Mission Oaks Post 24th Consecutive Profitable Quarter

TEMECULA, Calif.--(Business Wire)--
Mission Oaks Bancorp (OTC BB: MOKB), whose principal subsidiary is
Mission Oaks National Bank, reported its 24th consecutive profitable
quarter for the period ending June 30, 2008.

In the second quarter, the Temecula-based community bank reported
earnings of $158,000, or 4 cents a share, compared with earnings of
$576,000, or 13 cents a share from the same period a year ago.

During the most recent quarter, the bank set aside $534,000 as a
provision for loan losses. A year ago, the bank set aside $110,000.

The increase in loan loss reserves reflected a decision by Mission
Oaks management to increase its cushion against future loan losses,
recognizing declining values in underlying collateral values,
particularly real estate.

"We know many banks have been adversely affected by troubled real
estate loans and compressed net interest margins," said Gary Votapka,
Mission Oaks president and chief executive. "Although we remain well
capitalized and do not carry any sub-prime or Alt-A mortgage loans, we
decided to proactively boost our reserves at this point because it is
the prudent thing to do."

In the first six months of 2008, Mission Oaks earned $461,000, or
10 cents a share, compared with $1.0 million, or 22 cents a share, in
the corresponding 2007 period.

For the first six months of 2008, net operating income after taxes
expressed as an annualized rate of return on average assets and
average equity was 0.42 percent and 4.72 percent respectively,
compared with 1.05 percent and 11.31 percent in the first two quarters
of 2007.

Net interest income for the six-month period ended June 30, 2008
was $2.08 million, compared with $2.44 million in the first half of
2007. The reduction was primarily the result of net interest margin
compression. The bank's net interest margin has fallen from 5.48
percent for the six months ending June 30, 2007 to 4.39 percent for
the six months ending June 30, 2008.

Non-interest income in the second quarter of 2008 totaled
$556,000, compared with $630,000 in the year-earlier quarter. Higher
service charges on deposit accounts and increases in revenues for
referring commercial real estate mortgages were more than offset by a
decline in revenues generated from the sale of SBA guaranteed loans
and residential mortgage referral fee income.

Non-interest expense in the second quarter of 2008 fell to $1.87
million, compared with $2.02 million in the year-earlier quarter.
Across the board cost reductions have allowed the bank to reduce
overhead expenses and boost the company's bottom line.

At the end of the second quarter, Mission Oaks Bancorp assets
reached $211.0 million, up 4 percent from $203.0 million a year
earlier. Loans and leases, net of unearned fees, rose 4.8 percent to
$164.5 million at the recent quarter end from $156.9 million a year
earlier. Deposits were $160.2 million as of June 30, 2008, compared
with $155.1 million on June 30, 2007. At the end of the second
quarter, total stockholders' equity and reserves were $22.08 million,
up 8.44 percent from a year ago.

The provision for loan losses increased to $786,000 through the
second quarter of 2008 from $262,000 in the year-earlier quarter. Net
charge-offs of loans totaled $272,000 in the first six months of 2008
with no charge-offs taken in the second quarter.

"The increase to our reserve reflects the ongoing concerns for the
local economy, weakness in the real estate market, loan growth and, to
a lesser degree, deterioration in the bank's loan portfolio", Votapka
said. "Given the extraordinary economic situation, even well-run banks
are prudently setting aside extra reserves for potential problems."

Loans classified as nonperforming increased to $2.79 million, or
1.69 percent of total loans, as of June 30, 2008 from $438,000, or
0.28 percent a year earlier. and $2.33 million, or 1.39 percent, at
the end of the first quarter of 2008. A nonperforming ratio of under
2.00 percent is considered acceptable.

There were no loans past due 90 days or more and still accruing
interest as of June 30, 2008. The latest non-accrual loan totals
represent five loans, none of which were over 90 days past due at
quarter end, but had factors that in management's opinion warranted
treatment as non-accrual loans.

Real estate taken in foreclosure of defaulted loans totaled $2.2
million at the end of the second quarter compared with no OREO (other
real estate owned) as of June 30, 2007.

Despite tough economic conditions, Mission Oaks management remains
committed to the communities it serves and is investing in areas it
believes will have long-term growth potential.

In early July, the bank opened its first full-service branch in
San Diego County, an instore branch in a supermarket in Fallbrook.

Plans also are moving forward to open a fifth full-service branch
in Lake Elsinore as Mission Oaks solidifies its presence along the
dynamic I-15 freeway corridor that runs from Ontario, Ca. in the north
to San Diego County in the south.

Mission Oaks National Bank is a federally chartered Temecula-based
community bank that is committed to serving consumers and businesses
in Southern California. The bank offers personalized services and
products through four full-service branch offices in Temecula,
Fallbrook and Ontario and loan production offices in San Diego and
Phoenix.

Mission Oaks Bancorp common stock is traded over the counter under
the stock symbol MOKB.OB.

For more on Mission Oaks National Bank visit its Web site at
missionoaksbank.com.

Safe Harbor

Certain statements in this press release, including statements
regarding the anticipated development and expansion of Mission Oaks'
business, and the intent, belief or current expectations of Mission
Oaks, its directors or its officers, are "forward-looking" statements
(as such term is defined in the Private Securities Litigation Reform
Act of 1995). Because such statements are subject to risks and
uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. These risks
and uncertainties include, but are not limited to, risks related to
the local and national economy, the Bank's performance, regulatory
matters and those discussed in filings by the Bank with the Office of
the Comptroller of the Currency and by Mission Oaks with the Federal
Reserve Board.

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MISSION OAKS BANCORP
SECOND QUARTER REPORT / JUNE 30, 2008

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CONSOLIDATED BALANCE SHEET
----------------------------------------------------------------------
(all amounts in whole dollars except share and per share information)

Increase Increase
June 30, 2008 June 30, 2007 (Decrease) (Decrease)
------------- ------------- ------------ ----------

ASSETS

Cash and due
from banks $5,040,000 $5,470,000 ($430,000) -7.9%
Certificates of
deposit in other
banks 1,000,000 495,000 505,000 102.0%
Federal funds
sold 6,000 3,899,000 (3,893,000) -99.8%
Investment
securities
available for
sale 31,503,000 28,658,000 2,845,000 9.9%

Loans 164,536,000 156,931,000 7,605,000 4.8%
Less allowance
for loan losses (2,624,000) (1,940,000) (684,000) 35.3%
------------- ------------- ------------
Loans, net 161,912,000 154,991,000 6,921,000 4.5%

Premises and
equipment 560,000 665,000 (105,000) -15.8%
SBA-Loan
servicing
asset/interest
only strips 520,000 657,000 (137,000) -20.9%
Cash surrender
value of life
insurance 3,026,000 2,903,000 123,000 4.2%
Other real estate
owned 2,213,000 0 2,213,000
Other assets 5,220,000 5,306,000 (86,000) -1.6%
------------- ------------- ------------
$211,000,000 $203,044,000 $7,956,000 3.9%
============= ============= ============

LIABILIITIES AND SHAREHOLDERS'
EQUITY

Demand deposits $33,099,000 $34,697,000 ($1,598,000) -4.6%
Interest
bearing
deposits 127,062,000 120,403,000 6,659,000 5.5%
------------- ------------- ------------
Total deposits 160,161,000 155,100,000 5,061,000 3.3%

Borrowings 29,867,000 27,732,000 2,135,000 7.7%
Other
liabilities 1,520,000 1,795,000 (275,000) -15.3%
------------- ------------- ------------
Total
liabilities 191,548,000 184,627,000 6,921,000 3.7%

Total
shareholders'
equity 19,452,000 18,417,000 1,035,000 5.6%
------------- ------------- ------------
$211,000,000 $203,044,000 $7,956,000 3.9%
============= ============= ============
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----------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
----------------------------------------------------------------------

3 Mos ended 3 Mos ended 6 Mos ended 6 Mos ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Interest
income $3,548,000 $3,925,000 $7,333,000 $7,477,000
Interest
expense 1,465,000 1,483,000 3,084,000 2,749,000
----------- ----------- ----------- -----------
Net interest
income 2,083,000 2,442,000 4,249,000 4,728,000
Provision for
loan losses 534,000 110,000 786,000 262,000
----------- ----------- ----------- -----------
Net interest
income after
provision for
loan losses 1,549,000 2,332,000 3,463,000 4,466,000
Noninterest
income 556,000 630,000 1,017,000 1,167,000
Noninterest
expense 1,867,000 2,024,000 3,758,000 4,012,000
----------- ----------- ----------- -----------
Income before
income taxes 238,000 938,000 722,000 1,621,000
Provision for
income taxes 80,000 362,000 261,000 618,000
----------- ----------- ----------- -----------
Net income $158,000 $576,000 $461,000 $1,003,000
=========== =========== =========== ===========

Average common
shares
outstanding 4,467,836 4,536,092 (1) 4,472,981 4,528,091 (1)
Net income per
share-basic $0.04 $0.13 (1) $0.10 $0.22 (1)
Return on
average assets
(annualized) 0.29% 1.16% 0.42% 1.05%
Return on
average equity
(annualized) 3.24% 12.72% 4.72% 11.31%
*T

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SELECTED RATIOS
----------------------------------------------------------------------
June 30, 2008 June 30, 2007
------------- -------------
Allowance for loan losses as a percent of
total loans 1.59% 1.23%
Nonperforming assets as a percent of
total assets 2.37% 0.22%
Loan to deposit ratio 102.82% 100.48%

(1) Adjusted for January 2008 5% stock dividend
*T

Mission Oaks National Bank
Gary Votapka, president and chief executive officer
951-719-1210
Keith Johnson, executive vice president
951-719-1211

Copyright Business Wire 2008