Stockton, California – April 30, 2009

Rick D. Simas, Chief Executive Officer of Pacific State Bancorp (the “Company”) (NASDAQ Global Market/PSBC), today reported an after tax net loss of $294,000 for the first quarter of 2009 for the Stockton, California based bank holding company. The first quarter net loss of $294,000 reflects a provision for loan losses of $971,000, other real estate expense of $431,000 and increased professional costs of $225,000.

The increased level of provision for loan losses is attributable to lower real estate values and the general economic environment of the region where the Company operates. Other real estate expense is primarily the result of decreasing prices experienced in the market for the type of other real estate the Bank currently owns, and the costs associated with marketing and selling those properties. Increased professional costs are primarily the result of increased legal fees associated with the collection of loans.

In the first quarter of 2009 compared to the fourth quarter of 2008, the Company experienced an improvement in net interest margin. The improvement quarter over quarter was primarily a result of decreased funding costs. The net interest margin improved from 3.38% in the fourth quarter of 2008 to 3.70% in the first quarter of 2009. Funding costs decreased from 3.23% in the fourth quarter of 2008 to 2.84% in the first quarter of 2009. 

The Company has experienced a slight decrease in nonperforming loans from $23,560,000 or 7.7% of gross loans at December 31, 2008 to $21,067,000 or 6.9% of gross loans at March 31, 2009. The decrease in nonperforming loans was primarily the result of charge-off and foreclosure activity. The Company recorded $554,000 in charge-offs related to nonaccrual loans and $2,075,000 was reclassified to other real estate owned subsequent to foreclosure of the properties. One loan in the amount of $140,000 was added to nonaccrual in the first quarter of 2009. 

The Company has been successful at liquidating $914,000 of other real estate properties from its balance sheet in the first quarter of 2009. As the Company receives title to foreclosed properties, it markets the properties at prices to facilitate liquidation. If the market prices for the property further decline before liquidation, the Company reduces the other real estate balance through a charge to noninterest expense. The Company also incurs other expenses related to other real estate including, real estate taxes, insurance, maintenance and security. Total expense related to all of the above factors totaled $431,000 for 2009.

Despite the loss reported for the first quarter of 2009, Pacific State Bancorp has increased loan loss reserves from 1.95% of gross loans at December 31, 2008 to 2.11% of gross loans at March 31, 2009. In addition, the Company’s risk based capital levels have increased from total risk based capital ratio of 11.50% for the Company and 11.34% for the Bank at December 31, 2008 to 11.74% for the Company and 11.60% for the Bank at March 31, 2009. The minimum total risk based capital level required to be considered “well capitalized” by regulatory standards is 10%.

The Company’s financial performance information for the three month period ending March 31, 2009 compared to the same quarter in the prior year is as follows:

Income Statement:

Total Interest Income: $5,552,000, a decrease of $1,749,000 or 24%

Total Interest Expense: $2,227,000, a decrease of $1,155,000 or 34%

Net Interest Income: $3,325,000, a decrease of $594,000 or 15%

Non-Interest Income : $379,000, a decrease of $93,000 or 20%

Non-Interest Expense: $3,297,000, an increase of $802,000 or 32%

Provision for Loan Losses: $972,000, an increase of $762,000 or 363%

Net Loss: $294,000, a decrease of $1,388,000 from net income of $1,094,000

Basic Loss Per Share: $0.08, a decrease of $0.38 per share from earnings of $0.30

Diluted Loss Per Share: $0.08, a decrease of $0.35 per share from earnings of $0.27

Loss on Average Assets: Annualized loss rate of 0.29%, a decrease of 1.32% from earnings of 1.03%

Loss on Average Equity: Annualized loss rate of 4.30%, a decrease of 17.01% from earnings of 12.71%

The Company’s balance sheet information as of March 31, 2009 compared to December 31, 2008 was as follows: 

Total Federal Funds and Investment Securities: $48,875,000, a decrease of $12,674,000 or 21%

Net Loans: $297,784,000, a decrease of $4,161,000 or 1%

Total Assets: $400,710,000, a decrease of $20,743,000 or 5%

Non-Interest Bearing Deposits: $58,005,000, a decrease of $11,869,000 or 17%

Total Deposits: $320,783,000, a decrease of $20,197,000 or 6%

Total Borrowings: $48,764,000, remained unchanged

Total Shareholders’ Equity: $26,950,000, a decrease of $334,000 or 1%

Total Tier 1 Risk Based Capital Ratio of 10.48%

Total Tier 1 Leverage Capital Ratio of 9.08% 

Total Risk Based Capital Ratio of 11.74%

Attached are certain unaudited financial statements supporting the financial information summarized above. Further inquiries should be directed to Mr. Simas at 209-870-3214, or by mail to P.O. Box 1649, Stockton, California 95201. Additional information also can be obtained by visiting the Company website –www.pacificstatebank.com.

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.