BUSINESS SEGMENTS

6 Months Ended

Jun. 30, 2013

BUSINESS SEGMENTS

BUSINESS SEGMENTS

NOTE 15—BUSINESS SEGMENTS

        The Company's reportable segments consist of "Banking," "Asset Financing," and "Other." At June 30, 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 equipment 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 (the only segment income statements for which discontinued operations are applicable and reported are those for the three and six months ended June 30, 2013):

	June 30, 2013
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Loans and leases, net of unearned income	$	3,947,322		$	472,364		$	—		$	4,419,686
Allowance for loan and lease losses		(84,917	)		(5,726	)		—			(90,643	)
Total loans and leases, net	$	3,862,405		$	466,638		$	—		$	4,329,043
Goodwill	$	183,512		$	25,678		$	—		$	209,190
Core deposit and customer relationship intangibles, net		17,958			2,232			—			20,190
Total assets		6,189,202			510,630			9,270			6,709,102
Total deposits(1)		5,557,871			—			(34,871	)		5,523,000

(1)

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

	June 30, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Loans and leases, net of unearned income	$	3,102,215		$	382,488		$	—		$	3,484,703
Allowance for loan and lease losses		(100,759	)		(2,765	)		—			(103,524	)
Total loans and leases, net	$	3,001,456		$	379,723		$	—		$	3,381,179
Goodwill	$	39,141		$	22,867		$	—		$	62,008
Core deposit and customer relationship intangibles, net		14,104			2,839			—			16,943
Total assets		4,876,271			428,899			16,452			5,321,622
Total deposits(1)		4,604,387			—			(13,058	)		4,591,329

(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 June 30, 2013
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	59,321		$	12,310		$	—		$	71,631
Intersegment interest income (expense)		460			(460	)		—			—
Other interest expense		(2,080	)		(196	)		(882	)		(3,158	)
Net interest income		57,701			11,654			(882	)		68,473
Total (provision) negative provision for credit losses		2,607			(765	)		—			1,842
Noninterest income		(415	)		592			26			203
Intangible asset amortization		(1,127	)		(157	)		—			(1,284	)
Other noninterest expense		(55,554	)		(5,980	)		(1,398	)		(62,932	)
Total noninterest expense		(56,681	)		(6,137	)		(1,398	)		(64,216	)
Earnings (loss) from continuing operations before income taxes		3,212			5,344			(2,254	)		6,302
Income tax (expense) benefit		(612	)		(2,237	)		943			(1,906	)
Net earnings (loss) from continuing operations		2,600			3,107			(1,311	)		4,396
Loss from discontinued operations before income taxes		(81	)		—			—			(81	)
Income tax benefit		34			—			—			34
Net loss from discontinued operations		(47	)		—			—			(47	)
Net earnings (loss)	$	2,553		$	3,107		$	(1,311	)	$	4,349

	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
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 June 30, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	62,045		$	10,845		$	—		$	72,890
Intersegment interest income (expense)		630			(630	)		—			—
Other interest expense		(3,404	)		(225	)		(848	)		(4,477	)
Net interest income		59,271			9,990			(848	)		68,413
Total (provision) negative 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		(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 tax (expense) benefit		(9,563	)		(1,750	)		900			(10,413	)
Net earnings (loss)	$	14,521		$	2,275		$	(1,239	)	$	15,557

	Six Months Ended June 30, 2013
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	116,228		$	24,672		$	—		$	140,900
Intersegment interest income (expense)		931			(931	)		—			—
Other interest expense		(4,730	)		(339	)		(1,665	)		(6,734	)
Net interest income		112,429			23,402			(1,665	)		134,166
Total (provision) negative provision for credit losses		271			(1,566	)		—			(1,295	)
Noninterest income		1,858			1,136			49			3,043
Intangible asset amortization		(2,120	)		(340	)		—			(2,460	)
Other noninterest expense		(91,092	)		(12,033	)		(2,814	)		(105,939	)
Total noninterest expense		(93,212	)		(12,373	)		(2,814	)		(108,399	)
Earnings (loss) from continuing operations before income taxes		21,346			10,599			(4,430	)		27,515
Income tax (expense) benefit		(7,042	)		(4,436	)		1,853			(9,625	)
Net earnings (loss) from continuing operations		14,304			6,163			(2,577	)		17,890
Loss from discontinued operations before income taxes		(81	)		—			—			(81	)
Income tax benefit		34			—			—			34
Net loss from discontinued operations		(47	)		—			—			(47	)
Net earnings (loss)	$	14,257		$	6,163		$	(2,577	)	$	17,843

	Six Months Ended June 30, 2012
	Banking			Asset Financing			Other			Consolidated Company
	(In thousands)
Interest income	$	127,528		$	19,762		$	—		$	147,290
Intersegment interest income (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
Total (provision) negative 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		(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 tax (expense) benefit		(10,921	)		(3,650	)		1,301			(13,270	)
Net earnings (loss)	$	17,735		$	4,878		$	(1,792	)	$	20,821