PACIFIC CAPITAL BANCORP /CA/ - FORM 10-K/A

Attached files

file	filename
EX-31.1 - SECTION 302 CERTIFICATION OF GEORGE S. LEIS - PACIFIC CAPITAL BANCORP /CA/	dex311.htm
EX-31.2 - SECTION 302 CERTIFICATION OF DONALD LAFLER - PACIFIC CAPITAL BANCORP /CA/	dex312.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

(Amendment No. 1)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

COMMISSION FILE NUMBER 0-11113

LOGO

(Exact Name of Registrant as Specified in its Charter)


California		95-3673456
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1021 Anacapa St. Santa Barbara, California		93101
(Address of principal executive offices)		(Zip Code)

(805) 564-6405

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, no par value		The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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

Large accelerated filer Accelerated filer X Non-accelerated filer Smaller reporting company

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

The aggregate market value of the voting stock held by non-affiliates computed June 30, 2009, based on the sales prices on that date of $2.14 per share: Common Stock—$94,636,109. All directors and executive officers and the registrant’s Employee Stock Ownership Plan have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant; however, this determination does not constitute an admission of affiliate status for any of these stockholders.

As of February 19, 2010, there were 46,759,587 shares of the issuer’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of registrant’s Proxy Statement for the Annual Meeting of Shareholders on April 29, 2010 are incorporated by reference into Part III.

INDEX


			Page
Explanatory Note			3
PART I
	Forward-Looking Statements		4
	Item 1.	Business	7
	Item 1A.	Risk Factors	16
	Item 1B.	Unresolved Staff Comments	28
	Item 2.	Properties	28
	Item 3.	Legal Proceedings	29
	Item 4.	Reserved	29
PART IV
	Item 15.	Exhibits and Financial Statement Schedules	30
SIGNATURES			31
EXHIBIT INDEX CERTIFICATIONS			32

Explanatory Note

Pacific Capital Bancorp (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to amend Item 1A of Part I of its Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on March 12, 2010 (the “Original Filing”). The purpose of this Amendment is to correct an error contained in the risk factor entitled “Non Performing Assets,” which overstated by $397.8 million the amount of accruing loans that were 30-89 days delinquent at December 31, 2009. The third sentence of that risk factor has been amended as follows: “In addition, the Bank had approximately $78.9 million in accruing loans that were 30-89 days delinquent at December 31, 2009.”

Except for the correction described above, the information contained in the Original Filing is not amended hereby and shall be as set forth in the Original Filing. This Amendment continues to speak as of the date of the Original Filing and the Company has not updated the disclosure in this Amendment to speak to any later date. Currently-dated certifications from the Company’s Chief Executive Officer and Interim Chief Financial Officer have been included as exhibits to this Amendment.

PART I

Forward-Looking Statements

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Pacific Capital Bancorp (the “Company” or “PCB”) intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these provisions. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business prospects, strategic alternatives, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, acquisition and divestiture opportunities, plans and objectives of management for future operations, and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. Words such as “will likely result,” “aims,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of these words and similar expressions are intended to identify these forward-looking statements.

Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the regulatory environment, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. The Company’s actual results may differ materially from those contemplated by the forward-looking statements. The Company cautions you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following:

inability to continue as a going concern;

management’s ability to effectively execute the Company’s business plan;

inability to raise additional capital on acceptable terms, or at all;

inability to achieve the higher minimum capital ratios that Pacific Capital Bank, N.A. (the “Bank”) has agreed to maintain with the Office of the Comptroller of the Currency;

inability to receive dividends from the Bank and to service debt and satisfy obligations as they become due;

regulatory enforcement actions to which the Company and the Bank are currently, and may in the future be, subject;

costs and effects of legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations or reviews;

changes in capital classification;

the impact of current economic conditions and the Company’s results of operations on its ability to borrow additional funds to meet its liquidity needs;

local, regional, national and international economic conditions and events and the impact they may have on the Company and its customers;

changes in the economy affecting real estate values;

inability to attract and retain deposits;

changes in the level of non-performing assets and charge-offs;

changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements;

changes in the financial performance and/or condition of the Bank’s borrowers;

effect of additional provision for loan losses;

long-term negative trends in the Company’s market capitalization;

continued listing of the Company’s common stock on The NASDAQ Global Select Market;

effects of any changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board;

inflation, interest rate, cost of funds, securities market and monetary fluctuations;

political instability;

acts of war or terrorism, natural disasters such as earthquakes or fires, or the effects of pandemic flu;

the timely development and acceptance of new products and services and perceived overall value of these products and services by users;

changes in consumer spending, borrowings and savings habits;

technological changes;

changes in the Company’s organization, management, compensation and benefit plans;

competitive pressures from other financial institutions;

continued consolidation in the financial services industry;

inability to maintain or increase market share and control expenses;

impact of reputational risk on such matters as business generation and retention, funding and liquidity;

rating agency downgrades;

continued volatility in the credit and equity markets and its effect on the general economy;

effect of changes in laws and regulations (including laws concerning banking, taxes and securities) with which the Company and its subsidiaries must comply;

effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters;

other factors that are described in “Risk Factors”; and

the Company’s success at managing the risks involved in the foregoing items.

Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, whether as a result of new information, future developments or otherwise, except as may be required by law.

The assets, liabilities, and results of operations of the Company’s tax refund and transfer programs (“RAL and RT programs”) are reported in its periodic filings with the Securities and Exchange

Commission (“SEC”) as a segment of its business. Because these are activities conducted by very few other financial institutions, users of the financial statements have indicated that they are interested in information for the Company exclusive of these programs so that they may compare the results of operations with financial institutions that do not have comparable programs. These amounts and ratios may generally be computed from the information provided in the note to its financial statements that discloses segment information, but are computed and included elsewhere in this Annual Report on Form 10-K for the convenience of the readers of this document.

Purpose and Definition of Terms

The following discussion is designed to provide insight into the assessment by executive management (“Management”) of the financial condition and results of operations of the Company and its subsidiaries. This discussion should be read in conjunction with the Company’s Consolidated Financial Statements and the notes to the Consolidated Financial Statements, herein referred to as “the Consolidated Financial Statements”. These Consolidated Financial Statements are presented on pages 94 through 179 of this Annual Report on Form 10-K, herein referred to as “Form 10-K”. Specific accounting and banking industry terms and acronyms used throughout this document are defined in the glossary on pages 181 through 184. The Company utilizes the term “Core Bank” throughout this Form 10-K. Core Bank is defined as the Company’s consolidated financial results less the financial results from the refund anticipation loan (“RAL”) and refund transfer (“RT”) Programs and is interchangeably referred to as “Excluding RAL and RT”.

ITEM 1.

BUSINESS

Organizational Structure and Description of Services

The Company is a community bank holding company providing full service banking including all aspects of consumer and commercial lending, trust and investment advisory services and other consumer and business banking products through its subsidiaries’ retail branches, commercial and wealth management centers and other distribution channels to consumers and businesses primarily located in the central coast of California. The Company was one of three primary providers nationwide of RALs and RTs at December 31, 2009. On January 14, 2010, the Company sold all of the assets of the RAL and RT Programs segment.

The Company has six wholly-owned subsidiaries. Pacific Capital Bank, National Association (“the Bank” or “PCBNA”), a banking subsidiary, PCB Service Corporation, utilized as a trustee of deeds of trust in which PCBNA is the beneficiary and four unconsolidated subsidiaries used as business trusts in connection with issuance of trust-preferred securities as described in Note 14, “Long-term Debt and Other Borrowings” on page 144 of this Form 10-K.

PCBNA has three wholly-owned consolidated subsidiaries:

Morton Capital Management (“MCM”) and R.E. Wacker Associates, Inc. (“REWA”), two registered investment advisors that provide investment advisory services to individuals, foundations, retirement plans and select institutional clients.

SBBT RAL Funding Corp. which was utilized as part of the financing of the RAL program as described in Note 7, “RAL and RT Programs”.

In 2007, PCBNA made an investment in Veritas Wealth Advisors, LLC (“Veritas”), a registered investment advisor. PCBNA made an additional investment of $750,000 in January 2008, for a total investment of $1.0 million or a 20% interest in Veritas.

PCBNA also retains ownership in several low-income housing tax credit partnerships (“LIHTCP”) that are not consolidated into the Company’s Consolidated Financial Statements. For additional information regarding PCBNA’s investment in LIHTCP, refer to Note 1, “Summary of Significant Accounting Policies” of the Consolidated Financial Statements on page 103.

At December 31, 2009, PCBNA conducted its banking services under five brand names at 50 locations. These brand names represent the former names of select acquired independent banks merged into PCBNA.


Brand Name	Acronym	Counties Located in	Year Founded or Acquired	Number of Locations
Santa Barbara Bank & Trust	“SBB&T”	Santa Barbara, Ventura and Los Angeles	1960⁽¹⁾	34
First National Bank of Central California	“FNB”	Monterey and Santa Cruz	1998	7
South Valley National Bank	“SVNB”	Southern Santa Clara	1998	3
San Benito Bank	“SBB”	San Benito	1998	3
First Bank of San Luis Obispo	“FBSLO”	San Luis Obispo	2005	3

(1)

PCBNA commenced operations in 1960 as Santa Barbara National Bank (“SBNB”). In 1979, SBNB switched from a national charter to a state charter and changed the name to SBB&T. In 2002, PCBNA was created returning the charter to a national bank by consolidating the two subsidiaries of SBB&T and FNB into PCBNA. In 2007, PCBNA locations which were part of Pacific Crest Capital Incorporated (“PCCI”) and acquired with it in 2004 were renamed to the SBB&T brand name.

In addition to the retail and business deposits managed by the above banking offices, the Company makes use of brokered deposits and deposits received from the State of California, both of which are administered by the Company’s treasury department.

In early 2008, Management began an evaluation of all administrative and retail branch facilities in an effort to identify opportunities for greater efficiencies in its space utilization. As a result, throughout 2008 and 2009, and continuing into 2010, there are a number of location consolidations and closures related to this expense control initiative to ensure that all locations leased and owned are fully occupied. Additionally, the Company’s review will confirm that all retail branch locations meet its strategic initiatives and continue to meet the needs of the Bank’s customers.

In January 2010 and February 2010, the Commercial and Wealth Management Group’s (“CWMG”) San Jose and Calabasas locations were closed. Also, in February 2010 the Company announced plans to vacate its downtown Santa Barbara headquarters building in the first half of 2010 and is in the process of negotiating with the owners of the building to terminate the operating lease so that the executive and other staff currently occupying the building may move to other underutilized facilities. The Buellton and Vandenberg Village retail branch locations which operate under the SBB&T brand will consolidate into nearby locations in April 2010. There are also several locations that are being evaluated for possible sale, consolidation or closure during 2010.

Three-Year Strategic and Capital Plan

For the past two years, the Company has operated in an exceptionally difficult recessionary environment and has been significantly impacted by the resulting unprecedented credit and economic market turmoil. Deterioration in California’s commercial and residential real estate markets and the related declines in property values, and worsening unemployment, have had a significantly negative impact on the Company’s operating results. The Company also continues to operate under enhanced regulatory scrutiny. (See the “Regulation and Supervision—Current Regulatory Matters” Section of this Form 10-K.)

In an effort to strengthen the Company’s operations and capital position and enable it to better withstand these continued adverse market conditions, as required by the Office of the Comptroller of the Currency (the “OCC”), the Company has developed a detailed three-year strategic and capital plan (the “Capital Plan”).

Key components of the Capital Plan include:

A process to identify and evaluate a broad range of strategic alternatives to strengthen the Company’s capital base and enhance shareholder value.

Building and maintaining a strong capital base.

Improving asset quality through a combination of efforts to reduce the current concentration of classified assets, prudently managing credit risk exposures in the existing loan portfolio, and tightening credit underwriting standards.

A comprehensive review of the Bank’s entire loan portfolio to identify loans that are good candidates for sale. During 2009, the Company sold approximately $383.5 million in real estate secured loans.

Substantial curtailment of the Bank’s commercial real estate lending business pending a reduction in the Bank’s risk profile and significant improvement in market conditions.

Severely limited asset growth, as the Company focuses on improving asset quality and implementing necessary efficiency and risk management initiatives in the Core Bank.

Maintaining prudent levels of liquidity.

Improving earnings.

Strengthening Management and Board of Directors oversight.

Compliance with applicable laws and regulations, including, to the maximum possible extent, regulatory capital requirements and the requirements of regulatory enforcement actions.

Initiatives to improve the Company’s operating efficiency ratio through automation of key systems, process integration, and elimination of redundancies.

Additional expense reduction actions that are targeted to eliminate $25 million in annual operating expenses in 2010 and another $25 million in annual operating expenses in 2011. The initiative will focus on enhancing efficiencies in all business units and reducing expenses in areas such as information technology and corporate real estate.

The Company believes the successful completion of the Capital Plan would substantially improve its operations and capital position. However, no assurances can be made that the Company will be able to successfully complete all, or any portion of the Capital Plan, or that the Capital Plan will not be materially modified in the future. If the Company is not able to successfully complete a substantial portion of its Capital Plan, the Company expects that its business and the value of its securities will be materially and adversely affected, and it will be more difficult for the Company to meet the capital requirements requested by its primary banking regulators.

Segments

The Company had three reportable operating segments at December 31, 2009. These segments are determined based on product line and the types of customers serviced. These reportable operating segments are Community Banking, CWMG and RAL and RT Programs. The CWMG segment is the result of combining two segments that were reported separately in the 2008 Annual Report on Form 10-K. For purposes of the segment reporting in Note 24, “Segments” to the Consolidated Financial Statements, the two segments have been combined for the years ended December 31, 2008 and 2007 as if the segments had been combined as of January 1, 2007.

The administrative and treasury operations of the Company are not considered part of operating activities and are reported within the All Other segment for financial reporting. The financial results for each segment are based on products and services provided within each operating segment with various Management assumptions to calculate the indirect credits and charges for funds which also includes an allocation of certain expenses from the All Other segment. These Management assumptions are explained in Note 24, “Segments” of the Consolidated Financial Statements beginning on page 171.

The Community Banking and CWMG segments represent the traditional banking operations of the Company and are referred to as the “Core Bank” by Management. The banking operations of the Core Bank are similar to the operations of other banks. The RAL and RT Programs segment is highly seasonal as a majority of the income is earned in the first quarter of each year. The RAL product generates interest income and the RT product generates non-interest income. The Company experienced significant growth in the RAL and RT Programs over the last several years but also had a high amount of credit, reputation and regulatory risk. In an effort to reduce the Company’s risk, the Company sold the RAL and RT Program segment on January 14, 2010. The financial impact of the RAL and RT Programs will be discussed throughout the Management Discussion and Analysis (“MD&A”) section of this document and in Note 7, “RAL and RT Programs” of the Consolidated Financial Statements.

The income generated by these two Core Bank reportable segments is driven by the lending and trust and investment advisory products offered to customers. The primary expenses are interest expense on deposits and funding costs and personnel. Deposit products are provided to the customers of the Community Banking and CWMG segments.

Community Banking

Business units in this segment provide residential real estate loans, home equity lines and loans, consumer loans, small business loans, deposit products, Small Business Administration (“SBA”) loans and lines, and demand deposit overdraft protection products.

Residential real estate loans consist of first and second mortgage loans secured by trust deeds on one to four unit single family homes. The Company has specific underwriting and pricing guidelines based on the credit worthiness of the borrower and the value of the collateral, including credit score, debt-to-income ratio of the borrower and loan-to-value ratio. In the third quarter of 2008, residential loans began to be originated for sale on a flow basis in addition to booking loans held on the balance sheet. In the second half of 2009, the Company made a strategic decision to only originate loans to be sold into the secondary market.

The Company extends credit based on the underwriting requirements that Freddie Mac and Fannie Mae require so, that the loans can be sold on the secondary market. Home equity lines of credit are generally secured by a second trust deed on a single one to four unit family home. The interest rate on home equity lines is a variable index rate while term residential mortgage loans can have either variable or fixed interest rates.

Consumer loans and lines of credit are extended with or without collateral to provide financing for purposes such as the acquisition of recreational vehicles, automobiles, or to provide liquidity. The Company has specific underwriting guidelines which consider the borrower’s credit history, debt-to-income ratio and loan-to-value ratio for secured loans. The consumer loans typically have fixed interest rates.

Small business loans and lines of credit offered through the Community Banking Segment are extended without collateral to small businesses based on historical credit performance of the business

and with the principal owners of the business. The loans and lines of credit can have either variable or fixed interest rates and are extended to small businesses in amounts equal to or less than $100,000.

SBA loans are extended to small businesses for a variety of purposes, including working capital, business acquisitions, acquisition of real estate, growth capital and equipment financing. The Company focuses on 7(a), 504, and Express loan programs. 7(a) loans provide longer term financing, which are guaranteed 75% to 85% by the SBA depending on term and loan size. SBA 504 loans are typically used for the acquisition or construction of large equipment or real property. These are financing packages comprised of a first and second trust deed loan structure where the debt does not exceed 90% combined loan-to-value. Express loans are unsecured lines of credit or term loans of $100,000 or less and are generally guaranteed by the SBA at 50%. Periodically, the Company sells selected SBA loans into the secondary market. The Company retains servicing rights on the sold guaranteed portion of SBA 7(a) loans.

Deposit products include checking, savings, money market accounts, Individual Retirement Accounts (“IRAs”), Certificates of Deposit (“CDs”) and debit cards.

Demand deposit overdraft protection products are offered to customers to provide additional protection against unforeseen deficit balances in a specific account and the fees associated with returned checks. The Company offers these products based on factors such as the customers credit score and history with the Company. These products have fixed interest rates.

The Community Banking segment serves customers through traditional banking branches, loan production centers, Automated Teller Machines (“ATM”), through the customer contact call center and online banking.

Commercial and Wealth Management Group

As discussed above, in January 2009 the Commercial Banking and Wealth Management segments were combined into one segment. The new CWMG segment provides the same products and services that were offered prior to being combined, but the combined segment is serving the same customers under one business model.

A majority of the customers served in this segment are middle market companies with business owners who are high net-worth individuals. Combining the segments allows the Bank to serve these customers with one relationship manager. This segment offers a complete line of commercial and industrial and commercial real estate secured loan products and services as well as trust and investment advisory services and private banking lending, deposit services and securities brokerages services through the Bank’s trust and investment management group and through MCM and REWA. The types of products offered in this segment include traditional commercial and industrial and commercial real estate and lines of credit, letters of credit, asset-based lending, foreign exchange services and treasury management. The loan products also include construction loans for commercial and residential development, land acquisition and development loans, secured and unsecured lines of credit and financing arrangements for completed structures.

Loan products are underwritten and customized to meet specific customer needs. The Company considers several factors in order to extend the loan including the borrower’s historical loan re-payment, company management, and current economic conditions, industry specific issues, capital structure, potential collateral and financial projections.

In making commercial real estate secured loan decisions, the Company considers the purpose of the requested loan and nature of the collateral. Due to the high level of charge-offs, impairments and

non-accrual loans in the CWMG segment during 2008 and 2009, the lending policies were amended to increase loan approval oversight, reduce approval limits, reduce the risk on the Company’s balance sheet and reduce concentrations of commercial real estate loans. In addition, the origination of commercial real estate loans in 2009 was very limited and very closely monitored. The Company renewed commercial real estate loans during 2009, but the renewals utilized the new underwriting criteria amended during 2009. The maximum loan-to-value ratios for commercial real estate loans were reduced from 75% to 50% during 2009 and debt service ratios were increased to 1.50 from 1.25. Depending on the product, these loans have fixed or variable interest rates.

The trust and investment advisory services include investment review, analysis and customized portfolio management for separately managed accounts, full service brokerage, trust and fiduciary services, equity and fixed income management and real estate and specialty asset management. The CWMG segment’s underwriting guidelines consider tangible net worth, the nature of assets that make up this net worth, personal cash flow, past history with the Company, and general credit history. These loans may be either secured or unsecured, and may have either fixed or variable interest rates, with lines of credit generally having variable interest rates.

Deposit products include checking, savings, money market accounts, IRAs, CDs and debit cards. Overdraft protection is also offered to these customers.

The CWMG segment serves customers through traditional banking branches, loan production centers, ATMs, through the customer contact call center and online banking.

RAL and RT Programs

As disclosed above, on January 14, 2010, the Company sold all of the assets of the RAL and RT Programs segment. However, since the RAL and RT Programs activity continued through December 31, 2009, the products and results of operations of this segment will be discussed throughout this Form 10-K.

RALs are a seasonal credit product extended to consumers during the first four months of each calendar year. The purpose of a RAL is to provide consumers with liquidity at the time they file for their tax refund. The Company works with third party tax preparers who facilitate the origination of RALs through an application process. RAL underwriting is based on borrower information as well as certain criteria within the tax return. The source of repayment for the RAL is the Internal Revenue Service (“IRS”).

The Company subjects the RAL application to an automated credit review process utilizing specific predetermined criteria. If the application passes this review, the Company advances the amount of the refund due on the taxpayer’s return up to specified amounts based on certain criteria less the loan fee due to the Company, and if requested by the taxpayer, the fees due for preparation of the return. Each taxpayer signs an agreement permitting the IRS to send the taxpayer’s refund directly to the Company. When received from the IRS, the refund is used by the Company to pay off the RAL. Any amount due the taxpayer above the amount of the RAL is remitted to the taxpayer. The RAL income is recognized as interest income after the loan balance is collected from the IRS. The fee varies based on the amount of the RAL.

Generally, interest income earned on loans is a function of the outstanding balance multiplied by the rate specified in the loan agreement multiplied by the period of time the loan is outstanding. For RALs, the interest income is unrelated to the length of time the loan is outstanding and there is no explicit interest rate. The flat fee charged is recognized as income when the loan is collected from the IRS. No late fees are charged to customers whose loans are not paid within the expected time frame.

While the loan application form is completed by the taxpayer in the tax preparer’s office, the credit criteria are set by the Company and the underwriting decision is made by the Company. The Company reviews and evaluates all tax returns to determine the likelihood of IRS payment. If any attribute of the tax return appears to fall outside of predetermined parameters, the Company will reject the application and not make the loan.

The Company has entered into two separate contracts with Jackson Hewitt related to the RAL and RT Programs. One of the contracts with Jackson Hewitt is with Jackson Hewitt Inc. and the other is with Jackson Hewitt Technology Services, Inc. collectively referred to as “JH” throughout this Form 10-K.

The Company also has an electronic filing of tax return product called a Refund Transfer or RT. The RT product is also designed to provide taxpayers faster access to funds claimed by a taxpayer as a refund on their tax returns. An RT is in the form of a facilitated electronic transfer or check prepared by the taxpayer’s tax preparer.

For more information regarding RALs and RTs, refer to Note 7, “RAL and RT Programs” of the Consolidated Financial Statements beginning on page 133.

Changes to Segment Reporting in 2010

In January 2010, the Chief Executive Officer (“CEO”) announced further organizational change which changes the structure of the Community Banking and CWMG segments. This organizational change will significantly change the structure of how the Company defines its segments in 2010. Up until December 31, 2009 the segments were defined by the products offered to certain types of customers. This organizational change defines the segments by regional location as well as products offered but all serve the same type of client bases.

Employees

At December 31, 2009, the Company employed 1,164 employees. The Company’s employees are not represented by a union or covered by a collective bargaining agreement. Management believes that its employee relations are good.

Acquisitions

Recent mergers and acquisitions of the Company are disclosed in Note 2, “Acquisitions and Dispositions” in the Consolidated Financial Statements on page 118. In the last three years, the Company has had one acquisition, REWA. In January 2008, PCBNA acquired REWA, a California-based registered investment advisor for an initial cash payment of approximately $7.0 million. REWA is a wholly owned subsidiary of PCBNA which provides personal and financial investment advisory services to individuals, families and fiduciaries.

Market Area

The Company’s branches are located in eight California counties. These counties include Santa Barbara, Ventura, Monterey, Santa Cruz, Southern Santa Clara, San Benito, San Luis Obispo and Los Angeles. The Company uses separate brand names in various counties for community recognition only, all offices are legal branches of PCBNA, and all banking offices are administered under one management structure.

The RAL and RT Programs administrative offices were located in San Diego County, California with transactions conducted with taxpayers located throughout the United States.

Foreign Operations

The Company has no foreign operations. The Company does provide loans, letters of credit and other trade-related services to a number of commercial enterprises that conduct business outside the United States.

Customer Concentration

The Company does not have any customer relationships that individually account for 10% or more of consolidated revenues.

Competition

The banking and financial services business is highly competitive. The increasingly competitive environment faced by banks is a result primarily of changes in laws and regulations (refer to pages 82 through 89 of this Form 10-K), changes in technology and product delivery systems, and the continued consolidation among financial services providers. The Company competes for loans, deposits, trust and investment advisory services and customers with other commercial banks, savings and loan associations, securities and brokerage companies, investment advisors, mortgage companies, insurance companies, finance companies, money market funds, credit unions, and other non-bank financial service providers. Many competitors are much larger in total assets and capitalization, have greater access to capital markets, including foreign markets, and/or offer a broader range of financial services.

Economic Conditions, Government Policies, Legislation, and Regulatory Initiatives

The Company’s profitability, like most financial institutions, is primarily dependent on interest rate differentials. The difference between the interest rates paid on interest-bearing liabilities, such as deposits and other borrowings, and the interest rates received on interest-earning assets, such as loans to customers and securities held in the investment portfolio, comprise the major portion of earnings. These rates are highly sensitive to many factors that are beyond the Company’s control and cannot be predicted, such as inflation, recession and unemployment, and the impact which future changes in domestic and foreign economic conditions might have on the Company cannot be predicted. A more detailed discussion of the Company’s interest rate risks and the mitigation of those risks begins on page 90.

The Company’s business is also influenced by the monetary and fiscal policies of the Federal government and the policies of regulatory agencies, particularly the Board of Governors of the Federal Reserve System (“FRB”). The FRB implements national monetary policies (with objectives such as curbing inflation and combating recession) through its open-market operations in U.S. Government securities, by adjusting the required level of reserves for depository institutions subject to its reserve requirements, and by varying the target Federal funds and discount rates applicable to borrowings by depository institutions. The actions of the FRB in these areas influence the growth of bank loans, investments, and deposits and also affect interest earned on interest-earning assets and interest paid on interest-bearing liabilities. The nature and impact of any future changes in monetary and fiscal policies on the Company cannot be predicted.

From time to time, Federal and State legislation is enacted which may have the effect of materially increasing the cost of doing business, limiting or expanding permissible activities, or affecting the competitive balance between banks and other financial services providers. In response to the recent economic downturn and financial industry instability, legislative and regulatory initiatives have been, and will likely continue to be, introduced and implemented, which could substantially intensify the regulation of the financial services industry. These include possible comprehensive overhaul of the financial institutions regulatory system, the creation of a new consumer financial protection agency,

and enhanced supervisory attention and potential new restrictions on executive compensation arrangements. The Company cannot predict whether or when potential legislation or new regulations will be enacted, and if enacted, the effect that new legislation or any implementing regulations and supervisory policies would have on the Company’s financial condition or results of operations. Moreover, especially in the current economic environment, bank regulatory agencies have been very aggressive in responding to concerns and trends identified in examinations, and this has resulted in the increased issuance of enforcement actions to financial institutions requiring action to address credit quality, liquidity and risk management and capital adequacy, as well as other safety and soundness concerns.

Through its authority under the Emergency Economic Stabilization Act of 2008 (“EESA”), as amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”), the United States Department of the Treasury (“U.S. Treasury”) implemented the Troubled Asset Relief Program Capital Purchase Program (“TARP CPP”), a program designed to bolster eligible healthy institutions by injecting capital into these institutions. The Company participated in the TARP CPP and sold to the U.S. Treasury on November 21, 2008 (i) 180,634 shares of the Company’s Series B Fixed Rate Cumulative Perpetual Preferred Stock, having a liquidation preference of $1,000 per share (the “Series B Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase up to 1,512,003 shares of the Company’s common stock, no par value. Under the terms of the TARP CPP, the Company is prohibited from increasing dividends on its common stock, and from making certain repurchases of equity securities, including its common stock, without the U.S. Treasury’s consent. Furthermore, as long as the preferred stock issued to the U.S. Treasury is outstanding, dividend payments and repurchases or redemptions relating to certain equity securities, including the Company’s common stock, are prohibited until all accrued and unpaid dividends are paid on such preferred stock, subject to certain limited exceptions. Restrictions related to the payment of dividends on common stock are disclosed in the “Regulation and Supervision” section of this Form 10-K and in Note 20, “Regulatory Capital Requirements” of the Consolidated Financial Statements.

In order to participate in the TARP CPP, financial institutions were required to adopt certain standards for executive compensation and corporate governance. These standards generally apply to the Chief Executive Officer, Chief Financial Officer (“CFO”) and the three next most highly-compensated officers (“Senior Executive Officers” or “SEOs”) and other highly-compensated employees. The standards include (1) ensuring that incentive compensation for the SEOs does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to the SEOs and the next 20 most highly-compensated employees based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; (3) prohibition on making golden parachute payments to the SEOs and the next five most highly-compensated employees; (4) prohibitions on bonuses, retention awards and other incentive compensation payable to the five most highly-compensated employees, other than restricted stock grants which do not fully vest during the TARP period up to one-third of an employee’s total annual compensation; and (5) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each SEO. The Company has complied with these requirements.

The EESA also increased Federal Deposit Insurance Corporation (“FDIC”) deposit insurance on most accounts from $100,000 to $250,000. This increase was originally scheduled to end in 2009; however, Congress extended the temporary increase until December 31, 2013. The increase is not covered by deposit insurance premiums paid by the banking industry. In addition, the FDIC has implemented two temporary programs under the Temporary Liquidity Guarantee Program (“TLGP”) to (i) provide deposit insurance for the full amount of most non-interest bearing transaction accounts (the “Transaction Account Guarantee”) through the end of 2009, and later extended through June 30, 2010, and (ii) guarantee certain unsecured debt of financial institutions and their holding companies through June 2012 under a temporary liquidity guarantee program (the “Debt Guarantee Program”). Financial

institutions had until December 5, 2008 to opt out of these two programs. The Company and the Bank have elected to participate in these programs, but have not yet issued any debt under the Debt Guarantee Program.

Regulation and Supervision

The Company and its subsidiaries are extensively regulated and supervised under both Federal and certain State laws. A summary description of the laws and regulations which relate to the Company’s operations are discussed on pages 82 through 89. This section and Note 20, “Regulatory Capital Requirements” of the Consolidated Financial Statements need to be reviewed in order to understand the regulatory developments affecting the Company in 2009.

Available Information

The Company maintains an Internet website at http://www.pcbancorp.com. The Company makes available its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”), as amended, and other information related to the Company free of charge, through the Company’s Investor Relations page of this site as soon as reasonably practicable after it electronically files those documents with, or otherwise furnishes them to, the SEC. The Company’s internet website and the information contained therein or connected thereto are not intended to be incorporated into this annual report on Form 10-K.

ITEM 1A.

RISK FACTORS

RISK MANAGEMENT

Investing in the Company’s common stock involves various risks which are specific to the Company, the Company’s industry and market area. Several risk factors regarding investing in the Company’s common stock are discussed below. This listing should not be considered as all-inclusive. If any of the following risks were to occur, Management may not be able to conduct the Company’s business as currently planned and the financial condition or operating results could be negatively impacted. The Company’s Chief Audit Executive, Chief Risk Officer and Chief Credit Officer in conjunction with other members of the Company’s Management under the direction and oversight of the Board of Directors lead the Company’s risk management process. In addition to common business risks such as disasters, theft, and loss of market share, the Company is subject to special types of risk due to the nature of its business.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. As a result, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of any extraordinary regulatory action or the Company’s inability to meet its existing debt obligations. The Company has recently incurred significant operating losses, experienced a significant deterioration in the quality of its assets and become subject to enhanced regulatory scrutiny. These factors, among others, were deemed to cast significant doubt on the Company’s ability to continue as a going concern. If the Company cannot continue to operate as a going concern, it is likely that shareholders will lose all or substantially all of their investment in the Company.

The Company is actively considering a broad range of strategic alternatives, including a capital infusion or a merger, in order to address any doubt related to the Company’s ability to continue as a going concern. There can be no assurance that the exploration of strategic alternatives will result in any

transaction, or that any such transaction will allow the Company’s shareholders to avoid a loss of all or substantially all of their investment in the Company. The pursuit of strategic alternatives may also involve significant expenses and management time and attention.

Additional Capital

The Company will need to raise additional capital to meet the higher minimum capital levels that PCBNA is obligated to maintain under its agreement with the OCC. In addition, should the Company’s current rate of operating losses continue or should the Company’s asset quality erode and require significant additional provision for credit losses, resulting in additional net operating losses, the Company’s capital levels will decline further and it will need to raise more capital to satisfy its regulatory capital requirements. The Company’s ability to raise additional capital depends on conditions in the capital markets, which are outside the Company’s control, and on the Company’s financial performance. Accordingly, the Company cannot be certain of its ability to raise additional capital on acceptable terms, or at all. If the Company cannot raise additional capital, its results of operations and financial condition could be materially and adversely affected, and it may be subject to further supervisory action. See “Regulatory Risk.” In addition, if the Company were to raise additional capital through the issuance of additional shares, its stock price could be adversely affected, depending on the terms of any shares it were to issue.

Regulatory Risk

During the second quarter of 2009, PCB entered into the Memorandum of understanding with the FRB (“FRB Memorandum”) and PCBNA entered into the Memorandum of understanding with the OCC (“OCC Memorandum”). See “Regulation and Supervision—Current Regulatory Matters” for the discussion of the terms of the FRB Memorandum and OCC Memorandum. If PCB fails to comply with the FRB Memorandum or PCBNA fails to comply with the OCC Memorandum, it may be subject to further supervisory enforcement action, which could have a material adverse effect on its results of operations, financial condition and business. In addition, PCBNA agreed during the second quarter of 2009 to maintain a minimum Tier 1 leverage ratio of 8.5% as of June 30, 2009 and 9.0% from and after September 30, 2009, and a minimum total risk based capital ratio of 11.0% as of June 30, 2009 and 12.0% from and after September 30, 2009. PCBNA had a Tier 1 leverage ratio of 5.5%, 5.6% and 5.7%, respectively, at December 31, 2009, September 30, 2009 and June 30, 2009, and a total risk based capital ratio of 10.7%, 10.8% and 11.2%, respectively, at December 31, 2009, September 30, 2009 and June 30, 2009. While these ratios exceed the minimum ratios required to be classified as “well capitalized” under generally applicable regulatory guidelines, the Tier 1 leverage ratio at December 31, 2009, September 30, 2009 and June 30, 2009 and the total risk based capital ratio at December 31, 2009 and September 30, 2009 were not sufficient to meet the higher levels that PCBNA is obligated to maintain under its agreement with the OCC. As a result, PCBNA may be subject to further supervisory action, which could have a material adverse effect on its results of operations, financial condition and business.

In addition, due to the ongoing economic downturn and the resultant deterioration in the California commercial real estate and commercial business markets and adverse impact on PCBNA’s loan portfolio and financial results, the Company and PCBNA may be the subject of additional regulatory actions in the future and face further limitations on its business. Bank regulatory authorities have the authority to bring enforcement actions against banks and bank holding companies for unsafe or unsound practices in the conduct of their businesses or for violations of any law, rule or regulation, any condition imposed in writing by the appropriate bank regulatory agency or any written agreement with the authority. Possible enforcement actions against the Company and PCBNA could include the issuance of a cease-and-desist order that could be judicially enforced, the imposition of civil monetary penalties, the issuance of directives to increase capital or enter into a strategic transaction, whether by merger or otherwise, with a third party, the appointment of a conservator or receiver for PCBNA, the

termination of insurance of deposits, the issuance of removal and prohibition orders against institution- affiliated parties, and the enforcement of such actions through injunctions or restraining orders. The imposition of any such enforcement actions would likely have an adverse effect on the Company’s results of operations, financial condition and business.

No Assurance of Profitability

The Company incurred a net loss of $431.3 million, or $9.24 per diluted common share, for the year ended December 31, 2009, primarily due to a $426.9 million provision for loan losses, a $128.7 million charge for goodwill impairment and the establishment of a $145.9 million net deferred tax asset valuation allowance. Although the Company has taken a significant number of steps to reduce its credit exposure, the Company likely will continue to incur significant credit costs throughout 2010, which Management anticipates will continue to adversely impact the Company’s overall financial performance and results of operations. There can be no assurance that the Company will achieve profitability in the future.

Change in Capital Classification

As of December 31, 2009, the Company and PCBNA each met the minimum ratios required to be classified as “well capitalized” under generally applicable regulatory guidelines. However, there is a substantial risk that the Company and PCBNA will fail to meet such requirements in future periods unless the Company is successful in executing on its three-year capital and strategic plan. If PCBNA’s regulatory capital position were to deteriorate such that it was classified as “adequately capitalized,” it might not be able to use brokered deposits as a source of funds. A “well capitalized” institution may accept brokered deposits without restriction. An “adequately capitalized” institution must obtain a waiver from the FDIC in order to accept, renew or roll over brokered deposits. In addition, certain interest-rate limits apply to the financial institution’s brokered and solicited deposits. Although an institution could seek permission from the FDIC to accept brokered deposits if it were no longer considered to be “well capitalized,” the FDIC may deny permission, or may permit the institution to accept fewer brokered deposits than the level considered desirable. If PCBNA’s level of deposits were to be reduced, either by the lack of a full brokered deposit waiver or by the interest rate limits on brokered or solicited deposits, Management anticipates that PCBNA would reduce its assets and, most likely, curtail its lending activities. Other possible consequences of classification as an “adequately capitalized” institution include the potential for increases in borrowing costs and terms from the Federal Home Loan Bank (“FHLB”) and other financial institutions and increases in FDIC insurance premiums. Such changes could have a material adverse effect on the Company’s results of operations, financial condition and business.

Dividends from the Bank

The principal source of funds from which PCB services its debt and pays its obligations and dividends is the receipt of dividends from PCBNA. The availability of dividends from PCBNA is limited by various statutes and regulations. It is also possible, depending upon the financial condition of PCBNA and other supervisory factors, that the OCC or FRB could restrict or prohibit PCBNA from paying dividends to PCB. In this regard, and as a result of the OCC Memorandum and FRB Memorandum, both OCC and FRB approval will now be required before PCBNA can pay dividends to PCB. In the event that PCBNA is unable to pay dividends to PCB, PCB in turn may not be able to service its debt, pay its obligations or pay dividends on its outstanding equity securities, which would adversely affect PCB’s business, financial condition, results of operations and prospects.

Deferral of Interest on Trust Preferred Securities and Suspension of Cash Dividends on Series B Preferred Stock

In the second quarter of 2009, the Company elected to defer regularly scheduled interest payments on its outstanding $69.4 million of junior subordinated notes relating to its trust preferred securities and to suspend cash dividend payments on its Series B Preferred Stock. During the deferral period, interest

will continue to accrue on the junior subordinated notes at the stated coupon rate, including the deferred interest, and the Company may not, among other things and with limited exceptions, pay cash dividends on or repurchase its common stock or preferred stock nor make any payment on outstanding debt obligations that rank equally with or are junior to the junior subordinated notes. As a result of the Company’s deferral of interest on the junior subordinated notes, it is likely that the Company will not be able to raise funds through the offering of debt securities until the Company becomes current on those obligations or those obligations are restructured. This deferral may also adversely affect the Company’s ability to obtain debt financing on commercially reasonable terms, or at all. As a result, the Company will likely have greater difficulty in obtaining financing and, thus, will have fewer sources to enhance its capital and liquidity position. In addition, if the Company defers interest payments on the junior subordinated notes for more than 20 consecutive quarters, the Company would be in default under the governing agreements for such notes and the amount due under such agreements would be immediately due and payable.

Also during the deferral period, cash dividends on the Series B Preferred Stock will accrue and compound on each subsequent payment date, and the Company may not, among other things and with limited exceptions, pay cash dividends on or repurchase its common stock or preferred stock that ranks equally with or is junior to the Series B Preferred Stock. If the Company misses six quarterly dividend payments on the Series B Preferred Stock, whether or not consecutive, the U.S. Treasury will have the right to appoint two directors to the Company’s board of directors until all accrued but unpaid dividends have been paid.

Rating Agency Downgrades

The major credit agencies regularly evaluate the Company’s creditworthiness and assign credit ratings to the Company and the Bank. The agencies’ ratings are based on a number of factors, some of which are not within the Company’s control. In addition to factors specific to the financial strength and performance of the Company and the Bank, the agencies also consider conditions affecting the financial services industry generally. On July 31, 2009, Moody’s Investor Services (“Moody’s”) downgraded the credit rating for the financial strength of the Bank from D+ to E+ and the short-term debt of the Bank from Prime-3 to Not Prime with the long-term debt of the Bank remaining under review for a possible downgrade. On July 31, 2009, Dominion Bond Rating Service (“DBRS”) downgraded the ratings of the Company from BB (high) to B, the senior debt of the Company from BB (high) to B, and the deposits and senior debt of the Bank from BBB to BB, with all ratings remaining under review with negative implications. On December 24, 2009, Moody’s downgraded the credit ratings of the Company from Caa1 to C and the long term deposits of the Bank from B1 to B3 with the financial strength rating being under review for a possible downgrade. On December 24, 2009, DBRS downgraded their credit ratings for the Company from B to CCC and the deposits and senior debt of the Bank from BB to B with all ratings remaining under review with negative implications. On February 1, 2010, DBRS downgraded the credit ratings for the Company from CCC to CC and the senior debt of the Bank from B to CCC (high). These lower ratings, and any further ratings downgrades, could make it more difficult for the Company and the Bank to access the capital markets going forward, as the cost to borrow or raise debt or equity capital could become more expensive. Although the cost of the Bank’s primary funding sources (deposits and FHLB borrowings) is not influenced directly by the Bank’s credit ratings, no assurance can be given that the Company’s and the Bank’s credit ratings will not have any impact on the Bank’s access to deposits and FHLB borrowings. Long-term debt ratings also factor into the calculation of deposit insurance premiums, and a reduction in the Bank’s ratings would increase premiums and expense.

Continued Listing on The NASDAQ Global Select Market

The Company’s common stock is listed on The NASDAQ Global Select Market. The listing standards of The NASDAQ Global Select Market provide, among other things, that a company may be delisted if

the bid price of its stock drops below $1.00 for a period of 30 consecutive business days. The closing price of the Company’s common stock was $1.20 per share on March 1, 2010. However, there were a number of days during the fourth quarter of 2009 that the stock price was below $1.00 per share. If the Company fails to comply with the listing standards applicable to issuers listed on The NASDAQ Global Select Market, the Company’s common stock may be delisted from The NASDAQ Global Select Market. The delisting of the Company’s common stock would significantly affect the ability of investors to trade the Company’s securities and would likely reduce the liquidity and market price of the Company’s common stock. In addition, the delisting of the Company’s common stock could also materially adversely affect the Company’s ability to raise capital on terms acceptable to the Company or at all. Delisting from The NASDAQ Global Select Market could also have other negative results, including the potential loss of confidence by customers and employees and the loss of institutional investor interest in the Company’s common stock.

Difficult Economic Conditions

The Company’s success depends, to a certain extent, upon economic and political conditions, local and national, as well as governmental monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond the Company’s control may adversely affect the Company’s asset quality, deposit levels and loan demand and, therefore, earnings.

Dramatic declines in the housing market, with falling home prices and increasing delinquencies and foreclosures, have negatively impacted the credit performance of mortgage and construction loans and resulted in significant write-downs of asset values by the Company and many other financial institutions. General downward economic trends, reduced availability of commercial credit and increasing unemployment have negatively impacted the credit performance of commercial and consumer credit, resulting in additional write-downs. The resulting write-downs to assets of financial institutions have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to seek government assistance or bankruptcy protection. Bank failures and liquidation or sales by the FDIC as receiver have also increased.

Many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers, including to other financial institutions because of concern about the stability of the financial markets and the strength of counterparties. It is difficult to predict how long these economic conditions will exist, which of the Company’s markets, products or other businesses will ultimately be most affected, and whether Management’s actions will effectively mitigate these external factors. Accordingly, the decrease in funding sources and lack of available credit, lack of confidence in the financial sector, decreased consumer confidence, increased volatility in the financial markets and reduced business activity could materially and adversely affect the Company’s business, financial condition and results of operations.

As a result of the challenges presented by economic conditions, the Company may face the following risks in connection with these events:

Inability of the Company’s borrowers to make timely repayments of their loans, or decreases in value of real estate collateral securing the payment of such loans resulting in significant credit losses, which could result in increased delinquencies, foreclosures and customer bankruptcies, any of which could have a material adverse effect on the Company’s operating results.

Increased regulation of the Company’s industry, including heightened legal standards and regulatory requirements or expectations imposed in connection with EESA and ARRA. Compliance with such regulation will likely increase the Company’s costs and may limit the Company’s ability to pursue business opportunities.

Further disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations, may result in an inability to borrow on favorable terms or at all from other financial institutions.

Increased competition among financial services companies due to the recent consolidation of certain competing financial institutions and the conversion of certain investment banks to bank holding companies, which may adversely affect the Company’s ability to market its products and services.

Further increases in FDIC insurance premiums due to the market developments which have significantly depleted the Deposit Insurance Fund (“DIF”) of the FDIC and reduced the ratio of reserves to insured deposits.

In view of the concentration of the Bank’s operations and the collateral securing the loan portfolio in California, as well as the concentration in commercial real estate loans, the Company may be particularly susceptible to the adverse economic conditions in the state of California and in the eight counties where the Company’s business is concentrated.

Legislative and Regulatory Initiatives to Address Market and Economic Conditions

EESA, which established TARP, was signed into law on October 3, 2008. As part of TARP, the U.S. Treasury established the TARP CPP to provide up to $700 billion of funding to eligible financial institutions through the purchase of capital stock and other financial instruments for the purpose of stabilizing and providing liquidity to the U.S. financial markets. Then, on February 17, 2009, the ARRA was signed into law as a sweeping economic recovery package intended to stimulate the economy and provide for broad infrastructure, energy, health, and education needs. There can be no assurance as to the actual impact that EESA or its programs, including the TARP CPP, and ARRA or its programs, will have on the national economy or financial markets. The failure of these significant legislative measures to help stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect the Company’s business, financial condition, results of operations, access to credit or the trading price of its common shares.

There have been numerous actions undertaken in connection with or following EESA and ARRA by the FRB, Congress, U.S. Treasury, the SEC and the Federal bank regulatory agencies in efforts to address the current liquidity and credit crisis in the financial industry. These measures include homeowner relief that encourages loan restructuring and modification; the temporary increase in FDIC deposit insurance from $100,000 to $250,000, the establishment of significant liquidity and credit facilities for financial institutions and investment banks; the lowering of the Federal funds rate; emergency action against short selling practices; a temporary guaranty program for money market funds; the establishment of a commercial paper funding facility to provide back-stop liquidity to commercial paper issuers; and coordinated international efforts to address illiquidity and other weaknesses in the banking sector. The purpose of these legislative and regulatory actions is to help stabilize the U.S. banking system. EESA, ARRA and the other regulatory initiatives described above may not have their desired effects. If the volatility in the markets continues and economic conditions fail to improve or worsen, the Company’s business, financial condition and results of operations could be materially and adversely affected.

Changes in Legislation and Regulation of Financial Institutions

The financial services industry is extensively regulated. PCBNA is subject to extensive regulation, supervision and examination by the OCC and the FDIC. As a holding company, the Company is subject to regulation and oversight by the FRB. The Company is now also subject to supervision, regulation and investigation by the U.S. Treasury and Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) under EESA by virtue of its participation in the TARP

CPP. Federal and State regulation is designed primarily to protect the deposit insurance funds and consumers, and not to benefit the Company’s shareholders. Such regulations can at times impose significant limitations on the Company’s operations. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and assessment of the adequacy of an institution’s allowance for loan losses (“ALL”). Proposals to change the laws governing financial institutions are frequently raised in Congress and before bank regulatory authorities. Changes in applicable laws or policies could materially affect the Company’s business, and the likelihood of any major changes in the future and their effects are impossible to determine. Moreover, it is impossible to predict the ultimate form any proposed legislation might take or how it might affect the Company.

Strength and Stability of Other Financial Institutions

The actions and commercial soundness of other financial institutions could affect the Company’s ability to engage in routine funding transactions. Financial services to institutions are interrelated as a result of trading, clearing, counterparty or other relationships. The Company has exposure to different industries and counterparties, and executes transactions with various counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. Recent defaults by financial services institutions, and even rumors or questions about one or more financial services institutions or the financial services industry in general, have led to market-wide liquidity problems and could lead to losses or defaults by the Company or by other institutions. Many of these transactions expose the Company to credit risk in the event of default of its counterparty or client. In addition, the Company’s credit risk may increase when the collateral held by it cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to the Company. Any such losses could materially and adversely affect the Company’s results of operations.

Unprecedented Market Volatility

The capital and credit markets have been experiencing volatility and disruption for more than two years. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers seemingly without regard to those issuers’ underlying financial strength. If current levels of market disruption and volatility continue or worsen, there can be no assurance that the Company will not experience an adverse effect, which may be material, on the Company’s ability to access capital and on the business, financial condition and results of operations.

The market price for the Company’s common stock has been volatile in the past, and several factors could cause the price to fluctuate substantially in the future, including:

announcements of developments related to the Company’s business;

fluctuations in the Company’s results of operations;

sales of substantial amounts of the Company’s securities into the marketplace;

general conditions in the Company’s markets or the worldwide economy;

a shortfall in revenues or earnings compared to securities analysts’ expectations;

changes in analysts’ recommendations or projections and

disclosure of adverse regulatory developments.

Estimating the Allowance for Loan Losses

The allowance for loan losses may not be adequate to cover actual losses. A significant source of risk arises from the possibility that the Company could sustain losses because borrowers, guarantors, and related parties may fail to perform in accordance with the terms of their loans. The underwriting and

credit monitoring policies and procedures that the Company has adopted to address this risk may not prevent unexpected losses. These losses could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows. Management maintains an allowance for loan and lease losses to provide for loan defaults and non-performance. The allowance is also appropriately increased for new loan growth. Management believes that the allowance for loan losses is adequate to cover current losses. Management expects, however, to make additional provisions for loan losses for the next several quarters, through 2010, and possibly beyond, due to the anticipated ongoing deterioration in the local and national real estate markets and economies. In addition, federal regulators periodically evaluate the adequacy of the Company’s allowance for loan losses and may require the Company to increase its provision for loan losses or recognize further loan charge-offs based on judgments different from those of Management.

Liquidity Risk

Liquidity is essential to the Company’s business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a material adverse effect on the Company’s liquidity. The Company’s access to funding sources in amounts adequate to finance the Company’s activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact the Company’s access to liquidity sources include a decrease in the level of the Company’s business activity due to a market downturn, adverse regulatory action against the Company or the Bank, a reduction in the Company’s credit ratings, an increase in costs of capital in financial capital markets, or a decrease in depositor or investor confidence in the Company. The Bank’s ability to acquire deposits or borrow could also be impaired by factors that are not specific to the Company, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole as the recent turmoil faced by financial institutions in the domestic and worldwide credit markets deteriorates.

Interest Rate Risk

The banking industry is subject to interest rate risk and variations in interest rates may negatively affect the Company’s financial performance. A substantial portion of the Bank’s income is derived from the differential or “spread” between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Because of the inherent differences in the maturities and repricing characteristics of the Bank’s interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Fluctuations in interest rates could adversely affect the Bank’s interest rate spread and, in turn, the Company’s profitability. In addition, loan origination volumes are affected by market interest rates. Rising interest rates, generally, are associated with a lower volume of loan originations while lower interest rates are usually associated with higher loan originations. Conversely, in rising interest rate environments, loan repayment rates may decline and in falling interest rate environments, loan repayment rates may increase. In addition, in a rising interest rate environment, Management may need to accelerate the pace of rate increases on the Bank’s deposit accounts as compared to the pace of future increases in short-term market rates. Accordingly, changes in levels of market interest rates could materially and adversely affect the Bank’s net interest spread, asset quality and loan origination volume.

Concentration of Commercial Real Estate Loans and Commercial Business Loans

At December 31, 2009, $1.93 billion, or 37.4% of the Bank’s loan portfolio consisted of commercial real estate loans. Commercial real estate loans constitute a greater percentage of the Bank’s loan portfolio than any other loan category, including residential real estate loans secured by one to four family units, which totaled $971.7 million, or 18.8% of the Bank’s total loan portfolio at December 31, 2009. In addition, at December 31, 2009, $977.4 million, or 18.9% of the Bank’s loan portfolio consisted of

commercial loans. Commercial real estate loans and commercial loans generally expose a lender to greater risk of non-payment and loss than one to four family loans because repayment of the loans often depends on the successful operation of the property and/or the income stream of the borrower. Commercial loans expose the Company to additional risks since they are generally secured by business assets that may depreciate over time. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one to four family loans. Also, many of the Bank’s commercial borrowers have more than one loan outstanding with the Company. Consequently, an adverse development with respect to one loan or one credit relationship can expose the Company to a significantly greater risk of loss compared to an adverse development with respect to a one to four family loan. Changes in economic conditions that are out of the control of the borrower and lender could impact the value of the security for the loan, the future cash flow of the affected property or borrower, or the marketability of a construction project with respect to loans originated for the acquisition and development of property. Additionally, any decline in real estate values may be more pronounced with respect to commercial real estate properties than residential real estate properties. While Management intends to reduce the concentration of such loans in the Bank’s loan portfolio, there can be no assurance that Management will be successful in doing so.

Non Performing Assets

At December 31, 2009, the Bank’s nonperforming loans (which consist of non-accrual loans) totaled $397.8 million, or 7.70% of the Bank’s loan portfolio. At December 31, 2009, the Bank’s non-performing assets (which include foreclosed real estate) were $437.0 million, or 5.79% of assets. In addition, the Bank had approximately $78.9 million in accruing loans that were 30-89 days delinquent at December 31, 2009. The Bank’s non-performing assets adversely affect the Company’s net income in various ways. Until economic and market conditions improve, the Bank expects to continue to incur additional losses relating to an increase in non-performing loans. The Bank does not record interest income on non-accrual loans or other real estate owned, thereby adversely affecting the Bank’s income, and increasing the Bank’s loan administration costs. When the Bank takes collateral in foreclosures and similar proceedings, Management is required to mark the related loan to the then fair market value of the collateral, which may result in a loss. These loans and other real estate owned also increase the Bank’s risk profile and the capital the regulators believe is appropriate in light of such risks. While the Bank has reduced its problem assets through loan sales, workouts, restructurings and otherwise, decreases in the value of these assets, or the underlying collateral, or in these borrowers’ performance or financial conditions, whether or not due to economic and market conditions beyond the Company’s control, could adversely affect the Company’s business, results of operations and financial condition. In addition, the resolution of nonperforming assets requires significant commitments of time from Management and the board of directors, which can be detrimental to the performance of their other responsibilities. There can be no assurance that the Bank will not experience further increases in nonperforming loans in the future, or that nonperforming assets will not result in further losses in the future.

Competition from Financial Service Companies

The Company faces increased strong competition from financial services companies and other companies that offer banking services. The Company conducts most of its operations in California. Increased competition in its markets may result in reduced loans and deposits. Ultimately, the Company may not be able to compete successfully against current and future competitors as many competitors offer some of the banking services that the Bank offers in service areas. These competitors include national banks, regional banks and other community banks. The Company also faces competition from many other types of financial institutions, including savings institutions, industrial banks, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In particular, the Bank’s competitors include major financial companies whose greater resources may afford them a marketplace advantage by enabling them to

maintain numerous locations and mount extensive promotional and advertising campaigns. Areas of competition include interest rates for loans and deposits, efforts to obtain loan and deposit customers and a range in quality of products and services provided, including new technology-driven products and services. If the Bank is unable to attract and retain banking customers, it may be unable to continue loan growth and level of deposits.

FDIC Premiums

FDIC insurance premiums increased substantially in 2009, and the Bank expects to pay significantly higher FDIC premiums in the future. The FDIC has recently been considering different methodologies by which it may increase premium amounts, because the costs associated with bank resolutions or failures have substantially depleted the Deposit Insurance Fund. In November 2009, the FDIC voted to require insured depository institutions to prepay slightly over three years of estimated insurance assessments. While the Bank was able to obtain an exemption from this prepayment requirement due to its current financial condition, the increase in premiums significantly increased the Company’s non-interest expense in 2009, and may continue to do so for the foreseeable future.

Operational Risk

Operational risk represents the risk of loss resulting from the Company’s operations, including but not limited to, the risk of fraud by employees or persons outside the Company, the execution of unauthorized transactions, transaction processing errors by employees, and breaches of internal control system and compliance requirements. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation and customer attrition due to negative publicity.

Operational risk is inherent in all business activities and the management of this risk is important to the achievement of the Company’s objectives. In the event of a breakdown in the internal control system, improper operation of systems or improper employee actions, the Company could suffer financial loss, face regulatory action and suffer damage to its reputation. The Company manages operational risk through a risk management framework and its internal control processes. The Company believes that it has designed effective methods to minimize operational risks. Business disruption could occur in the event of a disaster and there is no absolute assurance that operational losses would not occur.

Reputation Risk

Reputation risk, or the risk to the Company’s earnings and capital from negative publicity or public opinion, is inherent in Company’s business. Negative publicity or public opinion could adversely affect the Bank’s ability to keep and attract customers and expose the Company to adverse legal and regulatory consequences. Negative public opinion could result from the Company’s actual or perceived conduct in any number of activities, including lending practices, corporate governance, regulatory compliance, mergers and acquisitions, and disclosure, sharing or inadequate protection of customer information, and from actions taken by government regulators and community organizations in response to that conduct.

Restrictions Resulting from Participation in the TARP CPP

Pursuant to the terms of the Securities Purchase Agreement, the Company’s ability to declare or pay dividends on any of the Company’s shares is limited. Specifically, the Company may not declare cash dividends on common shares, junior preferred shares or pari passu preferred shares when the Company is in arrears on the payment of dividends on the Series B Preferred Stock. Further, the Company is not permitted to increase dividends on its common shares above the amount of the last quarterly cash dividend per share declared prior to October 14, 2008 ($0.22 per share) without the U.S. Treasury’s approval until November 21, 2011, unless all of the Series B Preferred Stock has been

redeemed or transferred by the U.S. Treasury to unaffiliated third parties. In addition, the Company’s ability to repurchase its shares is restricted. The consent of the U.S. Treasury generally is required for the Company to make any stock repurchase (other than in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice) until November 21, 2011, unless all of the Series B Preferred Stock has been redeemed or transferred by the U.S. Treasury to unaffiliated third parties. Further, common shares, junior preferred shares or pari passu preferred shares may not be repurchased when the Company is in arrears on the payment of Series B Preferred Stock dividends. The terms of the Securities Purchase Agreement allow the U.S. Treasury to impose additional restrictions, including those on dividends and including unilateral amendments required to comply with changes in applicable Federal law.

In addition, pursuant to the terms of the Securities Purchase Agreement, the Company adopted the U.S. Treasury’s current standards for executive compensation and corporate governance for the period during which the U.S. Treasury holds the equity securities issued pursuant to the Securities Purchase Agreement, including the common shares which may be issued upon exercise of the Warrant. These standards generally apply to the SEOs and other highly-compensated employees. The standards include (i) ensuring that incentive compensation plans and arrangements for SEOs do not encourage unnecessary and excessive risks that threaten the Company’s value; (ii) required clawback of any bonus or incentive compensation paid (or under a legally binding obligation to be paid) to the SEOs and next 20 most highly-compensated employees based on materially inaccurate financial statements or other materially inaccurate performance metric criteria; (iii) prohibition on making “golden parachute payments” to SEOs and five most highly-compensated employees; and (iv) agreement not to claim a deduction, for Federal income tax purposes, for compensation paid to any of the SEOs in excess of $500,000 per year. In particular, the change to the deductibility limit on executive compensation will likely increase the overall cost of the Company’s compensation programs in future periods.

The adoption of the ARRA on February 17, 2009 imposed certain new executive compensation and corporate expenditure limits on all current and future TARP recipients, including the Company, until the institution has repaid the U.S. Treasury, which is now permitted under the ARRA without penalty and without the need to raise new capital, subject to the U.S. Treasury’s consultation with the recipient’s appropriate regulatory agency. The executive compensation standards are more stringent than those currently in effect under the TARP CPP or those previously proposed by the U.S. Treasury. The new standards include (but are not limited to) (i) prohibitions on bonuses, retention awards and other incentive compensation payable to the five most highly-compensated employees, other than restricted stock grants which do not fully vest during the TARP period up to one-third of an employee’s total annual compensation, (ii) prohibitions on golden parachute payments payable to the SEOs and five most highly-compensated employees for departure from a company or upon a change in control, (iii) an expanded clawback of bonuses, retention awards, and incentive compensation if payment is based on materially inaccurate statements of earnings, revenues, gains or other criteria, (iv) prohibitions on compensation plans that encourage manipulation of reported earnings, (v) retroactive review of bonuses, retention awards and other compensation previously provided by TARP recipients if found by the Treasury to be inconsistent with the purposes of TARP or otherwise contrary to public interest, (vi) required establishment of a company-wide policy regarding “excessive or luxury expenditures,” and (vii) inclusion in a participant’s proxy statements for annual shareholder meetings of a nonbinding “Say on Pay” shareholder vote on the compensation of executives.

Future Sales of Securities

Under certain circumstances, the Company’s Board of Directors has the authority, without any vote of the Company’s shareholders, to issue shares of the Company’s authorized but unissued securities, including common shares authorized and unissued under the Company’s stock option plans or additional shares of preferred stock. In the future, the Company may issue additional securities, through public or private offerings, in order to raise additional capital. It is also possible that the

Company’s regulators will require the Company to raise additional capital. Any such issuance would dilute the percentage of ownership interest of existing shareholders and may dilute the per share value of the common shares or any other then-outstanding class or series of the Company’s securities.

Increased Likelihood of Class Action Litigation and Additional Regulatory Enforcement

The market price of the Company’s common stock has declined substantially over the past year. This decline could result in shareholder class action lawsuits, such as the securities class actions described in Note 18, “Commitments and Contingencies” in the Consolidated Financial Statements in this Form 10-K, even if the activities subject to complaint are not unlawful, and even if the lawsuits are ultimately unsuccessful. Recent events in financial markets and negative publicity may result in more regulation and legislative scrutiny of the Company’s industry practices and may cause additional exposure to increased shareholder litigation and additional regulatory enforcement actions, which would adversely affect the Company’s business.

Reverse Stock Split

At the Company’s special meeting of shareholders held on September 29, 2009, the Company’s shareholders approved a proposal to effect a reverse stock split of the Company’s common stock by a ratio of not less than one-for-three and not more than one-for-ten, with the exact ratio to be set at a whole number within this range as determined by the Company’s Board of Directors in its sole discretion, and authorized the Board of Directors to effect the reverse stock split at any time prior to August 31, 2010 unless the Company’s Board of Directors elects to abandon the reverse stock split after a determination that it is no longer in the best interests of the Company and its shareholders. Reducing the number of outstanding shares of the Company’s common stock through the reverse stock split is intended, absent other factors, to increase the per share market price of the Company’s common stock. However, other factors, such as the Company’s financial results, market conditions and the market perception of the Company’s business, may adversely affect the market price of the Company’s common stock. As a result, there can be no assurance that the reverse stock split, if completed, will result in making the Company’s common stock more attractive to a broader range of institutional and other investors, that the per share market price of the Company’s common stock will increase following the reverse stock split or that the per share market price of the Company’s common stock will not decrease in the future. Additionally, Management cannot assure shareholders that the per share market price per share of the Company’s common stock after the reverse stock split, if completed, will increase in proportion to the reduction in the number of shares of the Company’s common stock outstanding before the reverse stock split. Accordingly, the total market capitalization of the Company’s common stock after the reverse stock split may be lower than the total market capitalization before the reverse stock split.

Anti-Takeover Provisions

Various provisions of the Company’s articles of incorporation and bylaws could delay or prevent a third-party from acquiring the Company even if doing so might be beneficial to the Company’s shareholders. The Bank Holding Company Act of 1956 (“BHCA”), as amended, and the Change in Bank Control Act of 1978, as amended, together with Federal regulations, require that, depending on the particular circumstances, either regulatory approval must be obtained or notice must be furnished to the appropriate regulatory agencies and not disapproved prior to any person or entity acquiring “control” of a national bank, such as PCBNA. These provisions may prevent a merger or acquisition that would be attractive to shareholders and could limit the price investors would be willing to pay in the future for the Company’s common stock.

Dependence on Personnel

Competition for qualified employees and personnel in the banking industry is intense and there are a limited number of qualified persons with knowledge of, and experience in, the California banking

industry. The process of recruiting personnel with the combination of skills and attributes required to carry out the Company’s strategies is often lengthy. In addition, EESA, TARP CPP and the ARRA has imposed significant limitations on executive compensation for recipients of TARP funds, such as PCB, which may make it more difficult for the Company to retain and recruit key personnel. The Company’s financial success depends to a significant degree on the Company’s ability to attract and retain qualified management, loan origination, finance, administrative, marketing and technical personnel and upon the continued contributions of the Company’s management and personnel. In particular, the Company’s success has been and continues to be highly dependent upon the abilities of key executives, including the Company’s President, and certain other employees.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

The Company is currently reviewing all locations to ensure that the locations leased and owned are fully occupied and that the retail branch locations are consistent with the strategic initiatives of the Company and continue to meet the needs of the Bank’s customers.

The Company’s executive offices are located at 1021 Anacapa Street in Santa Barbara, California. Management is currently in the process of negotiating with the owners of the building for an early termination of the operating lease. In addition, the Company occupies six administrative offices for support department operations in Santa Barbara, Ventura, Monterey and Los Angeles counties. These offices include human resources, information technology, loan and deposit operations, finance and accounting, and other support functions. As of December 31, 2008, the Company had five administrative offices for support department operations. The increase in administrative offices in 2009 relates to a loan production office that is currently included as an administrative support office in Monterey County that no longer produces loans. As result, this office is now only used for administrative support and included above.

Of the Company’s 50 locations which collect deposits and provide banking services, 37 are leased and 13 are owned. These 50 locations are located in the Los Angeles, Monterey, San Benito, San Luis Obispo, Santa Barbara, South Santa Clara, Santa Cruz, and Ventura Counties.

As of December 31, 2008, the Company had 51 locations. The activity in 2009 included the closure of the North Lompoc and South Broadway branches and the opening of the retail branch location within a retirement community in Santa Barbara County. In addition, the master lease on a retail shopping center where one of its retail branches is located was assigned in July 2009 as disclosed in Note 14, “Long-Term Debt and Other Borrowings” of the Consolidated Financial Statements. As part of the strategic initiatives discussed above, two retail locations in Buellton and Vandenberg Village are being consolidated into nearby locations and are scheduled to close in April 2010 and two CWMG locations in San Jose and Calabasas were closed in January and February 2010, respectively.

The Company also occupies 13 loan production offices that include administrative support. Of the 13 locations, 11 are leased and two are owned. The offices are located in Santa Barbara, Monterey, San Benito, South Santa Clara, San Diego, San Luis Obispo, and Los Angeles Counties. These production offices originate various loan products including SBA, RALs, commercial real estate, residential real estate, commercial, consumer and private banking. Included in these 13 loan offices, are two leases for the offices for the RAL and RT Program operations which have subsequently been assumed by the purchaser as part of the sale of the RAL and RT Programs on January 14, 2010. For more information on the RAL and RT Program sale, refer to Note 26, “Subsequent Events” of the Consolidated Financial

Statements. As of December 31, 2008, the Company had 17 loan production offices that include administrative support. The decrease during 2009 is result of the closing of three offices that were located in Monterey, Orange and Sacramento Counties. Also, as mentioned above, there was one office in Monterey that no longer offers loan products.

In addition, the Company has several locations that are leased and owned for storage, parking and administrative support offices that are vacant and are not included in the numbers disclosed above. The administrative offices consist of a building capital lease in Santa Barbara and a CWMG location in Ventura County, both of which are expected to be occupied in 2010.

ITEM 3.

LEGAL PROCEEDINGS

The Company has been named in lawsuits filed by customers and others. These lawsuits are described in Note 18, “Commitments and Contingencies” in the Consolidated Financial Statements beginning on page 156. The Company does not expect that these suits will have any material impact on its financial condition or operating results.

The Company is involved in various other litigation of a routine nature that is being handled and defended in the ordinary course of the Company’s business. In the opinion of Management, based in part on consultation with legal counsel, the resolution of these litigation matters will not have a material impact on the Company’s financial condition or operating results.

ITEM 4.

RESERVED

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following exhibits are filed as part of this Annual Report on Form 10-K/A (Amendment No. 1):


Exhibit Number		Description

31		Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

		31.1 Certification of George S. Leis.

		31.2 Certification of Donald Lafler.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed by the undersigned, thereunto duly authorized.


Pacific Capital Bancorp

By /s/ George S. Leis George S. Leis		March 16, 2010 Date
President and Chief Executive Officer

By /s/ Donald Lafler Donald Lafler		March 16, 2010 Date
Interim Chief Executive Officer

EXHIBIT INDEX TO PACIFIC CAPITAL BANCORP FORM 10-K/A (AMENDMENT NO. 1) FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009


Exhibit Number		Description

31		Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

		31.1 Certification of George S. Leis.

		31.2 Certification of Donald Lafler.

Attached files

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

PACIFIC CAPITAL BANCORP /CA/ Reports

Also read