WEST COAST BANCORP /NEW/OR/ - FORM 10-Q

Attached files

file	filename
EX-31.1 - CERTIFICATION OF CEO UNDER RULE 13(A) - 14(A) OF THE EXCHANGE ACT - WEST COAST BANCORP /NEW/OR/	exhibit31-1.htm
EX-31.2 - CERTIFICATION OF CFO UNDER RULE 13(A) - 14(A) OF THE EXCHANGE ACT - WEST COAST BANCORP /NEW/OR/	exhibit31-2.htm
EX-32 - CERTIFICATION OF CEO AND CFO UNDER 18 U.S.C. SECTION 1350 - WEST COAST BANCORP /NEW/OR/	exhibit32.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2011

Commission file number: 0-10997

WEST COAST BANCORP
(Exact name of registrant as specified in its charter)

Oregon		93-0810577
(State or other jurisdiction		I.R.S. Employer Identification Number
of incorporation or organization)

5335 Meadows Road – Suite 201, Lake Oswego, Oregon 97035
(Address of principal executive offices)(Zip code)

(503) 684-0884
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ ] No [ ]

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

[ ] Large Accelerated Filer [ X ] Accelerated Filer [ ] Non-accelerated Filer [ ] 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 ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, no par value: 96,415,607 shares outstanding as of March 31, 2011

Table of Contents

			PAGE
PART I: FINANCIAL INFORMATION			3

	Item 1.	Financial Statements (Unaudited)	3
		CONSOLIDATED BALANCE SHEETS	3
		CONSOLIDATED STATEMENTS OF INCOME (LOSS)	4
		CONSOLIDATED STATEMENTS OF CASH FLOWS	5
		CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	7
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

	Item 4.	Controls and Procedures	46

PART II: OTHER INFORMATION			47

	Item 1.	Legal Proceedings	47

	Item 1A.	Risk Factors	47

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

	Item 3.	Defaults Upon Senior Securities	48

	Item 4.	[Reserved]	48

	Item 5.	Other Information	48

	Item 6.	Exhibits	48

SIGNATURES			49

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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)

WEST COAST BANCORP
CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
(Dollars and shares in thousands, unaudited)	2011			2010
ASSETS

Cash and cash equivalents:
Cash and due from banks	$	50,865		$	42,672
Federal funds sold		1,966			3,367
Interest-bearing deposits in other banks		122,224			131,952
Total cash and cash equivalents		175,055			177,991
Trading securities		771			808
Investment securities available for sale, at fair value
(amortized cost: $644,819 and $645,246, respectively)		643,705			646,112
Federal Home Loan Bank stock, held at cost		12,148			12,148
Loans held for sale		1,414			3,102
Loans		1,535,700			1,536,270
Allowance for loan losses		(39,692	)		(40,217	)
Loans, net		1,496,008			1,496,053
Premises and equipment, net		26,601			26,774
Other real estate owned, net		39,329			39,459
Core deposit intangible, net		298			358
Bank owned life insurance		25,502			25,313
Other assets		31,026			32,941
Total assets	$	2,451,857		$	2,461,059

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
Demand	$	561,995		$	555,766
Savings and interest bearing demand		461,542			445,878
Money market		661,327			663,467
Time deposits		243,567			275,411
Total deposits		1,928,431			1,940,522

Long-term borrowings		168,599			168,599
Junior subordinated debentures		51,000			51,000
Other liabilities		26,839			28,378
Total liabilities		2,174,869			2,188,499

Commitments and contingent liabilities (Note 7)

Stockholders' equity:
Preferred stock: no par value, 10,000 shares authorized;
Series B issued and outstanding: 121 at March 31, 2011 and December 31, 2010		21,124			21,124
Common stock: no par value, 250,000 shares authorized;
issued and outstanding: 96,416 at March 31, 2011 and 96,431 at December 31, 2010		230,254			229,722
Retained earnings		26,280			21,175
Accumulated other comprehensive (loss) gain		(670	)		539
Total stockholders' equity		276,988			272,560
Total liabilities and stockholders' equity	$	2,451,857		$	2,461,059

See notes to consolidated financial statements.

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WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF INCOME (LOSS)

	Three months ended
	March 31,
(Dollars and shares in thousands, except per share amounts)	2011			2010
INTEREST INCOME:
Interest and fees on loans	$	20,299		$	22,843
Interest on taxable investment securities		4,069			3,611
Interest on nontaxable investment securities		479			596
Interest on deposits in other banks		70			145
Interest on federal funds sold		1			3
Total interest income		24,918			27,198

INTEREST EXPENSE:
Savings, interest bearing demand deposits and money market		752			1,620
Time deposits		1,057			2,673
Short-term borrowings		-			145
Long-term borrowings		1,321			1,857
Junior subordinated debentures		276			270
Total interest expense		3,406			6,565
Net interest income		21,512			20,633
Provision for credit losses		2,076			7,634
Net interest income after provision for credit losses		19,436			12,999

NONINTEREST INCOME:
Service charges on deposit accounts		3,644			3,596
Payment systems related revenue		2,930			2,536
Trust and investment services revenue		1,148			979
Gains on sales of loans		513			141
Other real estate owned valuation adjustments and (loss) gain on sales		(334	)		(2,058	)
Other noninterest income		748			757
Gains on sales of securities		267			457
Total noninterest income		8,916			6,408

NONINTEREST EXPENSE:
Salaries and employee benefits		11,877			11,175
Equipment		1,528			1,576
Occupancy		2,165			2,184
Payment systems related expense		1,247			1,004
Professional fees		982			861
Postage, printing and office supplies		810			804
Marketing		651			687
Communications		378			382
Other noninterest expense		2,915			2,422
Total noninterest expense		22,553			21,095

INCOME (LOSS) BEFORE INCOME TAXES		5,799			(1,688	)
PROVISION (BENEFIT) FOR INCOME TAXES		694			(800	)
NET INCOME (LOSS)	$	5,105		$	(888	)

Basic earnings (loss) per share	$	0.05			($0.01	)
Diluted earnings (loss) per share	$	0.05			($0.01	)

Weighted average common shares		94,800			67,125
Weighted average diluted shares		99,694			67,125

See notes to consolidated financial statements.

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WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended
(Dollars in thousands, unaudited)	March 31, 2011			March 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	5,105		$	(888	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and accretion		2,132			2,184
Amortization of tax credits		191			271
Deferred income tax benefit		(1,090	)		(800	)
Amortization of intangibles		60			80
Provision for credit losses		2,076			7,634
Increase in accrued interest receivable		(431	)		(214	)
Decrease in other assets		931			329
Gains on sales of securities		(267	)		(457	)
Net loss on disposal of premises and equipment		8			12
Net other real estate owned valuation adjustments and (loss) gain on sales		334			2,058
Gains on sales of loans		(513	)		(141	)
Origination of loans held for sale		(11,451	)		(5,379	)
Proceeds from sales of loans held for sale		13,652			6,081
Increase in interest payable		258			222
Increase (decrease) in other liabilities		1,234			(4,937	)
Increase in cash surrender value of bank owned life insurance		(189	)		(184	)
Stock based compensation expense		544			316
Excess tax deficiency associated with stock plans		(11	)		-
Decrease (increase) in trading securities		37			(20	)
Net cash provided by operating activities		12,610			6,167

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of available for sale securities		72,090			28,317
Proceeds from sales of available for sale securities		20,154			8,909
Purchase of available for sale securities		(92,814	)		(42,854	)
Loans made to customers less (greater) than principal collected on loans		(8,385	)		45,550
Proceeds from the sale of other real estate owned		6,276			11,301
Capital expenditures on other real estate owned		(125	)		(1,116	)
Capital expenditures on premises and equipment		(650	)		(522	)
Net cash provided (used) by investing activities		(3,454	)		49,585

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WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

	Three months ended
(Dollars in thousands, unaudited)	March 31, 2011			March 31, 2010
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand, savings and interest
bearing transaction accounts		19,753			(52,733	)
Net decrease in time deposits		(31,844	)		(28,728	)
Increase in secured borrowings		-			2,834
Proceeds from issuance of common stock-Rights Offering		-			10,000
Costs of issuance of common stock-Rights Offering		-			(700	)
Proceeds from issuance of common stock - stock options		11			-
Redemption of stock pursuant to stock plans		(10	)		(1	)
Activity in deferred compensation plan		(2	)		20
Net cash used by financing activities		(12,092	)		(69,308	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(2,936	)		(13,556	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		177,991			303,097
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	175,055		$	289,541

See notes to consolidated financial statements.

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WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

											Accumulated
											Other
(Shares and dollars in thousands, unaudited)	Preferred			Common Stock					Retained		Comprehensive
	Stock			Shares		Amount			Earnings		Income (Loss)			Total
BALANCE, January 1, 2010	$	139,248		15,641		$	93,246		$	17,950	$	(1,386	)	$	249,058
Comprehensive income:
Net income		-		-			-			3,225		-		$	3,225
Other comprehensive income, net of tax:
Net unrealized investment gain		-		-			-			-		1,925			1,925
Other comprehensive income, net of tax		-		-			-			-		-			1,925
Comprehensive income		-		-			-			-		-		$	5,150

Redemption of stock pursuant to stock plans		-		(58	)		(35	)		-		-			(35	)
Conversion of Series A preferred stock		(118,124	)	71,442			118,124			-		-			-
Issuance of common stock-Rights Offering, net of costs				5,000			9,350			-		-			9,350
Issuance of common stock-Discretionary Program, net of costs				2,804			7,039			-		-			7,039
Activity in deferred compensation plan		-		(13	)		262			-		-			262
Issuance of common stock-stock options		-		2			4			-		-			4
Issuance of common stock-restricted stock		-		1,613			-			-		-			-
Stock based compensation expense		-		-			2,089			-		-			2,089
Tax adjustment associated with stock plans		-		-			(357	)		-		-			(357	)
BALANCE, December 31, 2010		21,124		96,431			229,722			21,175		539			272,560

Comprehensive income:
Net income		-		-			-			5,105		-		$	5,105
Other comprehensive loss, net of tax:
Net unrealized investment loss		-		-			-			-		(1,209	)		(1,209	)
Other comprehensive loss, net of tax		-		-			-			-		-			(1,209	)
Comprehensive income		-		-			-			-		-		$	3,896

Redemption of stock pursuant to stock plans		-		(26	)		(10	)		-		-			(10	)
Issuance of common stock-stock options		-		5			11			-		-			11
Issuance of common stock-restricted stock		-		7			-			-		-			-
Activity in deferred compensation plan		-		(1	)		(2	)		-		-			(2	)
Stock based compensation expense		-		-			544			-		-			544
Tax adjustment associated with stock plans		-		-			(11	)		-		-			(11	)
BALANCE, March 31, 2011	$	21,124		96,416		$	230,254		$	26,280	$	(670	)	$	276,988

See notes to consolidated financial statements.

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WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION

The interim unaudited consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information. In addition, this report has been prepared in accordance with the instructions for Form 10-Q, and therefore, these financial statements do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. The accompanying interim consolidated financial statements include the accounts of West Coast Bancorp (“Bancorp” or the “Company”), and its wholly-owned subsidiaries, West Coast Bank (the “Bank”), West Coast Trust Company, Inc and Totten, Inc., after elimination of intercompany transactions and balances. The Company’s interim consolidated financial statements and related notes should be read in conjunction with the audited financial statements and related notes, including our significant accounting policies, contained in the Annual Report on Form 10-K for the year ended December 31, 2010 (“2010 10-K”).

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The financial information contained in this report reflects all adjustments of a normal, recurring nature that, in the opinion of management, are necessary for a fair presentation of the results of the interim periods. The results of operations and cash flows for the three months ended March 31, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011, or other future periods.

Supplemental cash flow information. The following table presents supplemental cash flow information for the three months ended March 31, 2011, and 2010.

(Dollars in thousands)	Three months ended
	March 31,
	2011			2010
Supplemental cash flow information:
Cash paid in the period for:
Interest	$	3,148		$	6,343
Income taxes		4,650		$	-

Noncash investing and financing activities:
Change in unrealized gain (loss) on available
for sale securities, net of tax	$	(1,209	)	$	2,692
Settlement of secured borrowings		(3,085	)		-
OREO and premises and equipment expenditures
accrued in other liabilities	$	169		$	259
Transfer of loans to OREO		6,354			3,847

New Accounting Pronouncements. In December 2010, the Financial Accounting Standards Board (“FASB”) issued guidance within the Accounting Standards Update (“ASU”) 2010-20 “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” ASU 2010-20 requires entities to provide disclosures designed to facilitate financial statement users’ evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (iii) the changes and reasons for those changes in the allowance for credit losses. Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systematic method for determining its allowance for credit losses, and class of financing receivable, which is generally a disaggregation of portfolio segment. The required disclosures include, among other things, a roll forward of the allowance for credit losses as well as information about modified, impaired, nonaccrual and past due loans and credit quality indicators. ASU 2010-20 became effective for the Company’s financial statements as of December 31, 2010, as it relates to disclosures required as of the end of a reporting period. Disclosures that relate to activity during a reporting period are required for the Company’s financial statements that include periods beginning on or after January 1, 2011. The adoption of this guidance did not have any impact on the Company’s consolidated statement of income (loss), its consolidated balance sheet, or its consolidated statement of cash flows.

In April 2011, the FASB issued guidance within the ASU 2011-02 “A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring.” ASU 2011-02 clarifies when a loan modification or restructuring is considered a troubled debt restructuring. This guidance is effective for the first interim or annual period beginning on or after June 15, 2011, and will be applied retrospectively to the beginning of the annual period of adoption. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated statement of income (loss), its consolidated balance sheet, or its consolidated statement of cash flows.

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2. STOCK PLANS

At March 31, 2011, Bancorp maintained two stock plans; the 2002 Stock Incentive Plan (“2002 Plan”) and the 1999 Stock Option Plan (“1999 Plan”). No additional grants may be made under the 1999 Plan. The 2002 Plan, which is shareholder approved, permits the grant of stock options, restricted stock and certain other stock based awards. On April 27, 2010, shareholders approved a 2.0 million share increase in the shares available under the 2002 Plan. The 2002 Plan permits the grant of stock options and restricted stock awards for up to 4.1 million shares, of which 514,217 shares remained available for issuance, of which 475,309 shares may be allocated to restricted stock awards as of March 31, 2011. It is Bancorp’s policy to issue new shares for stock option exercises and restricted stock. Bancorp expenses stock options and restricted stock on a straight line basis over the applicable vesting term.

Restricted stock granted under the 2002 Plan generally vests over a two to four year vesting period; however, certain grants have been made that vested over a one year period or immediately, including grants to directors.

All outstanding stock options have an exercise price that is equal to the closing market value of Bancorp’s stock on the date the options were granted. Options granted under the 2002 Plan generally vest over a two to four year vesting period; however, certain grants have been made that vested immediately, including grants to directors. Stock options have a 10 year maximum term. Options previously issued under the 1999 Plan are fully vested.

The following table presents information on stock options outstanding for the period shown:

	Three months ended
	March 31, 2011
			Weighted Average
	Common Shares		Exercise Price per share
Balance, beginning of period	1,532,634		$	13.38
Granted	-			-
Exercised	(4,950	)		2.31
Forfeited/expired	(16,482	)		12.78
Balance, end of period	1,511,202		$	13.42

The following table presents information on stock options outstanding for the periods shown, less estimated forfeitures:

	Three months ended		Three months ended
(Dollars in thousands, except share and per share data)	March 31, 2011		March 31, 2010
Stock options vested and expected to vest:
Number		1,474,425		1,593,659
Weighted average exercise price per share	$	13.42	$	13.17
Aggregate intrinsic value	$	446	$	107
Weighted average contractual term of options		4.4 years		5.2 years

Stock options vested and currently exercisable:
Number		1,279,903		1,146,786
Weighted average exercise price per share	$	14.85	$	16.04
Aggregate intrinsic value	$	274	$	19
Weighted average contractual term of options		3.8 years		3.7 years

The balance of unearned compensation related to stock options as of March 31, 2011, and March 31, 2010, was $.1 million and $.3 million, respectively.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes based stock option valuation model. Therefore, when valuing options under Black-Scholes, the Company looks at certain assumptions, including expected stock volatility which is based on implied volatility in Bancorp’s stock, historical volatility of Bancorp’s stock; expected dividend yields which is based on dividend trends and the market price of Bancorp’s stock price at time of grant; historical data to estimate option exercises and employee terminations within the valuation model; the risk-free rate for periods within the contractual life of the option which is based on the U.S. Treasury yield curve in effect at the time of grant, and certain other factors.

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2. STOCK PLANS (continued)

The following table presents information on restricted stock outstanding for the period shown:

	Three months ended
	March 31, 2011
			Weighted Average Market
	Restricted Shares		Price at Grant
Balance, beginning of period	1,636,982		$	3.80
Granted	6,827			3.49
Vested	(8,109	)		6.73
Forfeited	(22,446	)		3.42
Balance, end of period	1,613,254		$	3.79

Weighted average remaining recognition period	2.8 years

The balance of unearned compensation related to restricted stock shares as of March 31, 2011, and March 31, 2010, was $4.1 million and $1.0 million, respectively.

The following table presents stock-based compensation expense for the periods shown:

	Three months ended
	March 31,
(Dollars in thousands)	2011		2010
Restricted stock expense	$	507	$	234
Stock option expense		37		82
Total stock-based compensation expense	$	544	$	316

The income tax benefit recognized in the income statement for restricted stock compensation expense in the three months ended March 31, 2011, and March 31, 2010, was $193,000 and $89,000, respectively.

There was minimal cash received from stock option exercises for the three months ended March 31, 2011, and March 31, 2010. The Company had no tax benefits from disqualifying dispositions involving incentive stock options, the exercise of non-qualified stock options, and the vesting and release of restricted stock for the three ended March 31, 2011, and March 31, 2010.

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3. INVESTMENT SECURITIES

The following tables present the available for sale investment portfolio as of March 31, 2011, and December 31, 2010:

(Dollars in thousands)
March 31, 2011	Amortized		Unrealized		Unrealized
	Cost		Gross Gains		Gross Losses			Fair Value
U.S. Treasury securities	$	4,259	$	23	$	-		$	4,282
U.S. Government agency securities		153,637		205		(825	)		153,017
Corporate securities		14,514		-		(4,664	)		9,850
Mortgage-backed securities		403,707		4,638		(2,605	)		405,740
Obligations of state and political subdivisions		57,305		1,990		(159	)		59,136
Equity investments and other securities		11,397		326		(43	)		11,680
Total	$	644,819	$	7,182	$	(8,296	)	$	643,705

(Dollars in thousands)
December 31, 2010	Amortized		Unrealized		Unrealized
	Cost		Gross Gains		Gross Losses			Fair Value
U.S. Treasury securities	$	14,347	$	45	$	-		$	14,392
U.S. Government agency securities		193,901		836		(507	)		194,230
Corporate securities		14,499		-		(5,107	)		9,392
Mortgage-backed securities		359,965		5,853		(2,200	)		363,618
Obligations of state and political subdivisions		51,111		1,789		(255	)		52,645
Equity investments and other securities		11,423		437		(25	)		11,835
Total	$	645,246	$	8,960	$	(8,094	)	$	646,112

At March 31, 2011, the fair value of the securities in the investment portfolio was $643.7 million while the amortized cost was $644.8 million, reflecting a net unrealized loss in the portfolio of $1.1 million. At December 31, 2010, the fair value and amortized cost of securities in the investment portfolio were $646.1 million and $645.2 million, respectively, reflecting a net unrealized gain of $.9 million.

The corporate securities segment of the investment securities portfolio had a $4.7 million net unrealized loss at March 31, 2011. The unrealized loss was associated with the decline in market value of our four investments in pooled trust preferred securities issued primarily by banks and insurance companies. An increase in liquidity and credit spreads, including certain issuer defaults, and an extension of expected cash flows, including issuer elections to defer interest payments, since the purchase of these securities contributed to the unrealized loss associated with these securities at March 31, 2011. Collectively they had an amortized cost of $14.0 million and a $9.3 million estimated fair value at March 31, 2011. Compared to December 31, 2010, the estimated market value of these securities increased slightly due to a small decrease in expected duration of cash flows. These securities have several features that reduce credit risk, including seniority over certain tranches in the same pool and the benefit of certain collateral coverage tests. Based on our current estimates of the future default rates for the underlying collateral, we believe these features are sufficient to protect the Company’s securities from experiencing any credit losses.

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3. INVESTMENT SECURITIES (continued)

The following tables provide the fair value and gross unrealized losses on securities available for sale, aggregated by category and length of time the individual securities have been in a continuous unrealized loss position:

(Dollars in thousands)	Less than 12 months					12 months or more					Total
			Unrealized					Unrealized					Unrealized
March 31, 2011	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Government agency securities	$	81,204	$	(825	)	$	-	$	-			81,204		(825	)
Corporate securities		-		-			9,349		(4,664	)		9,349		(4,664	)
Mortgage-backed securities		166,586		(2,521	)		986		(84	)		167,572		(2,605	)
Obligations of state and political subdivisions		8,805		(159	)		-		-			8,805		(159	)
Equity and other securities		1,957		(42	)		1		(1	)		1,958		(43	)
Total	$	258,552	$	(3,547	)	$	10,336	$	(4,749	)	$	268,888	$	(8,296	)

(Dollars in thousands)	Less than 12 months					12 months or more					Total
			Unrealized					Unrealized					Unrealized
December 31, 2010	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Government agency securities	$	40,528	$	(507	)	$	-	$	-		$	40,528	$	(507	)
Corporate securities		-		-			8,892		(5,107	)		8,892		(5,107	)
Mortgage-backed securities		110,414		(2,088	)		978		(112	)		111,392		(2,200	)
Obligations of state and political subdivisions		4,084		(255	)		-		-			4,084		(255	)
Equity and other securities		1,776		(24	)		1		(1	)		1,777		(25	)
Total	$	156,802	$	(2,874	)	$	9,871	$	(5,220	)	$	166,673	$	(8,094	)

(Dollars in thousands)	Less than 12 months					12 months or more					Total
			Unrealized					Unrealized					Unrealized
As of March 31, 2010	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Government agency securities	$	58,102	$	(277	)	$	-	$	-		$	58,102	$	(277	)
Corporate securities		-		-			9,731		(4,220	)		9,731		(4,220	)
Mortgage-backed securities		82,278		(495	)		5,617		(664	)		87,895		(1,159	)
Obligations of state and political subdivisions		3,080		(48	)		1,879		(134	)		4,959		(182	)
Equity and other securities		1,188		(13	)		-		-			1,188		(13	)
Total	$	144,648	$	(833	)	$	17,227	$	(5,018	)	$	161,875	$	(5,851	)

At March 31, 2011, the Company had six investment securities with an amortized cost of $15.1 million and an unrealized loss of $4.8 million that have been in a continuous unrealized loss position for more than 12 months. Pooled trust preferred securities accounted for $4.7 million of the unrealized loss in these securities.

There were a total of 36 securities in Bancorp’s investment portfolio with an amortized cost of $262.1 million and a total unrealized loss of $3.5 million at March 31, 2011, that have been in a continuous unrealized loss position for less than 12 months. The unrealized loss on these investment securities was predominantly caused by changes in market interest rates, average life or credit spreads subsequent to purchase. The fair value of most of our securities fluctuates as market interest rates change.

Based on management’s review and evaluation of the Company’s debt securities, the debt securities with unrealized losses were not considered to have other-than-temporary impairment (“OTTI”). The Company does not intend to sell any debt securities which have an unrealized loss, it is unlikely the Company will be required to sell these securities before recovery, and we expect to recover the entire amortized cost of these impaired securities.

At March 31, 2011, and December 31, 2010, the Company had $340.2 and $504.0 million, respectively, in investment securities being provided as collateral to the Federal Home Loan Bank of Seattle (“FHLB”), the Federal Reserve Bank of San Francisco (“Reserve Bank”), the State of Oregon and the State of Washington, and others for our borrowings and certain public fund deposits. At March 31, 2011, and December 31, 2010, Bancorp had no reverse repurchase agreements.

- 12 -

3. INVESTMENT SECURITIES (continued)

The following table presents the contractual maturities of the investment securities available for sale at March 31, 2011:

(Dollars in thousands)	Available for sale
March 31, 2011	Amortized cost		Fair value
U.S. Treasury securities
One year or less	$	4,059	$	4,073
After one year through five years		200		209
After five through ten years		-		-
Due after ten years		-		-
Total		4,259		4,282

U.S. Government agency securities:
One year or less		-		-
After one year through five years		123,385		123,131
After five through ten years		30,252		29,886
Due after ten years		-		-
Total		153,637		153,017

Corporate securities:
One year or less		-		-
After one year through five years		500		500
After five through ten years		-		-
Due after ten years		14,014		9,350
Total		14,514		9,850

Obligations of state and political subdivisions:
One year or less		6,636		6,711
After one year through five years		10,911		11,551
After five through ten years		30,022		31,121
Due after ten years		9,736		9,753
Total		57,305		59,136

Sub-total		229,715		226,285

Mortgage-backed securities		403,707		405,740
Equity investments and other securities		11,397		11,680
Total securities	$	644,819	$	643,705

Mortgage-backed securities, including collateralized mortgage obligations and asset-backed securities, have maturities that will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

- 13 -

4. LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition and carrying value of the Company’s loan portfolio, excluding loans held for sale, is as follows:

(Dollars in thousands)	March 31, 2011			December 31, 2010
Commercial	$	306,864		$	309,327
Real estate construction		37,607			44,085
Real estate mortgage		341,526			349,016
Commercial real estate		834,880			818,577
Installment and other consumer		14,823			15,265
Total loans		1,535,700			1,536,270
Allowance for loan losses		(39,692	)		(40,217	)
Total loans, net	$	1,496,008		$	1,496,053

Loans greater than 90 days past due are classified into nonaccrual status. The following table presents an age analysis of the loan portfolio for the periods shown:

(Dollars in thousands)	March 31, 2011
	30 - 89 days		Greater than		Total		Current		Total
	past due		90 days past due		past due		loans		loans
Commercial	$	1,056	$	10,670	$	11,726	$	295,138	$	306,864
Real estate construction		2,616		4,207		6,823		30,784		37,607
Real estate mortgage		6,105		2,463		8,568		332,958		341,526
Commercial real estate		3,951		12,172		16,123		818,757		834,880
Installment and other consumer		156		-		156		14,667		14,823
Total	$	13,884	$	29,512	$	43,396	$	1,492,304	$	1,535,700

(Dollars in thousands)	December 31, 2010
	30 - 89 days		Greater than		Total		Current		Total
	past due		90 days past due		past due		loans		loans
Commercial	$	953	$	9,984	$	10,937	$	298,390	$	309,327
Real estate construction		2,098		4,039		6,137		37,948		44,085
Real estate mortgage		4,662		5,669		10,331		338,685		349,016
Commercial real estate		3,988		12,157		16,145		802,432		818,577
Installment and other consumer		53		-		53		15,212		15,265
Total	$	11,754	$	31,849	$	43,603	$	1,492,667	$	1,536,270

- 14 -

4. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

The following table presents an analysis of impaired loans for the periods shown:

											Quarter ended
(Dollars in thousands)	March 31, 2011										March 31, 2011
	Unpaid principal		Impaired loans		Impaired loans		Total impaired		Related		Average
	balance1		with no allowance		with allowance		loan balance		allowance		balance
Commercial	$	19,898	$	12,804	$	170	$	12,974	$	-	$	14,093
Real estate construction		13,831		8,125		1,067	$	9,192		5		9,588
Real estate mortgage		25,761		13,591		6,428	$	20,019		314		22,150
Commercial real estate		26,162		19,423		5,608	$	25,031		92		26,580
Installment and other consumer		25		-		-		-		-		-
Total	$	85,677	$	53,943	$	13,273	$	67,216	$	411	$	72,411

											Quarter ended
(Dollars in thousands)	December 31, 2010										December 31, 2010
	Unpaid principal		Impaired loans		Impaired loans		Total impaired		Related		Average
	balance1		with no allowance		with allowance		loan balance		allowance		balance
Commercial	$	22,692	$	13,377	$	1,679	$	15,056	$	2	$	19,992
Real estate construction		15,570		10,692		323		11,015		2		20,191
Real estate mortgage		28,856		15,491		7,828		23,319		443		20,610
Commercial real estate		28,717		21,648		5,634		27,282		103		17,187
Installment and other consumer		-		-		-		-		-		45
Total	$	95,835	$	61,208	$	15,464	$	76,672	$	550	$	78,025

1	The unpaid principal balance on impaired loans represents the amount owed by the borrower. The carrying value of impaired loans is lower than the unpaid principal balance due to charge-offs.

The following table presents nonaccrual loans by category as of the dates shown:

	March 31,		December 31,
(Dollars in thousands)	2011		2010
Commercial	$	12,803	$	13,377
Real estate construction		8,125		10,692
Real estate mortgage		13,591		15,491
Commercial real estate		19,424		21,671
Installment and other consumer		-		-
Total loans on nonaccrual status	$	53,943	$	61,231

- 15 -

4. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

The Company uses a risk rating matrix to assign a risk rating to loans not evaluated on a homogenous pool level. At March 31, 2011, $1.11 billion of loans were risk rated and $425.8 million were evaluated on a homogeneous pool basis. Individually risk rated loans are rated on a scale of 1 to 10. A description of the general characteristics of the 10 risk ratings is as follows:

Ratings 1, 2 and 3 - These ratings include loans to very high credit quality borrowers of investment or near investment grade. These borrowers have significant capital strength, moderate leverage, stable earnings and growth, and readily available financing alternatives. Smaller entities, regardless of strength, would generally not fit in these ratings. These ratings also include loans that are collateralized by U. S. Government securities and certificates of deposits.
Rating 4 - These ratings include loans to borrowers of solid credit quality with moderate risk. Borrowers in these ratings are differentiated from higher ratings on the basis of size (capital and/or revenue), leverage, asset quality and the stability of the industry or market area.
Ratings 5 and 6 - These ratings include “pass rating” loans to borrowers of acceptable credit quality and risk. Such borrowers are differentiated from Rating 4 in terms of size, secondary sources of repayment or they are of lesser stature in other key credit metrics in that they may be over-leveraged, undercapitalized, inconsistent in performance or in an industry or an economic area that is known to have a higher level of risk, volatility, or susceptibility to weaknesses in the economy. However, no material adverse trends are evident with borrowers in these pass ratings.
Rating 7 - This rating includes loans on management’s “watch list” and is intended to be utilized on a temporary basis for pass rating borrowers where a significant risk-modifying action is anticipated in the near term.
Rating 8 - This rating includes “Substandard” loans, in accordance with regulatory guidelines, for which the accrual of interest may or may not been discontinued. By definition under regulatory guidelines, a “Substandard” loan has defined weaknesses which make payment default or principal exposure likely, but not yet certain. Such loans are apt to be dependent upon collateral liquidation, a secondary source of repayment, or an event outside of the normal course of business.
Rating 9 - This rating includes “Doubtful” loans in accordance with regulatory guidelines. Such loans are placed on nonaccrual status and may be dependent upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty.
Rating 10 - This rating includes “Loss” loans in accordance with regulatory guidelines. Such loans are to be charged-off or charged-down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined. “Loss” is not intended to imply that the loan or some portion of it will never be paid, nor does it in any way imply that there has been a forgiveness of debt.

The Company considers loans assigned a risk rating 8 through 10 to be classified loans. The following table presents weighted average risk ratings of the loan portfolio and classified loans by category. The weighted average risk ratings did not exhibit material change from December 31, 2010, to March 31, 2011. Overall classified loans remained virtually unchanged from December 31, 2010, both in total and as a percentage of the loan portfolio. Total commercial real estate classified loans increased during 2010; as such portfolio typically is challenged in the latter part of a weak economic period.

(Dollars in thousands)	March 31, 2011				December 31, 2010
	Weighted average		Classified		Weighted average		Classified
	risk rating		loans		risk rating		loans
Commercial		5.95	$	31,350		5.89	$	32,895
Real estate construction		7.37		21,633		7.33		24,131
Real estate mortgage		6.45		25,579		6.34		20,913
Commercial real estate		5.72		40,709		5.75		42,045
Installment and other consumer1		7.42		137		7.41		137
Total			$	119,408			$	120,121

Total loans risk rated	$	1,109,936			$	1,096,859

1	Installment and other consumer loans are primarily evalued on a homogenous pool level and generally not individually risk rated unless certain factors are met.

- 16 -

4. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

The following table presents homogeneous loans where credit risk is evaluated on a portfolio basis by category, and includes our home equity lines of credit and certain small business loans. Important credit quality metrics for this portfolio include balances on nonaccrual and past due status. Total loans and lines evaluated on a homogeneous pool basis were $425.8 million at March 31, 2011, and $439.4 million at December 31, 2010. Such balances on nonaccrual status declined from $7.7 million at December 31, 2010, to $3.1 million at March 31, 2011. During the quarter ended March 31, 2011, due to the unique nature of nonstandard mortgages, the methodology for risk rating these loans was modified. This procedural change resulted in the movement of 35 notes with total commitments of $8.5 million from the homogenous pool to the individually risk rated portfolio. This change did not have a significant impact on the allowance for loan losses.

(Dollars in thousands)	March 31, 2011						December 31, 2010
	Current		Nonaccrual		30 - 89 days		Current		Nonaccrual		30 - 89 days
	status		status		past due		status		status		past due
Commercial	$	52,637	$	49	$	566	$	54,217	$	245	$	7
Real estate construction		-		796		-		-		1,136		-
Real estate mortgage		263,814		995		833		269,862		4,958		1,931
Commercial real estate		90,268		1,308		-		90,782		1,334		8
Installment and other consumer		14,388		-		156		14,878		-		52
Total	$	421,107	$	3,148	$	1,555	$	429,739	$	7,673	$	1,998

The following is an analysis of the changes in the allowance for credit losses:

(Dollars in thousands)	Three months ended
	March 31, 2011			March 31, 2010
Balance, beginning of period	$	41,067		$	39,418
Provision for credit losses		2,076			7,634
Losses charged to the allowance		(3,414	)		(6,426	)
Recoveries credited to the allowance		700			673
Balance, end of period	$	40,429		$	41,299

Components of allowance for credit losses
Allowance for loan losses	$	39,692		$	40,446
Reserve for unfunded commitments		737			853
Total allowance for credit losses	$	40,429		$	41,299

The reserve for unfunded commitments was included in other liabilities as of March 31, 2011 and 2010.

- 17 -

4. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

The following table presents summary account activity relating to the allowance for credit losses by loan category for the periods shown:

(Dollars in thousands)	Three months ended March 31, 2011
				Real estate			Real estate			Commercial			Installment and
	Commercial			construction			mortgage			real estate			other consumer			Unallocated			Total
Beginning balance December 31, 2010	$	8,541		$	4,474		$	8,156		$	12,462		$	1,273		$	6,161		$	41,067
Provision for credit losses		457			(109	)		1,354			654			221			(501	)		2,076
Losses charged to the allowance		(761	)		(376	)		(1,485	)		(329	)		(463	)		-			(3,414	)
Recoveries credited to the allowance		498			-			112			3			87			-			700
Ending balance March 31, 2011	$	8,735		$	3,989		$	8,137		$	12,790		$	1,118		$	5,660		$	40,429

Loans valued for impairment:
Individually	$	12,974		$	9,192		$	20,019		$	25,031		$	-		$	-		$	67,216
Collectively		293,890			28,415			321,507			809,849			14,823			-			1,468,484
Total	$	306,864		$	37,607		$	341,526		$	834,880		$	14,823		$	-		$	1,535,700

(Dollars in thousands)	Twelve months ended December 31, 2010
				Real estate			Real estate			Commercial			Installment and
	Commercial			construction			mortgage			real estate			other consumer			Unallocated			Total
Beginning balance December 31, 2009	$	8,224		$	7,240		$	8,211		$	9,492		$	1,294		$	4,957		$	39,418
Provision for credit losses		4,474			113			7,025			4,262			1,574			1,204			18,652
Losses charged to the allowance		(5,229	)		(3,576	)		(7,461	)		(1,321	)		(1,889	)		-			(19,476	)
Recoveries credited to the allowance		1,072			697			381			29			294			-			2,473
Ending balance at December 31, 2010	$	8,541		$	4,474		$	8,156		$	12,462		$	1,273		$	6,161		$	41,067

Loans valued for impairment:
Individually	$	15,056		$	11,015		$	23,319		$	27,282		$	-		$	-		$	76,672
Collectively		294,271			33,070			325,697			791,295			15,265			-			1,459,598
Total	$	309,327		$	44,085		$	349,016		$	818,577		$	15,265		$	-		$	1,536,270

5. OTHER REAL ESTATE OWNED, NET

The following tables summarize Other Real Estate Owned (“OREO”) for the periods shown:

(Dollars in thousands)	Three months ended
	March 31, 2011			March 31, 2010
Balance, beginning period	$	39,459		$	53,594
Additions to OREO		6,479			5,003
Disposition of OREO		(5,952	)		(11,000	)
Valuation adjustments in the period		(657	)		(2,359	)
Total OREO	$	39,329		$	45,238

The following tables summarize the OREO valuation allowance for the periods shown:

(Dollars in thousands)	Three months ended
	March 31, 2011			March 31, 2010
Balance, beginning period	$	7,584		$	9,489
Valuation adjustments in the period		657			2,359
Deductions from the valuation allowance due to disposition		(816	)		(3,845	)
Total OREO valuation allowance	$	7,425		$	8,003

- 18 -

6. EARNINGS (LOSS) PER SHARE

The earnings (loss) per share is calculated under the two-class method. The two-class method is an earnings allocation formula that determines earnings (loss) per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. A participating security is an instrument that may participate in undistributed earnings with common stock. The Company has issued restricted stock and preferred stock that qualifies as a participating security. Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings (loss) per share is computed in the same manner as basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if certain shares issuable upon exercise of options and warrants, conversion of preferred stock, and non-vested restricted stock were included, unless those additional shares would have been anti-dilutive. For the diluted earnings (loss) per share computation, the treasury stock method is applied and compared to the two-class method and whichever method results in a more dilutive impact is utilized to calculate diluted earnings per share. The two-class method was utilized to calculate diluted earnings per share for the quarter ended March 31, 2011.

The following table reconciles the numerator and denominator of the basic and diluted earnings (loss) per share computations for the quarters ended March 31, 2011, and 2010:

(Dollars and shares in thousands, except per share amounts)	Three months ended
	March 31, 2011		March 31, 2010
Net income (loss)	$	5,105	$	(888	)
Less: Net income (loss) allocated to participating securities-basic:
Preferred stock		302		-
Non-vested restricted stock		81		-
Net income (loss) available to common stock holders-basic		4,722		(888	)
Add: Net income (loss) allocated per two-class method-diluted:
Stock options and Class C warrants		18		-
Net income (loss) available to common stockholders-diluted	$	4,740	$	(888	)

Weighted average common shares outstanding -basic		94,800		67,125
Common stock equivalents from:
Stock options		114		-
Class C warrants		4,780		-
Weighted average common shares outstanding -diluted		99,694		67,125

Basic earnings (loss) per share	$	0.05	$	(0.01	)
Diluted earnings (loss) per share	$	0.05	$	(0.01	)

Common stock equivalent shares excluded due to anti-dilutive effect		1,147		1,770

- 19 -

7. COMMITMENTS AND CONTINGENT LIABILITIES

The Bank has financial instruments with off balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as for on-balance sheet instruments.

The following table summarizes the Bank’s off balance sheet unfunded commitments as of the dates shown:

	Contract or		Contract or
	Notional Amount		Notional Amount
(Dollars in thousands)	March 31, 2011		December 31, 2010
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit in the form of loans
Commercial	$	243,085	$	246,702
Real estate construction		8,009		10,568
Real estate mortgage
Mortgage		2,284		4,265
Home equity loans and lines of credit		154,665		154,073
Total real estate mortgage loans		156,949		158,338
Commercial real estate		7,960		7,756
Installment and consumer		10,427		10,734
Other		19,141		10,395
Standby letters of credit and financial guarantees		9,034		8,531
Account overdraft protection instruments		118,904		118,596
Total	$	573,509	$	571,620

Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the underlying contracts. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of the commitments may expire without being drawn upon; therefore total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on the Bank’s credit evaluation of the customer. Collateral held varies, but may include real property, accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. The Company maintains a reserve for unfunded commitments as a component of the allowance for credit losses.

Standby letters of credit are conditional commitments issued to support a customer’s performance or payment obligation to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Interest rates on residential 1-4 family mortgage loan applications are typically rate locked during the application stage for periods ranging from 15 to 60 days, the most typical period being 45 days. These loans are locked with various qualified investors under a best-efforts delivery program. The Company makes every effort to deliver these loans before their rate locks expire. This arrangement generally requires the Bank to deliver the loans prior to the expiration of the rate lock. Delays in funding the loans may require a lock extension. The cost of a lock extension at times is borne by the borrower and at times by the Bank. These lock extension costs paid by the Bank are not expected to have a material impact on results of operations. This activity is managed daily.

Bancorp is periodically party to litigation arising in the ordinary course of business. Based on information currently known to management, although there are uncertainties inherent in litigation, we do not believe there is any legal action to which Bancorp or any of its subsidiaries is a party that, individually or in the aggregate, will have a materially adverse effect on Bancorp’s financial condition and results of operations, cash flows, or liquidity.

- 20 -

8. COMPREHENSIVE INCOME (LOSS)

The following table displays the components of comprehensive income (loss) for the periods shown:

	Three months ended
	March 31,
(Dollars in thousands)	2011			2010
Net income (loss) as reported	$	5,105		$	(888	)

Unrealized holding (losses) gains on securities:
Unrealized holding (losses) gains arising during the period		(1,713	)		4,886
Tax (provision) benefit		667			(1,913	)
Unrealized holding (losses) gains arising during the period, net of tax		(1,046	)		2,973

Less: Reclassification adjustment for gains
on sales of securities		(267	)		(457	)
Tax provision		104			176
Net realized gains on sales of securities, net of tax		(163	)		(281	)
Total comprehensive income	$	3,896		$	1,804

9. LONG-TERM BORROWINGS AND JUNIOR SUBORDINATED DEBT

The following table summarized Bancorp’s long-term borrowings for the periods shown:

(Dollars in thousands)	March 31, 2011		December 31, 2010
FHLB non-putable advances	$	138,599	$	138,599
FHLB putable advances		30,000		30,000
Total long-term borrowings	$	168,599	$	168,599

Long-term borrowings at March 31, 2011, consisted of notes with fixed maturities and structured advances with the FHLB totaling $168.6 million, unchanged from December 31, 2010. At March 31, 2011, Bancorp’s remaining total long-term borrowings with fixed maturities, or non-putable advances, was $138.6 million, with rates ranging from 2.32% to 5.03%. Bancorp also had three structured, or putable, advances totaling $30.0 million, with original terms of five years at rates ranging from 2.45% to 3.78%. The scheduled maturities on these structured advances occur in February 2013, August 2013 and March 2014, although the FHLB may under certain circumstances require payment of these structured advances prior to maturity. Principal payments due at scheduled maturity of Bancorp’s total long-term borrowings at March 31, 2011, were $50.1 million in 2012, $76.3 million in 2013 and $42.2 million in 2014.

Bancorp had no outstanding federal funds purchased from correspondent banks, borrowings from the discount window or reverse repurchase agreements at March 31, 2011.

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9. LONG-TERM BORROWINGS AND JUNIOR SUBORDINATED DEBT (continued)

At March 31, 2011, six wholly-owned subsidiary grantor trusts established by Bancorp had an outstanding balance of $51.0 million in trust preferred securities. During 2009, the Company exercised its right to defer regularly scheduled interest payments on outstanding junior subordinated debentures related to its trust preferred securities. At March 31, 2011, the Company had a balance in other liabilities of $2.1 million in accrued and unpaid interest expense related to these junior subordinated debentures, and it may not pay dividends on its capital stock until all accrued but unpaid interest has been paid in full. The Company had recorded and continues to record junior subordinated debenture interest expense in long-term borrowings expense. Under our December 2009 Written Agreement with the Oregon Department of Consumer and Business Services, Division of Finance and Corporate Securities (“DFCS”) and the Reserve Bank, the Company cannot resume interest payments on our trust preferred securities without prior regulatory approval.

The following table is a summary of current trust preferred securities issued by the grantor trusts and guaranteed by Bancorp:

(Dollars in thousands)

Preferred

Rate at

Next possible

Issuance Trust

Issuance date

security amount

Rate type 1

3/31/11

Maturity date

redemption date2

West Coast Statutory Trust III

September 2003

7,500

Variable

3.26

September 2033

Currently redeemable

West Coast Statutory Trust IV

March 2004

6,000

Variable

3.10

March 2034

Currently redeemable

West Coast Statutory Trust V

April 2006

15,000

Variable

1.74

June 2036

June 2011

West Coast Statutory Trust VI

December 2006

5,000

Variable

1.99

December 2036

December 2011

West Coast Statutory Trust VII

March 2007

12,500

Variable

1.86

March 2037

March 2012

West Coast Statutory Trust VIII

June 2007

5,000

Variable

1.69

June 2037

June 2012

Total

51,000

Weighted rate

2.17

1	The variable rate preferred securities reprice quarterly.
2	Securities are redeemable at the option of Bancorp following these dates.

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10. SEGMENT AND RELATED INFORMATION

Bancorp accounts for intercompany fees and services at an estimated fair value according to regulatory requirements for the service provided. Intercompany items relate primarily to the provision of accounting, human resources, data processing and marketing services.

Summarized financial information concerning Bancorp’s reportable segments and the reconciliation to Bancorp’s consolidated results are shown in the following table. The “Other” column includes Bancorp’s trust operations and corporate-related items, including interest expense related to trust preferred securities. Investment in subsidiaries is netted out of the presentations below. The “Intersegment” column identifies the intersegment activities of revenues, expenses and other assets between the “Banking” and “Other” segments.

(Dollars in thousands)	Three months ended March 31, 2011
	Banking		Other			Intersegment			Consolidated
Interest income	$	24,906	$	12		$	-		$	24,918
Interest expense		3,130		276			-			3,406
Net interest income (expense)		21,776		(264	)		-			21,512
Provision for credit losses		2,076		-			-			2,076
Noninterest income		8,389		798			(271	)		8,916
Noninterest expense		21,892		932			(271	)		22,553
Income (loss) before income taxes		6,197		(398	)		-			5,799
Provision (benefit) for income taxes		849		(155	)		-			694
Net income (loss)	$	5,348	$	(243	)	$	-		$	5,105

Depreciation and amortization	$	2,125	$	7		$	-		$	2,132
Assets	$	2,446,906	$	18,035		$	(13,084	)	$	2,451,857
Loans, net	$	1,496,008	$	-		$	-		$	1,496,008
Deposits	$	1,940,957	$	-		$	(12,526	)	$	1,928,431
Equity	$	314,632	$	(37,644	)	$	-		$	276,988

(Dollars in thousands)	Three months ended March 31, 2010
	Banking			Other			Intersegment			Consolidated
Interest income	$	27,181		$	17		$	-		$	27,198
Interest expense		6,295			270			-			6,565
Net interest income (expense)		20,886			(253	)		-			20,633
Provision for credit losses		7,634			-			-			7,634
Noninterest income		5,916			779			(287	)		6,408
Noninterest expense		20,496			886			(287	)		21,095
Income (loss) before income taxes		(1,328	)		(360	)		-			(1,688	)
Benefit for income taxes		(660	)		(140	)		-			(800	)
Net income (loss)	$	(668	)	$	(220	)	$	-		$	(888	)

Depreciation and amortization	$	2,175		$	9		$	-		$	2,184
Assets	$	2,666,888		$	15,268		$	(20,447	)	$	2,661,709
Loans, net	$	1,626,487		$	-		$	-		$	1,626,487
Deposits	$	2,085,071		$	-		$	(19,648	)	$	2,065,423
Equity	$	299,997		$	(39,500	)	$	-		$	260,497

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11. FAIR VALUE MEASUREMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS

A financial instrument is defined as cash, evidence of an ownership interest in an entity, or a contract that conveys or imposes the contractual right or obligation to either receive or deliver cash or another financial instrument. Examples of financial instruments included in Bancorp’s balance sheet are cash, federal funds sold, debt and equity securities, loans, demand, savings and other interest-bearing deposits, notes and debentures. Examples of financial instruments which are not included in the Bancorp balance sheet are commitments to extend credit and standby letters of credit.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Accounting standards require the fair value of deposit liabilities with no stated maturity, such as demand deposits, NOW and money market accounts, to equal the carrying value of these financial instruments and does not allow for the recognition of the inherent value of core deposit relationships when determining fair value.

Bancorp has estimated fair value based on quoted market prices where available. In cases where quoted market prices were not available, fair values were based on the quoted market price of a financial instrument with similar characteristics, the present value of expected future cash flows or other valuation techniques that utilize assumptions which are subjective and judgmental in nature. Subjective factors include, among other things, estimates of cash flows, the timing of cash flows, risk and credit quality characteristics, interest rates and liquidity premiums or discounts. Accordingly, the results may not be precise, and modifying the assumptions may significantly affect the values derived. Further, fair values may or may not be realized if a significant portion of the financial instruments were sold in a bulk transaction or a forced liquidation. Therefore, any aggregate unrealized gains or losses should not be interpreted as a forecast of future earnings or cash flows. Furthermore, the fair values disclosed should not be interpreted as the aggregate current value of Bancorp.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and cash equivalents - The carrying amount is a reasonable estimate of fair value.

Trading securities – Trading securities held at March 31, 2011, are related solely to bonds, equity securities and mutual funds held in a Rabbi Trust for benefit of the Company’s deferred compensation plans. Fair values for trading securities are based on quoted market prices.

Investment securities - For substantially all securities within the categories U.S. Treasuries, U.S Government agencies, mortgage-backed, obligations of state and political subdivisions, and equity investments and other securities held for investment purposes, fair values are based on quoted market prices or dealer quotes if available. When quoted market prices are not readily accessible or available, the use of alternative approaches, such as matrix or model pricing or indicators from market makers, is used. If a quoted market price is not available due to illiquidity, fair value is estimated using quoted market prices for similar securities or other modeling techniques. If neither a quoted market price nor market prices for similar securities are available, fair value is estimated by discounting expected cash flows using a market derived discount rate as of the valuation date.

Our level 3 assets consist of pooled trust preferred securities and auction rate securities. The fair values of these securities were estimated using the discounted cash flow method. The fair value for these securities used inputs for base case default, recovery and prepayment rates to estimate the probable cash flows for the security. The estimated cash flows were discounted using a rate for comparably rated securities adjusted for an additional liquidity premium.

Loans - The fair value of loans is estimated by discounting the future cash flows using the current rate at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. An additional liquidity discount is also incorporated to more closely align the fair value with observed market prices.

Impaired loans - A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair market value of the collateral. A significant portion of the Bank's impaired loans are measured using the fair market value of the collateral.

Bank owned life insurance - The carrying amount is the cash surrender value of all policies, which approximates fair value.

Other real estate owned - Management obtains third party appraisals as well as independent fair market value assessments from realtors or persons involved in selling OREO in determining the fair value of particular properties. Accordingly, the valuation of OREO is subject to significant external and internal judgment. Management periodically reviews OREO and obtains periodic appraisals to determine whether the property continues to be carried at the lower of its recorded book value or fair value less estimated selling costs.

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11. FAIR VALUE MEASUREMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)

Deposit liabilities - The fair value of demand deposits, savings accounts and other deposits is the amount payable on demand at the reporting date. The fair value of time deposits is estimated using the rates currently offered for deposits of similar remaining maturities.

Short-term borrowings - The carrying amount is a reasonable estimate of fair value given the short-term nature of these financial instruments.

Long-term borrowings - The fair value of the long-term borrowings is estimated by discounting the future cash flows using the current rate at which similar borrowings with similar remaining maturities could be made.

Junior subordinated debentures - The fair value of the variable rate junior subordinated debentures and trust preferred securities approximates the pricing of a preferred security at current market prices.

Commitments to extend credit, standby letters of credit and financial guarantees - The majority of our commitments to extend credit carry current market interest rates if converted to loans.

The tables below present fair value information on certain assets broken down by recurring or nonrecurring measurement status. Recurring assets are initially measured at fair value and are required to be reflected at fair value in the financial statements at each reporting date. Assets measured on a nonrecurring basis are assets that due to an event or circumstance were required to be re-measured at fair value after initial recognition in the financial statements at some time during the reporting period.

Assets are classified as level 1-3 based on the lowest level of input that has a significant effect on fair value. The following definitions describe the level 1-3 categories for inputs used in the tables presented below.

Quoted prices in active markets for identical assets (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An active market for the asset is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.
Significant unobservable inputs (Level 3): Inputs that reflect the reporting entity's own estimates about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

- 25 -

11. FAIR VALUE MEASUREMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)

The following tables present fair value measurements for assets that are measured at fair value on a recurring basis subsequent to initial recognition for the periods shown:

			Fair value measurements at March 31, 2011, using
			Quoted prices in active		Other observable		Significant unobservable
	Total fair value		markets for identical assets		inputs		inputs
(Dollars in thousands)	March 31, 2011		(Level 1)		(Level 2)		(Level 3)
Trading securities	$	771	$	771	$	-	$	-
Available for sale securities:
U.S. Treasury securities		4,282		-		4,282		-
U.S. Government agency securities		153,017		-		153,017		-
Corporate securities		9,850		-		-		9,850
Mortgage-backed securities		405,740		-		405,740		-
Obligations of state and political subdivisions		59,136		-		58,247		889
Equity investments and other securities		11,680		-		11,680		-
Total recurring assets measured at fair value	$	644,476	$	771	$	632,966	$	10,739

			Fair value measurements at December 31, 2010, using
			Quoted prices in active		Other observable		Significant unobservable
	Total fair value		markets for identical assets		inputs		inputs
(Dollars in thousands)	December 31, 2010		(Level 1)		(Level 2)		(Level 3)
Trading securities	$	808	$	808	$	-	$	-
Available for sale securities:
U.S. Treasury securities		14,392		-		14,392		-
U.S. Government agency securities		194,230		-		194,230		-
Corporate securities		9,392		-		-		9,392
Mortgage-backed securities		363,618		-		363,618		-
Obligations of state and political subdivisions		52,645		-		51,688		957
Equity investments and other securities		11,835		1		11,834		-
Total recurring assets measured at fair value	$	646,920	$	809	$	635,762	$	10,349

The Company did not have any transfers between level 1, level 2, or level 3 instruments during the period. The Company transferred $14.4 million in U.S. Treasury securities from a level 1 instrument to a level 2 instrument at December 31, 2010. In addition, the Company had no material changes in valuation techniques for recurring and nonrecurring assets measured at fair value from the quarter ended March 31, 2011.

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11. FAIR VALUE MEASUREMENT AND FAIR VALUES OF FINANCIAL Instruments (continued)

The following table represents a reconciliation of level 3 instruments for assets that are measured at fair value on a recurring basis for the three months ended March 31, 2011, and 2010:

	Three months ended March 31, 2011
						Reclassification of
			Gains (losses)			gains (losses) from
			included in other			adjustment for		Purchases,
	Balance		comprehensive			impairment of		Issuances, and		Balance
(Dollars in thousands)	January 1, 2011		income			securities		Settlements		March 31, 2011
Corporate securities	$	9,392	$	458				$	-	$	9,850
Obligations of state and political subdivisions		957		(68	)		-		-		889
Fair value	$	10,349	$	390		$	-	$	-	$	10,739

	Three months ended March 31, 2010
					Reclassification of
			Gains		gains (losses) from
			included in other		adjustment for		Purchases,
	Balance		comprehensive		impairment of		Issuances, and		Balance
(Dollars in thousands)	January 1, 2010		income		securities		Settlements		March 31, 2010
Corporate securities	$	9,753	$	478	$	-	$	-	$	10,231
Obligations of state and political subdivisions		973		20		-		-		993
Fair value	$	10,726	$	498	$	-	$	-	$	11,224

Certain assets are measured at fair value on a nonrecurring basis after initial recognition such as loans held for sale, loans measured for impairment and OREO. For the three months ended March 31, 2011, loans held for sale were subject to the lower of cost or market method of accounting. However, there were no impairments recognized on loans held for sale in first quarter 2011. For the three months ended March 31, 2011, certain loans included in Bancorp’s loan portfolio were deemed impaired. In addition, during the first quarter, certain properties were written down by a total of $.7 million to reflect additional decreases in estimated fair market value subsequent to the time such properties were placed into OREO.

There were no nonrecurring level 1 or 2 fair value measurements for the three months ended March 31, 2011, or the full year 2010. The following tables represent the level 3 fair value measurements for nonrecurring assets for the periods presented:

	Three months ended March 31, 2011
(Dollars in thousands)	Impairment		Fair Value 1
Loans measured for impairment	$	3,414	$	19,423
OREO		657		18,046
Total nonrecurring assets measured at fair value	$	4,071	$	37,469

	Twelve months ended December 31, 2010
(Dollars in thousands)	Impairment		Fair Value 1
Loans measured for impairment	$	19,476	$	82,910
OREO		6,649		74,146
Total nonrecurring assets measured at fair value	$	26,125	$	157,056

1	Fair value excludes cost to sell collateral.

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11. FAIR VALUE MEASUREMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)

The estimated fair values of financial instruments at March 31, 2011, are as follows:

(Dollars in thousands)	Carrying Value		Fair Value
FINANCIAL ASSETS:
Cash and cash equivalents	$	175,055	$	175,055
Trading securities		771		771
Investment securities		643,705		643,705
Federal Home Loan Bank stock		12,148		12,148
Net loans (net of allowance for loan losses
and including loans held for sale)		1,497,422		1,400,045
Bank owned life insurance		25,502		25,502

FINANCIAL LIABILITIES:
Deposits	$	1,928,431	$	1,929,525
Long-term borrowings		168,599		174,878

Junior subordinated debentures-variable		51,000		26,731

The estimated fair values of financial instruments at December 31, 2010, are as follows:

(Dollars in thousands)	Carrying Value		Fair Value
FINANCIAL ASSETS:
Cash and cash equivalents	$	177,991	$	177,991
Trading securities		808		808
Investment securities		646,112		646,112
Federal Home Loan Bank stock		12,148		12,148
Net loans (net of allowance for loan losses
and including loans held for sale)		1,499,155		1,407,366
Bank owned life insurance		25,313		25,313

FINANCIAL LIABILITIES:
Deposits	$	1,940,522	$	1,942,301
Long-term borrowings		168,599		175,305

Junior subordinated debentures-variable		51,000		26,597

- 28 -

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

The following discussion should be read in conjunction with the audited consolidated financial statements and related notes to those statements of West Coast Bancorp (“Bancorp” or the “Company”) that appear under the heading “Financial Statements and Supplementary Data” in Bancorp's Annual Report on Form 10-K for the year ended December 31, 2010 (“2010 10-K”), as well as the unaudited consolidated financial statements for the current quarter found under Item 1 above.

Forward Looking Statement Disclosure

Statements in this Annual Report of West Coast Bancorp (“Bancorp” or the “Company”) regarding future events or performance are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) and are made pursuant to the safe harbors of the PSLRA. The Company’s actual results could be quite different from those expressed or implied by the forward-looking statements. Words such as “could,” “may,” “should,” “plan,” “believes,” “anticipates,” “estimates,” “predicts,” “expects,” “projects,” “potential,” “likely,” or “continue,” or words of similar import, often help identify “forward-looking statements,” which include any statements that expressly or implicitly predict future events, results, or performance. Factors that could cause events, results or performance to differ from those expressed or implied by our forward-looking statements include, among others, risks discussed in Item 1A, “Risk Factors” of the 2010 10-K, risks discussed elsewhere in the text of this report, as well as the following specific factors:

General economic conditions, whether national or regional, and conditions in real estate markets, that may affect the demand for our loan and other products, lead to declines in credit quality and increase in loan losses, negatively affect the value and salability of the real estate that we own or that is the collateral for many of our loans, and hinder our ability to increase lending activities;
Changing bank regulatory conditions, policies, or programs, whether arising as new legislation or regulatory initiatives or changes in our regulatory classifications, that could lead to restrictions on activities of banks generally or West Coast Bank (the “Bank”) in particular, increased costs, including higher deposit insurance premiums, price controls on debit card interchange, regulation or prohibition of certain income producing activities, or changes in the secondary market for bank loan and other products;
Competitive factors, including competition with community, regional and national financial institutions, that may lead to pricing pressures that reduce yields the Bank earns on loans or increase rates the Bank pays on deposits, the loss of our most valued customers, defection of key employees or groups of employees, or other losses;
Increasing or decreasing interest rate environments, including the slope and level of the yield curve, that could lead to decreases in net interest margin, lower net interest and fee income, including lower gains on sales of loans, and changes in the value of the Company’s investment securities; and
Changes or failures in technology or third party vendor relationships in important revenue production or service areas or increases in required investments in technology that could reduce our revenues, increase our costs, or lead to disruptions in our business.

Furthermore, forward-looking statements are subject to risks and uncertainties related to the Company’s ability to, among other things: dispose of properties or other assets obtained through foreclosures at expected prices and within a reasonable period of time; attract and retain key personnel; generate loan and deposit balances at projected spreads; sustain fee generation including gains on sales of loans; maintain asset quality and control risk; limit the amount of net loan charge-offs; manage its interest rate sensitivity position in periods of changing market interest rates; adapt to changing customer deposit, investment and borrowing behaviors; control expense growth; and monitor and manage the Company’s financial reporting, operating and disclosure control environments.

Readers are cautioned not to place undue reliance on our forward-looking statements, which reflect management’s analysis only as of the date of the statements. The Company does not intend to publicly revise or update forward-looking statements to reflect events or circumstances that arise after the date of this report.

Readers should carefully review all disclosures we file from time to time with the Securities and Exchange Commission (“SEC”).

Community Reinvestment Act (“CRA”)

The Bank received a CRA rating of satisfactory during its most recent CRA examination in September 2010.

- 29 -

First Quarter 2011 Financial Overview

During first quarter 2011, we recorded:

Net income of $5.1 million compared to a net loss of $.9 million in first quarter 2010;
A net interest margin of 3.81%, an increase of 43 basis points from 3.38% in first quarter 2010;
An average rate paid on total deposits of .38%, a 45 basis point decline from .83% in first quarter 2010;
A provision for credit losses of $2.1 million, a reduction of $5.5 million from $7.6 million for the same quarter in 2010;
Net loan charge-offs of $2.7 million, a decline from $5.8 million in first quarter 2010; and

Other real estate owned (“OREO”) valuation adjustments and net losses on OREO sales of $.3 million, a reduction from $2.1 million in first quarter 2010. Management continued to proactively implement and execute certain strategies that have resulted in significant strengthening of the Company’s balance sheet, including:

Increasing the Bank’s total and tier 1 risk-based capital ratios to 18.28% and 17.02%, respectively, at March 31, 2011, up from 16.50% and 15.24% at March 31, 2010;
Improving the Bank’s leverage ratio from 11.16% a year ago, to 12.87% at March 31, 2011; and
Reducing total nonperforming assets by 29% or $37.4 million over the past twelve months, to $93.3 million at quarter end.

Results of Operations

Three months ended March 31, 2011 and 2010

Net Income (Loss). Net income for the three months ended March 31, 2011, was $5.1 million, as compared to a net loss of $.9 for the three months ended March 31, 2010. Earnings per diluted share for the three months ended March 31, 2011, was $0.05, as compared to a loss per diluted share of $0.01 for the three months ended March 31, 2010. For additional detail regarding calculation of our earnings per diluted share in the current quarter and year to date, see Note 6 “Earnings (Loss) Per Share” of our interim financial statements included under Item 1 of this report.

- 30 -

Net Interest Income. The following table sets forth, for the periods indicated, information with regard to (1) average balances of assets and liabilities, (2) the total dollar amounts of interest income on interest earning assets and interest expense on interest bearing liabilities, (3) resulting yields and rates, (4) net interest income and (5) net interest spread. Nonaccrual loans have been included in the tables as loans carrying a zero yield. Loan fees are recognized as income using the interest method over the life of the loan.

	Three months ended
(Dollars in thousands)	March 31, 2011							March 31, 2010							December 31, 2010
	Average							Average			Interest				Average
	Outstanding			Interest		Yield/		Outstanding			Earned/		Yield/		Outstanding			Interest		Yield/
	Balance			Earned/Paid		Rate 1		Balance			Paid		Rate 1		Balance			Earned/Paid		Rate 1
ASSETS:
Interest earning balances
due from banks	$	106,794		$	70	0.26	%	$	227,278		$	145	0.26	%	$	142,398		$	94	0.26	%
Federal funds sold		3,947			1	0.09	%		12,912			3	0.09	%		3,996			1	0.09	%
Taxable securities 2		622,208			4,069	2.65	%		505,745			3,611	2.90	%		592,078			3,569	2.39	%
Nontaxable securities 3		51,241			737	5.83	%		63,781			917	5.83	%		54,698			762	5.53	%
Loans, including fees 4		1,530,422			20,299	5.38	%		1,703,597			22,842	5.44	%		1,558,757			21,350	5.43	%
Total interest earning assets		2,314,612			25,176	4.41	%		2,513,313			27,518	4.44	%		2,351,927			25,776	4.35	%

Allowance for loan losses		(40,296	)						(39,957	)						(42,208	)
Premises and equipment		26,667							28,190							26,845
Other assets		149,885							175,829							148,596
Total assets	$	2,450,868						$	2,677,375						$	2,485,160

LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest bearing demand	$	344,090		$	78	0.09	%	$	321,070		$	155	0.20	%	$	349,071		$	82	0.09	%
Savings		106,309			40	0.15	%		98,075			119	0.49	%		105,114			44	0.16	%
Money market		660,672			634	0.39	%		642,594			1,345	0.85	%		670,580			708	0.42	%
Time deposits		269,038			1,057	1.59	%		507,706			2,673	2.14	%		281,009			1,175	1.66	%
Total interest bearing deposits		1,380,109			1,809	0.53	%		1,569,445			4,292	1.11	%		1,405,774			2,009	0.57	%

Short-term borrowings		-			-	0.00	%		13,100			145	4.49	%		-			-	0.00	%
Long-term borrowings 5		219,599			1,597	2.95	%		301,199			2,127	2.86	%		217,256			1,611	2.94	%
Total borrowings		219,599			1,597	2.95	%		314,299			2,272	2.93	%		217,256			1,611	2.94	%
Total interest bearing
liabilities		1,599,708			3,406	0.86	%		1,883,744			6,564	1.41	%		1,623,030			3,620	0.88	%
Demand deposits		552,229							519,492							566,998
Other liabilities		24,983							19,762							18,858
Total liabilities		2,176,920							2,422,998							2,208,886
Stockholders' equity		273,948							254,377							276,274
Total liabilities and
stockholders' equity	$	2,450,868						$	2,677,375						$	2,485,160
Net interest income				$	21,770						$	20,954						$	22,156

Net interest spread						3.55	%						3.03	%						3.46	%

Net interest margin						3.81	%						3.38	%						3.74	%

1		Yield/rate calculations have been based on more detailed information and therefore may not recompute exactly due to rounding.
2		First quarter 2011 and fourth quarter 2010 do not include Federal Home Loan Bank (FHLB) stock balances. First quarter 2010 includes FHLB stock balances.
3		Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis. The tax equivalent basis adjustment for the three months ended March 31, 2011, and 2010, was $.26 million and $.32 million, respectively, and $.27 million for three months ended December 31, 2010.
4		Includes balances of loans held for sale and nonaccrual loans.
5		Includes junior subordinated debentures with average balance of $51.0 million for the three months ended March 31, 2011, and 2010, and December 31, 2010.

- 31 -

First quarter 2011 net interest income of $21.5 million increased $.9 million from the same quarter in 2010. Net interest income on a tax equivalent basis was $21.8 million in the most recent quarter, up from $21.0 million in the first quarter of 2010. Average interest earning assets decreased $198.7 million, or 7.9%, to $2.31 billion in the first quarter of 2011 from $2.51 billion for the same period in 2010, while average interest bearing liabilities decreased $284.0 million, or 15.1%, to $1.60 billion.

The first quarter 2011 net interest margin of 3.81% increased 43 basis points from first quarter 2010, predominantly due to a lower rate on interest bearing deposits and lower time deposit balances. The spread between the yield earned on loans and rate paid on interest bearing deposits improved 52 basis points year-over-year in the first quarter notwithstanding a significant shift in average earning asset mix as higher yielding loan balances declined over this period. Collectively, cash equivalents and investment securities earned 286 basis points less than the loan portfolio during the most recent quarter.

As of March 31, 2011, the Bank had $682.3 million in floating and adjustable rate loans with interest rate floors. Of these loans, $468.7 million were at their floor rate. These floors have benefited the Company’s loan yield and net interest income and margin over the past year. While dependent on how quickly and by how much market interest rates rise, as well as how the slope of the market yield curve may change, we anticipate our yields for loans at floors to lag underlying changes in market interest rates in a rising market interest rate environment.

At March 31, 2011, we estimated we remained slightly asset sensitive over the next twelve month measurement period, meaning that earning assets are expected to mature or reprice more quickly than interest bearing liabilities over this period. Whether we will be able to continue recent positive trends in or maintain our net interest margin will depend on our ability to generate new loans utilizing excess liquidity, to further reduce nonperforming assets, and to control our costs of funds, all of which will depend on economic conditions, competitive factors and market interest rate trends. For more information see the discussion under the heading “Quantitative and Qualitative Disclosures about Market Risk” in our 2010 10-K.

Provision for Credit Losses. Bancorp recorded provision for credit losses for the first quarters of 2011 and 2010 of $2.1 million and $7.6 million, respectively. The Company continued to experience a reduction in loan net charge-offs, particularly in the real estate mortgage, real estate construction, and commercial categories. Whether we will be able to continue the trend of decreasing provision for credit losses will depend primarily on economic conditions and the interest rate environment, as an increase in interest rates could put pressure on the ability of our borrowers to repay loans. For more information, see the discussion under the subheading “Allowance for Credit Losses and Net Loan Charge-offs” below.

Noninterest Income. Total noninterest income of $8.9 million for the quarter ended March 31, 2011, increased $2.5 million from $6.4 million in the first quarter of 2010. The increase was primarily due to a $1.7 million reduction in OREO valuation adjustments. Excluding the effects of OREO valuation adjustments, the Company’s noninterest income increased $.8 million compared to first quarter 2010 primarily due to $.4 million growth in both gains on sales of loans and payment systems over this period.

The following table illustrates the components and change in noninterest income for the periods shown:

	Three months ended						Three months ended
(Dollars in thousands)	March 31,						Change					December 31,			Change
	2011			2010			$			%		2010			$			%
Noninterest income
Service charges on deposit accounts	$	3,644		$	3,596		$	48		1	%	$	3,736		$	(92	)	-2	%
Payment systems related revenue		2,930			2,536			394		16	%		2,984			(54	)	-2	%
Trust and investment services revenues		1,148			979			169		17	%		1,143			5		0	%
Gains on sales of loans		513			141			372		264	%		568			(55	)	-10	%
Other		748			757			(9	)	-1	%		733			15		2	%
Gain on sales of securities		267			457			(190	)	-42	%		617			(350	)	-57	%
Total		9,250			8,466			784		9	%		9,781			(531	)	-5	%

OREO gains (losses) on sale		323			301			22		7	%		336			(13	)	-4	%
OREO valuation adjustments		(657	)		(2,359	)		1,702		72	%		(1,522	)		865		57	%
Total		(334	)		(2,058	)		1,724		84	%		(1,186	)		852		72	%

Total noninterest income	$	8,916		$	6,408		$	2,508		39	%	$	8,595		$	321		4	%

Guidance issued by the FDIC in November 2010 states that its supervised institutions, including the Bank, are to review check clearing procedures to ensure they operate in a manner that avoids maximizing customer overdrafts and related fees. If the Bank changes its clearing procedures, noninterest income may be adversely affected.

- 32 -

Noninterest Expense. Noninterest expense for the three months ended March 31, 2011, was $22.6 million, an increase of $1.5 million compared to $21.1 million in first quarter 2010. Salaries and employee benefits expense increased $.7 million over the same period in the prior year; primarily reflecting higher variable performance based compensation and restricted stock expense associated with grants made in April 2010. Payment system related expenses grew $.2 million or 24% due to higher customer transaction volumes and the discontinuance of our debit card reward program during the quarter. A reversal of Federal Deposit Insurance Corporation (“FDIC”) insurance premium expense in first quarter of 2010 resulted in the $.5 million increase in other noninterest expense year over year first quarter.

The following table illustrates the components and changes in noninterest expense for the periods shown:

	Three months ended				Three months ended
(Dollars in thousands)	March 31,		March 31,		Change					December 31,		Change
	2011		2010		$			%		2010		$			%
Noninterest expense
Salaries and employee benefits	$	11,877	$	11,175	$	702		6	%	$	11,521	$	356		3	%
Equipment		1,528		1,576		(48	)	-3	%		1,540		(12	)	-1	%
Occupancy		2,165		2,184		(19	)	-1	%		2,245		(80	)	-4	%
Payment systems related expense		1,247		1,004		243		24	%		1,297		(50	)	-4	%
Professional fees		982		861		121		14	%		822		160		19	%
Postage, printing and office supplies		810		804		6		1	%		816		(6	)	-1	%
Marketing		651		687		(36	)	-5	%		800		(149	)	-19	%
Communications		378		382		(4	)	-1	%		388		(10	)	-3	%
Other noninterest expense		2,915		2,422		493		20	%		3,901		(986	)	-25	%
Total	$	22,553	$	21,095	$	1,458		7	%	$	23,330	$	(777	)	-3	%

Changing business conditions, increased costs in connection with retention of, or a failure to retain key employees, lower loan production volumes causing deferred loan origination costs to decline, or a failure to manage operating and control environments could adversely affect our ability to limit expense growth in the future.

Income Taxes. The Company recorded income tax expense for the three months ended March 31, 2011, of $.7 million compared to a tax benefit of $.8 million during the first quarter of 2010. The provision for income taxes in first quarter 2011 is the result of the impact on tax expense from a $1.8 million decrease in gross unrealized gains on the investment securities portfolio during the quarter. As of March 31, 2011, the Company maintained a valuation allowance of $21.5 million against its deferred tax asset balance of $28.4 million, for a net deferred tax asset of $6.9 million. The Company’s future net deferred tax asset and income tax provision or benefit will continue to be impacted by changes in the gross unrealized gain on the Company’s investment portfolio.

The following table illustrates the components of the provision (benefit) for income taxes for the periods shown:

	Three months ended					Three months ended
(Dollars in thousands)	March 31,		March 31,					December 31,
	2011		2010			Change		2010		Change
Benefit for income taxes net of initial
establishment of deferred tax asset valuation allowance	$	-	$	-		$	-	$	-	$	-
Provision (benefit) for income taxes from deferred
tax asset valuation allowance:
Unrealized loss (gain) on securities		694		(800	)		1,494		2,077		(1,383	)
Change in deferred tax assets-tax return adjustments		-		-			-		1,472		(1,472	)
Total provision (benefit) for income taxes	$	694	$	(800	)	$	1,494	$	3,549	$	(2,855	)

- 33 -

Balance Sheet Overview

Balance sheet highlights are as follows:

Total assets were $2.5 billion as of March 31, 2011, substantially unchanged from December 31, 2010;
Total loans also remained unchanged at $1.5 billion from the balance at December 31, 2010, primarily due to a positive trend in our quarterly loan origination volume;
The combined balance of total cash equivalents and investment securities was $768 million, or 33% of earning assets, at March 31, 2011; and
Total deposits of $1.9 billion at March 31, 2011, was also relatively unchanged from year end 2010, with a continuing deposit balance mix shift from time deposits to non-time deposits.

Our balance sheet management efforts are focused on increasing loan balances within our concentration parameters to targeted customer segments as opportunities arise, maintaining a strong capital position until we have more certainty regarding economic conditions, retaining sufficient liquidity, and limiting loan concentrations within our loan portfolio. We also expect to further reduce nonperforming assets by resolving nonaccrual loans and disposing of OREO properties.

Cash and Cash Equivalents

Total cash and cash equivalents decreased slightly to $175.1 million at March 31, 2011, from $178.0 million at December 31, 2010.

(Dollars in thousands)	March 31,		% of		March 31,		% of		Change					December 31,		% of
	2011		total		2010		total		Amount			%		2010		total
Cash and Cash equivalents:
Cash and due from banks	$	50,865	29	%	$	47,002	16	%	$	3,863		8	%	$	42,672	24	%
Federal funds sold		1,966	1	%		3,859	1	%		(1,893	)	-49	%		3,367	2	%
Interest-bearing deposits in other banks		122,224	70	%		238,680	83	%		(116,456	)	-49	%		131,952	74	%
Total cash and cash equivalents	$	175,055	100	%		289,541	100	%	$	(114,486	)	-40	%	$	177,991	100	%

- 34 -

Investment Portfolio

The composition and carrying value of Bancorp’s investment portfolio is as follows:

	March 31, 2011							December 31, 2010							March 31, 2010
					Net							Net							Net
	Amortized				Unrealized			Amortized				Unrealized			Amortized				Unrealized
(Dollars in thousands)	Cost		Fair Value		Gain/(Loss)			Cost		Fair Value		Gain/(Loss)			Cost		Fair Value		Gain/(Loss)
U.S. Treasury securities	$	4,259	$	4,282	$	23		$	14,347	$	14,392	$	45		$	24,740	$	24,849	$	109
U.S. Government agency securities		153,637		153,017		(620	)		193,901		194,230		329			136,029		136,208		179
Corporate securities		14,514		9,850		(4,664	)		14,499		9,392		(5,107	)		14,451		10,231		(4,220	)
Mortgage-backed securities		403,707		405,740		2,033			359,965		363,618		3,653			326,757		330,849		4,092
Obligations of state and political subdivisions		57,305		59,136		1,831			51,111		52,645		1,534			58,271		60,111		1,840
Equity and other securities		11,397		11,680		283			11,423		11,835		412			9,261		9,352		91
Total Investment Portfolio	$	644,819	$	643,705	$	(1,114	)	$	645,246	$	646,112	$	866		$	569,509	$	571,600	$	2,091

At March 31, 2011, the estimated fair value of the investment portfolio was $643.7 million, compared to $646.1 million at 2010 year end, a decrease of .4% or $2.4 million. The net unrealized loss on the investment portfolio was $1.1 million at March 31, 2011, compared to a net unrealized gain of $.9 million at year end 2010. A decline in net unrealized gains in the Company’s mortgage-backed securities category, primarily due to rising market interest rates, led to an overall net unrealized loss in the Company’s investment portfolio.

The investment portfolio increased $72.1 million since March 31, 2010. Over the past twelve months, the Company reinvested cash primarily in mortgage-backed securities but also U.S. Government agency securities. The effective duration of the investment securities portfolio was 3.1 years at March 31, 2011.

For additional detail regarding our investment securities portfolio, see Note 3 “Investment Securities” and Note 11 “Fair Value Measurement and Fair Values of Financial Instruments” of our interim financial statements included under Item 1 of this report.

Loan Portfolio

The composition of the Bank’s loan portfolio is as follows for the periods shown:

(Dollars in thousands)	Mar. 31,		% of total		Dec. 31,		% of total		Change			Mar. 31,		% of total		Change
	2011		loans		2010		loans		Amount			2010		loans		Amount
Commercial loans	$	306,864	20.0	%	$	309,327	20.1	%	$	(2,463	)	$	342,385	20.6	%	$	(35,521	)
Commercial real estate construction		17,711	1.2	%		19,760	1.3	%		(2,049	)		23,554	1.4	%		(5,843	)
Residential real estate construction		19,896	1.2	%		24,325	1.6	%		(4,429	)		60,879	3.7	%		(40,983	)
Total real estate construction loans		37,607	2.4	%		44,085	2.9	%		(6,478	)		84,433	5.1	%		(46,826	)
Mortgage		63,780	4.2	%		67,525	4.4	%		(3,745	)		74,613	4.4	%		(10,833	)
Nonstandard mortgage		11,140	0.7	%		12,523	0.8	%		(1,383	)		18,233	1.1	%		(7,093	)
Home equity loans and lines of credit		266,606	17.4	%		268,968	17.5	%		(2,362	)		277,527	16.6	%		(10,921	)
Total real estate mortgage loans		341,526	22.3	%		349,016	22.7	%		(7,490	)		370,373	22.1	%		(28,847	)
Commercial real estate loans		834,880	54.3	%		818,577	53.3	%		16,303			853,180	51.2	%		(18,300	)
Installment and other consumer loans		14,823	1.0	%		15,265	1.0	%		(442	)		16,562	1.0	%		(1,739	)
Total loans	$	1,535,700	100.0	%	$	1,536,270	100.0	%	$	(570	)	$	1,666,933	100.0	%	$	(131,233	)

The Bank’s total loan portfolio was $1.54 billion at March 31, 2011, substantially unchanged from December 31, 2010. While loan balances contracted as compared to March 31, 2010, we have experienced a steady increase in our quarterly loan origination volumes over the past year which resulted in loan balances stabilizing in the most recent quarter. The real estate construction loan portfolio contracted $46.8 million or 55% since March 31, 2010, and measured just 2% of total loans at most recent quarter end compared to 5% a year ago. The Company also exited a number of higher risk rated loans over the past year which contributed to the $35.5 million or 10% contraction in the commercial loan category from March 31, 2010. Additionally, commercial credit line commitment utilization at most recent quarter end remained low compared to historical levels. At quarter end the Company’s new loan pipeline stood at its highest point since third quarter 2008.

Interest and fees earned on our loan portfolio are our primary source of revenue, and it will be very important that we continue to improve loan originations and increase loan balances in order to grow overall revenues. Our ability to achieve loan growth will be dependent on many factors, including the effects of competition, economic conditions in our markets, health of the real estate market, retention of key personnel and valued customers, and our ability to close loans in the pipeline.

At March 31, 2011, the Bank had outstanding loans of $5.2 million to persons serving as directors, executive officers, principal stockholders and their related interests. These loans, when made, were made in the ordinary course of business on substantially the same terms, including interest rates, maturities and collateral, as comparable loans made to customers not related to the Bank. At March 31, 2011, and December 31, 2010, Bancorp had no bankers’ acceptances.

- 35 -

Below is a discussion of our loan portfolio by category.

Commercial. At March 31, 2011, the outstanding balance of commercial loans and lines was $306.9 million or approximately 20% of the Company’s total loan portfolio. The total commercial lines and loans balance decreased by $2.4 million or 1% from $309.3 million at year end 2010.

At March 31, 2011, commercial lines of credit accounted for $187.4 million or 61% of total outstanding commercial loans and lines, while commercial term loans accounted for $119.5 million or 39% of the total. Over the past 12 months, commercial line utilization remained stable at 42% or towards the low end of our customers’ utilization range over the past few years.

The Company has elected to limit new loan originations to customers in certain sectors, including businesses related to the housing industry, and exit certain high risk client relationships. However, in terms of our long term strategy we expect the commercial loan portfolio to be an important contributor to growth in future revenues. Our capital and liquidity positions will support our efforts to pursue opportunities in targeted commercial lending segments.

Real Estate Construction. At March 31, 2011, the balance of real estate construction loans was $37.6 million, a reduction of $6.5 million or 15% from $44.1 million at December 31, 2010. Total real estate construction loans represented 2% of the total loan portfolio at the end of the first quarter, down from 3% at December 31, 2010, and 5% a year ago. Additionally, at the end of the first quarter 2011, the Bank’s real estate construction concentration at 18% relative to Tier 1 capital and allowance for credit losses was well within the Interagency Guidelines for Real Estate Lending and the Commercial Real Estate Lending Joint Guidance policy guidelines which set forth a 100% limit for such ratio.

Until the excess supply and market demand for new homes is more in balance and volume of homes being foreclosed upon declines, there will be limited demand for new residential construction loans in the market place. Limited financing for vertical construction may be made available, particularly under existing commitments to certain builders.

Real Estate Mortgage. The following table presents the components of our real estate mortgage loan portfolio:

									Change from
	March 31, 2011				December 31, 2010				December 31, 2010					March 31, 2010
			Percent of				Percent of									Percent of
			loan				loan									loan
(Dollars in thousands)	Amount		category		Amount		category		Amount			Percent		Amount		category
Mortgage	$	63,780	19	%	$	67,525	19	%	$	(3,745	)	-6	%	$	74,613	20	%
Nonstandard mortgage product		11,140	3	%		12,523	4	%		(1,383	)	-11	%		18,233	5	%
Home equity loans and lines of credit		266,606	78	%		268,968	77	%		(2,362	)	-1	%		277,527	75	%
Total real estate mortgage	$	341,526	100	%	$	349,016	100	%	$	(7,490	)	-2	%	$	370,373	100	%

At March 31, 2011, real estate mortgage loans totaled $341.5 million or approximately 22% of the Company’s total loan portfolio. This loan category included $11.1 million in nonstandard mortgage loans, a decline from $12.5 million at December 31, 2010, and $18.2 million a year ago. At March 31, 2011, mortgage loans measured $63.8 million or 19% of total real estate mortgage loans, $31.0 million of which were standard residential mortgage loans to homeowners. The remaining $32.8 million in mortgage loans were associated with commercial interests utilizing residences as collateral. Such commercial interests included $20.5 million related to businesses, $2.8 million related to condominiums, and $4.8 million related to ownership of residential land.

Home equity lines and loans represented 78% or $266.6 million of the real estate mortgage portfolio at March 31, 2011. The overall home equity line utilization measured approximately 61% at March 31, 2011.

While delinquencies and charge-offs in the mortgage loan portfolios have been modest to date, the extended weaknesses in the economy and housing market coupled with persistent high unemployment in our markets may lead to increased real estate mortgage delinquencies and charge-offs going forward. Additionally, there may be requests made in the future for repurchases of real estate mortgage loans previously sold by the Company in the secondary market.

- 36 -

The following table shows home equity lines of credit and loans by market areas at the date shown and indicates a geographic distribution of balances representative of our branch presence in these markets:

(Dollars in thousands)	March 31, 2011				December 31, 2010
Region	Amount		Percent of total		Amount		Percent of total
Portland-Beaverton, Oregon / Vancouver, Washington	$	126,762	48	%	$	127,479	48	%
Salem, Oregon		62,089	23	%		62,533	23	%
Oregon non-metropolitan area		27,368	10	%		27,615	10	%
Olympia, Washington		18,312	7	%		17,236	7	%
Washington non-metropolitan area		13,514	5	%		14,489	5	%
Bend, Oregon		5,019	2	%		5,692	2	%
Other		13,542	5	%		13,924	5	%
Total home equity loan and line portfolio	$	266,606	100	%	$	268,968	100	%

Commercial Real Estate. The composition of commercial real estate loan portfolio based on collateral type is as follows:

(Dollars in thousands)	March 31, 2011				December 31, 2010				March 31, 2010
			% of loan				% of loan				% of loan
	Amount		category		Amount		category		Amount		category
Office Buildings	$	188,736	22.6	%	$	182,376	22.3	%	$	189,836	22.2	%
Retail Facilities		110,859	13.3	%		108,874	13.3	%		112,908	13.2	%
Multi-Family - 5+ Residential		59,707	7.1	%		58,606	7.2	%		49,411	5.8	%
Commercial/Agricultural		58,435	7.0	%		54,361	6.6	%		60,239	7.1	%
Industrial parks and related		58,269	7.0	%		59,493	7.3	%		58,318	6.8	%
Medical Offices		57,406	6.9	%		55,294	6.8	%		60,390	7.1	%
Manufacturing Plants		48,136	5.7	%		47,341	5.8	%		54,326	6.4	%
Hotels/Motels		35,491	4.2	%		35,724	4.4	%		42,779	5.0	%
Assisted Living		25,510	3.1	%		25,669	3.1	%		26,431	3.1	%
Mini Storage		23,214	2.8	%		24,678	3.0	%		25,525	3.0	%
Land Development and Raw Land		19,527	2.3	%		19,534	2.4	%		21,101	2.5	%
Food Establishments		18,828	2.3	%		16,370	2.0	%		16,548	1.9	%
Other		130,762	15.7	%		130,257	15.8	%		135,368	15.9	%
Total commercial real estate loans	$	834,880	100.0	%	$	818,577	100.0	%	$	853,180	100.0	%

The commercial real estate portfolio increased $16.3 million or 2% from December 31, 2010, to March 31, 2011. At quarter end, loans secured by office buildings and retail facilities accounted for 36% of the commercial real estate portfolio, relatively unchanged from prior periods shown.

The composition of the commercial real estate loan portfolio by occupancy type is as follows:

	March 31, 2011				December 31, 2010				Change				March 31, 2010
			Mix				Mix				Mix
(Dollars in thousands)	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
Owner occupied	$	397,309	48	%	$	383,047	47	%	$	14,262	1	%	$	411,316	48	%
Non-owner occupied		437,571	52	%		435,530	53	%		2,041	-1	%		441,864	52	%
Total commercial real estate loans	$	834,880	100	%	$	818,577	100	%	$	16,303			$	853,180	100	%

- 37 -

The mix between owner occupied and non-owner occupied commercial real estate has remained fairly stable over the past year. At March 31, 2011, the Bank’s commercial real estate concentration at 132.2% relative to Tier 1 capital and allowance for credit losses was well within the Interagency Guidelines for Real Estate Lending and the Commercial Real Estate Lending Joint Guidance policy guidelines which set forth a 300% limit for such ratio. The following table shows the commercial real estate portfolio by property location:

(Dollars in thousands)	March 31, 2011
			Number of	Percent of
Region	Amount		loans	total
Portland-Beaverton, Oregon / Vancouver, Washington	$	448,752	749	53.8	%
Salem, Oregon		150,448	403	18.0	%
Oregon non-metropoliton area		55,178	167	6.6	%
Seattle-Tacoma-Bellevue, Washington		41,394	44	5.0	%
Washington non-metropoliton area		31,260	112	3.7	%
Olympia, Washington		28,522	77	3.4	%
Bend, Oregon		22,607	24	2.7	%
Other		56,719	90	6.8	%
Total commercial real estate loans	$	834,880	1,666	100.0	%

As shown in the table above, the distribution of our commercial real estate portfolio at March 31, 2011, was fairly consistent with our branch presence in our operating markets. The average size of our commercial real estate loans was approximately $.5 million at March 31, 2011.

The following table shows the commercial real estate portfolio by year of stated maturity:

	March 31, 2011
			Number of	Percent of
(Dollars in thousands)	Amount		loans	total
2011	$	45,170	86	5.4	%
2012		51,435	83	6.2	%
2013 & After		738,275	1,497	88.4	%
Total commercial real estate loans	$	834,880	1,666	100.0	%

At March 31, 2011, the stated loan maturities for the remainder of 2011 and in 2012 totaled $96.6 million or a relatively modest 12% of the $834.9 million total commercial real estate portfolio. Commercial real estate markets continue to be vulnerable to financial and valuation pressures that may impact borrowers’ ability to perform consistent with terms and conditions of the borrower’s loan agreements and limit refinance options. Declining values of commercial real estate or higher market interest rates may adversely affect the ability of borrowers whose loans are maturing to satisfy applicable loan to value ratios required to renew the loans.

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Nonperforming Assets and Delinquencies

Nonperforming Assets. Nonperforming assets consist of nonaccrual loans, loans past due more than 90 days and still accruing interest and OREO. The following table presents information with respect to total nonaccrual loans by category and OREO for the periods shown:

	March 31, 2011					Dec. 31, 2010			Sept. 30, 2010			Jun. 30, 2010			Mar. 31, 2010
				Percent of
				loan
(Dollars in thousands)	Amount			category		Amount			Amount			Amount			Amount
Commercial loans	$	12,803		4.2	%	$	13,377		$	13,319		$	15,317		$	24,856
Real estate construction loans:
Commercial real estate construction		4,032		22.8	%		4,077			3,391			3,391			3,939
Residential real estate construction		4,093		20.6	%		6,615			13,316			19,465			19,776
Total real estate construction loans		8,125		21.6	%		10,692			16,707			22,856			23,715
Real estate mortgage loans:
Mortgage		5,714		9.0	%		9,318			13,040			14,535			9,829
Nonstandard mortgage product		6,451		57.9	%		5,223			5,150			6,121			9,327
Home equity loans and lines of credit		1,426		0.5	%		950			1,538			2,198			2,248
Total real estate mortgage loans		13,591		4.0	%		15,491			19,728			22,854			21,404
Commercial real estate loans		19,424		2.3	%		21,671			18,792			17,542			15,322
Installment and other consumer loans		-		0.0	%		-			-			74			172
Total nonaccrual loans		53,943		3.5	%		61,231			68,546			78,643			85,469
90 day past due and accruing interest		-					-			-			-			-
Total nonperforming loans		53,943		3.5	%		61,231			68,546			78,643			85,469
Other real estate owned		39,329					39,459			35,814			37,578			45,238
Total nonperforming assets	$	93,272				$	100,690		$	104,360		$	116,221		$	130,707

Nonperforming loans to total loans		3.51	%				3.99	%		4.35	%		4.91	%		5.13	%
Nonperforming assets to total assets		3.80	%				4.09	%		4.20	%		4.64	%		4.91	%

Delinquent loans 30-89 days past due	$	4,901				$	2,721		$	5,502		$	2,743		$	5,566
Delinquent loans to total loans		0.32	%				0.18	%		0.35	%		0.17	%		0.33	%

At March 31, 2011, total nonperforming assets were $93.3 million, or 3.80% of total assets, compared to $100.7 million, or 4.09%, at December 31, 2010, and $130.7 million or 4.91% a year ago. Nonperforming assets have declined for eight consecutive quarters and were down 29% from March 31, 2010. The balance of total nonperforming assets at quarter end reflected write-downs totaling $49.4 million or 35% from the original principal loan balance compared to write-downs of 38% twelve months ago.

Over the past year, total nonaccrual loans declined $31.5 million or 37% to $53.9 million at March 31, 2011. The reduction was largely due to the Company taking ownership of additional residential and commercial properties related to loans which previously were on nonaccrual status, nonaccrual loan payoffs, charge-offs, and the disposition of certain large nonaccrual commercial loans. Over the past year, nonaccrual commercial, residential real estate construction and real estate mortgage loans declined and more than offset the increase in nonaccrual commercial real estate loans. At March 31, 2011, the total nonaccrual loan portfolio had been written down 21% from the original principal balance compared to 29% at the end of the first quarter a year ago.

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OREO. The following table presents activity in the total OREO portfolio for the periods shown:

(Dollars in thousands)	Total OREO related activity
	Amount			Number
Full year 2010:
Beginning balance January 1, 2010	$	53,594			672
Additions to OREO		25,199			123
Capitalized improvements		3,185			-
Valuation adjustments		(6,649	)		-
Disposition of OREO properties		(35,870	)		(393	)
Ending balance December 31, 2010	$	39,459			402

First Quarter 2011
Additions to OREO	$	6,354			25
Capitalized improvements		125			-
Valuation adjustments		(657	)		-
Disposition of OREO properties		(5,952	)		(28	)
Ending balance March 31, 2011	$	39,329			399

The Company remained focused on OREO property disposition activities. During the first quarter 2011 the Company disposed of $6.0 million in OREO property. At March 31, 2011, the OREO portfolio consisted of 399 properties valued at $39.3 million. The quarter end OREO balance reflected write-downs totaling 48% from the original loan principal compared to 50% twelve months ago. The largest balances in the OREO portfolio at March 31, 2011, were attributable to homes, followed by residential site development projects and income producing properties, all of which are located within regions we operate. For more information regarding the Company’s OREO, see the discussion under the subheading “OREO” and “Critical Accounting Policies” included in Item 7 of the Company’s 2010 10-K.

The following table presents segments of the OREO portfolio for the periods shown:

(Dollars in thousands)	March 31,		# of		Dec. 31,		# of		September 30,		# of
	2011		properties		2010		properties		2010		properties
Homes	$	15,093		64	$	17,297		69	$	15,341		66
Residential site developments		6,973		236		7,340		245		8,096		281
Lots		3,758		56		3,700		56		4,062		61
Land		4,427		11		5,135		12		3,525		10
Income producing properties		6,613		9		5,162		7		3,212		7
Condominiums		1,792		12		128		2		881		12
Multifamily		673		11		697		11		697		11
Total	$	39,329		399	$	39,459		402	$	35,814		448

Expenses from the acquisition, maintenance and disposition of OREO properties are included in other noninterest expense in the statements of income (loss.) Our operating results will be impacted by our ability to dispose of OREO properties at prices that are in line with current valuation expectations. Continued decline in real estate market values in our area would lead to additional OREO valuation adjustments or losses upon final disposal, which would have an adverse effect on our results of operations.

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Delinquencies. Bancorp also monitors delinquencies, defined as loan balances 30-89 days past due, not on nonaccrual status, as an indicator of future nonperforming assets. Total delinquencies were $4.9 million or .32% of total loans at March 31, 2011, up from $2.7 million or .18% at December 31, 2010, and a reduction from $5.6 million or .33% at March 31, 2010.

The following table summarizes total delinquent loan balances by type of loan as of the dates shown:

(Dollars in thousands)	March 31, 2011						December 31, 2010						March 31, 2010
				Percent of						Percent of						Percent of
	Amount			loan category			Amount			loan category			Amount			loan category
Loans 30-89 days past due, not on nonaccrual status
Commercial	$	797			0.26	%	$	52			0.02	%	$	341			0.10	%
Real estate construction		-			0.00	%		-			0.00	%		604			0.72	%
Real estate mortgage:
Mortgage		398			0.62	%		409			0.01	%		402			0.54	%
Nonstandard mortgage product		-			0.00	%		945			0.08	%		1,026			5.63	%
Home equity loans and lines of credit		562			0.21	%		708			0.00	%		527			0.19	%
Total real estate mortgage		960			0.28	%		2,062			0.59	%		1,955			0.53	%
Commercial real estate		2,988			0.36	%		555			0.07	%		2,552			0.30	%
Installment and consumer		156			1.06	%		52			0.34	%		114			0.69	%
Total loans 30-89 days past due, not in nonaccrual status	$	4,901					$	2,721					$	5,566

Delinquent loans past due 30-89 days to total loans		0.32	%					0.18	%					0.33	%

Allowance for Credit Losses and Net Loan Charge-offs

Allowance for Credit Losses. An allowance for credit losses has been established based on management’s best estimate, as of the balance sheet date, of probable losses inherent in the loan portfolio. For more information regarding the Company’s allowance for credit losses and net loan charge-offs, see the discussion under the subheadings “Credit Management”, “Allowance for Credit Losses and Net Loan Charge-offs” and “Critical Accounting Policies” included in Item 7 of the Company’s 2010 10-K.

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The following table is a summary of activity in the allowance for credit losses for the periods presented:

	March 31,			Dec. 31,			Sep. 30,			June 30,			Mar. 31,
(Dollars in thousands)	2011			2010			2010			2010			2010
Loans outstanding at end of period	$	1,535,700		$	1,536,270		$	1,575,451		$	1,602,032		$	1,666,933
Average loans outstanding during the period		1,529,290			1,556,975			1,586,849			1,645,189			1,702,763

Allowance for credit losses, beginning of period		41,067			42,618			44,347			41,299			39,418
Total provision for credit losses		2,076			1,693			1,567			7,758			7,634
Loan charge-offs:
Commercial		(761	)		(1,268	)		(713	)		(2,003	)		(1,245	)
Commercial real estate construction		(65	)		(76	)		-			(248	)		(487	)
Residential real estate construction		(311	)		(471	)		(906	)		(513	)		(875	)
Total real estate construction		(376	)		(547	)		(906	)		(761	)		(1,362	)
Mortgage		(310	)		(533	)		(450	)		(515	)		(932	)
Nonstandard mortgage		(316	)		(77	)		(7	)		(643	)		(1,497	)
Home equity lines of credit		(859	)		(673	)		(572	)		(631	)		(931	)
Total real estate mortgage		(1,485	)		(1,283	)		(1,029	)		(1,789	)		(3,360	)
Commercial real estate		(329	)		(587	)		(343	)		(288	)		(103	)
Installment and consumer		(176	)		(69	)		(288	)		(179	)		(170	)
Overdraft		(287	)		(382	)		(399	)		(216	)		(186	)
Total loan charge-offs		(3,414	)		(4,136	)		(3,678	)		(5,236	)		(6,426	)
Recoveries:
Commercial		498			159			189			319			406
Commercial real estate construction		-			-			-			-			-
Residential real estate construction		-			382			93			81			141
Total real estate construction		-			382			93			81			141
Mortgage		105			186			1			37			23
Nonstandard mortgage		1			1			2			2			-
Home equity loans and lines of credit		6			103			4			4			17
Total real estate mortgage		112			290			7			43			40
Commercial real estate		3			3			4			13			8
Installment and consumer		8			10			16			33			33
Overdraft		79			48			73			37			45
Total recoveries		700			892			382			526			673
Net loan charge-offs		(2,714	)		(3,244	)		(3,296	)		(4,710	)		(5,753	)
Allowance for credit losses, end of period	$	40,429		$	41,067		$	42,618		$	44,347		$	41,299

Components of allowance for credit losses
Allowance for loan losses	$	39,692		$	40,217		$	41,753		$	43,329		$	40,446
Reserve for unfunded commitments		737			850			865			1,018			853
Total allowance for credit losses	$	40,429		$	41,067		$	42,618		$	44,347		$	41,299

Net loan charge-offs to average loans annualized		0.72	%		0.83	%		0.82	%		1.15	%		1.37	%

Allowance for loan losses to total loans		2.58	%		2.62	%		2.65	%		2.70	%		2.43	%
Allowance for credit losses to total loans		2.63	%		2.67	%		2.71	%		2.77	%		2.48	%

Allowance for loan losses to nonperforming loans		74	%		66	%		61	%		55	%		47	%
Allowance for credit losses to nonperforming loans		75	%		67	%		62	%		56	%		48	%

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At March 31, 2011, the Company’s allowance for credit losses was $40.4 million, consisting of a $33.6 million formula allowance, a $5.7 million unallocated allowance, a $.4 million specific allowance and a $.7 million reserve for unfunded commitments. At December 31, 2010, our allowance for credit losses was $41.1 million, consisting of a $33.5 million formula allowance, a $6.2 million unallocated allowance, a $.6 million specific allowance and a $.8 million reserve for unfunded commitments. The reserve for unfunded commitments was included in other liabilities as of March 31, 2011, and December 31, 2010. At March 31, 2011, the allowance for credit losses was 2.63% of total loans, a decrease from 2.67% at December 31, 2010. At March 31, 2011, the allowance for credit losses was 75% to nonperforming loans, as compared to 67% at December 31, 2010.

Overall, we believe that the allowance for credit losses is adequate to absorb losses in the loan portfolio at March 31, 2011, although there can be no assurance that future loan losses will not exceed our current estimates. The process for determining the adequacy of the allowance for credit losses is critical to our financial results. Please see Item 1A “Risk Factors” in our 2010 10-K.

Net Loan Charge-offs. For the quarter ended March 31, 2011, total net loan charge-offs were $2.7 million compared to $3.2 million in the fourth quarter 2010, and $5.8 million in the first quarter 2010. The year over year first quarter reduction in net charge-offs was concentrated in the real estate mortgage, residential real estate construction, and commercial loan categories. First quarter 2011 annualized net loan charge-offs to total average loans outstanding was .72%, a reduction from 1.37% in the first quarter 2010.

Deposits and Borrowings

The following table summarizes the quarterly average dollar amount in, and the average interest rate paid on, each of the deposit and borrowing categories for the first quarters of 2011 and 2010 and fourth quarter 2010:

	First Quarter 2011								Fourth Quarter 2010								First Quarter 2010
	Quarterly Average		Percent			Rate			Quarterly Average		Percent			Rate			Quarterly Average		Percent			Rate
(Dollars in thousands)	Balance		of total			Paid			Balance		of total			Paid			Balance		of total			Paid
Non-interest bearing demand	$	552,229		28.6	%		-		$	566,998		28.8	%		-		$	519,492		24.9	%		-
Interest bearing demand		344,090		17.8	%		0.09	%		349,071		17.7	%		0.09	%		321,070		15.4	%		0.20	%
Savings		106,309		5.5	%		0.15	%		105,114		5.3	%		0.16	%		98,075		4.7	%		0.49	%
Money market		660,672		34.2	%		0.39	%		670,581		34.0	%		0.42	%		642,594		30.8	%		0.85	%
Time deposits		269,038		13.9	%		1.59	%		281,008		14.2	%		1.66	%		507,705		24.3	%		2.14	%
Total deposits		1,932,338		100.0	%		0.38	%		1,972,772		100.0	%		0.40	%		2,088,936		100.0	%		0.83	%

Short-term borrowings		-					0.00	%		-					0.00	%		13,100					4.49	%
Long-term borrowings 1		219,599					2.95	%		217,256					2.94	%		301,199					3.01	%
Total borrowings		219,599					2.95	%		217,256					2.94	%		314,299					2.93	%

Total deposits and borrowings	$	2,151,937					0.86	%	$	2,190,028					0.88	%	$	2,403,235					1.41	%

1	Long-term borrowings include junior subordinated debentures.

First quarter 2011 average total deposits of $1.93 billion declined 7% or $156.6 million from the same quarter in 2010. This was mainly due to the decision to continue to reduce higher cost time deposit balances, which declined $238.7 million or 47% from the same quarter last year. Time deposits represented just 14% of the Company’s average total deposits in the most recent quarter. The combination of the Company’s favorable deposit mix and recent deposit pricing strategies helped reduce the average rate paid on total deposits to .38% in first quarter 2011, representing a decline of 45 basis points from 0.83% in same quarter 2010. Whether we will continue to be successful maintaining or growing our low cost deposit base will depend on various factors, including deposit pricing strategies, the effects of competition, client behavior, and regulatory changes and requirements.

At March 31, 2011, total brokered deposits were insignificant at $7.7 million, compared to $30.4 million at December 31, 2010, and $63.0 million at March 31, 2010. Brokered deposits are currently not being replaced as they mature.

The average balance of long-term borrowings decreased by $81.6 million to $219.6 million in the quarter ended March 31, 2011, from the same period last year due to the prepayment of about $99.1 million of FHLB borrowings in the second quarter 2010.

At March 31, 2011, the balance of junior subordinated debentures issued in connection with our prior issuances of trust preferred securities was $51.0 million, unchanged from March 31, 2010. At March 31, 2011, the Company had a balance in other liabilities of $2.1 million in accrued and unpaid interest expense on these junior subordinated debentures and it may not pay dividends on its capital stock until all such accrued but unpaid interest has been paid in full. Under the December 2009 Written Agreement with the DFCS and the Federal Reserve Bank (“Reserve Bank”), we cannot resume interest payments on our trust preferred securities without prior regulatory approval. For additional detail regarding Bancorp’s outstanding debentures, see Note 9 in the financial statements included under Item 1 of this report.

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Capital Resources

The Board of Governors of the Federal Reserve System (“Federal Reserve”) and the FDIC have established minimum requirements for capital adequacy for bank holding companies and state non-member banks. For more information on these topics, see the discussions under the subheadings “Capital Adequacy Requirements” in the section “Supervision and Regulation” included in Item 1 of the Company’s 2010 10-K. The following table summarizes the capital measures of Bancorp and the Bank at March 31, 2011:

	West Coast Bancorp									West Coast Bank									Minimum requirements
(Dollars in thousands)	March 31,						December 31,			March 31,						December 31,			Adequately			Well
	2011			2010				2010		2011			2010			2010			Capitalized			Capitalized
Tier 1 risk-based capital ratio		17.71	%		15.88	%		17.47	%		17.02	%		15.24	%		16.79	%		4.00	%		6.00	%
Total risk-based capital ratio		18.98	%		17.14	%		18.74	%		18.28	%		16.50	%		18.05	%		8.00	%		10.00	%
Leverage ratio		13.40	%		11.57	%		13.02	%		12.87	%		11.16	%		12.51	%		4.00	%		5.00	%

Total stockholders' equity	$	276,988		$	260,497		$	272,560		$	314,632		$	299,997		$	310,487

Bancorp’s total risk-based capital ratio improved to 18.98% at March 31, 2011, from 18.74% at December 31, 2010, and 17.14% at March 31, 2010, while Bancorp's Tier 1 risk-based capital ratio increased to 17.71% at current quarter end, from 17.47% at year end 2010 and 15.88% at March 31, 2010. The combination of the Company returning to profitability and a continued reduction in risk weighted assets over the past year continued to strengthen the Company’s capital position. The total risk-based capital ratio at the Bank improved to 18.28% at March 31, 2011, from 18.05% at year end 2010, and 16.50% at March 31, 2010, while the Bank’s Tier 1 risk-based capital ratio increased to 17.02% from 16.79% and 15.24% at those same dates. The leverage ratio at the Bank improved to 12.87% at March 31, 2011, from 11.16% at March 31, 2010.

The total risk based capital ratios of Bancorp include $51.0 million of junior subordinated debentures which qualified as Tier 1 capital at March 31, 2011, under guidance issued by the Federal Reserve. As provided in the Dodd-Frank Act, which was signed into law on July 21, 2010, Bancorp expects to continue to rely on these junior subordinated debentures as part of its regulatory capital. However, at this point, Bancorp does not expect to issue additional junior subordinated debentures as any future issued junior subordinated debentures would not qualify as Tier 1 total capital under the same Act.

Bancorp’s stockholders’ equity was $277.0 million at March 31, 2011, up from $272.6 million at year end 2010 and $260.5 million at March 31, 2010. Bancorp may take steps to raise additional capital in the future. To do so, Bancorp may offer and issue qualifying equity or debt instruments. Any equity or debt financing, if available at all, may be dilutive to existing shareholders or include covenants or other restrictions that limit the Company’s activities.

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Liquidity and Sources of Funds

The Bank’s sources of funds include customer deposits, loan repayments, advances from the FHLB, maturities of investment securities, sales of “Available for Sale” securities, loan and OREO sales, net income, if any, loans taken out at the Reserve Bank discount window, and the use of Federal Funds markets. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows, unscheduled loan prepayments, and loan and OREO sales are not. Deposit inflows, sales of securities, loan and OREO sales, and unscheduled loan prepayments are influenced by general interest rate levels, interest rates available on other investments, competition, market and general economic conditions and other factors.

Deposits are our primary source of funds, and at March 31, 2011, our loan to deposit ratio was 80%, a slight decline from 81% at March 31, 2010. Lower loan balances caused the collective balance of interest bearing deposits at the Reserve Bank and investment securities portfolio of $767.9 million to account for a significant 33% of total earning assets at March 31, 2011. In light of our substantial liquidity position, a portion of which is funded at a higher cost of funds than amounts being earned and therefore has an adverse impact on net interest income and operating results, we continued to reduce brokered, internet, and other term deposits during the most recent quarter.

The following table summarizes the primary liquidity and non-core liability ratios. The primary liquidity ratio represents the sum of net cash, short-term and marketable assets divided by the sum of net deposits and short-term liabilities. The net non-core funding dependency ratio is non-core liabilities less short-term investments divided by long-term assets. The Company’s primary and net non-core funding dependency ratios remained strong at quarter end:

	March 31,			December 31,
	2011			2010
Primary liquidity		45	%		37	%
Net non-core funding dependency		5	%		6	%

At March 31, 2011, the Bank had outstanding borrowings of $168.6 million, against its $551.8 million in established borrowing capacity with the FHLB, as compared to $168.6 million outstanding against its $673.0 million in established borrowing capacity at December 31, 2010. The Bank’s borrowing facility is subject to collateral and stock ownership requirements. The Bank also had an available discount window primary credit line with the Reserve Bank of approximately $34.6 million at March 31, 2011, with no balance outstanding at either March 31, 2011, or December 31, 2010. The Reserve Bank line is subject to collateral requirements.

On December 15, 2009, Bancorp entered into a Written Agreement with the Reserve Bank and DFCS. For detailed discussion of the Written Agreement that may affect our business, see Item 1, “Business – Current Regulatory Actions” in our 2010 10-K. Under the Written Agreement, Bancorp may not directly or indirectly take dividends or other forms of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank and the DFCS. Also, under our Memorandum of Understanding, the Bank may not pay dividends to the holding company without the consent of the FDIC and the DFCS. At March 31, 2011, the holding company did not have any borrowing arrangements of its own.

Off-Balance Sheet Arrangements

At March 31, 2011, the Bank had commitments to extend credit of $573.5 million, which was up .3% compared to $571.6 million at December 31, 2010. For additional information regarding off balance sheet arrangements and future financial commitments, see Note 7 “Commitments and Contingent Liabilities” in the financial statements included under Item 1 of this report.

Critical Accounting Policies

Management has identified as our most critical accounting policies, the calculation of our allowance for credit losses, valuation of OREO, and estimates relating to income taxes. Each of these policies are discussed in our 2010 10-K under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Critical Accounting Policies.”

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the market risks disclosure under Item 7A “Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2010 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information the Company must disclose in its reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and accumulated and communicated to our management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. Our management has evaluated, with the participation and under the supervision of our CEO and CFO, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our CEO and CFO have concluded that, as of such date, the Company’s disclosure controls and procedures are effective in ensuring that information relating to the Company, including its consolidated subsidiaries, required to be disclosed in reports that it files under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

On June 24, 2009, West Coast Trust was served with an Objection to Personal Representative's Petition and Petition for Surcharge of Personal Representative in Linn County Circuit Court. The petition was filed by the beneficiaries of the estate of Archie Q. Adams, for which West Coast Trust acts as the personal representative. The petitioners allege a breach of fiduciary duty with respect to West Coast Trust's prior sale of real property owned by the Adams estate and sought relief in the form of a surcharge to West Coast Trust of $215,573,115.60, the amount of the alleged loss to the estate. West Coast Trust filed a motion to dismiss on July 2, 2009, which was granted in a letter ruling dated September 15, 2009. Petitioners appealed and briefs have been filed. The Company believes the appeal and underlying petition are without merit.

Item 1A. Risk Factors

For detailed discussion of risks that may affect our business, see Item 1A, “Risk Factors” in our 2010 10-K.

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

(a)		None

(b)		None

(c)		The following table provides information about repurchases of common stock by the Company during the quarter ended March 31, 2011:

					Total Number of Shares
					Purchased as Part of Publicly	Maximum Number of Shares Remaining
	Total Number of Shares		Average Price Paid		Announced Plans or Programs	at Period End that May Be Purchased
Period	Purchased (1)		per Share		(2)	Under the Plans or Programs
1/1/11 - 1/31/11		3,008	$	3.19	-		1,051,821
2/1/11 - 2/28/11		-	$	0.00	-		1,051,821
3/1/11 - 3/31/11		15	$	3.36	-		1,051,821
Total for quarter		3,023			-

	(1)		Shares repurchased by Bancorp during the quarter include shares acquired from employees in connection with stock option exercises and cancellation of restricted stock to pay withholding taxes totaling 3,008 shares, 0 shares, and 15 shares, respectively, for the periods indicated. There were no shares repurchased in the periods indicated pursuant to the Company’s corporate stock repurchase program publicly announced in July 2000 (the “Repurchase Program”) and described in note 2 below.

	(2)		Under the Repurchase Program, the board of directors originally authorized the Company to repurchase up to 330,000 common shares, which amount was increased by 550,000 shares in September 2000, by 1.0 million shares in September 2001, by 1.0 million shares in September 2002, by 1.0 million shares in April 2004, and by 1.0 million shares in September 2007 for a total authorized repurchase amount as of March 31, 2011, of approximately 4.9 million shares.

Item 3. Defaults Upon Senior Securities

None

Item 4. [Reserved]

Item 5. Other Information

None

Item 6. Exhibits

	Exhibit No.		Exhibit
	31.1		Certification of CEO under Rule 13(a) – 14(a) of the Exchange Act.

	31.2		Certification of CFO under Rule 13(a) – 14(a) of the Exchange Act.

	32		Certification of CEO and CFO under 18 U.S.C. Section 1350.

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SIGNATURES

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

	WEST COAST BANCORP
	(Registrant)


Dated: April 25, 2011	/s/ Robert D. Sznewajs
	Robert D. Sznewajs
	President and Chief Executive Officer


Dated: April 25, 2011	/s/ Anders Giltvedt
	Anders Giltvedt
	Executive Vice President and Chief Financial Officer

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WEST COAST BANCORP /NEW/OR/ - FORM 10-Q - April 25, 2011

Attached files

WEST COAST BANCORP /NEW/OR/ Reports