PacWest Bancorp (Nasdaq:PACW) of Los Angeles said Wednesday that its first-quarter earnings fell 50% from a year earlier, to $5.3 million, due to largely to costs related to prepaying $225 million of fixed-rate term Federal Home Loan Bank advances.
The $5.4 billion-asset parent of Pacific Western Bank said that the redemption of $18.6 million of fixed-rate trust preferred securities also ate into profits, but it noted that both actions would benefit PacWest in the long run.
Starting this quarter, annual after-tax interest cost savings should be $5.1 million and the debt prepayments should add roughly 25 basis points to its net interest margin, Vic Santoro, the company’s chief financial officer, said in a news release.
The company’s net interest margin rose seven basis points year over year and 41 basis points from the fourth quarter, to 5.41%, because of gains from its acquisition of an equipment leasing company, which it has since renamed Pacific Western Equipment Finance. PacWest also acquired Celtic Capital, an asset-based lender in Southern California, during the quarter, which should add 13 basis points to the net interest margin, Santoro said.
Net interest income totaled $67.7 million, up almost 3% year over year. Noninterest income fell 31%, to $3.3 million, as service charges on deposit accounts dropped almost 6%.
PacWest's shares were trading at $22.58 Wednesday afternoon, down 3.5% from Tuesday's close.
