-- Net Earnings of $2.7 Million or $0.08 Per Share -- -- Credit
Loss Reserve at 3.15% of Net Non-Covered Loans -- -- Average Core
Deposits Increased $190.5 Million -- -- Affinity Bank Acquisition
Closed on August 28, 2009 -- SAN DIEGO, Oct. 27
/PRNewswire-FirstCall/ -- PacWest Bancorp (NASDAQ: PACW) today
announced a net earnings for the third quarter of 2009 of $2.7
million, or $0.08 per diluted share, compared to a net loss of $5.7
million, or $0.18 per diluted share, for the second quarter of
2009. Third quarter operating results include the operating results
of Affinity Bank ("Affinity") which was acquired in an
FDIC-assisted transaction on August 28, 2009. The excess of the
acquired assets over assumed liabilities resulted in an after-tax
net gain of $38.9 million. Third quarter operating results also
include a $43.5 million after-tax provision for credit losses. This
press release contains certain non-GAAP financial disclosures for
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. 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. THIRD QUARTER RESULTS Third Second In
thousands, except per share data and Quarter Quarter percentages
2009 2009 --------------------------------------- ------- --------
Net earnings (loss) $2,725 $(5,740) Diluted earnings (loss) per
share $0.08 $ (0.18) Return on average assets 0.22% (0.52%) Return
on average equity 2.23% (4.88%) Efficiency ratio 37.1% 85.5% Net
interest margin 4.73% 4.92% At quarter end: Allowance for credit
losses to non-covered loans (1), net of unearned income 3.15% 1.97%
Equity-to-assets: Consolidated Company 9.45% 10.37% Pacific Western
Bank 10.85% 11.41% Tangible common equity ratios: Consolidated
Company 8.85% 9.65% Pacific Western Bank 10.26% 10.71%
-------------------------- (1) Non-covered loans represent legacy
Pacific Western Bank Loans and exclude all loans acquired in the
Affinity acquisition. Affinity loans are "covered" loans as defined
in the loss sharing agreement with the FDIC. See the section
"AFFINITY ACQUISITION" for further information. The increase in net
earnings of $8.5 million between the third quarter of 2009 and the
second quarter of 2009 is due mainly to the combination of higher
net interest income ($2.0 million after tax), a higher provision
for credit losses ($33.1 million after tax), the gain from the
Affinity acquisition ($38.9 million after tax) and lower
noninterest expenses ($487,000 after tax). The decrease in the
efficiency ratio for the linked quarters of 2009 was due mostly to
the gain from the Affinity acquisition which reduced the third
quarter efficiency ratio by 4,160 basis points from 78.7% to 37.1%.
Matt Wagner, Chief Executive Officer, commented, "We were busy on
numerous fronts during the third quarter: we acquired Affinity,
raised $50 million in capital with warrants for up to an additional
$50 million, continued to lend to existing and new customers,
addressed problem credits early and had meaningful core deposit
growth. All these efforts contributed to strengthening the Bank and
helping us grow in this challenging environment. Our considerable
capital position and strong franchise have allowed us to benefit in
these times and to further augment our footprint and operations.
While we see some indications of stability, we remain cautious
about the economic landscape and optimistic about future
opportunities for our Company." Vic Santoro, Executive Vice
President and Chief Financial Officer, stated, "Our third quarter
balance sheet reflects our continuing operating strength in an
uncertain environment: our net interest margin remained strong,
on-balance sheet liquidity grew, and our deposit cost dropped to 85
basis points. We contributed significantly to our allowance for
credit losses and boosted the ratio of allowance to non-covered
loans to 3.15%. Our core earnings, low cost deposit base and strong
capital position give us the ability to both support the Bank and
create operating and strategic flexibility for the Company during a
tough credit and economic cycle." YEAR TO DATE RESULTS Nine months
ended September 30, In thousands, except per share data and
percentages 2009 2008
--------------------------------------------------- ---- ---- Net
loss as reported $(1,570) $(737,686) Diluted loss per share $(0.06)
$(27.17) Efficiency ratio 56.3% 467.6% Net interest margin 4.78%
5.48% The lower net loss for the nine months ended September 30,
2009 compared to the same period last year was due mostly to the
$761.7 million goodwill write-off recorded in 2008. When compared
to 2008, the 2009 period shows lower net interest income ($8.6
million after tax), higher provision for credit losses ($40.6
million after tax), higher OREO costs ($9.8 million after tax) and
higher FDIC insurance assessments ($3.0 million after tax)
partially offset by the gain from the Affinity acquisition ($38.9
million after tax). The gain from the Affinity acquisition reduced
the 2009 efficiency ratio to 56.3% from 78.4%. The goodwill
write-off increased the 2008 efficiency ratio from 59.2% to 467.6%.
BALANCE SHEET CHANGES Gross loans increased $583.7 million during
the third quarter with the Affinity acquisition adding $666.3
million in loans. When the Affinity loans are excluded, gross loans
decreased $82.7 million. We nevertheless remain active in our
marketplace serving our customers with loans to new and existing
customers of approximately $191.0 million during the third quarter
and $382.4 million on a year-to-date basis. Total deposits
increased $794.3 million during the third quarter. As of September
30, the Affinity acquisition added $780.8 million in deposits and
legacy deposits increased $13.4 million. Brokered and acquired
money desk deposits increased to $33.0 million at September 30,
2009 from $31.8 million at June 30, 2009; the September 30 balance
includes Affinity's brokered and money desk deposits. Legacy core
deposits, which include noninterest-bearing demand,
interest-bearing checking, savings and money market deposits,
increased $80.5 million during the third quarter and $211.4 million
year-to-date. at September 30, 2009, noninterest-bearing demand
deposits totaled $1.3 billion and represented 31% of total
deposits. Noninterest-bearing deposits as a percentage of total
deposits declined during the third quarter due to the acquisition
of Affinity's high concentration of time deposits. As with prior
acquisitions, we expect to restructure Affinity's deposit base over
the next several quarters to align it more closely with our mix and
focus on core deposits. The $150.4 million increase in Federal Home
Loan Bank (FHLB) borrowings during the third quarter resulted from
the Affinity acquisition. COVERED ASSETS As part of the Affinity
acquisition, we entered into a loss sharing agreement with the FDIC
that covers a substantial portion of any future losses on loans,
other real estate owned and certain investment securities. The
terms of such loss sharing agreement are described more fully
below. A summary of the covered assets at September 30, 2009 are
shown in the following table. Covered Assets --------------- (In
thousands) Gross loans $666,312 Investment securities 54,499 Other
real estate owned 26,778 ------ Total covered assets $747,589
======== NET INTEREST INCOME Net interest income totaled $54.2
million for the third quarter of 2009 compared to $50.7 million for
the second quarter of 2009. The $3.5 million net increase is
largely composed of higher loan and investment interest income of
$3.0 million and $1.1 million, respectively, offset by higher
deposit and borrowing costs of $641,000. Loan and investment
interest income increased due mostly to higher average balances.
The increase in interest expense on deposits is due to higher
average balances partially offset by lower offering rates on
existing accounts. The increase in interest expense on borrowings
is due to higher average balances. Net interest income decreased
$14.9 million for the nine months ended September 30, 2009 compared
to the same period of 2008. The decrease is due mostly to reduced
loan interest income from lower yields. Loan yields are down
year-over-year due to the lower level of market interest rates
coupled with higher nonaccrual loans. The decline in market
interest rates also contributed to lower interest expense. NET
INTEREST MARGIN Our net interest margin for the third quarter of
2009 was 4.73%, a decrease of 19 basis points when compared to the
second quarter of 2009 net interest margin of 4.92%. The net
interest margin was 4.80% in July, 4.57% in August and 4.79% in
September. The yield on average loans was 6.20% for the third
quarter of 2009 compared to 6.31% for the second quarter and the
loan yield for the month of September was 6.45%. Net reversals of
interest income on nonaccrual loans negatively impacted the third
quarter's net interest margin and loan yield by 12 basis points. To
offset the decrease in loan yield, we have managed down our deposit
costs, increased our noninterest-bearing demand deposits and
replaced higher-cost acquired deposits with less expensive FHLB
advances. Deposit pricing and improved deposit mix led to a 12
basis point decrease in the cost of interest-bearing deposits to
1.31% for the third quarter and a 5 basis point decrease in our
all-in deposit cost to 0.85%. On a monthly basis, all-in deposit
cost was 0.83% in July, 0.82% in August and 0.89% in September. Our
relatively low cost of deposits is driven by demand deposit
balances, which averaged 35% of average total deposits during the
third quarter of 2009. Average core deposits increased $190.5
million quarter-over-quarter with Affinity contributing $100.0
million. The overall cost of interest-bearing liabilities was 1.72%
for the third quarter of 2009, down 17 basis points from the second
quarter due mostly to lower time deposit costs. The cost of
interest-bearing liabilities decreased to 1.61% in September 2009
from 1.85% in June 2009. The net interest margin for the nine
months ended September 30, 2009 was 4.78%, a decrease of 70 basis
points when compared to the same period of 2008. The decrease is
due mostly to lower market interest rates and increased nonaccrual
loans. NONINTEREST INCOME Noninterest income for the third quarter
of 2009 totaled $72.6 million compared to $5.4 million in the
second quarter of 2009. The increase is due to the $67.0 million
gain from the Affinity acquisition. Noninterest income increased
$66.2 million for the nine months ended September 30, 2009 compared
to the amount earned during the same period in 2008 due mostly to
the gain from the Affinity acquisition. NONINTEREST EXPENSE
Noninterest expense decreased $840,000 to $47.1 million in the
third quarter of 2009 from $47.9 million in the second quarter.
Such decrease is due mostly to a combination of lower OREO costs,
lower deposit insurance expenses, and added costs from the Affinity
acquisition. The third quarter OREO expenses include holding costs
of $2.2 million, carrying value write-downs and loss provisions of
$6.2 million and net realized gains on sales of $185,000. The FDIC
special deposit insurance assessment of $2.0 million was accrued in
the second quarter; there was no such accrual in the third quarter.
Compensation costs increased quarter-over-quarter due to increased
staff levels from the Affinity acquisition and higher accruals.
Noninterest expenses related to the Affinity acquisition for the
month of September totaled $2.5 million. 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 $2.2
million for the third quarter of 2009 compared to $1.9 million for
the second quarter of 2009. Amortization expense for restricted
stock awards is estimated to be $8.1 million for 2009. Intangible
asset amortization totaled $2.6 million for the third quarter of
2009 and $2.4 million for the second quarter of 2009 and is
estimated to be $10.2 million for 2009. The 2009 estimates of both
restricted stock award expense and intangible asset amortization
are subject to change. Goodwill of $761.7 million was written off
in the first half of 2008. The remaining $23.6 million increase in
noninterest expense is due to higher OREO costs of $16.9 million,
higher insurance costs of $5.1 million, and higher occupancy costs
of $1.2 million. 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 third quarter of 2009 was 42.9% compared to 41.7%
for the second quarter of 2009. The increase in the effective tax
rate for the third quarter compared to the second quarter is due to
estimates for certain non-deductible expenses. The Company's
blended Federal and State statutory rate is 42.0%. AFFINITY
ACQUISITION On August 28, 2009, Pacific Western Bank acquired
certain assets and liabilities of Affinity from the Federal Deposit
Insurance Corporation ("FDIC") in an FDIC-assisted transaction. The
FDIC assistance is embodied in a loss sharing agreement with the
FDIC that covers a substantial portion of any future losses on
loans, other real estate owned and certain investment securities.
Under the terms of such loss sharing agreement, the FDIC will
absorb 80% of losses and share in 80% of loss recoveries on the
first $234 million of losses and absorb 95% of losses and share in
95% of loss recoveries on losses exceeding $234 million. The loss
sharing arrangement for non-residential and residential loans is in
effect for 5 years and 10 years from the August 28, 2009
acquisition date and the loss recovery provisions are in effect for
8 years and 10 years, respectively, from the acquisition date. The
acquisition has been accounted for under the purchase method of
accounting. The assets and liabilities, both tangible and
intangible, were recorded at their estimated fair values as of the
August 28, 2009 acquisition date. Such fair values are preliminary
estimates and are subject to adjustment for up to one-year after
the acquisition date. The application of the purchase method of
accounting resulted in a gain of $67.0 million, or $38.9 million
after tax. Such gain represents the excess of the estimated fair
value of the assets acquired over the estimated fair value of the
liabilities assumed. A summary of the estimated fair value
adjustments resulting in the net gain follows: August 28, 2009
--------------- (In thousands) Affinity's cost basis net assets on
August 28, 2009 $45,839 Cash payment received from the FDIC 87,161
Fair value adjustments Loans (138,304) Other real estate owned
(15,759) FDIC loss sharing receivable 107,718 FHLB borrowings
(16,571) Core deposit intangible 2,812 Time deposits (5,542)
Miscellaneous (365) Income tax liability (28,135) ------- Net
after-tax gain from Affinity acquisition $38,854 ======= A
statement of the net assets acquired in the Affinity acquisition as
of August 28, 2009 is shown below. August 28, 2009 ---------------
Assets (In thousands) Cash and cash equivalents $251,679 Investment
securities: Covered by loss-sharing 55,271 Not covered by
loss-sharing 120,130 Loans covered by loss-sharing 675,616 Other
real estate owned covered by loss- sharing 22,897 Core deposit
intangible 2,812 FDIC loss sharing receivable 107,718 Other assets
9,282 ----- Total assets acquired 1,245,405 --------- Liabilities
Deposits 868,176 Securities sold under repurchase agreements 16,310
FHLB borrowings 289,492 Other liabilities 32,573 ------ Total
liabilities 1,206,551 --------- Net assets acquired $38,854 =======
Our results of operations for the quarter ended September 30, 2009,
include the results from the Affinity acquisition from its August
28, 2009 acquisition date. The income and expense items
attributable to the Affinity acquisition are summarized below; such
amounts and the resultant net earnings are not indicative of future
operating results. September 30, 2009 ------------------ (In
thousands) Interest income $6,041 Interest expense 1,491 ----- Net
interest income 4,550 ----- Noninterest income 71 --- Noninterest
expense Compensation 988 Occupancy 413 Data processing 121
Insurance and assessments 113 Intangible asset amortization 234
Other professional services 450 Other 165 --- Total noninterest
expense 2,484 ----- Income taxes 897 --- Net earnings $1,240 ======
A summary of loans acquired in the Affinity acquisition as of
August 28, 2009 and the related discounts is as follows: Credit-
impaired loans Other loans Total --------- ----------- -----
(Dollars in thousands) Commercial and industrial $622 $11,565
$12,187 Healthcare 9,667 45,463 55,130 Construction: Commercial
26,922 - 26,922 Residential 85,097 - 85,097 Acquisition and
development: Residential acquisition and development 33,686 -
33,686 Multifamily acquisition and development 12,816 - 12,816
Commercial real estate 100,312 179,890 280,202 Multifamily 97,834
185,509 283,343 Residential, Home equity credit lines &
Consumer 654 23,883 24,537 --- ------ ------ Total loans 367,610
446,310 813,920 Total discount resulting from acquisition date fair
value adjustments (94,442) (43,862) (138,304) ------- -------
-------- Net loans $273,168 $402,448 $675,616 ======== ========
======== Weighted average remaining contractual life in years 3.8
7.2 6.3 === === === CREDIT QUALITY Our loan portfolio, including
both non-covered and covered loans, continues to experience
pressure from economic trends in Southern California. We expect
that such pressures will continue for the remainder of 2009 and
into 2010. Non-covered Loans and Other Real Estate Owned The credit
loss provision for the third quarter of 2009 of $75.0 million is
applicable to non-covered loans only and 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 September 30, 2009, the allowance for credit
losses totaled $120.6 million and represented 3.15% of non-covered
loans net of unearned income compared to $76.7 million and 1.97% at
the end of June. The increase in the allowance reflects higher
classified and nonaccrual loans and elevated charge-offs and risk
levels in the hospitality and commercial real estate loan
portfolios. Non-covered nonperforming assets include non-covered
nonaccrual loans and non-covered OREO and totaled $232.8 million at
the end of September compared to $203.5 million at the end of June.
The ratio of non-covered nonperforming assets to non-covered loans
and non-covered OREO increased to 6.03% at September 30, 2009 from
5.15% at June 30, 2009. The increase in non-covered nonperforming
assets is due to higher non-covered nonaccrual loans. The types of
non-covered loans included in the nonaccrual and accruing loans
past due between 30 and 89 days categories as of September 30, 2009
and June 30, 2009 follow: Accruing and over 30 days Nonaccrual
loans (1) past due (1) -------------------- ------------- September
June 30, Sept- ember June 30, 30, 2009 2009 30, 2009 2009
----------------- ---------------- As a As a % of loan % of Loan
category category Balance category Balance Balance Balance
------------- -------- ------- -------- ------- ------- -------
(Dollars in thousands) SBA 504 22.0% $26,945 5.3% $6,497 $1,112
$14,821 SBA 7(a) and Express 24.6% 9,929 24.6% 10,028 32 529
Residential construction 33.0% 38,709 35.6% 49,071 - 2,606
Commercial real estate 2.7% 58,432 1.0% 21,029 6,234 7,087
Commercial construction 6.6% 14,713 3.4% 8,606 2,770 1,170
Commercial 0.5% 3,952 3.0% 21,760 3,237 1,199 Commercial land 1.6%
898 1.4% 1,058 8,592 - Residential other 17.0% 20,795 16.0% 20,504
1,092 101 Residential land 20.7% 17,219 23.4% 17,940 308 -
Residential multifamily 1.8% 1,795 0.3% 301 1,292 - Other,
including foreign 0.3% 231 0.2% 123 243 40 -------- --------
------- ------- 5.1% $193,618 4.0% $156,917 $24,912 $27,553
======== ======== ======= ======= (1) Excludes covered loans
acquired in the Affinity acquisition. The $36.7 million net
increase in nonaccrual loans during the third quarter is composed
of additions of $85.0 million, repayments, payoffs and returns to
accrual status of $28.9 million, charge-offs of $11.4 million, and
foreclosures of $8.0 million. The increase in nonaccrual loans
includes four hotel loans totaling $21.9 million, a $17.2 million
loan secured by a high-end golf course facility located in the
desert region, SBA 504 1st and 2nd mortgage loans on hotels and
office buildings totaling $20.6 million, and $10.8 million in
completed construction projects. There was one previous nonaccrual
commercial loan for $13.7 million that was partially repaid,
restructured, and returned to accrual status. Third quarter
foreclosures include a $4.6 million completed commercial
construction project located in the desert region. The most
significant loans which have remained on nonaccrual status during
the third quarter include a $13.0 million residential construction
loan collateralized by 28 remaining units of a 32-unit condo
project in Orange County, a $13.2 million residential loan for an
85 lot in-fill development in the South Bay area of Southern
California, and an $11.8 million "residential other" loan secured
by two exclusive residential properties in San Diego. Included in
the non-covered nonaccrual loans at the end of September are $36.9
million of SBA related loans representing 19% of total non-covered
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 $8.2 million. At September 30, 2009,
the SBA loan portfolio totaled $163.9 million and was composed of
$123.4 million in SBA 504 loans and $40.5 million in SBA 7(a) and
Express loans. Non-covered loans accruing and over 30 days past due
decreased $2.6 million during the third quarter to $24.9 million
due to $24.2 million in additions, $18.7 million in loans moved to
nonaccrual status, $6.6 million in loans brought current and $1.5
million of charge-offs and paydowns. The activity in non-covered
OREO during the third quarter of 2009 included 7 sales for $10.3
million, write-downs and loss provisions of $6.2 million and 6
additions of $9.1 million. The write-downs were based on new
appraisals or negotiated sales prices with buyers. The details of
non-covered OREO as of September 30, 2009 and June 30, 2009 follow:
Balance as of ------------- September 30, Property Type 2009 June
30, 2009 ------------- ------------- ------------- (Dollars in
thousands) Improved residential land $3,009 $2,611 Commercial real
estate 27,863 28,021 Residential condominiums 2,418 2,418 Single
family residences 5,920 13,532 ----- ------ Total $39,210 $46,582
======= ======= Our exposure to non-covered nonowner-occupied
residential construction loans was reduced by $20.8 million during
the third quarter to $188.0 million at the end of September. The
reduction was due mostly to $28.3 million in payoffs and $700,000
in foreclosures. The details of the non-covered nonowner-occupied
residential construction loan portfolio as of the dates indicated
follow: As of June As of 30, September 30, 2009 2009
------------------------ ----- Number of Average Loan Category
Balance loans loan balance Balance ------------- ------- ------
------------ ------- (Dollars in thousands) Residential land
acquisition and development $60,651 18 $3,370 $53,552 Residential
nonowner-occupied single family 52,204 21 2,486 66,320 Unimproved
residential land 39,748 13 3,058 48,169 Residential multifamily
35,423 8 4,428 40,798 ------ -- ------ $188,026 60 $3,134 $208,839
======== == ======== Our largest non-covered loan portfolio
concentration is the real estate mortgage category, which includes
loans secured by commercial and residential real estate. The
following table presents our non-covered real estate mortgage loan
portfolio as of the dates indicated. At September 30, Loan Category
2009 At June 30, 2009 ------------- ----------------
---------------- (Dollars in thousand) Commercial real estate
mortgage 100% owner-occupied $383,213 $372,828 Hotels and other
hospitality 278,489 284,980 Nonowner-occupied office building,
industrial and warehouse facilities 1,596,215 1,607,899 ---------
--------- Total commercial real estate mortgage 2,257,917 2,265,707
--------- --------- Residential real estate mortgage: Multi-family
107,842 105,450 Single family owner-occupied 92,227 86,389 Single
family nonowner-occupied 42,534 53,746 ------ ------ Total
residential real estate mortgage 242,603 245,585 ------- -------
Total real estate mortgage $2,500,520 $2,511,292 ==========
========== Covered Loans and Other Real Estate Owned As part of the
Affinity acquisition, we entered into a loss sharing agreement with
the FDIC that covers a substantial portion of any future losses on
loans, other real estate owned and certain investment securities.
Under the terms of such loss sharing agreement, the FDIC will
absorb 80% of losses and share in 80% of loss recoveries on the
first $234 million of losses and absorb 95% of losses and share in
95% of loss recoveries on losses exceeding $234 million. The loss
sharing arrangement for non-residential and residential loans is in
effect for 5 years and 10 years, respectively, from the August 28,
2009 acquisition date and the loss recovery provisions are in
effect for 8 years and 10 years, respectively, from the acquisition
date. A summary of loans that would normally be considered
nonaccrual except for the accounting requirements regarding
purchased impaired loans, and other real estate owned covered by
the loss sharing agreement ("covered nonaccrual loans" and "covered
OREO"; collectively, "covered nonperforming assets") at September
30, 2009 follows. Covered Nonperforming Assets ---------------
September 30, 2009 ------------- (In thousands) Covered nonaccrual
loans $130,656 Covered OREO 26,778 ------ Total covered
nonperforming assets $157,434 ======== 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. On August 25, 2009, PacWest Bancorp
sold in a direct placement to institutional investors 2.7 million
shares of common stock for $50 million, or a per share price of
$18.36 which was the closing price of PacWest's common stock on
Monday August 24, 2009. In addition to the issuance of the common
shares, PacWest issued to each investor two warrants exercisable
for common shares worth up to an additional $50 million in the
aggregate with an exercise price of $20.20 per share, or 110% of
the price per share at which the initial $50 million was sold. The
Series A warrants expire in six months on February 25, 2010 and the
Series B warrants expire in 12 months on August 25, 2010. The
common shares sold, the warrants and the shares underlying the
warrants are to be issued under PacWest Bancorp's $150 million
shelf 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
September 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% 11.70%
12.67% Tier 1 risk-based capital ratio 6.00% 13.25% 14.34% Total
risk-based capital 10.00% 14.52% 15.61% Equity-to-assets N/A 10.85%
9.45% Tangible common equity ratio N/A 10.26% 8.85% EARNINGS PER
SHARE New accounting guidance adopted on January 1, 2009 clarified
that all outstanding unvested sharebased payment awards that
contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of such
nature are considered participating securities and the two-class
method of computing basic and diluted earnings per share must be
applied. All of our unvested restricted stock participates with
common stockholders in dividends declared and paid by the Company.
Application of the guidance generally 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 guidance had no effect on the reported amounts of earnings per
share for the third quarter of 2008. The effect on the net loss per
share for the nine months ended September 30, 2008 was an increase
of $0.02 to $27.17 from $27.15. ABOUT PACWEST BANCORP PacWest
Bancorp is a bank holding company with $5.5 billion in assets as of
September 30, 2009, with one wholly-owned banking subsidiary,
Pacific Western Bank. Through 69 full-service community banking
branches, including 10 branches of the former Affinity Bank,
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. Former Affinity Bank branches are also located in San
Mateo, San Francisco and Ventura 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 September 30, June 30,
December 31, 2009 2009 2008 ------------ ------- ----------- (In
thousands, except share data) Assets: Cash and due from banks
$98,910 $102,351 $100,925 Federal funds sold - - 165 ------ -------
--- Total cash and cash equivalents 98,910 102,351 101,090
Interest-bearing deposits in financial institutions 199,899 83,564
58,780 Federal Home Loan Bank stock, at cost 50,429 33,782 33,782
Securities available-for- sale, at estimated fair value 362,056
161,036 121,577 ------- ------- ------- Total securities 412,485
194,818 155,359 Non-covered loans, net of unearned income 3,822,685
3,904,366 3,987,891 Allowance for loan losses (114,575) (72,122)
(63,519) -------- ------- ------- Non-covered loans, net 3,708,110
3,832,244 3,924,372 Covered loans 666,312 - - ------- ---------
--------- Total loans 4,374,422 3,832,244 3,924,372 Premises and
equipment 23,118 23,611 24,675 Non-covered other real estate owned,
net 39,210 46,583 41,310 Covered other real estate owned, net
26,778 - - ------ ------ ------ Total other real estate owned
65,988 46,583 41,310 Intangible assets 35,651 35,417 39,922 Cash
surrender value of life insurance 65,646 66,593 70,588 FDIC loss
sharing receivable 107,718 - - Other assets 95,761 91,055 79,406
------ ------ ------ Total assets $5,479,598 $4,476,236 $4,495,502
========== ========== ========== Liabilities and Stockholders'
Equity: Liabilities: Noninterest-bearing deposits $1,271,197
$1,227,891 $1,165,485 Interest-bearing deposits 2,776,390 2,025,420
2,309,730 --------- --------- --------- Total deposits 4,047,587
3,253,311 3,475,215 Accrued interest payable and other liabilities
49,195 43,931 64,567 Borrowings 735,419 585,000 450,000
Subordinated debentures 129,848 129,897 129,994 ------- -------
------- Total liabilities 4,962,049 4,012,139 4,119,776
Stockholders' Equity 517,549 464,097 375,726 ------- -------
------- Total Liabilities and Stockholders' Equity $5,479,598
$4,476,236 $4,495,502 ========== ========== ========== Shares
outstanding (including 1,186,868 shares at September 30, 2009,
1,237,423 shares at June 30, 2009, and 1,309,586 shares at December
31, 2008, underlying unvested stock awards) 35,022,552 32,310,308
28,516,106 Tangible book value per share $13.76 $13.27 $11.78 Book
value per share $14.78 $14.36 $13.18 UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) Nine Months Ended
Quarters Ended September 30, -------------- ------------- 9/30/09
6/30/09 9/30/08 2009 2008 ------- ------- ------- ---- ---- (In
thousands, except per share data) Interest income: Interest and
fees on loans $64,658 $61,663 $68,712 $188,168 $213,901 Interest on
federal funds sold - - 23 - 86 Interest on time deposits in other
financial institutions 111 37 1 209 6 Interest on investment
securities 2,741 1,641 1,808 5,928 5,370 ----- ----- ----- -----
----- Total interest income 67,510 63,341 70,544 194,305 219,363
------ ------ ------ ------- ------- Interest expense: Interest
expense on deposits 7,754 7,367 9,001 24,441 29,741 Interest
expense on borrowings 3,989 3,626 4,538 11,197 14,525 Interest
expense on subordinated debentures 1,530 1,639 2,030 4,948 6,490
----- ----- ----- ----- ----- Total interest expense 13,273 12,632
15,569 40,586 50,756 ------ ------ ------ ------ ------ Net
interest income before provision for credit losses 54,237 50,709
54,975 153,719 168,607 Provision for credit losses 75,000 18,000
7,500 107,000 37,000 ------ ------ ----- ------- ------ Net
interest income (loss) after provision for credit losses (20,763)
32,709 47,475 46,719 131,607 ------- ------ ------ ------ -------
Noninterest income: Service charges on deposit accounts 2,960 3,009
3,165 9,118 9,594 Other commissions and fees 1,721 1,746 1,884
5,152 5,215 Gain (loss) on sale of loans - - - - (303) Gain on sale
of securities, net - - 81 - 81 Increase in cash surrender value of
life insurance 371 394 632 1,204 1,836 Other income 584 224 290
1,616 1,462 Gain from Affinity acquisition 66,989 - - 66,989 -
------ ---- ---- ------ ---- Total noninterest income 72,625 5,373
6,052 84,079 17,885 ------ ----- ----- ------ ------ Noninterest
expense: Compensation 20,128 18,394 19,332 57,853 57,097 Occupancy
6,435 6,462 6,321 19,283 18,121 Data processing 1,810 1,677 1,495
5,115 4,642 Other professional services 1,857 1,486 1,768 4,867
4,852 Business development 528 625 650 1,878 2,255 Communications
762 688 745 2,143 2,385 Insurance and assessments 2,010 3,871 1,025
7,479 2,375 Other real estate owned, net 8,141 9,231 1,369 18,369
1,470 Intangible asset amortization 2,578 2,367 2,274 7,192 7,288
Reorganization and lease charges - - - 1,215 258 Legal settlement -
- - - 780 Goodwill write-off - - - - 761,701 Other 2,842 3,130
2,878 8,597 8,892 ----- ----- ----- ----- ----- Total noninterest
expense 47,091 47,931 37,857 133,991 872,116 ------ ------ ------
------- ------- Earnings (loss) before income taxes 4,771 (9,849)
15,670 (3,193) (722,624) Income taxes 2,046 (4,109) 6,119 (1,623)
15,062 ----- ------ ----- ------ ------ Net earnings (loss) $2,725
$(5,740) $9,551 $(1,570) $(737,686) ====== ======= ====== =======
========= Per share information Basic earning (loss) per share
$0.08 $(0.18) $0.35 $(0.06) $(27.17) Diluted earning (loss) per
share $0.08 $(0.18) $0.35 $(0.06) $(27.17) UNAUDITED AVERAGE
BALANCE SHEETS Quarters Ended Nine Months Ended --------------
----------------- 9/30/09 6/30/09 9/30/08 9/30/09 9/30/08 -------
------- ------- ------- ------- (Dollars in thousands) Average
Assets: Loans, net of unearned income $4,140,220 $3,921,561
$3,893,836 $4,000,774 $3,961,008 Investment securities 262,816
179,976 136,383 203,065 142,179 Federal funds sold 4 - 4,837 87
4,806 Interest-bearing deposits in financial institutions 150,358
33,835 235 92,367 295 ------- ------ --- ------ --- Average earning
assets 4,553,398 4,135,372 4,035,291 4,296,293 4,108,288 Other
assets 304,817 279,331 267,643 288,345 680,462 ------- -------
------- ------- ------- Average total assets $4,858,215 $4,414,703
$4,302,934 $4,584,638 $4,788,750 ========== ========== ==========
========== ========== Average Liabilities and Stockholders' Equity:
Average liabilities Noninterest- bearing deposits $1,274,968
$1,223,169 $1,232,660 $1,220,809 $1,254,130 Interest checking
402,503 370,664 351,863 374,551 364,981 Money market accounts
1,001,609 891,610 995,617 912,130 1,056,854 Savings 111,184 114,339
100,720 116,133 102,130 Time deposits 841,001 692,439 502,456
810,820 447,807 ------- ------- ------- ------- ------- Interest-
Bearing deposits 2,356,297 2,069,052 1,950,656 2,213,634 1,971,772
--------- --------- --------- --------- --------- Average deposits
3,631,265 3,292,221 3,183,316 3,434,443 3,225,902 Subordinated
debentures 129,876 129,924 130,082 129,925 132,677 Borrowings
567,320 475,634 566,049 498,611 593,023 Other liabilities 44,117
45,458 47,233 49,098 48,741 ------ ------ ------ ------ ------
Average liabilities 4,372,578 3,943,237 3,926,680 4,112,077
4,000,343 --------- --------- --------- --------- --------- Average
equity 485,637 471,466 376,254 472,561 788,407 ------- -------
------- ------- ------- Average liabilities and stockholders'
equity $4,858,215 $4,414,703 $4,302,934 $4,584,638 $4,788,750
========== ========== ========== ========== ========== Yield
Analysis: Average earning assets $4,553,398 $4,135,372 $4,035,291
$4,296,293 $4,108,288 Yield 5.88% 6.14% 6.95% 6.05% 7.13% Average
interest- bearing deposits $2,356,297 $2,069,052 $1,950,656
$2,213,634 $1,971,772 Cost 1.31% 1.43% 1.84% 1.48% 2.01% Average
deposits $3,631,265 $3,292,221 $3,183,316 $3,434,443 $3,225,902
Cost 0.85% 0.90% 1.12% 0.95% 1.23% Average interest- bearing
liabilities $3,053,493 $2,674,610 $2,646,787 $2,842,170 $2,697,472
Cost 1.72% 1.89% 2.34% 1.91% 2.51% Average subordinated debentures
$129,876 $129,924 $130,082 $129,925 $132,677 Cost 4.67% 5.06% 6.21%
5.09% 6.53% Average borrowings $567,320 $475,634 $566,049 $498,611
$593,023 Cost 2.79% 3.06% 3.19% 3.00% 3.27% Average interest
sensitive liabilities $4,328,461 $3,897,779 $3,879,447 $4,062,979
$3,951,602 Cost 1.22% 1.30% 1.60% 1.34% 1.72% Interest spread 4.16%
4.25% 4.61% 4.14% 4.62% Net interest margin 4.73% 4.92% 5.42% 4.78%
5.48% DEPOSITS (unaudited) As of the Dates Indicated
------------------------- 9/30/09 6/30/09 12/31/08 ------- -------
-------- (Dollars in thousands) Transaction accounts: Demand
deposits $1,271,197 $1,227,891 $1,165,485 Interest checking 432,273
366,126 342,241 ------- ------- ------- Total transaction accounts
1,703,470 1,594,017 1,507,726 Non-transaction accounts: Money
market 1,124,511 897,152 837,873 Savings 111,365 109,910 124,603
Time deposits under $100,000 489,580 250,826 611,083 Time deposits
over $100,000 618,661 401,406 393,930 ------- ------- ------- Total
non-transaction accounts 2,344,117 1,659,294 1,967,489 ---------
--------- --------- Total deposits $4,047,587 $3,253,311 $3,475,215
========== ========== ========== LOAN CONCENTRATION (unaudited)
Legacy Pacific Western Bank Loans As of the Dates Indicated
------------------------- 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08
------- ------- ------- -------- ------- (Dollars in thousands)
Loan Category: Domestic: Commercial $774,755 $776,060 $779,971
$845,410 $803,717 Real estate- construction 480,119 544,889 583,709
579,884 608,968 Commercial real estate- mortgage 2,500,520
2,511,292 2,482,790 2,473,089 2,437,593 Consumer 33,011 35,150
38,615 44,938 41,671 Foreign: Commercial 38,964 42,672 44,955
50,918 49,153 Other 1,763 1,722 2,126 2,245 2,323 ----- ----- -----
----- ----- Total gross non- covered loans $3,829,132 $3,911,785
$3,932,166 $3,996,484 $3,943,425 ========== ========== ==========
========== ========== Covered Loans From The Affinity Acquisition
----------------- September 30, 2009 ------------- (In thousands)
Commercial $16,369 Real estate, construction 102,283 Real estate,
mortgage 546,611 Consumer 1,049 ----- Total covered loans $666,312
======== COMPONENTS OF ALLOWANCE FOR CREDIT LOSSES, NONPERFORMING
ASSETS AND CREDIT QUALITY MEASURES FOR NON-COVERED LOANS
(Unaudited) As of or for the: ----------------- Quarter Ended Year
Ended --------------------------- ---------- 9/30/09 6/30/09
3/31/09 12/31/08 ------- ------- ------- -------- (Dollars in
thousands) ALLOWANCE FOR CREDIT LOSSES (1):
-------------------------------- Allowance for loan losses $114,575
$72,122 $71,361 $63,519 Reserve for unfunded loan commitments 6,011
4,621 5,271 5,271 ----- ----- ----- ----- Allowance for credit
losses for non-covered loans $120,586 $76,743 $76,632 $68,790
======== ======= ======= ======= NONPERFORMING ASSETS (2):
------------------------- Nonaccrual loans $193,618 $156,917
$138,497 $63,470 Other real estate owned 39,210 46,583 47,673
41,310 ------ ------ ------ ------ Total nonperforming assets
$232,828 $203,500 $186,170 $104,780 ======== ======== ========
======== Allowance for credit losses to loans, net of unearned
income 3.15% 1.97% 1.95% 1.72% Allowance for credit losses to
nonaccrual loans 62.28% 48.91% 55.33% 108.4% Nonperforming assets
to total loans and other real estate owned 6.03% 5.15% 4.69% 2.60%
Nonaccrual loans to total loans 5.06% 4.02% 3.53% 1.59% (1) Applies
only to legacy Pacific Western Bank. (2) Excludes covered
nonperforming assets acquired in the Affinity acquisition.
ALLOWANCE FOR CREDIT LOSSES ROLLFORWARD AND NET CHARGE-OFF
MEASUREMENT FOR NON-COVERED LOANS (1) (unaudited) As of or for the:
----------------- Quarter Ended Year Ended ------------- ----------
9/30/09 6/30/09 3/31/09 12/31/08 ------- ------- ------- --------
(Dollars in thousands) Balance at beginning of period $76,743
$76,632 $68,790 $61,028 Non-covered Loans charged-off: Commercial
(2,760) (3,405) (1,881) (7,664) Real estate- construction (8,224)
(12,757) (1,572) (24,998) Real estate- mortgage (19,908) (1,536)
(2,738) (2,617) Consumer (387) (529) (216) (3,947) Foreign - -
(368) (349) --- --- ---- ---- Total loans charged- off (31,279)
(18,227) (6,775) (39,575) Recoveries on non-covered loans
charged-off: Commercial 55 64 303 971 Real estate- construction 6 2
- 88 Real estate- mortgage 45 231 190 412 Consumer 16 11 110 47
Foreign - 30 14 19 --- --- --- --- Total recoveries on loans
charged-off 122 338 617 1,537 --- --- --- ----- Net charge-offs
(31,157) (17,889) (6,158) (38,038) Provision for credit losses
75,000 18,000 14,000 45,800 Balance at end of period $120,586
$76,743 $76,632 $68,790 ======== ======= ======= ======= Annualized
net charge- offs to average non- covered loans 2.99% 1.83% 0.63%
0.96% (1) Applies only to legacy Pacific Western Bank. This press
release contains certain non-GAAP financial disclosures for
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. 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) Quarter Ended
------------------------------------------------ In thousands,
except per share September 30, data and percentages 2009 June 30,
2009 September 30, 2008 -------------------- -------------
------------- ------------------ End of period assets $5,479,598
$4,476,236 $4,363,217 Intangibles 35,651 35,417 36,497 ------
------ ------ End of period tangible assets $5,443,947 $4,440,819
$4,326,720 ========== ========== ========== End of period equity
$517,549 $464,097 $376,287 Intangibles 35,651 35,417 36,497 ------
------ ------ End of period tangible equity $481,898 $428,680
$339,790 ======== ======== ======== Equity to assets ratio 9.45%
10.37% 8.62% ==== ===== ==== Tangible common equity ratio 8.85%
9.65% 7.85% ==== ==== ==== Pacific Western Bank
-------------------- End of period assets $5,469,398 $4,468,870
$4,352,569 Intangibles 35,651 35,417 36,497 ------ ------ ------
End of period tangible assets $5,433,747 $4,433,453 $4,316,072
========== ========== ========== End of period equity $593,199
$510,086 $481,541 Intangibles 35,651 35,417 36,497 ------ ------
------ End of period tangible equity $557,548 $474,669 $445,044
======== ======== ======== Equity-to-assets 10.85% 11.41% 11.06%
===== ===== ===== Tangible common equity ratio 10.26% 10.71% 10.31%
===== ===== ===== 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, fax, +1-310-201-0498 Web Site:
http://www.pacificwesternbank.com/ http://www.pacwestbancorp.com/
Copyright
