Pacific Capital Bancorp (PCBC)

Base Salary

Our philosophy is to position base salaries at close to market median levels in order to remain competitive in attracting and retaining executive talent. The Committee reviews the NEOs’ base salaries annually and considers a number of factors, including: the executive’s experience, sustained level of performance in the position, and average base salaries paid to comparable executives of the Peer Group. Base salaries paid by companies in the Peer Group are viewed as useful comparative information, but in order to obtain the most representative compensation data for an executive officer based on his/her unique scope or responsibility, the Committee may look at compensation data for senior executives at companies other than the primary Peer Group in setting base salary.

CEO 2008 Base Salary Decision

The Committee reviews CEO performance throughout the year, but generally makes adjustments to compensation, if any, in February following its review of performance in the prior fiscal year. The Committee met in February 2008 to establish the CEO’s compensation for 2008. In establishing CEO compensation, the Committee considered corporate financial performance, the CEO’s specific performance against goals, including qualitative goals, and Peer Group analysis of compensation for this position. The Committee was assisted in its deliberations by Amalfi Consulting. In determining CEO base salary for 2008, some of the factors considered by the Committee included:

The Peer Group analysis showed that Mr. Leis’ base salary of $500,000 compared to the 16^th percentile of the Peer Group. Based upon the Committee’s evaluation of corporate performance and the CEO’s specific goal based performance, the Committee recommended to the non-employee Directors a $100,000 increase to Mr. Leis’ base salary to reflect his performance and leadership of the Company. This adjustment brought his base salary compensation up to the 40^th percentile of the Peer Group. This action was approved by the independent members of the Board of Directors and became effective on March 1, 2008.

        2008 Base Salary Decisions for the Other NEOs

Pursuant to our compensation philosophy and policies, the CEO recommends compensation for the NEOs to the Committee. In January 2008, Mr. Leis met with the Committee to review the performance of each of the NEOs against pre-established objectives, as well as their individual contributions and leadership abilities. Mr. Leis recommended base salary adjustments for certain NEOs. In evaluating Mr. Leis’ recommendations, the Committee also considered the Executive Officers’ Peer Group analysis presented by Amalfi Consulting and compared base salary ranges for the NEOs to the 50 ^th percentile.

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The table below identifies actions taken with respect to NEO salaries by the Committee, and such actions became effective on March 1, 2008.

*On February 6, 2008, Mr. Masterson accepted an offer of employment and agreed to the terms of an offer letter with the Company in connection with his pending position as Executive Vice President and Chief Financial Officer, which offer included a base salary of $325,000. Please see “Executive Employment Agreements and Other Arrangements” section within this Proxy Statement for further information about the terms of his offer letter.

Base Salary

The objective of base salary is to provide fixed compensation to an individual that reflects his or her job responsibilities, experience, value to the Company, and demonstrated performance. Our philosophy is to position base salaries at close to market median levels in order to remain competitive in attracting and retaining executive talent. The Committee reviews the Named Executive Officers’ base salaries annually and considers a number of factors, including: the executive’s experience, sustained level of performance in the job, pay relative to other executives, and average base salaries paid to comparable executives of the Peer Group. When it becomes difficult to obtain compensation data for an executive officer based on his/her unique scope or responsibility, the Committee may look at compensation data for senior executives at companies other than the primary peer group in setting base salary.

Base Salary

It is the Company’s philosophy that employees be paid a base salary that is competitive with the salaries paid by comparable organizations based on each employee’s experience, performance, and geographic

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location. Generally, the Company has chosen to position cash compensation at close to market median levels in order to remain competitive in attracting and retaining executive talent. The allocation of total cash between base salary and annual bonus is based on a variety of factors. The Committee considers a combination of the executive’s performance, the performance of the Company and the individual business or corporate function for which the executive is responsible, the nature and importance of the position and role within the Company, the scope of the executive’s responsibility (including risk management and corporate strategic initiatives), internal relationships or comparisons, and the current compensation package in place for that executive, including the executive’s current annual salary and potential bonus awards under the Company’s High Performance Incentive Plan (discussed in more detail below).

The Committee generally evaluates executive salaries annually. An analysis of executive compensation indicated that base salaries for the Named Executives were generally positioned slightly below the market median. For the 2006 fiscal year, based in part on consultation with its independent compensation consultant, and in part upon the Committee’s own assessment of the information and factors described above, the Committee determined that it should generally attempt to position base salaries closer to the industry median levels. This decision resulted in an increase in the base salaries of the Named Executives.

Base Salary

The Committee determines the annual base salary of the CEO, and approves the CEO’s salary recommendations for each member of the Senior Leadership team. Compensation decisions are based upon individual achievement as measured against personal objectives, department objectives and corporate performance measures and targets. The same principles are applied in setting the salaries of all officers to ensure that salaries are equitably established. The Committee also considers the peer group analysis provided by the independent consultant in determining merit increases to base salaries for the CEO and other members of his management team.