PacWest Sells Distressed Residential and Commercial Loans

PacWest Bancorp, San Diego, sold $323.6 million of problem loans to an unnamed institutional buyer for $200.6 million in cash. Included in the sale were $144 million of real estate construction loans, $117 million of commercial mortgages (consisting of loans secured by owner-occupied properties, retail properties and hotel properties), $25 million of multifamily mortgages and $30 million of single-family mortgages. PacWest said the total balance of the loans sold was as of Feb. 23; the balances given in the breakout by loan type was as of Dec. 31, 2009. None of the loans sold were "covered loans" obtained when PacWest acquired Affinity Bank, Ventura, Calif., in a Federal Deposit Insurance Corp. transaction last August. There were a total of 61 loans sold. Approximately $108 million was on nonaccural status. The expected after-tax loss related to the sale is expected to be $41 million. PacWest chief executive Matt Wagner said, "Removing almost $324 million of problem loans from our portfolio in a single transaction creates tremendous opportunity for the company. We remain cautious and vigilant with respect to credit, and our existing loan portfolio is subject to uncertainty and volatility given the fragile economic environment. Without these problem loans, however, and given the significant earnings power of our company, we believe PacWest is well-positioned to grow, both organically and through acquisition."