NOTE 4—ACQUISITIONS

We completed the following acquisitions during the time period of January 1, 2011 to December 31, 2013, 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.

The following balance sheets of the acquired entities are presented at estimated fair value 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		129,070		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		47,671		4,234		69		467


Total assets acquired	$	1,580,856	$	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		19,729		840		2,278		10,317


Total liabilities assumed	$	1,329,288	$	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, we completed the acquisition of First California Financial Group, Inc., or FCAL, following receipt of shareholder approval from both institutions and all required regulatory approvals. As part of the acquisition, First California Bank, or FCB, a wholly-owned subsidiary of FCAL, merged with and into Pacific Western.

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, 1,094,000 shares of FCAL common stock previously owned by PacWest at a cost of $4.1 million were cancelled in the transaction. 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. Under acquisition accounting, this unrealized gain was recognized in earnings. 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, including the 1,094,000 shares of FCAL common stock owned by us and cancelled in the merger, was $251.6 million.

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. The application of the acquisition method of accounting resulted in goodwill of $129.1 million. All of the recognized goodwill is expected to be non-deductible for tax purposes.

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 15 branches 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. We completed the conversion and integration of the FCB branches to PWB's operating platform in June 2013 and as a result, we added seven locations to our branch network.

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 lending 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 loan 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.

	Year Ended December 31,

	2013		2012
	(In thousands, except per share date)
Pro forma revenues (net interest income plus noninterest income)	$	325,801	$	370,115
Pro forma net earnings from continuing operations	$	52,640	$	71,684
Pro forma net earnings from continuing operations per share:
Basic	$	1.16	$	1.58
Diluted	$	1.16	$	1.58

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 for acquisitions completed prior to January 1, 2009 was zero at December 31, 2013. 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 $28.4 million, $4.1 million, and $600,000 of such costs in 2013, 2012, and 2011, respectively.

CapitalSource Merger Announcement

On July 22, 2013, PacWest announced the signing of a definitive agreement and plan of merger (the "Agreement") whereby PacWest and CapitalSource, Inc. ("CapitalSource") will merge in a transaction valued at approximately $2.8 billion based on the closing price of PacWest common stock on February 13, 2014 of $40.11. The combined company will be called PacWest Bancorp. As part of the merger, CapitalSource Bank, a wholly-owned subsidiary of CapitalSource, will merge with and into Pacific Western, and the combined subsidiary bank will be called Pacific Western Bank. The CapitalSource national lending operation will continue to do business under the name CapitalSource as a division of Pacific Western Bank.

Under the terms of the Agreement, CapitalSource shareholders will receive $2.47 in cash and 0.2837 shares of PacWest common stock for each share of CapitalSource common stock. The total value of the CapitalSource per share merger consideration was $13.85 based on the closing price of PacWest shares on February 13, 2014 of $40.11.

As of December 31, 2013, on a pro forma consolidated basis, the combined company would have had approximately $15.4 billion in assets with 94 branches throughout California. We currently expect to receive final regulatory approval in the first quarter of 2014 and to close the merger on April 1, 2014.