From Stephen A. Meyers

President/CEO
The Merchants National Bank

November 2008

Greetings,
For the past several months, and on what seems like a daily basis, there has been some troubling news about banks and the health of the financial system in this country. While this may be unsettling, I want to take a moment to talk about the strength of our 87 year-old institution.

Whether you or your family have banked with us for six decades or six months, rest assured that our number one responsibility has been and always will be to safeguard and protect its depositor's money.

The Merchants National Bank of Sacramento has remained independent and financially strong for over 87 years. It has endured the Great Depression, the inflation of the 1970's, the turbulence of the 1980's and recession of the early 1990's.

In October of 2008, Bauer financial Reports awarded Merchants National Bank of Sacramento it highest 5-star rating as one of the safest banks in the U.S. for the 60th consecutive quarter dating back to 1993. Institutions like Merchants, that have achieved a 5-star rating for ten years or longer, have yet another distinction: "Exceptional Performance Bank". Only 15% of the nation’s banks are branded as such. In addition to the Bauer 5-Star rating, VERIBANC awarded Merchants National Bank of Sacramento its highest Green 3-Star rating, along with its Blue Ribbon designation.

Merchants National Bank of Sacramento continues to exhibit a strong financial condition. The Bank has total assets of $124 million, capital of $13.2 million, representing 11.09% of assets, over twice the regulatory minimum of the "Well Capitalized" definition. Earnings for the first nine months of 2008 were $855 thousand, up nearly 35% from a year ago, and loans have grown over 31%. Our prudent lending practices over the years have protected the Bank from past due and problem loans. We have no past-due loans or other non-performing assets.

Let your friends, family, customers, vendors and colleagues know about the best-kept banking secret in Sacramento. We are all about relationship banking, not transaction banking.

Sincerely,
Stephen A. Meyers
President/CEO