- Average Core Deposits Increased $267.1 Million - - Net Interest
Margin Increases to 4.79% - - Credit Loss Reserve at 3.35% of Net
Non-Covered Loans - SAN DIEGO, Jan. 21 /PRNewswire-FirstCall/ --
PacWest Bancorp (NASDAQ: PACW) today announced a net loss for the
fourth quarter of 2009 of $7.8 million, or $0.23 per diluted share,
compared to net earnings of $2.7 million, or $0.08 per diluted
share, for the third quarter of 2009. The third and fourth quarters
were impacted significantly by legacy portfolio credit loss
provisions and credit-related transactions from the Affinity
acquisition which are discussed further below. Net loss for the
year ended December 31, 2009 was $9.4 million, or $0.30 per diluted
share, compared to a net loss of $728.1 million for 2008, or $26.81
per diluted share. The 2008 goodwill write-off totaled $761.7
million; there was no such item in 2009. 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. FOURTH QUARTER RESULTS Fourth Third In
thousands, except per share data and percentages Quarter Quarter
--------------------------------------------------- ------- -------
2009 2009 --- --- Net earnings (loss) $(7,780) $2,725 Diluted
earnings (loss) per share $(0.23) $0.08 Return on average assets
(0.56%) 0.22% Return on average equity (5.91%) 2.25% Efficiency
ratio 53.7% 37.1% Net interest margin 4.79% 4.73% At quarter end:
Allowance for credit losses to non-covered loans (1), net of
unearned income 3.35% 3.15% Equity-to-assets: Consolidated Company
9.52% 9.45% Pacific Western Bank 11.03% 10.85% Tangible common
equity ratios: Consolidated Company 8.95% 8.85% Pacific Western
Bank 10.47% 10.26% -------------------- (1) Non-covered loans
represent legacy Pacific Western Bank loans and exclude all loans
acquired in the Affinity acquisition. The decrease in net earnings
between the third and fourth quarters was $10.5 million. Net
interest income increased $4.7 million after tax due largely to
increased interest income from the Affinity acquisition. The credit
loss provision on the legacy loan portfolio decreased to $34.9
million ($20.2 million after tax) compared to $75.0 million ($43.5
million after tax) in the third quarter. Fourth quarter
Affinity-related credit costs of $3.9 million ($2.3 million after
tax) include a credit loss provision, income from an increase in
the FDIC loss sharing asset and other real estate owned costs.
Although there were no Affinity-related credit transactions in the
third quarter, the third quarter includes the gain from the
Affinity transaction of $67.0 million ($38.9 million after tax).
Matt Wagner, Chief Executive Officer, commented, "Credit remains
volatile and we continue to aggressively manage performing and
nonperforming loans. During the fourth quarter, in addition to our
focus on credit, we integrated the Affinity acquisition, both in
terms of the branch network and establishing procedures and review
mechanisms for covered loans. We also continued to perform well on
the deposit front, with over $83 million in core deposit growth
during the fourth quarter. For 2009, we had over $550 million in
core deposit growth, and over $300 million of core deposit growth
excluding the Affinity acquisition." Mr. Wagner continued, "Our
portfolio of legacy and covered loans continues to generate
significant interest income. This, combined with our good deposit
mix, generates substantial revenue that allows us to absorb credit
loss provisions. Although we remain cautious about the economic
environment in which we operate, we are confident in the core
strengths of our franchise." Vic Santoro, Executive Vice President
and Chief Financial Officer, stated, "Our fourth quarter showed the
benefits of the Affinity acquisition which added approximately $13
million in revenue and $5 million in non-credit operating expenses.
Our strong balance sheet and revenue generating ability allows us
to add meaningfully to our allowance for credit losses as needed.
We continue to perform well in this difficult economic environment
with high levels of net interest income, strong capital levels in
excess of the regulatory well-capitalized minimums, and with an
appropriate allowance for credit losses." YEAR TO DATE RESULTS Year
ended December 31, In thousands, except per share data and
percentages 2009 2008 ------------------------------ ---- ---- Net
loss $(9,350) $(728,065) Diluted loss per share $(0.30) $(26.81)
Efficiency ratio 55.7% 371.7% Net interest margin 4.79% 5.30% The
lower net loss for the year ended December 31, 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 ($1.9 million after tax), higher
provision for credit losses ($66.2 million after tax), higher OREO
costs ($12.2 million after tax) and higher FDIC insurance
assessments ($3.4 million after tax) partially offset by the gain
from the Affinity acquisition ($38.9 million after tax) and income
from an increase in the FDIC loss sharing asset ($9.5 million after
tax). The gain from the Affinity acquisition reduced the 2009
efficiency ratio to 55.7% from 70.3%. The goodwill write-off
increased the 2008 efficiency ratio from 59.2% to 371.7%. BALANCE
SHEET CHANGES Gross loans decreased $142.4 million during the
fourth quarter, including a $115.8 million decrease in non-covered
loans. The legacy loan portfolio declined $283.1 million in 2009.
The legacy portfolio continues to decline as a result of
repayments, charge-offs and the stagnant economy which causes both
a low demand for loans and fewer acceptable lending opportunities.
The covered loan portfolio will also continue to decline from
resolutions of problem assets. Total deposits increased $47.0
million during the fourth quarter and $619.4 million for 2009. Core
deposits, which include noninterest-bearing demand, interest
checking, savings and money market deposits, totaled $3.0 billion
at December 31, 2009 and increased $83.3 million during the fourth
quarter and $552.4 million for 2009. During the fourth quarter we
added $87.6 million in brokered deposits, net of maturities and
used them together with excess liquidity to repay $185.0 million in
Federal Home Loan Bank advances. Brokered and acquired money desk
deposits totaled $111.1 million at December 31, 2009.
Noninterest-bearing demand deposits totaled $1.3 billion and
represented 32% of total deposits at year end. COVERED ASSETS As
part of the Affinity acquisition on August 28, 2009, we entered
into a loss sharing agreement with the FDIC that covers a
substantial portion of losses on loans, other real estate owned and
certain investment securities incurred after the acquisition date.
A summary of the covered assets at December 31, 2009 and September
30, 2009 are shown in the following table. Balance as of
------------- Covered Assets December 31, 2009 September 30, 2009
-------------- ----------------- ------------------ (Dollars in
thousands) Loans, net $621,686 $666,312 Investment securities
52,125 54,499 Other real estate owned 27,688 26,778 ------ ------
Total covered assets $701,499 $747,589 ======== ======== NET
INTEREST INCOME Net interest income was $62.3 million for the
fourth quarter of 2009 compared to $54.2 million for the third
quarter. The $8.1 million net increase is largely from interest
income on higher average loan and investment balances. Overall
deposit interest expense declined $279,000 during the fourth
quarter; interest on time deposits declined $753,000 due mostly to
lower offering rates while interest on demand, money market and
savings increased $474,000 due mostly to higher average balances.
Borrowing costs increased $311,000 due mainly to higher average
balances. Net interest income decreased $3.3 million for 2009
compared to 2008. The decrease is due mostly to reduced loan
interest income from lower yields. Loan yields are down
year-over-year due to the higher level of nonaccrual loans coupled
with the lower level of market interest rates. The decline in
market interest rates also contributed to lower interest expense.
NET INTEREST MARGIN Our net interest margin for the fourth quarter
of 2009 was 4.79%, an increase of 6 basis points when compared to
the third quarter of 2009 net interest margin of 4.73%. The yield
on average loans was 6.29% for the fourth quarter of 2009 compared
to 6.20% for the third quarter. Net reversals of interest income on
nonaccrual loans negatively impacted the fourth quarter's net
interest margin by 7 basis points and loan yield by 8 basis points.
Deposit pricing and improved deposit mix led to a 25 basis point
decrease in the cost of interest-bearing deposits to 1.06% for the
fourth quarter and a 13 basis point decrease in our all-in deposit
cost to 0.72%. Our relatively low cost of deposits is driven by
demand deposit balances, which averaged 32% of average total
deposits during the fourth quarter of 2009. Average core deposits
increased $267.1 million for the linked quarters. The overall cost
of interest-bearing liabilities was 1.44% for the fourth quarter of
2009, down 28 basis points from the third quarter due mostly to
lower time deposit costs. The net interest margin for 2009 was
4.79%, a decrease of 51 basis points when compared to 2008. The
decrease is due mostly to increased nonaccrual loans and lower
market interest rates. NONINTEREST INCOME Noninterest income for
the fourth quarter of 2009 totaled $21.8 million compared to $72.6
million in the third quarter of 2009. During the third quarter of
2009, the Company recorded a $67.0 million gain from the Affinity
acquisition; there was no such gain in the fourth quarter. Fourth
quarter noninterest income includes $16.3 million from an increase
in the FDIC loss sharing asset due to credit deterioration on
covered loans and OREO subsequent to the acquisition date. Such
income mostly represents the FDIC's share of the current period's
credit loss provision on covered loans and writedowns on covered
OREO under the terms of the loss sharing agreement. Noninterest
income increased $81.5 million for 2009 compared to the amount
earned in 2008 due mostly to the 2009 gain from the Affinity
acquisition coupled with the other income of $16.3 million related
to the loss-sharing arrangement with the FDIC on covered assets.
NONINTEREST EXPENSE Noninterest expense decreased $1.9 million to
$45.2 million in the fourth quarter of 2009 from $47.1 million in
the third quarter. Such decrease is due mostly to the combination
of lower OREO costs and a full quarter's costs from the acquired
Affinity Bank operations. The fourth quarter OREO expenses include
holding costs of $1.0 million, carrying value write-downs and loss
provisions of $4.1 million and net realized gains on sales of
$12,000. Other expense includes a $481,000 penalty related to the
early repayment of $85 million in acquired FHLB advances.
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 fourth quarter of
2009, $2.2 million for the third quarter of 2009 and $8.2 million
for the year ended December 31, 2009. Intangible asset amortization
totaled $2.4 million for the fourth quarter of 2009, $2.6 million
for the third quarter of 2009 and $9.5 million for the year ended
December 31, 2009. Noninterest expense decreased $726.7 million
year over year due mostly to the $761.7 million goodwill write-off
in 2008. The remaining $35.0 million increase in noninterest
expense is due to higher OREO costs of $21.1 million, higher
deposit insurance costs of $5.8 million and higher compensation
costs of $6.0 million. The increased deposit insurance costs relate
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 deposit insurance assessment.
Compensation costs increased year-over-year due to increased staff
levels from the Affinity acquisition and higher compensation
expense on restricted stock awards. TAXES The effective tax rate
for the fourth quarter of 2009 was 44.3% compared to 42.9% for the
third quarter of 2009. The increase in the effective tax rate for
the forth quarter compared to the third quarter is due to changes
in estimates for certain non-deductible expenses. The Company's
blended Federal and State statutory rate is 42.0%. CREDIT QUALITY
Our loan portfolio, including both non-covered and covered loans,
continues to experience pressure from adverse economic trends in
Southern California and other areas where our borrowers and
collateral are located, which we expect will continue during 2010.
Provision for Credit Losses The fourth quarter provision for credit
losses totaled $52.9 million and is composed of $34.9 million on
the legacy portfolio and $18.0 million on the covered loan
portfolio. The provision on the legacy portfolio is generated by
our methodology and reflects the levels of net charge-offs and
adversely classified loans. The provision on the covered loan
portfolio reflects an increase in the covered loan allowance for
credit losses and results from further credit deterioration since
the acquisition date. Net charge-offs on non-covered legacy loans
totaled $31.2 million in both the third and fourth quarters of
2009. These elevated charge-offs reflect the aggressive actions we
are taking in promptly identifying and resolving problem credits.
The allowance for credit losses on the legacy portfolio totaled
$124.3 million at December 31, 2009, and represented 3.35% of the
non-covered legacy loan balances at that date. Non-covered
Nonaccrual Loans and Other Real Estate Owned Non-covered
nonperforming assets include non-covered nonaccrual loans and
non-covered OREO and totaled $283.4 million at the end of December
compared to $232.8 million at the end of September. The ratio of
non-covered nonperforming assets to non-covered loans and
non-covered OREO increased to 7.56% at December 31, 2009 from 6.03%
at September 30, 2009. The increase in non-covered nonperforming
assets is primarily due to higher non-covered nonaccrual loans. The
types and balances of non-covered loans included in the categories
of nonaccrual and accruing loans past due between 30 and 89 days at
December 31, 2009 and September 30, 2009 follow: Nonaccrual loans
(1) -------------------- December 31, 2009 ----------------- As a %
of loan Loan category category Balance ------------- ---------
------- (Dollars in thousands) SBA 504 20.1% $22,849 SBA 7(a) and
Express 28.7% 12,095 Residential construction 16.3% 17,017
Commercial real estate 4.2% 88,869 Commercial construction 11.9%
26,393 Commercial 0.7% 5,064 Commercial land 15.6% 9,113
Residential other 16.7% 19,621 Residential land 68.2% 37,107
Residential multifamily 1.9% 1,579 Other, including foreign 0.7%
460 --- 6.5% $240,167 ======== Nonaccrual loans (1)
-------------------- September 30, 2009 ------------------ As a %
of loan Loan category category Balance ------------- ---------
------- (Dollars in thousands) SBA 504 22.0% $26,945 SBA 7(a) and
Express 24.6% 9,929 Residential construction 33.0% 38,709
Commercial real estate 2.7% 58,432 Commercial construction 6.6%
14,713 Commercial 0.5% 3,952 Commercial land 1.6% 898 Residential
other 17.0% 20,795 Residential land 20.7% 17,219 Residential
multifamily 1.8% 1,795 Other, including foreign 0.3% 231 --- 5.1%
$193,618 ======== Accruing and over 30 days past due (1)
------------------------- December 31, September 30, 2009 2009 Loan
category Balance Balance ------------- ------- ------- (Dollars in
thousands) SBA 504 $1,603 $1,112 SBA 7(a) and Express 1,487 32
Residential construction - - Commercial real estate 1,109 6,234
Commercial construction 1,032 2,770 Commercial 2,592 3,237
Commercial land - 8,592 Residential other 178 1,092 Residential
land - 308 Residential multifamily - 1,292 Other, including foreign
492 243 --- --- $8,493 $24,912 ====== ======= (1) Excludes covered
loans acquired in the Affinity acquisition. The $46.5 million net
increase in nonaccrual loans during the fourth quarter is composed
of additions of $120.4 million, reductions, payoffs and returns to
accrual status of $32.2 million, charge-offs of $27.6 million, and
foreclosures of $14.1 million. The additions to nonaccrual loans
include six hotel loans totaling $25.7 million, two retail mall
loans totaling $19.4 million, two loans totaling $30.6 million on
undeveloped land, and a $12.7 million construction loan on a
recently completed office building. Reductions include the sale of
a note on a residential condominium project for $11.5 million. The
most significant loans which have remained on nonaccrual status
during the fourth quarter include a $13.1 million residential loan
for an 85 lot in-fill development south of Los Angeles, a loan on a
golf course in our Desert Region for $14.7 million, three loans on
operating hotels totaling $10.0 million, and a $17.7 million
"residential other" loan secured by five exclusive residential
properties in San Diego. Subsequent to December 31, 2009, the golf
course loan was foreclosed and is currently in other real estate
owned. Included in the non-covered nonaccrual loans at the end of
December are $34.9 million of SBA related loans representing 15% of
total non-covered nonaccrual loans at that date. The SBA 504 loans
are secured by first trust deeds on owner-occupied commercial 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 $10.3 million. At December
31, 2009, the SBA loan portfolio totaled $157.2 million and was
composed of $114.9 million in SBA 504 loans and $42.3 million in
SBA 7(a) and Express loans. The details of non-covered OREO as of
December 31, 2009 and September 30, 2009 follow: Balance as of
------------- Property Type December 31, 2009 September 30, 2009
------------- ----------------- ------------------ (Dollars in
thousands) Improved residential land $7,514 $3,009 Commercial real
estate 28,478 27,863 Residential condominiums - 2,418 Single family
residences 7,263 5,920 ----- ----- Total $43,255 $39,210 =======
======= Our exposure to non-covered nonowner-occupied residential
construction loans was reduced by $28.3 million during the fourth
quarter to $159.7 million at the end of December. The reduction was
due mostly to $14.0 million in payoffs, the sale of an $11.5
million note on a residential condominium project and $9.4 million
in foreclosures offset by $6.6 million in new loans. The details of
the non-covered nonowner-occupied residential construction loan
portfolio as of the dates indicated follow: As of December 31, 2009
----------------------- Number of Loan Category Balance loans
------------- ------- ---------- (Dollars in thousands) Residential
land acquisition and development $52,458 16 Residential nonowner-
occupied single family 30,103 17 Unimproved residential land 39,003
13 Residential multifamily 38,130 7 ------ --- $159,694 53 ========
=== As of December 31, 2009 ----------------------- Loan Category
Average loan balance ------------- -------------------- (Dollars in
thousands) Residential land acquisition and development $3,279
Residential nonowner- occupied single family 1,771 Unimproved
residential land 3,000 Residential multifamily 5,447 $3,013 As of
September 30, 2009 -------------------- Loan Category Balance
------------- ------- (Dollars in thousands) Residential land
acquisition and development $60,651 Residential nonowner- occupied
single family 52,204 Unimproved residential land 39,748 Residential
multifamily 35,423 ------ $188,026 ======== 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 December 31,
Loan Category 2009 At September 30, 2009 -------------
---------------- --------------------- (Dollars in thousands)
Commercial real estate mortgage 100% owner-occupied $377,057
$383,213 Hotels and other hospitality 257,489 278,489 Retail
479,370 478,566 Nonowner-occupied office building, industrial and
warehouse facilities 1,079,525 1,117,649 --------- --------- Total
commercial real estate mortgage 2,193,441 2,257,917 ---------
--------- Residential real estate mortgage: Multi-family 105,276
107,842 Single family owner- occupied 84,591 92,227 Single family
nonowner- occupied 40,405 42,534 ------ ------ Total residential
real estate mortgage 230,272 242,603 ------- ------- Total real
estate mortgage $2,423,713 $2,500,520 ========== ========== Covered
Loans and Other Real Estate Owned As part of the Affinity
acquisition that occurred on August 28, 2009, we entered into a
loss sharing agreement with the FDIC that covers a substantial
portion of losses on loans, other real estate owned and certain
investment securities incurred after the acquisition date. The
carrying value 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 December
31, 2009 follows: Covered Nonperforming Assets At December 31, 2009
--------------------- -------------------- (Dollars in thousands)
Covered nonaccrual loans $87,653 Covered OREO 27,688 ------ Total
covered nonperforming assets $115,341 ======== STOCKHOLDERS' EQUITY
On December 22, 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 $350
million. The registration statement was declared effective on
January 8, 2010. Proceeds from any offering under this registration
statement are anticipated to be used to fund future acquisitions of
banks and financial institutions and for general corporate
purposes. 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. The effect of the application of the guidance on both
basic and diluted earnings per share for the fourth quarter of 2008
was a reduction of $0.01 to $0.34 from $0.35. The effect on the net
loss per share for the year ended December 31, 2008 was an increase
of $0.02 to $26.81 from $26.79. ABOUT PACWEST BANCORP PacWest
Bancorp is a bank holding company with $5.3 billion in assets as of
December 31, 2009, with one wholly-owned banking subsidiary,
Pacific Western Bank. Through 68 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 Bernardino, San Diego, San
Francisco, San Mateo 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; settlements with the FDIC
related to our loss-sharing arrangement and other adjustments
related to the Affinity Bank acquisition; 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 and Afghanistan; 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 December September December
31, 30, 31, 2009 2009 2008 ---- ---- ---- (In thousands, except
share data) Assets: Cash and due from banks $93,915 $98,910
$100,925 Federal funds sold - - 165 --- --- --- Total cash and cash
equivalents 93,915 98,910 101,090 Interest-bearing deposits in
financial institutions 117,133 199,899 58,780 Federal Home Loan
Bank stock, at cost 50,429 50,429 33,782 Securities available-for-
sale, at estimated fair value 423,700 362,056 121,577 -------
------- ------- Total securities 474,129 412,485 155,359
Non-covered loans, net of unearned income 3,707,383 3,822,685
3,987,891 Allowance for loan losses (118,717) (114,575) (63,519)
-------- -------- ------- Non-covered loans, net 3,588,666
3,708,110 3,924,372 Covered loans, net 621,686 666,312 - -------
------- --- Total loans 4,210,352 4,374,422 3,924,372 Premises and
equipment 22,546 23,118 24,675 Non-covered other real estate owned,
net 43,255 39,210 41,310 Covered other real estate owned, net
27,688 26,778 - ------ ------ --- Total other real estate owned
70,943 65,988 41,310 Intangible assets 33,296 35,651 39,922 Cash
surrender value of life insurance 66,149 65,646 70,588 FDIC loss
sharing asset 112,817 107,718 - Other assets 122,799 95,761 79,406
------- ------ ------ Total assets $5,324,079 $5,479,598 $4,495,502
========== ========== ========== Liabilities and Stockholders'
Equity: Liabilities: Noninterest- bearing deposits $1,302,974
$1,271,197 $1,165,485 Interest-bearing deposits 2,791,595 2,776,390
2,309,730 --------- --------- --------- Total deposits 4,094,569
4,047,587 3,475,215 Accrued interest payable and other liabilities
50,174 49,195 64,567 Borrowings 542,763 735,419 450,000
Subordinated debentures 129,798 129,848 129,994 ------- -------
------- Total liabilities 4,817,304 4,962,049 4,119,776
Stockholders' Equity 506,775 517,549 375,726 ------- -------
------- Total Liabilities and $5,324,079 $5,479,598 $4,495,502
Stockholders' Equity ========== ========== ========== Shares
outstanding (including 1,095,417 shares at December 31, 2009,
1,186,868 shares at September 30, 2009, and 1,309,586 shares at
December 31, 2008, underlying unvested stock awards) 35,015,322
35,022,552 28,516,106 Tangible book value per share $13.52 $13.76
$11.78 Book value per share $14.47 $14.78 $13.18 UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) Quarters Ended
-------------- 12/31/09 9/30/09 12/31/08 -------- ------- --------
(In thousands, except per share data) Interest income: Interest and
fees on loans $70,331 $64,658 $66,507 Interest on federal funds
sold - - 75 Interest on time deposits in other financial 197 111
176 institutions Interest on investment securities 5,041 2,741
1,707 ----- ----- ----- Total interest income 75,569 67,510 68,465
------ ------ ------ Interest expense: Interest expense on deposits
7,475 7,754 11,416 Interest expense on borrowings 4,300 3,989 4,217
Interest expense on subordinated debentures 1,467 1,530 2,107 -----
----- ----- Total interest expense 13,242 13,273 17,740 ------
------ ------ Net interest income before provision for credit
losses 62,327 54,237 50,725 Provision for credit losses 52,900
75,000 8,800 ------ ------ ----- Net interest income (loss) after
provision for credit losses 9,427 (20,763) 41,925 ----- -------
------ Noninterest income: Service charges on deposit accounts
2,890 2,960 3,420 Other commissions and fees 1,799 1,721 2,062 Loss
on sale of loans - - - Gain on sale of securities, net - - -
Increase in cash surrender value of life 375 371 584 insurance
Increase in FDIC loss sharing asset 16,314 - - Other income 450 584
476 Gain from Affinity acquisition - 66,989 - --- ------ --- Total
noninterest income 21,828 72,625 6,542 ------ ------ -----
Noninterest expense: Compensation 20,320 20,128 15,088 Occupancy
7,100 6,435 6,410 Data processing 1,831 1,810 1,590 Other
professional services 2,047 1,857 1,688 Business development 663
528 789 Communications 789 762 766 Insurance and assessments 1,826
2,010 1,148 Other real estate owned, net 4,953 8,141 748 Intangible
asset amortization 2,355 2,578 2,332 Reorganization and lease
charges - - - Legal settlement - - - Goodwill write-off - - - Other
3,329 2,842 3,260 ----- ----- ----- Total noninterest expense
45,213 47,091 33,819 ------ ------ ------ Earnings (loss) before
income taxes (13,958) 4,771 14,648 Income taxes (6,178) 2,046 5,027
------ ----- ----- Net earnings (loss) $(7,780) $2,725 $9,621
======= ====== ====== Per share information Basic earning (loss)
per share $(0.23) $0.08 $0.34 Diluted earning (loss) per share
$(0.23) $0.08 $0.34 Year Ended December 31, ------------ 2009 2008
---- ---- (In thousands, except per share data) Interest income:
Interest and fees on loans $258,499 $280,408 Interest on federal
funds sold - 161 Interest on time deposits in other financial 406
182 institutions Interest on investment securities 10,969 7,077
------ ----- Total interest income 269,874 287,828 ------- -------
Interest expense: Interest expense on deposits 31,916 41,157
Interest expense on borrowings 15,497 18,742 Interest expense on
subordinated debentures 6,415 8,597 ----- ----- Total interest
expense 53,828 68,496 ------ ------ Net interest income before
provision for credit losses 216,046 219,332 Provision for credit
losses 159,900 45,800 ------- ------ Net interest income (loss)
after provision for credit losses 56,146 173,532 ------ -------
Noninterest income: Service charges on deposit accounts 12,008
13,014 Other commissions and fees 6,951 7,277 Loss on sale of loans
- (303) Gain on sale of securities, net - 81 Increase in cash
surrender value of life 1,579 2,420 insurance Increase in FDIC loss
sharing asset 16,314 - Other income 2,066 1,938 Gain from Affinity
acquisition 66,989 - ------ --- Total noninterest income 105,907
24,427 ------- ------ Noninterest expense: Compensation 78,173
72,185 Occupancy 26,383 24,531 Data processing 6,946 6,232 Other
professional services 6,914 6,540 Business development 2,541 3,044
Communications 2,932 3,151 Insurance and assessments 9,305 3,523
Other real estate owned, net 23,322 2,218 Intangible asset
amortization 9,547 9,620 Reorganization and lease charges 1,215 258
Legal settlement - 780 Goodwill write-off - 761,701 Other 11,926
12,152 ------ ------ Total noninterest expense 179,204 905,935
------- ------- Earnings (loss) before income taxes (17,151)
(707,976) Income taxes (7,801) 20,089 ------ ------ Net earnings
(loss) $(9,350) $(728,065) ======= ========= Per share information
Basic earning (loss) per share $(0.30) $(26.81) Diluted earning
(loss) per share $(0.30) $(26.81) UNAUDITED AVERAGE BALANCE SHEETS
Quarters Ended -------------- 12/31/09 9/30/09 12/31/08 --------
------- -------- (Dollars in thousands) Average Assets: Loans, net
of unearned income $4,439,586 $4,140,220 $3,952,872 Investment
securities 421,647 262,816 142,494 Federal funds sold 279 4 29,702
Interest-bearing deposits in financial institutions 298,073 150,358
104,800 ------- ------- ------- Average earning assets 5,159,585
4,553,398 4,229,868 Other assets 373,570 304,817 274,687 -------
------- ------- Average total assets $5,533,155 $4,858,215
$4,504,555 ========== ========== ========== Average Liabilities and
Stockholders' Equity: Average liabilities Noninterest-bearing
deposits $1,318,819 $1,274,968 $1,208,085 Interest checking 438,242
402,503 338,434 Money market accounts 1,188,939 1,001,609 858,971
Savings 111,374 111,184 117,278 Time deposits 1,064,596 841,001
899,264 --------- ------- ------- Interest-bearing deposits
2,803,151 2,356,297 2,213,947 --------- --------- --------- Average
deposits 4,121,970 3,631,265 3,422,032 Subordinated debentures
129,829 129,876 130,025 Borrowings 706,013 567,320 536,370 Other
liabilities 52,846 44,117 38,919 ------ ------ ------ Average
liabilities 5,010,658 4,372,578 4,127,346 --------- ---------
--------- Average equity 522,497 485,637 377,209 ------- -------
------- Average liabilities and stockholders' equity $5,533,155
$4,858,215 $4,504,555 ========== ========== ========== Yield
Analysis: Average earning assets $5,159,585 $4,553,398 $4,229,868
Yield 5.81% 5.88% 6.44% Average interest-bearing deposits
$2,803,151 $2,356,297 $2,213,947 Cost 1.06% 1.31% 2.05% Average
deposits $4,121,970 $3,631,265 $3,422,032 Cost 0.72% 0.85% 1.33%
Average interest-bearing liabilities $3,638,993 $3,053,493
$2,880,342 Cost 1.44% 1.72% 2.45% Average subordinated debentures
$129,829 $129,876 $130,025 Cost 4.48% 4.67% 6.45% Average
borrowings $706,013 $567,320 $536,370 Cost 2.42% 2.79% 3.13%
Average interest sensitive liabilities $4,957,812 $4,328,461
$4,088,427 Cost 1.06% 1.22% 1.73% Interest spread 4.37% 4.16% 3.99%
Net interest margin 4.79% 4.73% 4.77% UNAUDITED AVERAGE BALANCE
SHEETS Year Ended ---------- 12/31/09 12/31/08 -------- --------
(Dollars in thousands) Average Assets: Loans, net of unearned
income $4,111,379 $3,958,963 Investment securities 258,160 142,258
Federal funds sold 135 11,064 Interest-bearing deposits in
financial institutions 144,216 26,564 ------- ------ Average
earning assets 4,513,890 4,138,849 Other assets 309,827 578,463
------- ------- Average total assets $4,823,717 $4,717,312
========== ========== Average Liabilities and Stockholders' Equity:
Average liabilities Noninterest-bearing deposits $1,245,512
$1,242,557 Interest checking 390,605 358,308 Money market accounts
981,901 1,007,112 Savings 114,933 105,938 Time deposits 874,786
561,288 ------- ------- Interest-bearing deposits 2,362,225
2,032,646 --------- --------- Average deposits 3,607,737 3,275,203
Subordinated debentures 129,901 132,010 Borrowings 550,888 578,783
Other liabilities 50,043 46,270 ------ ------ Average liabilities
4,338,569 4,032,266 --------- --------- Average equity 485,148
685,046 ------- ------- Average liabilities and stockholders'
equity $4,823,717 $4,717,312 ========== ========== Yield Analysis:
Average earning assets $4,513,890 $4,138,849 Yield 5.98% 6.95%
Average interest-bearing deposits $2,362,225 $2,032,646 Cost 1.35%
2.02% Average deposits $3,607,737 $3,275,203 Cost 0.88% 1.26%
Average interest-bearing liabilities $3,043,014 $2,743,439 Cost
1.77% 2.50% Average subordinated debentures $129,901 $132,010 Cost
4.94% 6.51% Average borrowings $550,888 $578,783 Cost 2.81% 3.24%
Average interest sensitive liabilities $4,288,526 $3,985,996 Cost
1.26% 1.72% Interest spread 4.21% 4.46% Net interest margin 4.79%
5.30% DEPOSITS (unaudited) As of the Dates Indicated
------------------------- 12/31/09 9/30/09 12/31/08 --------
------- -------- (Dollars in thousands) Transaction accounts:
Demand deposits $1,302,974 $1,271,197 $1,165,485 Interest checking
439,694 432,273 342,241 ------- ------- ------- Total transaction
accounts 1,742,668 1,703,470 1,507,726 Non-transaction accounts:
Money market 1,171,386 1,124,511 837,873 Savings 108,569 111,365
124,603 Time deposits under $100,000 505,130 489,580 611,083 Time
deposits over $100,000 566,816 618,661 393,930 ------- -------
------- Total non-transaction accounts 2,351,901 2,344,117
1,967,489 --------- --------- --------- Total deposits $4,094,569
$4,047,587 $3,475,215 ========== ========== ========== Core
deposits (1) $3,022,623 $2,939,346 $2,470,202 ========== ==========
========== (1) Includes noninterest-bearing demand, interest
checking, savings and money market deposits. LOAN CONCENTRATION
(unaudited) Legacy Pacific Western Bank Loans As of the Dates
Indicated ------------------------- 12/31/09 9/30/09 6/30/09
-------- ------- ------- (Dollars in thousands) Loan Category:
Domestic: Commercial $781,003 $774,755 $776,060 Real
estate-construction 440,286 480,119 544,889 Commercial real estate-
mortgage 2,423,712 2,500,520 2,511,292 Consumer 32,138 33,011
35,150 Foreign: Commercial 34,524 38,964 42,672 Other 1,719 1,763
1,722 ----- ----- ----- Total gross non-covered loans $3,713,382
$3,829,132 $3,911,785 ========== ========== ========== Legacy
Pacific Western Bank Loans As of the Dates Indicated
------------------------- 3/31/09 12/31/08 ------- --------
(Dollars in thousands) Loan Category: Domestic: Commercial $779,971
$845,410 Real estate-construction 583,709 579,884 Commercial real
estate- mortgage 2,482,790 2,473,089 Consumer 38,615 44,938
Foreign: Commercial 44,955 50,918 Other 2,126 2,245 ----- -----
Total gross non-covered loans $3,932,166 $3,996,484 ==========
========== COMPONENTS OF ALLOWANCE FOR CREDIT LOSSES, NONPERFORMING
ASSETS AND CREDIT QUALITY MEASURES FOR NON-COVERED LOANS
(Unaudited) As of the dates indicated: --------------------------
12/31/09 9/30/09 12/31/08 -------- ------- -------- (Dollars in
thousands) ALLOWANCE FOR CREDIT LOSSES (1):
--------------------------- Allowance for loan losses $118,717
$114,575 $63,519 Reserve for unfunded loan commitments 5,561 6,011
5,271 ----- ----- ----- Allowance for credit losses for non-covered
loans $124,278 $120,586 $68,790 ======== ======== =======
NONPERFORMING ASSETS (2): ------------------------- Nonaccrual
loans $240,167 $193,618 $63,470 Other real estate owned 43,255
39,210 41,310 ------ ------ ------ Total nonperforming assets
$283,422 $232,828 $104,780 ======== ======== ======== Allowance for
credit losses to loans, net of unearned income 3.35% 3.15% 1.72%
Allowance for credit losses to nonaccrual loans 51.75% 62.28%
108.4% Nonperforming assets to total loans and other real estate
owned 7.56% 6.03% 2.60% Nonaccrual loans to total loans 6.48% 5.06%
1.59% (1) Applies only to legacy Pacific Western Bank loans. (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
------------- ---------- 12/31/09 12/31/09 12/31/08 --------
-------- -------- (Dollars in thousands) Balance at beginning of
period $120,586 $68,790 $61,028 Non-covered Loans charged-off:
Commercial (3,936) (11,982) (7,664) Real estate- construction
(5,989) (28,542) (24,998) Real estate-mortgage (21,865) (46,047)
(2,617) Consumer (48) (1,180) (3,947) Foreign - (368) (349) ---
---- ---- Total loans charged- off (31,838) (88,119) (39,575)
Recoveries on non- covered loans charged- off: Commercial 126 548
971 Real estate- construction 453 461 88 Real estate-mortgage 37
503 412 Consumer 14 151 47 Foreign - 44 19 --- --- --- Total
recoveries on loans charged-off 630 1,707 1,537 --- ----- ----- Net
charge-offs (31,208) (86,412) (38,038) Provision for credit losses
34,900 141,900 45,800 ------ ------- ------ Balance at end of
period $124,278 $124,278 $68,790 ======== ======== =======
Annualized net charge- offs to average non- covered loans 3.26%
2.22% 0.96% (1) Applies only to legacy Pacific Western Bank loans.
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) As of the dates indicated:
-------------------------- In thousands, except per share data and
percentages 12/31/09 09/30/09 12/31/08 ---------------------------
-------- -------- -------- End of period assets $5,324,079
$5,479,598 $4,495,502 Intangibles 33,296 35,651 39,922 ------
------ ------ End of period tangible assets $5,290,783 $5,443,947
$4,455,580 ========== ========== ========== End of period equity
$506,775 $517,549 $375,726 Intangibles 33,296 35,651 39,922 ------
------ ------ End of period tangible equity $473,479 $481,898
$335,804 ======== ======== ======== Equity to assets ratio 9.52%
9.45% 8.36% ==== ==== ==== Tangible common equity ratio 8.95% 8.85%
7.54% ==== ==== ==== Pacific Western Bank -------------------- End
of period assets $5,313,750 $5,469,398 $4,488,680 Intangibles
33,296 35,651 39,922 ------ ------ ------ End of period tangible
assets $5,280,454 $5,433,747 $4,448,758 ========== ==========
========== End of period equity $585,940 $593,199 $494,858
Intangibles 33,296 35,651 39,922 ------ ------ ------ End of period
tangible equity $552,644 $557,548 $454,936 ======== ========
======== Equity-to-assets 11.03% 10.85% 11.02% ===== ===== =====
Tangible common equity ratio 10.47% 10.26% 10.23% ===== ===== =====
Contact: Matthew P. Wagner Victor R. Santoro Chief Executive
Officer Executive Vice President and 10250 Constellation Boulevard
Chief Financial Officer Suite 1640 10250 Constellation Boulevard
Los Angeles, CA 90067 Suite 1640 Los Angeles, CA 90067 Phone:
310-728-1020 310-728-1021 Fax: 310-201-0498 310-201-0498
DATASOURCE: PacWest Bancorp CONTACT: Matthew P. Wagner, Chief
Executive Officer, +1-310-728-1020, Fax, +1-310-201-0498, or Victor
R. Santoro, Executive Vice President and Chief Financial Officer,
+1-310-728-1021, Fax, +1-310-201-0498, both of PacWest Bancorp Web
Site: http://www.firstcommunitybancorp.com/
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