1st Pacific Bancorp Reports Second Quarter 2008 Results

Adds $3.6 Million to Loan Loss Reserves, Remains Well Capitalized


SAN DIEGO, July 28, 2008 (PRIME NEWSWIRE) -- 1st Pacific Bancorp (Nasdaq:FPBN), the holding company for 1st Pacific Bank of California, today reported a net loss for the second quarter ended June 30, 2008 of $1.7 million, or $0.34 per diluted share, compared to net income of $447,200, or $0.09 per diluted share, for the first quarter of 2008, and net income of $664,439, or $0.16 per diluted share, for the second quarter of 2007. The loss was the result of adding $3.6 million to the allowance for loan losses.

The $3.6 million addition to the loan loss reserve was in large part due to identifying two loans totaling $4.9 million to one borrower, both of which are now in default. Before establishing the amount of the provision for loan losses, a review of the entire loan portfolio was conducted to determine the adequacy of the reserve. "We are satisfied based on this review that the bank is properly reserved at this time," said Acting President and CEO Ron Carlson.

1st Pacific Bank remains "well capitalized" by regulatory standards with a Total Risk-Based capital ratio of 10.98% and a Tier 1 Risk-Based capital ratio of 8.53%. To be considered "well capitalized" a bank must have over 10% Total Risk-Based capital and 6% Tier 1 Risk-Based capital.

Compared to the prior quarter, total assets increased $30 million or 7.1% to $452 million. Asset growth was centered in loans, which increased $34 million or 10.0% over the prior quarter to $377 million at June 30, 2008.

"The Bank has a diversified deposit base provided by our eight branches and maintains significant liquidity sources through its FHLB membership, correspondent bank lines of credit, and access to the brokered deposit market," commented Jim Burgess, Chief Financial Officer. "These liquidity facilities have proven to be valuable resources in the past and provide strength to our liquidity position given the current market environment."

Asset Quality

Nonperforming assets were $11.6 million, or 2.57% of total assets, at June 30, 2008, compared with $4.3 million, or 1.01% of total assets, at the end of the preceding quarter and $4.7 million, or 1.51% of total assets at the end of June 2007. Nonperforming assets at the end of June 2008 included balances of approximately $1.0 million guaranteed by the U.S. Small Business Administration (SBA).

"Asset quality is a very important focus for us," said Carlson. "Our team is working closely with customers to assure that we all weather this challenging economic cycle with as few problems as possible. The Bank was not involved in sub-prime real estate lending, which has plagued the economy for months," he added. "However, the entire economy and the entire banking industry have been negatively impacted by the downturn that resulted."

The allowance for loan losses at June 30, 2008, totals $7.8 million, or 2.08% of total loans, compared with an allowance of $4.5 million, or 1.31% of total loans, at March 31, 2008. The allowance for loan losses totaled $3.4 million, or 1.21% of total loans at June 30, 2007.

Review of Operations

1st Pacific's net interest margin was 4.32% for the second quarter of 2008, compared with 4.60% for the previous quarter, and 4.80% for the second quarter of 2007. For the first six months of the year, the net interest margin was 4.45% compared with 4.87% for the first six months of 2007. The cost of funding earning assets decreased 49 basis points while asset yields decreased 77 basis points compared with the preceding quarter.

"Despite an increase in average earning assets during the quarter, we continue to experience a declining net interest margin, as the full impact of the Federal Reserve's rate cuts earlier this year are realized," said Burgess. "In addition, non-accruing loans reduced the margin by approximately 19 basis points in this year's second quarter."

About 1st Pacific Bancorp

1st Pacific Bancorp is the holding company for 1st Pacific Bank of California, San Diego's leading local business bank. The bank has been named a "Premier Performing Bank" for the past three calendar years by Findley Reports and has a Four Star-Rating of "Excellent" from BauerFinancial, Inc., an independent rating service, based on March 31, 2008 results.

The bank offers a full complement of business products and services to meet the financial needs of professional firms, small- to mid-sized businesses, their owners and the people who work there. 1st Pacific Bank has a total of eight banking offices located in San Diego County: in the University Towne Center area, the Tri-Cities area of Oceanside, Mission Valley, the Inland North County, El Cajon, La Jolla Village, Solana Beach and downtown San Diego. For additional information, visit the company's website at www.1stpacbank.com.

Safe Harbor Statement. This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices; levies and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in the national and local economy; and other factors, including risk factors, referred to from time to time in filings made by 1st Pacific Bancorp with the Securities and Exchange Commission. 1st Pacific Bancorp undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.


 1st Pacific Bancorp
 Second Quarter 2008 Results
 (Unaudited)

                       THREE MONTHS ENDED         SIX MONTHS ENDED
                   Jun 30, 2008 Jun 30, 2007 Jun 30, 2008 Jun 30, 2007
                    -----------  -----------  -----------  -----------
 INTEREST INCOME
 Loans, including
  fees              $ 6,347,085  $ 6,187,879  $13,057,801  $12,257,704
 Investment
  securities            573,834      144,061      937,003      276,573
 Federal funds sold      53,614      237,155      198,715      482,466
                    -----------  -----------  -----------  -----------
   Total interest
    income            6,974,533    6,569,095   14,193,519   13,016,743
                    -----------  -----------  -----------  -----------

 INTEREST EXPENSE
 Deposits             2,034,076    2,382,268    4,540,670    4,797,317
 Subordinated debt
  and other
  borrowings            470,595      419,089      761,110      714,197
                    -----------  -----------  -----------  -----------
   Total interest
    expense           2,504,671    2,801,357    5,301,780    5,511,514
                    -----------  -----------  -----------  -----------

 Net Interest Income  4,469,862    3,767,738    8,891,739    7,505,229

 Provision for Loan
  Losses              3,550,000       74,000    3,550,000      151,000
                    -----------  -----------  -----------  -----------

   Net interest
    income after
    provision for
    loan losses         919,862    3,693,738    5,341,739    7,354,229

 NON INTEREST INCOME
 Service charges,
  fees and other
  income                265,903       95,911      497,492      218,013
 Brokered loan fees
  and gains on loan
  sales                  60,950       80,493       60,950      128,283
                    -----------  -----------  -----------  -----------
   Total non
    interest income     326,853      176,404      558,442      346,296

 NON INTEREST EXPENSE
 Salaries and
  benefits            2,443,546    1,584,469    4,720,202    3,214,234
 Occupancy and
  equipment             760,530      401,672    1,507,501      801,845
 Other expense          936,238      752,348    1,798,361    1,416,676
                    -----------  -----------  -----------  -----------
   Total non
    interest expense  4,140,314    2,738,489    8,026,064    5,432,755
                    -----------  -----------  -----------  -----------

   Income (loss)
    before income
    tax expense      (2,893,599)   1,131,653   (2,125,883)   2,267,770

 Income tax expense
  (benefit)          (1,187,600)     467,214     (867,100)     930,898

                    -----------  -----------  -----------  -----------
   Net Income
    (Loss)          ($1,705,999) $   664,439  ($1,258,783) $ 1,336,872
                    ===========  ===========  ===========  ===========

 Basic earnings
  (loss) per share       ($0.34)       $0.17       ($0.25)       $0.34
 Diluted earnings
  (loss) per share       ($0.34)       $0.16       ($0.25)       $0.32
 Average shares
  outstanding         4,947,763    3,899,132    4,947,435    3,894,808
 Average diluted
  shares outstanding  5,076,791    4,233,262    5,109,015    4,231,001


 1st Pacific Bancorp
 Second Quarter 2008 Results
 (Unaudited)                                                  Annual %
                                                              --------
                   Jun 30, 2008  Dec 31, 2007  Jun 30, 2007    Change
                   ------------  ------------  ------------   --------
 ASSETS
 Cash and due
  from banks       $  8,522,149  $  6,397,189  $  6,085,134    40.0%
 Federal funds
  sold                7,605,000    11,160,000    10,140,000   -25.0%
                   ----------------------------------------
   Total cash
    and cash
    equivalents      16,127,149    17,557,189    16,225,134    -0.6%

 Investment
  securities
  available for
  sale               35,856,520    23,746,429     8,416,971   326.0%
 FRB, FHLB and
  other equity
  stock, at cost      5,574,650     3,184,200     2,612,300   113.4%

 Construction &
  Land              125,809,008   125,661,143   105,574,792    19.2%
 Residential &
  Comm'l RE         153,096,474   120,530,541    98,790,861    55.0%
 SBA 7a & 504 Loans  12,834,832    15,880,428    14,060,974    -8.7%
 Commercial Loans    74,238,526    77,581,769    57,804,497    28.4%
 Other Consumer      10,539,086    10,164,841     6,018,046    75.1%
                   ----------------------------------------
   Total loans and
    leases          376,517,926   349,818,722   282,249,170    33.4%
 Allowance for
  Loan Losses        (7,818,471)   (4,516,625)   (3,402,102)  129.8%
                   ----------------------------------------
   Total loans and
    leases, net     368,699,455   345,302,097   278,847,068    32.2%

 Premises and
  Equipment, net      3,873,502     4,094,785     1,938,323    99.8%
 Goodwill and
  Other Intangible
  Assets             11,815,393    11,906,536             0     n/a
 Accrued Interest
  and Other Assets   10,247,757     8,856,089     4,089,445   150.6%

                   ----------------------------------------
   Total Assets    $452,194,426  $414,647,325  $312,129,241    44.9%
                   ========================================

 LIABILITIES AND
  STOCKHOLDERS'
  EQUITY
 Deposits:
   Noninterest-
    bearing demand $ 68,747,742  $ 73,366,761  $ 51,716,519    32.9%
   Interest bearing
    checking         14,121,446    16,344,597    14,403,979    -2.0%
   Savings and
    Money Market    115,044,339    98,639,209    84,847,163    35.6%
   Time Deposits    146,437,993   157,011,040   122,182,245    19.9%
                   ----------------------------------------
 Total Deposits     344,351,520   345,361,607   273,149,906    26.1%

 Subordinated
  Debentures         10,155,000    10,155,000    10,155,000     0.0%
 Other borrowed
  money              50,000,000    10,000,000             0     n/a
 Accrued interest
  and other
  liabilities         4,001,547     4,156,771     1,350,491   196.3%
                   ----------------------------------------
   Total
    liabilities     408,508,067   369,673,378   284,655,397    43.5%

 Shareholders'
  Equity:
 Common stock and
  additional
  paid-in capital    37,549,472    37,378,697    20,918,348    79.5%
 Retained Earnings    6,390,257     7,649,040     6,520,730    -2.0%
 Accumulated other
  comprehensive
  income (loss)        (253,370)      (53,790)       34,766   -828.8%
                   ----------------------------------------
   Total
    shareholders'
    equity           43,686,359    44,973,947    27,473,844    59.0%

                   ----------------------------------------
   Total
    liabilities and
    shareholders'
    equity         $452,194,426  $414,647,325  $312,129,241    44.9%
                   ========================================


 1st Pacific Bancorp
 Second Quarter 2008 Results
 (Unaudited)

 (dollars in                          Quarterly
  thousands     ------------------------------------------------------
  except per       2008       2008       2007       2007       2007
  share data)    2nd Qtr    1st Qtr    4th Qtr    3rd Qtr    2nd Qtr
                ------------------------------------------------------
 EARNINGS
   Net interest
    income      $    4,470      4,422      4,703      5,032      3,768
   Provision
    for loan
    losses      $    3,550          0        150         37         74
   NonInterest
    income      $      327        232        186        178        176
   NonInterest
    expense     $    4,140      3,886      3,970      3,999      2,738
   Net income
    (loss)      $   (1,706)       447        443        685        664
   Basic
    earnings
    (loss) per
    share       $    (0.34)      0.09       0.09       0.14       0.17
   Diluted
    earnings
    (loss) per
    share       $    (0.34)      0.09       0.09       0.13       0.16
   Average
    shares
    outstanding  4,947,763  4,947,106  4,920,795  4,910,354  3,899,132
   Average
    diluted
    shares
    outstanding  5,076,791  5,125,317  5,163,053  5,212,129  4,233,262

 PERFORMANCE
  RATIOS
   Return on
    average
    assets           -1.55%      0.44%      0.42%      0.66%      0.83%
   Return on
    average
    common equity   -14.88%      3.94%      3.91%      6.20%      9.84%
   Net interest
    margin            4.32%      4.60%      4.71%      5.03%      4.80%
   Efficiency
    ratio            86.32%     83.50%     81.20%     76.76%     69.43%

 CAPITAL
   Tangible
    equity to
    assets            7.24%      8.18%      8.21%      7.88%      8.80%
   Tangible book
    value per
    share       $     6.44       6.78       6.69       6.56       7.04

 ASSET QUALITY
   Net loan
    charge-offs
    (recov-
    eries)      $      223         25         98         (0)        (0)
   Allowance for
    loan losses $    7,818      4,492      4,517      4,465      3,402
   Allowance for
    losses to
    total loans       2.08%      1.31%      1.29%      1.28%      1.21%
   Nonperforming
    loans       $   11,640      4,255      5,554      6,336      4,724
   Other real
    estate
    owned       $        0          0          0          0          0
   Nonperforming
    assets to
    total assets      2.57%      1.01%      1.34%      1.50%      1.51%

 END OF PERIOD
  BALANCES
   Total Loans  $  376,518    342,239    349,819    350,128    282,249
   Total assets $  452,194    422,276    414,647    421,184    312,129
   Deposits     $  344,352    322,677    345,362    352,158    273,150
   Shareholders'
    equity      $   43,686     45,414     44,974     44,302     27,474
   Full-time
    equivalent
    employees          106        109        107        101         77

 AVERAGE
  BALANCES
   Total Loans  $  364,791    341,070    345,918    352,384    285,352
   Earning
    Assets      $  415,197    385,470    396,221    397,059    314,564
   Total assets $  442,380    411,966    423,198    412,800    321,626
   Deposits     $  334,770    338,375    352,717    354,492    264,022
   Shareholders'
    equity      $   45,989     45,489     44,905     43,840     27,090


                                                 6 Months Year-To-Date
                                                 ---------------------
 (dollars in thousands except per share data)       2008       2007
                                                 ---------------------
 EARNINGS
   Net interest income                                8,892      7,505
   Provision for loan losses                          3,550        151
   NonInterest income                                   558        346
   NonInterest expense                                8,026      5,433
   Net income (loss)                                 (1,259)     1,337
   Basic earnings (loss) per share                    (0.25)      0.34
   Diluted earnings (loss) per share                  (0.25)      0.32
   Average shares outstanding                     4,947,435  3,894,808
   Average diluted shares outstanding             5,109,015  4,231,001

 PERFORMANCE RATIOS
   Return on average assets                           -0.59%      0.85%
   Return on average common equity                    -5.52%     10.10%
   Net interest margin                                 4.45%      4.87%
   Efficiency ratio                                   84.93%     69.19%

 CAPITAL
   Tangible equity to assets                           7.24%      8.80%
   Tangible book value per share                       6.44       7.04

 ASSET QUALITY
   Net loan charge-offs (recoveries)                    248         (0)
   Allowance for loan losses                          7,818      3,402
   Allowance for losses to total loans                 2.08%      1.21%
   Nonperforming loans                               11,640      4,724
   Other real estate owned                                0          0
   Nonperforming assets to total assets                2.57%      1.51%

 END OF PERIOD BALANCES
   Total Loans                                      376,518    282,249
   Total assets                                     452,194    312,129
   Deposits                                         344,352    273,150
   Shareholders' equity                              43,686     27,474
   Full-time equivalent employees                       106         77

 AVERAGE BALANCES
   Total Loans                                      352,931    281,381
   Earning Assets                                   400,334    310,912
   Total assets                                     427,173    318,344
   Deposits                                         336,573    265,064
   Shareholders' equity                              45,739     26,705

            

Contact Data