BUSINESS SEGMENTS

12 Months Ended

Dec. 31, 2012

BUSINESS SEGMENTS

BUSINESS SEGMENTS

NOTE 20—BUSINESS SEGMENTS

        The Company's reportable segments consist of "Banking," "Asset Financing," and "Other." At December 31, 2012, the Other segment consisted 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 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 interest expense is allocated to the Asset Financing segment based upon the Bank's total cost of interest-bearing liabilities. The provision for credit losses is allocated based on actual charge-offs for the period as well as assigning a minimum reserve requirement to the Asset Financing segment. Noninterest income and noninterest expense directly attributable to a segment are assigned to it.

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

	December 31, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Non-covered loans and leases, net of unearned income	$	2,631,838		$	415,132		$	—		$	3,046,970
Allowance for loan and lease losses		(61,469	)		(4,430	)		—			(65,899	)
Non-covered loans and leases, net		2,570,369			410,702			—			2,981,071
Covered loans, net		517,258			—			—			517,258
Total loans and leases, net	$	3,087,627		$	410,702		$	—		$	3,498,329
Goodwill and other intangibles(1)	$	66,339		$	28,250		$	—		$	94,589
Total assets		4,991,927			451,557			20,174			5,463,658
Total deposits(2)		4,737,593			—			(28,472	)		4,709,121

⁽¹⁾

Other intangibles include only core deposit and customer relationship intangibles. Non-compete agreements, tradenames, and favorable lease rights intangibles of $2.2 million are included in other assets on the consolidated balance sheets.

⁽²⁾

The negative balance in the "Other" segment represents the elimination of holding company cash held at the Bank.

	December 31, 2011
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Non-covered loans, net of unearned income	$	2,658,477		$	149,236		$	—		$	2,807,713
Allowance for loan losses		(82,628	)		(2,685	)		—			(85,313	)
Non-covered loans, net		2,575,849			146,551			—			2,722,400
Covered loans, net		703,023			—			—			703,023
Total loans, net	$	3,278,872		$	146,551		$	—		$	3,425,423
Goodwill and other intangibles(1)	$	56,556		$	—		$	—		$	56,556
Total assets		5,359,794			152,231			16,212			5,528,237
Total deposits(2)		4,613,353			—			(35,900	)		4,577,453

⁽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.

⁽²⁾

The negative balance in the "Other" segment represents the elimination of holding company cash held at the Bank.

	Year Ended Ended December 31, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	251,720		$	44,395		$	—		$	296,115
Intersegment interest expense		2,055			(2,055	)		—			—
Other interest expense		(15,043	)		(884	)		(3,721	)		(19,648	)
Net interest income		238,732			41,456			(3,721	)		276,467
Negative provision (provision) for credit losses		14,585			(1,766	)		—			12,819
Noninterest income		11,741			4,017			114			15,872
Intangible asset amortization		(5,898	)		(428	)		—			(6,326	)
Debt termination expense		(24,195	)		—			1,597			(22,598	)
Other noninterest expense		(153,660	)		(23,502	)		(5,576	)		(182,738	)
Total noninterest expense		(183,753	)		(23,930	)		(3,979	)		(211,662	)
Earnings (loss) before income taxes		81,305			19,777			(7,586	)		93,496
Income taxes		(31,542	)		(8,327	)		3,174			(36,695	)
Net earnings (loss)	$	49,763		$	11,450		$	(4,412	)	$	56,801

	Year Ended Ended December 31, 2011
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	276,734		$	18,550		$	—		$	295,284
Intersegment interest expense		1,226			(1,226	)		—			—
Other interest expense		(27,720	)		—			(4,923	)		(32,643	)
Net interest income		250,240			17,324			(4,923	)		262,641
Provision for credit losses		(26,520	)		(50	)		—			(26,570	)
Noninterest income		30,609			660			157			31,426
Intangible asset amortization		(8,264	)		(164	)		—			(8,428	)
Other noninterest expense		(152,464	)		(10,846	)		(8,255	)		(171,565	)
Total noninterest expense		(160,728	)		(11,010	)		(8,255	)		(179,993	)
Earnings (loss) before income taxes		93,601			6,924			(13,021	)		87,504
Income taxes		(39,554	)		(2,917	)		5,671			(36,800	)
Net earnings (loss)	$	54,047		$	4,007		$	(7,350	)	$	50,704

	Year Ended Ended December 31, 2010
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	272,411		$	17,873		$	—		$	290,284
Intersegment interest expense		1,284			(1,284	)		—			—
Other interest expense		(35,363	)		—			(5,594	)		(40,957	)
Net interest income		238,332			16,589			(5,594	)		249,327
Provision for credit losses		(211,922	)		(570	)		—			(212,492	)
Noninterest income		42,522			542			174			43,238
Intangible asset amortization		(9,264	)		(378	)		—			(9,642	)
Debt termination expense		(2,660	)		—			—			(2,660	)
Other noninterest expense		(155,997	)		(10,839	)		(9,665	)		(176,501	)
Total noninterest expense		(167,921	)		(11,217	)		(9,665	)		(188,803	)
Earnings (loss) before income taxes		(98,989	)		5,344			(15,085	)		(108,730	)
Income taxes		42,621			(2,263	)		6,356			46,714
Net earnings (loss)	$	(56,368	)	$	3,081		$	(8,729	)	$	(62,016	)