Panic, Desperation, Anxiety, Crisis, Fear, these are all words we have heard and come to live with the last three months. Never in our history has there been more of a lack of customer confidence in the financial industry. One Wall Street broker was quoted, "the last three months on Wall Street can be described as going from Armageddon to Nirvana". Another said, "the world is going to end, it's just not today." The herd mentality rules during a financial crisis because people are wired to follow the crowd when times are uncertain. When information is scarce people turn to their own logic and look to see what others are doing. This newsletter is dedicated to keeping you informed about "us" which is about "you".

The United States is experiencing an unprecedented financial crisis and many Arizonans are asking themselves, "Why should I care?" and more importantly, "Why should my tax dollars be used to help some unknown Wall Street firm?" The answer is simple; helping "them" will help all of us maintain access to credit. This crisis is one of liquidity. Put another way, banks have to have money to lend money and we are seeing these sources drying up across the country.

A philosophy, started in 1998 of strong directors and management leadership, is the underlying reason our bank has remained strong. Over two years ago, our board and management team saw the signs of trouble in the residential-construction lending market. Like a bad virus, the subprime-mortgage-driven plague has resulted in a national disaster. Our board and management group stayed the course and made a conscious decision not to participate in this reckless form of lending, which has caused unprecedented financial difficulty. We felt it was a product which questioned the very integrity of our lending philosophy and the foundation on which this bank was built. When you sacrifice your integrity, you erode your most precious leadership possession.

Southern Arizona Community Bank is as strong today as it was before this crisis. We were pleased with the recent move by the FDIC to increase basic insurance to $250,000 per depositor. Banks are rebuilding customer confidence. The first line of defense is for a bank to have significant capital and reserves to cover losses during tough economic times. The FDIC reports Arizona's banks have an average capital of 10.31% which is well above the national average of 7.89%. We're in the category of above 10%.

Where can you help us? It's no secret deposits have left the banking industry. We need deposits. If you are a company banking with us, ask your employees to bank with us. We will come to you and explain to your employees the benefits of banking with us. Tell your friends about us. We make every effort to be rate competitive on our deposits but we have a responsibility to our existing customers and shareholders not to "give away the bank".

Thank you for your continued support. I"ve talked to many of you in person and by phone the last three months and I want to talk to more of you. Please do not hesitate to pick up the phone and call me at 219-5000. If I don't have an answer to your question, I will by the end of the day.

Banking The Way It Should Be,