Letter to Shareholders
Continued growth and enhanced performance of First PacTrust Bancorp, Inc. is the primary focus
of management and the Board of Directors.
During 2004, total assets grew by $50.5 million or 8.1%, from $624.0 million at year-end 2003 to
$674.5 million at December 31, 2004. This increase primarily reflected growth in loans receivable
of $41.5 million funded by an increase in deposits of $63.7 million. In an environment of high loan
prepayments and refinancing activity the Company originated $273.6 million in new loans during
2004 resulting in the increase in loans receivable.
The Company continues to develop strong account relationships with customers by providing high
quality service while offering a variety of innovative and competitive deposit products. Staff
training and management oversight continue to be emphasized. New products introduced during
2004 included an adjustable rate certificate of deposit, a high yield savings account, and an
improved home equity line of credit. To entice new customers to our facilities and as an additional
service to existing customers, free self-service coin counting is now offered at all branches. Service
quality is guaranteed to each new account holder, and they also are provided the president’s phone
number should any problems be encountered that the Bank’s staff cannot resolve. The Company
also has a formal program where we pay customers for suggestions. We believe our customers are
the Bank’s most important asset, and proactively solicit their recommendations for service
improvements.
Growth, good customer relations and improved performance resulted in increased earnings. For the
year ended December 31, 2004, the Company reported net income of $5.1 million, an increase of
$1.0 million or 23.8%, compared to net income of $4.1 million for the prior year. The Company
reported basic and diluted earnings per share of $1.18 and $1.16 for the year ended December 31,
2004, as compared to $.86 and $.85 for the prior year.
This success was achieved through effective interest rate risk management practices, even though
the Company was challenged with a flatting yield curve during 2004, as the Federal Reserve
increased federal funds rates while mid- to long-term interest rates remained relatively low, by
historical standards. This interest rate environment continued to cause significant prepayments and
refinancing of higher yielding loans, and resulted in our re-investment of the proceeds in lower
yielding assets, as rates paid on deposits and shorter-term borrowed funds increased.
During 2004, the Company continued to increase the dividend payout on a quarterly basis.
Dividends paid during 2004 aggregated $0.42 per share compared to $0.26 per share paid in the
prior year.
Stock repurchases continued with 448,300 shares repurchased in 2004, up from the 398,600
acquired during 2003. The board of directors has currently authorized the Company to repurchase
up to an additional 126,800 common shares (as of March 11, 2005), and will consider additional
repurchases when that authorization is completed, subject to market conditions, our capital level,
and other available alternatives.
The Company continues to evaluate alternatives relative to improving future earnings which are
inherently tied to changes in interest rate levels, credit quality and economic trends. If the Federal
Reserve continues to increase short-term interest rates, the Company’s interest expense on deposits
is expected to increase at a faster pace than the interest income received on earning assets. This is
due to the relatively short maturity of the Company’s deposits verses the longer term maturity of the
loan portfolio. In this environment, considering the Company’s current high capital ratios, the plan
is for continued leveraging of assets through loan portfolio growth funded with deposit growth and
borrowed funds with terms that provide an acceptable net interest spread.
The Company recently took action based on its evaluation of opportunities to improve the
Company’s investment portfolio results through tax-advantaged investments. In December, to
advance the Bank’s “Community Reinvestment Act” position as well as to enhance future after-tax
net income, the Bank invested in federal low-income housing tax credits (related to properties
located in the Bank’s CRA assessment areas) through an equity investment in a California
Affordable Housing Fund. The investment will result in low income housing project tax credits
over several years. Based upon research, analysis and negotiations performed through much of
2004, in January 2005 the Company also completed a $15.0 million bank-owned life insurance
(BOLI) investment.
The market rewarded the combined effects of the Company’s improved operating results, stock
buy-backs and increased dividends rate with a year-end 2004 closing price of $27.35, up 22.5%
from the closing price of $22.35 on December 31, 2003.
As a local community bank with a growing regional and internet presence, our customer base is
strong and improving. Looking ahead, we expect to continue to build upon our strengths and
translate them into value for our shareholders.
We would also like to thank the Bank’s management team and employees for their dedicated efforts
to make 2004 a very successful year for the Company.
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Shareholder Information
Annual Meeting
April 20, 2005. 9:00 a.m. PDT
The Bonita Golf Club
5540 Sweetwater Road
Bonita, California 91902
Investor Relations
To obtain information about the Company, including a copy of our Annual Report on
Form 10K, please contact:
The Secretary
First PacTrust Bancorp, Inc.
610 Bay Boulevard
Chula Vista, California 91910
(619) 691-1519
E-mail: FPTB@pacifictrustbank.com
Listing of Common Stock
First PacTrust Bancorp, Inc.’s common stock is traded on the Nasdaq National Market.
Its symbol is “FPTB”
Transfer Agent and Registrar for Common Stock
Register and Transfer Company
10 Commerce Drive
Cranford, NJ 07016-3572
Stockholder Customer Service: (800) 368-5948
Auditors
Crowe Chizek and Company LLP
354 Eisenhower Parkway, Plaza I
Livingston, NJ 07039
Corporate Counsel
Silver, Freedman & Taff, LLP
1700 Wisconsin Ave. N.W.
Washington, D.C. 20007
First PacTrust Bancorp, Inc.
Directors and Officers
Board of Directors:
Alvin L. Majors - Chairman of the Board
Hans R. Ganz
Francis P. Burke
Donald M. Purdy
Kenneth W. Scholz
Donald A. Whitacre
Executive Officers
Hans R. Ganz – President and Chief Executive Officer
James P. Sheehy – Executive Vice President, Secretary and Treasurer
Regan J. Gallagher – Senior Vice President - Controller
Pacific Trust Bank
Executive Officers
Hans R. Ganz – President and Chief Executive Officer
James P. Sheehy – Executive Vice President, Secretary and Treasurer
Melanie M. Stewart – Executive Vice President - Lending
Regan J. Gallagher – Senior Vice President - Controller
Rachel M. Carrillo – Senior Vice President - Branch Operations
Lisa R. Goodwin – Senior Vice President - Information Services