NOTE 3—ACQUISITIONS

We completed the following acquisitions during the time period of January 1, 2010 to December 31, 2012, using the acquisition method of accounting, and, accordingly, the operating results of the acquired entities have been included in our consolidated financial statements from their respective dates of acquisition.

	Acquisition and Date Acquired

	American Perspective Bank		Celtic Capital Corporation		Pacific Western Equipment Finance		Los Padres Bank
	August 2012		April 2012		January 2012		August 2010
	(In thousands)
Assets Acquired:
Cash and due from banks	$	3,370	$	3,435	$	7,092	$	26,615
Interest-earning deposits in financial institutions		10,081		—		—		751
Cash received from the FDIC		—		—		—		144,000
Investment securities available-for-sale		48,887		—		—		33,604
FHLB stock		1,412		—		—		10,647
Loans and leases:
Not covered by loss-sharing		197,279		54,963		140,959		828
Covered by loss-sharing		—		—		—		436,291
Other real estate owned:
Not covered by loss-sharing		1,561		—		—		—
Covered by loss-sharing		—		—		—		33,913
FDIC loss sharing asset		—		—		—		78,814
Goodwill		15,047		6,645		19,033		39,141
Core deposit and customer relationship intangibles		1,924		1,300		1,700		2,189
Other intangible assets		—		670		1,420		—
Leases in process		—		—		19,162		—
Other assets		4,234		69		467		17,290

Total assets acquired	$	283,795	$	67,082	$	189,833	$	824,083

Liabilities Assumed:
Noninterest-bearing deposits	$	40,673	$	—	$	—	$	33,722
Interest-bearing deposits		178,891		—		—		718,463
Borrowings from parent		—		—		128,677		—
Other borrowings		5,315		46,804		15,839		70,013
Accrued interest payable and other liabilities		840		2,278		10,317		1,885

Total liabilities assumed	$	225,719	$	49,082	$	154,833	$	824,083

Cash consideration paid	$	58,076	$	18,000	$	35,000

Deposit premium paid							$	3,393

American Perspective Bank Acquisition

On August 1, 2012, Pacific Western completed the acquisition of American Perspective Bank, or APB, previously headquartered in San Luis Obispo, California. Pacific Western acquired all of the outstanding common stock of APB for $58.1 million in cash and APB was merged with and into Pacific Western; we refer to this transaction as the APB acquisition. APB had two operating branches located in San Luis Obispo and Santa Maria, California, and a loan production office located in Paso Robles, California, which has since been converted to a full-service branch. The APB acquisition strengthens our presence in the Central Coast region. At the acquisition date, APB had $197.3 million in gross loans outstanding, $48.9 million in investment securities available-for-sale, and $219.6 million in deposits. The application of the acquisition method of accounting resulted in goodwill of $15.0 million.

Celtic Capital Corporation Acquisition

On April 3, 2012, Pacific Western completed the acquisition of Celtic Capital Corporation, or Celtic, an asset-based lending company based in Santa Monica, California. Pacific Western acquired all of the capital stock of Celtic for $18 million in cash and Celtic became a wholly-owned subsidiary of Pacific Western; we refer to this transaction as the Celtic acquisition. Celtic focuses on providing asset-based loans to borrowers across the United States for amounts generally up to $5 million. The Celtic acquisition diversified our loan portfolio, expanded our product lines, and deployed excess liquidity into higher yielding assets. At the acquisition date, Celtic had $55.0 million in gross loans outstanding and $46.8 million in outstanding debt, which was repaid on the closing date. The application of the acquisition method of accounting resulted in goodwill of $6.6 million.

Pacific Western Equipment Finance Acquisition

On January 3, 2012, Pacific Western completed the acquisition of Pacific Western Equipment Finance (formerly known as Marquette Equipment Finance, which we refer to as EQF), an equipment leasing company based in Midvale, Utah. Pacific Western acquired all of the capital stock of EQF for $35 million in cash and EQF became a division of Pacific Western; we refer to this transaction as the EQF acquisition. The EQF acquisition diversified our loan portfolio, expanded our product lines, and deployed excess liquidity into higher yielding assets. At the acquisition date, EQF had $160.1 million in gross leases and leases in process outstanding; no acquired leases were on nonaccrual status. Pacific Western also assumed $128.7 million of debt payable to EQF's former parent, which Pacific Western repaid on the closing date from its excess liquidity on deposit at the Federal Reserve Bank, and $26.2 million of other outstanding debt and liabilities. The application of the acquisition method of accounting resulted in goodwill of $19.0 million.

Federally Assisted Acquisition of Los Padres Bank

On August 20, 2010, Pacific Western acquired certain assets of Los Padres Bank, including all loans, and assumed substantially all of its liabilities, including all deposits, from the FDIC in an FDIC-assisted acquisition, which we refer to as the Los Padres acquisition. We entered into a loss sharing agreement with the FDIC, whereby the FDIC agreed to cover a substantial portion of any future losses on acquired OREO and acquired loans, with the exception of acquired consumer loans. We refer to the acquired assets subject to the loss sharing agreement collectively as "covered assets." Under the terms of such loss sharing agreement, the FDIC is obligated to reimburse the Bank for 80% of losses with respect to the covered assets. The Bank will reimburse the FDIC for 80% of recoveries with respect to losses for which the FDIC paid the Bank 80% reimbursement under the loss sharing agreement. The loss sharing provisions for commercial (non-single family) and single family covered assets are in effect for 5 years and 10 years, respectively, from the August 20, 2010 acquisition date, and the loss recovery provisions are in effect for 8 years and 10 years, respectively, from the acquisition date. Accordingly, the loss sharing provisions expire in the third quarters of 2015 and 2020 for non-single family and single family covered assets, respectively, while the related loss recovery provisions expire in the third quarters of 2018 and 2020, respectively. Through December 31, 2012, gross losses for Los Padres covered assets totaled $65.0 million.

Los Padres was a federally chartered savings bank headquartered in Solvang, California that operated 14 branches, including 11 branches in California (three in Ventura County, four in Santa Barbara County, and four in San Luis Obispo County) and three branches in Arizona (Maricopa County). We continue to operate six of the former Los Padres branch offices, all of which are located in California. We made this acquisition to expand our presence in the Central Coast of California.

The assets acquired and liabilities assumed of Los Padres were accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the August 20, 2010 acquisition date. The application of the acquisition method of accounting resulted in an original goodwill amount of $47.3 million. During 2011, we reduced goodwill by $8.2 million, to $39.1 million, due primarily to the resolution of a matter with the FDIC regarding the settlement accounting for a wholly-owned subsidiary of Los Padres.

Acquisition-Related Charges

All of the acquisitions consummated after December 31, 2000 were completed using the acquisition method of accounting. For those acquisitions completed prior to January 1, 2009, we recorded the estimated merger-related charges associated with each acquisition as a liability at closing when the related purchase price was allocated. For each acquisition, we developed an integration plan for the Company that addressed, among other things, requirements for staffing, systems platforms, branch locations and other facilities. The remaining merger-related liability totaled $1.4 million at December 31, 2012 and represented the estimated lease payments, net of estimated sublease income, for the remaining life of leases for abandoned space. For acquisitions completed after January 1, 2009, acquisition-related costs, such as legal, accounting, valuation and other professional fees, necessary to effect a business combination, were charged to earnings in the periods in which the costs were incurred. We incurred and charged to expense approximately $4.1 million, $600,000, and $732,000 of such costs in 2012, 2011, and 2010, respectively.

Announcement of First California Financial Group, Inc. Acquisition

On November 6, 2012, we announced that we had entered into a definitive agreement and plan of merger whereby we will acquire First California Financial Group, Inc. ("First California") for $8.00 per First California common share, or approximately $231 million in aggregate consideration, payable in PacWest common stock, which we refer to as the First California acquisition.

The number of shares of PacWest common stock deliverable for each share of First California common stock will be determined based on the weighted average price of PacWest common stock over a 20-day measuring period, as defined in the merger agreement, and will fluctuate if such average price is between $20.00 and $27.00 and will be fixed if such average price is below $20.00 or above $27.00. Based on PacWest's 20-day weighted average stock price measured through January 29, 2013 of $26.64, First California stockholders would have received 0.3003 of a share of PacWest common stock for each share of First California common stock, which would provide First California stockholders with aggregate ownership, on a pro forma basis, of approximately 19.3% of the common stock of the combined company.

First California, headquartered in Westlake Village, California, is the parent of First California Bank and had approximately $1.9 billion in assets and 15 branches across Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Luis Obispo and Ventura Counties at December 31, 2012. In connection with the acquisition, First California Bank will be merged into Pacific Western.

As of December 31, 2012, on a pro forma consolidated basis with First California, PacWest would have had approximately $7.4 billion in assets with 82 branches throughout California. The combined institution would be the eighth largest publicly-owned bank headquartered in California, and the twelfth largest commercial bank headquartered in California.

Under the terms of the merger agreement, two individuals currently serving on the board of directors of First California will be designated to join the board of directors of PacWest. Such directors must be independent and mutually agreeable to both PacWest and First California. Directors of PacWest and First California unanimously approved the transaction. The transaction, currently expected to close late in the first quarter of 2013, is subject to customary conditions, including the approval of bank regulatory authorities and the stockholders of both companies.