PACIFIC STATE BANCORP 
By
Mr. Rosso is disappointed to report that with this quarter's release, the
Company experienced its first quarterly loss in over 15 years. Mr. Rosso
emphasizes that the loss is the result of an "other than temporary impairment"
("OTTI") charge of
The OTTI charge was partially offset by a non-taxable gain on Bank-owned
life insurance of
Mr. Rosso noted that the decreased income performance, other than the
individual items discussed above, compared to 2007 is primarily the result of
the Bank experiencing a contraction in its net interest margin, increased
provision for loan losses and an increase in legal expenses associated with
the collection of loans. The contraction of the net interest margin is the
result of the Bank's interest earning assets re-pricing downward more quickly,
after the 325 basis points reductions in the federal reserve federal funds
rate since
The Bank has continued to experience decreasing interest expense throughout 2008 as interest bearing liabilities continue to re-price. Net interest income continues to improve quarter after quarter through 2008. For more information on the net interest margin, please see the Yield Analysis statements included as part of this report below.
The increase in the provision for loan losses is the result of a
deteriorating economic environment and the concern that the overall credit
quality in the bank's service area is declining. The Bank will monitor
nonperforming assets very closely and work to collect them in full where
possible. Subsequent to the end of the third quarter, Pacific State Bank
received a recovery of approximately
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 principle and interest owed on the loans, management has reserved for the estimated potential loss. Management has also 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 performance issues. If issues are identified, the debt availability is frozen and reductions or new terms are obtained. The Bank believes that real estate values remain sufficient in a declining market due to the conservative lending policies of the Bank.
Pacific State Bank continues to have more than sufficient liquidity to
operate. The Bank utilizes borrowing lines from correspondent banks, the
Federal Home Loan Bank ("FHLB"), and the discount window with the Federal
Reserve for additional liquidity purposes. At
PSBC financial performance information for the three month period ending
Income Statement:
-- Total Interest Income: $6,948,000, a decrease of $989,000 or 13%.
-- Total Interest Expense: $2,900,000, a decrease of $796,000 or 22%.
-- Net Interest Income: $4,048,000, a decrease of $193,000 or 5%.
-- Non-Interest Income: $3,561,000, an increase of $2,972,000 or 505%.
-- Non-Interest Expense: $10,056,000, an increase of $7,345,000 or 271%.
-- Provision for loan losses: $600,000, an increase of $560,000 or 1,400%.
-- Net Loss: $1,209,000, a decrease of $2,510,000 or 193%.
-- Efficiency Ratio: 102% deteriorating from 56%.
-- Basic Loss Per Share: $0.33, a decrease of $0.68 per share or 194%.
-- Diluted Loss Per Share: $0.33, a decrease of $0.66 per share or 200%.
-- Loss on Average Assets: Annualized loss rate of 1.11%, a decrease of
237 basis points from 1.26%
-- Loss on Average Equity: Annualized loss rate of 11.56%, a decrease of
27.55% from 15.99%
PSBC financial performance information for the nine month period ending
Income Statement:
-- Total Interest Income: $18,998,000, a decrease of $2,150,000 or 10%.
-- Total Interest Expense: $9,668,000, a decrease of $682,000 or 7%.
-- Net Interest Income: $11,815,000, a decrease of $1,410,000 or 11%.
-- Non-Interest Income: $4,630,000, an increase of $2,649,000 or 134%.
-- Non-Interest Expense: $15,376,000, an increase of $6,964,000 or 83%.
-- Provision for loan losses: $1,410,000, an increase of $1,150,000 or
442%.
-- Net Income: $464,000, a decrease of $3,572,000 or 89%.
-- Efficiency Ratio: 93% deteriorating from 55%.
-- Basic Earnings Per Share: $0.13, a decrease of $0.97 per share or 88%.
-- Diluted Earnings Per Share: $0.12, a decrease of $0.89 per share or
88%.
-- ROAA: Annualized rate of 0.14%, a decrease of 122 basis points from
1.36%
-- ROAE: Annualized rate of 1.76%, a decrease of 15.72% from 17.48%
PSBC
Balance Sheet:
-- Total Federal Funds and Investment Securities: $52,717,000, a decrease
of $20,515,000 or an annualized 39%.
-- Net Loans: $322,420,000, an increase of $13,962,000 or an annualized
6%.
-- Total Assets: $427,822,000, a decrease of $3,253,000 or an annualized
1%.
-- Non-Interest Bearing Deposits: $69,019,000, an increase of $1,948,000
or an annualized 4%.
-- Total Deposits: $345,166,000, an increase of $3,345,000 or an
annualized 1%.
-- Total Borrowings: decreased from $40,000,000 to $35,000,000.
-- Total Shareholders' Equity: $34,000,000, a decrease of $36,000 or an
annualized 1%.
-- Total Tier 1 Risk Based Capital Ratio of 10.61%.
-- Total Tier 1 Leverage Capital Ratio of 9.40%.
-- Total Risk Based Capital Ratio of 11.62%.
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, quarterly reports on Form 10-Q and Current Reports on Form 8-K. Pacific State Bancorp disclaims any intent or obligation to update these forward-looking statements.
PACIFIC STATE BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited September 30, December 31,
(Dollars in thousands) 2008 2007
ASSETS
Cash and due from banks $13,198 $13,794
Federal funds sold 10,750 31,880
Total cash and cash equivalents 23,948 45,674
Interest bearing deposits at other banks - 3,000
Investment securities 41,967 41,352
Loans, less allowance for loan losses of
$3,892 in 2008 and $3,948 in 2007 322,420 308,458
Premises and equipment, net 15,977 14,269
Other real estate owned 190 -
Company owned life insurance 6,682 8,025
Accrued interest receivable and other assets 16,638 10,296
Total assets $427,822 $431,074
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $69,019 $67,071
Interest bearing 276,147 274,750
Total deposits 345,166 341,821
Other borrowings 35,000 40,000
Subordinated debentures 8,764 8,764
Accrued interest payable and other
liabilities 4,892 6,453
Total liabilities 393,822 397,038
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
-3,718,598 shares in 2008 and 3,707,698
shares in 2007 10,753 10,418
Retained earnings 24,468 24,004
Accumulated other comprehensive loss, net of
taxes (1,221) (386)
Total shareholders' equity 34,000 34,036
Total liabilities and shareholders' equity $427,822 $431,074
PACIFIC STATE BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
(Dollars in thousands,
except per share data) 2008 2007 2008 2007
Interest income:
Interest and fees
on loans $6,321 $7,006 $18,998 $21,148
Interest on Federal
funds sold 85 396 341 1,065
Interest on investment
securities 542 535 2,144 1,362
Total interest income 6,948 7,937 21,483 23,575
Interest expense:
Interest on deposits 2,587 3,467 8,245 9,623
Interest on borrowings 216 90 1,064 211
Interest on
subordinated debentures 97 139 359 516
Total interest expense 2,900 3,696 9,668 10,350
Net interest income before
provision for loan losses 4,048 4,241 11,815 13,225
Provision for loan losses 600 40 1,410 260
Net interest income after
provision for loan losses 3,448 4,201 10,405 12,965
Non-interest income:
Service charges 196 208 656 646
Gain on sale of loans 37 119 188 147
Gain on sale of assets 471 - 471 -
Gain on bank owned life
insurance 2,574 - 2,574 -
Other income 283 262 741 1,188
Total non-interest
income 3,561 589 4,630 1,981
Non-interest expenses:
Salaries and employee
benefits 1,398 1,264 3,948 4,252
Occupancy 316 292 881 855
Furniture and equipment 259 157 633 524
Other than temporary
impairment charge 6,498 - 6,498 -
Other expenses 1,585 998 3,416 2,781
Total non-interest
expenses 10,056 2,711 15,376 8,412
(Loss) income before
provision for income
taxes (3,047) 2,079 (341) 6,534
(Benefit) provision for
income taxes (1,838) 778 (805) 2,498
Net (loss) income $(1,209) $1,301 $464 $4,036
Basic (loss) earnings
per share $(0.33) $0.35 $0.13 $1.10
Diluted (loss) earnings
per share $(0.33) $0.33 $0.12 $1.01
PACIFIC STATE BANCORP
Yield Analysis
For Three Months Ended September 30,
(Dollars in thousands) 2008 2007
Interest Average Interest Average
Average Income or Yield or Average Income or Yield or
Assets: Balance Expense Cost Balance Expense Cost
Interest-
earning
assets:
Loans $324,545 $6,321 7.75% $303,858 $7,006 9.15%
Investment
securities 53,019 542 4.07% 39,733 521 5.20%
Federal funds
sold 17,739 85 1.91% 30,697 396 5.12%
Interest
bearing
deposits
in banks - - - 867 14 6.41%
Total average
earning
assets $ 395,303 $6,948 6.99% $375,155 $7,937 8.39%
Non-earning
assets:
Cash and due
from banks 13,342 14,354
Bank premises
and equipment 15,393 13,421
Other assets 12,010 11,051
Allowance for
loan loss (3,785) (2,704)
Total average
assets $432,263 $411,277
Liabilities and Shareholders' Equity:
Interest-
bearing
liabilities:
Deposits
Interest-
bearing
demand $ 73,397 $126 0.68% $76,347 $538 2.80%
Savings 6,113 7 0.46% 5,288 11 0.83%
Time deposits 215,307 2,454 4.53% 216,093 2,918 5.36%
Other
borrowing 26,685 313 4.67% 17,264 229 5.26%
Total average
interest-
bearing
liabilities $321,502 $2,900 3.59% $314,992 $3,696 4.66%
Noninterest-
bearing
liabilities:
Demand
deposits 65,098 61,010
Other
liabilities 4,045 2,995
Total average
liabilities 390,645 378,997
Shareholders'
equity: 41,618 32,280
Total average
liabilities
and
shareholders'
equity $432,263 $411,277
Net interest
income $4,048 $4,241
Net interest
margin 4.07% 4.49%
PACIFIC STATE BANCORP
Yield Analysis
For Nine Months Ended September 30,
(Dollars in thousands) 2008 2007
Interest Average Interest Average
Average Income or Yield or Average Income or Yield or
Assets: Balance Expense Cost Balance Expense Cost
Interest-
earning
assets:
Loans $325,004 $18,998 7.81% $297,362 $21,148 9.51%
Investment
securities 49,956 2,100 5.62% 34,621 1,348 5.21%
Federal funds
sold 19,930 341 2.29% 27,846 1,065 5.11%
Interest
bearing
deposits
in banks 1,391 44 4.23% 429 14 4.36%
Total average
earning
assets $396,281 $21,483 7.24% $360,258 $23,575 8.75%
Non-earning
assets:
Cash and due
from banks 13,435 15,649
Bank premises
and equipment 14,956 12,595
Other assets 16,194 11,033
Allowance for
loan loss (3,609) (2,651)
Total average
assets $437,257 $396,884
Liabilities and Shareholders' Equity:
Interest-
bearing
liabilities:
Deposits
Interest-
bearing
demand $70,421 $1,215 2.30% $ 82,863 $1,768 2.85%
Savings 5,623 22 0.52% 5,407 38 0.94%
Time deposits 214,583 7,008 4.36% 197,246 7,817 5.30%
Other
borrowing 44,109 1,423 4.31% 14,886 727 6.53%
Total average
interest-
bearing
liabilities $334,736 $9,668 3.86% $300,402 $10,350 4.61%
Noninterest-
bearing
liabilities:
Demand
deposits 63,101 64,609
Other
liabilities 4,245 1,003
Total average
liabilities 402,082 366,014
Shareholders'
equity: 35,175 30,870
Total average
liabilities
and
shareholders'
equity $437,257 $396,884
Net interest
income $11,815 $13,225
Net interest
margin 3.98% 4.91%
SOURCE Pacific State Bancorp
