THIRD QUARTER 2023 HIGHLIGHTS
- Net loss available to common stockholders of $33.3 million, or a loss of $0.28 per diluted share
- Pending merger with Banc of California, Inc. is on track with all regulatory approvals received and is expected to close on or about November 30, 2023
- The Bank put in place a large liquidity base to cautiously navigate the end of the first quarter of 2023 through the third quarter of 2023. The excess borrowings, including $1.4 billion of brokered deposits (at a rate of 5.19%) and the $1.3 billion repurchase agreement facility (at a rate of 8.50%), are expected to roll off in the fourth quarter of 2023. We believe this will accelerate the Bank’s return to more normalized funding levels and improved profitability, with significantly lower interest and FDIC insurance expenses
- We continue to execute on our profitability initiatives by optimizing resources, contracts, facilities, and processes, the benefits of which we anticipate realizing in the quarters ahead. Third quarter noninterest expense had notable movement, with compensation expense down 14% over the prior quarter to $71.6 million, with a higher than usual FDIC insurance expense that we expect will normalize over time, and with $9.9 million of non-recurring merger-related costs
- Adjusted loss available to common stockholders of $37.3 million and adjusted diluted loss per common share of $0.31, which exclude the effect of $9.9 million of merger-related costs related to the pending merger with Banc of California, Inc. and a $14.5 million credit related to a legal settlement gain (see GAAP to non-GAAP reconciliation financial tables at the end of this press release)
- Allowance for loan and lease losses ratio increased from 0.98% to 1.01%
- Third quarter results were marked by enhanced capital and liquidity
- All capital ratios increased from June 30, 2023, with CET1 increasing from 11.16% to 11.23%
- Immediately available liquidity (on-balance sheet liquidity and unused borrowing capacity) of $16.7 billion, with $5.9 billion of available cash on hand at September 30, 2023
- Community Banking deposits grew by 2% in the quarter as a result of strategic efforts to attract and retain customers
- Brokered deposits continue to mature, with balances decreasing by $1.9 billion in the quarter. $1.4 billion more are scheduled to mature in the fourth quarter of 2023
- The repurchase agreement facility interest expense was $35 million in the quarter and the facility will be repaid in December 2023
LOS ANGELES, Oct. 24, 2023 (GLOBE NEWSWIRE) --
CEO COMMENTARY
Paul Taylor, President and CEO, commented, “The integration planning for our merger with Banc of California, Inc. continues to progress very well. We expect the closing of the merger to occur on or about November 30, 2023, subject to receipt of stockholder approvals. We all look forward to completing the merger so we can begin to execute on a successful business plan for the combined company that we expect will drive significant value for PacWest’s stockholders, customers, communities, and employees.”
Mr. Taylor concluded, “As we work toward the completion of the merger, our primary strategic focus is adding new deposit customers and continuing to provide outstanding customer service to our existing customers. Our credit quality continues to be stable. Our funding profile improved in the third quarter as we strategically reduced higher-cost brokered deposits and we are pleased to see growth in the Community Bank return. We strategically put in place a high-cost liquidity buffer over the past few quarters to safely navigate the turmoil in the regional banking market. We created this buffer by selling loans and adding customer deposits and wholesale funding. We expect our profitability to improve as we continue to wind down wholesale funding, benefit from lower FDIC insurance expense, and execute on our profitability initiatives.”
FINANCIAL HIGHLIGHTS
| At or For the | At or For the | ||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | June 30, | Increase | September 30, | Increase | |||||||||||||||||||
| Financial Highlights | 2023 | 2023 | (Decrease) | 2023 | 2022 | (Decrease) | |||||||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||||||||||||
| Net (loss) earnings available | |||||||||||||||||||||||
| to common stockholders | $ | (33,291 | ) | $ | (207,361 | ) | $ | 174,070 | $ | (1,446,023 | ) | $ | 364,712 | $ | (1,810,735 | ) | |||||||
| Diluted (loss) earnings per | |||||||||||||||||||||||
| common share | $ | (0.28 | ) | $ | (1.75 | ) | $ | 1.47 | $ | (12.23 | ) | $ | 3.04 | $ | (15.27 | ) | |||||||
| Pre-provision, pre-goodwill | |||||||||||||||||||||||
| impairment, pre-tax net | |||||||||||||||||||||||
| revenue ("PPNR") (1) | $ | (26,566 | ) | $ | (262,443 | ) | $ | 235,877 | $ | (169,613 | ) | $ | 514,917 | $ | (684,530 | ) | |||||||
| Return on average assets | (0.24 | )% | (1.84 | )% | 1.60 | (4.60 | )% | 1.24 | % | (5.84 | ) | ||||||||||||
| PPNR return on average | |||||||||||||||||||||||
| assets (1) | (0.28 | )% | (2.45 | )% | 2.17 | (0.55 | )% | 1.71 | % | (2.26 | ) | ||||||||||||
| Return on average | |||||||||||||||||||||||
| tangible common equity (1) | (6.33 | )% | (37.62 | )% | 31.29 | (8.49 | )% | 22.90 | % | (31.39 | ) | ||||||||||||
| Yield on average loans and | |||||||||||||||||||||||
| leases (tax equivalent) | 5.54 | % | 6.08 | % | (0.54 | ) | 5.95 | % | 4.82 | % | 1.13 | ||||||||||||
| Cost of average total | |||||||||||||||||||||||
| deposits | 2.98 | % | 2.62 | % | 0.36 | 2.50 | % | 0.32 | % | 2.18 | |||||||||||||
| Net interest margin ("NIM") | |||||||||||||||||||||||
| (tax equivalent) | 1.45 | % | 1.82 | % | (0.37 | ) | 2.07 | % | 3.52 | % | (1.45 | ) | |||||||||||
| Efficiency ratio | 108.5 | % | 527.0 | % | (418.5 | ) | 123.5 | % | 50.2 | % | 73.3 | ||||||||||||
| Total assets | $ | 36,877,833 | $ | 38,337,250 | $ | (1,459,417 | ) | $ | 36,877,833 | $ | 41,404,592 | $ | (4,526,759 | ) | |||||||||
| Loans and leases held | |||||||||||||||||||||||
| for investment, | |||||||||||||||||||||||
| net of deferred fees | $ | 21,920,946 | $ | 22,258,210 | $ | (337,264 | ) | $ | 21,920,946 | $ | 27,660,041 | $ | (5,739,095 | ) | |||||||||
| Noninterest-bearing | |||||||||||||||||||||||
| demand deposits | $ | 5,579,033 | $ | 6,055,358 | $ | (476,325 | ) | $ | 5,579,033 | $ | 12,775,756 | $ | (7,196,723 | ) | |||||||||
| Interest-bearing deposits | $ | 21,019,648 | $ | 21,841,725 | $ | (822,077 | ) | $ | 21,019,648 | $ | 21,420,116 | $ | (400,468 | ) | |||||||||
| Total deposits | $ | 26,598,681 | $ | 27,897,083 | $ | (1,298,402 | ) | $ | 26,598,681 | $ | 34,195,872 | $ | (7,597,191 | ) | |||||||||
| As percentage of total | |||||||||||||||||||||||
| deposits: | |||||||||||||||||||||||
| Noninterest-bearing | |||||||||||||||||||||||
| demand deposits | 21 | % | 22 | % | (1 | ) | 21 | % | 37 | % | (16 | ) | |||||||||||
| Interest-bearing deposits | 79 | % | 78 | ||||||||||||||||||||
