Fourth Quarter of 2014 Highlights
  • Net Earnings of $71.0 Million, or $0.69 Per Diluted Share; Adjusted Net Earnings of $68.2 Million, or $0.66 Per Diluted Share
  • Core Net Interest Margin at 5.52%
  • $307.5 Million of Loan and Lease Growth in the Quarter Driven by $950.4 Million of Production
  • Demand Deposits Increased $88.9 Million in the Quarter and are 25% of Total Deposits
  • Core Deposits Increased $128.6 Million in the Quarter and are 52% of Total Deposits

Calendar Year 2014 Highlights
  • Net Earnings of $168.9 Million, or $1.92 Per Diluted Share; Adjusted Net Earnings of $220.4 Million, or $2.50 Per Diluted Share
  • Core Net Interest Margin at 5.60%
  • $684.0 Million of Organic Loan and Lease Growth in the Year Driven by $3.0 Billion of Production
  • Demand Deposits Increased $612.9 Million
  • Organic Core Deposit Growth of $700.3 Million

LOS ANGELES, Jan. 22, 2015 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq:PACW) today announced net earnings for the fourth quarter of 2014 of $71.0 million, or $0.69 per diluted share, compared to net earnings for the third quarter of 2014 of $62.3 million, or $0.60 per diluted share. Net earnings for calendar year 2014 are $168.9 million, or $1.92 per diluted share, compared to net earnings of $45.1 million for calendar year 2013, or $1.08 per diluted share. The significant increase in annual net earnings is largely the result of the CapitalSource merger that closed on April 7, 2014.

When certain income and expense items described below are excluded, adjusted net earnings are $68.2 million, or $0.66 per diluted share, for the fourth quarter of 2014 and $67.2 million, or $0.65 per diluted share, for the third quarter of 2014. Adjusted net earnings are $220.4 million, or $2.50 per diluted share, for calendar year 2014 and $77.5 million, or $1.86 per diluted share, for calendar year 2013.

Matt Wagner, President and CEO, commented, "2014 was truly a transformative year for the Company with the completion of the CapitalSource merger on April 7. We more than doubled our asset size and combined a national lending platform with our California-based deposit franchise. Our teams originated $3.0 billion of loans and leases in 2014 and increased core deposits by $700 million, of which $265 million are new accounts from CapitalSource division borrowers. Our 2014 net earnings almost quadrupled to $168.9 million from $45.1 million in 2013, and our adjusted net earnings for 2014 almost tripled to $220.4 million from $77.5 million in 2013. These strong operating results allowed us to distribute more than $114 million of cash dividends to our stockholders in 2014, with last quarter's regular cash dividend being increased 100% to $0.50 per share."

Mr. Wagner continued, "Our loan and lease portfolio has been diversified along product and geographical lines, and overall credit quality has improved as demonstrated by a 1.09% nonperforming asset ratio and a 92% coverage ratio on nonaccruals. The Company's capital position remains quite strong, with tangible capital at 12.2%. We steadily improved tangible book value per share, which increased $4.44 per share during the year and reached $17.17 per share at year end. Overall, the Company and the Bank are well positioned for continued success."

Vic Santoro, Executive Vice President and CFO, stated "Our fourth quarter results are equally as good as those for the full year. Reported and adjusted net earnings of $71.0 million and $68.2 million resulted in returns on tangible equity of 16.0% and 15.4%. Our core net interest margin remains quite strong at 5.52%, and our NIM, when adjusted for all the effects of purchase accounting, increased to 5.10% in the fourth quarter. We continue to closely control operating expenses as shown by the adjusted efficiency ratio, which declined to 42.3% in the fourth quarter. Our focus in 2015 will continue to be on loan and lease growth, core deposit growth and expense control."

FINANCIAL HIGHLIGHTS

  At or For the Three Months Ended At or For the Year Ended
  December 31, September 30,   December 31,  
  2014 2014 Change 2014 2013 Change
  (Dollars in thousands, except per share data)
Financial Highlights: (1)            
Total Assets  $ 16,234,800  $ 15,938,345  $ 296,455  $ 16,234,800  $ 6,533,363  $ 9,701,437
Loans and Leases, Net of Deferred Fees  $ 11,882,432  $ 11,574,885  $ 307,547  $ 11,882,432  $ 4,312,352  $ 7,570,080
Total Deposits  $ 11,755,128  $ 11,523,437  $ 231,691  $ 11,755,128  $ 5,280,987  $ 6,474,141
             
Net Earnings  $ 70,999  $ 62,271  $ 8,728  $ 168,905  $ 45,115  $ 123,790
Diluted Earnings Per Share  $ 0.69  $ 0.60  $ 0.09  $ 1.92  $ 1.08  $ 0.84
Annualized Return on Average Assets 1.77% 1.57%  0.20 1.27% 0.74%  0.53
             
Adjusted Net Earnings (2)  $ 68,200  $ 67,235  $ 965  $ 220,403  $ 77,466  $ 142,937
Adjusted Diluted Earnings Per Share (2)  $ 0.66  $ 0.65  $ 0.01  $ 2.50  $ 1.86  $ 0.64
Annualized Adjusted Return on Average Assets (2) 1.70% 1.70%  --  1.65% 1.27%  0.38
Annualized Return on Average Tangible Equity (2) 16.00% 14.36%  1.64 11.88% 8.25%  3.63
Annualized Adjusted Return on Average Tangible Equity (2) 15.37% 15.50%  (0.13) 15.51% 14.17%  1.34
             
Noninterest-Bearing Deposits as Percentage of Total Deposits 25% 25%  -- 25% 44%  (19)
Core Deposits as a Percentage of Total Deposits 52% 52%  -- 52% 88%  (36)
Tangible Common Equity Ratio (2) 12.20% 12.24%  (0.04) 12.20% 9.24%  2.96
Tangible Book Value Per Share (2)  $ 17.17  $ 16.86  $ 0.31  $ 17.17  $ 12.73  $ 4.44
Net Interest Margin 5.86% 5.78%  0.08 5.95% 5.37%  0.58
Core Net Interest Margin (2) 5.52% 5.64%  (0.12) 5.60% 5.29%  0.31
Efficiency Ratio 44.5% 46.6%  (2.1) 58.0% 76.4%  (18.4)
Adjusted Efficiency Ratio (2) 42.3% 43.4%  (1.1) 44.7% 60.6%  (15.9)
Annualized Operating Expense as Percentage of Average Assets 2.00% 2.09%  (0.09) 2.20% 3.13%  (0.93)
             
(1) Includes the acquisition of First California Financial Group, Inc. on May 31, 2013 and CapitalSource Inc. on April 7, 2014.
(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:
  Three Months Ended Year Ended
  December 31, September 30, December 31, December 31,
  2014 2014 2013 2014 2013
  (Dollars in thousands)
           
Reported net earnings  $ 70,999  $ 62,271  $ 3,109  $ 168,905  $ 45,115
Less: Tax benefit on discontinued operations  (47)  (3)  (240)  (1,114)  (258)
Add: Tax expense on continuing operations  42,226  42,205  9,135  113,853  30,003
Reported pre-tax earnings  113,178  104,473  12,004  281,644  74,860
Add: Acquisition, integration, reorganization and severance costs  7,381  5,193  16,673  101,016  40,812
Less: FDIC loss sharing expense, net  (4,360)  (7,415)  (10,593)  (31,730)  (26,172)
Gain on sale of loans and leases  7  973  683  601  1,791
(Loss) gain on securities  --  --  (272)  4,841  5,359
Covered OREO (expense) income, net  (176)  (452)  594  1,172  1,833
Gain on sale of owned office building  --  --  --  1,570  --
Adjusted pre-tax earnings before accelerated discount accretion  125,088  116,560  38,265  406,206  132,861
Less: Accelerated discount accretion resulting from payoffs of acquired loans  11,421  4,501  1,434  38,867  4,393
Adjusted pre-tax earnings  113,667  112,059  36,831  367,339  128,468
Tax expense (1)  (45,467)  (44,824)  (14,622)  (146,936)  (51,002)
Adjusted net earnings  $ 68,200  $ 67,235  $ 22,209  $ 220,403  $ 77,466
           
Annualized adjusted return on average assets 1.70% 1.70% 1.33% 1.65% 1.27%
           
Adjusted diluted earnings per share  $ 0.66  $ 0.65  $ 0.49  $ 2.50  $ 1.86
           
(1) Effective tax rates of 40.0% in 2014 periods and 39.7% in 2013 periods.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income increased $6.2 million to $195.0 million for the fourth quarter of 2014 compared to $188.8 million for the third quarter of 2014 due to higher accelerated discount accretion resulting from early payoffs of acquired loans. Net interest margin ("NIM") for the fourth quarter of 2014 was 5.86% compared to 5.78% for the third quarter of 2014, and loan yield was 6.76% compared to 6.68% for the third quarter of 2014. The increase in the NIM and loan yield are both due to higher accelerated discount accretion from early payoffs of acquired loans. Accelerated accretion resulting from early payoffs of acquired loans was $11.4 million in the fourth quarter (39 basis points on the loan and lease yield) compared to $4.5 million in the third quarter (16 basis points on the loan and lease yield), an increase of $6.9 million.

The total cost of deposits increased to 0.34% from 0.30% in the prior quarter due primarily to a lower amount of premium accretion on the time deposits acquired in the CapitalSource merger. The outflow of maturing higher-rate time deposits, and the retention of a portion of these deposits at current rates, resulted in the decline in the weighted average contractual rate of time deposits to 0.75% at December 31 from 0.80% at September 30. 

Net interest margin information is presented in the following table for the periods indicated:
  Three Months Ended
  December 31, September 30,
Net Interest Margin 2014 2014
  (In thousands)
Average Assets:    
Loans and leases  $ 11,586,573  $ 11,285,689
Investment securities  1,591,839  1,584,811
Deposits in financial institutions  26,971  99,276
Average interest-earning assets  13,205,383  12,969,776
Other assets  2,687,378  2,746,763
Average total assets  $ 15,892,761  $ 15,716,539
     
Average Liabilities:    
Interest-bearing deposits  $ 8,679,599  $ 8,778,642
Borrowings  214,053  96,711
Subordinated debentures  433,859  434,625
Average interest-bearing liabilities  9,327,511  9,309,978
Noninterest-bearing demand deposits  2,900,388  2,778,260
Other liabilities  164,571  163,182
Average total liabilities  12,392,470  12,251,420
Average stockholders' equity  3,500,291  3,465,119
Average liabilities and stockholders' equity  $ 15,892,761  $ 15,716,539
     
Average time deposits  $ 5,427,687  $ 5,680,732
Average total deposits  $ 11,579,987  $ 11,556,902
Average funding sources  $ 12,227,899  $ 12,088,238
     
Yield on:    
Average loans and leases 6.76% 6.68%
Average investment securities 3.04% 3.09%
Average interest-earning assets 6.30% 6.19%
     
Cost of:    
Average total deposits  0.34% 0.30%
Average time deposits 0.60% 0.51%
Average interest-bearing deposits 0.46% 0.40%
Average borrowings 0.27% 0.30%
Average subordinated debentures 4.20% 4.21%
Average interest-bearing liabilities 0.63% 0.58%
Average funding sources 0.48% 0.44%
     
Net interest rate spread 5.67% 5.61%
Net interest margin 5.86% 5.78%

The NIM and loan and lease yield are impacted by volatility caused by accelerated accretion of acquisition discounts resulting from early payoffs of acquired loans. The effects of this item are shown in the following table for the periods indicated:
  Three Months Ended Three Months Ended
  December 31, 2014 September 30, 2014
    Loan and    Loan and 
  NIM Lease Yield NIM Lease Yield
Reported 5.86% 6.76% 5.78% 6.68%
Less: Accelerated accretion of acquisition discounts resulting from acquired loan payoffs (0.34)% (0.39)% (0.14)% (0.16)%
Core (non-GAAP measure) 5.52% 6.37% 5.64% 6.52%

The impact on the NIM from all purchase accounting items is detailed in the table below for the period indicated:
  Three Months Ended Three Months Ended
  December 31, 2014 September 30, 2014
    Impact on   Impact on
  Amount NIM Amount NIM
  (Dollars in thousands)
Net interest income/NIM as reported  $ 194,983 5.86%  $ 188,846 5.78%
Less: Accelerated accretion of acquisition discounts from early acquired loan payoffs  (11,421) (0.34)%  (4,501) (0.14)%
Remaining accretion of Non-PCI loan acquisition discounts  (13,073) (0.39)%  (15,072) (0.46)%
Amortization of TruPS discount  1,401 0.04%  1,402 0.04%
Accretion of time deposits premium  (2,469) (0.07)%  (5,081) (0.16)%
   (25,562) (0.76)%  (23,252) (0.72)%
Net interest income/NIM excluding purchase accounting  $ 169,421 5.10%  $ 165,594 5.06%

Noninterest Income

Noninterest income decreased by $3.6 million to $12.7 million for the fourth quarter of 2014 compared to $16.3 million for the third quarter of 2014 due mostly to lower other commissions and fees, lower dividends and gains on equity investments and lower foreign currency translation net gains, offset by lower FDIC loss sharing expense. The decrease in other commissions and fees is due to lower prepayment fees and other loan-related fees. Dividends and gains on equity investments and foreign currency translation net gains tend to fluctuate from period to period based upon dividends received, sales of equity investments and the movement of the U.S. Dollar against various foreign currencies. FDIC loss sharing expense decreased $3.1 million due mostly to lower amortization of the FDIC loss sharing asset as one of the Bank's loss sharing agreements reached the end of its initial indemnification period during the previous quarter.

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

  Three Months Ended
  December 31, September 30, Increase
Noninterest Income 2014 2014 (Decrease)
  (In thousands)
       
Service charges on deposit accounts  $ 2,787  $ 2,725  $ 62
Other commissions and fees  4,556  6,371  (1,815)
Leased equipment income  5,382  5,615  (233)
Gain on sale of loans and leases  7  973  (966)
FDIC loss sharing expense, net  (4,360)  (7,415)  3,055
Other income:      
Dividends and realized gains on equity investments  1,924  3,625  (1,701)
Foreign currency translation net gains  854  2,253  (1,399)
Income recognized on early repayment of leases  294  510  (216)
Other  1,259  1,657  (398)
Total noninterest income  $ 12,703  $ 16,314  $ (3,611)

The following table presents the details of FDIC loss sharing expense for the periods indicated:
  Three Months Ended
  December 31, September 30, Increase
FDIC Loss Sharing Expense, Net 2014 2014 (Decrease)
  (In thousands)
       
Loss on FDIC loss sharing asset  $ (525)  $ (1,735)  $ 1,210
FDIC loss sharing asset amortization, net  (3,795)  (6,074)  2,279
Net reimbursement from FDIC for covered OREOs  63  491  (428)
Other  (103)  (97)  (6)
FDIC loss sharing expense, net  $ (4,360)  $ (7,415)  $ 3,055

Noninterest Expense

Noninterest expense decreased by $3.3 million to $92.3 million for the fourth quarter of 2014 compared to $95.6 million for the third quarter of 2014. The decrease was due mostly to lower foreclosed assets expense of $2.9 million and lower operating expenses of $2.7 million, offset by higher acquisition, integration, reorganization and severance costs of $2.2 million. The decrease in foreclosed assets expense was mostly due to lower write-downs on existing properties.

Operating expenses decreased to $79.9 million for the fourth quarter of 2014 compared to $82.6 million for the third quarter of 2014 due to decreases in other expenses and other professional services. Other expenses decreased due to lower loan-related expenses related to origination and work-out activities and the prior quarter included an accrual for loan-related litigation. Other professional services decreased due to lower legal and consulting expenses.

The following table presents details of noninterest expense for the periods indicated:
  Three Months Ended
  December 31, September 30, Increase
Noninterest Expense 2014 2014 (Decrease)
  (In thousands)
       
Compensation  $ 45,930  $ 45,861  $ 69
Occupancy   10,745  11,188  (443)
Data processing  4,050  3,929  121
Other professional services  3,181  3,687  (506)
Insurance and assessments  3,115  3,020  95
Intangible asset amortization  1,619  1,608  11
Other expense:      
Loan expense  2,365  3,711  (1,346)
Communications  1,141  1,369  (228)
Other  7,772  8,275  (503)
Total operating expense  79,918  82,648  (2,730)
Leased equipment depreciation  3,103  2,961  142
Foreclosed assets expense, net  1,938  4,827  (2,889)
Acquisition, integration, reorganization and severance costs  7,381  5,193  2,188
Total noninterest expense  $ 92,340  $ 95,629  $ (3,289)

Income Taxes

Our overall effective income tax rate was 37.3% for the fourth quarter of 2014 and 40.4% for the third quarter of 2014.

BALANCE SHEET HIGHLIGHTS

Loans and Leases

Total loans and leases increased $307.5 million in the fourth quarter to $11.9 billion at December 31, 2014. The loan and lease growth in the fourth quarter represents an annualized growth rate of 11%. 

The following table presents a roll forward of the loan and lease portfolio for the periods indicated:
  Three Months Ended
  December 31, September 30,
Loan and Lease Roll Forward (1) 2014 2014
  (In thousands)
     
Beginning balance  $ 11,574,885  $ 11,190,105
Loans and leases originated and purchased  950,385  974,658
Existing loans and leases:    
Principal repayments, net (2)  (620,799)  (535,758)
Loan and lease sales  (6,388)  (13,039)
Transfers to loans held for sale  --  (33,125)
Transfers to foreclosed assets  (9,139)  --
Charge-offs  (6,512)  (7,956)
Ending balance  $ 11,882,432  $ 11,574,885
     
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.
(2) Includes principal repayments on existing loans, changes in revolving lines of credit (repayments and draws) and other changes within the loan portfolio.

The following table presents a roll forward of the loan and lease portfolio by segment for the period indicated:
  Three Months Ended December 31, 2014
  Community National  
Loan and Lease Roll Forward by Segment Banking Lending Total
  (In thousands)
       
Beginning balance  $ 3,482,125  $ 8,092,760  $ 11,574,885
Loans and leases originated and purchased  121,817  828,568  950,385
Existing loans and leases:      
Principal repayments, net   (181,219)  (439,580)  (620,799)
Loan and lease sales  (6,246)  (142)  (6,388)
Transfers to foreclosed assets  (9,139)  --  (9,139)
Charge-offs  (6,209)  (303)  (6,512)
Ending balance  $ 3,401,129  $ 8,481,303  $ 11,882,432
       
Weighted average rate on originations 5.09% 5.76% 5.67%

The following table presents the composition of our loan and lease portfolio as of the dates indicated:
  December 31, September 30,
Loan and Lease Portfolio 2014 2014
  (In thousands)
Real estate mortgage:    
Hospitality  $ 570,634  $ 530,628
SBA  380,890  357,923
Commercial real estate  2,428,794  2,492,883
Healthcare real estate  1,030,851  1,006,164
Multi-family  774,710  811,234
Other  411,123  514,283
Total real estate mortgage  5,597,002  5,713,115
Real estate construction:    
Residential  96,749  72,881
Commercial  217,297  218,389
Total real estate construction  314,046  291,270
Commercial:    
Collateralized  439,567  429,011
Unsecured  131,939  127,150
Asset-based  1,794,907  1,594,488
Cash flow  2,486,411  2,341,511
Equipment finance  969,489  928,460
SBA  47,304  41,129
Total commercial  5,869,617  5,461,749
Consumer  101,767  108,751
Total loans and leases, net of deferred fees  $ 11,882,432  $ 11,574,885

Energy-Related Credit Exposure

At December 31, 2014, we had 45 outstanding loan and lease relationships totaling $288.0 million to borrowers broadly involved in the energy industry. The obligors under these loans and leases either conduct mining, quarrying, oil and gas extraction or provide industrial support services to such types of businesses. The collateral for these loans and leases primarily includes equipment, such as drilling and mining equipment and transportation vehicles, used directly and indirectly in these activities. At December 31, 2014, four of these loans totaling $6.8 million were on nonaccrual status. These loans and leases are subject to our normal review procedures and allowance for credit losses methodology.

Deposits

The following table presents the composition of our deposit portfolio as of the dates indicated:
  December 31, 2014 September 30, 2014
    % of    % of 
Deposit Category Amount Total Amount Total
  (Dollars in thousands)
         
Noninterest-bearing demand deposits  $ 2,931,352 25%  $ 2,842,488 25%
Interest checking deposits  732,196 6%  683,014 6%
Money market deposits  1,709,068 15%  1,721,563 15%
Savings deposits  762,961 6%  759,893 6%
Total core deposits  6,135,577 52%  6,006,958 52%
Brokered non-maturity deposits  120,613 1%  --  --
Total non-maturity deposits  6,256,190 53%  6,006,958 52%
Time deposits under $100,000  2,467,338 21%  2,267,013 20%
Time deposits of $100,000 and over  3,031,600 26%  3,249,466 28%
Total time deposits  5,498,938 47%  5,516,479 48%
Total deposits  $ 11,755,128 100%  $ 11,523,437 100%

At December 31, 2014, core deposits totaled $6.1 billion, or 52% of total deposits, and noninterest-bearing demand deposits, which totaled $2.9 billion, were 25% of total deposits. Core deposits obtained from CapitalSource Division borrowers totaled $264.8 million at December 31, 2014, of which $246.1 million were noninterest-bearing.

The following table summarizes the maturities of our time deposits as of the date indicated:

  December 31, 2014
  Time Deposits Time Deposits Total    Estimated
  Under $100,000 Time  Contractual Effective 
Time Deposit Maturities $100,000 or More Deposits Rate Rate
  (Dollars in thousands)
           
Due in three months or less  $ 618,024  $ 767,160  $ 1,385,184 0.70% 0.61%
Due in over three months through six months  608,290  700,199  1,308,489 0.70% 0.64%
Due in over six months through twelve months  1,007,390  1,257,397  2,264,787 0.75% 0.71%
Due in over 12 months through 24 months  176,125  248,533  424,658 1.01% 0.88%
Due in over 24 months   57,509  58,311  115,820 0.95% 0.70%
 Total  $ 2,467,338  $ 3,031,600  $ 5,498,938 0.75% 0.69%
           
At September 30, 2014  $ 2,267,013  $ 3,249,466  $ 5,516,479 0.80% 0.69%

The remaining purchase accounting premium on acquired CapitalSource time deposits was $3.6 million at December 31, 2014 with a weighted average life of 15 months.

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

We made a provision for credit losses of $2.1 million in the fourth quarter of 2014 and $5.1 million in the third quarter of 2014 in accordance with our loan methodology, which takes into consideration new loan and lease fundings, commitments to make loans and leases, and underlying credit quality trends. The fourth quarter provision is comprised of $2.7 million for Non-PCI loans and a negative provision of $0.6 million for PCI loans. The negative provision for PCI loans results from increases in expected cash flows on such loans, which have a net carrying value of $290.9 million at December 31.

The following tables show roll forwards of the allowance for credit losses for the third and fourth quarters:
  Three Months Ended September 30, 2014
  Non-PCI         
Allowance for Credit  Loans and  Unfunded  Total  PCI  
Losses Rollforward Leases Commitments Non-PCI Loans Total
  (In thousands)
           
Beginning balance  $ 65,523  $ 6,844  $ 72,367  $ 16,626  $ 88,993
Charge-offs  (7,848)  --  (7,848)  (108)  (7,956)
Recoveries  1,725  --  1,725  --  1,725
Net charge-offs  (6,123)  --  (6,123)  (108)  (6,231)
Provision (negative provision)  3,684  (931)  2,753  2,297  5,050
Ending balance  $ 63,084  $ 5,913  $ 68,997  $ 18,815  $ 87,812
           
  Three Months Ended December 31, 2014
  Non-PCI         
Allowance for Credit  Loans and  Unfunded  Total  PCI  
Losses Rollforward Leases Commitments Non-PCI Loans Total
  (In thousands)
           
Beginning balance  $ 63,084  $ 5,913  $ 68,997  $ 18,815  $ 87,812
Charge-offs  (1,647)  --  (1,647)  (4,865)  (6,512)
Recoveries  6,688  --  6,688  715  7,403
Net (charge-offs) recoveries  5,041  --  5,041  (4,150)  891
Provision (negative provision)  2,331  398  2,729  (666)  2,063
Ending balance  $ 70,456  $ 6,311  $ 76,767  $ 13,999  $ 90,766

Non-PCI loans and leases include $5.0 billion of originated loans and leases that were not obtained through acquisitions. The allowance related to these loans and leases totals $66.3 million, or 1.31% of the outstanding balance.

All acquired loans are recorded initially at their estimated fair value with such initial fair value including an estimate of credit losses. The two additional credit coverage ratios shown in the table below are presented to give an indication of overall credit risk coverage:

  December 31, 2014 September 30, 2014
  Non-PCI     Non-PCI    
Credit Risk Coverage Ratios Loans and Allowance/ Coverage Loans and Allowance/ Coverage
(Excludes PCI Loans) Leases Discount Ratio Leases Discount Ratio
  (Dollars in thousands)
             
Ending balance  $ 11,605,056  $ 76,767 0.66%  $ 11,239,964  $ 68,997 0.61%
Acquired loans  (6,562,267)  (4,184) (1)  (7,039,518)  (3,038) (1)
Adjusted balance  $ 5,042,789  $ 72,583 1.44%  $ 4,200,446  $ 65,959 1.57%
             
Ending balance  $ 11,605,056  $ 76,767 0.66%  $ 11,239,964  $ 68,997 0.61%
Unamortized net discount  156,428  156,428 (2)  179,424  179,424 (2)
Adjusted balance  $ 11,761,484  $ 233,195 1.98%  $ 11,419,388  $ 248,421 2.18%
             
(1) Allowance attributed to $6.6 billion and $7.0 billion of acquired Non-PCI loans at December 31, 2014 and September 30, 2014, based on the allowance calculation that includes an amount for credit deterioration on acquired loans and leases since their acquisition dates. 
(2) Unamortized net discount relates to $6.6 billion and $7.0 billion of acquired Non-PCI loans at December 31, 2014 and September 30, 2014, and is assigned specifically to those loans only. Such discount represents the acquisition date fair value adjustment based on market, liquidity, and interest rate risk in addition to credit risk and is being accreted to interest income over the remaining life of the respective loans.

The decrease in coverage ratios results from the combination of newly originated loans being provided for at a rate lower than the current coverage ratio and normal and accelerated accretion of unamortized discount.

CREDIT QUALITY

The following table presents our Non-PCI loan and lease credit quality metrics as of the dates indicated:
  December 31, September 30,
Non-PCI Credit Quality Metrics 2014 2014
  (Dollars in thousands)
     
Allowance for credit losses  $ 76,767  $ 68,997
Nonaccrual loans and leases (1)  83,621  88,948
Classified loans and leases (2)  242,611  260,986
Performing restructured loans  35,244  34,308
Net charge-offs (recoveries) (for the quarter)  (5,041)  6,123
Provision for credit losses (for the quarter)  2,729  2,753
Allowance for credit losses to loans and leases 0.66% 0.61%
Allowance for credit losses to nonaccrual loans and leases 91.8% 77.6%
Nonperforming assets to loans and leases and foreclosed assets 1.09% 1.15%
Classified loans and leases to loans and leases 2.09% 2.32%
     
(1) At December 31, 2014 and September 30, 2014, includes $22,899 and $24,465, respectively, of acquired loans and leases with no allowance due to fair value accounting.
(2) Classified loans and leases are those with a credit risk rating of substandard or doubtful.

The following table presents our 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:
  Nonaccrual Loans and Leases Accruing and
  December 31, 2014   September 30, 2014 30-89 Days Past Due
    % of      % of  December 31, September 30,
    Loan      Loan  2014 2014
  Balance Category   Balance Category Balance Balance
  (Dollars in thousands)
Real estate mortgage:                  
Hospitality  $ 6,366   1%    $ 6,451   1%  $ --  $ --
SBA  11,141   3%    7,483   2%  3,339  529
Other  20,105    --    26,575   1%  4,769  4,014
Total real estate mortgage  37,612   1%    40,509   1%  8,108  4,543
Real estate construction:                  
Residential  381    --    925   1%  --  --
Commercial  1,178   1%    2,703   1%  --  1,190
Total real estate construction  1,559   1%    3,628   1%  --  1,190
Commercial:                  
Collateralized  5,450   1%    5,165   1%  93  --
Unsecured  639    --    226    --  69  1
Asset-based  4,574    --    5,003    --  --  --
Cash flow  15,964   1%    15,958    1%  --  --
Equipment finance   11,131   1%    12,885   1%  2,339  --
SBA  3,207   7%    2,039   5%  26  --
Total commercial  40,965   1%    41,276   1%  2,527  1
Consumer  3,485   3%    3,535   3%  50  165
Total Non-PCI loans and leases   $ 83,621 (1) 1%    $ 88,948 (1) 1%  $ 10,685  $ 5,899
                   
(1) Includes leases to companies involved in the energy industry of $6.8 million and $8.5 million at December 31 and September 30, 2014, respectively. There were no energy-related leases accruing and 30-89 days past due.

The following table presents our nonperforming assets as of the dates indicated:
  December 31, September 30,
Nonperforming Assets 2014 2014
  (Dollars in thousands)
     
Nonaccrual Non-PCI loans and leases  $ 83,621  $ 88,948
Nonaccrual PCI Loans(1)  25,264  27,670
Total nonaccrual loans and leases  108,885  116,618
Foreclosed assets, net  43,721  40,524
Total nonperforming assets  $ 152,606  $ 157,142
     
Nonperforming assets to loans and leases and foreclosed assets 1.28% 1.35%
     
(1) Represents legacy CapitalSource borrowing relationships placed on nonaccrual status as of the acquisition date.

PCI loans, regardless of the underlying payment status of the borrower, are generally considered accruing and performing when reasonably estimable cash flows support the carrying amount of the loans. As of December 31, 2014, there are $25.3 million of PCI loans on nonaccrual status and included in the table above as the timing and amount of future cash flows is not reasonably estimable.

ABOUT PACWEST BANCORP

PacWest Bancorp is a bank holding company with over $16 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank ("Pacific Western"). Through 80 full-service branches located throughout the state of California, Pacific Western provides commercial banking services, including real estate, construction, and commercial loans, to small and medium-sized businesses. Its CapitalSource and Community Banking divisions, and its subsidiary CapitalSource Business Finance Group (formerly known as BFI Business Finance), deliver the full spectrum of financing solutions nationwide across numerous industries and property types. 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 certain plans, strategies, goals, and projections and including statements about our expectations regarding our loan and lease portfolio growth and production, deposit growth, and operating expenses. 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. Actual results could differ materially from those contained or implied by such forward-looking statements for a variety of factors, including without limitation:
  • changes in economic or competitive market conditions could negatively impact investment or lending opportunities or product pricing and services;
  • legislative or regulatory requirements or changes adversely affected the Company's business, including an increase to capital requirements;
  • loan repayments higher than expected;
  • reduced demand for our services due to strategic or regulatory reasons;
  • our inability to grow deposits and access wholesale funding sources;
  • higher than anticipated increases in operating expenses;
  • increased litigation;
  • higher asset workout or loan servicing expenses;
  • higher compensation costs and professional fees to retain and/or incent employees; and
  • other risk factors described in documents filed by PacWest with the U.S. Securities and Exchange Commission ("SEC").

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.
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
       
  December 31, September 30, December 31,
  2014 2014 2013
  (Dollars in thousands, except per share data)
ASSETS:      
Cash and due from banks  $ 164,757  $ 145,463  $ 96,424
Interest-earning deposits in financial institutions  148,469  115,399  50,998
Total cash and cash equivalents   313,226  260,862  147,422
       
Securities available-for-sale, at estimated fair value  1,567,177  1,539,681  1,494,745
Federal Home Loan Bank stock, at cost  40,609  45,602  27,939
Total investment securities  1,607,786  1,585,283  1,522,684
       
Non-PCI loans and leases  11,613,832  11,239,964  3,930,539
PCI loans  290,852  351,431  382,796
Total gross loans and leases  11,904,684  11,591,395  4,313,335
Deferred fees and costs  (22,252)  (16,510)  (983)
Total loans and leases, net of deferred fees  11,882,432  11,574,885  4,312,352
Allowance for loan and lease losses  (84,455)  (81,899)  (82,034)
Total loans and leases, net  11,797,977  11,492,986  4,230,318
       
Equipment leased to others under operating leases  122,506  125,119  -- 
Premises and equipment, net  36,551  38,368  32,435
Foreclosed assets, net  43,721  40,524  55,891
FDIC loss sharing asset  18,734  22,977  45,524
Deferred tax asset, net  284,411  331,176  79,636
Goodwill  1,720,479  1,722,129  208,743
Core deposit and customer relationship intangibles, net  17,204  18,822  17,248
Other assets  272,205  300,099  193,462
Total assets  $ 16,234,800  $ 15,938,345  $ 6,533,363
       
LIABILITIES:      
Noninterest-bearing deposits  $ 2,931,352  $ 2,842,488  $ 2,318,446
Interest-bearing deposits  8,823,776  8,680,949  2,962,541
Total deposits  11,755,128  11,523,437  5,280,987
Borrowings  383,402  363,672  113,726
Subordinated debentures  433,583  433,545  132,645
Accrued interest payable and other liabilities  156,262  139,445  196,912
Total liabilities  12,728,375  12,460,099  5,724,270
       
STOCKHOLDERS' EQUITY (1)  3,506,425  3,478,246  809,093
Total liabilities and shareholders' equity  $ 16,234,800  $ 15,938,345  $ 6,533,363
       
(1) Includes net unrealized gain (loss) on securities available-for-sale, net  $ 26,380  $ 20,821  $ (3,347)
       
Book value per share  $ 34.04  $ 33.76  $ 17.66
Tangible book value per share  $ 17.17  $ 16.86  $ 12.73
       
Shares outstanding (includes unvested restricted shares of 1,108,505 at December 31, 2014, 1,115,550 at September 30, 2014 and 1,216,524 at December 31, 2013)  103,022,017  103,027,830 45,822,834
 
PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
           
  Three Months Ended Year Ended
  December 31, September 30, December 31, December 31,
  2014 2014 2013 2014 2013
  (Dollars in thousands, except per share data)
Interest income:          
Loans and leases  $ 197,472  $ 189,961  $ 73,352  $ 657,097  $ 272,726
Investment securities  12,205  12,331  10,422  47,345  36,923
Deposits in financial institutions  19  64  82  333  265
Total interest income  209,696  202,356  83,856  704,775  309,914
           
Interest expense:          
Deposits  9,972  8,822  1,450  27,332  7,868
Borrowings  144  74  86  496  537
Subordinated debentures  4,597  4,614  1,062  14,570  3,796
Total interest expense  14,713  13,510  2,598  42,398  12,201
           
Net interest income  194,983  188,846  81,258  662,377  297,713
Provision (negative provision) for credit losses  2,063  5,050  (1,338)  11,499  (4,210)
Net interest income after provision for credit losses  192,920  183,796  82,596  650,878  301,923
           
Noninterest income:          
Service charges on deposit accounts  2,787  2,725  3,197  11,233  11,765
Other commissions and fees  4,556  6,371  2,125  18,602  8,416
Leased equipment income  5,382  5,615  --  16,669  --
Gain on sale of loans and leases  7  973  683  601  1,791
(Loss) gain on securities  --  --  (272)  4,841  5,359
FDIC loss sharing expense, net  (4,360)  (7,415)  (10,593)  (31,730)  (26,172)
Other income  4,331  8,045  934  21,971  3,085
Total noninterest income  12,703  16,314  (3,926)  42,187  4,244
           
Noninterest expense:          
Compensation   45,930  45,861  27,697  165,499  107,067
Occupancy  10,745  11,188  7,553  40,606  29,459
Data processing  4,050  3,929  2,216  14,618  9,494
Other professional services  3,181  3,687  1,770  11,234  6,754
Insurance and assessments  3,115  3,020  1,572  10,907  5,596
Intangible asset amortization  1,619  1,608  1,430  6,268  5,402
Other expenses  11,278  13,355  7,746  44,036  27,606
Total operating expense  79,918  82,648  49,984  293,168  191,378
Leased equipment depreciation  3,103  2,961  --  9,159  --
Foreclosed assets expense (income), net  1,938  4,827  (569)  5,401  (1,503)
Acquisition, integration, reorganization and severance costs  7,381  5,193  16,673  101,016  40,812
Total noninterest expense  92,340  95,629  66,088  408,744  230,687
           
Earnings from continuing operations before taxes  113,283  104,481  12,582  284,321  75,480
Income tax expense   (42,226)  (42,205)  (9,135)  (113,853)  (30,003)
Net earnings from continuing operations   71,057  62,276  3,447  170,468  45,477
           
Loss from discontinued operations before taxes  (105)  (8)  (578)  (2,677)  (620)
Income tax benefit   47  3  240  1,114  258
Net loss from discontinued operations  (58)  (5)  (338)  (1,563)  (362)
           
Net earnings   $ 70,999  $ 62,271  $ 3,109  $ 168,905  $ 45,115
           
Basic and diluted earnings per share:          
Net earnings from continuing operations  $ 0.69  $ 0.60  $ 0.07  $ 1.94  $ 1.09
Net earnings  $ 0.69  $ 0.60  $ 0.06  $ 1.92  $ 1.08
 
PACWEST BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND YIELD ANALYSIS
                   
  Three Months Ended
  December 31, 2014 September 30, 2014 December 31, 2013
    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  $ 311,061  $ 11,247 14.34%  $ 363,049  $ 13,490 14.74%  $ 384,727  $ 12,754 13.15%
Non-PCI loans and leases  11,275,512  186,225 6.55%  10,922,640  176,471 6.41%  3,916,650  60,598 6.14%
Total loans and leases  11,586,573  197,472 6.76%  11,285,689  189,961 6.68%  4,301,377  73,352 6.77%
Investment securities (1)  1,591,839  12,205 3.04%  1,584,811  12,331 3.09%  1,531,335  10,422 2.70%
Deposits in financial institutions  26,971  19 0.28%  99,276  64 0.26%  129,716  82 0.25%
Total interest-earning assets  13,205,383  209,696 6.30%  12,969,776  202,356 6.19%  5,962,428  83,856 5.58%
Other assets  2,687,378      2,746,763      670,302    
Total assets  $ 15,892,761      $ 15,716,539      $ 6,632,730    
                   
Liabilities and Stockholders' Equity:                  
Interest checking  $ 702,498  194 0.11%  $ 605,288  86 0.06%  $ 627,256  83 0.05%
Money market  1,788,341  932 0.21%  1,733,445  908 0.21%  1,512,369  654 0.17%
Savings  761,073  572 0.30%  759,177  575 0.30%  220,331  14 0.03%
Time  5,427,687  8,274 0.60%  5,680,732  7,253 0.51%  694,924  699 0.40%
Total interest-bearing deposits  8,679,599  9,972 0.46%  8,778,642  8,822 0.40%  3,054,880  1,450 0.19%
Borrowings  214,053  144 0.27%  96,711  74 0.30%  9,861  86 3.46%
Subordinated debentures  433,859  4,597 4.20%  434,625  4,614 4.21%  132,560  1,062 3.18%
Total interest-bearing liabilities  9,327,511  14,713 0.63%  9,309,978  13,510 0.58%  3,197,301  2,598 0.32%
Noninterest-bearing demand deposits  2,900,388      2,778,260      2,397,642    
Other liabilities  164,571      163,182      218,852    
Total liabilities  12,392,470      12,251,420      5,813,795    
Stockholders' equity  3,500,291      3,465,119      818,935    
Total liabilities and stockholders' equity  $ 15,892,761      $ 15,716,539      $ 6,632,730    
Net interest income    $ 194,983      $ 188,846      $ 81,258  
Net interest spread     5.67%     5.61%     5.26%
Net interest margin     5.86%     5.78%     5.41%
                   
Total deposits (2)  $ 11,579,987  $ 9,972 0.34%  $ 11,556,902  $ 8,822 0.30%  $ 5,452,522  $ 1,450 0.11%
Funding sources (3)  $ 12,227,899  $ 14,713 0.48%  $ 12,088,238  $ 13,510 0.44%  $ 5,594,943  $ 2,598 0.18%
                   
(1) The tax equivalent yield on investment securities was 3.45%, 3.47%, and 3.14% for the three months ended December 31, 2014, September 30, 2014, and December 31, 2013.
(2) Total deposits is the sum of 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.
(3) Funding sources is the sum of 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
           
  December 31, September 30, June 30, March 31, December 31,
  2014 2014 2014 2014 2013
  (Dollars in thousands, except per share data)
ASSETS:          
Cash and due from banks  $ 164,757  $ 145,463  $ 243,583  $ 113,508  $ 96,424
Interest-earning deposits in financial institutions  148,469  115,399  119,782  228,579  50,998
Total cash and cash equivalents   313,226  260,862  363,365  342,087  147,422
           
Securities available-for-sale  1,567,177  1,539,681  1,552,115  1,477,473  1,494,745
Federal Home Loan Bank stock, at cost  40,609  45,602  49,983  25,000  27,939
Total investment securities  1,607,786  1,585,283  1,602,098  1,502,473  1,522,684
           
Non-PCI loans and leases  11,613,832  11,239,964  10,802,053  3,828,569  3,930,539
PCI loans  290,852  351,431  398,471  332,516  382,796
Total gross loans and leases  11,904,684  11,591,395  11,200,524  4,161,085  4,313,335
Deferred fees and costs  (22,252)  (16,510)  (10,419)  (18)  (983)
Total loans and leases, net of deferred fees  11,882,432  11,574,885  11,190,105  4,161,067  4,312,352
Allowance for loan and lease losses  (84,455)  (81,899)  (82,149)  (81,180)  (82,034)
Total loans and leases, net  11,797,977  11,492,986  11,107,956  4,079,887  4,230,318
           
Equipment leased to others under operating leases  122,506  125,119  127,289  --  --
Premises and equipment, net  36,551  38,368  40,440  29,908  32,435
Foreclosed assets, net  43,721  40,524  53,821  50,895  55,891
FDIC loss sharing asset  18,734  22,977  28,834  34,628  45,524
Deferred tax asset, net  284,411  331,176  342,105  72,683  79,636
Goodwill  1,720,479  1,722,129  1,725,153  208,743  208,743
Core deposit and customer relationship intangibles, net  17,204  18,822  20,431  15,884  17,248
Other assets  272,205  300,099  273,374  180,665  193,462
Total assets  $ 16,234,800  $ 15,938,345  $ 15,684,866  $ 6,517,853  $ 6,533,363
           
LIABILITIES:          
Noninterest-bearing deposits  $ 2,931,352  $ 2,842,488  $ 2,701,434  $ 2,391,609  $ 2,318,446
Interest-bearing deposits  8,823,776  8,680,949  8,966,363  2,977,799  2,962,541
Total deposits  11,755,128  11,523,437  11,667,797  5,369,408  5,280,987
Borrowings  383,402  363,672  4,596  5,748  113,726
Subordinated debentures  433,583  433,545  434,878  132,790  132,645
Accrued interest payable and other liabilities  156,262  139,445  139,663  176,205  196,912
Total liabilities  12,728,375  12,460,099  12,246,934  5,684,151  5,724,270
           
STOCKHOLDERS' EQUITY (1)  3,506,425  3,478,246  3,437,932  833,702  809,093
Total liabilities and shareholders' equity  $ 16,234,800  $ 15,938,345  $ 15,684,866  $ 6,517,853  $ 6,533,363
           
(1) Includes net unrealized gain (loss) on securities available-for-sale, net  $ 26,380  $ 20,821  $ 20,121  $ 6,825  $ (3,347)
           
Book value per share  $ 34.04  $ 33.76  $ 33.37  $ 18.21  $ 17.66
Tangible book value per share  $ 17.17  $ 16.86  $ 16.43  $ 13.31  $ 12.73
           
Shares outstanding (includes unvested restricted shares)  103,022,017  103,027,830  103,033,449  45,777,580  45,822,834
 
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
           
  Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
  2014 2014 2014 2014 2013
  (Dollars in thousands, except per share data)
Interest income:          
Loans and leases  $ 197,472  $ 189,961  $ 192,201  $ 77,463  $ 73,352
Investment securities  12,205  12,331  11,986  10,823  10,422
Deposits in financial institutions  19  64  176  74  82
Total interest income  209,696  202,356  204,363  88,360  83,856
           
Interest expense:          
Deposits  9,972  8,822  7,313  1,225  1,450
Borrowings  144  74  199  79  86
Subordinated debentures  4,597  4,614  4,318  1,041  1,062
Total interest expense  14,713  13,510  11,830  2,345  2,598
           
Net interest income  194,983  188,846  192,533  86,015  81,258
Provision (negative provision) for credit losses  2,063  5,050  5,030  (644)  (1,338)
Net interest income after provision for credit losses  192,920  183,796  187,503  86,659  82,596
           
Noninterest income:          
Service charges on deposit accounts  2,787  2,725  2,719  3,002  3,197
Other commissions and fees  4,556  6,371  5,743  1,932  2,125
Leased equipment income  5,382  5,615  5,672  --  --
Gain (loss) on sale of loans and leases  7  973  (485)  106  683
Gain (loss) on securities  --  --  89  4,752  (272)
FDIC loss sharing expense, net  (4,360)  (7,415)  (8,525)  (11,430)  (10,593)
Other income  4,331  8,045  3,266  6,329  934
Total noninterest income  12,703  16,314  8,479  4,691  (3,926)
           
Noninterest expense:          
Compensation   45,930  45,861  45,081  28,627  27,697
Occupancy  10,745  11,188  11,078  7,595  7,553
Data processing  4,050  3,929  4,099  2,540  2,216
Other professional services  3,181  3,687  2,843  1,523  1,770
Insurance and assessments  3,115  3,020  3,179  1,593  1,572
Intangible asset amortization  1,619  1,608  1,677  1,364  1,430
Other expenses  11,278  13,355  12,115  7,288  7,746
Total operating expense  79,918  82,648  80,072  50,530  49,984
Leased equipment depreciation  3,103  2,961  3,095  --  --
Foreclosed assets expense (income), net  1,938  4,827  497  (1,861)  (569)
Acquisition, integration, reorganization and severance costs  7,381  5,193  86,242  2,200  16,673
Total noninterest expense  92,340  95,629  169,906  50,869  66,088
           
Earnings from continuing operations before taxes  113,283  104,481  26,076  40,481  12,582
Income tax expense   (42,226)  (42,205)  (14,846)  (14,576)  (9,135)
Net earnings from continuing operations   71,057  62,276  11,230  25,905  3,447
           
Loss from discontinued operations before taxes  (105)  (8)  (1,151)  (1,413)  (578)
Income tax benefit  47  3  476  588  240
Net loss from discontinued operations  (58)  (5)  (675)  (825)  (338)
           
Net earnings   $ 70,999  $ 62,271  $ 10,555  $ 25,080  $ 3,109
           
Basic and diluted earnings per share:          
Net earnings from continuing operations  $ 0.69  $ 0.60  $ 0.11  $ 0.57  $ 0.07
Net earnings   $ 0.69  $ 0.60  $ 0.10  $ 0.55  $ 0.06
 
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
           
  At or For the Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
  2014 2014 2014 2014 2013
  (Dollars in thousands)
Performance Ratios - GAAP:          
Annualized return on average assets 1.77% 1.57% 0.28% 1.56% 0.19%
Annualized return on average equity 8.05% 7.13% 1.31% 12.40% 1.51%
Yield on loans and leases 6.76% 6.68% 7.34% 7.42% 6.77%
Yield on interest-earning assets 6.30% 6.19% 6.62% 6.11% 5.58%
Cost of total deposits 0.34% 0.30% 0.26% 0.09% 0.11%
Cost of time deposits 0.60% 0.51% 0.42% 0.31% 0.40%
Cost of interest-bearing liabilities 0.63% 0.58% 0.52% 0.30% 0.32%
Cost of funding sources 0.48% 0.44% 0.41% 0.17% 0.18%
Net interest rate spread 5.67% 5.61% 6.10% 5.81% 5.26%
Net interest margin 5.86% 5.78% 6.24% 5.95% 5.41%
Annualized operating expense as a percentage of average assets 2.00% 2.09% 2.14% 3.15% 2.99%
Annualized noninterest expense as a percentage of average assets 2.31% 2.41% 4.53% 3.17% 3.95%
Efficiency ratio 44.5% 46.6% 84.5% 56.1% 85.5%
           
Performance Ratios - Non-GAAP:          
Annualized adjusted return on average assets 1.70% 1.70% 1.67% 1.38% 1.33%
Annualized adjusted return on average equity 7.73% 7.70% 7.79% 10.98% 10.76%
Annualized return on average tangible equity 16.00% 14.36% 2.65% 17.10% 2.11%
Annualized adjusted return on average tangible equity 15.37% 15.50% 15.79% 15.13% 15.05%
Core net interest margin 5.52% 5.64% 5.74% 5.42% 5.31%
Adjusted efficiency ratio 42.3% 43.4% 43.1% 57.1% 58.1%
           
Average Balances:          
Average loans and leases  $ 11,586,573  $ 11,285,689  $ 10,500,521  $ 4,231,319  $ 4,301,377
Average interest-earning assets  13,205,383  12,969,776  12,383,464  5,862,695  5,962,428
Average total assets  15,892,761  15,716,539  15,037,101  6,513,376  6,632,730
Average noninterest-bearing deposits  2,900,388  2,778,260  2,546,540  2,374,325  2,397,642
Average interest-bearing deposits  8,679,599  8,778,642  8,629,482  2,968,994  3,054,880
Average total deposits  11,579,987  11,556,902  11,176,022  5,343,319  5,452,522
Average borrowings and subordinated debentures  647,912  531,336  449,865  150,872  142,421
Average interest-bearing liabilities  9,327,511  9,309,978  9,079,347  3,119,866  3,197,301
Average funding sources  12,227,899  12,088,238  11,625,887  5,494,191  5,594,943
Average stockholders' equity  3,500,291  3,465,119  3,233,018  820,248  818,935
 
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER SELECTED FINANCIAL DATA
           
  At or For the Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
  2014 2014 2014 2014 2013
  (Dollars in thousands)
Non-PCI Credit Quality:          
Allowance for credit losses to loans and leases 0.66% 0.61% 0.67% 1.75% 1.73%
Allowance for credit losses to nonaccrual loans and leases 92% 78% 75% 115% 145%
Nonaccrual loans and leases to loans and leases 0.72% 0.79% 0.90% 1.52% 1.19%
Nonperforming assets to loans and leases and foreclosed assets 1.09% 1.15% 1.39% 2.81% 2.58%
Nonperforming assets to total assets 0.78% 0.81% 0.96% 1.67% 1.57%
Trailing twelve month net charge-offs to average loans and leases 0.02% 0.09% 0.05% 0.13% 0.12%
           
PacWest Bancorp Consolidated Capital Ratios:        
Tier 1 leverage capital ratio 12.34% 12.17% 12.40% 11.73% 11.22%
Tier 1 risk-based capital ratio 13.16% 13.24% 13.15% 16.16% 15.12%
Total risk-based capital ratio 16.07% 16.24% 16.25% 17.42% 16.38%
Tangible common equity ratio (non-GAAP measure) 12.20% 12.24% 12.14% 9.68% 9.24%
           
Pacific Western Bank Capital Ratios:          
Tier 1 leverage capital ratio 11.70% 11.74% 11.71% 10.88% 10.79%
Tier 1 risk-based capital ratio 12.46% 12.74% 12.58% 15.00% 14.54%
Total risk-based capital ratio 13.16% 13.44% 13.32% 16.25% 15.80%
Tangible common equity ratio (non-GAAP measure) 11.51% 11.60% 11.40% 10.92% 10.88%
 
PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS
           
  Three Months Ended Year Ended
  December 31, September 30, December 31, December 31,
  2014 2014 2013 2014 2013
  (Dollars in thousands, except per share data)
Basic Earnings Per Share:          
Net earnings from continuing operations  $ 71,057  $ 62,276  $ 3,447  $ 170,468  $ 45,477
Less: earnings allocated to unvested restricted stock (1)  (810)  (685)  (280)  (1,959)  (1,096)
Net earnings from continuing operations allocated to common shares  70,247  61,591  3,167  168,509  44,381
Net earnings from discontinued operations allocated to common shares  (57)  (5)  (338)  (1,545)  (348)
Net earnings allocated to common shares  $ 70,190  $ 61,586  $ 2,829  $ 166,964  $ 44,033
           
Weighted-average basic shares and unvested restricted stock outstanding  103,045  103,029  46,069  87,871  42,506
Less: weighted-average unvested restricted stock outstanding  (1,132)  (1,117)  (1,743)  (1,018)  (1,683)
Weighted-average basic shares outstanding  101,913  101,912  44,326  86,853  40,823
           
Basic earnings per share:          
Net earnings from continuing operations  $ 0.69  $ 0.60  $ 0.07  $ 1.94  $ 1.09
Net earnings from discontinued operations  --   --   (0.01)  (0.02)  (0.01)
Net earnings  $ 0.69  $ 0.60  $ 0.06  $ 1.92  $ 1.08
           
           
Diluted Earnings Per Share:          
Net earnings from continuing operations allocated to common shares  $ 70,247  $ 61,591  $ 3,167  $ 168,509  $ 44,381
Net earnings from discontinued operations allocated to common shares  (57)  (5)  (338)  (1,545)  (348)
Net earnings allocated to common shares  $ 70,190  $ 61,586  $ 2,829  $ 166,964  $ 44,033
           
Weighted-average basic shares outstanding  101,913  101,912  44,326  86,853  40,823
           
Diluted earnings per share:          
Net earnings from continuing operations  $ 0.69  $ 0.60  $ 0.07  $ 1.94  $ 1.09
Net earnings from discontinued operations  --   --   (0.01)  (0.02)  (0.01)
Net earnings  $ 0.69  $ 0.60  $ 0.06  $ 1.92  $ 1.08
           
(1) Represents cash dividends paid to holders of unvested stock, net of estimated forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any.

GAAP TO NON-GAAP RECONCILIATION

This press release contains certain non-GAAP financial disclosures for adjusted net earnings, adjusted return on average assets, adjusted return on average equity, return on average tangible equity, adjusted return on average tangible equity, tangible common equity amounts and ratios, tangible book value per share, adjusted efficiency ratio, core net interest margin, and operating expense as a percentage of average assets. 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:
  • Adjusted net earnings - as analysts and investors view this measure as an indicator of the Company's ability to both generate earnings and absorb credit losses, we disclose this amount in addition to net earnings.  
  • Adjusted return on average assets, adjusted return on average equity, return on average tangible equity, adjusted return on average tangible equity, tangible common equity amounts and ratios, and tangible book value per share - given that the use of these measures is prevalent among banking regulators, investors and analysts, we disclose them in addition to return on average assets, return on average equity, equity-to-assets ratio, and book value per share, respectively.  
  • Adjusted efficiency ratio - we disclose this measure in addition to efficiency ratio as it shows the trend in recurring overhead-related noninterest expense relative to recurring net revenues.

Please refer to the tables on the following pages for a presentation of performance ratios in accordance with GAAP and a reconciliation of the non-GAAP financial measures to the GAAP financial measures.
PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
           
           
  Three Months Ended Year Ended
Adjusted Net Earnings  December 31, September 30, December 31, December 31,
and Related Ratios 2014 2014 2013 2014 2013
  (Dollars in thousands)
           
Reported net earnings  $ 70,999  $ 62,271  $ 3,109  $ 168,905  $ 45,115
Less: Tax benefit on discontinued operations  (47)  (3)  (240)  (1,114)  (258)
Add: Tax expense on continuing operations  42,226  42,205  9,135  113,853  30,003
Reported pre-tax earnings  113,178  104,473  12,004  281,644  74,860
Add: Acquisition, integration, reorganization and severance costs  7,381  5,193  16,673  101,016  40,812
Less: FDIC loss sharing expense, net  (4,360)  (7,415)  (10,593)  (31,730)  (26,172)
Gain on sale of loans and leases  7  973  683  601  1,791
(Loss) gain on securities  --  --  (272)  4,841  5,359
Covered OREO (expense) income, net  (176)  (452)  594  1,172  1,833
Gain on sale of owned office building  --  --  --  1,570  --
Adjusted pre-tax earnings before accelerated discount accretion  125,088  116,560  38,265  406,206  132,861
Less: Accelerated discount accretion resulting from payoffs of acquired loans  11,421  4,501  1,434  38,867  4,393
Adjusted pre-tax earnings   113,667  112,059  36,831  367,339  128,468
Tax expense (1)  (45,467)  (44,824)  (14,622)  (146,936)  (51,002)
Adjusted net earnings  $ 68,200  $ 67,235  $ 22,209  $ 220,403  $ 77,466
           
Average assets  $ 15,892,761  $ 15,716,539  $ 6,632,730  $ 13,322,388  $ 6,116,853
           
Average stockholders' equity  $ 3,500,291  $ 3,465,119  $ 818,935  $ 2,763,726  $ 718,920
Less: Average intangible assets  1,739,977  1,744,542  233,628  1,342,286  172,096
Average tangible common equity  $ 1,760,314  $ 1,720,577  $ 585,307  $ 1,421,440  $ 546,824
           
Annualized return on average assets (2) 1.77% 1.57% 0.19% 1.27% 0.74%
Annualized adjusted return on average assets (3) 1.70% 1.70% 1.33% 1.65% 1.27%
Annualized return on average equity (4) 8.05% 7.13% 1.51% 6.11% 6.28%
Annualized adjusted return on average equity (5) 7.73% 7.70% 10.76% 7.97% 10.78%
Annualized return on average tangible equity (6) 16.00% 14.36% 2.11% 11.88% 8.25%
Annualized adjusted return on average tangible equity (7) 15.37% 15.50% 15.05% 15.51% 14.17%
           
(1) Effective tax rates of40.0% in 2014 periods and 39.7% in 2013 periods.
(2) Annualized net earnings divided by average assets
(3) Annualized adjusted net earnings divided by average assets
(4) Annualized net earnings divided by average stockholders' equity
(5) Annualized adjusted net earnings divided by average stockholders' equity
(6) Annualized net earnings divided by average tangible common equity
(7) Annualized adjusted net earnings divided by average tangible common equity
 
PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
           
           
  Three Months Ended Year Ended
  December 31, September 30, December 31, December 31,
Adjusted Efficiency Ratio 2014 2014 2013 2014 2013
  (Dollars in thousands)
           
Noninterest expense  $ 92,340  $ 95,629  $ 66,088  $ 408,744  $ 230,687
Less: Acquisition, integration, reorganization and severance costs  7,381  5,193  16,673  101,016  40,812
Covered OREO expense (income), net  176  452  (594)  (1,172)  (1,833)
Adjusted noninterest expense  $ 84,783  $ 89,984  $ 50,009  $ 308,900  $ 191,708
           
Net interest income  $ 194,983  $ 188,846  $ 81,258  $ 662,377  $ 297,713
Noninterest income  12,703  16,314  (3,926)  42,187  4,244
Net revenues  207,686  205,160  77,332  704,564  301,957
Less: FDIC loss sharing expense, net  (4,360)  (7,415)  (10,593)  (31,730)  (26,172)
Gain on sale of loans and leases  7  973  683  601  1,791
(Loss) gain on securities  --  --  (272)  4,841  5,359
Gain on sale of owned office building  --  --  --  1,570  --
Accelerated discount accretion resulting from payoffs of acquired loans  11,421  4,501  1,434  38,867  4,393
Adjusted net revenues  $ 200,618  $ 207,101  $ 86,080  $ 690,415  $ 316,586
           
Base efficiency ratio (1) 44.5% 46.6% 85.5% 58.0% 76.4%
Adjusted efficiency ratio (2) 42.3% 43.4% 58.1% 44.7% 60.6%
           
(1) Noninterest expense divided by net revenues
(2) Adjusted noninterest expense divided by adjusted net revenues
 
PACWEST BANCORP AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
           
           
  December 31, September 30, June 30, March 31, December 31,
Tangible Common Equity Ratio 2014 2014 2014 2014 2013
  (Dollars in thousands)
PacWest Bancorp Consolidated:          
Stockholders' equity  $ 3,506,425  $ 3,478,246  $ 3,437,932  $ 833,702  $ 809,093
Less: Intangible assets  1,737,683  1,740,951  1,745,584  224,627  225,991
Tangible common equity  $ 1,768,742  $ 1,737,295  $ 1,692,348  $ 609,075  $ 583,102
           
Total assets  $ 16,234,800  $ 15,938,345  $ 15,684,866  $ 6,517,853  $ 6,533,363
Less: Intangible assets  1,737,683  1,740,951  1,745,584  224,627  225,991
Tangible assets  $ 14,497,117  $ 14,197,394  $ 13,939,282  $ 6,293,226  $ 6,307,372
           
Equity to assets ratio 21.60% 21.82% 21.92% 12.79% 12.38%
Tangible common equity ratio (1) 12.20% 12.24% 12.14% 9.68% 9.24%
           
Book value per share  $ 34.04  $ 33.76  $ 33.37  $ 18.21  $ 17.66
Tangible book value per share (2)  $ 17.17  $ 16.86  $ 16.43  $ 13.31  $ 12.73
Shares outstanding  103,022,017  103,027,830  103,033,449  45,777,580  45,822,834
           
           
Pacific Western Bank:          
Stockholders' equity  $ 3,379,074  $ 3,357,138  $ 3,298,908  $ 910,644  $ 911,200
Less: Intangible assets  1,737,682  1,740,951  1,745,584  224,627  225,991
Tangible common equity  $ 1,641,392  $ 1,616,187  $ 1,553,324  $ 686,017  $ 685,209
           
Total assets  $ 15,995,914  $ 15,675,486  $ 15,376,440  $ 6,507,288  $ 6,523,742
Less: Intangible assets  1,737,682  1,740,951  1,745,584  224,627  225,991
Tangible assets  $ 14,258,232  $ 13,934,535  $ 13,630,856  $ 6,282,661  $ 6,297,751
           
Equity to assets ratio 21.12% 21.42% 21.45% 13.99% 13.97%
Tangible common equity ratio 11.51% 11.60% 11.40% 10.92% 10.88%
           
(1) Tangible common equity divided by tangible assets
(2) Tangible common equity divided by shares outstanding
CONTACT: Matthew P. Wagner         President and CEO         10250 Constellation Boulevard, Suite 1640         Los Angeles, CA 90067         Phone: 310-728-1020         Fax:   310-201-0498                  Victor R. Santoro         Executive Vice President and CFO         10250 Constellation Boulevard, Suite 1640         Los Angeles, CA 90067         Phone: 310-728-1021         Fax:   310-201-0498