Other News Releases in Banking & Financial Services
Professor Sharath Sury to Award Top Scholar in Ethical Finance and Risk Management at SIFIRM Conference.
DePaul Staffing Ranked as Top Oregon Staffing Firm
22nd Annual Help the Homeless Walkathon Takes Place on the National Mall
Other News Releases in Earnings
Escalon(R) Reports First Quarter Fiscal 2010 Results
Electronic Game Card, Inc. Files 10-Q for Period Ending September 30, 2009
Wolverine Tube Reports 2009 Third Quarter Results
Journalists and Bloggers
Visit PR Newswire for Journalists for releases, photos, ProfNet experts, and customized feeds just for Media.
View and download archived video content distributed by MultiVu on The Digital Center.
See more news releases in: Banking & Financial Services, Earnings
PacWest Bancorp Announces Results for the Third Quarter of 2009
-- 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 www.pacwestbancorp.com. Information regarding Pacific Western Bank is also available on the Internet at 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 www.pacwestbancorp.com or at the SEC's website at 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
SOURCE PacWest Bancorp