-Net Loss of $5.7 Million or $0.18 Per Share- -Net Interest Margin
Reaches 4.97% in June- -Total Tangible Capital Ratio at 9.65%-
-Credit Loss Reserve at 1.97% of Net Loans- -Average Core Deposits
Increased $122.4 Million- SAN DIEGO, July 21 /PRNewswire-FirstCall/
-- PacWest Bancorp (NASDAQ: PACW) today announced a net loss for
the second quarter of 2009 of $5.7 million, or $0.18 per diluted
share, compared to net earnings of $1.4 million, or $0.04 per
diluted share, for the first quarter of 2009. The decrease in net
earnings compared to the first quarter of 2009 resulted mostly from
higher credit loss provisions, higher other real estate owned
(OREO) expenses and the special FDIC insurance assessment. This
press release contains certain non-GAAP financial disclosures for
operating earnings and tangible capital. The Company uses certain
non-GAAP financial measures to provide meaningful supplemental
information regarding the Company's operational performance and to
enhance investors' overall understanding of such financial
performance. Operating earnings are determined by eliminating the
goodwill write-off; goodwill and any impairment thereof has no
effect on the Company's or the Bank's reported regulatory capital
ratios. Because the use of tangible capital amounts and ratios is
becoming more prevalent among banking regulators, investors and
analysts, we disclose our tangible capital ratios in addition to
equity to assets ratios. Please refer to the table at the end of
this release for a presentation of performance ratios in accordance
with GAAP and a reconciliation of the non-GAAP financial measures
to the GAAP financial measures. SECOND QUARTER RESULTS Second First
Quarter Quarter In thousands, except per share data and percentages
2009 2009 ---------------------------------------------------
------- -------- Net (loss) earnings $(5,740) $1,445 Diluted (loss)
earnings per share $(0.18) $0.04 Return on average assets (0.52%)
0.13% Return on average equity (4.88%) 1.27% Efficiency ratio 85.5%
71.0% Net interest margin 4.92% 4.71% At quarter end: Allowance for
credit losses to loans, net of unearned income 1.97% 1.95%
Equity-to-assets: Consolidated Company 10.37% 10.43% Pacific
Western Bank 11.41% 11.29% Tangible common equity (TCE) ratios:
Consolidated Company 9.65% 9.67% Pacific Western Bank 10.71% 10.54%
The decrease in net earnings of $7.2 million between the second
quarter of 2009 and the first quarter of 2009 is due mainly to the
combination of a higher provision for credit losses, ($2.3 million
after tax), higher OREO costs ($4.8 million after tax) and the
special FDIC insurance assessment ($1.2 million after tax). The
increase in the efficiency ratio for the linked quarters of 2009
was due mostly to the higher OREO costs and the special FDIC
insurance assessment which together added 183 basis points to the
second quarter efficiency ratio. Matt Wagner, Chief Executive
Officer, commented, "During the second quarter, we focused on core
deposit growth and managing our loan portfolio. Core deposits grew
over $10 million for the quarter and over $130 million for the
first six months, which has resulted from meaningful inflows from
new customers. On the credit side, we continued to review
individual credits for early indications of weakness and risk-grade
them appropriately. With respect to OREO properties, we are having
success in selling them with over $13 million sold during the
second quarter and another $13 million either in escrow or under
contract which are expected to be sold during the third quarter. We
believe that an aggressive, realistic approach to credit will
continue to serve us well in this difficult economic cycle." Mr.
Wagner continued, "While we are disappointed to have recorded a
small loss for the quarter, we remain vigilant in protecting our
credit loss reserve and our capital. Our credit loss provision
replenished our allowance for credit losses and we augmented the
Bank's capital during the quarter with a cash infusion from the
holding company. Our substantial capital base and core operating
strengths of low cost deposits and credit management are proving to
be our bedrock in this challenging environment." Vic Santoro,
Executive Vice President and Chief Financial Officer, stated, "Our
net interest margin increased by 21 basis points to 4.92% and was
driven mostly by lowering our deposit cost by 22 basis points to
0.90%. We increased our noninterest-bearing demand deposits while
continuing to run-off the higher-costing acquired and brokered
deposits. Despite the overall net loss reported for the quarter,
our core metrics remain strong with a credit loss reserve coverage
ratio of 1.97%, a healthy low-cost funding base, and robust capital
levels with the Company's and the Bank's tangible common equity
ratios at 9.65% and 10.71% at June 30, 2009. We continue to believe
that we are well-positioned to take advantage of growth
opportunities as they arise." YEAR TO DATE RESULTS Six months ended
June 30, In thousands, except per share data and percentages 2009
2008 --------------------------------------------------- ---- ----
Net loss as reported $(4,295) $(747,237) Goodwill write-off -
761,701 - ------- Net operating (loss) earnings (4,295) 14,464
====== ====== Diluted loss per share $(0.15) $(27.53) Diluted net
operating (loss) earnings per share $(0.15) $0.52 Efficiency ratio
78.3% 664.9% Operating efficiency ratio 78.3% 57.8% Net interest
margin 4.82% 5.51% The lower net loss for the six months ended June
30, 2009 was due mostly to the $761.7 million goodwill write-off
that occurred in the first half of 2008. The net loss for the first
six months of 2009 was $18.8 million lower than the net earnings
for the same period of 2008 when the 2008 goodwill write-off is
excluded. Such decrease is attributable to lower net interest
income ($8.2 million after tax), higher provision for credit losses
($1.5 million after tax), higher OREO costs ($5.9 million) and
higher FDIC insurance assessments ($2.4 million after tax). The
goodwill write-off increased the 2008 efficiency ratio by 6,071
basis points, from 57.8% to 664.9%. BALANCE SHEET CHANGES Total
loans, net of unearned income, decreased $20.0 million on a net
basis to $3.9 billion during the second quarter of 2009. Although
our loan balances declined, we remain active in our marketplace
serving our customers with loans to new and existing customers of
approximately $130 million. Total deposits decreased $147.5 million
during the second quarter. When brokered and acquired money desk
deposits are excluded, however, deposits decreased by only $11.9
million; this includes a $10.5 million increase in our core
deposits (noninterest-bearing demand, interest-bearing checking,
savings and money market deposits). at June 30, 2009,
noninterest-bearing demand deposits totaled $1.2 billion and
represented nearly 38% of total deposits. Brokered and acquired
money desk deposits totaled $31.8 million at June 30, 2009 compared
to $167.4 million at March 31, 2009. Since year end core deposits
have increased $130.9 million. NET INTEREST INCOME Net interest
income totaled $50.7 million for the second quarter of 2009
compared to $48.8 million for the first quarter of 2009. Loan
interest income declined $184,000 in the second quarter due mostly
to lower average balances. Interest expense decreased $2.0 million
compared to the first quarter due to continued run off of the
higher-rate brokered deposits, lower offering rates on existing
accounts and higher balances of lower-costing transactional
deposits. Net interest income decreased $14.2 million for the six
months ended June 30, 2009 compared to the same period of 2008. The
decrease is due mostly to reduced loan interest income from lower
average balances and yields. The loan yields are down
year-over-year due to the lower level of market interest rates and
higher nonaccrual loans. The decline in market interest rates also
contributed to lower interest expense. NET INTEREST MARGIN Our net
interest margin for the second quarter of 2009 was 4.92%, an
increase of 21 basis points when compared to the first quarter of
2009 net interest margin of 4.71%. The increase in the net interest
margin is due mostly to lower funding costs. We have managed down
our deposit costs as market interest rates remain at historically
low levels, increased our noninterest-bearing demand deposits and
replaced higher-cost acquired deposits with less expensive FHLB
advances to augment liquidity flows. The net interest margin was
4.77% in April, 5.02% in May and 4.97% in June. The yield on
average loans was 6.31% for the second quarter of 2009 compared to
6.37% for the first quarter and the loan yield for the month of
June was 6.29%. Net reversals of interest income on nonaccrual
loans negatively impacted the second quarter's net interest margin
and loan yield by 5 basis points. Deposit pricing and improved
deposit mix led to a 28 basis point decrease in the cost of
interest-bearing deposits to 1.43% for the second quarter and a 22
basis point decrease in our all-in deposit cost to 0.90%. On a
monthly basis, all-in deposit costs were 0.96% in April, 0.88% in
May and 0.85% in June. Our relatively low cost of deposits is
driven by demand deposit balances, which averaged 37% of average
total deposits during the second quarter of 2009. Average core
deposits increased $122.4 million quarter over quarter. The overall
cost of interest-bearing liabilities was 1.89% for the second
quarter of 2009, down 24 basis points from the first quarter due
mostly to lower deposit costs. The cost of interest-bearing
liabilities decreased to 1.85% in June 2009 from 1.99% in March
2009. The net interest margin for 2009 is 4.82% compared to 5.51%
for the first six months of 2008. The decrease is due mostly to
lower market interest rates and an increase in nonaccrual loans.
NONINTEREST INCOME Noninterest income for the second quarter of
2009 totaled $5.4 million compared to $6.1 million in the first
quarter of 2009. The decrease is due primarily to life insurance
proceeds of $536,000 received during the first quarter of 2009;
there was no similar item in the second quarter of 2009.
Noninterest income decreased for the six months ended June 30, 2009
to $11.5 million from the $11.8 million earned during the same
period in 2008. The decrease in noninterest income resulted largely
from lower interest return on the cash surrender values of our life
insurance policies and lower service charge income. NONINTEREST
EXPENSE Noninterest expense increased $8.9 million to $47.9 million
for second quarter of 2009 from the first quarter. Such increase is
due mostly to OREO expenses and higher FDIC deposit insurance
costs. The second quarter OREO expenses include holding costs of
$526,000, carrying value write-downs of $7.2 million and net
realized losses of $1.5 million resulting from the sale of OREO.
The FDIC special assessment for all banks was to be accrued in the
second quarter; such special assessment was based on asset size and
it totaled $2.0 million for Pacific Western Bank. Compensation
costs declined quarter-over-quarter as we reduced our staffing
levels in response to the lending environment. The first quarter of
2009 reorganization and lease charges of $1.2 million related to
staff reductions, premises costs related to the planned closing of
two banking offices and additional rent for a discontinued acquired
office; there were no such items in the second quarter of 2009.
Noninterest expense includes amortization of time-based and
performance-based restricted stock, which is included in
compensation, and intangible asset amortization. Amortization of
restricted stock totaled $1.9 million for the second quarter of
2009 compared to $2.2 million for the first quarter of 2009.
Amortization expense for restricted stock awards is estimated to be
$7.9 million for 2009. Intangible asset amortization totaled $2.4
million for the second quarter of 2009 and $2.2 million for the
first quarter of 2009 and is estimated to be $9.2 million for 2009.
The 2009 estimates of both restricted stock award expense and
intangible asset amortization are subject to change. Noninterest
expense for the six months ended June 30, 2009 totaled $86.9
million compared to $834.3 million for the same period in 2008. The
decrease is due to the goodwill write-off of $761.7 million
incurred in the first half of 2008; there was no such write-off in
2009. Excluding this write-off, operating noninterest expense was
$72.6 million for the first six months of 2008. The $14.3 million
increase in operating noninterest expense is due to higher OREO
costs of $10.1 million, higher insurance costs of $4.1 million, and
higher reorganization costs of $957,000. The majority of the OREO
costs were incurred in the second quarter of 2009. The higher
insurance costs relate entirely to higher FDIC deposit insurance
premiums, including the cost to participate in the Temporary
Liquidity Guarantee Program and the second quarter of 2009 special
FDIC assessment. TAXES The effective tax rate for the second
quarter of 2009 was 41.7% compared to 23.3% for the first quarter
of 2009. Tax credits on certain investments, tax-exempt income and
other tax adjustments have a greater effect on our effective tax
rates during periods of net losses or minimal net earnings. The
Company's blended Federal and State statutory rate is 42.0%. CREDIT
QUALITY The credit loss provision for the second quarter of 2009 of
$18.0 million was based on our reserve methodology and considered,
among other factors, net charge-offs, the level and trends of
classified, criticized, past due and nonaccrual loans, general
market conditions and portfolio concentrations. At June 30, 2009,
the allowance for credit losses totaled $76.7 million and
represented 1.97% of loans net of unearned income compared to $76.6
million and 1.95% at the end of March. Our loan portfolio continues
to experience pressure from the economic trends in Southern
California as indicated by the level of net charge-offs and the
increases in nonaccrual loans and nonperforming assets. We expect
that such pressures will continue in 2009. Nonperforming assets
include nonaccrual loans and OREO and totaled $203.5 million at the
end of June compared to $186.2 million at the end of March. The
ratio of nonperforming assets to loans and OREO increased to 5.15%
at June 30, 2009 from 4.69% at March 31, 2009. The increase in
nonperforming assets is due to higher nonaccrual loans. The types
of loans included in the nonaccrual and accruing loans past due
between 30 and 89 days categories as of June 30, 2009 and March 31,
2009 follow: Nonaccrual loans Accruing and ---------------- over 30
days June 30, 2009 March 31, 2009 past due -------------
-------------- ------------- As a % As a % June 30, March 31, of
loan of loan 2009 2009 Loan category category Balance category
Balance Balance Balance ------------- -------- ------- --------
------- ------- ------- (Dollars in thousands) SBA 504 5.3% $6,497
3.2% $3,869 $14,821 $2,699 SBA 7(a) and Express 24.6% 10,028 24.4%
10,173 529 738 Residential construction 35.6% 49,071 25.4% 44,778
2,606 22,893 Commercial real estate 1.0% 21,029 1.1% 22,782 7,087
13,442 Commercial construction 3.4% 8,606 5.7% 14,875 1,170 -
Commercial 3.0% 21,760 2.5% 18,255 1,199 2,543 Commercial land 1.4%
1,058 1.9% 1,641 - - Residential other 16.0% 20,504 15.5% 18,896
101 743 Residential land 23.4% 17,940 2.2% 1,257 - - Residential
multifamily 0.3% 301 0.3% 301 - - Other, including foreign 0.2% 123
2.0% 1,670 40 640 --- ----- --- --- 4.0% $156,917 3.5% $138,497
$27,553 $43,698 ======== ======== ======= ======= The $18.4 million
net increase in nonaccrual loans during the second quarter is
composed of additions of $57.5 million, repayments and payoffs of
$5.6 million, charge-offs of $15.9 million, and foreclosures of
$17.6 million. The most significant additions include: 4 high-end
residential construction loan projects for $22.1 million, of which
two are located in the Desert region of Southern California, one is
located in the Inland Empire, and one is located in Orange County;
a $4.9 million commercial real estate loan located in Orange County
that was paid down significantly in early July; and two residential
land loans for $17.0 million. The larger residential land loan
($13.1 million) is an in-fill lot development loan in the South Bay
area of Southern California. Other new nonaccrual loans include 3
SBA real estate loans totaling $2.7 million, $2.0 million in SBA
commercial loans, 2 financing receivables totaling $2.1 million and
3 loans in the residential other category totaling $1.6 million. In
addition to the loans added to nonaccrual in the second quarter,
the most significant nonaccrual loans include: a $16.6 million
residential construction loan collateralized by 28 remaining units
of a 32-unit condo project in Orange County; a $13.7 million
commercial loan for a retailer of high-end sports equipment where
we continue to work with the bankrupt debtor and the guarantor; and
an $11.8 million "residential other" loan secured by several
exclusive residential properties in and around San Diego. Included
in the nonaccrual loans at the end of June are $16.5 million of SBA
related loans representing 10.5% of total nonaccrual loans at that
date. The SBA 504 loans are secured by first trust deeds on
owner-occupied business real estate with loan-to-value ratios of
generally 50% or less at the time of origination. SBA 7(a) loans
are secured by borrowers' real estate and/or business assets and
are covered by an SBA guarantee of up to 85% of the loan amount.
The SBA guaranteed portion on the 7(a) and Express loans shown
above is $8.1 million. At June 30, 2009, the SBA loan portfolio
totaled $165.0 million and was composed of $124.1 million in SBA
504 loans and $40.9 million in SBA 7(a) and Express loans. Loans
accruing and over 30 days past due decreased $16.1 million during
the second quarter to $27.6 million due mostly to 21 loans totaling
$15.3 million that were brought current and a $1.0 million
combination of writeoffs, payoffs and transfers. The activity in
OREO during the second quarter of 2009 included 14 sales for $13.3
million; write-downs of $7.2 million and 11 additions of $19.5
million. The write-downs were based on new appraisals or negotiated
sales prices with buyers. The details of OREO as of June 30, 2009
and March 31, 2009 follow: Balance as of ------------- Property
Type June 30, 2009 March 31, 2009 ------------- -------------
-------------- (Dollars in thousands) Improved residential land
$2,611 $4,271 Commercial real estate 28,021 31,003 Residential
condominiums 2,418 3,143 Single family residences 13,532 9,256
------ ----- Total $46,582 $47,673 ======= ======= Our exposure to
nonowner-occupied residential construction loans was reduced by
$22.3 million during the second quarter to $208.8 million at the
end of June. The reduction was due mostly to $14.6 million in
payoffs and $4.6 million in foreclosures. The details of the
nonowner-occupied residential construction loan portfolio as of the
dates indicated follow: As of March 31, As of June 30, 2009 2009
------------------- ------- Number of Average loan Loan Category
Balance loans balance Balance ------------- ------- ------
------------ ------- (Dollars in thousands) Residential land
acquisition and development $53,552 19 $2,819 $58,420 Residential
nonowner-occupied single family 66,320 24 2,763 86,574 Unimproved
residential land 48,169 12 4,014 48,814 Residential multifamily
40,798 8 5,100 37,341 ------ --- ------ $208,839 63 $3,315 $231,149
======== === ======== Our largest loan portfolio concentration is
the real estate mortgage category, which includes loans secured by
commercial and residential real estate. The following table
presents our real estate mortgage loan portfolio as of the dates
indicated. At June 30, At March 31, Loan Category 2009 2009
------------- ------------ ------------- (Dollars in thousand)
Commercial real estate mortgage 100% owner-occupied $372,828
$362,428 Hotels and other hospitality 284,980 284,529
Nonowner-occupied office building, industrial and warehouse
facilities 1,607,899 1,595,686 --------- --------- Total commercial
real estate mortgage 2,265,707 2,242,643 --------- ---------
Residential real estate mortgage: Multi-family 105,450 103,329
Single family owner-occupied 86,389 91,004 Single family
nonowner-occupied 53,746 45,814 ------ ------ Total residential
real estate mortgage 245,585 240,147 ------- ------- Total real
estate mortgage $2,511,292 $2,482,790 ========== ==========
STOCKHOLDERS' EQUITY On June 16, 2009, PacWest Bancorp filed a
registration statement with the SEC to offer to sell, from time to
time, shares of common stock, preferred stock, and other
equity-linked securities, for an aggregate initial offering price
of up to $150 million. The registration statement was declared
effective on June 30, 2009. Proceeds from the offering are
anticipated to be used to fund future acquisitions of banks and
financial institutions and for general corporate purposes. To date,
no shares have been offered under this registration statement.
REGULATORY CAPITAL MEASURES ARE ABOVE THE WELL-CAPITALIZED MINIMUMS
PacWest and its wholly-owned banking subsidiary, Pacific Western
Bank, each remained well capitalized at June 30, 2009 as shown in
the following table. Minimum Regulatory Requirements Actual
------------ ------ Well Pacific Company Capitalized Western
Consolidated ----------- ------- ------------ Tier 1 leverage
capital ratio 5.00% 11.04% 12.59% Tier 1 risk-based capital ratio
6.00% 11.44% 13.25% Total risk-based capital 10.00% 12.70% 14.50%
Equity-to-assets -- 11.41% 10.37% Tangible common equity (TCE)
ratio -- 10.71% 9.65% EARNINGS PER SHARE On January 1, 2009, FSP
EITF 03-06-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities,
became effective for us. This pronouncement clarified that all
outstanding unvested share-based payment awards that contain rights
to nonforfeitable dividends are considered participating securities
and are included in the two-class method of determining basic and
diluted earnings per shares. All our unvested restricted stock
participates with our common stockholders in dividends. Application
of the new standard results in a reduction of net earnings
available to common stockholders and lower earnings per share when
compared to the previous requirements. Application of the new
standard had no effect on the reported amounts of earnings per
share for the second quarter of 2008. The new standard's effect on
the net loss per share for the six months ended June 30, 2008 was
an increase of $0.01 to $27.53 from $27.52. ABOUT PACWEST BANCORP
PacWest Bancorp is a bank holding company with $4.5 billion in
assets as of June 30, 2009, with one wholly-owned banking
subsidiary, Pacific Western Bank. Through 59 full-service community
banking branches, Pacific Western provides commercial banking
services, including real estate, construction and commercial loans,
to small and medium-sized businesses. Pacific Western's branches
are located in Los Angeles, Orange, Riverside, San Diego and San
Bernardino Counties. Through its subsidiary BFI Business Finance
and its division First Community Financial, Pacific Western also
provides working capital financing to growing companies located
throughout the Southwest, primarily in the states of Arizona,
California and Texas. Additional information regarding PacWest
Bancorp is available on the Internet at
http://www.pacwestbancorp.com/. Information regarding Pacific
Western Bank is also available on the Internet at
http://www.pacificwesternbank.com/. FORWARD-LOOKING STATEMENTS This
press release contains certain forward-looking information about
PacWest that is intended to be covered by the safe harbor for
"forward-looking statements" provided by the Private Securities
Litigation Reform Act of 1995. All statements other than statements
of historical fact are forward-looking statements. Such statements
involve inherent risks and uncertainties, many of which are
difficult to predict and are generally beyond the control of the
Company. We caution readers that a number of important factors
could cause actual results to differ materially from those
expressed in, implied or projected by, such forward-looking
statements. Risks and uncertainties include, but are not limited
to: lower than expected revenues; credit quality deterioration or a
pronounced and sustained reduction in real estate values could
cause an increase in the allowance for credit losses and a
reduction in net earnings; increased competitive pressure among
depository institutions; the Company's ability to complete future
acquisitions, successfully integrate such acquired entities, or
achieve expected beneficial synergies and/or operating efficiencies
within expected time-frames or at all; the possibility that
personnel changes will not proceed as planned; the cost of
additional capital is more than expected; a change in the interest
rate environment reduces interest margins; asset/liability
repricing risks and liquidity risks; pending legal matters may take
longer or cost more to resolve or may be resolved adversely to the
Company; general economic conditions, either nationally or in the
market areas in which the Company does or anticipates doing
business, are less favorable than expected; environmental
conditions, including natural disasters, may disrupt our business,
impede our operations, negatively impact the values of collateral
securing the Company's loans or impair the ability of our borrowers
to support their debt obligations; the economic and regulatory
effects of the continuing war on terrorism and other events of war,
including the war in Iraq; legislative or regulatory requirements
or changes adversely affecting the Company's business; and changes
in the securities markets; regulatory approvals for any capital
activities cannot be obtained on the terms expected or on the
anticipated schedule; and, other risks that are described in
PacWest's public filings with the U.S. Securities and Exchange
Commission (the "SEC"). If any of these risks or uncertainties
materializes or if any of the assumptions underlying such
forward-looking statements proves to be incorrect, PacWest's
results could differ materially from those expressed in, implied or
projected by such forward-looking statements. PacWest assumes no
obligation to update such forward-looking statements. For a more
complete discussion of risks and uncertainties, investors and
security holders are urged to read PacWest Bancorp's annual report
on Form 10-K, quarterly reports on Form 10-Q and other reports
filed by PacWest with the SEC. The documents filed by PacWest with
the SEC may be obtained at PacWest Bancorp's website at
http://www.pacwestbancorp.com/ or at the SEC's website at
http://www.sec.gov/. These documents may also be obtained free of
charge from PacWest by directing a request to: PacWest Bancorp c/o
Pacific Western Bank, 275 North Brea Boulevard, Brea, CA 92821.
Attention: Investor Relations. Telephone 714-671-6800. UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS June 30, March 31, December
31, 2009 2009 2008 ---- ---- ---- (In thousands, except share data)
Assets: Cash and due from banks $102,351 $118,009 $100,925 Federal
funds sold - - 165 --- --- --- Total cash and cash equivalents
102,351 118,009 101,090 Interest-bearing deposits in financial
institutions 79,314 95,758 58,780 Federal Home Loan Bank stock, at
cost 33,782 33,782 33,782 Securities available-for-sale, at
estimated fair value 165,286 141,106 121,577 ------- -------
------- Total securities 199,068 174,888 155,359 Loans, net of
unearned income 3,904,366 3,924,285 3,987,891 Allowance for loan
losses (72,122) (71,361) (63,519) ------- ------- ------- Net loans
3,832,244 3,852,924 3,924,372 Premises and equipment 23,611 24,202
24,675 Other real estate owned, net 46,583 47,673 41,310 Intangible
assets 35,417 37,675 39,922 Cash surrender value of life insurance
66,593 66,198 70,588 Other assets 91,055 78,743 79,406 ------
------ ------ Total assets $4,476,236 $4,496,070 $4,495,502
========== ========== ========== Liabilities and Stockholders'
Equity: Liabilities: Noninterest-bearing deposits $1,227,891
$1,223,884 $1,165,485 Interest-bearing deposits 2,025,420 2,176,932
2,309,730 --------- --------- --------- Total deposits 3,253,311
3,400,816 3,475,215 Accrued interest payable and other liabilities
43,931 46,302 64,567 Borrowings 585,000 450,000 450,000
Subordinated debentures 129,897 129,946 129,994 ------- -------
------- Total liabilities 4,012,139 4,027,064 4,119,776
Stockholders' Equity 464,097 469,006 375,726 ------- -------
------- Total Liabilities and Stockholders' Equity $4,476,236
$4,496,070 $4,495,502 ========== ========== ========== Shares
outstanding (including 1,237,423 shares at June 30, 2009, 1,267,405
shares at March 31, 2009, and 1,309,586 shares at December 31,
2008, underlying unvested stock awards) 32,310,308 32,326,505
28,516,106 Tangible book value per share $13.27 $13.34 $11.78 Book
value per share $14.36 $14.51 $13.18 UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) Six Months Ended
Quarters Ended June 30, -------------- -------- 6/30/09 3/31/09
6/30/08 2009 2008 ------- ------- ------- ---- ---- (In thousands,
except per share data) Interest income: Interest and fees on loans
$61,663 $61,847 $69,536 $123,510 $145,189 Interest on federal funds
sold - - 23 - 63 Interest on time deposits in other financial
institutions 37 61 2 98 5 Interest on investment securities 1,641
1,546 1,861 3,187 3,562 ----- ----- ----- ----- ----- Total
interest income 63,341 63,454 71,422 126,795 148,819 ------ ------
------ ------- ------- Interest expense: Interest expense on
deposits 7,367 9,320 8,919 16,687 20,740 Interest expense on
borrowings 3,626 3,582 4,680 7,208 9,987 Interest expense on
subordinated debentures 1,639 1,779 2,051 3,418 4,460 ----- -----
----- ----- ----- Total interest expense 12,632 14,681 15,650
27,313 35,187 ------ ------ ------ ------ ------ Net interest
income before provision for credit losses 50,709 48,773 55,772
99,482 113,632 Provision for credit losses 18,000 14,000 3,500
32,000 29,500 ------ ------ ----- ------ ------ Net interest income
after provision for credit losses 32,709 34,773 52,272 67,482
84,132 ------ ------ ------ ------ ------ Noninterest income:
Service charges on deposit accounts 3,009 3,149 3,205 6,158 6,429
Other commissions and fees 1,746 1,685 1,812 3,431 3,331 Gain
(loss) on sale of loans - - (572) - (303) Increase in cash
surrender value of life insurance 394 439 617 833 1,204 Other
income 224 808 302 1,032 1,172 --- --- --- ----- ----- Total
noninterest income 5,373 6,081 5,364 11,454 11,833 ----- -----
----- ------ ------ Noninterest expense: Compensation 18,394 19,331
18,919 37,725 37,765 Occupancy 6,462 6,386 5,930 12,848 11,800 Data
processing 1,677 1,628 1,604 3,305 3,147 Other professional
services 1,486 1,524 1,669 3,010 3,084 Business development 625 725
849 1,350 1,605 Communications 688 693 816 1,381 1,640 Insurance
and assessments 3,871 1,598 810 5,469 1,350 Other real estate
owned, net 9,231 997 127 10,228 101 Intangible asset amortization
2,367 2,247 2,484 4,614 5,014 Reorganization and lease charges -
1,215 258 1,215 258 Legal settlement - - 780 - 780 Goodwill
write-off - - 486,701 - 761,701 Other 3,130 2,625 3,100 5,755 6,014
----- ----- ----- ----- ----- Total noninterest expense 47,931
38,969 524,047 86,900 834,259 ------ ------ ------- ------ -------
(Loss) earnings before income taxes (9,849) 1,885 (466,411) (7,964)
(738,294) Income taxes (4,109) 440 8,103 (3,669) 8,943 ------ ---
----- ------ ----- Net (loss) earnings $(5,740) $1,445 $(474,514)
$(4,295) $(747,237) ======= ====== ========= ======= ========= Per
share information (Loss) earnings per share: Basic (loss) earnings
per share $(0.18) $0.04 $(17.47) $(0.15) $(27.53) Diluted (loss)
earnings per share $(0.18) $0.04 $(17.47) $(0.15) $(27.53)
UNAUDITED AVERAGE BALANCE SHEETS Quarters Ended Six Months Ended
-------------- ---------------- 6/30/09 3/31/09 6/30/08 6/30/09
6/30/08 ------- ------- ------- ------- ------- (Dollars in
thousands) Average Assets: Loans, net of unearned income $3,921,561
$3,938,322 $3,970,704 $3,929,895 $3,994,964 Investment securities
183,386 165,333 146,840 174,410 145,110 Federal funds sold - 260
4,549 129 4,791 Interest-bearing deposits in financial institutions
30,425 92,271 326 61,177 325 ------ ------ --- ------ --- Average
earning assets 4,135,372 4,196,186 4,122,419 4,165,611 4,145,190
Other assets 279,331 284,628 748,146 281,601 889,137 -------
------- ------- ------- ------- Average total assets $4,414,703
$4,480,814 $4,870,565 $4,447,212 $5,034,327 ========== ==========
========== ========== ========== Average Liabilities and
Stockholders' Equity: Average liabilities Noninterest- bearing
deposits $1,223,169 $1,163,059 $1,256,794 $1,193,280 $1,264,984
Interest checking 370,664 349,908 373,382 360,343 371,611 Money
market accounts 891,610 841,410 1,085,945 866,649 1,087,809 Savings
114,339 123,005 100,779 118,648 102,842 Time deposits 692,439
899,666 426,654 795,480 420,183 ------- ------- ------- -------
------- Interest- bearing deposits 2,069,052 2,213,989 1,986,760
2,141,120 1,982,445 --------- --------- --------- ---------
--------- Average deposits 3,292,221 3,377,048 3,243,554 3,334,400
3,247,429 Subordinated debentures 129,924 129,975 130,149 129,950
133,989 Borrowings 475,634 451,608 592,966 463,687 606,658 Other
liabilities 45,458 61,882 48,801 53,260 49,503 ------ ------ ------
------ ------ Average liabilities 3,943,237 4,020,513 4,015,470
3,981,297 4,037,579 --------- --------- --------- ---------
--------- Average equity 471,466 460,301 855,095 465,915 996,748
------- ------- ------- ------- ------- Average liabilities and
stockholders' equity $4,414,703 $4,480,814 $4,870,565 $4,447,212
$5,034,327 ========== ========== ========== ========== ==========
Yield Analysis: Average earning assets $4,135,372 $4,196,186
$4,122,419 $4,165,611 $4,145,190 Yield 6.14% 6.13% 6.97% 6.14%
7.22% Average interest- Bearing deposits $2,069,052 $2,213,989
$1,986,760 $2,141,120 $1,982,445 Cost 1.43% 1.71% 1.81% 1.57% 2.10%
Average deposits $3,292,221 $3,377,048 $3,243,554 $3,334,400
$3,247,429 Cost 0.90% 1.12% 1.11% 1.01% 1.28% Average interest-
bearing liabilities $2,674,610 $2,795,572 $2,709,875 $2,734,757
$2,723,092 Cost 1.89% 2.13% 2.32% 2.01% 2.60% Average subordinated
debentures 129,924 129,975 130,149 129,950 133,989 Cost 5.06% 5.55%
6.34% 5.30% 6.69% Average borrowings 475,634 451,608 592,966
463,687 606,658 Cost 3.06% 3.22% 3.17% 3.13% 3.31% Average interest
sensitive liabilities $3,897,779 $3,958,631 $3,966,669 $3,928,037
$3,988,076 Cost 1.30% 1.50% 1.59% 1.40% 1.77% Interest spread 4.25%
4.00% 4.65% 4.12% 4.62% Net interest margin 4.92% 4.71% 5.44% 4.82%
5.51% DEPOSITS (unaudited) As of the Dates Indicated
------------------------- 6/30/09 3/31/09 12/31/08 ------- -------
-------- (Dollars in thousands) Transaction accounts: Demand
deposits $1,227,891 $1,223,884 $1,165,485 Interest checking 366,126
359,551 342,241 ------- ------- ------- Total transaction accounts
1,594,017 1,583,435 1,507,726 Non-transaction accounts: Money
market 897,152 890,558 837,873 Savings 109,910 116,550 124,603 Time
deposits under $100,000 250,826 400,084 611,083 Time deposits over
$100,000 401,406 410,189 393,930 ------- ------- ------- Total
non-transaction accounts 1,659,294 1,817,381 1,967,489 ---------
--------- --------- Total deposits $3,253,311 $3,400,816 $3,475,215
========== ========== ========== LOAN CONCENTRATION (unaudited) As
of the Dates Indicated ------------------------- 6/30/09 3/31/09
12/31/08 9/30/08 6/30/08 ------- ------- -------- ------- -------
(Dollars in thousands) Loan Category: Domestic: Commercial $776,060
$779,971 $845,410 $803,717 $833,376 Real estate- construction
544,889 583,709 579,884 608,968 623,605 Commercial real estate-
mortgage 2,511,292 2,482,790 2,473,089 2,437,593 2,361,529 Consumer
35,150 38,615 44,938 41,671 47,500 Foreign: Commercial 42,672
44,955 50,918 49,153 46,096 Other 1,722 2,126 2,245 2,323 1,861
----- ----- ----- ----- ----- Total gross loans $3,911,785
$3,932,166 $3,996,484 $3,943,425 $3,913,967 ========== ==========
========== ========== ========== COMPONENTS OF ALLOWANCE FOR CREDIT
LOSSES, NONPERFORMING ASSETS AND CREDIT QUALITY MEASURES
(Unaudited) As of or for the: ----------------- Quarter Ended Year
Ended ------------- ---------- 6/30/09 3/31/09 12/31/08 -------
------- -------- (Dollars in thousands) ALLOWANCE FOR CREDIT
LOSSES: ---------------------------- Allowance for loan losses
$72,122 $71,361 $63,519 Reserve for unfunded loan commitments 4,621
5,271 5,271 ----- ----- ----- Allowance for credit losses $76,743
$76,632 $68,790 ======= ======= ======= NONPERFORMING ASSETS:
--------------------- Nonaccrual loans $156,917 $138,497 $63,470
Other real estate owned 46,583 47,673 41,310 ------ ------ ------
Total nonperforming assets $203,500 $186,170 $104,780 ========
======== ======== Allowance for credit losses to loans, net of
unearned income 1.97% 1.95% 1.72% Allowance for credit losses to
nonaccrual loans 48.91% 55.33% 108.4% Nonperforming assets to total
loans and other real estate owned 5.15% 4.69% 2.60% Nonaccrual
loans to total loans 4.02% 3.53% 1.59% ALLOWANCE FOR CREDIT LOSSES
ROLLFORWARD AND NET CHARGE-OFF MEASUREMENT (unaudited) As of or for
the: ----------------- Quarter Ended Quarter Ended Year Ended
------------- ------------- ---------- 6/30/09 3/31/09 12/31/08
------- ------- -------- (Dollars in thousands) Balance at
beginning of period $76,632 $68,790 $61,028 Loans charged-off:
Commercial (3,405) (1,881) (7,664) Real estate-construction
(12,757) (1,572) (24,998) Real estate-mortgage (1,536) (2,738)
(2,617) Consumer (529) (216) (3,947) Foreign - (368) (349) --- ----
---- Total loans charged-off (18,227) (6,775) (39,575) Recoveries
on loans charged-off: Commercial 64 303 971 Real
estate-construction 2 - 88 Real estate-mortgage 231 190 412
Consumer 11 110 47 Foreign 30 14 19 --- --- --- Total recoveries on
loans charged-off 338 617 1,537 --- --- ----- Net charge-offs
(17,889) (6,158) (38,038) Provision for credit losses 18,000 14,000
45,800 Balance at end of period $76,743 $76,632 $68,790 =======
======= ======= Annualized net charge-offs to average loans 1.83%
0.63% 0.96% This press release contains certain non-GAAP financial
disclosures for operating earnings and tangible capital. The
Company uses certain non-GAAP financial measures to provide
meaningful supplemental information regarding the Company's
operational performance and to enhance investors' overall
understanding of such financial performance. Operating earnings are
determined by eliminating the goodwill write-off. Because (a)
goodwill is eliminated in determining regulatory capital levels and
its impairment in no way impacts the Company's regulatory capital,
(b) the goodwill write-off occurred in the first half of 2008 with
no prior pattern of such write-offs and (c) further goodwill
write-offs are not expected as the asset has been totally
eliminated and acquisition activity has been minor, we believe its
exclusion from operating results allows investors to assess
operating results on a normalized basis. Because the use of
tangible capital amounts and ratios is becoming more prevalent
among banking regulators, investors and analysts, we disclose our
tangible capital ratios in addition to equity-to-assets ratios.
These non-GAAP financial measures are presented for supplemental
informational purposes only for understanding the Company's
operating results and should not be considered a substitute for
financial information presented in accordance with United States
generally accepted accounting principles (GAAP). The following
table presents performance ratios in accordance with GAAP and a
reconciliation of the non-GAAP financial measurements to the GAAP
financial measurements. Non GAAP Measurements (Unaudited) In
thousands, Six Months ended except per Quarter Ended June 30, share
data ------------- -------- and June 30, March 31, June 30,
percentages 2009 2009 2008 2009 2008 ------------ --------
--------- -------- ---- ---- Net (loss) earnings as reported
$(5,740) $1,445 $(474,514) $(4,295) $(747,237) Goodwill write-off -
- 486,701 - 761,701 --- --- ------- --- ------- Net operating
earnings $(5,740) $1,445 $12,187 $(4,295) $14,464 ======= ======
======= ======= ======= GAAP basic shares outstanding 31,067.6
30,495.2 27,166.8 30,783.0 27,156.0 Effect of restricted stock and
dilutive stock options (a) - 0.5 - - - --- --- --- --- --- GAAP
diluted shares outstanding 31,067.6 30,495.7 27,166.8 30,783.0
27,156.0 ======== ======== ======== ======== ======== Operating
earnings basic shares outstanding 31,067.6 30,495.2 27,166.8
30,783.0 27,156.0 Effect of restricted stock and dilutive stock
options - 0.5 0.7 - 0.8 --- --- --- --- --- Operating earnings
diluted shares outstanding 31,067.6 30,495.7 27,167.5 30,783.0
27,156.8 ======== ======== ======== ======== ======== GAAP basic
and diluted earnings (loss) per share $(0.18) $0.04 $(17.47)
$(0.15) $(27.53) ====== ===== ======= ====== ======= Net operating
diluted earnings per share $(0.18) $0.04 $0.44 $(0.15) $0.52 ======
===== ===== ====== ===== GAAP return on average assets (0.52%)
0.13% (39.18%) (0.19%) (29.85%) ===== ==== ====== ===== ====== Net
operating return on average assets (0.52%) 0.13% 1.01% (0.19%)
0.58% ===== ==== ==== ===== ==== GAAP return on average equity
(4.88%) 1.27% (223.19%) (1.86%) (150.76%) ===== ==== ======= =====
======= Net operating return on average equity (4.88%) 1.27% 5.73%
(1.86%) 2.92% ===== ==== ==== ===== ==== Noninterest expense as
reported $47,931 $38,969 $524,047 $86,900 $834,259 Goodwill
write-off - - (486,701) - (761,701) --- --- -------- --- --------
Operating noninterest expense $47,931 $38,969 $37,346 $86,900
$72,558 ======= ======= ======= ======= ======= End of period
assets $4,476,236 $4,496,070 $4,343,324 Intangibles 35,417 37,675
38,771 ------ ------ ------ End of period tangible assets
$4,440,819 $4,458,395 $4,304,553 ========== ========== ==========
End of period equity $464,097 $469,006 $374,744 Intangibles 35,417
37,675 38,771 ------ ------ ------ End of period tangible equity
$428,680 $431,331 $335,973 ======== ======== ======== Equity to
assets ratio 10.37% 10.43% 8.63% ===== ===== ==== Tangible equity
to assets (TCE) ratio 9.65% 9.67% 7.81% ==== ==== ==== Pacific
Western Bank -------------------- End of period assets $4,468,870
$4,486,793 $4,332,562 Intangibles 35,417 37,675 38,771 ------
------ ------ End of period tangible assets $4,433,453 $4,449,118
$4,293,791 ========== ========== ========== End of period equity
$510,086 $506,694 $467,921 Intangibles 35,417 37,675 38,771 ------
------ ------ End of period tangible equity $474,669 $469,019
$429,150 ======== ======== ======== Equity-to- assets 11.41% 11.29%
10.80% ===== ===== ===== Tangible equity to assets (TCE) ratio
10.71% 10.54% 9.99% ===== ===== ==== ------------------ (a)
Anti-dilutive for the quarters ended June 30, 2009 and 2008 for the
six months ended June 30, 2008. Contact information: Matt Wagner,
Chief Executive Officer, (310) 728-1020 Vic Santoro, Executive Vice
President and CFO, (310) 728-1021 DATASOURCE: PacWest Bancorp
CONTACT: Matt Wagner, Chief Executive Officer, +1-310-728-1020, or
Vic Santoro, Executive Vice President and CFO, +1-310-728-1021,
both of PacWest Bancorp Web Site: http://www.pacwestbancorp.com/
Copyright