PACWEST BANCORP Reports Operating Results (10-Q)

PACWEST BANCORP (NASDAQ:PACW) filed Quarterly Report for the period ended 2010-03-31.

Pacwest Bancorp has a market cap of $815.5 million; its shares were traded at around $23.1 with and P/S ratio of 2.2. The dividend yield of Pacwest Bancorp stocks is 0.2%. Pacwest Bancorp had an annual average earning growth of 0.4% over the past 10 years.PACW is in the portfolios of NWQ Managers of NWQ Investment Management Co.

Highlight of Business Operations:

Pacific Western is a full-service community bank offering a broad range of banking products and services including: accepting time and demand deposits; originating loans, including commercial, real estate construction, SBA-guaranteed, consumer, and international loans; and providing other business-oriented products. Our operations are primarily located in Southern California and the Bank focuses on conducting business with small to medium-sized businesses and the owners and employees of those businesses in our marketplace. Through our asset-based lending operation we also operate in Arizona, Northern California, the Pacific Northwest, and Texas. At March 31, 2010, our assets totaled $5.2 billion, of which total loans totaled $3.9 billion, of which $591.7 million are covered loans. At that date, the loan portfolio was broken down as follows: approximately 70% were real estate mortgage loans, 20% were commercial loans, 10% were real estate construction loans, and less than 1% were consumer and other loans. These percentages include some foreign loans, primarily to individuals or entities with business in Mexico, representing 1% of total non-covered loans. Our portfolio's value and credit quality is affected in large part by real estate trends in Southern California, which have been negative over the last several quarters.

We generally seek new lending opportunities in the $500,000 to $10 million range, try to limit loan maturities for commercial loans to one year, for construction loans up to 18 months, and for commercial real estate loans up to ten years, and to price lending products so as to preserve our interest spread and net interest margin. We sometimes encounter strong competition in pursuing lending opportunities such that potential borrowers obtain loans elsewhere at lower rates than those we offer. We have continued to reduce our exposure to residential construction and foreign loans, including limiting the amount of new loans in these categories. Our ability to make new loans is dependent on economic factors in our market area, borrower qualifications, competition, and liquidity, among other items. Considering the current state of the economy in Southern California and the competition among banks for liquidity, loan growth was not a focus area for us in 2009 and we expect the same for 2010.

We stress credit quality in originating and monitoring the loans we make and measure our success by the levels of our nonperforming assets, net charge-offs and allowance for credit losses. Our allowance for credit losses is the sum of our allowance for loan losses and our reserve for unfunded loan commitments and relates only to our non-covered loans. Provisions for credit losses are charged to operations as and when needed for both on and off balance sheet credit exposure. Loans which are deemed uncollectible are charged off and deducted from the allowance for loan losses. Recoveries on loans previously charged off are added to the allowance for loan losses. During the three months ended March 31, 2010, we made a provision for credit losses totaling $133.2 million composed of $112.5 million on non-covered loans and $20.7 million on covered loans. The provision for credit losses on the non-covered portfolio resulted mostly from the charge-offs from the classified loan sale and other actions to promptly identify and resolve problem credits. Additionally, based on our reserve methodology, the level of classified and non-accrual loans, usage trends of unfunded loan commitments, general market conditions, and portfolio risk concentrations, among other factors, contributed to our provision for credit losses. The provision for credit losses on the covered loan portfolio reflects an increase in the covered loan allowance for credit losses resulting from credit deterioration since the acquisition date.

The net loss for the first quarter of 2010 of $60.5 million, or $1.76 per diluted share, compared to the net loss of $7.8 million, or $0.23 per diluted share, for the fourth quarter of 2009. The first quarter included a loss on the Company's sale of $323.6 million of classified loans in February 2010 for $200.6 million in cash. Additionally the first quarter of 2010 was impacted significantly by other credit-related costs.

The net loss of $60.5 million, or $1.76 per diluted share, for the quarter ended March 31, 2010 compared to net earnings of $1.4 million, or $0.04 per diluted share, for the quarter ended March 31, 2009. The decrease in net earnings is due mainly to the first quarter of 2010 classified loan sale along with higher credit and OREO costs.

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