PacWest profit jumps 50% on improved credit quality, CRE growth

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Improvements in credit quality and growth in commercial real estate lending led to a higher first-quarter profit for PacWest Bancorp in Los Angeles.

The $24 billion-asset holding company for Pacific Western Bank reported net income of $118 million, a 50% increase from the same quarter a year earlier. Earnings per share of 93 cents were 13 cents higher than the mean estimate of analysts compiled by FactSet Research Systems.

“Our performance in the first quarter was highlighted by significant earnings growth, solid margin expansion, and notable decreases in nonaccrual and classified loans and leases,” CEO Matt Wagner said in a news release. “Our de-risking activities have resulted in lower credit costs, improved credit quality metrics and a reduced reliance on higher-cost deposits and borrowings.”

Net interest income after the loan-loss provision climbed 22% to $253 million. Total impaired loans and leases fell 23% to $164 million. Net charge-offs dropped to $5 million from $23 million.

Total loans held for investment rose 6% to $16.5 billion. Commercial real estate, the largest lending category at PacWest, jumped 14% to $5 billion.

Noninterest income jumped 10% to $39 million, largely due to gains on the sale of loans, leases and securities.

Noninterest expense increased 9% to $127 million, due to higher employee compensation and occupancy costs. PacWest’s federal income tax rate fell to 27.7% from 40.2% in the fourth quarter.

Total deposits rose 11% to $18 billion. Non-interest-bearing deposits, as a percentage of total deposits, increased four basis points to 46%. PacWest reduced its holdings of costlier time deposits, as that category fell 24% to $1.8 billion.

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