California Oaks State Bank Reports 1st Quarter 2010 Results

California Oaks State Bank (OTCBB:COSB), a community business bank with assets of $131.1 million, today reported a net loss for the first quarter of 2010 of $11,225 or ($0.01), compared to net income for the first quarter of 2009 of $116,660 or $.08 per share. In addition, the Bank paid $54,254 or $0.04 per share in the first quarter of 2010 and $20,282 or $0.01 per share in the first quarter of 2009 in dividend and accretion costs as a result of the TARP funding received by the Bank from the U.S. Treasury in January 2009.

Total assets ended March 31, 2010 at $131.1 million with net loans and deposits at $93.8 million and $108.4 million respectively. Total assets by comparison for first quarter 2009 were $126.5 million with net loans and deposits of $104.4 million and $92.3 million respectively. The year over year decrease in loans of $10.6 million can be attributed to the aggressive movement in borrowers’ attitudes to pay down debt during uncertain times and the Bank’s desire to get out of troubled relationships that are not poised to recover in a timely manner. A concerted effort has been made to reposition the portfolio from riskier lending groups to more typical commercial lending. Although this migration is currently having an impact on the net interest margin, the riskier lending was unacceptable from a risk analysis standpoint.

On the deposit side, the Bank saw its deposit base increase $16.1 million or 17.8% compared to a year ago. The Bank’s core deposits grew $20.1 million or 33.4% over the past 12 months while certificates of deposit decreased $4.0 million or 12.3%. FHLB borrowings decreased, compared to a year ago, by $10.5 million or 66%.

The net interest margin as a percentage of average assets ended the first quarter at 3.97% versus 3.98% in the fourth quarter of 2009. The Bank has been able to stabilize its net interest margin but it has still been impacted by a loss in interest income on loans that were transferred to non-accrual status in the first quarter of 2010 and eventually charged off. The margin has also been impacted by the amount of liquidity that sits on our balance sheet that has not been deployed in loans or securities. John Nerland, the Bank's President and CEO, noted, "The Bank has an extremely short duration on its investments as we have decided not to chase yields with rates being at historical lows.”

A thorough analysis of the Bank’s loan portfolio continues to be performed and the Bank appears to be adequately reserved for loan losses. Over the past 18 months, a negative quality migration in the credit portfolio was experienced. This migration can be attributed to the general economic conditions the country is experiencing.

The Bank’s capital ratios remain strong with a Tier 1 Risk Based Capital ratio at 15.86%. California Oaks State Bank remains highly capitalized as far as the regulatory entities are concerned, with a Total Risk Based Capital ratio of 17.11%. In today’s Banking environment, this is a very positive position to be in.

Nerland noted, "The Bank is focused on keeping its cost structure in line through the current challenging economic times and has been successful in reducing costs to offset the margin compression. We are not expecting aggressive growth this year; rather we are focused on maintaining and managing our existing credit portfolio. We continue to make progress in aggressively working down the problem and non accrual credits. In addition, we are encouraging core deposits which will build franchise value for Cal Oaks.”

The Bank had previously announced the commencement of an offering of up to 8,000,000 shares of its common stock at a price of $12.50 per share. The offering will be made only to accredited investors and qualified institutional buyers on a best efforts basis through its placement agents, Sandler O'Neill + Partners, LP and TBC Securities, LLC.

The Bank plans to use the net proceeds of the offering to offer to repurchase shares of Bank common stock from current stockholders at a price equal to the price of the shares sold in the offering, repurchase the Bank's Series A and Series B Preferred Stock from the U.S. Treasury, purchase vested stock options from current directors and employees of the Bank at the same price as the shares sold in the offering, increase the Bank's asset portfolio, on an opportunistic basis acquire assets and/or deposits of failed financial institutions from the Federal Deposit Insurance Corporation or from other institutions in negotiated transactions, pay operating expenses and for other general corporate purposes.

The completion of the offering is subject to several conditions, including receipt of certain regulatory approvals. Mr. John Nerland and Mr. Robert Lewis will continue to serve as directors of the Bank and Mr. Nerland will remain the Bank's Chief Executive Officer after the offering.

This press release does not constitute an offer to sell or the solicitation of an offer to buy shares of the Bank's common stock. Any offer will be made only by means of a private offering memorandum solely to accredited investors or qualified institutional buyers. This press release does not constitute an offer to purchase, or the solicitation of an offer to tender, any shares of the Bank's common stock.

Visit the California Oaks State Bank Web site at www.caloaks.com for more information and updates on new products as they become available.

About California Oaks State Bank

California Oaks State Bank (OTCBB:COSB) with $131 million in assets is located in Ventura County with offices in Thousand Oaks and Simi Valley and a Loan Production Office located in Walnut Creek, Calif. California Oaks State Bank was founded in 1998 as a locally owned Community business bank. The bank provides a full range of products and services including Commercial and real estate loans as well as cash management products and deposit services. Its unique capability in diversified lending in addition to its customary community bank credit products help its customers meet their cash management goals.

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbors created by the act. These forward-looking statements refer to the Company’s current expectations regarding future operating results, and growth in loans, deposits, and assets. These forward looking statements are subject to certain risks and uncertainties that could cause the actual results, performance, or achievements to differ materially from those expressed, suggested, or implied by the forward looking statements. These risks and uncertainties include, but are not limited to (1) the impact of changes in interest rates, a decline in economic conditions, and increased competition by financial service providers on the Company’s results of operation, (2) the Company’s ability to continue its internal growth rate, (3) the Company’s ability to build net interest spread, (4) the quality of the Company’s earning assets, and (5) governmental regulations.