PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
2020
|
|
2019
|
|
(Unaudited)
|
|
(Dollars in thousands, except par value amounts)
|
ASSETS:
|
|
|
|
Cash and due from banks
|
$
|
187,176
|
|
|
$
|
172,585
|
|
Interest-earning deposits in financial institutions
|
2,766,020
|
|
|
465,039
|
|
Total cash, cash equivalents, and restricted cash
|
2,953,196
|
|
|
637,624
|
|
Securities available-for-sale, at fair value
|
4,532,614
|
|
|
3,797,187
|
|
Federal Home Loan Bank stock, at cost
|
17,250
|
|
|
40,924
|
|
Total investment securities
|
4,549,864
|
|
|
3,838,111
|
|
|
|
|
|
Gross loans and leases held for investment
|
19,101,680
|
|
|
18,910,740
|
|
Deferred fees, net
|
(75,480)
|
|
|
(63,868)
|
|
Allowance for loan and lease losses
|
(345,966)
|
|
|
(138,785)
|
|
Total loans and leases held for investment, net
|
18,680,234
|
|
|
18,708,087
|
|
Equipment leased to others under operating leases
|
286,425
|
|
|
324,084
|
|
Premises and equipment, net
|
40,544
|
|
|
38,585
|
|
Foreclosed assets, net
|
13,747
|
|
|
440
|
|
Goodwill
|
1,078,670
|
|
|
2,548,670
|
|
Core deposit and customer relationship intangibles, net
|
26,813
|
|
|
38,394
|
|
Other assets
|
797,223
|
|
|
636,811
|
|
Total assets
|
$
|
28,426,716
|
|
|
$
|
26,770,806
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
Noninterest-bearing deposits
|
$
|
9,346,744
|
|
|
$
|
7,243,298
|
|
Interest-bearing deposits
|
14,618,951
|
|
|
11,989,738
|
|
Total deposits
|
23,965,695
|
|
|
19,233,036
|
|
Borrowings
|
60,000
|
|
|
1,759,008
|
|
Subordinated debentures
|
463,282
|
|
|
458,209
|
|
Accrued interest payable and other liabilities
|
451,508
|
|
|
365,856
|
|
Total liabilities
|
24,940,485
|
|
|
21,816,109
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY:
|
|
|
|
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued and outstanding)
|
—
|
|
|
—
|
|
Common stock ($0.01 par value, 200,000,000 shares authorized at September 30, 2020 and
|
|
|
|
December 31, 2019; 120,801,109 and 121,890,008 shares issued, respectively, includes
|
|
|
|
1,706,690 and 1,513,197 shares of unvested restricted stock, respectively)
|
1,208
|
|
|
1,219
|
|
Additional paid-in capital
|
3,125,554
|
|
|
3,306,006
|
|
Retained earnings
|
292,561
|
|
|
1,652,248
|
|
Treasury stock, at cost (2,311,182 and 2,108,403 shares at September 30, 2020 and
|
|
|
|
December 31, 2019)
|
(88,566)
|
|
|
(83,434)
|
|
Accumulated other comprehensive income, net
|
155,474
|
|
|
78,658
|
|
Total stockholders' equity
|
3,486,231
|
|
|
4,954,697
|
|
Total liabilities and stockholders' equity
|
$
|
28,426,716
|
|
|
$
|
26,770,806
|
|
See Notes to Condensed Consolidated Financial Statements.
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(Unaudited)
|
|
(Dollars in thousands, except per share amounts)
|
Interest income:
|
|
|
|
|
|
|
|
|
|
Loans and leases
|
$
|
240,811
|
|
|
$
|
247,851
|
|
|
$
|
275,978
|
|
|
$
|
750,940
|
|
|
$
|
834,443
|
|
Investment securities
|
24,443
|
|
|
26,038
|
|
|
28,806
|
|
|
77,927
|
|
|
87,434
|
|
Deposits in financial institutions
|
654
|
|
|
186
|
|
|
2,424
|
|
|
2,448
|
|
|
4,423
|
|
Total interest income
|
265,908
|
|
|
274,075
|
|
|
307,208
|
|
|
831,315
|
|
|
926,300
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
Deposits
|
9,887
|
|
|
13,075
|
|
|
40,703
|
|
|
51,209
|
|
|
113,658
|
|
Borrowings
|
27
|
|
|
1,319
|
|
|
6,852
|
|
|
8,124
|
|
|
21,772
|
|
Subordinated debentures
|
4,670
|
|
|
5,402
|
|
|
7,417
|
|
|
16,632
|
|
|
22,860
|
|
Total interest expense
|
14,584
|
|
|
19,796
|
|
|
54,972
|
|
|
75,965
|
|
|
158,290
|
|
Net interest income
|
251,324
|
|
|
254,279
|
|
|
252,236
|
|
|
755,350
|
|
|
768,010
|
|
Provision for credit losses
|
97,000
|
|
|
120,000
|
|
|
7,000
|
|
|
329,000
|
|
|
19,000
|
|
Net interest income after provision for credit losses
|
154,324
|
|
|
134,279
|
|
|
245,236
|
|
|
426,350
|
|
|
749,010
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
Other commissions and fees
|
10,541
|
|
|
10,111
|
|
|
10,855
|
|
|
30,373
|
|
|
33,453
|
|
Leased equipment income
|
9,900
|
|
|
12,037
|
|
|
9,615
|
|
|
34,188
|
|
|
28,079
|
|
Service charges on deposit accounts
|
2,570
|
|
|
2,004
|
|
|
3,525
|
|
|
7,232
|
|
|
11,026
|
|
Gain on sale of loans and leases
|
35
|
|
|
346
|
|
|
765
|
|
|
468
|
|
|
1,091
|
|
Gain on sale of securities
|
5,270
|
|
|
7,715
|
|
|
908
|
|
|
13,167
|
|
|
25,261
|
|
Other income
|
9,936
|
|
|
6,645
|
|
|
7,761
|
|
|
20,782
|
|
|
16,476
|
|
Total noninterest income
|
38,252
|
|
|
38,858
|
|
|
33,429
|
|
|
106,210
|
|
|
115,386
|
|
Noninterest expense:
|
|
|
|
|
|
|
|
|
|
Compensation
|
75,131
|
|
|
61,910
|
|
|
71,424
|
|
|
198,323
|
|
|
211,225
|
|
Occupancy
|
14,771
|
|
|
14,494
|
|
|
14,089
|
|
|
43,472
|
|
|
42,866
|
|
Data processing
|
6,505
|
|
|
7,102
|
|
|
7,044
|
|
|
20,061
|
|
|
20,786
|
|
Leased equipment depreciation
|
7,057
|
|
|
7,102
|
|
|
5,951
|
|
|
21,364
|
|
|
17,160
|
|
Intangible asset amortization
|
3,751
|
|
|
3,882
|
|
|
4,833
|
|
|
11,581
|
|
|
14,573
|
|
Other professional services
|
4,713
|
|
|
4,146
|
|
|
4,400
|
|
|
13,117
|
|
|
13,542
|
|
Insurance and assessments
|
3,939
|
|
|
9,373
|
|
|
4,100
|
|
|
17,561
|
|
|
12,236
|
|
Customer related expense
|
4,762
|
|
|
4,408
|
|
|
3,539
|
|
|
13,102
|
|
|
9,887
|
|
Loan expense
|
3,499
|
|
|
3,379
|
|
|
3,628
|
|
|
9,528
|
|
|
9,964
|
|
Acquisition, integration and reorganization costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
618
|
|
Foreclosed assets expense (income), net
|
335
|
|
|
(146)
|
|
|
8
|
|
|
255
|
|
|
(109)
|
|
Goodwill impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
1,470,000
|
|
|
—
|
|
Other expense
|
8,939
|
|
|
11,315
|
|
|
7,793
|
|
|
29,973
|
|
|
25,775
|
|
Total noninterest expense
|
133,402
|
|
|
126,965
|
|
|
126,809
|
|
|
1,848,337
|
|
|
378,523
|
|
Earnings (loss) before income taxes
|
59,174
|
|
|
46,172
|
|
|
151,856
|
|
|
(1,315,777)
|
|
|
485,873
|
|
Income tax expense
|
13,671
|
|
|
12,968
|
|
|
41,830
|
|
|
38,627
|
|
|
135,118
|
|
Net earnings (loss)
|
$
|
45,503
|
|
|
$
|
33,204
|
|
|
$
|
110,026
|
|
|
$
|
(1,354,404)
|
|
|
$
|
350,755
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.38
|
|
|
$
|
0.28
|
|
|
$
|
0.92
|
|
|
$
|
(11.60)
|
|
|
$
|
2.91
|
|
Diluted
|
$
|
0.38
|
|
|
$
|
0.28
|
|
|
$
|
0.92
|
|
|
$
|
(11.60)
|
|
|
$
|
2.91
|
|
See Notes to Condensed Consolidated Financial Statements.
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(Unaudited)
|
|
(In thousands)
|
Net earnings (loss)
|
$
|
45,503
|
|
|
$
|
33,204
|
|
|
$
|
110,026
|
|
|
$
|
(1,354,404)
|
|
|
$
|
350,755
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
Unrealized net holding gains on securities
|
|
|
|
|
|
|
|
|
|
available-for-sale arising during the period
|
19,745
|
|
|
82,780
|
|
|
32,759
|
|
|
119,708
|
|
|
167,566
|
|
Income tax expense related to net unrealized
|
|
|
|
|
|
|
|
|
|
holding gains arising during the period
|
(5,510)
|
|
|
(23,095)
|
|
|
(9,287)
|
|
|
(33,399)
|
|
|
(47,504)
|
|
Unrealized net holding gains on securities
|
|
|
|
|
|
|
|
|
|
available-for-sale, net of tax
|
14,235
|
|
|
59,685
|
|
|
23,472
|
|
|
86,309
|
|
|
120,062
|
|
Reclassification adjustment for net gains
|
|
|
|
|
|
|
|
|
|
included in net earnings (1)
|
(5,270)
|
|
|
(7,715)
|
|
|
(908)
|
|
|
(13,167)
|
|
|
(25,261)
|
|
Income tax expense related to reclassification
|
|
|
|
|
|
|
|
|
|
adjustment
|
1,471
|
|
|
2,152
|
|
|
257
|
|
|
3,674
|
|
|
7,161
|
|
Reclassification adjustment for net gains
|
|
|
|
|
|
|
|
|
|
included in net earnings, net of tax
|
(3,799)
|
|
|
(5,563)
|
|
|
(651)
|
|
|
(9,493)
|
|
|
(18,100)
|
|
Other comprehensive income, net of tax
|
10,436
|
|
|
54,122
|
|
|
22,821
|
|
|
76,816
|
|
|
101,962
|
|
Comprehensive income (loss)
|
$
|
55,939
|
|
|
$
|
87,326
|
|
|
$
|
132,847
|
|
|
$
|
(1,277,588)
|
|
|
$
|
452,717
|
|
___________________________________
(1) Entire amounts are recognized in "Gain on sale of securities" on the Condensed Consolidated Statements of Earnings (Loss).
See Notes to Condensed Consolidated Financial Statements.
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
Common Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Par
|
|
Paid-in
|
|
Retained
|
|
Treasury
|
|
Comprehensive
|
|
|
|
Shares
|
|
Value
|
|
Capital
|
|
Earnings
|
|
Stock
|
|
Income
|
|
Total
|
|
(Unaudited)
|
|
(Dollars in thousands)
|
Balance, December 31, 2019
|
119,781,605
|
|
|
$
|
1,219
|
|
|
$
|
3,306,006
|
|
|
$
|
1,652,248
|
|
|
$
|
(83,434)
|
|
|
$
|
78,658
|
|
|
$
|
4,954,697
|
|
Cumulative effect of change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accounting principle (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,283)
|
|
|
—
|
|
|
—
|
|
|
(5,283)
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,433,111)
|
|
|
—
|
|
|
—
|
|
|
(1,433,111)
|
|
Other comprehensive income - net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unrealized gain on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,258
|
|
|
12,258
|
|
Restricted stock awarded and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earned stock compensation,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of shares forfeited
|
194,916
|
|
|
2
|
|
|
6,492
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,494
|
|
Restricted stock surrendered
|
(106,021)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,460)
|
|
|
—
|
|
|
(3,460)
|
|
Common stock repurchased under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Repurchase Program
|
(1,953,711)
|
|
|
(20)
|
|
|
(69,980)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(70,000)
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.60/share
|
—
|
|
|
—
|
|
|
(71,206)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(71,206)
|
|
Balance, March 31, 2020
|
117,916,789
|
|
|
$
|
1,201
|
|
|
$
|
3,171,312
|
|
|
$
|
213,854
|
|
|
$
|
(86,894)
|
|
|
$
|
90,916
|
|
|
$
|
3,390,389
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
33,204
|
|
|
—
|
|
|
—
|
|
|
33,204
|
|
Other comprehensive income - net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unrealized gain on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54,122
|
|
|
54,122
|
|
Restricted stock awarded and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earned stock compensation,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of shares forfeited
|
550,738
|
|
|
6
|
|
|
6,283
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,289
|
|
Restricted stock surrendered
|
(92,924)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,601)
|
|
|
—
|
|
|
(1,601)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.25/share
|
—
|
|
|
—
|
|
|
(29,505)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29,505)
|
|
Balance, June 30, 2020
|
118,374,603
|
|
|
$
|
1,207
|
|
|
$
|
3,148,090
|
|
|
$
|
247,058
|
|
|
$
|
(88,495)
|
|
|
$
|
145,038
|
|
|
$
|
3,452,898
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
45,503
|
|
|
—
|
|
|
—
|
|
|
45,503
|
|
Other comprehensive income - net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unrealized gain on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,436
|
|
|
10,436
|
|
Restricted stock awarded and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earned stock compensation,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of shares forfeited
|
119,158
|
|
|
1
|
|
|
7,063
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,064
|
|
Restricted stock surrendered
|
(3,834)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(71)
|
|
|
—
|
|
|
(71)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.25/share
|
—
|
|
|
—
|
|
|
(29,599)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29,599)
|
|
Balance, September 30, 2020
|
118,489,927
|
|
|
$
|
1,208
|
|
|
$
|
3,125,554
|
|
|
$
|
292,561
|
|
|
$
|
(88,566)
|
|
|
$
|
155,474
|
|
|
$
|
3,486,231
|
|
________________________
(1) Impact due to adoption on January 1, 2020 of ASU 2016-13, "Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments," and the related amendments, commonly referred to as CECL.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
Common Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Par
|
|
Paid-in
|
|
Retained
|
|
Treasury
|
|
Comprehensive
|
|
|
|
Shares
|
|
Value
|
|
Capital
|
|
Earnings
|
|
Stock
|
|
Income (Loss)
|
|
Total
|
|
(Unaudited)
|
|
(Dollars in thousands)
|
Balance, December 31, 2018
|
123,189,833
|
|
|
$
|
1,251
|
|
|
$
|
3,722,723
|
|
|
$
|
1,182,674
|
|
|
$
|
(74,985)
|
|
|
$
|
(6,075)
|
|
|
$
|
4,825,588
|
|
Cumulative effect of change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accounting principle (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
938
|
|
|
—
|
|
|
—
|
|
|
938
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
112,604
|
|
|
—
|
|
|
—
|
|
|
112,604
|
|
Other comprehensive income - net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unrealized gain on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,333
|
|
|
43,333
|
|
Restricted stock awarded and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earned stock compensation,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of shares forfeited
|
195,536
|
|
|
2
|
|
|
5,806
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,808
|
|
Restricted stock surrendered
|
(113,544)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,522)
|
|
|
—
|
|
|
(4,522)
|
|
Common stock repurchased under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Repurchase Program
|
(3,070,676)
|
|
|
(31)
|
|
|
(119,556)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(119,587)
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.60/share
|
—
|
|
|
—
|
|
|
(73,180)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73,180)
|
|
Balance, March 31, 2019
|
120,201,149
|
|
|
$
|
1,222
|
|
|
$
|
3,535,793
|
|
|
$
|
1,296,216
|
|
|
$
|
(79,507)
|
|
|
$
|
37,258
|
|
|
$
|
4,790,982
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
128,125
|
|
|
—
|
|
|
—
|
|
|
128,125
|
|
Other comprehensive income - net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unrealized gain on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35,808
|
|
|
35,808
|
|
Restricted stock awarded and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earned stock compensation,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of shares forfeited
|
619,653
|
|
|
6
|
|
|
6,715
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,721
|
|
Restricted stock surrendered
|
(74,429)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,788)
|
|
|
—
|
|
|
(2,788)
|
|
Common stock repurchased under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Repurchase Program
|
(917,269)
|
|
|
(9)
|
|
|
(34,920)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34,929)
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.60/share
|
—
|
|
|
—
|
|
|
(71,909)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(71,909)
|
|
Balance, June 30, 2019
|
119,829,104
|
|
|
$
|
1,219
|
|
|
$
|
3,435,679
|
|
|
$
|
1,424,341
|
|
|
$
|
(82,295)
|
|
|
$
|
73,066
|
|
|
$
|
4,852,010
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
110,026
|
|
|
—
|
|
|
—
|
|
|
110,026
|
|
Other comprehensive income - net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unrealized gain on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22,821
|
|
|
22,821
|
|
Restricted stock awarded and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earned stock compensation,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of shares forfeited
|
5,040
|
|
|
—
|
|
|
7,305
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,305
|
|
Restricted stock surrendered
|
(2,952)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(102)
|
|
|
—
|
|
|
(102)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.60/share
|
—
|
|
|
—
|
|
|
(71,952)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(71,952)
|
|
Balance, September 30, 2019
|
119,831,192
|
|
|
$
|
1,219
|
|
|
$
|
3,371,032
|
|
|
$
|
1,534,367
|
|
|
$
|
(82,397)
|
|
|
$
|
95,887
|
|
|
$
|
4,920,108
|
|
________________________
(2) Impact due to adoption on January 1, 2019 of ASU 2016-02, "Leases (Topic 842)," and the related amendments.
See Notes to Condensed Consolidated Financial Statements.
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
September 30,
|
|
2020
|
|
2019
|
|
(Unaudited)
|
|
(In thousands)
|
Cash flows from operating activities:
|
|
|
|
Net (loss) earnings
|
$
|
(1,354,404)
|
|
|
$
|
350,755
|
|
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
|
|
|
|
Goodwill impairment
|
1,470,000
|
|
|
—
|
|
Depreciation and amortization
|
33,303
|
|
|
28,266
|
|
Amortization of net premiums on securities available-for-sale
|
9,994
|
|
|
11,078
|
|
Amortization of intangible assets
|
11,581
|
|
|
14,573
|
|
Amortization of operating lease ROU assets
|
22,080
|
|
|
22,028
|
|
Provision for credit losses
|
329,000
|
|
|
19,000
|
|
Gain on sale of foreclosed assets
|
(187)
|
|
|
(406)
|
|
Provision for losses on foreclosed assets
|
267
|
|
|
54
|
|
Gain on sale of loans and leases
|
(468)
|
|
|
(1,091)
|
|
Loss (gain) on sale of premises and equipment
|
309
|
|
|
(34)
|
|
Gain on sale of securities
|
(13,167)
|
|
|
(25,261)
|
|
|
|
|
|
Unrealized loss (gain) on derivatives and foreign currencies, net
|
494
|
|
|
(16)
|
|
Earned stock compensation
|
19,847
|
|
|
19,834
|
|
|
|
|
|
(Increase) decrease in other assets
|
(60,450)
|
|
|
50,345
|
|
Decrease in accrued interest payable and other liabilities
|
(125,262)
|
|
|
(41,530)
|
|
Net cash provided by operating activities
|
342,937
|
|
|
447,595
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
Net increase in loans and leases
|
(269,253)
|
|
|
(894,624)
|
|
Proceeds from sales of loans and leases
|
6,536
|
|
|
102,507
|
|
Proceeds from maturities and paydowns of securities available-for-sale
|
292,769
|
|
|
238,487
|
|
Proceeds from sales of securities available-for-sale
|
167,267
|
|
|
1,554,805
|
|
Purchases of securities available-for-sale
|
(1,085,749)
|
|
|
(1,444,720)
|
|
Net redemptions of Federal Home Loan Bank stock
|
23,674
|
|
|
5,238
|
|
Proceeds from sales of foreclosed assets
|
983
|
|
|
4,322
|
|
Purchases of premises and equipment, net
|
(11,013)
|
|
|
(10,990)
|
|
Proceeds from sales of premises and equipment
|
4
|
|
|
60
|
|
Proceeds from BOLI death benefit
|
761
|
|
|
555
|
|
Net decrease (increase) in equipment leased to others under operating leases
|
16,860
|
|
|
(19,981)
|
|
Net cash used in investing activities
|
(857,161)
|
|
|
(464,341)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Net increase (decrease) in noninterest-bearing deposits
|
2,105,033
|
|
|
(446,400)
|
|
Net increase in interest-bearing deposits
|
2,629,213
|
|
|
1,310,432
|
|
Net decrease in borrowings
|
(1,699,008)
|
|
|
(118,083)
|
|
|
|
|
|
Common stock repurchased and restricted stock surrendered
|
(75,132)
|
|
|
(161,928)
|
|
Cash dividends paid
|
(130,310)
|
|
|
(217,041)
|
|
Net cash provided by financing activities
|
2,829,796
|
|
|
366,980
|
|
|
|
|
|
Net increase in cash, cash equivalents, and restricted cash
|
2,315,572
|
|
|
350,234
|
|
Cash, cash equivalents, and restricted cash, beginning of period
|
637,624
|
|
|
385,767
|
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
2,953,196
|
|
|
$
|
736,001
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
September 30,
|
|
2020
|
|
2019
|
|
(Unaudited)
|
|
(In thousands)
|
Supplemental disclosures of cash flow information:
|
|
|
|
Cash paid for interest
|
$
|
86,060
|
|
|
$
|
154,212
|
|
Cash paid for income taxes
|
92,953
|
|
|
89,505
|
|
|
|
|
|
Loans transferred to foreclosed assets
|
14,370
|
|
|
37
|
|
Transfers from loans held for investment to loans held for sale
|
—
|
|
|
25,124
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1. ORGANIZATION
PacWest Bancorp, a Delaware corporation, is a bank holding company registered under the BHCA, with our corporate headquarters located in Beverly Hills, California. Our principal business is to serve as the holding company for our wholly-owned subsidiary, Pacific Western Bank. References to "Pacific Western" or the "Bank" refer to Pacific Western Bank together with its wholly-owned subsidiaries. References to "we," "us," or the "Company" refer to PacWest Bancorp together with its subsidiaries on a consolidated basis. When we refer to "PacWest" or to the "holding company," we are referring to PacWest Bancorp, the parent company, on a stand-alone basis.
We are focused on relationship-based business banking to small, middle-market and venture-backed businesses nationwide. The Bank offers a broad range of loan and lease and deposit products and services through 71 full-service branches located in California, one branch located in Durham, North Carolina, one branch located in Denver, Colorado, and numerous loan production offices across the country. The Bank provides community banking products including lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank also offers venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovation hubs across the United States. In addition, we provide investment advisory and asset management services to select clients through Pacific Western Asset Management Inc., a wholly-owned subsidiary of the Bank and an SEC-registered investment adviser.
We generate our revenue primarily from interest received on loans and leases and, to a lesser extent, from interest received on investment securities, and fees received in connection with deposit services, extending credit and other services offered, including foreign exchange services. Our major operating expenses are interest paid by the Bank on deposits and borrowings, compensation, occupancy, and general operating expenses.
Significant Accounting Policies
Our accounting policies are described in Note 1. Nature of Operations and Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission ("Form 10-K"). Updates to our significant accounting policies described below reflect the impact of the adoption of ASU 2016-13, “Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments” and the related amendments, commonly referred to as CECL.
Investment Securities
Prior to January 1, 2020, debt securities available-for-sale were measured at fair value and declines in the fair value were reviewed to determine whether the impairment was other-than-temporary. If the decline in fair value was considered temporary, the decline in fair value below the amortized cost basis of a security was recognized in other comprehensive income (loss). If we did not expect to recover the entire amortized cost basis of the security, then an other-than-temporary impairment was considered to have occurred. The cost basis of the security was written down to its estimated fair value and the amount of the write-down was recognized through a charge to earnings. If the amount of the amortized cost basis expected to be recovered increased in a future period, the cost basis of the security was not increased but rather recognized prospectively through interest income.
Effective January 1, 2020, upon the adoption of ASU 2016-13, debt securities available-for-sale are measured at fair value and are subject to impairment testing. A security is impaired if the fair value of the security is less than its amortized cost basis. When an available-for-sale debt security is considered impaired, the Company must determine if the decline in fair value has resulted from a credit-related loss or other factors and then, (1) recognize an allowance for credit losses by a charge to earnings for the credit-related component (if any) of the decline in fair value, and (2) recognize in other comprehensive income (loss) any non-credit related components of the fair value decline (if any). If the amount of the amortized cost basis expected to be recovered increases in a future period, the valuation allowance would be reduced, but not more than the amount of the current existing allowance for that security.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Purchased Loans with Credit Deterioration
Prior to January 1, 2020, purchased credit impaired loans were accounted for in accordance with ASC Subtopic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.” At the time of acquisition, these loans were recorded at estimated fair value based upon estimated future cash flows with no related allowance for credit losses.
Effective January 1, 2020, upon the adoption of ASU 2016-13, an entity records purchased financial assets with credit deterioration ("PCD assets") at the purchase price plus the allowance for credit losses expected at the time of acquisition. This allowance is recognized through a gross-up that increases the amortized cost basis of the asset with no effect on net income. Subsequent changes (favorable and unfavorable) in expected cash flows are recognized immediately in net income by adjusting the related allowance.
Allowance for Credit Losses on Loans and Leases Held for Investment
Effective January 1, 2020, upon the adoption of ASU 2016-13, the Company replaced the incurred loss accounting approach with the current expected credit loss ("CECL") approach for financial instruments measured at amortized cost and other commitments to extend credit. CECL requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable forecasts.
The allowance for credit losses on loans and leases held for investment is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments. The allowance for loan and lease losses is reported as a reduction of the amortized cost basis of loans and leases, while the reserve for unfunded loan commitments is included within "Accrued interest payable and other liabilities" on the condensed consolidated balance sheets. The amortized cost basis of loans and leases does not include accrued interest receivable, which is included in "Other assets" on the condensed consolidated balance sheets. The "Provision for credit losses" on the condensed consolidated statements of earnings (loss) is a combination of the provision for loan and lease losses and the provision for unfunded loan commitments.
Under the CECL methodology, expected credit losses reflect losses over the remaining contractual life of an asset, considering the effect of prepayments and available information about the collectability of cash flows, including information about relevant historical experience, current conditions, and reasonable and supportable forecasts of future events and circumstances. Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates. The resulting allowance for loan and lease losses is deducted from the associated amortized cost basis to reflect the net amount expected to be collected. Subsequent changes in this estimate are recorded through the provision for credit losses and the allowance. The CECL methodology could result in significant changes to both the timing and amounts of provision for credit losses and the allowance as compared to historical periods. Loans and leases that are deemed to be uncollectable are charged off and deducted from the allowance. The provision for credit losses and recoveries on loans and leases previously charged off are added to the allowance.
The allowance for loan and lease losses is comprised of an individually evaluated component for loans and leases that no longer share similar risk characteristics with other loans and leases and a pooled loans component for loans and leases that share similar risk characteristics.
A loan or lease with an outstanding balance greater than $250,000 is individually evaluated for expected credit loss when it is probable that we will be unable to collect all amounts due according to the original contractual terms of the agreement. We select loans and leases for individual assessment on an ongoing basis using certain criteria such as payment performance, borrower reported and forecasted financial results, and other external factors when appropriate. We measure the current expected credit loss of an individually evaluated loan or lease based upon the fair value of the underlying collateral if the loan or lease is collateral-dependent or the present value of cash flows, discounted at the effective interest rate, if the loan or lease is not collateral-dependent. To the extent a loan or lease balance exceeds the estimated collectable value, a reserve or charge-off is recorded depending upon either the certainty of the estimate of loss or the fair value of the loan’s collateral if the loan is collateral-dependent.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Our CECL methodology for the pooled loans component includes both quantitative and qualitative loss factors which are applied to our population of loans and leases and assessed at a pool level. The quantitative CECL model estimates credit losses by applying pool-specific probability of default ("PD") and loss given default ("LGD") rates to the expected exposure at default ("EAD") over the contractual life of loans and leases. The qualitative component considers internal and external risk factors that may not be adequately assessed in the quantitative model.
The loan portfolio is segmented into four loan segments, eight loan classes, and 19 loan pools (excluding Paycheck Protection Program loans, which are fully government guaranteed) based upon loan type that share similar default risk characteristics to calculate quantitative loss factors for each pool. Three of these loan pools have insignificant current balances and/or insignificant historical losses, thus, estimated losses are calculated using historical loss rates from the first quarter of 2009 to the current period rather than econometric regression modeling. For the remaining 16 loan pools, we estimate the PD during the reasonable and supportable forecast period using seven econometric regression models developed to correlate macroeconomic variables to historical credit performance (based on quarterly transition matrices from 2009 to 2019, which include risk rating upgrades/downgrades and defaults). The loans and unfunded commitments are grouped into nine LGD pools based on portfolio classes that share similar collateral risk characteristics. LGD rates are computed based on the net charge-offs recognized divided by the EAD of defaulted loans starting with the first quarter of 2009 to the current period. The PD and LGD rates are applied to the EAD at the loan or lease level based on contractual scheduled payments and estimated prepayments. We use our actual historical loan prepayment experience from 2009 to 2019 to estimate future prepayments by loan pool.
For the reasonable and supportable forecast period, future macroeconomic events and circumstances are estimated over a 4-quarter time horizon using a single scenario baseline forecast that is consistent with management's current expectations for the 16 loan pools. We use economic forecasts from Moody's Analytics in this process. The economic forecast is updated monthly; therefore, the one used for each quarter-end calculation is generally based on a one-month lag based on the timing of when the forecast is released. If economic conditions as of the balance sheet date change materially, management would consider a qualitative adjustment. The key macroeconomic assumptions used in each of the seven PD regression models include two or three of the following economic indicators: Real GDP, unemployment rates, CRE Price Index, the BBB corporate spread, nominal disposable income, and CPI. The quantitative CECL model applies the projected rates based on the economic forecasts for the 4-quarter reasonable and supportable forecast horizon to EAD to estimate defaulted loans. During this forecast horizon, prepayment rates during a historical period that exhibits economic conditions most similar to the economic forecast are used to estimate EAD. If no historical period from 2009 to 2019 exhibits economic conditions that are similar to the economic forecast, management considers the average of all historical prepayment experience to be a reasonable and supportable estimation of expected prepayments. Historical LGD rates are applied to estimated defaulted loans to determine estimated credit losses. We then use a 2-quarter reversion period to revert on a straight-line basis from the PD, LGD, and prepayment rates used during the reasonable and supportable forecast period to the Company’s historical PD, LGD, and prepayment experience. Subsequent to the reversion period for the remaining contractual life of loans and leases, the PD, LGD, and prepayment rates are based on historical experience from 2009 to 2019. PD regression models and prepayment rates are updated on an annual basis. LGD rates are updated every quarter to reflect current charge-off activity.
The PDs calculated by the quantitative models are highly correlated to our internal risk ratings assigned to each loan and lease. To ensure the accuracy of our credit risk ratings, an independent credit review function assesses the appropriateness of the credit risk ratings assigned to loans and leases on a regular basis. The credit risk ratings assigned to every loan and lease are as follows:
•High Pass: (Risk ratings 1-2) Loans and leases rated as "high pass" exhibit a favorable credit profile and have minimal risk characteristics. Repayment in full is expected, even in adverse economic conditions.
•Pass: (Risk ratings 3-4) Loans and leases rated as "pass" are not adversely classified and collection and repayment in full are expected.
•Special Mention: (Risk rating 5) Loans and leases rated as "special mention" have a potential weakness that requires management's attention. If not addressed, these potential weaknesses may result in further deterioration in the borrower's ability to repay the loan or lease.
•Substandard: (Risk rating 6) Loans and leases rated as "substandard" have a well-defined weakness or weaknesses that jeopardize the collection of the debt. They are characterized by the possibility that we will sustain some loss if the weaknesses are not corrected.
•Doubtful: (Risk rating 7) Loans and leases rated as "doubtful" have all the weaknesses of those rated as "substandard," with the additional trait that the weaknesses make collection or repayment in full highly questionable and improbable.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
We may refer to the loans and leases with assigned credit risk ratings of "substandard" and "doubtful" together as "classified" loans and leases. For further information on classified loans and leases, see Note 4. Loans and Leases of the Notes to Condensed Consolidated Financial Statements (Unaudited) contained in "Item 1. Condensed Consolidated Financial Statements (Unaudited)."
In addition to our internal risk rating process, our federal and state banking regulators, as an integral part of their examination process, periodically review the Company’s loan and lease risk rating classifications. Our regulators may require the Company to recognize rating downgrades based on their judgments related to information available to them at the time of their examinations. Risk rating downgrades generally result in increases in the provisions for credit losses and the allowance for credit losses.
The qualitative portion of the reserve on pooled loans and leases represents management’s judgment of additional considerations to account for internal and external risk factors that are not adequately measured in the quantitative reserve. The qualitative loss factors consider idiosyncratic risk factors, conditions that may not be reflected in quantitatively derived results, or other relevant factors to ensure the allowance for credit losses reflects our best estimate of current expected credit losses. Current and forecasted economic trends and underlying market values for collateral dependent loans are generally considered to be encompassed within the CECL quantitative reserve. An incremental qualitative adjustment may be considered when economic forecasts exhibit higher levels of volatility or uncertainty.
In addition to economic conditions and collateral dependency, the other qualitative criteria we consider when establishing the loss factors include the following:
•Legal and Regulatory - matters that could impact our borrowers’ ability to repay our loans and leases;
•Concentrations - loan and lease portfolio composition and any loan concentrations;
•Lending Policy - current lending policies and the effects of any new policies or policy amendments;
•Nature and Volume - loan and lease production volume and mix;
•Problem Loan Trends - loan and lease portfolio credit performance trends, including a borrower's financial condition, credit rating, and ability to meet loan payment requirements;
•Loan Review - results of independent credit review; and
•Management - changes in management related to credit administration functions.
We estimate the reserve for unfunded loan commitments using the same PD, LGD, and prepayment rates for the quantitative credit losses and qualitative loss factors as used for the allowance for loan and lease losses. The EAD for the reserve for unfunded loan commitments is computed using expected future utilization rates of the unfunded commitments during the contractual life of the commitments based on historical usage by loan pool from 2015 to 2019. The utilization rates are updated on an annual basis.
The CECL methodology requires a significant amount of management judgment in determining the appropriate allowance for credit losses. Most of the steps in the methodology involve judgment and are subjective in nature including, among other things: segmenting the loan and lease portfolio; determining the amount of loss history to consider; selecting predictive econometric regression models that use appropriate macroeconomic variables; determining the methodology to forecast prepayments; selecting the most appropriate economic forecast scenario; determining the length of the reasonable and supportable forecast and reversion periods; estimating expected utilization rates on unfunded loan commitments; and assessing relevant and appropriate qualitative factors. In addition, the CECL methodology is dependent on economic forecasts which are inherently imprecise and will change from period to period. Although the allowance for credit losses is considered appropriate, there can be no assurance that it will be sufficient to absorb future losses.
Management believes the allowance for credit losses is appropriate for the current expected credit losses in our loan and lease portfolio and associated unfunded commitments, and the credit risk ratings and inherent loss rates currently assigned are reasonable and appropriate as of the reporting date. It is possible that others, given the same information, may at any point in time reach different conclusions that could result in a significant impact to the Company's financial statements.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Accounting Standards Adopted in 2020
Effective January 1, 2020, the Company adopted ASU 2016-13 and the related amendments to ASC Topic 326, “Financial Instruments - Credit Losses,” to replace the incurred loss accounting approach with a current expected credit loss approach for financial instruments measured at amortized cost and other commitments to extend credit. The new standard is generally intended to require earlier recognition of credit losses. While the standard changes the measurement of the allowance for credit losses, it does not change the credit risk of our lending portfolios or the ultimate losses in those portfolios.
Under the CECL approach, the standard requires immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable forecasts. The standard modifies the other-than-temporary impairment model for available-for-sale debt securities to require entities to record an allowance when recognizing credit losses for available-for-sale securities, rather than reducing the amortized cost of the securities by direct write-offs.
The Company adopted the new standard using the modified retrospective approach and recognized a cumulative effect adjustment to decrease retained earnings by $5.3 million, net of taxes, and increase the allowance for credit losses by $7.3 million without restating prior periods and applied the requirements of the new standard prospectively. There was no cumulative effect adjustment related to available-for-sale securities at adoption. The Company elected to account for interest receivable separately from the amortized cost of loans and leases and investment securities. Interest receivable is included in "Other assets" on the condensed consolidated balance sheets. The Company elected the practical expedient to use the fair value of the collateral at the reporting date when recording the net carrying amount of the asset and determining the allowance for credit losses for a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty based on the entity’s assessment as of the reporting date (collateral dependent financial asset). Additionally, the Company implemented new business processes, new internal controls, and modified existing and/or implemented new internal models and tools to facilitate the ongoing application of the new standard. See Note 4. Loans and Leases for further details.
Effective January 1, 2020, the Company adopted ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" which simplifies goodwill impairment testing by eliminating the second step of the analysis under which the implied fair value of goodwill is determined as if the reporting unit were being acquired in a business combination. The goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge would be recognized for any amount by which the carrying amount exceeds the reporting unit's fair value, to the extent that the loss recognized does not exceed the amount of goodwill allocated to that reporting unit.
The Company used this approach to evaluate its goodwill during the first quarter of 2020, as an unprecedented decline in economic conditions triggered by the Coronavirus Disease ("COVID-19") pandemic caused a significant decline in stock market valuations in March 2020, including our stock price. These events indicated that goodwill may be impaired and resulted in us performing a goodwill impairment assessment. We applied the market approach using an average share price of the Company's stock and a control premium to determine the fair value of the reporting unit. As a result, a goodwill impairment charge of $1.47 billion was recorded in the first quarter of 2020 as the Company's estimated fair value was less than its book value.
Effective January 1, 2020, the Company adopted the provisions of ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to Disclosure Requirements for Fair Value Measurements" which add disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty. Although the guidance modifies our disclosures in 2020, there was no impact to our condensed consolidated financial statements from the adoption of this new standard.
ASU 2020-03, "Codification Improvements to Financial Instruments" ("ASU 2020-03"), revised a wide variety of topics in the Codification with the intent to make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications. ASU 2020-03 was effective immediately upon its release in March 2020 and did not have a material impact to our condensed consolidated financial statements.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Basis of Presentation
Our interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, certain disclosures accompanying annual consolidated financial statements are omitted. In the opinion of management, all significant intercompany accounts and transactions have been eliminated and adjustments, consisting solely of normal recurring accruals and considered necessary for the fair presentation of financial statements for the interim periods, have been included. The current period's results of operations are not necessarily indicative of the results that ultimately may be achieved for the year. The interim condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K.
Use of Estimates
We have made a number of estimates and assumptions related to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these condensed consolidated financial statements in conformity with U.S. GAAP. Actual results could differ from those estimates. Material estimates subject to change in the near term include, among other items, the allowance for credit losses, the carrying value of goodwill and other intangible assets, and the realization of deferred tax assets. These estimates may be adjusted as more current information becomes available, and any adjustment may be significant.
Reclassifications
None.
NOTE 2. RESTRICTED CASH BALANCES
The FRBSF establishes cash reserve requirements that its member banks must maintain based on a percentage of deposit liabilities. On March 26, 2020, the FRBSF reduced the reserve requirement ratios to zero percent. The average reserves required to be held at the FRBSF for the nine months ended September 30, 2020 and the year ended December 31, 2019 were $55.2 million and $131.0 million. As of September 30, 2020 and December 31, 2019, we pledged cash collateral for our derivative contracts of $2.5 million and $3.2 million.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 3. INVESTMENT SECURITIES
Securities Available-for-Sale
The following table presents amortized cost, gross unrealized gains and losses, and fair values of securities available-for-sale as of the dates indicated:
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
Security Type
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
(In thousands)
|
Agency commercial MBS
|
$
|
1,129,060
|
|
|
$
|
75,309
|
|
|
$
|
(54)
|
|
|
$
|
1,204,315
|
|
|
$
|
1,083,182
|
|
|
$
|
25,579
|
|
|
$
|
(537)
|
|
|
$
|
1,108,224
|
|
Municipal securities
|
1,133,811
|
|
|
70,758
|
|
|
(1,539)
|
|
|
1,203,030
|
|
|
691,647
|
|
|
43,851
|
|
|
(339)
|
|
|
735,159
|
|
Agency residential CMOs
|
1,111,235
|
|
|
54,900
|
|
|
(263)
|
|
|
1,165,872
|
|
|
1,112,573
|
|
|
24,403
|
|
|
(579)
|
|
|
1,136,397
|
|
Agency residential MBS
|
233,513
|
|
|
13,018
|
|
|
(33)
|
|
|
246,498
|
|
|
294,606
|
|
|
10,593
|
|
|
(1)
|
|
|
305,198
|
|
Asset-backed securities
|
236,081
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|
|
554
|
|
|
(2,532)
|
|
|
234,103
|
|
|
216,133
|
|
|
320
|
|
|
(1,670)
|
|
|
214,783
|
|
Corporate debt securities
|
173,707
|
|
|
726
|
|
|
(151)
|
|
|
174,282
|
|
|
17,000
|
|
|
3,748
|
|
|
—
|
|
|
20,748
|
|
Collateralized loan obligations
|
138,966
|
|
|
—
|
|
|
(3,633)
|
|
|
135,333
|
|
|
124,134
|
|
|
25
|
|
|
(403)
|
|
|
123,756
|
|
Private label residential CMOs
|
115,101
|
|
|
6,089
|
|
|
(28)
|
|
|
121,162
|
|
|
96,066
|
|
|
3,430
|
|
|
(13)
|
|
|
99,483
|
|
SBA securities
|
40,515
|
|
|
2,194
|
|
|
(25)
|
|
|
42,684
|
|
|
47,765
|
|
|
506
|
|
|
(13)
|
|
|
48,258
|
|
U.S. Treasury securities
|
4,988
|
|
|
347
|
|
|
—
|
|
|
5,335
|
|
|
4,985
|
|
|
196
|
|
|
—
|
|
|
5,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
4,316,977
|
|
|
$
|
223,895
|
|
|
$
|
(8,258)
|
|
|
$
|
4,532,614
|
|
|
$
|
3,688,091
|
|
|
$
|
112,651
|
|
|
$
|
(3,555)
|
|
|
$
|
3,797,187
|
|
As of September 30, 2020, securities available-for-sale with a fair value of $605.3 million were pledged as collateral for public deposits and other purposes as required by various statutes and agreements.
Realized Gains and Losses on Securities Available-for-Sale
The following table presents the amortized cost of securities sold with related gross realized gains, gross realized losses, and net realized gains for the years indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
Sales of Securities Available-for-Sale
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In thousands)
|
Amortized cost of securities sold
|
$
|
17,000
|
|
|
$
|
143,388
|
|
|
$
|
154,100
|
|
|
$
|
1,529,544
|
|
|
|
|
|
|
|
|
|
Gross realized gains
|
$
|
5,270
|
|
|
$
|
1,187
|
|
|
$
|
13,199
|
|
|
$
|
29,400
|
|
Gross realized losses
|
—
|
|
|
(279)
|
|
|
(32)
|
|
|
(4,139)
|
|
Net realized gains
|
$
|
5,270
|
|
|
$
|
908
|
|
|
$
|
13,167
|
|
|
$
|
25,261
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Unrealized Losses on Securities Available-for-Sale
The following tables present the gross unrealized losses and fair values of securities available-for-sale that were in unrealized loss positions as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
|
Gross
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
Security Type
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
(In thousands)
|
Agency commercial MBS
|
$
|
3,066
|
|
|
$
|
(4)
|
|
|
$
|
9,241
|
|
|
$
|
(50)
|
|
|
$
|
12,307
|
|
|
$
|
(54)
|
|
Municipal securities
|
189,163
|
|
|
(1,539)
|
|
|
—
|
|
|
—
|
|
|
189,163
|
|
|
(1,539)
|
|
Agency residential CMOs
|
77,168
|
|
|
(263)
|
|
|
—
|
|
|
—
|
|
|
77,168
|
|
|
(263)
|
|
Agency residential MBS
|
1,753
|
|
|
(33)
|
|
|
—
|
|
|
—
|
|
|
1,753
|
|
|
(33)
|
|
Asset-backed securities
|
44,658
|
|
|
(339)
|
|
|
122,729
|
|
|
(2,193)
|
|
|
167,387
|
|
|
(2,532)
|
|
Corporate debt securities
|
60,056
|
|
|
(151)
|
|
|
—
|
|
|
—
|
|
|
60,056
|
|
|
(151)
|
|
Collateralized loan obligations
|
102,396
|
|
|
(1,938)
|
|
|
32,937
|
|
|
(1,695)
|
|
|
135,333
|
|
|
(3,633)
|
|
Private label residential CMOs
|
8,510
|
|
|
(26)
|
|
|
76
|
|
|
(2)
|
|
|
8,586
|
|
|
(28)
|
|
SBA securities
|
1,964
|
|
|
(25)
|
|
|
—
|
|
|
—
|
|
|
1,964
|
|
|
(25)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
488,734
|
|
|
$
|
(4,318)
|
|
|
$
|
164,983
|
|
|
$
|
(3,940)
|
|
|
$
|
653,717
|
|
|
$
|
(8,258)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
|
Gross
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
Security Type
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
(In thousands)
|
Agency commercial MBS
|
$
|
214,862
|
|
|
$
|
(537)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
214,862
|
|
|
$
|
(537)
|
|
Municipal securities
|
38,667
|
|
|
(339)
|
|
|
—
|
|
|
—
|
|
|
38,667
|
|
|
(339)
|
|
Agency residential CMOs
|
180,071
|
|
|
(572)
|
|
|
1,456
|
|
|
(7)
|
|
|
181,527
|
|
|
(579)
|
|
Agency residential MBS
|
—
|
|
|
—
|
|
|
186
|
|
|
(1)
|
|
|
186
|
|
|
(1)
|
|
Asset-backed securities
|
165,575
|
|
|
(1,670)
|
|
|
—
|
|
|
—
|
|
|
165,575
|
|
|
(1,670)
|
|
Collateralized loan obligations
|
102,469
|
|
|
(403)
|
|
|
—
|
|
|
—
|
|
|
102,469
|
|
|
(403)
|
|
Private label residential CMOs
|
9,872
|
|
|
(11)
|
|
|
114
|
|
|
(2)
|
|
|
9,986
|
|
|
(13)
|
|
SBA securities
|
4,565
|
|
|
(13)
|
|
|
—
|
|
|
—
|
|
|
4,565
|
|
|
(13)
|
|
Total
|
$
|
716,081
|
|
|
$
|
(3,545)
|
|
|
$
|
1,756
|
|
|
$
|
(10)
|
|
|
$
|
717,837
|
|
|
$
|
(3,555)
|
|
The securities that were in an unrealized loss position at September 30, 2020, were considered impaired and required further review to determine if the unrealized losses were credit-related. We concluded their unrealized losses were a result of the level of market interest rates relative to the types of securities and pricing changes caused by shifting supply and demand dynamics and not a result of downgraded credit ratings or other indicators of deterioration of the underlying issuers' ability to repay. We also considered the seniority of the tranches and U.S. government agency guarantees, if any, to assess whether an unrealized loss was credit-related. Accordingly, we determined the unrealized losses were not credit-related and recognized the unrealized losses in "other comprehensive income" in stockholders' equity. Although we periodically sell securities for portfolio management purposes, we do not foresee having to sell any impaired securities strictly for liquidity needs and believe that it is more likely than not we would not be required to sell any impaired securities before recovery of their amortized cost.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Contractual Maturities of Securities Available-for-Sale
The following table presents the contractual maturities of our securities available-for-sale portfolio based on amortized cost and carrying value as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Amortized
|
|
Fair
|
Maturities
|
Cost
|
|
Value
|
|
(In thousands)
|
Due in one year or less
|
$
|
8,226
|
|
|
$
|
8,310
|
|
Due after one year through five years
|
508,645
|
|
|
532,309
|
|
Due after five years through ten years
|
1,067,818
|
|
|
1,135,249
|
|
Due after ten years
|
2,732,288
|
|
|
2,856,746
|
|
Total securities available-for-sale
|
$
|
4,316,977
|
|
|
$
|
4,532,614
|
|
CMBS, CMOs, and MBS have contractual maturity dates, but require periodic payments based upon scheduled amortization terms. Actual principal collections on these securities usually occur more rapidly than the scheduled amortization terms because of prepayments made by obligors of the underlying loan collateral.
Interest Income on Investment Securities
The following table presents the composition of our interest income on investment securities for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In thousands)
|
Taxable interest
|
$
|
17,835
|
|
|
$
|
22,829
|
|
|
$
|
59,457
|
|
|
$
|
63,515
|
|
Non-taxable interest
|
6,272
|
|
|
5,565
|
|
|
17,113
|
|
|
22,705
|
|
Dividend income
|
336
|
|
|
412
|
|
|
1,357
|
|
|
1,214
|
|
Total interest income on investment securities
|
$
|
24,443
|
|
|
$
|
28,806
|
|
|
$
|
77,927
|
|
|
$
|
87,434
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 4. LOANS AND LEASES
Our loans are carried at the principal amount outstanding, net of deferred fees and costs, and in the case of acquired and purchased loans, net of purchase discounts and premiums. Deferred fees and costs and purchase discounts and premiums on acquired loans are recognized as an adjustment to interest income over the contractual life of the loans primarily using the effective interest method or taken into income when the related loans are paid off or included in the carrying amount of loans that are sold.
Loans and Leases Held for Investment
The following table summarizes the composition of our loans and leases held for investment as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Real estate mortgage
|
$
|
7,883,473
|
|
|
$
|
7,982,383
|
|
Real estate construction and land
|
3,453,155
|
|
|
2,773,209
|
|
Commercial
|
7,402,854
|
|
|
7,714,358
|
|
Consumer
|
362,198
|
|
|
440,790
|
|
Total gross loans and leases held for investment
|
19,101,680
|
|
|
18,910,740
|
|
Deferred fees, net
|
(75,480)
|
|
|
(63,868)
|
|
Total loans and leases held for investment, net of deferred fees
|
19,026,200
|
|
|
18,846,872
|
|
Allowance for loan and lease losses
|
(345,966)
|
|
|
(138,785)
|
|
Total loans and leases held for investment, net (1)
|
$
|
18,680,234
|
|
|
$
|
18,708,087
|
|
____________________
(1) Excludes accrued interest receivable of $71.5 million and $67.5 million at September 30, 2020 and December 31, 2019, respectively, which is recorded in "Other assets" on the condensed consolidated balance sheets.
The following tables present an aging analysis of our loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
30 - 89
|
|
90 or More
|
|
|
|
|
|
|
|
Days
|
|
Days
|
|
Total
|
|
|
|
|
|
Past Due
|
|
Past Due
|
|
Past Due
|
|
Current
|
|
Total
|
|
(In thousands)
|
Real estate mortgage:
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
412
|
|
|
$
|
32,662
|
|
|
$
|
33,074
|
|
|
$
|
4,159,392
|
|
|
$
|
4,192,466
|
|
Income producing and other residential
|
1,761
|
|
|
537
|
|
|
2,298
|
|
|
3,682,281
|
|
|
3,684,579
|
|
Total real estate mortgage
|
2,173
|
|
|
33,199
|
|
|
35,372
|
|
|
7,841,673
|
|
|
7,877,045
|
|
Real estate construction and land:
|
|
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
—
|
|
|
1,241,647
|
|
|
1,241,647
|
|
Residential
|
3,108
|
|
|
—
|
|
|
3,108
|
|
|
2,178,992
|
|
|
2,182,100
|
|
Total real estate construction and land
|
3,108
|
|
|
—
|
|
|
3,108
|
|
|
3,420,639
|
|
|
3,423,747
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
Asset-based
|
—
|
|
|
2,248
|
|
|
2,248
|
|
|
3,150,800
|
|
|
3,153,048
|
|
Venture capital
|
2,319
|
|
|
—
|
|
|
2,319
|
|
|
1,634,813
|
|
|
1,637,132
|
|
Other commercial
|
185
|
|
|
10,751
|
|
|
10,936
|
|
|
2,562,058
|
|
|
2,572,994
|
|
Total commercial
|
2,504
|
|
|
12,999
|
|
|
15,503
|
|
|
7,347,671
|
|
|
7,363,174
|
|
Consumer
|
791
|
|
|
116
|
|
|
907
|
|
|
361,327
|
|
|
362,234
|
|
Total
|
$
|
8,576
|
|
|
$
|
46,314
|
|
|
$
|
54,890
|
|
|
$
|
18,971,310
|
|
|
$
|
19,026,200
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
30 - 89
|
|
90 or More
|
|
|
|
|
|
|
|
Days
|
|
Days
|
|
Total
|
|
|
|
|
|
Past Due
|
|
Past Due
|
|
Past Due
|
|
Current
|
|
Total
|
|
(In thousands)
|
Real estate mortgage:
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
2,448
|
|
|
$
|
5,919
|
|
|
$
|
8,367
|
|
|
$
|
4,194,320
|
|
|
$
|
4,202,687
|
|
Income producing and other residential
|
2,105
|
|
|
802
|
|
|
2,907
|
|
|
3,767,153
|
|
|
3,770,060
|
|
Total real estate mortgage
|
4,553
|
|
|
6,721
|
|
|
11,274
|
|
|
7,961,473
|
|
|
7,972,747
|
|
Real estate construction and land:
|
|
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
—
|
|
|
1,082,368
|
|
|
1,082,368
|
|
Residential
|
1,429
|
|
|
—
|
|
|
1,429
|
|
|
1,654,005
|
|
|
1,655,434
|
|
Total real estate construction and land
|
1,429
|
|
|
—
|
|
|
1,429
|
|
|
2,736,373
|
|
|
2,737,802
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
Asset-based
|
19
|
|
|
—
|
|
|
19
|
|
|
3,748,388
|
|
|
3,748,407
|
|
Venture capital
|
—
|
|
|
—
|
|
|
—
|
|
|
2,179,422
|
|
|
2,179,422
|
|
Other commercial
|
2,781
|
|
|
4,164
|
|
|
6,945
|
|
|
1,760,722
|
|
|
1,767,667
|
|
Total commercial
|
2,800
|
|
|
4,164
|
|
|
6,964
|
|
|
7,688,532
|
|
|
7,695,496
|
|
Consumer
|
1,006
|
|
|
200
|
|
|
1,206
|
|
|
439,621
|
|
|
440,827
|
|
Total
|
$
|
9,788
|
|
|
$
|
11,085
|
|
|
$
|
20,873
|
|
|
$
|
18,825,999
|
|
|
$
|
18,846,872
|
|
It is our policy to discontinue accruing interest when principal or interest payments are past due 90 days or more (unless the loan is both well secured and in the process of collection) or when, in the opinion of management, there is a reasonable doubt as to the collectability of a loan or lease in the normal course of business. Interest income on nonaccrual loans is recognized only to the extent cash is received and the principal balance of the loan is deemed collectable.
The following table presents our nonaccrual and performing loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
Nonaccrual
|
|
Performing
|
|
Total
|
|
Nonaccrual
|
|
Performing
|
|
Total
|
|
(In thousands)
|
Real estate mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
45,120
|
|
|
$
|
4,147,346
|
|
|
$
|
4,192,466
|
|
|
$
|
18,346
|
|
|
$
|
4,184,341
|
|
|
$
|
4,202,687
|
|
Income producing and other residential
|
2,008
|
|
|
3,682,571
|
|
|
3,684,579
|
|
|
2,478
|
|
|
3,767,582
|
|
|
3,770,060
|
|
Total real estate mortgage
|
47,128
|
|
|
7,829,917
|
|
|
7,877,045
|
|
|
20,824
|
|
|
7,951,923
|
|
|
7,972,747
|
|
Real estate construction and land:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
324
|
|
|
1,241,323
|
|
|
1,241,647
|
|
|
364
|
|
|
1,082,004
|
|
|
1,082,368
|
|
Residential
|
—
|
|
|
2,182,100
|
|
|
2,182,100
|
|
|
—
|
|
|
1,655,434
|
|
|
1,655,434
|
|
Total real estate construction and land
|
324
|
|
|
3,423,423
|
|
|
3,423,747
|
|
|
364
|
|
|
2,737,438
|
|
|
2,737,802
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Asset-based
|
2,817
|
|
|
3,150,231
|
|
|
3,153,048
|
|
|
30,162
|
|
|
3,718,245
|
|
|
3,748,407
|
|
Venture capital
|
2,001
|
|
|
1,635,131
|
|
|
1,637,132
|
|
|
12,916
|
|
|
2,166,506
|
|
|
2,179,422
|
|
Other commercial
|
32,941
|
|
|
2,540,053
|
|
|
2,572,994
|
|
|
27,594
|
|
|
1,740,073
|
|
|
1,767,667
|
|
Total commercial
|
37,759
|
|
|
7,325,415
|
|
|
7,363,174
|
|
|
70,672
|
|
|
7,624,824
|
|
|
7,695,496
|
|
Consumer
|
404
|
|
|
361,830
|
|
|
362,234
|
|
|
493
|
|
|
440,334
|
|
|
440,827
|
|
Total
|
$
|
85,615
|
|
|
$
|
18,940,585
|
|
|
$
|
19,026,200
|
|
|
$
|
92,353
|
|
|
$
|
18,754,519
|
|
|
$
|
18,846,872
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
At September 30, 2020, nonaccrual loans and leases included $46.3 million of loans and leases 90 or more days past due, $0.4 million of loans and leases 30 to 89 days past due, and $38.9 million of loans and leases current with respect to contractual payments that were placed on nonaccrual status based on management’s judgment regarding their collectability. At December 31, 2019, nonaccrual loans and leases included $11.1 million of loans and leases 90 or more days past due, $1.2 million of loans and leases 30 to 89 days past due, and $80.0 million of current loans and leases that were placed on nonaccrual status based on management’s judgment regarding their collectability.
As of September 30, 2020, our three largest loan relationships on nonaccrual status had an aggregate carrying value of $49.3 million and represented 58% of total nonaccrual loans and leases.
The following tables present the credit risk rating categories for loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of the dates indicated. Classified loans and leases are those with a credit risk rating of either substandard or doubtful.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Classified
|
|
Special Mention
|
|
Pass
|
|
Total
|
|
(In thousands)
|
Real estate mortgage:
|
|
|
|
|
|
|
|
Commercial
|
$
|
109,651
|
|
|
$
|
330,367
|
|
|
$
|
3,752,448
|
|
|
$
|
4,192,466
|
|
Income producing and other residential
|
9,558
|
|
|
63,378
|
|
|
3,611,643
|
|
|
3,684,579
|
|
Total real estate mortgage
|
119,209
|
|
|
393,745
|
|
|
7,364,091
|
|
|
7,877,045
|
|
Real estate construction and land:
|
|
|
|
|
|
|
|
Commercial
|
324
|
|
|
13,838
|
|
|
1,227,485
|
|
|
1,241,647
|
|
Residential
|
—
|
|
|
—
|
|
|
2,182,100
|
|
|
2,182,100
|
|
Total real estate construction and land
|
324
|
|
|
13,838
|
|
|
3,409,585
|
|
|
3,423,747
|
|
Commercial:
|
|
|
|
|
|
|
|
Asset-based
|
27,900
|
|
|
190,193
|
|
|
2,934,955
|
|
|
3,153,048
|
|
Venture capital
|
15,078
|
|
|
123,675
|
|
|
1,498,379
|
|
|
1,637,132
|
|
Other commercial
|
111,553
|
|
|
57,787
|
|
|
2,403,654
|
|
|
2,572,994
|
|
Total commercial
|
154,531
|
|
|
371,655
|
|
|
6,836,988
|
|
|
7,363,174
|
|
Consumer
|
508
|
|
|
4,518
|
|
|
357,208
|
|
|
362,234
|
|
Total
|
$
|
274,572
|
|
|
$
|
783,756
|
|
|
$
|
17,967,872
|
|
|
$
|
19,026,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Classified
|
|
Special Mention
|
|
Pass
|
|
Total
|
|
(In thousands)
|
Real estate mortgage:
|
|
|
|
|
|
|
|
Commercial
|
$
|
33,535
|
|
|
$
|
30,070
|
|
|
$
|
4,139,082
|
|
|
$
|
4,202,687
|
|
Income producing and other residential
|
8,600
|
|
|
1,711
|
|
|
3,759,749
|
|
|
3,770,060
|
|
Total real estate mortgage
|
42,135
|
|
|
31,781
|
|
|
7,898,831
|
|
|
7,972,747
|
|
Real estate construction and land:
|
|
|
|
|
|
|
|
Commercial
|
364
|
|
|
—
|
|
|
1,082,004
|
|
|
1,082,368
|
|
Residential
|
—
|
|
|
1,429
|
|
|
1,654,005
|
|
|
1,655,434
|
|
Total real estate construction and land
|
364
|
|
|
1,429
|
|
|
2,736,009
|
|
|
2,737,802
|
|
Commercial:
|
|
|
|
|
|
|
|
Asset-based
|
32,223
|
|
|
38,936
|
|
|
3,677,248
|
|
|
3,748,407
|
|
Venture capital
|
35,316
|
|
|
74,813
|
|
|
2,069,293
|
|
|
2,179,422
|
|
Other commercial
|
65,261
|
|
|
174,785
|
|
|
1,527,621
|
|
|
1,767,667
|
|
Total commercial
|
132,800
|
|
|
288,534
|
|
|
7,274,162
|
|
|
7,695,496
|
|
Consumer
|
613
|
|
|
1,212
|
|
|
439,002
|
|
|
440,827
|
|
Total
|
$
|
175,912
|
|
|
$
|
322,956
|
|
|
$
|
18,348,004
|
|
|
$
|
18,846,872
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents our nonaccrual loans and leases by loan portfolio segment and class and by with and without an allowance recorded as of the date indicated and interest income recognized on nonaccrual loans and leases for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At and For the Three Months Ended
|
|
At and For the Nine Months Ended
|
|
September 30, 2020
|
|
September 30, 2020
|
|
Nonaccrual
|
|
Interest
|
|
Nonaccrual
|
|
Interest
|
|
Recorded
|
|
Income
|
|
Recorded
|
|
Income
|
|
Investment
|
|
Recognized
|
|
Investment
|
|
Recognized
|
|
(In thousands)
|
|
(In thousands)
|
With An Allowance Recorded:
|
|
|
|
|
|
|
|
Real estate mortgage:
|
|
|
|
|
|
|
|
Commercial
|
$
|
736
|
|
|
$
|
—
|
|
|
$
|
736
|
|
|
$
|
—
|
|
Income producing and other residential
|
1,163
|
|
|
—
|
|
|
1,163
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
Asset based
|
2,248
|
|
|
—
|
|
|
2,248
|
|
|
—
|
|
Venture capital
|
2,001
|
|
|
—
|
|
|
2,001
|
|
|
—
|
|
Other commercial
|
1,235
|
|
|
—
|
|
|
1,235
|
|
|
—
|
|
Consumer
|
404
|
|
|
—
|
|
|
404
|
|
|
—
|
|
With No Related Allowance Recorded:
|
|
|
|
|
|
|
|
Real estate mortgage:
|
|
|
|
|
|
|
|
Commercial
|
$
|
44,384
|
|
|
$
|
155
|
|
|
$
|
44,384
|
|
|
$
|
285
|
|
Income producing and other residential
|
845
|
|
|
—
|
|
|
845
|
|
|
—
|
|
Real estate construction and land:
|
|
|
|
|
|
|
|
Commercial
|
324
|
|
|
—
|
|
|
324
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
Asset based
|
569
|
|
|
—
|
|
|
569
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Other commercial
|
31,706
|
|
|
517
|
|
|
31,706
|
|
|
1,628
|
|
|
|
|
|
|
|
|
|
Total Loans and Leases With and
|
|
|
|
|
|
|
|
Without an Allowance Recorded:
|
|
|
|
|
|
|
|
Real estate mortgage
|
$
|
47,128
|
|
|
$
|
155
|
|
|
$
|
47,128
|
|
|
$
|
285
|
|
Real estate construction and land
|
324
|
|
|
—
|
|
|
324
|
|
|
—
|
|
Commercial
|
37,759
|
|
|
517
|
|
|
37,759
|
|
|
1,628
|
|
Consumer
|
404
|
|
|
—
|
|
|
404
|
|
|
—
|
|
Total
|
$
|
85,615
|
|
|
$
|
672
|
|
|
$
|
85,615
|
|
|
$
|
1,913
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following tables present our loans held for investment by loan portfolio segment and class, by credit quality indicator (internal risk ratings), and by year of origination (vintage year) as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted
|
|
|
Amortized Cost Basis
|
Term Loans by Origination Year
|
|
Revolving
|
|
to Term
|
|
|
September 30, 2020
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
Prior
|
|
Loans
|
|
Loans
|
|
Total
|
|
(In thousands)
|
Real Estate Mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-2 High pass
|
$
|
—
|
|
|
$
|
28,297
|
|
|
$
|
15,106
|
|
|
$
|
13,295
|
|
|
$
|
7,746
|
|
|
$
|
47,517
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
111,961
|
|
3-4 Pass
|
459,907
|
|
|
453,362
|
|
|
646,326
|
|
|
804,351
|
|
|
362,735
|
|
|
846,325
|
|
|
63,689
|
|
|
3,792
|
|
|
3,640,487
|
|
5 Special mention
|
—
|
|
|
70,371
|
|
|
79,083
|
|
|
3,034
|
|
|
75,221
|
|
|
102,658
|
|
|
—
|
|
|
—
|
|
|
330,367
|
|
6-8 Classified
|
—
|
|
|
1,301
|
|
|
55,863
|
|
|
5,187
|
|
|
3,444
|
|
|
43,856
|
|
|
—
|
|
|
—
|
|
|
109,651
|
|
Total
|
$
|
459,907
|
|
|
$
|
553,331
|
|
|
$
|
796,378
|
|
|
$
|
825,867
|
|
|
$
|
449,146
|
|
|
$
|
1,040,356
|
|
|
$
|
63,689
|
|
|
$
|
3,792
|
|
|
$
|
4,192,466
|
|
Current YTD period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,330
|
|
|
$
|
—
|
|
|
$
|
2,677
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,007
|
|
Gross recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
|
(262)
|
|
|
—
|
|
|
—
|
|
|
(271)
|
|
Net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,321
|
|
|
$
|
—
|
|
|
$
|
2,415
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Producing and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-2 High pass
|
$
|
27,760
|
|
|
$
|
25,590
|
|
|
$
|
36,440
|
|
|
$
|
35,858
|
|
|
$
|
46,419
|
|
|
$
|
12,260
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
184,327
|
|
3-4 Pass
|
256,056
|
|
|
844,049
|
|
|
1,179,643
|
|
|
587,821
|
|
|
247,643
|
|
|
199,144
|
|
|
112,390
|
|
|
570
|
|
|
3,427,316
|
|
5 Special mention
|
12,308
|
|
|
4,207
|
|
|
42,660
|
|
|
1,863
|
|
|
—
|
|
|
—
|
|
|
2,340
|
|
|
—
|
|
|
63,378
|
|
6-8 Classified
|
—
|
|
|
—
|
|
|
2,874
|
|
|
—
|
|
|
—
|
|
|
5,608
|
|
|
83
|
|
|
993
|
|
|
9,558
|
|
Total
|
$
|
296,124
|
|
|
$
|
873,846
|
|
|
$
|
1,261,617
|
|
|
$
|
625,542
|
|
|
$
|
294,062
|
|
|
$
|
217,012
|
|
|
$
|
114,813
|
|
|
$
|
1,563
|
|
|
$
|
3,684,579
|
|
Current YTD period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
51
|
|
|
$
|
—
|
|
|
$
|
175
|
|
|
$
|
226
|
|
Gross recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(88)
|
|
|
(1)
|
|
|
—
|
|
|
(89)
|
|
Net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(37)
|
|
|
$
|
(1)
|
|
|
$
|
175
|
|
|
$
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Land: Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-2 High pass
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
3-4 Pass
|
38,945
|
|
|
335,115
|
|
|
385,317
|
|
|
209,380
|
|
|
106,937
|
|
|
139,453
|
|
|
6,630
|
|
|
5,708
|
|
|
1,227,485
|
|
5 Special mention
|
—
|
|
|
—
|
|
|
13,838
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,838
|
|
6-8 Classified
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
324
|
|
|
—
|
|
|
—
|
|
|
324
|
|
Total
|
$
|
38,945
|
|
|
$
|
335,115
|
|
|
$
|
399,155
|
|
|
$
|
209,380
|
|
|
$
|
106,937
|
|
|
$
|
139,777
|
|
|
$
|
6,630
|
|
|
$
|
5,708
|
|
|
$
|
1,241,647
|
|
Current YTD period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Gross recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted
|
|
|
Amortized Cost Basis
|
Term Loans by Origination Year
|
|
Revolving
|
|
to Term
|
|
|
September 30, 2020
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
Prior
|
|
Loans
|
|
Loans
|
|
Total
|
|
(In thousands)
|
Real Estate Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Land: Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-2 High pass
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
3-4 Pass
|
236,355
|
|
|
501,855
|
|
|
835,914
|
|
|
512,565
|
|
|
35,286
|
|
|
315
|
|
|
9,034
|
|
|
50,776
|
|
|
2,182,100
|
|
5 Special mention
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
6-8 Classified
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
236,355
|
|
|
$
|
501,855
|
|
|
$
|
835,914
|
|
|
$
|
512,565
|
|
|
$
|
35,286
|
|
|
$
|
315
|
|
|
$
|
9,034
|
|
|
$
|
50,776
|
|
|
$
|
2,182,100
|
|
Current YTD period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Gross recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21)
|
|
|
—
|
|
|
—
|
|
|
(21)
|
|
Net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(21)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: Asset-Based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-2 High pass
|
$
|
33,273
|
|
|
$
|
167,859
|
|
|
$
|
116,944
|
|
|
$
|
65,740
|
|
|
$
|
120,644
|
|
|
$
|
87,642
|
|
|
$
|
231,234
|
|
|
$
|
73,549
|
|
|
$
|
896,885
|
|
3-4 Pass
|
61,548
|
|
|
123,290
|
|
|
81,362
|
|
|
36,075
|
|
|
13,181
|
|
|
48,991
|
|
|
1,653,848
|
|
|
19,775
|
|
|
2,038,070
|
|
5 Special mention
|
—
|
|
|
64,586
|
|
|
61,726
|
|
|
21,043
|
|
|
14,913
|
|
|
958
|
|
|
22,150
|
|
|
4,817
|
|
|
190,193
|
|
6-8 Classified
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,398
|
|
|
569
|
|
|
8,791
|
|
|
(858)
|
|
|
27,900
|
|
Total
|
$
|
94,821
|
|
|
$
|
355,735
|
|
|
$
|
260,032
|
|
|
$
|
122,858
|
|
|
$
|
168,136
|
|
|
$
|
138,160
|
|
|
$
|
1,916,023
|
|
|
$
|
97,283
|
|
|
$
|
3,153,048
|
|
Current YTD period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,817
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,817
|
|
Gross recoveries
|
(39)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(323)
|
|
|
(231)
|
|
|
—
|
|
|
(593)
|
|
Net
|
$
|
(39)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,494
|
|
|
$
|
(231)
|
|
|
$
|
—
|
|
|
$
|
11,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: Venture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-2 High pass (1)
|
$
|
2,003
|
|
|
$
|
5,644
|
|
|
$
|
—
|
|
|
$
|
(4)
|
|
|
$
|
(6)
|
|
|
$
|
(4)
|
|
|
$
|
234,321
|
|
|
$
|
—
|
|
|
$
|
241,954
|
|
3-4 Pass
|
59,229
|
|
|
133,479
|
|
|
44,599
|
|
|
9,733
|
|
|
32,079
|
|
|
6,550
|
|
|
965,206
|
|
|
5,550
|
|
|
1,256,425
|
|
5 Special mention
|
5,958
|
|
|
38,163
|
|
|
1,586
|
|
|
4,000
|
|
|
526
|
|
|
—
|
|
|
68,331
|
|
|
5,111
|
|
|
123,675
|
|
6-8 Classified
|
—
|
|
|
(1,663)
|
|
|
11,750
|
|
|
—
|
|
|
—
|
|
|
3,663
|
|
|
1,328
|
|
|
—
|
|
|
15,078
|
|
Total
|
$
|
67,190
|
|
|
$
|
175,623
|
|
|
$
|
57,935
|
|
|
$
|
13,729
|
|
|
$
|
32,599
|
|
|
$
|
10,209
|
|
|
$
|
1,269,186
|
|
|
$
|
10,661
|
|
|
$
|
1,637,132
|
|
Current YTD period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,534
|
|
|
$
|
—
|
|
|
$
|
(8)
|
|
|
$
|
150
|
|
|
$
|
142
|
|
|
$
|
—
|
|
|
$
|
6,818
|
|
Gross recoveries
|
—
|
|
|
—
|
|
|
(177)
|
|
|
(128)
|
|
|
(145)
|
|
|
(3)
|
|
|
(450)
|
|
|
—
|
|
|
(903)
|
|
Net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,357
|
|
|
$
|
(128)
|
|
|
$
|
(153)
|
|
|
$
|
147
|
|
|
$
|
(308)
|
|
|
$
|
—
|
|
|
$
|
5,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1) Amounts with negative balances are loans with zero principal balances and deferred loan origination fees.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted
|
|
|
Amortized Cost Basis
|
Term Loans by Origination Year
|
|
Revolving
|
|
to Term
|
|
|
September 30, 2020
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
Prior
|
|
Loans
|
|
Loans
|
|
Total
|
|
(In thousands)
|
Commercial: Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-2 High pass
|
$
|
1,212,466
|
|
|
$
|
409
|
|
|
$
|
7
|
|
|
$
|
390
|
|
|
$
|
73
|
|
|
$
|
1,592
|
|
|
$
|
77,891
|
|
|
$
|
94
|
|
|
$
|
1,292,922
|
|
3-4 Pass
|
57,738
|
|
|
98,217
|
|
|
105,234
|
|
|
83,456
|
|
|
32,063
|
|
|
108,219
|
|
|
619,093
|
|
|
6,712
|
|
|
1,110,732
|
|
5 Special mention
|
—
|
|
|
1,011
|
|
|
—
|
|
|
316
|
|
|
1,735
|
|
|
5,398
|
|
|
48,252
|
|
|
1,075
|
|
|
57,787
|
|
6-8 Classified
|
—
|
|
|
2
|
|
|
84
|
|
|
48
|
|
|
2,969
|
|
|
7,723
|
|
|
97,357
|
|
|
3,370
|
|
|
111,553
|
|
Total
|
$
|
1,270,204
|
|
|
$
|
99,639
|
|
|
$
|
105,325
|
|
|
$
|
84,210
|
|
|
$
|
36,840
|
|
|
$
|
122,932
|
|
|
$
|
842,593
|
|
|
$
|
11,251
|
|
|
$
|
2,572,994
|
|
Current YTD period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
506
|
|
|
$
|
214
|
|
|
$
|
33,492
|
|
|
$
|
11,662
|
|
|
$
|
1,828
|
|
|
$
|
47,702
|
|
Gross recoveries
|
—
|
|
|
(9)
|
|
|
(8)
|
|
|
(26)
|
|
|
(84)
|
|
|
(2,683)
|
|
|
(100)
|
|
|
(4)
|
|
|
(2,914)
|
|
Net
|
$
|
—
|
|
|
$
|
(9)
|
|
|
$
|
(8)
|
|
|
$
|
480
|
|
|
$
|
130
|
|
|
$
|
30,809
|
|
|
$
|
11,562
|
|
|
$
|
1,824
|
|
|
$
|
44,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-2 High pass
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
101
|
|
|
$
|
453
|
|
|
$
|
—
|
|
|
$
|
601
|
|
3-4 Pass
|
45,224
|
|
|
126,060
|
|
|
69,895
|
|
|
44,717
|
|
|
48,158
|
|
|
14,164
|
|
|
8,383
|
|
|
6
|
|
|
356,607
|
|
5 Special mention
|
—
|
|
|
—
|
|
|
2,332
|
|
|
534
|
|
|
1,172
|
|
|
480
|
|
|
—
|
|
|
—
|
|
|
4,518
|
|
6-8 Classified
|
—
|
|
|
74
|
|
|
—
|
|
|
—
|
|
|
57
|
|
|
342
|
|
|
2
|
|
|
33
|
|
|
508
|
|
Total
|
$
|
45,246
|
|
|
$
|
126,134
|
|
|
$
|
72,236
|
|
|
$
|
45,267
|
|
|
$
|
49,387
|
|
|
$
|
15,087
|
|
|
$
|
8,838
|
|
|
$
|
39
|
|
|
$
|
362,234
|
|
Current YTD period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
86
|
|
|
$
|
152
|
|
|
$
|
295
|
|
|
$
|
44
|
|
|
$
|
22
|
|
|
$
|
9
|
|
|
$
|
705
|
|
Gross recoveries
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(8)
|
|
|
(15)
|
|
|
(24)
|
|
|
—
|
|
|
—
|
|
|
(48)
|
|
Net
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
85
|
|
|
$
|
144
|
|
|
$
|
280
|
|
|
$
|
20
|
|
|
$
|
22
|
|
|
$
|
9
|
|
|
$
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-2 High pass
|
$
|
1,275,524
|
|
|
$
|
227,799
|
|
|
$
|
168,506
|
|
|
$
|
115,295
|
|
|
$
|
174,876
|
|
|
$
|
149,108
|
|
|
$
|
543,899
|
|
|
$
|
73,643
|
|
|
$
|
2,728,650
|
|
3-4 Pass
|
1,215,002
|
|
|
2,615,427
|
|
|
3,348,290
|
|
|
2,288,098
|
|
|
878,082
|
|
|
1,363,161
|
|
|
3,438,273
|
|
|
92,889
|
|
|
15,239,222
|
|
5 Special mention
|
18,266
|
|
|
178,338
|
|
|
201,225
|
|
|
30,790
|
|
|
93,567
|
|
|
109,494
|
|
|
141,073
|
|
|
11,003
|
|
|
783,756
|
|
6-8 Classified
|
—
|
|
|
(286)
|
|
|
70,571
|
|
|
5,235
|
|
|
25,868
|
|
|
62,085
|
|
|
107,561
|
|
|
3,538
|
|
|
274,572
|
|
Total
|
$
|
2,508,792
|
|
|
$
|
3,021,278
|
|
|
$
|
3,788,592
|
|
|
$
|
2,439,418
|
|
|
$
|
1,172,393
|
|
|
$
|
1,683,848
|
|
|
$
|
4,230,806
|
|
|
$
|
181,073
|
|
|
$
|
19,026,200
|
|
Current YTD period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
6,620
|
|
|
$
|
3,988
|
|
|
$
|
501
|
|
|
$
|
48,231
|
|
|
$
|
11,826
|
|
|
$
|
2,012
|
|
|
$
|
73,275
|
|
Gross recoveries
|
(39)
|
|
|
(9)
|
|
|
(186)
|
|
|
(171)
|
|
|
(244)
|
|
|
(3,404)
|
|
|
(782)
|
|
|
(4)
|
|
|
(4,839)
|
|
Net
|
$
|
(39)
|
|
|
$
|
88
|
|
|
$
|
6,434
|
|
|
$
|
3,817
|
|
|
$
|
257
|
|
|
$
|
44,827
|
|
|
$
|
11,044
|
|
|
$
|
2,008
|
|
|
$
|
68,436
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
TDRs are a result of rate reductions, term extensions, fee concessions, transfers to foreclosed assets, discounted loan payoffs, and debt forgiveness, or a combination thereof. The Company has granted various commercial and consumer loan modifications to provide borrowers relief from the economic impacts of COVID-19. In accordance with the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, the Company has elected to not apply TDR classification to COVID-19 related loan modifications that met all of the requisite criteria as stipulated in the CARES Act. The following table presents our troubled debt restructurings of loans held for investment by loan portfolio segment and class for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
2020
|
|
2019
|
|
|
|
Pre-
|
|
Post-
|
|
|
|
Pre-
|
|
Post-
|
|
|
|
Modification
|
|
Modification
|
|
|
|
Modification
|
|
Modification
|
|
Number
|
|
Outstanding
|
|
Outstanding
|
|
Number
|
|
Outstanding
|
|
Outstanding
|
|
of
|
|
Recorded
|
|
Recorded
|
|
of
|
|
Recorded
|
|
Recorded
|
Troubled Debt Restructurings
|
Loans
|
|
Investment
|
|
Investment
|
|
Loans
|
|
Investment
|
|
Investment
|
|
(Dollars in thousands)
|
Real estate mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
1
|
|
|
$
|
12,594
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Income producing and other residential
|
2
|
|
|
157
|
|
|
157
|
|
|
2
|
|
|
495
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Asset-based
|
1
|
|
|
15,267
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Venture capital
|
1
|
|
|
2,015
|
|
|
2,015
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Other commercial
|
5
|
|
|
7,105
|
|
|
100
|
|
|
3
|
|
|
99
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
10
|
|
|
$
|
37,138
|
|
|
$
|
2,272
|
|
|
6
|
|
|
$
|
594
|
|
|
$
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2020
|
|
2019
|
|
|
|
Pre-
|
|
Post-
|
|
|
|
Pre-
|
|
Post-
|
|
|
|
Modification
|
|
Modification
|
|
|
|
Modification
|
|
Modification
|
|
Number
|
|
Outstanding
|
|
Outstanding
|
|
Number
|
|
Outstanding
|
|
Outstanding
|
|
of
|
|
Recorded
|
|
Recorded
|
|
of
|
|
Recorded
|
|
Recorded
|
Troubled Debt Restructurings
|
Loans
|
|
Investment
|
|
Investment
|
|
Loans
|
|
Investment
|
|
Investment
|
|
(Dollars in thousands)
|
Real estate mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
9
|
|
|
$
|
16,339
|
|
|
$
|
3,745
|
|
|
1
|
|
|
$
|
37
|
|
|
$
|
—
|
|
Income producing and other residential
|
6
|
|
|
911
|
|
|
911
|
|
|
7
|
|
|
1,280
|
|
|
1,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Asset-based
|
8
|
|
|
17,008
|
|
|
1,741
|
|
|
1
|
|
|
620
|
|
|
620
|
|
Venture capital
|
2
|
|
|
2,047
|
|
|
2,047
|
|
|
11
|
|
|
16,076
|
|
|
16,214
|
|
Other commercial
|
33
|
|
|
30,324
|
|
|
21,544
|
|
|
14
|
|
|
792
|
|
|
792
|
|
Consumer
|
3
|
|
|
212
|
|
|
212
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
61
|
|
|
$
|
66,841
|
|
|
$
|
30,200
|
|
|
34
|
|
|
$
|
18,805
|
|
|
$
|
18,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended September 30, 2020, there was one $412,000 real estate mortgage commercial loan restructured in the preceding 12-month period that subsequently defaulted. During the nine months ended September 30, 2020, there was one $412,000 real estate mortgage commercial loan and one $5,000 other commercial loan restructured in the preceding 12-month period that subsequently defaulted.
During the three months ended September 30, 2019, there were three other commercial loan of $133,000 and one income producing and other residential loan for $254,000 restructured in the preceding 12-month period that subsequently defaulted. During the nine months ended September 30, 2019, there were two venture capital loans totaling $441,000, three other commercial loans totaling $133,000, and one income producing and other residential loan for $254,000 restructured in the preceding 12-month period that subsequently defaulted.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Leases Receivable
We provide equipment financing to our customers primarily with operating and direct financing leases. For direct financing leases, lease receivables are recorded on the balance sheet but the leased equipment is not, although we generally retain legal title to the leased equipment until the end of each lease. Direct financing leases are stated at the net amount of minimum lease payments receivable, plus any unguaranteed residual value, less the amount of unearned income and net acquisition discount at the reporting date. Direct lease origination costs are amortized using the effective interest method over the life of the leases. Direct financing leases are subject to our accounting for allowance for loan and lease losses. See Note 8. Leases for information regarding operating leases where we are the lessor.
The following table provides the components of leases receivable income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In thousands)
|
Component of leases receivable income:
|
|
|
|
|
|
|
|
Interest income on net investments in leases
|
$
|
1,869
|
|
|
$
|
2,648
|
|
|
$
|
6,224
|
|
|
$
|
8,674
|
|
The following table presents the components of leases receivable as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
(In thousands)
|
Net investment in direct financing leases:
|
|
|
|
Lease payments receivable
|
$
|
124,550
|
|
|
$
|
147,729
|
|
Unguaranteed residual assets
|
18,404
|
|
|
20,806
|
|
Deferred costs and other
|
550
|
|
|
655
|
|
Aggregate net investment in leases
|
$
|
143,504
|
|
|
$
|
169,190
|
|
|
|
|
|
The following table presents maturities of leases receivable as of the date indicated:
|
|
|
|
|
|
|
September 30, 2020
|
|
(In thousands)
|
Period ending December 31,
|
|
2020
|
$
|
16,794
|
|
2021
|
61,600
|
|
2022
|
25,977
|
|
2023
|
15,329
|
|
2024
|
11,416
|
|
2025 and thereafter
|
3,160
|
|
Total undiscounted cash flows
|
134,276
|
|
Less: Unearned income
|
(9,726)
|
|
Present value of lease payments
|
$
|
124,550
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Allowance for Loan and Lease Losses
The following tables present a summary of the activity in the allowance for loan and lease losses on loans and leases held for investment by loan portfolio segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
Real Estate
|
|
Construction
|
|
|
|
|
|
|
|
Mortgage
|
|
and Land
|
|
Commercial
|
|
Consumer
|
|
Total
|
|
(In thousands)
|
Allowance for Loan and Lease Losses:
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
130,724
|
|
|
$
|
70,113
|
|
|
$
|
97,947
|
|
|
$
|
2,266
|
|
|
$
|
301,050
|
|
Charge-offs
|
(1,551)
|
|
|
—
|
|
|
(35,666)
|
|
|
(67)
|
|
|
(37,284)
|
|
Recoveries
|
109
|
|
|
21
|
|
|
1,063
|
|
|
7
|
|
|
1,200
|
|
Net charge-offs
|
(1,442)
|
|
|
21
|
|
|
(34,603)
|
|
|
(60)
|
|
|
(36,084)
|
|
Provision (negative provision)
|
(7,588)
|
|
|
20,039
|
|
|
64,921
|
|
|
3,628
|
|
|
81,000
|
|
Balance, end of period
|
$
|
121,694
|
|
|
$
|
90,173
|
|
|
$
|
128,265
|
|
|
$
|
5,834
|
|
|
$
|
345,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
Real Estate
|
|
Construction
|
|
|
|
|
|
|
|
Mortgage
|
|
and Land
|
|
Commercial
|
|
Consumer
|
|
Total
|
|
(In thousands)
|
Allowance for Loan and Lease Losses:
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
44,575
|
|
|
$
|
30,544
|
|
|
$
|
61,528
|
|
|
$
|
2,138
|
|
|
$
|
138,785
|
|
Cumulative effect of change in accounting
|
|
|
|
|
|
|
|
|
|
principle - CECL
|
5,308
|
|
|
(8,592)
|
|
|
6,860
|
|
|
41
|
|
|
3,617
|
|
Balance, January 1, 2020
|
49,883
|
|
|
21,952
|
|
|
68,388
|
|
|
2,179
|
|
|
142,402
|
|
Charge-offs
|
(6,233)
|
|
|
—
|
|
|
(66,337)
|
|
|
(705)
|
|
|
(73,275)
|
|
Recoveries
|
360
|
|
|
21
|
|
|
4,410
|
|
|
48
|
|
|
4,839
|
|
Net charge-offs
|
(5,873)
|
|
|
21
|
|
|
(61,927)
|
|
|
(657)
|
|
|
(68,436)
|
|
Provision
|
77,684
|
|
|
68,200
|
|
|
121,804
|
|
|
4,312
|
|
|
272,000
|
|
Balance, end of period
|
$
|
121,694
|
|
|
$
|
90,173
|
|
|
$
|
128,265
|
|
|
$
|
5,834
|
|
|
$
|
345,966
|
|
|
|
|
|
|
|
|
|
|
|
Ending Allowance by
|
|
|
|
|
|
|
|
|
|
Evaluation Methodology:
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
340
|
|
|
$
|
—
|
|
|
$
|
2,584
|
|
|
$
|
—
|
|
|
$
|
2,924
|
|
Collectively evaluated
|
$
|
121,354
|
|
|
$
|
90,173
|
|
|
$
|
125,681
|
|
|
$
|
5,834
|
|
|
$
|
343,042
|
|
|
|
|
|
|
|
|
|
|
|
Ending Loans and Leases by
|
|
|
|
|
|
|
|
|
|
Evaluation Methodology:
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
51,852
|
|
|
$
|
1,782
|
|
|
$
|
41,501
|
|
|
$
|
—
|
|
|
$
|
95,135
|
|
Collectively evaluated
|
7,825,193
|
|
|
3,421,965
|
|
|
7,321,673
|
|
|
362,234
|
|
|
18,931,065
|
|
Ending balance
|
$
|
7,877,045
|
|
|
$
|
3,423,747
|
|
|
$
|
7,363,174
|
|
|
$
|
362,234
|
|
|
$
|
19,026,200
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
Real Estate
|
|
Construction
|
|
|
|
|
|
|
|
Mortgage
|
|
and Land
|
|
Commercial
|
|
Consumer
|
|
Total
|
|
(In thousands)
|
Allowance for Loan and Lease Losses:
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
46,826
|
|
|
$
|
26,378
|
|
|
$
|
59,401
|
|
|
$
|
2,432
|
|
|
$
|
135,037
|
|
Charge-offs
|
(120)
|
|
|
—
|
|
|
(6,021)
|
|
|
(360)
|
|
|
(6,501)
|
|
Recoveries
|
95
|
|
|
—
|
|
|
1,898
|
|
|
23
|
|
|
2,016
|
|
Net charge-offs
|
(25)
|
|
|
—
|
|
|
(4,123)
|
|
|
(337)
|
|
|
(4,485)
|
|
Provision (negative provision)
|
(1,655)
|
|
|
683
|
|
|
8,907
|
|
|
65
|
|
|
8,000
|
|
Balance, end of period
|
$
|
45,146
|
|
|
$
|
27,061
|
|
|
$
|
64,185
|
|
|
$
|
2,160
|
|
|
$
|
138,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
Real Estate
|
|
Construction
|
|
|
|
|
|
|
|
Mortgage
|
|
and Land
|
|
Commercial
|
|
Consumer
|
|
Total
|
|
(In thousands)
|
Allowance for Loan and Lease Losses:
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
46,021
|
|
|
$
|
28,209
|
|
|
$
|
56,360
|
|
|
$
|
1,882
|
|
|
$
|
132,472
|
|
Charge-offs
|
(850)
|
|
|
—
|
|
|
(25,951)
|
|
|
(802)
|
|
|
(27,603)
|
|
Recoveries
|
478
|
|
|
—
|
|
|
11,084
|
|
|
121
|
|
|
11,683
|
|
Net charge-offs
|
(372)
|
|
|
—
|
|
|
(14,867)
|
|
|
(681)
|
|
|
(15,920)
|
|
Provision (negative provision)
|
(503)
|
|
|
(1,148)
|
|
|
22,692
|
|
|
959
|
|
|
22,000
|
|
Balance, end of period
|
$
|
45,146
|
|
|
$
|
27,061
|
|
|
$
|
64,185
|
|
|
$
|
2,160
|
|
|
$
|
138,552
|
|
|
|
|
|
|
|
|
|
|
|
Ending Allowance by
|
|
|
|
|
|
|
|
|
|
Evaluation Methodology:
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
248
|
|
|
$
|
—
|
|
|
$
|
9,082
|
|
|
$
|
—
|
|
|
$
|
9,330
|
|
Collectively evaluated
|
$
|
44,898
|
|
|
$
|
27,061
|
|
|
$
|
55,103
|
|
|
$
|
2,160
|
|
|
$
|
129,222
|
|
|
|
|
|
|
|
|
|
|
|
Ending Loans and Leases by
|
|
|
|
|
|
|
|
|
|
Evaluation Methodology:
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
29,808
|
|
|
$
|
5,357
|
|
|
$
|
75,455
|
|
|
$
|
—
|
|
|
$
|
110,620
|
|
Collectively evaluated
|
7,867,116
|
|
|
2,546,117
|
|
|
7,803,102
|
|
|
408,588
|
|
|
18,624,923
|
|
Ending balance
|
$
|
7,896,924
|
|
|
$
|
2,551,474
|
|
|
$
|
7,878,557
|
|
|
$
|
408,588
|
|
|
$
|
18,735,543
|
|
The allowance for loan and lease losses increased by $44.9 million in the third quarter of 2020 to $346.0 million due primarily to a provision for loan and lease losses of $81.0 million driven by changes in the economic forecast, changes in modeling assumptions, and increased provisions for individually evaluated loans and leases.
We actively participated in the Paycheck Protection Program ("PPP"), under the provisions of the CARES Act during the second quarter of 2020. As of September 30, 2020, PPP loans had an outstanding balance of approximately $1.2 billion. The loans have two-year terms, are fully guaranteed by the SBA, and do not carry an allowance. As of September 30, 2020, none of the PPP loans have been forgiven.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
A loan is considered collateral-dependent, and is individually evaluated for reserve purposes, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent loans held for investment by collateral type as of the following date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Real
|
|
Business
|
|
|
|
Property
|
|
Assets
|
|
Total
|
|
(In thousands)
|
Real estate mortgage
|
$
|
45,504
|
|
|
$
|
—
|
|
|
$
|
45,504
|
|
Real estate construction and land
|
1,782
|
|
|
—
|
|
|
1,782
|
|
Commercial
|
—
|
|
|
28,136
|
|
|
28,136
|
|
Total
|
$
|
47,286
|
|
|
$
|
28,136
|
|
|
$
|
75,422
|
|
Allowance for Credit Losses
The allowance for credit losses is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments. The reserve for unfunded loan commitments is included within "Accrued interest payable and other liabilities" on the condensed consolidated balance sheets.
The following tables present a summary of the activity in the allowance for loan and lease losses and reserve for unfunded loan commitments for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
September 30, 2020
|
|
|
|
Allowance for
|
|
Reserve for
|
|
Total
|
|
|
|
|
|
|
|
Loan and
|
|
Unfunded Loan
|
|
Allowance for
|
|
|
|
|
|
|
|
Lease Losses
|
|
Commitments
|
|
Credit Losses
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
301,050
|
|
|
$
|
80,571
|
|
|
$
|
381,621
|
|
|
|
|
|
|
|
Charge-offs
|
(37,284)
|
|
|
—
|
|
|
(37,284)
|
|
|
|
|
|
|
|
Recoveries
|
1,200
|
|
|
—
|
|
|
1,200
|
|
|
|
|
|
|
|
Net charge-offs
|
(36,084)
|
|
|
—
|
|
|
(36,084)
|
|
|
|
|
|
|
|
Provision
|
81,000
|
|
|
16,000
|
|
|
97,000
|
|
|
|
|
|
|
|
Balance, end of period
|
$
|
345,966
|
|
|
$
|
96,571
|
|
|
$
|
442,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2020
|
|
|
|
Allowance for
|
|
Reserve for
|
|
Total
|
|
|
|
|
|
|
|
Loan and
|
|
Unfunded Loan
|
|
Allowance for
|
|
|
|
|
|
|
|
Lease Losses
|
|
Commitments
|
|
Credit Losses
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
138,785
|
|
|
$
|
35,861
|
|
|
$
|
174,646
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting
|
|
|
|
|
|
|
|
|
|
|
|
principle - CECL
|
3,617
|
|
|
3,710
|
|
|
7,327
|
|
|
|
|
|
|
|
Balance, January 1, 2020
|
142,402
|
|
|
39,571
|
|
|
181,973
|
|
|
|
|
|
|
|
Charge-offs
|
(73,275)
|
|
|
—
|
|
|
(73,275)
|
|
|
|
|
|
|
|
Recoveries
|
4,839
|
|
|
—
|
|
|
4,839
|
|
|
|
|
|
|
|
Net charge-offs
|
(68,436)
|
|
|
—
|
|
|
(68,436)
|
|
|
|
|
|
|
|
Provision
|
272,000
|
|
|
57,000
|
|
|
329,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
$
|
345,966
|
|
|
$
|
96,571
|
|
|
$
|
442,537
|
|
|
|
|
|
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
September 30, 2019
|
|
|
|
Allowance for
|
|
Reserve for
|
|
Total
|
|
|
|
|
|
|
|
Loan and
|
|
Unfunded Loan
|
|
Allowance for
|
|
|
|
|
|
|
|
Lease Losses
|
|
Commitments
|
|
Credit Losses
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
135,037
|
|
|
$
|
34,861
|
|
|
$
|
169,898
|
|
|
|
|
|
|
|
Charge-offs
|
(6,501)
|
|
|
—
|
|
|
(6,501)
|
|
|
|
|
|
|
|
Recoveries
|
2,016
|
|
|
—
|
|
|
2,016
|
|
|
|
|
|
|
|
Net charge-offs
|
(4,485)
|
|
|
—
|
|
|
(4,485)
|
|
|
|
|
|
|
|
Provision (negative provision)
|
8,000
|
|
|
(1,000)
|
|
|
7,000
|
|
|
|
|
|
|
|
Balance, end of period
|
$
|
138,552
|
|
|
$
|
33,861
|
|
|
$
|
172,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2019
|
|
|
|
Allowance for
|
|
Reserve for
|
|
Total
|
|
|
|
|
|
|
|
Loan and
|
|
Unfunded Loan
|
|
Allowance for
|
|
|
|
|
|
|
|
Lease Losses
|
|
Commitments
|
|
Credit Losses
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
132,472
|
|
|
$
|
36,861
|
|
|
$
|
169,333
|
|
|
|
|
|
|
|
Charge-offs
|
(27,603)
|
|
|
—
|
|
|
(27,603)
|
|
|
|
|
|
|
|
Recoveries
|
11,683
|
|
|
—
|
|
|
11,683
|
|
|
|
|
|
|
|
Net charge-offs
|
(15,920)
|
|
|
—
|
|
|
(15,920)
|
|
|
|
|
|
|
|
Provision (negative provision)
|
22,000
|
|
|
(3,000)
|
|
|
19,000
|
|
|
|
|
|
|
|
Balance, end of period
|
$
|
138,552
|
|
|
$
|
33,861
|
|
|
$
|
172,413
|
|
|
|
|
|
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 5. FORECLOSED ASSETS
The following table summarizes foreclosed assets, net of the valuation allowance, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
Property Type
|
2020
|
|
2019
|
|
(In thousands)
|
Commercial real estate
|
$
|
12,594
|
|
|
$
|
221
|
|
Construction and land development
|
219
|
|
|
219
|
|
|
|
|
|
|
|
|
|
Total other real estate owned, net
|
12,813
|
|
|
440
|
|
Other foreclosed assets
|
934
|
|
|
—
|
|
Total foreclosed assets, net
|
$
|
13,747
|
|
|
$
|
440
|
|
The following table presents the changes in foreclosed assets, net of the valuation allowance, for the period indicated:
|
|
|
|
|
|
|
Foreclosed
|
|
Assets
|
|
(In thousands)
|
Balance, December 31, 2019
|
$
|
440
|
|
|
|
Transfers to foreclosed assets from loans
|
14,370
|
|
|
|
Provision for losses
|
(267)
|
|
Reductions related to sales
|
(796)
|
|
Balance, September 30, 2020
|
$
|
13,747
|
|
NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets arise from the acquisition method of accounting for business combinations. Goodwill and other intangible assets generated from business combinations and deemed to have indefinite lives are not subject to amortization and instead are tested for impairment annually unless a triggering event occurs thereby requiring an updated assessment. Our regular annual impairment assessment occurs in the fourth quarter. Goodwill represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. Impairment exists when the carrying value of the goodwill exceeds its fair value. An impairment loss would be recognized in an amount equal to that excess as a charge to "Noninterest expense" in the condensed consolidated statements of earnings (loss).
The unprecedented decline in economic conditions triggered by the COVID-19 pandemic caused a significant decline in stock market valuations in March 2020, including our stock price. These events indicated that goodwill may be impaired and resulted in us performing a goodwill impairment assessment. We applied the market approach using an average share price of the Company's stock and a control premium to determine the fair value of the reporting unit. As a result, we recorded a goodwill impairment charge of $1.47 billion in the first quarter of 2020 as the estimated fair value of equity was less than book value. This was a non-cash charge to earnings and had no impact on our regulatory capital ratios, cash flows, or liquidity position.
The following table presents the changes in the carrying amount of goodwill for the period indicated:
|
|
|
|
|
|
|
Goodwill
|
|
(In thousands)
|
Balance, December 31, 2019
|
$
|
2,548,670
|
|
Impairment - March 2020
|
(1,470,000)
|
|
Balance, September 30, 2020
|
$
|
1,078,670
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Our other intangible assets with definite lives include CDI and CRI. CDI and CRI are amortized over their respective estimated useful lives and reviewed for impairment at least quarterly. The amortization expense represents the estimated decline in the value of the underlying deposits or customer relationships acquired. The aggregate amortization expense is expected to be $14.8 million for 2020. The estimated aggregate amortization expense related to our current intangible assets for each of the next four years is $10.8 million for 2021, $7.4 million for 2022, $3.8 million for 2023, and $1.7 million for 2024. Our current intangible assets are estimated to be fully amortized by the end of 2024.
The following table presents the changes in CDI and CRI and the related accumulated amortization for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In thousands)
|
Gross Amount of CDI and CRI:
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
109,646
|
|
|
$
|
119,497
|
|
|
$
|
117,573
|
|
|
$
|
119,497
|
|
|
|
|
|
|
|
|
|
Fully amortized portion
|
—
|
|
|
(1,924)
|
|
|
(7,927)
|
|
|
(1,924)
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
109,646
|
|
|
117,573
|
|
|
109,646
|
|
|
117,573
|
|
Accumulated Amortization:
|
|
|
|
|
|
|
|
Balance, beginning of period
|
(79,082)
|
|
|
(72,117)
|
|
|
(79,179)
|
|
|
(62,377)
|
|
Amortization
|
(3,751)
|
|
|
(4,833)
|
|
|
(11,581)
|
|
|
(14,573)
|
|
Fully amortized portion
|
—
|
|
|
1,924
|
|
|
7,927
|
|
|
1,924
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
(82,833)
|
|
|
(75,026)
|
|
|
(82,833)
|
|
|
(75,026)
|
|
Net CDI and CRI, end of period
|
$
|
26,813
|
|
|
$
|
42,547
|
|
|
$
|
26,813
|
|
|
$
|
42,547
|
|
NOTE 7. OTHER ASSETS
The following table presents the detail of our other assets as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
Other Assets
|
2020
|
|
2019
|
|
(In thousands)
|
Cash surrender value of BOLI
|
$
|
201,884
|
|
|
$
|
199,029
|
|
LIHTC investments (1)
|
200,352
|
|
|
75,149
|
|
Operating lease ROU assets, net (2)
|
121,887
|
|
|
129,301
|
|
Interest receivable
|
86,540
|
|
|
81,479
|
|
Taxes receivable
|
42,243
|
|
|
31,591
|
|
Equity investments without readily determinable fair values
|
33,783
|
|
|
27,738
|
|
SBIC investments (3)
|
27,357
|
|
|
16,505
|
|
Prepaid expenses
|
23,972
|
|
|
17,099
|
|
Equity warrants (4)
|
4,742
|
|
|
3,434
|
|
Equity investments with readily determinable fair values
|
1,135
|
|
|
2,998
|
|
Deferred tax assets, net
|
1,080
|
|
|
—
|
|
Other receivables/assets
|
52,248
|
|
|
52,488
|
|
Total other assets
|
$
|
797,223
|
|
|
$
|
636,811
|
|
____________________
(1) During the first quarter of 2020, the Company increased the amount of its investment in low income housing project partnerships by $101 million representing the amount of related unfunded commitments, with an offset to a liability included in "Accrued interest payable and other liabilities" on the condensed consolidated balance sheets.
(2) See Note 8. Leases for further details regarding the operating lease ROU assets.
(3) During the third quarter of 2020, the Company prospectively changed the accounting method for its SBIC investments from modified cost to NAV fair value.
(4) For information regarding equity warrants, see Note 10. Derivatives.
.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 8. LEASES
Operating Leases as a Lessee
Our lease expense is a component of "Occupancy expense" on our condensed consolidated statements of earnings (loss). The following table presents the components of lease expense for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In thousands)
|
Operating lease expense:
|
|
|
|
|
|
|
|
Fixed costs
|
$
|
8,950
|
|
|
$
|
8,347
|
|
|
$
|
26,027
|
|
|
$
|
25,183
|
|
Variable costs
|
15
|
|
|
7
|
|
|
40
|
|
|
77
|
|
Short-term lease costs
|
117
|
|
|
126
|
|
|
312
|
|
|
849
|
|
Sublease income
|
(1,081)
|
|
|
(1,010)
|
|
|
(3,100)
|
|
|
(3,190)
|
|
Net lease expense
|
$
|
8,001
|
|
|
$
|
7,470
|
|
|
$
|
23,279
|
|
|
$
|
22,919
|
|
The following table presents supplemental cash flow information related to leases for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
September 30,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
Operating cash flows from operating leases
|
$
|
25,198
|
|
|
$
|
24,674
|
|
ROU assets obtained in exchange for lease obligations:
|
|
|
|
Operating leases
|
$
|
19,027
|
|
|
$
|
172,189
|
|
The following table presents supplemental balance sheet and other information related to operating leases as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
2020
|
|
2019
|
|
(Dollars in thousands)
|
Operating leases:
|
|
|
|
Operating lease right-of-use assets, net
|
$
|
121,887
|
|
|
$
|
129,301
|
|
Operating lease liabilities
|
$
|
142,016
|
|
|
$
|
145,354
|
|
|
|
|
|
Weighted average remaining lease term (in years)
|
5.9
|
|
6.1
|
Weighted average discount rate
|
2.61
|
%
|
|
2.82
|
%
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents the maturities of operating lease liabilities as of the date indicated:
|
|
|
|
|
|
|
September 30, 2020
|
|
(In thousands)
|
Period ending December 31,
|
|
2020
|
$
|
8,729
|
|
2021
|
33,834
|
|
2022
|
28,190
|
|
2023
|
25,194
|
|
2024
|
17,989
|
|
2025 and thereafter
|
39,926
|
|
Total operating lease liabilities
|
153,862
|
|
Less: Imputed interest
|
(11,846)
|
|
Present value of operating lease liabilities
|
$
|
142,016
|
|
Operating Leases as a Lessor
We provide equipment financing to our customers through operating leases where we facilitate the purchase of equipment leased to our customers. The equipment is shown on the condensed consolidated balance sheets as "Equipment leased to others under operating leases" and is depreciated to its estimated residual value at the end of the lease term, shown as "Leased equipment depreciation" in the condensed consolidated statements of earnings (loss), according to our fixed asset accounting policy. We receive periodic rental income payments under the leases, which are recorded as "Noninterest Income" in the condensed consolidated statements of earnings (loss). The equipment is tested periodically for impairment. No impairment was recorded on "Equipment leased to others under operating leases" in the three or nine months ended September 30, 2020 and 2019.
The following table presents the rental payments to be received on operating leases as of the date indicated:
|
|
|
|
|
|
|
September 30, 2020
|
|
(In thousands)
|
Period ending December 31,
|
|
2020
|
$
|
8,573
|
|
2021
|
33,629
|
|
2022
|
31,080
|
|
2023
|
23,931
|
|
2024
|
19,486
|
|
2025 and thereafter
|
34,284
|
|
Total undiscounted cash flows
|
$
|
150,983
|
|
|
|
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 9. BORROWINGS AND SUBORDINATED DEBENTURES
Borrowings
The following table summarizes our borrowings as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Average
|
|
|
|
Average
|
|
Balance
|
|
Rate
|
|
Balance
|
|
Rate
|
|
(Dollars in thousands)
|
FHLB secured advances
|
$
|
10,000
|
|
|
—
|
%
|
|
$
|
1,318,000
|
|
|
1.66
|
%
|
FHLB unsecured overnight advance
|
—
|
|
|
—
|
%
|
|
141,000
|
|
|
1.56
|
%
|
AFX short-term borrowings
|
50,000
|
|
|
0.06
|
%
|
|
300,000
|
|
|
1.61
|
%
|
Non-recourse debt
|
—
|
|
|
—
|
%
|
|
8
|
|
|
7.50
|
%
|
Total borrowings
|
$
|
60,000
|
|
|
0.05
|
%
|
|
$
|
1,759,008
|
|
|
1.64
|
%
|
The Bank has established secured and unsecured lines of credit under which it may borrow funds from time to time on a term or overnight basis from the FHLB, the FRBSF, and other financial institutions.
FHLB Secured Line of Credit. The Bank had secured financing capacity with the FHLB as of September 30, 2020 of $3.6 billion, collateralized by a blanket lien on $5.6 billion of qualifying loans. During the second quarter of 2020, the Company prepaid $750.0 million of FHLB term advances and incurred $6.6 million of prepayment penalties, which is included in "Other expense" on the condensed consolidated statements of earnings (loss). The FHLB term advances had a weighted average interest rate of 0.96% and the prepayment decision was made after the significant drop in market interest rates in March 2020 and the expectation of continued low interest rates for an extended time.
The following table presents the interest rates and maturity dates of FHLB secured advances as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Maturity
|
|
|
|
|
|
Maturity
|
|
Balance
|
|
Rate
|
|
Date
|
|
Balance
|
|
Rate
|
|
Date
|
|
(Dollars in thousands)
|
Overnight advance
|
$
|
—
|
|
|
—
|
%
|
|
—
|
|
$
|
1,318,000
|
|
|
1.66
|
%
|
|
1/2/2020
|
Term advance
|
5,000
|
|
|
—
|
%
|
|
11/6/2020
|
|
—
|
|
|
—
|
%
|
|
—
|
Term advance
|
5,000
|
|
|
—
|
%
|
|
5/6/2021
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FHLB secured advances
|
$
|
10,000
|
|
|
—
|
%
|
|
|
|
$
|
1,318,000
|
|
|
1.66
|
%
|
|
|
FRBSF Secured Line of Credit. The Bank has a secured line of credit with the FRBSF. As of September 30, 2020, the Bank had secured borrowing capacity of $1.6 billion collateralized by liens covering $2.1 billion of qualifying loans. As of September 30, 2020 and December 31, 2019, there were no balances outstanding.
FHLB Unsecured Line of Credit. The Bank has a $112.0 million unsecured line of credit with the FHLB for the purchase of overnight funds, of which there were no balances outstanding at September 30, 2020. At December 31, 2019, the balance outstanding was $141.0 million.
Federal Funds Arrangements with Commercial Banks. As of September 30, 2020, the Bank had unsecured lines of credit of $180.0 million in the aggregate with several correspondent banks for the purchase of overnight funds, subject to availability of funds. These lines are renewable annually and have no unused commitment fees. As of September 30, 2020 and December 31, 2019, there were no balances outstanding. The Bank is a member of the AFX, through which it may either borrow or lend funds on an overnight or short-term basis with a group of pre-approved commercial banks. The availability of funds changes daily. As of September 30, 2020, there was a $50.0 million balance outstanding. As of December 31, 2019, there were $300.0 million in overnight borrowings outstanding.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Subordinated Debentures
The following table summarizes the terms of each issuance of subordinated debentures outstanding as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
Date
|
|
Maturity
|
|
Rate Index
|
Series
|
Balance
|
|
Rate
|
|
Balance
|
|
Rate
|
|
Issued
|
|
Date
|
|
(Quarterly Reset)
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
Trust V
|
$
|
10,310
|
|
|
3.35
|
%
|
|
$
|
10,310
|
|
|
5.00
|
%
|
|
8/15/2003
|
|
9/17/2033
|
|
3-month LIBOR + 3.10
|
Trust VI
|
10,310
|
|
|
3.30
|
%
|
|
10,310
|
|
|
4.94
|
%
|
|
9/3/2003
|
|
9/15/2033
|
|
3-month LIBOR + 3.05
|
Trust CII
|
5,155
|
|
|
3.20
|
%
|
|
5,155
|
|
|
4.85
|
%
|
|
9/17/2003
|
|
9/17/2033
|
|
3-month LIBOR + 2.95
|
Trust VII
|
61,856
|
|
|
3.02
|
%
|
|
61,856
|
|
|
4.69
|
%
|
|
2/5/2004
|
|
4/23/2034
|
|
3-month LIBOR + 2.75
|
Trust CIII
|
20,619
|
|
|
1.94
|
%
|
|
20,619
|
|
|
3.58
|
%
|
|
8/15/2005
|
|
9/15/2035
|
|
3-month LIBOR + 1.69
|
Trust FCCI
|
16,495
|
|
|
1.85
|
%
|
|
16,495
|
|
|
3.49
|
%
|
|
1/25/2007
|
|
3/15/2037
|
|
3-month LIBOR + 1.60
|
Trust FCBI
|
10,310
|
|
|
1.80
|
%
|
|
10,310
|
|
|
3.44
|
%
|
|
9/30/2005
|
|
12/15/2035
|
|
3-month LIBOR + 1.55
|
Trust CS 2005-1
|
82,475
|
|
|
2.20
|
%
|
|
82,475
|
|
|
3.85
|
%
|
|
11/21/2005
|
|
12/15/2035
|
|
3-month LIBOR + 1.95
|
Trust CS 2005-2
|
128,866
|
|
|
2.22
|
%
|
|
128,866
|
|
|
3.89
|
%
|
|
12/14/2005
|
|
1/30/2036
|
|
3-month LIBOR + 1.95
|
Trust CS 2006-1
|
51,545
|
|
|
2.22
|
%
|
|
51,545
|
|
|
3.89
|
%
|
|
2/22/2006
|
|
4/30/2036
|
|
3-month LIBOR + 1.95
|
Trust CS 2006-2
|
51,550
|
|
|
2.22
|
%
|
|
51,550
|
|
|
3.89
|
%
|
|
9/27/2006
|
|
10/30/2036
|
|
3-month LIBOR + 1.95
|
Trust CS 2006-3 (1)
|
30,211
|
|
|
1.60
|
%
|
|
28,902
|
|
|
1.64
|
%
|
|
9/29/2006
|
|
10/30/2036
|
|
3-month EURIBOR + 2.05
|
Trust CS 2006-4
|
16,470
|
|
|
2.22
|
%
|
|
16,470
|
|
|
3.89
|
%
|
|
12/5/2006
|
|
1/30/2037
|
|
3-month LIBOR + 1.95
|
Trust CS 2006-5
|
6,650
|
|
|
2.22
|
%
|
|
6,650
|
|
|
3.89
|
%
|
|
12/19/2006
|
|
1/30/2037
|
|
3-month LIBOR + 1.95
|
Trust CS 2007-2
|
39,177
|
|
|
2.22
|
%
|
|
39,177
|
|
|
3.89
|
%
|
|
6/13/2007
|
|
7/30/2037
|
|
3-month LIBOR + 1.95
|
Gross subordinated debentures
|
541,999
|
|
|
2.30
|
%
|
|
540,690
|
|
|
3.87
|
%
|
|
|
|
|
|
|
Unamortized discount (2)
|
(78,717)
|
|
|
|
|
(82,481)
|
|
|
|
|
|
|
|
|
|
Net subordinated debentures
|
$
|
463,282
|
|
|
|
|
$
|
458,209
|
|
|
|
|
|
|
|
|
|
___________________
(1) Denomination is in Euros with a value of €25.8 million.
(2) Amount represents the fair value adjustment on trust preferred securities assumed in acquisitions.
NOTE 10. DERIVATIVES
The Company uses derivatives to manage exposure to market risk, primarily foreign currency risk and interest rate risk, and to assist customers with their risk management objectives. The Company uses foreign exchange contracts to manage the foreign exchange rate risk associated with certain foreign currency-denominated assets and liabilities. As of September 30, 2020, all of our derivatives were held for risk management purposes and none were designated as accounting hedges. The objective is to manage the uncertainty of future foreign exchange rate fluctuations. These derivatives provide for a fixed exchange rate which has the effect of reducing or eliminating changes to anticipated cash flows to be received on assets and liabilities denominated in foreign currencies as the result of changes to exchange rates. Our derivatives are carried at fair value and recorded in other assets or other liabilities, as appropriate. The changes in fair value of our derivatives and the related interest are recognized in "Noninterest income - other" in the condensed consolidated statements of earnings (loss). For the nine months ended September 30, 2020, changes in fair value recorded through noninterest income in the condensed consolidated statements of earnings (loss) were immaterial.
In connection with negotiated credit facilities and certain other services, we may obtain equity warrant assets giving us the right to acquire stock in primarily private, venture-backed companies. We hold these assets for prospective investment gains. We do not use them to hedge any economic risks nor do we use other derivative instruments to hedge economic risks stemming from equity warrant assets. We account for equity warrant assets as derivatives when they contain net settlement terms and other qualifying criteria under ASC 815. These equity warrant assets are recorded at estimated fair value and are classified as "Other assets" on our condensed consolidated balance sheets at the time they are obtained. See Note 7. Other Assets.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Derivative instruments expose us to credit risk in the event of nonperformance by counterparties. This risk exposure consists primarily of the termination value of agreements where we are in a favorable position. We manage the credit risk associated with various derivative agreements through bilateral collateral posting requirements, counterparty credit review, and monitoring procedures.
The following table presents the U.S. dollar notional amounts and fair values of our derivative instruments included in the condensed consolidated balance sheets as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
Notional
|
|
Fair
|
|
Notional
|
|
Fair
|
Derivatives Not Designated As Hedging Instruments
|
Amount
|
|
Value
|
|
Amount
|
|
Value
|
|
(In thousands)
|
Derivative Assets:
|
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
10,364
|
|
|
$
|
81
|
|
|
$
|
15,159
|
|
|
$
|
71
|
|
Foreign exchange contracts
|
72,284
|
|
|
3,533
|
|
|
91,144
|
|
|
1,163
|
|
Interest rate and economic contracts
|
82,648
|
|
|
3,614
|
|
|
106,303
|
|
|
1,234
|
|
Equity warrant assets
|
25,729
|
|
|
4,742
|
|
|
26,079
|
|
|
3,434
|
|
Total
|
$
|
108,377
|
|
|
$
|
8,356
|
|
|
$
|
132,382
|
|
|
$
|
4,668
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
10,364
|
|
|
$
|
81
|
|
|
$
|
15,159
|
|
|
$
|
71
|
|
Foreign exchange contracts
|
72,284
|
|
|
—
|
|
|
91,144
|
|
|
684
|
|
Total
|
$
|
82,648
|
|
|
$
|
81
|
|
|
$
|
106,303
|
|
|
$
|
755
|
|
|
|
|
|
|
|
|
|
NOTE 11. COMMITMENTS AND CONTINGENCIES
The following table presents a summary of commitments described below as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Loan commitments to extend credit
|
$
|
7,178,506
|
|
|
$
|
8,183,158
|
|
Standby letters of credit
|
353,820
|
|
|
355,503
|
|
Commitments to contribute capital to small business
|
|
|
|
investment companies and CRA-related loan pools
|
52,941
|
|
|
40,698
|
|
Commitments to contribute capital to low income housing
|
|
|
|
project partnerships (1)
|
—
|
|
|
88,515
|
|
Commitments to contribute capital to private equity funds
|
50
|
|
|
50
|
|
Total
|
$
|
7,585,317
|
|
|
$
|
8,667,924
|
|
____________________
(1) During the first quarter of 2020, the Company increased the amount of its investment in low income housing project partnerships by $101 million representing the amount of related unfunded commitments, with an offset to a liability included in "Accrued interest payable and other liabilities" on the condensed consolidated balance sheets.
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the condensed consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement that the Company has in particular classes of financial instruments.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Commitments to extend credit are contractual agreements to lend to our customers when customers are in compliance with their contractual credit agreements and when customers have contractual availability to borrow under such agreements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. We provide standby letters of credit in conjunction with several of our lending arrangements and property lease obligations. Most guarantees expire within one year from the date of issuance. If a borrower defaults on its commitments subject to any letter of credit issued under these arrangements, we would be required to meet the borrower's financial obligation but would seek repayment of that financial obligation from the borrower. In some cases, borrowers have pledged cash and investment securities as collateral under these arrangements.
In addition, we invest in small business investment companies that call for capital contributions up to an amount specified in the partnership agreements, and in CRA-related loan pools. As of September 30, 2020 and December 31, 2019, we had commitments to contribute capital to these entities totaling $52.9 million and $40.7 million. We also had commitments to contribute up to an additional $50,000 to private equity funds at September 30, 2020 and December 31, 2019.
The following table presents the years in which commitments are expected to be paid for our commitments to contribute capital to small business investment companies and CRA-related loan pools as of the date indicated:
|
|
|
|
|
|
|
September 30, 2020
|
|
(In thousands)
|
Period ending December 31,
|
|
2020
|
$
|
26,824
|
|
2021
|
26,117
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
52,941
|
|
|
|
|
|
Legal Matters
In the ordinary course of our business, the Company is party to various legal actions, which we believe are incidental to the operation of our business. The outcome of such legal actions and the timing of ultimate resolution are inherently difficult to predict. In the opinion of management, based upon currently available information, any resulting liability, in addition to amounts already accrued, and taking into consideration insurance which may be applicable, would not have a material adverse effect on the Company’s financial statements or operations. The range of any reasonably possible liabilities is also not significant.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 12. FAIR VALUE MEASUREMENTS
The Company uses fair value to measure certain assets and liabilities on a recurring basis, primarily securities available-for-sale and derivatives. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period and such measurements are therefore considered “nonrecurring” for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for individually evaluated loans and leases and other real estate owned and also to record impairment on certain assets, such as goodwill, CDI, and other long-lived assets.
For information regarding the valuation methodologies used to measure our assets recorded at fair value (under ASC Topic 820), and for estimating fair value for financial instruments not recorded at fair value (under ASC Topic 825, as amended by ASU 2016-01 and ASU 2018-03), see Note 1. Nature of Operations and Summary of Significant Accounting Policies, and Note 14. Fair Value Measurements, to the Consolidated Financial Statements of the Company's 2019 Annual Report on Form 10-K.
The Company also holds SBIC investments measured at fair value using the NAV per share practical expedient that are not required to be classified in the fair value hierarchy. At September 30, 2020, the fair value of these investments was $27.4 million.
The following tables present information on the assets and liabilities measured and recorded at fair value on a recurring basis as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of
|
|
September 30, 2020
|
Measured on a Recurring Basis
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(In thousands)
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
Agency commercial MBS
|
$
|
1,204,315
|
|
|
$
|
—
|
|
|
$
|
1,204,315
|
|
|
$
|
—
|
|
Municipal securities
|
1,203,030
|
|
|
—
|
|
|
1,203,030
|
|
|
—
|
|
Agency residential CMOs
|
1,165,872
|
|
|
—
|
|
|
1,165,872
|
|
|
—
|
|
Agency residential MBS
|
246,498
|
|
|
—
|
|
|
246,498
|
|
|
—
|
|
Asset-backed securities
|
234,103
|
|
|
—
|
|
|
203,881
|
|
|
30,222
|
|
Corporate debt securities
|
174,282
|
|
|
—
|
|
|
174,282
|
|
|
—
|
|
Collateralized loan obligations
|
135,333
|
|
|
—
|
|
|
135,333
|
|
|
—
|
|
Private label residential CMOs
|
121,162
|
|
|
—
|
|
|
116,111
|
|
|
5,051
|
|
SBA securities
|
42,684
|
|
|
—
|
|
|
42,684
|
|
|
—
|
|
U.S. Treasury securities
|
5,335
|
|
|
5,335
|
|
|
—
|
|
|
—
|
|
Total securities available-for-sale
|
$
|
4,532,614
|
|
|
$
|
5,335
|
|
|
$
|
4,492,006
|
|
|
$
|
35,273
|
|
Equity investments with readily determinable fair values
|
$
|
1,135
|
|
|
$
|
1,135
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivatives (1):
|
|
|
|
|
|
|
|
Equity warrants
|
4,742
|
|
|
—
|
|
|
—
|
|
|
4,742
|
|
Interest rate and economic contracts
|
3,614
|
|
|
—
|
|
|
3,614
|
|
|
—
|
|
Derivative liabilities
|
81
|
|
|
—
|
|
|
81
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of
|
|
December 31, 2019
|
Measured on a Recurring Basis
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(In thousands)
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
Agency commercial MBS
|
$
|
1,108,224
|
|
|
$
|
—
|
|
|
$
|
1,108,224
|
|
|
$
|
—
|
|
Agency residential CMOs
|
1,136,397
|
|
|
—
|
|
|
1,136,397
|
|
|
—
|
|
Municipal securities
|
735,159
|
|
|
—
|
|
|
735,159
|
|
|
—
|
|
Agency residential MBS
|
305,198
|
|
|
—
|
|
|
305,198
|
|
|
—
|
|
Asset-backed securities
|
214,783
|
|
|
—
|
|
|
198,348
|
|
|
16,435
|
|
Collateralized loan obligations
|
123,756
|
|
|
—
|
|
|
123,756
|
|
|
—
|
|
Private label residential CMOs
|
99,483
|
|
|
—
|
|
|
93,219
|
|
|
6,264
|
|
SBA securities
|
48,258
|
|
|
—
|
|
|
48,258
|
|
|
—
|
|
Corporate debt securities
|
20,748
|
|
|
—
|
|
|
20,748
|
|
|
—
|
|
U.S. Treasury securities
|
5,181
|
|
|
5,181
|
|
|
—
|
|
|
—
|
|
Total securities available-for-sale
|
$
|
3,797,187
|
|
|
$
|
5,181
|
|
|
$
|
3,769,307
|
|
|
$
|
22,699
|
|
Equity investments with readily determinable fair values
|
$
|
2,998
|
|
|
$
|
2,998
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivatives (1):
|
|
|
|
|
|
|
|
Equity warrants
|
3,434
|
|
|
—
|
|
|
—
|
|
|
3,434
|
|
Interest rate and economic contracts
|
1,234
|
|
|
—
|
|
|
1,234
|
|
|
—
|
|
Derivative liabilities
|
755
|
|
|
—
|
|
|
755
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1) For information regarding derivative instruments, see Note 10. Derivatives.
During the nine months ended September 30, 2020, there was an $8,000 transfer from Level 3 equity warrants to Level 1 equity investments with readily determinable fair values measured on a recurring basis.
The following table presents information about quantitative inputs and assumptions used to determine the fair values provided by our third party pricing service for our Level 3 private label residential CMOs and asset-backed securities available-for-sale measured at fair value on a recurring basis as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Private Label Residential CMOs
|
|
Asset-Backed Securities
|
|
|
|
Weighted
|
|
Input or
|
|
Weighted
|
|
Range
|
|
Average
|
|
Range
|
|
Average
|
Unobservable Inputs
|
of Inputs
|
|
Input (1)
|
|
of Inputs
|
|
Input (2)
|
Voluntary annual prepayment speeds
|
5.3% - 16.1%
|
|
10.7%
|
|
10.0% - 15.0%
|
|
12.1%
|
Annual default rates (3)
|
0.7% - 29.8%
|
|
3.1%
|
|
2.0%
|
|
2.0%
|
Loss severity rates (3)
|
1.9% - 165.2%
|
|
53.0%
|
|
60.0%
|
|
60.0%
|
Discount rates
|
2.1% - 7.9%
|
|
6.0%
|
|
3.0% - 5.2%
|
|
3.8%
|
____________________
(1) Unobservable inputs for private label residential CMOs were weighted by the relative fair values of the instruments.
(2) Voluntary annual prepayment speeds and discount rates for asset-backed securities were weighted by the relative fair values of the instruments.
(3) Annual default rates and loss severity rates were the same for all of the asset-backed securities.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents information about quantitative inputs and assumptions used in the modified Black-Scholes option pricing model to determine the fair value for our Level 3 equity warrants measured at fair value on a recurring basis as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Equity Warrants
|
|
|
|
Weighted
|
|
Range
|
|
Average
|
Unobservable Inputs
|
of Inputs
|
|
Input (1)
|
Volatility
|
23.7% - 224.4%
|
|
31.8%
|
Risk-free interest rate
|
0.1% - 0.3%
|
|
0.2%
|
Remaining life assumption (in years)
|
0.20 - 4.95
|
|
2.85
|
____________________
(1) Unobservable inputs for equity warrants were weighted by the relative fair values of the instruments.
The following table summarizes activity for our Level 3 private label residential CMOs available-for-sale, asset-backed securities available-for-sale, and equity warrants measured at fair value on a recurring basis for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Label
|
|
Asset-Backed
|
|
Equity
|
|
Residential CMOs
|
|
Securities
|
|
Warrants
|
|
(In thousands)
|
Balance, December 31, 2019
|
$
|
6,264
|
|
|
$
|
16,435
|
|
|
$
|
3,434
|
|
Total included in earnings
|
326
|
|
|
42
|
|
|
3,310
|
|
Total included in other comprehensive income
|
(447)
|
|
|
(389)
|
|
|
—
|
|
Purchases
|
—
|
|
|
20,100
|
|
|
—
|
|
Issuances
|
—
|
|
|
—
|
|
|
240
|
|
Sales
|
—
|
|
|
—
|
|
|
(2,234)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net settlements
|
(1,092)
|
|
|
(5,966)
|
|
|
—
|
|
|
|
|
|
|
|
Transfers to Level 1 (equity investments with readily
|
|
|
|
|
|
determinable fair values)
|
—
|
|
|
—
|
|
|
(8)
|
|
Balance, September 30, 2020
|
$
|
5,051
|
|
|
$
|
30,222
|
|
|
$
|
4,742
|
|
|
|
|
|
|
|
Unrealized net gains (losses) for the period included in other
|
|
|
|
|
|
comprehensive income for securities held at quarter-end
|
$
|
1,239
|
|
|
$
|
(192)
|
|
|
|
|
|
|
|
|
|
The following tables present assets measured at fair value on a non-recurring basis as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement as of
|
|
September 30, 2020
|
Measured on a Non-Recurring Basis
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(In thousands)
|
Individually evaluated loans and leases (1)
|
$
|
63,865
|
|
|
$
|
—
|
|
|
$
|
3,031
|
|
|
$
|
60,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-recurring
|
$
|
63,865
|
|
|
$
|
—
|
|
|
$
|
3,031
|
|
|
$
|
60,834
|
|
______________________
(1) Includes nonaccrual loans and leases and performing TDRs with balances greater than $250,000.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement as of
|
|
December 31, 2019
|
Measured on a Non-Recurring Basis
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(In thousands)
|
Impaired loans and leases (1)
|
$
|
28,706
|
|
|
$
|
—
|
|
|
$
|
1,083
|
|
|
$
|
27,623
|
|
OREO
|
105
|
|
|
—
|
|
|
—
|
|
|
105
|
|
Total non-recurring
|
$
|
28,811
|
|
|
$
|
—
|
|
|
$
|
1,083
|
|
|
$
|
27,728
|
|
_____________________
(1) Includes all nonaccrual loans and leases and performing TDRs.
The following table presents losses recognized on assets measured on a nonrecurring basis for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
Losses on Assets
|
September 30,
|
|
September 30,
|
Measured on a Non-Recurring Basis
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In thousands)
|
Individually evaluated loans and leases (1)
|
$
|
29,047
|
|
|
$
|
8,339
|
|
|
$
|
40,920
|
|
|
$
|
10,091
|
|
|
|
|
|
|
|
|
|
OREO
|
157
|
|
|
54
|
|
|
267
|
|
|
54
|
|
Total losses
|
$
|
29,204
|
|
|
$
|
8,393
|
|
|
$
|
41,187
|
|
|
$
|
10,145
|
|
_____________________
(1) For 2019, losses are based on impaired loans and leases.
The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
|
|
Valuation
|
|
Unobservable
|
|
Input or
|
|
Weighted
|
Asset
|
|
Fair Value
|
|
Technique
|
|
Inputs
|
|
Range
|
|
Average
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Individually evaluated
|
|
|
|
|
|
|
|
|
|
|
loans and leases
|
|
$
|
26,357
|
|
Discounted cash flows
|
|
Discount rates
|
|
3.75% - 10.46%
|
|
8.19%
|
Individually evaluated
|
|
|
|
|
|
Discount from
|
|
|
|
|
loans and leases (1)
|
|
26,889
|
|
Third party appraisal
|
|
appraisal
|
|
23.00%
|
|
23.00%
|
Individually evaluated
|
|
|
|
|
|
|
|
|
|
|
loans and leases
|
|
7,588
|
|
Third party appraisals
|
|
No discounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-recurring Level 3
|
|
$
|
60,834
|
|
|
|
|
|
|
|
|
_____________________
(1) Relates to one loan at September 30, 2020.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Carrying
|
|
Estimated Fair Value
|
|
Amount
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(In thousands)
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
187,176
|
|
|
$
|
187,176
|
|
|
$
|
187,176
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-earning deposits in financial institutions
|
2,766,020
|
|
|
2,766,020
|
|
|
2,766,020
|
|
|
—
|
|
|
—
|
|
Securities available-for-sale
|
4,532,614
|
|
|
4,532,614
|
|
|
5,335
|
|
|
4,492,006
|
|
|
35,273
|
|
Investment in FHLB stock
|
17,250
|
|
|
17,250
|
|
|
—
|
|
|
17,250
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases held for investment, net
|
18,680,234
|
|
|
19,040,922
|
|
|
—
|
|
|
3,031
|
|
|
19,037,891
|
|
Equity warrants
|
4,742
|
|
|
4,742
|
|
|
—
|
|
|
—
|
|
|
4,742
|
|
Interest rate and economic contracts
|
3,614
|
|
|
3,614
|
|
|
—
|
|
|
3,614
|
|
|
—
|
|
Equity investments with readily determinable fair values
|
1,135
|
|
|
1,135
|
|
|
1,135
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
Core deposits
|
21,117,629
|
|
|
21,117,629
|
|
|
—
|
|
|
21,117,629
|
|
|
—
|
|
Non-core non-maturity deposits
|
1,123,909
|
|
|
1,123,909
|
|
|
—
|
|
|
1,123,909
|
|
|
—
|
|
Time deposits
|
1,724,157
|
|
|
1,731,333
|
|
|
—
|
|
|
1,731,333
|
|
|
—
|
|
Borrowings
|
60,000
|
|
|
59,988
|
|
|
50,000
|
|
|
9,988
|
|
|
—
|
|
Subordinated debentures
|
463,282
|
|
|
445,978
|
|
|
—
|
|
|
445,978
|
|
|
—
|
|
Derivative liabilities
|
81
|
|
|
81
|
|
|
—
|
|
|
81
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Carrying
|
|
Estimated Fair Value
|
|
Amount
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(In thousands)
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
172,585
|
|
|
$
|
172,585
|
|
|
$
|
172,585
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-earning deposits in financial institutions
|
465,039
|
|
|
465,039
|
|
|
465,039
|
|
|
—
|
|
|
—
|
|
Securities available-for-sale
|
3,797,187
|
|
|
3,797,187
|
|
|
5,181
|
|
|
3,769,307
|
|
|
22,699
|
|
Investment in FHLB stock
|
40,924
|
|
|
40,924
|
|
|
—
|
|
|
40,924
|
|
|
—
|
|
Loans and leases held for investment, net
|
18,708,087
|
|
|
19,055,004
|
|
|
—
|
|
|
1,083
|
|
|
19,053,921
|
|
Equity warrants
|
3,434
|
|
|
3,434
|
|
|
—
|
|
|
—
|
|
|
3,434
|
|
Interest rate and economic contracts
|
1,234
|
|
|
1,234
|
|
|
—
|
|
|
1,234
|
|
|
—
|
|
Equity investments with readily determinable fair values
|
2,998
|
|
|
2,998
|
|
|
2,998
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
Core deposits
|
16,187,287
|
|
|
16,187,287
|
|
|
—
|
|
|
16,187,287
|
|
|
—
|
|
Non-core non-maturity deposits
|
496,407
|
|
|
496,407
|
|
|
—
|
|
|
496,407
|
|
|
—
|
|
Time deposits
|
2,549,342
|
|
|
2,549,260
|
|
|
—
|
|
|
2,549,260
|
|
|
—
|
|
Borrowings
|
1,759,008
|
|
|
1,759,008
|
|
|
1,759,000
|
|
|
8
|
|
|
—
|
|
Subordinated debentures
|
458,209
|
|
|
441,617
|
|
|
—
|
|
|
441,617
|
|
|
—
|
|
Derivative liabilities
|
755
|
|
|
755
|
|
|
—
|
|
|
755
|
|
|
—
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Limitations
Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates do not reflect income taxes or any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a portion of the Company’s financial instruments, fair value estimates are based on what management believes to be reasonable judgments regarding expected future cash flows, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimated fair values are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Since the fair values have been estimated as of September 30, 2020, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different.
NOTE 13. EARNINGS (LOSS) PER SHARE
The following table presents the computations of basic and diluted net earnings (loss) per share for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(Dollars in thousands, except per share data)
|
Basic Earnings (Loss) Per Share:
|
|
|
|
|
|
|
|
Net earnings (loss)
|
$
|
45,503
|
|
|
$
|
110,026
|
|
|
$
|
(1,354,404)
|
|
|
$
|
350,755
|
|
Less: Earnings allocated to unvested restricted stock(1)
|
(578)
|
|
|
(1,369)
|
|
|
(1,603)
|
|
|
(3,725)
|
|
Net earnings (loss) allocated to common shares
|
$
|
44,925
|
|
|
$
|
108,657
|
|
|
$
|
(1,356,007)
|
|
|
$
|
347,030
|
|
|
|
|
|
|
|
|
|
Weighted-average basic shares and unvested restricted
|
|
|
|
|
|
|
|
stock outstanding
|
118,438
|
|
|
119,831
|
|
|
118,469
|
|
|
120,691
|
|
Less: Weighted-average unvested restricted stock
|
|
|
|
|
|
|
|
outstanding
|
(1,684)
|
|
|
(1,622)
|
|
|
(1,596)
|
|
|
(1,480)
|
|
Weighted-average basic shares outstanding
|
116,754
|
|
|
118,209
|
|
|
116,873
|
|
|
119,211
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
$
|
0.38
|
|
|
$
|
0.92
|
|
|
$
|
(11.60)
|
|
|
$
|
2.91
|
|
|
|
|
|
|
|
|
|
Diluted Earnings (Loss) Per Share:
|
|
|
|
|
|
|
|
Net earnings (loss) allocated to common shares
|
$
|
44,925
|
|
|
$
|
108,657
|
|
|
$
|
(1,356,007)
|
|
|
$
|
347,030
|
|
|
|
|
|
|
|
|
|
Weighted-average diluted shares outstanding
|
116,754
|
|
|
118,209
|
|
|
116,873
|
|
|
119,211
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
$
|
0.38
|
|
|
$
|
0.92
|
|
|
$
|
(11.60)
|
|
|
$
|
2.91
|
|
________________________
(1) Represents cash dividends paid to holders of unvested restricted stock, net of forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 14. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following table presents interest income and noninterest income, the components of total revenue, as disclosed in the condensed consolidated statements of earnings (loss) and the related amounts which are from contracts with customers within the scope of ASC Topic 606, "Revenue from Contracts with Customers," for the periods indicated. As illustrated here, substantially all of our revenue is specifically excluded from the scope of ASC Topic 606.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
2020
|
|
2019
|
|
Total
|
|
Revenue from
|
|
Total
|
|
Revenue from
|
|
Recorded
|
|
Contracts with
|
|
Recorded
|
|
Contracts with
|
|
Revenue
|
|
Customers
|
|
Revenue
|
|
Customers
|
|
(In thousands)
|
Total interest income
|
$
|
265,908
|
|
|
$
|
—
|
|
|
$
|
307,208
|
|
|
$
|
—
|
|
Noninterest income:
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
2,570
|
|
|
2,570
|
|
|
3,525
|
|
|
3,525
|
|
Other commissions and fees
|
10,541
|
|
|
3,228
|
|
|
10,855
|
|
|
4,965
|
|
Leased equipment income
|
9,900
|
|
|
—
|
|
|
9,615
|
|
|
—
|
|
Gain on sale of loans
|
35
|
|
|
—
|
|
|
765
|
|
|
—
|
|
Gain on sale of securities
|
5,270
|
|
|
—
|
|
|
908
|
|
|
—
|
|
Other income
|
9,936
|
|
|
289
|
|
|
7,761
|
|
|
428
|
|
Total noninterest income
|
38,252
|
|
|
6,087
|
|
|
33,429
|
|
|
8,918
|
|
Total revenue
|
$
|
304,160
|
|
|
$
|
6,087
|
|
|
$
|
340,637
|
|
|
$
|
8,918
|
|
The following table presents revenue from contracts with customers based on the timing of revenue recognition for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
September 30,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Products and services transferred at a point in time
|
$
|
3,189
|
|
|
$
|
5,046
|
|
Products and services transferred over time
|
2,898
|
|
|
3,872
|
|
Total revenue from contracts with customers
|
$
|
6,087
|
|
|
$
|
8,918
|
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2020
|
|
2019
|
|
Total
|
|
Revenue from
|
|
Total
|
|
Revenue from
|
|
Recorded
|
|
Contracts with
|
|
Recorded
|
|
Contracts with
|
|
Revenue
|
|
Customers
|
|
Revenue
|
|
Customers
|
|
(In thousands)
|
Total interest income
|
$
|
831,315
|
|
|
$
|
—
|
|
|
$
|
926,300
|
|
|
$
|
—
|
|
Noninterest income:
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
7,232
|
|
|
7,232
|
|
|
11,026
|
|
|
11,026
|
|
Other commissions and fees
|
30,373
|
|
|
10,388
|
|
|
33,453
|
|
|
14,661
|
|
Leased equipment income
|
34,188
|
|
|
—
|
|
|
28,079
|
|
|
—
|
|
Gain on sale of loans
|
468
|
|
|
—
|
|
|
1,091
|
|
|
—
|
|
Gain on sale of securities
|
13,167
|
|
|
—
|
|
|
25,261
|
|
|
—
|
|
Other income
|
20,782
|
|
|
961
|
|
|
16,476
|
|
|
1,253
|
|
Total noninterest income
|
106,210
|
|
|
18,581
|
|
|
115,386
|
|
|
26,940
|
|
Total revenue
|
$
|
937,525
|
|
|
$
|
18,581
|
|
|
$
|
1,041,686
|
|
|
$
|
26,940
|
|
The following table presents revenue from contracts with customers based on the timing of revenue recognition for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
September 30,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Products and services transferred at a point in time
|
$
|
10,152
|
|
|
$
|
14,579
|
|
Products and services transferred over time
|
8,429
|
|
|
12,361
|
|
Total revenue from contracts with customers
|
$
|
18,581
|
|
|
$
|
26,940
|
|
Contract Balances
The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
(In thousands)
|
Receivables, which are included in "Other assets"
|
$
|
1,207
|
|
|
$
|
1,094
|
|
Contract assets, which are included in "Other assets"
|
$
|
—
|
|
|
$
|
—
|
|
Contract liabilities, which are included in "Accrued interest payable and other liabilities"
|
$
|
392
|
|
|
$
|
490
|
|
Contract liabilities relate to advance consideration received from customers for which revenue is recognized over the life of the contract. The change in contract liabilities for the nine months ended September 30, 2020 due to revenue recognized that was included in the contract liability balance at the beginning of the period was $98,000.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 15. STOCK-BASED COMPENSATION
The Company’s 2017 Stock Incentive Plan, or the 2017 Plan, permits stock-based compensation awards to officers, directors, employees, and consultants. The 2017 Plan authorized grants of stock-based compensation instruments to purchase or issue up to 4,000,000 shares of Company common stock. As of September 30, 2020, there were 1,670,705 shares available for grant under the 2017 Plan. Though frozen for new issuances, certain awards issued under the 2003 Stock Incentive Plan remain outstanding, but are due to vest no later than February 2021.
Restricted Stock
Restricted stock amortization totaled $7.1 million and $7.3 million for the three months ended September 30, 2020 and 2019, and $19.2 million and $19.3 million for the nine months ended September 30, 2020 and 2019. Such amounts are included in "Compensation expense" on the condensed consolidated statements of earnings (loss). The amount of unrecognized compensation expense related to unvested TRSAs and PRSUs as of September 30, 2020 totaled $50.6 million.
Time-Based Restricted Stock Awards
At September 30, 2020, there were 1,706,690 shares of unvested TRSAs outstanding pursuant to the Company's 2003 and 2017 Stock Incentive Plans. The TRSAs generally vest ratably over a service period of three to four years from the date of the grant or immediately upon death of an employee. Compensation expense related to TRSAs is based on the fair value of the underlying award on the grant date and is recognized over the vesting period using the straight-line method.
Performance-Based Restricted Stock Units
At September 30, 2020, there were 315,008 units of unvested PRSUs that have been granted. The PRSUs will vest only if performance goals with respect to certain financial metrics are met over a three-year performance period. The shares underlying the PRSUs are not considered issued and outstanding until they vest. PRSUs are granted and initially expensed based on a target number. The number of shares that will ultimately vest based on actual performance will range from zero to a maximum of either 150% or 200% of target.
Compensation expense related to PRSUs is based on the fair value of the underlying award on the grant date and is amortized over the vesting period using the straight-line method unless it is determined that: (1) attainment of the financial metrics is less than probable, in which case a portion or all of the amortization is suspended, or (2) attainment of the financial metrics is improbable, in which case a portion or all of the previously recognized amortization is reversed and also suspended. If it is determined that attainment of a financial measure higher than target is probable, the amortization will increase to up to 150% or 200% of the target amortization amount. Annual PRSU expense may vary during the three-year performance period based upon changes in management's estimate of the number of shares that may ultimately vest. In the case where the performance target for the PRSU is based on a market condition (such as total shareholder return), the amortization is neither reversed nor suspended if it is subsequently determined that the attainment of the performance target is less than probable or improbable and the employee continues to meet the service requirement of the award.
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 16. RECENTLY ISSUED ACCOUNTING STANDARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
Effect on the Financial Statements
|
Standard
|
|
Description
|
|
Date
|
|
or Other Significant Matters
|
ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes"
|
|
This Update simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates an clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.
|
|
January 1, 2021
|
|
The adoption of this guidance is not expected to have a material impact on the Company's condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
Effect on the Financial Statements
|
Standard
|
|
Description
|
|
Date
|
|
or Other Significant Matters
|
ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)"
|
|
This Update clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.
|
|
January 1, 2021
|
|
The adoption of this guidance is not expected to have a material impact on the Company's condensed consolidated financial statements.
|
PACWEST BANCORP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
Effect on the Financial Statements
|
Standard
|
|
Description
|
|
Date
|
|
or Other Significant Matters
|
ASU 2020-04, "Reference Rate Reform (Topic 848)"
|
|
This Update provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other agreements affected by the anticipated transition away from LIBOR toward new interest reference rates. For agreements that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered “minor” so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. This Update also provides numerous optional expedients for derivative accounting. An entity may elect to apply this Update for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. We anticipate that ASU 2020-04 will simplify any modifications we execute between the selected start date (not yet determined) and December 31, 2022 that are directly related to LIBOR transition.
|
|
March 12, 2020 through December 31, 2022
|
|
The adoption of this guidance is not expected to have a material impact on the Company’s condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
Effect on the Financial Statements
|
Standard
|
|
Description
|
|
Date
|
|
or Other Significant Matters
|
ASU 2020-08, "Codification Improvements to Subtopic 31-20, Receivables - Nonrefundable Fees and Other Costs"
|
|
This Update clarifies that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period, which impacts the amortization period for nonrefundable fees and other costs.
|
|
January 1, 2021
|
|
The adoption of this guidance is not expected to have a material impact on the Company's condensed consolidated financial statements.
|
NOTE 17. SUBSEQUENT EVENTS
The Company has evaluated events that have occurred subsequent to September 30, 2020 and have concluded there are no other subsequent events that would require recognition in the accompanying condensed consolidated financial statements.