	25,849,189								$	25,775,949							$	23,999,637
Liabilities and
Stockholders' Equity:
Interest checking	$	3,242,960			10,644		1.32%			$	3,041,822			9,321	1.24%			$	2,243,767			3,932		0.70%
Money market		5,046,021			14,604		1.16%				5,274,987			14,908	1.15%				5,013,119			8,072		0.65%
Savings		525,648			227		0.17%				553,032			242	0.18%				656,310			245		0.15%
Time		2,731,156			13,245		1.95%				2,286,932			9,764	1.73%				1,790,415			4,118		0.92%
Total interest-bearing
deposits		11,545,785			38,720		1.35%				11,156,773			34,235	1.24%				9,703,611			16,367		0.68%
Borrowings		1,142,223			7,210		2.53%				1,218,319			7,710	2.57%				549,665			2,649		1.93%
Subordinated debentures		454,901			7,705		6.79%				454,203			7,738	6.91%				451,973			7,166		6.36%
Total interest-bearing
liabilities		13,142,909			53,635		1.64%				12,829,295			49,683	1.57%				10,705,249			26,182		0.98%
Noninterest-bearing
demand deposits		7,544,027									7,783,652								8,253,413
Other liabilities		343,364									347,037								208,495
Total liabilities		21,030,300									20,959,984								19,167,157
Stockholders' equity		4,818,889									4,815,965								4,832,480
Total liabilities and
stockholders' equity	$	25,849,189								$	25,775,949							$	23,999,637
Net interest income (1)				$	261,689								$	256,052							$	264,798
Net interest spread (1)							4.04%								4.03%									4.72%
Net interest margin (1)							4.72%								4.69%									5.18%
Total deposits (4)	$	19,089,812		$	38,720		0.81%			$	18,940,425		$	34,235	0.73%			$	17,957,024		$	16,367		0.37%
(1) Tax equivalent.
(2) Includes discount accretion on acquired loans of $3.1 million, $3.0 million, and $8.7 million for the three months ended June 30, 2019,
March 31, 2019, and June 30, 2018, respectively.
(3) Includes tax-equivalent adjustments of $0.5 million, $0.9 million, and $2.2 million for the three months ended June 30, 2019,
March 31, 2019, and June 30, 2018 related to tax-exempt income on investment securities.
The federal statutory tax rate utilized was 21%.
(4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits.  The cost of total deposits is calculated
as annualized interest expense on total deposits divided by average total deposits.

PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER BALANCE SHEET
	June 30,				March 31,				December 31,				September 30,				June 30,
		2019				2019				2018				2018				2018
	(Dollars in thousands, except per share data)
ASSETS:
Cash and due from banks	$	185,075			$	224,758			$	175,830			$	196,502			$	245,998
Interest-earning deposits in financial
institutions		422,663				332,124				209,937				185,284				205,567
Total cash and cash equivalents		607,738				556,882				385,767				381,786				451,565
Securities available-for-sale		3,807,244				3,994,708				4,009,431				3,820,333				3,857,788
Federal Home Loan Bank stock		43,146				29,430				32,103				31,077				26,271
Total investment securities		3,850,390				4,024,138				4,041,534				3,851,410				3,884,059
Loans held for sale		-				25,124				-				-				-
Gross loans and leases held for investment		18,532,740				18,371,295				18,026,365				17,295,589				16,947,502
Deferred fees, net		(59,888	)			(63,598	)			(68,652	)			(65,443	)			(62,310	)
Total loans and leases held for
investment, net of deferred fees		18,472,852				18,307,697				17,957,713				17,230,146				16,885,192
Allowance for loan and lease losses		(135,037	)			(136,281	)			(132,472	)			(141,920	)			(132,139	)
Total loans and leases held for
investment, net		18,337,815				18,171,416				17,825,241				17,088,226				16,753,053
Equipment leased to others under
operating leases		300,668				293,853				292,677				275,707				266,576
Premises and equipment, net		38,162				37,783				34,661				34,012				34,513
Foreclosed assets, net		1,472				3,291				5,299				4,407				2,231
Deferred tax asset, net		-				-				17,489				41,280				25,551
Goodwill		2,548,670				2,548,670				2,548,670				2,548,670				2,548,670
Core deposit and customer relationship
intangibles, net		47,380				52,250				57,120				62,106				67,693
Other assets		612,119				610,731				522,896				494,522				495,646
Total assets	$	26,344,414			$	26,324,138			$	25,731,354			$	24,782,126			$	24,529,557
LIABILITIES:
Noninterest-bearing deposits	$	7,299,213			$	7,712,409			$	7,888,915			$	7,834,480			$	8,126,153
Interest-bearing deposits		11,506,543				11,573,518				10,981,586				10,045,063				9,803,039
Total deposits		18,805,756				19,285,927				18,870,501				17,879,543				17,929,192
Borrowings		1,913,059				1,481,087				1,371,114				1,513,166				1,187,226
Subordinated debentures		456,112				454,458				453,846				452,944				451,878
Accrued interest payable and other
liabilities		317,477				311,684				210,305				194,788				183,302
Total liabilities		21,492,404				21,533,156				20,905,766				20,040,441				19,751,598
STOCKHOLDERS' EQUITY (1)		4,852,010				4,790,982				4,825,588				4,741,685				4,777,959
Total liabilities and stockholders’
equity	$	26,344,414			$	26,324,138			$	25,731,354			$	24,782,126			$	24,529,557
Book value per share	$	40.49			$	39.86			$	39.17			$	38.46			$	38.36
Tangible book value per share (2)	$	18.83			$	18.22			$	18.02			$	17.28			$	17.35
Shares outstanding		119,829,104				120,201,149				123,189,833				123,283,450				124,567,950
(1) Includes net unrealized gain (loss) on
securities available-for-sale, net	$	73,066			$	37,258			$	(6,075	)		$	(43,854	)		$	(22,340	)
(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,
		2019				2019				2018				2018				2018
	(Dollars in thousands, except per share data)
Interest income:
Loans and leases	$	284,236			$	274,229			$	272,522			$	264,062			$	260,300
Investment securities		28,948				29,680				29,690				28,061				27,730
Deposits in financial institutions		1,349				650				527				519				484
Total interest income		314,533				304,559				302,739				292,642				288,514
Interest expense:
Deposits		38,720				34,235				28,834				21,121				16,367
Borrowings		7,210				7,710				4,602				3,814				2,649
Subordinated debentures		7,705				7,738				7,538				7,390				7,166
Total interest expense		53,635				49,683				40,974				32,325				26,182
Net interest income		260,898				254,876				261,765				260,317				262,332
Provision for credit losses		8,000				4,000				12,000				11,500				17,500
Net interest income after
provision for credit losses		252,898				250,876				249,765				248,817				244,832
Noninterest income:
Service charges on deposit accounts		3,771				3,730				4,091				3,979				4,265
Other commissions and fees		11,590				11,008				11,114				12,397				11,767
Leased equipment income		9,182				9,282				9,384				9,120				9,790
Gain on sale of loans and leases		326				-				-				-				106
Gain on sale of securities		22,192				2,161				786				826				253
Other income		3,832				4,883				8,151				10,590				13,457
Total noninterest income		50,893				31,064				33,526				36,912				39,638
Noninterest expense:
Compensation		68,956				70,845				69,299				72,333				69,913
Occupancy		14,457				14,320				13,356				13,069				13,575
Data processing		6,817				6,925				6,930				6,740				6,896
Other professional services		4,629				4,513				6,198				6,058				5,257
Insurance and assessments		4,098				4,038				4,202				5,446				5,330
Intangible asset amortization		4,870				4,870				4,986				5,587				5,587
Leased equipment depreciation		5,558				5,651				5,758				5,001				5,237
Foreclosed assets (income) expense, net		(146	)			29				(311	)			(257	)			(61	)
Acquisition, integration and
reorganization costs		-				618				970				800				-
Loan expense		3,451				2,885				2,991				2,249				3,058
Other expense		12,737				11,593				14,856				11,127				11,657
Total noninterest expense		125,427				126,287				129,235				128,153				126,449
Earnings before income taxes		178,364				155,653				154,056				157,576				158,021
Income tax expense		50,239				43,049				39,015				41,289				42,286
Net earnings	$	128,125			$	112,604			$	115,041			$	116,287			$	115,735
Basic and diluted earnings per share	$	1.07			$	0.92			$	0.93			$	0.94			$	0.92
Dividends declared and paid per share	$	0.60			$	0.60			$	0.60			$	0.60			$	0.60

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,
		2019				2019				2018				2018				2018
	(Dollars in thousands)
Performance Ratios:
Return on average assets (1)		1.99	%			1.77	%			1.84	%			1.89	%			1.93	%
Return on average equity (1)		10.66	%			9.48	%			9.59	%			9.72	%			9.61	%
Return on average tangible equity (1)(2)		23.15	%			20.64	%			21.23	%			21.61	%			20.98	%
Efficiency ratio		41.6	%			42.4	%			41.7	%			40.9	%			39.8	%
Noninterest expense as a percentage
of average assets (1)		1.95	%			1.99	%			2.07	%			2.09	%			2.11	%
Average Yields/Costs (1):
Yield on:
Average loans and leases (3)		6.26	%			6.16	%			6.27	%			6.20	%			6.30	%
Average interest-earning assets (3)		5.68	%			5.60	%			5.68	%			5.60	%			5.70	%
Cost of:
Average interest-bearing deposits		1.35	%			1.24	%			1.10	%			0.83	%			0.68	%
Average total deposits		0.81	%			0.73	%			0.62	%			0.46	%			0.37	%
Average interest-bearing liabilities		1.64	%			1.57	%			1.40	%			1.14	%			0.98	%
Net interest spread (3)		4.04	%			4.03	%			4.28	%			4.46	%			4.72	%
Net interest margin (3)		4.72	%			4.69	%			4.91	%			4.99	%			5.18	%
Average Balances:
Assets:
Loans and leases, net of deferred fees	$	18,239,690			$	18,064,230			$	17,275,343			$	16,913,792			$	16,576,361
Interest-earning assets		22,258,828				22,144,711				21,269,363				20,866,478				20,492,121
Total assets		25,849,189				25,775,949				24,784,462				24,357,771				23,999,637
Liabilities:
Noninterest-bearing deposits		7,544,027				7,783,652				8,163,699				8,120,306				8,253,413
Interest-bearing deposits		11,545,785				11,156,773				10,422,761				10,111,927				9,703,611
Total deposits		19,089,812				18,940,425				18,586,460				18,232,233				17,957,024
Borrowings		1,142,223				1,218,319				764,039				720,449				549,665
Subordinated debentures		454,901				454,203				452,998				452,312				451,973
Interest-bearing liabilities		13,142,909				12,829,295				11,639,798				11,284,688				10,705,249
Stockholders' equity		4,818,889				4,815,965				4,758,401				4,748,819				4,832,480
(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,
		2019				2019				2018				2018				2018
	(Dollars in thousands)
Credit Quality Ratios:
Nonaccrual loans and leases held for
investment to loans and leases held
for investment		0.44	%			0.48	%			0.44	%			0.66	%			0.67	%
Nonperforming assets to loans and
leases held for investment and
foreclosed assets		0.45	%			0.50	%			0.47	%			0.68	%			0.69	%
Classified loans and leases held for
investment to loans and leases held
for investment		1.03	%			1.04	%			1.32	%			1.51	%			1.40	%
Trailing 12 months net charge-offs
to average loans and leases
held for investment		0.18	%			0.22	%			0.26	%			0.28	%			0.28	%
Allowance for credit losses to loans
and leases held for investment		0.92	%			0.95	%			0.94	%			1.03	%			0.99	%
Allowance for credit losses to
nonaccrual loans and leases held
for investment		209.1	%			195.6	%			213.5	%			156.9	%			147.3	%
PacWest Bancorp Consolidated
Capital:
Tier 1 leverage ratio (1)		9.49	%			9.38	%			10.13	%			10.10	%			10.33	%
Common equity tier 1 capital ratio (1)		9.53	%			9.48	%			10.01	%			10.18	%			10.59	%
Tier 1 capital ratio (1)		9.53	%			9.48	%			10.01	%			10.18	%			10.59	%
Total capital ratio (1)		12.18	%			12.15	%			12.72	%			13.03	%			13.48	%
Risk-weighted assets (1)	$	23,117,367			$	22,939,074			$	22,525,096			$	21,650,542			$	20,929,325
Equity to assets ratio		18.42	%			18.20	%			18.75	%			19.13	%			19.48	%
Tangible common equity ratio (2)		9.50	%			9.23	%			9.60	%			9.61	%			9.86	%
Book value per share	$	40.49			$	39.86			$	39.17			$	38.46			$	38.36
Tangible book value per share (2)	$	18.83			$	18.22			$	18.02			$	17.28			$	17.35
Pacific Western Bank Capital:
Tier 1 leverage ratio (1)		10.76	%			10.57	%			10.80	%			10.78	%			11.11	%
Common equity tier 1 capital ratio (1)		10.80	%			10.69	%			10.68	%			10.87	%			11.40	%
Tier 1 capital ratio (1)		10.80	%			10.69	%			10.68	%			10.87	%			11.40	%
Total capital ratio (1)		11.53	%			11.45	%			11.44	%			11.69	%			12.21	%
(1) Capital information for June 30, 2019 is preliminary.
(2) Non-GAAP measure.

 GAAP TO NON-GAAP RECONCILIATIONS

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

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

	Three Months Ended												Six Months Ended
	June 30,				March 31,				June 30,				June 30,
Return on Average Tangible Equity		2019				2019				2018				2019				2018
	(Dollars in thousands)
Net earnings	$	128,125			$	112,604			$	115,735			$	240,729			$	234,011
Average stockholders' equity	$	4,818,889			$	4,815,965			$	4,832,480			$	4,817,435			$	4,866,654
Less: Average intangible assets		2,598,762				2,603,842				2,619,351				2,601,288				2,622,455
Average tangible common equity	$	2,220,127			$	2,212,123			$	2,213,129			$	2,216,147			$	2,244,199
Return on average equity (1)		10.66	%			9.48	%			9.61	%			10.08	%			9.70	%
Return on average tangible equity (2)		23.15	%			20.64	%			20.98	%			21.91	%			21.03	%
(1) Annualized net earnings divided by average stockholders' equity.
(2) Annualized net earnings divided by average tangible common equity.

Tangible Common Equity Ratio/	June 30,				March 31,				December 31,				September 30,				June 30,
Tangible Book Value Per Share		2019				2019				2018				2018				2018
	(Dollars in thousands, except per share data)
Stockholders' equity	$	4,852,010			$	4,790,982			$	4,825,588			$	4,741,685			$	4,777,959
Less: Intangible assets		2,596,050				2,600,920				2,605,790				2,610,776				2,616,363
Tangible common equity	$	2,255,960			$	2,190,062			$	2,219,798			$	2,130,909			$	2,161,596
Total assets	$	26,344,414			$	26,324,138			$	25,731,354			$	24,782,126			$	24,529,557
Less: Intangible assets		2,596,050				2,600,920				2,605,790				2,610,776				2,616,363
Tangible assets	$	23,748,364			$	23,723,218			$	23,125,564			$	22,171,350			$	21,913,194
Equity to assets ratio		18.42	%			18.20	%			18.75	%			19.13	%			19.48	%
Tangible common equity ratio (1)		9.50	%			9.23	%			9.60	%			9.61	%			9.86	%
Book value per share	$	40.49			$	39.86			$	39.17			$	38.46			$	38.36
Tangible book value per share (2)	$	18.83			$	18.22			$	18.02			$	17.28			$	17.35
Shares outstanding		119,829,104				120,201,149				123,189,833				123,283,450				124,567,950
(1) Tangible common equity divided by tangible assets.
(2) Tangible common equity divided by shares outstanding.

Contact:	Matthew P. Wagner	Patrick J. Rusnak
	President and CEO	Executive Vice President and CFO
Phone:	310-887-8520	714-989-4705