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

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

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

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

As of November 1, 2011, there were 35,495,962 shares of the registrant's common stock outstanding, excluding 1,762,870 shares of unvested restricted stock.

PACWEST BANCORP AND SUBSIDIARIES

SEPTEMBER 30, 2011 FORM 10-Q

TABLE OF CONTENTS

			September 30, 2011			December 31, 2010

ASSETS
Cash and due from banks			$	94,112		$	82,170
Interest-earning deposits in financial institutions				73,209			26,382

	Total cash and cash equivalents			167,321			108,552

Securities available-for-sale, at fair value ($47,213 and $50,437 covered by FDIC loss sharing at September 30, 2011 and December 31, 2010, respectively)				1,261,776			874,016
Federal Home Loan Bank stock, at cost				48,342			55,040

	Total investment securities			1,310,118			929,056

Non-covered loans, net of unearned income				2,893,637			3,161,055
Allowance for loan losses				(90,110	)		(98,653	)

	Non-covered loans, net			2,803,527			3,062,402
Covered loans, net				761,059			908,576

	Total loans			3,564,586			3,970,978

Other real estate owned, net ($32,301 and $55,816 covered by FDIC loss sharing at September 30, 2011 and December 31, 2010, respectively)				80,561			81,414
Premises and equipment, net				22,919			22,578
FDIC loss sharing asset				89,197			116,352
Cash surrender value of life insurance				67,004			66,182
Core deposit and customer relationship intangibles, net				19,251			25,843
Goodwill				39,141			47,301
Other assets				133,793			160,765

		Total assets	$	5,493,891		$	5,529,021

LIABILITIES
Noninterest-bearing deposits			$	1,628,253		$	1,465,562
Interest-bearing deposits				2,926,143			3,184,136

	Total deposits			4,554,396			4,649,698
Borrowings				225,000			225,000
Subordinated debentures				129,347			129,572
Accrued interest payable and other liabilities				45,680			45,954

		Total liabilities		4,954,423			5,050,224

Commitments and contingencies (Note 8)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; authorized 5,000,000 shares; none issued and outstanding				—			—
Common stock, $0.01 par value; authorized 75,000,000 shares; 37,489,011 shares issued at September 30, 2011 and 36,880,225 at December 31, 2010 (includes 1,762,870 and 1,230,582 shares of unvested restricted stock, respectively)				375			369
Additional paid-in capital				1,090,280			1,085,364
Accumulated deficit				(570,221	)		(607,042	)
Treasury stock, at cost—230,179 and 207,796 shares at September 30, 2011 and December 31, 2010, respectively				(4,290	)		(3,863	)
Accumulated other comprehensive income				23,324			3,969

		Total stockholders' equity		539,468			478,797

		Total liabilities and stockholders' equity	$	5,493,891		$	5,529,021

			Three Months Ended									Nine Months Ended September 30,

			September 30, 2011			June 30, 2011			September 30, 2010			Nine Months Ended September 30,
			September 30, 2011			June 30, 2011			September 30, 2010			2011			2010
Interest income:
	Loans		$	63,347		$	68,331		$	68,480		$	198,459		$	194,539
	Investment securities			9,077			8,782			6,519			25,678			17,342
	Deposits in financial institutions			94			83			131			234			505

		Total interest income		72,518			77,196			75,130			224,371			212,386

Interest expense:
	Deposits			5,072			5,518			6,375			16,546			20,209
	Borrowings			1,782			1,763			2,129			5,289			7,013
	Subordinated debentures			1,223			1,226			1,459			3,668			4,357

		Total interest expense		8,077			8,507			9,963			25,503			31,579

		Net interest income		64,441			68,689			65,167			198,868			180,807

Provision for credit losses:
	Non-covered loans			—			5,500			17,050			13,300			143,677
	Covered loans			348			5,890			6,500			9,148			34,600

		Total provision for credit losses		348			11,390			23,550			22,448			178,277

		Net interest income after provision for credit losses		64,093			57,299			41,617			176,420			2,530

Noninterest income:
	Service charges on deposit accounts			3,545			3,400			2,861			10,503			8,256
	Other commissions and fees			2,052			1,980			1,760			5,752			5,395
	Other-than-temporary impairment loss on securities			—			—			(874	)		—			(874	)
	Increase in cash surrender value of life insurance			359			368			353			1,106			1,120
	FDIC loss sharing income, net			963			5,316			5,506			5,109			27,257
	Other income			224			176			279			702			632

		Total noninterest income		7,143			11,240			9,885			23,172			41,786

Noninterest expense:
	Compensation			21,557			21,717			23,060			65,203			63,539
	Occupancy			7,423			7,142			6,872			21,548			20,406
	Data processing			2,228			2,129			2,121			6,832			5,982
	Other professional services			2,239			2,505			2,694			7,040			6,734
	Business development			548			595			571			1,712			1,893
	Communications			678			834			811			2,371			2,410
	Insurance and assessments			1,641			1,603			2,431			5,581			7,316
	Non-covered other real estate owned, net			2,293			2,300			2,151			5,296			11,217
	Covered other real estate owned expense (income), net			4,813			1,205			(319	)		3,440			1,761
	Intangible asset amortization			1,977			2,308			2,434			6,592			7,282
	Other expense			3,190			4,200			3,348			10,909			10,977

		Total noninterest expense		48,587			46,538			46,174			136,524			139,517

Earnings (loss) before income taxes				22,649			22,001			5,328			63,068			(95,201	)
Income tax (expense) benefit				(9,345	)		(9,160	)		(1,828	)		(26,247	)		40,873

	Net earnings (loss)		$	13,304		$	12,841		$	3,500		$	36,821		$	(54,328	)

Earnings (loss) per share:
	Basic		$	0.36		$	0.35		$	0.10		$	0.99		$	(1.55	)
	Diluted		$	0.36		$	0.35		$	0.10		$	0.99		$	(1.55	)
Dividends declared per share			$	0.01		$	0.01		$	0.01		$	0.03		$	0.03

		Nine Months Ended September 30, 2011

		Common Stock
		Common Stock														Accumulated Other Comprehensive Income
		Shares			Par Value		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income		Total
Balance, January 1, 2011			36,672,429		$	369	$	1,085,364		$	(607,042	)	$	(3,863	)	$	3,969	$	478,797
	Net earnings		—			—		—			36,821			—			—		36,821
	Tax effect from vesting of restricted stock		—			—		(497	)		—			—			—		(497	)
	Restricted stock awarded and earned stock compensation, net of shares forfeited		608,786			6		6,502			—			—			—		6,508
	Restricted stock surrendered		(22,383	)		—		—			—			(427	)		—		(427	)
	Cash dividends paid ($0.03 per share)		—			—		(1,089	)		—			—			—		(1,089	)
	Other comprehensive income—increase in net unrealized gain on securities available-for-sale, net of tax effect of $14.0 million		—			—		—			—			—			19,355		19,355

Balance, September 30, 2011			37,258,832		$	375	$	1,090,280		$	(570,221	)	$	(4,290	)	$	23,324	$	539,468

					Nine Months Ended September 30,

					2011			2010
Cash flows from operating activities:
	Net earnings (loss)				$	36,821		$	(54,328	)
		Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
			Depreciation and amortization			13,721			4,190
			Provision for credit losses			22,448			178,277
			Gain on sale of other real estate owned			(8,334	)		(4,044	)
			Provision for losses on other real estate owned			15,011			14,777
			Gain on sale of premises and equipment			(23	)		(14	)
			Impairment loss on securities			—			874
			Restricted stock amortization			6,508			6,563
			Tax effect included in stockholders' equity of restricted stock vesting			497			1,427
			Decrease in accrued and deferred income taxes, net			(3,689	)		(41,718	)
			Decrease in FDIC loss sharing asset			27,155			40,470
			Decrease in other assets			15,989			13,579
			Decrease in accrued interest payable and other liabilities			(2,406	)		(8,991	)

				Net cash provided by operating activities		123,698			151,062

Cash flows from investing activities:
		Resolution of goodwill matter with FDIC				7,636			—
		Net cash acquired in Los Padres Bank acquisition				—			171,366
		Net decrease in loans				324,823			26,393
		Proceeds from sale of loans				2,495			204,164
		Securities available-for-sale:
			Proceeds from maturities and paydowns			137,622			135,295
			Purchases			(495,341	)		(448,856	)
		Net redemptions of FHLB stock				6,698			3,744
		Proceeds from sales of other real estate owned				52,823			61,560
		Capitalized costs to complete other real estate owned				—			(638	)
		Purchases of premises and equipment, net				(4,397	)		(2,481	)
		Proceeds from sales of premises and equipment				27			28

			Net cash provided by investing activities			32,386			150,575

Cash flows from financing activities:
		Net increase (decrease) in deposits:
			Noninterest-bearing			162,691			131,166
			Interest-bearing			(257,993	)		(177,006	)
		Net proceeds from issuance of common stock				—			26,587
		Restricted stock surrendered				(427	)		(836	)
		Tax effect included in stockholders' equity of restricted stock vesting				(497	)		(1,427	)
		Net decrease in borrowings				—			(330,000	)
		Cash dividends paid				(1,089	)		(1,084	)

			Net cash used in financing activities			(97,315	)		(352,600	)

Net increase (decrease) in cash and cash equivalents						58,769			(50,963	)
Cash and cash equivalents, beginning of period						108,552			211,048

Cash and cash equivalents, end of period					$	167,321		$	160,085

Supplemental disclosures of cash flow information:
	Cash paid for interest				$	26,273		$	32,163
	Cash paid for income taxes					29,969			810
	Loans transferred to other real estate owned					57,266			45,669

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

Pacific Western is a full-service commercial bank offering a broad range of banking products and services including: accepting demand, money market, and time deposits; originating loans, including commercial, real estate construction, SBA-guaranteed and consumer loans; and providing other business-oriented products. Our operations are primarily located in Southern California and extend from California's Central Coast to San Diego County. The Bank focuses on conducting business with small to medium-sized businesses in our marketplace and the owners and employees of those businesses. The majority of our loans are secured by the real estate collateral of such businesses. We also operate three banking offices in the San Francisco Bay area and one office in Arizona, all of which were acquired through FDIC-assisted acquisitions. Our asset-based lending function operates in Arizona, California, Texas, and the Pacific Northwest.

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

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

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

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

among other items, the allowances for credit losses, the carrying value of other real estate owned, the carrying value of intangible assets, the carrying value of the FDIC loss sharing asset and the realization of deferred tax assets.

In August 2010, Pacific Western acquired assets and assumed liabilities of the former Los Padres Bank ("Los Padres") in an FDIC-assisted transaction, which we refer to as the Los Padres acquisition. The acquired assets and assumed liabilities were measured at their estimated fair values. Management made significant estimates and exercised significant judgment in estimating fair values and accounting for the acquired assets and assumed liabilities in the Los Padres acquisition.

Certain prior period amounts have been reclassified to conform to the current period's presentation format. During the second quarter of 2011, we reclassified recoveries on covered loans such that recoveries now reduce the credit loss provision for covered loans rather than increase FDIC loss sharing income. Such reclassifications had no effect on reported net earnings or losses.

Goodwill arises from business combinations and represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. Goodwill and other intangible assets deemed to have indefinite lives generated from purchase business combinations are not subject to amortization and are instead tested for impairment no less than annually. Impairment is determined in accordance with ASC 350, "Intangibles—Goodwill and Other" and is based on the reporting unit. Impairment exists when the carrying value of goodwill exceeds its implied fair value. An impairment loss would be recognized in an amount equal to that excess and would be included in noninterest expense in the consolidated statement of earnings (loss). Our annual impairment test of goodwill resulted in no impact on our results of operations and financial condition.

Goodwill in the amount of $46.8 million was recorded in the Los Padres acquisition. During the second quarter of 2011, we reduced goodwill by $7.6 million as the matter with the FDIC regarding settlement accounting for a wholly-owned subsidiary in the Los Padres acquisition was resolved. A receivable for such amount was included in the FDIC loss sharing asset at June 30, 2011 and the cash was received during the third quarter of 2011.

Our intangible assets with definite lives are core deposit intangibles, or CDI, and customer relationship intangibles, or CRI. These intangible assets are amortized over their useful lives to their estimated residual values and reviewed for impairment at least quarterly. The amortization expense represents the estimated decline in the value of the underlying deposits or loan customers acquired.

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

			Three Months Ended									Nine Months Ended September 30,

			September 30, 2011			June 30, 2011			September 30, 2010			Nine Months Ended September 30,
			September 30, 2011			June 30, 2011			September 30, 2010			2011			2010
			(In thousands)
Gross amount of CDI and CRI:
	Balance, beginning of period		$	73,629		$	76,319		$	75,911		$	76,319		$	75,911
	Additions			—			—			2,427			—			—
	Fully amortized portion			(6,529	)		(2,690	)		—			(9,219	)		2,427

		Balance, end of period		67,100			73,629			78,338			67,100			78,338

Accumulated amortization:
	Balance, beginning of period			(52,401	)		(52,783	)		(47,463	)		(50,476	)		(42,615	)
	Amortization			(1,977	)		(2,308	)		(2,434	)		(6,592	)		(7,282	)
	Fully amortized portion			6,529			2,690			—			9,219			—

		Balance, end of period		(47,849	)		(52,401	)		(49,897	)		(47,849	)		(49,897	)

Net CDI and CRI, end of period			$	19,251		$	21,228		$	28,441		$	19,251		$	28,441

The aggregate amortization expense related to the intangible assets is expected to be $8.4 million for 2011. The estimated aggregate amortization expense related to these intangible assets for each of the subsequent four years is $6.1 million for 2012, $4.5 million for 2013, $2.9 million for 2014, and $2.7 million for 2015.

The amortized cost, gross unrealized gains and losses and estimated fair values of securities available-for-sale are presented in the tables below as of the dates indicated. The private label collateralized mortgage obligations were acquired in the FDIC-assisted acquisition of Affinity Bank ("Affinity") in August 2009 and are covered by a FDIC loss sharing agreement. Other securities include

an investment in overnight money market funds at a financial institution. See Note 9, Fair Value Measurements, for information on fair value measurements and methodology.

			September 30, 2011

			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			(In thousands)
Residental mortgage-backed securities:
	Government and government-sponsored entity pass through securities		$	984,907	$	33,046	$	(347	)	$	1,017,606
	Government and government-sponsored entity collateralized mortgage obligations			84,783		2,001		(4	)		86,780
	Covered private label collateralized mortgage obligations			42,328		6,687		(1,802	)		47,213
Municipal securities				92,422		1,060		(255	)		93,227
Corporate debt securities				14,813		23		(194	)		14,642
Other securities				2,308		—		—			2,308

		Total securities available-for-sale	$	1,221,561	$	42,817	$	(2,602	)	$	1,261,776

			December 31, 2010

			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			(In thousands)
Government-sponsored entity debt securities			$	10,014	$	15	$	—		$	10,029
Residental mortgage-backed securities:
	Government and government-sponsored entity pass through securities			754,149		9,282		(7,366	)		756,065
	Government and government-sponsored entity collateralized mortgage obligations			47,416		565		(352	)		47,629
	Covered private label collateralized mortgage obligations			45,867		6,653		(2,083	)		50,437
Municipal securities				7,437		129		—			7,566
Other securities				2,290		—		—			2,290

		Total securities available-for-sale	$	867,173	$	16,644	$	(9,801	)	$	874,016

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

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

At September 30, 2011, the estimated fair value of debt securities and residential mortgage-backed debt securities issued by the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") was approximately $1.0 billion. We do not own any equity securities issued by Fannie Mae or Freddie Mac.

As of September 30, 2011, securities available-for-sale with an estimated fair value of $77.2 million were pledged as collateral for borrowings, public deposits and other purposes as required by various statutes and agreements.

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

			September 30, 2011

			Less Than 12 Months					12 months or Longer					Total
			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
			(In thousands)
Residential mortgage-backed securities:
	Government and government-sponsored entity pass through securities		$	72,233	$	(346	)	$	24	$	(1	)	$	72,257	$	(347	)
	Government and government-sponsored entity collateralized mortgage obligations			—		—			1,651		(4	)		1,651		(4	)
	Covered private label collateralized mortgage obligations			5,255		(396	)		4,514		(1,406	)		9,769		(1,802	)
Municipal securities				34,584		(255	)		—		—			34,584		(255	)
Corporate debt securities				10,098		(194	)		—		—			10,098		(194	)

		Total	$	122,170	$	(1,191	)	$	6,189	$	(1,411	)	$	128,359	$	(2,602	)

			December 31, 2010

			Less Than 12 Months					12 months or Longer					Total
			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
			(In thousands)
Residential mortgage-backed securities:
	Government and government-sponsored entity pass through securities		$	321,537	$	(7,366	)	$	—	$	—		$	321,537	$	(7,366	)
	Government and government-sponsored entity collateralized mortgage obligations			15,690		(327	)		1,553		(25	)		17,243		(352	)
	Covered private label collateralized mortgage obligations			1,579		(472	)		4,980		(1,611	)		6,559		(2,083	)

		Total	$	338,806	$	(8,165	)	$	6,533	$	(1,636	)	$	345,339	$	(9,801	)

We reviewed the securities that were in a continuous loss position less than 12 months and longer than 12 months at September 30, 2011, and concluded that their losses were a result of the level of market interest rates relative to the types of securities and not a result of the underlying issuers' abilities to repay. Accordingly, we determined that the securities were temporarily impaired. Additionally, we have no plans to sell these securities and believe that it is more likely than not we would not be required to sell these securities before recovery of their amortized cost. Therefore, we did not recognize the temporary impairment in the consolidated statements of earnings (loss).

At September 30, 2011, the Company had a $48.3 million investment in Federal Home Loan Bank of San Francisco (FHLB) stock carried at cost. In January 2009, the FHLB announced that it suspended excess FHLB stock redemptions and dividend payments. Since this announcement, the FHLB has declared and paid cash dividends in 2010 and 2011, though at rates less than that paid in the past, and repurchased certain amounts of our excess stock. We evaluated the carrying value of our FHLB stock investment at September 30, 2011 and determined that it was not impaired. Our evaluation considered the long-term nature of the investment, the current financial and liquidity position of the FHLB, the actions being taken by the FHLB to address its regulatory situation, and our intent and ability to hold this investment for a period of time sufficient to recover our recorded investment.

When we refer to non-covered loans we are referring to loans not covered by our FDIC loss sharing agreements.

The following table presents the composition of non-covered loans by portfolio segment as of the dates indicated:

The following tables present a summary of the activity in the allowance for loan losses on non-covered loans by portfolio segment for the periods indicated:

		Nine Months Ended September 30, 2011

		Real Estate Mortgage			Real Estate Construction			Commercial			Consumer			Foreign			Total
		(In thousands)
Allowance for Loan Losses on Non-Covered Loans:
Balance, beginning of period		$	51,657		$	8,766		$	33,229		$	4,652		$	349		$	98,653
	Charge-offs		(9,859	)		(5,838	)		(7,967	)		(1,379	)		—			(25,043	)
	Recoveries		349			1,021			1,160			1,375			45			3,950
	Provision		9,666			6,384			(1,090	)		(2,360	)		(50	)		12,550

Balance, end of period		$	51,813		$	10,333		$	25,332		$	2,288		$	344		$	90,110

The ending balance of the allowance is composed of amounts applicable to loans:
	Individually evaluated for impairment	$	6,399		$	3,363		$	7,035		$	2		$	—		$	16,799

	Collectively evaluated for impairment	$	45,414		$	6,970		$	18,297		$	2,286		$	344		$	73,311

Non-Covered Loan Balances:
Ending balance		$	2,031,893		$	152,411		$	671,963		$	20,621		$	20,932		$	2,897,820

The ending balance of the non-covered loan portfolio is composed of loans:
	Individually evaluated for impairment	$	91,495		$	32,621		$	21,692		$	565		$	—		$	146,373

	Collectively evaluated for impairment	$	1,940,398		$	119,790		$	650,271		$	20,056		$	20,932		$	2,751,447

		Year Ended December 31, 2010

		Real Estate Mortgage			Real Estate Construction			Commercial			Consumer			Foreign			Total
		(In thousands)
Allowance for Loan Losses on Non-Covered Loans:
Balance, January 1, 2010		$	58,241		$	39,934		$	17,710		$	2,021		$	811		$	118,717
	Charge-offs		(117,029	)		(63,590	)		(18,548	)		(3,749	)		(306	)		(203,222	)
	Recoveries		1,222			708			1,652			565			133			4,280
	Provision		109,223			31,714			32,415			5,815			(289	)		178,878

Balance, December 31, 2010		$	51,657		$	8,766		$	33,229		$	4,652		$	349		$	98,653

The ending balance of the allowance is composed of amounts applicable to loans:
	Individually evaluated for impairment	$	3,893		$	1,125		$	8,911		$	1,049		$	—		$	14,978

	Collectively evaluated for impairment	$	47,764		$	7,641		$	24,318		$	3,603		$	349		$	83,675

Non-Covered Loan Balances:
Ending balance		$	2,274,733		$	179,479		$	663,557		$	25,058		$	22,608		$	3,165,435

The ending balance of the non-covered loan portfolio is composed of loans:
	Individually evaluated for impairment	$	94,171		$	47,350		$	39,820		$	1,951		$	163		$	183,455

	Collectively evaluated for impairment	$	2,180,562		$	132,129		$	623,737		$	23,107		$	22,445		$	2,981,980

The following table presents the credit risk rating categories for non-covered loans by portfolio segment and class as of the dates indicated. Nonclassified loans are those with a credit risk rating of either pass or special mention, while classified loans are those with a credit risk rating of either substandard or doubtful.

Our federal and state banking regulators, as an integral part of their examination process, periodically review the Company's loan risk rating classifications. Our regulators may require the Company to recognize rating downgrades based on their judgments related to information available to

them at the time of their examinations. Risk rating downgrades generally result in higher provisions for credit losses.

			September 30, 2011						December 31, 2010

			Nonclassified		Classified		Total		Nonclassified		Classified		Total
			(In thousands)
Real estate mortgage:
	Hospitality		$	124,346	$	21,437	$	145,783	$	137,952	$	18,700	$	156,652
	SBA 504			51,838		7,386		59,224		55,774		13,513		69,287
	Other			1,749,840		77,046		1,826,886		1,956,905		91,889		2,048,794

		Total real estate mortgage		1,926,024		105,869		2,031,893		2,150,631		124,102		2,274,733

Real estate construction:
	Residential			16,908		3,398		20,306		39,644		25,399		65,043
	Commercial			98,819		33,286		132,105		82,291		32,145		114,436

		Total real estate construction		115,727		36,684		152,411		121,935		57,544		179,479

Commercial:
	Collateralized			396,393		17,133		413,526		342,607		15,820		358,427
	Unsecured			65,214		5,967		71,181		119,326		10,417		129,743
	Asset-based			157,270		48		157,318		141,813		1,354		143,167
	SBA 7(a)			18,716		11,222		29,938		29,557		2,663		32,220

		Total commercial		637,593		34,370		671,963		633,303		30,254		663,557

Consumer				19,799		822		20,621		22,949		2,109		25,058
Foreign				20,932		—		20,932		22,608		—		22,608

		Total non-covered loans	$	2,720,075	$	177,745	$	2,897,820	$	2,951,426	$	214,009	$	3,165,435

The following tables present an aging analysis of our non-covered loans by portfolio segment and class as of the dates indicated:

			September 30, 2011

			30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total
			(In thousands)
Real estate mortgage:
	Hospitality		$	—	$	—	$	—	$	—	$	145,783	$	145,783
	SBA 504			3,168		896		—		4,064		55,160		59,224
	Other			13,351		1,939		13,652		28,942		1,797,944		1,826,886

		Total real estate mortgage		16,519		2,835		13,652		33,006		1,998,887		2,031,893

Real estate construction:
	Residential			—		—		—		—		20,306		20,306
	Commercial			1,553		—		2,719		4,272		127,833		132,105

		Total real estate construction		1,553		—		2,719		4,272		148,139		152,411

Commercial:
	Collateralized			—		396		2,614		3,010		410,516		413,526
	Unsecured			—		113		2,003		2,116		69,065		71,181
	Asset-based			—		—		—		—		157,318		157,318
	SBA 7(a)			974		591		1,591		3,156		26,782		29,938

		Total commercial		974		1,100		6,208		8,282		663,681		671,963

Consumer				110		19		—		129		20,492		20,621
Foreign				—		—		—		—		20,932		20,932

		Total non-covered loans	$	19,156	$	3,954	$	22,579	$	45,689	$	2,852,131	$	2,897,820

At September 30, 2011 and December 31, 2010, the Company had no non-covered loans that were greater than 90 days past due and still accruing interest. It is the Company's policy to discontinue accruing interest when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectibility of a loan in the normal course of business. At September 30, 2011, nonaccrual loans totaled $60.0 million. Nonaccrual loans include $3.5 million of loans 30 to 89 days past due and $33.9 million of current loans which have been placed on nonaccrual status based on management's judgment regarding the collectibility of such loans.

			December 31, 2010

			30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total
			(In thousands)
Real estate mortgage:
	Hospitality		$	—	$	—	$	—	$	—	$	156,652	$	156,652
	SBA 504			799		462		6,235		7,496		61,791		69,287
	Other			426		2,566		13,936		16,928		2,031,866		2,048,794

		Total real estate mortgage		1,225		3,028		20,171		24,424		2,250,309		2,274,733

Real estate construction:
	Residential			—		—		24,004		24,004		41,039		65,043
	Commercial			—		667		2,145		2,812		111,624		114,436

		Total real estate construction		—		667		26,149		26,816		152,663		179,479

Commercial:
	Collateralized			725		883		1,457		3,065		355,362		358,427
	Unsecured			—		5,966		600		6,566		123,177		129,743
	Asset-based			—		—		—		—		143,167		143,167
	SBA 7(a)			1,254		494		751		2,499		29,721		32,220

		Total commercial		1,979		7,343		2,808		12,130		651,427		663,557

Consumer				407		1,048		—		1,455		23,603		25,058
Foreign				—		—		163		163		22,445		22,608

		Total non-covered loans	$	3,611	$	12,086	$	49,291	$	64,988	$	3,100,447	$	3,165,435

Nonaccrual loans totaled $94.2 million at December 31, 2010, of which $12.0 million were 30 to 89 days past due and $32.9 million were current.

The following table presents our nonaccrual and performing non-covered loans by portfolio segment and class as of the dates indicated:

			September 30, 2011						December 31, 2010

			Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
			(In thousands)
Real estate mortgage:
	Hospitality		$	7,336	$	138,447	$	145,783	$	4,151	$	152,501	$	156,652
	SBA 504			2,895		56,329		59,224		9,346		59,941		69,287
	Other			21,693		1,805,193		1,826,886		27,452		2,021,342		2,048,794

		Total real estate mortgage		31,924		1,999,969		2,031,893		40,949		2,233,784		2,274,733

Real estate construction:
	Residential			1,091		19,215		20,306		24,004		41,039		65,043
	Commercial			9,399		122,706		132,105		5,238		109,198		114,436

		Total real estate construction		10,490		141,921		152,411		29,242		150,237		179,479

Commercial:
	Collateralized			4,769		408,757		413,526		6,241		352,186		358,427
	Unsecured			4,887		66,294		71,181		9,104		120,639		129,743
	Asset-based			15		157,303		157,318		15		143,152		143,167
	SBA 7(a)			7,318		22,620		29,938		6,518		25,702		32,220

		Total commercial		16,989		654,974		671,963		21,878		641,679		663,557

Consumer				565		20,056		20,621		1,951		23,107		25,058
Foreign				—		20,932		20,932		163		22,445		22,608

		Total non-covered loans	$	59,968	$	2,837,852	$	2,897,820	$	94,183	$	3,071,252	$	3,165,435

Nonaccrual loans and performing restructured loans are considered impaired for reporting purposes. Impaired loans by portfolio segment are as follows as of the dates indicated:

The decrease in the real estate construction impaired loan segment is due to the foreclosure on undeveloped land located in Ventura County which secured two non-covered loans with an aggregate balance of $23.0 million. The decrease in the commercial impaired loan segment is due to two loans that have performed in accordance with their restructured terms for at least 12 months and have been removed from this category.

The following tables present information regarding our non-covered impaired loans by portfolio segment and class as of and for the dates indicated:

			September 30, 2011						December 31, 2010

			Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
			(In thousands)
With An Allowance Recorded:
Real estate mortgage:
	Hospitality		$	17,634	$	17,891	$	2,893	$	15,081	$	15,138	$	564
	SBA 504			1,159		1,250		195		4,161		6,180		280
	Other			56,238		60,220		3,311		47,188		47,343		3,049
Real estate construction:
	Residential			2,069		2,077		484		8,301		11,956		673
	Other			24,374		26,391		2,879		5,341		5,701		452

		Total real estate		101,474		107,829		9,762		80,072		86,318		5,018

Commercial:
	Collateralized			4,691		4,780		3,068		2,192		2,363		1,174
	Unsecured			4,748		14,708		3,183		9,361		9,445		7,696
	SBA 7(a)			4,543		4,632		784		1,999		2,123		41
Consumer				69		73		2		1,125		1,127		1,049

	Total other			14,051		24,193		7,037		14,677		15,058		9,960

With No Related Allowance Recorded:
Real estate mortgage:
	Hospitality		$	—	$	—	$	—	$	667	$	667	$	—
	SBA 504			2,348		4,007		—		5,185		6,320		—
	Other			14,116		16,819		—		21,889		29,191		—
Real estate construction:
	Residential			1,329		1,329		—		22,676		23,208		—
	Other			4,849		6,157		—		11,032		12,603		—

		Total real estate		22,642		28,312		—		61,449		71,989		—

Commercial:
	Collateralized			2,201		2,416		—		20,519		20,668		—
	Unsecured			591		656		—		224		236		—
	Asset-based			15		15		—		15		15		—
	SBA 7(a)			4,903		6,427		—		5,510		7,239		—
Consumer				496		563		—		826		876		—
Foreign				—		—		—		163		238		—

	Total other			8,206		10,077		—		27,257		29,272		—

Total:
	Real estate mortgage		$	91,495	$	100,187	$	6,399	$	94,171	$	104,839	$	3,893
	Real estate construction			32,621		35,954		3,363		47,350		53,468		1,125
	Commercial			21,692		33,634		7,035		39,820		42,089		8,911
	Consumer			565		636		2		1,951		2,003		1,049
	Foreign			—		—		—		163		238		—

		Total non-covered loans	$	146,373	$	170,411	$	16,799	$	183,455	$	202,637	$	14,978

			Three Months Ended September 30, 2011				Nine Months Ended September 30, 2011

			Weighted Average Recorded Investment⁽¹⁾		Interest Income Recognized		Weighted Average Recorded Investment⁽¹⁾		Interest Income Recognized
			(In thousands)
With An Allowance Recorded:
Real estate mortgage:
	Hospitality		$	17,634	$	162	$	17,435	$	528
	SBA 504			1,159		8		820		29
	Other			55,580		584		43,025		2,051
Real estate construction:
	Residential			2,069		17		2,069		55
	Other			20,969		274		16,293		502

		Total real estate		97,411		1,045		79,642		3,165

Commercial:
	Collateralized			4,568		32		3,644		76
	Unsecured			4,748		6		4,739		16
	SBA 7(a)			3,131		60		2,400		116
Consumer				69		—		69		—

	Total other			12,516		98		10,852		208

With No Related Allowance Recorded:
Real estate mortgage:
	Hospitality		$	—	$	—	$	—	$	—
	SBA 504			2,348		—		2,348		—
	Other			13,900		150		10,992		358
Real estate construction:
	Residential			1,329		48		1,329		48
	Other			4,849		114		4,849		163

		Total real estate		22,426		312		19,518		569

Commercial:
	Collateralized			2,198		—		2,133		—
	Unsecured			574		2		548		4
	Asset-based			15		—		15		—
	SBA 7(a)			4,815		15		4,704		25
Consumer				496		—		462		1
Foreign				—		—		—		—

	Total other			8,098		17		7,862		30

Total:
	Real estate mortgage		$	90,621	$	904	$	74,620	$	2,966
	Real estate construction			29,216		453		24,540		768
	Commercial			20,049		115		18,183		237
	Consumer			565		—		531		1
	Foreign			—		—		—		—

		Total non-covered loans	$	140,451	$	1,472	$	117,874	$	3,972

The following tables present non-covered new troubled debt restructurings and defaulted troubled debt restructurings for the periods indicated:

				Three Months Ended September 30, 2011						Nine Months Ended September 30, 2011

				Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
				(Dollars in thousands)
Troubled Debt Restructurings:
	Real estate mortgage:
		Hospitality			3	$	14,967	$	14,967		4	$	17,053	$	17,053
		SBA 504			—		—		—		5		2,619		2,619
		Other			12		34,244		34,053		25		52,765		52,574
	Real estate construction:
		Residential			—		—		—		1		618		618
		Other			1		2,082		2,082		7		18,605		18,605
	Commercial:
		Collateralized			3		1,158		1,158		12		3,161		3,161
		Unsecured			1		450		450		3		726		726
		SBA 7(a)			7		745		745		18		4,292		4,292
	Consumer				—		—		—		2		271		271

			Total		27	$	53,646	$	53,455		77	$	100,110	$	99,919

As a result of adopting the amendments in Accounting Standards Update No. 2011-02, Receivables (Topic 310): A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring, we reassessed all restructurings that occurred on or after January 1, 2011, for identification as troubled debt restructurings. We identified one loan as a troubled debt restructuring (TDR) for which the allowance for credit losses had previously been measured under our general allowance for credit losses methodology. Upon identifying this one loan as a TDR, we recognized it as impaired under the guidance in Section 310-10-35. The amendments in Accounting Standards Update No. 2011-02 require prospective application of the impairment measurement guidance in Section 310-10-35 for those loans newly identified as impaired. At the end of the first interim period of adoption (September 30, 2011), the recorded investment in this loan was $2.1 million and the allowance for credit losses associated with that receivable on the basis of a current evaluation of loss was $163,000.

We refer to the loans acquired in the Los Padres and Affinity acquisitions subject to loss sharing agreements with the FDIC as "covered loans" as we will be reimbursed for a substantial portion of any future losses on them under the terms of the agreements.

The following table reflects the carrying values of covered loans as of the dates indicated:

Loan Category		September 30, 2011			December 31, 2010

		(In thousands)
Multi-family		$	267,892		$	321,650
Commercial real estate			386,326			444,244
Single family			129,692			157,424
Construction and land			57,601			87,301
Commercial and industrial			22,869			34,828
Home equity lines of credit			6,287			5,916
Consumer			603			1,378

	Total gross covered loans		871,270			1,052,741
Less: discount			(80,920	)		(110,901	)

	Covered loans, net of discount		790,350			941,840
Less: allowance for loan losses			(29,291	)		(33,264	)

	Covered loans, net	$	761,059		$	908,576

The following table summarizes the changes in the carrying amount of covered acquired impaired loans and accretable yield on those loans for the period indicated:

The table above excludes the covered loans from the Los Padres acquisition which are accounted for as non-impaired loans and totaled $29.7 million and $29.1 million at September 30, 2011 and December 31, 2010, respectively.

The following table presents the credit risk rating categories for covered loans by portfolio segment as of the dates indicated. Nonclassified loans are those with a credit risk rating of either pass or special mention, while classified loans are those with a credit risk rating of either substandard or doubtful. It should be noted, however, that all of these loans are covered by loss sharing agreements with the FDIC.

The following table presents a rollforward of OREO, net of the valuation allowance, for the periods indicated:

OREO Activity:		Non-Covered OREO			Covered OREO			Total OREO

		(In thousands)
Balance, January 1, 2011		$	25,598		$	55,816		$	81,414
	Foreclosures		24,981			4,130			29,111
	Payments to third parties⁽¹⁾		950			—			950
	Provision for losses		(382	)		(890	)		(1,272	)
	Reductions related to sales		(2,780	)		(16,939	)		(19,719	)

Balance, March 31, 2011			48,367			42,117			90,484
	Foreclosures		6,073			13,329			19,402
	Payments to third parties⁽¹⁾		172			—			172
	Provision for losses		(1,897	)		(1,565	)		(3,462	)
	Reductions related to sales		(521	)		(12,932	)		(13,453	)

Balance, June 30, 2011		$	52,194		$	40,949		$	93,143
	Foreclosures		2,393			6,361			8,754
	Payments to third parties⁽¹⁾		259			—			259
	Provision for losses		(1,676	)		(8,601	)		(10,277	)
	Reductions related to sales		(4,910	)		(6,408	)		(11,318	)

Balance, September 30, 2011		$	48,260		$	32,301		$	80,561

The FDIC loss sharing asset was initially recorded at fair value, which represented the present value of the estimated cash payments from the FDIC for future losses on covered assets. The ultimate collectibility of this asset is dependent upon the performance of the underlying covered assets, the

passage of time and claims paid by the FDIC. The following table presents the changes in the FDIC loss sharing asset for the period indicated:

The following table summarizes our outstanding FHLB advances by their contractual maturity dates as of the date indicated:

The FHLB advances outstanding at September 30, 2011 are each callable term advances. The maturities shown are the contractual maturities for the advances. The advances have each passed their initial call dates and are currently callable on a quarterly basis by the FHLB. While the FHLB may call the advances to be repaid for any reason, they are likely to be called if market interest rates, for borrowings of similar remaining term, are higher than the advances' stated rates on the call dates. We may repay the advances at any time with a prepayment penalty. Our aggregate remaining borrowing capacity under the FHLB secured lines of credit was $1.2 billion at September 30, 2011. As of September 30, 2011, approximately $2.8 billion of real estate and commercial loans and securities with a carrying value of $43.0 million were pledged to secure our FHLB advances. Additionally, the Bank had secured borrowing capacity from the Federal Reserve discount window of $375.0 million at September 30, 2011. As of September 30, 2011, $469.5 million of real estate construction and commercial loans not pledged to the FHLB were pledged to secure the Federal Reserve borrowing capacity. The Bank also maintains unsecured lines of credit of $92.0 million with correspondent banks for the purchase of overnight funds; these lines are subject to availability of funds.

NOTE 7—BORROWINGS, SUBORDINATED DEBENTURES AND BROKERED DEPOSITS (Continued)

The Company had an aggregate amount of $129.3 million in subordinated debentures outstanding at September 30, 2011. These subordinated debentures were issued in seven separate series. Each issuance had a maturity of thirty years from its date of issue. The subordinated debentures were issued to trusts established by us or entities we have acquired, which in turn issued trust preferred securities, which totaled $123.0 million at September 30, 2011. These trust preferred securities are considered Tier 1 capital for regulatory purposes.

The subordinated debentures are each callable at par with the exception of Trust I and Trust CI, which are callable at par with a prepayment penalty, and only by the issuer. The prepayment penalty for Trust I and Trust CI diminishes over time such that they may be called at par in the year 2020.

The proceeds of the subordinated debentures we originated were used primarily to fund several of our acquisitions and to augment regulatory capital. Interest payments made by the Company on subordinated debentures are considered dividend payments by the Federal Reserve Bank, or FRB. As such, notification to the FRB is required prior to our intent to pay such interest during any period in which our cumulative net earnings for the previous four quarters are not sufficient to fund the interest payments due for those periods and the current period. Should the FRB object to payment of interest on the subordinated debentures, we would not be able to make the payments until approval is received.

NOTE 7—BORROWINGS, SUBORDINATED DEBENTURES AND BROKERED DEPOSITS (Continued)

The following table summarizes the terms of each issuance of the subordinated debentures outstanding as of September 30, 2011:

Series		September 30, 2011 Amount					Fixed or Variable Rate	Rate Index

		(In thousands)
Trust CI	3/23/00	$	10,310	3/8/30	3/8/20		Fixed	N/A	11.00	%	N/A
Trust I	9/7/00		8,248	9/7/30	9/7/20		Fixed	N/A	10.60	%	N/A
Trust V	8/15/03		10,310	9/17/33		⁽¹⁾	Variable	3 month LIBOR + 3.10	3.45	%	12/15/11
Trust VI	9/3/03		10,310	9/15/33		⁽¹⁾	Variable	3 month LIBOR + 3.05	3.40	%	12/13/11
Trust CII	9/17/03		5,155	9/17/33		⁽¹⁾	Variable	3 month LIBOR + 2.95	3.30	%	12/15/11
Trust VII	2/5/04		61,856	4/23/34		⁽¹⁾	Variable	3 month LIBOR + 2.75	3.18	%	1/27/12
Trust CIII	8/15/05		20,619	9/15/35		⁽¹⁾	Variable	3 month LIBOR + 1.69	2.04	%	12/13/11

Gross subordinated debentures			126,808
Unamortized premium⁽³⁾			2,539

Net subordinated debentures		$	129,347

As previously mentioned, the subordinated debentures were issued to trusts established by us, or entities we acquired, which in turn issued $123.0 million of trust preferred securities. The Company includes in Tier 1 capital an amount of trust preferred securities equal to no more than 25% of the sum of all core capital elements, which is generally defined as shareholders' equity less goodwill, net of any related deferred income tax liability. At September 30, 2011, the amount of trust preferred securities included in Tier I capital was $123.0 million.

Brokered deposits totaled $45.0 million at September 30, 2011 and are included in the interest-bearing deposits balance on the accompanying condensed consolidated balance sheets. Such amount represented customer deposits that were subsequently participated with other FDIC-insured financial institutions through the CDARS program as a means to provide FDIC deposit insurance coverage for the full amount of our customers' deposits.

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments to extend credit totaled $686.8 million and $723.1 million at September 30, 2011 and December 31, 2010, respectively.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing arrangements. Most guarantees expire within one year from the date of issuance. The Company generally requires collateral or other security to support financial instruments with credit risk. Standby letters of credit totaled $31.9 million and $23.7 million at September 30, 2011 and December 31, 2010, respectively.

The Company has investments in low income housing project partnerships, which provide the Company income tax credits, and in a few small business investment companies. As of September 30, 2011, the Company had commitments to contribute capital to these entities totaling $7.3 million.

In the ordinary course of our business, we are party to various legal actions, which we believe are incidental to the operation of our business. The outcome of such legal actions and the timing of ultimate resolution are inherently difficult to predict. Because of these factors, the Company cannot provide a meaningful estimate of the range of reasonably possible outcomes of claims in the aggregate or by individual claim. In the opinion of management, based upon information currently available to us, any resulting liability is not likely to have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. The hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

We use fair value to measure certain assets on a recurring basis, primarily securities available-for-sale; we have no liabilities being measured at fair value. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period and such measurements are therefore considered "nonrecurring" for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for impaired loans and other real estate owned and also to record impairment on certain assets, such as goodwill, core deposit intangibles and other long-lived assets.

The following tables present information on the assets measured and recorded at fair value on a recurring and nonrecurring basis as of the date indicated:

		Fair Value Measurement as of September 30, 2011

		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(In thousands)
Measured on a Recurring Basis:
Securities available-for-sale:
	Government and government-sponsored entity residential mortgage-backed securities	$	1,104,386	$	—	$	1,104,386	$	—
	Covered private label CMOs		47,213		—		—		47,213
	Municipal securities		93,227		—		93,227		—
	Corporate securities		14,642		—		14,642		—
	Other securities		2,308		—		2,308		—

		$	1,261,776	$	—	$	1,214,563	$	47,213

Measured on a Nonrecurring Basis:
	Non-covered impaired loans	$	112,360	$	—	$	23,597	$	88,763
	Non-covered other real estate owned		40,683		—		13,436		27,247
	Covered other real estate owned		16,449		—		15,037		1,412
	SBA loan servicing asset		1,334		—		—		1,334

		$	170,826	$	—	$	52,070	$	118,756

There were no significant transfers of assets between Level 1 and Level 2 of the fair value hierarchy during the three months ended September 30, 2011.

The following table presents gains and (losses) on assets measured on a nonrecurring basis for the periods indicated:

The following table summarizes activity for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period indicated:

ASC Topic 825, Financial Instruments, requires disclosure of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate such fair values. Additionally, certain financial instruments and all nonfinancial instruments are excluded from the applicable disclosure requirements. The following table is a summary of the carrying values and estimated fair values of certain financial instruments as of the dates indicated:

		September 30, 2011				December 31, 2010

		Carrying or Contract Amount		Estimated Fair Value		Carrying or Contract Amount		Estimated Fair Value
		(In thousands)
Financial Assets:
	Cash and due from banks	$	94,112	$	94,112	$	82,170	$	82,170
	Interest-earning deposits in financial institutions		73,209		73,209		26,382		26,382
	Securities available-for-sale		1,261,776		1,261,776		874,016		874,016
	Investment in FHLB stock		48,342		48,342		55,040		55,040
	Loans, net⁽¹⁾		3,564,586		3,588,445		3,970,978		3,960,244
Financial Liabilities:
	Deposits		4,554,396		4,566,531		4,649,698		4,664,575
	Borrowings		225,000		249,588		225,000		243,273
	Subordinated debentures		129,347		135,972		129,572		135,876

The following is a description of the valuation methodologies used to measure our assets recorded at fair value (under ASC Topic 820) and for estimating fair value for financial instruments not recorded at fair value (under ASC Topic 825).

Cash and due from banks. The carrying amount is assumed to be the fair value because of the liquidity of these instruments.

Interest-earning deposits in financial institutions. The carrying amount is assumed to be the fair value given the short-term nature of these deposits.

Securities available-for-sale. Securities available-for-sale are measured and carried at fair value on a recurring basis. Unrealized gains and losses on available-for-sale securities are reported as a component of accumulated other comprehensive income on the condensed consolidated balance sheets. See Note 3, Investment Securities, for further information on unrealized gains and losses on securities available-for-sale.

In determining the fair value of the securities categorized as Level 2, we obtain a report from a nationally recognized broker-dealer detailing the fair value of each investment security we hold as of each reporting date. The broker-dealer uses observable market information to value our securities, with the primary source being a nationally recognized pricing service. We review the market prices provided by the broker-dealer for our securities for reasonableness based on our understanding of the marketplace and we consider any credit issues related to the securities. As we have not made any adjustments to the market quotes provided to us and they are based on observable market data, they have been categorized as Level 2 within the fair value hierarchy.

Our covered private label collateralized mortgage obligation securities, which we refer to as private label CMOs, are categorized as Level 3 due in part to the inactive market for such securities. There is a wide range of prices quoted for private label CMOs among independent third party pricing services and this range reflects the significant judgment being exercised over the assumptions and variables that determine the pricing of such securities. We consider this subjectivity to be a significant unobservable input and have concluded the private label CMOs should be categorized as a Level 3 measured asset. While the private label CMOs may be based on significant unobservable inputs, our fair value was based on prices provided to us by a nationally recognized pricing service which we also use to determine the fair value of the majority of our securities portfolio. We determined the reasonableness of the fair values by reviewing assumptions at the individual security level about prepayment, default expectations, estimated severity loss factors, projected cash flows and estimated collateral performance, all of which are not directly observable in the market.

FHLB stock. The fair value of FHLB stock is based on our recorded investment. In January 2009, the FHLB announced that it had suspended excess FHLB stock redemptions and dividend payments. Since this announcement, the FHLB has declared and paid cash dividends in 2010 and 2011, though at rates less than that paid in the past, and repurchased certain amounts of our excess stock. As a result of these actions, we evaluated the carrying value of our FHLB stock investment. Based on the FHLB's most recent publicly available financial results, its capital position and its bond ratings, we concluded such investment was not impaired at either September 30, 2011 or December 31, 2010.

Non-covered loans. As non-covered loans are not measured at fair value, the following discussion relates to estimating the fair value disclosures under ASC Topic 825. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type and further segmented into fixed and adjustable rate interest terms and by credit risk categories. The fair value

estimates do not take into consideration the value of the loan portfolio in the event the loans are sold outside the parameters of normal operating activities. The fair value of performing fixed rate loans is estimated by discounting scheduled cash flows through the estimated maturity using estimated market prepayment speeds and estimated market discount rates that reflect the credit and interest rate risk inherent in the loans. The estimated market discount rates used for performing fixed rate loans are the Company's current offering rates for comparable instruments with similar terms. The fair value of performing adjustable rate loans is estimated by discounting scheduled cash flows through the next repricing date. As these loans reprice frequently at market rates and the credit risk is not considered to be greater than normal, the market value is typically close to the carrying amount of these loans.

Non-covered impaired loans. Nonaccrual loans and performing restructured loans are considered impaired for reporting purposes and are measured and recorded at fair value on a non-recurring basis. Non-covered nonaccrual loans with an unpaid principal balance over $250,000 and all performing restructured loans are reviewed individually for the amount of impairment, if any. Non-covered nonaccrual loans with an unpaid principal balance of $250,000 or less are evaluated for impairment collectively.

To the extent a loan is collateral dependent, we measure such impaired loan based on the estimated fair value of the underlying collateral. The fair value of each loan's collateral is generally based on estimated market prices from an independently prepared appraisal, which is then adjusted for the cost related to liquidating such collateral; such valuation inputs result in a nonrecurring fair value measurement that is categorized as a Level 2 measurement.

When adjustments are made to an appraised value to reflect various factors such as the age of the appraisal or known changes in the market or the collateral, such valuation inputs are considered unobservable and the fair value measurement is categorized as a Level 3 measurement. The impaired loans categorized as Level 3 also include unsecured loans and other secured loans whose fair values are based significantly on unobservable inputs such as the strength of a guarantor, including an SBA government guarantee, cash flows discounted at the effective loan rate, and management's judgment.

The non-covered impaired loan balances shown above represent those nonaccrual and restructured loans for which impairment was recognized during the three and nine months ended September 30, 2011. The amounts shown as losses represent, for the loan balances shown, the impairment recognized during the three and nine months ended September 30, 2011. We recorded $869,000 and $3.5 million in losses on impaired loans for the three and nine months ended September 30, 2011, respectively, for loans with a fair value of zero as of September 30, 2011. Of the $60.0 million of nonaccrual loans at September 30, 2011, $11.6 million were written down to their fair values through charge-offs during the quarter.

Other real estate owned. The fair value of foreclosed real estate, both non-covered and covered, is generally based on estimated market prices from independently prepared current appraisals or negotiated sales prices with potential buyers, less estimated costs to sell; such valuation inputs result in a fair value measurement that is categorized as a Level 2 measurement on a nonrecurring basis. As a matter of policy, appraisals are required annually and may be updated more frequently as circumstances require in the opinion of management. With the deterioration of real estate values

during this economic downturn, appraisals have been obtained more regularly and as a result our Level 2 measurement is based on appraisals that are generally less than nine months old.

When a current appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value as a result of known changes in the market or the collateral and there is no observable market price, such valuation inputs result in a fair value measurement that is categorized as a Level 3 measurement. To the extent a negotiated sales price or reduced listing price represents a significant discount to an observable market price, such valuation input would result in a fair value measurement that is also considered a Level 3 measurement. The OREO losses shown above are write-downs based on either a recent appraisal obtained after foreclosure or an accepted purchase offer by an independent third party received after foreclosure.

SBA servicing asset. In accordance with ASC Topic 860, Accounting for Servicing of Financial Assets, the SBA servicing asset, included in other assets in the condensed consolidated balance sheets, is carried at its implied fair value. The fair value of the servicing asset is estimated by discounting future cash flows using market-based discount rates and prepayment speeds. The discount rate is based on the current US Treasury yield curve, as published by the Department of the Treasury, plus a spread for the marketplace risk associated with these assets. We utilize estimated prepayment vectors using SBA prepayment information provided by Bloomberg for pools of similar assets to determine the timing of the cash flows. These nonrecurring valuation inputs are considered to be Level 3 inputs.

Deposits. Deposits are carried at historical cost. The fair value of deposits with no stated maturity, such as noninterest bearing demand deposits, savings and checking accounts, is equal to the amount payable on demand as of the balance sheet date. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. No value has been separately assigned to the Company's long-term relationships with its deposit customers, such as a core deposit intangible.

Borrowings. Borrowings are carried at amortized cost. The fair value of fixed rate borrowings is calculated by discounting scheduled cash flows through the estimated maturity dates or call dates, if applicable, using estimated market discount rates that reflect current rates offered for borrowings with similar remaining maturities and characteristics.

Subordinated debentures. Subordinated debentures are carried at amortized cost. The fair value of the subordinated debentures is based on the discounted value of contractual cash flows for fixed rate securities. The discount rate is estimated using the rates currently offered for similar securities of similar maturity. The fair value of subordinated debentures with variable rates is deemed to be the carrying value.

Commitments to extend credit and standby letters of credit. The majority of our commitments to extend credit carry current market interest rates if converted to loans. Because these commitments are generally unassignable by either the borrower or us, they only have value to the borrower and us. The estimated fair value approximates the recorded deferred fee amounts and is not disclosed as it is not material.

Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates do not reflect income taxes or any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a portion of the Company's financial instruments, fair value estimates are based on what management believes to be conservative judgments regarding expected future cash flows, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimated fair values are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Since the fair values have been estimated as of September 30, 2011, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different.

The following is a summary of the calculation of basic and diluted net earnings (loss) per share for the periods indicated:

				Three Months Ended									Nine Months Ended September 30,

				September 30, 2011			June 30, 2011			September 30, 2010			Nine Months Ended September 30,
				September 30, 2011			June 30, 2011			September 30, 2010			2011			2010
				(In thousands, except per share data)
Basic Earnings (Loss) Per Share:
	Net earnings (loss)			$	13,304		$	12,841		$	3,500		$	36,821		$	(54,328	)
	Less: earnings allocated to unvested restricted stock⁽¹⁾				(622	)		(600	)		(126	)		(1,595	)		(24	)

			Net earnings (loss) allocated to common shares	$	12,682		$	12,241		$	3,374		$	35,226		$	(54,352	)

	Weighted-average basic shares and unvested restricted stock outstanding				37,257.4			37,239.8			36,712.4			37,101.3			36,355.1
	Less: weighted-average unvested restricted stock outstanding				(1,768.9	)		(1,768.2	)		(1,375.1	)		(1,629.8	)		(1,347.6	)

			Weighted-average basic shares outstanding		35,488.5			35,471.6			35,337.3			35,471.5			35,007.5

	Basic earnings (loss) per share			$	0.36		$	0.35		$	0.10		$	0.99		$	(1.55	)

Diluted Earnings (Loss) Per Share:
	Net earnings (loss) allocated to common shares			$	12,682		$	12,241		$	3,374		$	35,226		$	(54,352	)

	Weighted-average basic shares outstanding				35,488.5			35,471.6			35,337.3			35,471.5			35,007.5
	Add: warrants outstanding				—			—			—			—			—

		Weighted-average diluted shares outstanding			35,488.5			35,471.6			35,337.3			35,471.5			35,007.5

	Diluted earnings (loss) per share			$	0.36		$	0.35		$	0.10		$	0.99		$	(1.55	)

At September 30, 2011, there were outstanding 912,870 shares of unvested time-based restricted common stock and 850,000 shares of unvested performance-based restricted common stock. The awarded shares of time-based restricted common stock vest over a service period of three to five years from the date of the grant. The awarded shares of performance-based restricted common stock vest in full on the date the Compensation, Nominating and Governance, or CNG, Committee of the Board of Directors, as Administrator of the Company's 2003 Stock Incentive Plan, or the 2003 Plan, determines that the Company achieved certain financial goals established by the CNG Committee as set forth in the grant documents. Both time-based and performance-based restricted common stock vest immediately upon a change in control of the Company as defined in the 2003 Plan and upon death of the employee.

In March 2011, the CNG awarded 350,000 shares of performance-based restricted common stock, which will expire on March 31, 2016 if the net earnings performance target established for such awards is not met. Such restricted stock will vest upon a change in control, however, as defined in the 2003 Plan. We have determined that it is not probable at the present time that the net earnings performance target will be achieved. Accordingly, no expense is being recognized for these shares.

Compensation expense related to time-based restricted stock awards is based on the fair value of the underlying stock on the award date and is recognized over the vesting period using the straight-line method. Restricted stock amortization totaled $2.1 million for each of the three months ended September 30, 2011, June 30, 2011, and September 30, 2010, respectively, and $6.2 million and $6.6 million for the nine months ended September 30, 2011 and 2010, respectively. Such amounts are included in compensation expense on the accompanying condensed consolidated statements of earnings (loss).

Currently no compensation expense is being recognized for any performance-based restricted stock awards as management has concluded that it is improbable that the respective financial targets for any outstanding performance-based restricted stock awards will be met. If and when the attainment of such financial targets is deemed probable in future periods, a catch-up adjustment will be recorded and amortization of such performance-based restricted stock will begin again. The total amount of unrecognized compensation expense related to all performance-based restricted stock for which

amortization was suspended or has not commenced totaled $33.8 million at September 30, 2011 as presented in the following table.

The Company's 2003 Plan permits stock based compensation awards to officers, directors, key employees and consultants. The 2003 Plan authorizes grants of stock-based compensation instruments to purchase or issue up to 5,000,000 shares of authorized but unissued Company common stock, subject to adjustments provided by the 2003 Plan. In May 2011, the Board of Directors approved the equity award of 13,740 common shares to non-employee directors of the Company. Such shares were granted outright and vested immediately with a charge to other noninterest expense of $300,000 at that time. As of September 30, 2011, there were 567,641 shares available for grant under the 2003 Plan.

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs." ASU 2011-04 was issued concurrently with IFRS 13, "Fair Value Measurements," to provide largely identical guidance about fair value measurement and disclosure requirements. ASU 2011-04 does not extend the use of fair value but, rather, provides guidance about how fair value should be applied where it already is required or permitted under U.S. GAAP or International Financial Reporting Standards (IFRSs). For U.S. GAAP, most of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. ASU 2011-04 is effective prospectively for interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. In the period of adoption, a reporting entity will be required to disclose a change, if any, in valuation technique and related inputs that result from applying ASU 2011-04 and to quantify the total effect, if practicable. We have not as yet determined what effect, if any, adoption of ASU 2011-04 will have on our financial statements and related disclosures.

In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income." Under ASU 2011-05, an entity will have the option to present the components of net earnings and comprehensive income in either one or two consecutive financial statements. This standard eliminates the option in U.S. GAAP to present other comprehensive income in the statement of changes in equity. ASU 2011-05 should be applied retrospectively and is effective for fiscal years,

and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. Adoption of this standard will not have a material effect on our financial statements.

In September 2011, the FASB issued ASU 2011-08, "Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment." Under ASU 2011-08, an entity is permitted to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011. Early adoption is permitted. We have not determined what effect, if any, adoption of ASU 2011-08 will have on our financial statements.

On November 7, 2011, the Company announced that the Board of Directors had declared a quarterly cash dividend of $0.18 per common share payable on November 30, 2011, to stockholders of record at the close of business on November 17, 2011.

We have evaluated events that have occurred subsequent to September 30, 2011 and have concluded there are no subsequent events that would require recognition or disclosure in the accompanying condensed consolidated financial statements.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains certain forward-looking information about the Company and its subsidiaries, which statements are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to:

We are a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as the holding company for our subsidiary bank, Pacific Western Bank, which we refer to as Pacific Western or the Bank.

Pacific Western is a full-service commercial bank offering a broad range of banking products and services including: accepting demand, money market, and time deposits; originating loans, including

commercial, real estate construction, SBA-guaranteed and consumer loans; and providing other business-oriented products. Our operations are primarily located in Southern California and extend from California's Central Coast to San Diego County. The Bank focuses on conducting business with small to medium-sized businesses in our marketplace and the owners and employees of those businesses. The majority of our loans are secured by the real estate collateral of such businesses. We acquired through FDIC-assisted acquisitions three banking offices in the San Francisco Bay area and one office in Arizona. Our asset-based lending function operates in Arizona, California, Texas, and the Pacific Northwest.

Pacific Western competes actively for deposits, and emphasizes solicitation of noninterest-bearing deposits. In managing the top line of our business, we focus on quality loan growth and loan yield, deposit cost, and net interest margin, as net interest income, on a year-to-date basis, accounts for 90% of our net revenues (net interest income plus noninterest income).

During the nine months ended September 30, 2011, our assets declined $35.1 million to $5.5 billion. This was due primarily to a decrease in our total loans of $406.4 million on a net basis, including a $147.5 million reduction in our covered loans. The loan portfolio continues to decline generally due to repayments, resolution activities, and tepid loan growth. The decline in total loans was offset partially by an increase in investment securities available-for-sale of $387.8 million due to purchases of $495.3 million, offset partially by principal reductions.

During the nine months ended September 30, 2011, our total deposits declined $95.3 million to $4.6 billion. Time deposits decreased $197.5 million to $1.0 billion. Core deposits, which include noninterest-bearing demand, interest checking, money market, and savings deposits, grew $102.2 million as noninterest-bearing demand accounts and savings accounts increased $162.7 million and $23.0 million, respectively, while money market deposits decreased $86.9 million. At September 30, 2011, core deposits totaled $3.5 billion, or 77% of total deposits at that date, including $1.6 billion of noninterest-bearing demand accounts, or 36% of total deposits.

Among other factors, our operating results depend generally on the following key performance indicators:

Net interest income is the excess of interest earned on our interest-earning assets over the interest paid on our interest-bearing liabilities. Net interest margin is net interest income expressed as a percentage of average interest-earning assets. A sustained low interest rate environment combined with low loan growth and high levels of marketplace liquidity may lower both our net interest income and net interest margin going forward.

Our primary interest-earning assets are loans and investments. Our primary interest-bearing liabilities are deposits. We attribute our high net interest margin to our high level of noninterest-bearing deposits and low cost of deposits. While our deposit balances will fluctuate depending on deposit holders' perceptions of alternative yields available in the market, we attempt to minimize these variances by attracting a high percentage of noninterest-bearing deposits, which have no expectation of yield. At September 30, 2011, approximately 36% of our total deposits were noninterest-bearing.

We generally seek new lending opportunities in the $500,000 to $15 million range, try to limit loan maturities for commercial loans to one year, for construction loans up to 18 months, and for commercial real estate loans up to ten years, and to price lending products so as to preserve our

interest spread and net interest margin. We sometimes encounter strong competition in pursuing lending opportunities such that potential borrowers obtain loans elsewhere at lower rates than those we offer. Our ability to make new loans is dependent on economic factors in our market area, borrower qualifications, competition, and liquidity, among other items. Loan growth remains tepid, as new loan volume is not replacing maturities. We continue to retain maturing lending relationships that contribute positively to our profitability and net interest margin.

The decline in the non-covered loan portfolio moderated during the third quarter of 2011 to $19.5 million compared to declines of $144.5 million and $103.4 million during the second and first quarters of 2011, respectively. In addition, the commercial and industrial non-covered loan segment increased $32.1 million during the third quarter and the pipeline of new lending opportunities has grown. Although these trends may signal a turnaround in loan growth, no assurance can be given that meaningful loan growth will materialize over the next several quarters.

We stress credit quality in originating and monitoring the loans we make and measure our success by the levels of our nonperforming assets, net charge-offs and allowance for credit losses. We maintain an allowance for credit losses on non-covered loans which is the sum of our allowance for loan losses and our reserve for unfunded loan commitments. Provisions for credit losses are charged to operations as and when needed for both on and off balance sheet credit exposure. Loans which are deemed uncollectible are charged off and deducted from the allowance for loan losses. Recoveries on loans previously charged off are added to the allowance for loan losses. The provision for credit losses on the non-covered loan portfolio was based on our allowance methodology and reflected net charge-offs, the levels and trends of nonaccrual and classified loans, and the migration of loans into various risk classifications. A provision for credit losses on the covered loan portfolio may be recorded to reflect decreases in expected cash flows on covered loans compared to those previously estimated.

We regularly review our loans to determine whether there has been any deterioration in credit quality stemming from economic conditions or other factors which may affect collectibility of our loans. Changes in economic conditions, such as inflation, unemployment, increases in the general level of interest rates, declines in real estate values and negative conditions in borrowers' businesses could negatively impact our customers and cause us to adversely classify loans and increase portfolio loss factors. An increase in classified loans generally results in increased provisions for credit losses. Any deterioration in the real estate market may lead to increased provisions for credit losses because of our concentration in real estate loans.

Our noninterest expense includes fixed and controllable overhead, the major components of which are compensation, occupancy, data processing, other professional services, and OREO expense. We measure success in controlling such costs through monitoring of the efficiency ratio. We calculate the base efficiency ratio by dividing noninterest expense by net revenues (the sum of net interest income plus noninterest income). We also calculate a non-GAAP measure called the "credit cost adjusted efficiency ratio." The credit cost adjusted efficiency ratio is calculated in the same manner as the base efficiency ratio except that noninterest income is reduced by FDIC loss sharing income and noninterest expense is reduced by OREO expenses. See calculations in "Results of Operations—Non-GAAP Measurements" contained herein.

The consolidated base and credit cost adjusted efficiency ratios have been as follows:


Three Months Ended:	Base Efficiency Ratio		Credit Cost Adjusted Efficiency Ratio
September 30, 2011		67.9	%	58.7	%
June 30, 2011		58.2	%	57.7	%
March 31, 2011		58.7	%	60.4	%
December 31, 2010		70.4	%	63.8	%
September 30, 2010		61.5	%	63.8	%

The base efficiency ratio fluctuations shown in the above table result from the volatility of FDIC loss sharing income and OREO expenses. The credit cost adjusted efficiency ratio eliminates such volatility and shows the trend in overhead related noninterest expense relative to net revenues.

The Company's accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition. The Company has identified several policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the allowances for credit losses and the carrying values of intangible assets and deferred income tax assets. For further information, refer to our Annual Report on Form 10-K for the year ended December 31, 2010.

Certain discussion in this Form 10-Q contains non-GAAP financial disclosures for tangible common equity, pre-credit, pre-tax earnings, and credit cost adjusted efficiency ratios. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. Given the use of tangible common equity amounts and ratios is prevalent among banking regulators, investors and analysts, we disclose our tangible common equity ratios in addition to equity-to-assets ratios. Also, as analysts and investors view pre-credit, pre-tax earnings as an indicator of the Company's ability to absorb credit losses, we disclose this amount in addition to net earnings. The methodology of determining tangible common equity and pre-credit, pre-tax earnings may differ among companies. We disclose the credit cost adjusted efficiency ratio as it eliminates the volatility of FDIC loss sharing income and OREO expenses from the base efficiency ratio and shows the trend in overhead related noninterest expense relative to net revenues.

These non-GAAP financial measures are presented for supplemental informational purposes only for understanding the Company's operating results and should not be considered a substitute for financial information presented in accordance with United States generally accepted accounting principles (GAAP). The following table presents performance amounts and ratios in accordance with

GAAP and a reconciliation of the non-GAAP financial measurements to the GAAP financial measurements.

			Three Months Ended							Nine Months Ended September 30,

			September 30, 2011		June 30, 2011		September 30, 2010			Nine Months Ended September 30,
Pre Credit, Pre-Tax Earnings			September 30, 2011		June 30, 2011		September 30, 2010			2011		2010
			(In thousands)
Net earnings (loss)			$	13,304	$	12,841	$	3,500		$	36,821	$	(54,328	)
Plus: Total provision for credit losses				348		11,390		23,550			22,448		178,277
	Other real estate owned expense (income):
		Non-covered		2,293		2,300		2,151			5,296		11,217
		Covered		4,813		1,205		(319	)		3,440		1,761
	Income tax expense (benefit)			9,345		9,160		1,828			26,247		(40,873	)
Less: FDIC loss sharing income, net				963		5,316		5,506			5,109		27,257

		Pre-credit, pre-tax earnings	$	29,140	$	31,580	$	25,204		$	89,143	$	68,797

			Three Months Ended

Credit Cost Adjusted Efficiency Ratio			September 30, 2011			June 30, 2011			March 31, 2011			December 31, 2010			September 30, 2010
			(Dollars in thousands)
Noninterest expense			$	48,587		$	46,538		$	41,399		$	49,286		$	46,174
Less: Non-covered OREO expense				2,293			2,300			703			1,093			2,151
	Covered OREO expense			4,813			1,205			(2,578	)		699			(319	)

		Credit adjusted noninterest expense	$	41,481		$	43,033		$	43,274		$	47,494		$	44,342

Net interest income			$	64,441		$	68,689		$	65,738		$	68,520		$	65,167
Noninterest income				7,143			11,240			4,789			1,452			9,885

	Net revenues			71,584			79,929			70,527			69,972			75,052
Less: FDIC loss sharing income (expense), net				963			5,316			(1,170	)		(4,473	)		5,506

		Credit adjusted net revenues	$	70,621		$	74,613		$	71,697		$	74,445		$	69,546

Base efficiency ratio⁽¹⁾				67.9	%		58.2	%		58.7	%		70.4	%		61.5	%
Credit cost adjusted efficiency ratio⁽²⁾				58.7	%		57.7	%		60.4	%		63.8	%		63.8	%

Tangible Common Equity		September 30, 2011			June 30, 2011			December 31, 2010

		(Dollars in thousands)
PacWest Bancorp Consolidated:
Stockholders' equity		$	539,468		$	511,964		$	478,797
Less: Intangible assets			58,392			60,369			73,144

	Tangible common equity	$	481,076		$	451,595		$	405,653

Total assets		$	5,493,891		$	5,394,725		$	5,529,021
Less: Intangible assets			58,392			60,369			73,144

	Tangible assets	$	5,435,499		$	5,334,356		$	5,455,877

	Equity to assets ratio		9.82	%		9.49	%		8.66	%
	Tangible common equity ratio⁽¹⁾		8.85	%		8.47	%		7.44	%
Book value per share		$	14.48		$	13.74		$	13.06
Tangible book value per share		$	12.91		$	12.12		$	11.06
Shares outstanding			37,258,832			37,251,267			36,672,429
Pacific Western Bank:
Stockholders' equity		$	635,026		$	606,084		$	570,118
Less: Intangible assets			58,392			60,369			73,144

	Tangible common equity	$	576,634		$	545,715		$	496,974

Total assets		$	5,479,173		$	5,378,288		$	5,513,601
Less: Intangible assets			58,392			60,369			73,144

	Tangible assets	$	5,420,781		$	5,317,919		$	5,440,457

	Equity to assets ratio		11.59	%		11.27	%		10.34	%
	Tangible common equity ratio⁽¹⁾		10.64	%		10.26	%		9.13	%

				Three Months Ended									Nine Months Ended September 30,

				September 30, 2011			June 30, 2011			September 30, 2010			Nine Months Ended September 30,
				September 30, 2011			June 30, 2011			September 30, 2010			2011			2010
				(Dollars in thousands, except per share data)
Earnings Summary:
	Interest income			$	72,518		$	77,196		$	75,130		$	224,371		$	212,386
	Interest expense				(8,077	)		(8,507	)		(9,963	)		(25,503	)		(31,579	)

		Net interest income			64,441			68,689			65,167			198,868			180,807

	Provision for credit losses:
		Non-covered loans			—			(5,500	)		(17,050	)		(13,300	)		(143,677	)
		Covered loans			(348	)		(5,890	)		(6,500	)		(9,148	)		(34,600	)

			Total provision for credit losses		(348	)		(11,390	)		(23,550	)		(22,448	)		(178,277	)

	FDIC loss sharing income, net				963			5,316			5,506			5,109			27,257
	Other noninterest income				6,180			5,924			4,379			18,063			14,529
	Non-covered OREO costs, net				(2,293	)		(2,300	)		(2,151	)		(5,296	)		(11,217	)
	Covered OREO costs, net				(4,813	)		(1,205	)		319			(3,440	)		(1,761	)
	Other noninterest expense				(41,481	)		(43,033	)		(44,342	)		(127,788	)		(126,539	)
	Income tax (expense) benefit				(9,345	)		(9,160	)		(1,828	)		(26,247	)		40,873

		Net earnings (loss)		$	13,304		$	12,841		$	3,500		$	36,821		$	(54,328	)

Profitability Measures:
	Earnings (loss) per share:
		Basic		$	0.36		$	0.35		$	0.10		$	0.99		$	(1.55	)
		Diluted		$	0.36		$	0.35		$	0.10		$	0.99		$	(1.55	)
	Annualized return (loss) on:
		Average assets			0.97	%		0.94	%		0.25	%		0.90	%		(1.37	)%
		Average equity			10.11	%		10.31	%		2.82	%		9.81	%		(14.74	)%
	Net interest margin				5.15	%		5.57	%		5.08	%		5.35	%		4.95	%
	Efficiency ratio				67.9	%		58.2	%		61.5	%		61.5	%		62.7	%

Net earnings for the third quarter of 2011 were $13.3 million, or $0.36 per diluted share, compared to net earnings of $12.8 million, or $0.35 per diluted share, for the second quarter of 2011. The $463,000 increase in net earnings for the linked quarters was due mostly to a lower provision for credit losses, offset partially by lower net interest income, lower FDIC loss sharing income and higher OREO costs.

Net earnings for the third quarter of 2011 were $13.3 million, or $0.36 per diluted share, compared to net earnings of $3.5 million, or $0.10 per diluted share, for the third quarter of 2010. The $9.8 million increase in net earnings was due mostly to a lower provision for credit losses, offset partially by lower FDIC loss sharing income and higher covered OREO costs.

Net earnings of $36.8 million, or $0.99 per diluted share, for the nine months ended September 30, 2011 compared to a net loss of $54.3 million, or $1.55 per diluted share, for the nine months ended September 30, 2010. The $91.1 million increase in net earnings for the current year-to-date period is attributed to a lower provision for credit losses. The provision for the prior year period included $71.4 million related to the sale of $323.6 million of non-covered classified loans in the first quarter of 2010; there was no similar sale of classified loans in the current year.

Net interest income, which is our principal source of revenue, represents the difference between interest earned on assets and interest paid on liabilities. Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income is affected by changes in both interest rates and the volume of average interest-earning assets and interest-bearing liabilities.

The following tables present, for the periods indicated, the distribution of average assets, liabilities and stockholders' equity, as well as interest income and yields earned on average interest-earning assets and interest expense and rates on average interest-bearing liabilities:

		Three Months Ended

		September 30, 2011							June 30, 2011							September 30, 2010
		Average Balance		Interest Income/ Expense		Yields and Rates			Average Balance		Interest Income/ Expense		Yields and Rates			Average Balance		Interest Income/ Expense		Yields and Rates
		(Dollars in thousands)
ASSETS
Loans, net of unearned income⁽¹⁾⁽²⁾		$	3,656,184	$	63,347		6.87	%	$	3,815,414	$	68,331		7.18	%	$	4,123,684	$	68,480		6.59	%
Investment securities⁽²⁾			1,168,822		9,077		3.08	%		1,006,008		8,782		3.50	%		757,945		6,519		3.41	%
Deposits in financial institutions			142,691		94		0.26	%		126,568		83		0.26	%		208,074		131		0.25	%

	Total interest-earning assets		4,967,697	$	72,518		5.79	%		4,947,990	$	77,196		6.26	%		5,089,703	$	75,130		5.86	%

Other assets			486,276							505,632							455,323

	Total assets	$	5,453,973						$	5,453,622						$	5,545,026

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest checking deposits		$	489,988	$	190		0.15	%	$	489,952	$	245		0.20	%	$	466,366	$	262		0.22	%
Money market deposits			1,222,787		1,304		0.42	%		1,217,406		1,529		0.50	%		1,246,585		2,034		0.65	%
Savings deposits			154,922		66		0.17	%		149,553		72		0.19	%		124,132		63		0.20	%
Time deposits			1,049,805		3,512		1.33	%		1,092,614		3,672		1.35	%		1,281,423		4,016		1.24	%

	Total interest-bearing deposits		2,917,502		5,072		0.69	%		2,949,525		5,518		0.75	%		3,118,506		6,375		0.81	%
Borrowings			225,022		1,782		3.14	%		225,044		1,763		3.14	%		276,543		2,129		3.05	%
Subordinated debentures			129,395		1,223		3.75	%		129,469		1,226		3.80	%		129,683		1,459		4.46	%

	Total interest-bearing liabilities		3,271,919	$	8,077		0.98	%		3,304,038	$	8,507		1.03	%		3,524,732	$	9,963		1.12	%

Noninterest-bearing demand deposits			1,616,012							1,608,455							1,472,366
Other liabilities			43,983							41,683							55,450

	Total liabilities		4,931,914							4,954,176							5,052,548
Stockholders' equity			522,059							499,446							492,478

	Total liabilities and stockholders' equity	$	5,453,973						$	5,453,622						$	5,545,026

Net interest income				$	64,441						$	68,689						$	65,167

Net interest rate spread							4.81	%						5.23	%						4.74	%
Net interest margin							5.15	%						5.57	%						5.08	%
Total deposits			4,533,514							4,557,980							4,590,872
All-in deposit cost⁽³⁾							0.44	%						0.49	%						0.55	%

		Nine Months Ended September 30,

		2011							2010
		Average Balance		Interest Income/ Expense		Yields and Rates			Average Balance		Interest Income/ Expense		Yields and Rates
		(Dollars in thousands)
ASSETS
Loans, net of unearned income⁽¹⁾⁽²⁾		$	3,820,036	$	198,459		6.95	%	$	4,018,697	$	194,539		6.47	%
Investment securities⁽²⁾			1,030,416		25,678		3.33	%		605,071		17,342		3.83	%
Deposits in financial institutions			119,698		234		0.26	%		263,196		505		0.26	%

	Total interest-earning assets		4,970,150	$	224,371		6.04	%		4,886,964	$	212,386		5.81	%

Other assets			502,435							429,116

	Total assets	$	5,472,585						$	5,316,080

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest checking deposits		$	491,942	$	702		0.19	%	$	446,702	$	993		0.30	%
Money market deposits			1,226,840		4,567		0.50	%		1,205,893		7,675		0.85	%
Savings deposits			148,552		207		0.19	%		115,918		179		0.21	%
Time deposits			1,102,865		11,070		1.34	%		1,132,489		11,362		1.34	%

	Total interest-bearing deposits		2,970,199		16,546		0.74	%		2,901,002		20,209		0.93	%
Borrowings			225,722		5,289		3.13	%		341,438		7,013		2.75	%
Subordinated debentures			129,469		3,668		3.79	%		129,731		4,357		4.49	%

	Total interest-bearing liabilities		3,325,390	$	25,503		1.03	%		3,372,171	$	31,579		1.25	%

Noninterest-bearing demand deposits			1,602,518							1,403,370
Other liabilities			43,057							47,786

	Total liabilities		4,970,965							4,823,327
Stockholders' equity			501,620							492,753

	Total liabilities and stockholders' equity	$	5,472,585						$	5,316,080

Net interest income				$	198,868						$	180,807

Net interest rate spread							5.01	%						4.56	%
Net interest margin							5.35	%						4.95	%
Total deposits			4,572,717							4,304,372
All-in deposit cost⁽³⁾							0.48	%						0.63	%

The net interest margin has been impacted by the accelerated accretion of purchase discounts on covered loan payoffs and loans being placed on or removed from nonaccrual status. The effects of such items on the net interest margin are shown in the following table for the periods indicated:

Net interest income was $64.4 million for the third quarter of 2011 compared to $68.7 million for the second quarter of 2011. The $4.3 million decline was due to a $4.7 million decrease in interest income, which was attributed to lower accelerated accretion of discounts on covered loan payoffs and lower average loans. Offsetting the decline in interest income was a reduction in interest expense of $430,000 due to lower rates on money market deposits and a decline in average time deposits.

Our net interest margin for the third quarter of 2011 was 5.15%, a decrease of 42 basis points from the 5.57% reported for the second quarter of 2011. The decrease reflected lower accelerated accretion of discounts on covered loan payoffs and a shift in the mix of average interest-earning assets to lower yielding investment securities from higher yielding loans. Average interest-earning assets increased $19.7 million for the linked quarters including a $162.8 million increase in average investment securities.

The yield on average loans was 6.87% for the third quarter of 2011 compared to 7.18% for the prior quarter. The combination of accelerated accretion of discounts on covered loan payoffs and nonaccrual loan interest positively impacted the loan yield for the third quarter by 17 basis points and the second quarter by 52 basis points, resulting in base loan yields of 6.70% and 6.66%, respectively. The cost of interest-bearing deposits declined six basis points to 0.69% and all-in deposit cost declined five basis points to 0.44% due to lower rates on money market deposits and lower average time deposits.

Net interest income declined $726,000 during the third quarter of 2011 compared to the same quarter of 2010. The decrease was due primarily to lower interest income of $2.6 million, offset partially by lower interest expense of $1.9 million. The reduction in interest income was attributable to lower average loans, offset partially by higher average investment securities and a higher yield on average loans. Interest expense declined due primarily to lower average time deposits, lower rates on money market deposits, and a reduction in average borrowings.

The net interest margin grew 7 basis points to 5.15% for the third quarter of 2011 compared to 5.08% for the same period last year. The increase in the net interest margin was due mostly to a decline of $122.0 million in average interest-earning assets, due primarily to a decrease of $467.5 million in average loans. The yield on average loans grew 28 basis points to 6.87% for the third quarter of 2011 from 6.59% from the third quarter of 2010, due in part to higher accelerated accretion of discounts on covered loan disposals. The cost of interest-bearing deposits and all-in deposit cost decreased 12 and 11 basis points to 0.69% and 0.44%, respectively. Average noninterest-bearing demand deposits increased $143.6 million to $1.6 billion in the current quarter compared to the same period last year, and represented 36% of total average deposits for the third quarter of 2011 compared to 32% for the third quarter of 2010.

Net interest income grew by $18.1 million to $198.9 million during the nine months ended September 30, 2011 compared to the same period last year. This change was due to a $12.0 million increase in interest income and a $6.1 million decrease in interest expense. The increase in interest income was due to the combination of the Los Padres acquisition, purchases of investment securities and higher accelerated accretion of discounts on covered loan payoffs. The decrease in interest expense was due to lower rates on money market deposits and lower average borrowing balances as $260 million of FHLB advances were repaid in the first half of 2010 and another $50 million were repaid in December 2010.

The net interest margin for the first nine months of 2011 was 5.35% compared to 4.95% for the same period last year. The increase was due to a higher yield on loans, lower costs for money market deposits and subordinated debentures, and a lower average balance of FHLB advances, offset by lower average loans and an increase in the average balance of lower-yielding investment securities.

The following table sets forth the details of the provision for credit losses and allowance for credit losses data for the periods indicated:

				Three Months Ended									Nine Months Ended September 30,

				September 30, 2011			June 30, 2011			September 30, 2010			Nine Months Ended September 30,
				September 30, 2011			June 30, 2011			September 30, 2010			2011			2010
							(Dollars in thousands)
Provision For Credit Losses:
	Addition (reduction) to allowance for loan losses			$	(300	)	$	5,050		$	17,271		$	12,550		$	144,488
	Addition (reduction) to reserve for unfunded loan commitments				300			450			(221	)		750			(811	)

			Total provision for non-covered loans		—			5,500			17,050			13,300			143,677
	Provision for covered loans				348			5,890			6,500			9,148			34,600

		Total provision for credit losses		$	348		$	11,390		$	23,550		$	22,448		$	178,277

Allowance for Credit Losses Data:
	Net charge-offs on non-covered loans			$	6,017		$	7,187		$	9,240		$	21,093		$	166,711
	Charge-offs on classified loans sold				—			—			—			—			123,705
	Annualized net charge-off ratios:
		Net charge-offs to non-covered average loans			0.83	%		0.97	%		1.09	%		0.94	%		6.61	%

Provisions for credit losses are charged to earnings as and when needed for both on and off balance sheet credit exposures. We have a provision for credit losses on our non-covered loans and a provision for credit losses on our covered loans. The provision for credit losses on our non-covered loans is based on our allowance methodology and is an expense that, in our judgment, is required to maintain the adequacy of the allowance for loan losses and the reserve for unfunded loan commitments. Our allowance methodology reflects net charge-offs, the levels and trends of nonaccrual and classified loans, and the migration of loans into various risk classifications. The provision for credit losses on our covered loans reflects decreases in expected cash flows on covered loans compared to those previously estimated.

Our provisions for credit losses on non-covered and covered loans totaled $348,000 during the third quarter of 2011 compared to $11.4 million for the second quarter of 2011 and $23.6 million for the third quarter of 2010. The provision related to non-covered loans was $0 for the third quarter of 2011; this compares to $5.5 million for the second quarter of 2011 and $17.1 million for the third quarter of 2010. Net non-covered loan charge-offs were $6.0 million for the third quarter of 2011; this compares to $7.2 million for the second quarter of 2011 and $9.2 million for the third quarter of 2010. Nonaccrual loans totaled $60.0 million, $65.3 million, and $105.5 million at September, 2011, June 30, 2011, and September 30, 2010, respectively.

The allowance for credit losses on non-covered loans was $96.5 million as of September 30, 2011 and represented 3.34% of the non-covered loan balances at that date. This compares to an allowance for credit losses on non-covered loans of $102.3 million, or 3.52% of non-covered loans, as of June 30, 2011 and an allowance for credit losses on non-covered loans of $101.2 million, or 3.05% of non-covered loans, as of September 30, 2010.

During the third quarter of 2011, we recorded a $348,000 provision for credit losses on the covered loan portfolio based on current quarter analysis of acquired loans, which indicated a decrease in expected cash flows from previous estimates. Under the terms of our loss sharing agreements with the FDIC, the FDIC will absorb 80% of the losses on the covered loans. As a result, the effect on pre-tax earnings was 20% of the provision for covered loans as we recorded 80% of this provision as an offset in FDIC loss sharing income. The provisions for credit losses on covered loans for the second quarter of 2011 and third quarter of 2010 were $5.9 million and $6.5 million, respectively.

We made provisions for credit losses totaling $22.4 million during the first nine months of 2011 compared to $178.3 million for the same period last year. The provision related to non-covered loans totaled $13.3 million for the nine months ended September 30, 2011 compared to $143.7 million for the nine months ended September 30, 2010. The prior year non-covered provision included $71.4 million related to the Company's sale of $323.6 million of non-covered classified loans in the first quarter of

2010; there was no similar sale of classified loans in 2011. Net non-covered charge-offs were $21.1 million during the first nine months of 2011 compared to $166.7 million for the same period last year, but the latter amount included $123.7 million in charge-offs related to the classified loan sale in the first quarter of 2010. The provision for covered loans was $9.1 million for the nine months ended September 30, 2011 compared to $34.6 million for the nine months ended September 30, 2010.

Increased provisions for credit losses may be required in the future based on loan and unfunded commitment growth, the effect changes in economic conditions, such as inflation, unemployment, market interest rate levels, and real estate values, may have on the ability of our borrowers to repay their loans, and other negative conditions specific to our borrowers' businesses. See further discussion in "Balance Sheet Analysis—Allowance for Credit Losses on Non-Covered Loans" and "Balance Sheet Analysis—Allowance for Credit Losses on Covered Loans" contained herein.

The following table summarizes noninterest income by category for the periods indicated:

		Three Months Ended							Nine Months Ended September 30,

		September 30, 2011		June 30, 2011		September 30, 2010			Nine Months Ended September 30,
		September 30, 2011		June 30, 2011		September 30, 2010			2011		2010
		(In thousands)
Service charges on deposit accounts		$	3,545	$	3,400	$	2,861		$	10,503	$	8,256
Other commissions and fees			2,052		1,980		1,760			5,752		5,395
Other-than-temporary impairment loss on securities			—		—		(874	)		—		(874	)
Increase in cash surrender value of life insurance			359		368		353			1,106		1,120
FDIC loss sharing income, net			963		5,316		5,506			5,109		27,257
Other income			224		176		279			702		632

	Total noninterest income	$	7,143	$	11,240	$	9,885		$	23,172	$	41,786

Noninterest income for the third quarter of 2011 totaled $7.1 million compared to $11.2 million for the second quarter of 2011 and $9.9 million for the third quarter of 2010. The $4.1 million decline in noninterest income for the third quarter of 2011 compared to the prior quarter was due mostly to lower FDIC loss sharing income stemming from a lower provision for credit losses on covered loans. Service charges on deposits increased $145,000 for the linked 2011 quarters due primarily to growth in account analysis charges.

The $2.8 million decline in noninterest income for the third quarter of 2011 compared to the same period last year was due primarily to a $4.5 million decrease in FDIC loss sharing income related to a decrease in net credit costs on covered loans and OREO. This was partially offset by an $874,000 impairment loss on covered securities recorded in the third quarter of 2010 not repeated in the current quarter. Service charges on deposit accounts increased due to increases in service charges, account analysis fees, and NSF handling fees, attributable to a higher number of acquisition-related accounts and organic growth.

Third quarter of 2011 FDIC loss sharing income includes a write-off of the FDIC loss sharing asset because of improvement in the expected cash flows on covered loan pools. When expected cash flows improve, the estimated amount of losses collectible from the FDIC decreases and the carrying value of the FDIC loss sharing asset must be reduced. The charge to FDIC loss sharing income for this item was approximately $3 million.

Noninterest income declined $18.6 million, to $23.2 million, for the nine months ended September 30, 2011 compared to the same period in 2010. The decline was due mainly to lower FDIC loss sharing income of $22.1 million attributable to lower net credit costs on covered loans and OREO. However, service charges on deposit accounts increased $2.2 million due to increases in service charges, account analysis fees, and NSF handling fees, attributable to a higher number of acquisition-related accounts and organic growth.

The following table summarizes noninterest expense by category for the periods indicated:

		Three Months Ended							Nine Months Ended September 30,

		September 30, 2011		June 30, 2011		September 30, 2010			Nine Months Ended September 30,
		September 30, 2011		June 30, 2011		September 30, 2010			2011		2010
				(Dollars in thousands)
Compensation		$	21,557	$	21,717	$	23,060		$	65,203	$	63,539
Occupancy			7,423		7,142		6,872			21,548		20,406
Data processing			2,228		2,129		2,121			6,832		5,982
Other professional services			2,239		2,505		2,694			7,040		6,734
Business development			548		595		571			1,712		1,893
Communications			678		834		811			2,371		2,410
Insurance and assessments			1,641		1,603		2,431			5,581		7,316
Non-covered other real estate owned, net			2,293		2,300		2,151			5,296		11,217
Covered other real estate owned expense (income), net			4,813		1,205		(319	)		3,440		1,761
Intangible asset amortization			1,977		2,308		2,434			6,592		7,282
Other expense			3,190		4,200		3,348			10,909		10,977

	Total noninterest expense	$	48,587	$	46,538	$	46,174		$	136,524	$	139,517

The following tables present the components of OREO expense, net for the periods indicated:

		Three Months Ended									Nine Months Ended September 30,

		September 30, 2011			June 30, 2011			September 30, 2010			Nine Months Ended September 30,
		September 30, 2011			June 30, 2011			September 30, 2010			2011			2010
		(In thousands)
Non-Covered OREO Expense:
Provision for losses		$	1,676		$	1,897		$	2,064		$	3,955		$	11,361
Maintenance costs			639			400			501			1,512			1,883
(Gain) loss on sale			(22	)		3			(414	)		(171	)		(2,027	)

	Total non-covered OREO expense, net	$	2,293		$	2,300		$	2,151		$	5,296		$	11,217

Covered OREO Expense:
Provision for losses		$	8,601		$	1,565		$	1,038		$	11,056		$	3,416
Maintenance costs			137			86			192			547			362
(Gain) loss on sale			(3,925	)		(446	)		(1,549	)		(8,163	)		(2,017	)

	Total covered OREO expense, net	$	4,813		$	1,205		$	(319	)	$	3,440		$	1,761

Noninterest expense grew $2.1 million to $48.6 million during the third quarter of 2011 compared to $46.5 million for the second quarter of 2011. This change was due mostly to an increase in covered

OREO costs. Covered OREO costs increased by $3.6 million due to higher write-downs of $7.0 million, offset partially by higher gains on sales of $3.5 million. Other expense declined $1.0 million due to director stock awards in the second quarter not repeated in the third quarter, write-downs of CRA investments in the second quarter also not repeated in the third quarter, and lower net loan collection expenses.

Noninterest expense includes non-cash expenses of time-based restricted stock amortization, which is included in compensation, and intangible asset amortization. Amortization of restricted stock totaled $2.1 million for each of the third and second quarters of 2011 and the third quarter of 2010. Intangible asset amortization totaled $2.0 million and $2.3 million for the third and second quarters of 2011, respectively, and $2.4 million for the third quarter of 2010.

Noninterest expense grew $2.4 million for the third quarter of 2011 compared to the same period of 2010 due mostly to higher covered OREO costs of $5.1 million, which was attributable to higher write-downs of $7.6 million, offset partially by higher net gains on sales of $2.4 million. Salary expense declined by $1.5 million due primarily to severance paid to Los Padres employees in connection with the August 2010 Los Padres acquisition during the third quarter of 2010 not repeated in the current quarter. Insurance and assessments decreased by $790,000 due to a reduction in FDIC deposit insurance costs attributable to a revised FDIC assessment methodology effective April 1, 2011.

Noninterest expense declined by $3.0 million to $136.5 million during the nine months ended September 30, 2011 compared to the same period last year. This reduction was attributable to a decrease in non-covered OREO costs and lower FDIC insurance assessment expense. Non-covered OREO costs declined $5.9 million due to lower write-downs of $7.4 million, offset by lower net gains on sales of OREO of $1.9 million. The declines were offset by increases in almost all other expense categories for the additional operating costs arising from the Los Padres acquisition in August 2010 and the nine branches added to our network through that acquisition. Covered OREO costs increased by $1.7 million due to higher write-downs, offset by higher net gains on sales of OREO.

Amortization of restricted stock totaled $6.2 million and $6.6 million for the nine months ended September 30, 2011 and 2010, respectively. Intangible asset amortization totaled $6.6 million for the first nine months of 2011 compared to $7.3 million for the same period last year.

The effective tax rate for the third quarter of 2011 was 41.3% compared to 41.6% for the second quarter of 2011 and 34.3% in the third quarter of 2010. The lower rate in the third quarter of 2010 resulted mostly from the resolution and/or lapse of tax contingencies, which reduced income tax expense by $417,000. The effective tax rates for the nine months ended September 30, 2011 and 2010 were 41.6% and 42.9%, respectively. The Company's blended Federal and California statutory tax rate is 42.0%.

The following table presents the balance of our non-covered loans by portfolio segment at the dates indicated:

			September 30, 2011						June 30, 2011						December 31, 2010

Loan Segment			Amount			% of Total			Amount			% of Total			Amount			% of Total
			(Dollars in thousands)
Real estate mortgage			$	2,031,893			70	%	$	2,073,868			71	%	$	2,274,733			72	%
Commercial				671,963			23			640,805			22			663,557			21
Real estate construction				152,411			5			160,254			5			179,479			5
Consumer				20,621			1			22,248			1			25,058			1
Foreign:
	Commercial			19,532			1			18,633			1			21,057			1
	Other, including real estate			1,400			—			1,442			—			1,551			—

		Total gross non-covered loans		2,897,820			100	%		2,917,250			100	%		3,165,435			100	%

Less: unearned income				(4,183	)					(4,114	)					(4,380	)
Less: allowance for loan losses				(90,110	)					(96,427	)					(98,653	)

	Total net non-covered loans		$	2,803,527					$	2,816,709					$	3,062,402

The decline in the non-covered loan portfolio moderated during the third quarter of 2011 to $19.5 million compared to declines of $144.5 million and $103.4 million during the second and first quarters of 2011, respectively. We continue to retain maturing relationships that contribute positively to profitability and net interest margin. In addition, the commercial and industrial non-covered loan segment increased $32.1 million during the third quarter and the pipeline of new lending opportunities has grown. Although these trends may signal a turnaround in loan growth, no assurance can be given that meaningful loan growth will materialize over the next several quarters.

The following table presents the composition of our non-covered real estate mortgage loan portfolio as of the dates indicated:

			September 30, 2011					June 30, 2011					December 31, 2010

Loan Category			Balance		% of Total			Balance		% of Total			Balance		% of Total
			(Dollars in thousands)
Commercial real estate mortgage:
	Industrial/warehouse		$	362,049		17.8	%	$	374,502		18.1	%	$	432,263		19.0	%
	Retail			299,100		14.7	%		310,588		15.0	%		374,027		16.4	%
	Office buildings			314,352		15.5	%		322,972		15.6	%		350,192		15.4	%
	Owner-occupied			250,772		12.3	%		263,686		12.7	%		263,603		11.6	%
	Hotel			145,783		7.2	%		149,043		7.2	%		156,614		6.9	%
	Healthcare			114,277		5.6	%		114,805		5.5	%		102,227		4.5	%
	Mixed use			56,507		2.8	%		56,810		2.7	%		57,230		2.5	%
	Gas station			35,743		1.8	%		35,998		1.7	%		38,502		1.7	%
	Self storage			23,260		1.1	%		26,163		1.3	%		26,432		1.2	%
	Restaurant			23,585		1.2	%		23,410		1.1	%		26,463		1.2	%
	Land acquisition/development			9,514		0.5	%		9,559		0.5	%		9,649		0.4	%
	Unimproved land			1,415		0.1	%		1,449		0.1	%		1,494		0.1	%
	Other			216,206		10.6	%		225,712		10.9	%		250,068		11.0	%

		Total commercial real estate mortgage		1,852,563		91.2	%		1,914,697		92.3	%		2,088,764		91.8	%

Residential real estate mortgage:
	Multi-family			91,588		4.5	%		64,735		3.1	%		81,880		3.6	%
	Single family owner-occupied			31,439		1.5	%		36,369		1.8	%		38,025		1.7	%
	Single family nonowner-occupied			20,059		1.0	%		20,449		1.0	%		26,618		1.2	%
	HELOCs			36,244		1.8	%		37,618		1.8	%		38,823		1.7	%
	Unimproved land			—		0.0	%		—		0.0	%		623		0.0	%

		Total residential real estate mortgage		179,330		8.8	%		159,171		7.7	%		185,969		8.2	%

	Total gross non-covered real estate mortgage loans		$	2,031,893		100.0	%	$	2,073,868		100.0	%	$	2,274,733		100.0	%

The largest subset of the "Other" commercial real estate mortgage category is for fixed base operators at airports with a balance of $35.4 million, or 16.4% of the total in "Other".

The following table presents the composition of our non-covered real estate construction loan portfolio as of the dates indicated:

			September 30, 2011					June 30, 2011					December 31, 2010

Loan Category			Balance		% of Total			Balance		% of Total			Balance		% of Total
			(Dollars in thousands)
Commercial real estate construction:
	Retail		$	18,678		12.3	%	$	20,123		12.6	%	$	20,378		11.4	%
	Industrial/warehouse			16,020		10.5	%		8,460		5.3	%		11,329		6.3	%
	Office buildings			6,313		4.1	%		6,354		4.0	%		3,805		2.1	%
	Owner-occupied			2,227		1.5	%		2,000		1.2	%		2,000		1.1	%
	Healthcare			—		0.0	%		—		0.0	%		4,305		2.4	%
	Self storage			19,148		12.6	%		19,169		12.0	%		13,191		7.3	%
	Land acquisition/development			35,323		23.2	%		35,513		22.2	%		16,983		9.5	%
	Unimproved land			27,857		18.3	%		29,726		18.5	%		26,032		14.5	%
	Other			6,539		4.3	%		5,116		3.2	%		9,062		5.0	%

		Total commercial real estate construction		132,105		86.7	%		126,461		78.9	%		107,085		59.7	%

Residential real estate construction:
	Multi-family			4,475		2.9	%		18,346		11.4	%		26,474		14.8	%
	Single family owner-occupied			90		0.1	%		—		0.0	%		—		0.0	%
	Single family nonowner-occupied			1,165		0.8	%		1,161		0.7	%		1,026		0.6	%
	Land acquisition/development			3,275		2.1	%		3,238		2.0	%		1,482		0.8	%
	Unimproved land			11,301		7.4	%		11,048		6.9	%		43,412		24.2	%

		Total residential real estate construction		20,306		13.3	%		33,793		21.1	%		72,394		40.3	%

	Total gross non-covered real estate construction loans		$	152,411		100.0	%	$	160,254		100.0	%	$	179,479		100.0	%

The following table presents the composition of our covered loans as of the dates indicated:

Loan Category		September 30, 2011			June 30, 2011			December 31, 2010

		(In thousands)
Multi-family		$	267,892		$	286,615		$	321,650
Commercial real estate			386,326			407,257			444,244
Single family			129,692			139,238			157,424
Construction and land			57,601			67,343			87,301
Commercial and industrial			22,869			24,135			34,828
Home equity lines of credit			6,287			6,235			5,916
Consumer			603			864			1,378

	Total gross covered loans		871,270			931,687			1,052,741
Less: discount			(80,920	)		(92,847	)		(110,901	)

	Covered loans, net of discount		790,350			838,840			941,840
Less: allowance for loan losses			(29,291	)		(32,888	)		(33,264	)

	Covered loans, net	$	761,059		$	805,952		$	908,576

The above loans are subject to loss sharing agreements with the FDIC under which we will be reimbursed for a substantial portion of any future losses on them. Under the terms of the Los Padres

loss sharing agreement, the FDIC will absorb 80% of losses and receive 80% of loss recoveries on covered assets. This loss sharing arrangement for single family and commercial (non-single family) covered assets is in effect for 10 years and 5 years, respectively, from the August 20, 2010 acquisition date and the loss recovery provisions are in effect for 10 years and 8 years, respectively, from the acquisition date. Under the terms of the Affinity loss sharing agreement, the FDIC will absorb 80% of losses and receive 80% of loss recoveries on the first $234 million of losses on covered assets and absorb 95% of losses and receive 95% of loss recoveries on covered assets exceeding the $234 million threshold. This loss sharing agreement is in effect for 10 years for residential loans and 5 years for commercial assets (non-residential loans, OREO, and certain securities) from the August 28, 2009 acquisition date. The loss recovery provisions are in effect for 10 years for residential loans and 8 years for commercial assets from the acquisition date.

The allowance for credit losses on non-covered loans is the combination of the allowance for loan losses and the reserve for unfunded loan commitments. The allowance for credit losses on non-covered loans relates only to loans which are not subject to the loss sharing agreement with the FDIC. The allowance for loan losses is reported as a reduction of outstanding loan balances and the reserve for unfunded loan commitments is included within other liabilities on the condensed consolidated balance sheets. Generally, as loans are funded, the amount of the commitment reserve applicable to such funded loans is transferred from the reserve for unfunded loan commitments to the allowance for loan losses based on our allowance methodology. The following discussion is for non-covered loans and the allowance for credit losses thereon. Refer to "Balance Sheet Analysis—Allowance for Credit Losses on Covered Loans" for the policy on covered loans.

At September 30, 2011, the allowance for credit losses on non-covered loans totaled $96.5 million, a $6.0 million decrease from the allowance at June 30, 2011, and was comprised of the allowance for loan losses of $90.1 million and the reserve for unfunded loan commitments of $6.4 million. During the three months ended September 30, 2011, the Company recorded $6.0 million in net charge-offs and a provision for credit losses of $0.

An allowance for loan losses is maintained at a level deemed appropriate by management to adequately provide for known and inherent risks in the loan portfolio and other extensions of credit at the balance sheet date. The allowance is based upon a continuing review of the portfolio, past loan loss experience, current economic conditions which may affect the borrowers' ability to pay, and the underlying collateral value of the loans. Loans which are deemed to be uncollectible are charged off and deducted from the allowance. The provision for loan losses and recoveries on loans previously charged off are added to the allowance.

The methodology we use to estimate the amount of our allowance for credit losses is based on both objective and subjective criteria. While some criteria are formula driven, other criteria are subjective inputs included to capture environmental and general economic risk elements which may trigger losses in the loan portfolio, and to account for the varying levels of credit quality in the loan portfolios of the entities we have acquired that have not yet been captured in our objective loss factors.

Specifically, our allowance methodology contains three key elements: (i) amounts based on specific evaluations of impaired loans; (ii) amounts of estimated losses on several pools of loans categorized by risk rating and loan type; and (iii) amounts for environmental and general economic factors that indicate probable losses were incurred but were not captured through the other elements of our allowance process.

Impaired loans are identified at each reporting date based on certain criteria and the majority of which are individually reviewed for impairment. Non-covered nonaccrual loans with an unpaid principal balance over $250,000 and all performing restructured loans are reviewed individually for the amount

of impairment, if any. Non-covered nonaccrual loans with an unpaid principal balance of $250,000 or less are evaluated for impairment collectively. A loan is considered impaired when it is probable that a creditor will be unable to collect all amounts due according to the original contractual terms of the loan agreement. We measure impairment of a loan based upon the fair value of the loan's collateral if the loan is collateral dependent or the present value of cash flows, discounted at the loan's effective interest rate, if the loan is not collateral-dependent. The impairment amount on a collateral-dependent loan is charged-off to the allowance and the impairment amount on a loan that is not collateral-dependent is set up as a specific reserve. Increased charge-offs or additions to specific reserves generally result in increased provisions for credit losses.

Our loan portfolio, excluding impaired loans which are evaluated individually, is categorized into several pools for purposes of determining allowance amounts by loan pool. The loan pools we currently evaluate are: commercial real estate construction, residential real estate construction, SBA real estate, hospitality real estate, real estate other, commercial collateralized, commercial unsecured, SBA commercial, consumer, foreign, and asset-based. Within these loan pools, we then evaluate loans not adversely classified, which we refer to as "pass" credits, separately from adversely classified loans. The adversely classified loans are further grouped into three credit risk rating categories: "special mention," "substandard" and "doubtful," which we define as follows:

In addition, we may refer to the loans classified as "substandard" and "doubtful" together as "criticized loans." For additional information on classified loans, see Note 4, Loans, in the Notes to Consolidated Financial Statements (Unaudited) contained in "Item 1. Condensed Consolidated Financial Statements (Unaudited)."

The allowance amounts for "pass" rated loans and those loans adversely classified, which are not reviewed individually, are determined using historical loss rates developed through migration analysis. The migration analysis is updated quarterly based on historic losses and movement of loans between ratings. As a result of this migration analysis and its quarterly updating, the decreases we experienced in both charge-offs and adverse classifications generally resulted in lower loss factors.

Finally, in order to ensure our allowance methodology is incorporating recent trends and economic conditions, we apply environmental and general economic factors to our allowance methodology including: credit concentrations; delinquency trends; economic and business conditions; the quality of lending management and staff; lending policies and procedures; loss and recovery trends; nature and volume of the portfolio; nonaccrual and problem loan trends; usage trends of unfunded commitments; and other adjustments for items not covered by other factors.

Management believes that the allowance for loan losses is adequate and appropriate for the known and inherent risks in our non-covered loan portfolio. In making its evaluation, management considers certain quantitative and qualitative factors including the Company's historical loss experience, the volume and type of lending conducted by the Company, the results of our credit review process, the levels of classified, criticized and nonperforming assets, regulatory policies, general economic conditions, underlying collateral values, and other factors regarding collectibility and impairment. To

the extent we experience, for example, increased levels of documentation deficiencies, adverse changes in collateral values, or negative changes in economic and business conditions which adversely affect our borrowers, our classified loans may increase. Higher levels of adversely classified loans generally result in higher allowances for loan losses.

We recognize the determination of the allowance for loan losses is sensitive to the assigned credit risk ratings and inherent loss rates at any given point in time. Therefore, we perform sensitivity analyses to provide insight regarding the impact adverse changes in credit risk ratings may have on our allowance for loan losses. The sensitivity analyses have inherent limitations and are based on various assumptions as of a point in time and, accordingly, it is not necessarily representative of the impact loan risk rating changes may have on the allowance for loan losses.

At September 30, 2011, in the event that 1% of our non-covered loans were downgraded one credit risk rating category for each category (e.g., 1% of the "pass" category moved to the "special mention" category, 1% of the "special mention" category moved to "substandard" category, and 1% of the "substandard" category moved to the "doubtful" category within our current allowance methodology), the allowance for credit losses would have increased by approximately $1.6 million. In the event that 5% of our non-covered loans were downgraded one credit risk category, the allowance for credit losses would increase by approximately $7.9 million. Given current processes employed by the Company, management believes the credit risk ratings and inherent loss rates currently assigned are appropriate. It is possible that others, given the same information, may at any point in time reach different conclusions that could be significant to the Company's financial statements. In addition, current credit risk ratings are subject to change as we continue to review loans within our portfolio and as our borrowers are impacted by economic trends within their market areas.

Although we have established an allowance for loan losses that we consider adequate, there can be no assurance that the established allowance for loan losses will be sufficient to offset losses on loans in the future. Management also believes that the reserve for unfunded loan commitments is adequate. In making this determination, we use the same methodology for the reserve for unfunded loan commitments as we do for the allowance for loan losses and consider the same quantitative and qualitative factors, as well as an estimate of the probability of advances of the commitments correlated to their credit risk rating.

The following table presents information regarding the allowance for credit losses on non-covered loans as of the dates indicated:

The following table presents the changes in our allowance for credit losses on non-covered loans for the periods indicated:

The following table presents the changes in our allowance for loan losses on non-covered loans for the periods indicated:

			Three Months Ended									Nine Months Ended September 30,

			September 30, 2011			June 30, 2011			September 30, 2010			Nine Months Ended September 30,
			September 30, 2011			June 30, 2011			September 30, 2010			2011			2010
			(Dollars in thousands)
Allowance for loan losses, beginning of period			$	96,427		$	98,564		$	88,463		$	98,653		$	118,717
Loans charged off:
	Real estate mortgage			(4,293	)		(4,354	)		(4,601	)		(9,859	)		(94,438	)
	Real estate construction			—			(1,193	)		(3,032	)		(5,838	)		(62,114	)
	Commercial			(2,237	)		(2,609	)		(2,074	)		(7,967	)		(11,237	)
	Consumer			(54	)		(1,165	)		(218	)		(1,379	)		(2,280	)
	Foreign			—			—			(113	)		—			(113	)

		Total loans charged off		(6,584	)		(9,321	)		(10,038	)		(25,043	)		(170,182	)

Recoveries on loans charged off:
	Real estate mortgage			225			27			—			349			1,197
	Real estate construction			33			896			—			1,021			708
	Commercial			235			308			319			1,160			1,061
	Consumer			74			890			348			1,375			372
	Foreign			—			13			131			45			133

		Total recoveries on loans charged off		567			2,134			798			3,950			3,471

Net charge-offs				(6,017	)		(7,187	)		(9,240	)		(21,093	)		(166,711	)
Provision (reversal) for loan losses				(300	)		5,050			17,271			12,550			144,488

Allowance for loan losses, end of period			$	90,110		$	96,427		$	96,494		$	90,110		$	96,494

Charge-offs on classified loans sold			$	—		$	—		$	—		$	—		$	123,705
Ratios⁽¹⁾:
Allowance for loan losses to loans, net (end of period)				3.11	%		3.31	%		2.91	%		3.11	%		2.91	%
Allowance for loan losses to nonaccrual loans (end of period)				150.26	%		147.67	%		91.43	%		150.26	%		91.43	%
Annualized net charge-offs to average loans				0.83	%		0.97	%		1.09	%		0.94	%		6.61	%
Annualized net charge-offs to average loans excluding charge-offs on classified loans sold				0.83	%		0.97	%		1.09	%		0.94	%		1.71	%

The following table presents the changes in our reserve for unfunded loan commitments for the periods indicated:

The loans acquired in the Los Padres and Affinity acquisitions are covered by loss sharing agreements with the FDIC and we will be reimbursed for a substantial portion of any future losses. Under the terms of the Los Padres loss sharing agreement, the FDIC will absorb 80% of losses and receive 80% of loss recoveries on the covered assets. This loss sharing agreement is in effect for 10 years for single family covered assets and 5 years for commercial (non-single family) covered assets from the August 20, 2010 acquisition date. The loss recovery provisions are in effect for 10 years for single family assets and 8 years for commercial (non-single family) assets from the acquisition date. Under the terms of the Affinity loss sharing agreement, the FDIC will absorb 80% of losses and receive 80% of loss recoveries on the first $234 million of losses on covered assets and absorb 95% of losses and receive 95% of loss recoveries on covered assets exceeding $234 million. This loss sharing agreement is in effect for 10 years for residential loans and 5 years for commercial assets (non-residential loans, OREO and certain securities) from the August 28, 2009 acquisition date. The loss recovery provisions are in effect for 10 years for residential loans and 8 years for commercial assets from the acquisition date.

We evaluated the acquired covered loans and elected to account for them under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30"), which we refer to as acquired impaired loan accounting.

The covered loans are subject to our internal and external credit review. If deterioration in the expected cash flows results in a reserve requirement, a provision for credit losses is charged to earnings without regard to the FDIC loss sharing agreement. The portion of the estimated loss reimbursable from the FDIC will be recorded in FDIC loss sharing income and will increase the FDIC loss sharing asset. For acquired impaired loans, the allowance for loan losses is measured at the end of each financial reporting period based on expected cash flows. Decreases in the amount and changes in the timing of expected cash flows on the acquired impaired loans as of the financial reporting date compared to those previously estimated are usually recognized by recording a provision for credit losses on such covered loans. At September 30, 2011, acquired covered loans not accounted for as impaired loans totaled $29.7 million from the Los Padres acquisition and are subject to our allowance for credit losses methodology. Although we estimate the required allowance for credit losses similarly to the methodology used for originated loans, we record a provision for such loan losses only when the reserve requirement exceeds any remaining credit discount on these covered loans.

The following table presents the changes in our allowance for credit losses on covered loans for the periods indicated:

The following table presents non-covered nonperforming assets and performing restructured loans information as of the dates indicated:

Non-covered nonperforming assets include non-covered nonaccrual loans and non-covered OREO and totaled $108.2 million at September 30, 2011 compared to $117.5 million at June 30, 2011. The $9.3 million decline in non-covered nonperforming assets is due to reductions of $5.3 million and $4.0 million in nonaccrual loans and OREO, respectively. The non-covered nonperforming assets ratio decreased to 3.68% at September 30, 2011 from 3.96% at June 30, 2011.

The $5.3 million decline in non-covered nonaccrual loans during the third quarter was attributable to (a) foreclosures of $2.4 million, (b) other reductions, payoffs and returns to accrual status of $5.7 million, (c) charge-offs of $6.0 million, and (d) additions of $8.8 million.

The following table presents our non-covered nonaccrual loans and accruing loans past due between 30 and 89 days by portfolio segment and class as of the dates indicated:

			Nonaccrual Loans⁽¹⁾

			Nonaccrual Loans⁽¹⁾										Accruing and 30 - 89 Days Past Due⁽¹⁾
			September 30, 2011					June 30, 2011					Accruing and 30 - 89 Days Past Due⁽¹⁾
			Balance		% of Loan Category			Balance		% of Loan Category			September 30, 2011 Balance		June 30, 2011 Balance
			(Dollars in thousands)
Real estate mortgage:
	Hospitality		$	7,336		5.0	%	$	7,451		5.0	%	$	—	$	865
	SBA 504			2,895		4.9	%		3,304		5.3	%		3,168		—
	Other commercial			19,378		1.2	%		25,710		1.5	%		14,664		8,197
	Residential			2,315		1.3	%		3,026		1.9	%		400		—

		Total real estate mortgage		31,924		1.6	%		39,491		1.9	%		18,232		9,062

Real estate construction:
	Residential			1,091		5.4	%		1,099		3.3	%		—		—
	Commercial			9,399		7.1	%		5,976		4.7	%		—		2,136

		Total real estate construction		10,490		6.9	%		7,075		4.4	%		—		2,136

Commercial:
	Collateralized			4,769		1.2	%		5,294		1.4	%		396		451
	Unsecured			4,887		6.9	%		6,558		8.0	%		73		158
	Asset-based			15		0.0	%		15		0.0	%		—		—
	SBA 7(a)			7,318		24.4	%		6,122		19.9	%		828		199

		Total commercial		16,989		2.5	%		17,989		2.8	%		1,297		808

Consumer				565		2.7	%		745		3.3	%		53		40

		Total non-covered loans	$	59,968		2.1	%	$	65,300		2.2	%	$	19,582	$	12,046

The following lending relationships, excluding SBA-related loans, were on nonaccrual status at September 30, 2011:

Nonaccrual Amount		Description

(In thousands)
$	10,360	This loan is secured by three airplane hangar structures and two office buildings in Los Angeles County, California.⁽¹⁾

$	7,336	Two hotels in San Diego County, California. The borrower is paying as agreed.⁽¹⁾

$	3,899	Four industrial warehouse loans in Riverside County, California. The borrower is paying as agreed.⁽¹⁾

$	2,564	Strip retail center in Riverside County, California. The borrower is paying as agreed.

$	2,563	This loan is secured by a medical-related office building in Los Angeles County, California.⁽¹⁾

$	2,338	This loan is unsecured and has a specific reserve for 50% of the balance. The borrower is paying as agreed.⁽¹⁾

$	2,091	Land in Riverside County, California. The borrower is paying as agreed.

$	2,000	Unsecured loan that is fully reserved for.⁽¹⁾

$	1,701	Two unsecured loans that are fully reserved for.⁽¹⁾

$	1,553	Loan secured by unimproved land in Imperial County, California.⁽¹⁾

Non-covered OREO declined $4.0 million during the third quarter of 2011 due mainly to sales of $4.9 million and write-downs of $1.7 million, offset partially by foreclosures of $2.4 million. The write-downs were based on new appraisals or negotiated sales prices with buyers.

The following table presents the components of non-covered OREO by property type as of the dates indicated:

Non-covered performing restructured loans grew by $3.9 million during the third quarter of 2011 to $86.4 million at September 30, 2011. The change was attributable primarily to newly restructured loans of $2.6 million and transfers from nonaccrual status of $1.7 million. At September 30, 2011, we had $59.6 million in real estate mortgage loans, $22.1 million in real estate construction loans, and $4.7 million in commercial loans that were accruing interest under the terms of troubled debt restructurings.

The majority of the performing restructured loans was on accrual status prior to the loan modifications and has remained on accrual status after the loan modifications due to the borrowers making payments before and after the restructurings. In these circumstances, generally, a borrower may have had a fixed rate loan that they continued to repay, but may be having cash flow difficulties. In an effort to work with certain borrowers, we have agreed to interest rate reductions to reflect the lower market interest rate environment and/or interest-only payments for a period of time. In these cases, we do not forgive principal or extend the maturity date as part of the loan modification. As a result of the current economic environment in our market areas, we anticipate loan restructurings to continue.

Loans accounted for under ASC 310-30, which we refer to as "acquired impaired loan accounting," are generally considered accruing and performing loans as the loans accrete interest income over the estimated life of the loan when expected cash flows are reasonably estimable. Accordingly, acquired impaired loans that are contractually past due are still considered to be accruing and performing loans. If the timing and amount of future cash flows is not reasonably estimable, the loans may be classified as nonaccrual loans and interest income is not recognized until the timing and amount of future cash flows can be reasonably estimated.

The following table presents a summary of covered loans that would be considered nonaccrual except for the accounting requirements regarding acquired impaired loans and other real estate owned covered by the loss sharing agreement ("covered nonaccrual loans" and "covered OREO"; collectively, "covered nonperforming assets") as of the dates indicated:

The negative trends throughout the Southern California economy have affected certain industries and collateral types more than others. Our real estate loan portfolio is predominantly commercial and as such does not expose us to higher risks generally associated with residential mortgage loans such as option ARM, interest-only or subprime mortgage loans. Our portfolio does include mortgage loans on commercial property. Commercial mortgage loan repayments typically do not rely on the sale of the underlying collateral and instead rely on the income producing potential of the collateral as the source of repayment. Ultimately, though, due to the loan amortization period being greater than the contractual loan term, the borrower may be required to refinance the loan, either with us or another lender, or sell the underlying collateral in order to pay off the loan.

At September 30, 2011, we had $191.4 million of commercial real estate mortgage loans maturing over the next 12 months. In the event we refinance any of these loans because the borrowers are unable to obtain financing elsewhere due to the inability of banks in our market area to make loans, such loans may be considered troubled debt restructurings even though they were performing throughout their terms. Higher levels of troubled debt restructurings may lead to increased classified assets and credit loss provisions.

Our loan portfolio, including both non-covered and covered loans, continues to experience pressure from economic trends in Southern California. We expect that such pressures will continue for the remainder of 2011.

The following table presents the balance of each major category of deposits at the dates indicated:

			September 30, 2011					June 30, 2011					December 31, 2010

Deposit Category			Amount		% of Total			Amount		% of Total			Amount		% of Total
			(Dollars in thousands)
Noninterest-bearing deposits			$	1,628,253		36	%	$	1,599,410		36	%	$	1,465,562		32	%
Interest checking deposits				497,987		11			477,126		11			494,617		11
Money market deposits				1,234,900		27			1,189,999		26			1,321,780		28
Savings deposits				158,921		3			151,957		3			135,876		3

	Total core deposits			3,520,061		77			3,418,492		76			3,417,835		74

Time deposits under $100,000				345,380		8			359,890		8			436,838		9
Time deposits $100,000 and over				688,955		15			708,113		16			795,025		17

	Total time deposits			1,034,335		23			1,068,003		24			1,231,863		26

		Total deposits	$	4,554,396		100	%	$	4,486,495		100	%	$	4,649,698		100	%

Total deposits grew $67.9 million during the third quarter to $4.6 billion at September 30, 2011. Time deposits decreased $33.7 million during the third quarter to $1.0 billion at September 30, 2011. Core deposits, which include noninterest-bearing demand, interest checking, money market, and savings accounts, grew $101.6 million during the third quarter due to increases in all categories. At September 30, 2011, core deposits totaled $3.5 billion, or 77% of total deposits at that date. Noninterest-bearing demand deposits were $1.6 billion at September 30, 2011 and represented 36% of total deposits at that date.

Actual capital amounts and ratios for the Company and the Bank as of September 30, 2011 are presented in the following table. Regulatory capital requirements limit the amount of deferred tax assets that may be included when determining the amount of regulatory capital. Deferred tax asset amounts in excess of the calculated limit are deducted from regulatory capital. At September 30, 2011, such amount was $53.1 million for the Company and $30.8 million for the Bank. No assurance can be given that the regulatory capital deferred tax asset limitation will not increase in the future.

The Company issued subordinated debentures to trusts that were established by us or entities we have acquired, which, in turn, issued trust preferred securities, which totaled $123.0 million at September 30, 2011. The Company includes in Tier 1 capital an amount of trust preferred securities equal to no more than 25% of the sum of all core capital elements, which is generally defined as shareholders' equity less goodwill, net of any related deferred income tax liability. At September 30, 2011, the amount of trust preferred securities included in Tier I capital was $123.0 million. While our existing trust preferred securities are grandfathered under the Dodd-Frank Wall Street Reform and Consumer Protection Act that was enacted in July 2010, new issuances will not qualify as Tier 1 capital.

Notification to the FRB is required prior to our declaring and paying a cash dividend to our stockholders during any period in which our quarterly and/or cumulative twelve-month net earnings are insufficient to fund the dividend amount. Interest payments made by the Company on subordinated debentures are considered dividend payments under FRB regulations. As such, notification to the FRB is required prior to our paying such interest during any period in which our quarterly net earnings are insufficient to fund the interest due. Should the FRB object to payment of interest on the subordinated debentures we would not be able to make the payments until approval is received.

The goals of our liquidity management are to ensure the ability of the Company to meet its financial commitments when contractually due and to respond to other demands for funds such as the ability to meet the cash flow requirements of customers who may be either depositors wanting to withdraw funds or borrowers who may need assurance that sufficient funds will be available to meet their credit needs. We have an Executive Asset/Liability Management Committee, or Executive ALM Committee, which is comprised of members of senior management and is responsible for managing balance sheet and off-balance sheet commitments to meet the needs of customers while achieving our financial objectives. Our Executive ALM Committee meets regularly to review funding capacities, current and forecasted loan demand, and investment opportunities.

Historically, the Bank's primary liquidity source has been its core deposit base. In addition, the Bank relies on collateralized FHLB advances as one of its sources of affordable and immediately available liquidity. The level of such wholesale funding is monitored based on the Bank's liquidity requirements, and we maintain what we believe to be an acceptable level of this collateralized borrowing capacity. The Bank's secured borrowing capacity with the FHLB was $1.1 billion, of which $913.4 million was available as of September 30, 2011. The Bank also maintains a security repurchase line with the FHLB to provide an additional $30.5 million in secured borrowing capacity, against which there were no borrowings as of September 30, 2011. The Bank also maintains a secured line of credit with the FRB which had a borrowing capacity of $375.0 million and no amount outstanding at September 30, 2011. In addition to its secured lines of credit, the Bank maintains unsecured lines of credit, subject to availability, of $92.0 million with correspondent banks for purchase of overnight funds.

In addition to the secured and unsecured borrowing relationships to meet short-term liquidity needs, the Bank maintains adequate balances in liquid assets, which include cash and due from banks, interest-earning deposits in other financial institutions and investment securities with a maturity or duration of five years or less. Our on-balance sheet liquidity ratio, calculated as liquid assets (cash, interest-earning deposits in financial institutions and unpledged investment securities available-for-sale) as a percent of total deposits, was 29.7% as of September 30, 2011 and 18.1% at December 31, 2010.

We increased the Bank's on-balance sheet liquidity in order to have more flexibility during this current economic cycle.

We may use large denomination brokered time deposits, the availability of which is uncertain and subject to competitive market forces, for liquidity management purposes. At September 30, 2011, the Bank had none of these brokered deposits. In addition, we have $45.0 million of customer deposits that were subsequently participated with other FDIC insured financial institutions through the CDARS program as a means to provide FDIC deposit insurance coverage for the full amount of our participating customers' deposits.

The primary sources of liquidity for the Company, on a stand-alone basis, include dividends from the Bank and our ability to raise capital, issue subordinated debt and secure outside borrowings. The ability of the Company to obtain funds for the payment of dividends to our stockholders and for other cash requirements is largely dependent upon the Bank's earnings. Pacific Western is subject to restrictions under certain federal and state laws and regulations which limit its ability to transfer funds to the Company through intercompany loans, advances or cash dividends.

Dividends paid by state banks, such as Pacific Western, are regulated by the California Department of Financial Institutions ("DFI") under its general supervisory authority as it relates to a bank's capital requirements. A state bank may declare a dividend without the approval of the DFI as long as the total dividends declared in a calendar year do not exceed either the retained earnings or the total of net profits for three previous fiscal years less any dividends paid during such period. During the nine months ended September 30, 2011, PacWest received no dividends from the Bank. For the foreseeable future, any dividends from the Bank to the Company require DFI approval.

At September 30, 2011, the Company had, on a stand-alone basis, approximately $20.0 million in cash on deposit at the Bank. Management believes this amount of cash is sufficient to fund the Company's 2011 cash flow needs.

The following table presents the known contractual obligations of the Company as of the date indicated:

Time deposits include brokered deposits of $45.0 million of customer deposits that were subsequently participated with other FDIC insured financial institutions through the CDARS program as a means to provide FDIC deposit insurance coverage for the full amount of our customers' deposits.

Long term debt obligations include $129.3 million of subordinated debentures and $225.0 million of callable term FHLB advances. While the FHLB may call the advances to be repaid for any reason, they are likely to be called if market interest rates are higher than the advances' stated rates on the call dates. If the advances are called by the FHLB, there is no prepayment penalty. Should our FHLB

advances be called, we would evaluate the funding opportunities available at that time, including new secured FHLB borrowings at the prevailing market rates. As borrowing rates are currently lower than our contract rates, we do not expect our secured FHLB borrowings to be called. Debt obligations are also discussed in Note 7, Borrowings, Subordinated Debentures and Brokered Deposits, in the Notes to Condensed Consolidated Financial Statements (Unaudited) contained in "Item 1. Condensed Consolidated Financial Statements (Unaudited)." Operating lease obligations are discussed in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2010. The other contractual obligations relate to the minimum liability associated with our data and item processing contract with a third-party provider and commitments to contribute capital to investments in low income housing project partnerships.

We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels. We expect to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity, and continued deposit gathering activities. We believe we have in place sufficient borrowing mechanisms for short-term liquidity needs.

Our obligations also include off-balance sheet arrangements consisting of loan-related commitments, of which only a portion are expected to be funded. At September 30, 2011, our loan-related commitments, including standby letters of credit, totaled $718.7 million. The commitments which result in a funded loan increase our profitability through net interest income. We manage our overall liquidity taking into consideration funded and unfunded commitments as a percentage of our liquidity sources. Our liquidity sources have been and are expected to be sufficient to meet the cash requirements of our lending activities.

Our market risk arises primarily from credit risk and interest rate risk inherent in our lending and financing activities. To manage our credit risk, we rely on adherence to our underwriting standards and loan policies, internal loan monitoring and periodic credit review as well as our allowance for credit losses methodology, all of which are administered by the Bank's credit administration department and overseen by the Company's Credit Risk Committee. To manage our exposure to changes in interest rates, we perform asset and liability management activities which are governed by guidelines pre-established by our Executive ALM Committee, and approved by our Asset/Liability Management Committee of the Board of Directors, which we refer to as our Board ALCO. Our Executive ALM Committee monitors our compliance with our asset/liability policies. These policies focus on providing sufficient levels of net interest income while considering capital constraints and acceptable levels of interest rate exposure and liquidity.

Market risk sensitive instruments are generally defined as derivatives and other financial instruments, which include investment securities, loans, deposits, and borrowings. At September 30, 2011, we had not used any derivatives to alter our interest rate risk profile or for any other reason. However, both the repricing characteristics of our fixed rate loans and floating rate loans, the significant percentage of noninterest-bearing deposits compared to interest- earning assets, and the callable features in certain borrowings, may influence our interest rate risk profile. Our financial instruments include loans receivable, Federal funds sold, interest-bearing deposits in financial institutions, Federal Home Loan Bank stock, investment securities, deposits, borrowings and subordinated debentures.

We measure our interest rate risk position on at least a quarterly basis using three methods: (i) net interest income simulation analysis; (ii) market value of equity modeling; and (iii) traditional gap

analysis. The results of these analyses are reviewed by the Executive ALM Committee and the Board ALCO quarterly. If hypothetical changes to interest rates cause changes to our simulated net present value of equity and/or net interest income outside our pre-established limits, we may adjust our asset and liability mix in an effort to bring our interest rate risk exposure within our established limits.

We evaluated the results of our net interest income simulation and market value of equity models prepared as of September 30, 2011, the results of which are presented below. Our net interest income simulation indicates that our balance sheet is liability sensitive as rising interest rates would result in a decline in our net interest margin. This profile is primarily a result of (a) the increased origination of fixed rate loans and variable rate loans with initial fixed rate terms over the last several years and (b) declining floating rate construction loans. Our market value of equity model indicates an asset sensitive profile suggesting a sudden sustained increase in rates would result in an increase in our estimated market value of equity. This profile is a result of the assumed floors in the Company's offering rates, which are not expected to increase to the extent of the movement of market interest rates, and the significant value placed on the Company's noninterest-bearing deposits for purposes of this analysis. The divergent profile between the net interest income simulation and market value of equity model is a result of the Company's significant level of noninterest-bearing deposits. Static balances of noninterest-bearing deposits do not impact the net interest income simulation, while at the same time the value of these deposits increases substantially in the market value of equity model when market rates are assumed to rise. In general, we view the net interest income model results as more relevant to the Company's current operating profile and manage our balance sheet based on this information.

We used a simulation model to measure the estimated changes in net interest income that would result over the next 12 months from immediate and sustained changes in interest rates as of September 30, 2011. This model is an interest rate risk management tool and the results are not necessarily an indication of our future net interest income. This model has inherent limitations and these results are based on a given set of rate changes and assumptions at one point in time. We have assumed no growth in either our interest-sensitive assets or liabilities over the next 12 months; therefore, the results reflect an interest rate shock to a static balance sheet.

This analysis calculates the difference between net interest income forecasted using both increasing and declining interest rate scenarios and net interest income forecasted using a base market interest rate derived from the U.S. Treasury yield curve at September 30, 2011. In order to arrive at the base case, we extend our balance sheet at September 30, 2011 one year and reprice any assets and liabilities that would contractually reprice or mature during that period using the products' pricing as of September 30, 2011. Based on such repricings, we calculate an estimated net interest income and net interest margin.

The repricing relationship for each of our assets and liabilities includes many assumptions. For example, many of our assets are floating rate loans, which are assumed to reprice to the same extent as the change in market rates according to their contracted index except for floating rate loans tied to our base lending rate which are assumed to reprice upward only after the first 75 basis point increase in market rates. This assumption is due to the fact that we reduced our base lending rate 100 basis points when the Federal Reserve lowered the Federal Funds benchmark rate by 175 basis points in the fourth quarter of 2008. Some loans and investment vehicles include the opportunity of prepayment (imbedded options) and the simulation model uses a prepayment model to estimate these prepayments and reinvest these proceeds at current simulated yields. Our deposit products reprice at our discretion and are assumed to reprice more slowly in a rising or declining interest rate environment and usually reprice at a rate less than the change in market rates. Also, a callable option feature on certain borrowings will reprice differently in a rising interest rate environment than in a declining interest rate

environment. The effects of certain balance sheet attributes, such as fixed rate loans, floating rate loans that have reached their floors, and the volume of noninterest-bearing deposits as a percentage of earning assets, impact our assumptions and consequently the results of our interest rate risk management model. Changes that could vary significantly from our assumptions include loan and deposit growth or contraction, changes in the mix of our earning assets or funding sources, and future asset/liability management decisions, all of which may have significant effects on our net interest income.

The simulation analysis does not account for all factors that impact this analysis, including changes by management to mitigate the impact of interest rate changes or the impact a change in interest rates may have on our credit risk profile, loan prepayment estimates and spread relationships which can change regularly. In addition, the simulation analysis does not make any assumptions regarding loan fee income, which is a component of our net interest income and tends to increase our net interest margin. Management reviews the model assumptions for reasonableness on a quarterly basis.

The following table presents as of September 30, 2011, forecasted net interest income and net interest margin for the next 12 months using a base market interest rate and the estimated change to the base scenario given immediate and sustained upward and downward movements in interest rates of 100, 200 and 300 basis points.

The net interest income simulation model prepared as of September 30, 2011 suggests our balance sheet is liability sensitive. Liability sensitivity indicates that in a rising interest rate environment, our net interest margin would decrease. Due to the historically low market interest rates as of September 30, 2011 the "down" scenarios are not considered meaningful and are excluded from the following discussion. The liability sensitive profile is due mostly to the mix of fixed rate loans to total loans in the loan portfolio relative to our amount of interest-bearing deposits that would reprice as interest rates change. Although $1.8 billion of the $3.7 billion of total loans in the portfolio have variable interest rate terms, only $571 million of those variable rate loans will reprice within 12 months. The remaining variable rate loans will behave as if they have fixed rates in the short run because of the effect of interest rate floors and hybrid ARM loan pricing structures of mini-perm commercial real estate loans, which generally contain initial fixed rate terms ranging from three to five years before becoming variable rate.

In comparing the September 30, 2011 simulation results to June 30, 2011, our profile has remained relatively unchanged while our overall estimated net interest income has decreased for all scenarios. The decline in the simulated net interest income is a result of lower earning assets due to the net decline in the loan portfolio.

We measure the impact of market interest rate changes on the net present value of estimated cash flows from our assets, liabilities and off-balance sheet items, defined as the market value of equity,

using a simulation model. This simulation model assesses the changes in the market value of our interest sensitive financial instruments that would occur in response to an instantaneous and sustained increase or decrease in market interest rates of 100, 200 and 300 basis points. This analysis assigns significant value to our noninterest-bearing deposit balances. The projections are by their nature forward looking and therefore inherently uncertain, and include various assumptions regarding cash flows and interest rates. This model is an interest rate risk management tool and the results are not necessarily an indication of our actual future results. Actual results may vary significantly from the results suggested by the market value of equity table. Loan prepayments and deposit attrition, changes in the mix of our earning assets or funding sources, and future asset/liability management decisions, among others, may vary significantly from our assumptions. The base case is determined by applying various current market discount rates to the estimated cash flows from the different types of assets, liabilities and off-balance sheet items existing at September 30, 2011.

The following table shows the projected change in the market value of equity for the set of rate shocks presented as of September 30, 2011:

Interest rate scenario	Estimated Market Value		Dollar Change From Base

	(Dollars in thousands)
Up 300 basis points	$	688,994	$	26,075		3.9	%	12.5	%	127.7	%
Up 200 basis points	$	715,870	$	52,951		8.0	%	13.0	%	132.7	%
Up 100 basis points	$	710,940	$	48,021		7.2	%	12.9	%	131.8	%
BASE CASE	$	662,919		—		—		12.1	%	122.9	%
Down 100 basis points	$	578,742	$	(84,177	)	(12.7	)%	10.5	%	107.3	%
Down 200 basis points	$	550,506	$	(112,413	)	(17.0	)%	10.0	%	102.0	%
Down 300 basis points	$	526,353	$	(136,566	)	(20.6	)%	9.6	%	97.6	%

The results of our market value of equity model indicate an asset sensitive interest rate risk profile at September 30, 2011 demonstrated by the increase in the market value of equity in the "up" interest rate scenarios compared to the "base case". Given the historically low market interest rates as of September 30, 2011, the "down" scenarios at September 30, 2011 are not considered meaningful and are excluded from the following discussion.

Our asset sensitive position as of September 30, 2011 is due primarily to the significant value placed on our noninterest-bearing deposits and the assumed floors in the discount rates used to value a portion of the loan portfolio. The discount rate used to value our loan portfolio is derived from the expected offering rate for each loan type with a similar term and credit risk profile. In a rising rate environment, management does not expect to increase our offering rates on certain loan products to the same extent as market rates until the fully indexed offering rate exceeds the current pricing floor, and in turn, our loans are not projected to lose significant value in the "up" 100 basis point and "up" 200 basis point scenarios. Conversely, the discount rates for our liabilities are expected to immediately change when market rates change. Therefore, our liabilities are expected to increase in value as rates rise thereby increasing the estimated market value of equity in the rising rate scenario.

In comparing the September 30, 2011 simulation results to June 30, 2011, our base case estimated market value of equity has increased while our overall profile is consistent with the prior quarter. The increase in base case estimated market value of equity is the result of net earnings for the quarter of $13.3 million and increases in the fair values of loans and securities, partially offset by increases in the fair values of deposits and FHLB advances. The changes in the fair values of securities, loans and deposits resulted from lower discount rates used to estimate their fair values.

As part of the interest rate management process, we use a gap analysis. A gap analysis provides information about the volume and repricing characteristics and relationship between the amounts of interest-sensitive assets and interest-bearing liabilities at a particular point in time. An effective interest rate strategy attempts to match the volume of interest sensitive assets and interest-bearing liabilities repricing over different time intervals.

The following table illustrates the volume and repricing characteristics of our balance sheet at September 30, 2011 over the indicated time intervals:

			Amounts Maturing or Repricing In

September 30, 2011			3 Months Or Less			Over 3 Months to 12 Months			Over 1 Year to 5 Years			Over 5 Years			Non-Interest Rate Sensitive			Total
			(Dollars in thousands)
ASSETS
Cash and deposits in financial institutions			$	73,094		$	115		$	—		$	—		$	94,112		$	167,321
Investment securities				10,942			22,379			10,634			1,266,163			—			1,310,118
Loans, net of unearned income				1,197,969			392,994			1,132,245			960,779			—			3,683,987
Other assets				—			—			—			—			332,465			332,465

	Total assets		$	1,282,005		$	415,488		$	1,142,879		$	2,226,942		$	426,577		$	5,493,891

LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits			$	—		$	—		$	—		$	—		$	1,628,253		$	1,628,253
Interest-bearing demand, money market and savings				1,891,808			—			—			—			—			1,891,808
Time deposits				229,900			266,715			537,720			—			—			1,034,335
Borrowings				—			—			—			225,000			—			225,000
Subordinated debentures				108,250			—			—			18,558			2,539			129,347
Other liabilities				—			—			—			—			45,680			45,680
Stockholders' equity				—			—			—			—			539,468			539,468

	Total liabilities and stockholders' equity		$	2,229,958		$	266,715		$	537,720		$	243,558		$	2,215,940		$	5,493,891

Period gap			$	(947,953	)	$	148,773		$	605,159		$	1,983,384		$	(1,789,363	)
Cumulative interest-earning assets			$	1,282,005		$	1,697,493		$	2,840,372		$	5,067,314
Cumulative interest-bearing liabilities			$	2,229,958		$	2,496,673		$	3,034,393		$	3,277,951
Cumulative gap			$	(947,953	)	$	(799,180	)	$	(194,021	)	$	1,789,363
Cumulative interest-earning assets to cumulative interest-bearing liabilities				57.5	%		68.0	%		93.6	%		154.6	%
Cumulative gap as a percent of:
		Total assets		(17.3	)%		(14.5	)%		(3.5	)%		32.6	%
		Interest-earning assets		(19.0	)%		(16.0	)%		(3.9	)%		35.8	%

All amounts are reported at their contractual maturity or repricing periods, except for $48.3 million in FHLB stock which is shown as a longer-term repricing investment because of the FHLB's suspended/reduced stock redemptions and dividend payments. This analysis makes certain assumptions as to interest rate sensitivity of savings and NOW accounts which have no stated maturity

and have had minimal rate fluctuation in the past three years. Money market accounts are repriced at management's discretion and generally are more rate sensitive.

The preceding table indicates that we had a negative one-year cumulative gap of $799.2 million at September 30, 2011, a change of $156.2 million from the $643.0 million negative gap position at June 30, 2011. The change in the negative gap is attributable to a reduction in one-year assets of $132.8 million, which was due mostly to the origination and renewal of loans during the quarter that will mature/reprice in the over one year to five years term, and an increase in one-year liabilities of $23.4 million, which was attributable primarily to an increase of $72.7 million in interest-bearing checking, money market and savings deposit, offset partially by a decline in one-year time deposits of $49.3 million. This gap position suggests that we are liability sensitive and if rates were to increase, our net interest margin would most likely decrease. Conversely, if rates were to decrease, our net interest margin would most likely increase. The ratio of interest-earning assets to interest-bearing liabilities maturing or repricing within one year at September 30, 2011, is 68.0%. This one year gap position indicates that interest expense is likely to be affected to a greater extent than interest income for any changes in interest rates within one year from September 30, 2011.

Borrowings includes two long term advances totaling $225.0 million with maturity dates of 2017 and 2018, which contain quarterly call options and are currently callable by the FHLB. While the FHLB may call the advances to be repaid for any reason, they are likely to be called if market interest rates, for borrowings of similar remaining term, are higher than the advances' stated rates on the call dates. If the advances are called by the FHLB, there is no prepayment penalty. Should our FHLB advances be called, we would evaluate the funding opportunities available at that time, including new secured borrowings from the FHLB at the then market rates. As borrowing rates are currently lower than our contract rates, we do not expect our secured FHLB borrowings to be called. We may repay the advances with a prepayment penalty at any time.

The gap table has inherent limitations and actual results may vary significantly from the results suggested by the gap table. The gap table is unable to incorporate certain balance sheet characteristics or factors. The gap table assumes a static balance sheet, and accordingly, looks at the repricing of existing assets and liabilities without consideration of new loans and deposits that reflect a more current interest rate environment. Unlike the net interest income simulation, however, the interest rate risk profile of certain deposit products and floating rate loans that have reached their floors cannot be captured effectively in a gap table. Although the table shows the amount of certain assets and liabilities scheduled to reprice in a given time frame, it does not reflect when or to what extent such repricings may actually occur. For example, interest-bearing demand, money market and savings deposits are shown to reprice in the first three months, but we may choose to reprice these deposits more slowly and incorporate only a portion of the movement in market rates based on market conditions at that time. Alternatively, a loan which has reached its floor may not reprice even though market interest rates change causing such loan to act like a fixed rate loan regardless of its scheduled repricing date. The gap table as presented cannot factor in the flexibility we believe we have in repricing either deposits or the floors on our loans.

We believe the estimated effect of a change in interest rates is better reflected in our net interest income and market value of equity simulations which incorporate many of the factors mentioned.

Please see the section above titled "Asset/Liability Management and Interest Rate Sensitivity" in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" which provides an update to our quantitative and qualitative disclosure about market risk. This analysis should be read in conjunction with text under the caption "Quantitative and Qualitative Disclosure About Market Risk" in our Annual Report on Form 10-K for the year ended December 31, 2010, which text is incorporated herein by reference. Our analysis of market risk and market-sensitive financial information contains forward-looking statements and is subject to the disclosure at the beginning of Item 2 regarding such forward-looking information.

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

There have been no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Below we supplement and amend the risk factors disclosed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2010.

Our information systems may experience an interruption or security breach.

We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems. While we have policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of our information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failure, interruption or security breach of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny or expose us to civil litigation and possible financial liability.

The following table presents stock purchases made during the third quarter of 2011:

Exhibit Number			Description

	3.1		Certificate of Incorporation, as amended, of PacWest Bancorp, a Delaware corporation (Exhibit 3.1 to Form 8-K filed on May 14, 2008 and incorporated herein by this reference).
	3.2		Certificate of Amendment, dated May 14, 2010, to Certificate of Incorporation of PacWest Bancorp (Exhibit 3.1 to Form 8-K filed on May 14, 2010 and incorporated herein by this reference).
	3.3		Bylaws of PacWest Bancorp, a Delaware corporation, dated April 22, 2008 (Exhibit 3.2 to Form 8-K filed on May 14, 2008 and incorporated herein by this reference).
	31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
	31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
	32.1		Section 1350 Certification of Chief Executive Officer.
	32.2		Section 1350 Certification of Chief Financial Officer.
	101		Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010, (ii) the Condensed Consolidated Statements of Earnings (Loss) for the three months ended September 30, 2011, June 30, 2011, and September 30, 2010 and the nine months ended September 30, 2011 and 2010, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2011, June 30, 2011, and September 30, 2010 and the nine months ended September 30, 2011 and 2010, (iv) Condensed Consolidated Statement of Changes in Stockholders' Equity for the nine months ended September 30, 2011, (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010, and (vi) the Notes to Condensed Consolidated Financial Statements. (Pursuant to Rule 406T of Regulation S-T, this information is deemed furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.)

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.


ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


DELAWARE (State or other jurisdiction of incorporation or organization)		33-0885320 (I.R.S. Employer Identification Number)
10250 Constellation Blvd., Suite 1640 Los Angeles, California (Address of principal executive offices)		90067 (Zip Code)


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

			Page

PART I—FINANCIAL INFORMATION			3
	ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	3
		Condensed Consolidated Balance Sheets (Unaudited)	3
		Condensed Consolidated Statements of Earnings (Loss) (Unaudited)	4
		Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	5
		Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited)	6
		Condensed Consolidated Statements of Cash Flows (Unaudited)	7
		Notes to Condensed Consolidated Financial Statements (Unaudited)	8
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	43
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	80
	ITEM 4.	Controls and Procedures	81
PART II—OTHER INFORMATION			82
	ITEM 1.	Legal Proceedings	82
	ITEM 1A.	Risk Factors	82
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82
	ITEM 6.	Exhibits	83
SIGNATURES			84

		September 30, 2011

		Amortized Cost		Estimated Fair Value
		(In thousands)
Due in one year or less		$	2,308	$	2,308
Due after one year through five years			8,790		9,083
Due after five years through ten years			38,956		40,646
Due after ten years			1,171,507		1,209,739

	Total securities available-for-sale	$	1,221,561	$	1,261,776

		September 30, 2011						December 31, 2010

Loan Segment		Nonaccrual Loans		Performing Restructured Loans		Total Impaired Loans		Nonaccrual Loans		Performing Restructured Loans		Total Impaired Loans
		(In thousands)
Real estate mortgage		$	31,924	$	59,571	$	91,495	$	40,949	$	53,222	$	94,171
Real estate construction			10,490		22,131		32,621		29,242		18,108		47,350
Commercial			16,989		4,703		21,692		21,878		17,942		39,820
Consumer			565		—		565		1,951		—		1,951
Foreign			—		—		—		163		—		163

	Total	$	59,968	$	86,405	$	146,373	$	94,183	$	89,272	$	183,455

			Three Months Ended September 30, 2011				Nine Months Ended September 30, 2011

			Number of Loans		Recorded Investment(1)		Number of Loans		Recorded Investment(1)
			(Dollars in thousands)
Troubled Debt Restructurings That Subsequently
	Defaulted(2):
Real estate mortgage:
	Other			4	$	5,566		4	$	5,566
Commercial:
	SBA 7(a)			1		448		1		448

		Total		5	$	6,014		5	$	6,014

		Covered Acquired Impaired Loans

		Carrying Amount			Accretable Yield
		(In thousands)
Balance, January 1, 2011		$	879,486		$	(290,665	)
	Accretion		50,875			50,875
	Payments received		(189,826	)		—
	Increase in expected cash flows, net		—			(37,685	)
	Provision for credit losses		(9,148	)		—

Balance, September 30, 2011		$	731,387		$	(277,475	)

		September 30, 2011						December 31, 2010

Property Type		Non-Covered OREO		Covered OREO		Total OREO		Non-Covered OREO		Covered OREO		Total OREO
		(In thousands)						(In thousands)
Commercial real estate		$	21,431	$	14,151	$	35,582	$	18,205	$	21,658	$	39,863
Construction and land development			26,093		14,676		40,769		4,650		19,205		23,855
Multi-family			—		1,656		1,656		—		10,393		10,393
Single family residence			736		1,818		2,554		2,743		4,560		7,303

	Total OREO, net	$	48,260	$	32,301	$	80,561	$	25,598	$	55,816	$	81,414

		September 30, 2011

Contractual Maturity Date		Amount		Interest Rate			Next Date Callable by FHLB⁽¹⁾
		(In thousands)
December 11, 2017		$	200,000		3.16	%		December 12, 2011
January 11, 2018			25,000		2.61	%		January 11, 2012

	Total FHLB advances	$	225,000		3.10	%

		Three Months Ended September 30, 2011			Nine Months Ended September 30, 2011

		(In thousands)
Non-covered impaired loans		$	(9,615	)	$	(16,388	)
Non-covered other real estate owned			(1,676	)		(3,549	)
Covered other real estate owned			(7,982	)		(8,561	)
SBA loan servicing asset			72			2

	Total gain (loss) on assets measured on a nonrecurring basis	$	(19,201	)	$	(28,496	)

		Covered Private Label CMOs (Level 3)

		(In thousands)
Beginning as of January 1, 2011		$	50,437
	Total realized in earnings		1,572
	Total unrealized in comprehensive income		315
	Net settlements		(5,111	)

Balance, September 30, 2011		$	47,213

		September 30, 2011

		Number of Shares Outstanding		Unrecognized Compensation Expense		Expiration Year of Award
				(in thousands)
Performance-based restricted stock awarded in:
	2006		275,000	$	14,924		2013
	2007		205,000		11,259		2017
	2008		20,000		453		2013
	2011		350,000		7,161		2016

	Outstanding performance-based restricted stock awards		850,000	$	33,797

		September 30, 2011			June 30, 2011			December 31, 2010			September 30, 2010

		(Dollars in thousands)
Nonaccrual loans⁽¹⁾		$	59,968		$	65,300		$	94,183		$	105,539
Other real estate owned⁽¹⁾			48,260			52,194			25,598			24,598

	Total nonperforming assets	$	108,228		$	117,494		$	119,781		$	130,137

Performing restructured loans⁽¹⁾		$	86,406		$	82,487		$	89,272		$	143,407
Nonperforming assets ratio⁽¹⁾⁽²⁾			3.68	%		3.96	%		3.76	%		3.89	%
Nonaccrual loans to loans, net of unearned income⁽¹⁾			2.07	%		2.24	%		2.98	%		3.18	%

		September 30, 2011		June 30, 2011		December 31, 2010		September 30, 2010

		(In thousands)
Covered nonaccrual loans		$	170,242	$	146,359	$	142,964	$	171,804
Covered OREO			32,301		40,949		55,816		55,244

	Total covered nonperforming assets	$	202,543	$	187,308	$	198,780	$	227,048

Covered performing restructured loans		$	14,074	$	12,404	$	14,255	$	44,614

	September 30, 2011

	Well Capitalized Requirement			Pacific Western Bank			PacWest Bancorp Consolidated
Tier 1 leverage capital ratio		5.00	%		9.85	%		9.96	%
Tier 1 risk-based capital ratio		6.00	%		14.63	%		14.70	%
Total risk-based capital ratio		10.00	%		15.90	%		15.98	%
Tangible common equity ratio		N/A			10.64	%		8.85	%

		September 30, 2011

		Due Within One Year		Due in One to Three Years		Due in Three to Five Years		Due After Five Years		Total
		(Dollars in thousands)
Time deposits		$	496,615	$	525,088	$	12,632	$	—	$	1,034,335
Long-term debt obligations			—		—		—		354,347		354,347
Operating lease obligations			16,182		27,202		17,901		15,569		76,854
Other contractual obligations			9,315		8,707		3,101		—		21,123

	Total	$	522,112	$	560,997	$	33,634	$	369,916	$	1,486,659

Interest rate scenario	Estimated Net Interest Income

	(Dollars in thousands)
Up 300 basis points	$	241,136	(4.8	)%	4.74	%	(0.24	)%
Up 200 basis points	$	242,089	(4.4	)%	4.76	%	(0.22	)%
Up 100 basis points	$	244,692	(3.4	)%	4.81	%	(0.17	)%
BASE CASE	$	253,281	—		4.98	%	—
Down 100 basis points	$	244,243	(3.6	)%	4.80	%	(0.18	)%
Down 200 basis points	$	241,899	(4.5	)%	4.76	%	(0.22	)%
Down 300 basis points	$	240,940	(4.9	)%	4.74	%	(0.24	)%

Purchase Dates:		Average Price Per Share

July 1 - July 31, 2011	—	$	—
August 1 - August 31, 2011	7,585		16.39
September 1 - September 30, 2011	—		—

Total	7,585	$	16.39


		PACWEST BANCORP
Date: November 8, 2011		/s/ VICTOR R. SANTORO Victor R. Santoro Executive Vice President and Chief Financial Officer