NOTE 3—ACQUISITIONS

We completed the following acquisitions during the time period of January 1, 2012 to September 30, 2013, using the acquisition method of accounting, and accordingly, the operating results of the acquired entities have been included in our condensed consolidated financial statements from their respective dates of acquisition.

The following balance sheets of the acquired entities are presented at estimated fair value as of their respective acquisition dates:

	Acquisition and Date Acquired

	First California Financial Group		American Perspective Bank		Celtic Capital Corporation		Pacific Western Equipment Finance
	May 31, 2013		August 1, 2012		April 3, 2012		January 3, 2012
	(In thousands)
Assets Acquired:
Cash and due from banks	$	6,124	$	3,370	$	3,435	$	7,092
Interest-earning deposits in financial institutions		266,889		10,081		—		—
Investment securities available-for-sale		4,444		48,887		—		—
FHLB stock		9,518		1,412		—		—
Loans and leases		1,049,613		197,279		54,963		140,959
Other real estate owned		13,772		1,561		—		—
Premises and equipment		15,322		—		—		—
FDIC loss sharing asset		17,241		—		—		—
Cash surrender value of life insurance		13,265		—		—		—
Goodwill		136,189		15,047		6,645		19,033
Core deposit and customer relationship intangibles		7,927		1,924		1,300		1,700
Other intangible assets		—		—		670		1,420
Leases in process		—		—		—		19,162
Other assets		40,192		4,234		69		467

Total assets acquired	$	1,580,496	$	283,795	$	67,082	$	189,833

Liabilities Assumed:
Noninterest-bearing deposits	$	361,166	$	40,673	$	—	$	—
Interest-bearing deposits		739,713		178,891		—		—
Borrowings from parent		—		—		—		128,677
Other borrowings		—		5,315		46,804		15,839
Subordinated debentures		24,061		—		—		—
Discontinued operations		184,619		—		—		—
Accrued interest payable and other liabilities		19,369		840		2,278		10,317

Total liabilities assumed	$	1,328,928	$	225,719	$	49,082	$	154,833

Total consideration paid	$	251,568	$	58,076	$	18,000	$	35,000

Summary of consideration:
Cash paid	$	—	$	58,076	$	18,000	$	35,000
PacWest common stock issued		242,268		—		—		—
Cancellation of FCAL common stock owned by
PacWest (at acquisition date fair value)		9,300		—		—		—

Total	$	251,568	$	58,076	$	18,000	$	35,000

First California Financial Group Acquisition

On May 31, 2013, PacWest Bancorp ("PacWest") completed the acquisition of First California Financial Group, Inc. ("FCAL"). As part of the acquisition, First California Bank ("FCB"), a wholly-owned subsidiary of FCAL, merged with and into Pacific Western. The acquisition, which was first announced on November 6, 2012, was concluded following receipt of shareholder approval from both institutions and all required regulatory approvals.

In the FCAL acquisition, each share of FCAL common stock was converted into the right to receive 0.2966 of a share of PacWest common stock. The exchange ratio was calculated based on the volume-weighted average share price of PacWest common stock for the 20 consecutive trading days ending on the second full trading day prior to the receipt of the last of the regulatory approvals required under the merger agreement. PacWest issued an aggregate of approximately 8.4 million shares of PacWest common stock to FCAL stockholders. In addition, approximately one million shares of FCAL common stock previously owned by PacWest were cancelled in the transaction. Based on the closing price of PacWest's common stock on May 31, 2013 of $28.83 per share, the aggregate consideration paid to FCAL common stockholders, plus the acquisition date fair value of the FCAL shares of common stock cancelled in the merger, was $251.6 million.

The integration of FCB systems and the conversion of FCB's branches to PWB's operating platform were completed in June 2013. FCB had 15 branches, eight of which overlapped with existing PWB branches. Six of the FCB branches and two PWB branches were closed as part of the integration and consolidation plan. As a result PWB added seven locations to its branch network.

FCB was a full-service commercial bank headquartered in Westlake Village, California. FCB provided a full range of banking services, including revolving lines of credit, term loans, commercial real estate loans, construction loans, consumer loans and home equity loans to individuals, professionals, and small to mid-sized businesses. FCB operated throughout Southern California in the Los Angeles, Orange, Riverside, San Bernardino, San Diego, Ventura, and San Luis Obispo Counties. We made this acquisition to expand our presence in Southern California.

The FCAL acquisition has been 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 May 31, 2013 acquisition date. Such fair values are preliminary estimates and are subject to adjustment for up to one year after the acquisition date or when additional information relative to the closing date fair values becomes available and such information is considered final, whichever is earlier. While the fair values are preliminary we believe there will not be material adjustments to the amounts recorded with the exception of the acquired tax assets, which will be finalized once the final tax returns have been filed. The application of the acquisition method of accounting resulted in goodwill of $136.2 million. All of the recognized goodwill is expected to be non-deductible for tax purposes.

During the third quarter of 2013, we recorded a $5.2 million non-taxable securities gain in earnings related to the FCAL acquisition. Prior to the closing of the FCAL acquisition, we acquired 1,094,000 shares of FCAL common stock at a cost of $4.1 million. These shares were carried in our securities available-for-sale portfolio at their estimated market value with their unrealized gain of $5.2 million included in stockholders' equity at May 31, 2013. Our accounting for the FCAL acquisition included these shares at their historical cost. We should have included these shares at their estimated fair value and recognized an acquisition-related securities gain of $5.2 million at May 31, 2013. We corrected for this in the third quarter of 2013 by recognizing the gain with an offset to goodwill.

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 operated two 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 strengthened our presence in the Central Coast region.

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.

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, and 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 lending portfolio, expanded our product lines, and deployed excess liquidity into higher yielding assets.

Unaudited Pro Forma Results of Operations

The following table presents our unaudited pro forma results of operations for the periods presented as if the FCAL acquisition had been completed on January 1, 2012. The unaudited pro forma results of operations include the historical accounts of the Company and FCAL and pro forma adjustments as may be required, including the amortization of intangibles with definite lives and the amortization or accretion of any premiums or discounts arising from fair value adjustments for assets acquired and liabilities assumed. The unaudited pro forma information is intended for informational purposes only and is not necessarily indicative of our future operating results or operating results that would have occurred had the FCAL acquisition been completed at the beginning of 2012. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions.

No pro forma results of operations information have been provided for the three months ended September 30, 2013 as FCAL was acquired on May 31, 2013 and the actual results of FCAL and the Company are included together for this three-month period in the condensed consolidated statements of earnings.

			Nine Months Ended September 30,

	Three Months Ended September 30, 2012		Nine Months Ended September 30,
	Three Months Ended September 30, 2012		2013		2012
	(In thousands, except per share data)
Pro forma revenues (net interest income plus noninterest income)	$	95,441	$	250,155	$	278,182
Pro forma net earnings from continuing operations	$	19,880	$	49,692	$	47,039
Pro forma net earnings from continuing operations per share:
Basic	$	0.44	$	1.09	$	1.04
Diluted	$	0.44	$	1.09	$	1.04