Use these links to rapidly review the document
TABLE OF CONTENTS
TABLE OF CONTENTS

Table of Contents

Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-203573

LOGO

Dear Stockholder:

          You are cordially invited to attend a special meeting of the stockholders of Square 1 Financial, Inc., a Delaware corporation ("Square 1"), which we will hold at Washington Duke Inn & Golf Club, 3001 Cameron Boulevard, Durham, North Carolina, on July 29, 2015, at 11:00 a.m., local time. At the special meeting, holders of our Class A common stock, par value $0.01, will be asked to approve the agreement and plan of merger by and between PacWest Bancorp ("PacWest") and Square 1, dated as of March 1, 2015 (the "merger agreement"), pursuant to which Square 1 will merge with and into PacWest, with PacWest as the surviving corporation (the "merger"). At the effective time of the merger, each share of Square 1 common stock, excluding certain specified shares, will be converted into the right to receive 0.5997 of a share of PacWest common stock, par value $0.01 per share, with cash paid in lieu of fractional shares of PacWest common stock.

          The board of directors of Square 1 (the "board") has determined that the merger agreement and the transactions contemplated therein, including the merger, are fair to and in the best interests of Square 1 and its stockholders, and approved and declared advisable the merger agreement and the transactions contemplated therein, including the merger. The board recommends that the Class A common stockholders of Square 1 vote "FOR" the proposal to adopt the merger agreement.

          The market value of the merger consideration will fluctuate with the price of PacWest common stock. Based on the closing price of PacWest common stock on February 27, 2015, the last trading day before the public announcement of the signing of the merger agreement, the value of the per share merger consideration payable to holders of Square 1 common stock was $27.49. Based on the closing price of PacWest common stock on June 18, 2015, the last practicable date before the date of this document, the value of the per share merger consideration payable to holders of Square 1 common stock was $28.21. You should obtain current stock price quotations for Square 1 common stock and PacWest common stock. Square 1 common stock is traded on NASDAQ under the symbol "SQBK" and PacWest common stock is traded on NASDAQ under the symbol "PACW."

          Based on the current number of shares of Square 1 common stock outstanding, PacWest currently expects to issue approximately 17,909,916 shares upon completion of the merger. However, an increase or decrease in the number of outstanding shares of Square 1 common stock prior to completion of the merger could cause the actual number of shares issued upon completion of the merger to change.

          The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, referred to as the Internal Revenue Code. Assuming the merger qualifies as a reorganization, a stockholder of Square 1 generally will not recognize any gain or loss upon receipt of PacWest common stock in exchange for Square 1 common stock in the merger (except with respect to any cash received in lieu of a fractional share of PacWest common stock, as discussed in this proxy statement/prospectus).

          At the special meeting, Class A common stockholders will also be asked to vote on a proposal to approve the adjournment of the special meeting from time to time, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement. The board recommends that the Class A common stockholders of Square 1 vote "FOR" this proposal.

          Your vote is very important. To ensure your representation at the special meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Whether or not you expect to attend the special meeting, please vote promptly. Submitting a proxy now will not prevent you from being able to vote in person at the special meeting.

          If you hold your shares in "street name" through a broker, bank or other nominee you should follow the directions provided by your broker, bank or other nominee regarding how to instruct your broker, bank or other nominee to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as voting against the proposal to adopt the merger agreement.

          This document provides you with detailed information about the proposed merger. You are encouraged to read this document carefully. In particular, you should read the "Risk Factors" section beginning on page 26 for a discussion of the risks you should consider in evaluating the proposed merger and how it will affect you.

          Thank you for your continued support.

    Sincerely,

 

 


SIGNATURE

 

 

Douglas H. Bowers
President and Chief Executive Officer
of Square 1 Financial, Inc.

          Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, the issuance of the PacWest common stock in connection with the merger or the other transactions described in this document, or passed upon the adequacy or accuracy of the disclosures in this document.

          The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

          If you have any questions or need assistance in voting your shares, please call Square 1 Investor Relations at (919) 314-3125.

          This document is dated June 19, 2015 and is first being mailed to stockholders of Square 1 on or about June 23, 2015.


Table of Contents


WHERE YOU CAN FIND MORE INFORMATION

        Both PacWest and Square 1 file annual, quarterly and special reports, proxy statements and other business and financial information with the Securities and Exchange Commission, referred to as the SEC. You may read and copy any materials that either PacWest or Square 1 files with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. Please call the SEC at (800) SEC-0330 or (800) 732-0330 for further information on the public reference room. In addition, PacWest and Square 1 file reports and other business and financial information with the SEC electronically, and the SEC maintains a website located at http://www.sec.gov containing this information. You will also be able to obtain these documents, free of charge, from PacWest at www.pacwestbancorp.com under the "Public Filings" link or from Square 1 at www.square1financial.com under the "About Us" tab and then under the heading "Investor Relations."

        PacWest has filed a registration statement on Form S-4 of which this document forms a part. As permitted by SEC rules, this document does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules and exhibits, at the addresses set forth below. Statements contained in this document as to the contents of any contract or other documents referred to in this document are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement. This document incorporates by reference documents that PacWest and Square 1 have previously filed with the SEC. They contain important information about the companies and their financial condition. For further information, please see the section entitled "Incorporation of Certain Documents by Reference." These documents are available without charge to you upon written or oral request to the applicable company's principal executive offices. The respective addresses and telephone numbers of such principal executive offices are listed below.

PacWest Bancorp
10250 Constellation Blvd., Suite 1640
Los Angeles, California 90067
Attention: Investor Relations
(310) 286-1144
  Square 1 Financial, Inc.
406 Blackwell Street, Suite 240
Durham, North Carolina 27701
Attention: Investor Relations
(919) 314-3125

        To obtain timely delivery of these documents, you must request the information no later than July 22, 2015 in order to receive them before Square 1's special meeting of stockholders.

        PacWest common stock is traded on the NASDAQ Global Select Market under the symbol "PACW," and Square 1 common stock is traded on NASDAQ Global Select Market under the symbol "SQBK."


Table of Contents

SQUARE 1 FINANCIAL, INC.
406 BLACKWELL STREET, SUITE 240
DURHAM, NORTH CAROLINA 27701

NOTICE OF THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 29, 2015

        NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of Square 1 Financial, Inc., referred to as Square 1, will be held at Washington Duke Inn & Golf Club, 3001 Cameron Boulevard, Durham, North Carolina, at 11:00 a.m., local time, on July 29, 2015 for the following purposes:

        The above proposals are described in more detail in this document, which you should read carefully and in its entirety before you vote.

        The Square 1 board of directors has set June 18, 2015 as the record date for the special meeting. Only holders of record of Square 1 Class A common stock at the close of business on June 18, 2015 will be entitled to notice of and to vote at the special meeting and any adjournments or postponements thereof. Any stockholder entitled to attend and vote at the special meeting is entitled to appoint a proxy to attend and vote on such stockholder's behalf. Such proxy need not be a holder of Square 1 common stock.

        Your vote is very important. To ensure your representation at the special meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please vote promptly whether or not you expect to attend the special meeting. Submitting a proxy now will not prevent you from being able to vote in person at the special meeting.

        The Square 1 board of directors has approved the merger agreement and the transactions contemplated thereby and recommends that you vote "FOR" the merger proposal and "FOR" the adjournment proposal.

BY ORDER OF THE BOARD OF DIRECTORS

SIGNATURE

Beth Reeves

Corporate Secretary

Durham, North Carolina
June 19, 2015

        PLEASE VOTE YOUR SHARES OF SQUARE 1 CLASS A COMMON STOCK PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT VOTING YOUR SHARES, PLEASE CALL SQUARE 1 INVESTOR RELATIONS AT (919) 314-3125.


Table of Contents


TABLE OF CONTENTS

 
  Page  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

    1  

SUMMARY

    8  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA FOR PACWEST

    19  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA FOR SQUARE 1

    22  

UNAUDITED COMPARATIVE PER SHARE DATA

    24  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

    25  

RISK FACTORS

    26  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    32  

SQUARE 1 SPECIAL MEETING OF STOCKHOLDERS

    34  

SQUARE 1 PROPOSALS

    38  

INFORMATION ABOUT THE COMPANIES

    39  

THE MERGER

    41  

Terms of the Merger

    41  

Background of the Merger

    42  

Recommendation of the Square 1 Board of Directors and Reasons for the Merger

    47  

Opinion of Square 1's Financial Advisor

    49  

Certain Square 1 Unaudited Prospective Financial Information

    64  

PacWest's Reasons for the Merger

    65  

Management and Board of Directors of PacWest After the Merger

    67  

Interests of Square 1 Directors and Executive Officers in the Merger

    67  

Regulatory Approvals Required for the Merger

    72  

Accounting Treatment

    75  

Public Trading Markets

    75  

Exchange of Shares in the Merger

    75  

Appraisal Rights

    75  

THE MERGER AGREEMENT

    76  

Explanatory Note

    76  

The Merger

    76  

Effects of the Merger

    76  

Closing and Effective Time of the Merger

    77  

PacWest's Governing Documents, Directors and Officers Following the Closing

    77  

Merger Consideration

    77  

Representations and Warranties

    79  

Conduct of Business Prior to the Completion of the Merger

    81  

PacWest Forbearance

    86  

Regulatory Matters

    86  

Stockholder Approval

    87  

Bank Merger

    87  

NASDAQ Listing

    87  

Employee Matters

    87  

Indemnification and Directors' and Officers' Insurance

    88  

Acquisition Proposals

    88  

Conditions to Consummation of the Merger

    90  

Termination of the Merger Agreement

    92  

Termination Fee

    93  

Waiver and Amendment of the Merger Agreement

    93  

Expenses

    93  

Voting Agreements

    93  

i


Table of Contents

 
  Page  

LITIGATION RELATED TO THE MERGER

    94  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

    96  

COMPARISON OF STOCKHOLDERS' RIGHTS

    100  

DESCRIPTION OF CAPITAL STOCK

    109  

EXPERTS

    114  

LEGAL OPINIONS

    114  

OTHER MATTERS

    114  

SQUARE 1 ANNUAL MEETING STOCKHOLDER PROPOSALS

    114  

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

    116  

Appendix A—Agreement and Plan of Merger, dated March 1, 2015, between PacWest Bancorp and Square 1 Financial, Inc. 

   
A-1
 

Appendix B—Form of Voting Agreement, dated March 1, 2015, between PacWest Bancorp and certain stockholders of Square 1 Financial, Inc. 

    B-1  

Appendix C—Opinion of Sandler O'Neill & Partners, L.P.. 

    C-1  

ii


Table of Contents


QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

        The following are answers to certain questions that you may have regarding the special meeting of Square 1 stockholders. You should carefully read the remainder of this document because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the appendices to, and the documents incorporated by reference in, this document.

Q:
WHAT IS THE MERGER?

A.
PacWest and Square 1 have entered into a merger agreement, pursuant to which and subject to the terms and conditions of the merger agreement, Square 1 will merge with and into PacWest, with PacWest continuing as the surviving corporation, which transaction is referred to as the merger. A copy of the merger agreement is attached as Appendix A to this document. Immediately following the merger, Square 1 Bank, a wholly owned subsidiary of Square 1, will merge with and into Pacific Western Bank, a wholly owned subsidiary of PacWest, with Pacific Western Bank continuing as the surviving bank, which transaction is referred to as the bank merger. In order to complete these transactions, the Square 1 stockholders must adopt the merger agreement, and the applicable banking regulators must approve both mergers.

Q:
WHY AM I RECEIVING THIS PROXY STATEMENT/PROSPECTUS?

A.
Square 1 is sending these materials to its stockholders to help them decide how to vote their shares of Square 1 Class A common stock with respect to the merger agreement and other matters to be considered at the special meeting.
Q:
WHAT WILL SQUARE 1 STOCKHOLDERS RECEIVE IN THE MERGER?

A:
In the merger, each share of Square 1 common stock owned by a Square 1 stockholder will be converted into the right to receive 0.5997 of a share of PacWest common stock. For each fractional share that would otherwise be issued, PacWest will pay cash in an amount equal to the fraction of a share of PacWest common stock which the holder would otherwise be entitled to receive multiplied by the average closing price of PacWest common stock as quoted on the NASDAQ Global Select Market, referred to as NASDAQ, over the 15 consecutive trading days ending on the second full trading day prior to the receipt of the last of the regulatory approvals from the Board of Governors of the Federal Reserve System, referred to as the Federal Reserve Board, the Federal Deposit Insurance Corporation, referred to as the FDIC, the California Department of Business Oversight, referred to as the CDBO, and the Commissioner of Banks of the State of North Carolina, referred to as the CBNC, which are necessary to consummate the merger and the bank merger. This 15 consecutive trading day average is referred to as the PacWest Average

1


Table of Contents

Q:
WILL THE VALUE OF THE MERGER CONSIDERATION CHANGE BETWEEN THE DATE OF THIS DOCUMENT AND THE TIME THE MERGER IS COMPLETED?

A:
Yes. Although the number of shares of PacWest common stock that Square 1 stockholders will receive in the merger is fixed, the value of the merger consideration will fluctuate between the date of this document and the completion of the merger based upon the market value of PacWest common stock. Any fluctuation in the market price of PacWest common stock after the date of this document will change the value of the shares of PacWest common stock that Square 1 stockholders will receive.

Q:
WHAT HAPPENS TO SQUARE 1 EQUITY AWARDS IN THE MERGER?

A:
Square 1 Stock Options.    At the effective time of the merger, referred to as the effective time, each outstanding option to acquire shares of Square 1 common stock under Square 1's stock plan, referred to as a Square 1 stock option, whether vested or unvested, will be cancelled and will entitle the holder of such option to receive an amount in cash equal to the product of (i) the total number of shares of Square 1 common stock subject to such option and (ii) the excess, if any, of (A) the product of (1) the PacWest Average Closing Price and (2) 0.5997 over (B) the exercise price per share of Square 1 common stock underlying such option, less any applicable taxes to be withheld with respect to such payment.
Q:
WHEN WILL THE MERGER BE COMPLETED?

A:
PacWest and Square 1 are working to complete the merger as soon as practicable. The parties are seeking regulatory approval by the fourth quarter of 2015, with the consummation of the merger to occur as soon as practicable thereafter. Neither PacWest nor Square 1 can predict, however, the actual date on which the merger will be completed because it is subject to factors beyond each company's control, including whether or when the required regulatory approvals and the Square 1 stockholder approval will be received. For further information, please see the section entitled "The Merger Agreement—Conditions to Consummation of the Merger."

Q:
WHO IS ENTITLED TO VOTE?

A:
Holders of record of Square 1 Class A common stock at the close of business on June 18, 2015, which is the date that the Square 1 board of directors has fixed as the record date for the special meeting, are entitled to vote at the special meeting. Holders of shares of non-voting Square 1 Class B common stock are not entitled to vote at the special meeting.

Q:
WHAT CONSTITUTES A QUORUM?

A:
The representation of holders of at least a majority of the votes entitled to be cast on the matters to be voted on at the special meeting constitutes a quorum for transacting business at the special meeting. All shares of Square 1 Class A common stock, whether present in person or represented

2


Table of Contents

Q:
WHAT AM I BEING ASKED TO VOTE ON AND WHY IS THIS APPROVAL NECESSARY?

A:
Square 1 Class A common stockholders are being asked to vote on the following proposals:

1.
to adopt the Agreement and Plan of Merger, dated as of March 1, 2015, by and between Square 1 and PacWest Bancorp, as such agreement may be amended from time to time, referred to as the merger agreement, a copy of which is attached as Appendix A, referred to as the merger proposal;

2.
to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of the merger proposal, referred to as the adjournment proposal; and

3.
to act upon other business as may properly come before the special meeting or any adjournment or postponement thereof by or at the direction of the Square 1 board of directors.
Q:
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE SPECIAL MEETING?

A:
The Merger Proposal:    The affirmative vote of a majority of the outstanding shares of Square 1 Class A common stock entitled to vote on the proposal is required to approve the merger proposal.
Q:
ARE THERE ANY VOTING AGREEMENTS WITH EXISTING STOCKHOLDERS?

A:
Yes. In connection with the merger agreement, Patriot Financial Partners, L.P., Castle Creek Capital Partners IV, L.P., Endicott Opportunity Partners III, L.P. and Northaven Management, Inc. (and certain affiliates thereof), in their capacities as stockholders of Square 1, have separately entered into voting agreements with PacWest, the form of which is attached as Appendix B, in which they have agreed to vote all shares of Square 1 common stock that they own and have the power to vote in favor of the merger proposal and any other matter that is required to be approved by the stockholders of Square 1 to facilitate the transactions contemplated by the merger agreement. As of the close of business on the record date, these stockholders beneficially owned, in the aggregate, 9,066,056 shares of Square 1 Class A common stock, allowing them to exercise approximately 34.25% of the voting power of Square 1 common stock.

Q:
WHAT DOES THE SQUARE 1 BOARD OF DIRECTORS RECOMMEND?

A:
The Square 1 board of directors recommends that Square 1 stockholders vote "FOR" the merger proposal and "FOR" the adjournment proposal.

Q:
WHAT DO I NEED TO DO NOW?

A:
After carefully reading and considering the information contained in this document, please vote your shares of Square 1 Class A common stock as soon as possible so that such shares will be represented at the special meeting. Please follow the instructions set forth on the proxy card or on

3


Table of Contents

Q:
HOW DO I VOTE?

A:
If you are a Square 1 Class A common stockholder of record as of the close of business on the record date, you may submit your proxy before the special meeting in one of the following ways:

use the toll-free number shown on your proxy card;

visit the website shown on your proxy card to vote via the Internet; or

complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.
Q:
HOW MANY VOTES DO I HAVE?

A:
You are entitled to one vote for each share of Square 1 Class A common stock that you owned as of the close of business on the record date. As of the close of business on the record date, there were approximately 26,469,682 outstanding shares of Square 1 Class A common stock entitled to vote. As of that date, approximately 37.43% of such outstanding shares of Square 1 Class A common stock were beneficially owned by the directors and executive officers of Square 1 and their affiliates (which amount includes the shares held by stockholders of Square 1 that have entered into voting agreements with PacWest).

Q:
WHEN AND WHERE IS THE SPECIAL MEETING?

A:
The special meeting will be held at Washington Duke Inn & Golf Club, 3001 Cameron Boulevard, Durham, North Carolina at 11:00 a.m, local time, on July 29, 2015. Subject to space availability, all Square 1 Class A common stockholders as of the close of business on the record date, or their duly appointed proxies, may attend the special meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 10:30 a.m., local time.

Q:
IF MY SHARES ARE HELD IN "STREET NAME" BY A BROKER, BANK OR OTHER NOMINEE, WILL MY BROKER, BANK OR OTHER NOMINEE VOTE MY SHARES FOR ME?

A:
If your shares of Square 1 Class A common stock are held in "street name" in a stock brokerage account or by a bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Square 1 or by voting in person at the special meeting unless you provide a "legal proxy," which you must obtain from your broker, bank or other nominee.

4


Table of Contents

Q:
WHAT IF I DO NOT VOTE OR I ABSTAIN?

A:
For purposes of the special meeting, an abstention occurs when a stockholder attends the special meeting, either in person or represented by proxy, but abstains from voting.
Q:
WHAT WILL HAPPEN IF I RETURN MY PROXY OR VOTING INSTRUCTION CARD WITHOUT INDICATING HOW TO VOTE?

A:
If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the Square 1 Class A common stock represented by your proxy will be voted as recommended by the Square 1 board of directors with respect to each proposal. Unless a Square 1 stockholder checks the box on its proxy card to withhold discretionary authority, the proxyholders may use their discretion to vote on other matters relating to the special meeting.

Q:
MAY I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY OR VOTING INSTRUCTION CARD?

A:
Yes. You may change your vote at any time before your proxy is voted at the special meeting. You may do this in one of four ways:

first, by sending a notice of revocation to Square 1's corporate secretary at 406 Blackwell Street, Suite 240, Durham, North Carolina 27701, stating that you would like to revoke your proxy;

second, by logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you are eligible to do so and following the instructions on the proxy card;

third, by sending a completed proxy card bearing a later date than your original proxy card; or

fourth, by attending the special meeting and voting in person.

5


Table of Contents

Q:
DO I NEED IDENTIFICATION TO ATTEND THE SPECIAL MEETING IN PERSON?

A:
Yes. Please bring proper identification, together with proof that you are a record owner of Square 1 Class A common stock. If your shares are held in street name, please bring acceptable proof of ownership, such as a letter from your broker or an account statement showing that you beneficially owned shares of Square 1 Class A common stock at the close of business on the record date.

Q:
ARE SQUARE 1 STOCKHOLDERS ENTITLED TO APPRAISAL RIGHTS?

A:
No. Under Delaware law, holders of Square 1 common stock will not be entitled to exercise any appraisal or dissenters' rights in connection with any of the proposals being presented to them.

Q:
WHAT ARE THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO SQUARE 1 STOCKHOLDERS?

A:
The merger is intended to qualify, and the obligation of PacWest and Square 1 to complete the merger is conditioned upon the receipt of legal opinions from their respective counsel to the effect that the merger will qualify, as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. Assuming the merger qualifies as a reorganization, you generally will not recognize any gain or loss upon receipt of PacWest common stock in exchange for Square 1 common stock in the merger (except for any gain or loss that may result from the receipt of cash in lieu of fractional shares of PacWest common stock that you would otherwise be entitled to receive).
Q:
WHAT HAPPENS IF THE MERGER IS NOT COMPLETED?

A:
If the merger is not completed, Square 1 stockholders will not receive any consideration for their shares of Square 1 common stock that otherwise would have been received in connection with the merger. Instead, Square 1 will remain an independent public company and its common stock will continue to be listed and traded on NASDAQ.

6


Table of Contents

Q:
SHOULD SQUARE 1 STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?

A:
No. Square 1 stockholders SHOULD NOT send in any stock certificates now. If the merger is approved, transmittal materials with instructions for their completion will be provided to Square 1 stockholders under separate cover and the stock certificates should be sent at that time.

Q:
WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING MATERIALS?

A:
Square 1 Class A common stockholders may receive more than one set of voting materials, including multiple copies of this document and multiple proxy cards or voting instruction cards. For example, if you hold shares of Square 1 Class A common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold such shares. If you are a holder of record of Square 1 Class A common stock and your shares are registered in more than one name, you will receive one or more separate proxy cards or voting instruction cards. Please complete, sign, date and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this document to ensure that you vote every share of Square 1 Class A common stock that you own.

Q:
WHOM SHOULD I CONTACT IF I HAVE ANY QUESTIONS ABOUT THE PROXY MATERIALS OR VOTING?

A:
If you are a Square 1 Class A common stockholder and have any questions about the proxy materials or if you need assistance submitting your proxy or voting your shares or need additional copies of this document or the enclosed proxy card, you should contact Square 1 Investor Relations at (919) 314-3125.

7


Table of Contents

 


SUMMARY

        This summary highlights selected information included in this document and does not contain all of the information that may be important to you. You should read this entire document and its appendices and the other documents to which the parties refer before you decide how to vote with respect to the proposals. In addition, the parties incorporate by reference important business and financial information about Square 1 and PacWest into this document. For a description of this information, please see the section entitled "Incorporation of Certain Documents by Reference." You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled "Where You Can Find More Information" in the forepart of this document. Each item in this summary includes a page reference directing you to a more complete description of that item.

        Unless the context otherwise requires, throughout this document, "PacWest" refers to PacWest Bancorp, "Square 1" refers to Square 1 Financial, Inc. and "we," "us" and "our" refer collectively to PacWest and Square 1. Also, the parties refer to the proposed merger of Square 1 with and into PacWest as the "merger," the proposed merger of Square 1 Bank with and into Pacific Western Bank as the "bank merger" and the Agreement and Plan of Merger, dated as of March 1, 2015, by and between PacWest and Square 1 as the "merger agreement."

The Merger and the Merger Agreement (pages 41 and 76)

        The terms and conditions of the merger are contained in the merger agreement, which is attached to this document as Appendix A. The parties encourage you to read the merger agreement carefully, as it is the legal document that governs the merger.

        Under the terms of the merger agreement, Square 1 will merge with and into PacWest, with PacWest being the surviving corporation.

Merger Consideration (page 77)

        In the merger, each share of Square 1 common stock, par value $0.01 per share, owned by a Square 1 stockholder will be converted into the right to receive 0.5997 of a share of PacWest common stock, par value $0.01 per share. For each fractional share that would otherwise be issued, PacWest will pay cash in an amount equal to the fraction of a share of PacWest common stock which the holder would otherwise be entitled to receive multiplied by the PacWest Average Closing Price. No interest will be paid or accrue on cash payable to holders in lieu of fractional shares.

        The share price of PacWest common stock will fluctuate, and the value that holders of Square 1 common stock will receive upon consummation of the merger may be different than the value that they would receive if calculated on the date PacWest and Square 1 publicly announced the signing of the merger agreement, on the date that this document is being mailed to Square 1 stockholders, and on the date of the special meeting. Based on the closing price of PacWest common stock on February 27, 2015, the last trading day before the public announcement of the signing of the merger agreement, the value of the per share merger consideration payable to holders of Square 1 common stock was $27.49. Based on the closing price of PacWest common stock on June 18, 2015, the last practicable date before the date of this document, the value of the per share merger consideration payable to holders of Square 1 common stock was $28.21.

Recommendation of the Square 1 Board of Directors (page 47)

        After careful consideration, the Square 1 board of directors recommends that Square 1 stockholders vote "FOR" the merger proposal and "FOR" the adjournment proposal.

        Certain stockholders of Square 1 have entered into voting agreements with PacWest, pursuant to which each such stockholder has agreed to vote "FOR" the merger proposal and "FOR" any other

 

8


Table of Contents

matter required to be approved by the stockholders of Square 1 to facilitate the transactions contemplated by the merger agreement. For more information regarding the voting agreements, please see the section entitled "The Merger Agreement—Voting Agreements."

        For a more complete description of Square 1's reasons for the merger and the recommendations of the Square 1 board of directors, please see the section entitled "The Merger—Recommendation of the Square 1 Board of Directors and Reasons for the Merger."

Opinion of Financial Advisor (page 49)

        At the March 1, 2015 meeting at which the board of directors of Square 1 considered and approved the merger agreement, Sandler O'Neill & Partners, L.P., referred to as Sandler O'Neill, delivered to the board its oral opinion, which was subsequently confirmed in writing, that, as of such date, subject to procedures followed, assumptions made, matters considered and qualifications and limitations described in Sandler O'Neill's opinion, the merger consideration was fair to the holders of Square 1 common stock from a financial point of view.

        The full text of Sandler O'Neill's opinion is attached as Appendix C to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O'Neill in rendering its opinion. Holders of Square 1 common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

        Sandler O'Neill's opinion speaks only as of the date of the opinion and was necessarily based on financial, economic, market and other conditions as they existed on, and the information made available to Sandler O'Neill as of, that date. The opinion was directed to the board of directors of Square 1 and is directed only to the fairness of the merger consideration to the holders of Square 1 common stock from a financial point of view. It does not address the underlying business decision of Square 1 to engage in the merger or any other aspect of the merger and is not a recommendation to any holder of Square 1 common stock as to how such stockholder should vote at the special meeting with respect to the merger or any other matter. Sandler O'Neill did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by Square 1's officers, directors or employees, or class of such persons, relative to the per share consideration to be received by Square 1 stockholders.

        For further information, please see the section entitled "The Merger—Opinion of Square 1's Financial Advisor."

Square 1 Special Meeting (page 34)

        The special meeting will be held at 11:00 a.m., local time, on July 29, 2015, at Washington Duke Inn & Golf Club, located at 3001 Cameron Boulevard, Durham, North Carolina. At the special meeting, holders of Square 1 Class A common stock will be asked to approve the merger proposal and the adjournment proposal and to act upon other business as may properly come before the special meeting or any adjournment or postponement thereof by or at the direction of the Square 1 board of directors.

        The Square 1 board of directors has fixed the close of business on June 18, 2015 as the record date for determining the holders of Square 1 Class A common stock entitled to receive notice of and to vote at the special meeting. As of the close of business on the record date, there were 26,469,682 shares of Square 1 Class A common stock outstanding and entitled to vote at the special meeting held by 262 holders of record. Each share of Square 1 Class A common stock entitles the holder to one vote on each proposal to be considered at the special meeting. As of the close of business on the record date, directors and executive officers of Square 1 and their affiliates owned and were entitled to vote

 

9


Table of Contents

9,907,547 shares of Square 1 Class A common stock (including the shares held by stockholders of Square 1 that have entered into voting agreements with PacWest), representing approximately 37.43% of the shares of Square 1 Class A common stock outstanding on that date. Certain stockholders of Square 1 have entered into voting agreements with PacWest, pursuant to which they have agreed, solely in their capacity as stockholders of Square 1, to vote all of their shares of Square 1 Class A common stock "FOR" the merger proposal and any other matter required to be approved by the stockholders of Square 1 to facilitate the transactions contemplated by the merger agreement. As of the close of business on the record date, these stockholders beneficially owned, in the aggregate, 9,066,056 shares of Square 1 Class A common stock, allowing them to exercise approximately 34.25% of the voting power of Square 1 common stock. As of close of business on the record date, PacWest beneficially held no shares of Square 1 common stock.

        Approval of the merger proposal requires the affirmative vote of a majority of the outstanding shares of Square 1 Class A common stock entitled to vote on such proposal. Approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast at the special meeting.

Square 1's Directors and Executive Officers Have Certain Interests in the Merger (page 67)

        In considering the recommendation of the Square 1 board of directors with respect to the merger, Square 1 Class A common stockholders should be aware that the executive officers and directors of Square 1 have certain interests in the merger that may be different from, or in addition to, the interests of Square 1 stockholders generally. The Square 1 board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the transactions contemplated thereby and making its recommendation that Square 1 Class A common stockholders vote to approve the Square 1 merger proposal. These interests include:

        We estimate that the aggregate amount that would become payable to Square 1's eight executive officers in settlement of their unvested Square 1 stock options and RSUs, as severance benefits (including a prorated bonus for 2015) and in respect of retention awards due upon the closing of the merger, assuming that the closing of the merger occurred on May 31, 2015 and each executive officer experienced a severance-qualifying termination at such time, is $14,422,331. In addition, we estimate that the aggregate amount of the retention awards payable to Mr. Bowers, Mr. Bhaumik, Ms. Earle, Ms. Erwin and Mr. Tower in respect of post-closing services is $3,435,000. We estimate that the

 

10


Table of Contents

aggregate amount that would become payable to Square 1's 11 non-employee directors in settlement of their unvested Square 1 stock options and RSUs is $679,359. The foregoing amounts do not include certain interests that cannot be quantified at this time, such as continued indemnification and compensation that might be paid in respect of continued employment. For a more complete description of these interests, and information regarding how the foregoing amounts were estimated, see "The Merger—Interests of Square 1 Directors and Executive Officers in the Merger."

Treatment of Square 1 Stock Options and Square 1 RSUs (page 41)

        Square 1 Stock Options.    At the effective time, each outstanding Square 1 stock option, whether vested or unvested, will be cancelled and will entitle the holder of such option to receive an amount in cash equal to the product of (i) the total number of shares of Square 1 common stock subject to such option and (ii) the excess, if any, of (A) the product of (1) the PacWest Average Closing Price and (2) 0.5997 over (B) the exercise price per share of Square 1 common stock underlying such option, less any applicable taxes to be withheld with respect to such payment.

        Square 1 RSUs.    At the effective time, each outstanding Square 1 RSU will be cancelled and will entitle the holder to receive an amount in cash equal to the product of (i) the number of shares of Square 1 common stock subject to such Square 1 RSU and (ii) the product of (A) the PacWest Average Closing Price and (B) 0.5997, less any applicable taxes to be withheld with respect to such payment.

Treatment of Square 1 Warrants (page 42)

        At the effective time, each warrant to purchase shares of Square 1 common stock held by specified individuals to the extent then outstanding and not previously exercised will be cancelled and will only entitle the holder thereof to receive, as soon as reasonably practicable after the effective time, an amount in cash equal to the product of (i) the total number of shares of Square 1 common stock subject to such warrants and (ii) the excess, if any, of (A) the product of (1) the PacWest Average Closing Price and (2) 0.5997 over (B) the exercise price per share of Square 1 common stock under such warrants, less any applicable taxes required to be withheld with respect to such payment. As of the date of this document, there were outstanding warrants to purchase 20,000 shares of Square 1 common stock. All such warrants expire, if not previously exercised, on July 11, 2015.

Board of Directors and Officers of PacWest After the Merger (page 67)

        On or prior to the effective time, the PacWest board of directors will increase the number of directors constituting the PacWest board of directors by one and fill such vacancy by a current director of Square 1 selected by Square 1 and reasonably acceptable to PacWest to be effective immediately following the effective time. The officers of PacWest immediately prior to the effective time will be the officers of the surviving corporation until the earlier of their resignation or removal or until their respective successors are duly appointed and qualified.

Regulatory Approvals Required for the Merger (page 72)

        Completion of the merger and the bank merger are subject to various regulatory approvals, including approvals from the Federal Reserve Board, the FDIC, the CDBO and the CBNC. Notifications and/or applications requesting approval for the merger or for the bank merger may also be submitted to other federal and state regulatory authorities and self-regulatory organizations. The parties have filed notices and applications to obtain the necessary regulatory approvals of the Federal Reserve Board, the FDIC, the CDBO and the CBNC. Approval from the CNBC was received on June 1, 2015. Although the parties currently believe they should be able to obtain all required regulatory approvals in a timely manner, they cannot be certain when or if they will obtain them or, if

 

11


Table of Contents

obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to or have a material adverse effect on PacWest after the completion of the merger. The regulatory approvals to which completion of the merger and bank merger are subject are described in more detail under the section entitled "The Merger—Regulatory Approvals Required for the Merger."

Conditions to the Merger (page 90)

        The obligations of PacWest and Square 1 to complete the merger are each subject to the satisfaction or waiver of the following conditions:

        In addition, the obligation of Square 1 to complete the merger is subject to the satisfaction or waiver of the following conditions:

 

12


Table of Contents

        PacWest's obligation to complete the merger is also subject to the satisfaction or waiver of the following conditions:

 

13


Table of Contents

No Solicitation (page 88)

        Under the terms of the merger agreement, Square 1 has agreed not to initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to, or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to, any acquisition proposal. Notwithstanding these restrictions, the merger agreement provides that, under specified circumstances, in response to an unsolicited bona fide written acquisition proposal from a third party, if the Square 1 board of directors determines in good faith (after consultation with its outside legal counsel) that the failure to take such action would reasonably be expected to violate the Square 1 directors' fiduciary duties under applicable law, Square 1 may (i) execute a confidentiality agreement with such third party to provide confidential information or (ii) engage in discussions or negotiations with such third party. The merger agreement also provides that, under specified circumstances, in response to an unsolicited bona fide written acquisition proposal if the Square 1 board of directors determines in good faith (i) after consultation with its financial advisors, that such proposal is a superior proposal and (ii) after consultation with outside legal counsel, that the failure to change its recommendation to the Square 1 stockholders to adopt the merger agreement would result in a violation of the Square 1 board of directors' fiduciary duties under applicable law, the Square 1 board of directors may change its recommendation to the Square 1 stockholders that the Square 1 stockholders adopt the merger agreement.

Termination of the Merger Agreement (page 92)

        PacWest and Square 1 may mutually agree at any time to terminate the merger agreement without completing the merger, even if the Square 1 stockholders have adopted the merger agreement.

        The merger agreement may also be terminated and the merger may be abandoned:

 

14


Table of Contents

        For more information, please see the section entitled "The Merger Agreement—Termination of the Merger Agreement."

Termination Fee (page 93)

        Square 1 must pay PacWest a termination fee of $32.5 million in the following circumstances:

 

15


Table of Contents

Voting Agreements (page 93)

        Patriot Financial Partners, L.P., Castle Creek Capital Partners IV, L.P., Endicott Opportunity Partners III, L.P. and Northaven Management, Inc. (and certain affiliates thereof), in their capacities as stockholders of Square 1, have separately entered into voting agreements with PacWest in which they have agreed to vote all shares of Square 1 common stock that they own and have the power to vote in favor of the merger proposal and any other matter that is required to be approved by the stockholders of Square 1 to facilitate the transactions contemplated by the merger agreement. These stockholders also agreed to vote against any proposal made in opposition to adoption of the merger agreement or in competition with the merger agreement and against any acquisition proposal. As of the close of business on the record date, these stockholders beneficially owned, in the aggregate, 9,066,056 shares of Square 1 Class A common stock, allowing them to exercise approximately 34.25% of the voting power of Square 1 common stock (which does not include shares issuable upon the exercise of stock options that were not outstanding as of the close of business on the record date).

        The voting agreements terminate in certain circumstances, including in the event that the merger agreement is terminated in accordance with its terms.

        For more information, please see the section entitled "The Merger Agreement—Voting Agreements."

Material U.S. Federal Income Tax Consequences of the Merger (page 96)

        The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. Assuming the merger qualifies as a reorganization, a stockholder of Square 1 generally will not recognize any gain or loss upon receipt of PacWest common stock in exchange for Square 1 common stock in the merger (except for any gain or loss that may result from the receipt of cash in lieu of fractional shares of PacWest common stock that the stockholder of Square 1 would otherwise be entitled to receive). It is a condition to the completion of the merger that PacWest and Square 1 receive written opinions from their respective counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

        Tax matters are complicated and the tax consequences of the merger to each Square 1 stockholder may depend on such stockholder's particular facts and circumstances. Square 1 stockholders are urged to consult their tax advisors to understand fully the tax consequences to them of the merger. For more information, please see the section entitled "Material U.S. Federal Income Tax Consequences of the Merger."

Litigation Related to the Merger (page 94)

        Three putative stockholder class action lawsuits, referred to as the merger litigation, have been filed in connection with the merger agreement. The first action, Manganaro v. Burke et al., Case No. 10817-VCL, was filed on March 20, 2015 in the Court of Chancery of the State of Delaware. This action alleged, among other things, that the members of the Square 1 board of directors breached their fiduciary duties to Square 1 stockholders, and was voluntarily dismissed without prejudice on May 5, 2015.

        Two more actions were filed in the United States District Court for the Middle District of North Carolina: (1) Lakowitz v. Bowers et al., Case No. 1:15-CV-371, filed on May 6, 2015; and (2) Li v. Bowers et al., Case No. 1:15-CV-373, filed on May 7, 2015. The Lakowitz litigation was voluntarily dismissed without prejudice on May 7, 2015. The Li complaint alleges, on behalf of a putative class of Square 1 stockholders, that the members of the Square 1 board of directors breached their fiduciary duties to Square 1 stockholders by approving the proposed merger for inadequate consideration; approving the transaction in order to obtain benefits not equally shared by other Square 1 stockholders;

 

16


Table of Contents

engaging a conflicted financial advisor; entering into the merger agreement containing preclusive deal protection devices; and causing a materially deficient and misleading Registration Statement to be filed and disseminated to stockholders. The Li complaint also alleges claims against PacWest and Square 1 for aiding and abetting these alleged breaches of fiduciary duties. The plaintiff also brings claims in his individual capacity against Square 1 and the members of the Square 1 board of directors for alleged violations of Sections 14(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), and against the members of the Square 1 board of directors for alleged violations of Section 20(a) of the Exchange Act, based upon alleged omissions and misrepresentations in the Registration Statement. The plaintiff in this action seeks injunctive relief prohibiting consummation of the merger, rescission and damages in the event the merger is consummated, an accounting of damages suffered by the plaintiff and the putative class, attorneys' fees and costs, and other and further relief. On June 3, 2015, the parties to the Li action entered into a Memorandum of Understanding providing that, among other things, (1) Square 1 will make specified additional disclosures in the definitive proxy statement/prospectus filed in connection with the merger, which disclosures are included in this document; (2) the litigation is stayed; and (3) the parties will enter into a stipulation providing for certification of a class for settlement purposes and a class release. The proposed settlement is subject to, among other things, approval of the United States District Court for the Middle District of North Carolina. Under the terms of the proposed settlement, following final court approval, the action will be dismissed with prejudice. There can be no assurances, however, that the parties will ultimately enter into a stipulation of settlement or that court approval of the settlement will be obtained. In such event, the proposed settlement as contemplated by the Memorandum of Understanding may be terminated.

Comparison of Stockholders' Rights (page 100)

        The rights of Square 1 stockholders who continue as PacWest stockholders after the merger will be governed by the certificate of incorporation and bylaws of PacWest rather than by the certificate of incorporation and bylaws of Square 1. For more information, please see the section entitled "Comparison of Stockholders' Rights."

The Parties (page 39)

PacWest Bancorp
10250 Constellation Blvd., Suite 1640
Los Angeles, California 90067
Phone: (310) 286-1144

        PacWest Bancorp, a Delaware corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. PacWest's principal business is to serve as the holding company for PacWest's wholly owned subsidiary, Pacific Western Bank. Pacific Western Bank is focused on relationship-based business banking to small and middle-market businesses nationwide. PacWest offers a broad range of deposit products and services through 80 full-service branches located throughout California. PacWest, through offices across the United States, provides loans to middle-market businesses, real estate investment firms, and sophisticated individual real estate investors.

        As of March 31 2015, PacWest had total assets of $16.6 billion, gross loans and leases of $12.3 billion, total deposits of $11.9 billion and stockholders' equity of $3.5 billion. PacWest's corporate headquarters is located in Los Angeles, California, and PacWest has 80 full-service, retail bank branches located primarily in southern and central California and three branches in northern California. PacWest's loan origination efforts are conducted nationwide with key offices located in Chevy Chase, Maryland, Southern California, including Los Angeles, St. Louis, Missouri, Denver, Colorado, Chicago, Illinois, New York, New York, and Midvale, Utah. PacWest also maintains a number of smaller lending offices throughout the country. PacWest operates as two business segments: Community Banking and National Lending. The Community Banking segment is focused on the

 

17


Table of Contents

lending and deposit gathering activities conducted primarily through PacWest's California-based branch offices and PacWest's treasury management function. The National Lending segment comprises PacWest's CapitalSource Division through which PacWest offers a broad range of specialized senior secured commercial loan products to small and middle-market businesses on a nationwide basis.

Square 1 Financial, Inc.
406 Blackwell Street, Suite 240
Durham, North Carolina 27701
Phone: (866) 355-0468

        Square 1 is a financial services company focused primarily on serving entrepreneurs and their investors. Square 1 is headquartered in Durham, North Carolina with thirteen loan production offices located in key innovation hubs across the United States. Through Square 1's banking subsidiary, Square 1 Bank, which was formed by experienced venture bankers, commercial bankers and entrepreneurs, Square 1 offers a full range of banking and financial products focused on the entrepreneurial community and their venture capital and private equity investors. Since inception, Square 1 has operated as a highly-focused venture bank and has provided a broad range of financial services to entrepreneurs, growing entrepreneurial companies and the venture capital and private equity communities. Square 1 provides banking services to its clients, including venture, commercial and international banking services, asset-based lending programs, and SBA and USDA commercial and real estate loan programs. Square 1 also provides investment advisory and asset management services to its clients through Square 1 Asset Management, a subsidiary of Square 1 Bank.

        As of March 31, 2015, Square 1 had consolidated total assets of $3.3 billion, total loans and leases of $1.5 billion, investment securities of $1.7 billion, deposits of $3.0 billion and stockholders' equity of $318.8 million. Square 1 had 270 full-time equivalent employees as of March 31, 2015.

Risk Factors (page 26)

        Before voting at the special meeting, you should carefully consider all of the information contained in or incorporated by reference into this document, including the risk factors set forth in the section entitled "Risk Factors" or described in PacWest's and Square 1's respective Annual Reports on Form 10-K for the year ended on December 31, 2014 and other reports filed with the SEC, which are incorporated by reference into this document. Please see "Where You Can Find More Information" and "Incorporation of Certain Documents by Reference."

 

18


Table of Contents

 


SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA FOR PACWEST

        The following table summarizes consolidated financial results of PacWest for the periods and at the dates indicated and should be read in conjunction with PacWest's consolidated financial statements and the notes to the consolidated financial statements contained in reports that PacWest has previously filed with the SEC. Historical financial information for PacWest can be found in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and its Annual Report on Form 10-K for the year ended December 31, 2014. Please see the section entitled "Where You Can Find More Information" for instructions on how to obtain the information that has been incorporated by reference. Financial amounts as of and for the three months ended March 31, 2015 and 2014 are unaudited and are not necessarily indicative of the results of operations for the full year or any other interim period, and management of PacWest believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its results of operations and financial position as of the dates and for the periods indicated. You should not assume the results of operations for past years and for the three months ended March 31, 2015 and 2014 indicate results for any future period.

 
  At or for the
Three Months
Ended March 31,
  At or For the Year Ended December 31,  
 
  2015   2014   2014   2013   2012   2011   2010  
 
  (In thousands, except per share amounts and percentages)
 

Results of Operations(1):

                                           

Interest income

  $ 214,314   $ 88,360   $ 704,775   $ 309,914   $ 296,115   $ 295,284   $ 290,284  

Interest expense

    (15,239 )   2,345     (42,398 )   (12,201 )   (19,648 )   (32,643 )   (40,957 )

Net interest income

    199,075     86,015     662,377     297,713     276,467     262,641     249,327  

Total (provision) negative provision for credit losses(2)

    (16,434 )   644     (11,499 )   4,210     12,819     (26,570 )   (212,492 )

Gain on securities

    3,275     4,752     4,841     5,359     1,239          

FDIC loss sharing (expense) income, net

    (4,399 )   (11,430 )   (31,730 )   (26,172 )   (10,070 )   7,776     22,784  

Other noninterest income

    21,995     11,369     69,076     25,057     24,703     23,650     20,454  

Total noninterest income

    20,871     4,691     42,187     4,244     15,872     31,426     43,238  

Foreclosed assets (expense) income, net

    (336 )   1,861     (5,401 )   1,503     (10,931 )   (10,676 )   (14,770 )

Acquisition, integration and reorganization costs

    (2,000 )   (2,200 )   (101,016 )   (40,812 )   (4,089 )   (600 )   (732 )

Debt termination expense

                    (22,598 )       (2,660 )

Other noninterest expense

    (82,024 )   (49,825 )   (299,175 )   (188,856 )   (174,044 )   (168,717 )   (170,641 )

Total noninterest expense

    (84,360 )   (50,164 )   (405,592 )   (228,165 )   (211,662 )   (179,993 )   (188,803 )

Earnings (loss) from continuing operations before income tax (expense) benefit

    119,152     41,186     287,473     78,002     93,496     87,504     (108,730 )

Income tax (expense) benefit

    (46,073 )   (15,281 )   (117,005 )   (32,525 )   (36,695 )   (36,800 )   46,714  

Net earnings (loss) from continuing operations

    73,079     25,905     170,468     45,477     56,801     50,704     (62,016 )

Loss from discontinued operations before income tax benefit

        (1,413 )   (2,677 )   (620 )            

Income tax benefit

        588     1,114     258              

Net loss from discontinued operations

        (825 )   (1,563 )   (362 )            

Net earnings (loss)

  $ 73,079   $ 25,080   $ 168,905   $ 45,115   $ 56,801   $ 50,704   $ (62,016 )

Per Common Share Data:

                                           

Basic and diluted earnings (loss) per share (EPS):

                                           

Net earnings (loss) from continuing operations

  $ 0.71   $ 0.57   $ 1.94   $ 1.09   $ 1.54   $ 1.37   $ (1.77 )

Net earnings (loss)

  $ 0.71   $ 0.55   $ 1.92   $ 1.08   $ 1.54   $ 1.37   $ (1.77 )

Dividends declared during period

  $ 0.50   $ 0.25   $ 1.25   $ 1.00   $ 0.79   $ 0.21   $ 0.04  

Book value per share(3)

  $ 34.29   $ 18.21   $ 34.04   $ 17.66   $ 15.74   $ 14.66   $ 13.06  

Shares outstanding(3)

    103,044     45,778     103,022     45,823     37,421     37,254     36,672  

Average shares outstanding for basic and diluted EPS

    101,913     44,651     86,853     40,823     35,685     35,491     35,108  

 

19


Table of Contents

 

 
  Selected Historical Consolidated Financial Data for PacWest  
 
  At or For the
Three Months
Ended March 31,
  At or For the Year Ended December 31,  
 
  2015   2014   2014   2013   2012   2011   2010  
 
  (In thousands, except per share amounts and percentages)
 

Balance Sheet Data:

                                           

Total assets

  $ 16,643,940   $ 6,517,658   $ 16,234,605   $ 6,533,168   $ 5,463,658   $ 5,528,237   $ 5,529,021  

Cash and cash equivalents

    391,854     342,087     313,226     147,422     164,404     295,617     108,552  

Investment securities

    1,624,314     1,502,473     1,607,786     1,522,684     1,392,511     1,372,464     929,056  

Non-purchased credit impaired (Non-PCI) loans and leases

    12,047,946     3,828,569     11,613,832     3,930,539     3,074,947     2,841,071     3,196,881  

Allowance for credit losses, Non-PCI loans and leases

    86,554     66,955     76,767     67,816     72,119     93,783     104,328  

Purchased credit impaired (PCI) loans

    254,346     332,516     290,852     382,796     517,885     705,332     910,394  

FDIC loss sharing asset

    16,532     34,628     18,734     45,524     57,475     95,187     116,352  

Goodwill

    1,728,380     208,743     1,720,479     208,743     79,866     39,141     47,301  

Core deposit and customer relationship intangibles

    15,703     15,884     17,204     17,248     14,723     17,415     25,843  

Deposits

    11,934,175     5,369,408     11,755,128     5,280,987     4,709,121     4,577,453     4,649,698  

Borrowings

    618,156     5,748     383,402     113,726     12,591     225,000     225,000  

Subordinated debentures

    431,448     132,790     433,583     132,645     108,250     129,271     129,572  

Stockholders' equity

    3,533,361     833,507     3,506,230     808,898     589,121     546,203     478,797  

Performance Ratios:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Return on average assets

    1.82 %   1.56 %   1.27 %   0.74 %   1.04 %   0.92 %   (1.14 )%

Return on average equity

    8.39 %   12.40 %   6.11 %   6.28 %   10.01 %   9.92 %   (12.56 )%

Net interest margin

    5.89 %   5.95 %   5.95 %   5.37 %   5.52 %   5.26 %   5.02 %

Efficiency ratio

    38.35 %   55.30 %   57.57 %   75.60 %   72.40 %   61.21 %   64.53 %

Stockholders' equity to total assets ratio

    21.23 %   12.79 %   21.60 %   12.38 %   10.78 %   9.88 %   8.66 %

Average equity to average assets

    21.68 %   12.59 %   20.74 %   11.75 %   10.36 %   9.32 %   9.10 %

Dividend payout ratio(4)

    70.45 %   45.08 %   67.66 %   90.89 %   50.68 %   15.04 %   NM  

Tier 1 leverage capital ratio(5)

    11.74 %   11.73 %   12.34 %   11.22 %   10.53 %   10.42 %   8.54 %

Tier 1 risk-based capital ratio(5)

    12.27 %   16.16 %   13.16 %   15.12 %   15.17 %   15.97 %   12.68 %

Total risk-based capital ratio(5)

    15.80 %   17.42 %   16.07 %   16.38 %   16.43 %   17.25 %   13.96 %

Non-PCI Credit Quality Metrics:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Non-PCI nonaccrual loans and leases

  $ 139,334   $ 58,121   $ 83,621   $ 46,774   $ 41,762   $ 61,619   $ 95,509  

Foreclosed assets

    35,940     50,895     43,721     55,891     56,414     81,918     81,414  

Total nonperforming assets

  $ 175,274   $ 109,016   $ 127,342   $ 102,665   $ 98,176   $ 143,537   $ 176,923  

Non-PCI nonaccrual loans to Non-PCI loans and leases

    1.16 %   1.52 %   0.72 %   1.19 %   1.36 %   2.17 %   2.99 %

Nonperforming assets to Non-PCI loans and leases and foreclosed assets

    1.61 %   2.71 %   1.28 %   2.58 %   3.14 %   4.91 %   5.40 %

Allowance for credit losses to Non-PCI nonaccrual loans and leases

    62.12 %   115.20 %   91.80 %   144.99 %   172.69 %   152.20 %   109.20 %

Allowance for credit losses to Non-PCI loans and leases

    0.72 %   1.75 %   0.66 %   1.73 %   2.35 %   3.30 %   3.26 %

Net charge-offs to average Non-PCI loans and leases(2)

    0.06 %   0.02 %   0.02 %   0.12 %   0.33 %   0.80 %   5.88 %

(1)
Operating results of acquired companies are included from the respective acquisition dates.

(2)
During 2010, the Bank executed two sales of adversely classified loans totaling $398.5 million that included $128.1 million in nonaccrual loans. The sales resulted in $144.6 million of charge-offs to the allowance for credit losses.

 

20


Table of Contents

(3)
Includes 1,129,445 and 1,087,436 shares at March 31, 2015 and 2014, respectively, and 1,108,505 shares, 1,216,524 shares, 1,698,281 shares, 1,675,730 shares, and 1,230,582 shares of unvested restricted stock outstanding at December 31, 2014, 2013, 2012, 2011, and 2010.

(4)
Not meaningful for 2010.

(5)
Capital ratios presented are for PacWest as a consolidated company.

 

21


Table of Contents

 


SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA FOR SQUARE 1

        The following table summarizes consolidated financial results of Square 1 for the periods and at the dates indicated and should be read in conjunction with Square 1's consolidated financial statements and the notes to the consolidated financial statements contained in reports that Square 1 has previously filed with the SEC. Historical financial information for Square 1 can be found in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and its Annual Report on Form 10-K for the year ended December 31, 2014. Please see the section entitled "Where You Can Find More Information" for instructions on how to obtain the information that has been incorporated by reference. Financial amounts as of and for the three months ended March 31, 2015 and 2014 are unaudited and are not necessarily indicative of the results of operations for the full year or any other interim period, and management of Square 1 believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its results of operations and financial position as of the dates and for the periods indicated. You should not assume the results of operations for past years and for the three months ended March 31, 2015 and 2014 indicate results for any future period.

 
  Three Months
Ended March 31,
  Years Ended December 31,  
(Dollars in thousands)
  2015   2014   2014   2013   2012   2011   2010  

Financial Condition Data:

                                           

Total assets

  $ 3,337,024   $ 2,467,142   $ 3,094,866   $ 2,326,427   $ 1,803,281   $ 1,648,287   $ 1,583,871  

Cash and cash equivalents

    126,230     197,894     86,921     105,730     48,971     194,240     201,279  

Investment securities—available-for-sale

    1,292,931     980,669     1,294,533     924,229     776,160     679,553     820,048  

Investment securities—held-to-maturity

    365,771     169,521     300,425     154,255     67,022     28,817     16,964  

Loans, net of unearned income(1)

    1,478,582     1,061,287     1,346,449     1,082,536     863,081     710,904     490,636  

Off-balance sheet unfunded loan commitments

    1,297,505     1,036,497     1,232,078     977,262     741,232     714,185     576,632  

Deposits

    3,009,463     2,198,199     2,776,552     2,106,727     1,519,329     1,508,829     1,461,913  

Off-balance sheet client investment funds

    1,461,755     643,514     1,436,633     557,883     377,932     458,464     263,325  

Borrowings

                6,207     96,204     6,193     6,183  

Repurchase agreements

                12,737             928  

Operating Data:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Interest income

  $ 29,401   $ 22,800   $ 104,581   $ 77,662   $ 67,676   $ 60,827   $ 52,854  

Interest expense

    256     293     807     1,328     1,142     1,502     1,880  

Net interest income

    29,145     22,507     103,774     76,334     66,534     59,325     50,974  

Provision for loan losses

    5,447     2,964     12,614     13,300     9,371     7,300     5,050  

Net interest income after provision for loan losses

    23,698     19,543     91,160     63,034     57,163     52,025     45,924  

Noninterest income (expense)

    6,212     7,139     25,217     25,308     15,560     6,857     (22,724 )

Noninterest expense

    18,337     15,583     66,551     55,921     51,148     49,163     43,091  

Income (loss) before income tax expense

    11,573     11,099     49,826     32,421     21,575     9,719     (19,892 )

Income tax expense (benefit)

    3,420     3,251     15,643     10,038     7,203     4,372     (7,271 )

Preferred stock dividends and discount accretion

        62     63     250     250     250     250  

Net income (loss) available to common stockholders

    8,153     7,786     34,120     22,133     14,122     5,097     (12,871 )

(1)
Net of unearned income of $8.6 million and $4.6 million at March 31, 2015 and 2014, respectively, and $7.9 million, $4.5 million, $4.0 million, $4.1 million, and $2.1 million at December 31, 2014, 2013, 2012, 2011 and 2010, respectively. Unearned loan fees, the discount on SBA loans and the unearned initial warrant value are included in unearned income.

 

22


Table of Contents

 
  Three Months
Ended March 31,
  Years Ended December 31,  
 
  2015   2014   2014   2013   2012   2011   2010  

Performance Ratios:

                                           

Return on average assets

    1.04 %   1.33 %   1.25 %   1.06 %   0.83 %   0.33 %   (1.01 )%

Return on average common equity

    10.66     16.34     12.88     12.44     10.11     4.59     (14.00 )

Net interest margin(1)

    3.96     4.12     4.06     3.91     4.14     4.02     4.22  

Average equity to average assets

    9.72     8.35     9.77     8.75     8.48     7.52     7.58  

Capital Ratios (consolidated):

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Tier 1 leverage capital

    9.61     10.90     9.71     8.34     9.53     8.69     8.88  

Tier 1 risk-based capital

    11.73     14.83     13.84     11.38     13.49     13.03     15.59  

Total risk-based capital

    12.73     15.93     14.96     12.46     14.57     14.13     16.72  

Total shareholders' equity to assets

    9.55     10.45     9.78     8.13     9.80     7.55     6.76  

Asset Quality Ratios:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Allowance for loan losses as a percent of total loans

    1.67     1.80     1.70     1.70     1.60     1.64     1.87  

Allowance for loan losses as a percent of nonperforming loans

    135.34     198.65     132.87     127.05     95.25     164.69     166.47  

Net charge-offs to average outstanding loans (annualized)

    1.07     0.85     0.68     0.95     0.95     0.79     1.14  

Nonperforming loans as a percent of total loans

    1.24     0.91     1.28     1.34     1.68     0.99     1.13  

Nonperforming assets as a percent of total assets

    0.55     0.39     0.56     0.63     0.81     0.50     0.55  

Per Share Data:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Net income (loss) per basic common share

  $ 0.28   $ 0.33   $ 1.25   $ 0.94   $ 0.67   $ 0.25   $ (0.78 )

Net income (loss) per diluted common share

  $ 0.27   $ 0.31   $ 1.18   $ 0.93   $ 0.67   $ 0.25   $ (0.78 )

Book value per common share

  $ 10.71   $ 9.29   $ 10.48   $ 7.80   $ 7.31   $ 5.94   $ 5.08  

Weighted average common shares outstanding-basic

    29,269,812     23,725,739     27,401,132     23,508,254     20,925,764     20,093,977     16,455,993  

Weighted average common shares outstanding-diluted

    30,281,386     25,739,743     29,100,814     23,859,448     21,136,770     20,200,227     16,514,246  

(1)
Represents net interest income as a percent of average interest-earning assets.

 

23


Table of Contents

 


UNAUDITED COMPARATIVE PER SHARE DATA

        The following table shows per common share data regarding basic and diluted earnings, cash dividends and book value for (a) PacWest and Square 1 on a historical basis, (b) PacWest and Square 1 on a pro forma combined basis, and (c) Square 1 on a pro forma equivalent basis. The pro forma basic and diluted earnings per share information was computed as if the merger, as well as PacWest's merger with CapitalSource Inc., which occurred on April 7, 2014, had been completed on January 1, 2014. The pro forma book value per share information was computed as if the merger had been completed on December 31, 2014.

        The following pro forma information has been derived from and should be read in conjunction with PacWest's and Square 1's audited consolidated financial statements for the year ended December 31, 2014 and their unaudited consolidated financial statements as of and for the three months ended March 31, 2015, incorporated herein by reference. This information is presented for illustrative purposes only. You should not rely on the pro forma combined or pro forma equivalent amounts as they are not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the dates indicated, nor are they necessarily indicative of the future operating results or financial position of the combined company. The pro forma information, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related costs, or other factors that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results.

 
  Unaudited Comparative Per Common Share Data  
 
  PacWest(1)   Square 1   PacWest
Pro Forma
Combined
  Square 1
Pro Forma
Equivalent
Per Share(2)
 

Basic Earnings

                         

Year ended December 31, 2014

  $ 1.92   $ 1.25   $ 2.40   $ 1.44  

Three months ended March 31, 2015

  $ 0.71   $ 0.28   $ 0.68   $ 0.41  

Diluted Earnings

   
 
   
 
   
 
   
 
 

Year ended December 31, 2014

  $ 1.92   $ 1.18   $ 2.40   $ 1.44  

Three months ended March 31, 2015

  $ 0.71   $ 0.27   $ 0.68   $ 0.41  

Cash Dividends Paid(3)

   
 
   
 
   
 
   
 
 

Year ended December 31, 2014

  $ 1.25   $   $ 1.25   $ 0.75  

Three months ended March 31, 2015

  $ 0.50   $   $ 0.50   $ 0.30  

Book Value

   
 
   
 
   
 
   
 
 

December 31, 2014

  $ 34.04   $ 10.48   $ 35.92   $ 21.54  

March 31, 2015

  $ 34.29   $ 10.71   $ 36.31   $ 21.78  

(1)
Basic earnings and diluting earning for PacWest for the year ended December 31, 2014 reflect the results of CapitalSource Inc. only from April 7, 2014.

(2)
Computed by multiplying the PacWest pro forma combined amounts by the exchange ratio of 0.5997.

(3)
PacWest pro forma combined cash dividends paid are based only upon PacWest's historical amounts.

 

24


Table of Contents


COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

        The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share, and the dividend paid per share, of PacWest common stock, which trades on NASDAQ under the symbol "PACW," and Square 1 common stock, which trades on NASDAQ under the symbol "SQBK."

 
  PacWest Common Stock   Square 1 Common Stock  
 
  High   Low   Dividend   High   Low   Dividend  

2013

                                     

First quarter

  $ 29.20   $ 24.96   $ 0.25   $ N/A   $ N/A   $ N/A  

Second quarter

  $ 31.02   $ 25.81   $ 0.25   $ N/A   $ N/A   $ N/A  

Third quarter

  $ 36.31   $ 30.58   $ 0.25   $ N/A   $ N/A   $ N/A  

Fourth quarter

  $ 42.96   $ 34.14   $ 0.25   $ N/A   $ N/A   $ N/A  

2014

   
 
   
 
   
 
   
 
   
 
   
 
 

First quarter

  $ 46.08   $ 37.70   $ 0.25   $ 20.70 (1) $ 19.53 (1) $ 0.00  

Second quarter

  $ 47.37   $ 38.04   $ 0.25   $ 20.50   $ 16.94   $ 0.00  

Third quarter

  $ 44.80   $ 39.50   $ 0.25   $ 19.95   $ 17.85   $ 0.00  

Fourth quarter

  $ 48.03   $ 37.63   $ 0.50   $ 26.53   $ 16.92   $ 0.00  

2015

   
 
   
 
   
 
   
 
   
 
   
 
 

First Quarter

  $ 47.47   $ 41.18   $ 0.50   $ 28.75   $ 21.43   $ 0.00  

Second Quarter (through June 18, 2015)

  $ 48.03   $ 43.69   $ 0.50   $ 28.17   $ 25.35   $ 0.00  

(1)
Stock prices for Square 1 common stock are available starting on March 27, 2014.

        The following table sets forth the closing sale prices per share of PacWest common stock and Square 1 common stock on February 27, 2015, the last trading day before the public announcement of the signing of the merger agreement, and on June 18, 2015, the latest practicable date before the date of this document. The following table also includes the equivalent market value per share of Square 1 common stock on February 27, 2015 and June 18, 2015 determined by multiplying the share price of PacWest common stock on such dates by the exchange ratio of 0.5997.

 
  PacWest
Common Stock
  Square 1
Common Stock
  Equivalent
Market Value
per Share
of Square 1
Common Stock
 

February 27, 2015

  $ 45.84   $ 27.68   $ 27.49  

June 18, 2015

  $ 47.04   $ 27.48   $ 28.21  

 

25


Table of Contents


RISK FACTORS

        In addition to the other information contained in or incorporated by reference into this document, including the matters addressed under the caption entitled "Cautionary Statement Regarding Forward-Looking Statements," Square 1 stockholders should carefully consider the following factors in deciding whether to vote for Square 1's proposals. Please see the sections entitled "Where You Can Find More Information" and "Incorporation of Certain Documents by Reference."

Because the market price of PacWest common stock will fluctuate, the value of the merger consideration to be received by Square 1 stockholders may change.

        Upon completion of the merger, each outstanding share of Square 1 common stock, excluding certain specified shares, will be converted into the right to receive 0.5997 of a share of PacWest common stock pursuant to the terms of the merger agreement. The closing price of PacWest common stock on the date that the merger is completed may vary from the closing price of PacWest common stock on the date PacWest and Square 1 announced the merger, on the date that this document is being mailed to the Square 1 stockholders, and on the date of the special meeting of Square 1 stockholders. Because the merger consideration is determined by a fixed exchange ratio, at the time of the special meeting, Square 1 stockholders will not know or be able to calculate the value of the PacWest common stock they will receive upon completion of the merger. Any change in the market price of PacWest common stock prior to completion of the merger may affect the value of the merger consideration that Square 1 stockholders will receive upon completion of the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in Square 1's and PacWest's respective businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of PacWest and Square 1. Square 1 stockholders should obtain current market quotations for shares of PacWest common stock before voting their shares at the special meeting.

Square 1 stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

        Square 1 stockholders currently have the right to vote in the election of the Square 1 board of directors and on other matters affecting Square 1. Upon the completion of the merger, each Square 1 stockholder will be a stockholder of PacWest with a percentage ownership of PacWest that is smaller than such stockholder's current percentage ownership of Square 1. It is currently expected that the former stockholders of Square 1 as a group will receive shares in the merger constituting approximately 14.93% of the outstanding shares of PacWest's common stock immediately after the merger. Because of this, Square 1 stockholders will have less influence on the management and policies of PacWest than they now have on the management and policies of Square 1.

Sales of substantial amounts of PacWest's common stock in the open market by former Square 1 stockholders could depress PacWest's stock price.

        Shares of PacWest common stock that are issued to stockholders of Square 1 in the merger will be freely tradable without restrictions or further registration under the Securities Act. As of the close of business on the record date, PacWest had approximately 102,061,730 shares of common stock outstanding (excluding 990,259 shares of unvested time-based restricted stock) and 13,205,736 shares of PacWest common stock were reserved for issuance under the PacWest stock plan. Based on the shares of Square 1 common stock currently outstanding, PacWest currently expects to issue approximately 17,909,916 shares of its common stock in connection with the merger.

        Because of the significantly enhanced liquidity of PacWest common stock as compared to Square 1 common stock on account of the greater public float and trading volume of PacWest common stock

26


Table of Contents

relative to Square 1 common stock, if the merger is completed, Square 1's former stockholders may sell substantial amounts of PacWest common stock in the public market following completion of the merger. Any such sales may cause the market price of PacWest common stock to decrease. These sales might also make it more difficult for PacWest to sell equity or equity-related securities at a time and price that it otherwise would deem appropriate.

PacWest may fail to realize the anticipated benefits of the merger.

        The success of the merger will depend on, among other things, PacWest's ability to combine and integrate the business of Square 1 into PacWest's business. If PacWest is not able to successfully achieve this objective, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected.

        PacWest and Square 1 have operated and, until the consummation of the merger, will continue to operate independently. It is possible that the integration process or other factors could result in the loss or departure of key employees, the disruption of the ongoing business of PacWest or Square 1 or inconsistencies in standards, controls, procedures and policies. It is also possible that clients, customers, depositors and counterparties of Square 1 could choose to discontinue their relationships with PacWest post-merger because they prefer doing business with an independent company or for any other reason, which would adversely affect the future anticipated performance of PacWest. These transition matters could have an adverse effect on Square 1 during the pre-merger period and for an undetermined amount of time after the consummation of the merger.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

        Before the transactions contemplated by the merger agreement, including the merger and the bank merger, may be completed, various approvals must be obtained from bank regulatory authorities. These governmental entities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the merger or of imposing additional costs or limitations on PacWest following the merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, and may contain conditions on the completion of the merger that are not anticipated or cannot be met. If the consummation of the merger is delayed, including by a delay in receipt of necessary governmental approvals, the business, financial condition and results of operations of each company may also be materially adversely affected.

Failure of the merger to be completed, the termination of the merger agreement or a significant delay in the consummation of the merger could negatively impact PacWest and Square 1.

        The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include: (i) adoption of the merger agreement by Square 1 stockholders, (ii) absence of any governmental order or law prohibiting completion of the merger, and (iii) effectiveness of the registration statement of which this document is a part.

        The obligation of each party to consummate the merger is also conditioned upon (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (ii) performance in all material respects by the other party of its obligations under the merger agreement, (iii) receipt by such party of a tax opinion to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and (iv) the absence of a material adverse effect with respect to the other party since the date of the merger agreement. The obligation of PacWest to consummate the merger is also conditioned upon (i) the adjusted stockholders' equity of Square 1 being in excess of a specified level,

27


Table of Contents

(ii) the receipt of certain required regulatory approvals and such approvals not containing materially burdensome regulatory conditions, and (iii) the receipt by PacWest of a certificate as to certain tax matters. The obligation of Square 1 to consummate the merger is also conditioned upon the receipt of certain required regulatory approvals.

        These conditions to the consummation of the merger may not be fulfilled and, accordingly, the merger may not be completed. In addition, if the merger is not completed by March 31, 2016, either PacWest or Square 1 may choose not to proceed with the merger, and the parties can mutually decide to terminate the merger agreement at any time, before or after the Square 1 stockholder approval.

        If the merger is not consummated, the ongoing business, financial condition and results of operations of each party may be materially adversely affected and the market price of each party's common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the merger will be consummated. If the consummation of the merger is delayed, including by the receipt of a competing acquisition proposal, the business, financial condition and results of operations of each company may be materially adversely affected.

        In addition, each party has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement. If the merger is not completed, the parties would have to recognize these expenses without realizing the expected benefits of the transaction. Any of the foregoing, or other risks arising in connection with the failure of or delay in consummating the merger, including the diversion of management attention from pursuing other opportunities and the constraints in the merger agreement on each party's ongoing business during the pendency of the merger, could have a material adverse effect on each party's business, financial condition and results of operations.

        Additionally, PacWest's or Square 1's business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. If the merger agreement is terminated and a party's board of directors seeks another merger or business combination, such party's stockholders cannot be certain that such party will be able to find a party willing to engage in a transaction on more attractive terms than the merger.

Square 1 will be subject to business uncertainties and contractual restrictions while the merger is pending.

        Uncertainty about the effect of the merger on employees, customers, suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of Square 1 and, consequently, PacWest. These uncertainties may impair Square 1's ability to attract, retain and motivate key personnel and customers pending the consummation of the merger, as such personnel and customers may experience uncertainty about their future roles following the consummation of the merger. Additionally, these uncertainties could cause customers, suppliers, vendors and others who deal with Square 1 to seek to change existing business relationships with Square 1 or fail to extend an existing relationship with Square 1. In addition, competitors may target Square 1's existing customers by highlighting potential uncertainties and integration difficulties that may result from the merger.

        Square 1 has a small number of key personnel. The pursuit of the merger and the preparation for the integration may place a burden on Square 1's management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on Square 1's business, financial condition and results of operations.

        In addition, the merger agreement restricts Square 1 from taking certain actions without PacWest's consent while the merger is pending. These restrictions may, among other matters, prevent Square 1 from pursuing otherwise attractive business opportunities, selling assets, incurring indebtedness,

28


Table of Contents

engaging in significant capital expenditures in excess of certain limits set forth in the merger agreement, entering into other transactions or making other changes to Square 1's business prior to consummation of the merger or termination of the merger agreement. These restrictions could have a material adverse effect on Square 1's business, financial condition and results of operations. Please see the section entitled "The Merger Agreement—Conduct of Business Prior to the Completion of the Merger" for a description of the restrictive covenants applicable to Square 1.

Square 1 directors and officers have interests in the merger different from the interests of other Square 1 stockholders.

        Square 1's executive officers and directors have interests in the merger that are different from, or in addition to, the interests of Square 1 stockholders generally. Such interests include the rights to accelerated vesting of equity awards, payments in connection with the termination of employment agreements with certain executive officers, potential benefits upon certain qualifying terminations following consummation of the merger under existing employment agreements with other executive officers and the right to indemnification and insurance coverage following the consummation of the merger. In addition, pursuant to the merger agreement, on or prior to the effective time, the PacWest board of directors will increase the number of directors constituting the PacWest board of directors by one and fill such vacancy by a current director of Square 1 selected by Square 1 and reasonably acceptable to PacWest to be effective immediately following the effective time. These interests are described in more detail under the section entitled "The Merger—Interests of Square 1 Directors and Executive Officers in the Merger."

Shares of PacWest common stock to be received by Square 1 stockholders as a result of the merger will have rights different from the shares of Square 1 common stock.

        Upon completion of the merger, the rights of former Square 1 stockholders will be governed by the certificate of incorporation and bylaws of PacWest. The rights associated with Square 1 common stock are different from the rights associated with PacWest common stock, although both companies are organized under Delaware law. Please see the section entitled "Comparison of Stockholders' Rights" for a discussion of the different rights associated with PacWest common stock.

The merger agreement contains provisions that may discourage other companies from trying to acquire Square 1.

        The merger agreement contains provisions that may discourage a third party from submitting a business combination proposal to Square 1 that might result in greater value to Square 1 stockholders than the merger. These provisions include a general prohibition on Square 1 from soliciting, or, subject to certain exceptions, entering into discussions with any third party regarding any acquisition proposal or offers for competing transactions. In addition, in some circumstances upon termination of the merger agreement, Square 1 may be required to pay PacWest a termination fee of $32.5 million. Certain stockholders of Square 1 have entered into voting agreements and have agreed to vote their shares of Square 1 common stock that they have the power to vote in favor of the merger agreement and certain related matters and against alternative transactions. The stockholders that are party to the voting agreements described in this paragraph beneficially own in the aggregate approximately 34.25% of the outstanding shares of Square 1 voting common stock as of the close of business on the record date. For further information, please see the section entitled "The Merger Agreement—Voting Agreements." Square 1 also has an unqualified obligation to submit the merger proposal to a vote of Square 1 stockholders, even if Square 1 receives a proposal that its board of directors believes is superior to the merger.

29


Table of Contents

PacWest expects to incur substantial expenses related to the merger.

        PacWest expects to incur substantial expenses in connection with consummation of the merger and combining the business, operations, networks, systems, technologies, policies and procedures of Square 1 into that of PacWest. Although PacWest and Square 1 have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the merger could, particularly in the near term, exceed the savings that PacWest expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the consummation of the merger. As a result of these expenses, both PacWest and Square 1 expect to take charges against their earnings before and after the completion of the merger. The charges taken in connection with the merger are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.

In connection with the announcement of the merger agreement, one lawsuit is pending, seeking, among other things, to enjoin the merger, and an adverse judgment in this lawsuit may prevent the merger from becoming effective within the expected time frame (if at all).

        Three putative stockholder class action lawsuits, referred to as the merger litigation, have been filed in connection with the merger agreement. The first action, Manganaro v. Burke et al., Case No. 10817-VCL, was filed on March 20, 2015 in the Court of Chancery of the State of Delaware. This action alleged, among other things, that the members of the Square 1 board of directors breached their fiduciary duties to Square 1 stockholders, and was voluntarily dismissed without prejudice on May 5, 2015.

        Two more actions were filed in the United States District Court for the Middle District of North Carolina: (1) Lakowitz v. Bowers et al., Case No. 1:15-CV-371, filed on May 6, 2015; and (2) Li v. Bowers et al., Case No. 1:15-CV-373, filed on May 7, 2015. The Lakowitz litigation was voluntarily dismissed without prejudice on May 7, 2015. The Li complaint alleges, on behalf of a putative class of Square 1 stockholders, that the members of the Square 1 board of directors breached their fiduciary duties to Square 1 stockholders by approving the proposed merger for inadequate consideration; approving the transaction in order to obtain benefits not equally shared by other Square 1 stockholders; engaging a conflicted financial advisor; entering into the merger agreement containing preclusive deal protection devices; and causing a materially deficient and misleading Registration Statement to be filed and disseminated to stockholders. The Li complaint also alleges claims against PacWest and Square 1 for aiding and abetting these alleged breaches of fiduciary duties. The plaintiff also brings claims in his individual capacity against Square 1 and the members of the Square 1 board of directors for alleged violations of Sections 14(a) of the Exchange Act, and against the members of the Square 1 board of directors for alleged violations of Section 20(a) of the Exchange Act, based upon alleged omissions and misrepresentations in the Registration Statement. The plaintiff in this action seeks injunctive relief prohibiting consummation of the merger, rescission and damages in the event the merger is consummated, an accounting of damages suffered by the plaintiff and the putative class, attorneys' fees and costs, and other and further relief. On June 3, 2015, the parties to the Li action entered into a Memorandum of Understanding providing that, among other things, (1) Square 1 will make specified additional disclosures in the definitive proxy statement/prospectus filed in connection with the merger, which disclosures are included in this document; (2) the litigation is stayed; and (3) the parties will enter into a stipulation providing for certification of a class for settlement purposes and a class release. The proposed settlement is subject to, among other things, approval of the United States District Court for the Middle District of North Carolina. Under the terms of the proposed settlement, following final court approval, the action will be dismissed with prejudice. There can be no assurances, however, that

30


Table of Contents

the parties will ultimately enter into a stipulation of settlement or that court approval of the settlement will be obtained. In such event, the proposed settlement as contemplated by the Memorandum of Understanding may be terminated.

The opinion of Square 1's financial advisor will not reflect changes in circumstances between the date of the opinion and the completion of the merger.

        The Square 1 board of directors received an opinion from Sandler O'Neill, its financial advisor, on March 1, 2015 to address the fairness of the merger consideration from a financial point of view as of that date. Subsequent changes in the operations and prospects of Square 1 or PacWest, general market and economic conditions and other factors that may be beyond the control of Square 1 or PacWest, and on which Square 1's financial advisor's opinion was based, may significantly alter the value of Square 1 or PacWest or the prices of the shares of PacWest common stock or Square 1 common stock by the time the merger is completed. Because Square 1 does not anticipate asking Sandler O'Neill to update its opinion, the opinion will not address the fairness of the merger consideration from a financial point of view at the time the merger is completed or as of any other date other than the date of such opinion. For a description of the opinion that Square 1 received from its financial advisor, please refer to the section entitled "The Merger—Opinion of Square 1's Financial Advisor."

PacWest may not be able to realize its deferred income tax assets.

        It is currently expected that PacWest will undergo an "ownership change" within the meaning of Section 382 of the Internal Revenue Code as a result of the merger, and therefore an annual limit may be imposed on the amount of net operating loss carryforwards that may be used to offset future taxable income. Such annual limit is generally the product of the total value of a company's outstanding equity immediately prior to an "ownership change" (subject to certain adjustments) and the applicable federal long-term tax-exempt interest rate. Based on PacWest's current values and income projections, it is not currently expected that such annual limit will impair PacWest's ability to utilize the net operating loss carryforwards as of the date of the merger.

31


Table of Contents


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This document, including information included or incorporated by reference in this document, contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 giving PacWest's and Square 1's expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as "believe," "expect," "anticipate," "intend," "target," "estimate," "continue," "positions," "prospects," "projections" or "potential," by future conditional verbs such as "will," "would," "should," "could" or "may", or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time. Forward-looking statements speak only as of the date they are made and PacWest and Square 1 assume no duty to update forward-looking statements.

        In addition to factors previously disclosed in PacWest's and Square 1's reports filed with the SEC and those identified elsewhere in this filing (including the section entitled "Risk Factors") the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

32


Table of Contents

33


Table of Contents


SQUARE 1 SPECIAL MEETING OF STOCKHOLDERS

Date, Time and Place

        The special meeting will be held at Washington Duke Inn & Golf Club, 3001 Cameron Boulevard, Durham, North Carolina at 11:00 a.m, local time, on July 29, 2015. On or about June 23, 2015, Square 1 commenced mailing of this document and the enclosed form of proxy to its stockholders entitled to vote at the special meeting.

Purpose of the Special Meeting

        At the special meeting, Square 1 Class A common stockholders will be asked to:

Recommendation of the Square 1 Board of Directors

        After careful consideration, the Square 1 board of directors approved and declared advisable the merger agreement, and determined that the merger agreement and the transaction contemplated thereby are fair to and in the best interests of Square 1 and its stockholders.

        The Square 1 board of directors recommends that you vote "FOR" the merger proposal and "FOR" the adjournment proposal. Please see the section entitled "The Merger—Recommendation of the Square 1 Board of Directors and Reasons for the Merger."

Record Date and Quorum

        The Square 1 board of directors has fixed the close of business on June 18, 2015 as the record date for determining the holders of Square 1 Class A common stock entitled to receive notice of and to vote at the special meeting.

        As of the close of business on the record date, there were 26,469,682 shares of Square 1 Class A common stock outstanding and entitled to vote at the special meeting held by 262 holders of record. Each share of Square 1 Class A common stock entitles the holder to one vote on each proposal to be considered at the special meeting. Shares of non-voting Square 1 Class B common stock are not entitled to vote at the special meeting.

        The representation of holders of at least a majority of the votes entitled to be cast on the matters to be voted on at the special meeting constitutes a quorum for transacting business at the special meeting. All shares of Square 1 Class A common stock, whether present in person or represented by proxy, including abstentions and broker non-votes, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the special meeting.

        As of the close of business on the record date, directors and executive officers of Square 1 and their affiliates owned and were entitled to vote 9,907,547 shares of Square 1 Class A common stock (including the shares held by stockholders of Square 1 that have entered into voting agreements with PacWest), representing approximately 37.43% of the shares of Square 1 Class A common stock outstanding on that date. As of the close of business on the record date, PacWest beneficially held no shares of Square 1 common stock.

34


Table of Contents

        Patriot Financial Partners, L.P., Castle Creek Capital Partners IV, L.P., Endicott Opportunity Partners III, L.P. and Northaven Management, Inc. (and certain affiliates thereof), in their capacities as stockholders of Square 1, have separately entered into voting agreements with PacWest in which they have agreed to vote all shares of Square 1 common stock that they own and have the power to vote in favor of the merger proposal and any other matter that is required to be approved by the stockholders of Square 1 to facilitate the transactions contemplated by the merger agreement. These stockholders also agreed to vote against any proposal made in opposition to adoption of the merger agreement or in competition with the merger agreement and against any acquisition proposal. As of the close of business on the record date, these stockholders beneficially owned, in the aggregate, 9,066,056 shares of Square 1 Class A common stock, allowing them to exercise approximately 34.25% of the voting power of Square 1 common stock (which does not include shares issuable upon the exercise of stock options that were not outstanding as of the close of business on the record date).

Required Vote

        The affirmative vote of a majority of the outstanding shares of Square 1 Class A common stock entitled to vote is required to approve the merger proposal.

        The affirmative vote of a majority of the votes cast at the special meeting is required to approve the adjournment proposal.

Treatment of Abstentions; Failure to Vote

        For purposes of the special meeting, an abstention occurs when a Square 1 Class A common stockholder attends the special meeting, either in person or represented by proxy, but abstains from voting.

Voting on Proxies; Incomplete Proxies

        Giving a proxy means that a stockholder authorizes the persons named in the enclosed proxy card to vote such holder's shares at the special meeting in the manner such holder directs. A Square 1 Class A common stockholder may vote by proxy or in person at the special meeting. If you hold your shares of Square 1 Class A common stock in your name as a stockholder of record, to submit a proxy, you, as a stockholder, may use one of the following methods:

35


Table of Contents

        Square 1 requests that its Square 1 Class A common stockholders vote by telephone, over the Internet or by completing and signing the accompanying proxy and returning it to Square 1 as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy is returned properly executed, the shares of Square 1 Class A common stock represented by it will be voted at the special meeting in accordance with the instructions contained on the proxy card. Applicable deadlines for voting by telephone or through the Internet are set forth in your proxy card.

        If any proxy is returned without indication as to how to vote, the shares of Square 1 Class A common stock represented by the proxy will be voted as recommended by the Square 1 board of directors. Unless a stockholder checks the box on its proxy card to withhold discretionary authority, the proxyholders may use their discretion to vote on any other matters voted upon at the special meeting.

        If a stockholder's shares are held in "street name" by a broker, bank or other nominee, the stockholder should check the voting form used by that firm to determine whether it may vote by telephone or the Internet.

        Every stockholder's vote is important. Accordingly, each Class A common stockholder should sign, date and return the enclosed proxy card, or vote via the Internet or by telephone, whether or not the stockholder plans to attend the special meeting in person.

Shares Held in Street Name

        If you are a Class A common stockholder and your shares are held in "street name" through a bank, broker or other holder of record, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by the bank or broker. You may not vote shares held in street name by returning a proxy card directly to Square 1 or by voting in person at the special meeting unless you provide a "legal proxy," which you must obtain from your broker, bank or other nominee. Further, brokers, banks or other nominees who hold shares of Square 1 Class A common stock on behalf of their customers may not give a proxy to Square 1 to vote those shares with respect to any of the proposals without specific instructions from their customers, as brokers, banks and other nominees do not have discretionary voting power on these matters. Therefore, if you are a Class A common stockholder and you do not instruct your broker, bank or other nominee on how to vote your shares:

Revocability of Proxies and Changes to a Stockholder's Vote

        You may change your vote at any time before your proxy is voted at the special meeting. You may do this in one of four ways:

36


Table of Contents

        If you choose any of the first three methods, you must take the described action (or, with respect to the third method, Square 1 shall have received the subsequent proxy card) no later than July 28, 2015, at 5:00 p.m. local time, which is the business day immediately prior to the special meeting. If you choose to send a completed proxy card bearing a later date than your original proxy card or a notice of revocation, the new proxy card or notice of revocation must be received before the beginning of the special meeting. If you have instructed a bank, broker or other nominee to vote your shares of Square 1 Class A common stock, you must follow the directions you receive from your bank, broker or other nominee in order to change or revoke your vote.

Solicitation of Proxies

        The cost of solicitation of proxies from stockholders will be borne by Square 1. Square 1 will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of common stock. In addition to solicitations by mail, Square 1's directors, officers and regular employees may solicit proxies personally or by telephone without additional compensation.

Attending the Special Meeting

        Subject to space availability, all Class A common stockholders as of the close of business on the record date, or their duly appointed proxies, may attend the special meeting. Since seating is limited, admission to the special meeting will be on a first-come, first-served basis. Registration and seating will begin at 10:30 a.m., local time.

        If you hold your shares of Square 1 Class A common stock in your name as a stockholder of record and you wish to attend the special meeting, please bring your proxy and evidence of your stock ownership, such as your most recent account statement, to the special meeting. You must also bring valid picture identification.

        If your shares of Square 1 Class A common stock are held in "street name" in a stock brokerage account or by a bank or nominee and you wish to attend the special meeting, you need to bring a copy of a bank or brokerage statement to the special meeting reflecting your stock ownership as of the close of business on the record date. You must also bring valid picture identification.

37


Table of Contents


SQUARE 1 PROPOSALS

Merger Proposal

        As discussed throughout this document, Square 1 is asking its Class A common stockholders to approve the merger proposal. Holders of our Class A common stock should read carefully this document in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. In particular, holders of our Class A common stock are directed to the merger agreement, a copy of which is attached as Appendix A to this document.

        The Square 1 board of directors recommends a vote "FOR" the merger proposal.

Adjournment Proposal

        The special meeting may be adjourned to another time or place, if necessary or appropriate, to permit, among other things, the solicitation of additional proxies if there are insufficient votes at the time of the special meeting to approve the merger proposal.

        If, at the special meeting, the number of shares of our Class A common stock present or represented and voting in favor of the merger proposal is insufficient to approve the merger proposal, Square 1 intends to move to adjourn the special meeting in order to enable the board of directors to solicit additional proxies for approval of the merger proposal. In that event, Square 1 will ask its Class A stockholders to vote only upon the adjournment proposal and not the merger proposal.

        In the adjournment proposal, Square 1 is asking its Class A common stockholders to authorize the holder of any proxy solicited by the board of directors to vote in favor of granting discretionary authority to the proxy holders to adjourn the special meeting to another time and place, if necessary or appropriate, for the purpose of soliciting additional proxies. If the Class A common stockholders approve the adjournment proposal, Square 1 could adjourn the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from Class A common stockholders who have previously voted.

        The Square 1 board of directors recommends a vote "FOR" the adjournment proposal.

Other Matters to Come Before the Special Meeting

        No other matters are intended to be brought before the special meeting by Square 1, and Square 1 does not know of any matters to be brought before the special meeting by others. If, however, any other matters properly come before the special meeting, the persons named in the proxy will vote the shares represented thereby in accordance with their best judgment on any such matter.

38


Table of Contents


INFORMATION ABOUT THE COMPANIES

PacWest Bancorp
10250 Constellation Blvd., Suite 1640
Los Angeles, California 90067
Phone: (310) 286-1144

        PacWest Bancorp, a Delaware corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. PacWest's principal business is to serve as the holding company for PacWest's wholly owned subsidiary, Pacific Western Bank. Pacific Western Bank is focused on relationship-based business banking to small and middle-market businesses nationwide. PacWest offers a broad range of deposit products and services through 80 full-service branches located throughout California. PacWest, through offices across the United States, provides loans to middle-market businesses, real estate investment firms, and sophisticated individual real estate investors.

        As of March 31, 2015, PacWest had total assets of $16.6 billion, gross loans and leases of $12.3 billion, total deposits of $11.9 billion and stockholders' equity of $3.5 billion. PacWest's corporate headquarters is located in Los Angeles, California, and PacWest has 80 full-service, retail bank branches located primarily in southern and central California and three branches in northern California. PacWest's loan origination efforts are conducted nationwide with key offices located in Chevy Chase, Maryland, Southern California, including Los Angeles, St. Louis, Missouri, Denver, Colorado, Chicago, Illinois, New York, New York, and Midvale, Utah. PacWest also maintains a number of smaller lending offices throughout the country. PacWest operates as two business segments: Community Banking and National Lending. The Community Banking segment is focused on the lending and deposit gathering activities conducted primarily through PacWest's California-based branch offices and PacWest's treasury management function. The National Lending segment comprises PacWest's CapitalSource Division through which PacWest offers a broad range of specialized senior secured commercial loan products to small and middle-market businesses on a nationwide basis.

        PacWest's stock is traded on NASDAQ under the symbol "PACW."

        Additional information about PacWest and its subsidiaries may be found in the documents incorporated by reference into this document. Please also see the section entitled "Where You Can Find More Information."

39


Table of Contents

Square 1 Financial, Inc.
406 Blackwell Street, Suite 240
Durham, North Carolina 27701
Phone: (866) 355-0468

        Square 1 is a financial services company focused primarily on serving entrepreneurs and their investors. Square 1 is headquartered in Durham, North Carolina with thirteen loan production offices located in key innovation hubs across the United States. Through Square 1's banking subsidiary, Square 1 Bank, which was formed by experienced venture bankers, commercial bankers and entrepreneurs, Square 1 offers a full range of banking and financial products focused on the entrepreneurial community and their venture capital and private equity investors. Since inception, Square 1 has operated as a highly-focused venture bank and has provided a broad range of financial services to entrepreneurs, growing entrepreneurial companies and the venture capital and private equity communities. Square 1 provides banking services to its clients, including venture, commercial and international banking services, asset-based lending programs, and SBA and USDA commercial and real estate loan programs. Square 1 also provides investment advisory and asset management services to its clients through Square 1 Asset Management, a subsidiary of Square 1 Bank.

        As of March 31, 2015, Square 1 had consolidated total assets of $3.3 billion, total loans and leases of $1.5 billion, investment securities of $1.7 billion, deposits of $3.0 billion and stockholders' equity of $318.8 million. Square 1 had 270 full-time equivalent employees as of March 31, 2015.

        Square 1's stock is traded on NASDAQ under the symbol "SQBK."

        Additional information about Square 1 and its subsidiaries may be found in the documents incorporated by reference into this document. Please see the section entitled "Where You Can Find More Information."

40


Table of Contents


THE MERGER

        The following is a discussion of the merger and the material terms of the merger agreement between PacWest and Square 1. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Appendix A to this document and incorporated by reference herein. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. This section is not intended to provide you with any factual information about PacWest or Square 1. Such information can be found elsewhere in this document and in the public filings PacWest and Square 1 make with the SEC, as described in the section entitled "Where You Can Find More Information."

Terms of the Merger

Transaction Structure

        PacWest's and Square 1's boards of directors have approved the merger agreement. The merger agreement provides for the merger of Square 1 with and into PacWest, with PacWest continuing as the surviving corporation. Immediately after the merger, Square 1 Bank, a de novo North Carolina commercial bank and a wholly owned subsidiary of Square 1, will merge with and into Pacific Western Bank, a bank chartered under the laws of the State of California and a wholly owned subsidiary of PacWest, with Pacific Western Bank being the surviving bank.

Merger Consideration

        In the merger, each share of Square 1 common stock, par value $0.01 per share, owned by a Square 1 stockholder, other than certain specified excluded shares described under "The Merger Agreement—Merger Consideration—Cancellation of Excluded Shares," will be converted into the right to receive 0.5997 of a share of PacWest common stock, par value $0.01 per share. For each fractional share that would otherwise be issued, PacWest will pay cash in an amount equal to the fraction of a share of PacWest common stock which the holder would otherwise be entitled to receive multiplied by the PacWest Average Closing Price.

        The market value of the merger consideration will fluctuate with the price of PacWest common stock, and the value of the shares of PacWest common stock that holders of Square 1 common stock will receive upon consummation of the merger may be different than the value of the shares of PacWest common stock that holders of Square 1 common stock would receive if calculated on the date PacWest and Square 1 announced the merger, on the date that this document is being mailed to Square 1 stockholders, and on the date of the special meeting of Square 1 stockholders. Based on the closing price of PacWest common stock on February 27, 2015, the value of the per share merger consideration payable to holders of Square 1 common stock was $27.49. Based on the closing price of PacWest common stock on June 18, 2015, the last practicable date before the date of this document, the value of the per share merger consideration payable to holders of Square 1 common stock was $28.21.

Treatment of Square 1 Stock Options and Square 1 RSUs

        Square 1 Stock Options.    At the effective time, each Square 1 stock option, whether vested or unvested, will be cancelled and will entitle the holder of such option to receive an amount in cash equal to the product of (i) the total number of shares of Square 1 common stock subject to such option and (ii) the excess, if any, of (A) the product of (1) the PacWest Average Closing Price and (2) 0.5997 over (B) the exercise price per share of Square 1 common stock underlying such option, less any applicable taxes to be withheld with respect to such payment.

        Square 1 RSUs.    At the effective time, each outstanding Square 1 RSU will be cancelled and will entitle the holder to receive an amount in cash equal to the product of (i) the number of shares of

41


Table of Contents

Square 1 common stock subject to such Square 1 RSU and (ii) the product of (A) the PacWest Average Closing Price and (B) 0.5997, less any applicable taxes to be withheld with respect to such payment.

Treatment of Square 1 Warrants

        At the effective time, each warrant to purchase shares of Square 1 common stock held by the specified individuals to the extent then outstanding and not previously exercised will be cancelled and will only entitle the holder thereof to receive, as soon as reasonably practicable after the effective time, an amount in cash equal to the product of (i) the total number of shares of Square 1 common stock subject to such warrants and (ii) the excess, if any, of (A) the product of (1) the PacWest Average Closing Price and (2) 0.5997 over (B) the exercise price per share of Square 1 common stock under such warrants, less any applicable taxes required to be withheld with respect to such payment. As of the date of this document, there were outstanding warrants to purchase 20,000 shares of Square 1 common stock. All such warrants expire, if not previously exercised, on July 11, 2015.

Background of the Merger

        The Square 1 board of directors frequently reviews, with management, its business strategies, opportunities and challenges as part of its consideration and evaluation of its long-term prospects in light of developments in its business, in the sectors in which it competes, in the economy generally and in financial markets, with the goal of enhancing value for its stockholders.

        In November 2014, Matthew Wagner, PacWest's Chief Executive Officer, contacted a member of the Square 1 board of directors to indicate PacWest's potential interest in discussing strategic matters. After conferring with Mr. Robert Muehlenbeck, Chairman of the Square 1 board of directors, Douglas Bowers, a director and President and Chief Executive Officer of Square 1, had an introductory conversation with Mr. Wagner to learn more about PacWest's potential interest in Square 1. On November 14, 2014, Mr. Wagner and Mr. Bowers had a telephone call during which they discussed business and industry trends and their respective companies. In the course of the call, Mr. Wagner communicated to Mr. Bowers that PacWest was interested in a potential strategic business combination with Square 1 in view of the substantial benefits and synergies potentially available for the combined company. Mr. Wagner also expressed an interest in continuing conversations regarding a potential transaction and commencing due diligence to assess the possibility of proceeding with more detailed discussions.

        Following this discussion between Mr. Bowers and Mr. Wagner, a special meeting of the Square 1 board of directors was held on November 20, 2014. At this meeting, Mr. Bowers updated the Square 1 board of directors on the conversation he had with Mr. Wagner. The Square 1 board of directors also reviewed a preliminary financial analysis of a potential combination of the two companies developed internally by the Square 1 board of directors and management for discussion purposes. At the meeting, the Square 1 board of directors also established a mergers and acquisitions committee, referred to as the M&A Committee, comprised of Mr. Bowers, Mr. Muehlenbeck, Robert Usdan, Paul Burke and W. Kirk Wycoff to review, with the assistance of Square 1 management and outside advisors, Square 1's strategic alternatives, including the potential interest of PacWest and continuing operations as an independent entity, and to report to the full Square 1 board of directors regularly on such matters. The Square 1 board of directors established the M&A Committee to ensure regular dialogue between senior management and the Square 1 board of directors regarding Square 1's strategic alternatives, since the smaller size of the M&A Committee as compared to the full Square 1 board of directors would allow for more convenient and flexible scheduling of periodic meetings, as well as to enable a subset of the Square 1 board of directors to engage, in conjunction with management, in direct discussions with PacWest concerning a potential transaction. The Square 1 board of directors selected the members of the M&A Committee based on their significant collective experience with strategic

42


Table of Contents

transactions, including but not limited to mergers and acquisitions and other business combination transactions, and their particular knowledge of the industries in which Square 1 operates, as well as their flexibility and availability to join meetings on short notice. In forming the M&A Committee and establishing its membership, the Square 1 board of directors noted that Messrs. Usdan, Burke and Wycoff each represented significant stockholders of Square 1, and that by virtue of their participation on the M&A Committee, stockholders holding at that time in the aggregate more than 26% of the outstanding voting power of Square 1 would be directly represented on the M&A Committee, which the Square 1 board of directors considered advantageous and an important feature of the committee in view of the significance of the potential transactions that the M&A Committee would be considering and their substantial potential effect on Square 1 and Square 1's stockholders. In addition, the Square 1 board of directors authorized management to engage a financial advisor to assist in the Square 1 board of directors' and the M&A Committee's review of potential strategic alternatives. Prior to the Square 1 board of directors' meeting on November 20, 2014, Mr. John Pietrzak, a director of Square 1 and a managing principal at Castle Creek Capital, an affiliate of a significant stockholder of Square 1, informed the Square 1 board of directors that the founder and managing principal of Castle Creek Capital, John Eggemeyer, was the Chairman of the PacWest board of directors and that, in view of this fact, Mr. Pietrzak intended to recuse himself from all discussions pertaining to PacWest or a potential transaction with PacWest. Mr. Pietrzak did not participate in the preparation of the preliminary financial analysis reviewed at the November 20, 2014 Square 1 board of directors meeting, and following Mr. Pietrzak's recusal, he did not attend or otherwise participate in any M&A Committee meetings or in any portions of meetings of the Square 1 board of directors in which PacWest or a potential transaction with PacWest was discussed.

        On December 4, 2014, Mr. Bowers and Mr. Wagner both attended an industry conference and continued their preliminary exploratory discussions through an in-person meeting, during which they discussed their respective companies and the feasibility of a strategic business combination transaction between the two companies. Following this conversation, Mr. Bowers and members of the M&A Committee continued to discuss among themselves and with other members of the Square 1 board of directors the possibility of a business combination transaction with PacWest. On December 8, 2014, the M&A Committee met and determined to arrange a meeting with representatives of PacWest to discuss a potential business combination transaction in more detail.

        On December 16, 2014, the M&A Committee met with Mr. Wagner and other senior executives of PacWest at PacWest's offices. The discussion principally focused on Square 1's lines of businesses and the complementary nature of Square 1's business to that of PacWest. Mr. Wagner confirmed PacWest's potential interest in a strategic business combination, and indicated that based on PacWest's preliminary review, PacWest would be interested in discussing a transaction in which Square 1 stockholders would receive consideration of $27.00 per share, but did not provide additional detail about the form of consideration or structure of the potential transaction.

        On December 18, 2014, at a special meeting of the Square 1 board of directors, the Square 1 board of directors reviewed, together with the M&A Committee, the details of the discussions between representatives of Square 1 and representatives of PacWest. The Square 1 board of directors reached the consensus that it would be advisable to continue discussions with PacWest and directed the M&A Committee to continue to engage with representatives of PacWest. On December 30, 2014, Square 1 entered into a customary confidentiality agreement with PacWest in order to facilitate reciprocal due diligence efforts.

        In January 2015, the M&A Committee determined that, as discussions with PacWest continued and the companies had just commenced reciprocal due diligence, it would be advisable and appropriate to engage a financial advisor at that time. The M&A Committee recommended that the Square 1 board of directors consider retaining one of two financial advisors to assist in the Square 1 board of directors' and the M&A Committee's review of potential strategic alternatives. At a meeting of the Square 1

43


Table of Contents

board of directors on January 14, 2015, each of the two financial advisors under consideration met with the Square 1 board of directors and presented to the board its preliminary financial analysis of Square 1 and Square 1's potential strategic alternatives. Following these presentations, Sandler O'Neill was selected as financial advisor based on, among other factors, Sandler O'Neill's reputation, experience in mergers and acquisitions, valuations, financing and capital markets and its familiarity with Square 1 and Square 1's strategic goals and the industries in which it competes, and on January 29, 2015, Square 1 formally retained Sandler O'Neill.

        On January 26, 2015, representatives of Square 1 and PacWest, along with representatives of Sandler O'Neill and Jefferies LLC, PacWest's financial advisor, met to discuss in detail the loan portfolios, underwriting practices and credit profiles of the businesses and the cultures of the two companies.

        On January 28, 2015, the Square 1 board of directors met at a regularly scheduled meeting. In addition to discussion of Square 1's regular business, significant portions of the meeting were devoted to a review and analysis of Square 1's strategic and financial alternatives, in light of PacWest's verbal indications of interest to date. During these portions of the meeting, which were attended by members of Square 1 management and representatives of Sandler O'Neill and Wachtell, Lipton, Rosen & Katz, referred to as Wachtell Lipton, Square 1's legal advisor, the Square 1 board of directors considered the value for Square 1 and its stockholders that could be achieved on a stand-alone basis and in a potential business combination transaction with PacWest. In the course of assessing the stand-alone value of Square 1, the Square 1 board of directors considered risks associated with executing on its stand-alone business plan and the effect of general industry and business conditions in the future. In the course of assessing the value to Square 1 stockholders of a potential business combination with PacWest, the Square 1 board of directors considered similar risks as applicable to a combined organization, which would be significantly larger and have more diverse operations, lending lines and customer bases. The Square 1 board of directors also considered PacWest's dividend payment history and the significant increase in trading liquidity that would result from Square 1 stockholders receiving PacWest common stock as consideration in a transaction. In the course of its discussions the Square 1 board of directors also considered other potential strategic partners identified by Sandler O'Neill, the likelihood of any such partners actually having interest in proceeding with a transaction, as well as what the Square 1 board of directors believed to be very significant risks from a confidentiality, competitive, and employee retention perspective of approaching other potential strategic partners. The Square 1 board of directors determined that these risks outweighed the limited expected benefits from attempting to solicit interest in a business combination transaction from other parties because of the very small number of potentially interested parties, its belief that the synergies that any other potential strategic partner would be likely to realize from a transaction would be minimal relative to the synergies PacWest would likely be able to achieve, and the Square 1 board of director's view that PacWest was a significantly better strategic fit than any other potential strategic partners. In this regard, the Square 1 board of directors also considered the fact that, although some of the risks from a confidentiality, competitive, and employee retention perspective of engaging in discussions with potential strategic partners might, to a limited extent, already exist as a consequence of ongoing discussions with PacWest, PacWest was subject to a binding confidentiality agreement which reduced those risks and, moreover, such risks would be greatly enhanced, and would become significantly more difficult to control, if Square 1 approached additional parties regarding a potential transaction. Based on these discussions and analyses, the Square 1 board of directors determined to continue discussions with PacWest to evaluate the possibility of a potential transaction with PacWest and determined not to contact other parties to assess their interest in a potential transaction. The Square 1 board of directors authorized management (i) to proceed with reciprocal due diligence, including an assessment of PacWest's company, culture, loan portfolio and regulatory standing and feasibility of pursuing and completing a transaction, (ii) to begin discussing with PacWest with more specificity the terms of a potential business combination

44


Table of Contents

transaction, and (iii) to request from PacWest a written confirmation of the significant terms on which it would be willing to proceed with a transaction.

        On January 30, 2015, the closing trading price of Square 1 common stock was $23.26. Starting around the beginning of February, Square 1 common stock experienced occasional increases in trading volume and trading price, which appeared to diverge from the general market and general bank indices and did not appear to be driven by any reports or releases by Square 1. Such occasional increased levels of trading volume and trading price continued to occur periodically over the next several weeks, and accelerated in the final week of February.

        On February 4, 2015, PacWest submitted to Sandler O'Neill a preliminary letter of interest. PacWest indicated that it was prepared to proceed with a transaction in which Square 1 would merge into PacWest, immediately followed by the merger of Square 1 Bank into Pacific Western Bank. The letter contemplated that Square 1's stockholders would receive consideration in the form of PacWest common stock at a fixed exchange ratio of 0.5997, which was the exchange ratio calculated on the basis of PacWest's then-current trading price to provide consideration with a value equal to $27.00 per share, subject to the completion of due diligence and the negotiation of a definitive transaction agreement. The letter of interest from PacWest also indicated that certain large stockholders of Square 1, who were not specified in the letter, would be required to enter into voting agreements in support of the transaction.

        On February 11, 2015, the M&A Committee met to review a report from Sandler O'Neill and management on continuing discussions and financial due diligence with PacWest and separately to discuss, in view of the potential transaction, compensation matters being considered by the Compensation Committee of the Square 1 board of directors. In the course of the meeting the M&A Committee and Sandler O'Neill discussed the recent periodic increases in trading price and volume of Square 1 common stock, and their shared belief that such increases may be attributable to market speculation about a possible transaction. The M&A Committee also discussed the proposed structure of the transaction, including the fixed exchange ratio, and directed Sandler O'Neill to consider and report on the financial risks and benefits of such a structure. Alternatively the M&A Committee instructed Sandler O'Neill to analyze a structure that would include a band of stock price values, or "collar" within which the exchange ratio would adjust to provide a fixed consideration value for certain limited PacWest common stock price movements from the date of entering into a merger agreement through the closing of the merger. The M&A Committee also directed Sandler O'Neill to explore with representatives of PacWest the possibility of an increase in the overall consideration to be paid in the transaction.

        On February 11, 2015, the PacWest board of directors held a meeting during which the PacWest board of directors received an overview from Mr. Wagner of the preliminary discussions that had been held with Square 1, including the proposed terms of the transaction, and discussed the proposed transaction generally.

        Over the course of the following weeks, PacWest and Square 1 continued to undertake their reciprocal due diligence efforts and made available to each other certain due diligence materials in electronic data rooms. In addition, during this period, PacWest and Square 1 and their respective legal advisors held preliminary discussions concerning the regulatory approvals that would be required in connection with a potential transaction and the process for obtaining required regulatory approvals. During this period, management of Square 1 updated the M&A Committee and members of the Square 1 board of directors on the results of the ongoing reciprocal due diligence efforts.

        On February 19, 2015, PacWest and its legal advisor, Sullivan & Cromwell LLP, referred to as S&C, provided Square 1 and Wachtell Lipton with an initial draft merger agreement for the proposed transaction. Over the course of the following week, the parties and their respective legal advisors

45


Table of Contents

exchanged drafts of the merger agreement and worked towards finalizing the terms of the transaction, and the parties and their respective advisors continued to conduct reciprocal due diligence.

        On February 24, 2015, the Square 1 board of directors met for a regularly scheduled meeting, which was attended by senior management of Square 1 and representatives of Sandler O'Neill and Wachtell Lipton. During that meeting, the Square 1 board of directors received an update from management on the status of the ongoing diligence efforts. Among these updates was a detailed review of the PacWest loan portfolio analysis management conducted with the assistance of outside consultants. In addition, representatives of Wachtell Lipton discussed with the Square 1 board of directors the terms of the transaction documents and the legal standards applicable to the Square 1 board of directors' decisions and actions with respect to the proposed transaction. The Square 1 board of directors and its advisors discussed the request of PacWest that major stockholders accounting for approximately 29% of the outstanding voting power of Square 1 common stock in the aggregate enter into voting and support agreements in which they would agree to vote their shares in favor of the proposed transaction, including in the event a subsequent competing offer arose, and the fact that such agreements could reduce the probability of a competing offer arising. Representatives of Sandler O'Neill reviewed and discussed with the Square 1 board of directors its financial analysis of the merger consideration and the proposed transaction, including the market liquidity and dividend payment history associated with PacWest common stock. Sandler O'Neill also reported on its discussions with representatives of PacWest, including that PacWest had confirmed a fixed exchange ratio of 0.5997, despite the subsequent increase in the trading price of PacWest common stock, which at that time would result in consideration per share of Square 1 common stock of $27.35. The Square 1 board of directors also discussed the structure of the consideration, and its conclusion that on balance a fixed exchange ratio was in the best interest of Square 1 stockholders because it would enable them to share fully in the potential upside from the combination of PacWest and Square 1 and the realization of resulting synergies. In this regard, the Square 1 board of directors and Square 1's advisors discussed the fact that, although an alternative "collar" structure could insulate Square 1's stockholders from declines in the stock price of PacWest prior to the closing of a transaction, PacWest made clear that any "collar" would need to be symmetrical, and therefore Square 1's stockholders may not benefit from the increase in the stock price of PacWest prior to closing, and, as a result, the Square 1 board of directors ultimately determined that a fixed exchange ratio was preferable to a symmetrical "collar" structure. At the conclusion of the meeting, the Square 1 board of directors authorized Square 1 management to finalize a strategic business combination transaction with PacWest on substantially the terms described to the Square 1 board of directors.

        Over the next several days following the meeting of the Square 1 board of directors on February 24, 2015, members of Square 1 management and Wachtell Lipton worked with members of PacWest management and S&C to finalize the merger agreement and related transaction documents, including the terms of the agreements with executive officers of Square 1 described under "—Interests of Square 1 Directors and Officers in the Merger—Letter and Employment Agreements."

        On March 1, 2015, the Square 1 board of directors held a special meeting, together with members of Square 1 management and representatives of Sandler O'Neill and Wachtell Lipton, during which representatives of management, Sandler O'Neill and Wachtell Lipton reviewed for the Square 1 board of directors the final terms of the transaction documents. Representatives of Wachtell Lipton also reviewed for the Square 1 board of directors, as they had previously done, the legal standards applicable to the Square 1 board of directors' decisions and actions with respect to the transaction, and Sandler O'Neill rendered its oral opinion, which was subsequently confirmed in writing, to the Square 1 board of directors that, as of that date, and based upon and subject to the factors, assumptions and limitations set forth in its written opinion, the merger consideration to be paid to the holders of Square 1 common stock in the merger was fair, from a financial point of view, to such holders. The Square 1 board of directors thereafter discussed at length the transaction and the pricing terms, and noted that

46


Table of Contents

the trading price and trading volume for Square 1 common stock had increased to all-time highs during the preceding week, in each case at levels that appeared to diverge from the general market and general bank indices and did not appear to be driven by any reports or releases by Square 1. The Square 1 board of directors noted that the implied consideration per share of Square 1 common stock in the potential transaction was below the trading price for Square 1 common stock at the close of trading on the preceding trading date. The Square 1 board of directors also noted its view, and that of its financial advisor, that the recent Square 1 common stock trading reflected market speculation about a potential transaction, and that in the absence of such speculation the trading price of Square 1 common stock would be significantly lower. In this regard, the Square 1 board of directors considered, among other things, the financial analyses of Sandler O'Neill regarding the valuation of Square 1 as a stand-alone entity. The Square 1 board of directors also discussed with management and Square 1's advisors the impact of the transaction on Square 1's employees in light of the importance to preserving the value of Square 1 and its franchise of providing maximum assurances that relationships with employees would not be adversely affected by the transaction. Following extensive discussion and questions and answers, including consideration of the factors described under "—Recommendation of the Square 1 Board of Directors and Reasons for the Merger," the Square 1 board of directors determined that the merger agreement and the transactions contemplated thereby, including the merger, were advisable and in the best interests of Square 1 and its stockholders, and to recommend that the Square 1 stockholders approve the adoption of the merger agreement.

        Also, on March 1, 2015, the PacWest board of directors held a special meeting to discuss the final terms of the proposed transaction with members of PacWest management and a representative from S&C and approved the entry into the merger agreement.

        Following the respective board meetings of PacWest and Square 1, on the evening of March 1, 2015, Square 1 and PacWest executed the merger agreement, and PacWest executed the voting agreements entered into with certain stockholders of Square 1 and the non-solicitation agreements entered into with certain directors of Square 1. In addition, PacWest and Square 1 also entered into agreements with executive officers of Square 1, as described under "—Interests of Square 1 Directors and Officers in the Merger—Letter and Employment Agreements." On the morning of March 2, 2015, Square 1 and PacWest issued a joint press release announcing the execution of the merger agreement.

Recommendation of the Square 1 Board of Directors and Reasons for the Merger

        After careful consideration, the Square 1 board of directors, at a meeting held on March 1, 2015, determined that the merger agreement and the transactions contemplated therein, including the merger, are fair to and in the best interests of Square 1 and its stockholders and approved and declared advisable the merger agreement and the transactions contemplated therein, including the merger, and recommends that Square 1's Class A common stockholders vote "FOR" the adoption of the merger proposal. In reaching its decision to approve and recommend the adoption of the merger agreement and the transactions contemplated by the merger agreement, the Square 1 board of directors consulted with Square 1's management, as well as its financial and legal advisors, and considered a number of factors, including the following material factors:

47


Table of Contents

48


Table of Contents

        The foregoing discussion of the factors considered by the Square 1 board of directors is not intended to be exhaustive, but, rather, includes the material factors considered by the Square 1 board of directors. In reaching its decision to approve the merger agreement and the other transactions contemplated by the merger agreement, including the merger, the Square 1 board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Square 1 board of directors considered all these factors as a whole, including discussions with, and questioning of, Square 1's management and Square 1's financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

        This explanation of Square 1's reasons for the merger and other information presented in this section is forward-looking in nature and should be read in light of the section entitled "Cautionary Statement Regarding Forward-Looking Statements."

        For the reasons set forth above, the Square 1 board of directors has approved the merger agreement and the transactions contemplated thereby and recommends that you vote "FOR" the merger proposal and "FOR" the adjournment proposal.

Opinion of Square 1's Financial Advisor

        By letter dated January 29, 2015, Square 1 retained Sandler O'Neill to act as financial advisor to the Square 1 board of directors in connection with Square 1's consideration of a possible business combination. Sandler O'Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O'Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. The Square 1 board of directors also considered the fact that Sandler O'Neill is familiar with Square 1 and its business as Sandler O'Neill has provided investment banking services to Square 1 in the past.

        Sandler O'Neill acted as financial advisor in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of the merger agreement. At the March 1, 2015 meeting at which the Square 1 board of directors considered and approved the merger agreement, Sandler O'Neill delivered to the board its oral opinion, which was subsequently confirmed in writing, that, as of such date, the merger consideration was fair to the holders of Square 1 common stock from a financial point of view. The full text of Sandler O'Neill's opinion is attached as Appendix C to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O'Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of Square 1 common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

        Sandler O'Neill's opinion speaks only as of the date of the opinion and was necessarily based on financial, economic, market and other conditions as they existed on, and the information made available to Sandler O'Neill as of, that date. Events occurring or information available after that date could materially affect its opinion. Sandler O'Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date of its opinion. The opinion was directed to Square 1's board and is directed only to the fairness of the merger

49


Table of Contents

consideration to the holders of Square 1 common stock from a financial point of view. It does not address the underlying business decision of Square 1 to engage in the merger or any other aspect of the merger and is not a recommendation to any holder of Square 1 common stock as to how such stockholder should vote at the special meeting with respect to the merger or any other matter. Sandler O'Neill did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by Square 1's officers, directors or employees, or class of such persons, relative to the per share consideration to be received by Square 1 stockholders.

        In connection with rendering its opinion, Sandler O'Neill reviewed and considered, among other things:

        Sandler O'Neill also discussed with certain members of Square 1's senior management the business, financial condition, results of operations and prospects of Square 1 and held similar discussions with the senior management of PacWest regarding the business, financial condition, results of operations and prospects of PacWest.

        In performing its reviews and analyses and in rendering its opinion, Sandler O'Neill relied upon the accuracy and completeness of all of the financial and other information that was available to it from public sources, that was provided to them by Square 1 or its representatives or that was otherwise reviewed by them and they assumed such accuracy and completeness for purposes of rendering its opinion. Sandler O'Neill further relied on the assurances of senior management of Square 1 that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading in any material respect. Sandler O'Neill was not asked to, and did not, undertake an independent verification of any of such information and did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O'Neill did not make an independent evaluation or

50


Table of Contents

appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Square 1 or PacWest or any of their respective subsidiaries. Sandler O'Neill did not review any individual credit files of Square 1 or PacWest or make an independent evaluation of the adequacy of the allowance for loan losses of Square 1 or PacWest, and assumed, with Square 1's consent, that the respective allowances for loan losses for both Square 1 and PacWest were adequate to cover any such losses.

        In preparing its analyses, Sandler O'Neill used publicly available earnings estimates and guidance from senior management of Square 1, which senior management of Square 1 confirmed reflected the best judgments of management of the future financial performance of Square 1. With respect to PacWest, PacWest indicated to Sandler O'Neill its policy of not providing earnings guidance. Accordingly, Sandler O'Neill used publicly available analyst earnings estimates and consensus long-term growth estimates. Sandler O'Neill also used in its analyses certain forecasts of transaction costs, purchase accounting adjustments and expected cost savings. These figures, which included a limited amount of cost savings in the transaction, were estimated by Sandler O'Neill and reviewed with senior management of Square 1. With respect to the earnings guidance provided to Sandler O'Neill by Square 1 management, Sandler O'Neill assumed that it had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of such management, and Sandler O'Neill assumed that such performance would be achieved. Sandler O'Neill expressed no opinion as to such earnings guidance or the assumptions on which it was based. Sandler O'Neill also assumed that there had been no material change in the respective assets, financial condition, results of operations, business or prospects of Square 1 or PacWest since the date of the most recent financial data made available to them as of the date of their opinion.

        Sandler O'Neill assumed in all respects material to its analysis that Square 1 and PacWest will remain as going concerns for all periods relevant to its analyses, that the parties to the merger agreement will comply with all material terms of the merger agreement, that all of the representations and warranties contained in the merger agreement are true and correct, that each party to the merger agreement will perform all of the covenants required to be performed by such party under the agreement and that the conditions precedent in the merger agreement will not be waived, that no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Square 1, PacWest or the merger, and that the merger will be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Sandler O'Neill's opinion was approved by its fairness opinion committee. Finally, Sandler O'Neill expressed no opinion as to the legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement.

        In rendering its opinion, Sandler O'Neill performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Sandler O'Neill's opinion or the presentation made by Sandler O'Neill to the Square 1 board of directors, but is a summary of all material analyses performed and presented by Sandler O'Neill. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Also, no company included in Sandler O'Neill's comparative analyses described below is identical to Square 1 or PacWest and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as

51


Table of Contents

the case may be, of Square 1 and PacWest and the companies to which they are being compared. In arriving at its opinion, Sandler O'Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, it made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O'Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinions; rather, Sandler O'Neill made its determination as to the fairness of the merger consideration on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

        In performing its analyses, Sandler O'Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of Square 1, PacWest and Sandler O'Neill. The analyses performed by Sandler O'Neill are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler O'Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the board of directors of Square 1 at its March 1, 2015, meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O'Neill's analyses do not necessarily reflect the value of Square 1 common stock or the prices at which Square 1 common stock or PacWest common stock may be sold at any time. The analyses of Sandler O'Neill and its opinion were among a number of factors taken into consideration by the Square 1 board of directors in making its determination to approve the merger agreement and the analyses described below should not be viewed as determinative of the decision of the Square 1 board of directors or management with respect to the fairness of the merger.

        Summary of Proposal.    Sandler O'Neill reviewed the financial terms of the proposed transaction. As described in the merger agreement, Square 1 stockholders will receive in exchange for each share of Square 1 common stock 0.5997 of a share of PacWest common stock. Using PacWest's February 27, 2015 closing stock price of $45.84, and based upon 29,607,835 common shares outstanding, including all 30,000 outstanding warrants with a weighted average exercise price of $10.00 per share to be exercised prior to closing, 437,788 outstanding Square 1 RSUs that vest, according to their terms, upon a change in control, and options to purchase 1,096,060 shares of Square 1 common stock with a weighted average exercise price of $6.13 per share that will be cashed out by PacWest at closing, Sandler O'Neill calculated a per share consideration of $27.49 and aggregate consideration of approximately $849.4 million. Based upon financial information for Square 1 as of and for the twelve months ended December 31, 2014, Sandler O'Neill calculated the following transaction ratios:

Transaction Value / Book Value Per Share:

    262 %

Transaction Value / Tangible Book Value Per Share:

    263 %

Transaction Value / LTM Earnings Per Share:

    23.3x  

Core Deposit Premium(1):

    19.8 %

30-day Market Premium(2):

    19.3 %

(1)
Tangible book premium to core deposits calculated as (deal value – tangible equity) / (core deposits); Core Deposits defined as deposits, less time deposit accounts with balances over $100,000, foreign deposits and unclassified deposits.

(2)
Based upon the closing stock price on January 27, 2015.

        Stock Trading History.    Sandler O'Neill reviewed the history of the publicly reported trading prices of Square 1 common stock for the period from Square 1's initial public offering to February 27, 2015, and PacWest common stock for the one year period ending February 27, 2015. Sandler O'Neill then

52


Table of Contents

compared the relationship between the movements in the price of Square 1 common stock and PacWest common stock, respectively, to movements in their respective peer groups as well as certain stock indices. During the period since Square 1's initial public offering, Square 1 common stock outperformed its comparable peers (which group consists of the banks set forth under "Comparable Company Analysis" below) as well as the NASDAQ Bank Index and the S&P 500 Index. During the one-year period ending February 27, 2015, PacWest common stock outperformed its comparable peers (which group consists of the banks set forth under "Comparable Company Analysis" below) and the NASDAQ Bank Index but underperformed the S&P 500 Index.


Square 1's Stock Performance Since IPO

 
  Beginning Index Value
March 26, 2014
  Ending Index Value
February 27, 2015
 

Square 1

    100 %   153.8 %

Square 1 Peers(1)

    100 %   96.5 %

NASDAQ Bank Index

    100 %   98.3 %

S&P 500 Index

    100 %   113.6 %

(1)
Group comprised of regional high performing banks in high growth geographic markets and niche businesses; Square 1 has historically used this group for comparable purposes. See "Comparable Company Analysis" below for a listing of such banks.


PacWest's One Year Stock Performance

 
  Beginning Index Value
February 27, 2014
  Ending Index Value
February 27, 2015
 

PacWest

    100 %   107.5 %

PacWest Peers(1)

    100 %   97.4 %

NASDAQ Bank Index

    100 %   102.2 %

S&P 500 Index

    100 %   113.5 %

(1)
Group comprised of 20 commercial banks with assets between $12 billion and $24 billion, excluding companies that are closely held by insiders. See "Comparable Company Analysis" below for a listing of such commercial banks.

        Review of Analyst Recommendations and Estimates.    Sandler O'Neill reviewed publicly available research analyst estimates and recommendations to outline the current analyst views of Square 1. The analysis compared published recommendations and earnings per share estimates for the years ending December 31, 2015 and 2016. As of February 27, 2015, three research analysts had published recommendations for Square 1, composed of one "market perform" recommendation and two "buy" recommendations. The table below sets forth the median of the estimates:

2015 earnings per share

  $ 1.25  

2016 earnings per share

  $ 1.45  

        Sandler O'Neill also reviewed publicly available research analyst estimates and recommendations to outline the current analyst views of PacWest. The analysis compared published recommendations and earnings per share estimates for the years ending December 31, 2015 and 2016. As of February 27, 2015, nine research analysts had published recommendations for PacWest, composed of two "equal

53


Table of Contents

weight" or "sector perform" recommendations and seven "outperform" or "buy" recommendations. The table below sets forth the median of the estimates:

2015 earnings per share

  $ 2.88  

2016 earnings per share

  $ 3.10  

        Comparable Company Analysis.    Sandler O'Neill used publicly available information to compare selected financial information for Square 1 with a group of financial institutions selected by Sandler O'Neill which Square 1 has historically used for comparable purposes. The Square 1 peer group consisted of regional high performing banks in high growth markets and niche businesses. The Square 1 peer group consisted of the following companies:

 
   
   
   
  Capital Position   LTM Profitability   Asset Quality  
Company
  City, State   Ticker   Total
Assets
($mm)
  TCE/
TA
(%)
  Total
RBC
Ratio
(%)
  ROAA
(%)
  ROATCE
(%)
  Net
Interest
Margin
(%)
  Efficiency
Ratio (%)
  LLR/
Gross
Loans
(%)
  NPAs(1)/
Total
Assets
(%)
  NCOs/
Avg.
Loans
(%)
 

First Republic Bank

  San Francisco, CA   FRC     48,353     7.63     14.20     1.06     12.9     3.32     51.8     0.54     0.13     0.01  

SVB Financial Group

  Santa Clara, CA   SIVB     39,345     7.16     13.92     1.45     10.5     2.81     61.6     1.15     0.04     0.32  

Signature Bank

  New York, NY   SBNY     27,319     9.14     14.39     1.20     13.6     3.29     35.2     0.89     0.23     0.01  

Texas Capital Bancshares, Inc.

  Dallas, TX   TCBI     15,900     8.27     10.57     1.05     11.6     3.75     55.2     0.71     0.29     0.05  

Bridge Capital Holdings

  San Jose, CA   BBNK     1,814     10.31     13.91     1.07     10.1     4.83     64.0     1.71     0.94     0.23  

 
   
   
  Valuation  
 
   
   
  Price/    
   
   
 
Company
  City, State   Ticker   Tang.
Book
Value
(%)
  2015
Est.
EPS
(x)
  2016
Est.
EPS
(x)
  Current
Dividend
Yield
(%)
  LTM
Dividend
Ratio
(%)
  Market
Value
($mm)
 

First Republic Bank

  San Francisco, CA   FRC     215     18.8     16.1     1.0     17.6     7,881  

SVB Financial Group

  Santa Clara, CA   SIVB     222     21.3     17.3     0.0     0.0     6,259  

Signature Bank

  New York, NY   SBNY     249     18.1     15.7     0.0     0.0     6,340  

Texas Capital Bancshares, Inc. 

  Dallas, TX   TCBI     162     15.5     13.2     0.0     0.0     2,125  

Bridge Capital Holdings

  San Jose, CA   BBNK     183     17.3     13.4     0.0     0.0     343  

(1)
Nonperforming assets include nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.

        The analysis compared publicly available financial information for Square 1 with the comparable data for the Square 1 peer group as of or for the twelve months ended December 31, 2014, with pricing data as of February 27, 2015. The table below sets forth the data for Square 1 as compared to the median and mean data for the Square 1 peer group.

54


Table of Contents


Square 1 Comparable Company Analysis

 
  Square 1   Peer Group
Median
  Peer Group
Mean
 

Total assets (in millions)

  $ 3,095   $ 27,319   $ 26,546  

Tangible common equity/Tangible assets

    9.77 %   8.27 %   8.50 %

Total risk-based capital ratio

    14.95 %   13.92 %   13.40 %

LTM Return on average assets

    1.25 %   1.07 %   1.17 %

LTM Return on avg. tangible common equity

    12.8 %   11.6 %   11.7 %

Net interest margin

    4.07 %   3.32 %   3.60 %

Efficiency ratio

    49.6 %   55.2 %   53.6 %

Loan loss reserves/Gross loans

    1.70 %   0.89 %   1.00 %

Non-performing assets(1)/Total assets

    0.56 %   0.23 %   0.33 %

Net charge-offs/Average loans

    0.68 %   0.05 %   0.12 %

Price/Tangible book value

    264 %   215 %   206 %

Price/2015 Earnings per share(2)

    22.1x     18.1x     18.2x  

Price/2016 Earnings per share(2)

    19.1x     15.7x     15.1x  

Current dividend yield

    0.0 %   0.0 %   0.2 %

Market value (in millions)

  $ 799   $ 6,259   $ 4,590  

(1)
Nonperforming assets include nonaccrual loans and leases, renegotiated loans and leases and real estate owned.

(2)
Based on median analyst estimates.

        Sandler O'Neill used publicly available information to perform a similar analysis for PacWest and a group of financial institutions as selected by Sandler O'Neill. The PacWest peer group consisted of 20 commercial banks with assets between $12 billion and $24 billion, excluding companies that were closely held by insiders and companies that were merger targets. The PacWest peer group consisted of the following companies:

55


Table of Contents

 
   
   
   
   
  Capital Position   LTM Profitability   Asset Quality  
Company
  City, State   Ticker   Total
Assets
($mm)
  C&I
Loans/
Total
Loans(1)
(%)
  TCE/TA
(%)
  Leverage
Ratio
(%)
  Total
RBC
Ratio
(%)
  ROAA
(%)
  ROAE
(%)
  Net
Interest
Margin
(%)
  Efficiency
Ratio
(%)
  LLR/
Gross
Loans
(%)
  Reported
NPAs/
Total
Assets
(%)
  NCOs/
Avg.
Loans
(%)
 

Commerce Bancshares, Inc. 

  Kansas City, MO   CBSH     23,994     22.18     8.55     9.36     14.86     1.16     11.48     3.00     60.4     1.36     0.19     0.31  

Umpqua Holdings Corporation

  Portland, OR   UMPQ     22,613     13.61     9.33     10.99     15.20     0.77     4.70     4.73     61.5     0.74     0.42     0.13  

Webster Financial Corporation

  Waterbury, CT   WBS     22,533     28.18     7.45     8.99     14.06     0.93     8.72     3.21     59.6     1.14     1.75     0.23  

Prosperity Bancshares, Inc. 

  Houston, TX   PB     21,508     17.25     6.70     7.69     14.56     1.44     9.66     3.80     39.6     0.87     0.15     0.05  

Hancock Holding Company

  Gulfport, MS   HBHC     20,747     33.65     8.59     9.17     12.29     0.90     7.10     3.87     62.9     0.93     0.63     0.14  

Wintrust Financial Corporation

  Rosemont, IL   WTFC     20,011     25.21     7.75     9.99     13.10     0.81     7.59     3.53     65.1     0.63     0.62     0.20  

TCF Financial Corporation

  Wayzata, MN   TCB     19,395     21.67     8.50     10.07     13.54     0.96     8.82     4.61     69.5     0.99     4.82     0.48  

BankUnited, Inc. 

  Miami Lakes, FL   BKU     19,211     21.59     10.37     10.70     16.27     1.21     10.13     4.61     54.9     0.77     0.27     0.08  

Valley National Bancorp

  Wayne, NJ   VLY     18,794     14.49     7.77     7.46     11.42     0.69     7.18     3.21     71.8     0.76     1.17     0.11  

UMB Financial Corporation

  Kansas City, MO   UMBF     17,501     47.76     8.01     8.72     14.04     0.75     7.54     2.35     76.6     1.02     0.21     0.22  

Fulton Financial Corporation

  Lancaster, PA   FULT     17,125     28.15     8.83     11.33     14.50     0.93     7.62     3.39     65.3     1.40     0.88     0.24  

F.N.B. Corporation

  Pittsburgh, PA   FNB     16,127     20.60     6.83     8.43     12.30     0.96     7.50     3.59     59.2     1.12     0.68     0.23  

Texas Capital Bancshares, Inc. 

  Dallas, TX   TCBI     15,900     32.32     8.27     10.98     11.75     1.05     10.74     3.75     55.2     0.71     0.28     0.05  

IBERIABANK Corporation

  Lafayette, LA   IBKC     15,759     26.23     8.47     9.36     12.30     0.72     6.17     3.54     69.7     1.12     0.41     0.05  

PrivateBancorp, Inc. 

  Chicago, IL   PVTB     15,603     48.99     8.91     9.96     12.51     1.04     10.91     3.22     52.0     1.31     0.54     0.03  

Bank of Hawaii Corporation

  Honolulu, HI   BOH     14,787     9.92     6.94     7.13     15.94     1.14     15.50     2.85     58.1     1.57     0.54     0.03  

MB Financial, Inc. 

  Chicago, IL   MBFI     14,602     42.04     8.39     10.47     13.62     0.75     5.40     3.77     63.9     1.12     0.73     0.18  

BancorpSouth, Inc. 

  Tupelo, MS   BXS     13,326     16.09     9.92     10.55     14.52     0.90     7.38     3.59     70.6     1.45     0.84     0.11  

United Bankshares, Inc. 

  Charleston, WV   UBSI     12,329     12.69     7.98     10.30     13.20     1.11     8.13     3.68     48.3     0.83     1.20     0.24  

Trustmark Corporation

  Jackson, MS   TRMK     12,251     19.03     8.62     9.63     14.56     1.03     8.83     4.03     65.5     1.15     1.55     (0.03 )

(1)
Based on regulatory loan data.

56


Table of Contents

 
   
   
  Valuation  
 
   
   
  Price/    
   
   
 
Company
  City, State   Ticker   Tang.
Book
Value
(%)
  2015
Est.
EPS
(x)
  2016
Est.
EPS
(x)
  Current
Dividend
Yield
(%)
  LTM
Dividend
Ratio
(%)
  Market
Value
($mm)
 

Commerce Bancshares, Inc. 

  Kansas City, MO   CBSH     200     15.6     13.8     2.2     32.8     4,004  

Umpqua Holdings Corporation

  Portland, OR   UMPQ     188     13.2     12.3     3.6     76.9     3,645  

Webster Financial Corporation

  Waterbury, CT   WBS     191     15.3     14.1     2.3     36.1     3,125  

Prosperity Bancshares, Inc. 

  Houston, TX   PB     275     12.1     12.0     2.1     23.0     3,610  

Hancock Holding Company

  Gulfport, MS   HBHC     137     12.6     11.6     3.3     45.7     2,354  

Wintrust Financial Corporation

  Rosemont, IL   WTFC     145     14.6     13.1     0.9     13.4     2,204  

TCF Financial Corporation

  Wayzata, MN   TCB     161     13.1     11.6     1.3     21.3     2,631  

BankUnited, Inc. 

  Miami Lakes, FL   BKU     166     17.0     13.5     2.6     43.1     3,295  

Valley National Bancorp

  Wayne, NJ   VLY     178     15.0     13.6     4.6     78.6     2,228  

UMB Financial Corporation

  Kansas City, MO   UMBF     172     16.6     14.5     1.8     34.3     2,347  

Fulton Financial Corporation

  Lancaster, PA   FULT     148     14.1     12.9     2.6     40.5     2,165  

F.N.B. Corporation

  Pittsburgh, PA   FNB     214     14.3     12.8     3.7     60.0     2,232  

Texas Capital Bancshares, Inc. 

  Dallas, TX   TCBI     162     15.5     13.2     0.0     0.0     2,125  

IBERIABANK Corporation

  Lafayette, LA   IBKC     161     14.0     12.4     2.2     41.2     2,112  

PrivateBancorp, Inc. 

  Chicago, IL   PVTB     197     16.9     14.8     0.1     2.1     2,715  

Bank of Hawaii Corporation

  Honolulu, HI   BOH     257     15.9     14.5     3.0     48.8     2,631  

MB Financial, Inc. 

  Chicago, IL   MBFI     198     14.6     13.2     1.8     39.7     2,331  

BancorpSouth, Inc. 

  Tupelo, MS   BXS     167     15.4     13.2     1.3     20.7     2,156  

United Bankshares, Inc. 

  Charleston, WV   UBSI     281     18.6     17.7     3.4     66.7     2,595  

Trustmark Corporation

  Jackson, MS   TRMK     152     13.8     13.9     4.0     50.3     1,555  

57


Table of Contents

        The analysis compared publicly available financial information for PacWest with the comparable data for the PacWest peer group as of or for the twelve months ended December 31, 2014, with pricing data as of February 27, 2015. The table below sets forth the data for PacWest as compared to the median and mean data for the PacWest peer group.


PacWest Comparable Company Analysis

 
  PacWest   Peer Group
Median
  Peer Group
Mean
 

Total assets (in millions)

  $ 16,235   $ 17,125   $ 17,375  

C&I Loans/Total Loans(1)

    36.43 %   21.67 %   25.24 %

Tangible common equity/Tangible assets

    12.20 %   8.39 %   8.30 %

Leverage ratio

    12.34 %   9.96 %   9.57 %

Total risk-based capital ratio

    16.07 %   13.62 %   13.67 %

LTM Return on average assets

    1.27 %   0.93 %   0.95 %

LTM Return on average equity

    6.11 %   7.62 %   8.40 %

Net interest margin

    5.95 %   3.59 %   3.65 %

Efficiency ratio

    41.5 %   62.9 %   61.5 %

Loan loss reserves/Gross loans

    0.71 %   1.02 %   1.03 %

Reported non-performing assets/Total assets

    0.78 %   0.63 %   0.93 %

Net charge-offs/Average loans

    0.02 %   0.13 %   0.15 %

Price/Tangible book value

    267 %   175 %   188 %

Price/2015 Earnings per share(2)

    16.1x     14.8x     14.9x  

Price/2016 Earnings per share(2)

    15.0x     13.2x     13.4x  

Current dividend yield

    4.4 %   2.2 %   2.3 %

Market value (in millions)

  $ 4,722   $ 2,350   $ 2,603  

(1)
Based on regulatory loan data.

(2)
Based on median analyst estimates.

        Analysis of Selected Merger Transactions.    Sandler O'Neill reviewed a nationwide group of comparable merger and acquisition transactions. The group consisted of 19 transactions nationwide, announced between January 1, 2010 and February 27, 2015, involving banks and thrifts, with transaction values between $500 million and $6 billion (the "Nationwide M&A Transactions").

58


Table of Contents

        The Nationwide M&A Transactions group was composed of the following transactions:

 
   
   
  Transaction Information   Seller Information  
 
   
   
   
  Price/    
   
   
   
   
   
 
 
   
   
   
  Core
Deposit
Premium
(%)
  1-Day
Market
Premium
(%)
   
   
   
   
 
Acquiror
  Target   Annc.
Date
  Deal
Value
($mm)
  LTM
Earnings
(x)
  Est.
EPS
(x)
  TBV
(%)
  Total
Assets
($mm)
  TCE/TA
(%)
  YTD
ROAA
(%)
  NPAs/
Assets(1)
(%)
 

Royal Bank of Canada

  City National Corp.     1/22/15     5,332     22.9     21.0     262     12.3     26.0     32,016     6.3     0.85     0.20  

BB&T Corp. 

  Susquehanna Bancshares Inc.     11/12/14     2,501     16.6     17.4     172     8.9     39.1     18,583     8.4     0.83     0.87  

Sterling Bancorp

  Hudson Valley Holding Corp.     11/5/14     538     NM     44.0     188     9.4     18.4     3,120     9.2     0.32     1.52  

Banner Corp. 

  Starbuck Bancshares Inc.     11/5/14     702     37.5         148     7.8         4,087     11.7     0.79     0.69  

CIT Group Inc. 

  IMB HoldCo LLC     7/22/14     3,369     13.7         102     0.8         21,807     15.2     0.78     1.19  

First Citizens BancShares Inc. 

  First Citizens Bancorp.     6/10/14     676     14.2         118     1.5     40.4     8,532     6.9     0.71     1.62  

Umpqua Holdings Corp. 

  Sterling Financial Corp.     9/11/13     1,995     19.1     19.4     167     16.5     13.9     9,940     11.7     1.08     1.70  

PacWest Bancorp

  CapitalSource Inc.     7/22/13     2,382     5.4     19.1     169     35.4     20.1     8,483     16.2     1.38     2.11  

MB Financial Inc. 

  Taylor Capital Group Inc.     7/15/13     659     11.3     14.0     182     9.3     24.6     5,901     6.0     1.15     1.89  

Banco de Credito e Inversiones

  CM Florida Holdings Inc.     5/24/13     881     14.5     14.1     191     13.8         4,609     11.0     1.33     0.99  

Columbia Banking System Inc. 

  West Coast Bancorp     9/26/12     509     13.8     21.4     145     11.0     14.5     2,408     12.7     0.99     3.05  

FirstMerit Corp. 

  Citizens Republic Bancorp Inc.     9/13/12     943     2.6     4.3     130     3.3     17.1     9,670     7.7     6.92     1.16  

M&T Bank Corp. 

  Hudson City Bancorp Inc.     8/27/12     3,813     NM     12.7     84     NM     12.1     43,590     10.4     0.66     2.50  

Hilltop Holdings Inc. 

  PlainsCapital Corp.     5/9/12     527     8.6         128     4.8         5,788     6.6     1.51     1.69  

Mitsubishi UFJ Finl Grp Inc. 

  Pacific Capital Bancorp     3/12/12     1,516     21.5     18.6     224     23.1     60.3     5,850     11.7     1.20     1.19  

Prosperity Bancshares Inc. 

  American State Financial Corp.     2/27/12     529     12.6         206     13.5         3,082     8.4     1.48     0.30  

Comerica Inc. 

  Sterling Bancshares Inc.     1/18/11     1,029     NM     64.4     230     16.7     29.8     5,040     9.1     (0.03 )   3.89  

Hancock Holding Co. 

  Whitney Holding Corp.     12/22/10     1,468     NM     39.4     164     7.4     39.8     11,517     8.1     (0.61 )   4.51  

First Niagara Finl Group

  NewAlliance Bancshares Inc.     8/19/10     1,498     24.6     23.0     165     12.7     25.4     8,712     11.1     0.77     0.83  

(1)
Nonperforming assets include nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.

59


Table of Contents

        Sandler O'Neill reviewed the following multiples: transaction price to last-twelve-months earnings per share, transaction price to estimated earnings per share, transaction price to tangible book value per share, tangible book premium to core deposits, and one-day market premium. Sandler O'Neill compared the indicated transaction multiples to the median and mean multiples of the comparable transaction groups.

 
  Square 1 /
PacWest
  Mean
Nationwide
Transactions
  Median
Nationwide
Transactions
 

Transaction value/LTM earnings per share

    23.3x     15.9x     14.2x  

Transaction value/Estimated earnings per share(1):

    22.0x     23.8x     19.3x  

Transaction value/Tangible book value per share:

    263 %   167 %   167 %

Core deposit premium(2):

    19.8 %   11.6 %   10.2 %

1-Day market premium:

        27.3 %   25.0 %

(1)
Based on median analyst estimates.

(2)
Tangible book premium to core deposits calculated as (deal value – tangible equity) / (core deposits); Core Deposits defined as deposits, less time deposit accounts with balances over $100,000, foreign deposits and unclassified deposits.

        Net Present Value Analysis.    Sandler O'Neill performed an analysis that estimated the net present value per share of Square 1 common stock assuming Square 1 performed in accordance with earnings estimates reviewed with management of Square 1. The analysis also assumed that Square 1's regular cash dividend remained at $0.00 per share annually through 2018. To approximate the terminal value of Square 1 common stock at December 31, 2018, Sandler O'Neill applied price-to-earnings multiples ranging from 17.0x to 19.0x and multiples of tangible book value ranging from 205% to 230%. The terminal values were then discounted to present values using different discount rates ranging from 11.0% to 15.0% chosen by Sandler O'Neill in its professional judgment to reflect different assumptions regarding required rates of return that holders or prospective buyers of Square 1 common stock would expect to receive. Using a 20-year normalized treasury yield of 4.00%, a publicly available equity risk premium of 5.00% and a publicly available size premium of 1.98%, Sandler O'Neill calculated a 10.98% discount rate for Square 1. As illustrated in the following tables, the analysis indicates an imputed range of values per share of Square 1 common stock of $19.79 to $25.48 when applying multiples of earnings to the applicable amounts indicated in the Square 1 forecasts and $19.88 to $25.69 when applying multiples of tangible book value to the applicable amounts indicated in the Square 1 forecasts.


Earnings Per Share Multiples

Discount Rate
  17.0x   17.5x   18.0x   18.5x   19.0x  
  11.0 % $ 22.80   $ 23.47   $ 24.14   $ 24.81   $ 25.48  
  12.0 %   22.00     22.64     23.29     23.94     24.58  
  12.5 %   21.61     22.24     22.88     23.51     24.15  
  13.0 %   21.23     21.85     22.48     23.10     23.72  
  14.0 %   20.49     21.09     21.70     22.30     22.90  
  14.5 %   20.14     20.73     21.32     21.91     22.51  
  15.0 %   19.79     20.37     20.95     21.53     22.12  

60


Table of Contents


Tangible Book Value Multiples

Discount Rate
  205%   215%   220%   225%   230%  
  11.0 % $ 22.90   $ 24.02   $ 24.58   $ 25.14   $ 25.69  
  12.0 %   22.09     23.17     23.71     24.25     24.79  
  12.5 %   21.70     22.76     23.29     23.82     24.35  
  13.0 %   21.32     22.36     22.88     23.40     23.92  
  14.0 %   20.58     21.59     22.09     22.59     23.09  
  14.5 %   20.23     21.21     21.71     22.20     22.69  
  15.0 %   19.88     20.85     21.33     21.82     22.30  

        Sandler O'Neill also considered and discussed with the Square 1 board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O'Neill performed a similar analysis assuming Square 1's net income varied from 25% above forecasts to 25% below forecasts. This analysis resulted in the following range of per share values for Square 1 common stock, using the same price-to-earnings multiples of 17.0x to 19.0x and a discount rate of 10.98%.


Earnings Per Share Multiples

Annual
Budget
Variance
  17.0x   17.5x   18.0x   18.5x   19.0x  
  (25.0 )% $ 17.11   $ 17.61   $ 18.12   $ 18.62   $ 19.12  
  (20.0 )%   18.25     18.79     19.33     19.86     20.40  
  (15.0 )%   19.39     19.96     20.53     21.10     21.67  
  (10.0 )%   20.53     21.14     21.74     22.35     22.95  
  (5.0 )%   21.67     22.31     22.95     23.59     24.22  
  0.0 %   22.81     23.49     24.16     24.83     25.50  
  5.0 %   23.96     24.66     25.36     26.07     26.77  
  10.0 %   25.10     25.83     26.57     27.31     28.05  
  15.0 %   26.24     27.01     27.78     28.55     29.32  
  20.0 %   27.38     28.18     28.99     29.79     30.60  
  25.0 %   28.52     29.36     30.20     31.04     31.87  

        Sandler O'Neill also performed an analysis that estimated the net present value per share of PacWest common stock assuming that PacWest performed in accordance with publicly available analyst earnings estimates for the years ending December 31, 2015 and 2016, and thereafter grew at the Bloomberg annual long-term growth rate of 7%. To approximate the terminal value of PacWest common stock at December 31, 2018, Sandler O'Neill applied price-to-earnings multiples ranging from 15.0x to 17.5x and multiples of tangible book value ranging from 240% to 290%. The terminal values were then discounted to present values using different discount rates ranging from 9.0% to 12.0% chosen by Sandler O'Neill in its professional judgment to reflect different assumptions regarding required rates of return of holders or prospective buyers of PacWest common stock. Using a 20-year normalized treasury yield of 4.00%, a publicly available equity risk premium of 5.00% and a publicly available two-year stock Beta of 1.008x, Sandler O'Neill calculated a discount rate of 9.04%. As illustrated in the following tables, the analysis indicates an imputed range of values per share of PacWest common stock of $40.05 to $50.62 when applying earnings multiples to the applicable amounts indicated in the PacWest analyst forecasts and $39.54 to $51.50 when applying multiples of tangible book value to the applicable amounts indicated in the PacWest analyst forecasts.

61


Table of Contents


Earnings Per Share Multiples

Discount
Rate
  15.0x   15.5x   16.0x   16.5x   17.0x   17.5x  
  9.0 % $ 44.35   $ 45.61   $ 46.86   $ 48.11   $ 49.37   $ 50.62  
  9.5 %   43.59     44.83     46.06     47.29     48.52     49.75  
  10.0 %   42.85     44.06     45.27     46.48     47.69     48.90  
  10.5 %   42.13     43.32     44.50     45.69     46.88     48.07  
  11.0 %   41.42     42.59     43.75     44.92     46.09     47.25  
  11.5 %   40.73     41.87     43.02     44.16     45.31     46.45  
  12.0 %   40.05     41.18     42.30     43.43     44.55     45.68  


Tangible Book Value Multiples

Discount
Rate
  240%   250%   260%   270%   280%   290%  
  9.0 % $ 43.78   $ 45.32   $ 46.87   $ 48.41   $ 49.96   $ 51.50  
  9.5 %   43.03     44.55     46.07     47.58     49.10     50.61  
  10.0 %   42.30     43.79     45.28     46.77     48.26     49.75  
  10.5 %   41.59     43.05     44.51     45.97     47.44     48.90  
  11.0 %   40.89     42.33     43.76     45.20     46.63     48.07  
  11.5 %   40.21     41.62     43.03     44.44     45.85     47.26  
  12.0 %   39.54     40.92     42.31     43.69     45.08     46.46  

        Sandler O'Neill also considered and discussed with the Square 1 board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O'Neill performed a similar analysis assuming PacWest's net income varied from 25% above analyst forecasts to 25% below analyst forecasts. This analysis resulted in the following range of per share values for PacWest common stock, using the same price-to-earnings multiples of 15.0x to 17.5x and a discount rate of 9.04%, based on a 4.00% 20-year normalized treasury yield, a two-year beta of PacWest common stock of 1.008x, and an equity risk premium of 5.00%.


Earnings Per Share Multiples

Annual
Budget
Variance
  15.0x   15.5x   16.0x   16.5x   17.0x   17.5x  
  (25.0 )% $ 34.90   $ 35.84   $ 36.78   $ 37.72   $ 38.66   $ 39.59  
  (20.0 )%   36.78     37.78     38.78     39.78     40.78     41.79  
  (15.0 )%   38.66     39.72     40.78     41.85     42.91     43.98  
  (10.0 )%   40.53     41.66     42.79     43.91     45.04     46.17  
  (5.0 )%   42.41     43.60     44.79     45.98     47.17     48.36  
  0.0 %   44.29     45.54     46.79     48.05     49.30     50.55  
  5.0 %   46.17     47.48     48.80     50.11     51.43     52.74  
  10.0 %   48.05     49.42     50.80     52.18     53.56     54.93  
  15.0 %   49.92     51.36     52.80     54.24     55.68     57.12  
  20.0 %   51.80     53.30     54.81     56.31     57.81     59.31  
  25.0 %   53.68     55.25     56.81     58.38     59.94     61.51  

        In connection with its analyses, Sandler O'Neill considered and discussed with the Square 1 board of directors how the present value analyses would be affected by changes in the underlying assumptions. Sandler O'Neill noted that the net present value analysis is a widely used valuation

62


Table of Contents

methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

        Pro Forma Merger Analysis.    Sandler O'Neill analyzed certain potential pro forma effects of the merger, based on the following assumptions: (i) the merger closes in the fourth calendar quarter of 2015; (ii) 100% of the outstanding shares of Square 1 common stock are converted into PacWest common stock at the fixed exchange ratio of 0.5997; (iii) all outstanding Square 1 options will be cashed out by PacWest at closing; (iv) all outstanding Square 1 warrants will be exercised prior to closing; (v) all outstanding Square 1 RSUs will vest upon a change-in-control and be cashed out by PacWest at closing; and (vi) PacWest's closing stock price of $45.84 on February 27, 2015. Sandler O'Neill also incorporated the following assumptions: (a) 2015 and 2016 estimated earnings per share forecasts for both Square 1 and PacWest based on median research consensus estimates; (b) replacing a portion of PacWest's CD funding with Square 1's off-balance sheet deposits of $400 million in 2016, $200 million in 2017 and $200 million in 2018, at a cost savings of 0.75%; (c) purchase accounting adjustments of a credit mark on loans equal to Square 1's fourth quarter 2014 allowance for loan losses (1.70% of gross loans), thereby reducing Square 1's stand-alone provision expense by 25% annually, and no interest rate marks; (d) cost savings equal to 20% of Square 1's forecasted non-interest expense, 100% realized in the first year; (e) transaction costs and expenses of approximately $35 million, $30 million of which is related to Square 1 and expensed pre-closing; (f) a 1.50% core deposit premium on $1.95 billion of core deposits; and (g) a tax rate of 40% on pro forma adjustments. The analysis indicated that the merger would be less than 1% dilutive to PacWest's earnings per share in 2016 (excluding transaction expenses in 2015) and less than 2% dilutive to tangible book value per share at close.

        In connection with this analyses, Sandler O'Neill considered and discussed with the Square 1 board of directors how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the transaction, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.

        Sandler O'Neill's Relationship.    Sandler O'Neill acted as the financial advisor to the Square 1 board of directors in connection with the merger and will receive a transaction fee of approximately $7.64 million in connection with the merger, contingent on the closing of the merger. Sandler O'Neill has also received a fee of $750,000 in connection with the delivery of its fairness opinion, which will be credited in full against the transaction fee that becomes due and payable upon the closing of the merger. Square 1 has also agreed to reimburse Sandler O'Neill for its reasonable out-of-pocket expenses incurred in connection with its engagement and to indemnify Sandler O'Neill and its affiliates and their respective partners, directors, officers, employees and agents against certain expenses and liabilities, including liabilities under applicable federal or state law.

        In the past, Sandler O'Neill has provided certain other investment banking services for Square 1 and has received compensation for such services. Most recently, Sandler O'Neill acted as a lead book running underwriter in connection with Square 1's initial public offering of common stock in March 2014 as well as financial advisor in Square 1's fall 2012 private capital raise, placement agent in Square 1's May 2010 private placement, and placement agent in Square 1's de novo capital raise in August 2005. In the past two years, Sandler O'Neill has received compensation of $5.33 million from Square 1 for these services. In the past two years, Sandler O'Neill has not performed any services for PacWest for which it has received or is entitled to compensation. In the ordinary course of Sandler O'Neill's business as a broker-dealer, it may also purchase securities from and sell securities to Square 1 and PacWest and their affiliates. It may also actively trade the securities of Square 1 and PacWest for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

63


Table of Contents

Certain Square 1 Unaudited Prospective Financial Information

        Square 1 does not as a matter of course make public projections as to future performance, revenues, earnings or other financial results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, Square 1 is including in this proxy statement/prospectus certain unaudited prospective financial information that was made available to Square 1's financial advisor and to PacWest in connection with the merger. The inclusion of this information should not be regarded as an indication that any of Square 1, PacWest, Sandler O'Neill, their respective representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual fu