LOS ANGELES, Jan. 19, 2022 (GLOBE NEWSWIRE) -- PacWest Bancorp (NASDAQ:PACW) -

FOURTH QUARTER 2021 RESULTS

$136.0M	$1.14	$181.7M	22.06%
Net Earnings	Diluted Earnings per Share	PPNR	ROATE

FOURTH QUARTER 2021 HIGHLIGHTS

Net Earnings of $136.0 Million or $1.14 Per Diluted Share
Core Deposits Up $4.6 Billion or 16.3% of which $4.1 Billion Related to the Acquisition of the HOA Business in October; Represents 93% of Total Deposits
Loan Growth of $2.4 Billion or 11.8%
Civic Loan Production of $480 Million in 4Q21, Compared to $481 Million in 3Q21
PPNR of $181.7 Million, Up 8.3% Compared to 3Q21
Provision for Credit Losses Benefit of $6.0 Million in 4Q21 Compared to Benefit of $20.0 Million in 3Q21
Net Interest Income (TE) of $304.5 Million in 4Q21, Compared to $279.8 Million in 3Q21
Noninterest Income of $57.4 Million in 4Q21, Compared to $51.3 Million in 3Q21, With Continued Strength in Warrant Income
Noninterest Expense of $176.1 Million in 4Q21, Up 10.5% From 3Q21, Due Mainly to First Quarter of Operating Expenses Related to Acquired HOA Business plus Acquisition Costs of $5.6 Million
Classified and Special Mention Loans Fell $25.5 Million and $104.8 Million, Respectively, From 3Q21
ACL Ratio of 1.19% and ALLL Ratio of 0.87%
Net Charge-offs of $169 Thousand
Cost of Deposits Remained at 8bps
Loan and Lease Production of $3.4 Billion, Up From $2.4 Billion in 3Q21; WAC of 3.89% vs. 4.24% in 3Q21
Strong Capital Position – CET1 Ratio of 8.86% and Total Capital Ratio of 12.69% at 4Q21
Tangible Book Value Per Share Decreased From $22.57 at 3Q21 to $21.31 at 4Q21 Due Mainly to Cash Used for the HOA Acquisition

FULL YEAR 2021 RESULTS

$607.0M	$5.10	$660.3M	24.41%
Net Earnings	Diluted Earnings per Share	PPNR	ROATE

FULL YEAR 2021 HIGHLIGHTS

Net Earnings of $607.0 Million or $5.10 Per Diluted Share
Core Deposits Up $10.5 Billion or 47.0% in 2021; Venture Banking Up $4.5 Billion; HOA Acquisition Added $4.1 Billion
Loan Growth of $3.9 Billion or 20.2%
PPNR of $660.3 Million, Up 2.1% Compared to 2020
Provision for Credit Losses Benefit of $162.0 Million in 2021 Compared to Provision of $339.0 Million in 2020
Net Interest Income (TE) of $1.1 Billion in 2021, Compared to $1.0 Billion in 2020
Classified and Special Mention Loans Fell $149.2 Million and $329.7 Million, Respectively, From 2020
Net Recoveries of $1.9 Million
Cost of Deposits 9bps for 2021 Down From 27 bps in 2020
Loan and Lease Production of $9.1 Billion, Up From $4.2 Billion in 2020; WAC of 4.19% vs. 3.57% in 2020
Tangible Book Value Per Share Increased From $21.05 at the End of 2020 to $21.31 at the End of 2021
Noninterest Income of $193.9 Million in 2021, Compared to $146.1 Million in 2020, With Record Warrant Income of $49.3 Million in 2021

CEO COMMENTARY

Matt Wagner, President and CEO, commented, "We are very pleased to deliver another strong quarter. We deployed approximately $3.8 billion of excess liquidity into higher-yielding securities and loans during the fourth quarter which resulted in a $24.6 million increase in net interest income and helped drive a $13.9 million increase in our pre-tax pre-provision net revenue compared to the third quarter. Loans grew by $2.4 billion in the fourth quarter to an all-time high of $22.9 billion."

"We continued to experience strong deposit growth as core deposits increased by $4.6 billion during the fourth quarter driven by the $4.1 billion of deposits acquired with the HOA business."

"Credit quality continues the improvement seen throughout 2021 with net recoveries of $1.9 million for the year and continued decreases in special mention (down 46% in 2021) and classified loans and leases (down 56% in 2021) which resulted in a provision benefit for the fourth consecutive quarter."

"We had a strong year in 2021 and produced record net earnings of over $600 million, ended the year with record high balances for loans and deposits and crossed the $40 billion total assets milestone. We completed two strategic acquisitions with Civic Financial Services in February and the HOA business in October which expanded our product offerings and position us well for a rising rate environment. "

"Our strategy of prioritizing a strong balance sheet, followed by profitability and growth, in that order, served us well in 2021 and we are well positioned as we begin 2022."

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/be14ae62-9832-453c-9087-7d077d54bfcc

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 (1)		2021			2021		(Decrease)				2021			2020		(Decrease)
	*(Dollars in thousands, except per share data)*
Net earnings (loss)	$	136,045		$	139,996		$	(3,951	)	$	606,959		$	(1,237,574	)	$	1,844,533
Diluted earnings (loss) per share	$	1.14		$	1.17		$	(0.03	)	$	5.10		$	(10.61	)	$	15.71
Pre-provision, pre-goodwill impairment, pre-tax net revenue ("PPNR") (2)	$	181,677		$	167,766		$	13,911		$	660,334		$	646,599		$	13,735
Return on average assets		1.34	%		1.55	%		(0.21	)		1.71	%		(4.46	)%		6.17
PPNR return on average assets (2)		1.79	%		1.86	%		(0.07	)		1.86	%		2.33	%		(0.47	)
Return on average tangible equity (2)		22.06	%		21.03	%		1.03			24.41	%		10.36	%		14.05

Yield on average loans and leases (tax equivalent)		4.93	%		5.01	%		(0.08	)		5.08	%		5.18	%		(0.10	)
Cost of average total deposits		0.08	%		0.08	%		-			0.09	%		0.27	%		(0.18	)
Net interest margin ("NIM") (tax equivalent)		3.24	%		3.33	%		(0.09	)		3.40	%		4.05	%		(0.65	)
Efficiency ratio		46.2	%		47.2	%		(1.0	)		46.9	%		43.1	%		3.8

Total assets	$	40,443,344		$	35,885,676		$	4,557,668		$	40,443,344		$	29,498,442		$	10,944,902
Loans and leases held for investment, net of deferred fees	$	22,941,548		$	20,511,020		$	2,430,528		$	22,941,548		$	19,083,377		$	3,858,171
Noninterest-bearing demand deposits	$	14,543,133		$	12,881,806		$	1,661,327		$	14,543,133		$	9,193,827		$	5,349,306
Core deposits	$	32,734,949		$	28,140,708		$	4,594,241		$	32,734,949		$	22,264,480		$	10,470,469
Total deposits	$	34,997,757		$	30,559,745		$	4,438,012		$	34,997,757		$	24,940,717		$	10,057,040

As percentage of total deposits:
Noninterest-bearing demand deposits		41	%		42	%		(1	)		41	%		37	%		4
Core deposits		93	%		92	%		1			93	%		89	%		4

Equity to assets ratio		9.89	%		10.92	%		(1.03	)		9.89	%		12.19	%		(2.30	)
Common equity tier 1 capital ratio		8.86	%		10.15	%		(1.29	)		8.86	%		10.53	%		(1.67	)
Total capital ratio		12.69	%		14.36	%		(1.67	)		12.69	%		13.76	%		(1.07	)
Tangible common equity ratio (2)		6.54	%		7.79	%		(1.25	)		6.54	%		8.78	%		(2.24	)
Book value per share	$	33.45		$	32.77		$	0.68		$	33.45		$	30.36		$	3.09
Tangible book value per share (2)	$	21.31		$	22.57		$	(1.26	)	$	21.31		$	21.05		$	0.26

(1) The operations of the Homeowners Association Services business are included from its October 8, 2021 acquisition date and the operations of Civic are included from its February 1, 2021 acquisition date.
(2) Non-GAAP measure.

INCOME STATEMENT HIGHLIGHTS

NET INTEREST INCOME

Net interest income increased by $24.6 million to $300.4 million for the fourth quarter of 2021 compared to $275.8 million for the third quarter of 2021 due mainly to higher income on investment securities and loans and leases primarily resulting from higher average balances as we deployed our excess liquidity. Income on investment securities increased by $7.7 million in the fourth quarter of 2021 due to a $1.9 billion increase in the average balance of investment securities, offset partially by a 10 basis point decrease in the yield on average investment securities. Income on loans and leases increased by $16.9 million in the fourth quarter of 2021 due to a $1.7 billion increase in the average balance of loans and leases, offset partially by an eight basis point decrease in the yield on average loans and leases. The tax equivalent yield on average loans and leases was 4.93% for the fourth quarter of 2021 compared to 5.01% for the third quarter of 2021. The decrease in the tax equivalent yield on average loans and leases was due primarily to the purchases of lower yielding single-family loans and higher loan premium amortization of $4.1 million.

The tax equivalent NIM was 3.24% for the fourth quarter of 2021 compared to 3.33% for the third quarter of 2021. The decrease in the NIM was due primarily to the change in the earning assets mix driven by the increase in the balance of average investment securities as a percentage of average earning assets and the decrease in the balance of average loans and leases as a percentage of average earning assets, as well as lower yields on average loans and leases and average investment securities. The average balance of investment securities increased by $1.9 billion to $10.0 billion, the average balance of deposits in financial institutions increased by $303.3 million to $6.0 billion, and the average balance of loans and leases increased by $1.7 billion to $21.4 billion in the fourth quarter of 2021. The increase in average balances of investment securities and loans and leases was the result of deploying some of our excess liquidity ahead of the closing of the acquisition of the HOA Services Division of MUFG Union Bank that added approximately $4.1 billion of deposits on October 8, 2021.

The cost of average total deposits was 0.08% in the fourth quarter of 2021, unchanged from 0.08% in the third quarter of 2021.

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		2021			2021		(Decrease)
	*(In thousands)*
(Reduction in) addition to allowance for loan and lease losses	$	(3,000	)	$	(21,500	)	$	18,500
(Reduction in) addition to reserve for unfunded loan commitments		(3,000	)		1,500			(4,500	)
Total provision for credit losses	$	(6,000	)	$	(20,000	)	$	14,000

The provision for credit losses benefit was $6.0 million for the fourth quarter of 2021 compared to a benefit of $20.0 million for the third quarter of 2021. The fourth quarter benefit was primarily impacted by changes in the qualitative component and a slightly improved economic forecast offset by an increased provision for loan growth.

NONINTEREST INCOME

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

	Three Months Ended
	December 31,			September 30,		Increase
Noninterest Income		2021			2021	(Decrease)
	*(In thousands)*
Service charges on deposit accounts	$	3,476		$	3,407	$	69
Other commissions and fees		10,633			11,792		(1,159	)
Leased equipment income		12,602			10,943		1,659
Gain on sale of loans and leases		172			-		172
Gain on sale of securities		999			515		484
Other income:
Dividends and gains on equity investments		(1,570	)		8,387		(9,957	)
Warrant income		23,990			13,578		10,412
Other		7,080			2,723		4,357
Total noninterest income	$	57,382		$	51,345	$	6,037

Noninterest income increased by $6.0 million to $57.4 million for the fourth quarter of 2021 compared to $51.3 million for the third quarter of 2021 due primarily to increases of $10.4 million in warrant income, $4.4 million in other income, and $1.7 million in leased equipment income, offset partially by a $10.0 million decrease in dividends and gains on equity investments. Warrant income increased due to continued strength in the capital markets activity including our single largest warrant gain ever of $13.6 million along with a second warrant gain of $5.2 million. Other income increased due primarily to higher gains from early lease terminations of $4.5 million. Leased equipment income increased due to a higher average balance of leased equipment and the return of one large lease to accrual status in December 2021. Dividends and gains on equity investments decreased due primarily to lower gains on sales of equity investments, higher fair value losses on equity investments still held, and lower income distributions and fair value marks on SBIC investments.

NONINTEREST EXPENSE

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

	Three Months Ended
	December 31,			September 30,		Increase
Noninterest Expense		2021			2021	(Decrease)
	*(In thousands)*
Compensation	$	99,700		$	98,061	$	1,639
Occupancy		14,656			14,928		(272	)
Data processing		8,171			7,391		780
Other professional services		5,946			5,164		782
Insurance and assessments		5,032			3,685		1,347
Intangible asset amortization		3,876			2,890		986
Leased equipment depreciation		9,569			8,603		966
Foreclosed assets (income) expense, net		(260	)		165		(425	)
Acquisition, integration and reorganization costs		5,590			200		5,390
Customer related expense		6,175			4,538		1,637
Loan expense		5,627			4,180		1,447
Other		12,028			9,616		2,412
Total noninterest expense	$	176,110		$	159,421	$	16,689

Noninterest expense increased by $16.7 million to $176.1 million for the fourth quarter of 2021 compared to $159.4 million for the third quarter of 2021 due primarily to increases in several expense categories such as compensation expense by $1.6 million, data processing by $0.8 million, insurance and assessments by $1.3 million, intangible asset amortization by $1.0 million, acquisition, integration and reorganization costs by $5.4 million, and customer related expense by $1.6 million. The increases related primarily to the acquisition of the HOA business on October 8, 2021. Total operating expenses for the quarter, excluding the acquisition, integration and reorganization costs of $5.6 million, were $170.5 million including $5.9 million of operating expenses for the acquired HOA business.

INCOME TAXES

The effective income tax rate was 27.5% in the fourth quarter of 2021 compared to 25.4% in the third quarter of 2021. The increase was due primarily to an increase in state tax rates for fiscal year 2021 caused by a shift in apportionment and a tax benefit from the release of a valuation allowance recorded in the third quarter. The effective income tax rate for the full year 2021 was 26.2%. The effective tax rate for the full year 2022 is currently estimated to be in the range of 25% to 27%.

BALANCE SHEET HIGHLIGHTS

DEPOSITS AND CLIENT INVESTMENT FUNDS

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

	December 31, 2021				September 30, 2021				December 31, 2020
			% of				% of				% of
Deposit Composition	Balance		Total		Balance		Total		Balance		Total
	*(Dollars in thousands)*
Noninterest-bearing demand	$	14,543,133	41	%	$	12,881,806	42	%	$	9,193,827	37	%
Interest checking		7,319,898	21	%		7,168,472	24	%		5,974,910	24	%
Money market		10,241,265	29	%		7,463,261	24	%		6,532,917	26	%
Savings		630,653	2	%		627,169	2	%		562,826	2	%
Total core deposits		32,734,949	93	%		28,140,708	92	%		22,264,480	89	%
Non-core non-maturity deposits		889,976	3	%		960,438	3	%		1,149,467	5	%
Total non-maturity deposits		33,624,925	96	%		29,101,146	95	%		23,413,947	94	%
Time deposits $250,000 and under		885,938	3	%		882,551	3	%		994,197	4	%
Time deposits over $250,000		486,894	1	%		576,048	2	%		532,573	2	%
Total time deposits		1,372,832	4	%		1,458,599	5	%		1,526,770	6	%
Total deposits	$	34,997,757	100	%	$	30,559,745	100	%	$	24,940,717	100	%

At December 31, 2021, core deposits totaled $32.7 billion or 93% of total deposits, including $14.5 billion of noninterest-bearing demand deposits or 41% of total deposits. Core deposits increased by $4.6 billion or 16.3% in the fourth quarter of 2021 driven primarily by the $4.1 billion of core deposits acquired with the HOA business on October 8, 2021.

In addition to deposit products, we also offer alternative, non-depository cash investment options for select clients. These alternative options 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, 2021 were $1.4 billion, of which $0.9 billion was managed by PWAM.

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)		2021			2021			2021
	*(Dollars in thousands)*
Balance, beginning of period	$	20,511,020		$	19,506,257		$	19,083,377
Additions:
Production		3,372,815			2,406,024			9,054,767
Disbursements		1,917,195			1,349,333			5,952,158
Total production and disbursements		5,290,010			3,755,357			15,006,925
Reductions:
Payoffs		(2,000,293	)		(1,732,621	)		(7,337,296	)
Paydowns		(845,443	)		(1,013,867	)		(3,728,950	)
Total payoffs and paydowns		(2,845,736	)		(2,746,488	)		(11,066,246	)
Sales		(15,837	)		(2,175	)		(117,263	)
Transfers to foreclosed assets		-			(415	)		(1,062	)
Charge-offs		(4,395	)		(1,516	)		(10,715	)
Transfers to loans held for sale		-			-			(25,554	)
Total reductions		(2,865,968	)		(2,750,594	)		(11,220,840	)
Loans acquired through acquisitions		6,486			-			72,086
Net increase (decrease)		2,430,528			1,004,763			3,858,171
Balance, end of period	$	22,941,548		$	20,511,020		$	22,941,548

Weighted average rate on production (2)		3.89	%		4.24	%		4.19	%

(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 38 basis points to loan yields in 2021.

Loans and leases held for investment, net of deferred fees, increased by $2.4 billion or 11.8% in the fourth quarter of 2021 to $22.9 billion at December 31, 2021. Excluding PPP loan activity, loans grew by $2.5 billion or 12.6%. The overall increase in the loans and leases balance for the fourth quarter of 2021 was due primarily to increases in the income producing and other residential, venture capital, and asset-based portfolios, offset partially by a reduction in the commercial real estate construction portfolio. Civic loan production was $480 million in the fourth quarter of 2021 compared to $481 million in the third quarter of 2021. The total outstanding balance of the Civic loan portfolio as of December 31, 2021 was $1.4 billion. The PPP loan forgiveness in the fourth quarter of 2021 was $111 million, down from $338 million in the third quarter of 2021. Net fees for PPP loans were $3.6 million in the fourth quarter of 2021, down from the $7.9 million in the third quarter of 2021. Remaining PPP loans totaled $157 million as of December 31, 2021 with $4.2 million of net fees to amortize over the remaining life of the loans. The weighted average rate on the $3.4 billion of new production for the fourth quarter of 2021 decreased to 3.89% from 4.24% in the third quarter of 2021 due primarily to the loan mix (higher levels of single-family loan pool purchases and equity fund loans). In the fourth quarter of 2021, we purchased $1.1 billion in single-family loan pools compared to $1.0 billion in the third quarter of 2021. The total of the single-family loan pool purchase portfolio as of December 31, 2021 was $2.3 billion.

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, 2021				September 30, 2021				December 31, 2020
			% of				% of				% of
Loan and Lease Portfolio	Balance		Total		Balance		Total		Balance		Total
	*(In thousands)*
Real estate mortgage:
Commercial	$	3,762,299	17	%	$	3,694,597	18	%	$	4,096,671	21	%
Income producing and other residential		7,416,421	32	%		6,153,662	30	%		3,803,265	20	%
Total real estate mortgage		11,178,720	49	%		9,848,259	48	%		7,899,936	41	%
Real estate construction and land:
Commercial		832,591	4	%		992,003	5	%		1,117,121	6	%
Residential		2,604,536	11	%		2,392,568	12	%		2,243,160	12	%
Total real estate construction and land		3,437,127	15	%		3,384,571	17	%		3,360,281	18	%
Total real estate		14,615,847	64	%		13,232,830	65	%		11,260,217	59	%
Commercial:
Asset-based		4,075,477	18	%		3,661,769	18	%		3,429,283	18	%
Venture capital		2,320,593	10	%		1,632,861	8	%		1,698,508	9	%
Other commercial		1,471,981	6	%		1,577,592	7	%		2,375,114	12	%
Total commercial		7,868,051	34	%		6,872,222	33	%		7,502,905	39	%
Consumer		457,650	2	%		405,968	2	%		320,255	2	%
Total loans and leases held for investment, net of deferred fees	$	22,941,548	100	%	$	20,511,020	100	%	$	19,083,377	100	%

Total unfunded loan commitments	$	9,006,350			$	8,480,599			$	7,601,390

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, 2021
	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	$	203,733		$	76,071		$	279,804
Charge-offs		(4,395	)		-			(4,395	)
Recoveries		4,226			-			4,226
Net charge-offs		(169	)		-			(169	)
Provision		(3,000	)		(3,000	)		(6,000	)
Ending balance	$	200,564		$	73,071		$	273,635


	Three Months Ended September 30, 2021
	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	$	225,600		$	74,571		$	300,171
Charge-offs		(1,516	)		-			(1,516	)
Recoveries		1,149			-			1,149
Net charge-offs		(367	)		-			(367	)
Provision		(21,500	)		1,500			(20,000	)
Ending balance	$	203,733		$	76,071		$	279,804

Allowance for Credit	Year Ended December 31,
Losses Rollforward		2021			2020
	*(In thousands)*
Beginning balance	$	433,752		$	174,646
Cumulative effect of change in accounting principle - CECL		-			7,327
Balance, January 1		433,752			181,973
Charge-offs		(10,715	)		(93,589	)
Recoveries		12,598			6,368
Net recoveries (charge-offs)		1,883			(87,221	)
Provision		(162,000	)		339,000
Ending balance	$	273,635		$	433,752

The following table presents allowance for credit losses information as of and for the dates and periods indicated:

	December 31,			September 30,			Increase
Allowance for Credit Losses		2021			2021		(Decrease)
	*(Dollars in thousands)*
Allowance for loan and lease losses	$	200,564		$	203,733		$	(3,169	)
Reserve for unfunded loan commitments		73,071			76,071			(3,000	)
Allowance for credit losses	$	273,635		$	279,804		$	(6,169	)

Provision for credit losses (for the quarter)	$	(6,000	)	$	(20,000	)	$	14,000
Net charge-offs (recoveries) (for the quarter)	$	169		$	367		$	(198	)
Net charge-offs (recoveries) to average loans and leases (for the quarter)		0.00	%		0.01	%
Allowance for loan and lease losses to loans and leases held for investment		0.87	%		0.99	%
Allowance for loan and lease losses to loans and leases held for investment, excluding PPP loans		0.88	%		1.01	%
Allowance for credit losses to loans and leases held for investment		1.19	%		1.36	%
Allowance for credit losses to loans and leases held for investment, excluding PPP loans		1.20	%		1.38	%

The allowance for credit losses decreased by $6.2 million in the fourth quarter of 2021 to $273.6 million at December 31, 2021. The decrease in the allowance for credit losses during the fourth quarter of 2021 was attributable to a provision for credit losses benefit of $6.0 million and $0.2 million in net charge-offs. The allowance for credit losses ratio, excluding PPP loans, of 1.20% remains robust and moderately higher than the pre-pandemic level of 0.97% as of the January 1, 2020 CECL adoption date.

Net charge-offs were $0.2 million for the fourth quarter of 2021 as gross charge-offs of $4.4 million were reduced by recoveries of $4.2 million.

Net charge-offs were $0.4 million for the third quarter of 2021 as gross charge-offs of $1.5 million were reduced by recoveries of $1.1 million.

On a year-to-date basis for the year ended December 31, 2021, net recoveries were $1.9 million as gross charge-offs of $10.7 million were reduced by recoveries of $12.6 million.

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		2021			2021		(Decrease)
	*(Dollars in thousands)*
NPAs and Performing TDRs:
Nonaccrual loans and leases held for investment (1)	$	61,174		$	64,507		$	(3,333	)
Accruing loans contractually past due 90 days or more		-			-			-
Foreclosed assets, net		12,843			13,364			(521	)
Total nonperforming assets ("NPAs")	$	74,017		$	77,871		$	(3,854	)

Performing TDRs held for investment	$	24,430		$	36,750		$	(12,320	)

Nonaccrual loans and leases held for investment to loans and leases held for investment		0.27	%		0.31	%
Nonperforming assets to loans and leases held for investment and foreclosed assets		0.32	%		0.38	%
Allowance for credit losses to nonaccrual loans and leases held for investment		447.3	%		433.8	%

Loan and Lease Credit Risk Ratings:
Pass	$	22,433,833		$	19,873,050		$	2,560,783
Special mention		391,611			496,366			(104,755	)
Classified		116,104			141,604			(25,500	)
Total loans and leases held for investment, net of deferred fees	$	22,941,548		$	20,511,020		$	2,430,528

Classified loans and leases held for investment to loans and leases held for investment		0.51	%		0.69	%

(1) Nonaccrual loans include SBA guaranteed amounts of $22.1 million at December 31, 2021 and $20.1 million at September 30, 2021.

Since downgrading certain loans at the onset of the pandemic in the first quarter of 2020 given all the uncertainty at the time, special mention loans and leases have decreased by $507.0 million or 56% from their peak in the first quarter of 2020, while classified loans and leases have decreased by $177.1 million or 60% from their peak in the second quarter of 2020, and each have significantly declined in the fourth quarter of 2021. Classified loans and leases are now below pre-pandemic levels while special mention loans and leases are also approaching pre-pandemic levels. Nonaccrual loans and leases decreased by $3.3 million to $61.2 million in the fourth quarter of 2021 due primarily to a decrease in nonaccrual short-term, single-family residential renovation loans as a result of payoffs during the quarter.

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:

	December 31, 2021				September 30, 2021				Increase (Decrease)
			Accruing				Accruing					Accruing
			and 30-89				and 30-89					and 30-89
			Days Past				Days Past					Days Past
	Nonaccrual		Due		Nonaccrual		Due		Nonaccrual			Due
	*(Dollars in thousands)*
Real estate mortgage:
Commercial	$	27,540	$	2,165	$	25,615	$	676	$	1,925		$	1,489
Income producing and other residential		12,292		39,929		7,547		3,760		4,745			36,169
Total real estate mortgage		39,832		42,094		33,162		4,436		6,670			37,658
Real estate construction and land:
Commercial		-		-		-		-		-			-
Residential		4,715		5,031		19,918		12,809		(15,203	)		(7,778	)
Total real estate construction and land		4,715		5,031		19,918		12,809		(15,203	)		(7,778	)
Commercial:
Asset-based		1,464		-		1,605		-		(141	)		-
Venture capital		2,799		-		2,348		1,670		451			(1,670	)
Other commercial		11,950		630		6,979		340		4,971			290
Total commercial		16,213		630		10,932		2,010		5,281			(1,380	)
Consumer		414		1,004		495		1,042		(81	)		(38	)
Total held for investment	$	61,174	$	48,759	$	64,507	$	20,297	$	(3,333	)	$	28,462

The increase in accruing and 30-89 days past due loans is primarily due to $19.3 million in past due purchased single-family loans. As of January 14, 2022, $5.9 million of these loans remained over 30 days past due. The delinquency related to these loans was attributable to delayed payment application stemming from servicing being transferred following our purchase of the loans. The increase in this category was also due to an increase of $9.1 million in single-family residential loans originated by Civic.

CAPITAL

The following table presents certain actual capital ratios and ratios excluding PPP loans:

	December 31, 2021
				Excluding				September 30,
				PPP					2021
	Actual (1)			Loans (1)				Actual
PacWest Bancorp Consolidated:
Tier 1 leverage capital ratio		6.84	%		6.88	%	(3)		8.05	%
Common equity tier 1 capital ratio		8.86	%		8.86	%			10.15	%
Tier 1 capital ratio		9.32	%		9.32	%			10.65	%
Total capital ratio		12.69	%		12.69	%			14.36	%
Risk-weighted assets	$	28,508,808		$	28,508,808			$	26,057,583
Tangible common equity ratio (2)		6.54	%		6.56	%	(3)		7.79	%

(1) Capital information for December 31, 2021 is preliminary.
(2) Non-GAAP measure.
(3) PPP loans have been excluded from total assets in the denominator as they are zero risk-weighted.

The decreases in the capital ratios during the fourth quarter of 2021 were due primarily to the increase in goodwill related to the HOA acquisition combined with an increase in risk-weighted assets as we deployed $3.8 billion of excess liquidity into securities and loans and leases during the quarter.

ABOUT PACWEST BANCORP

PacWest Bancorp ("PacWest") is a bank holding company with over $40 billion in assets headquartered in Los Angeles, California, with an executive office in Denver, Colorado, with one wholly-owned banking subsidiary, Pacific Western Bank (the "Bank"). The Bank has 69 full-service branches located in California, one branch located in Durham, North Carolina, and one branch located in Denver, Colorado. The Bank provides community banking products including 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. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank provides venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovative hubs across the United States. The Bank also offers financing of non-owner-occupied investor properties through Civic Financial Services a wholly-owned subsidiary. The Bank also offers a specialized suite of services for the HOA industry. 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. Statements that are not historical or current facts, including statements about future financial and operational results, expectations, or intentions are forward-looking statements. Such statements are based on information available at the time of the 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. The ongoing COVID-19 pandemic has adversely affected PacWest, its employees, customers and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity and prospects is uncertain. The risks from the COVID-19 pandemic have decreased as the pandemic subsides, however, new variants may continue to impact key macro-economic indicators such as unemployment and GDP and may have a material impact on our allowance for credit losses and related provision for credit losses. Continued deterioration in general business and economic conditions could adversely affect PacWest's revenues and the values of its assets, including goodwill, and liabilities, lead to a tightening of credit, and increase stock price volatility. In addition, PacWest's results could be adversely affected by changes in interest rates, sustained high unemployment rates, deterioration in the credit quality of its loan portfolio or in the value of the collateral securing those loans, deterioration in the value of its investment securities, the magnitude of individual loan losses on security monitoring loans, and legal and regulatory developments. Actual results may differ materially from those set forth or implied in the forward-looking statements due to a variety of factors, including the risk factors described in documents filed by PacWest with the U.S. 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,
		2021			2021			2020
	*(Dollars in thousands, except per share data)*
ASSETS:
Cash and due from banks	$	112,548		$	174,585		$	150,464
Interest-earning deposits in financial institutions		3,944,686			3,524,613			3,010,197
Total cash and cash equivalents		4,057,234			3,699,198			3,160,661

Securities available-for-sale, at estimated fair value		10,694,458			9,276,926			5,235,591
Federal Home Loan Bank stock, at cost		17,250			17,250			17,250
Total investment securities		10,711,708			9,294,176			5,252,841

Loans held for sale		-			-			-

Gross loans and leases held for investment		23,026,308			20,588,255			19,153,357
Deferred fees, net		(84,760	)		(77,235	)		(69,980	)
Total loans and leases held for investment, net of deferred fees		22,941,548			20,511,020			19,083,377
Allowance for loan and lease losses		(200,564	)		(203,733	)		(348,181	)
Total loans and leases held for investment, net		22,740,984			20,307,287			18,735,196

Equipment leased to others under operating leases		339,150			334,275			333,846
Premises and equipment, net		46,740			47,246			39,234
Foreclosed assets, net		12,843			13,364			14,027
Goodwill		1,405,736			1,204,118			1,078,670
Core deposit and customer relationship intangibles, net		44,957			15,533			23,641
Other assets		1,083,992			970,479			860,326
Total assets	$	40,443,344		$	35,885,676		$	29,498,442

LIABILITIES:
Noninterest-bearing deposits	$	14,543,133		$	12,881,806		$	9,193,827
Interest-bearing deposits		20,454,624			17,677,939			15,746,890
Total deposits		34,997,757			30,559,745			24,940,717
Borrowings		-			-			5,000
Subordinated debt		863,283			862,447			465,812
Accrued interest payable and other liabilities		582,674			545,050			491,962
Total liabilities		36,443,714			31,967,242			25,903,491
STOCKHOLDERS' EQUITY (1)		3,999,630			3,918,434			3,594,951
Total liabilities and stockholders' equity	$	40,443,344		$	35,885,676		$	29,498,442

Book value per share	$	33.45		$	32.77		$	30.36
Tangible book value per share (2)	$	21.31		$	22.57		$	21.05
Shares outstanding		119,584,854			119,579,566			118,414,853

(1) Includes net unrealized gain on securities available-for-sale, net	$	65,968		$	98,859		$	172,523
(2) Non-GAAP measure.

PACWEST BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (LOSS)

	Three Months Ended									Year Ended
	December 31,			September 30,			December 31,			December 31,
		2021			2021			2020			2021			2020
	*(Dollars in thousands, except per share data)*
Interest income:
Loans and leases	$	263,662		$	246,722		$	242,198		$	996,457		$	993,138
Investment securities		48,469			40,780			28,843			153,468			106,770
Deposits in financial institutions		2,674			2,580			1,135			8,804			3,583
Total interest income		314,805			290,082			272,176			1,158,729			1,103,491

Interest expense:
Deposits		6,622			6,417			8,454			27,808			59,663
Borrowings		64			101			37			623			8,161
Subordinated debt		7,714			7,722			4,477			26,474			21,109
Total interest expense		14,400			14,240			12,968			54,905			88,933

Net interest income		300,405			275,842			259,208			1,103,824			1,014,558
Provision for credit losses		(6,000	)		(20,000	)		10,000			(162,000	)		339,000
Net interest income after provision for credit losses		306,405			295,842			249,208			1,265,824			675,558

Noninterest income:
Service charges on deposit accounts		3,476			3,407			3,119			13,269			10,351
Other commissions and fees		10,633			11,792			9,974			42,287			40,347
Leased equipment income		12,602			10,943			9,440			45,746			43,628
Gain on sale of loans and leases		172			-			1,671			1,733			2,139
Gain on sale of securities		999			515			4			1,615			13,171
Other income		29,500			24,688			15,642			89,277			36,424
Total noninterest income		57,382			51,345			39,850			193,927			146,060

Noninterest expense:
Compensation		99,700			98,061			73,171			368,450			271,494
Occupancy		14,656			14,928			14,083			58,422			57,555
Data processing		8,171			7,391			6,718			30,277			26,779
Other professional services		5,946			5,164			6,800			21,492			19,917
Insurance and assessments		5,032			3,685			5,064			17,365			22,625
Intangible asset amortization		3,876			2,890			3,172			12,734			14,753
Leased equipment depreciation		9,569			8,603			7,501			35,755			28,865
Foreclosed assets (income) expense, net		(260	)		165			(272	)		(213	)		(17	)
Acquisition, integration and reorganization costs		5,590			200			1,060			9,415			1,060
Customer related expense		6,175			4,538			4,430			20,504			17,532
Loan expense		5,627			4,180			3,926			17,031			13,454
Goodwill impairment		-			-			-			-			1,470,000
Other expense		12,028			9,616			10,029			46,185			40,002
Total noninterest expense		176,110			159,421			135,682			637,417			1,984,019

Earnings (loss) before income taxes		187,677			187,766			153,376			822,334			(1,162,401	)
Income tax expense		51,632			47,770			36,546			215,375			75,173
Net earnings (loss)	$	136,045		$	139,996		$	116,830		$	606,959		$	(1,237,574	)

Basic and diluted earnings (loss) per share	$	1.14		$	1.17		$	0.99		$	5.10		$	(10.61	)
Dividends declared and paid per share	$	0.25		$	0.25		$	0.25		$	1.00		$	1.35

PACWEST BANCORP AND SUBSIDIARIES
NET EARNINGS (LOSS) PER SHARE CALCULATIONS

	Three Months Ended
	December 31,			September 30,			December 31,			December 31,
		2021			2021			2020			2021			2020
	*(In thousands, except per share data)*
Basic Earnings (Loss) Per Share:
Net earnings (loss)	$	136,045		$	139,996		$	116,830		$	606,959		$	(1,237,574	)
Less: earnings allocated to unvested restricted stock (1)		(2,311	)		(2,417	)		(1,398	)		(10,248	)		(1,782	)
Net earnings (loss) allocated to common shares	$	133,734		$	137,579		$	115,432		$	596,711		$	(1,239,356	)

Weighted average basic shares and unvested restricted stock outstanding		119,577			119,569			118,446			119,349			118,463
Less: weighted average unvested restricted stock outstanding		(2,314	)		(2,340	)		(1,652	)		(2,255	)		(1,610	)
Weighted average basic shares outstanding		117,263			117,229			116,794			117,094			116,853

Basic earnings (loss) per share	$	1.14		$	1.17		$	0.99		$	5.10		$	(10.61	)

Diluted Earnings (Loss) Per Share:
Net earnings (loss) allocated to common shares	$	133,734		$	137,579		$	115,432		$	596,711		$	(1,239,356	)

Weighted average diluted shares outstanding		117,263			117,229			116,794			117,094			116,853

Diluted earnings (loss) per share	$	1.14		$	1.17		$	0.99		$	5.10		$	(10.61	)

(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, 2021						September 30, 2021						December 31, 2020
			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)	$	21,367,665	$	265,549	4.93	%	$	19,670,671	$	248,485	5.01	%	$	18,769,214	$	243,188	5.15	%
Investment securities (3)		9,964,568		50,710	2.02	%		8,047,098		42,952	2.12	%		4,888,993		30,757	2.50	%
Deposits in financial institutions		5,961,104		2,674	0.18	%		5,657,768		2,580	0.18	%		3,576,335		1,135	0.13	%
Total interest-earning assets (1)		37,293,337		318,933	3.39	%		33,375,537		294,017	3.50	%		27,234,542		275,080	4.02	%
Other assets		3,064,810						2,496,127						2,100,247
Total assets	$	40,358,147					$	35,871,664					$	29,334,789

Liabilities and Stockholders' Equity:
Interest checking	$	7,767,211		2,041	0.10	%	$	7,372,859		2,042	0.11	%	$	5,191,435		2,064	0.16	%
Money market		10,226,366		3,400	0.13	%		8,662,449		2,997	0.14	%		7,636,220		3,225	0.17	%
Savings		634,874		39	0.02	%		620,079		38	0.02	%		567,646		35	0.02	%
Time		1,421,859		1,142	0.32	%		1,475,307		1,340	0.36	%		1,650,150		3,130	0.75	%
Total interest-bearing deposits		20,050,310		6,622	0.13	%		18,130,694		6,417	0.14	%		15,045,451		8,454	0.22	%
Borrowings		234,391		64	0.11	%		238,335		101	0.17	%		237,098		37	0.06	%
Subordinated debt		862,777		7,714	3.55	%		862,272		7,722	3.55	%		463,951		4,477	3.84	%
Total interest-bearing liabilities		21,147,478		14,400	0.27	%		19,231,301		14,240	0.29	%		15,746,500		12,968	0.33	%
Noninterest-bearing demand deposits		14,713,385						12,198,313						9,589,789
Other liabilities		543,017						525,429						462,075
Total liabilities		36,403,880						31,955,043						25,798,364
Stockholders' equity		3,954,267						3,916,621						3,536,425
Total liabilities and stockholders' equity	$	40,358,147					$	35,871,664					$	29,334,789
Net interest income (1)			$	304,533					$	279,777					$	262,112
Net interest spread (1)					3.12	%					3.21	%					3.69	%
Net interest margin (1)					3.24	%					3.33	%					3.83	%

Total deposits (4)	$	34,763,695	$	6,622	0.08	%	$	30,329,007	$	6,417	0.08	%	$	24,635,240	$	8,454	0.14	%

(1) Tax equivalent.
(2) Includes net loan premium amortization of $6.4 million and $2.4 million and net loan discount accretion of $1.2 for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively.
(3) Includes tax-equivalent adjustments of $2.2 million, $2.2 million, and $1.9 million for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020 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,
		2021			2021			2021			2021			2020
	*(Dollars in thousands, except per share data)*
ASSETS:
Cash and due from banks	$	112,548		$	174,585		$	179,505		$	177,199		$	150,464
Interest-earning deposits in financial institutions		3,944,686			3,524,613			5,678,587			5,517,667			3,010,197
Total cash and cash equivalents		4,057,234			3,699,198			5,858,092			5,694,866			3,160,661

Securities available-for-sale		10,694,458			9,276,926			7,198,608			5,941,690			5,235,591
Federal Home Loan Bank stock		17,250			17,250			17,250			17,250			17,250
Total investment securities		10,711,708			9,294,176			7,215,858			5,958,940			5,252,841

Loans held for sale		-			-			-			25,554			-

Gross loans and leases held for investment		23,026,308			20,588,255			19,580,731			19,055,165			19,153,357
Deferred fees, net		(84,760	)		(77,235	)		(74,474	)		(75,937	)		(69,980	)
Total loans and leases held for investment, net of deferred fees		22,941,548			20,511,020			19,506,257			18,979,228			19,083,377
Allowance for loan and lease losses		(200,564	)		(203,733	)		(225,600	)		(292,445	)		(348,181	)
Total loans and leases held for investment, net		22,740,984			20,307,287			19,280,657			18,686,783			18,735,196

Equipment leased to others under operating leases		339,150			334,275			313,574			327,413			333,846
Premises and equipment, net		46,740			47,246			39,541			39,622			39,234
Foreclosed assets, net		12,843			13,364			13,227			14,298			14,027
Goodwill		1,405,736			1,204,118			1,204,118			1,204,092			1,078,670
Core deposit and customer relationship intangibles, net		44,957			15,533			18,423			21,312			23,641
Other assets		1,083,992			970,479			924,497			883,653			860,326
Total assets	$	40,443,344		$	35,885,676		$	34,867,987		$	32,856,533		$	29,498,442

LIABILITIES:
Noninterest-bearing deposits	$	14,543,133		$	12,881,806		$	11,252,286		$	11,017,462		$	9,193,827
Interest-bearing deposits		20,454,624			17,677,939			18,394,748			17,205,829			15,746,890
Total deposits		34,997,757			30,559,745			29,647,034			28,223,291			24,940,717
Borrowings		-			-			6,625			19,750			5,000
Subordinated debt		863,283			862,447			861,788			465,814			465,812
Accrued interest payable and other liabilities		582,674			545,050			505,859			493,541			491,962
Total liabilities		36,443,714			31,967,242			31,021,306			29,202,396			25,903,491
STOCKHOLDERS' EQUITY (1)		3,999,630			3,918,434			3,846,681			3,654,137			3,594,951
Total liabilities and stockholders' equity	$	40,443,344		$	35,885,676		$	34,867,987		$	32,856,533		$	29,498,442

Book value per share	$	33.45		$	32.77		$	32.17		$	30.68		$	30.36
Tangible book value per share (2)	$	21.31		$	22.57		$	21.95		$	20.39		$	21.05
Shares outstanding		119,584,854			119,579,566			119,555,102			119,105,642			118,414,853

(1) Includes net unrealized gain on securities available-for-sale, net	$	65,968		$	98,859		$	145,516		$	106,381		$	172,523
(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,
		2021			2021			2021			2021			2020
	*(Dollars in thousands, except per share data)*
Interest income:
Loans and leases	$	263,662		$	246,722		$	244,529		$	241,544		$	242,198
Investment securities		48,469			40,780			33,954			30,265			28,843
Deposits in financial institutions		2,674			2,580			2,022			1,528			1,135
Total interest income		314,805			290,082			280,505			273,337			272,176

Interest expense:
Deposits		6,622			6,417			7,269			7,500			8,454
Borrowings		64			101			265			193			37
Subordinated debt		7,714			7,722			6,663			4,375			4,477
Total interest expense		14,400			14,240			14,197			12,068			12,968

Net interest income		300,405			275,842			266,308			261,269			259,208
Provision for credit losses		(6,000	)		(20,000	)		(88,000	)		(48,000	)		10,000
Net interest income after provision for credit losses		306,405			295,842			354,308			309,269			249,208

Noninterest income:
Service charges on deposit accounts		3,476			3,407			3,452			2,934			3,119
Other commissions and fees		10,633			11,792			10,704			9,158			9,974
Leased equipment income		12,602			10,943			10,847			11,354			9,440
Gain on sale of loans and leases		172			-			1,422			139			1,671
Gain on sale of securities		999			515			-			101			4
Other income		29,500			24,688			13,946			21,143			15,642
Total noninterest income		57,382			51,345			40,371			44,829			39,850

Noninterest expense:
Compensation		99,700			98,061			90,807			79,882			73,171
Occupancy		14,656			14,928			14,784			14,054			14,083
Data processing		8,171			7,391			7,758			6,957			6,718
Other professional services		5,946			5,164			5,256			5,126			6,800
Insurance and assessments		5,032			3,685			3,745			4,903			5,064
Intangible asset amortization		3,876			2,890			2,889			3,079			3,172
Leased equipment depreciation		9,569			8,603			8,614			8,969			7,501
Foreclosed assets (income) expense, net		(260	)		165			(119	)		1			(272	)
Acquisition, integration and reorganization costs		5,590			200			200			3,425			1,060
Customer related expense		6,175			4,538			4,973			4,818			4,430
Loan expense		5,627			4,180			4,031			3,193			3,926
Other expense		12,028			9,616			8,812			15,729

PacWest Bancorp Announces Results for the Fourth Quarter and Full Year 2021