BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2013

BUSINESS SEGMENTS

BUSINESS SEGMENTS

NOTE 14—BUSINESS SEGMENTS

        The Company's reportable segments consist of "Banking," "Asset Financing," and "Other." At March 31, 2013, 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 Capital Corporation ("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," of our Annual Report on Form 10-K for the year ended December 31, 2012. 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:

	March 31, 2013
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Non-covered loans and leases, net of unearned income	$	2,492,159		$	464,738		$	—		$	2,956,897
Allowance for loan and lease losses		(60,079	)		(5,137	)		—			(65,216	)
Non-covered loans and leases, net		2,432,080			459,601			—			2,891,681
Covered loans, net		483,063			—			—			483,063
Total loans and leases, net	$	2,915,143		$	459,601		$	—		$	3,374,744
Goodwill	$	53,995		$	25,678		$	—		$	79,673
Core deposit and customer relationship intangibles, net		11,159			2,388			—			13,547
Total assets		4,773,916			504,554			21,435			5,299,905
Total deposits(1)		4,580,514			—			(27,284	)		4,553,230

⁽¹⁾

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

	March 31, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Non-covered loans and leases, net of unearned income	$	2,563,893		$	301,390		$	—		$	2,865,283
Allowance for loan and lease losses		(72,062	)		(2,705	)		—			(74,767	)
Non-covered loans and leases, net		2,491,831			298,685			—			2,790,516
Covered loans, net		660,297			—			—			660,297
Total loans and leases, net	$	3,152,128		$	298,685		$	—		$	3,450,813
Goodwill	$	39,140		$	17,004		$	—		$	56,144
Core deposit and customer relationship intangibles, net		15,707			1,673			—			17,380
Total assets		5,087,364			342,743			18,001			5,448,108
Total deposits(1)		4,569,708			—			(13,038	)		4,556,670

⁽¹⁾

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

	Three Months Ended March 31, 2013
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	56,907		$	12,362		$	—		$	69,269
Intersegment interest income (expense)		471			(471	)		—			—
Other interest expense		(2,650	)		(143	)		(783	)		(3,576	)
Net interest income		54,728			11,748			(783	)		65,693
(Provision) negative provision for credit losses:
Non-covered loans and leases		801			(801	)		—			—
Covered loans		(3,137	)		—			—			(3,137	)
Total (provision) negative provision for credit losses		(2,336	)		(801	)		—			(3,137	)
Noninterest income		2,273			544			23			2,840
Intangible asset amortization		(993	)		(183	)		—			(1,176	)
Other noninterest expense		(35,538	)		(6,053	)		(1,416	)		(43,007	)
Total noninterest expense		(36,531	)		(6,236	)		(1,416	)		(44,183	)
Earnings (loss) before income taxes		18,134			5,255			(2,176	)		21,213
Income tax (expense) benefit		(6,430	)		(2,199	)		910			(7,719	)
Net earnings (loss)	$	11,704		$	3,056		$	(1,266	)	$	13,494

	Three Months Ended March 31, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	65,483		$	8,917		$	—		$	74,400
Intersegment interest income (expense)		523			(523	)		—			—
Other interest expense		(5,311	)		(218	)		(1,191	)		(6,720	)
Net interest income		60,695			8,176			(1,191	)		67,680
(Provision) negative provision for credit losses:
Non-covered loans and leases		10,000			—			—			10,000
Covered loans		(3,926	)		—			—			(3,926	)
Total (provision) negative provision for credit losses		6,074			—			—			6,074
Noninterest income		2,058			1,166			38			3,262
Intangible asset amortization		(1,708	)		(27	)		—			(1,735	)
Debt termination expense		(24,195	)		—			1,597			(22,598	)
Other noninterest expense		(38,352	)		(4,812	)		(1,398	)		(44,562	)
Total noninterest expense		(64,255	)		(4,839	)		199			(68,895	)
Earnings (loss) before income taxes		4,572			4,503			(954	)		8,121
Income tax (expense) benefit		(1,358	)		(1,900	)		401			(2,857	)
Net earnings (loss)	$	3,214		$	2,603		$	(553	)	$	5,264

	Three Months Ended December 31, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	61,834		$	11,868		$	—		$	73,702
Intersegment interest income (expense)		448			(448	)		—			—
Other interest expense		(3,041	)		(226	)		(832	)		(4,099	)
Net interest income		59,241			11,194			(832	)		69,603
(Provision) negative provision for credit losses:
Non-covered loans and leases		482			(482	)		—			—
Covered loans		4,333			—			—			4,333
Total (provision) negative provision for credit losses		4,815			(482	)		—			4,333
Noninterest income		359			1,672			26			2,057
Intangible asset amortization		(1,043	)		(133	)		—			(1,176	)
Other noninterest expense		(34,343	)		(6,540	)		(1,466	)		(42,349	)
Total noninterest expense		(35,386	)		(6,673	)		(1,466	)		(43,525	)
Earnings (loss) before income taxes		29,029			5,711			(2,272	)		32,468
Income tax (expense) benefit		(11,130	)		(2,386	)		940			(12,576	)
Net earnings (loss)	$	17,899		$	3,325		$	(1,332	)	$	19,892