“A man without mirth is like a wagon without springs, in which one is caused disagreeably to jolt by every pebble over which it turns.” Henry Ward Beecher We need a good sense of humor these days as we cope with a troubled real estate market, a recessionary economy and depressed conditions that could last well into next year. However, within our Bank are many seasoned veterans who have been there before. We need to pull together as a team and work our way to better times.

Meanwhile, we continue on into year 2008, and with very good results for the first quarter. We did post an increase in Net Income in the First Quarter 2008 compared to First Quarter 2007, and a return on Equity of nearly 20% which will be one of the highest in the State. Each quarter this year will be a special challenge as the economy continues to weaken, but we must take each quarter as it comes and do the best we can in uncertain conditions. We do have a very strong Ag economy and that is helping counter the effects of the weak general economy.

Our ongoing efforts to expand our branch system continue. We are approaching the opening of our fourth branch in Bakersfield, the Easthills Branch near Mt. Vernon and Bernard. It should formally open right after the 4th of July and the “soft” opening will be a week or two before. Our next new office will be in the Sunnyside area of Fresno and this office should open in Fall 2008.

In the first quarter we signed a contract with PHH Mortgage Company to originate and service home mortgages in our name. We will have the option of keeping as much loan volume as we want. This partnership provides a vital service that we as a community Bank must provide, particularly now. By partnering with PHH we can provide a complete product line, quick processing and closing, and keep everything in our name! PHH is one of the top 10 mortgage originators in the Country, and is unaffected by the current turmoil in the mortgage market. This should be a very productive undertaking.

We currently are working on several new products and services which we will announce very soon. This kind of research and development is ongoing and it keeps the Bank competitive and alive with excitement. We are fortunate to have the leadership and staffing to make this possible.

We are now starting the Second Quarter and with it new challenges are ahead. The economy and especially the real estate market has not been so weak since the early 1990’s. We do have the capacity, the capital, and the leadership to work our way through this. The current Board and Senior Management have seen this before and you can be assured we will work our way through this to better times. I will look forward to reporting our progress.


“Sprints don’t count. The final score makes no mention of a splendid start if the finish proves that you were an ‘also ran’.”
Herbert Kaufman


Sincerely,

James C. Holly
CEO and President

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