PacWest Bancorp reported higher quarterly profit, as loan growth and lower expenses offset credit issues in the Los Angeles company's energy portfolio.

The $16.6 billion-asset company's first-quarter net income rose 3% from a quarter earlier, to $73.1 million. Earnings per share of 61 cents were 7 cents below the average estimate of analysts polled by Bloomberg. Year-over-year comparisons were skewed by PacWest's April 2014 purchase of CapitalSource.

PacWest set aside $16.4 million to bolster its allowance for loan losses, compared to a combined $12 million in the prior three quarters. The company said in a press release Thursday that specific reserves tied to energy-related credit accounted for $6.5 million, or 40%, of the first-quarter provision. Energy-related credits also accounted for $5 million, or 68%, of the company's net chargeoffs in the quarter.

The company also disclosed that $69.3 million of energy-related loans — or 26% of that lending segment — were on nonaccrual status. Such loans account for six of PacWest's 45 energy-related loan relationships.

"The obligors under these loans and leases either conduct mining, oil and gas extraction or provide industrial support services to such types of businesses," the company said in its release. "The collateral for these loans and leases primarily includes equipment, such as drilling and mining equipment and transportation vehicles, used directly and indirectly in these activities."

Loan growth helped offset some of the credit issues.

Net interest income rose 2% from the fourth quarter, to $182 million. Total loans increased 3.3%, to $12.3 billion, and the net interest margin expanded by 3 basis points, to 5.89%.

Noninterest income rose 64%, to $20.9 million, though the results were aided by nearly $3.3 million in securities gains.

Noninterest expenses fell 7.6%, to $84.4 million, reflecting lower merger-related expenses. The company, however, is in the process of buying Square 1 Financial in Durham, N.C.

The $3.3 billion-asset Square 1 also reported earnings Thursday. Its net income fell 14.5% from the fourth quarter but rose 4.7% from a year earlier, to $8.2 million.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.