UNITED STATES 
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,
D.C. 20549

FORM 10-K/AAMENDMENT NO. 1 TO

|   |                                                                                           
|-- | ------------------------------------------------------------------------------------------
|x  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934    
|   | For the fiscal year ended December 31, 2007                                               
|OR
|o  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
  THE SECURITIES EXCHANGE ACT OF 1934
|   | For the transition period from __________________ to
  __________________                 

000-50323

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(Commission File Number)


SERVICE 1ST BANCORP

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(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 Number)

49 W. 10th
Street, Tracy, California 95376

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(Address of principal executive offices, Zip Code)


Registrants
telephone number, including area code:(209) 830-6995

Securities registered pursuant to Section 12 (b) of
the Act: None
Securities registered pursuant to Section 12 (g) of the Act:

Title of Each Class

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Common Stock (No Par Value)


Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o
No x

Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o
No x

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 of 1934 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 if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter)
is not contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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 oNon-accelerated filer o (Do not check if a smaller
reporting company) Smaller reporting company x

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

State the aggregate market value of the voting and
non-voting common equity held by non-affiliates computed by reference to the
price at which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the registrants
most recently completed second fiscal quarter. $27,410,887.

Indicate the number of shares outstanding of each of
the registrants classes of common stock, as of the latest practicable date. As
of April 28, 2008, the registrant had 2,388,739 shares of its common stock
outstanding.

The Index to Exhibits is located at page 34.

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EXPLANATORY NOTE

Service 1st Bancorp (the Company) is
filing this Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K
for the year ended December 31, 2007 to amend Item 9B and to include Item 10,
Item 11, Item 12, Item 13, and Item 14 of Part III to Form 10-K due to a delay
in scheduling of the 2008 Annual Meeting of Shareholders. No change is being made
to Part I or Part II of the Form 10-K, as filed with the Commission on March
31, 2008.

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|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION

A
report on Form 8-K was not filed in connection with an employment agreement for
Thomas Vander Ploeg dated November 16, 2007. The employment agreement is
attached as Exhibit 10.30 to the registrants Form 10-K for the year ended
December 31, 2007 filed with the Commission on March 31, 2008.

1

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PART III

|           |                                                         
|---------- | --------------------------------------------------------
|ITEM
  10. | DIRECTORS,
  EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

The following table sets for the names of and certain
information, as of April 28, 2008, concerning the Directors of the Company.

|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- |  | ------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name and
   TitleOther
   Than Director                                                                                                                  |  | Age |  | Year
   FirstAppointedDirector
   (1) |  | Principal
   Occupation
   During the Past Five Years                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Dean F. Andal                                                                                                                                            |  | 48  |  | 2006                                  |  | A Principal in Gerry N.
  Kamilos, LLC, a real estate investment concern, since 2005. Director of State
  & Local Tax, KPMG, LLP from 2003 to 2004. Served as an elected member of
  California Board of Equalization from 1994 to 2002 and as its Chairman in
  1998 and 2000. California Assemblyman from 1990 to 1994.                             
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|John O. Brooks, Chairman of
  the Board and Chief Executive Officer of the Company and Bank; Chairman of
  the Board of Charter Services Group, Inc. (2) |  | 68  |  | 2000                                  |  | Prior to joining the Bank
  on November 1, 2000, he was a Director and President and Chief Executive
  Officer of Tracy Federal Savings Bank, Tracy, California, from 1998 to 2000,
  and Bay Area Bank, Redwood City, California, from 1992 to 1998.                                                                                                 
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Eugene C. Gini                                                                                                                                           |  | 70  |  | 1999                                  |  | President and Chief
  Executive Officer of Collins Electric Company, Inc., an electrical
  contracting firm, Stockton, California, since 1987.                                                                                                                                                                                                        
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Bryan R. Hyzdu, President
  of the Company; President and Chief Executive Officer of Charter Services
  Group, Inc. (2)                                  |  | 50  |  | 1999                                  |  | Prior to joining the Bank
  on November 10, 1999, he was a Regional Vice President and Central Valley
  Portfolio Manager with Union Bank of California, since 1992.                                                                                                                                                                                  
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Robert D. Lawrence, M.D.                                                                                                                                 |  | 67  |  | 1999                                  |  | Pathologist and owner of
  Delta Pathology Associates Medical Group, Inc., Stockton, California, since
  1973.                                                                                                                                                                                                                                        
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Susan H. Lenz, CPA                                                                                                                                       |  | 52  |  | 2007                                  |  | Partner in Iacopi, Lenz
  & Company, an Accountance Corporation since 1978.                                                                                                                                                                                                                                                                           
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Frances C. Mizuno                                                                                                                                        |  | 51  |  | 1999                                  |  | Civil Engineer and
  Assistant Executive Director of the San Luis and Delta Mendota Water
  Authority, Byron, California, since 1992.                                                                                                                                                                                                                 
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Richard R. Paulsen                                                                                                                                       |  | 49  |  | 1999                                  |  | Life insurance agent for New
  York Life Insurance Company and a partner in Resource Management Group, a
  securities and financial planning firm, Stockton, California, since 1983.                                                                                                                                                                  
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Toni Marie Raymus                                                                                                                                        |  | 51  |  | 1999                                  |  | President of Raymus Homes,
  Inc., land development and construction of homes, since 1996. Vice President
  of Raymus Construction, a construction company, since 2004. President and
  broker of Raymus Realty Group, real estate sales, since 1999. President of
  Destiny Homes, a custom home building company, Manteca, California, since
  1997.
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Michael K. Repetto                                                                                                                                       |  | 47  |  | 1999                                  |  | Chief Executive Officer of
  Tracy Material Recovery Facility, a disposal and waste recycling company,
  Tracy, California, since 1995. Co-owner and Operations Manager of Tracy Delta
  Solid Waste Management, a waste management company, Tracy, California, since
  1987.                                                                         
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Anthony F. Souza                                                                                                                                         |  | 67  |  | 1999                                  |  | Owner of Souza Realty and
  Development, a real estate sales, development and consulting company, Tracy,
  California, since 1985.                                                                                                                                                                                                                    
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Albert Van Veldhuizen                                                                                                                                    |  | 78  |  | 1999                                  |  | Retired. Formerly,
  commercial real estate sales with Pan Pacific Financial, a real estate income
  property lender, Lodi, California, since 1994.                                                                                                                                                                                                   
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       
|Donald L. Walters                                                                                                                                        |  | 52  |  | 1999                                  |  | Managing member of Grower
  Direct Marketing, a fresh produce sales and worldwide shipping company,
  Stockton, California, since 1998. President and Chief Executive Officer of
  Walters Carpet One, Stockton, California, from 1982 until 1997 when the
  business was sold.                                                                       
|                                                                                                                                                         |  |     |  |                                       |  |                                                                                                                                                                                                                                                                                                                                                       

2

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(1) The year indicated in the preceding table represents the year each director was
first appointed as a director of the Company and/or the Bank. The Company
became the parent holding company for the Bank effective June 26, 2003, at
which time all directors named in the chart above (except Directors Andal and
Lenz) became directors of the Company. Director Andal was appointed as a
director of the Bank on January 15, 2004 and a director of the Company on March
30, 2006. Director Lenz was appointed as a director of the Bank and a director
of the Company on July 19, 2007.

(2) Effective April 1, 2007, Mr. Brooks assumed the position as Chief Executive
Officer of the Bank, Patrick Carman assumed the position of President of the
Bank, and Mr. Hyzdu relinquished his positions as President and Chief Executive
Officer of the Bank in order to focus full-time on the development of the
Companys non-bank subsidiary, Charter Services Group, Inc., as its President
and Chief Executive Officer.

(3) Mr. Van Veldhuizen resigned his position as
a director of the Bank on October 31, 2007 and is a Director Emeritus.

None
of the directors were selected pursuant to any arrangement or understanding
other than with the directors and officers of the Company acting within their
capacities as such. There are no family relationships between any two or more
of the directors, officers or persons nominated or chosen by the Board of
Directors to become a director or officer, except that Bryan R. Hyzdu and
Donald L. Walters are brothers-in-law. No director or officer of the Company
serves as a director of any company which has a class of securities registered
under, or which is subject to the periodic reporting requirements of, the
Securities Exchange Act of 1934, or of any company registered as an investment
company under the Investment Company Act of 1940. None of the directors were
subject to any legal proceedings involving violations of securities laws,
convictions in a criminal proceeding (excluding traffic violations and minor
offenses) or had a petition under bankruptcy laws filed against themselves or
an affiliate within the last five years.

3

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Executive
Officers

The
following table sets forth as of April 28, 2008, information concerning
executive officers of the Company, excluding John O. Brooks, Chief Executive
Officer, and Bryan R. Hyzdu, President, as to whom the same information has
been previously disclosed in the previous table.

|                                                                                                                                    |  |     |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------- |  | --- |  | --------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name and
  Title                                                                                                                    |  | Age |  | Executive
  Officer
  Since |  | Principal
  Occupation 
  During the Past Five Years                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                    |  |     |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Patrick Carman, President
  and Chief Operating Officer 
  of the Bank                                                              |  | 58  |  | 2000                        |  | Prior to joining the Bank
  on August 7, 2000, he held positions as Senior Vice President and Senior
  Credit Officer from 1999 to 2000, Credit Administrator from 1998 to 1999, and
  as SBA portfolio manager from 1995 to 1998, at East County Bank, Antioch,
  California.                                                                                                                                                                 
|                                                                                                                                    |  |     |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Robert E. Bloch, Executive
  Vice President and Chief Financial Officer of the Company, the Bank and
  Charter Services Group, Inc. |  | 60  |  | 2001                        |  | Prior to joining the Bank
  on March 26, 2001, he was Executive Vice President and Chief Financial
  Officer for Mission Community Bank, N.A., San Luis Obispo, California, from
  1999 to 2001, and Executive Vice President and Chief Financial Officer of
  Heritage Oaks Bank, Paso Robles, California, from 1992 to 1999.                                                                                                                 
|                                                                                                                                    |  |     |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Shannon Reinard,
  Executive Vice
  President and
  Operations Manager
  of the Bank                                                |  | 50  |  | 2004                        |  | Prior to joining the Bank
  on March 4, 2002, she was Vice President/Operations Manager at the Concord
  Office of Civic Bank of Commerce from 2000 to 2002 and Vice
  President/Operations Administrator at the Antioch Office of East County Bank
  from 1996 to 2000.                                                                                                                                                                       
|                                                                                                                                    |  |     |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Thomas Vander Ploeg
  Executive Vice President
  and Chief Credit Officer of
  the Bank                                             |  | 54  |  | 2007                        |  | Prior to joining the Bank
  on June 1, 2007, he was Senior Vice President and Chief Credit Officer for
  Redwood Capital Bank in Eureka, California from May 2006 to 2007 and Senior
  Vice President and Chief Credit Officer of Granite Community Bank, N.A.,
  Granite Bay, California, from 2004 to 2006. He also served as Vice President
  and Senior Credit Administrator at Bank of Lodi, N.A. in Lodi, California
  from 2000 to 2004.
|                                                                                                                                    |  |     |  |                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                

Compliance
With Section 16(a) of the Exchange Act

Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the
Companys directors, executive officers and ten percent or more shareholders of
the Companys equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes of ownership of
the Companys equity securities. Officers, directors and ten percent or more
shareholders are required by Securities and Exchange Commission regulation to
furnish the Company with copies of all Section 16(a) forms they file. To the
Companys knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 2007, all Section 16(a)
filing requirements applicable to its executive officers, directors and
beneficial owners of ten percent or more of the Companys equity securities
appear to have been met.

Code of
Ethics

The
Board of Directors has adopted a code of ethics as defined under applicable
rules promulgated by the Securities and Exchange Commission pursuant to the
Sarbanes-Oxley Act of 2002. The code of ethics requires that the Companys
directors, officers (including the principal executive, financial and
accounting officers, or controller and persons performing similar functions)
and employees conduct business in accordance with the highest ethical standards
and in compliance with all laws, rules and regulations applicable to the
Company. The code of ethics is intended to supplement the provisions of any
other personnel policies of the Company or codes of conduct which may establish
additional standards of ethical behavior applicable to the Companys directors,
officers and employees. The code of ethics was filed as Exhibit 14.1 to the
Companys Annual Report on Form 10-KSB for the year ended December 31, 2003,
and may be accessed through the Companys website by following the instructions
for accessing reports filed with the Securities and Exchange Commission.

4

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Board Meetings and Committees

The
Companys Board of Directors held 13 meetings and the Bank Board of Directors
held 12 meetings during 2007. In addition to meeting as a group to review the
Companys business, members of the Board of Directors served on certain
standing committees. During 2007, no director attended less than 75% of the
aggregate of the number of meetings held by the Board of Directors and of all
committee meetings on which such director served.

Audit
Committee. The Audit Committee held 6 meetings in 2007. The
Audit Committee consists of Directors Andal, Lenz, Repetto, Van Veldhuizen and
Walters. The Audit Committee generally recommends the appointment of and
oversees the Companys independent public accountants, monitors and reviews all
audit and examination reports, financial and accounting organization and
financial planning, reporting and internal controls. Each member of the Audit
Committee is independent as defined under NASDAQ listing rules. Director
Lenz has been designated by the Board of Directors as an audit committee
financial expert as defined under applicable rules promulgated by the
Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002.
In addition, each other member of the audit committee is financially literate
as defined under NASDAQ listing rules and qualified to review the Companys
financial statements. See the Audit Committee Charter attached as Exhibit 99.1
for additional information regarding the functions of the Audit Committee.

Compensation
Committee. The Compensation Committee held 3 meetings in
2007. The Compensation Committee consists of Directors Brooks, Gini, Hyzdu,
Mizuno, Paulsen and Souza and reviews compensation and employee benefit plans
and determines the compensation of the Companys directors and executive
officers. Each member of the Executive Committee, except Messrs. Brooks and
Hyzdu, is independent as defined under NASDAQ listing rules. See
Compensation Discussion and Analysis and the Compensation Committee Charter
attached as Exhibit 99.2 for additional information regarding compensation
practices of the Company.

| |   |                                                              
| | - | -------------------------------------------------------------
| | · | Compensation
  Committee Interlocks and Insider Participation

Messrs.
 Brooks and Hyzdu participate in deliberations
and vote upon recommendations regarding compensation for executive officers
other than for themselves. They are not present and do not vote on compensation
for themselves. The independent directors determine the compensation for
Messrs. Brooks and Hyzdu.

Funds
Management Committee. The Funds Management Committee held 4
meetings during 2007. The Funds Management Committee consists of Directors
Brooks, Lawrence, Mizuno and Raymus. The Funds Management Committee is
responsible for managing the Banks assets and liabilities so as to preserve
the necessary liquidity, maximize net interest margin over time, and control
interest rate risk. This involves overseeing deposit and loan pricing,
establishing targeted asset and liability mix ratios, and formulating
appropriate plans to ensure adequate capital for continued growth. The Funds
Management Committee must establish and continually review Bank policies to
ensure compliance with these goals.

Executive
Committee. The Executive Committee held 1 meeting during
2007. The Executive Committee consists of Directors Brooks, Gini, Hyzdu,
Mizuno, Paulsen and Souza. The Executive Committee is responsible for long-term
strategic planning for the Company and its subsidiaries.

Loan
Committee. The Loan Committee held 33 meetings during 2007.
The Loan Committee consists of Directors Brooks, Gini, Hyzdu, Souza and Van
Veldhuizen. The Loan Committee is responsible for overseeing all of the Banks
lending functions. This includes establishing and ongoing review of the Banks
lending policies, making decisions on loans which exceed established lending
limits for Bank personnel, reviewing loans approved within the lending
authorities of the Bank personnel, reviewing problem and Watch List loans and
the follow-up on established action plans to correct identified deficiencies,
reviewing past due loans and action plans to cure the payment defaults, and
monitoring concentration risk within the Banks loan portfolio.

5

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Marketing
Committee. The Marketing Committee held 7 meetings during
2007. The Marketing Committee consists of Directors Andal, Hyzdu, Paulsen,
Raymus and Walters. The Marketing Committee is responsible for overseeing the
Companys outside marketing agency and developing strategies to grow loans and
deposits.

Nominating
Committee. The Nominating Committee held 1 meeting during
2007. The
Nominating Committee consists of Directors Brooks, Gini, Hyzdu, Mizuno, Paulsen
and Souza. The Nominating Committee is responsible for considering and
evaluating appropriate candidates as directors. Candidates are selected by a
majority of directors who are independent as defined under NASDAQ listing
rules and in accordance with a Nominating Committee Charter adopted by a
majority of such independent directors. The Nominating Committee Charter
includes a policy for consideration of candidates proposed by shareholders. Any
recommendations by shareholders will be evaluated by the Nominating Committee
and the Board of Directors in the same manner as any other recommendation and
in each case in accordance with the Nominating Committee Charter. Shareholders
that desire to recommend candidates for consideration by the Companys Board of
Directors should mail or deliver written recommendations to the Company
addressed as follows: Board of Directors, Service 1st Bancorp, 49 W.
10th Street, Tracy, CA 95376. Each recommendation should include
biographical information indicating the background and experience of the
candidate that qualifies the candidate for consideration as a director for
evaluation by the Nominating Committee and the Board of Directors. In addition
to minimum standards of independence for non-employee directors and financial
literacy, the Nominating Committee and the Board of Directors considers various
other criteria including the candidates experience and expertise, financial
resources, ability to devote the time and effort necessary to fulfill the
responsibilities of a director and involvement in community activities in the
market areas served by the Company and the Bank that may enhance the reputation
of the Company and the Bank. The Company and the Bank operate in a highly
regulated industry and are subject to the supervision, regulation and periodic
examination by state and federal banking regulatory authorities including the
Board of Governors of the Federal Reserve System, California Commissioner of
Financial Institutions and Federal Deposit Insurance Corporation. Directors of
the Company and the Bank are subject to certain rules and regulations and
potential liabilities not otherwise applicable to directors of non-banking
organizations. Consequently, evaluation of candidates by the Nominating
Committee and the Board of Directors may include more extensive inquiries into
personal background information including confirmation of the accuracy and
completeness of background information by (a) requiring candidates to complete
questionnaires to elicit information of the type required to be disclosed by
the Company in reports filed with the Securities and Exchange Commission, or
such state and federal banking regulatory authorities, (b) conducting
background investigations by qualified independent organizations experienced in
conducting criminal and civil investigatory reviews, and (c) such other
personal and financial reviews and analyses as the Nominating Committee and the
Board of Directors may deem appropriate in connection with the consideration of
candidates. Shareholders who wish to nominate a candidate for election to the
Companys Board of Directors, as opposed to recommending a potential nominee
for consideration by the Board of Directors, are required to comply with the
advance notice and any other requirements of the Companys bylaws, applicable
laws and regulations. The Nominating Committee and the Board of Directors may
elect to use third parties in the future to identify or evaluate candidates for
consideration as directors. The Nominating Committee Charter is
attached as Exhibit 99.3.

Shareholder Communications

A
majority of the members of the Board of Directors, each of whom is
independent as defined under applicable NASDAQ listing rules, has established
procedures for receipt and delivery of shareholder communications addressed to
the Board of Directors. Any such shareholder communications, including
communications by employees of the Company solely in their capacity as
shareholders, should be mailed or delivered to the Company addressed as
follows: Board of Directors, Service 1st Bancorp, 49 W. 10th
Street, Tracy, CA 95376.

6

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Annual Meeting Attendance

The
Company encourages members of its Board of Directors to attend the Companys
Annual Meeting of Shareholders each year. All of the directors, except
Directors Lawrence, Paulsen and Souza, attended the Companys Annual Meeting of
Shareholders held in 2007.

|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE
COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Oversight
of Executive Compensation Program

The
Board of Directors has established a Compensation Committee and adopted a
written Compensation Committee Charter which is attached as Exhibit 99.2 to
this document. The Compensation Committee oversees the Companys
compensation programs. The compensation programs include elements that are designed specifically for the executive
officers (the Executives or an Executive), and the Executives named
in the Summary Compensation Table. Additionally, the Compensation Committee is
charged with the review and recommendation to the full Board of Directors of
all annual compensation decisions relating to the Executives and to Directors.

The
Compensation Committee is composed primarily of non-employee members of the Board of Directors. John O. Brooks and Bryan R.
Hyzdu are ex-officio members of the Compensation Committee and do not vote on
compensation issues. The Board of Directors has determined that each voting
member of the Compensation Committee
is independent under applicable NASDAQ listing rules. No Compensation
Committee member, except Messrs. Brooks and Hyzdu, participates in any of the
Companys employee compensation programs.
Each year the Companys Audit Committee reviews any and all relationships that
each director may have with the
Company and the Board of Directors subsequently reviews the findings of the
Audit Committee. Messrs. Brooks and Hyzdu were not present during the Compensation
Committee voting or deliberations regarding their respective compensation.

The
Compensation Committee has taken the following actions to improve the links
between Executive pay and performance:

| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| | · | Including
  performance-based awards in the Companys incentive programs;                                              
| |   |                                                                                                                        
| | · | Hiring an
  independent compensation consultant to advise on executive compensation issues;                            
| |   |                                                                                                                        
| | · | Realigning
  compensation structures based on a more clearly defined competitive pay strategy; and                     
| |   |                                                                                                                        
| | · | Reviewing
  and approving the industry specific Peer Group (as defined below) for more precise performance comparisons.

The
responsibilities of the Compensation Committee, as stated in the Compensation Committee
Charter, include the following:

| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Provide
  oversight to the Companys overall compensation strategy and objectives pursuant to the goals of the Company.                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | · | Review and
  recommend to the Board of Directors changes to the structure and design of
  the compensation elements for the Executives including: annual base salary,
  annual cash incentives, long-term equity
  incentives, retirement plans (401(k) deferred compensation and salary
  continuation plans), change in control benefits and severance arrangements.
| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | · | Review and
  recommend to the Board of Directors changes in the structure and design of
  the compensation elements for directors of the Company and its subsidiaries and any committees thereof,
  including cash (meeting fees and retainers), long-term equity
  incentive plans and the Director Emeritus Program.                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | · | Review and
  recommend to the Board of Directors, the appropriate peer group to be used in
  benchmarking compensation for Executives and directors.                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | · | Recommend
  annually to the Board of Directors the compensation of the CEO, including base salary, annual cash incentive opportunity
  and changes to other compensation elements.                                                                                                                                                                                    

7

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Recommend annually to the Board of Directors the compensation of
  other Executives based on the recommendation of the CEO,
  including base salary, annual cash incentive opportunity and changes to other
  compensation elements.                                                                                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Recommend to
  the Board of Directors the performance criteria required by the Companys
  Annual Incentive Plan for Executives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Recommend to
  the Board of Directors changes to Company Board member and/or subsidiary Board member compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Recommend to the Board of Directors equity grants to the Executives,
  directors and other key employees, pursuant to Board of
  Directors approved option granting
  methodology.                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Recommend to
  the Board of Directors additions to personnel covered by the Companys Salary
  Continuation Plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Recommend to
  the Board of Directors employment agreements for the Executives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Periodically
  review and recommend to the Board of Directors changes to Executive retirement benefits, employment agreements,
  change in control benefits and severance
  arrangements.                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Periodically
  review the Company succession plans relating to positions held by the
  Executives and make recommendations to the Board of Directors regarding the
  process for selecting the individuals as successors.                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Evaluate the
  CEOs performance relative to the goals and objectives of the Company and
  discuss evaluations of other Executives with the CEO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Annually
  review and recommend changes deemed necessary to the Compensation Committee Charter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Prepare and submit an appropriate Compensation Committee Report
  pursuant to applicable regulations of the Securities and
  Exchange Commission for inclusion in the management
  proxy statement for each annual meeting of shareholders, stating, among other
  matters, whether (i) the Compensation Committee has reviewed and discussed
  the Compensation Discussion and Analysis with management, and (ii) the
  Compensation Committee has recommended to
  the Board of Directors that the Compensation Discussion and Analysis be
  included in such proxy statement and the Companys Annual Report on Form 10-K.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | Perform such
  other duties and responsibilities as it may be required by the rules and regulations that govern the Company that are
  consistent with the purpose of the Compensation Committee, or as the
  Board of Directors may deem appropriate.                                                                                                                                                                                                                                                                                                                                                                         

Overview
of Compensation Philosophy

The
Compensation Committees compensation philosophy was developed to balance and align the interests of the Executives and
shareholders. The philosophy is intended to attract, motivate, reward
and retain the most qualified management talent required to achieve corporate
objectives and increase shareholder value, while at the same time the
compensation philosophy seeks to make the most efficient use of shareholder
resources. The compensation philosophy emphasizes rewards for performance in an
effort to achieve these goals.

The three
primary components of compensation for the Executives are base salary, annual cash incentive opportunity and long-term,
equity-based incentive compensation. The Company also provides the
Executives with retirement benefits that are earned over time.

To be
effective, the compensation philosophy must reflect the corporate mission,
culture, and long-term goals of the Company. In order to recruit
and retain the most qualified and competent individuals
as Executives, the Company strives to maintain a compensation program that is competitive in its peer industry labor market. The
purpose of the compensation program is to reward individual performance
tied to the achievement of Company objectives. The following objectives are
considered in setting the compensation programs for the Executives:

| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | reward performance which supports the Companys core values of
  performance, integrity, teamwork, and advancement
  opportunities;                                
| |   |                                                                                                                                                                    
| | · | provide a
  significant percentage of total compensation that is at-risk, or variable,
  based on predetermined performance criteria;                              
| |   |                                                                                                                                                                    
| | · | design competitive total compensation and rewards programs to enhance
  the Companys ability to attract and retain knowledgeable and
  experienced Executives; and
| |   |                                                                                                                                                                    
| | · | set compensation and incentive levels that reflect competitive
  marketplace and industry practices.                                                               

8

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Compensation
Consultant

In
2006, the Compensation Committee retained John Parry & Alexander, a
compensation and benefits consulting firm.
John Parry & Alexander served as
an independent compensation consultant to advise the Compensation
Committee on all matters related to the Executives compensation and general compensation programs. John Parry & Alexander
participated in Compensation Committee meetings on an as needed basis. No compensation consultant was retained in 2007.

John Parry
& Alexander assisted the Compensation Committee by providing comparative
marketplace and industry data on compensation practices and programs for the
Executives based on an analysis of peer competitors. John Parry & Alexander also provided guidance on industry best practices.
John Parry & Alexander advised the
Compensation Committee in (1) determining base salaries, (2) setting
performance criteria for the Companys Annual Incentive Plan, (3) determining
the appropriateness of individual grant levels for stock option awards, (4) evaluating the retirement plans and
benefit amounts, (5) evaluating any benefits that may qualify as perquisites, and (6) determining the appropriateness of severance
benefits related to events of
termination or change in control.

Peer Group and
Benchmark Targets

The
Compensation Committee selected a compensation peer group consisting of a survey from the California
Bankers Association and a survey prepared by the California Department of
Financial Institutions (the Survey Data). The Compensation Committee selected
the institutions for the peer group based on the asset ranges of the institutions
and their geographical locations.
The Peer Group is used to benchmark executive compensation levels against
companies that have executive
positions with responsibilities similar in breadth and scope to the Company and
that compete with the Company for executive talent.

Compensation
Benchmarking Relative to Market

Using the
Survey Data, we consider marketplace compensation to be the median of the
Survey Data. The Company targets
total compensation at the median or slightly above the median of the Survey
Data, adjusted for excellent Company and individual performance. Compensation
elements such as base salary, short-term and long-term incentives,
retirement and other benefits may be adjusted within total compensation at
levels above or below the median of the Survey Data based on decisions by the Compensation Committee and the
Board of Directors about the compensation elements, the Survey Data, as
well as Company and Executive performance, including the Executives level of
responsibility, skill level, experience and
contributions to the Company.

Review of Executive
Performance

The
Compensation Committee reviews, on an annual basis, each compensation element
for each Executive. In each case, the Compensation Committee
takes into account the scope of responsibilities and years of experience and
balances these against competitive salary levels and other information
contained in the Survey Data. The Compensation
Committee has the opportunity to interact with the Executives at various times during
the year, which allows the Compensation Committee to form its own assessment of
each Executives performance.

In
addition, the CEO presents to the Compensation Committee an annual evaluation
of each Executive, which includes a review of individual contributions,
performance against specific criteria, strengths and weaknesses, as well as a development plan. Following this
presentation and a review of the
Survey Data, the Compensation Committee makes its own assessments and approves compensation for recommendation to the Board of
Directors for each Executive.

9

---



Overview of Executive
Compensation Elements

The
Companys compensation program for Executives consists of several compensation
elements, as illustrated in the table below.

|                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Pay Element                              |  | What the Pay Element Rewards                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Purpose of the Pay Element                                                                                                                                                                                                                                                                                                                                                                           
|                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|Base Salary                              |  | Core
  competence in the Executives role relative to skills, years of experience
  and contributions to the Company.                                                                                                                                                                                                                                                                                                                                                                |  | Provides fixed compensation
  based on competitive market practices.                                                                                                                                                                                                                                                                                                                                 
|                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|Short-Term AnnualIncentives              |  | Contributions toward the
  Companys achievement of specified
  profitability, growth, and credit quality.                                                                                                                                                                                                                                                                                                                                                                           |  | Provides
  focus on meeting annual goals that lead to the long-term success of the Company. Motivates achievement of annual performance
criteria.                                                                                                                                                                                                                                                    
|                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|Long-TermIncentives                      |  | The
  Companys long-term incentives consist of stock option grants that reward
  stock price performance and continued employment with the Company during the vesting
  period.                                                                                                                                                                                                                                                                                                     |  | Attempts
  to align interests of Executives with shareholder interests related to stock
  price performance. Increases Executive ownership in the Company. Enhances prospects for long-term
  retention in a competitive labor market.                                                                                                                                                               
|                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|RetirementBenefits                       |  | The
  Companys employee benefit plans include both tax-qualified and nonqualified retirement plans which are available to eligible
  employees, including the Executives, to reward long-term service to the
  Company. The Company offers a qualified 401(k) program for participation by
  all employees, including Executives. The Salary Continuation Plans for Executives
  are nonqualified and noncontributory plans that provide the Executives
  with retirement benefits. |  | Encourages retention of
  Executives. Provides a tax-deferred retirement savings plan subject to IRS
  limitations on qualified plans. The 401(k) Plan is described in more detail
  on page 13. The Salary Continuation Plans make available retirement benefits
  for the Executives comparable to peer group Survey Data. The Salary
  Continuation Plans are described in more detail on page 23.
|                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|Health andWelfareBenefits                |  | As
  part of a broad-based and competitive compensation program to support long-term
  service to the Company, Executives participate in employee health benefit
  plans generally
  available to all employees, including medical, health, life insurance,
  disability plans, and vacation and
  personal absence time.                                                                                                                                                            |  | Encourages a healthy lifestyle
  and contributes to overall health and
  fitness that, among other factors, may reduce health related risks and
  associated expense to the Company.                                                                                                                                                                                                                 
|                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|AdditionalBenefits andPerquisites        |  | The Executives receive
  certain additional benefits that may qualify as perquisites including
  contributions to (a) a health savings account, (b) the 401(k) Plan as
  matching funds, and (c) reimburse taxes related to bank owned life insurance
  acquired to fund retirement benefits under the salary continuation plans. The
  perquisite amounts are included in the Summary Compensation Table on page 17.                                                                |  | Encourages retention of
  Executives in a competitive labor market with benefits comparable to peer
  group Survey Data.                                                                                                                                                                                                                                                                             
|                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|Change in Control and Severance Benefits |  | The
  Executives have severance benefit provisions in their respective employment
  agreements which provide severance payments in certain events of termination
  or in connection with a change in control of the Company.                                                                                                                                                                                                                                                         |  | Severance
  payments under employment agreements are designed for retention purposes to
  provide continuity of management and to maintain business focus and eliminate
  uncertainty regarding employment during a change in control that benefits
  shareholders. The
  employment agreements are described in more detail on page 21.                                                             
|                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                      

10

---



The use of
these compensation elements enables the Company to reinforce its pay for performance
philosophy, as well as strengthen the ability to attract and retain highly
qualified executive officers. The
Compensation Committee believes that this combination of elements provides an appropriate mix of fixed and variable
pay, balances short-term operational performance
with long-term shareholder value, and encourages recruitment and retention of executive officers.

Detail
of Executive Compensation Elements

The
Compensation Committee believes the total compensation and benefits program for
Executives should consist of the following:
base salary, annual cash incentives, short-term and long-term incentives, retirement plans, health and welfare
benefits, certain perquisites and severance benefits in certain events of
termination or in connection with a change in control, as more fully
described below.

Base
Salary

Increases to base salaries, if any, are driven
primarily by individual performance and comparative information from the Survey Data. Individual performance is
evaluated by reviewing the Executives success in achieving business
results, promoting core values, focusing on the keys to success and
demonstrating leadership abilities.

In setting
the base salary of the Executives for fiscal year 2007, the Compensation
Committee reviewed the Survey Data. The Compensation Committee
also considered the Companys continuing achievement of its short-term and
long-term goals to achieve specific profitability, growth and asset quality
results.

The Compensation Committee based its compensation
decisions on the Companys performance related to the objectives listed
above. The Compensation Committee does not rely solely on predetermined
formulas or a limited set of criteria when it evaluates the performance of the Executives. The Compensation Committee reviews
the Survey Data, general economic conditions
and marketplace compensation trends with the assistance of its compensation consultant.
The Compensation Committee usually adjusts base salaries for Executives when:

| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| | · | the current compensation levels deviate significantly from the
  competitive marketplace data and information in the Survey Data;
| |   |                                                                                                                                  
| | · | recognizing
  outstanding individual performance; or                                                                             
| |   |                                                                                                                                  
| | · | recognizing an increase in responsibility.                                                                                       

Consistent
with the general compensation philosophy described above, the Compensation
Committee strives to reward
the Executives with a total compensation package at the median or slightly
above the median of the Survey Data, adjusted for excellent Company and
individual performance. The
base salaries paid to the CEO and other Executives during fiscal year 2007 are
shown in the Summary Compensation Table on page 17.

Short-Term
Annual Incentives

The Annual
Incentive Plan provides the Executives and participating employees with the
opportunity to earn cash incentives based on the achievement of specific
Company-wide, division or department, and individual performance
goals. The Compensation Committee designs the annual incentive component to
align Executive and employee compensation with annual (short-term) performance
criteria.

The
Compensation Committee annually approves an incentive bonus pool based on the
budgeted net earnings goal for each year. If the net earnings goal is exceeded,
the Compensation Committee recommends that contributions be made to the incentive bonus pool
in an amount equal to 50% of the amount which exceeds the net earnings goal. In
addition to the achievement of the net earnings goal, to be eligible to receive
payment of a cash incentive, the Executives and employees must each receive an
individual performance evaluation of 3, 4 or 5 based on a five point scale as follows:

| |   |                              
| | - | -----------------------------
| | · | 5  clearly
  outstanding;   
| |   |                              
| | · | 4  exceeds
  expectations;  
| |   |                              
| | · | 3  meets
  expectations;    
| |   |                              
| | · | 2  below
  expectations; and
| |   |                              
| | · | 1 
  unacceptable.          

11

---



In the
event that cash incentives are paid, the incentive bonus pool is divided into
percentage allocations as follows: 50% allocated for payment to the
Chairman/CEO group, 30% allocated for payment to other Executives as a group
and 20% allocated for payment to all other employees as a group. Payments are
then allocated further among individuals within a group based on the ratio that
the base salary of an individual participant within a group bears to the total
of all base salaries of individuals in the same group. Payments, if any, are made
annually in April to coincide with annual performance evaluations, but only
after the Companys independent certified public accountants have audited the
results of operations and financial condition of the Company and determined
that no adjustments to the financial statements are necessary.

The
budgeted net earnings goal for 2007 included an after-tax return on beginning
shareholders equity in excess of 8.6% (equal to $1,460,000 or more in net
earnings). No cash incentives were paid or
accrued under the Annual Incentive Plan in 2007 as the Company failed to exceed
the budgeted net earnings goal.

Long-Term
Incentives

An
important objective of the long-term incentive program is to strengthen the
relationship between the long-term value of
the Companys stock performance and the potential financial gain for
employees. The long-term incentive component has historically been provided in
the form of stock options that vest and become exercisable ratably over not
more than five years. The Compensation Committee has used stock options, rather
than other forms of long-term incentives, because they create value for the
Executives only if the shareholder value is increased through an increased
stock price. The Compensation Committee believes that this creates strong
alignment between the interests of the Executives and shareholders. The stock
options help the Company attract and retain
talented Executives.

Stock
options provide the Executives with the opportunity to purchase the Companys common stock at a price fixed on the grant date
regardless of future market price. The Compensation
Committees objective is to provide Executives with awards that are consistent with the Survey Data and based on the
Executives
individual performance. A stock option becomes
valuable only if the Companys common stock price increases above the option
exercise price and the holder of the option remains employed during the
period required for the option to vest,
which provides an incentive for the Executive to remain employed by the
Company. In addition, stock options link a portion of the Executive
compensation to shareholders interests by providing an incentive to make
decisions designed to increase the market price of the Companys common stock.

The
Company has two stock option plans. The 1999 Stock Option Plan was adopted by
the Board of Directors of the Bank on November 15, 1999, and approved by
shareholders at the 1999 Annual Meeting of Shareholders of the Bank held on May
11, 2000 (the 1999 Plan). The Company assumed the 1999 Plan and further
option grants were terminated in connection with the reorganization whereby the
Bank became a wholly-owned subsidiary of the Company effective June 26, 2003.
The 1999 Plan set aside 240,000 shares (378,000 shares as of April 28, 2008,
adjusted for stock dividends and stock splits) of no par value common stock of
the Company for the grant of incentive and nonstatutory stock options to key,
full-time salaried employees and officers of the Company, and to the
non-employee directors of the Company. Only nonstatutory options could be
granted to non-employee directors under the 1999 Plan.

The
Companys 2004 Stock Option Plan was adopted by the Board of Directors of the
Company on February 19, 2004, and approved by shareholders at the 2004 Annual
Meeting of Shareholders held on May 27, 2004 (the 2004 Plan). The 2004 Plan
set aside 169,000 shares (253,500 shares as of April 28, 2008, adjusted for a
stock split in 2005) of no par value common stock of the Company for the grant
of incentive and nonstatutory stock options to key, full-time salaried
employees and officers of the Company, and to the non-employee directors of the
Company. Only nonstatutory options could be granted to non-employee directors
under the 2004 Plan. The terms of the 2004 Plan are substantially similar to
the terms of the 1999 Plan described below.

12

---



Options
granted under the 1999 Plan were either incentive options or nonstatutory
options, however, only nonstatutory options were permitted to be granted to
non-employee directors. Options granted became exercisable in accordance with a
vesting schedule established at the time of grant. Vesting could not extend
beyond ten years from the date of grant. Upon a change in control of the
Company, options under the 1999 Plan become fully vested and exercisable, or
may be assumed or equivalent options may be substituted by a successor
corporation. Options are adjusted to protect against dilution in the event of
certain changes in the Companys capitalization, including stock splits and
stock dividends. All options granted under the 1999 Plan have an exercise price
equal to the fair market value of the common stock on the date of grant. No
options were granted under the 1999 Plan from and after June 26, 2003, the
Effective Date of the reorganization described above and future grants of
options thereunder were terminated, in accordance with the permit issued by the
California Commissioner of Corporations to authorize the exchange of shares of
common stock of the Company for the outstanding shares of common stock of the
Bank in the reorganization.

Option
grant recommendations are made at Compensation Committee meetings
scheduled in advance to meet appropriate deadlines for compensation related decisions. The Compensation Committee then
recommends the grants to the full
Board of Directors for their approval. The Companys practice is that the full
Board of Directors approves all
stock option grants at regularly scheduled meetings. The meetings are held after the close of the U.S. stock markets and the
Board of Directors sets the exercise price for each stock option using
the closing price of the Companys stock price on the date of grant.

There is a
limited term which is not more than ten years from the date of grant in which
the Executive can exercise vested stock options. At the end of this option
term, the right to purchase Company stock subject to any unexercised options
expires. Option holders generally forfeit any unvested options if
their employment with the Company terminates.

In
certain instances, stock options may vest on an accelerated schedule. A change
of control may trigger accelerated vesting.
In this instance, all unvested options will vest as of the date of the
change in control.

Retirement Benefits

The
Company offers retirement programs that are intended to supplement the
employees personal savings and social
security. The programs include the Company 401(k) Plan (401(k) Plan)
and Salary Continuation Plans. All employees who work at least one year for
1,000 or more hours, including the Executives, are generally eligible to
participate in the 401(k) Plan. Only the Executives have entered into Salary
Continuation Plans with the Company.

| |   |            
| | - | -----------
| | · | 401(k) Plan

The
Company adopted the 401(k) Plan to enable employees to save for retirement
through a tax-advantaged combination of employee and Company contributions and
to provide employees the opportunity to directly manage their retirement plan
assets through a variety of investment options. The 401(k) Plan allows eligible
employees, including the Executives, to elect to
contribute from 1% to 100% of their eligible compensation to an investment
trust. Eligible compensation generally
means all wages, salaries and fees for services from the Company. Employee
contributions are matched in cash by the Company at the rate of 100% for the
first 2% of the employees salary for
2006 and 3% for 2007. Such contributions vest immediately. The 401(k) Plan
provides different investment options, for which the participant has
sole discretion in determining how both the
employer and employee contributions are invested. The 401(k) Plan does not provide the employees the option to invest
directly in the Companys common stock. The 401(k) Plan offers
in-service withdrawals in the form of loans, hardship distributions, after-tax account distributions and age 59.5
distributions. The 401(k) Plan benefits are payable pursuant to the participants
election in the form of a single lump sum.

13

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| |   |                            
| | - | ---------------------------
| | · | Salary Continuation
  Plans

The
Salary Continuation Plans are structured as individual agreements with the
Executives. The terms of the agreements include the amounts each will receive
upon the occurrence of certain specified events, including normal retirement
and in the case of Mr. Hyzdu and Ms. Reinard, early retirement on or after a
specified age coinciding with fifteen (15) years of service. A lump-sum premium
payment of approximately three million one hundred ninety-four thousand dollars
($3,194,000) was paid to acquire insurance policies on the lives of the named
executive officers as a funding mechanism in connection with the agreements.
The Bank is the owner and beneficiary of the policies and is entitled to the
increase in cash surrender value represented by the policies. The increase in
cash surrender value is accrued monthly and reflected in the Companys
consolidated financial statements as a category under Other income. The Bank
reimburses the Executives each year in an amount to satisfy payroll taxes
applicable to each Executive related to the insurance, which amounts are
reflected in the Summary Compensation Table.

The
agreements provide for the following annual retirement benefit payments:

| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | forty
  thousand dollars ($40,000) for Mr. Brooks at age sixty-six (66);                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | · | one hundred
  thirty-three thousand dollars ($133,000) for Mr. Hyzdu at age sixty-five (65)
  and a reduced amount upon early retirement beginning at age fifty-six (56) or
  thereafter and prior to normal retirement ranging from seventy-seven thousand
  nine hundred seventy-four dollars ($77,974) to one hundred twenty-six
  thousand eight hundred eighty-six dollars ($126,886);
| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | · | seventy-one
  thousand dollars ($71,000) for Mr. Bloch at age sixty-five (65);                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | · | seventy-seven
  thousand dollars ($77,000) for Mr. Carman at age sixty-five (65); and                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | · | sixty-four
  thousand dollars ($64,000) for Ms. Reinard at age sixty-five (65) and a
  reduced amount upon early retirement beginning at age fifty-nine (59) or
  thereafter and prior to normal retirement ranging from thirty eight thousand
  one hundred eighteen dollars ($38,118) to fifty-eight thousand eight hundred
  thirty-eight dollars ($58,838).                            

See
the discussion under the heading Salary Continuation Plans on page 23 for more information regarding the
agreements.

Health and Welfare Benefits

The
Company offers a variety of health and welfare programs to all eligible
employees. The Executives generally are
eligible for the same benefit programs on the same basis as the rest of the
broad-based employees. The health and welfare programs are intended to protect
employees against health risks and encourage
a healthy lifestyle. The health and welfare programs include medical,
pharmacy, dental, vision, life insurance, accidental death and disability, paid
vacation and personal absence time. Coverage under the life and accidental
death and disability programs offer benefit
amounts specific to each Executive.

The
Company offers a long-term disability program that provides income replacement
to Executives after a 90-day disability
period at a rate of 66.67% of basic monthly
earnings up to a maximum of $10,000 per month until normal Social Security retirement age or recovery per the terms and
conditions of the program. All other
employees are eligible to receive 66.67% of basic monthly earnings to a maximum of $10,000 per
month.

Perquisites

The Compensation
Committee annually reviews payments to Executives that may qualify as
perquisites to determine if
such payments are appropriate and whether any adjustments are required. All
such payments are included in the Summary Compensation Table on page 17.

14

---



Change in Control and Termination
Benefits

In June
2004, the Company entered into employment agreements with Messrs. Brooks,
Hyzdu, Carman and Bloch, and Ms. Reinard. The agreements provide for a base salary which is included in the Summary
Compensation Table on page 17. The agreements
may be terminated with or without cause, but if an agreement is terminated
without cause under certain specified circumstances, the Executive is entitled to receive severance compensation in the amount
specified. Each
agreement further provides that in the event of a change in control as
defined therein and within a specified
period following consummation of such change in control (i) the employees employment is terminated; or (ii) any adverse change
occurs in the nature and scope of the employees
salary or benefits; or (iii) any event occurs which reasonably constitutes a
constructive termination of
employment, by resignation or otherwise, then the employee will be entitled to
receive severance compensation in the
amount specified, less applicable
withholding deductions (in addition to salary, incentive compensation, or other
payments, if any, due the
Executive). See the discussion under the heading Employment Agreements on page 21.

15

---



COMPENSATION COMMITTEE REPORT

The
Compensation Committee reviewed and discussed the Compensation Discussion and Analysis included in this document with
management. Based on such review and discussion, the Compensation
Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included
in this document for filing with the Securities and Exchange Commission.

Submitted by the Compensation Committee of the Board of Directors:

|                        |  |                          |  |                     
|----------------------- |  | ------------------------ |  | --------------------
|/s/ John O.
  Brooks    |  | /s/ Eugene C.
  Gini     |  | /s/ Bryan R.
  Hyzdu
|                        |  |                          |  |                     
|                       
|/s/ Frances
  C. Mizuno |  | /s/ Richard R.
  Paulsen |  | /s/ Anthony F. Souza
|                        |  |                          |  |                     

16

---



SUMMARY COMPENSATION TABLE

The
following table shows the cash and non-cash compensation awarded to or earned
by individuals who served as our chief executive officer, chief financial
officer and other most highly compensated executive officers in all capacities
during fiscal years 2006 and 2007.

|                                                                                                                                                            |  |      |      |                  |         |              |  |                      |   |                          |     |                                                   |   |                                                                                               |        |                                    |     |             |   |        |        |   |        |        |   |         |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | ---------------- | ------- | ------------ |  | -------------------- | - | ------------------------ | --- | ------------------------------------------------- | - | --------------------------------------------------------------------------------------------- | ------ | ---------------------------------- | --- | ----------- | - | ------ | ------ | - | ------ | ------ | - | ------- | ------- | 
|Name and
  Principal Position                                                                                                                               |  |      |      | Salary
  ($) (3) |         | Bonus($) (4) |  | Stock
  Awards
  ($) |   | Option
  Awards  ($) (5) |     | Non-Equity
  Incentive Plan
  Compen-sation
  ($) |   | Change in
  Pension
  Value and
  Nonqualified
  Deferred
  Compensation
  Earnings
  ($) (6) |        | All Other
  Compensation
  ($) (7) |     | Total
  ($) |  
|                                                                                                                                                            |  |      |      |                  |         |              |  |                      |   |                          |     |                                                   |   |                                                                                               |        |                                    |     |             |  
|John O. Brooks, Chairman of
  the Board and Chief Executive Officer of the Company; Chairman of the Board
  of the Bank and Charter Services Group, Inc.(1) |  |      | 2007 |                  | $       | 145,230      |  |                      |  |                          |     |                                                  |   | $                                                                                             | 14,400 |                                    |     |            |   |        |       |   | $      | 11,154 |   | $       | 170,784 | 
|                                                                                                                                                            |  | 2006 |      | $                | 143,557 |              |  |                     |   |                          |    |                                                   | $ | 14,400                                                                                        |        |                                    |    |             |   |       |        | $ | 9,430  |        | $ | 167,387 |        
|                                                                                                                                                            |  |      |      |                  |         |              |  |                      |   |                          |     |                                                   |   |                                                                                               |        |                                    |     |             |   |        |        |   |        |        |   |         |         | 
|Bryan R. Hyzdu, President of
  the Company; President and Chief Executive Officer of the Bank and Charter
  Services Group, Inc. (1)                        |  |      | 2007 |                  | $       | 189,993      |  |                      |  |                          |     |                                                  |   | $                                                                                             | 14,400 |                                    |     |            |   | $      | 23,960 |   | $      | 14,033 |   | $       | 242,386 | 
|                                                                                                                                                            |  | 2006 |      | $                | 170,237 |              |  |                     |   |                          |    |                                                   | $ | 14,400                                                                                        |        |                                    |    |             | $ | 20,879 |        | $ | 10,539 |        | $ | 216,055 |        
|                                                                                                                                                            |  |      |      |                  |         |              |  |                      |   |                          |     |                                                   |   |                                                                                               |        |                                    |     |             |   |        |        |   |        |        |   |         |         | 
|Robert E. Bloch, Executive
  Vice President and Chief Financial Officer of the Company, the Bank and
  Charter Services Group, Inc.                         |  |      | 2007 |                  | $       | 129,452      |  |                      |  |                          |     |                                                  |   | $                                                                                             | 7,200  |                                    |     |            |   | $      | 68,097 |   | $      | 11,500 |   | $       | 216,249 | 
|                                                                                                                                                            |  | 2006 |      | $                | 118,219 |              |  |                     |   |                          |    |                                                   | $ | 7,200                                                                                         |        |                                    |    |             | $ | 59,312 |        | $ | 10,863 |        | $ | 195,594 |        
|                                                                                                                                                            |  |      |      |                  |         |              |  |                      |   |                          |     |                                                   |   |                                                                                               |        |                                    |     |             |   |        |        |   |        |        |   |         |         | 
|Patrick Carman, President
  and Chief Operating Officer (1) (2)                                                                                             |  |      | 2007 |                  | $       | 153,469      |  |                      |  |                          |     |                                                  |   | $                                                                                             | 7,200  |                                    |     |            |   | $      | 45,581 |   | $      | 14,168 |   | $       | 220,418 | 
|                                                                                                                                                            |  | 2006 |      | $                | 124,125 |              |  |                     |   |                          |    |                                                   | $ | 7,200                                                                                         |        |                                    |    |             | $ | 39,732 |        | $ | 10,408 |        | $ | 181,465 |        
|                                                                                                                                                            |  |      |      |                  |         |              |  |                      |   |                          |     |                                                   |   |                                                                                               |        |                                    |     |             |   |        |        |   |        |        |   |         |         | 
|Shannon Reinard, Executive
  Vice President and Operations Manager of the Bank                                                                              |  |      | 2007 |                  | $       | 91,669       |  |                      |  |                          |     |                                                  |   | $                                                                                             | 15,150 |                                    |     |            |   | $      | 15,606 |   | $      | 8,072  |   | $       | 130,497 | 
|                                                                                                                                                            |  | 2006 |      | $                | 81,719  |              |  |                     |   |                          |    |                                                   | $ | 17,800                                                                                        |        |                                    |    |             | $ | 13,658 |        | $ | 5,914  |        | $ | 113,177 |        
|                                                                                                                                                            |  |      |      |                  |         |              |  |                      |   |                          |     |                                                   |   |                                                                                               |        |                                    |     |             |   |        |        |   |        |        |   |         |         | 
|Thomas Vander Ploeg,
  Executive Vice President and Chief Credit Officer of the Bank(2)                                                                     |  |      | 2007 |                  | $       | 76,250       |  |                      |  |                          |     |                                                  |   | $                                                                                             | 2,508  |                                    |     |            |   |        |       |   | $      | 2,800  |   | $       | 81,558  | 
|                                                                                                                                                            |  | 2006 |      |                  | N/A     |              |  | N/A                  |   |                          | N/A |                                                   |   | N/A                                                                                           |        |                                    | N/A |             |   | N/A    |        |   | N/A    |        |   | N/A     |        

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Effective April 1, 2007,
  Mr. Brooks assumed the position as Chief Executive Officer of the Bank,
  Patrick Carman assumed the position of President of the Bank, and Mr. Hyzdu
  relinquished his positions as President and Chief Executive Officer of the
  Bank in order to focus full-time on the development of the Companys non-bank
  subsidiary, Charter Services Group, Inc., as its President and Chief
  Executive Officer.

17

---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Effective June 1, 2007, Mr.
  Carman relinquished his position as Chief Credit Officer of the Bank and Mr.
  Vander Ploeg was hired as Executive Vice President and Chief Credit Officer
  of the Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) | Amounts shown include cash
  and non-cash compensation earned and received by executive officers as well
  as amounts earned but deferred at the election of those officers under the
  401(k) Plan and amounts paid for auto allowance which was added to the
  base salary of each executive officer. Mr. Brooks voluntarily agreed to a
  reduced salary during 2007 and 2006, to the amount reflected in the table and
  provided under the terms of his employment agreement dated July 15, 2004, to
  reflect the comparable reduction in his availability due to illness. The
  executive officer employment agreements, each dated July 15, 2004, are
  discussed hereafter in this document under the heading
  Post-Employment Payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(4) | No incentive bonus
  compensation was accrued or paid in 2006 or 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(5) | The amount reported in this
  column is the dollar amount recognized for financial statement reporting
  purposes for 2006 and 2007 in accordance with FAS 123(R). The assumptions
  used to calculate FAS 123(R) fair value are described in Note 1 under the
  heading Stock-based compensation and Note 12 under the heading Stock
  Option Plan in the Notes to Consolidated Financial Statements included in
  our Annual Report on Form 10-K for the year ended December 31, 2007. No
  options were granted to the named executive officers in 2006 or 2007 except for 15,000 options granted to Thomas Vander Ploeg at an exercise
price of $13.00 per share. The Company has
  a 2004 Stock Option Plan (the 2004 Plan) which was adopted by the Board of
  Directors of the Company on February 19, 2004, and approved by shareholders
  at the 2004 Annual Meeting of Shareholders held on May 27, 2004. The Company
  also has a 1999 Stock Option Plan pursuant to which options are outstanding,
  which was adopted by the Board of Directors of the Bank on November 15, 1999,
  and approved by shareholders at the 1999 Annual Meeting of Shareholders of
  the Bank held on May 11, 2000 (the 1999 Plan). The terms of the 2004 Plan
  are substantially similar to the terms of the 1999 Plan. Under the 1999 Plan,
  options were permitted to be granted to non-employee directors, officers and
  employees of Service 1st Bank. Options granted under the 1999 Plan
  were either incentive options or nonstatutory options, however, only
  nonstatutory options were permitted to be granted to non-employee directors.
  Options granted became exercisable in accordance with a vesting schedule
  established at the time of grant. Vesting could not extend beyond ten years
  from the date of grant. The Company assumed the 1999 Plan in connection with
  the reorganization whereby the Bank became a wholly-owned subsidiary of the
  Company. Upon a change in control of the Company, options under the 1999 Plan
  become fully vested and exercisable, or may be assumed or equivalent options
  may be substituted by a successor corporation. Options are adjusted to
  protect against dilution in the event of certain changes in the Companys
  capitalization, including stock splits and stock dividends. All options
  granted to the named executive officers are incentive stock options and have
  an exercise price equal to the fair market value of the common stock on the
  date of grant. No options were granted under the 1999 Plan from and after
  June 26, 2003, the Effective Date of the reorganization described above and
  future grants of options thereunder were terminated, in accordance with the
  permit issued by the California Commissioner of Corporations to authorize the
  exchange of shares of common stock of the Company for the outstanding shares
  of common stock of the Bank in the reorganization. See the discussion under
  the heading Long-Term Incentives on page
  12 for more information regarding the Companys 2004 Plan and 1999 Plan.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(6) | The amount reported in the
  column represents the increase in the actuarial net present value of all
  future retirement benefits under the executive officers salary continuation
  plan. The executive officers may not be entitled to the benefit amounts
  included as the salary continuation plan is not vested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(7) | Amounts shown include (i)
  $464 as disability insurance premiums for Mr. Hyzdu;(ii) contributions to a
  health savings account for Messrs. Hyzdu of $4,800 in 2007 and $3,600 in
  2006; Carman of $4,800 in 2007 and $3,600 in 2006; Vander Ploeg of $2,800 in 2007;
  and Bloch of $2,400 in 2007 and $3,600 in 2006; (iii) in lieu of not
  participating in the health savings account program, Mr. Brooks and Ms.
  Reinard received $3,600 in 2007 and $2,700 in 2006;  (v) matching contributions on deferrals under the Companys 401(k)
  Plan for Messrs. Hyzdu, Bloch and Carman and Ms. Reinard in the amounts of
  $6,519, $5,796, $6,001, and $3,120, respectively, for 2007 and $4,377,
  $4,195, $3,774, and $2,199, respectively, for 2006. No matching contributions
  were made for Mr. Brooks; and (iv) a reimbursement payment to satisfy payroll
  taxes applicable to bank owned life insurance for the salary continuation
  plans for Messrs. Brooks, Hyzdu, Bloch and Carman and Ms. Reinard in the
  amounts of $7,554, $2,250, $3,304, $3,367, and $1,152, respectively, for 2007
  and $6,730, $2,098, $3,068, $3,034 and $1,015, respectively for 2006.  Generally, all Company employees are
  eligible to participate in the 401(k) Plan. Participating employees may defer
  a portion of their compensation in the 401(k) Plan and the Company, at its
  option, may make matching contributions on participants deferrals. During
  2007, the Company matched 100% of the first 3% of the amount deferred by the
  employees and in 2006, the Company matched 100% of the first 2% of the amount
  deferred by participating employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

18

---



OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END

The following table shows information regarding equity
awards held at the end of fiscal year 2007 by the Companys executive officers
named in the Summary Compensation Table. Data in the table below has been adjusted,
as applicable, for stock dividends and stock splits

Outstanding Equity Awards At Fiscal Year-End Table

|                    |  |                                                                              |      |                                                                                  |        |                                                                                                                  |  |                                 |   |                            |   |                                                                           |  |                                                                                 |  |                                                                                                                             |  |                                                                                                                                               |  |  |   |  |  |   |  |  |   | 
|------------------- |  | ---------------------------------------------------------------------------- | ---- | -------------------------------------------------------------------------------- | ------ | ---------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | - | -------------------------- | - | ------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  |  | - |  |  | - |  |  | - | 
|                    |  | Option Awards                                                                |      | Stock Awards                                                                     |       
|                    |  |                                                                              |      |                                                                                  |       
|Name                |  | Number
  of
  Securities
  Underlying
  Unexercised
  Options
(#)Exercisable |      | Number
  of
  Securities
  Underlying
  Unexercised
  Options
  (#)Unexercisable |        | Equity
  Incentive
  Plan Awards:
  Number of
  Securities
  Underlying
  Unexercised
  Unearned
  Options
  (#) |  | Option
  Exercise
  Price
  ($) |   | Option
  Expiration
  Date |   | Number
  of
  Shares or
  Units of
  Stock That
  Have Not
  Vested
  (#) |  | Market
  Value of
  Shares or
  Units of
  Stock That
  Have Not
  Vested
  ($) |  | Equity
  Incentive
  Plan Awards:
  Number of
  Unearned
  Shares, Units
  or Other
  Rights That
  Have Not
  Vested
  (#) |  | Equity
  Incentive
  Plan Awards:
  Market or
  Payout Value
  of Unearned
  Shares, Units
  or Other
  Rights That
  Have Not
  Vested
  ($) | 
|                    |  |                                                                              |      |                                                                                  |        |                                                                                                                  |  |                                 |   |                            |   |                                                                           |  |                                                                                 |  |                                                                                                                             |  |                                                                                                                                               | 
|John O. Brooks      |  | 39,375                                                                       | (1)  |                                                                                  |       |                                                                                                                  |  |                                 |  |                            | $ | 6.35                                                                      |  | 11/1/10                                                                         |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 
|                    |  | 10,000                                                                       | (2)  |                                                                                  | 5,000  |                                                                                                                  |  |                                 |  |                            | $ | 12.33                                                                     |  | 6/16/15                                                                         |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 
|Bryan R. Hyzdu      |  | 31,500                                                                       | (3)  |                                                                                  |       |                                                                                                                  |  |                                 |  |                            | $ | 6.35                                                                      |  | 11/15/09                                                                        |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 
|                    |  | 10,000                                                                       | (4)  |                                                                                  | 5,000  |                                                                                                                  |  |                                 |  |                            | $ | 12.33                                                                     |  | 6/16/15                                                                         |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 
|Robert E. Bloch     |  | 23,625                                                                       | (5)  |                                                                                  |       |                                                                                                                  |  |                                 |  |                            | $ | 6.03                                                                      |  | 3/26/11                                                                         |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 
|                    |  | 5,000                                                                        | (6)  |                                                                                  | 2,500  |                                                                                                                  |  |                                 |  |                            | $ | 12.33                                                                     |  | 6/16/15                                                                         |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 
|Patrick Carman      |  | 15,750                                                                       | (7)  |                                                                                  |       |                                                                                                                  |  |                                 |  |                            | $ | 6.25                                                                      |  | 8/7/10                                                                          |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 
|                    |  | 5,000                                                                        | (8)  |                                                                                  | 2,500  |                                                                                                                  |  |                                 |  |                            | $ | 12.33                                                                     |  | 6/16/15                                                                         |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 
|Shannon Reinard     |  | 15,000                                                                       | (9)  |                                                                                  |       |                                                                                                                  |  |                                 |  |                            | $ | 9.30                                                                      |  | 10/25/14                                                                        |  |                                                                                                                             |  |                                                                                                                                               |  |  |  |  |  |  |  |  |  | 
|                    |  | 5,000                                                                        | (10) |                                                                                  | 2,500  |                                                                                                                  |  |                                 |  |                            | $ | 12.33                                                                     |  | 6/16/15                                                                         |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 
|Thomas Vander Ploeg |  | 15,000                                                                       | (11) |                                                                                  | 15,000 |                                                                                                                  |  |                                 |  |                            | $ | 13.00                                                                     |  | 9/20/17                                                                         |  |                                                                                                                             |  |                                                                                                                                              |  |  |  |  |  |  |  |  |  | 

|     |                                                                                                                                                                                                            
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  | The stock options vest
  ratably over three years commencing one year after the grant date and 100%
  were vested as of December 31, 2007.                                                                 
|     |                                                                                                                                                                                                            
|(2)  | The stock options vest
  ratably over three years commencing one year after the grant date and 67.6%
  were vested as of December 31, 2007 with the remaining vesting of 33.3% to
  occur on June 16, 2008.
|     |                                                                                                                                                                                                            
|(3)  | The stock options vest
  ratably over three years commencing one year after the grant date and 100%
  were vested as of December 31, 2007.                                                                 
|     |                                                                                                                                                                                                            
|(4)  | The stock options vest
  ratably over three years commencing one year after the grant date and 67.6%
  were vested as of December 31, 2007 with the remaining vesting of 33.3% to
  occur on June 16, 2008.
|     |                                                                                                                                                                                                            
|(5)  | The stock options vest
  ratably over three years commencing one year after the grant date and 100%
  were vested as of December 31, 2007.                                                                 
|     |                                                                                                                                                                                                            
|(6)  | The stock options vest
  ratably over three years commencing one year after the grant date and 67.6%
  were vested as of December 31, 2007 with the remaining vesting of 33.3% to
  occur on June 16, 2008.
|     |                                                                                                                                                                                                            
|(7)  | The stock options vest
  ratably over three years commencing one year after the grant date and 100%
  were vested as of December 31, 2007.                                                                 
|     |                                                                                                                                                                                                            
|(8)  | The stock options vest
  ratably over three years commencing one year after the grant date and 67.6%
  were vested as of December 31, 2007 with the remaining vesting of 33.3% to
  occur on June 16, 2008.
|     |                                                                                                                                                                                                            
|(9)  | The stock options vest
  ratably over three years commencing one year after the grant date and 100%
  were vested as of December 31, 2007.                                                                 
|     |                                                                                                                                                                                                            
|(10) | The stock options vest
  ratably over three years commencing one year after the grant date and 67.6%
  were vested as of December 31, 2007 with the remaining vesting of 33.3% to
  occur June 16, 2008.   
|     |                                                                                                                                                                                                            
|(11) | The stock options vest
  ratably over three years commencing one year after the grant date. None of
  these options were exercisable as of December 31, 2007.                                              
|     |                                                                                                                                                                                                            
|(12) | The fair market value per
  share of the Companys common stock at the fiscal year-end was $7.90.                                                                                                          

19

---



OPTION
EXERCISES AND STOCK VESTED

The Option Exercises and Stock Vested Table is omitted
as there were no stock option awards exercised by or restricted stock and
restricted stock unit awards vested for the executive officers named in the
Summary Compensation Table during fiscal year 2007.

PENSION
BENEFITS

The following table summarizes information with
respect to each plan that provides for payments or other benefits at, following,
or in connection with the retirement of any of the executive officers named in
the Summary Compensation Table.

Pension Benefits Table

|                |  |               |                            |                                         |  |                                          |  |                                      |         |  |  |   | 
|--------------- |  | ------------- | -------------------------- | --------------------------------------- |  | ---------------------------------------- |  | ------------------------------------ | ------- |  |  | - | 
|Name            |  | Plan Name (1) |                            | Number of YearsCredited
  Service(#)(2) |  | Present Valueof AccumulatedBenefit($)(3) |  | Payments During LastFiscal
  Year($) |        
|                |  |               |                            |                                         |  |                                          |  |                                      |        
|John O. Brooks  |  |               | Salary
  Continuation Plan |                                         |  | 4                                        |  | $                                    | 361,825 |  |  |  | 
|Bryan R. Hyzdu  |  |               | Salary
  Continuation Plan |                                         |  | 4                                        |  | $                                    | 71,493  |  |  |  | 
|Robert E. Bloch |  |               | Salary
  Continuation Plan |                                         |  | 4                                        |  | $                                    | 197,531 |  |  |  | 
|Patrick Carman  |  |               | Salary
  Continuation Plan |                                         |  | 4                                        |  | $                                    | 138,199 |  |  |  | 
|Shannon Reinard |  |               | Salary
  Continuation Plan |                                         |  | 2                                        |  | $                                    | 34,426  |  |  |  | 

|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The salary continuation plans are more fully
  described under the heading Salary Continuation Plans on page 23. Mr. Vander Ploeg does not have a salary
  continuation plan.
|    |                                                                                                                                                                                
|(2) | Years of credited service represents the number of
  years the executive officer has participated in the pension benefit plan.
  Normal retirement age is 65.                  
|    |                                                                                                                                                                                
|(3) | Includes amounts which the executive officer may not
  be currently entitled to receive because those amounts are not vested.                                                  

NONQUALIFIED
DEFERRED COMPENSATION

The Nonqualified Deferred Compensation Table is
omitted as the Company does not have any nonqualified deferred compensation
plans. The Company has a qualified 401(k) Plan in which the executive officers
named in the Summary Compensation Table participate on the same basis as other
Company employees. See footnote 7 to the Summary Compensation Table and
discussion under the heading 401(k) Plan on page
13 for additional information regarding the 401(k) Plan.

POST-EMPLOYMENT
PAYMENTS

Employment
Agreements          The Company has entered into employment agreements with the
executive officers named in the Summary Compensation Table. Each such employment
agreement includes certain provisions providing benefits to the executive
officers which are substantially identical as follows:

| |   |                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | an annual base salary that includes an auto
  allowance as reflected in the Summary Compensation Table, which is subject to
  annual adjustment increase during the term in the discretion of the Board of
  Directors;                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                      
| | · | an annual bonus payment in an amount to be
  determined in the discretion of the Board of Directors based upon the
  Companys profitability and implementation of strategic plans;                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                      
| | · | four (4) weeks annual vacation;                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                      
| | · | group life, health and disability insurance
  benefits;                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                      
| | · | reimbursement of business expenses incurred on
  behalf of the Company;                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                      
| | · | group life and medical insurance benefits; and                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                      
| | · | continuation of group insurance coverages for the
  executive officer and his or her dependents at the expense of the Company
  from the date of termination without cause or in connection with a change in
  control from the date of termination or the occurrence of certain events
  deemed to be the equivalent of termination.

20

---



John
Brooks Employment Agreement. The Company and John O.
Brooks entered into an employment agreement dated July 15, 2004, which replaced
a prior employment agreement dated November 1, 2000. Mr. Brooks currently
serves as the Chairman of the Board of Directors and Chief Executive Officer of
the Company and the Bank, and Chairman of the Board of Directors of Charter
Services Group, Inc. The employment agreement has a two (2) year term, subject
to renewal and termination rights of the Company and Mr. Brooks. In addition to
the provisions common to all of the employment agreements as described above,
Mr. Brooks employment agreement includes the following severance provisions
for certain termination events including a change in control of the Company:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | severance
  payments in connection with an involuntary termination without cause equal to
  twelve (12) months of base salary payable in bi-monthly installments
  commencing with the month immediately following the termination; and                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | · | severance
  payments in connection with an involuntary termination or certain events
  deemed to be the equivalent of termination occurring within twenty-four (24)
  months following a change in control, or upon voluntary resignation at any
  time during the period commencing on the expiration of six (6) months
  following a change in control through the expiration of twelve (12) months
  following a change in control, equal to twenty-four (24) months of base
  salary payable in lump sum within thirty (30) days of any such termination,
  event or resignation.

Bryan
Hyzdu Employment Agreement. The Company and Bryan R.
Hyzdu entered into an employment agreement dated July 15, 2004, which replaced
a prior severance agreement dated November 1, 2002. Mr. Hyzdu currently serves
as the President of the Company and President and Chief Executive Officer of
Charter Services Group, Inc. The employment agreement has a three (3) year
term, subject to renewal and termination rights of the Company and Mr. Hyzdu.
In addition to the provisions common to all of the employment agreements as
described above, Mr. Hyzdus employment agreement includes the following
severance provisions for certain termination events including a change in
control of the Company:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | severance
  payments in connection with an involuntary termination without cause equal to
  twelve (12) months of base salary payable in bi-monthly installments
  commencing with the month immediately following the termination; and                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | · | severance
  payments in connection with an involuntary termination or certain events
  deemed to be the equivalent of termination occurring within twenty-four (24)
  months following a change in control, or upon voluntary resignation at any
  time during the period commencing on the expiration of six (6) months following
  a change in control through the expiration of twelve (12) months following a
  change in control, equal to twenty-four (24) months of base salary payable in
  lump sum within thirty (30) days of any such termination, event or
  resignation.

Robert
Bloch Employment Agreement. The Company and Robert E.
Bloch entered into an employment agreement dated July 15, 2004, which replaced
a prior offer of employment letter by the Bank dated February 26, 2001. Mr.
Bloch currently serves as Executive Vice President and Chief Financial Officer
of the Company, the Bank and Charter Services Group, Inc. The employment
agreement has a three (3) year term, subject to renewal and termination rights
of the Company and Mr. Bloch. In addition to the provisions common to all of
the employment agreements as described above, Mr. Blochs employment agreement
includes the following severance provisions for certain termination events
including a change in control of the Company:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | severance
  payments in connection with an involuntary termination without cause equal to
  six (6) months of base salary payable in bi-monthly installments commencing
  with the month immediately following the termination; and                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | · | severance
  payments in connection with an involuntary termination or certain events
  deemed to be the equivalent of termination occurring within twenty-four (24)
  months following a change in control, or upon voluntary resignation at any
  time during the period commencing on the expiration of six (6) months
  following a change in control through the expiration of twelve (12) months
  following a change in control, equal to twelve (12) months of base salary
  payable in lump sum within thirty (30) days of any such termination, event or
  resignation.

21

---



Patrick
Carman Employment Agreement. The Company and Patrick
Carman entered into an employment agreement dated July 15, 2004, which replaced
a prior offer of employment letter by the Bank dated May 26, 2000. Mr. Carman
currently serves as President and Chief Operating Officer/Chief Credit Officer
of the Bank. The employment agreement has a three (3) year term, subject to
renewal and termination rights of the Company and Mr. Carman. In addition to
the provisions common to all of the employment agreements as described above, Mr.
Carmans employment agreement includes the following severance provisions for
certain termination events including a change in control of the Company:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | severance
  payments in connection with an involuntary termination without cause equal to
  six (6) months of base salary payable in bi-monthly installments commencing
  with the month immediately following the termination; and                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | · | severance
  payments in connection with an involuntary termination or certain events
  deemed to be the equivalent of termination occurring within twenty-four (24)
  months following a change in control, or upon voluntary resignation at any
  time during the period commencing on the expiration of six (6) months
  following a change in control through the expiration of twelve (12) months
  following a change in control, equal to twelve (12) months of base salary
  payable in lump sum within thirty (30) days of any such termination, event or
  resignation.

Shannon
Reinard Employment Agreement. The Company and Shannon Reinard
entered into an employment agreement dated July 15, 2004, which replaced an
offer letter dated February 7, 2002. Ms. Reinard currently serves as Executive
Vice President and Operations Manager of the Bank. The employment agreement has
a three (3) year term, subject to renewal and termination rights of the Company
and Ms. Reinard. In addition to the provisions common to all of the employment
agreements as described above, Ms. Reinards employment agreement includes the
following severance provisions for certain termination events including a
change in control of the Company:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | severance
  payments in connection with an involuntary termination without cause equal to
  six (6) months of base salary payable in bi-monthly installments commencing
  with the month immediately following the termination; and                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | · | severance
  payments in connection with an involuntary termination or certain events
  deemed to be the equivalent of termination occurring within twenty-four (24)
  months following a change in control, or upon voluntary resignation at any
  time during the period commencing on the expiration of six (6) months
  following a change in control through the expiration of twelve (12) months
  following a change in control, equal to twelve (12) months of base salary
  payable in lump sum within thirty (30) days of any such termination, event or
  resignation.

Thomas
Vander Ploeg Employment Agreement. The Company and
Thomas Vander Ploeg entered into an employment agreement dated November 16,
2007. Mr. Vander Ploeg currently serves as Executive Vice President and Chief
Credit Officer of the Bank. The employment agreement has a three (3) year term,
subject to renewal and termination rights of the Company and Mr. Vander Ploeg.
In addition to the provisions common to all of the employment agreements as
described above, Mr. Vander Ploegs employment agreement includes the following
severance provisions for certain termination events including a change in
control of the Company:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | severance
  payments in connection with an involuntary termination without cause equal to
  six (6) months of base salary payable in bi-monthly installments commencing
  with the month immediately following the termination; and                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | · | severance
  payments in connection with an involuntary termination or certain events
  deemed to be the equivalent of termination occurring within twenty-four (24)
  months following a change in control, or upon voluntary resignation at any
  time during the period commencing on the expiration of six (6) months
  following a change in control through the expiration of twelve (12) months
  following a change in control, equal to twelve (12) months of base salary
  payable in lump sum within thirty (30) days of any such termination, event or
  resignation.

22

---



Salary Continuation
Plans

Recognizing
the importance of building and retaining a competent management team,
additional agreements were entered into with Messrs. Brooks, Hyzdu, Bloch and
Carman effective as of September 10, 2003, and with Ms. Reinard effective as of
June 1, 2005, in each case to provide post-retirement benefits to the named
executive officers. The agreements for Messrs. Hyzdu, Bloch and Carman were
amended on August 8, 2005, among other matters, to:

| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | conform
  certain benefit factors among the agreements for Messrs. Hyzdu, Bloch, Carman
  and Ms. Reinard including age, service and compensation factors;
| |   |                                                                                                                                                           
| | · | adjust the
  annual retirement benefit payments to the amounts specified below to reflect
  such factors and cost of living adjustments based thereon; and
| |   |                                                                                                                                                           
| | · | change the
  normal retirement age from sixty-six (66) to age sixty-five (65).                                                                            

The
terms of the agreements with the named executive officers include the amounts
each will receive upon the occurrence of certain specified events, including
normal retirement and in the case of Mr. Hyzdu and Ms. Reinard, early
retirement on or after a specified age coinciding with fifteen (15) years of
service. A lump-sum premium payment of approximately three million one hundred
ninety-four thousand dollars ($3,194,000) was paid to acquire insurance
policies on the lives of the named executive officers as a funding mechanism in
connection with the agreements. The Bank is the owner and beneficiary of the
policies and is entitled to the increase in cash surrender value represented by
the policies. The increase in cash surrender value is accrued monthly and
reflected in the Companys consolidated financial statements as a category
under Other income. The Bank pays a bonus payment each year to the named
executive officers to satisfy taxes applicable to each named executive officer
which amounts are reflected in the Summary Compensation Table.

The
agreements provide for the following annual retirement benefit payments:

| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | forty
  thousand dollars ($40,000) for Mr. Brooks at age sixty-six (66);                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | · | one hundred
  thirty-three thousand dollars ($133,000) for Mr. Hyzdu at age sixty-five (65)
  and a reduced amount upon early retirement beginning at age fifty-six (56) or
  thereafter and prior to normal retirement ranging from seventy-seven thousand
  nine hundred seventy-four dollars ($77,974) to one hundred twenty-six
  thousand eight hundred eighty-six dollars ($126,886);
| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | · | seventy-one
  thousand dollars ($71,000) for Mr. Bloch at age sixty-five (65);                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | · | seventy-seven
  thousand dollars ($77,000) for Mr. Carman at age sixty-five (65); and                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                            
| | · | sixty-four
  thousand dollars ($64,000) for Ms. Reinard at age sixty-five (65) and a
  reduced amount upon early retirement beginning at age fifty-nine (59) or
  thereafter and prior to normal retirement ranging from thirty eight thousand
  one hundred eighteen dollars ($38,118) to fifty-eight thousand eight hundred
  thirty-eight dollars ($58,838).                            

The
annual retirement benefit amounts are each payable in equal monthly installments
over a fifteen (15) year period. In the event of an employees death, all
remaining amounts due are anticipated to be paid to the employees designated
beneficiary over the remaining payout period. Other events which may alter when
payment of the annual retirement benefit is to begin, or the amount which is to
be paid, include the following:

| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | disability
  prior to normal retirement or early termination other than for cause, death,
  disability or a change of control, in which cases the executive officer shall
  be entitled to a lesser benefit payment amount based upon an accrual balance
  representing the liability accrued to satisfy the benefit payments due to the
  executive officer; and
| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | · | termination
  within a specified period following a change of control, in which case the
  executive officer is entitled to receive the normal retirement benefit
  payment described above in equal monthly installments for fifteen (15) years
  beginning in the month following the executive officers normal retirement age.                               

Change of Control

The Company, from time to time, has
pursued evaluations of strategic alternatives to enhance shareholder value including the
alternatives of remaining independent and considering business combination transactions.
The company has engaged advisors to assist with such evaluations. The Company
is not currently subject to any arrangement that would require a change of
control.

23

---



DIRECTOR COMPENSATION

Director Fees

Non-employee
members of the Board of Directors of the Company were paid $250 per month as a
single retainer fee for all meetings held each month during 2007 of the Board
of Directors of the Company and $500 for attendance at each meeting of the
Banks Board of Directors. Each chairman of the Companys Audit and Executive
Committees, and the Banks Funds Management, Loan, and Marketing Committees,
received $150 and the committee members each received $100, for each committee
meeting of the Company and each committee meeting of the Bank attended. The
total amount of fees paid to all directors as a group as monthly retainer fees
for attendance at all monthly Board of Director meetings of the Company and the
Bank and as the fees paid for attendance at each committee meeting of the
Company and each committee meeting of the Bank, was $102,070 in 2007.

Stock Option Awards

The
Company has two stock option plans. The 1999 Stock Option Plan was adopted by
the Board of Directors of the Bank on November 15, 1999, and approved by
shareholders at the 1999 Annual Meeting of Shareholders of the Bank held on May
11, 2000 (the 1999 Plan). The Company assumed the 1999 Plan and further
option grants were terminated in connection with the reorganization whereby the
Bank became a wholly-owned subsidiary of the Company effective June 26, 2003.
The 1999 Plan set aside 240,000 shares (378,000 shares as of April 28,2008,
adjusted for stock dividends and stock splits) of no par value common stock of
the Company for the grant of incentive and nonstatutory stock options to key,
full-time salaried employees and officers of the Company, and to the
non-employee directors of the Company. Only nonstatutory options could be
granted to non-employee directors under the 1999 Plan.

The
Companys 2004 Stock Option Plan was adopted by the Board of Directors of the Company
on February 19, 2004, and approved by shareholders at the 2004 Annual Meeting
of Shareholders held on May 27, 2004 (the 2004 Plan). The 2004 Plan set aside
169,000 shares (253,500 shares as of April 28, 2008, adjusted for a stock split
in 2005) of no par value common stock of the Company for the grant of incentive
and nonstatutory stock options to key, full-time salaried employees and
officers of the Company, and to the non-employee directors of the Company. Only
nonstatutory options could be granted to non-employee directors under the 2004
Plan. The terms of the 2004 Plan are substantially similar to the terms of the
1999 Plan described below.

Options
granted under the 1999 Plan were either incentive options or nonstatutory
options, however, only nonstatutory options were permitted to be granted to
non-employee directors. Options granted became exercisable in accordance with a
vesting schedule established at the time of grant. Vesting could not extend
beyond ten years from the date of grant. Upon a change in control of the
Company, options under the 1999 Plan become fully vested and exercisable,
or may be assumed or equivalent options may be substituted by a successor
corporation. Options are adjusted to protect against dilution in the event of
certain changes in the Companys capitalization, including stock splits and
stock dividends. All options granted under the 1999 Plan have an exercise price
equal to the fair market value of the common stock on the date of grant. No
options were granted under the 1999 Plan from and after June 26, 2003, the
Effective Date of the reorganization described above and future grants of
options thereunder were terminated, in accordance with the permit issued by the
California Commissioner of Corporations to authorize the exchange of shares of
common stock of the Company for the outstanding shares of common stock of the
Bank in the reorganization.

| |   |                              
| | - | -----------------------------
| | · | 1999 Stock Option Plan Awards

The
Companys non-employee directors, except Directors Andal and Lenz, were each
granted nonstatutory options under the 1999 Plan to acquire 5,000 shares (7,875
shares as of April 28, 2008, adjusted for stock dividends and stock splits) of
the Companys common stock on the date of adoption of the 1999 Plan, at a grant
price of $10.00 per share ($6.35 per share as of April 28, 2008, adjusted for
stock dividends and stock splits), which reflected the fair market value of the
Companys common stock on the grant date. The option grants were made subject
to the approval of the 1999 Plan by the shareholders of the Company.
Nonstatutory stock options granted to outside directors under the 1999 Stock
Option Plan generally vest at the rate of one-third per year. The 1999 Plan was
terminated as to future grants effective June 26, 2003. At the time of
termination of grants under the 1999 Plan, 171,000 shares (269,325 shares as of
April 28, 2008, adjusted for stock dividends and stock splits) of common stock
were reserved for issuance upon exercise of options outstanding under the 1999
Plan. As of April 28, 2008, there were 63,000 shares (adjusted for stock
dividends and stock splits) reserved for issuance upon exercise of nonstatutory
stock options previously granted to the outside directors as a group under the
1999 Stock Option Plan at a weighted average exercise price of $6.35 per share.

24

---



| |   |                              
| | - | -----------------------------
| | · | 2004 Stock Option Plan Awards

The
terms of the 2004 Plan are substantially similar to the terms of the 1999 Plan.
As of April 28, 2008, there were 80,375 shares (adjusted for stock dividends
and a stock split in 2005) reserved for issuance upon exercise of nonstatutory
stock options previously granted to the outside directors as a group under the
2004 Stock Option Plan at a weighted average exercise price of $12.33 per
share. There were no grants of stock options to directors in 2007 or 2006.

Director Emeritus
Program

The
Board of Directors adopted a Director Emeritus Program effective June 30, 2006
that provides for compensation with an eligible retiring director, subject to
the discretion of the Board of Directors under the Program. Director Van
Veldhuizen was designated to serve as a Director Emeritus under the Program
during 2007.

The
Director Emeritus Program was established for the purpose of inducing retiring
members of the Board of Directors to provide continued consultation services to
the Company and its subsidiaries as requested by the Board of Directors for a
period ranging from one year to a maximum of three years following retirement.
Any director of the Company who has attained a minimum age of fifty-five (55)
and who shall have served the Company continuously for at least ten (10) years
as a director of the Company and/or a subsidiary of the Company prior to
retirement may be selected by the Board of Directors to serve as a Director
Emeritus, provided that the Board of Directors may waive this condition in any
case.

The
term of service as a Director Emeritus shall be one year from the date of the
resolution adopted by the Board of Directors designating a director as a
Director Emeritus. The Board of Directors shall annually review the status of
each Director Emeritus prior to expiration of his or her current term of
service and, in its discretion, may terminate or extend the term of service of
any Director Emeritus for successive one-year periods. The maximum term of
service of a Director Emeritus shall not exceed three (3) years. During such
term of service, a Director Emeritus shall perform the following duties:

| |   |                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | represent
  and promote the goodwill of the Company and its subsidiaries in his or her
  community;                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                
| | · | promote the
  continued profitability of the Company and its subsidiaries by endeavoring,
  among other things, to make monthly promotional calls on customers and
  prospective customers of the Company and its subsidiaries;                                                
| |   |                                                                                                                                                                                                                                                                                
| | · | maintain
  communication with management by meeting twice annually with the President
  and Chairman of the Board of the Company at their invitation;                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                
| | · | provide
  industry consultation in his or her field of expertise, business or
  profession; and                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                
| | · | comply with
  all written policies of the Company and its subsidiaries applicable to his or
  her activities as a Director Emeritus or otherwise. A Director Emeritus shall
  not participate in establishing or administering any policy of the Company or
  its subsidiaries.

The
Board of Directors may approve at the commencement of each year of the term of
service by a Director Emeritus, an amount of annual compensation (payable in
monthly installments) not to exceed one (1) times the monthly fee (exclusive of
fees paid for committee membership or attendance) paid to the Director Emeritus
during his or her last full year of service as a member of the Companys Board
of Directors, subject to the following:

| |                                                                                                                                                                                                                                                                                                                                                                      | 
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| | ·       the annual
  compensation paid to a Director Emeritus may not exceed one (1) times the
  current monthly fee (exclusive of fees paid for committee membership or
  attendance) paid to active members of the Companys Board of Directors;                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                      | 
| | ·       the Board of
  Directors may elect to compensate a Director Emeritus who is a former member
  of the Companys Board of Directors an amount of annual compensation not to
  exceed one (1) times the current monthly fee (exclusive of fees paid for
  committee membership or attendance) paid to active members of the Companys
  Board of Directors; and

25

---



| |                                                                                                                                                                                                                                                                                                                                                           | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| | ·       no fees for
  service as a Director Emeritus shall be paid to any member or former member
  of the Companys Board of Directors who is compensated pursuant to a
  Supplemental Employee Retirement Plan (SERP) including, without limitation,
  a Salary Continuation Plan or other form of agreement, with the Company or
  its subsidiaries.

Director
Compensation Table

The
following table shows the compensation of the Companys Board of Directors
during the fiscal year 2007.

|                         |  |                              |   |               |  |                                                                             |  |       |        |  |  |  |   |        |  |  |  |   |        | 
|------------------------ |  | ---------------------------- | - | ------------- |  | --------------------------------------------------------------------------- |  | ----- | ------ |  |  |  | - | ------ |  |  |  | - | ------ | 
|                         |  |                              |   |               |  |                                                                             |  |       |        |  |  |  |   |        |  |  |  |   |        | 
|                         |  | Fees Earnedor
  Paid in Cash |   | Option Awards |  | Change in Pension Value
  and Nonqualified Deferred
  Compensation Earnings |  | Total
|Name                     |  | ($)                          |   | ($)(2) (3)    |  | ($)                                                                         |  | ($)  
|                         |  |                              |   |               |  |                                                                             |  |       |        |  |  |  |   |        |  |  |  |   |        | 
|Dean F. Andal            |  |                              | $ | 11,250        |  |                                                                             |  | $     | 12,768 |  |  |  |   |       |  |  |  | $ | 22,818 | 
|John O. Brooks (1)       |  |                              |   |              |  |                                                                             |  | $     | 14,200 |  |  |  |   |       |  |  |  | $ | 14,200 | 
|Eugene C. Gini           |  |                              | $ | 16,250        |  |                                                                             |  | $     | 7,200  |  |  |  |   |       |  |  |  | $ | 20,350 | 
|Bryan R. Hyzdu (1)       |  |                              |   |              |  |                                                                             |  | $     | 14,200 |  |  |  | $ | 23,960 |  |  |  | $ | 38,160 | 
|Robert D. Lawrence, M.D. |  |                              | $ | 10,200        |  |                                                                             |  | $     | 7,200  |  |  |  |   |       |  |  |  | $ | 14,650 | 
|Susan H. Lenz            |  |                              | $ | 4,250         |  |                                                                             |  |       |       |  |  |  |   |       |  |  |  | $ | 4,250  | 
|Frances C. Mizuno        |  |                              | $ | 11,600        |  |                                                                             |  | $     | 7,200  |  |  |  |   |       |  |  |  | $ | 17,150 | 
|Richard R. Paulsen       |  |                              | $ | 11,200        |  |                                                                             |  | $     | 7,200  |  |  |  |   |       |  |  |  | $ | 18,600 | 
|Toni Marie Raymus        |  |                              | $ | 11,250        |  |                                                                             |  | $     | 7,200  |  |  |  |   |       |  |  |  | $ | 17,100 | 
|Michael K. Repetto       |  |                              | $ | 10,500        |  |                                                                             |  | $     | 7,200  |  |  |  |   |       |  |  |  | $ | 16,250 | 
|Anthony F. Souza         |  |                              | $ | 16,900        |  |                                                                             |  | $     | 7,200  |  |  |  |   |       |  |  |  | $ | 21,550 | 
|Albert Van Veldhuizen(4) |  |                              | $ | 13,500        |  |                                                                             |  | $     | 7,200  |  |  |  |   |        |  |  |  | $ | 20,350 | 
|Donald L. Walters        |  |                              | $ | 11,100        |  |                                                                             |  | $     | 7,200  |  |  |  |   |        |  |  |  | $ | 17,250 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The compensation shown for
  Messrs. Brooks and Hyzdu is also included in the Summary Compensation Table
  at page 17.                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(2) | The amount reported in this
  column is the dollar amount recognized for financial statement reporting
  purposes for 2007 in accordance with FAS 123(R). The assumptions used to
  calculate FAS 123(R) fair value are described in Note 1 under the heading
  Stock-based compensation and Note 12 under the heading Stock Option Plan in
  the Notes to Consolidated Financial Statements included in our Annual Report
  on Form 10-K for the year ended December 31, 2007. No options were granted to
  directors in 2007.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(3) | As of December 31, 2007,
  the aggregate number of unexercised stock options (vested and unvested) held
  by each director is as follows: Mr. Andal, 15,375; Mr. Brooks, 54,375; Mr.
  Gini, 15,375; Mr. Hyzdu, 50,700; Dr. Lawrence, 5,000; Mrs. Mizuno, 15,375;
  Mr. Paulsen, 15,375; Mrs. Raymus, 15,375; Mr. Repetto, 15,375; Mr. Souza, 15,375;
  Mr. VanVeldhuizen, 15,375; and Mr. Walters, 15,375.                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(4) | Mr. Van Veldhuizen resigned
  effective October 31, 2007 at which time he became a Director Emeritus. His
  compensation as Director Emeritus has been included in the table.                                                                                                                                                                                                                                                                                                                                                      

26

---



|         |                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
  RELATED STOCKHOLDER MATTERS

Management
of the Company knows of no person who owns, beneficially or of record, either
individually or together with associates, 5 percent or more of the outstanding
shares of Company common stock, except as set forth in the table below. The
following table sets forth, as of April 28, 2008, the number and percentage of
shares of Company common stock beneficially owned, directly or indirectly, by
each of the Companys directors, principal shareholders, the executive officers(1)
named in the Summary Compensation Table, and all of the individuals named in
the table as a group. Beneficial ownership generally includes shares over which
a person named below has sole or shared voting or investment power and shares
which such person has the right to acquire within 60 days of April 28, 2008.
Unless otherwise indicated, the persons listed below have sole voting and
investment powers respecting the shares beneficially owned.

|                                                |  |                                          |  |                                              |      |                   |       |  
|----------------------------------------------- |  | ---------------------------------------- |  | -------------------------------------------- | ---- | ----------------- | ----- | -
|Title of
  Class                                |  | Name and
  Addressof Beneficial Owner(2) |  | Amount and
  Natureof
  Beneficial Ownership |      | Percentof
  Class
|                                                |  |                                          |  |                                              |      |                   |       |  
|Common Stock, No Par Value                      |  | Dean F. Andal                            |  | 35,512                                       | (3)  |                   | 1.48  | %
|Common Stock, No Par Value                      |  | Robert E. Bloch                          |  | 33,954                                       | (4)  |                   | 1.40  | %
|Common Stock, No Par Value                      |  | John O. Brooks                           |  | 64,675                                       | (5)  |                   | 2.65  | %
|Common Stock, No Par Value                      |  | Patrick Carman                           |  | 44,635                                       | (6)  |                   | 1.85  | %
|Common Stock, No Par Value                      |  | Eugene C. Gini                           |  | 125,128                                      | (7)  |                   | 5.20  | %
|Common Stock, No Par Value                      |  | Bryan R. Hyzdu                           |  | 67,762                                       | (8)  |                   | 2.78  | %
|Common Stock, No Par Value                      |  | Robert D. Lawrence                       |  | 73,626                                       | (9)  |                   | 3.08  | %
|Common Stock, No Par Value                      |  | Susan H. Lenz                            |  | 786                                          | (10) |                   | 0.03  | %
|Common Stock, No Par Value                      |  | Frances C. Mizuno                        |  | 38,367                                       | (11) |                   | 1.60  | %
|Common Stock, No Par Value                      |  | Richard R. Paulsen                       |  | 47,561                                       | (12) |                   | 1.98  | %
|Common Stock, No Par Value                      |  | Toni Marie Raymus                        |  | 47,337                                       | (13) |                   | 1.97  | %
|Common Stock, No Par Value                      |  | Shannon Reinard                          |  | 28,350                                       | (14) |                   | 1.18  | %
|Common Stock, No Par Value                      |  | Michael K. Repetto                       |  | 37,509                                       | (15) |                   | 1.56  | %
|Common Stock, No Par Value                      |  | Anthony F. Souza                         |  | 98,536                                       | (16) |                   | 4.10  | %
|Common Stock, No Par Value                      |  | Thomas Vander Ploeg                      |  | 0                                            |      |                   | 0.00  | %
|Common Stock, No Par Value                      |  | Donald L. Walters                        |  | 39,888                                       | (17) |                   | 1.66  | %
|All named individuals as a
  group (16 persons) |  |                                          |  | 783,626                                      | (18) |                   | 29.08 | %

|    |                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The term executive
  officer of the Company includes the Chief Executive Officer, President,
  Executive Vice President and Chief Financial Officer, Executive Vice
  President and Chief Credit Officer of the Bank and Executive Vice President and
  Operations Manager of the Bank.
|    |                                                                                                                                                                                                                                                                                          
|(2) | The address for beneficial
  owners is c/o Service 1st Bancorp, 49 W. 10th Street,
  Tracy, California 95376.                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                          
|(3) | Mr. Andal has shared voting
  and investment powers as to 20,137 shares. Includes 15,375 shares subject to
  stock options exercisable within 60 days of April 28, 2008.                                                                                                                 
|    |                                                                                                                                                                                                                                                                                          
|(4) | Mr. Bloch has shared voting
  and investment powers as to 2,829 shares. Includes 31,125 shares subject to
  stock options exercisable within 60 days of April 28, 2008.                                                                                                                  
|    |                                                                                                                                                                                                                                                                                          
|(5) | Mr. Brooks has shared
  voting and investment powers as to 10,300 shares. Includes 54,375 shares
  subject to stock options exercisable within 60 days of April 28, 2008.                                                                                                                
|    |                                                                                                                                                                                                                                                                                          
|(6) | Mr. Carman has shared
  voting and investment powers as to 21,385 shares. Includes 23,250 shares
  subject to stock options exercisable within 60 days of April 28, 2008.                                                                                                                
|    |                                                                                                                                                                                                                                                                                          
|(7) | Mr. Gini has shared voting
  and investment powers as to 109,753 shares. Includes 15,375 shares subject to
  stock options exercisable within 60 days of April 28, 2008.                                                                                                                 

27

---



|     |                                                                                                                                                                           
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(8)  | Mr. Hyzdu has shared voting
  and investment powers as to 21,262 shares. Includes 46,500 shares subject to
  stock options exercisable within 60 days of April 28, 2008.  
|     |                                                                                                                                                                           
|(9)  | Dr. Lawrence has shared
  voting and investment powers as to 68,626 shares. Includes 5,000 shares
  subject to stock options exercisable within 60 days of April 28, 2008.
|     |                                                                                                                                                                           
|(10) | Ms. Lenz has shared voting
  and investment powers as to 786 shares.                                                                                                      
|     |                                                                                                                                                                           
|(11) | Ms. Mizuno has shared
  voting and investment powers as to 22,992 shares. Includes 15,375 shares
  subject to stock options exercisable within 60 days of April 28, 2008. 
|     |                                                                                                                                                                           
|(12) | Mr. Paulsen has shared
  voting and investment powers as to 32,186 shares. Includes 15,375 shares
  subject to stock options exercisable within 60 days of April 28, 2008.
|     |                                                                                                                                                                           
|(13) | Ms. Raymus has shared
  voting and investment powers as to 31,962 shares. Includes 15,375 shares
  subject to stock options exercisable within 60 days of April 28, 2008. 
|     |                                                                                                                                                                           
|(14) | Ms. Reinard has shared
  voting and investment powers as to 5,850 shares. Includes 22,500 shares
  subject to stock options exercisable within 60 days of April 28, 2008. 
|     |                                                                                                                                                                           
|(15) | Mr. Repetto has shared
  voting and investment powers as to 22,134 shares. Includes 15,375 shares
  subject to stock options exercisable within 60 days of April 28, 2008.
|     |                                                                                                                                                                           
|(16) | Mr. Souza has shared voting
  and investment powers as to 83,161 shares. Includes 15,375 shares subject to
  stock options exercisable within 60 days of April 28, 2008.  
|     |                                                                                                                                                                           
|(17) | Mr. Walters has shared
  voting and investment powers as to 24,513 shares. Includes 15,375 shares
  subject to stock options exercisable within 60 days of April 28, 2008.
|     |                                                                                                                                                                           
|(18) | Includes 305,750 shares
  subject to stock options exercisable within 60 days of April 28, 2008.                                                                          

EQUITY COMPENSATION PLAN INFORMATION

The
table below lists information regarding Company common stock issuable upon the
exercise of stock options, the weighted average exercise price of those options
and the number of shares available for issuance under the 2004 and 1999 Stock
Option Plans at year-end 2007 (adjusted, as applicable, for stock dividends and
stock splits). The Company has no other equity compensation plan and there are
no warrants or other rights outstanding that would result in the issuance of
shares of Company common stock.

|                                                             |  |                                                                                                 |  |                                                                               |  |                                                                                                                                                 |      |  |  |        |  | 
|------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------- | ---- |  |  | ------ |  | 
|                                                             |  | Number of
  securities to be issued upon exercise of outstanding options, warrants and
  rights |  | Weighted-average
  exercise price of outstanding options, warrants and rights |  | Number of
  securities remaining available for future issuance under equity compensation
  plans (excluding securities reflected in column (a)) |     
|Plan Category                                                |  | (a)                                                                                             |  | (b)                                                                           |  | (c)                                                                                                                                             |     
|                                                             |  |                                                                                                 |  |                                                                               |  |                                                                                                                                                 |      |  |  |        |  | 
|Equity
  compensation plans approved by security holders     |  | 406,238                                                                                         |  |                                                                               |  | $                                                                                                                                               | 9.41 |  |  | 51,875 |  | 
|Equity
  compensation plans not approved by security holders |  |                                                                                                |  |                                                                               |  |                                                                                                                                                 |     |  |  |       |  | 
|Total                                                        |  | 406,238                                                                                         |  |                                                                               |  | $                                                                                                                                               | 9.41 |  |  | 51,875 |  | 

|    |                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Shares reserved but
  unissued remain available for grant during any subsequent calendar year.
  Awards that expire or are cancelled, forfeited or terminated before being exercised
  again become available for future awards under the 2004 Plan.

|         |                                                                            
|-------- | ---------------------------------------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
  INDEPENDENCE

Transactions with Related Persons

The Company
has a policy that it does not enter into any transactions covered under Item
404 of Regulation S-K with the exception of loans made by the Bank. There have
been no transactions, or series of similar transactions, during 2007, or any
currently proposed transaction, or series of similar transactions, to which the
Company or the Bank was or is to be a party, in which the amount involved
exceeded or will exceed $120,000 and in which any director of the Company or
the Bank, executive officer of the Company or the Bank, any shareholder owning
of record or beneficially 5% or more of the Companys common stock, or any
member of the immediate family of any of the foregoing persons, had, or will
have, a direct or indirect material interest.

28

---



Indebtedness of
Management

Some
of the directors and officers of the Company and the companies with which those
directors and officers are associated are customers of, and have had banking
transactions with the Company, through the Bank, in the ordinary course of the
Companys business during 2007, and the Company expects to have banking
transactions with such persons in the future. In the opinion of the Companys
management, all loans and commitments to lend in such transactions were made in
compliance with applicable laws and on substantially the same terms, including
interest rates and collateral, as those prevailing for comparable transactions
with unrelated persons of similar creditworthiness and did not involve more
than a normal risk of collectibility or present other unfavorable features.
Loans to executive officers of the Company and the Bank are subject to
limitations as to amount and purposes prescribed in part by the Federal Reserve
Act, as amended, and the regulations of the Federal Deposit Insurance
Corporation.

Director Independence

Our
Board of Directors has determined that each of our directors other than
executive officers, John O. Brooks and Bryan R. Hyzdu, are independent as
defined under NASDAQ listing rules. A director who otherwise meets the
definition of independence under applicable NASDAQ listing rules may be deemed
independent by the Board of Directors after consideration of all of the
relationships between the Company and the director, or any of his or her
immediate family members, or any entity with which the director or any of his
or her immediate family members is affiliated by reason of being a partner,
officer or a significant shareholder thereof. However, ordinary banking
relationships (such as depository, lending, and other services readily
available from other financial institutions) are not considered by the Board of
Directors in determining a directors independence, if:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | with respect to an
  extension of credit by the Bank, it (i) has been made in compliance with
  applicable banking law and regulation, including requirements of Federal
  Reserve Act and regulations of the Federal Deposit Insurance Corporation, and
  (ii) was made on substantially the same terms, including interest rates and
  collateral, as those prevailing for comparable transactions with unrelated
  persons of similar creditworthiness and did not involve more than a normal
  risk of collectibility or present other unfavorable features;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | · | no event of default has
  occurred and is continuing beyond any period of cure and the loans are not
  classified as nonaccrual, past due, restructured or potential problem loans;
  and                                                                                                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | · | the relationship has no
  other unusual characteristics.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

In
assessing the independence of our directors, our full Board of Directors
carefully considered all of the business relationships between the Company and
our directors or their affiliated companies, other than ordinary banking
relationships. This review was based primarily on responses of the directors to
questions in a directors and officers questionnaire regarding employment,
business, familial, compensation and other relationships with the Company and
our management. Where business relationships other than ordinary banking
relationships existed, the Board of Directors determined that, except in the
case of Messrs. Brooks and Hyzdu, none of the relationships between the Company
and the directors or the directors affiliated companies impair the directors
independence because the amounts involved are immaterial to the directors or to
those companies when compared to their annual income or gross revenues. The
Board of Directors also determined for all of the relationships between the
Company and our directors (including Mr. Hyzdus relationship with his
brother-in-law, Mr. Walters) or the directors affiliated companies, that none
of the relationships had unique characteristics that could influence the
directors impartial judgment as a director of the Company.

29

---



|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES

The
table below summarizes the services rendered to the Company by Vavrinek, Trine,
Day & Co., LLP, during the 2007 and 2006 fiscal years.

|                       |  |                  |   |                  |  |  |  |   |        |  | 
|---------------------- |  | ---------------- | - | ---------------- |  |  |  | - | ------ |  | 
|Category
  of Services |  | Fiscal Year 2007 |   | Fiscal Year 2006 | 
|                       |  |                  |   |                  |  |  |  |   |        |  | 
|Audit Fees (1)         |  |                  | $ | 35,500           |  |  |  | $ | 44,000 |  | 
|Audit-Related Fees (2) |  |                  |   | 6,000            |  |  |  |   |        |  | 
|Tax Fees (3)           |  |                  |   | 4,000            |  |  |  |   | 4,000  |  | 
|All Other Fees         |  |                  |   |                  |  |  |  |   |        |  | 
|Total Accounting Fees  |  |                  | $ | 45,500           |  |  |  | $ | 48,000 |  | 

|    |                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees consisted of
  services for the audit of the financial statements included in the Companys
  annual report on Form 10-K for the year ended December 31, 2007 and Form
  10-KSB for the year ended December 31, 2006, and for reviews of the financial
  statements included in the Companys quarterly reports on Form 10-QSB during
  the fiscal years 2007 and 2006.
|    |                                                                                                                                                                                                                                                                                                                                                                                   
|(2) | Audit-related fees
  consisted of general assistance on SEC matters.                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                   
|(3) | Tax fees consisted
  primarily of assistance relating to tax compliance and reporting.                                                                                                                                                                                                                                                                                            

The
Audit Committee approved each professional service rendered by Vavrinek, Trine,
Day & Co., LLP during the 2007 and 2006 fiscal years and considered whether
the provision of such services is compatible with Vavrinek, Trine, Day &
Co., LLP maintaining its independence. The approval of such professional
services included pre-approval of all audit and permissible non-audit services
provided by Vavrinek, Trine, Day & Co., LLP. These services included audit,
tax and other services described above. The Audit Committee Charter attached as
Exhibit 99.1 includes a policy of pre-approval of all services provided by the
Companys independent public accountants. The Audit Committee approved one
hundred percent (100%) of all such professional services provided by Vavrinek,
Trine, Day & Co., LLP during the 2007 and 2006 fiscal years.

The
Audit Committee recommended to the Board of Directors that the Companys
audited financial statements be included in the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2007, for filing with the
Securities and Exchange Commission.

30

---



PART IV

|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

| |        |                                                                                                                                                                 
| | ------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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.
| |        |                                                                                                                                                                 
| | (99.1) | Audit
  Committee Charter                                                                                                                                       
| |        |                                                                                                                                                                 
| | (99.2) | Compensation
  Committee Charter                                                                                                                                
| |        |                                                                                                                                                                 
| | (99.3) | Nominating
  Committee Charter                                                                                                                                  

31

---



SIGNATURES

Pursuant
to the requirements of Section 13 or 15d) 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: April 28, 2008 |  | By:                 | /s/ John O. Brooks           
|                     |  |                     |                              
|                     |  |                     | John O. Brooks               
|                     |  |                     | Chief Executive Officer      
|                     |  |                     | (Principal Executive Officer)
|                     |  |                     |                              
|Date: April 28, 2008 |  | By:                 | /s/ Robert E. Bloch          
|                     |  |                     |                              
|                     |  |                     | Robert E. Bloch              
|                     |  |                     | Executive Vice President and 
|                     |  |                     | Chief financial Officer      
|                     |  |                     | (Principal Financial and     
|                     |  |                     | Accounting Officer)          

Pursuant
to the requirements of the Securities Exchange Act of 1934 this report has been
signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated.

|                       |  |          |  |               
|---------------------- |  | -------- |  | --------------
|Signature              |  | Title    |  | Date          
|                       |  |          |  |               
|                       |  |          |  |               
|/s/ John O. Brooks     |  | Chairman |  | April 28, 2008
|                       |  |          |  |               
|John O. Brooks         |  |          |  |               
|                       |  |          |  |               
|/s/ Eugene C. Gini     |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Eugene C. Gini         |  |          |  |               
|                       |  |          |  |               
|/s/ Bryan R. Hyzdu     |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Bryan R. Hyzdu         |  |          |  |               
|                       |  |          |  |               
|/s/ Susan Lenz         |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Susan Lenz             |  |          |  |               
|                       |  |          |  |               
|/s/ Robert D. Lawrence |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Robert D. Lawrence     |  |          |  |               
|                       |  |          |  |               
|/s/ Frances C. Mizuno  |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Frances C. Mizuno      |  |          |  |               
|                       |  |          |  |               
|/s/ Richard R. Paulsen |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Richard R. Paulsen     |  |          |  |               

32

---



|                       |  |          |  |               
|---------------------- |  | -------- |  | --------------
|/s/ Toni Marie Raymus  |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Toni Marie Raymus      |  |          |  |               
|                       |  |          |  |               
|/s/ Michael K. Repetto |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Michael K. Repetto     |  |          |  |               
|                       |  |          |  |               
|/s/ Anthony F. Souza   |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Anthony F. Souza       |  |          |  |               
|                       |  |          |  |               
|/s/ Donald L. Walters  |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Donald L. Walters      |  |          |  |               
|                       |  |          |  |               
|/s/ Dean Andal         |  | Director |  | April 28, 2008
|                       |  |          |  |               
|Dean Andal             |  |          |  |               

33

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EXHIBIT INDEX

|                 |  |                                                                                                                                                               |  |                         
|---------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------
|Exhibit
  Number |  | Description                                                                                                                                                   |  | Sequential
  Page Number
|                 |  |                                                                                                                                                               |  |                         
|                 |  |                                                                                                                                                               |  |                         
|31.1             |  | Certification of Chief Executive Officer pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002                                                          |  | 35                      
|                 |  |                                                                                                                                                               |  |                         
|31.2             |  | Certification of Chief Financial Officer pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002                                                          |  | 36                      
|                 |  |                                                                                                                                                               |  |                         
|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 |  | 37                      
|                 |  |                                                                                                                                                               |  |                         
|99.1             |  | Audit Committee Charter                                                                                                                                       |  | 38                      
|                 |  |                                                                                                                                                               |  |                         
|99.2             |  | Compensation Committee Charter                                                                                                                                |  | 42                      
|                 |  |                                                                                                                                                               |  |                         
|99.3             |  | Nominating Committee Charter                                                                                                                                  |  | 44                      

34

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