- Quarterly Report (10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 00-30747

PACWEST BANCORP
(Exact name of registrant as specified in its charter)


DELAWARE (State or other jurisdiction of incorporation or organization)		33-0885320 (I.R.S. Employer Identification Number)
401 West "A" Street
San Diego, California		92101
(Address of principal executive offices)		(Zip Code)

(619) 233-5588
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

As of November 1, 2010 there were 35,348,681 shares of the registrant's common stock outstanding, excluding 1,359,594 shares of unvested restricted stock.

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PACWEST BANCORP AND SUBSIDIARIES

TABLE OF CONTENTS



PART I—FINANCIAL INFORMATION			3
	ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	3
		Condensed Consolidated Balance Sheets (Unaudited)	3
		Condensed Consolidated Statements of Earnings (Loss) (Unaudited)	4
		Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	5
		Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited)	6
		Condensed Consolidated Statements of Cash Flows (Unaudited)	7
		Notes to Condensed Consolidated Financial Statements (Unaudited)	8
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	73
	ITEM 4.	Controls and Procedures	73
PART II—OTHER INFORMATION			73
	ITEM 1.	Legal Proceedings	73
	ITEM 1A.	Risk Factors	73
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
	ITEM 6.	Exhibits	74
SIGNATURES			75

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)

PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Par Value Data)

(Unaudited)

			September 30, 2010			December 31, 2009

ASSETS
Cash and due from banks			$	91,615		$	93,915
Interest-earning deposits in financial institutions				68,470			117,133

	Total cash and cash equivalents			160,085			211,048

Non-covered securities available-for-sale				737,642			371,575
Covered securities available-for-sale				51,125			52,125

	Total securities available-for sale, at extimated fair value			788,767			423,700
Federal Home Loan Bank stock, at cost				57,332			50,429

	Total investment securities			846,099			474,129

Non-covered loans, net of unearned income				3,318,409			3,707,383
Allowance for loan losses				(96,494	)		(118,717	)

	Total non-covered loans, net			3,221,915			3,588,666
Covered loans, net				966,140			621,686

	Total loans			4,188,055			4,210,352

Non-covered other real estate owned, net				24,598			43,255
Covered other real estate owned, net				55,244			27,688

	Total other real estate owned			79,842			70,943

Premises and equipment, net				21,138			22,546
Goodwill				46,228			—
Core deposit and customer relationship intangibles				28,441			33,296
Cash surrender value of life insurance				65,735			66,149
FDIC loss sharing asset				141,591			112,817
Other assets				165,708			122,799

		Total assets	$	5,742,922		$	5,324,079

LIABILITIES
Noninterest-bearing deposits			$	1,467,862		$	1,302,974
Interest-bearing deposits				3,333,052			2,791,595

	Total deposits			4,800,914			4,094,569
Borrowings				275,000			542,763
Subordinated debentures				129,648			129,798
Accrued interest payable and other liabilities				43,598			50,176

		Total liabilities		5,249,160			4,817,306

STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; authorized 5,000,000 shares; none issued and outstanding				—			—
Common stock, $0.01 par value; authorized 75,000,000 and 50,000,000 shares at September 30, 2010 and December 31, 2009, respectively; issued 36,862,990 and 35,128,452 shares, respectively (includes 1,359,594 and 1,095,417 shares of unvested restricted stock, respectively)				369			351
Additional paid-in capital				1,084,205			1,053,584
Accumulated deficit				(599,354	)		(545,026	)
Treasury stock, at cost—154,715 and 113,130 shares at September 30, 2010 and December 31, 2009, respectively				(2,868	)		(2,032	)
Accumulated other comprehensive income (loss)				11,410			(104	)

		Total stockholders' equity		493,762			506,773

		Total liabilities and stockholders' equity	$	5,742,922		$	5,324,079

See "Notes to Condensed Consolidated Financial Statements."

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PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

(Dollars in Thousands, Except Per Share Data)

(Unaudited)

			Three Months Ended									Nine Months Ended September 30,

			September 30, 2010			June 30, 2010			September 30, 2009			Nine Months Ended September 30,
			September 30, 2010			June 30, 2010			September 30, 2009			2010			2009
Interest income:
	Loans		$	68,480		$	62,314		$	64,658		$	194,539		$	188,168
	Investment securities			6,519			5,702			2,741			17,342			5,928
	Deposits in financial institutions			131			245			111			505			209

		Total interest income		75,130			68,261			67,510			212,386			194,305

Interest expense:
	Deposits			6,375			6,945			7,754			20,209			24,441
	Borrowings			2,129			2,216			3,989			7,013			11,197
	Subordinated debentures			1,459			1,483			1,530			4,357			4,948

		Total interest expense		9,963			10,644			13,273			31,579			40,586

		Net interest income		65,167			57,617			54,237			180,807			153,719

Provision for credit losses:
	Non-covered loans			17,050			14,100			75,000			143,677			107,000
	Covered loans			7,400			8,850			—			36,950			—

		Total provision for credit losses		24,450			22,950			75,000			180,627			107,000

		Net interest income (expense) after provision for credit losses		40,717			34,667			(20,763	)		180			46,719

Noninterest income:
	Service charges on deposit accounts			2,861			2,666			2,960			8,256			9,118
	Other commissions and fees			1,760			1,845			1,721			5,395			5,152
	Other-than-remporary impairment loss on securities			(874	)		—			—			(874	)		—
	Increase in cash surrender value of life insurance			353			369			371			1,120			1,204
	FDIC loss sharing income, net			6,406			7,029			—			29,607			—
	Gain from Affinity acquisition			—			—			66,989			—			66,989
	Other income			279			173			584			632			1,616

		Total noninterest income		10,785			12,082			72,625			44,136			84,079

Noninterest expense:
	Compensation			23,060			21,068			20,128			63,539			57,853
	Occupancy			6,872			6,576			6,435			20,406			19,283
	Data processing			2,121			1,892			1,810			5,982			5,115
	Other professional services			2,694			2,042			1,857			6,734			4,867
	Business development			571			655			528			1,893			1,878
	Communications			811			795			762			2,410			2,143
	Insurance and assessments			2,431			2,611			2,010			7,316			7,479
	Other real estate owned, net			1,832			536			8,141			12,978			18,369
	Intangible asset amortization			2,434			2,424			2,578			7,282			7,192
	Reorganization and lease charges			—			—			—			—			1,215
	Other expense			3,348			4,174			2,842			10,977			8,597

		Total noninterest expense		46,174			42,773			47,091			139,517			133,991

Earnings (loss) before income taxes				5,328			3,976			4,771			(95,201	)		(3,193	)
Income tax (expense) benefit				(1,828	)		(1,271	)		(2,046	)		40,873			1,623

	Net earnings (loss)		$	3,500		$	2,705		$	2,725		$	(54,328	)	$	(1,570	)

Earnings (loss) per share:
	Basic		$	0.10		$	0.07		$	0.08		$	(1.55	)	$	(0.06	)
	Diluted		$	0.10		$	0.07		$	0.08		$	(1.55	)	$	(0.06	)
Dividends declared per share			$	0.01		$	0.01		$	0.01		$	0.03		$	0.34

See "Notes to Condensed Consolidated Financial Statements."

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PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

(Unaudited)

		Three Months Ended						Nine Months Ended September 30,

		September 30, 2010		June 30, 2010		September 30, 2009		Nine Months Ended September 30,
		September 30, 2010		June 30, 2010		September 30, 2009		2010			2009
Net earnings (loss)		$	3,500	$	2,705	$	2,725	$	(54,328	)	$	(1,570	)
Other comprehensive income (loss), net of related income taxes:
	Unrealized holding gains (losses) on securities available-for-sale arising during the period		2,869		7,420		1,098		11,514			1,351

Comprehensive income (loss)		$	6,369	$	10,125	$	3,823	$	(42,814	)	$	(219	)

See "Notes to Condensed Consolidated Financial Statements."

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PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollars in Thousands, Except Share Data)

(Unaudited)

		Common Stock

		Common Stock														Accumulated Other Comprehensive Income (Loss)
		Shares			Par Value		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
Balance as of January 1, 2010			35,015,322		$	351	$	1,053,584		$	(545,026	)	$	(2,032	)	$	(104	)	$	506,773
	Net loss		—			—		—			(54,328	)		—			—			(54,328	)
	Issuance of common stock		1,348,040			14		26,573			—			—			—			26,587
	Tax effect from vesting of restricted stock		—			—		(1,427	)		—			—			—			(1,427	)
	Restricted stock awarded and earned stock compensation, net of shares forfeited		386,498			4		6,559			—			—			—			6,563
	Restricted stock surrendered		(41,585	)		—		—			—			(836	)		—			(836	)
	Cash dividends paid ($0.03 per share)		—			—		(1,084	)		—			—			—			(1,084	)
	Other comprehensive income—increase in net unrealized gain on securities available-for-sale, net of tax effect of $8.3 million		—			—		—			—			—			11,514			11,514

Balance as of September 30, 2010			36,708,275		$	369	$	1,084,205		$	(599,354	)	$	(2,868	)	$	11,410		$	493,762

See "Notes to Condensed Consolidated Financial Statements."

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PACWEST BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

					Nine Months Ended September 30,

					2010			2009
Cash flows from operating activities:
	Net loss				$	(54,328	)	$	(1,570	)
		Adjustments to reconcile net loss to net cash provided by operating activities:
			Depreciation and amortization			4,190			11,290
			Provision for credit losses			180,627			107,000
			Gain from Affinity acquisition			—			(66,989	)
			(Gain) loss on sale of other real estate owned			(4,044	)		1,320
			Provision for losses on other real estate owned			14,778			13,697
			(Gain) loss on sale of premises and equipment			(14	)		12
			Impairment loss on securities			874			—
			Restricted stock amortization			6,563			6,284
			Tax effect included in stockholders' equity of restricted stock vesting			1,427			1,295
			Increase in accrued and deferred income taxes, net			(41,718	)		(13,276	)
			Decrease in FDIC loss sharing asset			40,470			—
			Decrease in other assets			13,578			11,351
			Decrease in accrued interest payable and other liabilities			(8,991	)		(20,037	)

				Net cash provided by operating activities		153,412			50,377

Cash flows from investing activities:
		Cash paid to FDIC in settlement of Security Pacific Bank deposit acquisition				—			(109	)
		Net cash acquired in Los Padres Bank and Affinity Bank acquisitions				171,366			251,679
		Net decrease in net loans outstanding				24,043			71,708
		Proceeds from sale of loans				204,164			30
		Securities available-for-sale:
			Proceeds from maturities and paydowns			135,295			53,009
			Purchases			(448,856	)		(132,501	)
		Net redemptions of FHLB stock				3,744			—
		Proceeds from sales of other real estate owned				61,560			28,533
		Capitalized costs to complete other real estate owned				(638	)		(863	)
		Purchases of premises and equipment, net				(2,481	)		(2,564	)
		Proceeds from sales of premises and equipment				28			69

			Net cash provided by investing activities			148,225			268,991

Cash flows from financing activities:
		Net increase (decrease) in deposits:
			Noninterest-bearing			131,166			99,468
			Interest-bearing			(177,006	)		(395,272	)
		Net proceeds from issuance of common stock				26,587			148,782
		Restricted stock surrendered				(836	)		(929	)
		Tax effect included in stockholders' equity of restricted stock vesting				(1,427	)		(1,295	)
		Net decrease in borrowings				(330,000	)		(20,383	)
		Cash dividends paid				(1,084	)		(10,800	)

			Net cash used in financing activities			(352,600	)		(180,429	)

Net (decrease) increase in cash and cash equivalents						(50,963	)		138,939
Cash and cash equivalents at beginning of period						211,048			159,870

Cash and cash equivalents at end of period					$	160,085		$	298,809

Supplemental disclosures of cash flow information:
	Cash paid for interest				$	32,163		$	41,979
	Cash paid for income taxes					810			11,625
	Loans transferred to other real estate owned					45,669			43,800

See "Notes to Condensed Consolidated Financial Statements."

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PACWEST BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1—BASIS OF PRESENTATION

PacWest Bancorp is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as a holding company for our banking subsidiary, Pacific Western Bank, which we refer to as Pacific Western or the Bank. When we say "we", "our" or the "Company", we mean the Company on a consolidated basis with the Bank. When we refer to "PacWest" or to the holding company, we are referring to the parent company on a stand-alone basis.

Pacific Western is a full-service commercial bank offering a broad range of banking products and services. We accept time and demand deposits, fund loans including real estate, construction, SBA and commercial loans, and offer other business oriented banking products. Our operations are primarily located in Southern California, but we expanded our presence in California's Central Coast with the acquisition of Los Padres Bank on August 20, 2010. See Note 2 for more information on this acquisition. The Bank focuses on conducting business with small to medium sized businesses in our marketplace and the owners and employees of those businesses. We acquired through two FDIC-assisted mergers three banking offices in the San Francisco Bay area and three offices in Arizona. Through our asset-based lending function, we also operate in Arizona, Northern California, and the Pacific Northwest.

We generate our revenue primarily from interest received on loans and, to a lesser extent, from interest received on investment securities, and fees received in connection with deposit services, extending credit and other services offered, including foreign exchange services. Our major operating expenses are the interest paid by the Bank on deposits and borrowings, compensation and general operating expenses. The Bank relies on a foundation of locally generated deposits. The Bank has a relatively low cost of funds due to a high percentage of noninterest-bearing and low cost deposits.

We have completed 22 acquisitions since May 2000, including the Los Padres Bank acquisition on August 20, 2010. See Notes 2 and 3 for more information about our acquisitions.

Basis of Presentation

The accounting and reporting policies of the Company are in accordance with U.S. generally accepted accounting principles, which we refer to as GAAP. All significant intercompany balances and transactions have been eliminated.

Our financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The interim operating results are not necessarily indicative of operating results for the full year.

Use of Estimates

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates. Material estimates subject to change in the near term include, among other items, the allowances for credit losses, the carrying value of other real estate owned, the

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PACWEST BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

NOTE 1—BASIS OF PRESENTATION (Continued)

carrying value of intangible assets, the carrying value of the FDIC loss sharing asset and the realization of deferred tax assets.

As described in Note 2 below, Pacific Western acquired assets and assumed liabilities of the former Los Padres Bank ("Los Padres") in an FDIC-assisted transaction, which we refer to as the Los Padres acquisition. The acquired assets and assumed liabilities were measured at their estimated fair values. Management made significant estimates and exercised significant judgment in estimating fair values and accounting for the acquisition of Los Padres.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year's presentation.

NOTE 2—ACQUISITIONS

Business combinations are accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. Results of operations of an acquired business are included in the statement of earnings from the date of acquisition. Acquisition-related costs, including conversion and restructuring charges, are expensed as incurred. We adopted this guidance as of January 1, 2009 and applied it to the Los Padres and Affinity acquisitions.

For acquisitions completed prior to January 1, 2009, the estimated merger-related charges associated with each acquisition were recorded 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 totals $1.1 million at September 30, 2010 and represents the estimated lease payments, net of estimated sublease income, for the remaining life of leases for abandoned space.

Federally Assisted Acquisition of Los Padres Bank

On August 20, 2010, Pacific Western Bank acquired certain assets and liabilities of Los Padres Bank from the Federal Deposit Insurance Corporation ("FDIC") in an FDIC-assisted transaction. The FDIC assistance is embodied in a loss sharing agreement with the FDIC that covers a substantial portion of any future losses on loans and other real estate owned. Under the terms of such loss sharing agreement, the FDIC will absorb 80% of losses and share in 80% of loss recoveries. We refer to the acquired assets subject to the loss sharing agreement collectively as "covered assets." The loss sharing arrangement for single family and commercial (non-single family) loans is in effect for 10 years and 5 years, respectively, from the acquisition date and the loss recovery provisions are in effect for 10 years and 8 years, respectively, from the acquisition date. Los Padres was a federally chartered savings bank headquartered in Solvang, California that operated 14 branches, including 11 branches in California (three in Ventura County, four in Santa Barbara County, and four in San Luis Obispo County) and three branches in Arizona (Maricopa County). We made this acquisition to expand our presence in the Central Coast of California.

The operations of Los Padres Bank are included in our operating results from August 20, 2010, and added revenue of $2.8 million, non-interest expenses of $2.1 million, and net earnings of $420,000 for the third quarter of 2010. Such operating results are not necessarily indicative of future operating results. Los Padres' results of operations prior to the acquisition are not included in our operating results.

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PACWEST BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

NOTE 2—ACQUISITIONS (Continued)

The Los Padres 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 August 20, 2010 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 closing date fair values becomes available and such information is considered final, whichever is earlier. The application of the acquisition method of accounting resulted in goodwill of $46.2 million. Such goodwill includes $9.5 million related to the FDIC's settlement accounting for Los Padres' wholly-owned subsidiary. We disagree with the FDIC's accounting for this item and are in process of negotiating with the FDIC to resolve this matter. Should we be successful in our negotiations, goodwill would be reduced by a cash payment to us from the FDIC of $9.5 million. No assurance can be given, however, that we will be successful in our efforts.

In the Los Padres acquisition, the estimated fair value of the liabilities assumed exceeded the estimated fair value of the assets acquired. The excess of the fair value of the liabilities assumed over the fair value of the assets acquired is goodwill. All of the recognized goodwill is expected to be deductible for tax purposes. The determination of goodwill is influenced significantly by the FDIC-assisted transaction process. Under the FDIC-assisted transaction process, only certain assets and liabilities are transferred to the acquirer and, depending on the nature and amount of the acquirer's bid, the FDIC may be required to make a cash payment to the acquirer. In the Los Padres Acquisition, we acquired net liabilities with cost basis of $160.8 million, received $144.0 million in a cash payment, and established a $13.4 million receivable from the FDIC that is net of the $3.4 million deposit premium we paid. The receivable from the FDIC is due at final settlement. A summary of the net liabilities received from the FDIC and the estimated fair value adjustments resulting in goodwill follows:

				August 20, 2010

				(In thousands)
Los Padres cost basis net liabilities on August 20, 2010				$	(160,794	)
Cash received and due from the FDIC					160,794
Fair value adjustments—
	Net increase (decrease) in acquired assets:
		Loans			(99,332	)
		Other real estate owned			(4,507	)
		FDIC loss sharing asset			69,244
		Core deposit intangible			2,427
		Receivable from subsidiary			(9,513	)
		Miscellaneous			(674	)
	Net (increase) decrease in assumed liabilities:
		Time deposits			(467	)
		FHLB advances			(13	)

			Total fair value adjustments		(42,835	)
Deposit premium paid					(3,393	)

	Goodwill resulting from the Los Padres acquisition			$	46,228

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PACWEST BANCORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

NOTE 2—ACQUISITIONS (Continued)

The statement of assets acquired and liabilities assumed at their estimated fair values as of August 20, 2010 are presented in the following table.

We refer to the loans acquired in the Los Padres acquisition as "covered loans" as we will be reimbursed for a substantial portion of any future losses on them under the terms of the FDIC loss sharing agreement. We account for loans under ASC 310-30 ("acquired impaired loan accounting") when (a) we acquire loans deemed to be impaired when there is evidence of credit deterioration since the origination and it is probable at the date of acquisition that we would be unable to collect all contractually required payments and (b) as a general policy election for non-impaired loans that we acquire. We may refer to acquired loans accounted for under ASC 310-30 as "acquired impaired loans". Revolving credit agreements such as home equity lines and credit card loans are excluded from acquired impaired loan accounting requirements. We acquired $34.5 million, at fair value, of revolving credit agreements, mainly home equity loans and commercial asset-based lines of credit, where the borrower had revolving privileges on the acquisition date; we account for such revolving covered loans in accordance with accounting requirements for purchased non-impaired loans.

The acquired covered loans were recorded at their estimated fair value at the time of acquisition. Fair value of acquired loans is determined using a discounted cash flow model based on assumptions about the amount and timing of principal and interest payments, estimated prepayments, estimated default rates, estimated loss severity in the event of defaults, and current market rates. Estimated credit losses are included in the determination of fair value; therefore, an allowance for loan losses is not recorded on the acquisition date.

For acquired impaired loans, we (a) calculated the contractual amount and timing of undiscounted principal and interest payments (the "undiscounted contractual cash flows") and (b) estimated the

amount and timing of undiscounted expected principal and interest payments (the "undiscounted expected cash flows"). Under acquired impaired loan accounting, the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows is the nonaccretable difference. The nonaccretable difference represents an estimate of the loss exposure of principal and interest related to the covered acquired impaired loans portfolio and such amount is subject to change over time based on the performance of such covered loans. The carrying value of covered acquired impaired loans is reduced by payments received, both principal and interest, and increased by the portion of the accretable yield recognized as interest income.

The excess of expected cash flows at acquisition over the initial fair value of acquired impaired loans is referred to as the "accretable yield" and is recorded as interest income over the estimated life of the loans using the effective yield method if the timing and amount of the future cash flows is reasonably estimable. Subsequent to acquisition, the Company aggregates loans into pools of loans with common credit risk characteristics such as loan type and risk rating. Increases in expected cash flows over those originally estimated increase the accretable yield and are recognized as interest income prospectively. Decreases in the amount and changes in the timing of expected cash flows compared to those originally estimated decrease the accretable yield and usually result in a provision for loan losses and the establishment of an allowance for loan losses.

Under acquired impaired loan accounting, purchased loans are generally considered accruing and performing loans as the loans accrete interest income over the estimated life of the loan when expected cash flows are reasonably estimable. Accordingly, acquired impaired loans that are contractually past due are still considered to be accruing and performing loans as long as the estimated cash flows are received as expected. If the timing and amount of cash flows is not reasonably estimable, the loans may be classified as nonaccrual loans and interest income may be recognized on a cash basis or as a reduction of the principal amount outstanding.

At the August 20, 2010 acquisition date, we estimated the fair value of the Los Padres loan portfolio at $440.2 million.

A summary of the covered loans acquired in the Los Padres acquisition as of August 20, 2010 and the related discount is as follows:

The carrying value of covered loans purchased in the Los Padres acquisition, where we applied acquired impaired loan accounting, was $405.7 million at August 20, 2010. The undiscounted contractual cash flows for such covered acquired impaired loans was $681.9 million and the undiscounted estimated cash flows not expected to be collected was $129.9 million on the acquisition date.

The accretable yield represents the amount by which the undiscounted expected cash flows exceed the estimated fair value. The accretable yield is measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the acquired impaired loans. As of August 20, 2010, the weighted average contractual maturity of the acquired impaired loans was 8 years. The following table summarizes the accretable yield on the covered loans purchased in the Los Padres acquisition and accounted for under acquired impaired loan accounting as of August 20, 2010:

Acquired revolving lines of credit were recorded at fair value. The carrying amount of covered revolving lines of credit was $34.5 million, net of a $12.2 million discount, at August 20, 2010. The difference between the loan balances and fair value will be accreted to interest income over the life of

the loans on a straight-line basis. The estimated life of the purchased revolving lines of credit agreements was 6 years. Such loans will be subject to our allowance for credit loss methodology, and a provision for credit losses will be recorded when the required allowance exceeds the remaining credit discount.

Other real estate owned covered under loss sharing agreements with the FDIC is recorded at fair value and is also carried exclusive of the FDIC loss sharing asset. Subsequent decreases in fair value estimates for covered other real estate owned results in a reduction of the covered other real estate owned carrying amounts with a charge against earnings; further, a partial offset of such amount will be credited to FDIC loss sharing noninterest income reflecting the increase to the FDIC loss sharing asset.

The FDIC loss sharing asset is initially recorded at fair value which represents the present value of the estimated cash payments from the FDIC for future losses on covered assets. The estimated gross cash flows associated with this asset are $74.9 million. The ultimate collectibility of this asset is dependent upon the performance of the underlying covered assets, the passage of time and claims paid by the FDIC.

On August 28, 2009, Pacific Western Bank acquired certain assets and assumed certain liabilities of Affinity Bank ("Affinity") from the FDIC in an FDIC-assisted transaction. We entered into a loss sharing agreement with the FDIC, whereby the FDIC will cover a substantial portion of any future losses on loans, other real estate owned and certain investment securities. Under the terms of this loss sharing agreement, the FDIC will absorb 80% of losses and receive 80% of loss recoveries on the first $234 million of losses on Affinity covered assets and absorb 95% of losses and receive 95% of loss recoveries on Affinity covered assets exceeding $234 million. The Affinity loss sharing agreement is in effect for 5 years for commercial assets (non-residential loans, commercial OREO and certain securities) and 10 years for residential assets, both loans and OREO, from the August 28, 2009 acquisition date. The Affinity loss recovery provisions are in effect for 8 years for commercial assets and 10 years for residential assets from the acquisition date. Through September 30, 2010, we have claimed $116.1 million in gross losses related to covered assets under the loss sharing agreement. Affinity was a full service commercial bank headquartered in Ventura, California that operated 10 branch locations in California. We made this acquisition to expand our presence in California.

The assets acquired and liabilities assumed have 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 August 28, 2009 acquisition date.

The following table presents our unaudited pro forma results of operations for the periods presented as if the Los Padres and Affinity acquisitions had been completed on January 1, 2009. The unaudited pro forma results of operations include the historical accounts of the Company, Los Padres and Affinity 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 this acquisition been completed at the beginning of 2009. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions.

Goodwill and intangible assets arise from purchase business combinations. Goodwill and other intangible assets deemed to have indefinite lives generated from purchase business combinations are not subject to amortization and are instead tested for impairment no less than annually. Impairment is determined in accordance with ASC 350, " Intangibles—Goodwill and Other " and is based on the reporting unit. Impairment exists when the carrying value of goodwill exceeds its implied fair value. An impairment loss is recognized in an amount equal to that excess and is included in noninterest expense in the consolidated statement of earnings (loss). The implied fair value of goodwill is determined in the same manner as goodwill recognized in a business combination. First, the fair value of the reporting unit is determined, which is the price that would be received to sell the unit as a whole in an orderly transaction between market participants. Then, the estimated fair value of the reporting unit is allocated to all of the reporting unit's individual assets and liabilities as if the reporting unit had been acquired in a business combination and the estimated fair value of the reporting unit was the price paid to acquire it. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. Goodwill in the amount $46.2 million was recorded in the August 2010 Los Padres acquisition.

Our intangible assets with definite lives are core deposit intangibles, or CDI, and customer relationship intangibles, or CRI. These intangible assets are amortized over their useful lives to their estimated residual values and reviewed for impairment at least quarterly. If the recoverable amount of the intangible asset is determined to be less than its carrying value, we would then measure the amount of impairment based on an estimate of the intangible asset's fair value at that time. If the fair value is below the carrying value, the intangible asset is reduced to such fair value and impairment is recognized as noninterest expense in the consolidated statement of earnings (loss).

The following table presents the changes in CDI and CRI and the related accumulated amortization for the periods indicated:

The aggregate amortization expense related to the intangible assets is expected to be $9.7 million for 2010. The estimated aggregate amortization expense related to these intangible assets for each of the subsequent four years is $8.5 million for 2011, $6.1 million for 2012, $4.5 million for 2013, and $2.9 million for 2014.

The amortized cost, gross unrealized gains and losses and estimated fair values of securities available-for-sale are presented in the tables below as of the dates indicated. The private label collateralized mortgage obligations were acquired in the Affinity acquisition and are covered by a FDIC

loss sharing agreement. Other securities include an investment in overnight money market funds at a financial institution. See Note 9 for information on fair value measurements and methodology.

Mortgage-backed securities have contractual terms to maturity and require periodic payments to reduce principal. In addition, expected maturities may differ from contractual maturities because obligors and/or issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following table presents the contractual maturity distribution of our available-for-sale securities portfolio based on amortized cost and fair value as of the date indicated:

At September 30, 2010, the estimated fair value of debt securities and residential mortgage-backed debt securities issued by the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") was approximately $617.0 million. We do not own any equity securities issued by Fannie Mae or Freddie Mac.

As of September 30, 2010, securities available-for-sale with an estimated fair value of $155.0 million were pledged as collateral for borrowings, public deposits and other purposes as required by various statutes and agreements.

The following table presents the estimated fair values and the gross unrealized losses on securities by length of time the securities have been in an unrealized loss position at the dates indicated:

		August 20, 2010

		(In thousands)
Commercial real estate		$	233,560
Single family			113,371
Multi-family			65,835
Construction and land			55,217
Commercial and industrial			43,988
Home equity lines of credit			26,220
Consumer ⁽¹⁾			1,360

	Total gross loans		539,551
Discount resulting from acquisition date fair value adjustment			(99,332	)

	Total net loans	$	440,219

	Accretable Yield

	(In thousands)
Undiscounted contractual cash flows	$	681,936
Undiscounted cash flows not expected to be collected (nonaccretable difference)		(129,866	)

Undiscounted cash flows expected to be collected		552,070
Estimated fair value of loans acquired		(405,656	)
Acquired accrued interest receivable		(2,436	)

Accretable yield	$	143,978

		Three Months Ended September 30,					Nine Months Ended September 30,

		2010		2009			2010			2009
		(In thousands, except per share data)
Revenues (net interest income plus noninterest income)		$	79,760	$	78,333		$	239,269		$	256,530
Net (loss) earnings		$	3,888	$	(39,637	)	$	(56,196	)	$	(57,296	)
Net (loss) income per share:
	Basic	$	0.11	$	(1.23	)	$	(1.61	)	$	(1.84	)
	Diluted	$	0.11	$	(1.23	)	$	(1.61	)	$	(1.84	)

			Three Months Ended									Nine Months Ended September 30,

			September 30, 2010			June 30, 2010			September 30, 2009			Nine Months Ended September 30,
			September 30, 2010			June 30, 2010			September 30, 2009			2010			2009
			(In thousands)
Gross amount of CDI and CRI:
	Balance at beginning of period		$	75,911		$	75,911		$	73,099		$	75,911		$	72,990
	Adjustment to Security Pacific Bank CDI			—			—			—			—			109
	Additions			2,427			—			2,812			2,427			2,812

		Balance at end of period		78,338			75,911			75,911			78,338			75,911

Accumulated amortization:
	Balance at beginning of period			(47,463	)		(45,039	)		(37,682	)		(42,615	)		(33,068	)
	Amortization			(2,434	)		(2,424	)		(2,578	)		(7,282	)		(7,192	)

		Balance at end of period		(49,897	)		(47,463	)		(40,260	)		(49,897	)		(40,260	)

Net CDI and CRI at end of period			$	28,441		$	28,448		$	35,651		$	28,441		$	35,651

			September 30, 2010

			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			(In thousands)
Government-sponsored entity debt securities			$	33,221	$	124	$	—		$	33,345
Municipal securities				7,439		208		(4	)		7,643
Residental mortgage-backed securities:
	Government and government-sponsored entity pass through securities			621,622		15,714		(223	)		637,113
	Government and government-sponsored entity collateralized mortgage obligations			56,347		997		(106	)		57,238
	Covered private label collateralized mortgage obligations			48,163		5,619		(2,657	)		51,125
Other securities				2,303		—		—			2,303

		Total securities available-for-sale	$	769,095	$	22,662	$	(2,990	)	$	788,767

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			August 20, 2010

			(In thousands)
Assets
	Cash and cash equivalents		$	171,366
	Investment securities			44,251
	Loans			440,219
	Other real estate owned			33,394
	Core deposit intangible			2,427
	Goodwill			46,228
	FDIC loss sharing asset			69,244
	Other assets			16,954

		Total assets acquired at fair value	$	824,083

Liabilities
	Deposits		$	752,185
	FHLB advances			70,013
	Other liabilities			1,885

		Total liabilities assumed at fair value	$	824,083

			September 30, 2010															December 31, 2009

			Less Than 12 Months					12 Months or Longer					Total					Less Than 12 Months
			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
			(In thousands)
Government-sponsored entity debt securities			$	—	$	—		$	—	$	—		$	—	$	—		$	35,626	$	(319	)
Municipal securities				236		(4	)		—		—			236		(4	)		—		—
Residential mortgage-backed securities:
	Government and government-sponsored entity pass through securities			59,926		(223	)		—		—			59,926		(223	)		113,621		(840	)
	Government and government-sponsored entity collateralized mortgage obligations			6,127		(82	)		2,685		(24	)		8,812		(106	)		64,661		(2,702	)
	Covered private label collateralized mortgage obligations			2,651		(1,303	)		4,007		(1,354	)		6,658		(2,657	)		30,511		(1,555	)

		Total	$	68,940	$	(1,612	)	$	6,692	$	(1,378	)	$	75,632	$	(2,990	)	$	244,419	$	(5,416	)

		September 30, 2010			December 31, 2009

		(In thousands)
Covered loans, gross		$	1,183,105		$	742,535
Less: discount			(176,786	)		(102,849	)

	Covered loans, net of discount		1,006,319			639,686
Less: allowance for loan losses			(40,179	)		(18,000	)

	Covered loans, net	$	966,140		$	621,686

		Covered Acquired Impaired Loans

		Carrying Amount			Accretable Yield
		(In thousands)
Balance as of January 1, 2010		$	621,686		$	(226,446	)
	Addition		405,656			(143,978	)
	Accretion		35,708			35,708
	Payments received		(91,529	)		—
	Decrease in expected cash flows		—			16,292
	Provision for credit losses		(36,950	)		—

Balance as of September 30, 2010		$	934,571		$	(318,424	)

Property Type		September 30, 2010

		(In thousands)
Construction and land development		$	17,322
Commercial real estate			13,557
Multi-family			11,219
Single family residence			13,146

	Total covered OREO	$	55,244

September 30, 2010

Maturity Date		Amount		Interest Rate			Next Date Callable by FHLB
		(In thousands)
January 11, 2013		$	50,000		2.71	%		January 11, 2011	⁽¹⁾
December 11, 2017			200,000		3.16	%		December 11, 2010	⁽¹⁾
January 11, 2018			25,000		2.61	%		January 11, 2011	⁽¹⁾

	Total FHLB advances	$	275,000		3.03	%

Series		September 30, 2010 Amount					Fixed or Variable Rate	Rate Index

		(In thousands)
Trust CI	3/23/00	$	10,310	3/8/30	3/8/20		Fixed	N/A	11.00	%	N/A
Trust I	9/7/00		8,248	9/7/30	9/7/20		Fixed	N/A	10.60	%	N/A
Trust V	8/15/03		10,310	9/17/33		⁽¹⁾	Variable	3 month LIBOR + 3.10	3.39	%	12/15/10
Trust VI	9/3/03		10,310	9/15/33		⁽¹⁾	Variable	3 month LIBOR + 3.05	3.34	%	12/11/10
Trust CII	9/17/03		5,155	9/17/33		⁽¹⁾	Variable	3 month LIBOR + 2.95	3.24	%	12/15/10
Trust VII	2/5/04		61,856	4/23/34		⁽¹⁾	Variable	3 month LIBOR + 2.75	3.04	%	1/28/11
Trust CIII	8/15/05		20,619	9/15/35		⁽¹⁾	Variable	3 month LIBOR + 1.69	1.98	%	12/15/10
Unamortized premium ⁽³⁾			2,840

Total subordinated debentures		$	129,648

		Fair Value Measurement as of September 30, 2010

		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(In thousands)
Measured on a Recurring Basis:
Securities available-for-sale:
	Government-sponsored entity debt securities	$	33,345	$	—	$	33,345	$	—
	Municipal securities		7,643		—		7,643		—
	Government and government-sponsored enitity mortgage-backed securities		694,351		—		694,351		—
	Covered private label CMOs		51,125		—		—		51,125
	Other securities		2,303		—		2,303		—

		$	788,767	$	—	$	737,642	$	51,125

Measured on a Nonrecurring Basis:
	Non-covered impaired loans	$	136,743	$	—	$	18,734	$	118,009
	Covered impaired loans		59,334		—		51,373		7,961
	Non-covered other real estate owned		12,753		—		11,972		781
	Covered other real estate owned		10,664		—		10,568		96
	SBA loan servicing asset		1,669		—		—		1,669

		$	221,163	$	—	$	92,647	$	128,516

		Three Months Ended September 30, 2010			Nine Months Ended September 30, 2010

		(In thousands)
Non-covered impaired loans		$	(14,958	)	$	(28,215	)
Covered impaired loans			(7,166	)		(25,633	)
Non-covered other real estate owned			(1,571	)		(8,042	)
Covered other real estate owned			(1,038	)		(3,091	)
SBA loan servicing asset			—			139

	Total loss on assets measured on a nonrecurring basis	$	(24,733	)	$	(64,842	)

		Covered Private Label CMOs (Level 3)

		(In thousands)
Beginning as of January 1, 2010		$	52,125
	Total realized in earnings		1,055
	Other-than-temporary impairment loss		(874	)
	Total unrealized in comprehensive income		3,804
	Principal collections		(4,985	)

Balance as of September 30, 2010		$	51,125

		Three Months Ended

		September 30, 2010							June 30, 2010							September 30, 2009
		Average Balance		Interest Income/ Expense		Yields and Rates			Average Balance		Interest Income/ Expense		Yields and Rates			Average Balance		Interest Income/ Expense		Yields and Rates
		(Dollars in thousands)
ASSETS
Loans, net of unearned income ⁽¹⁾⁽²⁾		$	4,123,684	$	68,480		6.59	%	$	3,809,546	$	62,314		6.56	%	$	4,140,220	$	64,658		6.20	%
Investment securities ⁽¹⁾			757,945		6,519		3.41	%		584,368		5,702		3.91	%		262,816		2,741		4.14	%
Deposits in financial institutions			208,074		131		0.25	%		374,613		245		0.26	%		150,358		111		0.29	%
Federal funds sold			—		—		—			—		—		—			4		—		—

	Total interest-earning assets		5,089,703	$	75,130		5.86	%		4,768,527	$	68,261		5.74	%		4,553,398	$	67,510		5.88	%

Other assets			455,323							413,103							304,817

	Total assets	$	5,545,026						$	5,181,630						$	4,858,215

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest checking deposits		$	466,366	$	262		0.22	%	$	438,945	$	338		0.31	%	$	402,503	$	420		0.41	%
Money market deposits			1,246,585		2,034		0.65	%		1,203,527		2,773		0.92	%		1,001,609		3,024		1.20	%
Savings deposits			124,132		63		0.20	%		112,909		58		0.21	%		111,184		53		0.19	%
Time deposits			1,281,423		4,016		1.24	%		1,068,033		3,776		1.42	%		841,001		4,257		2.01	%

	Total interest-bearing deposits		3,118,506		6,375		0.81	%		2,823,414		6,945		0.99	%		2,356,297		7,754		1.31	%
Borrowings			276,543		2,129		3.05	%		303,877		2,216		2.92	%		567,320		3,989		2.79	%
Subordinated debentures			129,683		1,459		4.46	%		129,732		1,483		4.59	%		129,876		1,530		4.67	%

	Total interest-bearing liabilities		3,524,732	$	9,963		1.12	%		3,257,023	$	10,644		1.31	%		3,053,493	$	13,273		1.72	%

Noninterest-bearing demand deposits			1,472,366							1,403,348							1,274,968
Other liabilities			55,450							41,053							44,117

	Total liabilities		5,052,548							4,701,424							4,372,578
Stockholders' equity			492,478							480,206							485,637

	Total liabilities and stockholders' equity	$	5,545,026						$	5,181,630						$	4,858,215

Net interest income				$	65,167						$	57,617						$	54,237

Net interest rate spread							4.73	%						4.43	%						4.16	%
Net interest margin							5.08	%						4.85	%						4.73	%

		Nine Months Ended September 30,

		2010							2009
		Average Balance		Interest Income/ Expense		Yields and Rates			Average Balance		Interest Income/ Expense		Yields and Rates
		(Dollars in thousands)
ASSETS
Loans, net of unearned income ⁽¹⁾⁽²⁾		$	4,018,697	$	194,539		6.47	%	$	4,000,774	$	188,168		6.29	%
Investment securities ⁽²⁾			605,071		17,342		3.83	%		203,065		5,928		3.90	%
Deposits in financial institutions			263,196		505		0.26	%		92,367		209		0.30	%
Federal funds sold			—		—		—			87		—		—

	Total interest-earning assets		4,886,964	$	212,386		5.81	%		4,296,293	$	194,305		6.05	%

Other assets			429,116							288,345

	Total assets	$	5,316,080						$	4,584,638

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest checking deposits		$	446,702	$	993		0.30	%	$	374,551	$	1,268		0.45	%
Money market deposits			1,205,893		7,675		0.85	%		912,130		8,349		1.22	%
Savings deposits			115,918		179		0.21	%		116,133		203		0.23	%
Time deposits			1,132,489		11,362		1.34	%		810,820		14,621		2.41	%

	Total interest-bearing deposits		2,901,002		20,209		0.93	%		2,213,634		24,441		1.48	%
Borrowings			341,438		7,013		2.75	%		498,611		11,197		3.00	%
Subordinated debentures			129,731		4,357		4.49	%		129,925		4,948		5.09	%

	Total interest-bearing liabilities		3,372,171	$	31,579		1.25	%		2,842,170	$	40,586		1.91	%

Noninterest-bearing demand deposits			1,403,370							1,220,809
Other liabilities			47,786							49,098

	Total liabilities		4,823,327							4,112,077
Stockholders' equity			492,753							472,561

	Total liabilities and stockholders' equity	$	5,316,080						$	4,584,638

Net interest income				$	180,807						$	153,719

Net interest rate spread							4.56	%						4.14	%
Net interest margin							4.95	%						4.78	%

		September 30, 2010				December 31, 2009

		Carrying or Contract Amount		Estimated Fair Value		Carrying or Contract Amount		Estimated Fair Value
		(In thousands)
Financial Assets:
	Cash and due from banks	$	91,615	$	91,615	$	93,915	$	93,915
	Interest-earning deposits in financial institutions		68,470		68,470		117,133		117,133
	Securities available-for-sale		788,767		788,767		423,700		423,700
	Investment in FHLB stock		57,332		57,332		50,429		50,429
	Loans, net		4,188,055		4,175,933		4,210,352		4,195,805
Financial Liabilities:
	Deposits		4,800,914		4,816,420		4,094,569		4,102,467
	Borrowings		275,000		299,455		542,763		557,363
	Subordinated debentures		129,648		134,369		129,798		146,413

Three Months Ended:

September 30, 2010	60.8	%
June 30, 2010	61.4	%
March 31, 2010	63.8	%
December 31, 2009	53.7	%
September 30, 2009	37.1	%

GAAP to Non-GAAP Reconciliations			September 30, 2010			June 30, 2010			December 31, 2009

			(Dollars in thousands)
PacWest Bancorp Consolidated:
	Stockholders' equity		$	493,762		$	486,585		$	506,773
	Less: intangible assets			74,669			28,448			33,296

		Tangible common equity	$	419,093		$	458,137		$	473,477

	Total assets		$	5,742,922		$	5,153,682		$	5,324,079
	Less: intangible assets			74,669			28,448			33,296

		Tangible assets	$	5,668,253		$	5,125,234		$	5,290,783

	Equity to assets ratio			8.60	%		9.44	%		9.52	%
	Tangible common equity ratio ⁽¹⁾			7.39	%		8.94	%		8.95	%
Pacific Western Bank:
	Stockholder's equity		$	582,335		$	573,227		$	585,940
	Less: intangible assets			74,669			28,448			33,296

		Tangible common equity	$	507,666		$	544,779		$	552,644

	Total assets		$	5,728,353		$	5,141,150		$	5,313,750
	Less: intangible assets			74,669			28,448			33,296

		Tangible assets	$	5,653,684		$	5,112,702		$	5,280,454

	Equity to assets ratio			10.17	%		11.15	%		11.03	%
	Tangible common equity ratio ⁽¹⁾			8.98	%		10.66	%		10.47	%

		Three Months Ended

		September 30, 2010			June 30, 2010		March 31, 2010		December 31, 2009		September 30, 2009
		(In thousands)
Service charges on deposit accounts		$	2,861		$	2,666	$	2,729	$	2,890	$	2,960
Other commissions and fees			1,760			1,845		1,790		1,799		1,721
Other-than-remporary impairment loss on securities			(874	)		—		—		—		—
Increase in cash surrender value of life insurance			353			369		398		375		371
FDIC loss sharing income, net			6,406			7,029		16,172		16,314		—
Gain from Affinity acquisition			—			—		—		—		66,989
Other income			279			173		180		450		584

	Total noninterest income	$	10,785		$	12,082	$	21,269	$	21,828	$	72,625

		July 1, 2010

		(In thousands)
Office building and light industrial		$	151,958
Retail			47,968
Commercial owner-occupied			16,757
Other commercial			12,476
Residential			2,685
Hotel			1,797
Commercial land			497

	Total loans purchased	$	234,138

			September 30, 2010						June 30, 2010						December 31, 2009						September 30, 2009

Loan Category			Amount			% of Total			Amount			% of Total			Amount			% of Total			Amount			% of Total
			(Dollars in thousands)
Domestic:
	Real estate mortgage		$	2,368,943			71	%	$	2,229,331			70	%	$	2,423,712			65	%	$	2,500,520			65	%
	Commercial			708,329			21			709,075			22			781,003			21			774,755			20
	Real estate construction			192,595			6			194,181			6			440,286			12			480,119			13
	Consumer			28,328			1			30,323			1			32,138			1			33,011			1
Foreign:
	Commercial			22,948			1			25,309			1			34,524			1			38,964			1
	Other, including real estate			1,595			—			1,637			—			1,719			—			1,763			—

		Total gross non-covered loans		3,322,738			100	%		3,189,856			100	%		3,713,382			100	%		3,829,132			100	%

Less: unearned income				(4,329	)					(4,831	)					(5,999	)					(6,447	)
Less: allowance for loan losses				(96,494	)					(88,463	)					(118,717	)					(114,575	)

	Total net non-covered loans		$	3,221,915					$	3,096,562					$	3,588,666					$	3,708,110

			September 30, 2010					June 30, 2010

Loan Category			Balance		% of Total			Balance		% of Total
			(Dollars in thousands)
Commercial real estate mortgage:
	Retail		$	394,727		16.7	%	$	386,132		17.3	%
	Industrial/warehouse			414,020		17.5	%		326,002		14.6	%
	Office buildings			358,858		15.1	%		305,843		13.7	%
	Owner-occupied			279,760		11.8	%		279,428		12.5	%
	Hotel			166,504		7.0	%		172,122		7.7	%
	Healthcare			95,311		4.0	%		90,298		4.1	%
	Gas station			40,008		1.7	%		40,051		1.8	%
	Self storage			32,235		1.4	%		29,721		1.3	%
	Restaurant			26,461		1.1	%		24,929		1.1	%
	Land acquisition/development			9,693		0.4	%		9,734		0.4	%
	Unimproved land			1,524		0.1	%		1,067		0.0	%
	Other			300,144		12.7	%		286,386		12.8	%

		Total commercial real estate mortgage		2,119,245		89.5	%		1,951,713		87.5	%

Residential real estate mortgage:
	Mixed use			63,472		2.7	%		89,506		4.0	%
	Multi-family			78,109		3.3	%		72,434		3.2	%
	Single family owner-occupied			40,903		1.7	%		42,921		1.9	%
	Single family nonowner-occupied			27,872		1.2	%		35,698		1.6	%
	HELOC's			38,716		1.6	%		37,059		1.7	%
	Unimproved land			626		0.0	%		—		0.0	%

		Total residential real estate mortgage		249,698		10.5	%		277,618		12.5	%

	Total gross non-covered real estate mortgage loans		$	2,368,943		100.0	%	$	2,229,331		100.0	%

Loan Category		September 30, 2010			December 31, 2009

		(In thousands)
Commercial real estate		$	509,645		$	311,298
Multi-family			303,309			263,944
Construction and land			151,895			121,735
Single family			129,900			17,078
Commercial and industrial			53,278			21,340
Home equity lines of credit			33,365			6,565
Consumer			1,713			575

	Total gross covered loans		1,183,105			742,535
Less: discount			(176,786	)		(102,849	)

	Covered loans, net of discount		1,006,319			639,686
Less: allowance for loan losses			(40,179	)		(18,000	)

	Covered loans, net	$	966,140		$	621,686

		September 30, 2010			June 30, 2010			December 31, 2009			September 30, 2009

		(Dollars in thousands)
Allowance for loan losses		$	96,494		$	88,463		$	118,717		$	114,575
Reserve for unfunded loan commitments			4,750			4,971			5,561			6,011

	Total allowance for credit losses	$	101,244		$	93,434		$	124,278		$	120,586

Allowance for credit losses to loans, net of unearned income			3.05	%		2.93	%		3.35	%		3.15	%
Allowance for credit losses to nonaccrual loans			95.9	%		86.3	%		51.7	%		62.3	%
Allowance for credit losses to nonperforming assets			77.8	%		70.4	%		43.8	%		51.8	%

	Three Months Ended September 30, 2010			Three Months Ended June 30, 2010			Year Ended December 31, 2009			Three Months Ended September 30, 2009

	(In thousands)
Allowance for credit losses—beginning of period	$	93,434		$	91,379		$	68,790		$	76,743
Provision for credit losses		17,050			14,100			141,900			75,000
Net charge-offs		(9,240	)		(12,045	)		(86,412	)		(31,157	)

Allowance for credit losses—end of period	$	101,244		$	93,434		$	124,278		$	120,586

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			Three Months Ended September 30, 2010			Three Months Ended June 30, 2010			Year Ended December 31, 2009			Three Months Ended September 30, 2009

			(Dollars in thousands)
Allowance for loan losses—beginning of period			$	88,463		$	86,163		$	63,519		$	72,122
Loans charged off:
	Real estate mortgage			(4,601	)		(6,988	)		(46,047	)		(2,760	)
	Real estate construction			(3,032	)		(3,341	)		(28,542	)		(8,224	)
	Commercial			(2,074	)		(1,024	)		(11,982	)		(19,908	)
	Consumer			(218	)		(2,004	)		(1,180	)		(387	)
	Foreign			(113	)		—			(368	)		—

		Total loans charged off		(10,038	)		(13,357	)		(88,119	)		(31,279	)

Recoveries on loans charged off:
	Real estate mortgage			—			1,017			503			55
	Real estate construction			—			27			461			6
	Commercial			319			254			548			45
	Consumer			348			12			151			16
	Foreign			131			2			44			—

		Total recoveries on loans charged off		798			1,312			1,707			122

Net charge-offs				(9,240	)		(12,045	)		(86,412	)		(31,157	)
Provision for loan losses				17,271			14,345			141,610			73,610

Allowance for loan losses—end of period			$	96,494		$	88,463		$	118,717		$	114,575

Ratios ⁽¹⁾ :
Allowance for loan losses to loans, net (end of period)				2.91	%		2.78	%		3.20	%		3.00	%
Allowance for loan losses to nonaccrual loans (end of period)				91.43	%		81.70	%		49.43	%		59.18	%
Annualized net charge-offs to average loans				1.09	%		1.50	%		2.22	%		3.17	%

	Three Months Ended September 30, 2010			Three Months Ended June 30, 2010			Year Ended December 31, 2009		Three Months Ended September 30, 2009

	(In thousands)
Reserve for unfunded loan commitments—beginning of period	$	4,971		$	5,216		$	5,271	$	4,621
Provision (reversal)		(221	)		(245	)		290		1,390

Reserve for unfunded loan commitments—end of period	$	4,750		$	4,971		$	5,561	$	6,011

	Three Months Ended September 30, 2010			Three Months Ended June 30, 2010

	(In thousands)
Allowance for credit losses on covered loans, beginning of period	$	37,878		$	32,014
Provision		7,400			8,850
Charge-offs, net		(5,099	)		(2,986	)

Allowance for credit losses on covered loans, end of period	$	40,179		$	37,878

		September 30, 2010

		(In thousands)
Covered nonaccrual loans		$	171,804
Covered OREO			55,244

	Total covered nonperforming assets	$	227,048

Covered performing restructured loans		$	44,614

		September 30, 2010			June 30, 2010			December 31, 2009			September 30, 2009

		(Dollars in thousands)
Nonaccrual loans ⁽¹⁾		$	105,539		$	108,283		$	240,167		$	193,618
Other real estate owned ⁽¹⁾			24,598			24,523			43,255			39,210

	Total nonperforming assets	$	130,137		$	132,806		$	283,422		$	232,828

Performing restructured loans ⁽¹⁾		$	143,407		$	76,367		$	181,454		$	142,542
Nonperforming assets to loans, net of unearned income, and other real estate owned ⁽¹⁾			3.89	%		4.14	%		7.56	%		6.03	%
Nonaccrual loans to loans, net of unearned income ⁽¹⁾			3.18	%		3.40	%		6.48	%		5.06	%

			Nonaccrual Loans ⁽¹⁾

			Nonaccrual Loans ⁽¹⁾										Accruing and Over 30 days Past Due ⁽¹⁾
			September 30, 2010					June 30, 2010					Accruing and Over 30 days Past Due ⁽¹⁾
Loan Category			Balance		% of Loan Category			Balance		% of Loan Category			September 30, 2010 Balance		June 30, 2010 Balance
			(Dollars in thousands)
SBA:
	SBA 504			24,480		26.5	%		21,359		22.6	%		500		3,041
	SBA 7(a) and Express			5,258		16.3	%		7,134		20.7	%		141		132

		Total SBA		29,738					28,493					641		3,173
Commercial real estate				26,392		1.3	%		38,428		2.1	%		1,356		67
Residential land				25,463		67.8	%		24,625		68.3	%		22		—
Commercial				8,592		1.3	%		12,188		1.8	%		1,189		2,244
Commercial construction				1,353		1.6	%		1,493		1.8	%		—		—
Residential multi-family				848		0.6	%		879		0.5	%		—		—
Residential				9,250		8.4	%		623		0.5	%		1,043		503
Residential construction				814		3.0	%		470		1.6	%		—		—
Commercial land				1,517		3.5	%		—		0.0	%		—		2,150
Other, including foreign				1,572		3.0	%		1,084		1.9	%		335		64

			$	105,539		3.2	%	$	108,283		3.4	%	$	4,586	$	8,201

Property Type		September 30, 2010		June 30, 2010		December 31, 2009

		(Dollars in thousands)
Commercial real estate		$	18,920	$	17,285	$	28,478
Single family residence			2,743		4,057		7,263
Construction and land development			2,935		3,181		7,514

	Total non-covered OREO	$	24,598	$	24,523	$	43,255

	September 30, 2010

	Well Capitalized Requirement			Pacific Western Bank			PacWest Bancorp Consolidated
Tier 1 leverage capital ratio		5.00	%		9.04	%		9.17	%
Tier 1 risk-based capital ratio		6.00	%		12.44	%		12.54	%
Total risk-based capital ratio		10.00	%		13.72	%		13.82	%
Tangible common equity ratio		N/A			8.98	%		7.39	%

		September 30, 2010

		Due Within One Year		Due in One to Three Years		Due in Three to Five Years		Due After Five Years		Total
		(Dollars in thousands)
Time deposits		$	868,314	$	535,042	$	3,907	$	—	$	1,407,263
Long-term debt obligations			—		50,000		—		354,648		404,648
Operating lease obligations			16,757		27,602		18,507		15,672		78,538
Other contractual obligations			3,788		—		—		—		3,788

	Total	$	888,859	$	612,644	$	22,414	$	370,320	$	1,894,237

Interest rate scenario	Estimated Net Interest Income

	(Dollars in thousands)
Up 300 basis points	$	250,332	(4.96	)%	4.69	%	(0.24	)%
Up 200 basis points	$	249,526	(5.27	)%	4.68	%	(0.25	)%
Up 100 basis points	$	251,487	(4.52	)%	4.71	%	(0.22	)%
BASE CASE	$	263,402			4.93	%	—
Down 100 basis points	$	254,875	(3.24	)%	4.78	%	(0.15	)%
Down 200 basis points	$	254,605	(3.34	)%	4.77	%	(0.16	)%
Down 300 basis points	$	253,250	(3.85	)%	4.75	%	(0.18	)%