PacWest Bancorp Announces Results for the Second Quarter 2017

Highlights

  • Net Earnings of $93.6 Million, or $0.77 Per Diluted Share
  • New Loan and Lease Production of $1.1 Billion
  • Core Deposits Increase of $449 Million and Represent 78% of Total Deposits
  • Tax Equivalent Net Interest Margin Increased Five Basis Points to 5.21%
  • Classified Loans and Leases Reduced by 20%  

LOS ANGELES, July 18, 2017 (GLOBE NEWSWIRE) — PacWest Bancorp (Nasdaq:PACW) today announced net earnings for the second quarter of 2017 of $93.6 million, or $0.77 per diluted share, compared to net earnings for first quarter of 2017 of $78.7 million, or $0.65 per diluted share. The increase in net earnings from the prior quarter was primarily due to an increase in interest income from higher average balances of interest-earning assets and a lower provision for credit losses.

Matt Wagner, President and CEO, commented, “We delivered outstanding performance in the second quarter and continued to demonstrate our earning power. Our strong second quarter results produced a return on assets of 1.71% and a return on tangible equity of 16.06%. We also continue to proactively manage credit risk. During the second quarter we sold or contracted to sell loans totaling $221.1 million, including $159.4 million of healthcare cash flow loans. All of these sales have since closed. As a result, our healthcare cash flow loan portfolio today includes only one non-pass rated loan.”

Patrick Rusnak, Executive Vice President and CFO stated, “Our second quarter tax equivalent NIM increased five basis points to 5.21%. While the NIM benefitted from the repricing of variable-rate loans, this was partially offset by higher rates on non-core interest-bearing deposits and borrowings.”

Mr. Wagner continued, “We continue to look forward to closing the CU Bancorp acquisition in the fourth quarter of 2017, as we expect regulatory and shareholder approvals to come in the normal course. The date of the CU Bancorp special shareholders meeting has been set and management of both organizations are working on the integration plan.”

FINANCIAL HIGHLIGHTS

                           
  At or For the Three Months Ended   At or For the Six Months Ended    
  June 30,   March 31,       June 30,        
Financial Highlights   2017       2017     Change     2017       2016     Change    
  (Dollars in thousands, except per share data)    
Net earnings $   93,647     $   78,668     $   14,979     $   172,315     $   172,624     $   (309 )    
Diluted earnings per share $   0.77     $   0.65     $   0.12     $   1.42     $   1.42     $   –       
Return on average assets   1.71 %     1.47 %       0.24       1.59 %     1.65 %       (0.06 )    
Return on average                          
tangible equity (1)    16.06 %     13.90 %       2.16       15.00 %     15.52 %       (0.52 )    
                           
Net interest margin                          
(tax equivalent)   5.21 %     5.16 %       0.05       5.19 %     5.43 %       (0.24 )    
Efficiency ratio   40.3 %     41.4 %       (1.1 )     40.8 %     39.5 %       1.3      
                           
Total assets $   22,246,877     $   21,927,254     $   319,623     $   22,246,877     $   21,147,139     $   1,099,738      
Loans and leases held                           
for investment, net of                          
deferred fees $   15,543,457     $   15,556,689     $   (13,232 )   $   15,543,457     $   14,641,460     $   901,997      
Noninterest-bearing                           
deposits $   6,701,039     $   6,789,808     $   (88,769 )   $   6,701,039     $   6,222,696     $   478,343      
Core deposits $   13,217,574     $   12,769,073     $   448,501     $   13,217,574     $   11,411,992     $   1,805,582      
Total deposits $   16,874,977     $   16,331,008     $   543,969     $   16,874,977     $   15,148,009     $   1,726,968      
                           
Noninterest-bearing                           
deposits as percentage                           
of total deposits   40 %     42 %       (2 )     40 %     41 %       (1 )    
Core deposits as                           
percentage of total                          
deposits   78 %     78 %       –       78 %     75 %       3      
                           
Equity to assets ratio    20.50 %     20.56 %       (0.06 )     20.50 %     21.34 %       (0.84 )    
Tangible common equity                           
ratio (1)   11.75 %     11.67 %       0.08       11.75 %     12.12 %       (0.37 )    
Book value per share $   37.55     $   37.13     $   0.42     $   37.55     $   37.05     $   0.50      
Tangible book value per                           
share (1) $   19.40     $   18.95     $   0.45     $   19.40     $   18.83     $   0.57      
                           
(1) Non-GAAP measure.                          
                           

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased by $10.0 million to $242.5 million in the second quarter of 2017 compared to $232.5 million in the first quarter of 2017 due to higher average yields and balances of loans and leases. The loan and lease yield for the second quarter of 2017 was 6.07% compared to 5.94% for the first quarter of 2017. The increase in the loan and lease yield was principally due to the higher yields on average loans and leases as a result of the repricing of variable-rate loans due to the increase in market rates during the first half of 2017.

The tax equivalent NIM for the second quarter of 2017 was 5.21% compared to 5.16% for the first quarter of 2017. The increase in the NIM was mostly due to higher yields on loans and leases due to the upward repricing of variable-rate loans, partially offset by a higher cost of interest-bearing liabilities.

The cost of total deposits increased to 0.25% in the second quarter of 2017 from 0.21% in the first quarter of 2017 due to a higher cost and average balance of non-core deposits.

Noninterest Income

Noninterest income increased by $0.2 million to $35.3 million in the second quarter of 2017 compared to $35.1 million in the first quarter of 2017 due mainly to a $2.2 million increase in leased equipment income due to higher gains on early lease terminations, a $1.8 million increase in gain on sale of securities, and a $0.7 million increase in warrant income, offset by a $4.5 million decrease in other income attributable mainly to a $5.0 million legal settlement with a former borrower recorded in the first quarter of 2017.   

The following table presents details of noninterest income for the periods indicated:

             
  Three Months Ended  
  June 30,   March 31,   Increase  
Noninterest Income   2017       2017     (Decrease)  
  (In thousands)          
Service charges on deposit accounts $   3,510     $   3,758     $   (248 )  
Other commissions and fees     10,583         10,390         193    
Leased equipment income     11,635         9,475         2,160    
Gain on sale of loans and leases     649         712         (63 )  
Gain (loss) on sale of securities     1,651         (99 )       1,750    
Other income:            
Dividends and realized gains on equity investments     1,587         1,345         242    
Warrant income     815         155         660    
Other     4,852         9,378         (4,526 )  
Total noninterest income  $   35,282     $   35,114     $   168    
             

Noninterest Expense

Noninterest expense increased by $1.2 million to $117.7 million in the second quarter of 2017 compared to $116.5 million in the first quarter of 2017 due mostly to a $1.2 million increase in acquisition, integration, and reorganization costs and a $1.1 million charge related to the sale of the unfunded commitments portion of the healthcare loan sale. 

The following table presents details of noninterest expense for the periods indicated:

               
  Three Months Ended    
  June 30,   March 31,   Increase    
Noninterest Expense   2017       2017     (Decrease)    
  (In thousands)            
Compensation $   65,288     $   64,880     $   408      
Occupancy      11,811         11,608         203      
Data processing     6,337         7,015         (678 )    
Other professional services     3,976         3,378         598      
Insurance and assessments     4,856         4,791         65      
Intangible asset amortization     3,065         3,064         1      
Leased equipment depreciation     5,232         5,625         (393 )    
Foreclosed assets (income) expense, net     (157 )       143         (300 )    
Acquisition, integration and reorganization costs     1,700         500         1,200      
Other expense:              
Loan expense     3,884         3,387         497      
Other     11,715         12,153         (438 )    
Total noninterest expense $   117,707     $   116,544     $   1,163      
               

Income Taxes

The overall effective income tax rate was 37.0% in the second quarter of 2017 and 37.7% in the first quarter of 2017. The estimated effective tax rate for the full year 2017 is approximately 38%. 

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Total loans and leases held for investment decreased by $13.2 million in the second quarter to $15.5 billion at June 30, 2017. The net decrease was driven by principal repayments of $843.1 million, an increase in loans held for sale of $175.2 million, and loan sales of $46.0 million, partially offset by second quarter new production of $1.1 billion. In the second quarter, we sold $46.0 million of loans consisting primarily of loans from our healthcare portfolios. Additionally, we entered into two agreements to sell loans with balances totaling $175.2 million and the associated unfunded commitments of $19.3 million, primarily from our healthcare portfolios. The $175.2 million of loans were reported as held for sale at June 30, 2017 and the sales were completed in July. As a result of the second quarter loan sales and transfers to loans held for sale, our healthcare cash flow portfolio held for investment decreased from $740.6 million at March 31, 2017 to $514.7 million, including one non-pass rated credit of $19.2 million, at June 30, 2017.

The following table presents a roll forward of loans and leases held for investment for the periods indicated:

             
  Three Months Ended      
  June 30,   March 31,      
Loan and Lease Roll Forward (1)   2017       2017        
  (Dollars in thousands)    
Loans and leases held for investment, start of period $   15,556,689     $   15,455,954        
New production     1,077,929         1,048,841        
Existing loans and leases:            
Principal repayments, net (2)     (843,115 )       (888,409 )      
Loan sales      (45,976 )       (36,461 )      
Transfers to foreclosed assets     (502 )       (78 )      
Charge-offs     (26,410 )       (23,158 )      
Transfers to loans held for sale     (175,158 )       –        
Loans and leases held for investment, end of period $   15,543,457     $   15,556,689        
             
Weighted average rate on new production    4.93 %     4.91 %      
             
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.      
(2) Includes principal disbursements/repayments on existing loans, changes in revolving lines of credit (repayments and draws), loan participation sales and other changes within the loan portfolio.       
             

The following table presents the composition of loans and leases held for investment as of the dates indicated: 

               
  June 30,   March 31,   December 31,   June 30,
Loan and Lease Portfolio   2017     2017     2016     2016
  (In thousands)
Real estate mortgage:              
Commercial $   4,418,463   $   4,420,923   $   4,396,696   $   4,519,209
Residential     1,719,269       1,554,946       1,314,036       1,164,784
Total real estate mortgage     6,137,732       5,975,869       5,710,732       5,683,993
Real estate construction and land:              
Commercial     691,828       668,510       581,246       417,144
Residential     473,282       442,051       384,001       281,788
Total real estate construction and land     1,165,110       1,110,561       965,247       698,932
Total real estate loans     7,302,842       7,086,430       6,675,979       6,382,925
Commercial:              
Cash flow     2,834,966       3,138,196       3,112,890       3,048,439
Asset-based     2,392,203       2,391,161       2,611,796       2,683,913
Venture capital     2,001,427       1,934,949       1,987,900       1,666,352
Equipment finance     613,550       623,237       691,967       646,940
Total commercial     7,842,146       8,087,543       8,404,553       8,045,644
Consumer     398,469       382,716       375,422       212,891
Total loans and leases held for               
investment, net of deferred fees $   15,543,457   $   15,556,689   $   15,455,954   $   14,641,460
               
Total unfunded loan commitments $   4,926,743   $   4,497,373   $   4,166,703   $   3,888,686
               

Deposits and Client Investment Funds

The following table presents the composition of our deposit portfolio as of the dates indicated:

                 
                 
  June 30,   March 31,   December 31,   June 30,  
Deposit Category   2017       2017       2016       2016    
  (Dollars in thousands)  
Noninterest-bearing demand deposits $   6,701,039     $   6,789,808     $   6,659,016     $   6,222,696    
Interest checking deposits     1,762,016         1,509,902         1,448,394         1,035,395    
Money market deposits     4,033,471         3,758,962         3,705,385         3,392,811    
Savings deposits     721,048         710,401         711,039         761,090    
Total core deposits     13,217,574         12,769,073         12,523,834         11,411,992    
Non-core non-maturity deposits     1,329,324         1,154,070         1,174,487         972,820    
Total non-maturity deposits     14,546,898         13,923,143         13,698,321         12,384,812    
Time deposits $250,000 and under     1,940,872         1,998,597         1,758,434         2,226,066    
Time deposits over $250,000     387,207         409,268         413,856         537,131    
Total time deposits     2,328,079         2,407,865         2,172,290         2,763,197    
Total deposits $   16,874,977     $   16,331,008     $   15,870,611     $   15,148,009    
                 
Noninterest-bearing demand deposits                 
as percentage of total deposits   40 %     42 %     42 %     41 %  
Core deposits as percentage of total deposits   78 %     78 %     79 %     75 %  
                 

At June 30, 2017, core deposits totaled $13.2 billion, or 78% of total deposits, including $6.7 billion of noninterest-bearing demand deposits, or 40% of total deposits. 

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Square 1 Asset Management, Inc. (“S1AM”), our registered investment advisor subsidiary, and third-party sweep products. Total off-balance sheet client investment funds at June 30, 2017 were $1.8 billion, of which $1.6 billion was managed by S1AM.

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

A provision for credit losses of $11.5 million was recorded in the second quarter of 2017 compared to $24.7 million in the first quarter of 2017. The second quarter provision consisted of $12.5 million for non-purchased credit impaired (“Non-PCI”) loans and leases and a $1.0 negative provision for PCI loans; this compares to provisions of $24.5 million and $0.2 million, respectively, for the first quarter of 2017. The lower provision for the second quarter of 2017 was mainly attributable to lower general reserves being required because of the decreased levels of classified loans and healthcare cash flow loans, both of which carry greater than average general reserve levels due to charge-off experience. In addition, the prior quarter provision was higher due to general provisions from increased general reserve loss factors which were influenced by net charge-off experience. The allowance for Non-PCI credit losses to Non-PCI loans and leases held for investment coverage ratio was 1.02% and 1.08% at June 30, 2017 and March 31, 2017.

The following tables show roll forwards of the allowance for credit losses for the periods indicated:

                     
  Three Months Ended June 30, 2017  
  Non-PCI                   
Allowance for Credit  Loans and    Unfunded    Total    PCI      
Losses Rollforward Leases   Commitments   Non-PCI   Loans   Total  
  (In thousands)  
Beginning balance $   149,826     $   17,763   $   167,589     $   11,481     $   179,070    
  Charge-offs     (22,951 )       –       (22,951 )       (3,459 )       (26,410 )  
  Recoveries     2,004         –       2,004         58         2,062    
Net charge-offs     (20,947 )       –       (20,947 )       (3,401 )       (24,348 )  
  Provision      10,000         2,500       12,500         (1,001 )       11,499    
Ending balance $   138,879     $   20,263   $   159,142     $   7,079     $   166,221    
                     
                     
       
  Three Months Ended March 31, 2017  
  Non-PCI                   
Allowance for Credit  Loans and    Unfunded    Total    PCI      
Losses Rollforward Leases   Commitments   Non-PCI   Loans   Total  
  (In thousands)  
Beginning balance $   143,755     $   17,523   $   161,278     $   13,483     $   174,761    
  Charge-offs     (20,928 )       –       (20,928 )       (2,230 )       (23,158 )  
  Recoveries     2,739         –       2,739         –         2,739    
Net charge-offs     (18,189 )       –       (18,189 )       (2,230 )       (20,419 )  
  Provision     24,260         240       24,500         228         24,728    
Ending balance $   149,826     $   17,763   $   167,589     $   11,481     $   179,070    
                     

The gross charge-offs for the second quarter of 2017 included approximately $10.9 million for venture capital loans and $7.2 million related to the recording of the healthcare portfolio loans at the lower of cost or market value at the time of transfer to loans held for sale. The transfer of loans to held for sale also decreased reported nonaccrual loans by $5.3 million and classified loans by $44.8 million. The annualized ratio of net charge-offs to total average loans for the quarter ended June 30, 2017 was 0.54%.   

CREDIT QUALITY

The following table presents Non-PCI loan and lease credit quality metrics as of the dates indicated:

           
  June 30,   March 31,    
Non-PCI Credit Quality Metrics   2017       2017      
  (Dollars in thousands)    
Nonaccrual loans and leases (1) $   172,576     $   173,030      
Classified loans and leases (1)     339,977         424,399      
Performing troubled debt restructured loans     55,910         56,501      
Allowance for credit losses     159,142         167,589      
Net charge-offs (for the quarter)     20,947         18,189      
Provision for credit losses (for the quarter)     12,500         24,500      
Allowance for credit losses to loans and leases          
held for investment   1.02 %     1.08 %    
Allowance for credit losses to nonaccrual loans           
and leases held for investment   92.2 %     96.9 %    
Nonaccrual loans and leases held for investment           
to loans and leases held for investment   1.11 %     1.11 %    
Nonperforming assets to loans and leases           
held for investment and foreclosed assets   1.20 %     1.20 %    
Classified loans and leases held for investment           
to loans and leases held for investment   2.19 %     2.73 %    
           
(1) Includes loans and leases held for investment; excludes loans held for sale carried at lower of cost or fair value.    
           

The following table presents Non-PCI nonaccrual loans and leases and accruing loans and leases past due between 30 and 89 days by portfolio segment and class as of the dates indicated:

                       
  Non-PCI Nonaccrual Loans and Leases    Non-PCI Accruing and    
  June 30, 2017   March 31, 2017   30-89 Days Past Due     
    % of      % of    June 30,   March 31,    
    Loan      Loan      2017     2017    
  Amount Category   Amount Category   Amount   Amount    
  (Dollars in thousands)    
Real estate mortgage:                      
Commercial $   65,599 1.5 %   $   66,216 1.5 %   $   3,734   $   7,383    
Residential     5,229 0.3 %       5,826 0.4 %       46       640    
Total real estate mortgage     70,828 1.2 %       72,042 1.2 %       3,780       8,023    
Real estate construction and land:                      
Commercial     – 0.0 %       – 0.0 %       –       –    
Residential     – 0.0 %       362 0.1 %       –       –    
Total real estate                       
construction and land     – 0.0 %       362 0.0 %       –       –    
Commercial:                      
Cash flow     43,169 1.5 %       53,611 1.7 %       201       394    
Asset-based     1,718 0.1 %       1,165 0.0 %       –       –    
Venture capital     25,278 1.3 %       15,289 0.8 %       23,171       13,265    
Equipment finance      31,111 5.1 %       30,388 4.9 %       –       115    
Total commercial     101,276 1.3 %       100,453 1.2 %       23,372       13,774    
Consumer     472 0.1 %       173 0.0 %       –       49    
Total (1) $   172,576 1.1 %   $   173,030 1.1 %   $   27,152   $   21,846    
                       
(1) Includes loans and leases held for investment; excludes loans held for sale carried at lower of cost or fair value.    
                       

The following table presents nonperforming assets as of the dates indicated:

         
  June 30,   March 31,  
Nonperforming Assets   2017       2017    
  (Dollars in thousands)  
Nonaccrual Non-PCI loans and leases (1) $   172,576     $   173,030    
Nonaccrual PCI loans      1,980         2,404    
  Total nonaccrual loans and leases     174,556         175,434    
Foreclosed assets, net     13,278         12,842    
  Total nonperforming assets $   187,834     $   188,276    
         
Nonaccrual loans and leases held for investment         
to loans and leases held for investment   1.12 %     1.12 %  
Nonperforming assets to loans and leases         
held for investment and foreclosed assets   1.20 %     1.20 %  
         
(1) Includes loans and leases held for investment; excludes loans held for sale carried at lower of cost or fair value.  
         

CU BANCORP MERGER ANNOUNCEMENT

On April 6, 2017, PacWest announced the signing of a definitive agreement and plan of merger (the “Agreement”) whereby PacWest will acquire CU Bancorp in a transaction valued at approximately $705 million. 

CU Bancorp, headquartered in Los Angeles, California, is the parent of California United Bank, a California state-chartered non-member bank, with approximately $3.1 billion in assets and nine branches located in Los Angeles, Orange, Ventura, and San Bernardino counties at March 31, 2017. In connection with the transaction, California United Bank will be merged into Pacific Western Bank, the principal operating subsidiary of PacWest Bancorp.

The transaction, which was approved by the PacWest and CU Bancorp boards of directors, is expected to close in the fourth quarter of 2017 and is subject to customary closing conditions, including obtaining approval by CU Bancorp’s shareholders and bank regulatory authorities.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $22 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 full-service branches located throughout the state of California and one branch in Durham, North Carolina. We provide commercial banking services, including real estate, construction, and commercial loans, and comprehensive deposit and treasury management services to small and medium-sized businesses. We offer additional products and services through our CapitalSource and Square 1 Bank divisions. Our CapitalSource Division provides cash flow, asset-based, equipment and real estate loans and treasury management services to established middle market businesses on a national basis. Our Square 1 Bank Division offers a comprehensive suite of financial services focused on entrepreneurial businesses and their venture capital and private equity investors, with offices located in key innovation hubs across the United States. For more information about PacWest Bancorp, visit www.pacwestbancorp.com, or to learn more about Pacific Western Bank, visit www.pacificwesternbank.com.

FORWARD LOOKING STATEMENTS

This release contains certain “forward-looking statements” about the Company and its subsidiaries within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results and metrics and including statements about our expectations regarding our pending merger between the Company and CU Bancorp. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “assume,” “intend,” “believe,” “forecast,” “expect,” “estimate,” “plan,” “continue,” “will,” “should,” “look forward” and similar expressions are generally intended to identify forward-looking statements. All forward-looking statements (including statements regarding future financial and operating results and future transactions and their results) involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements. These risks and uncertainties include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; the impact of changes in interest rates or levels of market activity, especially on our loan and investment portfolios; deterioration, weaker than expected improvement, or other changes in the state of the economy or the markets in which we conduct business (including the levels of IPOs and M&A activities); changes in credit quality and the effect of credit quality on our provision for loan and lease losses and allowance for loan and leases losses; our ability to attract deposits and other sources of funding or liquidity; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the impact of adverse judgments or settlements in litigation, the initiation and resolution of regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; the Company’s ability to complete the proposed CU Bancorp transaction, including by obtaining regulatory approvals and approval by the shareholders of CU Bancorp, or any future transaction, successfully integrate such acquired entities, or achieve expected beneficial synergies and/or operating efficiencies, in each case within expected timeframes or at all; changes in the Company’s stock price before completion of the CU Bancorp merger, including as a result of the financial performance of the Company or CU Bancorp before closing; and our success at managing the risks involved in the foregoing items and all other factors set forth in the Company’s public reports, including the Annual Report on Form 10-K for the year ended December 31, 2016, and particularly the discussion of risk factors within that document.

All forward-looking statements included in this release are based on information available at the time of the release. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise except as required by law.

ADDITIONAL INFORMATION ABOUT THE PROPOSED TRANSACTION AND WHERE TO FIND IT

Investors and security holders are urged to carefully review and consider each of PacWest’s and CU Bancorp’s public filings with the SEC, including but not limited to their Annual Reports on Form 10-K, their proxy statements, their Current Reports on Form 8-K and their Quarterly Reports on Form 10-Q. The documents filed by PacWest with the SEC may be obtained free of charge at PacWest’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 requesting them in writing to PacWest Bancorp, 9701 Wilshire Boulevard, Suite 700, Beverly Hills, CA 90212; Attention: Investor Relations, by submitting an email request to investor-relations@pacwestbancorp.com or by telephone at (310) 887-8521.

The documents filed by CU Bancorp with the SEC may be obtained free of charge at CU Bancorp’s website at www.cubancorp.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from CU Bancorp by requesting them in writing to CU Bancorp, 818 W. 7th Street, Suite 220, Los Angeles, CA 90017; Attention: Investor Relations, or by telephone at 818-257-7700.

PacWest has filed a registration statement with the SEC which includes a proxy statement of CU Bancorp and a prospectus of PacWest, and each party will file other documents regarding the proposed transaction with the SEC. Before making any voting or investment decision, investors and security holders of CU Bancorp are urged to carefully read the entire registration statement and proxy statement/prospectus, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction. A definitive proxy statement/prospectus will be sent to the shareholders of CU Bancorp seeking any required shareholder approvals. Investors and security holders are able to obtain the registration statement and the proxy statement/prospectus free of charge from the SEC’s website or from PacWest or CU Bancorp by writing to the addresses provided for each company set forth in the paragraphs above.

PacWest, CU Bancorp, their directors, executive officers and certain other persons may be deemed to be participants in the solicitation of proxies from CU Bancorp shareholders in favor of the approval of the transaction. Information about the directors and executive officers of PacWest and their ownership of PacWest common stock is set forth in the proxy statement for PacWest’s 2017 annual meeting of stockholders, as previously filed with the SEC. Information about the directors and executive officers of CU Bancorp and their ownership of CU Bancorp common shares is set forth in the proxy statement for CU Bancorp’s 2016 annual meeting of shareholders, as previously filed with the SEC. Shareholders may obtain additional information regarding the interests of such participants by reading the registration statement and the proxy statement/prospectus.

PACWEST BANCORP AND SUBSIDIARIES              
CONDENSED CONSOLIDATED BALANCE SHEET              
               
  June 30,   March 31,   December 31,    
    2017       2017       2016      
  (Dollars in thousands, except per share data)    
ASSETS:              
Cash and due from banks $   180,330     $   184,608     $   337,965      
Interest-earning deposits in financial institutions     107,150         111,892         81,705      
  Total cash and cash equivalents      287,480         296,500         419,670      
               
Securities available-for-sale, at estimated fair value     3,474,560         3,336,992         3,223,830      
Federal Home Loan Bank stock, at cost     22,059         17,901         21,870      
  Total investment securities     3,496,619         3,354,893         3,245,700      
               
Loans held for sale     175,158         –         –      
               
Non-PCI loans and leases     15,536,735         15,526,518         15,412,092      
PCI loans     72,445         96,353         108,445      
  Total gross loans and leases held for investment     15,609,180         15,622,871         15,520,537      
Deferred fees, net     (65,723 )       (66,182 )       (64,583 )    
Total loans and leases held for investment,              
net of deferred fees     15,543,457         15,556,689         15,455,954      
Allowance for loan and lease losses     (145,958 )       (161,307 )       (157,238 )    
  Total loans and leases held for investment, net     15,397,499         15,395,382         15,298,716      
               
Equipment leased to others under operating leases     203,212         224,580         229,905      
Premises and equipment, net     29,108         28,908         38,594      
Foreclosed assets, net     13,278         12,842         12,976      
Deferred tax asset, net     70,354         88,765         94,112      
Goodwill     2,173,949         2,173,949         2,173,949      
Core deposit and customer              
relationship intangibles, net     30,237         33,302         36,366      
Other assets     369,983         318,133         319,779      
  Total assets $   22,246,877     $   21,927,254     $   21,869,767      
               
LIABILITIES:              
Noninterest-bearing deposits $   6,701,039     $   6,789,808     $   6,659,016      
Interest-bearing deposits     10,173,938         9,541,200         9,211,595      
  Total deposits     16,874,977         16,331,008         15,870,611      
Borrowings     217,454         460,609         905,812      
Subordinated debentures     445,743         442,516         440,744      
Accrued interest payable and other liabilities     148,798         185,015         173,545      
  Total liabilities     17,686,972         17,419,148         17,390,712      
STOCKHOLDERS’ EQUITY (1)     4,559,905         4,508,106         4,479,055      
  Total liabilities and stockholders’ equity $   22,246,877     $   21,927,254     $   21,869,767      
               
Book value per share $   37.55     $   37.13     $   36.93      
Tangible book value per share (2) $   19.40     $   18.95     $   18.71      
Shares outstanding      121,448,321         121,408,133         121,283,669      
               
(1) Includes net unrealized gain on securities              
available-for-sale, net $   29,729     $   12,718     $   5,982      
(2) Non-GAAP measure.              
               

 

PACWEST BANCORP AND SUBSIDIARIES                  
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS              
                     
  Three Months Ended   Six Months Ended  
  June 30,   March 31,   June 30,   June 30,  
    2017       2017       2016       2017       2016    
  (Dollars in thousands, except per share data)  
Interest income:                    
Loans and leases $   234,618     $   224,178     $   224,326     $   458,796     $   460,701    
Investment securities     24,689         23,039         22,420         47,728         44,967    
Deposits in financial institutions     237         192         308         429         616    
Total interest income     259,544         247,409         247,054         506,953         506,284    
                     
Interest expense:                    
Deposits     10,205         8,377         7,823         18,582         16,896    
Borrowings     1,066         1,018         352         2,084         933    
Subordinated debentures     5,800         5,562         5,122         11,362         10,104    
Total interest expense     17,071         14,957         13,297         32,028         27,933    
                     
Net interest income     242,473         232,452         233,757         474,925         478,351    
Provision for credit losses     11,499         24,728         13,903         36,227         34,043    
Net interest income after provision                     
for credit losses     230,974         207,724         219,854         438,698         444,308    
                     
Noninterest income:                    
Service charges on deposit accounts     3,510         3,758         3,633         7,268         7,489    
Other commissions and fees     10,583         10,390         11,073         20,973         22,562    
Leased equipment income     11,635         9,475         8,523         21,110         16,767    
Gain on sale of loans and leases     649         712         388         1,361         633    
Gain (loss) on sale of securities     1,651         (99 )       478         1,552         8,588    
FDIC loss sharing expense, net     –         –         (6,502 )       –         (8,917 )  
Other income     7,254         10,878         4,528         18,132         9,538    
Total noninterest income     35,282         35,114         22,121         70,396         56,660    
                     
Noninterest expense:                    
Compensation      65,288         64,880         62,174         130,168         123,239    
Occupancy     11,811         11,608         12,193         23,419         24,825    
Data processing     6,337         7,015         5,644         13,352         11,548    
Other professional services     3,976         3,378         3,401         7,354         6,973    
Insurance and assessments     4,856         4,791         4,951         9,647         9,916    
Intangible asset amortization     3,065         3,064         4,371         6,129         9,117    
Leased equipment depreciation     5,232         5,625         5,286         10,857         10,310    
Foreclosed assets (income) expense, net     (157 )       143         (3 )       (14 )       (564 )  
Acquisition, integration and                     
reorganization costs      1,700         500         –         2,200         200    
Other expense     15,599         15,540         12,064         31,139         25,205    
Total noninterest expense     117,707         116,544         110,081         234,251         220,769    
                     
Earnings before income taxes     148,549         126,294         131,894         274,843         280,199    
Income tax expense      (54,902 )       (47,626 )       (49,726 )       (102,528 )       (107,575 )  
Net earnings  $   93,647     $   78,668     $   82,168     $   172,315     $   172,624    
                     
Basic and diluted earnings per share $   0.77     $   0.65     $   0.68     $   1.42     $   1.42    
                     

PACWEST BANCORP AND SUBSIDIARIES                  
NET EARNINGS PER SHARE CALCULATIONS                  
                     
  Three Months Ended   Six Months Ended  
  June 30,   March 31,   June 30,   June 30,  
    2017       2017       2016       2017       2016    
  (In thousands, except per share data)  
Basic Earnings Per Share:                    
Net earnings  $   93,647     $   78,668     $   82,168     $   172,315     $   172,624    
Less: earnings allocated to unvested                     
restricted stock (1)     (1,080 )       (999 )       (863 )       (2,082 )       (1,933 )  
Net earnings allocated to common                     
shares $   92,567     $   77,669     $   81,305     $   170,233     $   170,691    
                     
Weighted-average basic shares and                     
unvested restricted stock outstanding     121,422         121,346         121,799         121,384         121,698    
Less: weighted-average unvested                     
restricted stock outstanding     (1,455 )       (1,503 )       (1,481 )       (1,479 )       (1,436 )  
Weighted-average basic shares                     
outstanding     119,967         119,843         120,318         119,905         120,262    
                     
Basic earnings per share $   0.77     $   0.65     $   0.68     $   1.42     $   1.42    
                     
Diluted Earnings Per Share:                    
Net earnings allocated to common                     
shares $   92,567     $   77,669     $   81,305     $   170,233     $   170,691    
                     
Weighted-average basic shares                     
outstanding     119,967         119,843         120,318         119,905         120,262    
                     
Diluted earnings per share $   0.77     $   0.65     $   0.68     $   1.42     $   1.42    
                     
(1) Represents cash dividends paid to holders of unvested stock, net of forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any.   
           

 

PACWEST BANCORP AND SUBSIDIARIES                      
AVERAGE BALANCE SHEET AND YIELD ANALYSIS                    
                           
  Three Months Ended    
  June 30, 2017   March 31, 2017   June 30, 2016    
    Interest Average     Interest Average     Interest Average    
  Average  Income/ Yield/   Average  Income/ Yield/   Average  Income/ Yield/    
  Balance Expense Cost   Balance Expense Cost   Balance Expense Cost    
  (Dollars in thousands)    
Assets:                          
PCI loans $   68,759   $   4,643   27.08 %   $   89,335   $   4,250   19.29 %   $   147,270   $   8,484   23.17 %    
Non-PCI loans and leases     15,429,162       229,975   5.98 %       15,207,709       219,928   5.86 %       14,321,320       215,842   6.06 %    
Total loans and leases     15,497,921       234,618   6.07 %       15,297,044       224,178   5.94 %       14,468,590       224,326   6.24 %    
Investment securities (1)     3,436,785       29,538   3.45 %       3,257,448       27,822   3.46 %       3,288,819       27,330   3.34 %    
Deposits in financial                           
institutions     96,087       237   0.99 %       100,751       192   0.77 %       245,666       308   0.50 %    
Total interest-earning                         
assets     19,030,793       264,393   5.57 %       18,655,243       252,192   5.48 %       18,003,075       251,964   5.63 %    
Other assets     2,905,809             2,990,291             2,996,867          
Total assets $  21,936,602         $  21,645,534         $  20,999,942          
                           
Liabilities and                           
Stockholders’ Equity:                        
Interest checking $   1,709,699       1,697   0.40 %   $   1,505,439       1,167   0.31 %   $   1,024,763       501   0.20 %    
Money market     4,907,865       4,993   0.41 %       4,866,720       4,410   0.37 %       4,321,533       2,886   0.27 %    
Savings     708,389       296   0.17 %       711,529       298   0.17 %       766,309       412   0.22 %    
Time     2,366,399       3,219   0.55 %       2,246,547       2,502   0.45 %       3,086,492       4,024   0.52 %    
Total interest-bearing                         
deposits     9,692,352       10,205   0.42 %       9,330,235       8,377   0.36 %       9,199,097       7,823   0.34 %    
Borrowings     457,774       1,066   0.93 %       596,903       1,018   0.69 %       300,428       352   0.47 %    
Subordinated debentures     443,756       5,800   5.24 %       441,521       5,562   5.11 %       439,081       5,122   4.69 %    
Total interest-bearing                         
liabilities     10,593,882       17,071   0.65 %       10,368,659       14,957   0.59 %       9,938,606       13,297   0.54 %    
Noninterest-bearing                           
demand deposits     6,646,349             6,595,346             6,437,720          
Other liabilities     151,095             177,854             140,023          
Total liabilities     17,391,326             17,141,859             16,516,349          
Stockholders’ equity     4,545,276             4,503,675             4,483,593          
Total liabilities and                           
stockholders’ equity $  21,936,602         $  21,645,534         $  20,999,942          
Net interest income (2)   $   247,322         $   237,235         $   238,667        
Net interest spread (2)     4.92 %       4.89 %       5.09 %    
Net interest margin (2)     5.21 %       5.16 %       5.33 %    
                           
Total deposits (3) $  16,338,701   $   10,205   0.25 %   $  15,925,581   $   8,377   0.21 %   $  15,636,817   $   7,823   0.20 %    
Funding sources (4) $  17,240,231   $   17,071   0.40 %   $  16,964,005   $   14,957   0.36 %   $  16,376,326   $   13,297   0.33 %    
                           
(1) Includes tax equivalent adjustments of $4.9 million, $4.8 million, and $4.9 million for the three months ended June 30, 2017, March 31, 2017, and June 30, 2016 related to tax exempt income on municipal securities.  The federal statutory tax rate utilized was 35% for the periods.  
(2) Tax equivalent.                          
(3) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits.  The cost of total deposits is calculated as annualized interest expense on deposits divided by average total deposits.  
(4) Funding sources is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of funding sources is calculated as annualized total interest expense divided by average funding sources.  
                 

PACWEST BANCORP AND SUBSIDIARIES                  
FIVE QUARTER BALANCE SHEET                    
                     
  June 30,   March 31,   December 31,   September 30,   June 30,  
    2017       2017       2016       2016       2016    
  (Dollars in thousands, except per share data)  
ASSETS:                    
Cash and due from banks $   180,330     $   184,608     $   337,965     $   286,371     $   226,471    
Interest-earning deposits in financial                     
institutions     107,150         111,892         81,705         253,994         218,882    
  Total cash and cash equivalents      287,480         296,500         419,670         540,365         445,353    
                     
Securities available-for-sale     3,474,560         3,336,992         3,223,830         3,341,335         3,347,546    
Federal Home Loan Bank stock     22,059         17,901         21,870         19,386         24,214    
  Total investment securities     3,496,619         3,354,893         3,245,700         3,360,721         3,371,760    
                     
Loans held for sale     175,158         –         –         –         –    
                     
Non-PCI loans and leases     15,536,735         15,526,518         15,412,092         14,686,206         14,566,425    
PCI loans     72,445         96,353         108,445         120,221         136,901    
  Total gross loans and leases                     
held for investment     15,609,180         15,622,871         15,520,537         14,806,427         14,703,326    
Deferred fees, net     (65,723 )       (66,182 )       (64,583 )       (63,581 )       (61,866 )  
Total loans and leases held for                    
investment, net of deferred fees     15,543,457         15,556,689         15,455,954         14,742,846         14,641,460    
Allowance for loan and lease losses     (145,958 )       (161,307 )       (157,238 )       (147,976 )       (143,289 )  
  Total loans and leases held for                    
investment, net     15,397,499         15,395,382         15,298,716         14,594,870         14,498,171    
                     
Equipment leased to others under                     
operating leases     203,212         224,580         229,905         198,931         204,062    
Premises and equipment, net     29,108         28,908         38,594         38,977         38,718    
Foreclosed assets, net     13,278         12,842         12,976         15,113         16,181    
Deferred tax asset, net     70,354         88,765         94,112         27,073         24,413    
Goodwill     2,173,949         2,173,949         2,173,949         2,173,949         2,175,791    
Core deposit and customer                     
relationship intangibles, net     30,237         33,302         36,366         39,542         43,766    
Other assets     369,983         318,133         319,779         325,750         328,924    
  Total assets $   22,246,877     $   21,927,254     $   21,869,767     $   21,315,291     $   21,147,139    
                     
LIABILITIES:                    
Noninterest-bearing deposits $   6,701,039     $   6,789,808     $   6,659,016     $   6,521,946     $   6,222,696    
Interest-bearing deposits     10,173,938         9,541,200         9,211,595         9,123,722         8,925,313    
  Total deposits     16,874,977         16,331,008         15,870,611         15,645,668         15,148,009    
Borrowings     217,454         460,609         905,812         541,011         918,208    
Subordinated debentures     445,743         442,516         440,744         441,112         439,322    
Accrued interest payable and other                    
liabilities     148,798         185,015         173,545         144,905         128,296    
  Total liabilities     17,686,972         17,419,148         17,390,712         16,772,696         16,633,835    
STOCKHOLDERS’ EQUITY (1)     4,559,905         4,508,106         4,479,055         4,542,595         4,513,304    
  Total liabilities and stockholders’                     
  equity $   22,246,877     $   21,927,254     $   21,869,767     $   21,315,291     $   21,147,139    
                     
Book value per share $   37.55     $   37.13     $   36.93     $   37.29     $   37.05    
Tangible book value per share (2) $   19.40     $   18.95     $   18.71     $   19.12     $   18.83    
Shares outstanding     121,448,321         121,408,133         121,283,669         121,817,524         121,819,849    
                     
(1) Includes net unrealized gain on                     
securities available-for-sale, net $   29,729     $   12,718     $   5,982     $   72,073     $   81,744    
(2) Non-GAAP measure.                    
                     

 

PACWEST BANCORP AND SUBSIDIARIES                  
FIVE QUARTER STATEMENT OF EARNINGS                  
                     
  Three Months Ended  
  June 30,   March 31,   December 31,   September 30,   June 30,  
    2017       2017       2016       2016       2016    
  (Dollars in thousands, except per share data)  
Interest income:                    
Loans and leases $   234,618     $   224,178     $   238,223     $   225,370     $   224,326    
Investment securities     24,689         23,039         23,403         22,187         22,420    
Deposits in financial institutions     237         192         147         298         308    
Total interest income     259,544         247,409         261,773         247,855         247,054    
                     
Interest expense:                    
Deposits     10,205         8,377         7,369         7,247         7,823    
Borrowings     1,066         1,018         631         695         352    
Subordinated debentures     5,800         5,562         5,468         5,278         5,122    
Total interest expense     17,071         14,957         13,468         13,220         13,297    
                     
Net interest income     242,473         232,452         248,305         234,635         233,757    
Provision for credit losses     11,499         24,728         23,215         8,471         13,903    
Net interest income after provision                     
for credit losses     230,974         207,724         225,090         226,164         219,854    
                     
Noninterest income:                    
Service charges on deposit accounts     3,510         3,758         3,557         3,488         3,633    
Other commissions and fees     10,583         10,390         12,036         12,528         11,073    
Leased equipment income     11,635         9,475         8,614         8,538         8,523    
Gain on sale of loans and leases     649         712         119         157         388    
Gain (loss) on sale of securities     1,651         (99 )       515         382         478    
FDIC loss sharing expense, net     –         –         –         –         (6,502 )  
Other income     7,254         10,878         4,054         1,827         4,528    
Total noninterest income     35,282         35,114         28,895         26,920         22,121    
                     
Noninterest expense:                    
Compensation      65,288         64,880         66,013         62,661         62,174    
Occupancy     11,811         11,608         12,076         12,010         12,193    
Data processing     6,337         7,015         6,574         6,234         5,644    
Other professional services     3,976         3,378         4,880         4,625         3,401    
Insurance and assessments     4,856         4,791         4,124         4,324         4,951    
Intangible asset amortization     3,065         3,064         3,176         4,224         4,371    
Leased equipment depreciation     5,232         5,625         5,291         5,298         5,286    
Foreclosed assets (income) expense, net     (157 )       143         2,693         (248 )       (3 )  
Acquisition, integration and                     
reorganization costs      1,700         500         –         –         –     
Other expense     15,599         15,540         13,795         11,582         12,064    
Total noninterest expense     117,707         116,544         118,622         110,710         110,081    
                     
Earnings before income taxes     148,549         126,294         135,363         142,374         131,894    
Income tax expense      (54,902 )       (47,626 )       (49,716 )       (48,479 )       (49,726 )  
Net earnings  $   93,647     $   78,668     $   85,647     $   93,895     $   82,168    
                     
Basic and diluted earnings per share $   0.77     $   0.65     $   0.71     $   0.77     $   0.68    
                     

PACWEST BANCORP AND SUBSIDIARIES                
FIVE QUARTER SELECTED FINANCIAL DATA                
                   
  At or For the Three Months Ended
  June 30,   March 31,   December 31,   September 30,   June 30,
    2017       2017       2016       2016       2016  
  (Dollars in thousands)                
Performance Ratios:                  
Return on average assets (1)   1.71 %     1.47 %     1.59 %     1.77 %     1.57 %
Return on average equity (1)   8.26 %     7.08 %     7.57 %     8.24 %     7.37 %
Return on average tangible equity (1)(2)   16.06 %     13.90 %     14.88 %     16.15 %     14.61 %
                   
Yield on average loans and leases (1)   6.07 %     5.94 %     6.31 %     6.17 %     6.24 %
Yield on average interest-earning                   
assets (1)(3)   5.57 %     5.48 %     5.76 %     5.55 %     5.63 %
Cost of average total deposits (1)   0.25 %     0.21 %     0.19 %     0.19 %     0.20 %
Cost of average time deposits (1)   0.55 %     0.45 %     0.40 %     0.45 %     0.52 %
Cost of average interest-bearing                   
liabilities (1)   0.65 %     0.59 %     0.52 %     0.52 %     0.54 %
Cost of average funding sources (1)   0.40 %     0.36 %     0.32 %     0.32 %     0.33 %
Net interest rate spread (1)(3)   4.92 %     4.89 %     5.24 %     5.03 %     5.09 %
Net interest margin (1)(3)   5.21 %     5.16 %     5.47 %     5.26 %     5.33 %
                   
Efficiency ratio   40.3 %     41.4 %     40.1 %     40.1 %     40.6 %
Noninterest expense as a percentage                  
of average assets (1)   2.15 %     2.18 %     2.20 %     2.09 %     2.11 %
                   
Average Balances:                  
Loans and leases $   15,497,921     $   15,297,044     $   15,008,268     $   14,534,951     $   14,468,590  
Interest-earning assets     19,030,793         18,655,243         18,413,189         18,111,585         18,003,075  
Total assets     21,936,602         21,645,534         21,427,950         21,072,053         20,999,942  
Noninterest-bearing deposits     6,646,349         6,595,346         6,496,221         6,274,294         6,437,720  
Interest-bearing deposits     9,692,352         9,330,235         9,327,080         9,107,305         9,199,097  
Total deposits     16,338,701         15,925,581         15,823,301         15,381,599         15,636,817  
Borrowings and subordinated                   
debentures     901,530         1,038,424         946,474         1,023,952         739,509  
Interest-bearing liabilities     10,593,882         10,368,659         10,273,554         10,131,257         9,938,606  
Funding sources     17,240,231         16,964,005         16,769,775         16,405,551         16,376,326  
Stockholders’ equity     4,545,276         4,503,675         4,501,948         4,530,701         4,483,593  
                   
(1) Annualized.                  
(2) Non-GAAP measure.                  
(3) Tax equivalent.                  
                   

PACWEST BANCORP AND SUBSIDIARIES                    
FIVE QUARTER SELECTED FINANCIAL DATA                    
                       
  At or For the Three Months Ended    
  June 30,   March 31,   December 31,   September 30,   June 30,    
    2017       2017       2016       2016       2016      
  (Dollars in thousands)                    
Non-PCI Credit Quality:                      
Allowance for credit losses to loans                       
and leases held for investment   1.02 %     1.08 %     1.05 %     1.05 %     1.03 %    
Allowance for credit losses to                       
nonaccrual loans and leases held                       
for investment   92.2 %     96.9 %     94.5 %     90.1 %     117.5 %    
Nonaccrual loans and leases held for                       
investment to loans and leases held                      
for investment   1.11 %     1.11 %     1.11 %     1.16 %     0.88 %    
Nonperforming assets to loans and                       
leases held for investment and                       
foreclosed assets   1.20 %     1.20 %     1.19 %     1.27 %     0.99 %    
Nonperforming assets to total assets   0.84 %     0.85 %     0.84 %     0.87 %     0.68 %    
Trailing twelve month net charge-offs                       
to average loans and leases                      
held for investment   0.37 %     0.24 %     0.15 %     0.04 %     0.04 %    
                       
PacWest Bancorp Consolidated                       
Capital:                      
Tier 1 leverage ratio (1)   11.90 %     11.87 %     11.91 %     12.13 %     11.92 %    
Common equity tier 1 capital ratio (1)   12.28 %     12.31 %     12.31 %     12.83 %     12.72 %    
Tier 1 capital ratio (1)   12.28 %     12.31 %     12.31 %     12.83 %     12.72 %    
Total capital ratio (1)   15.42 %     15.56 %     15.56 %     16.18 %     16.08 %    
Risk-weighted assets (1) $   19,084,824     $   18,732,723     $   18,568,622     $   17,713,506     $   17,520,609      
                       
Equity to assets ratio    20.50 %     20.56 %     20.48 %     21.31 %     21.34 %    
Tangible common equity ratio (2)   11.75 %     11.67 %     11.54 %     12.19 %     12.12 %    
Book value per share $   37.55     $   37.13     $   36.93     $   37.29     $   37.05      
Tangible book value per share (2) $   19.40     $   18.95     $   18.71     $   19.12     $   18.83      
                       
Pacific Western Bank Capital:                      
Tier 1 leverage ratio (1)   11.41 %     11.36 %     11.40 %     11.54 %     11.38 %    
Common equity tier 1 capital ratio (1)   11.79 %     11.79 %     11.78 %     12.21 %     12.13 %    
Tier 1 capital ratio (1)   11.79 %     11.79 %     11.78 %     12.21 %     12.13 %    
Total capital ratio (1)   12.66 %     12.74 %     12.72 %     13.15 %     13.06 %    
                       
Equity to assets ratio    20.07 %     20.11 %     20.02 %     20.77 %     20.82 %    
Tangible common equity ratio (2)   11.27 %     11.16 %     11.02 %     11.56 %     11.51 %    
                       
(1) Capital information for June 30, 2017 is preliminary.                    
(2) Non-GAAP measure.                      
                       

GAAP TO NON-GAAP RECONCILIATION

This press release contains certain non-GAAP financial disclosures for: (1) return on average tangible equity, (2) tangible common equity ratio, and (3) tangible book value per share. The Company uses these 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.  In particular, the use of return on average tangible equity, tangible common equity ratio, and tangible book value per share is prevalent among banking regulators, investors and analysts.  Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of: (1) return on average equity, (2) equity to assets ratio, and (3) book value per share.   

The reconciliations for the following GAAP financial measures to the non-GAAP financial measures are presented below: (1) return on average equity to return on average tangible equity, (2) equity to assets ratio to tangible common equity ratio, and (3) book value per share to tangible book value per share.

PACWEST BANCORP AND SUBSIDIARIES                  
GAAP TO NON-GAAP RECONCILIATION                  
                       
    Three Months Ended   Six Months Ended  
    June 30,   March 31,   June 30,   June 30,  
Return on Average Tangible Equity   2017       2017       2016       2017       2016    
    (Dollars in thousands)  
Net earnings $   93,647     $   78,668     $   82,168     $   172,315     $   172,624    
                       
Average stockholders’ equity $   4,545,276     $   4,503,675     $   4,483,593     $   4,524,591     $   4,461,097    
Less:  Average intangible assets     2,205,814         2,209,112         2,222,007         2,207,454         2,224,764    
Average tangible common equity $   2,339,462     $   2,294,563     $   2,261,586     $   2,317,137     $   2,236,333    
                       
Return on average equity (1)   8.26 %     7.08 %     7.37 %     7.68 %     7.78 %  
Return on average tangible equity (2)   16.06 %     13.90 %     14.61 %     15.00 %     15.52 %  
                       
(1) Annualized net earnings divided by average stockholders’ equity.              
(2) Annualized net earnings divided by average tangible common equity.              
                       

PACWEST BANCORP AND SUBSIDIARIES                  
GAAP TO NON-GAAP RECONCILIATION                  
                     
                     
Tangible Common Equity Ratio/ June 30,   March 31,   December 31,   September 30,   June 30,  
Tangible Book Value Per Share   2017       2017       2016       2016       2016    
  (Dollars in thousands, except per share data)                  
PacWest Bancorp Consolidated:                    
Stockholders’ equity $   4,559,905     $   4,508,106     $   4,479,055     $   4,542,595     $   4,513,304    
Less: Intangible assets     2,204,186         2,207,251         2,210,315         2,213,491         2,219,557    
Tangible common equity $   2,355,719     $   2,300,855     $   2,268,740     $   2,329,104     $   2,293,747    
                     
Total assets $   22,246,877     $   21,927,254     $   21,869,767     $   21,315,291     $   21,147,139    
Less: Intangible assets     2,204,186         2,207,251         2,210,315         2,213,491         2,219,557    
Tangible assets $   20,042,691     $   19,720,003     $   19,659,452     $   19,101,800     $   18,927,582    
                     
Equity to assets ratio   20.50 %     20.56 %     20.48 %     21.31 %     21.34 %  
Tangible common equity ratio (1)   11.75 %     11.67 %     11.54 %     12.19 %     12.12 %  
                     
Book value per share $   37.55     $   37.13     $   36.93     $   37.29     $   37.05    
Tangible book value per share (2) $   19.40     $   18.95     $   18.71     $   19.12     $   18.83    
Shares outstanding     121,448,321         121,408,133         121,283,669         121,817,524         121,819,849    
                     
                     
Pacific Western Bank:                    
Stockholder’s equity $   4,460,911     $   4,405,770     $   4,374,478     $   4,416,623     $   4,390,928    
Less: Intangible assets     2,204,186         2,207,251         2,210,315         2,213,491         2,219,557    
Tangible common equity $   2,256,725     $   2,198,519     $   2,164,163     $   2,203,132     $   2,171,371    
                     
Total assets $   22,223,320     $   21,910,720     $   21,848,644     $   21,266,705     $   21,084,950    
Less: Intangible assets     2,204,186         2,207,251         2,210,315         2,213,491         2,219,557    
Tangible assets $   20,019,134     $   19,703,469     $   19,638,329     $   19,053,214     $   18,865,393    
                     
Equity to assets ratio   20.07 %     20.11 %     20.02 %     20.77 %     20.82 %  
Tangible common equity ratio (1)   11.27 %     11.16 %     11.02 %     11.56 %     11.51 %  
                     
(1) Tangible common equity divided by tangible assets.                  
(2) Tangible common equity divided by shares outstanding.                  
                     

CONTACT: Contact:
Donald D. Destino
Executive Vice President
Corporate Development and Investor Relations

Phone:
310-887-8521