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

FORM 10-Q/A
(Amendment No. 1)

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

For the quarterly period ended: June 30, 2008

Commission file number: 0-10997

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

  Oregon     93-0810577  
  (State or other jurisdiction of     (I.R.S. Employer  
  incorporation or organization)     Identification No.)  

5335 Meadows Road – Suite 201
Lake Oswego, Oregon 97035
(Address of principal executive offices, including 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 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: 15,701,829 shares outstanding as of July 31, 2008

EXPLANATORY NOTE

      This Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) is being filed with respect to West Coast Bancorp’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 2008, filed with the Securities and Exchange Commission on August 6, 2008 (the “Second Quarter 10-Q”). On November 6, 2008, we concluded that the Consolidated Statement of Cash Flows for the six-month period ended June 30, 2008, as included in the Second Quarter 10-Q, contained an error with respect to loans transferred to Other Real Estate Owned (“OREO”), and that the previously issued financial statements included in the Second Quarter 10-Q should be restated to properly reflect the cash flows. We are amending the Second Quarter 10-Q to correct the error and to add related disclosure in Note 1 of our Notes to Consolidated Financial Statements under the heading Supplemental Cash Flow Information. The changes are more fully described in Note 11 of the Notes to Consolidated Financial Statements included below.

      The restatement does not affect our Consolidated Balance Sheets, Consolidated Income Statements, or Consolidated Statements of Changes in Stockholders’ Equity for any period. Accordingly, our historical net income, earnings per share, total assets, and cash and cash equivalents remain unchanged.

      A revised Part I, Item 1 “Financial Statements” is presented below with the corrections to the consolidated financial statements included. In addition, we have included Part I, Item 4 “Controls and Procedures” to update our assessment of our controls and procedures at June 30, 2008, and Part II, Item 6 “Exhibits” to reflect the filing of currently dated certifications of our chief executive officer and chief financial officer. No other changes were made to the Second Quarter 10-Q.

      This Amendment No. 1 continues to speak as of the date of the Second Quarter 10-Q, and we have not updated or amended the disclosures to reflect events that have occurred since the filing of the Second Quarter 10-Q, other than as described in the preceding paragraphs and in Note 11 of the Notes to Consolidated Financial Statements included below.

WEST COAST BANCORP

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION   3
 
Item 1.       Financial Statements (Unaudited)   3
        CONSOLIDATED BALANCE SHEETS   3
        CONSOLIDATED INCOME STATEMENTS   4
        CONSOLIDATED STATEMENTS OF CASH FLOWS   5
        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY   6
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   7
 
Item 4. Controls and Procedures   21
 
PART II: OTHER INFORMATION   22
 
Item 6. Exhibits   22
 
SIGNATURES   23

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

WEST COAST BANCORP
CONSOLIDATED BALANCE SHEETS
(Unaudited)

June 30, December 31,
(Dollars and shares in thousands)       2008       2007
ASSETS:  
Cash and cash equivalents:
       Cash and due from banks $       83,055 $       81,666
       Federal funds sold 18,632   31,512
       Interest-bearing deposits in other banks 80 624
              Total cash and cash equivalents 101,767 113,802
Trading assets 1,262 1,582
Investment securities available for sale, at fair value
       (amortized cost: $240,759 and $259,844) 234,372 259,130
Federal Home Loan Bank stock held at cost 14,582 10,295
Loans held for sale 4,366 3,187
Loans 2,153,716 2,172,669
Allowance for loan losses (35,723 ) (46,917 )
              Loans, net 2,117,993 2,125,752
Premises and equipment, net 34,456 34,733
Other real estate owned 27,892 3,255
Goodwill 13,059 13,059
Core deposit intangible, net 1,194 1,432
Bank owned life insurance 23,057 22,612
Other assets   58,926 57,775
              Total assets $ 2,632,926 $ 2,646,614
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
 
Deposits:
       Demand $ 500,189 $ 501,506
       Savings and interest-bearing demand 349,950 364,971
       Money market 693,801 678,090
       Time deposits 534,310 550,265
              Total deposits 2,078,250 2,094,832
Short-term borrowings 161,200 167,000
Long-term borrowings 110,178 83,100
Junior subordinated debentures 51,000 51,000
Reserve for unfunded commitments 1,322 7,986
Other liabilities 25,468 34,455
              Total liabilities 2,427,418 2,438,373
 
Commitments and contingent liabilities (Note 6)
 
STOCKHOLDERS' EQUITY:
Preferred stock: no par value, none issued; 10,000 shares authorized - -
Common stock: no par value, 50,000 shares
       authorized; 15,702 and 15,593 shares issued
       and outstanding, respectively 19,628 19,491
Additional paid-in capital 70,902 70,391
Retained earnings 118,855 118,792
Accumulated other comprehensive loss (3,877 ) (433 )
       Total stockholders' equity 205,508 208,241
              Total liabilities and stockholders' equity $ 2,632,926 $ 2,646,614

See notes to consolidated financial statements.

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WEST COAST BANCORP
CONSOLIDATED INCOME STATEMENTS
(Unaudited)

Three months ended Six months ended
June 30, June 30,
(In thousands, except per share amounts)       2008       2007       2008       2007
INTEREST INCOME:
Interest and fees on loans $       32,826 $       42,637 $       67,899 $       82,548
Interest on taxable investment securities 1,945 2,660   4,207 5,661
Interest on nontaxable investment securities 834 737 1,670 1,478
Interest on deposits in other banks 20 27 32 34
Interest on federal funds sold 120 87 249 199
       Total interest income 35,745 46,148 74,057 89,920
 
INTEREST EXPENSE:
Savings and interest-bearing demand deposits 3,782 7,253 9,155 14,048
Time deposits 5,282 6,271 11,522 12,463
Short-term borrowings 1,250 2,127 2,623 3,704
Long-term borrowings 1,098 651 2,052 1,257
Junior subordinated debt 620 1,122 1,415 1,839
       Total interest expense 12,032 17,424 26,767 33,311
NET INTEREST INCOME 23,713 28,724 47,290 56,609
Provision for credit losses 6,000 3,500 14,725 6,300
Net interest income after provision for credit loss 17,713 25,224 32,565 50,309
 
NONINTEREST INCOME:
Service charges on deposit accounts 3,883 3,136 7,518 6,021
Payment systems related revenue 2,340 2,012 4,471 3,690
Trust and investment services revenue 1,534 1,649 3,119 3,141
Gain on sales of loans 769 967 1,629 2,271
Other noninterest income 325 845 1,735 1,519
Gains on sales of securities 187 96 777 96
       Total noninterest income 9,038 8,705 19,249 16,738
 
NONINTEREST EXPENSE:
Salaries and employee benefits 12,645 12,544 25,000 25,057
Equipment 1,765 1,574 3,516 3,100
Occupancy 2,297 2,158 4,672 4,207
Payment systems related expense 892 825 1,735 1,490
Professional fees 948 545 1,748 966
Postage, printing and office supplies 1,000 969 1,966 1,845
Marketing 1,006 870 1,801 1,994
Communications 427 354 829 787
Other noninterest expense 2,366 1,661 4,300 3,093
       Total noninterest expense 23,346 21,500 45,567 42,539
 
INCOME BEFORE INCOME TAXES 3,405 12,429 6,247 24,508
PROVISION FOR INCOME TAXES 721 4,294 1,563 8,509
NET INCOME $ 2,684 $ 8,135 $ 4,684 $ 15,999
 
       Basic earnings per share $ 0.17 $ 0.52 $ 0.30 $ 1.03
       Diluted earnings per share $ 0.17 $ 0.50 $ 0.30 $ 0.99
 
       Weighted average common shares 15,467 15,567 15,456 15,525
       Weighted average diluted shares 15,540 16,143 15,572 16,136

See notes to consolidated financial statements.

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WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited

Six months ended
June 30,
(Dollars in thousands)       2008       2007
(Restated, see note 11)
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income $                      4,684 $                      15,999
Adjustments to reconcile net income to net cash
       provided by operating activities:
Depreciation and amortization 2,185 2,494
Amortization of tax credits 626 437
Deferred income tax (benefit) expense (6,682 ) 1,795
Amortization of intangibles 238 302
Provision for credit losses 14,725 6,300
Gains on sales of securities (777 ) (96 )
Net gain on disposal of premises and equipment (6 ) (98 )
Net loss (gain) on sale of other real estate owned 263 (13 )
Gains on sale of loans (1,629 ) (2,271 )
Increase in cash surrender value of bank owned life insurance (445 ) (420 )
Stock based compensation expense 1,101 957
Excess tax benefit from stock based compensation expense - (144 )
Decrease in interest receivable 3,924 157
Decrease (increase) in other assets 3,882 (4,704 )
Origination of loans held for sale (36,895 ) (51,332 )
Proceeds from sales of loans held for sale 37,345 55,787
(Decrease) increase in interest payable (546 ) 206
Decrease in other liabilities (15,871 ) (279 )
Decrease (increase) in trading assets 320 (628 )
              Net cash provided by operating activities 6,442 24,449
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of available for sale securities 20,812 73,225
Proceeds from sales of available for sale securities 30,898 833
Purchase of available for sale securities (31,678 ) (15,353 )
Purchase of Federal Home Loan Bank stock (4,287 ) -
Loans made to customers greater than principal collected on loans (34,566 ) (196,073 )
Investments in tax credits (430 ) -
Proceeds from the sale of premises and equipment - 350
Proceeds from the sale of other real estate owned 3,185 360
Capital expenditures on other real estate owned (462 ) -
Capital expenditures on premises and equipment (1,958 ) (2,960 )
              Net cash used in investing activities (18,486 ) (139,618 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand, savings and interest
       bearing transaction accounts (627 ) 15,227
Net (decrease) increase in time deposits (15,955 ) 23,574
Proceeds from issuance of junior subordinated debentures - 17,500
Repayment of junior subordinated debentures - (7,500 )
Proceeds from issuance of long-term borrowings 32,078 4,200
Repayment of long-term borrowings - (10,000 )
Net (decrease) increase in short-term borrowings (10,800 ) 63,109
Repurchase of common stock - (474 )
Net activity in common stock of deferred compensation plans 9 (60 )
Net proceeds (redemption) from issuance of common stock (462 ) 1,842
Excess tax benefit from stock based compensation - 144
Dividends paid and cash paid for fractional shares (4,234 ) (3,779 )
              Net cash provided by financing activities 9 103,783
 
NET DECREASE IN CASH AND CASH EQUIVALENTS (12,035 ) (11,386 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 113,802 93,800
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 101,767 $ 82,414

See notes to consolidated financial statements.

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WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)

Accumulated
Additional Other
Common Stock Paid-In Retained Comprehensive
(Dollars and shares in thousands)       Shares       Amount       Capital       Earnings       Loss       Total
BALANCE, January 1, 2007               15,586   $       19,482   $       71,762   $       109,952   $         (314 ) $       200,882  
 
Comprehensive income:
Net income - - - 16,842 - $ 16,842
       Other comprehensive loss, net of tax:
              Net unrealized investment/derivative loss - - - - (119 ) (119 )
       Other comprehensive loss, net of tax   (119 )
Comprehensive income   $ 16,723
Cash dividends, $.51 per common share - - - (8,002 ) - (8,002 )
 
Issuance of common stock-stock options 162 202 2,123 - - 2,325
Redemption of common stock-options and restricted stock (22 ) (28 ) (611 ) - - (639 )
Activity in Deferred Compensation Plan (2 ) (2 ) (82 ) - - (84 )
Issuance of common stock-restricted stock 74 93 (93 ) - - -
Common stock repurchased and retired (205 ) (256 ) (5,591 ) - - (5,847 )
Stock based compensation expense - - 2,030 - - 2,030
Tax benefit associated with stock plans - - 853 - - 853
BALANCE, December 31, 2007 15,593 19,491 70,391 118,792 (433 ) 208,241
 
Comprehensive income:
Net income - - - 4,684 - $ 4,684
       Other comprehensive loss, net of tax:
              Net unrealized investment loss - - - - (3,444 ) (3,444 )
       Other comprehensive loss, net of tax (3,444 )
Comprehensive income $ 1,240
Cash dividends, $.27 per common share - - - (4,234 ) - (4,234 )
 
Issuance of common stock-stock options 1 1 8 - - 9
Redemption of common stock-options and restricted stock (18 ) (22 ) (162 ) - - (184 )
Activity in Deferred Compensation Plan (2 ) (2 ) 11 - - 9
Issuance of common stock-restricted stock 128 160 (160 ) - - -
Stock based compensation expense - - 1,101 - - 1,101
Tax adjustment associated with stock plans - - (287 ) - - (287 )
Post retirement benefit adjustment - - - (387 ) - (387 )
BALANCE, June 30, 2008 15,702 $ 19,628 $ 70,902 $ 118,855 $ (3,877 ) $ 205,508

See notes to consolidated financial statements.

- 6 -

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 (“generally accepted accounting principles”) 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 footnotes 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, and Totten, Inc., after elimination of intercompany transactions and balances. The Company’s interim consolidated financial statements and related notes, including our significant accounting policies, should be read in conjunction with the audited financial statements and related notes, including our significant accounting policies, contained in Bancorp's Annual Report on Form 10-K for the year ended December 31, 2007 (“2007 10-K”). Other real estate owned (“OREO”) and FHLB stock held at cost have been reclassified in prior periods to conform to current presentation in the Company’s consolidated balance sheet. In addition, certain items in prior periods of the cash flow statement have been reclassified to conform to the current presentation including OREO, premises and equipment, FHLB stock and the classification of stock related activity in our deferred compensation plan in the cash flow statement.

      The Company revised its loan policy on accounting for the recognition of impairment on collateral dependent loans in the first quarter ended March 31, 2008. The Company changed its practice of establishing specific reserves in the allowance for loan losses associated with collateral dependent impaired loans. As a result, the Company now charges off the amount of impairment at the time of impairment, rather than placing the impaired loan amount in a specific reserve. The policy also accelerated the timing of placing loans with certain characteristics on nonaccrual status. Applying these new practices accelerated the timing of charge-offs associated with collateral dependent impaired loans.

      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 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 and six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008, or other future periods.

      Supplemental cash flow information. The following table presents supplemental cash flow information for the six months ended June 30, 2008, and 2007.

(Dollars in thousands) Six months ended
June 30,
Cash paid in the period for: 2008       2007
     Interest $      27,313 $      33,105
     Income taxes $ 4,385 $ 9,856
Noncash investing and financing activities:
     Change in unrealized loss on available for sale securities
     and derivatives, net of tax $ (3,444 )   $ (1,504 )
Dividends declared and accrued in other liabilities $ 2,124 $ 1,894
Transfers of loans to OREO (Restated, see note 11) $ 27,600 $ -
Other real estate owned and premises and equipment expenditures accrued in other liabilities $ 138 $ -

      Other real estate owned . OREO is real property that the Bank has taken ownership of in partial or full satisfaction of a loan or loans. OREO is recorded at the lower of the carrying amount of the loan or fair value less estimated costs to sell. This amount becomes the property’s new basis. Any write-downs based on the property fair value less estimated cost to sell at the date of acquisition are charged to the allowance for credit losses. Management periodically reviews OREO in an effort to ensure the property is carried at the lower of its new basis or fair value, net of estimated costs to sell. Any further OREO write-downs are charged to other noninterest expense. Net expenses from operations of OREO properties are included in other noninterest expense in the consolidated income statements.

- 7 -

1. BASIS OF PRESENTATION (continued)

      Goodwill and Intangible Assets. At June 30, 2008, Bancorp had $14.3 million in goodwill and other intangible assets, that related to its acquisition of Mid-Valley Bank and are evaluated for possible impairment on an annual basis as of April 30, or when other impairment indicators exist. All goodwill and other intangible assets reside at the Bank operating segment. The Company evaluated its goodwill and intangible assets as of April 30, 2008, and subsequently at June 30, 2008, due to a further decrease in its market capitalization, and concluded that there was no impairment at either date under SFAS No. 142, “Goodwill and Other Intangible Assets.”

      The impairment analysis requires management to make highly subjective judgments. Events and factors that may significantly affect the estimates include, among others, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures, changes in discount rates and specific industry and market conditions. If impairment is later deemed to exist, goodwill or other intangible assets will be written down to estimated fair value, resulting in a charge to earnings in the period in which the write down occurs.

      New accounting pronouncements. In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements.” This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements. The Company adopted SFAS No. 157 on January 1, 2008. The adoption of this standard did not have a material impact on the Company. See footnote 10 “Fair Value Measurement” for further information.

      In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 provides entities with an option to report certain financial assets and liabilities at fair value with changes in fair value reported in earnings. In addition, it requires disclosures related to an entity’s election to use fair value reporting. It also requires entities to display the fair value of those assets and liabilities for which the entity has elected to use fair value on the face of the balance sheet. SFAS No. 159 is effective for the Company beginning January 1, 2008. The Company did not choose to report additional assets and liabilities at fair value other than those required to be accounted for at fair value prior to the adoption of SFAS No. 159. Therefore, the adoption of this standard had no impact on the Company.

      In September 2006, the FASB's Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue No. 06-4, "Accounting for Deferred Compensation and Postretirement Benefits Aspects of Endorsement Split-Dollar Life Insurance Arrangements" ("EITF 06-4"). This addresses endorsement split-dollar life insurance arrangements that provide a benefit to an employee that extends to postretirement periods. In an endorsement split-dollar arrangement, the employer owns and controls the policy, and the employer and an employee split the insurance policy's cash surrender value and/or death benefits.

      The EITF consensus requires that the deferred compensation or postretirement benefit aspects of an endorsement-type split-dollar life insurance arrangement be recognized as a liability by the employer and that the obligation is not effectively settled by the purchase of a life insurance policy. The liability for future benefits would be recognized based on the substantive agreement with the employee, which may be either to provide a future death benefit or to pay for the future cost of the life insurance. The Company adopted EITF 06-4 on January 1, 2008. In conjunction with that adoption, the Company recorded a $.4 million, net of deferred taxes, adjustment to retained earnings and a corresponding liability of $.6 million for future postretirement benefits at January 1, 2008. In the future the Company will record postretirement benefit expense in salaries and employee benefits in the income statement with an increase to liability for postretirement benefits.

- 8 -

2. STOCK PLANS AND STOCK BASED COMPENSATION

      At June 30, 2008, Bancorp had multiple stock and stock option plans. Bancorp’s stock option plans include the 2002 Stock Incentive Plan (“2002 Plan”), the 1999 Stock Option Plan (“1999 Plan”), the Combined 1991 Employee Stock Option Plan and Non-Qualified Stock Option Plan (“1991 Plan”), and the 1995 Directors Stock Option Plan (“1995 Plan”). No additional grants may be made under plans other than the 2002 Plan. The 2002 Plan, which is shareholder approved, permits the grant of stock options and restricted stock awards for up to 1.9 million shares, of which, .2 million shares remain available for issue, of which, .05 million may be allocated to restricted stock awards.

      All 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 three or four year vesting period; however, certain grants have been made that vested immediately. Stock options granted have a 10 year maximum term. Options previously issued under the 1999 Plan or prior plans are fully vested.

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

Six months ended
June 30, 2008
Weighted Avg.
Common Shares       Exercise Price
Balance, beginning of period     1,311,585 $      16.97
     Granted 177,500 12.73
     Exercised (981 )   9.20
     Forfeited/Expired (56,414 )     17.31
Balance, end of period 1,431,690     $ 16.43

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

Six months ended Six months ended
(Dollars in thousands, except share and per share data) June 30, 2008       June 30, 2007
Intrinsic value of options exercised in the period $     2 $ 2,236
 
Stock options vested and expected to vest:
     Number 1,398,438 1,322,754
     Weighted avg. exercise price $ 16.40 $ 16.95
     Aggregate intrinsic value $ 1   $ 17,784
     Weighted avg. contractual term of options 5.2 years 5.4 years
 
Stock options vested and currently exercisable:
     Number 1,165,573   1,133,296
     Weighted avg. exercise price $ 16.08 $ 15.45
     Aggregate intrinsic value $ 1   $ 16,937
     Weighted avg. contractual term of options 4.3 years 4.9 years

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2. STOCK PLANS AND STOCK BASED COMPENSATION (continued)

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

June 30, 2008  
    Weighted Avg. Market 
  Restricted Shares       Price at Grant
Balance, beginning of period   148,317   $      27.97
     Granted 127,900     11.48
     Vested (57,278 )     26.58
     Forfeited (3,505 )     28.60
Balance, end of period 215,434     $      18.54
 
Weighted avg. remaining recognition period 1.9 years

      In the first two quarters of 2008, the Company granted 127,900 shares of restricted stock of which approximately 35,000 shares were granted with a clause that requires the Company's stock price to be at a certain level to vest. The balance of unearned compensation related to restricted stock shares as of June 30, 2008, and June 30, 2007, was $3.8 million and $3.9 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. This model uses the assumptions listed in the table below. Expected volatilities are based on implied volatilities from Bancorp’s stock, historical volatility of Bancorp’s stock, and other factors. Expected dividend yields are based on dividend trends and the market price of Bancorp’s stock price at grant. Bancorp uses 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 is based on the U.S. Treasury yield curve in effect at the time of grant.

      The following table presents the Black-Scholes assumptions used in connection with stock option grants in the periods shown.

  Black-Scholes assumptions
  Six months ended   Year ended
  June 30, 2008       December 31, 2007
Risk Free interest rates   2.75%-3.52%     4.44%-4.78%
Expected dividend yield   3.60%-4.14%     1.48%-1.66%
Expected lives, in years   4     4
Expected volatility   27%     23%
Weighted avg. fair value of options granted in period $      2.20   $      6.80

      It is Bancorp’s policy to issue new shares for stock option exercises and restricted stock, rather than issue treasury shares. Bancorp expenses stock options and restricted stock on a straight line basis over the related vesting term. The following table presents stock-based compensation expense for the periods shown.

  Three months ended   Six months ended
  June 30,   June 30,
(Dollars in thousands, pretax) 2008       2007       2008       2007
Restricted stock expense $      421   $      361   $      835   $      709
Stock option expense   140     120     266     248
     Total stock-based compensation expense $ 561   $ 481   $ 1,101   $ 957

      The income tax benefit recognized in the income statement for restricted stock compensation expense in the three and six months ended June 30, 2008, was $160,000 and $317,000, respectively, compared to $137,000 and $269,000 for the three and six months ended June 30, 2007, respectively.

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2. STOCK PLANS AND STOCK BASED COMPENSATION (continued)

      The Company’s tax benefits from disqualifying dispositions for the exercise of incentive stock options, the exercise of non-qualified stock options, and the vesting and release of restricted stock for the three months ended June 30, 2008 and 2007, were $0 and $.5 million, respectively. For the six months ended June 30, 2008 and 2007, the Company recognized income tax benefits of $0 and $.7 million, respectively, when recorded. These tax benefits lower the Company’s tax liability and increase additional paid in capital.

      Cash received from stock option exercises for the three months ended June 30, 2008 and 2007, was $0 and $.8 million, respectively. For the six months ended June 30, 2008 and 2007, the Company’s cash received from stock option exercises was $0 and $1.5 million, respectively.

3. INVESTMENT SECURITIES AVAILABLE FOR SALE

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

  June 30,         December 31,
(Dollars in thousands) 2008   2007
Investments available for sale (At fair value)          
Treasury securities $ 209 $ 207
U.S. Government agency securities   25,445   61,557
Corporate securities   15,280   19,568
Mortgage-backed securities   102,849   84,197
Obligations of state and political subdivisions   83,582   86,106
Equity and other securities   7,007   7,495
     Total investment securities available for sale $         234,372 $         259,130

      As of June 30, 2008, the fair value of the securities in the investment portfolio was $234.4 million while the carrying, or book, value was $240.8 million, reflecting an unrealized loss in the portfolio of $6.4 million as of that date. At December 31, 2007, the fair value and carrying value of the securities in the investment portfolio were $259.1 million and $259.8 million, respectively, reflecting an unrealized loss of $.7 million.

      The June 30, 2008, investment portfolio balance of $234.4 million decreased $24.8 million from December 31, 2007. At June 30, 2008, total investment securities available for sale had a pre-tax net unrealized loss of $6.4 million. Our US Government agency portfolio consisted of $24.4 million of AAA rated debt and $1 million of agency debt rated AA-.

      There was a $3.4 million unrealized loss in corporate securities at June 30, 2008. This was associated with the decline in market value of our $13.9 million carrying value investment in collateralized debt obligations collateralized by pools of trust preferred securities issued primarily by banks and insurance companies. These securities are rated A- or better and have several features that reduce credit risk, including subordination and collateral coverage tests.

      The investment portfolio has limited direct exposure to “subprime” mortgages. Our mortgage-backed security portfolio consists of $61 million of US agency backed mortgages and $42 million of non-agency mortgages. The majority of our non-agency mortgage-backed securities portfolio is comprised of securities secured by 15 year fully amortizing jumbo loans. All of our non-agency mortgage-backed securities are rated AAA or Aaa.

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3. INVESTMENT SECURITIES AVAILABLE FOR SALE (continued)

      Included in equity and other securities is a $2.9 million investment in Freddie Mac preferred stock. At June 30, 2008, we had a $.8 million unrealized loss on this investment. The market value of this investment has been volatile as the market situation for Freddie Mac remains very fluid and lacks clarity for investors. There are multiple scenarios for government intervention and management expects decisions impacting the future structure of Freddie Mac to be made in the next few months. The outcome is expected to help preferred stock investors better assess the market value of Freddie Mac preferred stock. Based on the current evaluation, management has concluded there is no other-than-temporary-impairment on Freddie Mac preferred stock at June 30, 2008.

      Finally, consistent with the industry, the Company has experienced an adverse change in the credit ratings of its securities representing obligations of state and political subdivisions, which is comprised solely of municipal bonds. Several municipal bond insurers were downgraded by credit rating agencies, which impacted the municipal bonds that the Company owns. At June 30, 2008 the ratings were: 59% AAA, 22% AA, 15% A and 4% BBB. At December 31, 2007 the ratings were: 91% AAA, 6% AA, 2% A and 1% BBB.

      The following table provides information on investment securities with 12 month or greater continuous unrealized losses as of June 30, 2008:

(Dollars in thousands) Amortized cost of   Fair value of      
  securities with an securities with an    
  unrealized loss for more unrealized loss for more Unrealized
  than 12 months       than 12 months       Gross Losses
Corporate securities $ 475 $ 456 $ (19 )
Mortgage-backed securities   10,928   10,288   (640 )
Obligations of state and political subdivisions   2,798   2,722   (76 )
Equity and other securities   1,800     1,722     (78 )
     Total $       16,001   $       15,188   $        (813 )  

      At June 30, 2008, the Company had 12 investment securities with a book value of $16.0 million and an unrealized loss of $.8 million that have been in a continuous unrealized loss position for more than 12 months. The Company has the ability and intent to hold securities with a stated maturity until the value recovers. The unrealized loss on our investment securities portfolio was substantially due to an increase in interest rates subsequent to purchasing these securities. Based on management’s evaluation and intent, none of the unrealized losses summarized in this table are considered other-than-temporary. In addition to accounting and regulatory guidance, in determining whether a security is other-than-temporarily impaired, the Company regularly considers the duration and amount of the unrealized loss, the financial condition of the issuer, and the prospects for a change in market value within a reasonable period of time.

      The following table provides information on investment securities which have unrealized losses and have been in an unrealized loss position for less than 12 months as of June 30, 2008:

(Dollars in thousands) Amortized cost of   Fair value of      
  securities with an securities with an    
  unrealized loss for less unrealized loss for less Unrealized
  than 12 months       than 12 months       Gross Losses
U.S. Government agency securities $ 2,158 $ 2,135 $ (23 )
Corporate securities   16,006   12,556   (3,450 )
Mortgage-backed securities   67,579   66,307   (1,272 )
Obligations of state and political subdivisions   39,349   38,455   (894 )
Equity and other securities   6,159     5,284     (875 )
     Total $       131,251   $       124,737   $       (6,514 )  

      There were a total of 93 securities in Bancorp’s investment portfolio at June 30, 2008, that have been in a continuous unrealized loss position for less than 12 months, with a book value of $131.3 million and a total unrealized loss of $6.5 million. The unrealized loss on corporate securities was due to a widening of credit spreads over the past several months particularly on the investments in collateralized debt obligations collateralized by pools of trust preferred securities issued primarily by banks and insurance companies. These securities had a $13.9 million carrying value with a $10.5 million fair value at June 30, 2008. The fair value of these securities fluctuates as credit spreads and market interest rates change. The unrealized loss on our mortgage-backed securities portfolio was substantially due to an increase in interest rates subsequent to purchasing these securities. The unrealized loss in equity and other securities was primarily caused by the Bank’s previously disclosed investment in Freddie Mac preferred shares. Based on management’s evaluation and intent, none of the unrealized losses summarized in this table are considered other-than-temporary. The Company has the ability and intent to hold debt securities until the value recovers.

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4. LOANS AND ALLOWANCE FOR CREDIT LOSSES

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

(Dollars in thousands) June 30, 2008         December 31, 2007
Commercial $      512,689   $      504,101  
Real estate construction   392,724     517,988  
Real estate mortgage   377,771     330,803  
Commercial real estate   847,430     796,622  
Installment and other consumer   23,102     23,155  
Total loans   2,153,716     2,172,669  
Allowance for loan losses   (35,723 )   (46,917 )
Total loans, net $       2,117,993   $      2,125,752  

      The following table presents activity in the allowance for credit losses, comprised of the Company’s allowance for loan losses and reserve for unfunded commitments, for the three and six months ended June 30, 2008, and 2007:

  Three months ended
(Dollars in thousands) June 30, 2008       June 30, 2007
Balance at beginning of period $       42,454   $      24,464  
Provision for credit losses   6,000     3,500  
 
Loan charge-offs   (12,753 )   (1,567 )
Loan recoveries   1,344     99  
     Total allowance for credit losses, end of period $      37,045   $ 26,496  
 
Components of allowance for credit losses        
Allowance for loan losses $      35,723   $ 26,496  
Reserve for unfunded commitments   1,322     -  
     Total allowance for credit losses $      37,045   $ 26,496  
 
 
  Six months ended
(Dollars in thousands) June 30, 2008 June 30, 2007
Balance at beginning of period $      54,903   $ 23,017  
Provision for credit losses   14,725     6,300  
 
Loan charge-offs   (34,146 )   (3,087 )
Loan recoveries   1,563     266  
     Total allowance for credit losses, end of period $      37,045   $ 26,496  
Components of allowance for credit losses        
Allowance for loan losses $      35,723   $ 26,496  
Reserve for unfunded commitments   1,322     -  
     Total allowance for credit losses $ 37,045   $ 26,496  

      As of September 30, 2007, we reclassified $1.0 million of the allowance for loan losses to a reserve for unfunded loan commitments. As a result, we are reporting our allowance for credit losses in this report and elsewhere for ease of comparison to prior periods and to give readers information about our entire loan portfolio, including our unfunded commitments. The reserve for unfunded commitments is evaluated on a quarterly basis and appropriate increases or decreases are reflected in the provision for credit losses in the income statement.

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4. LOANS AND ALLOWANCE FOR CREDIT LOSSES (continued)

      The Company revised its loan policy on accounting for the recognition of impairment on collateral dependent loans in the quarter ended March 31, 2008. The Company changed its practice of establishing specific reserves in the allowance for loan losses associated with collateral dependent impaired loans. As a result, the Company now charges off the estimated amount of impairment at the time of impairment, rather than placing the impaired loan amount in a specific reserve. The policy also accelerated the timing of placing loans with certain characteristics on nonaccrual status. These new practices accelerated the charge-offs associated with collateral dependent impaired loans in the first two quarters of 2008.

5. EARNINGS PER SHARE

      Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if certain shares issueable upon exercise of options and non-vested restricted stock were included. For the periods reported, Bancorp had no reconciling items between net income and income available to common stockholders.

      The following tables reconcile the numerator and denominator of the basic and diluted earnings per share computations:

          Per Share
(Dollars and shares in thousands, except per share data) Net Income Weighted Average Shares Amount
      Three months    
      ended    
            June 30, 2008          
Basic earnings $       2,684 15,467 $               0.17
Common stock equivalents from:          
     Stock options     54    
     Restricted stock     19    
Diluted earnings $ 2,684 15,540 $         0.17
Common stock equivalent shares excluded due to anti-dilutive effect   1,300
 
      Three months    
      ended    
        June 30, 2007      
Basic earnings $ 8,135 15,567 $         0.52
Common stock equivalents from:          
     Stock options     541    
     Restricted stock     35    
Diluted earnings $ 8,135 16,143 $         0.50
Common stock equivalent shares excluded due to anti-dilutive effect   129
 
      Six months    
      ended    
        June 30, 2008      
Basic earnings $ 4,684 15,456 $         0.30
Common stock equivalents from:          
     Stock options     92    
     Restricted stock     24    
Diluted earnings $ 4,684 15,572 $         0.30
Common stock equivalent shares excluded due to anti-dilutive effect   1,070
 
      Six months    
      ended    
        June 30, 2007      
Basic earnings $ 15,999 15,525 $         1.03
Common stock equivalents from:          
     Stock options     569    
     Restricted stock     42    
Diluted earnings $         15,999 16,136 $         0.99
Common stock equivalent shares excluded due to anti-dilutive effect   118

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6. COMMITMENTS AND CONTINGENT LIABILITIES

      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.

7. COMPREHENSIVE INCOME (LOSS)

      The components of comprehensive income (loss) are as follows:

  Three months ended   Six months ended
  June 30, June 30,
(Dollars in thousands) 2008       2007       2008       2007
Net income as reported $      2,684   $      8,135   $      4,684   $       15,999  
 
Unrealized losses on securities arising during the period (5,158 )   (2,938 )   (4,896 )   (2,410 )
Tax benefit   2,028      1,154      1,930      947  
Net unrealized losses on securities arising during the period (3,130 )   (1,784 )   (2,966 )   (1,463 )
 
Less: Reclassification adjustment for gains on sales of securities (187 )   (96 )   (777 )   (96 )
Tax provision   72      38      299      38  
Net gains on sales of securities (115 )   (58 )   (478 )   (58 )
 
Unrealized gains on derivatives- cash flow hedges -     15     -     28  
Tax provision   -      (6 )    -      (11 )
Net unrealized gains on derivatives- cash flow hedges   -      9      -      17  
Total comprehensive income (loss) $ (561 ) $ 6,302   $ 1,240   $ 14,495  

8. JUNIOR SUBORDINATED DEBT

      At June 30, 2008, six wholly owned subsidiary grantor trusts established by Bancorp had an outstanding balance of $51 million in pooled trust preferred securities. The following table is a summary of current trust preferred securities issued by the grantor trusts and guaranteed by Bancorp:

(Dollars in thousands)                          
 
        Preferred       Current stated       Next possible
Issuance Trust      Issuance date      security amount        Rate type (1)        rate      Maturity date      redemption date
West Coast Statutory Trust III September 2003 $       7,500 Fixed   6.75%   September 2033 September 2008
West Coast Statutory Trust IV March 2004   6,000 Fixed   5.88%   March 2034 March 2009
West Coast Statutory Trust V April 2006   15,000 Variable   4.21%   June 2036 June 2011
West Coast Statutory Trust VI December 2006   5,000 Variable   4.46%   December 2036 December 2011
West Coast Statutory Trust VII March 2007   12,500 Variable   4.33%   March 2037 March 2012
West Coast Statutory Trust VIII June 2007   5,000 Variable   4.16%   June 2037 June 2012
     Total   $ 51,000 Weighted avg.   4.83%      

(1) The variable rate preferred securities reprice quarterly.

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9. 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 June 30, 2008
  Banking       Other       Intersegment       Consolidated
Interest income $      35,721 $      24   $      -   $       35,745
Interest expense   11,412     620       -       12,032
     Net interest income (expense)   24,309     (596 )     -       23,713
Provision for credit losses 6,000   -   -   6,000
Noninterest income 8,395   925   (282 ) 9,038
Noninterest expense   22,625     1,003       (282 )     23,346
     Income (loss) before income taxes 4,079   (674 ) -   3,405
Provision (benefit) for income taxes   984     (263 )     -       721
     Net income (loss) $ 3,095   $ (411 )   $ -     $ 2,684
 
Depreciation and amortization $ 1,119 $ 5   $ -   $ 1,124
Assets $ 2,618,480 $ 19,338   $ (4,892 ) $ 2,632,926
Loans, net $ 2,117,993 $ -   $ -   $ 2,117,993
Deposits $ 2,082,385 $ -   $ (4,135 ) $ 2,078,250
Equity $ 241,841 $ (36,333 ) $ -   $ 205,508
 
 
(Dollars in thousands) Three months ended June 30, 2007
  Banking   Other   Intersegment   Consolidated
Interest income $ 46,118 $ 30   $ -   $ 46,148
Interest expense   16,302     1,122       -       17,424
     Net interest income (expense)   29,816     (1,092 )       -       28,724
Provision for credit losses 3,500   -   -   3,500
Noninterest income 7,987   955   (237 )         8,705
Noninterest expense   20,787     950       (237 )         21,500
     Income (loss) before income taxes 13,516   (1,087 )     -   12,429
Provision (benefit) for income taxes   4,718     (424 )       -       4,294
     Net income (loss) $ 8,798   $ (663 )     $     -     $ 8,135
 
Depreciation and amortization $ 1,474 $ 6   $ -   $ 1,480
Assets $ 2,579,387 $ 13,510   $ (8,498 )       $ 2,584,399
Loans, net $ 2,114,446 $ -   $ -   $ 2,114,446
Deposits $ 2,052,908 $ -   $ (7,755 )       $ 2,045,153
Equity $ 247,769 $ (33,906 )   $     -   $ 213,863

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9. SEGMENT AND RELATED INFORMATION (continued)

(Dollars in thousands) Six months ended June 30, 2008
  Banking       Other       Intersegment       Consolidated
Interest income $      74,022 $      35   $      -   $       74,057
Interest expense   25,352     1,415       -       26,767
     Net interest income (expense)   48,670     (1,380 )     -       47,290
Provision for credit losses 14,725   -     -     14,725
Noninterest income 17,984   1,836     (571 )   19,249
Noninterest expense   44,133     2,005       (571 )     45,567
     Income (loss) before income taxes 7,796   (1,549 )   -     6,247
Provision (benefit) for income taxes   2,167     (604 )     -       1,563
     Net income (loss) $ 5,629   $ (945 )   $ -     $ 4,684
 
Depreciation and amortization $ 2,175 $ 10   $ -   $ 2,185
Assets $ 2,618,480 $ 19,338   $ (4,892 ) $ 2,632,926
Loans, net $ 2,117,993 $ -   $ -   $ 2,117,993
Deposits $ 2,082,385 $ -   $ (4,135 ) $ 2,078,250
Equity $ 241,841 $ (36,333 ) $ -   $ 205,508
 
 
 
(Dollars in thousands) Six months ended June 30, 2007
  Banking   Other   Intersegment   Consolidated
Interest income $ 89,863 $ 57   $ -   $ 89,920
Interest expense   31,472     1,839       -       33,311
     Net interest income (expense)   58,391     (1,782 )     -       56,609
Provision for credit losses 6,300   -     -     6,300
Noninterest income 15,382   1,824     (468 )   16,738
Noninterest expense   41,164     1,843       (468 )     42,539
     Income (loss) before income taxes 26,309   (1,801 )   -     24,508
Provision (benefit) for income taxes   9,212     (703 )     -       8,509
     Net income (loss) $ 17,097   $ (1,098 )   $ -     $ 15,999
 
Depreciation and amortization $ 2,482 $ 12   $ -   $ 2,494
Assets $ 2,579,387 $ 13,510   $ (8,498 ) $ 2,584,399
Loans, net $ 2,114,446 $ -   $ -   $ 2,114,446
Deposits $ 2,052,908 $ -   $ (7,755 ) $ 2,045,153
Equity $ 247,769 $ (33,906 ) $ -   $ 213,863

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10. FAIR VALUE MEASUREMENT

      SFAS No. 157, “Fair Value Measurements” defines fair value and establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The following definitions describe the categories used in the tables presented under Fair Value Measurement.

  • 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 assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

      Financial instruments are broken down in the tables that follow by recurring or nonrecurring measurement status. Recurring assets are initially measured at fair value and are required to be remeasured 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 remeasured at fair value after initial recognition in the financial statements at some time during the reporting period.

      The following table presents fair value measurements for assets that are measured at fair value on a recurring basis subsequent to initial recognition.

        Fair value measurements at June 30, 2008, using
      Quoted prices in active   Other observable   Significant unobservable
  Total fair value markets for identical assets inputs inputs
(Dollars in thousands)       June 30, 2008       (Level 1)      (Level 2)      (Level 3)
Trading assets $   1,262 $       1,262 $       - $      -
Available for sale securities   234,372      217     223,137      11,018
Total recurring assets measured at fair value $ 235,634   $ 1,479   $ 223,137   $ 11,018

      The following table represents a reconciliation from the beginning of the period to end of the period of level three instruments, for assets that are measured at fair value on a recurring basis.

  Available for sale
(Dollars in thousands) securities
Fair value, December 31, 2007 $   13,948
    Losses included in other comprehensive income (loss)             (1,918 )
Fair value, March 31, 2008   12,030  
    Losses included in other comprehensive income (loss)   (1,012 )
Fair value, June 30, 2008 $ 11,018  

      The following method was used to estimate the fair value of each class of financial instrument above:

Trading assets – Trading assets held at June 30, 2008 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 assets are based on quoted market prices.

Available for Sale Securities - Fair values for available for sale securities are based on quoted market prices when available or through the use of alternative approaches, such as matrix or model pricing or indicators from market makers, when market quotes are not readily accessible or available.

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10. FAIR VALUE MEASUREMENT (continued)

      Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as loans held for sale, loans measured for impairment, and OREO. During the second quarter 2008, certain 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 the second quarter of 2008. During the second quarter 2008, certain loans included in Bancorp’s loan portfolio were deemed impaired in accordance with SFAS No. 114. OREO that was taken into possession during the second quarter of 2008 was measured at fair market value less sales expense. In addition, during the second quarter, certain properties were written down $.2 million to reflect additional decreases in their fair market value after initial recognition when placed into OREO.

      There were no nonrecurring level one or two fair value measurements in the second quarter of 2008. The following table represents the level three fair value measurements for nonrecurring assets.

(Dollars in thousands) Impairment       Fair Value
Loans held for sale $       - $       4,366
Loans measured for impairment   9,847   44,579
OREO   245         22,239
Total nonrecurring assets measured at fair value $ 10,092       $ 71,184

      The following methods were used to estimate the fair value of each class of financial instrument above:

Loans held for sale - Loans held for sale are carried at the lower of cost or market utilizing the quoted market price. When a loan is sold, the gain is recognized in the consolidated statement of income as the proceeds less the book value of the loan including unamortized fees and capitalized direct costs.

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 less sales expenses if the loan is collateral dependent. A significant portion of the Bank’s impaired loans are measured using the fair market value of the collateral less sales expenses.

Other real estate owned - OREO is real property that the Bank has taken ownership of in partial or full satisfaction of a loan or loans. OREO is recorded at the lower of the carrying amount of the loan or fair value less estimated costs to sell. This amount becomes the property’s new basis. Any write-downs based on the property fair value less estimated cost to sell at the date of acquisition are charged to the allowance for credit losses. Management periodically reviews OREO in an effort to ensure the property is carried at the lower of its new basis or fair value, net of estimated costs to sell.

      The Company did not have any transfers between level 1, level 2, or level 3 instruments. In addition, the Company had no changes in valuation techniques for recurring and nonrecurring assets measured at fair value from the year ended December 31, 2007.

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11. RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

      Subsequent to the issuance of Bancorp’s Consolidated Financial Statements for the three and six months ended June 30, 2008, it was determined that its Consolidated Statement of Cash Flows contained an error relating to the transfer of loans to OREO. As a result, Bancorp has restated the accompanying Consolidated Statement of Cash Flows and supplemental cash flow information included in Note 1 of the Notes to Consolidated Financial Statements for the six months ended June 30, 2008.

      This transfer of loans to OREO was incorrectly reflected as a cash flows activity resulting in the overstatement of both net cash used in operating activities and net cash provided by investing activities of $27.6 million for the six months ended June 30, 2008. Such transfers were a noncash item that should have only been disclosed as such in the Supplemental Cash Flow Information provided in Note 1 of the Notes to Consolidated Financial Statements.

      The restatement does not affect Bancorp’s Consolidated Balance Sheets, Consolidated Income Statements, or Consolidated Statements of Changes in Stockholders’ Equity for any period. Accordingly, Bancorp’s historical net income, earnings per share, total assets, and cash and cash equivalents remain unchanged.

      The effects of the restatement on the individual line items of the Consolidated Statements of Cash Flows for the six months ended June 30, 2008 are as follows:

(dollars in thousands)      As Previously Presented      Adjustments      As Restated
Increase in other real estate owned $ (27,600 ) $      27,600 $      -
Net cash (used in) provided by operating activities                         (21,158 )   27,600   6,442
Loans made to customers greater than principal collected on loans (6,966 )   (27,600 ) (34,566 )
Net cash provided by (used in) investing activities   9,114 (27,600 ) (18,486 )

- 20 -

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 on a timely basis. Our management has evaluated, with the participation and under the supervision of our chief executive officer (“CEO”) and chief financial officer (“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 were not effective because of the material weakness in our internal control over financial reporting, as described below.

Material Weakness

      A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

      In preparing our Consolidated Statement of Cash Flows for the nine months ended September 30, 2008, we discovered as part of our review and analysis process that our previously issued Consolidated Statement of Cash Flows for the six months ended June 30, 2008 contained a cash flows presentation error relating to loans transferred to OREO. As a result of this cash flows presentation error, on November 6, 2008, management recommended to the Company's Audit Committee that the previously issued financial statements be restated to properly reflect the cash flows. The Audit Committee concurred with management’s recommendation and concluded that the Financial Statements should be restated. See Note 11 of Notes to Consolidated Financial Statements in Item 1 above for a discussion of the restatement.

      As a result of the restatement described above, our management has determined that, during the period covered by this quarterly report on Form 10-Q/A, the Company had a material weakness in our internal control over financial reporting, that existed as of June 30, 2008. Specifically, the Company’s established processes for review of the Consolidated Statement of Cash Flows intended to result in the proper identification and classification of cash flows for the period reviewed failed to identify the inappropriate inclusion of noncash entries related to the increase of OREO. Accordingly, controls related to the preparation of the Statement of Cash Flows were not effective as of June 30, 2008. As a result of this material weakness, the Company is filing this report on Form 10-Q/A to restate its Consolidated Statement of Cash Flows for the quarter ended June 30, 2008.

Remediation Steps to Address Material Weakness

      The Company has since taken steps to correct the control deficiency noted above, including evaluation and confirmation of the effectiveness of the review process for the Company’s financial statements in subsequent periods and the enhancement of the technical competencies of personnel performing these review controls.

Changes in Internal Control Over Financial Reporting

      During the second quarter 2008, the Company finalized and implemented changes in its internal control over financial reporting that are designed to timely identify impaired loans for non-accrual status, calculate applicable reversal of previously capitalized interest for impaired loans, and calculate charge-offs resulting from the recorded impairment. These controls include manual review and attestation steps designed to identify loans for impairment, place them on non-accrual, and calculate associated capitalized interest reversals and impaired loan charge-offs. To support these control steps, redundant controls over these financial reporting controls were also implemented. Specifically, secondary review processes, whereby an independent verification of the manual steps described above is performed and documented, were implemented to maximize the accuracy and completeness in performing the described control activities and properly record the results of these activities into the Company's applicable loan processing and financial reporting systems.

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PART II: OTHER INFORMATION

Item 6. Exhibits

  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: November 6, 2008   /s/ Robert D. Sznewajs  
  Robert D. Sznewajs  
  President and Chief Executive Officer  
 
 
 
Dated: November 6, 2008   /s/ Anders Giltvedt  
  Anders Giltvedt  
  Executive Vice President and Chief Financial Officer  

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