San Joaquin Bancorp and Bank Regulators Enter Into Joint Pact

San Joaquin Bancorp, a Bakersfield based bank holding company, and its subsidiary San Joaquin Bank, a state chartered bank that is a member of the Federal Reserve System, recently announced that they have mutually agreed to enter into a written agreement with the Federal Reserve Bank of San Francisco and the California Department of Financial Institutions.

In a release on April 10, the groups noted that the common goal of the agreement is to take affirmative actions to improve the Bank's operations and address the current economic environment impacting Bancorp and the Bank.

Bart Hill, President of Bancorp, stated, "Like most financial institutions in our nation, the current economic environment is presenting numerous challenges prompted by unprecedented weakness in the housing market nationally, rising unemployment and illiquid credit markets. Our local market is no different. The written agreement is a mutual plan with our regulators that contains important and appropriate steps that we believe will help improve asset quality and overall earnings, and will provide a foundation to further strengthen the Bank's financial condition and enhance shareholder value. We have been and continue to work diligently with the regulators to see that the Bank continues with its tradition of providing safe and sound banking services to our customers."

The written agreement requires that the Bank take certain steps to strengthen its credit risk management and loan review function, address loan policies and procedures, add loan adjustment and credit administration staff to assist with reducing classified loans, refine its methodology for the allowance for loan losses, submit a strategic plan related to earnings and annual budgets and adopt a plan related to maintaining liquidity and funds management. Bancorp also confirmed in the agreement certain steps it had previously announced concerning a suspension of dividends or other distributions related to its trust preferred securities and adoption of a capital plan to maintain sufficient capital at Bancorp on a consolidated basis and the Bank on a stand alone basis.

The agreement does not restrict Bancorp or the Bank from transacting its normal banking business. The Bank will continue to provide superior service to our customers including all deposit and lending services. All customer deposits remain fully insured to the highest limits set by the FDIC. Although specific capital ratio targets were not required under the written agreement, Bancorp applies a risk-based approach in determining adequate levels of capital for planning purposes. Currently, the well-capitalized guidelines for banks required by the federal bank regulatory agencies are:

Tier I Leverage Ratio of 5.0 percent

Tier I Capital to Risk-Weighted Assets Ratio of 6.0 percent, and

Total Risk-Based Capital Ratio of 10.0 percent.

As of December 31, 2008, the Bank's ratios exceeded federal requirements as follows:

Tier I Leverage Ratio of 7.68 percent

Tier I Capital to Risk-Weighted Assets Ratio of 8.27 percent, and

Total Risk-Based Capital Ratio of 10.25 percent.

"The agreement is a joint plan to maintain the financial soundness of Bancorp and the Bank," said Bart Hill. "Management and the Board of Directors have been actively working with the Reserve Bank and the Department since last year with regard to the matters outlined in the written agreement. For this reason we have already implemented a plan designed to achieve full compliance with the written agreement."

Bancorp filed a Form 8-K with the Securities and Exchange Commission today that includes the written agreement as an exhibit. The description of the written agreement contained in this release is qualified in its entirety by reference to the exhibit.

San Joaquin Bancorp is a bank holding company formed in 2006 and is subject to the regulatory oversight of the Board of Governors of the Federal Reserve System. San Joaquin Bank, wholly-owned by San Joaquin Bancorp, is an insured state-chartered member bank of the Federal Reserve System. The Bank was established in 1980 and is headquartered in Bakersfield, California. San Joaquin Bank is a full-service, community bank with four banking offices in Bakersfield and one in Delano. San Joaquin Bank emphasizes professional, personal banking service directed primarily to small and medium-sized businesses and professionals. The Bank also provides a full range of banking services that are available to individuals, public entities, and non-profit organizations.

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