Previously we described a method of calculating auditory excitation patterns and loudness for steady sounds, based on a nonlinear filterbank. Here the method is extended to deal with time-varying sounds. Firstly, the input waveform is transformed to short-term spectrum by a structure with six FFTs, which using longer signal segments for low frequencies and shorter segments for higher frequencies. Secondly, the excitation patterns are calculated from the short-term spectrum, and the summation of the excitation gives a value for the instantaneous loudness. Thirdly, the short-term loudness is calculated from the instantaneous loudness using an averaging mechanism similar to an automatic gain control system, with attack and release times. Finally the long-term loudness is calculated from the short-term loudness using a similar averaging mechanism, but with longer attack and release time. The method gives good predictions of loudness for both steady sounds and time-varying sounds.