BUSINESS SEGMENTS

9 Months Ended

Sep. 30, 2012

BUSINESS SEGMENTS

BUSINESS SEGMENTS

NOTE 13—BUSINESS SEGMENTS

        The Company's reportable segments consist of "Banking", "Asset Financing", and "Other". At September 30, 2012, the Other segment consists of the PacWest Bancorp holding company and other elimination and reconciliation entries.

        The Bank's Asset Financing segment includes the operations of the divisions and subsidiaries that provide asset-based commercial loans and equipment leases. The asset-based lending products are offered primarily through three 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, a wholly-owned subsidiary of the Bank based in Santa Monica, California. The Bank's leasing products are offered through Pacific Western Equipment Finance ("EQF"), a division of the Bank based in Midvale, Utah.

        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 beginning with the second quarter of 2012.

        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:

	September 30, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Non-covered loans and leases, net of unearned income	$	2,661,471		$	389,420		$	—		$	3,050,891
Allowance for loan and lease losses		(65,174	)		(3,968	)		—			(69,142	)
Non-covered loans and leases, net		2,596,297			385,452			—			2,981,749
Covered loans, net		567,396			—			—			567,396
Total loans and leases, net	$	3,163,693		$	385,452		$	—		$	3,549,145
Goodwill and other intangibles(1)	$	67,898		$	27,593		$	—		$	95,491
Total assets	$	5,080,308		$	440,690		$	17,504		$	5,538,502
Total deposits	$	4,800,852		$	—		$	(13,504	)	$	4,787,348

⁽¹⁾

Other intangibles include only core deposit and customer relationship intangibles. Non-compete agreements, tradenames, and favorable lease rights intangibles of $2.6 million are included in other assets on the consolidated balance sheets.

	September 30, 2011
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Non-covered loans and leases, net of unearned income	$	2,737,037		$	156,600		$	—		$	2,893,637
Allowance for loan and lease losses		(87,431	)		(2,679	)		—			(90,110	)
Non-covered loans and leases, net		2,649,606			153,921			—			2,803,527
Covered loans, net		761,059			—			—			761,059
Total loans and leases, net	$	3,410,665		$	153,921		$	—		$	3,564,586
Goodwill and other intangibles(1)	$	58,392		$	—		$	—		$	58,392
Total assets	$	5,320,700		$	158,473		$	14,718		$	5,493,891
Total deposits	$	4,574,375		$	—		$	(19,979	)	$	4,554,396

⁽¹⁾

Other intangibles include only core deposit and customer relationship intangibles. Tradenames and favorable lease rights intangibles of $1.5 million are included in other assets on the consolidated balance sheets.

	Three Months Ended September 30, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	62,358		$	12,765		$	—		$	75,123
Intersegment interest expense		454			(454	)		—			—
Other interest expense		(3,287	)		(215	)		(850	)		(4,352	)
Net interest income		59,525			12,096			(850	)		70,771
Provision for credit losses		3,325			(1,184	)		—			2,141
Noninterest income		5,191			466			25			5,682
Intangible asset amortization		(1,544	)		(134	)		—			(1,678	)
Other noninterest expense		(42,877	)		(5,706	)		(1,396	)		(49,979	)
Total noninterest expense		(44,421	)		(5,840	)		(1,396	)		(51,657	)
Earnings (loss) before income taxes		23,620			5,538			(2,221	)		26,937
Income taxes		(9,491	)		(2,291	)		933			(10,849	)
Net earnings (loss)	$	14,129		$	3,247		$	(1,288	)	$	16,088

	Three Months Ended September 30, 2011
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	67,712		$	4,806		$	—		$	72,518
Intersegment interest expense		317			(317	)		—			—
Other interest expense		(6,854	)		—			(1,223	)		(8,077	)
Net interest income		61,175			4,489			(1,223	)		64,441
Provision for credit losses		(348	)		—			—			(348	)
Noninterest income		6,959			145			39			7,143
Intangible asset amortization		(1,977	)		—			—			(1,977	)
Other noninterest expense		(41,967	)		(2,562	)		(2,081	)		(46,610	)
Total noninterest expense		(43,944	)		(2,562	)		(2,081	)		(48,587	)
Earnings (loss) before income taxes		23,842			2,072			(3,265	)		22,649
Income taxes		(9,841	)		(876	)		1,372			(9,345	)
Net earnings (loss)	$	14,001		$	1,196		$	(1,893	)	$	13,304

	Nine Months Ended September 30, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	189,886		$	32,527		$	—		$	222,413
Intersegment interest expense		1,607			(1,607	)		—			—
Other interest expense		(12,002	)		(658	)		(2,889	)		(15,549	)
Net interest income		179,491			30,262			(2,889	)		206,864
Provision for credit losses		9,770			(1,284	)		—			8,486
Noninterest income		11,382			2,345			88			13,815
Intangible asset amortization		(4,855	)		(295	)		—			(5,150	)
Debt termination expense		(24,195	)		—			1,597			(22,598	)
Other noninterest expense		(119,317	)		(16,962	)		(4,110	)		(140,389	)
Total noninterest expense		(148,367	)		(17,257	)		(2,513	)		(168,137	)
Earnings (loss) before income taxes		52,276			14,066			(5,314	)		61,028
Income taxes		(20,412	)		(5,941	)		2,234			(24,119	)
Net earnings (loss)	$	31,864		$	8,125		$	(3,080	)	$	36,909

	Nine Months Ended September 30, 2011
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	210,575		$	13,796		$	—		$	224,371
Intersegment interest expense		926			(926	)		—			—
Other interest expense		(21,835	)		—			(3,668	)		(25,503	)
Net interest income		189,666			12,870			(3,668	)		198,868
Provision for credit losses		(22,398	)		(50	)		—			(22,448	)
Noninterest income		22,540			514			118			23,172
Intangible asset amortization		(6,428	)		(164	)		—			(6,592	)
Other noninterest expense		(115,055	)		(8,226	)		(6,651	)		(129,932	)
Total noninterest expense		(121,483	)		(8,390	)		(6,651	)		(136,524	)
Earnings (loss) before income taxes		68,325			4,944			(10,201	)		63,068
Income taxes		(28,505	)		(2,102	)		4,360			(26,247	)
Net earnings (loss)	$	39,820		$	2,842		$	(5,841	)	$	36,821