Actionable news
0
All posts from Actionable news
Actionable news in PACW: PacWest Bancorp,

PacWest: Executive Vice President And Cfo Phone:

The following excerpt is from the company's SEC filing.

310-728-1020

714-989-4705

FOR IMMEDIATE RELEASE

October 15, 2015

PACWEST BANCORP ANNOUNCES RESULTS

FOR THE THIRD QUARTER OF 2015

Highlights

Net Earnings of $69.6 Million, or $0.68 Per Diluted Share; Adjusted Net Earnings of $65.2 Million, or $0.63 Per Diluted Share

New Loan and Lease Production of $1.1 Billion; Annualized Growth Rate of 14%

Core Deposits Increased $230.6 Million in the Quarter and Represent 56% of Total Deposits

Core Tax Equivalent Net Interest Margin of 5.19%

Square 1 Merger Closed October 6, 2015

Los Angeles, C alifornia . . . PacWest Bancorp (Nasdaq: PACW)

(PacWest) today announced net earnings for the third quarter of 2015 of $69.6 million, or $0.68 per diluted share, compared to net earnings for the second quarter of 2015 of $85.1 million, or $0.83 per diluted share. When certain income and expense items described below are excluded, adjusted net earnings were $65.2 million, or $0.63 per diluted share, for the third quarter of 2015 compared to $73.1 million, or $0.71 per diluted share, for the second quarter of 2015. The decrease in adjusted net earnings is largely the result of higher foreclosed assets expense, lower adjusted noninterest income, and a higher provision for credit losses as compared to the second quarter.

Matt Wagner, President and CEO, commented, As expected, the loan and lease production and growth rebounded strongly in the third quarter and will have a positive impact on revenues in the fourth quarter. We remain confident with our outlook for upper single-digits annual growth for the near term, bearing in mind there may be some volatility between quarters in the growth rate due to payoff activity.

The decline in our adjusted earnings on a linked-quarter basis was mostly due to a few discrete items, including an increase in foreclosed assets expense and a decline in equity investment income. Even with the noise from these items, our profitability levels remained solid with an adjusted ROA and ROTE for the third quarter of 1.55% and 14.1%.

Mr. Wagner continued, Our Non-PCI credit metrics improved during the third quarter, with meaningful reductions in the level of classified and nonperforming assets. In addition, our credit exposure to the oil and gas services industry also improved, with reductions in both outstandings and nonaccrual balances of 14% and 25%, respectively.

Mr. Wagner commented on the Square 1 merger stating, With the completion of the Square 1 merger, PacWest has a substantially improved core deposit base and a proven platform for generating profitable loan, deposit and noninterest income growth in the venture capital banking space. We welcome our new director, Mr. Paul Burke, and all of the Square 1 clients and employees.

Patrick Rusnak, Executive Vice President and CFO stated, Third quarter core deposit growth was very good, totaling over $230 million of which about one third was generated by the CapitalSource Division. While we have continued to make progress towards our goal of remixing the Banks deposit base, the Square 1 merger will significantly accelerate that process.

Mr. Rusnak continued, Our core tax equivalent net interest margin remains very strong at 5.19%. We continue to control operating expenses as shown by the adjusted efficiency ratio of 40.6% in the third quarter. Our focus for the remainder of 2015 will be loan and lease growth, core deposit growth, expense control and the successful integration of Square 1.

FINANCIAL HIGHLIGHTS

At or For the Three Months Ended

At or For the Nine Months Ended

September 30,

June 30,

Change

(Dollars in thousands, except per share data)

Financial Highlights:

69,616

85,083

(15,467

227,778

97,906

129,872

Diluted Earnings Per Share

Return on Average Assets (1)

Return on Average Tangible Equity (1) (2)

Adjusted Net Earnings (2)

65,167

73,088

(7,921

203,821

151,683

52,138

Adjusted Diluted Earnings Per Share (2)

Adjusted Return on Average Assets (1) (2)

Adjusted Return on Average Tangible Equity (1) (2)

Net Interest Margin (tax equivalent)

Core Net Interest Margin (tax equivalent) (2)

Efficiency Ratio

Adjusted Efficiency Ratio (2)

Total Assets

16,814,105

16,697,020

117,085

15,938,150

875,955

Loans and Leases, Net of Deferred Fees

12,452,205

12,034,189

418,016

11,574,885

877,320

12,115,763

12,581,816

(466,053

11,523,437

592,326

Noninterest-Bearing Deposits as Percentage of Total Deposits

Core Deposits as Percentage of Total Deposits

Tangible Common Equity Ratio (2)

Tangible Book Value Per Share (2)

(1) Annualized.

(2) Non-GAAP measure.

ADJUSTED NET EARNINGS

In evaluating its earnings, the Company removes certain items to arrive at adjusted net earnings and adjusted diluted earnings per share, as detailed below:

(Dollars in thousands)

Net earnings

62,271

Tax benefit on discontinued operations

(1,067

Tax expense on continuing operations

39,777

45,287

42,911

131,137

73,744

Pre-tax earnings

109,393

130,370

105,179

358,915

170,583

Acquisition, integration, and reorganization costs

93,635

FDIC loss sharing expense, net

(4,449

(5,107

(7,415

(13,955

(27,370

Gain on sale of loans and leases

Gain (loss) on securities

Covered OREO (expense) income, net

Gain on sale of owned office building

Adjusted pre-tax earnings before accelerated discount accretion

113,927

136,388

117,266

372,572

283,235

Accelerated discount accretion from early payoffs of acquired loans

19,447

46,458

27,446

104,268

116,941

112,765

326,114

255,789

Tax expense (1)

(39,101

(43,853

(45,895

(122,293

(104,106

Adjusted net earnings

66,870

Adjusted diluted earnings per share

Adjusted return on average assets

(1) Full-year expected effective rate of 37.5% used for 2015 periods and actual effective rate of 40.7%

used for 2014 periods.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income decreased $10.1 million to $192.5 million for the third quarter of 2015 compared to $202.6 million for the second quarter of 2015 due to lower discount accretion on acquired loans and lower FHLB dividends, offset by one more day in the third quarter. The loan and lease yield for the third quarter of 2015 was 6.34% compared to 6.75% for the second quarter of 2015. The decrease in the loan and lease yield was due to lower discount accretion on acquired loans and the yield on new originations being lower than the current portfolio yield. Discount accretion on acquired loans was $17.1 million in the third quarter of 2015 (57 basis points on the loan and lease yield) compared to $28.0 million in the second quarter of 2015 (92 basis points on the loan and lease yield). The decrease in discount accretion was due primarily to lower accelerated accretion from early payoffs.

The tax equivalent net interest margin (NIM) for the third quarter of 2015 was 5.46% compared to 5.89% for the second quarter of 2015. The decrease in the NIM was due to lower discount accretion on acquired loans, lower FHLB dividends and a higher percentage of average lower-yielding assets in the mix. Discount accretion on acquired loans contributed 48 basis points to the NIM in the third quarter of 2015 and 81 basis points in the second quarter of 2015. A $1.4 million special dividend received from the FHLB in the second quarter of 2015 contributed four basis points to the second quarter NIM.

The cost of total deposits decreased to 0.33% in the third quarter from 0.37% in the prior quarter due primarily to a lower level of higher-cost time deposits and the increased balance of noninterest-bearing deposits. The repricing of maturing time deposits at current rates and new time deposit production resulted in the decline in the weighted average contractual interest rate on time deposits to 0.67% at September 30, 2015 from 0.71% at June 30, 2015.

Net interest margin information is presented in the following table for the periods indicated:

Net Interest Margin - Tax Equivalent

Average Assets:

Loans and leases

12,112,881

12,108,016

Investment securities

1,806,628

1,672,590

Deposits in financial institutions

278,973

161,683

Interest-earning assets

14,198,482

13,942,289

Other assets

2,491,695

2,521,022

Total assets

16,690,177

16,463,311

Average Liabilities and Stockholders Equity:

Interest-bearing deposits

8,993,681

9,107,937

Borrowings

70,171

81,164

Subordinated debentures

434,420

432,656

Interest-bearing liabilities

9,498,272

9,621,757

Noninterest-bearing demand deposits

3,486,780

3,157,129

Other liabilities

132,360

135,677

Total liabilities

13,117,412

12,914,563

Stockholders equity

3,572,765

3,548,748

Liabilities and stockholders equity

Time deposits

5,042,768

5,559,903

Total deposits

12,480,461

12,265,066

Funding sources

12,985,052

12,778,886

Yields on Average Assets:

Investment securities (1)

Interest-earning assets (1)

Costs of Average Liabilities:

Net interest rate spread (1)

Net interest margin (1)

(1) Tax equivalent

The tax equivalent NIM and loan and lease yield are impacted by volatility in accelerated accretion of acquisition discounts due to the prepayment of acquired loans and leases. The effects of this item are shown in the following table for the periods indicated:

September 30, 2015

June 30, 2015

Loan and

Lease Yield

Reported

Less: Accelerated accretion of acquisition discounts from early payoffs of acquired loans

Core (non-GAAP measure)

The impact on the tax equivalent net interest income and NIM from all purchase accounting items is set forth in the table below for the periods indicated:

Impact on

Amount

Net interest income/NIM (TE)

195,274

204,721

Less: Accelerated accretion of acquisition discounts from early payoffs of acquired loans

(9,659

(19,447

Remaining accretion of Non-PCI loan acquisition discounts

(7,485

(8,575

Total accretion of loan acquisition discounts

(17,144

(28,022

Amortization of TruPS discount

Accretion of time deposits premium

(16,321

(27,421

Net interest income/NIM - excluding purchase accounting (non-GAAP measure)

178,953

177,300

Noninterest Income

Noninterest income decreased by $3.8 million to $15.8 million for the third quarter of 2015 compared to $19.6 million for the second quarter of 2015 due mostly to lower realized gains and dividends on equity investments and lower income recognized as a result of loan and lease prepayments, offset by lower foreign currency translation net losses and higher net gains on sale of securities. Realized gains and dividends on equity investments tend to fluctuate from period to period based upon sales activity and actual dividends received. The second quarter of 2015 included the sale of three equity investments at a net gain of $6.0 million compared to one sale in the third quarter at a gain of $0.1 million and dividends on equity investments increased $2.2 million in the third quarter. Foreign currency translation net losses decreased $1.0 million from the prior quarter as the result of movement of the U.S. Dollar against various foreign currencies, principally the Euro. In June 2015, PacWest hedged its Euro-denominated trust preferred issuance with a cross currency swap to reduce the related foreign currency translation volatility.

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

Noninterest Income

(Decrease)

(In thousands)

Service charges on deposit accounts

Other commissions and fees

Leased equipment income

Other income:

Dividends and realized gains on equity investments

(3,812

Foreign currency translation net losses

(1,377

Income recognized on early repayment of leases

(1,636

Total noninterest income

15,758

19,623

(3,865

The following table presents the details of FDIC loss sharing expense for the periods indicated:

FDIC Loss Sharing Expense, Net

Loss on FDIC loss sharing asset

FDIC loss sharing asset amortization, net

(3,484

(4,286

Net reimbursement from (to) FDIC for covered OREOs

Noninterest Expense

Noninterest expense increased by $4.8 million to $90.1 million for the third quarter of 2015 compared to $85.3 million for the second quarter of 2015. The increase was due mostly to higher foreclosed assets expense of $6.9 million, offset by lower insurance and assessments expense of $0.9 million and lower compensation expense of $0.9 million. The increase in foreclosed assets expense was due mostly to a write-down of $4.6 million on an existing foreclosed property in the third quarter, while the second quarter included gains related to foreclosed asset sales of $2.8 million. Insurance and assessments expense decreased due to lower FDIC insurance assessment expense. The reduction in compensation expense was principally due to lower stock-based compensation expense.

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

Noninterest Expense

Compensation

48,152

49,033

Occupancy

10,762

10,588

Data processing

Other professional services

Insurance and assessments

Intangible asset amortization

Leased equipment depreciation

Foreclosed assets expense (income), net

(2,340

Acquisition, integration and reorganization costs

Other expense:

Loan expense

Total noninterest expense

90,139

85,276

Income Taxes

Our overall effective income tax rate was 36.4% for the third quarter of 2015 and 34.7% for the second quarter of 2015. The effective rate for the second quarter...


More