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PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2019

/EIN News/ -- Fourth Quarter 2019 Highlights

  • Net Earnings of $117.9 Million, or $0.98 Per Diluted Share
  • Loan and Lease Production of $1.0 Billion; $111 Million of Net Loan Growth
  • Core Deposits Represents 84% of Total Deposits
  • Cost of Average Total Deposits Decreased 12 Basis Points from Q3 to 71 Basis Points
  • Net Charge-offs to Average Loans of Two Basis Points

Full Year 2019 Highlights

  • Net Earnings of $468.6 Million, or $3.90 Per Diluted Share
  • Loan and Lease Production of $4.9 Billion; $889 Million of Net Loan Growth or 5%
  • Net Charge-offs to Average Loans of Nine Basis Points; 62% Lower for 2019 Compared to 2018

LOS ANGELES, Jan. 21, 2020 (GLOBE NEWSWIRE) -- PacWest Bancorp (Nasdaq: PACW) today announced net earnings for the fourth quarter of 2019 of $117.9 million, or $0.98 per diluted share, compared to net earnings for the third quarter of 2019 of $110.0 million, or $0.92 per diluted share.  The increase in net earnings in the fourth quarter was primarily due to lower income tax expense, of which $9.1 million related to benefits from changes in state apportionment. Net earnings for the full year 2019 were $468.6 million, or $3.90 per diluted share, compared to net earnings for the full year 2018 of $465.3 million, or $3.72 per diluted share.

Matt Wagner, President and CEO, commented, “We finished the year with strong earnings and continued improvement in our credit quality metrics and credit costs reflected by our fourth quarter net charge-offs ratio of two basis points. Our fourth quarter results produced a return on assets of 1.77% and a return on tangible equity of 19.98%.”

Mr. Wagner continued, “The strong fourth quarter capped a year of profitable growth and continued our solid operating performance resulting in a 2019 return on assets of 1.80% and return on tangible equity of 20.66%. The de-risking strategy initiated in 2017 has proven to be successful as our net charge-offs ratio decreased from 40 basis points in 2017 to nine basis points in 2019, while the provision for credit losses declined by 63% from $59.0 million for non-PCI loans in 2017 to $22.0 million in 2019. Our strategy and these outstanding operating results allowed us to return $444 million to our stockholders in 2019 through stock repurchases and dividends. Our earnings per share for the full year 2019 increased by 5% over the prior year to $3.90.”  

Mr. Wagner added, “In 2019, we successfully completed the rebranding of all of our operating groups under one brand as Pacific Western Bank. As we head into 2020, we will continue to focus on profitable growth and increasing the value of our franchise for our stockholders.”   

FINANCIAL HIGHLIGHTS

  At or For the       At or For the    
  Three Months Ended       Year Ended    
  December 31,   September 30,   Increase   December 31,   Increase
Financial Highlights   2019       2019     (Decrease)     2019       2018     (Decrease)
   
  (Dollars in thousands, except per share data)
Net earnings $ 117,881     $ 110,026     $ 7,855     $ 468,636     $ 465,339     $ 3,297  
Diluted earnings per share $ 0.98     $ 0.92     $ 0.06     $ 3.90     $ 3.72     $ 0.18  
Return on average assets   1.77 %     1.65 %     0.12       1.80 %     1.91 %     (0.11 )
Return on average                      
tangible equity (1)   19.98 %     19.01 %     0.97       20.66 %     21.22 %     (0.56 )
                       
Net interest margin ("NIM")                    
(tax equivalent)   4.33 %     4.46 %     (0.13 )     4.54 %     5.05 %     (0.51 )
Yield on average loans and                      
leases (tax equivalent)   5.67 %     5.91 %     (0.24 )     6.00 %     6.22 %     (0.22 )
Cost of average total                      
deposits   0.71 %     0.83 %     (0.12 )     0.77 %     0.44 %     0.33  
Efficiency ratio   44.8 %     42.3 %     2.5       42.7 %     41.0 %     1.7  
                       
Total assets $ 26,770,806     $ 26,724,627     $ 46,179     $ 26,770,806     $ 25,731,354     $ 1,039,452  
Loans and leases held                      
for investment,                      
net of deferred fees $ 18,846,872     $ 18,735,543     $ 111,329     $ 18,846,872     $ 17,957,713     $ 889,159  
Noninterest-bearing                      
demand deposits $ 7,243,298     $ 7,441,185     $ (197,887 )   $ 7,243,298     $ 7,888,915     $ (645,617 )
Core deposits $ 16,187,287     $ 16,471,264     $ (283,977 )   $ 16,187,287     $ 16,346,671     $ (159,384 )
Total deposits $ 19,233,036     $ 19,733,203     $ (500,167 )   $ 19,233,036     $ 18,870,501     $ 362,535  
                       
As percentage of total                      
deposits:                      
Noninterest-bearing                      
demand deposits   38 %     38 %     -       38 %     42 %     (4 )
Core deposits   84 %     84 %     -       84 %     87 %     (3 )
                       
Equity to assets ratio   18.51 %     18.41 %     0.10       18.51 %     18.75 %     (0.24 )
Tangible common equity                      
ratio (1)   9.79 %     9.65 %     0.14       9.79 %     9.60 %     0.19  
Book value per share $ 41.36     $ 41.06     $ 0.30     $ 41.36     $ 39.17     $ 2.19  
Tangible book value per                      
share (1) $ 19.77     $ 19.43     $ 0.34     $ 19.77     $ 18.02     $ 1.75  
                       
(1) Non-GAAP measure.                      

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income decreased by $5.6 million to $246.6 million for the fourth quarter of 2019 compared to $252.2 million for the third quarter of 2019 due mainly to a lower yield on average loans and leases and a lower balance of average loans and leases. The tax equivalent yield on average loans and leases was 5.67% for the fourth quarter of 2019 compared to 5.91% for the third quarter of 2019. The decrease in the yield on average loans and leases was due principally to the repricing of variable-rate loans causing lower coupon interest in addition to lower loan fee income in the fourth quarter compared to the third quarter, offset partially by higher loan prepayment fees. The prepayment fees added seven basis points to the fourth quarter yield on average loans and leases and five basis points to the third quarter yield on average loans and leases.

The tax equivalent NIM was 4.33% for the fourth quarter of 2019 compared to 4.46% for the third quarter of 2019. The decrease in the NIM was due mainly to the repricing of variable-rate loans causing lower coupon interest and lower loan fee income, offset partially by the lower cost of interest-bearing liabilities.            

The cost of average total deposits decreased to 0.71% for the fourth quarter of 2019 from 0.83% for the third quarter of 2019 due mainly to a lower cost of average interest-bearing deposits, offset partially by a lower average balance of noninterest-bearing deposits. Our cost of average total deposits has declined from a 2019 peak of 86 basis points in the month of July to a 2019 low of 66 basis points in the month of December. The lower cost of average interest-bearing deposits reflected actions taken to reduce deposit rates in light of the fed funds target rate cuts during the second half of 2019.

Provision for Credit Losses

The following table presents details of the provision for credit losses for the periods indicated:

  Three Months Ended    
  December 31,   September 30,   Increase
Provision for Credit Losses   2019       2019     (Decrease)
                   
   
  (In thousands)
Addition to allowance for loan and lease losses $ 1,000     $ 8,000     $ (7,000 )
Addition (reduction) to reserve for unfunded          
loan commitments   2,000       (1,000 )     3,000  
Total provision for credit losses $ 3,000     $ 7,000     $ (4,000 )

The increase in the provision for unfunded commitments was the result of significant growth in unfunded construction loan commitments in the fourth quarter of 2019.

Noninterest Income

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

  Three Months Ended    
  December 31,   September 30,   Increase
Noninterest Income   2019       2019     (Decrease)
   
  (In thousands)
Service charges on deposit accounts $ 3,611     $ 3,525     $ 86  
Other commissions and fees   10,170       10,855       (685 )
Leased equipment income   10,648       9,615       1,033  
Gain on sale of loans and leases   23       765       (742 )
Gain on sale of securities   184       908       (724 )
Other income:          
Dividends and (losses) gains on equity investments   (794 )     14       (808 )
Warrant income   1,240       3,936       (2,696 )
Other   2,094       3,811       (1,717 )
Total noninterest income $ 27,176     $ 33,429     $ (6,253 )

Noninterest income decreased by $6.3 million to $27.2 million for the fourth quarter of 2019 compared to $33.4 million for the third quarter of 2019 due primarily to a $2.7 million decrease in warrant income, a $1.7 million decrease in other income, a $0.8 million decrease in dividends and gains on equity investments, a $0.7 million decrease in gain on sale of loans and leases, and a $0.7 million decrease in gain on sale of securities, offset partially by a $1.0 million increase in leased equipment income.  The decrease in warrant income was due to lower gains resulting from exercised warrants. The decrease in other income was due mainly to lower gains from lease terminations. The decreases in gain on sale of loans and leases and gain on sale of securities were attributable to a lower level of sales activity in the fourth quarter of 2019 as compared to the third quarter of 2019. The increase in leased equipment income was due primarily to a higher average balance of leased equipment in the fourth quarter compared to the third quarter.

Noninterest Expense

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

  Three Months Ended    
  December 31,   September 30,   Increase
Noninterest Expense   2019       2019     (Decrease)
   
  (In thousands)
Compensation $ 74,637     $ 71,424     $ 3,213  
Occupancy   14,541       14,089       452  
Data processing   6,770       7,044       (274 )
Other professional services   4,261       4,400       (139 )
Insurance and assessments   4,168       4,100       68  
Intangible asset amortization   4,153       4,833       (680 )
Leased equipment depreciation   6,856       5,951       905  
Foreclosed assets (income) expense, net   (3,446 )     8       (3,454 )
Acquisition, integration and reorganization costs   (269 )     -       (269 )
Customer related expense   3,952       3,539       413  
Loan expense   2,967       3,628       (661 )
Other   5,138       7,793       (2,655 )
Total noninterest expense $ 123,728     $ 126,809     $ (3,081 )
           

Noninterest expense decreased by $3.1 million to $123.7 million for the fourth quarter of 2019 compared to $126.8 million for the third quarter of 2019 attributable primarily to a $3.5 million increase in foreclosed assets income and a $2.7 million decrease in other expense, offset partially by a $3.2 million increase in compensation expense. Foreclosed assets income increased due to a $3.3 million gain on the sale of a repossessed asset. Other expense decreased due primarily to a $1.7 million reversal of previously accrued merger costs and a $1.1 million credit adjustment to franchise tax expense for refunds related to state apportionment changes. Compensation expense increased due mainly to higher bonus expense of $2.9 million.  

Income Taxes

The overall effective income tax rate was 19.8% for the fourth quarter of 2019 and 27.5% for the third quarter of 2019. The fourth quarter 2019 effective tax rate was lower due primarily to $9.1 million of benefits related to changes in state apportionment net of the federal tax effect. The effective tax rate for the year ended December 31, 2019 was 26.0% and for the full year 2020 is currently estimated to be in the range of 26-28%.   

BALANCE SHEET HIGHLIGHTS

Loans and Leases

The following table presents roll forwards of loans and leases held for investment, net of deferred fees, for the periods indicated:

  Three Months Ended   Year Ended
Roll Forward of Loans and Leases Held December 31,   September 30,   December 31,
for Investment, Net of Deferred Fees (1)   2019       2019       2019  
   
  (Dollars in thousands)
Balance, beginning of period $ 18,735,543     $ 18,472,852     $ 17,957,713  
Additions:          
Production   1,021,334       1,230,817       4,863,288  
Disbursements   1,317,389       1,288,111       5,092,219  
Total production and disbursements   2,338,723       2,518,928       9,955,507  
Reductions:          
Payoffs   (816,134 )     (1,390,883 )     (4,669,530 )
Paydowns   (1,406,475 )     (837,551 )     (4,262,977 )
Total payoffs and paydowns   (2,222,609 )     (2,228,434 )     (8,932,507 )
Sales   (43 )     (21,302 )     (76,335 )
Transfers to foreclosed assets   (83 )     -       (120 )
Charge-offs   (4,659 )     (6,501 )     (32,262 )
Transfers to loans held for sale   -       -       (25,124 )
Total reductions   (2,227,394 )     (2,256,237 )     (9,066,348 )
Net increase   111,329       262,691       889,159  
Balance, end of period $ 18,846,872     $ 18,735,543     $ 18,846,872  
           
Weighted average rate on production (2)   4.73 %     5.28 %     5.06 %
           
(1) Includes direct financing leases but excludes equipment leased to others under operating leases.    
(2) The weighted average rate on production presents contractual rates on a tax equivalent basis    
and excludes amortized fees. Amortized fees added approximately 22 basis points to loan    
yields in 2019.          

Loans and leases held for investment, net of deferred fees, increased by $111.3 million, or 2.4% annualized, in the fourth quarter of 2019 to $18.8 billion at December 31, 2019.  The net loan growth in the fourth quarter was primarily from the income producing and other residential real estate mortgage loan portfolio class and the residential real estate construction loan portfolio class. For the year ended December 31, 2019, loans and leases held for investment, net of deferred fees, increased by $889.2 million or 5.0%.

The following table presents the composition of loans and leases held for investment by loan portfolio segment and class, net of deferred fees, as of the dates indicated:

                       
  December 31, 2019   September 30, 2019   December 31, 2018
    % of     % of     % of
Loan and Lease Portfolio Amount Total   Amount Total   Amount Total
   
  (In thousands)
Real estate mortgage:                      
Commercial $ 4,202,687 22 %   $ 4,300,566 23 %   $ 4,824,298 27 %
Income producing and other                      
residential 3,770,060 20 %   3,596,358 19 %   3,093,843 17 %
Total real estate mortgage 7,972,747 42 %   7,896,924 42 %   7,918,141 44 %
Real estate construction and land:                      
Commercial 1,082,368 6 %   1,009,362 6 %   912,583 5 %
Residential 1,655,434 9 %   1,542,112 8 %   1,321,073 8 %
Total real estate construction                      
and land 2,737,802 15 %   2,551,474 14 %   2,233,656 13 %
Total real estate 10,710,549 57 %   10,448,398 56 %   10,151,797 57 %
Commercial:                      
Asset-based 3,748,407 20 %   3,810,741 20 %   3,305,421 18 %
Venture capital 2,179,422 12 %   2,209,649 12 %   2,038,748 11 %
Other commercial 1,767,667 9 %   1,858,167 10 %   2,060,426 12 %
Total commercial 7,695,496 41 %   7,878,557 42 %   7,404,595 41 %
Consumer 440,827 2 %   408,588 2 %   401,321 2 %
Total loans and leases held for                      
investment, net of deferred fees $ 18,846,872 100 %   $ 18,735,543 100 %   $ 17,957,713 100 %
                       
Total unfunded loan commitments $ 8,183,158       $ 7,790,796       $ 7,528,248    

Allowance for Credit Losses

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

  Three Months Ended December 31, 2019
  Allowance for   Reserve for   Total
Allowance for Credit Loan and   Unfunded Loan   Allowance for
Losses Rollforward Lease Losses   Commitments   Credit Losses
   
  (In thousands)
Beginning balance $ 138,552     $ 33,861     $ 172,413  
Charge-offs   (4,659 )     -       (4,659 )
Recoveries   3,892       -       3,892  
Net charge-offs   (767 )     -       (767 )
Provision   1,000       2,000       3,000  
Ending balance $ 138,785     $ 35,861     $ 174,646  
           
           
  Three Months Ended September 30, 2019
  Allowance for   Reserve for   Total
Allowance for Credit Loan and   Unfunded Loan   Allowance for
Losses Rollforward Lease Losses   Commitments   Credit Losses
   
  (In thousands)
Beginning balance $ 135,037     $ 34,861     $ 169,898  
Charge-offs   (6,501 )     -       (6,501 )
Recoveries   2,016       -       2,016  
Net charge-offs   (4,485 )     -       (4,485 )
Provision   8,000       (1,000 )     7,000  
Ending balance $ 138,552     $ 33,861     $ 172,413  
           
           
Allowance for Credit Year Ended December 31,    
Losses Rollforward   2019       2018      
       
  (In thousands)    
Beginning balance $ 169,333     $ 168,091      
Charge-offs   (32,262 )     (59,042 )    
Recoveries   15,575       15,284      
Net charge-offs   (16,687 )     (43,758 )    
Provision   22,000       45,000      
Ending balance $ 174,646     $ 169,333      

The allowance for credit losses as a percentage of loans and leases held for investment was 0.93% at December 31, 2019 and 0.92% at September 30, 2019.

Gross charge-offs for the fourth quarter of 2019 were $4.7 million and included $3.2 million for venture capital loans and $1.0 million for other commercial loans compared to gross charge-offs for the third quarter of 2019 of $6.5 million that included $4.4 million for venture capital loans and $1.7 million for other commercial loans.

Recoveries for the fourth quarter of 2019 were $3.9 million and included $1.8 million for other commercial loans, $0.9 million for asset-based loans, and $0.6 million for venture capital loans compared to recoveries for the third quarter of 2019 of $2.0 million that included $1.2 million for other commercial loans and $0.4 million for venture capital loans.

For the fourth quarter of 2019 and third quarter of 2019, annualized net charge-offs to average loans and leases were 0.02% and 0.10%.

For the full year 2019, net charge-offs were $16.7 million, of which $10.9 million related to one asset-based loan, while $1.2 million related to venture capital loans, a decrease from the full year 2018 net charge-offs of $43.8 million that included $24.2 million for venture capital loans.  This resulted in a decrease in net charge-offs to average loans for the venture capital portfolio from 1.17% in 2018 to 0.06% in 2019.   

For the full years 2019 and 2018, net charge-offs to average loans and leases declined to 0.09% from 0.26%.

Deposits and Client Investment Funds

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

                       
  December 31, 2019
  September 30, 2019
  December 31, 2018
    % of     % of     % of
Deposit Composition Amount Total   Amount Total   Amount Total
   
  (Dollars in thousands)
Noninterest-bearing demand $ 7,243,298 38 %   $ 7,441,185 38 %   $ 7,888,915 42 %
Interest checking 3,753,978 19 %   3,645,660 18 %   2,842,463 15 %
Money market 4,690,420 24 %   4,870,344 25 %   5,043,871 27 %
Savings 499,591 3 %   514,075 3 %   571,422 3 %
Total core deposits 16,187,287 84 %   16,471,264 84 %   16,346,671 87 %
Non-core non-maturity deposits 496,407 3 %   479,732 2 %   518,192 3 %
Total non-maturity deposits 16,683,694 87 %   16,950,996 86 %   16,864,863 90 %
Time deposits $250,000 and under 2,065,733 11 %   2,282,976 12 %   1,593,453 8 %
Time deposits over $250,000 483,609 2 %   499,231 2 %   412,185 2 %
Total time deposits 2,549,342 13 %   2,782,207 14 %   2,005,638 10 %
Total deposits $ 19,233,036 100 %   $ 19,733,203 100 %   $ 18,870,501 100 %

At December 31, 2019, core deposits totaled $16.2 billion, or 84% of total deposits, including $7.2 billion of noninterest-bearing demand deposits, or 38% of total deposits. For the year ended December 31, 2019, total deposits increased by $362.5 million, or 2%, while core deposits decreased by $159.4 million, or 1%. 

In addition to deposit products, we also offer alternative non-depository cash investment options for select clients; these alternatives include investments managed by Pacific Western Asset Management Inc. (“PWAM”), our registered investment advisor subsidiary, and third-party sweep products.  Total off-balance sheet client investment funds at December 31, 2019 were $1.5 billion, of which $1.2 billion was managed by PWAM.

CREDIT QUALITY  

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

  December 31,   September 30,   Increase
Credit Quality Metrics   2019       2019     (Decrease)
   
  (Dollars in thousands)
NPAs and Performing TDRs:  
Nonaccrual loans and leases held for investment (1) $ 92,353     $ 99,113     $ (6,760 )
Accruing loans contractually past due 90 days or more   -       -       -  
Foreclosed assets, net   440       1,366       (926 )
  Total nonperforming assets ("NPAs") $ 92,793     $ 100,479     $ (7,686 )
   
Nonaccrual loans and leases held for investment          
to loans and leases held for investment   0.49 %     0.53 %    
Nonperforming assets to loans and leases          
held for investment and foreclosed assets   0.49 %     0.54 %    
   
Nonaccrual loans and leases held for investment (1) $ 92,353     $ 99,113     $ (6,760 )
Performing TDRs held for investment   12,257       16,329       (4,072 )
Total impaired loans and leases $ 104,610     $ 115,442     $ (10,832 )
           
Loan and Lease Credit Risk Ratings:          
Pass $ 18,348,004     $ 18,279,011     $ 68,993  
Special mention   322,956       267,925       55,031  
Classified   175,912       188,607       (12,695 )
Total loans and leases held for investment,          
net of deferred fees $ 18,846,872     $ 18,735,543     $ 111,329  
           
Classified loans and leases held for investment          
to loans and leases held for investment   0.93 %     1.01 %    
           
Allowance for Credit Losses:          
Allowance for credit losses $ 174,646     $ 172,413     $ 2,233  
Provision for credit losses (for the quarter) $ 3,000     $ 7,000     $ (4,000 )
Net charge-offs (for the quarter) $ 767     $ 4,485     $ (3,718 )
Net charge-offs to average loans and leases          
(for the quarter)   0.02 %     0.10 %    
Allowance for credit losses to loans and leases          
held for investment   0.93 %     0.92 %    
Allowance for credit losses to nonaccrual loans          
and leases held for investment   189.1 %     174.0 %    
           
(1) Nonaccrual loans include guaranteed amounts of $17.5 million at December 31, 2019 and $15.4 million
at September 30, 2019.          

Nonaccrual, classified, and special mention loans and leases fluctuate from period to period as a result of loan repayments and our ongoing active portfolio monitoring.

During the fourth quarter of 2019, nonaccrual loans and leases decreased by $6.8 million, while classified loans and leases decreased by $12.7 million and special mention loans and leases increased by $55.0 million. There were no individually significant loan movements in the nonaccrual and classified loans and leases categories. The increase in special mention loans and leases in the fourth quarter was attributable to the downgrade of two security monitoring loans for $77.3 million, offset partially by the payoff of one security monitoring loan for $14.9 million and the net decrease in all other loans and leases of $7.4 million. 

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

                   
  Nonaccrual Loans and Leases   Accruing and
  December 31, 2019   September 30, 2019   30-89 Days Past Due
    % of     % of   December 31,   September 30,
    Loan     Loan     2019     2019
  Amount Category   Amount Category   Amount   Amount
   
  (Dollars in thousands)
Real estate mortgage:                  
Commercial $ 18,346 0.4 %   $ 19,515 0.5 %   $ 1,735   $ -
Income producing and other                  
residential   2,478 0.1 %     2,868 0.1 %     2,094     3,750
Total real estate mortgage   20,824 0.3 %     22,383 0.3 %     3,829     3,750
Real estate construction and land:                
Commercial   364 0.0 %     377 0.0 %     -     -
Residential   - 0.0 %     - 0.0 %     1,429     2,622
Total real estate                  
construction and land   364 0.0 %     377 0.0 %     1,429     2,622
Commercial:                  
Asset-based   30,162 0.8 %     33,015 0.9 %     19     48
Venture capital   12,916 0.6 %     20,131 0.9 %     -     -
Other commercial   27,594 1.6 %     22,554 1.2 %     2,258     4,068
Total commercial   70,672 0.9 %     75,700 1.0 %     2,277     4,116
Consumer   493 0.1 %     653 0.2 %     1,006     795
Total held for investment $ 92,353 0.5 %   $ 99,113 0.5 %   $ 8,541   $ 11,283
                   

STOCK REPURCHASE PROGRAM

During the fourth quarter of 2019, there were no stock repurchases. At December 31, 2019, the remaining amount that could be used to repurchase shares under the $225 million Stock Repurchase Program was $124.7 million.

ABOUT PACWEST BANCORP

PacWest Bancorp (“PacWest”) is a bank holding company with over $26 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 74 full-service branches located in California, one branch located in Durham, North Carolina, and one branch located in Denver, Colorado. Our Community Banking group provides lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. We offer additional products and services through our National Lending and Venture Banking groups. National Lending provides asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. Venture Banking offers a comprehensive suite of financial services focused on entrepreneurial or venture-backed businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States.  For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com.

FORWARD LOOKING STATEMENTS

This communication contains certain forward-looking information about PacWest that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on information available at the time of this communication and are based on current beliefs and expectations of the Company’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those set forth in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by the Company with the Securities and Exchange Commission.

We are under no obligation (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,
    2019       2019       2018  
   
  (Dollars in thousands, except per share data)
ASSETS:          
Cash and due from banks $ 172,585     $ 252,596     $ 175,830  
Interest-earning deposits in financial institutions   465,039       483,405       209,937  
Total cash and cash equivalents   637,624       736,001       385,767  
           
Securities available-for-sale, at estimated fair value   3,797,187       3,817,348       4,009,431  
Federal Home Loan Bank stock, at cost   40,924       26,865       32,103  
Total investment securities   3,838,111       3,844,213       4,041,534  
           
Loans held for sale   -       -       -  
           
Gross loans and leases held for investment   18,910,740       18,796,011       18,026,365  
Deferred fees, net   (63,868 )     (60,468 )     (68,652 )
Total loans and leases held for investment,          
net of deferred fees   18,846,872       18,735,543       17,957,713  
Allowance for loan and lease losses   (138,785 )     (138,552 )     (132,472 )
Total loans and leases held for investment, net   18,708,087       18,596,991       17,825,241  
           
Equipment leased to others under operating leases   324,084       295,854       292,677  
Premises and equipment, net   38,585       37,926       34,661  
Foreclosed assets, net   440       1,366       5,299  
Goodwill   2,548,670       2,548,670       2,548,670  
Core deposit and customer relationship intangibles, net   38,394       42,547       57,120  
Other assets   636,811       621,059       540,385  
Total assets $ 26,770,806     $ 26,724,627     $ 25,731,354  
           
LIABILITIES:          
Noninterest-bearing deposits $ 7,243,298     $ 7,441,185     $ 7,888,915  
Interest-bearing deposits   11,989,738       12,292,018       10,981,586  
Total deposits   19,233,036       19,733,203       18,870,501  
Borrowings   1,759,008       1,253,031       1,371,114  
Subordinated debentures   458,209       456,145       453,846  
Accrued interest payable and other liabilities   365,856       362,140       210,305  
Total liabilities   21,816,109       21,804,519       20,905,766  
STOCKHOLDERS' EQUITY (1)   4,954,697       4,920,108       4,825,588  
Total liabilities and stockholders’ equity $ 26,770,806     $ 26,724,627     $ 25,731,354  
           
Book value per share $ 41.36     $ 41.06     $ 39.17  
Tangible book value per share (2) $ 19.77     $ 19.43     $ 18.02  
Shares outstanding   119,781,605       119,831,192       123,189,833  
           
(1) Includes net unrealized gain (loss) on securities          
available-for-sale, net $ 78,658     $ 95,887     $ (6,075 )
(2) Non-GAAP measure.          
           


                       
PACWEST BANCORP AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS  
                             
  Three Months Ended
  Year Ended
  December 31,   September 30,   December 31,   December 31,
  2019   2019   2018   2019   2018
       
Interest income: (Dollars in thousands, except per share data)  
Loans and leases $ 263,402     $ 275,978     $ 272,522     $ 1,097,845     $ 1,047,969  
Investment securities 28,135     28,806     29,690     115,569     111,619  
Deposits in financial institutions 2,056     2,424     527     6,479     2,082  
Total interest income 293,593     307,208     302,739     1,219,893     1,161,670  
                             
Interest expense:                            
Deposits 34,802     40,703     28,834     148,460     80,140  
Borrowings 5,189     6,852     4,602     26,961     11,985  
Subordinated debentures 6,983     7,417     7,538     29,843     28,631  
Total interest expense 46,974     54,972     40,974     205,264     120,756  
                             
Net interest income 246,619     252,236     261,765     1,014,629     1,040,914  
Provision for credit losses 3,000     7,000     12,000     22,000     45,000  
Net interest income after                            
provision for credit losses 243,619     245,236     249,765     992,629     995,914  
                             
Noninterest income:                            
Service charges on deposit accounts 3,611     3,525     4,091     14,637     16,509  
Other commissions and fees 10,170     10,855     11,114     43,623     45,543  
Leased equipment income 10,648     9,615     9,384     38,727     37,881  
Gain on sale of loans and leases 23     765     -     1,114     4,675  
Gain on sale of securities 184     908     786     25,445     8,176  
Other income 2,540     7,761     8,151     19,016     35,851  
Total noninterest income 27,176     33,429     33,526     142,562     148,635  
                             
Noninterest expense:                            
Compensation 74,637     71,424     69,299     285,862     282,568  
Occupancy 14,541     14,089     13,356     57,407     53,223  
Data processing 6,770     7,044     6,930     27,556     27,225  
Other professional services 4,261     4,400     6,198     17,803     21,952  
Insurance and assessments 4,168     4,100     4,202     16,404     20,705  
Intangible asset amortization 4,153     4,833     4,986     18,726     22,506  
Leased equipment depreciation 6,856     5,951     5,758     24,016     21,371  
Foreclosed assets (income) expense, net (3,446 )   8     (311 )   (3,555 )   (751 )
Acquisition, integration and                            
reorganization costs (269 )   -     970     349     1,770  
Customer related expense 3,952     3,539     2,933     13,839     10,353  
Loan expense 2,967     3,628     2,991     12,931     10,569  
Other expense 5,138     7,793     11,923     30,913     39,741  
Total noninterest expense 123,728     126,809     129,235     502,251     511,232  
                             
Earnings before income taxes 147,067     151,856     154,056     632,940     633,317  
Income tax expense 29,186     41,830     39,015     164,304     167,978  
Net earnings $ 117,881     $ 110,026     $ 115,041     $ 468,636     $ 465,339  
                             
Basic and diluted earnings per share $ 0.98     $ 0.92     $ 0.93     $ 3.90     $ 3.72  
Dividends declared and paid per share $ 0.60     $ 0.60     $ 0.60     $ 2.40     $ 2.30  
                             


PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS PER SHARE CALCULATIONS                
                   
  Three Months Ended   Year Ended
  December 31,   September 30,   December 31,   December 31,
    2019       2019       2018       2019       2018  
   
  (In thousands, except per share data)
Basic Earnings Per Share:                  
Net earnings $ 117,881     $ 110,026     $ 115,041     $ 468,636     $ 465,339  
Less: earnings allocated to unvested                  
restricted stock (1)   (1,458 )     (1,369 )     (1,219 )     (5,182 )     (5,119 )
Net earnings allocated to common                  
shares $ 116,423     $ 108,657     $ 113,822     $ 463,454     $ 460,220  
                   
Weighted-average basic shares and                  
unvested restricted stock outstanding   119,804       119,831       123,238       120,468       125,100  
Less: weighted-average unvested                  
restricted stock outstanding   (1,566 )     (1,622 )     (1,426 )     (1,502 )     (1,460 )
Weighted-average basic shares                  
outstanding   118,238       118,209       121,812       118,966       123,640  
                   
Basic earnings per share $ 0.98     $ 0.92     $ 0.93     $ 3.90     $ 3.72  
                   
Diluted Earnings Per Share:                  
Net earnings allocated to common                  
shares $ 116,423     $ 108,657     $ 113,822     $ 463,454     $ 460,220  
                   
Weighted-average diluted shares                  
outstanding   118,238       118,209       121,812       118,966       123,640  
                   
Diluted earnings per share $ 0.98     $ 0.92     $ 0.93     $ 3.90     $ 3.72  
                   
   
 
(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
  December 31, 2019   September 30, 2019   December 31, 2018
    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:                      
Loans and leases (1)(2) $ 18,470,583 $ 263,783 5.67 %   $ 18,539,281 $ 276,309 5.91 %   $ 17,275,343 $ 272,824 6.27 %
Investment securities (3)   3,811,216   29,509 3.07 %     3,809,243   32,213 3.36 %     3,899,520   30,992 3.15 %
Deposits in financial                      
institutions   498,068   2,056 1.64 %     445,152   2,424 2.16 %     94,500   527 2.21 %
Total interest-earning                      
assets (1)   22,779,867   295,348 5.14 %     22,793,676   310,946 5.41 %     21,269,363   304,343 5.68 %
Other assets   3,600,872         3,612,927         3,515,099    
Total assets $ 26,380,739       $ 26,406,603       $ 24,784,462    
                       
Liabilities and                      
Stockholders' Equity:              
Interest checking $ 3,731,696   10,031 1.07 %   $ 3,598,698   11,942 1.32 %   $ 2,785,702   7,932 1.13 %
Money market   5,117,553   12,063 0.94 %     5,121,856   14,807 1.15 %     5,107,468   13,621 1.06 %
Savings   509,497   204 0.16 %     515,649   218 0.17 %     597,259   273 0.18 %
Time   2,744,156   12,504 1.81 %     2,795,573   13,736 1.95 %     1,932,332   7,008 1.44 %
Total interest-bearing                      
deposits   12,102,902   34,802 1.14 %     12,031,776   40,703 1.34 %     10,422,761   28,834 1.10 %
Borrowings   1,179,220   5,189 1.75 %     1,181,313   6,852 2.30 %     764,039   4,602 2.39 %
Subordinated debentures   456,997   6,983 6.06 %     456,011   7,417 6.45 %     452,998   7,538 6.60 %
Total interest-bearing                      
liabilities   13,739,119   46,974 1.36 %     13,669,100   54,972 1.60 %     11,639,798   40,974 1.40 %
Noninterest-bearing                      
demand deposits   7,338,888         7,487,555         8,163,699    
Other liabilities   372,550         359,202         222,564    
Total liabilities   21,450,557         21,515,857         20,026,061    
Stockholders' equity   4,930,182         4,890,746         4,758,401    
Total liabilities and                      
stockholders' equity $ 26,380,739       $ 26,406,603       $ 24,784,462    
Net interest income (1)   $ 248,374       $ 255,974       $ 263,369  
Net interest spread (1)     3.78 %       3.81 %       4.28 %
Net interest margin (1)     4.33 %       4.46 %       4.91 %
                       
Total deposits (4) $ 19,441,790 $ 34,802 0.71 %   $ 19,519,331 $ 40,703 0.83 %   $ 18,586,460 $ 28,834 0.62 %
                       
(1) Tax equivalent. 
(2) Includes discount accretion on acquired loans of $3.0 million, $2.6 million, and $6.9 million for the three months ended
December 31, 2019, September 30, 2019, and December 31, 2018, respectively.
(3) Includes tax-equivalent adjustments of $1.4 million, $3.4 million, and $1.3 million for the three months ended   
December 31, 2019, September 30, 2019, and December 31, 2018 related to tax-exempt income on 
investment securities. The federal statutory tax rate utilized was 21%.
(4) 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 total deposits divided by average total 
deposits.
                       


 
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER BALANCE SHEET
                   
  December 31,   September 30,   June 30,   March 31,   December 31,
    2019       2019       2019       2019       2018  
   
  (Dollars in thousands, except per share data)
ASSETS:                  
Cash and due from banks $ 172,585     $ 252,596     $ 185,075     $ 224,758     $ 175,830  
Interest-earning deposits in financial                  
institutions   465,039       483,405       422,663       332,124       209,937  
Total cash and cash equivalents   637,624       736,001       607,738       556,882       385,767  
                   
Securities available-for-sale   3,797,187       3,817,348       3,807,244       3,994,708       4,009,431  
Federal Home Loan Bank stock   40,924       26,865       43,146       29,430       32,103  
  Total investment securities   3,838,111       3,844,213       3,850,390       4,024,138       4,041,534  
                   
Loans held for sale   -       -       -       25,124       -  
                   
Gross loans and leases held for investment   18,910,740       18,796,011       18,532,740       18,371,295       18,026,365  
Deferred fees, net   (63,868 )     (60,468 )     (59,888 )     (63,598 )     (68,652 )
Total loans and leases held for                  
investment, net of deferred fees   18,846,872       18,735,543       18,472,852       18,307,697       17,957,713  
Allowance for loan and lease losses   (138,785 )     (138,552 )     (135,037 )     (136,281 )     (132,472 )
Total loans and leases held for                  
investment, net   18,708,087       18,596,991       18,337,815       18,171,416       17,825,241  
                   
Equipment leased to others under                  
operating leases   324,084       295,854       300,668       293,853   -   292,677  
Premises and equipment, net   38,585       37,926       38,162       37,783       34,661  
Foreclosed assets, net   440       1,366       1,472       3,291       5,299  
Goodwill   2,548,670       2,548,670       2,548,670       2,548,670       2,548,670  
Core deposit and customer relationship                  
intangibles, net   38,394       42,547       47,380       52,250       57,120  
Other assets   636,811       621,059       612,119       610,731       540,385  
Total assets $ 26,770,806     $ 26,724,627     $ 26,344,414     $ 26,324,138     $ 25,731,354  
                   
LIABILITIES:                  
Noninterest-bearing deposits $ 7,243,298     $ 7,441,185     $ 7,299,213     $ 7,712,409     $ 7,888,915  
Interest-bearing deposits   11,989,738       12,292,018       11,506,543       11,573,518       10,981,586  
Total deposits   19,233,036       19,733,203       18,805,756       19,285,927       18,870,501  
Borrowings   1,759,008       1,253,031       1,913,059       1,481,087       1,371,114  
Subordinated debentures   458,209       456,145       456,112       454,458       453,846  
Accrued interest payable and other                  
liabilities   365,856       362,140       317,477       311,684       210,305  
Total liabilities   21,816,109       21,804,519       21,492,404       21,533,156       20,905,766  
STOCKHOLDERS' EQUITY (1)   4,954,697       4,920,108       4,852,010       4,790,982       4,825,588  
Total liabilities and stockholders’                  
equity $ 26,770,806     $ 26,724,627     $ 26,344,414     $ 26,324,138     $ 25,731,354  
                   
Book value per share $ 41.36     $ 41.06     $ 40.49     $ 39.86     $ 39.17  
Tangible book value per share (2) $ 19.77     $ 19.43     $ 18.83     $ 18.22     $ 18.02  
Shares outstanding   119,781,605       119,831,192       119,829,104       120,201,149       123,189,833  
                   
                 
(1) Includes net unrealized gain (loss) on                
securities available-for-sale, net $ 78,658     $ 95,887     $ 73,066     $ 37,258     $ (6,075 )
(2) Non-GAAP measure.                  
                   


                 
PACWEST BANCORP AND SUBSIDIARIES
FIVE QUARTER STATEMENT OF EARNINGS
 
  Three Months Ended
  December 31,   September 30,   June 30,   March 31,   December 31,
    2019       2019       2019       2019       2018  
   
  (Dollars in thousands, except per share data)
Interest income:                  
Loans and leases $ 263,402     $ 275,978     $ 284,236     $ 274,229     $ 272,522  
Investment securities   28,135       28,806       28,948       29,680       29,690  
Deposits in financial institutions   2,056       2,424       1,349       650       527  
Total interest income   293,593       307,208       314,533       304,559       302,739  
                   
Interest expense:                  
Deposits   34,802       40,703       38,720       34,235       28,834  
Borrowings   5,189       6,852       7,210       7,710       4,602  
Subordinated debentures   6,983       7,417       7,705       7,738       7,538  
Total interest expense   46,974       54,972       53,635       49,683       40,974  
                   
Net interest income   246,619       252,236       260,898       254,876       261,765  
Provision for credit losses   3,000       7,000       8,000       4,000       12,000  
Net interest income after                  
provision for credit losses   243,619       245,236       252,898       250,876       249,765  
                   
Noninterest income:                  
Service charges on deposit accounts   3,611       3,525       3,771       3,730       4,091  
Other commissions and fees   10,170       10,855       11,590       11,008       11,114  
Leased equipment income   10,648       9,615       9,182       9,282       9,384  
Gain on sale of loans and leases   23       765       326       -       -  
Gain on sale of securities   184       908       22,192       2,161       786  
Other income   2,540       7,761       3,832       4,883       8,151  
Total noninterest income   27,176       33,429       50,893       31,064       33,526  
                   
Noninterest expense:                  
Compensation   74,637       71,424       68,956       70,845       69,299  
Occupancy   14,541       14,089       14,457       14,320       13,356  
Data processing   6,770       7,044       6,817       6,925       6,930  
Other professional services   4,261       4,400       4,629       4,513       6,198  
Insurance and assessments   4,168       4,100       4,098       4,038       4,202  
Intangible asset amortization   4,153       4,833       4,870       4,870       4,986  
Leased equipment depreciation   6,856       5,951       5,558       5,651       5,758  
Foreclosed assets (income) expense, net   (3,446 )     8       (146 )     29       (311 )
Acquisition, integration and                  
reorganization costs   (269 )     -       -       618       970  
Customer related expense   3,952       3,539       3,405       2,943       2,933  
Loan expense   2,967       3,628       3,451       2,885       2,991  
Other expense   5,138       7,793       9,332       8,650       11,923  
Total noninterest expense   123,728       126,809       125,427       126,287       129,235  
                   
Earnings before income taxes   147,067       151,856       178,364       155,653       154,056  
Income tax expense   29,186       41,830       50,239       43,049       39,015  
Net earnings $ 117,881     $ 110,026     $ 128,125     $ 112,604     $ 115,041  
                   
Basic and diluted earnings per share $ 0.98     $ 0.92     $ 1.07     $ 0.92     $ 0.93  
Dividends declared and paid per share $ 0.60     $ 0.60     $ 0.60     $ 0.60     $ 0.60  
                   



                 
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,
    2019       2019       2019       2019       2018  
   
  (Dollars in thousands)
Performance Ratios:                  
Return on average assets (1)   1.77 %     1.65 %     1.99 %     1.77 %     1.84 %
Return on average equity (1)   9.49 %     8.93 %     10.66 %     9.48 %     9.59 %
Return on average tangible equity (1)(2)   19.98 %     19.01 %     23.15 %     20.64 %     21.23 %
Efficiency ratio   44.8 %     42.3 %     41.6 %     42.4 %     41.7 %
Noninterest expense as a percentage                  
of average assets (1)   1.86 %     1.91 %     1.95 %     1.99 %     2.07 %
                   
Average Yields/Costs (1):                  
Yield on:                  
Average loans and leases (3)   5.67 %     5.91 %     6.26 %     6.16 %     6.27 %
Average interest-earning assets (3)   5.14 %     5.41 %     5.68 %     5.60 %     5.68 %
Cost of:                  
Average interest-bearing deposits   1.14 %     1.34 %     1.35 %     1.24 %     1.10 %
Average total deposits   0.71 %     0.83 %     0.81 %     0.73 %     0.62 %
Average interest-bearing liabilities   1.36 %     1.60 %     1.64 %     1.57 %     1.40 %
Net interest spread (3)   3.78 %     3.81 %     4.04 %     4.03 %     4.28 %
Net interest margin (3)   4.33 %     4.46 %     4.72 %     4.69 %     4.91 %
                   
Average Balances:                  
Assets:                  
Loans and leases, net of deferred fees $ 18,470,583     $ 18,539,281     $ 18,239,690     $ 18,064,230     $ 17,275,343  
Interest-earning assets   22,779,867       22,793,676       22,258,828       22,144,711       21,269,363  
Total assets   26,380,739       26,406,603       25,849,189       25,775,949       24,784,462  
Liabilities:                  
Noninterest-bearing deposits   7,338,888       7,487,555       7,544,027       7,783,652       8,163,699  
Interest-bearing deposits   12,102,902       12,031,776       11,545,785       11,156,773       10,422,761  
Total deposits   19,441,790       19,519,331       19,089,812       18,940,425       18,586,460  
Borrowings   1,179,220       1,181,313       1,142,223       1,218,319       764,039  
Subordinated debentures   456,997       456,011       454,901       454,203       452,998  
Interest-bearing liabilities   13,739,119       13,669,100       13,142,909       12,829,295       11,639,798  
Stockholders' equity   4,930,182       4,890,746       4,818,889       4,815,965       4,758,401  
                   
(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
  December 31,   September 30,   June 30,   March 31,   December 31,
    2019       2019       2019       2019       2018  
   
  (Dollars in thousands)
Credit Quality Ratios:                  
Nonaccrual loans and leases held for                  
investment to loans and leases                  
held for investment   0.49 %     0.53 %     0.44 %     0.48 %     0.44 %
Nonperforming assets to loans and                  
leases held for investment and                  
foreclosed assets   0.49 %     0.54 %     0.45 %     0.50 %     0.47 %
Classified loans and leases held for                  
investment to loans and leases                  
held for investment   0.93 %     1.01 %     1.03 %     1.04 %     1.32 %
Provision for credit losses (for the                  
quarter) to average loans and leases                  
held for investment (annualized)   0.06 %     0.15 %     0.18 %     0.09 %     0.28 %
Net charge-offs (for the quarter) to                  
average loans and leases held                  
for investment (annualized)   0.02 %     0.10 %     0.25 %     0.00 %     0.46 %
Trailing 12 months net charge-offs                  
to average loans and leases                  
held for investment   0.09 %     0.20 %     0.18 %     0.22 %     0.26 %
Allowance for credit losses to loans                  
and leases held for investment   0.93 %     0.92 %     0.92 %     0.95 %     0.94 %
Allowance for credit losses to                  
nonaccrual loans and leases                  
held for investment   189.1 %     174.0 %     209.1 %     195.6 %     213.5 %
                   
PacWest Bancorp Consolidated                  
Capital:                  
Tier 1 leverage ratio (1)   9.74 %     9.50 %     9.49 %     9.38 %     10.13 %
Common equity tier 1 capital ratio (1)   9.78 %     9.55 %     9.53 %     9.48 %     10.01 %
Tier 1 capital ratio (1)   9.78 %     9.55 %     9.53 %     9.48 %     10.01 %
Total capital ratio (1)   12.41 %     12.16 %     12.18 %     12.15 %     12.72 %
Risk-weighted assets (1) $ 23,582,495     $ 23,579,614     $ 23,117,199     $ 22,939,074     $ 22,525,096  
                   
Equity to assets ratio   18.51 %     18.41 %     18.42 %     18.20 %     18.75 %
Tangible common equity ratio (2)   9.79 %     9.65 %     9.50 %     9.23 %     9.60 %
Book value per share $ 41.36     $ 41.06     $ 40.49     $ 39.86     $ 39.17  
Tangible book value per share (2) $ 19.77     $ 19.43     $ 18.83     $ 18.22     $ 18.02  
                   
Pacific Western Bank Capital:                  
Tier 1 leverage ratio (1)   10.95 %     10.72 %     10.76 %     10.57 %     10.80 %
Common equity tier 1 capital ratio (1)   11.00 %     10.79 %     10.80 %     10.69 %     10.68 %
Tier 1 capital ratio (1)   11.00 %     10.79 %     10.80 %     10.69 %     10.68 %
Total capital ratio (1)   11.74 %     11.52 %     11.53 %     11.45 %     11.44 %
                   
(1) Capital information for December 31, 2019 is preliminary.            
(2) Non-GAAP measure.                  
                   

GAAP TO NON-GAAP RECONCILIATIONS

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 tables below present the reconciliations of these GAAP financial measures to the related non-GAAP financial measures:

                   
                   
  Three Months Ended   Year Ended
  December 31,   September 30,   December 31,   December 31,
Return on Average Tangible Equity   2019       2019       2018       2019       2018  
   
  (Dollars in thousands)
Net earnings $ 117,881     $ 110,026     $ 115,041     $ 468,636     $ 465,339  
                   
Average stockholders' equity $ 4,930,182     $ 4,890,746     $ 4,758,401     $ 4,864,332     $ 4,809,667  
Less: Average intangible assets   2,589,217       2,593,925       2,608,497       2,596,389       2,616,820  
Average tangible common equity $ 2,340,965     $ 2,296,821     $ 2,149,904     $ 2,267,943     $ 2,192,847  
                   
Return on average equity (1)   9.49 %     8.93 %     9.59 %     9.63 %     9.68 %
Return on average tangible equity (2)   19.98 %     19.01 %     21.23 %     20.66 %     21.22 %
                   
(1) Annualized net earnings divided by average stockholders' equity.            
(2) Annualized net earnings divided by average tangible common equity.            
                   


                   
                   
Tangible Common Equity Ratio/ December 31,   September 30,   June 30,   March 31,   December 31,
Tangible Book Value Per Share   2019       2019       2019       2019       2018  
   
  (Dollars in thousands, except per share data)
Stockholders' equity $ 4,954,697     $ 4,920,108     $ 4,852,010     $ 4,790,982     $ 4,825,588  
Less: Intangible assets   2,587,064       2,591,217       2,596,050       2,600,920       2,605,790  
Tangible common equity $ 2,367,633     $ 2,328,891     $ 2,255,960     $ 2,190,062     $ 2,219,798  
                   
Total assets $ 26,770,806     $ 26,724,627     $ 26,344,414     $ 26,324,138     $ 25,731,354  
Less: Intangible assets   2,587,064       2,591,217       2,596,050       2,600,920       2,605,790  
Tangible assets $ 24,183,742     $ 24,133,410     $ 23,748,364     $ 23,723,218