Profits at PacWest Bancorp dipped during the fourth quarter due to an uptick in costs tied to its latest acquisition, as well as a loss on the sale of a securities portfolio.
The Los Angeles company said Thursday that it earned $84 million, or 2% less than a year earlier. Earnings per share were 66 cents, falling 9 cents short of estimates of analysts polled by Bloomberg.
The company’s quarterly results were affected, in part, by its purchase of the $3.1 billion-asset CU Bancorp, which closed on Oct. 20.
Acquisition and integration expenses of $14.6 million were a drag on profits. Overall, noninterest costs spiked 20%, to $142.9 million, on the deal-related costs, as well as increases in compensation.
“Although the fourth quarter included several significant items, the benefits of the [CU Bancorp] acquisition for our future profitability were apparent in our fourth-quarter results,” Matt Wagner, PacWest’s president and CEO, said in a press release. He pointed, in particular, to increases in income from loans.
Net interest income climbed 6%, to $262.9 million. Total loans jumped 10%, to $16.9 billion, as growth in commercial and residential real estate offset the sale of $1.5 billion of cash-flow loans. The net interest margin slipped 50 basis points, to 4.97%, weighed down by lower-yielding loans and higher-cost deposits acquired from CU Bancorp.
Fee-based income fell 7%, to $26.8 million, primarily due to a loss incurred on the sale of securities. PacWest sold approximately $173 million in securities during the quarter, ahead of the reduction in the corporate tax rate that took effect on Jan. 1, the company said. It plans to reinvest the proceeds into higher-yielding securities.
The tax law, signed by President Trump in late December, permanently slashed the corporate rate to 21% from 35%.
Additionally, the $25 billion-asset company booked a $1.2 million accounting benefit related to the new tax law. That benefit, however, was offset by a larger tax provision tied to the sale of foreign loans, as well as an increase in nondeductible expenses related to the CU Bancorp deal.
