STOCK COMPENSATION PLANS

12 Months Ended

Dec. 31, 2011

STOCK COMPENSATION PLANS

STOCK COMPENSATION PLANS

NOTE 16—STOCK COMPENSATION PLANS

        The Company's 2003 Stock Incentive Plan, or the 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 December 31, 2011, there were 514,365 shares available for grant under the 2003 Plan.

• Restricted Stock

        The following table presents a summary of restricted stock transactions for the years indicated:

	Number of Shares			Weighted Average Fair Value on Award Date
Unvested restricted stock, December 31, 2009		1,095,417		$	42.86
Awarded		443,050			19.99
Shares issued by the Company upon vesting		(268,568	)		36.78
Forfeited		(39,317	)		45.82
Unvested restricted stock, December 31, 2010		1,230,582			35.86
Awarded		692,900			20.50
Shares issued by the Company upon vesting		(203,174	)		30.13
Forfeited		(44,578	)		23.56
Unvested restricted stock, December 31, 2011		1,675,730		$	30.53

        At December 31, 2011, there were outstanding 825,730 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 2003 Plan, determines that the Company achieved certain financial goals established by the CNG Committee as set forth in the award 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 $7.6 million, $8.5 million, and $8.2 million for the years ended December 31, 2011, 2010, and 2009, respectively. Such amounts are included in compensation expense on the accompanying consolidated statements of earnings (loss). As of December 31, 2011, total unrecognized compensation cost related to unvested time-based restricted stock was $11.4 million. This cost is expected to be recognized over a weighted average period of 1.6 years.

        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 December 31, 2011 as presented in the following table:

	December 31, 2011
	Number of Shares Outstanding		Total Unrecognized Compensation Expense		Expiration Year of Award
	(Dollars 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

        The following table summarizes information about outstanding time-based and performance-based restricted stock awards at December 31, 2011:

	At Award Date				Vested				Forfeited				Outstanding at December 31, 2011
	Number of Shares Awarded		Weighted Average Fair Value		Number of Shares Vested		Weighted Average Fair Value on Award Date		Number of Shares Forfeited		Weighted Average Fair Value on Award Date		Number of Shares Outstanding		Weighted Average Fair Value on Award Date		Weighted Average Fair Value(1) (000)		Weighted Average Remaining Contractual Life (Years)
Time-based restricted stock awarded in:
2008		577,730	$	29.52		481,060	$	28.91		32,876	$	31.37		63,794	$	33.14	$	1,209		0.6
2009		57,812	$	15.88		36,376	$	15.79		—	$	—		21,436	$	16.03		406		0.9
2010		443,050	$	19.99		—	$	—		20,000	$	22.24		423,050	$	19.88		8,017		1.2
2011		342,900	$	20.54		—	$	—		25,450	$	21.76		317,450	$	20.44		6,016		2.3
Outstanding time-based restricted stock awards		1,421,492				517,436				78,326				825,730				15,648		1.6
Performance-based stock awarded in:
2006		315,000	$	54.27		—	$	—		40,000	$	54.21		275,000	$	54.27		5,211		1.2
2007		205,000	$	54.92		—	$	—		—	$	—		205,000	$	54.92		3,885		5.1
2008		20,000	$	22.66		—	$	—		—	$	—		20,000	$	22.66		379		1.2
2011		350,000	$	20.46		—	$	—		—	$	—		350,000	$	20.46		6,632		4.2
Outstanding performance-based restricted stock awards		890,000				—				40,000				850,000				16,107		3.4
Total awards		2,311,492				517,436				118,326				1,675,730			$	31,755		2.5

⁽¹⁾

Determined using the $18.95 closing price of PacWest common stock on December 31, 2011.