10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

OR

( )        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 0-22193

(Exact name of registrant as specified in its charter)

DELAWARE	33-0743196
(State or other jurisdiction of incorporation or organization)	(I.R.S Employer Identification No.)

1600 SUNFLOWER AVENUE, 2ND FLOOR, COSTA MESA, CALIFORNIA 92626

(Address of principal executive offices and zip code)

(714) 431-4000

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act).

Large accelerated filer	[ ]	Accelerated filer	[ ]	Non-accelerated filer	[ ]	Smaller reporting company	[ X ]
				(Do not check if a smaller reporting company)

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

The number of shares outstanding of the registrant's common stock as of November 5, 2010 was 10,033,836.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

FORM 10-Q

INDEX

FOR THE QUARTER ENDED SEPTEMBER 30, 2010

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except share data)
	September 30,			December 31,			September 30,
ASSETS	2010			2009			2009
	(Unaudited)			(Audited)			(Unaudited)
Cash and due from banks	$	51,267		$	59,677		$	115,662
Federal funds sold		29			29			30
Cash and cash equivalents		51,296			59,706			115,692
Investment securities available for sale		172,181			123,407			101,686
FHLB stock/Federal Reserve Bank stock, at cost		13,805			14,330			14,330
Loans held for investment		552,454			575,489			584,614
Allowance for loan losses		(9,170	)		(8,905	)		(8,107	)
Loans held for investment, net		543,284			566,584			576,507
Accrued interest receivable		3,556			3,520			3,346
Other real estate owned		1,700			3,380			3,644
Premises and equipment		8,358			8,713			8,928
Deferred income taxes		10,346			11,465			10,981
Bank owned life insurance		12,323			11,926			11,792
Other assets		4,471			4,292			959
TOTAL ASSETS	$	821,320		$	807,323		$	847,865
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposit accounts:
Noninterest bearing	$	51,798		$	33,885		$	33,098
Interest bearing:
Transaction accounts		198,788			161,872			128,493
Retail certificates of deposit		404,232			417,377			438,545
Wholesale/brokered certificates of deposit		1,973			5,600			6,246
Total deposits		656,791			618,734			606,382
FHLB advances and other borrowings		66,500			91,500			166,500
Subordinated debentures		10,310			10,310			10,310
Accrued expenses and other liabilities		9,175			13,277			6,357
TOTAL LIABILITIES		742,776			733,821			789,549
STOCKHOLDERS’ EQUITY
Preferred Stock, $.01 par value; 1,000,000 shares authorized; no shares outstanding		-			-			-
Common stock, $.01 par value; 15,000,000 shares authorized; 10,033,836 shares at September 30, 2010 and December 31, 2009, and 5,003,451 shares at September 30, 2009 issued and outstanding		100			100			49
Additional paid-in capital		79,933			79,907			64,648
Accumulated deficit		(2,126	)		(4,764	)		(4,487	)
Accumulated other comprehensive income (loss), net of tax (benefit) of $446 at September 30, 2010, ($1,218) at December 31, 2009, and ($1,324) at September 30, 2009		637			(1,741	)		(1,894	)
TOTAL STOCKHOLDERS’ EQUITY		78,544			73,502			58,316
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	821,320		$	807,323		$	847,865

Accompanying notes are an integral part of these consolidated financial statements.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended						Nine Months Ended
	September 30, 2010			September 30, 2009			September 30, 2010			September 30, 2009
INTEREST INCOME
Loans	$	9,196		$	9,612		$	27,193		$	29,832
Investment securities and other interest-earning assets		1,284			1,145			3,461			3,172
Total interest income		10,480			10,757			30,654			33,004
INTEREST EXPENSE
Interest-bearing deposits:
Interest on transaction accounts		416			378			1,305			943
Interest on certificates of deposit		1,886			2,667			5,964			9,150
Total interest-bearing deposits		2,302			3,045			7,269			10,093
FHLB advances and other borrowings		693			1,870			2,246			5,602
Subordinated debentures		83			89			235			290
Total interest expense		3,078			5,004			9,750			15,985
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES		7,402			5,753			20,904			17,019
PROVISION FOR LOAN LOSSES		397			2,001			2,092			5,535
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		7,005			3,752			18,812			11,484
NONINTEREST INCOME
Loan servicing fees		122			117			334			402
Deposit fees		207			215			603			638
Net loss from sales of loans		(37	)		7			(2,677	)		7
Net gain from sales of investment securities		388			19			762			322
Other-than-temporary impairment loss on investment securities, net		(252	)		(399	)		(908	)		(1,600	)
Other income		246			297			796			789
Total noninterest income (loss)		674			256			(1,090	)		558
NONINTEREST EXPENSE
Compensation and benefits		2,070			1,954			6,135			6,040
Premises and occupancy		671			628			1,942			1,942
Data processing and communications		181			143			594			471
Other real estate owned operations, net		195			198			1,027			197
FDIC insurance premiums		383			274			1,065			1,118
Legal and audit		426			165			815			645
Marketing expense		213			164			570			508
Office and postage expense		158			78			409			247
Other expense		512			515			1,382			1,473
Total noninterest expense		4,809			4,119			13,939			12,641
NET INCOME (LOSS) BEFORE INCOME TAX		2,870			(111	)		3,783			(599	)
INCOME TAX (BENEFIT)		1,025			(104	)		1,145			(416	)
NET INCOME (LOSS)	$	1,845		$	(7	)	$	2,638		$	(183	)
EARNINGS (LOSS) PER SHARE
Basic	$	0.18		$	-		$	0.26		$	(0.04	)
Diluted	$	0.17		$	-		$	0.24		$	(0.04	)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		10,033,836			5,003,451			10,033,836			4,919,385
Diluted		11,025,345			5,003,451			11,035,467			4,919,385

Accompanying notes are an integral part of these consolidated financial statements.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND OTHER COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(dollars in thousands)
(unaudited)
	Common Stock Shares			Amount			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Comprehensive Income			Total Stockholders’ Equity
Balance at December 31, 2009		10,033,836		$	100		$	79,907		$	(4,764	)	$	(1,741	)				$	73,502
Comprehensive Income:
Net income											2,638					$	2,638			2,638
Unrealized holding gains on securities arising during the period, net of tax																	2,293
Reclassification adjustment for net loss on sale of securities included in net income, net of tax																	85
Net unrealized gain on securities, net of tax														2,378			2,378			2,378
Total comprehensive income																$	5,016
Share-based compensation expense								26												26
Balance at September 30, 2010		10,033,836		$	100		$	79,933		$	(2,126	)	$	637					$	78,544
Balance at December 31, 2008		4,903,451		$	49		$	64,679		$	(4,304	)	$	(2,876	)				$	57,548
Comprehensive Income:
Net loss											(183	)				$	(183	)		(183	)
Unrealized holding gains on securities arising during the period, net of tax																	691
Reclassification adjustment for net loss on sale of securities included in net income, net of tax																	291
Net unrealized gain on securities, net of tax														982			982			982
Total comprehensive income																$	799
Share-based compensation expense								204												204
Warrants exercised		200,000			2			148												150
Common stock repurchased and retired		(100,000	)		(2	)		(383	)											(385	)
Balance at September 30, 2009		5,003,451		$	49		$	64,648		$	(4,487	)	$	(1,894	)				$	58,316

Accompanying notes are an integral part of these consolidated financial statements.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
	Nine Months Ended
	September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	2,638		$	(183	)
Adjustments to net income (loss):
Depreciation and amortization expense		740			765
Provision for loan losses		2,092			5,535
Share-based compensation expense		26			203
Loss on sale and disposal of premises and equipment		30			25
Loss (gain) on sale of other real estate owned		191			(7	)
Write down of other real estate owned		698			164
Amortization of premium/discounts on securities held for sale, net		457			235
Gain on sale of loans held for sale		-			(7	)
Gain on sale of investment securities available for sale		(762	)		(322	)
Other-than-temporary impairment loss on investment securities, net		908			1,600
Loss on sale of loans held for investment		2,677			-
Proceeds from the sales of and principal payments from loans held for sale		-			675
Deferred income tax provision (benefit)		1,119			(477	)
Change in accrued expenses and other liabilities, net		(4,102	)		(1,287	)
Federal Home Loan Bank stock dividend		-			(54	)
Income from bank owned life insurance, net		(397	)		(397	)
Change in accrued interest receivable and other assets, net		(1,442	)		346
Net cash provided by operating activities		4,873			6,814
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and principal payments on loans held for investment		113,225			51,142
Net change in undisbursed loan funds		(27,031	)		(2,496	)
Purchase and origination of loans held for investment		(71,198	)		(11,017	)
Proceeds from sale of other real estate owned		4,355			45
Principal payments on securities available for sale		11,290			11,153
Purchase of securities available for sale		(135,123	)		(147,502	)
Proceeds from sale or maturity of securities available for sale		78,031			92,456
Purchases of premises and equipment		(414	)		(80	)
Purchase of Federal Reserve Bank stock		(420	)		-
Redemption of Federal Home Loan Bank of San Francisco stock		945			-
Net cash used in investing activities		(26,340	)		(6,299	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net  increase in deposit accounts		38,057			149,254
Repayment of FHLB advances and other borrowings		(25,000	)		(43,400	)
Repurchase of common stock		-			(384	)
Net cash provided by financing activities		13,057			105,470
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(8,410	)		105,985
CASH AND CASH EQUIVALENTS, beginning of period		59,706			9,707
CASH AND CASH EQUIVALENTS, end of period	$	51,296		$	115,692
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid	$	9,740		$	16,054
Income taxes paid	$	1,035		$	810
NONCASH OPERATING ACTIVITIES DURING THE PERIOD
Restricted stock vested	$	-		$	104
NONCASH INVESTING ACTIVITIES DURING THE PERIOD
Transfers from loans to other real estate owned	$	3,564		$	3,806
Investment securities available for sale purchased and not settled	$	2,081		$	-

Accompanying notes are an integral part of these consolidated financial statements.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(UNAUDITED)

Note 1 - Basis of Presentation

The consolidated financial statements include the accounts of Pacific Premier Bancorp, Inc. (the “Corporation”) and its wholly owned subsidiary, Pacific Premier Bank (the “Bank”) (collectively, the “Company,” “we,” “our” or “us”).  All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of September 30, 2010, December 31, 2009, and September 30, 2009 and the results of its operations, changes in stockholders’ equity, comprehensive income and cash flows for the three and nine months ended September 30, 2010 and 2009.  Operating results for the three and nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for any other interim period or the full year ending December 31, 2010.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2009.

The Company accounts for its investments in its wholly owned special purpose entity, PPBI Trust I, under the equity method whereby the subsidiary’s net earnings are recognized in the Company’s statement of income.

Note 2 – Recently Issued Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820):  Improving Disclosures about Fair Value Measurements.”  ASU 2010-06 revises two disclosure requirements concerning fair value measurements and clarifies two others.  It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers.  It will also require the presentation of purchases, sales, issuances, and settlements within Level 3 on a gross basis rather than a net basis.  The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements.  The Company’s disclosures about fair value measurements are presented in Note 6 – Fair Value Disclosures.  These new disclosure requirements were effective for the period ended September 30, 2010, except for the requirement concerning gross presentation of Level 3 activity, which is effective for fiscal years beginning after December 15, 2010.  There was no significant effect to the Company’s financial statement disclosure upon adoption of this ASU.

Future Application of Accounting Pronouncements

In July 2010, the FASB issued ASU No. 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses,” which will require the Company to provide a greater level of disaggregated information about the credit quality of the Company’s loans and leases and the Allowance for Loan and Lease Losses (the “Allowance”).  This ASU will also require the Company to disclose additional information related to credit quality indicators, past due information, and information related to loans modified in a troubled debt restructuring.  The provisions of this ASU are effective for the Company’s reporting period ending December 31, 2010.  As this ASU amends only the disclosure requirements fo r loans and leases and the allowance, the adoption will have no impact on the Company’s statements of income or condition.

Note 3 – Subordinated Debentures

In March 2004, the Corporation issued $10.3 million of Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Subordinated Debentures”) to PPBI Trust I, which funded the payment of $10.0 million of Floating Rate Trust Preferred Securities issued by PPBI Trust I in March 2004. The net proceeds from the offering of Trust Preferred Securities were contributed as capital to the Bank to support further growth.  Interest is payable quarterly on the Subordinated Debentures at three-month LIBOR plus 2.75% per annum, for an effective rate of 3.28% per annum as of September 30, 2010.

The Corporation is not allowed to consolidate PPBI Trust I into the Company’s financial statements.  The resulting effect on the Company’s consolidated financial statements is to report the Subordinated Debentures as a component of liabilities.

Note 4 – Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common shares in treasury.  Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted from the issuance of common stock that would then share in earnings and excludes common shares in treasury.  Stock options exercisable for 505,057 shares of common stock for the three months ended September 30, 2010 and stock options exercisable for 565,935 shares of common stock for the three months ended September 30, 2009 were not included in the computation of earnings per share because their exe rcise price exceeded the average market price during the respective periods.  Stock options exercisable for 494,935 shares of common stock for the nine months ended September 30, 2010 and stock options exercisable for 565,551 shares of common stock for the nine months ended September 30, 2009 were not included in the computation of earnings per share because their exercise price exceeded the average market price for the respective periods.

The following table sets forth the Company’s unaudited earnings per share calculations for the periods indicated:

	Three Months Ended September 30,
	2010						2009
	Net				Per Share		Net					Per Share
	Income		Shares		Amount		Loss			Shares		Amount
	(dollars in thousands, except per share data)
Net income (loss)	$	1,845					$	(7	)
Basic income (loss) available to common stockholders		1,845		10,033,836	$	0.18		(7	)		5,003,451	$	(0.00	)
Effect of warrants and dilutive stock options		-		991,509				-			-
Diluted income (loss) available to common stockholders plus assumed conversions	$	1,845		11,025,345	$	0.17	$	(7	)		5,003,451	$	(0.00	)

	Nine Months Ended September 30,
	2010						2009
	Net				Per Share		Net					Per Share
	Income		Shares		Amount		Loss			Shares		Amount
	(dollars in thousands, except per share data)
Net income (loss)	$	2,638					$	(183	)
Basic income (loss) available to common stockholders	$	2,638		10,033,836	$	0.26	$	(183	)		4,919,385	$	(0.04	)
Effect of warrants and dilutive stock options		-		1,001,631				-			-
Diluted income (loss) available to common stockholders plus assumed conversions	$	2,638		11,035,467	$	0.24	$	(183	)		4,919,385	$	(0.04	)

Note 5 – Fair Value of Financial Instruments

The Company’s estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies.  However, considerable judgment is required to develop the estimates of fair value. Accordingly, the estimates are not necessarily indicative of the amounts the Company could have realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since the balance sheet date and, therefore, current estimates o f fair value may differ significantly from the amounts presented.  The following methods were used to estimate the fair value of each class of financial instruments identified in the table immediately below.

Cash and Cash Equivalents—The carrying amount approximates fair value due to their short-term repricing characteristics.

Securities Available for Sale—Fair values are based on quoted market prices from securities dealers or readily available market quote systems.

Federal Home Loan Bank (“FHLB”) of San Francisco and Federal Reserve Bank Stock —The carrying value approximates the fair value based upon the redemption provisions of the stock.

Loans Held for Sale—Fair values are based on quoted market prices or dealer quotes.

Loans Held for Investment—The fair value of gross loans receivable has been estimated using the present value of cash flow method, discounting expected future cash flows by estimated market interest rates for loans with similar characteristics, including credit ratings and maturities.  Consideration is also given to estimated prepayments and credit losses.

Accrued Interest Receivable/Payable—The carrying amount approximates fair value.

Deposit Accounts—The fair value disclosed for checking, passbook and money market accounts is the amount payable on demand at the reporting date.  The fair value of certificates of deposit accounts is estimated using a discounted cash flow calculation based on interest rates currently offered for certificate of deposits of similar remaining maturities.

FHLB Advances and Other Borrowings—The fair value disclosed for FHLB advances and other borrowings is determined by discounting contractual cash flows at current market interest rates for similar instruments with similar terms.

Subordinated Debentures—The fair value of subordinated debentures is estimated by discounting the balance by the current three-month LIBOR rate plus the current market spread.  The fair value is determined based on the maturity date as the Company does not currently have intentions to call the debenture.

Off-balance sheet commitments and standby letters of credit—The notional amount disclosed for off-balance sheet commitments and standby letters of credit is the amount available to be drawn down on all lines and letters of credit.  The cost to assume is calculated at 10% of the notional amount.

Based on the above methods and pertinent information available to management as of the periods indicated, the following table presents the carrying amount and estimated fair value of our financial instruments:

	At September 30, 2010				At December 31, 2009				At September 30, 2009
	Carrying		Estimated		Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value		Amount		Fair Value
	(in thousands)
Assets:
Cash and cash equivalents	$	51,296	$	51,296	$	59,706	$	59,706	$	115,692	$	115,692
Securities available for sale		172,181		172,181		123,407		123,407		101,686		101,686
Federal Reserve Bank and FHLB stock, at cost		13,805		13,805		14,330		14,330		14,330		14,330
Loans held for investment, net		543,284		618,264		566,584		558,901		576,507		576,679
Accrued interest receivable		3,556		3,556		3,520		3,520		3,346		3,346
Liabilities:
Deposit accounts		656,791		662,976		618,734		632,135		606,382		617,966
FHLB advances		38,000		38,255		63,000		64,666		138,000		140,669
Other borrowings		28,500		30,027		28,500		35,384		28,500		27,918
Subordinated debentures		10,310		7,812		10,310		5,378		10,310		7,983
Accrued interest payable		173		173		161		161		267		267
	Notional Amount		Cost to Cede or Assume		Notional Amount		Cost to Cede or Assume		Notional Amount		Cost to Cede or Assume
Off-balance sheet commitments and standby letters of credit	$	39,745	$	3,975	$	13,027	$	1,303	$	2,699	$	270

Note 6 – Fair Value Disclosures

The Company determines the fair market values of certain financial instruments based on the fair value hierarchy established in GAAP under ASC 820, “Fair Value Measurements and Disclosures”, and as modified  by ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820):  Improving Disclosures about Fair Value Measurements”.  GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and describes three levels of inputs that may be used to measure fair value.

The following provides a summary of the hierarchical levels used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities may include debt and equity securities that are actively traded in an exchange market or an over-the-counter market and are considered highly liquid. This category generally includes U.S. Government and agency mortgage-backed debt securities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and other instruments whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes corporate debt securities, derivative contracts, residential mortgage and loans held-for-sale.

Level 3—Unobservable inputs supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, asset-backed securities (“ABS”), highly structured or long-term derivative contracts and certain collateralized debt obligations (“CDO”) where independent pricing information could not be obtained for a significant portion of the underlying assets.

The Company’s financial assets and liabilities measured at fair value on a recurring basis include securities available for sale and equity securities.  Securities available for sale include U.S. Treasuries, municipal bonds and mortgage-backed securities.  The Company’s financial assets and liabilities measured at fair value on a non-recurring basis include impaired loans and other real estate owned (“OREO”).

Marketable Securities.  Where possible, the Company utilizes quoted market prices to measure debt and equity securities; such items are classified as Level 1 in the hierarchy and include equity securities, U.S. Treasuries and securities issued by government sponsored enterprises (“GSE”).  When quoted market prices for identical assets are unavailable or the market for the asset is not sufficiently active, varying valuation techniques are used.  Common inputs in valuing these assets include, among others, benchmark yields, issuer spreads, forward mortgage-backed securities trade prices and recently reported trades.  Such assets are classified as Level 2 in the hierarchy and typically include private labe l mortgage-backed securities and corporate bonds. Pricing on these securities are provided to the Company by a pricing service vendor.  In the Level 3 category, the Company is classifying all the securities that its pricing service vendor cannot price due to lack of trade activity in these securities.

Impaired Loans.  A loan is considered impaired when it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. Impairment is measured based on the fair value of the underlying collateral less the anticipated selling costs or the discounted expected future cash flows.  The Company does not measure loan impairment on loans less than $100,000.  As such, the Company records impaired loans as non-recurring Level 2 when the fair value of the underlying collateral is based on an observable market price or current appraised value. When current market prices are not available or the Company determines that the fair value of the underlying collateral is furthe r impaired below appraised values, the Company records impaired loans as Level 3. At September 30, 2010, substantially all the Company’s impaired loans were evaluated based on the fair value of their underlying collateral based upon the most recent appraisal available to management.

OREO.  The Company generally obtains an appraisal and/or a market evaluation from a qualified third party on all OREO prior to obtaining possession. After foreclosure, an updated appraisal and/or a market evaluation is periodically performed, as deemed appropriate by management, due to changing market conditions or factors specifically attributable to the property’s condition.  If the carrying value of the property exceeds its fair value less estimated cost to sell, a charge to operations is recorded and the OREO value is reduced accordingly.

The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following fair value hierarchy table presents information about the Company’s assets measured at fair value on a recurring basis at the date indicated:

	September 30, 2010
	Fair Value Measurement Using
	Level 1		Level 2		Level 3		Securities at Fair Value
	(in thousands)
Investment securities available for sale:
U.S. Treasury	$	163	$	-	$	-	$	163
Municipal bonds		20,224		-		-		20,224
Mortgage-backed securities:
Government Sponsored Enterprise		147,154		-		-		147,154
Private label securities		-		4,446		194		4,640
Total securities available for sale	$	167,541	$	4,446	$	194	$	172,181
Stock:
FHLB stock	$	11,786	$	-	$	-	$	11,786
Federal Reserve Bank stock		2,019		-		-		2,019
Total stock	$	13,805	$	-	$	-	$	13,805
Total securities	$	181,346	$	4,446	$	194	$	185,986

The following table provides a summary of the changes in balance sheet carrying values associated with Level 3 financial instruments for the period indicated:

	Fair Value Measurement Using Significant Other Unobservable Inputs
	(Level 3)
	Marketable securities
	(in thousands)
Beginning Balance, January 1, 2010	$	623
Total gains or losses (realized/unrealized):
Included in earnings (or changes in net assets)		(219	)
Included in other comprehensive income		(147	)
Purchases, issuances, and settlements		(63	)
Transfer in and/or out of Level 3		-
Ending Balance, September 30, 2010	$	194

The following fair value hierarchy table presents information about the Company’s assets measured at fair value on a non-recurring basis at the date indicated:

	September 30, 2010
	Fair Value Measurement Using
	Level 1		Level 2		Level 3		Assets at Fair Value
	(in thousands)
Assets
Impaired loans	$	-	$	6,615	$	-	$	6,615
Other real estate owned		-		1,700		-		1,700
Total assets	$	-	$	8,315	$	-	$	8,315

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains information and statements that are considered “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based.  Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” &# 8220;should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” or words or phases of similar meaning.  We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control.  Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.

The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:

·   The strength of the United States economy in general and the strength of the local economies in which we conduct operations;

·   The effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”);

·   Inflation/deflation, interest rate, market and monetary fluctuations;

·   The timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;

·   The willingness of users to substitute competitors’ products and services for our products and services;

·   The impact of changes in financial services policies, laws and regulations, including those concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies;

·   Technological changes;

·   The effect of acquisitions we may make, if any, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions;

·   Changes in the level of our nonperforming assets and charge-offs;

·   Oversupply of inventory and continued deterioration in values of California real estate, both residential and commercial;

·   The effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters;

·   Possible other-than-temporary impairments of securities held by us;

·   The impact of current governmental efforts to restructure the U.S. financial regulatory system, including enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act;

·   Changes in consumer spending, borrowing and savings habits;

·   The effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations;

·   Ability to attract deposits and other sources of liquidity;

·   Changes in the financial performance and/or condition of our borrowers;

·   Changes in the competitive environment among financial and bank holding companies and other financial service providers;

·   Geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad;

·   Unanticipated regulatory or judicial proceedings; and

·   Our ability to manage the risks involved in the foregoing.

If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Quarterly Report on Form 10-Q and other reports and registration statements filed by us with the SEC.  Therefore, we caution you not to place undue reliance on our forward-looking information and statements.  We will not update the forward-looking information and statements to reflect actual results or changes in the factors affecting the forward-looking information and statements.  The above factors and other risks and uncertainties are discussed in our 2009 Annual Report on Form 10-K, as amended, as supplemented by the risk fact ors contained in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q.

Forward-looking information and statements should not be viewed as predictions, and should not be the primary basis upon which investors evaluate us.  Any investor in our common stock should consider all risks and uncertainties disclosed in our filings with the SEC, all of which are accessible on the SEC’s website at http://www.sec.gov.

GENERAL

This discussion should be read in conjunction with our Management Discussion and Analysis of Financial Condition and Results of Operations included in the 2009 Annual Report on Form 10-K, as amended, plus the unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.  The results for the three and nine months ended September 30, 2010 are not necessarily indicative of the results expected for the year ending December 31, 2010.

We are a California-based bank holding company incorporated in the state of Delaware and registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”).  Our wholly owned subsidiary, Pacific Premier Bank, is a California state chartered commercial bank.  As a bank holding company, the Corporation is subject to regulation and supervision by the Federal Reserve. We are required to file with the Federal Reserve quarterly and annual reports and such additional information as the Federal Reserve may require pursuant to the BHCA. The Federal Reserve may conduct examinations of bank holding companies, such as the Corporation, and their subsidiaries.  The Corporation is also a bank holding company within the meaning of the California Financial Code (the “Financ ial Code”). As such, the Corporation and its subsidiaries are subject to examination by, and may be required to file reports with, the California Department of Financial Institutions (“DFI”).

Under a policy of the Federal Reserve, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such a policy. The Federal Reserve, under the BHCA, has the authority to require a bank holding company to terminate any activity or to relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.

As a California state-chartered commercial bank which is a member of the Federal Reserve System, the Bank is subject to supervision, periodic examination and regulation by the DFI and the Federal Reserve. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) through the Deposit Insurance Fund (“DIF”).  In general terms, insurance coverage is unlimited for non-interest bearing transaction accounts until December 31, 2012 and up to $250,000 per depositor for all other accounts in accordance with the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).  As a result of this deposit insurance function, the FDIC also has certain supervisory authority and powers over our bank as well as all other FDIC insur ed institutions. If, as a result of an examination of the Bank, the regulators should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of the Bank’s operations are unsatisfactory or that the Bank or our management is violating or has violated any law or regulation, various remedies are available to the regulators. Such remedies include the power to enjoin unsafe or unsound practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict growth, to assess civil monetary penalties, to remove officers and directors and ultimately to request the FDIC to terminate the Bank’s deposit insurance. As a California-chartered commercial bank, the Bank is also subject to certain provisions of California law.

We provide banking services within our targeted markets in Southern California to businesses, including the owners and employees of those businesses, professionals, real estate investors and non-profit organizations, as well as consumers in the communities we serve. The Bank operates six depository branches in Southern California located in the cities of Costa Mesa, Huntington Beach, Los Alamitos, Newport Beach, San Bernardino, and Seal Beach.  Our corporate headquarters are located in Costa Mesa, California.  Through our branches and our web site at www.ppbi.com, we offer a broad array of deposit products and services for both business and consumer customers, including checking, money market and savings accounts, cash management services, electronic ban king, and on-line bill payment.  We also offer a variety of loan products, including commercial business loans, lines of credit, commercial real estate loans, U.S. Small Business Administration (“SBA”) loans, residential home loans, and home equity loans.  The Bank funds it’s lending and investment activities with retail deposits obtained through its branches, advances from the FHLB, lines of credit, and wholesale and brokered certificates of deposits.

Our principal source of income is the net spread between interest earned on loans and investments and the interest costs associated with deposits and borrowings used to finance the loan and investment portfolios.  Additionally, the Bank generates fee income from loan and investment sales and various products and services offered to both depository and loan customers.

Regulatory Developments

On July 21 2010, sweeping financial regulatory reform legislation entitled the “Dodd-Frank Wall Street Reform and Consumer Protection Act” was signed into law by President Obama. The Dodd-Frank Act implements far-reaching changes across the financial regulatory landscape, including provisions that, among other things, will:

·   Centralize responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, responsible for implementing, examining and enforcing compliance with federal consumer financial laws.

·   Limit the preemption of state law by federal law and disallow subsidiaries and affiliates of national banks, such as the Bank, from availing themselves of such preemption.

·   Require federal bank regulators to seek to make their capital requirements countercyclical so that capital requirements increase in times of economic expansion and decrease in times of economic contraction.

·   Require bank holding companies and banks to be both well-capitalized and well-managed in order to engage in interstate bank acquisitions.

·   Impose comprehensive regulation of the over-the-counter derivatives market, which would include certain provisions that would effectively prohibit insured depository institutions from conducting certain derivatives businesses in the institution itself.

·   Implement corporate governance revisions, including with regard to executive compensation and proxy access by shareholders.

·   Make permanent the $250,000 limit for federal deposit insurance and increase the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000 and provide unlimited federal deposit insurance through December 31, 2012 for non-interest bearing demand transaction accounts at all insured depository institutions.

·   Repeal the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts.

·   Amend the Electronic Fund Transfer Act to, among other things, give the Federal Reserve the authority to establish rules regarding interchange fees charged for electronic debit transactions by payment card issuers having assets over $10 billion and to enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction to the issuer.

·   Increase the authority of the Federal Reserve to examine bank holding companies, such as the Corporation, and their non-bank subsidiaries.

·   Exempt non-accelerated filers, such as the Corporation, from the auditor attestation requirements on management’s assessment of internal controls.  However, the requirement of an assessment by management of the issuer’s internal controls is not affected by this amendment.

Many aspects of the Dodd-Frank Act are subject to rulemaking and will take effect over several years, making it difficult to anticipate the overall financial impact on the Company, its customers or the financial industry generally.  Provisions in the legislation that affect deposit insurance assessments, payment of interest on demand deposits and interchange fees could increase the costs associated with deposits as well as place limitations on certain revenues those deposits may generate.

CRITICAL ACCOUNTING POLICIES

Management has established various accounting policies which govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements.  Our significant accounting policies are described in the Notes to the Consolidated Financial Statements in our 2009 Annual Report on Form 10-K, as amended.  Certain accounting policies require management to make estimates and assumptions which have a material impact on the carrying value of certain assets and liabilities; management considers these to be critical accounting policies.  The estimates and assumptions management uses are based on historical experience and other factors, which management believes to be reasonable under the circumstances.  Actual results could differ significantly f rom these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at balance sheet dates and our results of operations for future reporting periods.

We consider the allowance for loan losses to be a critical accounting policy that requires judicious estimates and assumptions in the preparation of our financial statements that is particularly susceptible to significant change. For further information, see “Allowances for Loan Losses” discussed later in this report and in our 2009 Annual Report on Form 10-K, as amended.

RESULTS OF OPERATIONS

In the third quarter of 2010, we recorded net income of $1.8 million, or $0.17 per diluted share, compared to net loss of $7,000 or less than $0.01 per share for the third quarter of 2009.

The Company’s pre-tax income totaled $2.9 million in the third quarter of 2010, compared with a pre-tax loss of $111,000 from the same period in the prior year.  The $3.0 million favorable change between quarters was primarily due to:

·   A $1.6 million increase in net interest income due to a higher net interest margin; and

·   A $1.6 million decrease in the provision for loan losses due to improved loan credit quality metrics.

Partially offsetting those favorable items was a $690,000 increase in noninterest expense, essentially spread throughout all of our expense categories.

For the three months ended September 30, 2010, our return on average assets was 0.91% and return on average equity was 9.62%, compared to a negative return on average assets of less than 0.01% and a negative return on average equity of 0.05% for the same comparable period of 2009.

For the first nine months of 2010, the Company’s net income totaled $2.6 million or $0.24 per share on a diluted basis, compared with a net loss of $183,000 or $0.04 per share in the first nine months of 2009.

Net Interest Income

Our earnings are derived predominately from net interest income, which is the difference between the interest income earned on interest-earning assets, primarily loans and securities, and the interest expense incurred on interest-bearing liabilities, primarily deposits and borrowings.  The spread between the yield on interest-earning assets and the cost of interest-bearing liabilities and the relative dollar amounts of these assets and liabilities principally affect net interest income.

Net interest income totaled $7.4 million in the third quarter of 2010, up $1.6 million or 28.7% from the third quarter of 2009.  The increase reflected a higher net interest margin of 3.86% in the current quarter, compared with 2.98% in the prior year quarter, partially offset by a $4.4 million decrease in average interest-earning assets in the current quarter.  The increase in the current quarter net interest margin of 88 basis points reflected the average costs on interest-bearing liabilities decreasing more rapidly than the average yield on interest-earning assets.  The decrease in costs on our interest-bearing liabilities of 98 basis points resulted from the decline in our cost of deposits of 72 basis points and borrowings of 39 basis points during the current quarter.  These lower costs were p artially offset by a lower yield on our current quarter interest-earning assets primarily associated with a decrease in the yield on investment securities of 130 basis points compared to the same quarter in the prior year.  The lower yield on our investment securities was primarily due to the decision to reduce our credit risk exposure in our securities portfolio by selling private label securities with higher credit risk and replacing them with lower yielding, lower credit risk GSE securities.  These GSE securities also enhanced our regulatory capital as they have a lower asset risk weighting than private label securities.

For the first nine months of 2010, net interest income totaled $20.9 million, up $3.9 million or 22.8% from the same period in the prior year.  The increase was associated with a higher net interest margin, which increased by 63 basis points to 3.72%, and higher interest-earning assets, which grew by $15.7 million to $749.5 million.

The following tables present for the periods indicated the average dollar amounts from selected balance sheet categories calculated from daily average balances and the total dollar amount, including adjustments to yields and costs, of:

·   Interest income earned from average interest-earning assets and the resultant yields; and

·   Interest expense incurred from average interest-bearing liabilities and resultant costs, expressed as rates.

The tables also set forth our net interest income, net interest rate spread and net interest rate margin for the periods indicated.  The net interest rate margin reflects the relative level of interest-earning assets to interest-bearing liabilities and equals our net interest rate spread divided by average interest-earning assets for the periods indicated.

	Three Months Ended							Three Months Ended
	September 30, 2010							September 30, 2009
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Assets	(dollars in thousands)
Interest-earning assets:
Cash and cash equivalents	$	51,324	$	29		0.22	%	$	82,250	$	49		0.24	%
Federal funds sold		29		-		0.00			30		-		0.00
Investment securities		173,398		1,255		2.90			104,476		1,096		4.20
Loans receivable, net (1)		542,201		9,196		6.78			584,625		9,612		6.58
Total interest-earning assets		766,952		10,480		5.46			771,381		10,757		5.58
Noninterest-earning assets		39,849							37,004
Total assets	$	806,801						$	808,385
Liabilities and Equity
Interest-bearing liabilities:
Transaction accounts	$	248,382	$	416		0.66		$	137,523	$	378		1.09
Retail certificates of deposit		395,193		1,883		1.89			422,120		2,610		2.45
Wholesale/brokered certificates of deposit		1,973		3		0.60			8,146		57		2.78
Total interest-bearing deposits		645,548		2,302		1.41			567,789		3,045		2.13
FHLB advances and other borrowings		66,663		693		4.12			166,543		1,870		4.45
Subordinated debentures		10,310		83		3.19			10,310		89		3.42
Total borrowings		76,973		776		4.00			176,853		1,959		4.39
Total interest-bearing liabilities		722,521		3,078		1.69			744,642		5,004		2.67
Non-interest-bearing liabilities		7,572							5,739
Total liabilities		730,093							750,381
Stockholders' equity		76,708							58,004
Total liabilities and equity	$	806,801						$	808,385
Net interest income			$	7,402						$	5,753
Net interest rate spread (2)						3.77	%						2.91	%
Net interest margin (3)						3.86	%						2.98	%
Ratio of interest-earning assets to interest-bearing liabilities						106.15	%						103.59	%

(1)   Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees, unamortized discounts and premiums, and allowance for loan losses.

(2)   Represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

(3)   Represents net interest income divided by average interest-earning assets.

	Nine Months Ended							Nine Months Ended
	September 30, 2010							September 30, 2009
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Assets	(dollars in thousands)
Interest-earning assets:
Cash and cash equivalents	$	56,189	$	95		0.23	%	$	39,454	$	67		0.23	%
Federal funds sold		29		-		0.00			4,001		8		0.27
Investment securities		150,355		3,366		2.98			88,212		3,097		4.68
Loans receivable, net (1)		542,973		27,193		6.68			602,189		29,832		6.61
Total interest-earning assets		749,546		30,654		5.45			733,856		33,004		6.00
Noninterest-earning assets		42,040							35,547
Total assets	$	791,586						$	769,403
Liabilities and Equity
Interest-bearing liabilities:
Transaction accounts	$	227,801	$	1,305		0.77		$	113,154	$	943		1.11
Retail certificates of deposit		396,567		5,937		2.00			398,157		8,879		2.98
Wholesale/brokered certificates of deposit		2,953		27		1.22			12,229		271		2.96
Total interest-bearing deposits		627,321		7,269		1.55			523,540		10,093		2.58
FHLB advances and other borrowings		71,826		2,246		4.18			171,967		5,602		4.36
Subordinated debentures		10,310		235		3.05			10,310		290		3.76
Total borrowings		82,136		2,481		4.04			182,277		5,892		4.32
Total interest-bearing liabilities		709,457		9,750		1.84			705,817		15,985		3.03
Non-interest-bearing liabilities		7,041							5,620
Total liabilities		716,498							711,437
Stockholders' equity		75,088							57,966
Total liabilities and equity	$	791,586						$	769,403
Net interest income			$	20,904						$	17,019
Net interest rate spread (2)						3.61	%						2.97	%
Net interest margin (3)						3.72	%						3.09	%
Ratio of interest-earning assets to interest-bearing liabilities						105.65	%						103.97	%

(1)   Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees, unamortized discounts and premiums, and allowance for loan losses.

(2)   Represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

(3)   Represents net interest income divided by average interest-earning assets.

Changes in our net interest income are a function of changes in both volumes and rates of interest-earning assets and interest-bearing liabilities.  The following table presents the impact the volume and rate changes have had on our net interest income for the periods indicated.  For each category of interest-earning assets and interest-bearing liabilities, we have provided information on changes to our net interest income with respect to:

·   Changes in interest rates (changes in interest rates multiplied by prior volume);

·   Changes in volume (changes in volume multiplied by prior rate); and

·   The net change or the combined impact of volume and rate changes allocated proportionately to changes in volume and changes in interest rates.

	Three Months Ended September 30, 2010									Nine Months Ended September 30, 2010
	Compared to									Compared to
	Three Months Ended September 30, 2009									Nine Months Ended September 30, 2009
	Increase (Decrease) due to									Increase (decrease) due to
	Rate			Volume			Net			Rate			Volume			Net
	(in thousands)
Interest-earning assets
Cash and cash equivalents	$	(2	)	$	(18	)	$	(20	)	$	-		$	28		$	28
Federal funds sold		-			-			-			(4	)		(4	)		(8	)
Investment securities		(412	)		571			159			(1,393	)		1,662			269
Loans receivable, net		299			(715	)		(416	)		314			(2,953	)		(2,639	)
Total interest-earning assets	$	(115	)	$	(162	)	$	(277	)	$	(1,083	)	$	(1,267	)	$	(2,350	)
Interest-bearing liabilities
Transaction accounts	$	(187	)	$	225		$	38		$	(367	)	$	729		$	362
Retail certificates of deposit		(570	)		(157	)		(727	)		(2,907	)		(35	)		(2,942	)
Wholesale/brokered certificates of deposit		(28	)		(26	)		(54	)		(107	)		(137	)		(244	)
FHLB advances and other borrowings		(128	)		(1,049	)		(1,177	)		(211	)		(3,145	)		(3,356	)
Subordinated debentures		(6	)		-			(6	)		(55	)		-			(55	)
Total interest-bearing liabilities	$	(919	)	$	(1,007	)	$	(1,926	)	$	(3,647	)	$	(2,588	)	$	(6,235	)
Change in net interest income	$	804		$	845		$	1,649		$	2,564		$	1,321		$	3,885

Provision for Loan Losses

During the third quarter of 2010, the provision for loan losses totaled $397,000, a decrease of $1.6 million from the third quarter of 2009.  Net loan charge-offs amounted to $396,000 for the third quarter of 2010, a decrease of $656,000 from the same period in the prior year.  The current period loan charge-offs related to the continued general economic weakness in the California economy, as reflected in high unemployment figures, sluggish commercial real estate markets and other economic factors, which adversely affect our borrowers, our borrowers’ businesses and the collateral securing our loans.

For the first nine months of 2010, the provision for loan losses totaled $2.1 million and net loan charge-offs were $1.8 million.  This compares with a provision for loan losses of $5.5 million and net charge-offs of $3.3 million for the first nine months of 2009.

Our Loss Mitigation Department continues collection efforts on loans previously written down and/or charged-off to maximize potential recoveries.  See “Allowance for Loan Losses” discussed below in this report.

Noninterest Income (Loss)

Our noninterest income increased $418,000 or 163.3% from $256,000 in the third quarter of 2009 to $674,000 in the third quarter of 2010.  This increase between third quarters was primarily due to higher gains from the sale of investment securities available for sale of $369,000 and a favorable reduction in other-than-temporary impairment charges on our private label securities of $147,000.

For the first nine months of 2010, our noninterest loss totaled $1.1 million, compared with income of $558,000 for the same period a year ago.  The unfavorable change was primarily related to the sale of $26.3 million in loans during the first nine months of 2010 at a $2.7 million loss, which loss was entirely related to $12.0 million of sub-performing and nonperforming loans included in the loan sale.  Partially offsetting this loss was an improvement in other-than-temporary impairment charges of $692,000 and higher gains on sales of investment securities available for sale of $440,000 for the first nine months of 2010, compared to same period in prior year.

Noninterest Expense

Noninterest expense totaled $4.8 million in the third quarter of 2010, up $690,000 or 16.8% from the same period in the prior year.  The increase was primarily associated with higher costs within our legal and audit expense category of $261,000, primarily associated with loan workouts, with the remainder of the increase spread through various expense categories.

For the first nine months of 2010, noninterest expense totaled $13.9 million, up $1.3 million or 10.3% from the first nine months of 2009.  The increase primarily related to higher costs within our other real estate owned operations, net category of $830,000, due primarily to increased write downs of $536,000 and an unfavorable change from gains to losses on sales of $199,000, with the remainder of the increase spread through various expense categories.

Income Taxes

For the three months ended September 30, 2010, we had a tax provision of $1.0 million, compared to a tax benefit of $104,000 for the same period in 2009.  The change in income taxes was primarily due to a favorable change in net income (loss) before taxes of $3.0 million. For the nine months ended September 30, 2010, we had a tax provision of $1.1 million, compared to a tax benefit of $416,000 for the same period in 2009.  The change in income taxes for the year-to-date periods was primarily due to a favorable change in net income (loss) before taxes of $4.4 million.   At September 30, 2010, we had no valuation allowance against our deferred tax asset of $10.3 million based on management’s analysis that the asset was more-likely-than-not to be realized.

FINANCIAL CONDITION

At September 30, 2010, assets totaled $821.3 million, down $26.5 million or 3.1% from September 30, 2009, but up $14.0 million or 1.7% from December 31, 2009.  During the third quarter of 2010, assets increased $24.1 million, primarily due to increases in cash of $16.6 million and investment securities available for sale of $8.7 million.

Loans

At September 30, 2010, net loans held for investment totaled $543.3 million, down $33.2 million or 5.8% from September 30, 2009 and $23.3 million or 4.1% from December 31, 2009.

The following table sets forth the composition of our loan portfolio in dollar amounts, as a percentage of the portfolio and gives the weighted average interest rate by loan category at the dates indicated:

	September 30, 2010									December 31, 2009									September 30, 2009
	Amount			Percent of Total			Weighted Average Interest Rate			Amount			Percent of Total			Weighted Average Interest Rate			Amount			Percent of Total			Weighted Average Interest Rate
	(dollars in thousands)
Real estate loans:
Multi-family	$	251,163			45.0	%		6.18	%	$	278,744			48.4	%		6.20	%	$	284,116			48.6	%		6.20	%
Commercial non-owner occupied		130,428			23.4	%		6.71	%		149,577			26.0	%		6.84	%		153,406			26.2	%		6.88	%
One-to-four family (1)		19,668			3.5	%		5.42	%		8,491			1.5	%		8.25	%		8,591			1.5	%		8.30	%
Business loans:
Commercial owner occupied (2)		105,415			18.9	%		6.52	%		103,019			17.9	%		7.11	%		105,060			18.0	%		7.16	%
Commercial and industrial		44,580			8.0	%		6.48	%		31,109			5.4	%		6.98	%		28,820			4.9	%		7.11	%
SBA		3,482			0.6	%		5.92	%		3,337			0.5	%		5.73	%		3,521			0.6	%		5.70	%
Other loans		3,520			0.6	%		4.33	%		1,991			0.3	%		1.33	%		1,644			0.2	%		1.33	%
Total gross loans		558,256			100.0	%		6.35	%		576,268			100.0	%		6.58	%		585,158			100.0	%		6.61	%
Less loans held for sale		-									-									-
Total gross loans held for investment		558,256									576,268									585,158
Less (plus):
Deferred loan origination costs (fees) and premiums (discounts)		(5,802	)								(779	)								(544	)
Allowance for loan losses		(9,170	)								(8,905	)								(8,107	)
Loans held for investment, net	$	543,284								$	566,584								$	576,507
(1) Includes second trust deeds.
(2) Secured by real estate.

Gross loans held for investment totaled $558.3 million at September 30, 2010, compared to $585.2 million at September 30, 2009 and $576.3 million at December 31, 2009.  The decrease of $18.0 million since December 31, 2009 was primarily due to principal repayments of $89.6 million, loan sales of $26.3 million, and OREO acquired in the settlement of loans of $3.6 million, which was partially offset by loan originations of $46.3 million, loan purchases of $30.1 million and the net change in undisbursed loan funds of $27.0 million.  Given the weakness in the commercial real estate (“CRE”) markets where our loans are located, during the first quarter of 2010, management implemented a strategy to sell CRE loans to reduce its concentration in the loan portfolio.  In accordance with that strategy, durin g the first nine months of 2010, $14.3 million of performing commercial owner and non-owner occupied loans as well as multi-family loans were sold at par.  In addition, over the same period, we sold an aggregate of $12.0 million of sub performing or nonperforming predominately CRE non-owner occupied and multi-family loans at a recorded loss of $2.7 million. The sale of these loans was part of our loss mitigation strategy to minimize losses in our loan portfolio. From time to time, management utilizes loan purchases or sales to manage its liquidity, interest rate risk, loan to deposit ratio, diversification of the loan portfolio and net balance sheet growth.

The following table sets forth loan originations, purchases, sales and principal repayments relating to our gross loans for the periods indicated:

	Nine Months Ended
	September 30, 2010			September 30, 2009
	(in thousands)
Beginning balance gross loans	$	576,268		$	628,767
Loans originated:
Real estate loans:
Multi-family		-			494
Business loans:
Commercial owner occupied (1)		443			365
Commecial and industrial		39,759			3,890
SBA		1,370			1,150
Other loans		4,776			1,067
Total loans originated		46,348			6,966
Loans purchased:
Multi-family		-			4,051
Commercial non-owner occupied		1,244			-
Commercial owner occupied		18,825			-
Commecial and industrial		1,188			-
One-to-four family		7,238			-
Other loans		1,618			-
Total loans purchased		30,113			4,051
Total loan production		76,461			11,017
Principal repayments		(89,607	)		(49,954	)
Change in undisbursed loan funds		27,031			2,496
Sales of loans		(26,295	)		-
Charge-offs		(2,038	)		(3,359	)
Transfer to other real estate owned		(3,564	)		(3,809	)
Net decrease in gross loans		(18,012	)		(43,609	)
Ending balance gross loans	$	558,256		$	585,158

The following table sets forth the weighted average interest rates, weighted average number of months to reprice and the periods to repricing for our multi-family and commercial real estate loans and our commercial owner occupied loans at the date indicated:

	September 30, 2010
					Weighted			Weighted
	Number				Average			Average Months
	of Loans		Amount		Interest Rate			to Reprice
	(dollars in thousands)
1 Year and less (1)		243	$	233,309		6.24	%		3.53
Over 1 Year to 3 Years		114		136,374		6.64	%		24.85
Over 3 Years to 5 Years		20		25,955		6.57	%		50.58
Over 5 Years to 7 Years		11		12,693		7.15	%		72.31
Over 7 Years to 10 Years		11		9,070		6.39	%		92.40
Total adjustable		399	$	417,401		6.42	%		17.44
Fixed		99		69,605		6.24	%
Total		498	$	487,006		6.40	%
(1) Includes three and five-year hybrid loans that have reached their initial repricing date.

Delinquent Loans.  When a borrower fails to make required payments on a loan and does not cure the delinquency within 30 days, we normally record a notice of default and, after providing the required notices to the borrower, commence foreclosure proceedings.  If the loan is not reinstated within the time permitted by law, we may sell the property at a foreclosure sale.  At theseforeclosure sales, we generally acquire title to the property.  At September 30, 2010, loans delinquent 30 or more days as a percentage of total gross loans was 0.64%, down from 1.65% at December 31, 2009 and from 1.35% at September 30, 2009.  The improvement in the ratio during 2010 was primarily from the sale of $11.0 million of predominantly delinquent commercial real estate, multi-family and SBA loans.

The following table sets forth delinquencies in the Company's loan portfolio at the dates indicated:

	30 - 59 Days					60 - 89 Days					90 Days or More (1)					Total
	# of Loans		Principal Balance of Loans			# of Loans		Principal Balance of Loans			# of Loans		Principal Balance of Loans			# of Loans		Principal Balance of Loans
	(dollars in thousands)
At September 30, 2010
Real estate loans:
Multi-family		1	$	327			-	$	-			-	$	-			1	$	327
One-to-four family		1		58			-		-			2		31			3		89
Business loans:
Commercial owner occupied		-		-			-		-			3		2,239			3		2,239
Commercial and industrial		1		45			-		-			1		6			2		51
SBA		1		136			-		-			6		705			7		841
Total		4	$	566			-	$	-			12	$	2,981			16	$	3,547
Delinquent loans to total gross loans				0.10	%				0.00	%				0.53	%				0.64	%
At December 31, 2009
Real estate loans:
Multi-family		1	$	3,149			-	$	-			3	$	2,073			4	$	5,222
Commercial non-owner occupied		1		694			-		-			1		1,851			2		2,545
One-to-four family		3		45			-		-			4		97			7		142
Business loans:
Commercial owner occupied		-		-			-		-			2		996			2		996
SBA		1		69			1		52			3		463			5		584
Other		1		19			-		-			-		-			1		19
Total		7	$	3,976			1	$	52			13	$	5,480			21	$	9,508
Delinquent loans to total gross loans				0.69	%				0.01	%				0.95	%				1.65	%
At September 30, 2009
Real estate loans:
Multi-family		-	$	-			-	$	-			1	$	2,234			1	$	2,234
Commercial non-owner occupied		-		-			-		-			1		2,168			1		2,168
One-to-four family		3		57			1		14			5		108			9		179
Business loans:
Commercial owner occupied		-		-			-		-			5		2,690			5		2,690
Commercial and industrial		-		-			-		-			1		52			1		52
SBA		-		-			1		146			4		432			5		578
Total		3	$	57			2	$	160			17	$	7,684			22	$	7,901
Delinquent loans to total gross loans				0.01	%				0.03	%				1.31	%				1.35	%
(1) All 90 day or greater delinquency are on nonaccrual status and are reported as part of nonperforming loans.

Allowance for Loan Losses.  The allowance for loan losses represents an estimate of probable losses inherent in our loan portfolio and is determined by applying a systematically derived loss factor to individual segments of the loan portfolio.  The adequacy and appropriateness of the allowance for loan losses and the individual loss factors is reviewed each quarter by management.

The loss factor for each segment of our loan portfolio is generally based on our actual historical loss rate experience with emphasis on recent past periods to account for current economic conditions and supplemented by management judgment for certain segments where we lack loss history experience.  We also consider historical charge-off rates for the last 10 and 15 years for commercial banks and savings institutions headquartered in California as collected and reported by the FDIC.  The loss factor is adjusted by qualitative adjustment factors to arrive at a final loss factor for each loan portfolio segment.  For additional information regarding the qualitative adjustments, please see “Allowances for Loan Losses” discussed in our 2009 Annual Report on Form 10-K, as amended.  The q ualitative factors allow management to assess current trends within our loan portfolio and the economic environment to incorporate their affect when calculating the allowance for loan losses.  The final loss factors are applied to pass graded loans within our loan portfolio.  Higher factors are applied to loans graded below pass, including classified and criticized assets.

No assurance can be given that we will not, in any particular period, sustain loan losses that exceed the amount reserved, or that subsequent evaluation of our loan portfolio, in light of the prevailing factors, including economic conditions which may adversely affect our market area or other circumstances, will not require significant increases in the loan loss allowance.  In addition, regulatory agencies as an integral part of their examination process, periodically review our allowance for loan losses and may require us to recognize additional provisions to increase the allowance or take charge-offs in anticipation of future losses.

At September 30, 2010, the Company’s allowance for loan losses was $9.2 million, an increase of $1.1 million from the year ago quarter end and an increase of $265,000 from year-end 2009.  At September 30, 2010, given the composition of our loan portfolio, the allowance for loan losses was considered adequate to cover estimated losses inherent in the loan portfolio.

The following table sets forth the Company’s allowance for loan losses and its corresponding percentage of the loan category balance and the percent of loan balance to total gross loans in each of the loan categories listed for the periods indicated:

	September 30, 2010								December 31, 2009								September 30, 2009
Balance at End of Period Applicable to	Amount		Allowance as a % of Category Total			% of Loans in Category to Total Loans			Amount		Allowance as a % of Category Total			% of Loans in Category to Total Loans			Amount		Allowance as a % of Category Total			% of Loans in Category to Total Loans
	(dollars in thousands)
Real estate loans:
Multi-family	$	2,856		1.1	%		45.0	%	$	3,350		1.2	%		48.4	%	$	2,558		0.9	%		48.6	%
Commercial non-owner occupied		1,734		1.3	%		23.4	%		1,585		1.1	%		26.0	%		1,373		0.9	%		26.2	%
One-to-four family		382		1.9	%		3.5	%		269		3.2	%		1.5	%		263		3.1	%		1.5	%
Business loans:
Commercial owner occupied		1,286		1.2	%		18.9	%		897		0.9	%		17.9	%		815		0.8	%		18.0	%
Commercial and industrial		2,456		5.5	%		8.0	%		2,384		7.7	%		5.4	%		2,622		9.1	%		4.9	%
SBA		178		5.1	%		0.6	%		323		9.7	%		0.5	%		455		12.9	%		0.6	%
Other Loans		42		1.2	%		0.6	%		2		0.1	%		0.3	%		21		1.3	%		0.2	%
Unallocated		236		--			--			95		--			--			-		--			--
Total	$	9,170		--			100.0	%	$	8,905		--			100.0	%	$	8,107		--			100.0	%

 The current year increase in the allowance for loan losses was primarily due to the provision for loan losses of $2.1 million, partially offset by net loan charge-offs of $1.8 million, which charge-offs were down from the $3.3 million recorded in the first nine months of 2009.  The increase in the allowance for loan losses from December 31, 2009 was attributed to the continued slow economic growth in the economy, especially in Southern California.  At September 30, 2010, the allowance for loan losses as a percentage of total loans remained at 1.66% from December 31, 2009, while the allowance for loan losses as a percent of nonperforming loans increased to 297.92% from 88.94% at December 31, 2009, primarily due to the sale an aggregate of $12.0 million of sub performing or nonperforming predominately CRE non-owner occupied and multi-family loans.

The following table sets forth the activity within the Company’s allowance for loan losses in each of the loan categories listed for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
	(dollars in thousands)
Balance, beginning of period	$	9,169		$	7,158		$	8,905		$	5,881
Provision for loan losses		397			2,001			2,092			5,535
Charge-offs:
Real estate:
Multi-family		-			-			(334	)		(515	)
Commercial non-owner occupied		-			-			(405	)		-
One-to-four family		(10	)		-			(117	)		(125	)
Land		-			-			-			(468	)
Business loans:
Commercial owner occupied		(264	)		-			(264	)		(59	)
Commercial and industrial		(32	)		(1,037	)		(547	)		(1,392	)
SBA		(131	)		(22	)		(371	)		(800	)
Total charge-offs		(437	)		(1,059	)		(2,038	)		(3,359	)
Recoveries :
Real estate:
One-to-four family		17			1			39			24
Business loans:
Commercial owner occupied		-			-			-			-
Commercial and industrial		1			1			11			2
SBA		20			-			151			11
Other loans		3			5			10			13
Total recoveries		41			7			211			50
Net loan charge-offs		(396	)		(1,052	)		(1,827	)		(3,309	)
Balance at end of period	$	9,170		$	8,107		$	9,170		$	8,107
Ratios:
Net charge-offs to average total loans, net		0.29	%		0.72	%		0.45	%		0.73	%
Allowance for loan losses to gross loans at end of period		1.66	%		1.39	%		1.66	%		1.39	%

Investment Securities

Investment securities available for sale totaled $172.2 million at September 30, 2010, up $70.5 million or 69.3% from September 30, 2009 and up $48.8 million or 39.5% from December 31, 2009.  The increase in the current year was primarily due to purchases of investment securities of $135.1 million, partially offset by the sale of securities totaling $77.3 million and principal received of $11.3 million.  As part of our strategy to reduce our risk profile, we used excess cash from loans sales and deposit growth to purchase investment securities, which were predominately GSE mortgage-backed securities and municipal bonds.  At September 30, 2010, the investment securities available for sale consisted of $147.2 million of GSE mortgage-backed securities, $20.2 million of municipal bonds, $4.6 million of private l abel mortgage-backed securities and $163,000 in U.S. Treasury securities.  Within our private label securities, 30 or $0.8 million were rated as investment grade while 49 or $3.8 million were rated as below investment grade, which is any rating below “BBB”.  All of our private label mortgage-backed securities were acquired when we redeemed our shares in certain mutual funds in 2008.

The following tables set forth the amortized cost, unrealized gains and losses, and estimated fair value of our investment securities portfolio at the dates indicated:

	September 30, 2010
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(in thousands)
Investment securities available for sale:
U.S. Treasury	$	147	$	16	$	-		$	163
Municipal bonds		19,545		680		(1	)		20,224
Mortgage-backed securities:
Government Sponsored Enterprise		145,242		2,070		(158	)		147,154
Private label securities		6,164		133		(1,657	)		4,640
Total securities available for sale		171,098		2,899		(1,816	)		172,181
Stock:
FHLB stock		11,786		-		-			11,786
Federal Reserve Bank stock		2,019		-		-			2,019
Total stock		13,805		-		-			13,805
Total securities	$	184,903	$	2,899	$	(1,816	)	$	185,986
	December 31, 2009
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(in thousands)
Investment securities available for sale:
U.S. Treasury	$	148	$	6	$	-		$	154
Municipal bonds		17,918		200		(153	)		17,965
Mortgage-backed securities:
Government Sponsored Enterprise		100,104		244		(738	)		99,610
Private label securities		8,196		63		(2,581	)		5,678
Total securities available for sale		126,366		513		(3,472	)		123,407
Stock:
FHLB stock		12,731		-		-			12,731
Federal Reserve Bank stock		1,599		-		-			1,599
Total stock		14,330		-		-			14,330
Total securities	$	140,696	$	513	$	(3,472	)	$	137,737
	September 30, 2009
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(in thousands)
Investment securities available for sale:
U.S. Treasury	$	148	$	9	$	-		$	157
Mortgage-backed securities:
Government Sponsored Enterprise		83,683		490		(112	)		84,061
Private label securities		21,072		49		(3,653	)		17,468
Total securities available for sale		104,903		548		(3,765	)		101,686
Stock:
FHLB stock		12,731		-		-			12,731
Federal Reserve Bank stock		1,599		-		-			1,599
Total stock		14,330		-		-			14,330
Total securities	$	119,233	$	548	$	(3,765	)	$	116,016

The following table sets forth the fair values and weighted average yields on our investment securities available for sale portfolio by contractual maturity at the date indicated:

	September 30, 2010
	One Year					More than One					More than Five Years					More than
	or Less					to Five Years					to Ten Years					Ten Years					Total
	Fair Value		Weighted Average Yield			Fair Value		Weighted Average Yield			Fair Value		Weighted Average Yield			Fair Value		Weighted Average Yield			Fair Value		Weighted Average Yield
	(dollars in thousands)
Investment securities available for sale:
U.S. Treasury	$	-		0.00	%	$	79		3.53	%	$	84		4.15	%	$	-		0.00	%	$	163		3.84	%
Municipal bonds		-		0.00	%		-		0.00	%		-		0.00	%		20,224		3.95	%		20,224		3.95	%
Mortgage-backed securities:
Government Sponsored Enterprise		-		0.00	%		29		5.97	%		148		5.35	%		146,977		3.10	%		147,154		3.11	%
Private label securities		-		0.00	%		-		0.00	%		-		0.00	%		4,640		5.80	%		4,640		5.80	%
Total investment securities available for sale		-		0.00	%		108		4.19	%		232		4.92	%		171,841		3.27	%		172,181		3.30	%
Stock:
FHLB		11,786		0.00	%		-		0.00	%		-		0.00	%		-		0.00	%		11,786		0.00	%
Federal Reserve Bank		2,019		6.00	%		-		0.00	%		-		0.00	%		-		0.00	%		2,019		6.00	%
Total stock		13,805		0.88	%		-		0.00	%		-		0.00	%		-		0.00	%	$	13,805		0.88	%
Total securities	$	13,805		0.88	%	$	108		4.19	%	$	232		4.92	%	$	171,841		3.27	%	$	185,986		3.12	%

Each quarter, we review individual securities classified as available for sale to determine whether a decline in fair value below the amortized cost basis is other-than-temporary.  If it is probable that we will be unable to collect all amounts due according to the contractual terms of the debt security, an other-than-temporary impairment (“OTTI”) write down is recorded against the security and a loss recognized.

In determining if a security has an OTTI loss, we review downgrades in credit ratings and the length of time and extent that the fair value has been less than the cost of the security.  We estimate OTTI losses on a security primarily through:

·   An evaluation of the present value of estimated cash flows from the security using the current yield to accrete beneficial interest and including assumptions in the prepayment rate, default rate, delinquencies, loss severity and percentage of nonperforming assets;

·   An evaluation of the estimated payback period to recover principal;

·   An analysis of the credit support available in the underlying security to absorb losses; and

·   A review of the financial condition and near term prospects of the issuer.

During the quarter ended September 30, 2010, we took a net $252,000 OTTI charge against our private label mortgage-backed securities deemed to be impaired.  This brought our OTTI charges for the nine months ended September 30, 2010 to $908,000, compared to $1.6 million of OTTI charges during the same period last year.  These impaired private label mortgage-backed securities are classified as substandard assets with all the interest received since the date of impairment being applied against their principal balances.

Securities with OTTI credit losses recognized in noninterest income and associated OTTI non-credit losses recognized in accumulated other comprehensive loss during the periods indicated were as follows:

	Three Months Ended									Three Months Ended
	September 30, 2010									September 30, 2009
Rating	Number		Fair Value		OTTI Credit Loss		Non Credit  Gain (Loss)  in AOCL			Number		Fair Value		OTTI Credit Loss		Non Credit Gain (Loss) in AOCL
(dollars in thousands)
B		-	$	-	$	-	$	-			-	$	-	$	-	$	-
BB		-		-		-		-			-		-		-		-
Caa1		1		395		40		22
Caa3		-		-		-		-			-		-		-		-
Ca		2		-		2		-			5		10		26		-
C		4		89		15		5			2		223		184		-
CC		4		50		68		(49	)		1		115		53		(8	)
CCC		3		92		79		(20	)		2		337		136		-
D		1		203		48		(15	)		-		-		-		-
		15	$	829	$	252	$	(57	)		10	$	685	$	399	$	(8	)
	Nine Months Ended									Nine Months Ended
	September 30, 2010									September 30, 2009
Rating	Number		Fair Value		OTTI credit loss		Non Credit Gain (Loss) in AOCL			Number		Fair Value		OTTI credit loss		Non Credit Gain (Loss) in AOCL
(dollars in thousands)
B		-	$	-	$	-	$	-			-	$	-	$	-	$	-
BB		-		-		-		-			-		-		-		-
Caa1		1		395		40		22			-		-		-		-
Caa3		-		-		-		-			1		27		45		5
Ca		2		-		2		-			8		48		233		(7	)
C		5		217		237		(28	)		8		634		800		(124	)
CC		5		140		284		(202	)		3		166		290		8
CCC		4		132		205		(85	)		3		373		232		(6	)
D		3		203		140		(15	)		-		-		-		-
		20	$	1,087	$	908	$	(308	)		23	$	1,248	$	1,600	$	(124	)

The largest OTTI credit loss for any single debt security was $146,000 for the nine months ended September 30, 2010 and $233,000 for the same period in the prior year.

Nonperforming Assets

Nonperforming assets consist of loans on which we have ceased accruing interest (nonaccrual loans), restructured loans and real estate acquired in settlement of loans (OREO).  It is our general policy to account for a loan as nonaccrual when the loan becomes 90 days delinquent or when collection of interest appears doubtful.

At September 30, 2010, nonperforming assets totaled $4.8 million or 0.58% of total assets, down from $13.4 million or 1.58% of total assets at September 30, 2009 and $13.4 million or 1.66% of total assets at December 31, 2009.  During the first nine months of 2010, nonperforming loans decreased by $6.9 million, primarily due to the sale of $7.4 million of nonperforming loans at a loss of $1.7 million.  At September 30, 2010, nonperforming assets consisted of nonaccrual loans totaling $3.1 million and OREO of $1.7 million, essentially all from one commercial land property.

The following table sets forth our composition of nonperforming assets at the dates indicated:

	September 30,			December 31,			September 30,
	2010			2009			2009
	(dollars in thousands)
Nonperforming assets
Real estate:
Multi-family	$	-		$	5,223		$	2,234
Commercial non-owner occupied		-			1,851			3,096
One-to-four family		48			107			108
Business loans:
Commercial owner occupied		2,239			996			2,690
Commercial and industrial		6			955			1,027
SBA (1)		785			880			596
Total nonaccrual loans		3,078			10,012			9,751
Other real estate owned		1,700			3,380			3,644
Total nonperforming assets, net	$	4,778		$	13,392		$	13,395
Allowance for loan losses	$	9,170		$	8,905		$	8,107
Allowance for loan losses as a percent of total nonperforming loans, gross		297.92	%		88.94	%		83.14	%
Nonperforming loans as a percent of gross loans receivable		0.55	%		1.74	%		1.67	%
Nonperforming assets as a percent of total assets		0.58	%		1.66	%		1.58	%
(1) The SBA totals include the guaranteed amount, which was $358,000 as of September 30, 2010, $341,000 as of December 31, 2009, and $293,000 as of September 30, 2009.

Liabilities and Stockholders’ Equity

Total liabilities were $742.8 million at September 30, 2010, compared to $789.6 million at September 30, 2009 and $733.8 million at December 31, 2009.  The increase during 2010 was due to an increase in total deposits of $38.1 million, partially offset by a decrease in FHLB advances and other borrowings of $25.0 million and a decrease in accrued expenses and other liabilities of $4.1 million.

Deposits.  Total deposits were $656.8 million at September 30, 2010, up $50.4 million or 8.3% from September 30, 2009 and up $38.1 million or 6.2% from December 31, 2009.  The increase in deposits during 2010 was primarily due to an increase in interest bearing transaction accounts of $36.9 million and noninterest bearing transaction accounts of $17.9 million, partially offset by a reduction in certificates of deposit accounts of $16.8 million. At September 30, 2010, we had $2.0 million of wholesale deposits and no brokered deposits.  At September 30, 2010, our loan to deposit ratio was 84.1%, down from 93.0% at December 31, 2009 and 96.4% at September 30, 2009.

The following table sets forth the distribution of the Company’s deposit accounts at the dates indicated and the weighted average interest rates on each category of deposits presented:

	September 30, 2010								December 31, 2009								September 30, 2009
	Balance		% of Total Deposits			Weighted Average Rate			Balance		% of Total Deposits			Weighted Average Rate			Balance		% of Total Deposits			Weighted Average Rate
	(dollars in thousands)
Transaction accounts:
Non-interest bearing checking	$	51,798		7.9	%		0.00	%	$	33,885		5.5	%		0.00	%	$	33,098		5.5	%		0.00	%
Interest bearing checking		20,161		3.1	%		0.13	%		22,406		3.6	%		0.39	%		23,162		3.8	%		0.67	%
Money market		107,591		16.4	%		0.72	%		77,687		12.6	%		1.17	%		62,334		10.3	%		1.63	%
Regular passbook		71,036		10.8	%		0.73	%		61,779		9.9	%		1.33	%		42,997		7.0	%		1.69	%
Total transaction accounts		250,586		38.2	%		0.53	%		195,757		31.6	%		0.93	%		161,591		26.6	%		1.18	%
Certificates of deposit accounts:
Less than 1.00%		51,197		7.8	%		0.45	%		30,867		5.0	%		0.82	%		10,718		1.8	%		0.99	%
1.00 - 1.99		140,008		21.3	%		1.67	%		91,207		14.7	%		1.63	%		89,387		14.7	%		1.69	%
2.00 - 2.99		211,346		32.2	%		2.33	%		292,689		47.3	%		2.44	%		321,182		53.0	%		2.42	%
3.00 - 3.99		1,032		0.2	%		3.28	%		3,427		0.6	%		3.29	%		15,500		2.6	%		3.47	%
4.00 - 4.99		1,335		0.2	%		4.46	%		3,463		0.6	%		4.40	%		6,268		1.0	%		4.37	%
5.00 and greater		1,287		0.2	%		5.28	%		1,324		0.2	%		5.34	%		1,736		0.3	%		5.92	%
Total certificates of deposit accounts		406,205		61.8	%		1.88	%		422,977		68.4	%		2.18	%		444,791		73.4	%		2.32	%
Total deposits	$	656,791		100.0	%		1.37	%	$	618,734		100.0	%		1.79	%	$	606,382		100.0	%		2.01	%

Borrowings.  At September 30, 2010, total borrowings amounted to $76.8 million, down $100.0 million or 56.6% from September 30, 2009 and $25.0 million or 27.3% from December 31, 2009.  At September 30, 2010, total borrowings represented 9.4% of total assets and were comprised of the following:

·   One FHLB term borrowing of $38.0 million at an interest rate of 4.92% maturing in November 2010, collateralized by pledges of certain real estate loans with an aggregate principal balance of $429.2 million and FHLB stock totaling $11.8 million;

·   Three inverse putable reverse repurchase agreements totaling $28.5 million at a weighted average rate of 3.04% and secured by approximately $41.2 million of GSE mortgage backed securities; and

·   Subordinated debentures used to fund the issuance of trust preferred securities in 2004 of $10.3 million with a rate of 3.28%.

The following table sets forth certain information regarding the Company's borrowed funds at the dates indicated:

	September 30, 2010						December 31, 2009						September 30, 2009
	Balance			Weighted Average Rate			Balance			Weighted Average Rate			Balance			Weighted Average Rate
	(dollars in thousands)
FHLB advances	$	38,000			4.92	%	$	63,000			4.90	%	$	138,000			4.92	%
Reverse repurchase agreements		28,500			3.04	%		28,500			3.04	%		28,500			3.04	%
Subordinated debentures		10,310			3.28	%		10,310			3.00	%		10,310			3.26	%
Total borrowings	$	76,810			4.00	%	$	101,810			4.19	%	$	176,810			4.52	%
Weighted average cost of borrowings during the quarter		4.00	%					4.40	%					4.39	%
Borrowings as a percent of total assets		9.4	%					12.6	%					20.9	%

Stockholders’ Equity.  Total stockholders’ equity was $78.5 million as of September 30, 2010, up from $58.3 million at September 30, 2009 and $73.5 million at December 31, 2009.  The current year increase of $5.0 million was primarily due to net income of $2.6 million and an increase in the accumulated adjustment to stockholders’ equity of $2.4 million as a result of an increase in the unrealized value on our investment securities portfolio available for sale.  The increase in total stockholders’ equity from September 30, 2009 to December 31, 2009 was primarily due to a successful capital raise in the fourth quarter of 2009, whereby the Company raised gross proceeds of $15.5 million from the sale of 5,030,385 shares of common sto ck at a public offering price of $3.25 per share.  At September 30, 2010, the Company’s tangible common equity to total assets ratio was 9.56%.  Our basic book value per share increased to $7.83 at September 30, 2010 from $7.33 at December 31, 2009.  Our diluted book value per share increased to $7.20 at September 30, 2010 from $6.75 at December 31, 2009, reflecting an annualized increase of 8.9%.

CAPITAL RESOURCES AND LIQUIDITY

Our primary sources of funds are deposits, advances from the FHLB and other borrowings, principal and interest payments on loans, and income from investments. While maturities and scheduled amortization of loans are a predictable source of funds, deposit inflows and outflows as well as loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.

Our primary sources of funds generated during the first nine months of 2010 were from:

·   Proceeds of $89.3 million from the sale and principal payments on  securities available for sale;

·   Proceeds $113.2 million from the sale and principal payments on loans held for investment; and

·   An increase in deposits of $38.1 million.

We used these funds to:

·   Purchase of $135.1 million of securities available for sale;

·   Purchase and originate loans held for investment of $76.5 million; and

·   Reduce FHLB advances by $25.0 million.

Our most liquid assets are unrestricted cash and short-term investments.  The levels of these assets are dependent on our operating, lending and investing activities during any given period. Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate.  At September 30, 2010, cash and cash equivalents totaled $51.3 million and the market value of our investment securities available for sale totaled $172.2 million.  If additional funds are needed, we have additional sources of liquidity that can be accessed, including FHLB advances, Federal Funds lines, the Federal Reserve’s lending programs and loan sales.  As of September 30, 2010, the maximum amount we could borrow through the FHLB was $356.6 million, of whi ch $237.7 million was available for borrowing based on collateral pledged of $429.2 million in real estate loans and $11.8 million of FHLB Stock.  At September 30, 2010, we had $199.7 million of available funds to borrow based on our $38.0 million FHLB advance outstanding and our current pledged assets. In addition, the Bank had unsecured lines of credit aggregating to $48.8 million at September 30, 2010, which consisted of $44.0 million with other financial institutions from which to draw funds and $4.8 million with the Federal Reserve Bank. At September 30, 2010, no funds were drawn against these lines.  For the quarter ended September 30, 2010, our average liquidity ratio was 23.21%, up from a ratio of 17.66 % for the same period in 2009.

To the extent that 2010 deposit growth is not sufficient to satisfy our ongoing commitments to fund maturing and withdrawalable deposits, repay maturing borrowings, fund existing and future loans, or make investments, we may access funds through our FHLB borrowing arrangement, unsecured lines of credit or other sources.

The Company has a policy in place that permits the purchase of brokered funds, in an amount not to exceed 5% of total deposits, as a secondary source for funding.  At September 30, 2010, the balance of brokered time deposits was approximately $1.9 million.

The Corporation is a company separate and apart from the Bank that must provide for its own liquidity.  The Corporation’s primary sources of liquidity are dividends from the Bank. There are statutory and regulatory provisions that limit the ability of the Bank to pay dividends to the Corporation.  Management believes that such restrictions will not have a material impact on the ability of the Corporation to meet its ongoing cash obligations.

In February 2010, the boards of directors of the Corporation and the Bank adopted certain board resolutions which require, among other things, that we provide prior written notice to the Federal Reserve Bank before (i) receiving any dividends or other distributions from the Bank, (ii) declaring any dividends or making any payments on trust preferred securities or subordinated debt, (iii) making any capital distributions, (iv) incurring, increasing, refinancing or guaranteeing any debt; (v) issuing any trust preferred securities or (iv) repurchasing, redeeming or acquiring any of our stock.

Contractual Obligations and Off-Balance Sheet Commitments

Contractual Obligations.  The Company enters into contractual obligations in the normal course of business primarily as a source of funds for its asset growth and to meet required capital needs.

The following schedule summarizes maturities and payments due on our obligations and commitments, excluding accrued interest, as of the date indicated:

	September 30, 2010
	Less than		1 - 3		3 - 5		More than
	1 year		years		years		5 years		Total
	(in thousands)
Contractual obligations
FHLB advances	$	38,000	$	-	$	-	$	-	$	38,000
Other borrowings		-		-		-		28,500		28,500
Subordinated debentures		-		-		-		10,310		10,310
Certificates of deposit		218,023		176,798		10,782		602		406,205
Operating leases		613		1,248		1,202		2,829		5,892
Total contractual cash obligations	$	256,636	$	178,046	$	11,984	$	42,241	$	488,907

Off-Balance Sheet Commitments.  We utilize off-balance sheet commitments in the normal course of business to meet the financing needs of our customers and to reduce our own exposure to fluctuations in interest rates. These financial instruments include commitments to originate real estate, business and other loans held for investment, undisbursed loan funds, lines and letters of credit, and commitments to purchase loans and investment securities for portfolio. The contract or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Commitments to originate loans held for investment are agreements to lend to a customer as long as there is no violation of any condition established in the commitment. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Undisbursed loan funds and unused lines of credit on home equity and commercial loans include committed funds not disbursed. Letters of credit are conditional commitments we issue to guarantee the performance of a customer to a third party. As of September 30, 2010, we had commitments to extend credit on existing lines and letters of credit of $39.7 million, compared to $13.0 million at December 31, 2009.

The following table summarizes our contractual commitments with off-balance sheet risk by expiration period at the date indicated:

	September 30, 2010
	Less than		1 - 3			3 - 5		More than
	1 year			years		years		5 years		Total
	(in thousands)
Other unused commitments
Home equity lines of credit	$	-		$	-	$	-	$	4,004	$	4,004
Commercial lines of credit		22,142			835		-		11,627		34,604
Other lines of credit		80			39		-		10		129
Standby letters of credit		1,008			-		-		-		1,008
Total commitments	$	23,230		$	874	$	-	$	15,641	$	39,745

Regulatory Capital Compliance

The Company owns all of the capital stock of the Bank.  Federal banking regulations define, for each capital category, the levels at which institutions are “well capitalized,” “adequately capitalized,” or undercapitalized.  A “well capitalized” institution has a total risk-based capital ratio of 10.0% or higher; a Tier I risk-based capital ratio of 6.0% or higher; and a leverage ratio of 5.0% or higher.  At September 30, 2010, the Bank exceeded the “well capitalized” standards.

The Bank’s and the Company’s capital amounts and ratios are presented in the following table along with the well capitalized requirement at the dates indicated:

	Tier-1 Capital to					Tier-1 Risk-Based Capital to					Total Capital to
	Adjusted Tangible Assets					Risk-Weighted Assets					Risk-Weighted Assets
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(dollars in thousands)
September 30, 2010
Bank:
Regulatory capital	$	81,295		10.15	%	$	81,295		14.01	%	$	88,573		15.26	%
Adequately capitalized requirement		32,039		4.00	%		23,214		4.00	%		46,428		8.00	%
Well capitalized requirement		40,048		5.00	%		34,821		6.00	%		58,035		10.00	%
Consolidated regulatory capital		82,299		10.28	%		82,299		14.23	%		89,555		15.48	%
December 31, 2009
Bank:
Regulatory capital	$	78,463		9.72	%	$	78,463		13.30	%	$	85,855		14.55	%
Adequately capitalized requirement		32,300		4.00	%		23,600		4.00	%		47,201		8.00	%
Well capitalized requirement		40,375		5.00	%		35,401		6.00	%		59,001		10.00	%
Consolidated regulatory capital		79,801		9.89	%		79,801		13.41	%		87,256		14.67	%
September 30, 2009
Bank:
Regulatory capital	$	64,658		8.03	%	$	64,658		10.74	%	$	72,191		11.99	%
Adequately capitalized requirement		32,214		4.00	%		24,087		4.00	%		48,175		8.00	%
Well capitalized requirement		40,267		5.00	%		36,131		6.00	%		60,218		10.00	%
Consolidated regulatory capital		65,026		8.08	%		65,026		10.71	%		72,619		11.96	%

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

Management believes that there have been no material changes in our quantitative and qualitative information about market risk since December 31, 2009.  For a complete discussion of our quantitative and qualitative market risk, see “Item 7A. Quantitative and Qualitative Disclosure About Market Risk” in our 2009 Annual Report on Form 10-K, as amended.

Item 4T.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by our management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Controls

There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

We were not involved in any legal proceedings other than those occurring in the ordinary course of business, except for the “James Baker v. Century Financial, et al” which was discussed in “Item 3. Legal Proceedings” in our 2009 Annual Report on Form 10-K, as amended.  Management believes that none of these legal proceedings, individually or in the aggregate, will have a material adverse impact on our results of operations or financial condition.

Item 1A.  Risk Factors

There were no material changes to the risk factors as previously disclosed under Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2009, as amended, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.  Defaults Upon Senior Securities

None

Item 4.  Reserved

Item 5.  Other Information

None

Item 6.   Exhibits

Exhibit No.	Description of Exhibit
3.2	Bylaws of Pacific Premier Bancorp, Inc., as amended
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as Amended
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as Amended
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PACIFIC PREMIER BANCORP, INC.,

November 5, 2010	By:	/s/ Steven R. Gardner
Date		Steven R. Gardner
		President and Chief Executive Officer
		(principal executive officer)
November 5, 2010	By:	/s/ Kent J. Smith
Date		Kent J. Smith
		Senior Vice President and Chief Financial Officer
		(principal financial and accounting officer)

Index to Exhibits

Exhibit No.	Description of Exhibit
3.2	Bylaws of Pacific Premier Bancorp, Inc., as amended
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as Amended
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as Amended
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002

EX-3.2

Exhibit 3.2

PACIFIC PREMIER BANCORP, INC.

BYLAWS

As amended September 29, 2010

ARTICLE I – STOCKHOLDERS

Section 1.  Annual Meeting

An annual meeting of the stockholders, for the election of Directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen (13) months subsequent to the later of the date of incorporation or the last annual meeting of stockholders.

Section 2.  Special Meetings

Subject to the rights of the holders of any class or series of preferred stock of the Corporation, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the total number of Directors which the Corporation would have if there were no vacancies on the Board of Directors (hereinafter the "Whole Board").

Section 3.  Notice of Meetings.

Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the Corporation).

When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith.  At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

Section 4.  Quorum

At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy (after giving effect to the provisions of Article FOURTH of the Corporation's Certificate of Incorporation), shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law.  Where a separate vote by a class or classes is required, a majority of the shares of such class or classes present in person or represented by proxy (after giving effect to the provisions of Article FOURTH of the Corporation's Certificate of Incorporation) shall constitute a quorum entitled to take action with respect to that vote on that matter.

If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time.

If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present in person or by proxy constituting a quorum, then except as otherwise required by law, those present in person or by proxy at such adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting.

Section 5.  Organization

Such person as the Board of Directors may have designated or, in the absence of such a person, the Chairman of the Board of the Corporation or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting.  In the absence of the Secretary of the Corporation, the secretary of the meeting shall be such person as the chairman appoints.

Section 6.  Conduct of Business

(a)           Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with each of the procedures set forth in Sections 6(b), 6(d) and 6(e) of this Article I and, if any proposed nomination or other business is not in compliance with each of Sections 6(b), 6(d) and 6(e) of this Article I, to declare that such defective proposal or nomination shall be disregarded.  To be properly brought before a meeting of stockholders, business must be of a proper subject for action by stockholders under applicable law and must not, if implemented, cause the Corporation to violate any state, federal or foreign law or regulation, each as determined in good faith by the Board of Directors.

 (b)           At any annual meeting of the stockholders, only such nominations of persons for election to the Board of Directors shall be made, and only such other business shall be conducted or considered, as shall have been properly brought before the meeting.  For nominations to be properly made at an annual meeting, and proposals of other business to be properly brought before an annual meeting, nominations and proposals of other business must be  (a) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly made at the annual meeting, by or at the direction of the Board of Directors or (c) otherwise properly requested to be brought before the annual meeting by a stockholder of the Corporation in accordance with these Bylaws.  For nominations of persons for election to the Board of Directors or proposals of other business to be properly requested by a stockholder to be made at an annual meeting, a stockholder must (i) be a stockholder of record at the time of giving of notice of such annual meeting by or at the direction of the Board of Directors and at the time of the annual meeting, (ii) be entitled to vote at such annual meeting and (iii) comply with the additional requirements and procedures set forth in Sections 6(d) and 6(e) of this Article I as to such nomination or other business.  The immediately preceding sentence shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 or Rule 14a-11 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and included in the Corporation’s notice of meeting) before a n annual meeting of stockholders.

(c)           Subject to Section 6(e)(4) of this Article I, at any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors,.

(d)           Without qualification or limitation, subject to Section 6(e)(4) of this Article I, for any nominations or any other business to be properly brought before an annual meeting by a stockholder pursuant to Section 6(b) of this Article I, the stockholder must have given timely notice thereof and timely updates and supplements thereof in writing to the Secretary.

To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to th e date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation.  In no event shall any adjournment or postponement of an annual meeting, or the public announcement thereof, commence a new time period for the giving of a stockholder’s notice as described above.

Notwithstanding anything in the immediately preceding paragraph to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased by the Board of Directors, and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 6(d) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

In addition, to be timely, a stockholder’s notice shall be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof.

(e)(1)           Without qualification or limitation, for a stockholder’s notice required to be given to the Secretary pursuant to this Article I to be considered to be in proper form, such stockholder’s notice must include the following, as applicable.

(a)           As to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, a stockholder’s notice must set forth:  (i) the name and address of such stockholder, as they appear on the Corporation’s books, of such beneficial owner, if any, and of their respective affiliates or associates or others acting in concert therewith, (ii) (A) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conv ersion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder has a right to vote any shares of any security of the Corporation, (D) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder that are separated or separable from the underlying shares of the Corporation, (E) any proportionate interest in shares of the Corporation held, directly or indirectly, by a general or limited partnership in which such stockholder is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership, (F) any performance-related fees (other than an asset-based fee) that such stockholder is entitled to based on any increase or decrease in the v alue of shares of the Corporation, as of the date of such notice, including without limitation any such interests held by members of such stockholder’s immediate family sharing the same household, (G) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such stockholder, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such stockholder with respect to any class or series of the shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of any class or series of the shares of the Corporation (“Short Interests”), (H) any significant equity interests or Short Interests in any principal competitor of the Corporation held by such stockholder, and (I) any direct or indirect interest of such stockholder in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), and (iii) any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;

(b)            If the notice relates to any business other than a nomination of a director or directors that the stockholder proposes to bring before the meeting, a stockholder’s notice must, in addition to the matters set forth in paragraph (a) immediately above, set forth:  (i) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such stockholder and beneficial owner, if any, in such business, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration), and (iii) a description of all agreements, arrangements and understandings between such stockholder and beneficial owner, if any, and any other person or per sons (including their names) in connection with the proposal of such business by such stockholder; and

(c)           As to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board of Directors, a stockholder’s notice must, in addition to the matters set forth in paragraph (a) above, set forth:  (i) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) and (ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and

(d)           With respect to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board of Directors, a stockholder’s notice must, in addition to the matters set forth in paragraphs (a) and (c) above, also include a completed and signed questionnaire, representation and agreement required by Section 6(f) of this Article I.  The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.  No person may be appoi nted, nominated or elected as a director of the Corporation unless such person, at the time such person is nominated and appointed or elected, would then be able to serve as a director without conflicting in any manner with any state, federal or foreign law or regulation applicable to the Corporation, as determined in good faith by the Board of Directors.

(2)           For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(3)           Notwithstanding the foregoing provisions of these Bylaws, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in these Bylaws; provided, however, that any references in these Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Section 6(b) of this Article I.

(4)           Nothing in these Bylaws shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act, or (ii) of stockholders to request inclusion of nominees in the Corporation’s proxy statement pursuant to Rule 14a-11 under the Exchange Act or (iii) of the holders of any series of Preferred Stock if and to the extent provided for under law, the Certificate of Incorporation or these Bylaws.  Subject to Rule 14a-8 and Rule 14a-11 under the Exchange Act, nothing in these Bylaws shall be construed to permit any stockholder, or give any stockholder the right, to include or have disseminated or described in the Corporation’s proxy statement any nomi nation of director or directors or any other business proposal.

(f)           To be eligible to be a nominee for election or reelection as a director of the Corporation, (or, in the case of a nomination brought under Rule 14a-11 of the Exchange Act, to serve as a director of the Corporation), a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 6(d) of this Article I or, in the case of a nomination brought under Rule 14a-11 of the Exchange Act, prior to the time such person is to begin service as a director) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provi ded by the Secretary upon written request), and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has n ot been disclosed therein, and (C) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

Section 7.  Proxies and Voting.

At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting.  Any facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.     All voting, including on the election of Directors but excepting where otherwise required by law or by the governing documents of the Corporation, may be made by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or his or her proxy, a stock vote shall be taken.  Every stock vote shall be taken by ballot, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedures established for the meeting.  The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof.  The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act.  If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.  Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability.

All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law or the Certificate of Incorporation, all other matters shall be determined by a majority of the votes cast.

Section 8.  Stock List

A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to beheld.

The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present.  This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

Section 9.  Consent of Stockholders in Lieu of Meeting

Subject to the rights of the holders of any class or series of preferred stock of the Corporation, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

ARTICLE II - BOARD OF DIRECTORS

Section 1.  General Powers, Number and Term of Office

The business and affairs of the Corporation shall be under the direction of its Board of Directors.  The number of Directors who shall constitute the “whole” Board shall be such number as the Board of Directors shall from time to time have designated, except that in the absence of such designation shall be seven (7).  The board of Directors shall annually elect a Chairman of the Board from among its members who shall, when present, preside at its meetings.

The Directors, other than those who may be elected by the holders of any class or series of Preferred Stock, shall be divided, with respect to the time for which they severally hold office, into three classes.  The term of office of the first class will expire at the first annual meeting of stockholders. The term of office of the second class will expire at the annual meeting of stockholders one year thereafter and the term of the office of the third class will expire at the annual meeting of stockholders two years thereafter.  At each annual meeting of stockholders, Directors elected to succeed those Directors whose terms expire shall be elected for a term of offic e to expire at the third succeeding annual meeting of stockholders after their election. Each Director will hold office until his or her successor shall have been duly elected and qualified.

Section 2.  Vacancies and Newly Created Directorships

Subject to the rights of the holders of any class or series of Preferred Stock, and unless the Board of Directors otherwise determines, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the Directors then in office, though less than a quorum, and Directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such Director's successor shall have been duly elected and qualified.  No decrease in the number of authorized directors constituting the Board shall shorten the term of any incumbent Director.

Section 3.  Regular Meetings

Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all Directors.  A notice of each regular meeting shall not be required.

Section 4.  Special Meetings

Special meetings of the Board of Directors may be called by one-third (1/3) of the Directors then in office (rounded up to the nearest whole number), by the Chairman of the Board or the President and shall be held at such place, on such date, and at such time as they, or he or she, shall fix.  Notice of the place, date, and time of each such special meeting shall be given each Director by whom it is not waived by mailing written notice not less than five (5) days before the meeting or by telegraphing or telexing or by facsimile transmission of the same not less than twenty-four (24) hours before the meeting.  Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.

Section 5.  Quorum

At any meeting of the Board of Directors, a majority of the Whole Board shall constitute a quorum for all purposes.  If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.

Section 6.  Participation in Meetings By Conference Telephone

Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.

Section 7.  Conduct of Business

At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the Directors present, except as otherwise provided herein or required by law.  The Board of Directors may take action without a meeting if all members thereof consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board of Directors.

Section 8.  Powers

The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power:

(1)To declare dividends from time to time in accordance with law;

(2)To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;

(3)To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or

non-negotiable,secured or unsecured, and to do all things necessary in connection therewith;

(4)To remove any Officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any Officer

upon any other person for the time being;

(5)To confer upon any Officer of the Corporation the power to appoint, remove and suspend subordinate Officers, employees and agents;

(6)To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for Directors, Officers, employees

and agents of the Corporation and its subsidiaries as it may determine;

(7)To adopt from time to time such insurance, retirement, and other benefit plans for Directors, Officers, employees and agents of the Corporation

and its subsidiaries as it may determine; and,

(8)To adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the Corporation's business and affairs.

Section 9.  Compensation of Directors

Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as Directors, including, without limitation, their services as members of committees of the Board of Directors.

ARTICLE III – COMMITTEES

Section 1.  Committees of the Board of Directors

The Board of Directors, by a vote of a majority of the Board of Directors, may from time to time designate committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for these committees and any others provided for herein, elect a Director or Directors to serve as the member or members, designating, if it desires, other Directors as alternate members who may replace any absent or disqualified member at any meeting of the committee.  Any committee so designated may exercise the power and authority of the Board of Directors to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law if the resolution which designates the committee or a supplemental resolution of the Board of Directors shall so provide.  In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

Section 2.  Conduct of Business

Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law.  Adequate provision shall be made for notice to members of all meetings; one-third (1/3) of the members shall constitute a quorum unless the committee shall consist of one (1) or two (2) members, in which event one (1) member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present.  Any committee may take action without a meeting if all members thereof consent thereto in writing and the writing or writings are filed with the minutes of the proceedings of such committee.

Section 3.  Nominating Committee

The Board of Directors shall appoint a Nominating Committee of the Board, consisting of not less than three (3) members.  The Nominating Committee shall have authority:  (a) to review any nominations for election to the Board of Directors made by a stockholder of the Corporation pursuant to Section 6 of Article I of these Bylaws in order to determine compliance with such Bylaw, and; (b) to recommend to the Whole Board nominees election to the Board of Directors to replace those Directors whose terms expire at the annual meeting of stockholders next ensuing.

ARTICLE IV – OFFICERS

Section 1.  Generally

(a)           The Board of Directors as soon as may be practicable after the annual meeting of stockholders shall choose a Chairman of the Board, a President and Chief Executive Officer, one or more Vice Presidents, a Secretary and a Treasurer and from time to time may choose such other officers as it may deem proper.  The Chairman of the Board shall be chosen from among the Directors.  The same person may hold any number of offices.

(b)           The term of office of all Officers shall be until the next annual election of Officers and until their respective successors are chosen but any Officer may be removed from office at any time by the affirmative vote of a majority of the authorized number of Directors then constituting the Board of Directors.

(c)           All Officers chosen by the Board of Directors shall have such powers and duties as generally pertain to their respective Offices, subject to the specific provisions of this ARTICLE IV.  Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof.

Section 2.  Chairman of the Board of Directors

The Chairman of the Board shall, subject to the provisions of these Bylaws and to the direction of the Board of Directors, unless the Board has designated another person, when present, shall preside at all meetings of the stockholders of the Corporation.  The Chairman of the Board shall perform all duties and have all powers which are commonly incident to the office of Chairman of the Board or which are delegated to him or her by the Board of Directors.  He or she shall have power to sign all stock certificates, contracts and other instruments of the Corporation, which are authorized.

Section 3.  President and Chief Executive Officer

The President and Chief Executive Officer (the "President") shall have general responsibility for the management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the offices of President and Chief Executive Officer or which are delegated to him or her by the Board of Directors.  Subject to the direction of the Board of Directors, the President and Chief Executive Officer shall have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision of all of the other Officers (other than the Chairman of the Board), employees and agents of the Corporation.

Section 4.  Vice President

The Vice President or Vice Presidents shall perform the duties of the President in his absence or during his inability to act.  In addition, the Vice Presidents shall perform the duties and exercise the powers usually incident to their respective offices and/or such other duties and powers as may be properly assigned to them by the Board of Directors, the Chairman of the Board or the President.  A Vice President or Vice Presidents may be designated as Executive Vice President or Senior Vice President.

Section 5.  Secretary

The Secretary or Assistant Secretary shall issue notices of meetings, shall keep their minutes, shall have charge of the seal and the corporate books, shall perform such other duties and exercise such other powers as are usually incident to such office and/or such other duties and powers as are properly assigned thereto by the Board of Directors, the Chairman of the Board or the President. Subject to the direction of the Board of Directors, the Secretary shall have the power to sign all stock certificates.

Section 6.  Treasurer

The Treasurer shall be the Comptroller of the Corporation and shall have the responsibility for maintaining the financial records of the Corporation.  He or she shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions and of the financial condition of the Corporation.  The Treasurer shall also perform such other duties as the Board of Directors may from time to time prescribe.  Subject to the direction of the Board of Directors, the Treasurer shall have the power to sign all stock certificates.

Section 7.  Assistant Secretaries and Other Officers

The Board of Directors may appoint one or more Assistant Secretaries and such other Officers who shall have such powers and shall perform such duties as are provided in these Bylaws or as may be assigned to them by the Board of Directors, the Chairman of the Board or the President.

Section 8.  Action with Respect to Securities of Other Corporations

Unless otherwise directed by the Board of Directors, the President or any Officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.

ARTICLE V - STOCK

Section 1. Certificates of Stock

Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the Chairman of the Board or the President, and by the Secretary or an Assistant Secretary, or any Treasurer or Assistant Treasurer, certifying the number of shares owned by him or her. Any or all of the signatures on the certificate may be by facsimile.

Section 2.  Transfers of Stock

Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of Article V of these Bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.

Section 3.  Record Date

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for such other action as herein before described; provided, however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the next day preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment or rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 4.  Lost, Stolen or Destroyed Certificates

In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.

Section 5.  Regulations

The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.

ARTICLE VI – NOTICES

Section 1. Notices

Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, Director, Officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or by sending such notice by prepaid telegram or mailgram or other courier.  Any such notice shall be addressed to such stockholder, Director, Officer, employee or agent at his or her last known address as the same appears on the books of the Corporation.  The time when such notice is received, if hand-delivered, or dispatched, if delivered through the mails or by telegram or mailgram or other courier, shall be the time of the giving of the notice.

Section 2.  Waivers

A written waiver of any notice, signed by a stockholder, Director, Officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, Director, Officer, employee or agent.  Neither the business nor the purpose of any meeting need be specified in such a waiver.

ARTICLE VII – MISCELLANEOUS

Section 1.  Facsimile Signatures

In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

Section 2.  Corporate Seal

The Board of Directors may provide a suitable seal, containing then name of the Corporation, which seal shall be in the charge of the Secretary.  If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or an assistant to the Treasurer.

Section 3.  Reliance Upon Books, Reports and Records

Each Director, each member of any committee designated by the Board of Directors, and each Officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its Officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such Director or committee member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

Section 4.  Fiscal Year

The fiscal year of the Corporation shall be as fixed by the Board of Directors.

Section 5.  Time Periods

In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

ARTICLE VIII - AMENDMENTS

The Board of Directors may amend, alter or repeal these Bylaws at any meeting of the Board, provided notice of the proposed change was given not less than two days prior to the meeting.  The stockholders shall also have power to amend, alter or repeal these Bylaws at any meeting of stockholders provided notice of the proposed change was given in the notice of the meeting; provided, however, that, notwithstanding any other provisions of the Bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the voting stock required by law, the Certificate of Incorporation, any Preferred Stock Designation or these Bylaws, the affirmative votes of the holders of at least 80% of the voting power of all the then-outstand ing shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal any provisions of these Bylaws.

The above Bylaws are effective as of December 6, 1996, the date of incorporation of Life Financial Corp.

EX-31.1

Exhibit 31.1

Pacific Premier Bancorp, Inc.,

Quarterly Report on Form 10-Q

for the Quarter ended September 30, 2010

CHIEF EXECUTIVE OFFICER CERTIFICATION

Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as Amended

I, Steven R. Gardner,certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Pacific Premier Bancorp, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  November 5, 2010                                                                   /s/ Steven R. Gardner

Steven R. Gardner

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Pacific Premier Bancorp, Inc.,

Quarterly Report on Form 10-Q

for the Quarter ended September 30, 2010

CHIEF FINANCIAL OFFICER CERTIFICATION

Pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as Amended

I, Kent J. Smith,certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Pacific Premier Bancorp, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  November 5, 2010                                                                   /s/ Kent J. Smith

Kent J. Smith

Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

Pacific Premier Bancorp, Inc.,

Quarterly Report on Form 10-Q

for the Quarter ended September 30, 2010

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Pacific Premier Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned’s best knowledge and belief:

a)   the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

b)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 5th day of November, 2010.

Pacific Premier Bancorp, Inc.

/s/ Steven R. Gardner

Steven R. Gardner

President and

Chief Executive Officer

/s/ Kent J. Smith

Kent J. Smith

Senior Vice President and

Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.