PacWest Bancorp announced results for the third quarter of 2021.
Article continues below
Net interest income increased by $9.5 million to $275.8 million for the third quarter of 2021 compared to $266.3 million for the second quarter of 2021.
Income on investment securities increased by $6.8 million in the third quarter of 2021 due to a $1.6 billion increase in the average balance of investment securities, partially offset by an 11 basis point decrease in the yield on average investment securities.
Income on loans and leases increased $2.2 million in the third quarter of 2021 due to a $613.3 million increase in the average balance of loans and leases, partially offset by a 17 basis point decrease in the yield on average loans and leases.
The tax equivalent yield on average loans and leases was 5.01% for the third quarter of 2021 compared to 5.18% for the second quarter of 2021. The decrease in the tax equivalent yield on average loans and leases was due primarily to lower nonaccrual interest recapture of $2.6 million, lower loan prepayment fees of $1.7 million, and higher loan premium amortization of $0.8 million.
The tax equivalent NIM was 3.33% for the third quarter of 2021 compared to 3.40% for the second quarter of 2021.
The decrease in the NIM was due primarily to the change in the earning assets mix driven by the increase in the investment portfolio as a percentage of earning assets.
The average balance of investment securities increased by $1.6 billion to $8.0 billion, the average balance of deposits in financial institutions decreased by $690.0 million to $5.7 billion, and the average balance of loans and leases increased by $613.3 million in the third quarter of 2021.
The increase in average balances of investment securities and loans and leases was the result of prudently deploying some of our excess liquidity ahead of the closing of the acquisition of the HOA Services Division of MUFG Union Bank that added approximately $4.1 billion of deposits on October 8th. Excess liquidity continues to negatively impact the tax equivalent NIM, however, we saw the impact decrease from approximately 73 basis points in the second quarter of 2021 to approximately 57 basis points in the third quarter of 2021.
The cost of average total deposits decreased to 0.08% in the third quarter of 2021 from 0.10% in the second quarter of 2021. ■