First PacTrust Bancorp, Inc. Announces 3rd Quarter Results

First PacTrust Bancorp, Inc. ("Bancorp” or the "Company”) (Nasdaq: BANC), the holding company for Pacific Trust Bank ("the Bank”), announced today results for the third quarter of 2011. The Company earned net income of $0.6 million and net income to common of $0.5 million for the quarter ending September 31, 2011. Core earnings¹ for the quarter stood $1.1 million or $0.10 per share of common stock, which excludes $0.5 million of non-core transaction related expenses, on an after tax basis, including change of control payments and professional fees related to acquisition activity. The Company experienced a reduction in the level of non-performing loans, net of specific valuation allowances, of $5.9 million or 41.4%, to $8.3 million or 1.19% of total gross loans at September 30, 2011. Classified loans fell to $29.8 million, a decline of 16.2%. Meanwhile, third quarter 2011 pre-tax pre-provision income, adjusted for OREO charges¹, increased to $3.3 million from $2.8 million, linked quarters, driven primarily by a $24 million increase the Bank’s loan portfolio, a $26 million increase in the Bank’s total deposits and a five basis point expansion in the Bank’s net interest margin.

"I am proud of the tremendous steps we have made to grow the business while continuing to deliver positive net income and a secure, growing dividend. We continue to make solid progress in building a high quality community banking franchise and producing sustainable core earnings. I am particularly proud of the significant progress we have made cleaning up our existing loan portfolio while increasing our origination volumes and deposit franchise,” said Greg Mitchell, Bancorp President and CEO.

THIRD QUARTER 2011 HIGHLIGHTS:

Earnings Fundamentals

Bancorp reported net income of $0.6 million and net income available to common shareholders of $0.5 million for the quarter ending September 30, 2011. Earnings per common share was $0.04. Pre-tax-pre-provision profit¹ of $3.3 million, compared to linked quarter profit of $2.8 million, adjusted for OREO valuation allowances and losses on sale of OREO.

Bancorp’s subsidiary, Pacific Trust Bank, earned net income of $1.6 million for the third quarter, or 0.72% of average assets on an annualized basis. The Bank remained well-capitalized reporting third quarter Tier-1, Tier-1 Risk Based and Total Risk-Based capital ratios of 14.33%, 19.68% and 20.73% as of September 30, 2011, respectively.

Bancorp’s net interest margin increased five basis points from 3.56% for the quarter ending June 30, 2011, to 3.61% for the quarter ended September 30, 2011. The Bank’s cost of funds fell twelve basis points from 0.88% for the quarter ending June 30, 2011 to 0.76% for the quarter ending September 30, 2011. The cost of deposits improved by three basis points (4.1%) falling from 0.74% for the quarter ending June 30, 2011 to 0.71% for the quarter ending September 30, 2011. The improvement in cost of funds was offset by a twelve basis point reduction in the average yield on the Bank’s earnings assets principally due to the decline of 0.87% in the yield on securities from 5.37% during the second quarter 2011 to 4.50% during the third quarter 2011. Notably, the Company experienced a five basis point increase in loan yields from 4.52% for the quarter ending June 30, 2011 to 4.57% for the quarter ending September 30, 2011. This expansion was due largely to higher levels of interest income from new lending initiatives which began funding during the second quarter 2011, as well as the conversion of non-earning assets and recovery of previously reversed interest income on loans that were delinquent more than 90 days. During the quarter, the Bank added $824 thousand to its provision for loan losses largely related to increased volume of loans and the establishment of additional specific allowance allocations for performing TDRs and other impaired loans.

Third quarter 2011 earnings were impacted by (1) $244 thousand in change-in-control payments related to the 2010 Private Placement, (2) $475 thousand in professional fees associated with acquisitions and other non-core activities; and (3) $1,434 thousand in OREO related charges and valuation allowances.

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¹ - See Section on Non-GAAP Financial Information

Asset Quality:

• Non-performing loans decreased by $5.9 million or 41.4%, to $8.3 million as of September 30, 2011 from $14.2 million as of June 30, 2011, or 1.2% and 2.1% of gross loans, respectively.
• Total classified loans, defined as loans rated Loss, Doubtful or Substandard, decreased by $5.7 million, or 16.1%, from $35.5 million as of June 30, 2011, to $29.8 million as of September 30, 2011.
• Loans delinquent 60 - 89 days decreased $1.4 million during the three months ended September 30, 2011, and declined by $7.3 million, or 73.6%, from $9.9 million as of December 31, 2010 to $2.6 million as of September 30, 2011.
• OREO increased $5.5 million to $20.6 million as of September 30, 2011 when compared to $15.0 million as of June 30, 2011, or 2.2% and 1.7% of total assets, respectively.
• Total nonperforming assets remained at 3.1% of total assets as of September 30, 2011.
• The allowance for loan losses increased from $8.4 million, or 1.2% of loans as of June 30, 2011, to $9.0 million, or 1.3% of loans, as of September 30, 2011. The increase in the allowance resulted largely from increased loan production and the establishment of additional specific allowance allocations for performing TDRs and other impaired loans.

Balance sheet and liquidity:

• Total assets increased by $46.7 million (5.3%) for the three month period ended September 30, 2011.
• Loans, net of allowance, totaled $696 million at September 30, 2011, compared to $672 million at June 30, 2011. Loan originations during the third quarter of 2011 increased to $68.7 million compared to $31.9 million in the second quarter of 2011 as the Bank saw increased production volume from its commercial real estate and residential lending programs during the third quarter. The average note rate on loans funded in the third quarter was 5.14%.
• Securities available-for-sale at September 30, 2011 totaled $64.9 million compared to $74.6 million at June 30, 2011.
• Total deposits were $711.6 million as of September 30, 2011. Total deposit balances grew by $25.7 million (3.7%) for the three month period ended September 30, 2011. The opening of the La Jolla and San Marcos branches accounted for approximately $15 million of growth during the third quarter.
• The Bank opened its newest branch in Century City, CA on October 20, 2011. The Bank expects to open a Santa Monica, CA branch in early 2012. The Bank also signed a lease for a branch in Tustin, CA, which is anticipated to open in early 2012.

Dividend:

• Bancorp increased its quarterly dividend to $0.115 per share, its fourth consecutive quarterly dividend increase.

Other Events

• On July 27, 2011, the Company announced that the underwriters of the registrant’s public offering of voting common stock partially exercised their overallotment option, resulting in the issuance of an additional 35,000 shares.
• On August 30, 2011, Bancorp announced that it received an investment of $32.0 million in its preferred stock from the U.S. Treasury Department under the Small Business Lending Fund.
• On August 30, 2011, the Company announced that it has entered into an agreement to acquire Beach Business Bank.
• On September 28, 2011, the Company announced a change in its NASDAQ ticker symbol to "BANC” effective October 3, 2011.
• On September 28, 2011, the Company announced the retirement of James Sheehy triggering a change in control payment of $244,534 and the appointment of Richard Herrin as successor Corporate Secretary.

CONFERENCE CALL INFORMATION

First PacTrust Bancorp, Inc. will host an earnings conference call at 10:00 a.m. PST (1:00 p.m. EST) on November 10, 2011, to discuss third quarter 2011 results as well as other matters. To access the conference call, please dial (866) 509-2785. The related presentation slides in PDF format will be available in the Annual Reports & Presentations section of the Company’s Investor Relations Web site at www.firstpactrustbancorp.com.

For those unable to participate in the conference call, a recording of the call will be archived on the investor relations page of First PacTrust Bancorp’s website at www.firstpactrustbancorp.com for 90 days following the presentation.

First PacTrust Bancorp, Inc. is the parent holding company of Pacific Trust Bank and is headquartered in Chula Vista, California. Pacific Trust Bank provides a full range of banking products and services designed for small- to mid-sized businesses and their owners, real estate professionals and individuals interested in a comprehensive relationship with their financial institution.

Pacific Trust Bank began operations in 1941 and has since grown to $909 million assets as of September 30, 2011. The financial institution is now the largest federally chartered community bank headquartered in San Diego County, currently with 12 offices primarily serving San Diego, Riverside and Los Angeles counties. The Bank provides customers with the convenience of banking at more than 4,400 branch locations throughout the United States as part of the CU Services Network and 28,000 fee-free ATM locations through the CO-OP ATM Network

Additional information concerning First PacTrust Bancorp, Inc. can be accessed at www.firstpactrustbancorp.com.

Non-GAAP Financial Information:

This presentation contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States ("GAAP”). These non-GAAP financial measures include pre-tax pre-provision income and core earnings.

Pre-tax pre-provision profit is total revenue less non-interest expense and pre-tax pre-provision profit , adjusted for OREO charges, is total revenue less non-interest expense plus OREO-valuation allowance plus loss on sale of OREO. Management believes that these two additional non-GAAP financial measures are useful because it enables investors and other to assess the Company’s ability to generate capital to cover losses through a credit cycle. Management also believes that core earnings is a useful measure of assessing our operating performance.

Reconciliations of the non-GAAP measures to the comparable GAAP measures are provided below.

The following table presents a reconciliation of core earnings to net income (dollars in thousands):

The following table presents a reconciliation of pre-tax pre-provision income to net income (dollars in thousands):

Statements contained in this news release that are not historical facts may constitute forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended), which involve significant risks and uncertainties. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Company and the subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including the U.S. Treasury and the Federal Reserve Board, the quality or composition of the Company’s loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, the possible short-term dilutive effect of potential acquisitions and accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward looking statements and undue reliance should not be placed on such statements.

SELECTED DETAIL ON CHANGES IN LOAN QUALITY AND RISK

Non-performing Loans. The following table is a summary of our nonperforming assets, net of specific valuation allowances. This table does not include all loans on nonaccrual or loans past due over 90 days that are on accrual. The information presented is for September 30, 2011 and December 31, 2010 (dollars in thousands):

Troubled Debt Restructured Loans (TDRs). As of September 30, 2011, the Company had 27 loans with an aggregate balance of $17.0 million, net of specific valuation allowances, classified as TDR compared to $23.1 million at December 31, 2010. Specific valuation allowances totaling $1 million (net of $201 thousand previously charged off) have been established for these loans as of September 30, 2011 compared to $3.1 million at December 31, 2010. When a loan becomes a TDR the Company ceases accruing interest, recognizes principal and interest payments on a cash basis and classifies it as non-accrual until the borrower has made at least six consecutive payments and in certain instances twelve consecutive payments under the modified terms. Of the 27 loans classified as TDR, 19 loans totaling $10.6 million are performing under their modified terms (defined as less than 30 days delinquent). Of the performing TDRs, $10 million have been paying as agreed for more than six months and are on accrual status while $489 thousand are performing and earning interest on a cash basis but are classified non-accrual because the borrower has yet to make six consecutive payments under the modified agreement. Six TDR loans with an aggregate balance of $2.4 million are past due (defined as over 90 days delinquent). Past due TDR loans consist of one land loan with an aggregate balance of $333 thousand and four real estate one-to four- family first mortgage loans totaling $2.1 million. These loans will either return to a performing TDR status or move through the Bank’s normal collection process for non-performing loans. In addition, the Bank has two TDR with an aggregate balance of $3.8 million that were recently modified and have yet to make a payment under their restructure.

The following table presents the seasoning of the Bank’s performing restructured loans, their effective balance (principal balance minus specific valuation allowances charged-off), and their weighted average interest rates (dollars in thousands):

(1) Average balances of nonperforming loans are included in the above amounts.

(1) Average balances of nonperforming loans are included in the above amounts.