---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

|  |                                                                                   
|- | ----------------------------------------------------------------------------------
|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
|  |                                                                                   
|  | For the quarterly period ended June 30, 2008                                      
|  |                                                                                   
|o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT       
|  | For the transition period from____________ to
 ____________                       

Commission file
number 000-50323

|                                                       
|-------------------------------------------------------
|SERVICE 1STBANCORP                                     
|                                                       
|(Exact name of
 registrant as specified in its charter)

|                                                                |  |                                   
|--------------------------------------------------------------- |  | ----------------------------------
|State of California                                             |  | 32-0061893                        
|                                                                |  |                                   
|(State or other
 jurisdiction of incorporation or organization) |  | (IRS Employer
 Identification No.)
|                                                                |  |                                   
|60 W. 10th
 Street, Tracy, California 95376                    
|                                                               
|(Address of principal
 executive offices)                      
|                                                               
|(209) 956-7800                                                 
|                                                               
|(Registrants Telephone
 Number, Including Area Code)          

Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x        No
o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act.

| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | Large accelerated filer o Accelerated filer o                                                     
| | Non-accelerated filer o (Do not check if a smaller reporting
 company) Smaller reporting company x

Indicate by check whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes o     No
x

Indicate the number of shares outstanding of each of
the issuers classes of common equity as of the latest practicable date: No par
value common stock  2,388,739 shares outstanding at August 12, 2008.

The Index to Exhibits is located at page 29.

---



INDEX
TO SERVICE 1ST BANCORP FORM 10-Q
FOR THE SIX MONTHS ENDED
June 30, 2008

|              |  |                                                                                                                                                             |    |     
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | ----
|              |  |                                                                                                                                                             |    | Page
|Part I        |  | Financial
 Information                                                                                                                                      |    |     
|              |  |                                                                                                                                                             |    |     
|Item 1        |  | Financial
 Statements                                                                                                                                       |    | 3   
|Item 2        |  | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                                                                      |    | 11  
|Item 3        |  | Quantitative
 and Qualitative Disclosures About Market Risk                                                                                                 |    | 21  
|Item 4        |  | Controls
 and Procedures                                                                                                                                    |    | 22  
|Item
 4T      |  | Controls
 and Procedures                                                                                                                                    |    | 22  
|              |  |                                                                                                                                                             |    |     
|Part II       |  | Other
 Information                                                                                                                                          |    |     
|              |  |                                                                                                                                                             |    |     
|Item 1        |  | Legal
 Proceedings                                                                                                                                          |    | 23  
|Item
 1A      |  | Risk
 Factors                                                                                                                                               |    | 23  
|Item 2        |  | Unregistered
 Sales of Equity Securities and Use of Proceeds                                                                                                |    | 23  
|Item 3        |  | Defaults
 Upon Senior Securities                                                                                                                            |    | 23  
|Item 4        |  | Submission
 of Matters to a Vote of Security Holders                                                                                                        |    | 23  
|Item 5        |  | Other
 Information                                                                                                                                          |    | 23  
|Item 6        |  | Exhibits                                                                                                                                                    |    | 23  
|              |  |                                                                                                                                                             |    |     
|Signatures    |  |                                                                                                                                                             |    | 28  
|              |  |                                                                                                                                                             |    |     
|Exhibit
Index |  |                                                                                                                                                             | 29
|              |  |                                                                                                                                                             |    |     
|31.1          |  | Certification of Chief Executive Officer pursuant to
 Section 302 of the Sarbanes-Oxley Act of 2002                                                         |    | 30  
|31.2          |  | Certification of Chief Financial Officer pursuant to
 Section 302 of the Sarbanes-Oxley Act of 2002                                                         |    | 31  
|32.1          |  | Certification of
 Service 1st Bancorp by its Chief Executive Officer and Chief
 Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |    | 32  

2

---



PART I - FINANCIAL INFORMATION

ITEM 1.          Financial Statements

SERVICE 1ST BANCORP AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS(Unaudited)

|                                                                                                                                           |  |         |             |          |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------- | ----------- | -------- | - | ----------- | -
|                                                                                                                                           |  | 6/30/08 |             | 12/31/07 |  
|                                                                                                                                           |  |         |             |          |  
|ASSETS                                                                                                                                    
|Cash and due from banks                                                                                                                    |  | $       | 3,166,238   |          | $ | 6,636,751   |  
|Federal funds sold                                                                                                                         |  |         | 1,711,756   |          |   | 4,652,900   |  
|                                                                                                                                           |  |         |             |          |   |             |  
|Cash and cash equivalents                                                                                                                  |  |         | 4,877,994   |          |   | 11,289,651  |  
|Certificates of deposit with other banks                                                                                                   |  |         | 382,336     |          |   | 486,488     |  
|Investment securities available for sale                                                                                                   |  |         | 75,854,990  |          |   | 82,934,208  |  
|Investment securities held to maturity                                                                                                     |  |         | 17,588,595  |          |   | 13,061,476  |  
|Loans, net                                                                                                                                 |  |         | 126,019,587 |          |   | 113,169,164 |  
|Bank premises and equipment, net                                                                                                           |  |         | 1,170,234   |          |   | 1,308,720   |  
|Cash surrender value of life insurance                                                                                                     |  |         | 3,766,380   |          |   | 3,698,239   |  
|Accrued interest receivable                                                                                                                |  |         | 1,357,813   |          |   | 1,505,244   |  
|Other assets                                                                                                                               |  |         | 6,328,266   |          |   | 3,622,753   |  
|Other real estate owned                                                                                                                    |  |         |            |          |   |            |  
|                                                                                                                                           |  |         |             |          |   |             |  
|                                                                                                                                           |  | $       | 237,346,195 |          | $ | 231,075,943 |  
|                                                                                                                                           |  |         |             |          |   |             |  
|                                                                                                                                           |  |         |             |          |   |             |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                       | 
|Deposits:                                                                                                                                  |  |         |             |          |   |             |  
|Noninterest-bearing demand                                                                                                                 |  | $       | 25,388,301  |          | $ | 26,697,543  |  
|Money market, NOW and savings                                                                                                              |  |         | 86,385,546  |          |   | 86,305,530  |  
|Time deposits under $100,000                                                                                                               |  |         | 70,154,339  |          |   | 69,781,685  |  
|Time deposits $100,000 and over                                                                                                            |  |         | 26,790,580  |          |   | 19,620,888  |  
|                                                                                                                                           |  |         |             |          |   |             |  
|Total
 deposits                                                                                                                            |  |         | 208,718,766 |          |   | 202,405,646 |  
|Junior subordinated debt securities                                                                                                        |  |         | 5,155,000   |          |   | 5,155,000   |  
|Other borrowings                                                                                                                           |  |         | 4,000,000   |          |   | 4,000,000   |  
|Accrued interest and other liabilities                                                                                                     |  |         | 2,197,327   |          |   | 1,867,283   |  
|                                                                                                                                           |  |         |             |          |   |             |  
|Total
 liabilities                                                                                                                         |  |         | 220,071,093 |          |   | 213,427,929 |  
|Commitments and contingencies - Notes 5 and 9                                                                                              |  |         |            |          |   |            |  
|Shareholders equity:                                                                                                                      |  |         |             |          |   |             |  
|Preferred stock, no par value, 10,000,000 shares authorized, none
 issued or outstanding                                                   |  |         |            |          |   |            |  
|Common stock, no par value, 30,000,000 shares authorized; issued and
 outstanding, 2,388,739 shares at June 30, 2008 and December 31, 2007 |  |         | 16,023,738  |          |   | 16,023,738  |  
|Additional paid-in capital                                                                                                                 |  |         | 411,718     |          |   | 356,152     |  
|Retained earnings                                                                                                                          |  |         | 2,001,785   |          |   | 1,484,090   |  
|Accumulated other comprehensive income, net of tax                                                                                         |  |         | (1,162,139  | )        |   | (215,966    | )
|                                                                                                                                           |  |         |             |          |   |             |  
|Total
 shareholders equity                                                                                                                |  |         | 17,275,102  |          |   | 17,648,014  |  
|                                                                                                                                           |  |         |             |          |   |             |  
|                                                                                                                                           |  | $       | 237,346,195 |          | $ | 231,075,943 |  
|                                                                                                                                           |  |         |             |          |   |             |  

The accompanying notes are an integral part
of these consolidated statements.

3

---



SERVICE 1ST BANCORP AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|---------------------------------------------------- |  | -------------------------- | --------- | ------------------------ | - | --------- |  | -------- | --------- | - | - | --------- | -
|                                                     |  | For the three months ended |           | For the six months ended |  
|                                                     |  |                            |           |                          |  
|                                                     |  | 06/30/08                   |           | 06/30/07                 |   | 06/30/08  |  | 06/30/07 |          
|                                                     |  |                            |           |                          |   |           |  |          |          
|Interest income:                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Interest and fees on loans                           |  | $                          | 2,014,706 |                          | $ | 2,612,211 |  | $        | 4,363,945 |   | $ | 5,131,388 |  
|Interest on investments                              |  |                            | 1,210,077 |                          |   | 1,034,262 |  |          | 2,422,186 |   |   | 2,054,072 |  
|Interest on fed funds sold                           |  |                            | 29,836    |                          |   | 9,403     |  |          | 93,574    |   |   | 66,399    |  
|Other interest income                                |  |                            | 1,907     |                          |   | 13,839    |  |          | 5,980     |   |   | 31,794    |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Total interest income                                |  |                            | 3,256,526 |                          |   | 3,669,715 |  |          | 6,885,685 |   |   | 7,283,653 |  
|Interest expense:                                    |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Interest expense on deposits                         |  |                            | 1,290,981 |                          |   | 1,750,008 |  |          | 2,934,790 |   |   | 3,513,321 |  
|Interest on borrowings                               |  |                            | 91,499    |                          |   | 183,957   |  |          | 218,137   |   |   | 315,291   |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Total interest expense                               |  |                            | 1,382,480 |                          |   | 1,933,965 |  |          | 3,152,927 |   |   | 3,828,612 |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Net interest income before provision for loan losses |  |                            | 1,874,046 |                          |   | 1,735,750 |  |          | 3,732,758 |   |   | 3,455,041 |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Provision for loan losses                            |  |                            | 400,000   |                          |   | 50,000    |  |          | 703,000   |   |   | 50,000    |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Net interest income after provision for loan losses  |  |                            | 1,474,046 |                          |   | 1,685,750 |  |          | 3,029,758 |   |   | 3,405,041 |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Other Income:                                        |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Service charges, fees, and other income              |  |                            | 147,192   |                          |   | 44,121    |  |          | 216,707   |   |   | 159,516   |  
|Gain on the sale of investment securities            |  |                            | (2,637    | )                        |   | 1,375     |  |          | 33,680    |   |   | (6,578    | )
|Gain on sale and servicing of loans                  |  |                            | 9,998     |                          |   | 12,970    |  |          | 20,379    |   |   | 34,814    |  
|Gain on sale of OREO                                 |  |                            | 190,122   |                          |   |          |  |          | 190,122   |   |   |          |  
|Referral fees on mortgage loans                      |  |                            |          |                          |   | 174,970   |  |          |          |   |   | 211,870   |  
|Earnings on cash surrender value of life insurance   |  |                            | 41,060    |                          |   | 39,623    |  |          | 81,729    |   |   | 78,614    |  
|Consulting fees                                      |  |                            |          |                          |   | 60,000    |  |          |          |   |   | 60,000    |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Total other income                                   |  |                            | 385,735   |                          |   | 333,059   |  |          | 542,617   |   |   | 538,236   |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Other Expenses:                                      |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Salaries and employee benefits                       |  |                            | 851,619   |                          |   | 1,070,054 |  |          | 1,650,870 |   |   | 2,089,275 |  
|Occupancy expense                                    |  |                            | 152,714   |                          |   | 160,811   |  |          | 309,513   |   |   | 324,856   |  
|Equipment expense                                    |  |                            | 81,771    |                          |   | 88,406    |  |          | 169,843   |   |   | 164,075   |  
|Data processing and other professional fees          |  |                            | 198,764   |                          |   | 147,009   |  |          | 346,806   |   |   | 297,220   |  
|Office supplies and equipment                        |  |                            | 44,605    |                          |   | 67,039    |  |          | 86,610    |   |   | 134,771   |  
|Loan department expense                              |  |                            | 21,912    |                          |   | 409       |  |          | 65,818    |   |   | 20,654    |  
|Advertising and promotion                            |  |                            | 30,243    |                          |   | 47,694    |  |          | 68,015    |   |   | 138,712   |  
|Directors fees and expenses                          |  |                            | 44,293    |                          |   | 61,688    |  |          | 95,037    |   |   | 113,380   |  
|FDIC and state assessments                           |  |                            | 60,844    |                          |   | 18,442    |  |          | 107,665   |   |   | 28,035    |  
|Other operating expenses                             |  |                            | 122,315   |                          |   | 118,882   |  |          | 242,543   |   |   | 236,787   |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Total other expenses                                 |  |                            | 1,609,080 |                          |   | 1,780,434 |  |          | 3,142,720 |   |   | 3,547,765 |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Income before income taxes                           |  |                            | 250,701   |                          |   | 238,375   |  |          | 429,655   |   |   | 395,512   |  
|Income tax expense                                   |  |                            | (107,729  | )                        |   | 54,880    |  |          | (88,040   | ) |   | 98,878    |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Net income                                           |  | $                          | 358,430   |                          | $ | 183,495   |  | $        | 517,695   |   | $ | 296,634   |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Net income per share - basic                         |  | $                          | 0.15      |                          | $ | 0.07      |  | $        | 0.22      |   | $ | 0.12      |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  
|Net income per share - diluted                       |  | $                          | 0.15      |                          | $ | 0.07      |  | $        | 0.22      |   | $ | 0.12      |  
|                                                     |  |                            |           |                          |   |           |  |          |           |   |   |           |  

The accompanying notes are an integral part
of these consolidated statements.

4

---



SERVICE 1ST BANCORP AND
SUBSIDIARIES 
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(unaudited)

|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|------------------------------------------------------------------------------------- |  | ------------- | --------- | ------ | - | ------------------------------- |  | ----------------------- | ------- | ----------------------------- | - | --------------------------------------------- | - | ---------------------------- | --------- |  | - | ---------- | - | - | ---------- | -
|                                                                                      |  |               |           |        |   | Additional
 
 Paid In 
 Capital |  | Comprehensive
 
 Income |         | Retained
 Earnings
 (Deficit) |   | Accumulated
 
 Other 
 Comprehensive 
 Income |   | Total
 Shareholders
 Equity |          
|                                                                                      |  | Common
 Stock |           |        |   |                                 |  |                        
|                                                                                      |  |               |           |        |   |                                 |  |                        
|                                                                                      |  | Shares        |           | Amount |   |                                 |  |                         |         |                              
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |          
|Balance
 at January 1, 2007                                                           |  |               | 2,388,739 |        | $ | 16,023,738                      |  | $                       | 207,144 |                               |   |                                               |   | $                            | 1,147,067 |  | $ | (411,115   | ) | $ | 16,966,834 |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Surplus from
 options expense                                                         |  |               |           |        |   |                                 |  |                         | 149,008 |                               |   |                                               |   |                              |           |  |   |            |   |   | 149,008    |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Comprehensive
 Income:                                                                |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Net income                                                                            |  |               |           |        |   |                                 |  |                         |         |                               | $ | 337,023                                       |   |                              | 337,023   |  |   |            |   |   | 337,023    |  
|Unrealized gains
 on securities net of taxes of $135,135                              |  |               |           |        |   |                                 |  |                         |         |                               |   | 199,368                                       |   |                              |           |  |   | 199,368    |   |   | 199,368    |  
|Reclassification
 adjustment for gains included in net income, net of tax of $2,968   |  |               |           |        |   |                                 |  |                         |         |                               |   | (4,219                                        | ) |                              |           |  |   | (4,219     | ) |   | (4,219     | )
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Comprehensive
 Income                                                                 |  |               |           |        |   |                                 |  |                         |         |                               | $ | 532,172                                       |   |                              |           |  |   |            |   |   |            |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Balance
 at December 31, 2007                                                         |  |               | 2,388,739 |        | $ | 16,023,738                      |  | $                       | 356,152 |                               |   |                                               |   | $                            | 1,484,090 |  | $ | (215,966   | ) | $ | 17,648,014 |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Surplus from
 options expense                                                         |  |               |           |        |   |                                 |  |                         | 55,566  |                               |   |                                               |   |                              |           |  |   |            |   |   | 55,566     |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Comprehensive
 Income:                                                                |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Net income                                                                            |  |               |           |        |   |                                 |  |                         |         |                               | $ | 517,695                                       |   |                              | 517,695   |  |   |            |   |   | 517,695    |  
|Unrealized loss
 on securities net of taxes of $679,616                               |  |               |           |        |   |                                 |  |                         |         |                               |   | (965,943                                      | ) |                              |           |  |   | (965,943   | ) |   | (965,943   | )
|Reclassification
 adjustment for gains included in net
 income, net of tax of $13,910 |  |               |           |        |   |                                 |  |                         |         |                               |   | 19,770                                        |   |                              |           |  |   | 19,770     |   |   | 19,770     |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Comprehensive
 Loss                                                                   |  |               |           |        |   |                                 |  |                         |         |                               | $ | (428,478                                      | ) |                              |           |  |   |            |   |   |            |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  
|Balance
 at June 30, 2008                                                             |  |               | 2,388,739 |        | $ | 16,023,738                      |  | $                       | 411,718 |                               |   |                                               |   | $                            | 2,001,785 |  | $ | (1,162,139 | ) | $ | 17,275,102 |  
|                                                                                      |  |               |           |        |   |                                 |  |                         |         |                               |   |                                               |   |                              |           |  |   |            |   |   |            |  

The accompanying notes are an integral part
of the financial statements.

5

---



SERVICE 1ST BANCORP AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 
(unaudited)

|                                                                               |  |      |             |      |   |             |  
|------------------------------------------------------------------------------ |  | ---- | ----------- | ---- | - | ----------- | -
|                                                                               |  | 2008 |             | 2007 |  
|                                                                               |  |      |             |      |  
|Operating activities:                                                          |  |      |             |      |   |             |  
|Net income                                                                     |  | $    | 517,695     |      | $ | 296,634     |  
|Adjustments to reconcile
 net income to net cash from operating activities:    |  |      |             |      |   |             |  
|Provision for loan losses                                                      |  |      | 703,000     |      |   | 50,000      |  
|Depreciation                                                                   |  |      | 146,417     |      |   | 118,942     |  
|Amortization and accretion on securities                                       |  |      | (65,033     | )    |   | (36,488     | )
|Earnings on cash surrender value life insurance,
net                           |  |      | (68,141     | )    |   | (64,778     | )
|Stock-based compensation expense                                               |  |      | 55,566      |      |   | 106,010     |  
|Gain on sale of loans                                                          |  |      |            |      |   | (6,737      | )
|Loans originated for sale                                                      |  |      |            |      |   | (63,750     | )
|Proceeds from loan sales                                                       |  |      |            |      |   | 70,487      |  
|(Gain) Loss on sale of securities, net                                         |  |      | (36,317     | )    |   | 6,578       |  
|Decrease (increase) in accrued interest                                        |  |      | 147,431     |      |   | 17,172      |  
|Gain on sale of OREO                                                           |  |      | (190,122    | )    |   |            |  
|Increase in other assets                                                       |  |      | (2,049,107  | )    |   | (1,620,972  | )
|Increase (decrease) in accrued expenses and other
liabilities                  |  |      | 330,044     |      |   | 600,652     |  
|                                                                               |  |      |             |      |   |             |  
|Net cash provided by (used
 in) operating activities                           |  |      | (508,567    | )    |   | (526,250    | )
|                                                                               |  |      |             |      |   |             |  
|Investing activities:                                                          |  |      |             |      |   |             |  
|Purchases of securities available-for-sale                                     |  |      | (30,314,999 | )    |   | (5,339,062  | )
|Purchases of securities held-to-maturity                                       |  |      | (6,849,450  | )    |   | (7,380,003  | )
|Proceeds from sales of available-for-sale
securities                           |  |      | 5,157,578   |      |   | 3,228,767   |  
|Proceeds from sales of held-to-maturity
securities                             |  |      |            |      |   | 209,042     |  
|Proceeds from payments, maturities and calls of
available-for-sale
 securities |  |      | 30,733,922  |      |   | 10,158,779  |  
|Proceeds from payments, maturities and calls of
held-to-maturity
 securities   |  |      | 2,513,941   |      |   | 639,360     |  
|Net decrease (increase) in loans                                               |  |      | (15,167,423 | )    |   | (4,185,931  | )
|Reduction in OREO                                                              |  |      | 1,614,000   |      |   |            |  
|Certificates of deposit with other banks                                       |  |      | 104,152     |      |   | (841,750    | )
|Purchases of premises and equipment                                            |  |      | (7,931      | )    |   | (36,810     | )
|                                                                               |  |      |             |      |   |             |  
|                                                                               |  |      |             |      |   |             |  
|Net cash (used in) provided
 by investing activities                           |  |      | (12,216,210 | )    |   | (3,547,608  | )
|                                                                               |  |      |             |      |   |             |  
|Financing activities:                                                          |  |      |             |      |   |             |  
|Net (decrease) increase in demand, interest-bearing
deposits and
 savings      |  |      | (1,229,226  | )    |   | (14,163,446 | )
|Net increase in time deposits                                                  |  |      | 7,542,346   |      |   | 5,833,042   |  
|Increase in junior subordinated debts                                          |  |      |            |      |   |            |  
|Net increase in other borrowings                                               |  |      |            |      |   | 638,026     |  
|                                                                               |  |      |             |      |   |             |  
|                                                                               |  |      |             |      |   |             |  
|Net cash provided by (used
 for) financing activities                          |  |      | 6,313,120   |      |   | (7,692,378  | )
|                                                                               |  |      |             |      |   |             |  
|                                                                               |  |      |             |      |   |             |  
|Net (decrease) increase in
 cash and cash equivalents                          |  |      | (6,411,657  | )    |   | (11,766,236 | )
|Cash and cash equivalents
 at beginning of period                              |  |      | 11,289,651  |      |   | 17,160,318  |  
|                                                                               |  |      |             |      |   |             |  
|                                                                               |  |      |             |      |   |             |  
|Cash and cash equivalents
 at end of period                                    |  | $    | 4,877,994   |      | $ | 5,394,082   |  
|                                                                               |  |      |             |      |   |             |  
|                                                                               |  |      |             |      |   |             |  
|Supplemental disclosures of
 cash flow information:                            |  |      |             |      |   |             |  
|                                                                               |  |      |             |      |   |             |  
|Cash paid during the period for:                                               |  |      |             |      |   |             |  
|Interest                                                                       |  | $    | 3,107,329   |      | $ | 3,797,407   |  
|Income taxes                                                                   |  | $    |            |      | $ |            |  

The accompanying notes are an integral part
of the financial statements.

6

---



SERVICE 1ST BANCORP AND
SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  BASIS OF PRESENTATION AND MANAGEMENT
REPRESENTATION

The
accompanying unaudited consolidated financial statements of Service 1st
Bancorp (the Company) have been prepared in accordance with the instructions
to Form 10-Q and, therefore, do not include information or footnote disclosures
required by generally accepted accounting principles for complete financial
statements. For further information, refer to the financial statements and
related footnotes included in the Companys annual report on Form 10-K for the
year ended December 31, 2007. In the opinion of management, the financial
statements presented herein include all adjustments (consisting of normal
recurring accruals) necessary to present fairly, in all material respects, the
financial position of the Company as of June 30, 2008 and the Companys income
statements for the three months and six months ended June 30, 2008 and 2007,
and the statements of cash flows for the six months ended June 30, 2008 and
2007. Operating results for interim periods are not necessarily indicative of
operating results for an entire fiscal year.

The
balance sheet as of December 31, 2007, has been derived from the audited
balance sheet as of that date.

Reclassifications

Certain
reclassifications were made to prior periods presented to conform to the
current year. These reclassifications are of a normal recurring nature.

Stock-Based
Compensation

On
January 1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS No.
123R), Share-Based
Payment, which addresses the accounting for stock-based payment
transactions in which an enterprise receives employee services in exchange for
(a) equity instruments of the enterprise or (b) liabilities that are based on
the fair value of the enterprises equity instruments or that may be settled by
issuance of such equity instruments. In January 2005, the Securities and
Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 107, which
provides supplemental implementation guidance for SFAS No. 123R. SFAS No. 123R
eliminates the ability to account for stock-based compensation transactions
using the intrinsic value method under Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, and instead
generally requires that such transactions be accounted for using a
fair-value-based method. SFAS No. 123R requires the use of a valuation model to
calculate the fair value of stock-based awards. The Company has elected to use
the Black-Scholes Model for option valuation. This model incorporates various
assumptions including volatility, expected life, and interest rates. The
expected volatility is based on the historical volatility of the Companys
common stock over the most recent period commensurate with the estimated
expected life of the Companys stock options adjusted for the impact of unusual
fluctuations not reasonably expected to recur and other relevant factors. The
expected life of an award is based on historical experience and on the terms
and conditions of the stock awards granted to employees.

The assumptions used for the six-month period
ended June 30, 2008 and 2007 are as follows:

WEIGHTED AVERAGE ASSUMPTIONS FOR OPTIONS GRANTED
DURING THE PERIOD ENDED:

|                         |  |               |          |               |  |           | 
|------------------------ |  | ------------- | -------- | ------------- |  | --------- | 
|                         |  | June 30, 2008 |          | June 30, 2007 | 
|                         |  |               |          |               | 
|Expected
 Life           |  |               | 3 months |               |  | 72 months | 
|Stock
 Volatility        |  |               | 36.5%    |               |  | 75.08%    | 
|Risk free interest
 rate |  |               | 1.80%    |               |  | 4.75%     | 
|Dividend
 yield          |  |               | 0.00%    |               |  | 0.00%     | 

7

---



SERVICE 1ST BANCORP AND
SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - EARNINGS PER SHARE (EPS)

Basic
EPS excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in earnings of the entity as of June 30, 2008 and 2007. Weighted average shares
outstanding used in the computation of basic earnings per share for the three
months and the six months ended June 30, 2008 and 2007 were 2,388,739 and 2,388,739,
respectively. Weighted average shares outstanding used in the computation of
diluted earnings per share for the six months ended June 30, 2008 and 2007 were
2,401,602 and 2,530,173, respectively. Weighted average shares outstanding used
in the computation of diluted earnings per share for the three months ended
June 30, 2008 and 2007 were 2,401,602 and 2,548,089, respectively.

NOTE 3  SECURITIES

Securities
are classified in two categories and accounted for as follows: debt and equity
securities that the Company has the positive intent and ability to hold to
maturity are classified as held-to-maturity and are measured at amortized cost;
and equity securities classified as available-for-sale and are measured at fair
value, with unrealized gains and losses, net of applicable taxes reported in a
separate component of shareholders equity. Any gains or losses on sales of
investments are computed on a specific identification basis.

The
tables below reflect the composition of investment securities, amortized cost,
unrealized gains and losses and estimated fair values as of June 30, 2008.

The amortized cost or fair
values of investment securities available-for-sale at June 30, 2008 were:

|                                        |  |                 |            |                            |   |                             |  |                        |            |   |   |            | 
|--------------------------------------- |  | --------------- | ---------- | -------------------------- | - | --------------------------- |  | ---------------------- | ---------- | - | - | ---------- | 
|                                        |  | Amortized
 Cost |            | Gross 
 Unrealized 
 Gains |   | Gross 
 Unrealized 
 Losses |  | Estimated
 Fair
 Value |           
|                                        |  |                 |            |                            |   |                             |  |                        |            |   |   |            | 
|Available-for-Sale Securities:          |  |                 |            |                            |   |                             |  |                        |            |   |   |            | 
|Obligations of U.S. Government Agencies |  | $               | 14,087,406 |                            | $ | 63,478                      |  | $                      | (48,133    | ) | $ | 14,102,751 | 
|State and political subdivisions        |  |                 | 29,182,934 |                            |   | 10,331                      |  |                        | (1,048,611 | ) |   | 28,144,654 | 
|Asset backed-securities                 |  |                 | 8,289,558  |                            |   |                            |  |                        | (477,885   | ) |   | 7,811,673  | 
|Mortgage backed-securities              |  |                 | 24,344,844 |                            |   | 36,141                      |  |                        | (236,248   | ) |   | 24,144,737 | 
|Preferred Stock                         |  |                 | 1,530,000  |                            |   |                            |  |                        | (43,052    | ) |   | 1,486,948  | 
|Short-term mutual funds                 |  |                 | 197,363    |                            |   |                            |  |                        | (33,136    | ) |   | 164,227    | 
|                                        |  |                 |            |                            |   |                             |  |                        |            |   |   |            | 
|                                        |  | $               | 77,632,105 |                            | $ | 109,950                     |  | $                      | (1,887,065 | ) | $ | 75,854,990 | 
|                                        |  |                 |            |                            |   |                             |  |                        |            |   |   |            | 

The amortized cost or fair values of
investment securities held-to-maturity at June 30, 2008 were:

|                                        |  |                 |            |                         |   |                          |  |                        |          |   |   |            | 
|--------------------------------------- |  | --------------- | ---------- | ----------------------- | - | ------------------------ |  | ---------------------- | -------- | - | - | ---------- | 
|                                        |  | Amortized
 Cost |            | Gross Unrealized  Gains |   | Gross Unrealized  Losses |  | Estimated
 Fair
 Value |         
|                                        |  |                
|Held-to-Maturity Securities:            |  |                 |            |                         |   |                          |  |                        |          |   |   |            | 
|Obligations of U.S. Government Agencies |  | $               | 4,248,022  |                         | $ |                         |  | $                      | (155,491 | ) | $ | 4,092,531  | 
|State and political subdivisions        |  |                 | 5,240,327  |                         |   | 119,689                  |  |                        | (12,909  | ) |   | 5,347,107  | 
|Asset backed-securities                 |  |                 | 7,951,620  |                         |   |                         |  |                        |         |   |   | 7,951,620  | 
|Mortgage backed-securities              |  |                 | 148,626    |                         |   | 2,567                    |  |                        | (57      | ) |   | 151,136    | 
|                                        |  |                 |            |                         |   |                          |  |                        |          |   |   |            | 
|                                        |  | $               | 17,588,595 |                         | $ | 122,256                  |  | $                      | (168,457 | ) | $ | 17,542,394 | 
|                                        |  |                 |            |                         |   |                          |  |                        |          |   |   |            | 

Securities
carried at approximately $57,586,000 were pledged to secure deposits of public
funds and borrowing arrangements.

8

---



SERVICE 1ST BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3  SECURITIES (continued)

The
tables below reflect the composition of investment securities, amortized cost,
unrealized gains and losses and estimated fair values as of December 31, 2007.

|                                 |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|-------------------------------- |  | ------------- | ---------- | -------------------- | - | --------------------- |  | ------------------ | -------- | - | - | ---------- | 
|                                 |  | AmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFairValue |         
|                                 |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|Available-for-Sale
 Securities:  |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|U.S. Government Agencies         |  | $             | 35,211,652 |                      | $ | 83,394                |  | $                  | (53,615  | ) | $ | 35,241,431 | 
|State and political
subdivisions |  |               | 23,520,119 |                      |   | 24,390                |  |                    | (249,204 | ) |   | 23,295,305 | 
|Asset backed-securities          |  |               | 7,173,180  |                      |   | 1,274                 |  |                    | (77,244  | ) |   | 7,097,210  | 
|Mortgage backed-securities       |  |               | 14,368,973 |                      |   | 47,170                |  |                    | (128,003 | ) |   | 14,288,140 | 
|Agency preferred stock           |  |               | 2,530,000  |                      |   |                      |  |                    | (13,767  | ) |   | 2,516,233  | 
|Short-term mutual funds          |  |               | 500,000    |                      |   |                      |  |                    | (4,111   | ) |   | 495,889    | 
|                                 |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|                                 |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|                                 |  | $             | 83,303,924 |                      | $ | 156,228               |  | $                  | (525,944 | ) | $ | 82,934,208 | 
|                                 |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|                                 |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|Held-to-Maturity
 Securities:    |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|U.S. Government Agencies         |  | $             | 3,875,767  |                      | $ | 353                   |  | $                  | (96,834  | ) | $ | 3,779,286  | 
|State and political
subdivisions |  |               | 5,123,990  |                      |   | 18,549                |  |                    | (383,769 | ) |   | 4,758,770  | 
|Asset backed-securities          |  |               | 3,898,115  |                      |   | 14,070                |  |                    | (83,352  | ) |   | 3,828,833  | 
|Mortgage backed-securities       |  |               | 163,604    |                      |   | 3,202                 |  |                    | (6       | ) |   | 166,800    | 
|                                 |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|                                 |  |               |            |                      |   |                       |  |                    |          |   |   |            | 
|                                 |  | $             | 13,061,476 |                      | $ | 36,174                |  | $                  | (563,961 | ) | $ | 12,533,689 | 
|                                 |  |               |            |                      |   |                       |  |                    |          |   |   |            | 

Securities
carried at approximately $42,672,000 were pledged to secure deposits of public
funds and borrowing arrangements.

9

---



NOTE 4 - LOANS

Service
1st Banks customers are primarily located in San Joaquin County. At
June 30, 2008, approximately 59.2% of the Banks loans are for real estate and
construction loans and approximately 20.9% of the Banks loans are for general
commercial users including professional, retail, and small businesses. Consumer
loans make up approximately 8.2% of the loan portfolio, leases make up 6.3% of
the loan portfolio, with agricultural loans making up the remaining 5.4%.
Generally, real estate loans are collateralized by real property while
commercial and other loans are collateralized by funds on deposit, business or
personal assets. Repayment is generally expected from the sale of property for
real estate loans and cash flows of the borrowers for other loans.

Major classifications of loans were:

|                                         |  |           |             |            |   |             |  
|---------------------------------------- |  | --------- | ----------- | ---------- | - | ----------- | -
|                                         |  | 6/30/2008 |             | 12/31/2007 |  
|                                         |  |           |             |            |  
|Construction and land
 development loans |  | $         | 24,740,956  |            | $ | 29,541,045  |  
|Real estate loans                        |  |           | 51,077,667  |            |   | 45,002,196  |  
|Commercial loans                         |  |           | 26,785,952  |            |   | 23,029,593  |  
|Leases                                   |  |           | 8,120,569   |            |   | 8,560,166   |  
|Agricultural loans                       |  |           | 6,934,711   |            |   | 4,713,710   |  
|Consumer loans                           |  |           | 10,459,414  |            |   | 4,041,061   |  
|                                         |  |           |             |            |   |             |  
|                                         |  |           | 128,119,269 |            |   | 114,887,771 |  
|Deferred loan fees and
 costs            |  |           | (44,618     | )          |   | (160,557    | )
|Allowance for loan losses                |  |           | (2,055,064  | )          |   | (1,558,050  | )
|                                         |  |           |             |            |   |             |  
|                                         |  |           |             |            |   |             |  
|Total net loans                          |  | $         | 126,019,587 |            | $ | 113,169,164 |  
|                                         |  |           |             |            |   |             |  

NOTE 5  Pending Acquisition

On
May 28, 2008, Central Valley Community Bancorp and Service 1st Bancorp,
headquartered in Tracy, California entered into a Reorganization Agreement and
Plan of Merger. Under the terms of the agreement, Service 1st Bancorp will
merge with and into Central Valley Community Bancorp (the Merger), and the
Service 1st Bancorp subsidiary, Service 1st Bank, with branches in Tracy,
Stockton and Lodi, will merge with and into Central Valley Community Bancorps
subsidiary, Central Valley Community Bank (the Bank Merger), subject to
receipt of required regulatory approvals and approvals by both companies
shareholders.

The
California Department of Financial Institutions approved the Bank Merger on
August 6, 2008. An application for approval is currently pending with the
Federal Deposit Insurance Corporation. Notice to the Board of Governors of the
Federal Reserve System is planned to be given in the near future. The dates of
shareholder special meetings have not yet been set. The Merger and Bank Merger
are currently projected to be completed in the fourth quarter of 2008.

Under
the merger agreement, Service 1st Bancorp shareholders will receive in exchange
for each share of Bancorp common stock held, cash in the amount of $2.50 and
shares of Central Valley Community Bancorp common stock based on a exchange
ratio of 0.681818, representing an aggregate cash amount of $5,971,848 and an
aggregate share amount of 1,628,686, subject to certain adjustments that will
be finalized prior to completion of the Merger, and subject to a cash holdback
of $3,500,000, approximately $1.33 per share, to be deposited into an escrow
account pending the outcome of certain litigation matters.

10

---



|        |                                                                         
|------- | ------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS
|        | OF OPERATIONS                                                           

CAUTIONARY STATEMENTS
REGARDING FORWARD-LOOKING STATEMENTS

Certain
matters discussed or incorporated by reference in this Quarterly Report on Form
10-Q including, but not limited to, matters described in Item 2 - Managements
Discussion and Analysis of Financial Condition and Results of Operations, are
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, Section 27A of the Securities Act
of 1933, as amended, and subject to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements may
contain words related to future projections including, but not limited to,
words such as believe, expect, anticipate, intend, may, will,
should, could, would, and variations of those words and similar words
that are subject to risks, uncertainties and other factors that could cause
actual results to differ materially from those projected. Factors that could cause or
contribute to such differences include, but are not limited to, the following:
(1) variances in the actual versus projected growth in assets; (2) return on
assets; (3) loan and lease losses; (4) expenses; (5) changes in the interest
rate environment including interest rates charged on loans, earned on
securities investments and paid on deposits; (6) competition effects; (7) fee
and other noninterest income earned; (8) general economic conditions
nationally, regionally, and in the operating market areas of the Company and
its subsidiaries; (9) changes in the regulatory environment; (10) changes in
business conditions and inflation; (11) changes in securities markets; (12) data
processing problems; (13) a decline in real estate values in the Companys
operating market areas; (14) the effects of earthquakes, floods, fires and
other natural disasters; (15) terrorism, the threat of terrorism or the impact
of the current military conflicts in Afghanistan and Iraq and the conduct of
the war on terrorism by the United States and its allies, as well as other factors. The factors set forth under Item
1A-Risk Factors in the Annual Report on Form 10-K for the year ended December
31, 2007 and other cautionary statements and information set forth in
this quarterly report on Form 10-Q should be carefully considered and
understood as being applicable to all related forward-looking statements
contained in this report, when evaluating the business prospects of the Company
and its subsidiaries.

Forward-looking
statements are not guarantees of performance. By their nature, they involve
risks, uncertainties and assumptions. The future results and shareholder values
may differ significantly from those expressed in these forward-looking
statements. You are cautioned not to put undue reliance on any forward-looking
statement. Any such statement speaks only as of the date of this report, and in
the case of any documents that may be incorporated by reference, as of the date
of those documents. We do not undertake any obligation to update or release any
revisions to any forward-looking statements, to report any new information,
future event or other circumstances after the date of this report or to reflect
the occurrence of unanticipated events, except as required by law. However,
your attention is directed to any further disclosures made on related subjects
in our subsequent reports filed with the Securities and Exchange Commission on
Forms 10-K, 10-Q and 8-K.

BUSINESS ORGANIZATION

Service
1st Bancorp (the Company) is a California corporation and was
incorporated on January 23, 2004 to act as a holding company for Service 1st
Bank (the Bank). The Bank became a subsidiary of the Company effective June
26, 2004. As of June 30, 2008, the Company maintained its administrative office
in Tracy, San Joaquin County and the Bank operated three full-service offices
in the cities of Stockton, Tracy, and Lodi in San Joaquin County. The Bank
offers a full range of commercial banking services to individuals, small and
medium-sized businesses, municipalities and professionals in San Joaquin County
and the surrounding communities. On August 18, 2006, the Company established a
new subsidiary, Charter Services Group, Inc. (Charter). Charter assists new
(de novo) banks in filing applications for regulatory approval to organize and
to commence business as a commercial bank. Charter also provides consulting
services to new banks including formulating policies and providing other
ongoing services.

We
recently entered into a Reorganization Agreement and Plan of Merger with
Central Valley Community Bancorp. Applications by Central Valley Bancorp for
prior approval of the merger by the Federal Deposit Insurance Corporation and
the California Department of Financial Institutions were mailed on July 2,
2008. On August 6, 2008, the Bank Merger was approved by the California
Department of Financial Institutions. The merger application filed with the
Federal Deposit Insurance Corporation is still pending. Notice to the Board of
Governors of the Federal Reserve System is planned to be given in the near
future. The dates of shareholders special meetings have not yet been set.
The Merger and Bank Merger are currently projected to be completed in
the fourth quarter of 2008.

11

---



The
following analysis is designed to provide a more complete understanding of the
material changes and trends related to the Companys financial condition,
results of operations, cash flows, and capital resources. This discussion
should be read in conjunction with the audited financial statements included in
Item 1 of the Annual Report on Form 10-K for the year ended December 31, 2007.

CRITICAL ACCOUNTING POLICIES

Use of Estimates in the Preparation of
Financial Statements

The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Companys
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Note 1 to the financial
statements describes the significant accounting policies used in the
preparation of the financial statements. A critical accounting policy is
defined as one that is both material to the presentation of the Companys
financial statements and requires management to make difficult, subjective or
complex judgments that could have a material effect on the Companys financial
condition and results of operations. Management believes that the matters
described below are critical accounting policies.

Allowance for Loan Losses

The
allowance for loan losses is established through a provision for loan losses
charged to expenses. Loans are charged against the allowance for loan losses
when management believes that the collectibility of the principal is unlikely.
The allowance is an amount that management believes will be adequate to absorb
losses inherent in existing loans and commitments to extend credit, based on
evaluations of collectibility and prior loss experience of loans and
commitments to extend credit. The evaluations take into consideration such
factors as changes in the nature and volume of the portfolio, overall portfolio
quality, loan concentration, specific problem loans, commitments, and current
economic conditions that may affect the borrowers ability to pay.

Summary of Financial Condition

The
Companys total consolidated assets increased 2.7% from December 31, 2007 to
June 30, 2008. As of June 30, 2008, total consolidated assets were $237,346,195
compared to $231,075,943 as of December 31, 2007, and $220,099,256 at June 30,
2007. The increase in total assets from December 31, 2007 was primarily due to
an increase in loans.

Total
net loans at June 30, 2008 were $126,019,587 compared $113,169,164 at December 31, 2007 and
$117,644,105 at June 30, 2007. This represents an increase in net loans of
11.4% from December 31, 2007.

Cash
and due from banks declined from $6,636,751 at December 31, 2007 to $3,166,238
at June 30, 2008. The reduction in cash was used to fund loan originations.

Total
deposits were $208,718,766 at June 30, 2008 compared to $202,405,646 at
December 31, 2007 and $191,624,687 at June 30, 2007. Noninterest-bearing DDA
accounts decreased from $26,697,543 at December 31, 2007 to $25,388,301 at June
30, 2008. Money market, NOW, and savings accounts increased to $86,385,546 at
June 30, 2008 from $86,305,530 at December 31, 2007. Time deposits under
$100,000 increased from $69,781,685 at December 31, 2007 to $70,154,339 at June
30, 2008. Time deposits $100,000 and over increased from $19,620,888 at
December 31, 2007 to $26,790,580 at June 30, 2008.

Other
borrowings at June 30, 2008 and December 31, 2007 were $9,155,000. The
borrowings consist of $4,000,000 from the Federal Home Loan Bank of San
Francisco and $5,155,000 of Trust Preferred Securities.

12

---



Results of Operations

Net
income for the three months ended June 30, 2008 was $358,430 compared to
$183,495 for 2007. The increase in net income for the three months ended June
30, 2008 was from an increase in net interest income, a reduction in operating
expenses and a tax benefit of $107,729 for the second quarter of 2008 compared
to $54,880 of tax expense for the same quarter in 2007. Net income for the six
months ended June 30, 2008 was $517,695 compared to $296,634 for June 30, 2007,
primarily as a result of the Companys investment in tax free municipal
securities which has reduced its effective income tax rate. For the six months
ended June 30, 2008, the Company had tax free income of $758,016 compared to
$377,076 for the same period in 2007.

Basic
earnings per share for the three months ended June 30, 2008 was $0.15 per share
compared to $0.07 for the three months ended June 30, 2007. Diluted earnings
per share for the three months ended June 30, 2008 and 2007 were $0.15 and
$0.07, respectively. Basic earnings per share for the six months ended June 30,
2008 were $0.22 per share compared to $0.12 for 2007. Diluted earnings per
share for the six months ended June 30, 2008 were $0.22 compared to $0.12 for
2007.

13

---



Net Interest Income and Net Interest Margin

Net
interest income, the primary component of the net earnings of a financial
institution, refers to the difference between the interest earned on loans and
investments and the interest paid on deposits and borrowings. Please see the
tables of average balance sheet and net interest income below.

The
following table sets forth average balance sheet information, interest income
and expense, average yields and rates, and net interest income and margin for
the three months ended June 30, 2008 and 2007:

|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|---------------------------------------------------------- |  | -------------- | ----------- | -------------- | - | ------------------------ |  | -------------- | - | -------------- | ----------- | ------------------------ | - | --------- |  | ---- | -
|                                                           |  | June 30, 2008  |             | June 30, 2007  |  
|                                                           |  |                |             |                |  
|                                                           |  | AverageBalance |             | Income/Expense |   | AverageYield orRate Paid |  | AverageBalance |   | Income/Expense |             | AverageYield orRate Paid |  
|                                                           |  |                |             |                |  
|Interest-earning assets:                                   |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Interest-bearing deposits                                  |  | $              | 254,369     |                | $ | 1,907                    |  | 3.01           | % | $              | 1,067,091   |                          | $ | 13,839    |  | 5.20 | %
|Investments                                                |  |                | 95,488,737  |                |   | 1,210,077                |  | 5.08           | % |                | 84,791,452  |                          |   | 1,034,262 |  | 4.89 | %
|Federal funds sold                                         |  |                | 5,345,344   |                |   | 29,836                   |  | 2.24           | % |                | 722,318     |                          |   | 9,403     |  | 5.22 | %
|Loans (1) (2)                                              |  |                | 129,085,796 |                |   | 2,014,706                |  | 6.26           | % |                | 116,915,548 |                          |   | 2,612,211 |  | 8.96 | %
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total interest-earning assets                              |  |                | 230,174,246 |                |   | 3,256,526                |  | 5.67           | % |                | 203,496,409 |                          |   | 3,669,715 |  | 7.23 | %
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Allowance for possible loan losses                         |  |                | (1,894,818  | )              |   |                          |  |                |   |                | (1,438,941  | )                        |   |           |  |      |  
|Cash and due from banks                                    |  |                | 3,405,563   |                |   |                          |  |                |   |                | 3,319,526   |                          |   |           |  |      |  
|Bank premises and equipment                                |  |                | 1,210,823   |                |   |                          |  |                |   |                | 1,367,060   |                          |   |           |  |      |  
|Accrued interest receivable                                |  |                | 1,448,093   |                |   |                          |  |                |   |                | 1,255,897   |                          |   |           |  |      |  
|Other assets                                               |  |                | 9,232,484   |                |   |                          |  |                |   |                | 6,855,623   |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total assets                                               |  | $              | 243,576,391 |                |   |                          |  |                |   | $              | 214,855,574 |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|                                                          
|Interest-bearing liabilities:                              |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Demand deposits                                            |  | $              | 58,290,098  |                |   | 402,615                  |  | 2.77           | % | $              | 57,930,325  |                          |   | 622,763   |  | 4.31 | %
|Savings and money market accounts                          |  |                | 32,671,137  |                |   | 169,547                  |  | 2.08           | % |                | 25,396,563  |                          |   | 181,553   |  | 2.87 | %
|Time deposits                                              |  |                | 98,668,931  |                |   | 718,819                  |  | 2.92           | % |                | 77,017,947  |                          |   | 945,692   |  | 4.93 | %
|Other borrowings                                           |  |                | 9,419,726   |                |   | 91,499                   |  | 3.90           | % |                | 11,530,178  |                          |   | 183,957   |  | 6.40 | %
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total interest-bearing liabilities                         |  |                | 199,049,892 |                |   | 1,382,480                |  | 2.79           | % |                | 171,875,013 |                          |   | 1,933,965 |  | 4.51 | %
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Non-interest bearing demand deposits                       |  |                | 24,761,652  |                |   |                          |  |                |   |                | 23,688,288  |                          |   |           |  |      |  
|Other liabilities                                          |  |                | 2,054,081   |                |   |                          |  |                |   |                | 2,071,877   |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total liabilities                                          |  |                | 225,865,625 |                |   |                          |  |                |   |                | 197,635,178 |                          |   |           |  |      |  
|Shareholders equity                                       |  |                | 17,710,766  |                |   |                          |  |                |   |                | 17,220,396  |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total liabilities and shareholders
equity                 |  | $              | 243,576,391 |                |   |                          |  |                |   | $              | 214,855,574 |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Net interest income                                        |  |                |             |                | $ | 1,874,046                |  |                |   |                |             |                          | $ | 1,735,750 |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Net interest margin on average interest earning assets (3) |  |                |             |                |   |                          |  | 3.25           | % |                |             |                          |   |           |  | 3.42 | %

|                                                               |                                                                                                                                                     
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|1.                                                             | Average loan balances
 include average deferred loan fees of $128,422 and $250,542 for the three
 months ended June 30, 2008 and 2007, respectively.
|                                                               |                                                                                                                                                     
|2.                                                             | Interest on loans includes
 fees of $3,703 and $59,461 for the three month periods ended June 30, 2008
 and 2007, respectively.                     
|                                                               |                                                                                                                                                     
|3.                                                             | Net interest margin is
 computed by dividing net interest income by total average earning assets.                                                   
|                                                               |                                                                                                                                                     
|All average balances have
 been computed using daily balances.

14

---



The following table sets forth average balance
sheet information, interest income and expense, average yields and rates, and
net interest income and margin for the six months ended June 30, 2008 and 2007.

|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|---------------------------------------------------------- |  | -------------- | ----------- | -------------- | - | ------------------------ |  | -------------- | - | -------------- | ----------- | ------------------------ | - | --------- |  | ---- | -
|                                                           |  | June 30, 2008  |             | June 30, 2007  |  
|                                                           |  |                |             |                |  
|                                                           |  | AverageBalance |             | Income/Expense |   | AverageYield orRate Paid |  | AverageBalance |   | Income/Expense |             | AverageYield orRate Paid |  
|                                                           |  |                |             |                |  
|Interest-earning assets:                                   |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Interest-bearing deposits                                  |  | $              | 307,914     |                | $ | 5,980                    |  | 3.91           | % | $              | 1,213,934   |                          | $ | 31,794    |  | 5.28 | %
|Investments                                                |  |                | 93,916,274  |                |   | 2,422,186                |  | 5.19           | % |                | 85,858,789  |                          |   | 2,054,072 |  | 4.82 | %
|Federal funds sold                                         |  |                | 6,377,139   |                |   | 93,574                   |  | 2.95           | % |                | 2,376,065   |                          |   | 66,399    |  | 5.64 | %
|Loans (1) (2)                                              |  |                | 126,093,814 |                |   | 4,363,945                |  | 6.96           | % |                | 115,324,163 |                          |   | 5,131,388 |  | 8.97 | %
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total interest-earning assets                              |  |                | 226,695,141 |                |   | 6,885,685                |  | 6.11           | % |                | 204,772,951 |                          |   | 7,283,653 |  | 7.17 | %
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Allowance for loan losses                                  |  |                | (1,739,577  | )              |   |                          |  |                |   |                | (1,434,023  | )                        |   |           |  |      |  
|Cash and due from banks                                    |  |                | 4,360,961   |                |   |                          |  |                |   |                | 3,640,892   |                          |   |           |  |      |  
|Bank premises and equipment                                |  |                | 1,245,378   |                |   |                          |  |                |   |                | 1,388,698   |                          |   |           |  |      |  
|Accrued interest receivable                                |  |                | 1,317,710   |                |   |                          |  |                |   |                | 1,238,039   |                          |   |           |  |      |  
|Other assets                                               |  |                | 8,871,441   |                |   |                          |  |                |   |                | 6,749,907   |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total assets                                               |  | $              | 240,751,054 |                |   |                          |  |                |   | $              | 216,356,464 |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|                                                          
|Interest-bearing
 liabilities:                             |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Demand deposits                                            |  | $              | 58,369,369  |                |   | 927,563                  |  | 3.20           | % | $              | 57,620,788  |                          |   | 1,217,904 |  | 4.26 | %
|Savings and money market
 accounts                         |  |                | 32,009,326  |                |   | 371,235                  |  | 2.33           | % |                | 27,154,165  |                          |   | 402,194   |  | 2.99 | %
|Time deposits                                              |  |                | 96,518,117  |                |   | 1,635,992                |  | 3.41           | % |                | 77,617,673  |                          |   | 1,893,223 |  | 4.92 | %
|Other borrowings                                           |  |                | 9,287,363   |                |   | 218,137                  |  | 4.72           | % |                | 10,390,026  |                          |   | 315,291   |  | 6.12 | %
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total interest-bearing liabilities                         |  |                | 196,184,175 |                |   | 3,152,927                |  | 3.23           | % |                | 172,782,652 |                          |   | 3,828,612 |  | 4.47 | %
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Non-interest bearing demand
 deposits                      |  |                | 25,090,431  |                |   |                          |  |                |   |                | 24,471,932  |                          |   |           |  |      |  
|Other liabilities                                          |  |                | 1,750,799   |                |   |                          |  |                |   |                | 1,889,253   |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total liabilities                                          |  |                | 223,025,405 |                |   |                          |  |                |   |                | 199,143,837 |                          |   |           |  |      |  
|Shareholders equity                                       |  |                | 17,725,649  |                |   |                          |  |                |   |                | 17,212,627  |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Total liabilities and shareholders
equity                 |  | $              | 240,751,054 |                |   |                          |  |                |   | $              | 216,356,464 |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Net interest income                                        |  |                |             |                | $ | 3,732,758                |  |                |   |                |             |                          | $ | 3,455,041 |  |      |  
|                                                           |  |                |             |                |   |                          |  |                |   |                |             |                          |   |           |  |      |  
|Net interest margin on average interest earning assets (3) |  |                |             |                |   |                          |  | 3.31           | % |                |             |                          |   |           |  | 3.40 | %

|                                                               |                                                                                                                                                   
|-------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------
|1.                                                             | Average loan balances
 include average deferred loan fees of $112,958 and $195,791 for the six
 months ended June 30, 2008 and 2007, respectively.
|                                                               |                                                                                                                                                   
|2.                                                             | Interest on loans includes
 fees of $41,600 and $122,309 for the six months ended June 30, 2008 and 2007, respectively.                           
|                                                               |                                                                                                                                                   
|3.                                                             | Net interest margin is
 computed by dividing net interest income by total average earning assets.                                                 
|                                                               |                                                                                                                                                   
|All average
 balances have been computed using daily balances.

15

---



Net
interest income for the three months ended June 30, 2008 was $1,874,046
compared to $1,735,750 for 2007. Net interest income for the six months ended
June 30, 2008 was $3,732,758 compared to $3,455,041for 2007. Average
interest-earning assets for the three months ended June 30, 2008 were
$230,174,246 compared to $203,496,409 during the same three months of 2007. The
Federal Reserve started lowering interest rates beginning in September of 2007.
The prime rate has dropped from 8.25% in September 2007 to 5.00% at June 30,
2008. As a result of the Federal Reserves action and an increase in non-accrual
loans, the yield earned on average interest-earning assets during the second
quarter of 2008 was 5.67% compared to 7.23% during the same quarter of 2007.
The yield earned on average interest-earning assets during the six months ended
June 30, 2008 was 6.11% compared to 7.17% during the same period of 2007. At
June 30, 2008, the Bank had $11,070,038 of loans on non-accrual, which reduced
the yield on interest-earning assets for 2008. The non-accrual loans at June
30, 2007 and December 31, 2007 were $356,042 and $2,006,029, respectively. The
average rate paid on interest bearing-liabilities decreased from 4.51% for the
second quarter of 2007 to 2.79% during the second quarter of 2008. The average
rate paid on interest bearing-liabilities decreased from 4.47% for the six
months ended June 30, 2007 to 3.32% during the first six months of 2008.

Allowance and Provision for Loan Losses

The
Company assesses and manages credit risk on an ongoing basis through stringent
credit review and approval policies, extensive internal monitoring, and
established formal lending policies. Additionally, the Bank contracts with an
outside source to periodically review the existing loan portfolio.

Management
believes its ability to identify and assess risk and return characteristics of
the Companys loan portfolio is critical for profitability and growth.
Management strives to reduce credit losses by continuing its emphasis on credit
quality in the loan approval process, active credit administration, and regular
monitoring. Management has implemented a loan review and grading system that
functions to continually assess the credit risk inherent in the loan portfolio.

In
extending credit and commitments to borrowers, the Bank generally requires
collateral and/or guarantees as security. The repayment of such loans is
expected to come from cash flows or from proceeds from the sale of selected
assets of the borrowers. The Banks requirement for collateral and/or
guarantees is determined on a case-by-case basis in connection with
managements evaluation of the creditworthiness of the borrower. Collateral
held varies, but may include accounts receivable, inventory, property, plant
and equipment, income-producing properties, residences, and other real
property.

Construction
loans and other real estate secured loans comprised 59.2% of total loans
outstanding at June 30, 2008. Although management believes such loans have no
more than the normal risk of collectibility, a substantial decline in the
economy in general, or a decline in real estate values in the Companys primary
operating market areas in particular, could have an adverse impact on the
collectibility of such loans. In addition, such an occurrence could result in
an increase in loan losses and an increase in the provision for loan losses,
which could adversely affect the Companys future prospects, results of
operations, overall profitability, and the market price of the Companys common
stock.

The
provision for loan losses for the three months ended June 30, 2008 was $400,000
compared to $50,000 during the same quarter of 2007. The provision for loan
losses for the six months ended June 30, 2008 was $703,000 compared to $50,000
during the same quarter of 2007. The increase in loan loss provision for 2008
primarily represents reserves for loans that were placed on non-accrual. At
June 30, 2008, the allowance for loan losses was $2,055,064 compared to $1,558,050 at December 31, 2007 and
$1,479,050 at June 30,
2007. The ratio of allowance for loan losses to gross loans was 1.60% at June
30, 2008 compared to 1.36% at December 31, 2007 and 1.24% at June 30, 2007. The
allowance for loan losses is adjusted by charges to income and decreased by
charge-offs (net of recoveries). Managements periodic evaluation of the
adequacy of the allowance is based on past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrowers ability to repay, the estimated value of any underlying collateral,
and current economic conditions. Additional provisions will be added as new
loans are placed on the books in an amount necessary to support the risks
inherent in the loan portfolio.

16

---



The
following table summarizes the changes in the allowances for loan losses
arising from loans charged-off, recoveries on loans previously charged-off, and
additions to the allowance which have been charged to operating expenses and
certain ratios relating to the allowance for loan losses.

|                                                                           |  |                                |             |      |   |             |  
|-------------------------------------------------------------------------- |  | ------------------------------ | ----------- | ---- | - | ----------- | -
|                                                                           |  | For the six months ended June, |            
|                                                                           |  | 2008                           |             | 2007 |  
|                                                                           |  |                                |             |      |  
|Outstanding Loans:                                                         |  |                                |             |      |   |             |  
|Average for the Period                                                     |  | $                              | 122,481,672 |      | $ | 115,324,163 |  
|End of the Period                                                          |  |                                | 128,119,269 |      |   | 119,275,675 |  
|Allowance For Loan Losses:                                                 |  |                                |             |      |   |             |  
|Balance at Beginning of Year                                               |  |                                | 1,558,050   |      |   | 1,429,050   |  
|Actual Charge-Offs:                                                        |  |                                |             |      |   |             |  
|Commercial                                                                 |  |                                | (215,270    | )    |   |            |  
|Consumer                                                                   |  |                                |            |      |   |            |  
|Real Estate                                                                |  |                                |            |      |   |            |  
|                                                                           |  |                                |             |      |   |             |  
|Total Charge-Offs                                                          |  |                                | (215,270    | )    |   |            |  
|                                                                           |  |                                |             |      |   |             |  
|                                                                           |  |                                |             |      |   |             |  
|Less Recoveries:                                                           |  |                                |             |      |   |             |  
|Commercial                                                                 |  |                                | 9,284       |      |   |            |  
|Consumer                                                                   |  |                                |            |      |   |            |  
|Real Estate                                                                |  |                                |            |      |   |            |  
|                                                                           |  |                                |             |      |   |             |  
|Total Recoveries                                                           |  |                                | 9,284       |      |   |            |  
|                                                                           |  |                                |             |      |   |             |  
|Net Loans Charged-Off (Recoveries)                                         |  |                                | (205,986    | )    |   |            |  
|Provision for Loan Losses                                                  |  |                                | 703,000     |      |   | 50,000      |  
|                                                                           |  |                                |             |      |   |             |  
|Balance at End of Period                                                   |  | $                              | 2,055,064   |      | $ | 1,479,050   |  
|                                                                           |  |                                |             |      |   |             |  
|Ratios:                                                                    |  |                                |             |      |   |             |  
|Net Loans Charged-Off (Recoveries) to Average
 Loans                       |  |                                | 0.17        | %    |   | 0.00        | %
|                                                                           |  |                                |             |      |   |             |  
|Allowance for Loan Losses to Total Loans                                   |  |                                | 1.60        | %    |   | 1.24        | %
|                                                                           |  |                                |             |      |   |             |  
|Net Loans Charged-Off (Recoveries) to Beginning
 Allowance for Loan Losses |  |                                | 13.22       | %    |   | 0.00        | %
|                                                                           |  |                                |             |      |   |             |  
|Net Loans Charged-Off (Recoveries) to Provision
 for Loan Losses           |  |                                | 29.30       | %    |   | 0.00        | %
|                                                                           |  |                                |             |      |   |             |  
|Allowance for Loan Losses to Nonperforming
Loans                           |  |                                | 18.56       | %    |   | 417.17      | %

Nonaccrual Loans, Loans Past Due 90 Days and OREO

Management
generally places loans on nonaccrual status when they become 90 days past due,
unless the loan is well secured and in the process of collection. Loans are
charged off when, in the opinion of management, collection appears unlikely.
There were nonaccrual loans of $11,070,038 at June 30, 2008, $356,042 at June
30, 2007, and $2,006,029 at December 31, 2007.

At
June 30, 2008, there were loans totaling $11,070,038 that were considered
impaired or troubled debt restructurings compared to $356,042 at June 30, 2007
and $2,006,029 at December
31, 2007. The increase in impaired loans was primarily as a result of three
large loans. The Bank filed a notice of default on May 24, 2008 for a borrower
on a loan in connection with a commercial RV resort in the amount of $4,314,926
and placed the loan on nonaccrual. A lawsuit was filed in May 2008 naming the
Bank as a co-defendant related to its participation on a hotel
loan. The outstanding balance on the loan totaling $3,486,181 was placed on
nonaccrual in June 2008. A borrower on a land development and construction loan
notified the Bank during the second quarter of 2008 that it would have
difficulty meeting its loan obligation. The Bank and the borrower entered into
a workout plan and the Bank placed the loan on nonaccrual. The loans were
placed on nonaccrual to defer future income recognition until the delinquent
payments have been received. During the first quarter of 2008, the Bank
acquired property through foreclosure on a delinquent loan. The book value of
the foreclosed property was $1,614,000. During the second quarter of 2008, the
Bank sold this property and received net proceeds of $1,804,122. The gain for
this property was $190,122.

17

---



There
were no loan concentrations in excess of 10% of total loans not otherwise
disclosed as a category of loans as of June 30, 2008 or December 31, 2007.
Management is not aware of any potential problem loans, which were accruing and
current at June 30, 2008 or December 31, 2007, where serious doubt exists as to
the ability of the borrower to comply with the present repayment terms. There
was no other real estate owned at June 30, 2008 and December 31, 2007.

Other Income

Other
income for the three months ended June 30, 2008 was $385,735 compared to
$333,059 for the same period during 2007. Other income for the six months ended
June 30, 2008 was $542,617 compared to $538,236 for the same period during
2007. The Bank offers fixed rate commercial real estate loans through a third
party lender. The Bank receives fees for packaging the loans provided to the
third party lender. The loans are funded by and become assets of the third
party lender. The fees on such loans for the three months ended June 30, 2008
were $0 compared to $174,970 for the same quarter in 2007. The fees on such
loans for the six months ended June 30, 2008 were $0 compared to $211,870 for
the same period in 2007. Due to a slowdown in the commercial real estate
market, the Bank has not funded any loans through a third party lender in 2008.
The Bank originates loans through various government guarantee programs. The
guaranteed portion of these loans can be sold in the secondary market. Gains on
loans sold in the secondary market and the fees for servicing of these loans
for the three months ended June 30, 2008 were $9,998 compared to $12,970 during
the same period in 2007. Gains on loans sold in the secondary market and the
fees for servicing of these loans for the six months ended June 30, 2008 were
$20,379 compared to $34,814 during the same period in 2007.

Other Expense

Salaries
and employee benefits for the three months ended June 30, 2008 were $851,619
compared to $1,070,054 for the three months ended June 30, 2007. The reduction
in salaries and employee benefits was from a reduction of 8 employees through
attrition and layoffs. Salaries and employee benefits for the six months ended
June 30, 2008 were $1,650,870 compared to $2,089,275 for the six months ended
June 30, 2007. The decline is due to a reduction in employees. At June 30, 2008
there were 36 employees compared to 49 at June 30, 2007.

Occupancy
and equipment expense for the three months ended June 30, 2008 was $234,485
compared to $249,217 for the same period of 2007. Occupancy and equipment
expense for the six months ended June 30, 2008 was $479,356 compared to
$488,931 for the same period of 2007.

Data
processing and other professional fees expense was $198,764 for the three
months ended June 30, 2008 compared to $147,010 for the three months ended June
30, 2007. Data processing and other professional fees expense was $348,806 for
the six months ended June 30, 2008 compared to $297,220 for the six months
ended June 30, 2007.

Loan
department expense for the three months ended June 30, 2008 was $21,912
compared to $409 for the same period of 2007. During the first quarter of 2008,
the Company foreclosed on real estate securing collateral for one loan. The
increase in costs is related to foreclosure expenses of $32,045. Loan
department expense for the six months ended June 30, 2008 was $65,818 compared
to $20,654 for the same period of 2007.

Capital Resources

Total
shareholders equity at June 30, 2008 was $17,275,102 compared to $17,648,014
December 31, 2007. The primary changes in shareholders equity resulting from
net income for the six months ended June 30, 2008 of $517,695, an increase in
additional paid-in capital of $55,566 related to stock-based compensation, and
a decrease in accumulated other comprehensive income net of tax of $965,943.

The
Company and the Bank are subject to regulations issued by the Board of
Governors of the Federal Reserve System and the FDIC, which require maintenance
of a certain level of capital. Under the regulations, capital requirements are
based upon the composition of an institutions asset base and the risk factors
assigned to those assets. The guidelines characterize an institutions capital
as being Tier 1 capital (defined to be principally shareholders equity less
intangible assets) and Tier 2 capital (defined to be principally the
allowance for loan losses, limited to one and one-fourth percent of gross risk
weighted assets). The guidelines require the Company and the Bank to maintain a
risk-based capital target ratio of 8%, one-half or more of which should be in
the form of Tier 1 capital.

18

---



The
following table shows the Companys and the Banks actual capital amounts and
ratios at June 30, 2008 and December 31, 2007, as well as the minimum capital
ratios for capital adequacy under the regulatory framework (dollar amounts are
in thousands).

|                                         |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|---------------------------------------- |  | ------ | ------ | ------------------------------ |  | -------------------------------------------------------------------- | - | ----- | ------ | ------ |  | ----- | - | - | ------ |  |  | ---- | -
|                                         |  | Actual |        | For capital adequacy
 purposes |  | To be well-
 capitalized under
 prompt corrective
 action provisions |  
|                                         |  |        |        |                                |  |                                                                      |  
|                                         |  | Amount |        | Ratio                          |  | Amount                                                               |   | Ratio |        | Amount |  | Ratio |  
|                                         |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |  
|As of June 30, 2008:                     |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|                                         |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|Company:                                 |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|Total capital (to risk weighted assets)  |  | $      | 25,626 |                                |  | 14.1                                                                 | % | $     | 14,473 |        |  | 8.0   | % |   | N/A    |  |  | N/A  |  
|Tier 1 capital (to risk weighted assets) |  | $      | 23,570 |                                |  | 12.9                                                                 | % | $     | 7,236  |        |  | 4.0   | % |   | N/A    |  |  | N/A  |  
|Tier 1 capital (to average assets)       |  | $      | 23,570 |                                |  | 9.7                                                                  | % | $     | 9,690  |        |  | 4.0   | % |   | N/A    |  |  | N/A  |  
|Bank:                                    |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|Total capital (to risk weighted assets)  |  | $      | 23,709 |                                |  | 13.1                                                                 | % | $     | 14,476 |        |  | 8.0   | % | $ | 18,091 |  |  | 10.0 | %
|Tier 1 capital (to risk weighted assets) |  | $      | 21,614 |                                |  | 11.9                                                                 | % | $     | 7,236  |        |  | 4.0   | % | $ | 10,854 |  |  | 6.0  | %
|Tier 1 capital (to average assets)       |  | $      | 21,614 |                                |  | 9.0                                                                  | % | $     | 9,634  |        |  | 4.0   | % | $ | 12,043 |  |  | 5.0  | %
|                                         |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|As of December 31, 2007:                 |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|                                         |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|Company:                                 |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|Total capital (to risk weighted assets)  |  | $      | 24,574 |                                |  | 14.7                                                                 | % | $     | 13,334 |        |  | 8.0   | % |   | N/A    |  |  | N/A  |  
|Tier 1 capital (to risk weighted assets) |  | $      | 23,016 |                                |  | 13.8                                                                 | % | $     | 6,667  |        |  | 4.0   | % |   | N/A    |  |  | N/A  |  
|Tier 1 capital (to average assets)       |  | $      | 23,016 |                                |  | 9.8                                                                  | % | $     | 9,422  |        |  | 4.0   | % |   | N/A    |  |  | N/A  |  
|Bank:                                    |  |        |        |                                |  |                                                                      |   |       |        |        |  |       |   |   |        |  |  |      |  
|Total capital (to risk weighted assets)  |  | $      | 22,423 |                                |  | 13.5                                                                 | % | $     | 13,334 |        |  | 8.0   | % | $ | 16,668 |  |  | 10.0 | %
|Tier 1 capital (to risk weighted assets) |  | $      | 20,825 |                                |  | 12.5                                                                 | % | $     | 6,667  |        |  | 4.0   | % | $ | 10,001 |  |  | 6.0  | %
|Tier 1 capital (to average assets)       |  | $      | 20,825 |                                |  | 8.9                                                                  | % | $     | 9,375  |        |  | 4.0   | % | $ | 11,719 |  |  | 5.0  | %

The
Bank met the well capitalized capital ratio measures at both June 30, 2008
and December 31, 2007.

Liquidity

Liquidity
management refers to the Companys ability to provide funds on an ongoing basis
to meet fluctuations in deposit levels as well as the credit needs and
requirements of its clients. Both assets and liabilities contribute to the
Companys liquidity position. Federal funds lines, short-term investments and
securities, and loan repayments contribute to liquidity, along with deposit
increases, while loan funding and deposit withdrawals decrease liquidity. The
Company assesses the likelihood of projected funding requirements by reviewing
historical funding patterns, current and forecasted economic conditions and
individual client funding needs. Commitments to fund loans and outstanding
letters of credit at June 30, 2008 and December 31, 2007 were approximately
$38,782,439 and $38,038,672, respectively. Such loan commitments relate
primarily to revolving lines of credit and other commercial loans and to real
estate construction loans. Since some of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.

The
Companys sources of liquidity consist of cash and due from correspondent
banks, overnight funds sold to correspondent banks, unpledged marketable
investments and loans held for sale and/or pledged for secured borrowings. At
June 30, 2008, consolidated liquid assets totaled $27,739,358 or 11.7% of total
assets compared to $36,075,272 or 15.61% of total assets on December 31, 2007.
In addition to liquid assets, the Company maintains short-term lines of credit
in the amount of $36,300,000 with correspondent banks. Additionally, Service 1st
Bank is a member of the FHLB. At June 30, 2008, Service 1st Bank
could have arranged for up to $17,454,796 in secured borrowings from the FHLB.
These borrowings are secured by pledged mortgage loans. At June 30, 2008, the
Company had advances, borrowings and commitments (including letters of credit)
outstanding of $4,000,000, leaving $13,454,796 available under these FHLB
secured borrowing arrangements. Service 1st Bank also has informal
agreements with various other banks to sell participations in loans, if
necessary. The Company serves primarily a business and professional customer
base and, as such, its deposit base is susceptible to economic fluctuations.
Accordingly, management strives to maintain a balanced position of liquid
assets and borrowing capacity to volatile and cyclical deposits.

19

---



Liquidity
is also affected by portfolio maturities and the effect of interest rate
fluctuations on the marketability of both assets and liabilities. The Company
can sell any of its unpledged securities held in the available-for-sale
category to meet liquidity needs. These securities are also available to pledge
as collateral for borrowings if the need should arise. Service 1st
Bank has established a master repurchase agreement with a correspondent bank to
enable such transactions. Service 1st Bank can also pledge
securities to borrow from the FRB and the FHLB. The principal cash requirements
of the Company are for expenses incurred in the support of administration and
operations.

Inflation

The
impact of inflation on a financial institution differs significantly from that
exerted on manufacturing or other commercial concerns, primarily because its
assets and liabilities are largely monetary. In general, inflation primarily
affects the Company and the Bank indirectly through its effect on market rates
of interest, and thus the ability of the Bank to attract loan customers.
Inflation affects the growth of total assets by increasing the level of loan
demand, and potentially adversely affects the Companys and the Banks capital
adequacy because loan growth in inflationary periods can increase at rates
higher than the rate that capital grows through retention of earnings, which
the Company may generate in the future. In addition to its effects on interest
rates, inflation directly affects the Company by increasing operating expenses.
The effects of inflation were not material to the Companys results of
operations during the periods ending June 30, 2008 and 2007.

Off-Balance Sheet
Items

The
Company is a party to financial instruments with off-balance sheet risk in the
normal course of business in order to meet the financing needs of its customers
and to reduce its exposure to fluctuations in interest rates. These financial
instruments consist of commitments to extend credit and letters of credit.
These instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized on the balance sheet.

The
Companys exposure to credit loss in the event of nonperformance by the other
party for commitments to extend credit and letters of credit is represented by
the contractual amount of those instruments. The Company applies the same
credit policies to commitments and letters of credit as it does for loans
included on the consolidated balance sheet. As of June 30, 2008 and December
31, 2007, commitments to extend credit and standby letters of credit were the
only financial instruments with off-balance sheet risk. The Company has not
entered into any contracts for financial derivative instruments such as
futures, swaps, options or similar instruments. Loan commitments and standby
letters of credit were $38,782,439 and $38,038,672 at June 30, 2008 and
December 31, 2007, respectively. As a percentage of gross loans and leases
these off-balance sheet items represent 30.30% and 33.13%, respectively.

The
Company has certain ongoing commitments under operating leases. The minimum
commitment under these operating leases for 2008 is $470,247.

Effects of Terrorism

The
terrorist actions on September 11, 2001 and thereafter and the conflicts in
Afghanistan and Iraq have had significant adverse effects upon the United
States economy. Whether the terrorist activities in the future and the actions
of the United States and its allies in combating terrorism on a worldwide basis
will adversely impact the Company and the extent of such impact is uncertain.
Such economic deterioration could adversely affect the Companys future results
of operations by, among other matters, reducing the demand for loans and other
products and services offered by the Bank, increasing nonperforming loans and
the amounts reserved for loan losses, and causing a decline in the Companys
stock price.

Website Access

Information
regarding the Company, the Bank, and Charter may be obtained from the Companys
website at www.service1stbank.com. Copies of the Companys annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
Section 16 reports by Company insiders, including exhibits and amendments
thereto, are available free of charge on the Companys website as soon as they
are published by the Securities and Exchange Commission through a link to the
Edgar reporting system maintained by the Securities and Exchange Commission. To
access Company filings, select Go to Service 1st Bancorp at the
bottom of the Company website page, then select Click here to view Service 1st
Bancorp SEC Filings, followed by selecting Continue to view SEC Filings to
view or download copies of reports including Form 10-K, 10-Q or 8-K, or select
Click here to view Section 16 Reports, followed by selecting Continue to
view Section 16 Reports, to view or download reports on Forms 3, 4 or 5 of
insider transactions in Company securities.

20

---



|        |                                                           
|------- | ----------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About Market Risk

The
types of market risk exposures generally faced in the banking industry include
interest rate risk, liquidity risk, equity price risk, foreign currency risk,
and commodity price risk. Due to the nature of our operations, foreign currency
and commodity price risk are not significant to us. See Managements
Discussion and Analysis of Financial Condition and Operations - Liquidity for
a discussion of our liquidity risk. Our interest rate risk and equity market
price risk are described below.

Interest Rate Risk

The
Company manages its interest rate risk within an overall asset and liability
management framework that includes attention to credit risk, liquidity risk,
and capital structure. A principal objective of asset/liability management is
to manage the sensitivity of net interest income to changing interest rates.
Asset and liability management activity is governed by a policy reviewed and
approved annually by the Board of Directors. The Board of Directors has
delegated the administration of this policy to the Funds Management Committee,
a committee of the Board of Directors, which is comprised of senior executive
management, and four independent directors. Two common measures used to monitor
interest rate risk are economic value interest rate sensitivity and forecasted
net interest income rate sensitivity.

Economic Value Interest Rate
Sensitivity

Interest
rate sensitivity is computed by estimating percentage changes in the economic
value of our equity over a range of potential yield curve shocks. Economic
value sensitivity is defined as the economic value of our assets less the
economic value of our liabilities plus or minus the economic value of off-balance
sheet items. The economic value of each asset, liability and off-balance sheet
item is its discounted present value of expected cash flows. Discount rates are
based on implied forward market rates of interest, adjusted for assumed shock
scenario interest rate changes. The following table shows our projected
percentage change in economic value sensitivity for parallel yield curve shocks
as of the dates indicated relative to the value if wholesale market rates
follow implied forward rates.

|                         |  |                                    |       |                   |  |       |   
|------------------------ |  | ---------------------------------- | ----- | ----------------- |  | ----- | --
|                         |  | Projected
change in economic
value |      
|                         |  |                                    |      
|                         |  |                                    |      
|Change in interest rates |  | June
30, 2008                      |       | December
31, 2007 | 
|                         |  |                                    |       |                   | 
|100 basis point rise     |  |                                    | (2.32 | )%                |  | (3.28 | )%
|100 basis point decline  |  |                                    | (0.44 | )%                |  | 1.61  | % 

The
economic value of portfolio equity sensitivity from June 30, 2008 to
December 31, 2007 has shifted due to changes in wholesale rates, a change
in the composition of customer loans, leases, investments, and deposits, and
shortened wholesale borrowing maturities.

Forecasted Net Interest Income
Interest Rate Sensitivity

The
impact of interest rate changes on the next 12 months net interest income is
measured using income simulation. The various products in our balance sheet are
modeled to simulate their income (and cash flow) behavior in relation to
interest rate movements. Income for the next 12 months is calculated using the
implied forward curve and for immediate and sustained yield curve shocks.

21

---



The
income simulation model includes various assumptions about the repricing
behavior for each product and new business volumes and pricing behaviors. Many
of our assets are floating rate loans, which would subsequently reprice in
response to changes in market interest rates with the repricing being the same
extent as the change in the underlying contracted index. Our Liquid Gold
account deposit products are assumed to reprice gradually in response to
wholesale rate changes. The following table shows our projected percentage
change in 12 month net interest income as a consequence of parallel yield curve
shocks from the implied forward curve:

|                         |  |                                          |       |                   |  |      |  
|------------------------ |  | ---------------------------------------- | ----- | ----------------- |  | ---- | -
|                         |  | Projected
change in net interest 
income |      
|                         |  |                                          |      
|                         |  |                                          |       |                   |  |      |  
|Change in interest rates |  | June
30, 2008                            |       | December
31, 2007 | 
|                         |  |                                          |       |                   | 
|100 basis point rise     |  |                                          | 0.21  | %                 |  | 0.09 | %
|100 basis point decline  |  |                                          | (0.01 | )%                |  | 0.07 | %

Net
interest income sensitivity from March 31, 2008 to December 31, 2007
evolved from a slightly asset-sensitive position to a relatively neutral
position.

Equity Market Price Risk

We
are not exposed to equity market risk through our investments in stocks. The
only stocks owned are 9,716 shares of FHLB of San Francisco and 400 shares of
Pacific Coast Bankers Bank. These stocks are not actively traded on any
exchange, but their market value exceeds their cost.

|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

(a)          
Disclosure Controls and Procedures

An
evaluation of the Companys disclosure controls and procedures (as defined in
the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) and
15d-15(e)) was carried out under the supervision and with the participation of
the Companys Chief Executive Officer, Chief Financial Officer and other
members of the Companys senior management as of the end of the period covered
by this quarterly report on Form 10-Q. The Companys Chief Executive Officer
and Chief Financial Officer concluded that the Companys disclosure controls
and procedures as in effect are effective in ensuring that the information
required to be disclosed by the Company in the reports it files or submits
under the Exchange Act is (i) accumulated and communicated to the Companys
management (including the Chief Executive Officer and Chief Financial Officer)
to allow timely decisions regarding required disclosure, and (ii) recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms.

(b)          
Internal Control Over Financial Reporting

An
evaluation of any changes in the Companys internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), that
occurred during the Companys fiscal quarter ended June 30, 2008, was carried
out under the supervision and with the participation of the Companys Chief
Executive Officer, Chief Financial Officer and other members of the Companys
senior management. The Companys Chief Executive Officer and Chief Financial
Officer concluded that no change identified in connection with such evaluation
has materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.

|         |                        
|-------- | -----------------------
|Item 4T. | Controls and Procedures

Not Applicable

22

---



PART II - OTHER INFORMATION

|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

On
May 6, 2008, the Registrants bank subsidiary, Service 1st Bank, was
served with a Summons and Complaint, which was filed on May 1, 2008 in the
Superior Court of the State of California in the County of Sacramento, Case No.
34-2008 -00009879, by Plaintiff, Regent Hotel LLC, a California limited
liability company and subsidiary of Regent Development, Inc., a California
corporation. The full details of the lawsuit are included in the Companys Form
8-K filed with the Securities and Exchange Commission on May 15, 2008. After
evaluating the potential loss related to this loan, the Bank increased its
reserve for possible loan loss by $186,000, which is reflected in the
Consolidated Statement of Income for the three months ended June 30, 2008.

|         |             
|-------- | ------------
|Item 1A. | Risk Factors

There
have been no material changes in the risk factors previously disclosed in the
Companys Form 10-K for the period ended December 31, 2007, other than the fact
that the overall decline in real estate values in California, and more
specifically in the Companys primary market area of San Joaquin County, has
continued and expanded during 2008. Further declines in real estate values
would increase the likelihood of a negative impact on general economic
conditions in San Joaquin County, which could thereby adversely impact the
Company. Such a negative impact could result in increased loan losses and
require a material increase in the allowance for loan losses, thereby adversely
affecting the Companys results of operations, financial condition, future
prospects, and stock price.

|        |                                                            
|------- | -----------------------------------------------------------
|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|        |                                                            
|        | None                                                       
|        |                                                            
|Item 3. | Defaults Upon Senior Securities                            
|        |                                                            
|        | None                                                       
|        |                                                            
|Item 4. | Submission of Matters to a Vote of Security Holders        
|        |                                                            
|        | None                                                       
|        |                                                            
|Item 5. | Other Information                                          
|        |                                                            
|        | None                                                       
|        |                                                            
|Item 6. | Exhibits                                                   

| |       |                                                                                                                                                                                                                                                         
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2.1) | Plan of
 Reorganization and Merger Agreement (included in Annex A) incorporated by
 reference from the Registrants Form S-4EF, Registration No. 333-104244,
 filed with the Securities and Exchange Commission on April 1, 2003.                       
| |       |                                                                                                                                                                                                                                                         
| | (2.2) | Plan of
 Reorganization and Merger Agreement, incorporated by reference from the
 Registrants Form 8-K, filed with the Securities and Exchange Commission on
 June 3, 2008.                                                                            
| |       |                                                                                                                                                                                                                                                         
| | (3.1) | Articles of
 Incorporation, as amended, incorporated by reference from the Registrants
 Form 10-QSB for the quarter ended September 30, 2005, filed with the
 Securities and Exchange Commission on November 10, 2005.                                 
| |       |                                                                                                                                                                                                                                                         
| | (3.2) | Bylaws, as
 amended, incorporated by reference from the Registrants Form 8-K, filed with
 the Securities and Exchange Commission on July 23, 2007.                                                                                                     
| |       |                                                                                                                                                                                                                                                         
| | (4.1) | Specimen
 form of certificate for Service 1st Bancorp common stock
 incorporated by reference from Registrants Form 10-QSB for the quarterly
 period ended September 30, 2003, filed with the Securities and Exchange
 Commission on November 14, 2003.

23

---



| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | ------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (4.2)   | Trust
 Preferred Security Indenture dated August 17, 2006 between Service 1st
 Bancorp and Wells Fargo Bank, National Association, incorporated by reference
 from the Registrants Form 10-Q for the quarterly period ended June 30, 2007,
 filed with the Securities and Exchange Commission on August 13, 2007.                                              
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (4.3)   | Trust
 Preferred Security Amended and Restated Declaration of Trust dated August 17,
 2006 between Service 1st Capital Trust I and Wells Fargo Bank,
 National Association, incorporated by reference from the Registrants Form
 10-Q for the quarterly period ended June 30, 2007, filed with the Securities
 and Exchange Commission on August 13, 2007.     
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (4.4)   | Trust
 Preferred Security Guarantee Agreement dated August 17, 2006 between Service
 1st Bancorp and Wells Fargo Bank, National Association,
 incorporated by reference from the Registrants Form 10-Q for the quarterly
 period ended June 30, 2007, filed with the Securities and Exchange Commission
 on August 13, 2007.                                   
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (4.5)   | Trust
 Preferred Security Junior Subordinated Debt Security dated August 17, 2006
 between Service 1st Bancorp and Wells Fargo Bank, National
 Association, incorporated by reference from the Registrants Form 10-Q for
 the quarterly period ended June 30, 2007, filed with the Securities and
 Exchange Commission on August 13, 2007.                     
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (4.6)   | Trust
 Preferred Security Certificate dated August 17, 2006 between Service 1st
 Capital Trust I and Wells Fargo Bank, National Association, incorporated by
 reference from the Registrants Form 10-Q for the quarterly period ended June
 30, 2007, filed with the Securities and Exchange Commission on August 13,
 2007.                                   
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (10.1)  | Lease
 agreement dated May 3, 2002, related to 2800 West March Lane, Suite 120,
 Stockton, CA 95219 incorporated by reference from the Registrants Form
 S-4EF, Registration No. 333-104244, filed with the Securities and Exchange
 Commission on April 1, 2003.                                                                                              
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (10.2)  | Lease
 agreement dated April 13, 1999 and amendment thereto dated June 17, 1999,
 related to 60 West 10th Street, Tracy, CA 95376, incorporated by reference
 from the Registrants Form S-4EF, Registration No. 333-104244, filed with the
 Securities and Exchange Commission on April 1, 2003.                                                               
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (10.3)* | 1999 Service
 1st Bancorp Stock Option Plan, Amendment No. 1 thereto, and
 related forms of Incentive and Nonstatutory Stock Option Agreements entered
 into with executive officers and directors, incorporated by reference from
 the Registrants Form S-8, Registration No. 333-107346, filed with the
 Securities and Exchange Commission on July 25, 2003.
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (10.4)  | Agreement
 dated July 27, 1999 with BancData Solutions, Inc. for service bureau and data
 processing services, incorporated by reference from the Registrants Form
 S-4EF, Registration No. 333-104244, filed with the Securities and Exchange
 Commission on April 1, 2003.                                                                                   
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (10.5)  | Agreement
 with Financial Marketing Services dated February 1, 2000, incorporated by
 reference from the Registrants Form S-4EF, Registration No. 333-104244,
 filed with the Securities and Exchange Commission on April 1, 2003.                                                                                                                             
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (10.6)* | Service 1st
 Bank 401(k) Profit Sharing Plan and Trust Summary Plan Description, dated
 January 1, 2000, incorporated by reference from the Registrants Form S-4EF,
 Registration No. 333-104244, filed with the Securities and Exchange
 Commission on April 1, 2003.                                                                                         
| |         |                                                                                                                                                                                                                                                                                                                                                                 
| | (10.7)* | John O.
 Brooks Salary Continuation Agreement dated September 10, 2003, incorporated
 by reference from the Registrants Form 10-KSB for the year ended December
 31, 2003, filed with the Securities and Exchange Commission on March 30,
 2004.                                                                                                               

24

---



| |          |                                                                                                                                                                                                                                                                                                                  
| | -------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (10.8)*  | Bryan R.
 Hyzdu Salary Continuation Agreement dated September 10, 2003, incorporated by
 reference from the Registrants Form 10-KSB for the year ended December 31,
 2003, filed with the Securities and Exchange Commission on March 30, 2004.                                                                 
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.9)*  | Robert E.
 Bloch Salary Continuation Agreement dated September 10, 2003, incorporated by
 reference from the Registrants Form 10-KSB for the year ended December 31,
 2003, filed with the Securities and Exchange Commission on March 30, 2004.                                                                
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.10)* | Patrick
 Carman Salary Continuation Agreement dated September 10, 2003, incorporated
 by reference from the Registrants Form 10-KSB for the year ended December
 31, 2003, filed with the Securities and Exchange Commission on March 30,
 2004.                                                                
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.11)* | 2004 Stock
 Option Plan and Forms of Incentive and Nonstatutory Stock Option Agreements,
 incorporated by reference from the Registrants Form S-8, Registration No.
 333-116818, filed with the Securities and Exchange Commission on June 24,
 2004.                                                           
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.12)* | John O.
 Brooks Employment Agreement dated July 15, 2004, incorporated by reference
 from the Registrants Form 10-QSB, for the quarterly period ended September
 30, 2004, filed with the Securities and Exchange Commission on November 15,
 2004.                                                             
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.13)* | Bryan R.
 Hyzdu Employment Agreement dated July 15, 2004, incorporated by reference
 from the Registrants Form 10-QSB, for the quarterly period ended September
 30, 2004, filed with the Securities and Exchange Commission on November 15,
 2004.                                                             
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.14)* | Robert E.
 Bloch Employment Agreement dated July 15, 2004, incorporated by reference
 from the Registrants Form 10-QSB, for the quarterly period ended September
 30, 2004, filed with the Securities and Exchange Commission on November 15,
 2004.                                                            
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.15)* | Patrick
 Carman Employment Agreement dated July 15, 2004, incorporated by reference
 from the Registrants Form 10-QSB, for the quarterly period ended September
 30, 2004, filed with the Securities and Exchange Commission on November 15,
 2004.                                                             
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.16)* | Shannon
 Reinard Employment Agreement dated July 15, 2004, incorporated by reference
 from the Registrants Form 10-QSB, for the quarterly period ended September
 30, 2004, filed with the Securities and Exchange Commission on November 15,
 2004.                                                            
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.17)  | Fiserv
 Solutions, Inc. Agreement dated October 7, 2004, for service bureau, data
 processing, and item processing, incorporated by reference from the
 Registrants Form 10-KSB for the year ended December 31, 2004, filed with the
 Securities and Exchange Commission on June 30, 2005.                      
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.18)  | Lease
 agreement dated May 1, 2005, related to 49 W. 10th Street, Tracy,
 CA 95378 incorporated by reference from the Registrants Form 10-QSB for the
 quarterly period ended September 30, 2005, filed with the Securities and
 Exchange Commission on November 10, 2005.                                      
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.19)  | Lease
 agreement dated October 3, 2005, related to 1901 W. Kettleman Lane, Building
 A, Suite 1A and 1B, Lodi, CA 95242, incorporated by reference from the
 Registrants Form 10-QSB for the quarterly period ended September 30, 2005,
 filed with the Securities and Exchange Commission on November 10, 2005.
| |          |                                                                                                                                                                                                                                                                                                                  
| | (10.20)* | Shannon
 Reinard Salary Continuation Agreement dated August 8, 2005, incorporated by
 reference from Registrants Form 10-KSB for the year ended December 31, 2005,
 filed with the Securities and Exchange Commission on March 30, 2006.                                                                        

25

---



| |          |                                                                                                                                                                                                                                                                                        
| | -------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (10.21)* | Bryan R.
 Hyzdu First Amendment dated August 8, 2005 to Salary Continuation Agreement dated September 10, 2003,
 incorporated by reference from Registrants Form 10-KSB for the year ended
 December 31, 2005, filed with the Securities and Exchange Commission on March
 30, 2006.  
| |          |                                                                                                                                                                                                                                                                                        
| | (10.22)* | Bryan R.
 Hyzdu Second Amendment dated August 8, 2005 to Salary Continuation Agreement dated September 10, 2003,
 incorporated by reference from Registrants Form 10-KSB for the year ended
 December 31, 2005, filed with the Securities and Exchange Commission on March
 30, 2006. 
| |          |                                                                                                                                                                                                                                                                                        
| | (10.23)* | Patrick
 Carman First Amendment dated August 8, 2005 to Salary Continuation Agreement dated September 10, 2003,
 incorporated by reference from Registrants Form 10-KSB for the year ended
 December 31, 2005, filed with the Securities and Exchange Commission on March
 30, 2006.  
| |          |                                                                                                                                                                                                                                                                                        
| | (10.24)* | Patrick
 Carman Second Amendment dated August 8, 2005 to Salary Continuation Agreement
 dated September 10, 2003, incorporated by reference from Registrants Form
 10-KSB for the year ended December 31, 2005, filed with the Securities and
 Exchange Commission on March 30, 2006. 
| |          |                                                                                                                                                                                                                                                                                        
| | (10.25)* | Robert E.
 Bloch First Amendment dated August 8, 2005 to Salary Continuation Agreement dated September 10, 2003,
 incorporated by reference from Registrants Form 10-KSB for the year ended
 December 31, 2005, filed with the Securities and Exchange Commission on March
 30, 2006. 
| |          |                                                                                                                                                                                                                                                                                        
| | (10.26)* | Robert E.
 Bloch Second Amendment dated August 8, 2005 to Salary Continuation Agreement dated September 10, 2003,
 incorporated by reference from Registrants Form 10-KSB for the year ended
 December 31, 2005, filed with the Securities and Exchange Commission on March
 30, 2006.
| |          |                                                                                                                                                                                                                                                                                        
| | (10.27)* | Director
 Emeritus Program approved by Board of Directors effective June 30, 2006,
 incorporated by reference from Registrants Form 8-K, filed with the
 Securities and Exchange Commission on July 7, 2006.                                                                          
| |          |                                                                                                                                                                                                                                                                                        
| | (10.28)  | Lease option
 exercise letter dated September 12, 2006, related to 60 West 10th Street,
 Tracy, CA 95376, incorporated by reference from Registrants Form 10-K, filed
 with the Securities and Exchange Commission on April 2, 2007.                                                  
| |          |                                                                                                                                                                                                                                                                                        
| | (10.29)  | Lease option
 exercise letter dated September 12, 2006, related to 60 West 10th Street,
 Tracy, CA 95376, incorporated by reference from Registrants Form 10-K for
 the year ended December 31, 2006, filed with the Securities and Exchange
 Commission on March 14, 2007.           
| |          |                                                                                                                                                                                                                                                                                        
| | (10.30)* | Thomas A.
 Vander Ploeg Employment Agreement dated November 16, 2007, incorporated by
 reference from Registrants Form 10-K for the year ended December 31, 2007,
 filed with the Securities and Exchange Commission on March 31, 2008.                                               
| |          |                                                                                                                                                                                                                                                                                        
| | (10.31)  | Resignation
 letter from Thomas A. Vander Ploeg dated May 7, 2008, incorporated by
 reference from Registrants Form 8-K, filed with the Securities and Exchange
 Commission on May 9, 2008.                                                                                           
| |          |                                                                                                                                                                                                                                                                                        
| | (10.32)* | Thomas A.
 Vander Ploeg Settlement Agreement and Release of All Claims, incorporated by
 reference from Registrants Form 8-K, filed with the Securities and Exchange
 Commission on May 15, 2008.                                                                                     
| |          |                                                                                                                                                                                                                                                                                        
| | (14.1)   | Code of
 Ethics, incorporated by reference from the Registrants Form 10-K for the
 year ended December 31, 2003, filed with the Securities and Exchange
 Commission on March 30, 2004.                                                                                                

26

---



| |        |                                                                                                                                                              
| | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (21.1) | Registrants
 only subsidiaries are Service 1st Bank and Charter Services Group,
 Inc.                                                                       
| |        |                                                                                                                                                              
| | (31.1) | Certification
 of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
 of 2002.                                                        
| |        |                                                                                                                                                              
| | (31.2) | Certification
 of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
 of 2002.                                                        
| |        |                                                                                                                                                              
| | (32.1) | Certification
 of Service 1st Bancorp
 by its Chief Executive Officer and Chief Financial Officer pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002.
| |        |                                                                                                                                                              
| |        | *Denotes
 management compensatory plans or arrangements.                                                                                                     

27

---



SIGNATURES

Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

|                       |                      |  |                               
|---------------------- | -------------------- |  | ------------------------------
|                       | SERVICE 1ST
 BANCORP
|                       |                     
|Date: August
 12, 2008 | By:                  |  | /s/ JOHN O.
 BROOKS           
|                       |                      | 
|                       |                      |  | John O.
 Brooks               
|                       |                      |  | Chief
 Executive Officer      
|                       |                      |  | (Principal
 Executive Officer)
|                       |                      |  |                               
|Date: August
 12, 2008 | By:                  |  | /s/ ROBERT
 E. BLOCH          
|                       |                      | 
|                       |                      |  | Robert E.
 Bloch              
|                       |                      |  | Executive
 Vice President and 
|                       |                      |  | Chief
 Financial Officer      
|                       |                      |  | (Principal
 Financial and     
|                       |                      |  | Accounting
 Officer)          

28

---



EXHIBIT INDEX

|                |  |                                                                                |  |                        
|--------------- |  | ------------------------------------------------------------------------------ |  | -----------------------
|Exhibit
 Number |  | Description                                                                    |  | Sequential
 Page Number
|                |  |                                                                                |  |                        
|31.1            |  | Certification
 of Chief Executive Officer pursuant to Section 302 of the       |  | 30                     
|                |  | Sarbanes-Oxley
 Act of 2002.                                                   |  |                        
|                |  |                                                                                |  |                        
|31.2            |  | Certification
 of Chief Financial Officer pursuant to Section 302 of the       |  | 31                     
|                |  | Sarbanes-Oxley
 Act of 2002.                                                   |  |                        
|                |  |                                                                                |  |                        
|32.1            |  | Certification
 of Service 1st Bancorp by its Chief Executive Officer and Chief |  | 32                     
|                |  | Financial
 Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  |  |                        

29

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