BUSINESS SEGMENTS

6 Months Ended

Jun. 30, 2012

BUSINESS SEGMENTS

BUSINESS SEGMENTS

NOTE 13—BUSINESS SEGMENTS

        PacWest Bancorp is a bank holding company with the principal business to serve as the holding company for our banking subsidiary, Pacific Western Bank. Pacific Western Bank is a full service commercial bank offering a broad range of banking products and services, including equipment leasing and asset-based commercial loans. At June 30, 2012 the Company's reportable segments consist of "Banking", "Asset Financing", and "Other". Other consists of the PacWest Bancorp holding company and other elimination and reconciliation entries.

        The Bank's asset-based lending products are offered primarily through 3 business units: (1) First Community Financial ("FCF"), a division of the Bank, based in Phoenix, Arizona; (2) BFI Business Finance ("BFI"), a wholly-owned subsidiary of the Bank, based in San Jose, California; and (3) Celtic Capital Corporation ("Celtic"), a wholly-owned subsidiary of the Bank acquired on April 3, 2012, based in Santa Monica, California. The Bank's leasing products are offered through Pacific Western Equipment Finance ("EQF"), a division of the Bank acquired on January 3, 2012, based in Midvale, Utah. The operations of these divisions and subsidiaries represent the Company's "Asset Financing" segment.

        With the acquisitions of EQF in January 2012 and Celtic in April 2012, we expanded our asset-based lending operations, both in terms of size and product diversification by adding equipment leasing, and determined that our asset financing operations met the threshold to be a reportable segment.

        All prior period balances have been reclassified to reflect the change in structure.

        The accounting policies of the reported segments are the same as those of the Company described in Note 1, "Nature of Operations and Summary of Significant Accounting Policies." Transactions between segments consist primarily of borrowed funds. Intersegment borrowing transactions that resulted in intersegment profits were eliminated for reporting consolidated results of operations. The Company allocated certain centrally provided services to the operating segments based upon estimated usage of those services.

        The following tables present information regarding our business segments as of and for the periods indicated:

	June 30, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Non-covered loans and leases, net of unearned income	$	2,461,803		$	382,488		$	—		$	2,844,291
Allowance for loan and lease losses		(69,296	)		(2,765	)		—			(72,061	)
Non-covered loans and leases, net		2,392,507			379,723			—			2,772,230
Covered loans, net		608,949			—			—			608,949
Total loans and leases, net	$	3,001,456		$	379,723		$	—		$	3,381,179
Goodwill and other intangibles(1)	$	53,245		$	25,706		$	—		$	78,951
Total assets	$	4,876,271		$	428,899		$	16,452		$	5,321,622
Total deposits	$	4,604,387		$	—		$	(13,058	)	$	4,591,329

⁽¹⁾

Other intangibles include only core deposit and customer relationship intangibles. Non-compete agreements, tradenames, and favorable lease rights intangibles are included in other assets on the consolidated balance sheets.

	June 30, 2011
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Non-covered loans and leases, net of unearned income	$	2,758,979		$	154,157		$	—		$	2,913,136
Allowance for loan and lease losses		(93,767	)		(2,660	)		—			(96,427	)
Non-covered loans and leases, net		2,665,212			151,497			—			2,816,709
Covered loans, net		805,952			—			—			805,952
Total loans and leases, net	$	3,471,164		$	151,497		$	—		$	3,622,661
Goodwill and other intangibles(1)	$	60,369		$	—		$	—		$	60,369
Total assets	$	5,218,978		$	159,310		$	16,437		$	5,394,725
Total deposits	$	4,506,739		$	—		$	(20,244	)	$	4,486,495

⁽¹⁾

Other intangibles include only core deposit and customer relationship intangibles. Tradenames and favorable lease rights intangibles are included in other assets on the consolidated balance sheets.

	Three Months Ended June 30, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	62,045		$	10,845		$	—		$	72,890
Intersegment interest expense		630			(630	)		—			—
Other interest expense		(3,404	)		(225	)		(848	)		(4,477	)
Net interest income		59,271			9,990			(848	)		68,413
Provision for credit losses		371			(100	)		—			271
Noninterest income		4,133			713			25			4,871
Intangible asset amortization		(1,603	)		(134	)		—			(1,737	)
Other noninterest expense(1)		(38,088	)		(6,444	)		(1,316	)		(45,848	)
Total noninterest expense		(39,691	)		(6,578	)		(1,316	)		(47,585	)
Earnings (loss) before income taxes		24,084			4,025			(2,139	)		25,970
Income taxes		(9,563	)		(1,750	)		900			(10,413	)
Net earnings (loss)	$	14,521		$	2,275		$	(1,239	)	$	15,557

⁽¹⁾

The Asset Financing segment includes $348,000 for amortization of non-compete agreements and tradenames.

	Three Months Ended June 30, 2011
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	72,603		$	4,593		$	—		$	77,196
Intersegment interest expense		317			(317	)		—			—
Other interest expense		(7,281	)		—			(1,226	)		(8,507	)
Net interest income		65,639			4,276			(1,226	)		68,689
Provision for credit losses		(11,340	)		(50	)		—			(11,390	)
Noninterest income		11,023			177			40			11,240
Intangible asset amortization		(2,226	)		(82	)		—			(2,308	)
Other noninterest expense(1)		(39,144	)		(2,872	)		(2,214	)		(44,230	)
Total noninterest expense		(41,370	)		(2,954	)		(2,214	)		(46,538	)
Earnings (loss) before income taxes		23,952			1,449			(3,400	)		22,001
Income taxes		(10,043	)		(618	)		1,501			(9,160	)
Net earnings (loss)	$	13,909		$	831		$	(1,899	)	$	12,841

⁽¹⁾

The Asset Financing segment includes $24,000 for amortization of non-compete agreements.

	Six Months Ended June 30, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	127,528		$	19,762		$	—		$	147,290
Intersegment interest expense		1,153			(1,153	)		—			—
Other interest expense		(8,715	)		(443	)		(2,039	)		(11,197	)
Net interest income		119,966			18,166			(2,039	)		136,093
Provision for credit losses		6,445			(100	)		—			6,345
Noninterest income		6,191			1,879			63			8,133
Intangible asset amortization		(3,311	)		(161	)		—			(3,472	)
Debt termination expense		(24,195	)		—			1,597			(22,598	)
Other noninterest expense(1)		(76,440	)		(11,256	)		(2,714	)		(90,410	)
Total noninterest expense		(103,946	)		(11,417	)		(1,117	)		(116,480	)
Earnings (loss) before income taxes		28,656			8,528			(3,093	)		34,091
Income taxes		(10,921	)		(3,650	)		1,301			(13,270	)
Net earnings (loss)	$	17,735		$	4,878		$	(1,792	)	$	20,821

⁽¹⁾

The Asset Financing segment includes $644,000 for amortization of non-compete agreements and tradenames.

	Six Months Ended June 30, 2011
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	142,863		$	8,990		$	—		$	151,853
Intersegment interest expense		609			(609	)		—			—
Other interest expense		(14,981	)		—			(2,445	)		(17,426	)
Net interest income		128,491			8,381			(2,445	)		134,427
Provision for credit losses		(22,050	)		(50	)		—			(22,100	)
Noninterest income		15,581			369			79			16,029
Intangible asset amortization		(4,451	)		(164	)		—			(4,615	)
Other noninterest expense(1)		(73,088	)		(5,664	)		(4,570	)		(83,322	)
Total noninterest expense		(77,539	)		(5,828	)		(4,570	)		(87,937	)
Earnings (loss) before income taxes		44,483			2,872			(6,936	)		40,419
Income taxes		(18,664	)		(1,226	)		2,988			(16,902	)
Net earnings (loss)	$	25,819		$	1,646		$	(3,948	)	$	23,517

⁽¹⁾

The Asset Financing segment includes $47,000 for amortization of non-compete agreements.