NOTE 18—SUBSEQUENT EVENTS

CapitalSource Merger

On April 7, 2014, PacWest Bancorp ("PacWest") completed the merger with CapitalSource Inc. ("CapitalSource"). The combined company is called PacWest Bancorp. As part of the merger, CapitalSource Bank, ("CSB"), a wholly-owned subsidiary of CapitalSource, merged with and into PacWest's wholly-owned banking subsidiary, Pacific Western Bank, and the combined subsidiary bank is called Pacific Western Bank. As of March 31, 2014, CapitalSource had $9.1 billion in assets.

Upon closing, PacWest created the CapitalSource division of Pacific Western Bank. This division, which will operate under the CapitalSource name, will continue to serve businesses nationwide with a full spectrum of middle-market lending. Pacific Western Bank, through its combined network of 81 branches throughout California, will continue to serve small and medium-sized businesses with financing solutions, cash management and deposit services.

In the merger with CapitalSource, each share of CapitalSource common stock was converted into the right to receive $2.47 in cash and 0.2837 of a share of PacWest Bancorp common stock. PacWest issued an aggregate of approximately 56.7 million shares of PacWest common stock to CapitalSource stockholders. Based on the closing price of PacWest's common stock on April 7, 2014 of $45.83 per share, the aggregate consideration paid to CapitalSource common stockholders and holders of equity awards to acquire CapitalSource common stock was approximately $3.1 billion.

Former holders of CapitalSource common stock and equity awards to acquire CapitalSource common stock as a group received shares of PacWest common stock in the merger constituting approximately 55% of the outstanding shares of PacWest common stock immediately after the merger. As a result, holders of PacWest common stock immediately prior to the merger, as a group, own approximately 45% of the outstanding shares of the PacWest common stock immediately after the merger.

The integration of CSB's deposit system and the conversion of CSB's branches to Pacific Western Bank's operating platform were completed over the weekend of April 12, 2014. CSB had 21 branches, 12 of which were closed in the consolidation with Pacific Western Bank at the close of business on April 11, 2014. One overlapping Pacific Western Bank branch was closed at the close of business on April 11, 2014 as well. All remaining branches re-opened on Monday April 14, 2014 as Pacific Western Bank branches.

CSB was a commercial lender headquartered in Los Angeles, California. CSB provided financial products to small to middle market businesses nationwide and also provided depository products and services to consumers in southern and central California. CSB's loan origination efforts were conducted nationwide with offices located in Chevy Chase, Maryland; Los Angeles, California; Denver, Colorado; Chicago, Illinois; and New York, New York. As a result of the merger, we will increase our presence as a middle-market lender and increase our market share in our primary Southern California market.

The CapitalSource merger 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 April 7, 2014 merger date. Such fair values are preliminary estimates and are subject to adjustment for up to one year after the merger 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 $1.6 billion. All of the recognized goodwill is expected to be non-deductible for tax purposes. The assignment of goodwill to reporting segments has not yet been completed.

The following table presents the estimated fair values of the assets acquired and liabilities assumed for CapitalSource as of April 7, 2014:

	April 7, 2014

	(In thousands)
Assets Acquired:
Cash and due from banks	$	768,553
Interest-earning deposits in financial institutions		60,612
Investment securities available-for-sale		429,771
Loans and leases		6,886,289
Other real estate owned		7,665
Goodwill and intangible assets		1,611,153
Deferred tax asset, net		235,026
Other assets		732,514


Total assets acquired at fair value	$	10,731,583




Liabilities Assumed:
Noninterest-bearing deposits	$	4,631
Interest-bearing deposits		6,236,419
Other borrowings		992,109
Subordinated debentures		300,918
Accrued interest payable and other liabilities		120,318


Total liabilities assumed at fair value	$	7,654,395




Total consideration paid	$	3,077,188




Summary of consideration:
Cash paid	$	483,118
PacWest common stock issued		2,594,070


Total	$	3,077,188

The following table presents the amounts of the significant purchase accounting adjustments which will be accreted/amortized to earnings and the related amortization periods.

Description	Purchase Accounting Adjustment			Estimated Accretion/ Amortization Period

(In thousands) (DR. (CR.))
Loans and non-operating leases	$	(214,765	)	60 months using a level yield method
Operating leases (included in Other assets)	$	(10,352	)	48 months using a level yield method
Core deposit intangible	$	6,720		Straight line over 84 months
Investment in trust preferred securities	$	(3,352	)	Straight line over 280 months
Time deposit premium	$	(17,183	)	60 months using an accelerated method
Subordinated debentures	$	111,235		Straight line over 280 months

As of April 7, 2014, the fair value of the CapitalSource Non-PCI loans acquired was $6.8 billion, the related gross contractual amount was $7.0 billion, and the estimated contractual cash flows not expected to be collected were $121.5 million.

The following table summarizes the accretable yield on the purchased credit impaired loans acquired in the CapitalSource merger as of April 7, 2014:

	April 7, 2014 Accretable Yield

	(In thousands)
Undiscounted contractual cash flows	$	234,378
Undiscounted cash flows not expected to be collected (nonaccretable difference)		(120,534	)


Undiscounted cash flows expected to be collected		113,844
Estimated fair value of PCI loans acquired		(88,627	)
Acquired accrued interest receivable		—


Accretable yield	$	25,217

On April 7, 2014, as required by the merger agreement and as described in the joint proxy statement/prospectus relating to the merger, the Board of Directors of PacWest adopted a Tax Asset Protection Plan (the "Plan"). This Plan was described in detail in the joint proxy/prospectus and is similar to the Tax Benefit Preservation Plan that CapitalSource had in place prior to the merger. The purpose of the Plan is to seek to preserve PacWest's ability to utilize net operating loss carryforwards and certain other tax assets (collectively, the "NOLs") for U.S. federal income tax purposes that PacWest and certain of its subsidiaries will continue to have after the merger. The Plan seeks to protect the ability to utilize the NOLs by mitigating the potential for an "ownership change" within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the "Code").

In general, an "ownership change" would occur if PacWest's "5-percent shareholders," as defined under Section 382 of the Code, collectively increase their ownership in PacWest, in relation to their respective historical low points, by more than 50 percentage points over a rolling three-year period. In general, institutional holders that file as "investment advisers" for SEC purposes, such as mutual fund companies that hold PacWest common stock on behalf of several individual mutual funds where no single fund owns five percent or more of PacWest's common stock, are typically not treated as "5-percent shareholders" for purposes of Section 382 of the Code.

The following table presents our unaudited pro forma results of operations for the periods presented as if the CapitalSource and FCAL acquisitions had been completed on January 1, 2013. The unaudited pro forma results of operations include the historical accounts of the Company, CapitalSource, 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 CapitalSource and FCAL acquisitions been completed at the beginning of 2013. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions.

	Three Months Ended March 31,

	2014		2013
	(In thousands, except per share data)
Pro forma revenues (net interest income plus noninterest income)	$	194,820	$	207,982
Pro forma net earnings from continuing operations	$	56,943	$	53,890
Pro forma net earnings from continuing operations per share:
Basic	$	0.56	$	0.53
Diluted	$	0.56	$	0.53

Other

We have evaluated events that have occurred subsequent to March 31, 2014 and have concluded there are no subsequent events that would require recognition or disclosure in the accompanying condensed consolidated financial statements.