Pacwest Bancorp Is Well Positioned for the Economic Impacts from This Contagion

15MAR201803403775 Dear Fellow Stockholders: As we write this, we are living through unprecedented times related to COVID-19. We believe that PacWest Bancorp is well positioned for the economic impacts from this contagion. Over the past several years, we have updated you on our de-risking strategies focused on our lending portfolio. In 2017, we exited our cash flow lending business and sold approximately $1.5 billion of cash flow loans, as well as de-emphasized healthcare real estate lending. Since 2018 we have focused our Venture Bank on growing lower-risk capital call lending to venture capital funds. In 2019, we announced our exit from Security Monitoring lending, with $619 million of loans outstanding at year end 2019, due to growing technological disruption from the likes of Ring and Nest. Throughout we have shied away from the oil and gas industry, and specifically from exploration and production. And although we could not have anticipated the occurrences taking place in 2020, we are working diligently on our hotel loan portfolio, which represents just under 5% of our total loans, and our smaller portfolios in aviation and restaurants. At all times, we have been committed to shareholder value. To this end, we delivered robust results in 2019. We grew net earnings to $468.6 million, or $3.90 per diluted share versus $3.72 in 2018, and returned 20.66% on average tangible equity. Our de-risking strategy success is evidenced by our credit loss provisions and net charge-off metrics, which decreased year-on-year from 0.27% to 0.12% and from 0.26% to 0.09%, respectively, of average loans and leases. We are proud of our credit performance, especially while growing our loan book 5% to $18.8 billion in 2019 and achieving market leading net interest margins versus our KRX index peers. In terms of capital and liquidity, our regulatory capital far exceeds levels that designate a bank to be ‘‘well-capitalized’’. The Bank maintains access to significant sources of liquidity, including borrowing facilities with the Federal Home Loan Bank and Federal Reserve Bank. We regularly run stress tests for both capital and liquidity that are reviewed by our regulators during their routine examinations. Although the PacWest Bancorp Board of Directors recently authorized a new program to repurchase up to $200 million of our common stock, we have suspended buybacks until future notice due to COVID-19. For 2020, we remain focused on growing our relationship-focused, community banking model, where we offer business and real estate loans to local borrowers funded by low-cost, locally-obtained deposits. We are making great strides in Colorado, where we have established executive offices, loan production capabilities and a full-service branch office in Denver. We are also focusing on opportunities to further leverage our unique platform built through 29 acquisitions. Today, we service sophisticated clients that cover a broad geography and cross-section of our economy, including C&I businesses, alternative asset managers, real estate investors and developers, start-ups and more. We see opportunities to expand our breadth of engagement, as well as the stickiness of their core deposits, via enhanced products, features and functionalities. Ultimately, we are most proud of our close to 1,900 employees. During these moments of uncertainty, it is their hard work and passion that elevates us. Following the Financial Crisis of 2008-2010, we emerged as a larger and stronger bank by seizing attractive organic and inorganic growth opportunities in markets aligned with our business model and strategic plans. We fully expect the same outcome coming out of the COVID-19 pandemic. Although domestic and global markets face a period of economic and political uncertainty, the commitment and energy of our employees, the seasoned experience of our executive management and Board, and the continued trust and support of our stockholders allow us to remain confident in the continued success of PacWest Bancorp. We look forward to continuing this journey with you. Sincerely, 15MAR201803383364 12FEB201314060753 Matthew P. Wagner John M. Eggemeyer President & CEO, PacWest Bancorp & Pacific Chairman of the Board Western Bank UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ፤ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or អ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 Commission File No. 001-36408 PACWEST BANCORP (Exact name of registrant as specified in its charter) Delaware 33-0885320 (State of Incorporation) (I.R.S. Employer Identification No.) 9701 Wilshire Blvd., Suite 700 Beverly Hills, CA 90212 (Address of Principal Executive Offices, Including Zip Code) (310) 887-8500 (Registrant’s Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share PACW The Nasdaq Stock Market, LLC (Title of Each Class) (Trading Symbol) (Name of Exchange on Which Registered) Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Ye s No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Ye s No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Ye s No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Ye s No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company អ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Ye s No As of June 30, 2019, the aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to the average high and low sales prices on The Nasdaq Global Select Market as of the close of business on June 28, 2019, was approximately $4.5 billion. Registrant does not have any nonvoting common equities. As of February 14, 2020, there were 116,859,317 shares of registrant’s common stock outstanding, excluding 1,574,793 shares of unvested restricted stock. DOCUMENTS INCORPORATED BY REFERENCE The information required by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K will be found in the Company’s definitive proxy statement for its 2020 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and such information is incorporated herein by this reference. PACWEST BANCORP 2019 ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS PART I Forward-Looking Information ...................................... 3 Available Information ........................................... 4 Glossary of Acronyms, Abbreviations, and Terms ........................ 5 Item 1. Business ..................................................... 6 Item 1A. Risk Factors .................................................. 27 Item 1B. Unresolved Staff Comments ....................................... 40 Item 2. Properties .................................................... 40 Item 3. Legal Proceedings .............................................. 40 Item 4. Mine Safety Disclosure .......................................... 40 PART II ITEM 5. Market For Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities ............................... 41 ITEM 6. Selected Financial Data .......................................... 44 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .................................................. 46 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk ............... 89 ITEM 8. Financial Statements and Supplementary Data ......................... 93 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................................................. 179 ITEM 9A. Controls and Procedures ......................................... 179 ITEM 9B. Other Information .............................................. 179 PART III ITEM 10. Directors, Executive Officers and Corporate Governance .................. 180 ITEM 11. Executive

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