PACIFIC STATE BANCORP 
By
-- Net income for the quarter ended June 30, 2008 decreased 58.6% to
$579,000 from the second quarter of 2007.
-- Net income for the six months ended June 30, 2008 decreased 38.8% to
$1,673,000 from the first half of 2007.
-- Total Assets as of June 30, 2008 increased 5.3% or 10.7% annualized to
$453,915,000 from December 31, 2007.
Mr. Rosso is excited to report that with this quarter's release, the Bank has achieved positive quarterly earnings for over 15 years or 60 consecutive quarters. Despite the troubled economic times for financial institutions, the Company continues to outperform many of its peers and is dedicated to continuing it's successful record. In addition, the Bank remains free of any other real estate owned on its balance sheet.
Mr. Rosso noted that the decreased income performance is primarily the result of the Bank experiencing a contraction in its net interest margin and increased provision for loan losses. The contraction of the net interest margin is the result of the more rapid downward repricing of the Bank's interest earning assets, after the Federal Reserve rate cuts, than the Bank's repricing of interest bearing liabilities. For more information on the net interest margin, please see the Yield Analysis statements included below in this report. The increase in the provision for loan losses is the result of a deteriorating economic environment and the inability of specific customers to repay loan commitments. The bank continues to monitor it's non-performing assets very closely.
Continuing from the first quarter, the Bank has begun to experience a
repricing of liabilities. Repricing of time deposits led to a decrease in
deposit interest expense during May and June while average balances increased.
In addition to the repricing of the interest bearing deposits, interest rate
changes in the market and deposit growth have allowed the Bank to prepay
certain borrowings and will allow the bank to reduce wholesale borrowings to
The Bank has experienced an increase in nonperforming loans from
Management has been proactive in working with problem customers to repay loans that have become delinquent or have the potential to become delinquent. In most cases, personal guarantees and collateral value are sufficient to repay outstanding principal and interest. In the cases where collateral value and personal guarantees have fallen short of the principal and interest owed on the loans, management has reserved for the estimated potential loss. Management has ordered real estate appraisals on all new or renewed loans and on loans which are in foreclosure that are secured by real estate. Management has also been proactive in ordering real estate appraisals on loans with potential problems. Appraisals received thus far indicate generally that overall collateral levels remain sufficient to repay the loans secured by the real estate in case of default. Management has also reviewed all home equity lines of credit for current loan to values, credit quality and or performance issues. If issues are identified, the debt availability is frozen and reductions or new terms are obtained. Management believes that overall real estate values remain sufficient in a declining market due to the conservative lending policies of the Bank.
In addition to a contracting net interest margin, the Bank has also
experienced a decline in non-interest income of
PSBC financial performance information for the three month period ending
Income Statement:
-- Total Interest Income: $7,234,000, a decrease of $898,000 or 11%.
-- Total Interest Expense: $3,386,000, an increase of $93,000 or 2.7%.
-- Net Interest Income: $3,850,000, a decrease of $803,000 or 17.3%.
-- Non-Interest Income: $597,000, a decrease of $109,000 or 15.4%.
-- Non-Interest Expense: $2,825,000, a decrease of $177,000 or 5.9%.
-- Provision for loan losses: $600,000, an increase of $545,000 or 990.9%.
-- Net Income: $579,000, a decrease of $819,000 or 58.6%.
-- Efficiency Ratio: 63.6% deteriorating from 56.0%.
-- Basic Earnings Per Share: $0.16, a decrease of $0.22 per share or
57.9%.
-- Diluted Earnings Per Share: $0.15, a decrease of $0.20 per share or
57.1%.
-- ROAA: Annualized rate of 0.52%, a decrease of 89 basis points from
1.41%
-- ROAE: Annualized rate of 6.64%, a decrease of 11.54% from 18.18%
PSBC financial performance information for the six month period ending
Income Statement:
-- Total Interest Income: $14,535,000, a decrease of $1,103,000 or 7.1%.
-- Total Interest Expense: $6,768,000, an increase of $114,000 or 1.7%.
-- Net Interest Income: $7,767,000, a decrease of $1,217,000 or 13.5%.
-- Non-Interest Income: $1,069,000, a decrease of $323,000 or 23.2%.
-- Non-Interest Expense: $5,320,000, a decrease of $381,000 or 6.7%.
-- Provision for loan losses: $810,000, an increase of $590,000 or 268.2%.
-- Net Income: $1,673,000, a decrease of $1,062,000 or 38.8%.
-- Efficiency Ratio: 60.2% deteriorating from 54.9%.
-- Basic Earnings Per Share: $0.45, a decrease of $0.30 per share or
39.8%.
-- Diluted Earnings Per Share: $0.43, a decrease of $0.25 per share or
36.8%.
-- ROAA: Annualized rate of 0.77%, a decrease of 65 basis points from
1.42%
-- ROAE: Annualized rate of 9.60%, a decrease of 8.69% from 18.29%
PSBC
Balance Sheet:
-- Total Federal Funds and Investment Securities: $82,532,000, an increase
of $9,300,000 or an annualized 25.7%.
-- Net Loans: $321,502,000, an increase of $13,044,000 or an annualized
8.6%.
-- Total Assets: $453,915,000, an increase of $22,841,000 or an annualized
10.7%.
-- Non-Interest Bearing Deposits: $67,123,000, an increase of $52,000 or
an annualized 0.2%.
-- Total Deposits: $371,404,000, an increase of $29,583,000 or an
annualized 17.5%.
-- Total Borrowings: Decreased from $40,000,000 to $35,000,000.
-- Total Shareholders' Equity: $34,955,000, an increase of $919,000 or an
annualized 5.5%.
Attached are certain unaudited financial statements supporting the
financial information summarized above. Further inquiries should be directed
to Mr. Rosso at 209-870-3214, or by mail to P.O. Box 1649,
SAFE HARBOR: Except for historical information contained herein, the statements contained in this press release include forward-looking statements within the meaning of the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those set forth in or implied by forward-looking statements. These risks are described from time to time in Pacific State Bancorp's Securities and Exchange Commission filings, including its Annual Reports on Form 10-K and quarterly reports on Form 10-Q. Pacific State Bancorp disclaims any intent or obligation to update these forward-looking statements.
PACIFIC STATE BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited June 30, December 31,
(Dollars in thousands) 2008 2007
ASSETS
Cash and due from banks $16,079 $13,794
Federal funds sold 35,091 31,880
Total cash and cash equivalents 51,170 45,674
Interest bearing deposits at other banks - 3,000
Investment securities 47,441 41,352
Loans, less allowance for loan losses of
$3,427 in 2008 and $3,948 in 2007 321,502 308,458
Premises and equipment, net 15,234 14,269
Company owned life insurance 8,160 8,025
Accrued interest receivable and other assets 10,407 10,296
Total assets $453,914 $431,074
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $67,123 $67,071
Interest bearing 304,281 274,750
Total deposits 371,404 341,821
Other borrowings 35,000 40,000
Subordinated debentures 8,764 8,764
Accrued interest payable and other liabilities 3,791 6,453
Total liabilities 418,959 397,038
Commitments and contingencies
Shareholders' equity:
Preferred stock - 2,000,000 shares authorized;
none issued or outstanding - -
Common stock - no par value; 24,000,000 shares
authorized; issued and outstanding - 3,715,598
shares in 2008 and 3,707,698 shares in 2007 10,645 10,418
Retained earnings 25,678 24,004
Accumulated other comprehensive loss, net of taxes (1,368) (386)
Total shareholders' equity 34,955 34,036
Total liabilities and shareholders' equity $453,914 $431,074
PACIFIC STATE BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three Months Ended Six Months Ended
(Dollars in thousands, June 30, June 30,
except per share data) 2008 2007 2008 2007
Interest income:
Interest and fees on loans $6,201 $7,300 $12,677 $14,142
Interest on Federal funds sold 141 348 256 669
Interest on investment securities 892 484 1,602 827
Total interest income 7,234 8,132 14,535 15,638
Interest expense:
Interest on deposits 2,860 3,239 5,658 6,156
Interest on other borrowings 418 55 848 121
Interest on subordinated debentures 108 185 262 377
Total interest expense 3,386 3,479 6,768 6,654
Net interest income before provision
for loan losses 3,848 4,653 7,767 8,984
Provision for loan losses 600 55 810 220
Net interest income after provision
for loan losses 3,248 4,598 6,957 8,764
Non-interest income:
Service charges 223 217 460 438
Gain on sale of loans 132 19 151 28
Other income 242 470 458 926
Total non-interest income 597 706 1,069 1,392
Non-interest expenses:
Salaries and employee benefits 1,282 1,506 2,550 2,988
Occupancy 302 277 565 563
Furniture and equipment 195 200 374 367
Other expenses 1,046 1,019 1,831 1,783
Total non-interest expenses 2,825 3,002 5,320 5,701
Income before provision for income
taxes 1,020 2,302 2,706 4,455
Provision for income taxes 441 904 1,033 1,720
Net income $579 $1,398 $1,673 $2,735
Basic earnings per share $0.16 $0.38 $0.45 $0.75
Diluted earnings per share $0.15 $0.35 $0.43 $0.68
PACIFIC STATE BANCORP
Yield Analysis
For Three Months Ended June 30,
(Dollars in
thousands) 2008 2007
Interest Average Interest Average
Income Yield Income Yield
Average or or Average or or
Assets: Balance Expense Cost Balance Expense Cost
Interest-earning
assets:
Loans $329,055 $6,201 7.58% $295,030 $7,300 9.92%
Investment securities 51,341 892 7.00% 37,310 484 5.20%
Federal funds sold 28,908 129 1.79% 27,424 348 5.09%
Interest Bearing
Deposits in Banks 1,187 12 4.07% 0 0 0.00%
Total average
earning assets $410,491 $7,234 7.09% $359,764 $8,132 9.07%
Non-earning assets:
Cash and due from
banks 13,669 16,644
Bank premises and
equipment 14,953 12,365
Other assets 15,619 10,480
Allowance for loan
loss (3,036) (2,702)
Total average assets $451,696 $396,551
Liabilities and
Shareholders' Equity:
Interest-bearing
liabilities:
Deposits
Interest-bearing
Demand $68,752 $399 2.33% $84,522 $622 2.95%
Savings 5,394 7 0.52% 5,343 13 0.98%
Time Deposits 227,825 2,454 4.33% 196,233 2,604 5.32%
Other borrowing 47,857 526 4.42% 13,564 240 7.10%
Total average
interest-bearing
liabilities $349,828 $3,386 3.89% $299,662 $3,479 4.66%
Noninterest-bearing
liabilities:
Demand deposits 62,853 63,893
Other liabilities 3,923 2,157
Total average
liabilities 416,604 365,712
Shareholders' equity: 35,092 30,839
Total average
liabilities and
shareholders'
equity $451,696 $396,551
Net interest income $3,848 $4,653
Net interest margin 3.77% 5.19%
PACIFIC STATE BANCORP
Yield Analysis
For Six Months Ended June 30,
(Dollars in
thousands) 2008 2007
Interest Average Interest Average
Income Yield Income Yield
Average or or Average or or
Assets: Balance Expense Cost Balance Expense Cost
Interest-earning
assets:
Loans $325,236 $12,677 7.84% $293,728 $14,142 9.71%
Investment securities 49,561 1,559 6.33% 31,945 821 5.18%
Federal funds sold 21,037 256 2.45% 26,393 669 5.11%
Interest Bearing
Deposits in Banks 2,093 43 4.13% 215 6 5.63%
Total average earning
assets $397,927 $14,535 7.35% $352,281 $15,638 8.95%
Non-earning assets:
Cash and due from
banks 13,482 16,316
Bank premises and
equipment 14,705 12,176
Other assets 15,980 11,454
Allowance for loan
loss (3,520) (2,623)
Total average assets $438,574 $389,604
Liabilities and
Shareholders' Equity:
Interest-bearing
liabilities:
Deposits
Interest-bearing
Demand $68,917 $788 2.30% $86,181 $1,230 2.88%
Savings 5,376 14 0.52% 5,468 27 1.00%
Time Deposits 214,217 4,856 4.56% 187,687 4,899 5.26%
Other borrowing 48,487 1,110 4.60% 13,677 498 7.34%
Total average
interest-bearing
liabilities $336,997 $6,768 4.04% $293,013 $6,654 4.58%
Noninterest-bearing
liabilities:
Demand deposits 62,229 64,609
Other liabilities 4,309 1,826
Total average
liabilities 403,535 359,448
Shareholders' equity: 35,039 30,156
Total average
liabilities and
shareholders'
equity $438,574 $389,604
Net interest income $7,767 $8,984
Net interest margin 3.93% 5.14%
SOURCE Pacific State Bancorp
