The Bank Holdings Reports Second Quarter Earnings

RENO, Nev.--(Business Wire)--
The Bank Holdings (NASDAQ: TBHS), parent holding company of Nevada
Security Bank (operating under the name Silverado Bank in California)
and Granite Exchange, Inc., today announced results of operations for
the quarter ended June 30, 2008.

Second Quarter 2008 Highlights:

-- Earnings of $857,000 before the provisions for loan loss
reserves and taxes represent an increase of $200,000 from the
first quarter of the year.

-- An addition of $1.140 million for the second quarter preserved
the Allowance for Loan and Lease Losses at 1.57% of
outstanding loans.

-- The Company's Regulatory Capital reflects a strong capital
position with Tier 1 Capital ratio of 11.83%, Total Risk Based
Capital ratio of 13.04% and the Leverage Ratio of 10.38% all
exceeding the "Well Capitalized" threshold.

-- Substantial reductions in cost of funds continue.

-- Continued expense control initiatives resulted in a $51,000
reduction in non-interest expenses from the first three months
of 2008 and a year-to-date 2008 reduction of $491,000 from the
first six months of 2007.

-- Strong liquidity position maintained with over $89 million of
immediately accessible funding sources.

-- Problem loans aggressively managed; charged-off $1.1 million
in the second quarter and increased OREO by $2 million,
bringing nonperforming assets to 2.73% of total assets at June
30, 2008.

-- The quarter's net interest margin was 3.64%, a fourteen (14)
basis point reduction from the first quarter of 2008.

-- After the $1.140 million provision for loan losses and a tax
benefit of $308,000, the quarter's net income was $25,000.

TBHS Chairman and CEO Hal Giomi stated, "Our second quarter
results positively reflect our credit and expense control strategies
and the fundamental earning power of the Company, showing our ability
to absorb significant increases in our loan loss reserve and still
record income for the first six months of the year. Absent our
substantial loan loss provision, the Company's second quarter earnings
would have surpassed 2007 levels."

Mr. Giomi explained, "The economic downturn that began to affect
our markets and customers in 2007 has continued into the first half of
this year. It is likely to present additional challenges for the rest
of this year and may extend into 2009. The high growth areas in which
we do business have borne the brunt of the collapsing real estate
prices. There is a domino reaction with slowing employment, and the
declining 'wealth effect' has created anxiety far beyond our borders.
We believe these economic factors may continue to constrain loan and
deposit growth, '1031' real estate transactions, and the northern
California and northern Nevada markets for the foreseeable future.
Along with this climate of uncertainty, recent bank closures may also
have a detrimental effect on deposit growth as customers move their
deposits to multiple banks to ensure full FDIC coverage."

Mr. Giomi advised, "We continue to experience slower growth in our
Nevada and California markets, pressure on asset portfolio yields and
the net interest margin, and strains on credit quality. Our allowance
for loan losses at 1.57% of outstanding loans evidences our aggressive
recognition of problem credits. With the uncertainties of the current
economy, growth has taken a back seat to tighter management controls
of our operations and stricter underwriting standards. Remote deposit
sales activities and enhanced online banking products are advancing
our efforts for greater core deposit growth during 2008; however,
these efforts may just stem the tide of reduced individual core
deposits as a result of the downturn in the national economy."

2008 Versus 2007 Year-over-Year Results (Six Months):

-- After an increased loan loss provision of $876,000 for the six
months ended June 30, 2008 as compared to the same period of
2007, year-to-date 2008 net income totaled $534,000 or $0.09
per fully diluted share, a decrease of 58% from $1,261,000 or
$0.21 per fully diluted share for the same period of 2007.

-- Net interest income before the provision for loan losses
decreased by $422,000 (3.8%) to $10.6 million when compared to
$11.0 million through the second quarter of 2007, reflecting
an 82 basis point drop (10.6%) in interest earned on average
assets versus an 88 basis point decline (19.17%) on interest
paid on average interest bearing liabilities.

-- The net interest margin was 3.71%, only a six (6) basis point
reduction from the 3.77% posted for the same period last year.

-- The loan loss provision exceeded charge-offs; the allowance
for loan and lease losses increased to 1.57% of gross loans
outstanding, as compared to 1.20% at June 30, 2007.

-- After increases in loan collection costs for delinquent loans,
severance payments for staff reductions, and an impairment
charge of $120,000 for Rocky Mountain Exchange, non-interest
expense decreased by $491,000.

Linked Quarter Data (Second Quarter 2008 Versus First Quarter
2008):

-- After an increased loan loss provision of $990,000, net income
was $25,000 or $0.00 per fully diluted share as compared to
$509,000 or $0.09 per fully diluted share in the first quarter
of 2008.

-- Net interest income of $5.2 million before the provision for
loan losses declined by $84,000 from that reported for the
first quarter of 2008.

-- The provision for loan losses of $1.1 million represented an
increase of $990,000 from the prior quarter.

-- Continued expense control initiatives resulted in a $51,000
reduction in non-interest expenses from the first three months
of 2008.

Financial Performance Ratios, Second Quarter 2008 Versus 2007:

Return on average shareholders' equity:

For the second quarter of 2008, the Company's return on average
shareholders' equity (ROAE) was 0.13%, as compared to 4.35% for 2007.

Diluted earnings per share:

For the second quarter 2008, the Company's fully diluted earnings
per share were $0.00, as compared to $0.14 for the same period of
2007.

Return on average assets:

The Company's return on average assets (ROAA) for the second
quarter 2008 was 0.02%, as compared to 0.50% for 2007. Average assets
at $644 million were essentially unchanged for both periods under
review.

Operating efficiency:

The Company's efficiency ratio for the second quarter of 2008
increased slightly to 81% from the 75% reported for the same period of
last year.

Financial Performance Ratios, Year-to-Date 2008 Versus 2007:

Return on average shareholders' equity:

For year-to-date June 30, 2008, the Company's return on average
shareholders' equity (ROAE) was 1.44%, as compared to 3.43% for 2007.

Diluted earnings per share:

For year-to-date 2008, the Company's fully diluted earnings per
share were $0.09, as compared to $0.21 for the same period of 2007.

Return on average assets:

The Company's return on average assets (ROAA) for year-to-date
2008 was 0.17%, as compared to 0.39% for 2007. Average assets declined
about $15 million or 2.3% over the periods reported.

Operating efficiency:

The Company's efficiency ratio for year-to-date 2008 increased
slightly to 82% from the 80% reported for the same period of last
year.

Income Statement Results

The Company believes its experienced lending and credit
administration staffs have identified the problem credits in the loan
portfolio. Staff continues to closely monitor the loan portfolio in
response to deteriorating real estate conditions and the changing
economies in the northern Nevada and northern California markets. As a
result of aggressive action to address risk within the loan portfolio
and to deal with non-performing assets, impairments and charge-offs,
management prudently increased the loan loss reserve provision to
cover current charge-offs and maintain a reserve at 1.57% of
outstanding loans. With a lesser volume of loan renewals and slower
new loan growth, it is anticipated the loan loss reserve level is
likely to change only slightly over the next quarter.

For the second quarter of 2008, the average loan portfolio volume
was $461 million, or about 2.7% less than reported at the quarter
ended June 2007; for the six months ended June 30, 2008, the portfolio
was about 1.5% less than that reported for the same period of last
year. Reflecting the 300 plus basis point decrease in prime rate over
the past year and increasing levels of non-accruals and Other Real
Estate Owned, interest income on loans declined $2.1 million or 21%
when comparing this quarter's results to the same quarter of last
year; for the six month periods under review, the decline was $3.3
million or 16%. During the first six months of the year, the rate
earned on average loans outstanding was 7.27% for 2008, as compared to
8.58% for 2007.

The book yield on the investment portfolio increased to 5.40% for
the year-to-date period ending June 30, as compared to 4.32% for the
same period of 2007, as a result of dividends received and year-end
investment portfolio adjustments reported in the 10-K. The interest
earned on average earning assets was 6.92% for the first six months of
2008, as compared to 7.74% for the same period of 2007. The average
prime interest rate during 2007 was 8.05%; prime rate has fallen to
approximately 5.00% for year-to-date 2008, a reduction of over 37%.
Further reductions in the prime interest rate during 2008 would place
additional pressure on the Company's net interest margin for the
remainder of the year. The Company's year-to-date net interest margin
was 3.71%, a six (6) basis point reduction from the first six months
of 2007.

Interest expense for the year-to-date period was $9.2 million, a
decrease of $2.4 million or about 21% from the $11.6 million reported
for the same period of 2007. Management made a concerted effort to
restructure the Company's liabilities' profile over the past six
months; average interest bearing deposits were reduced by $44 million
or 10% between June 2008 and 2007, while average borrowed funds
increased by $31 million or 42% over the same period. With a reduction
in volumes of higher cost deposits, the cost of average interest
bearing deposits declined to 3.81% for the six months ended June 2008,
as compared to 4.44% for the same period of 2007. In addition, the
utilization of a greater volume of short-term borrowed funds brought
about the reduction of total borrowed funds costs to 3.34% for the
first six months of 2008, as compared to 5.48% for the year-to-date
2007 period. Based on these actions, total year-to-date interest
expense declined to 3.71% for the first six months of 2008 from 4.59%
for the same period of 2007. The outcome has been a slight decrease in
the Company's net interest margin before the provision for loan
losses; for year-to-date June 2008, it was 3.71%, a decrease of six
(6) basis points from the 3.77% reported for the same period of 2007.

Non-interest income was impacted by unrealized and realized
securities gains and losses and a reduction of values in the
investment portfolio stemming from uncertainties in the credit
markets. These investment valuations are currently subject to extreme
volatility as the credit markets adjust to a more reasonable
perspective of value over subsequent periods; management hopes these
values stabilize although there can be no assurance this will occur.
The Company reported $568,000 in realized and unrealized investment
losses which led to reduced non-interest income of $69,000 for
year-to-date 2008, as compared to a gain of $446,000 for securities
items in year-to-date June 2007. Service charges and other fees and
commissions increased to $434,000 for the first six months of 2008, as
compared to $366,000 for the same period of 2007. Additional growth in
service charges, other fees and commissions is anticipated over the
remainder of 2008.

Non-interest expenses decreased by $491,000 (a 5% reduction) for
year-to-date June 2008 when compared to the same period of 2007.
Although Company staff reductions have totaled fourteen individuals
since the end of the year, associated severance payments and increased
amortized loan costs have offset these savings; as a result, salaries
and benefit costs are essentially flat for the periods under review.
The primary decrease in non-interest expenses between periods can be
noted in occupancy and advertising costs. The investment in Rocky
Mountain 1031 Exchange was written-off during the quarter with the
closure of the Montana office due to substantial reductions in
exchange transactions in this market. Total non-interest costs were
$9.1 million for the first six months of 2008, as compared to $9.6
million for the same period of 2007. Increased expenses for audit,
tax, and SOX 404 compliance continue to hamper Company profitability,
showing little likelihood of reduction in the near term.

Balance Sheet Changes

Since June 30, 2007, total average assets have decreased $15
million to $637 million, with average gross loans decreasing $7
million to $465 million at June 30, 2008 from the $472 million
reported at June 30, 2007. Average interest bearing deposits for the
six months ended June 30, 2008 were $391 million, a decrease of $44
million or 10%, as compared to the average $435 million reported for
June 30, 2007. In addition, higher cost deposits have been allowed to
run-off with replacement from lower cost funding sources. Average
borrowings increased $31 million as of June 30, 2008 when compared to
the same six month period of 2007.

In restructuring the investment portfolio, management replaced
called and matured government agency securities with additional
tax-free municipal securities and preferred stock issues for greater
after-tax yield potential. Such agency preferreds have experienced
substantial revisions in market value over the near term. Government
secured equity values may continue to be volatile for the immediate
future.

For both periods under review, year-to-date June 30, 2008 and
2007, the distribution of loans held did not substantially change with
approximately 80% of all loans represented in real estate categories.
Furthermore at both periods, the Company had no sub-prime loans.

Non-performing assets at June 30, 2008 totaled $17.8 million and
consisted of fourteen non-accrual loans totaling $13.4 million and
$4.3 million in OREO, while at June 30, 2007 the Bank had four
non-accrual loans totaling $1.9 million and no other non-performing
assets.

As a result of the slowing economy, the Bank has placed potential
problem credits on non-accrual status, enhanced and strengthened its
underwriting criteria, and performed an extensive internal review of
its loan portfolio. These actions have given rise to increased loans
categorized as "Impaired" under FAS 114. At June 30, 2008
non-performing loans totaled $13.4 million, and other impaired loans
totaled $19.7 million. This is compared to $1.9 million in
non-performing loans and impaired loans of $1.5 million at June 30,
2007. During this period of real estate valuation uncertainties,
management has concentrated its resources on the early identification
of and attention to properties subject to re-appraisal facilitating
the early resolution of problem credits. Further, OREO at June 30,
2008 was $4.3 million, while there was no OREO at June 30, 2007.

Capital Adequacy

The Company's capital ratios continue to exceed the
well-capitalized guidelines issued by regulatory agencies. While
substantial growth is unlikely in the current time horizon, management
remains interested in exploring strategic opportunities. The Board
authorized the repurchase of up to $3 million in outstanding common
stock; no purchases were made during the first quarter of 2008 and
only 1,000 shares were re-purchased in the second quarter. With the
current uncertainties in the capital markets, the Company is not
likely to continue re-purchasing its stock in the near term.

Guidance for 2008

"We continue to re-evaluate our expectations for 2008 based on
credit market uncertainties, declining real estate valuations, loan
loss reserve provisions and interest rate conditions. We remain
cautiously optimistic for 2008," said Chief Financial Officer Jack
Buchold.

About The Bank Holdings

The Bank Holdings is the holding company for Nevada Security Bank
and Granite Exchange. The Company's other "1031" subsidiary, Rocky
Mountain Exchange in Montana, was closed on July 30, 2008 with
on-going activities handled through Granite. The Bank was incorporated
in February 2001 and opened for business on December 27, 2001 with
initial capitalization of over $14 million. The Bank currently has
contributed capital of approximately $74 million and operates five
northern Nevada branches: three in Reno and one each in Incline
Village and Carson City. Silverado Bank, a northern California
division of Nevada Security Bank, currently operates one branch in
Roseville and one in Rancho Cordova, California. The President of the
Bank, David A. Funk, is a long-time banker and resident of the Reno
area. Granite Exchange operates one office in Roseville, California.
For additional information, please visit www.nevadasecuritybank.com,
www.silveradobank.com, and www.ges1031.com. The President of The Bank
Holdings is Joseph Bourdeau and Hal Giomi is the Chairman and Chief
Executive Officer.

Forward-looking statements, by their nature, are subject to risks
and uncertainties. The statements contained in this release that are
not historical facts are forward-looking statements based on
management's current expectations and beliefs concerning future
developments and their potential effects on the Company. Readers are
cautioned not to unduly rely on forward-looking statements. Actual
results may differ from those projected. These forward-looking
statements involve risks and uncertainties concerning the health of
the national, Nevada and California economies, changes in business and
economic conditions and fiscal and monetary policies, competition,
disintermediation and legislation, as well as the Companies' abilities
to attract and retain skilled employees, customers' service
expectations, the Companies' abilities to successfully deploy new
technology and gain efficiencies therefrom, success of branch
expansion, changes in interest rates, loan portfolio performance, and
other factors detailed in the Company's Securities and Exchange
Commission filings. Forward-looking statements speak only as of the
date they were made. The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect subsequent events
or circumstances that may occur after the date that forward-looking
statements are made.

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FOR ADDITIONAL INFORMATION,
Please review the Company's Form 10-K and other current filings with
the SEC and/or CONTACT:
Hal Giomi, Chairman and Chief Executive Officer, or
Jack Buchold, Chief Financial Officer
The Bank Holdings or www.thebankholdings.com
Nevada Security Bank or www.nevadasecuritybank.com
Mailing Address: P.O. Box 19579 (89511)
Physical Address: 9990 Double R. Blvd. (89521)
Reno, Nevada
Phone: 775-853-8600
FAX: 775-853-2056
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Summary Selected Consolidated Financial Data
Six months Six months Year Ended
Ended June 30, Ended June 30, December 31,
2008 (3) 2007 (3) 2007
-------------- -------------- ------------
(Dollars in thousands, except per share
data)
Condensed Income Statement
Interest income $ 19,719 $ 22,564 $ 45,183
Interest expense 9,153 11,576 22,964
-------------- -------------- ------------
Net interest
income 10,566 10,988 22,219
Provision for loan
losses 1,290 414 3,007
Non - interest income 69 1,027 1,422
Non - interest expenses 9,121 9,612 18,307
(Loss)/income
attributable to
minority shareholders - (39) (27)
(Benefit)/Provision for
income taxes (310) 767 625
-------------- -------------- ------------
Net income $ 534 $ 1,261 $ 1,729
============== ============== ============
Period End Data
Assets 651,612 662,000 626,640
Loans, gross
including fair value
loans 462,412 476,936 474,769
Securities 112,095 83,081 80,276
Deposits 440,579 483,707 451,335
Other borrowed funds 130,619 78,619 91,229
Shareholders' equity 73,814 74,504 74,837
Average Balance Sheet
Assets 636,826 651,972 649,110
Loans 464,872 471,789 478,461
Securities 98,022 90,389 85,306
Deposits 448,574 495,063 492,347
Shareholders' equity 74,680 74,133 74,696

Asset Quality
Non-performing assets
(1) 17,773 1,881 6,433
Allowance for loan
losses 7,241 5,584 7,276
Net charge-offs 1,111 260 1,161
Non-performing assets
to total assets 2.73% 0.28% 1.03%
Allowance for loan
losses to loans 1.57% 1.17% 1.53%
Net Charge-offs to
average loans 0.24% 0.06% 0.24%

Per Common Share
Basic income per
share 0.09 0.22 0.30
Diluted income per
share 0.09 0.21 0.29
Book value per share 12.66 12.78 12.83
Period end common
shares outstanding 5,830,099 5,831,099 5,831,099
Wtd average shares
outstanding -basic 5,830,608 5,831,099 5,831,099
Wtd average shares
outstanding -diluted 5,834,191 5,986,165 5,968,687

Financial Ratios
Return on average
assets (4) 0.17% 0.39% 0.27%
Return on average
equity (4) 14.4% 3.43% 2.31%
Net interest margin
(2) 3.71% 3.77% 3.79%
Tier 1 leverage
capital ratio 10.38% 10.41% 10.39%
----------------------------------------------------------------------
(1) Non-performing assets consists of loans 90 days or more
delinquent and still accruing interest, investments or loans placed
on non-accrual status, and other real estate owned.
(2) Net interest income is divided by average interest-earning
assets.
(3) Unaudited.
(4) Annualized.
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Summary Selected Consolidated Financial Data
Quarter Ended Quarter Ended Year Ended
June 30, June 30, December 31,
2008 (3) 2007 (3) 2007
------------- ------------- ------------
(Dollars in thousands, except per share
data)
Condensed Income Statement
Interest income $ 9,411 $ 11,222 $ 45,183
Interest expense 4,170 5,584 22,964
------------- ------------- ------------
Net interest
income 5,241 5,638 22,219
Provision for loan losses 1,140 234 3,007
Non - interest income 151 605 1,422
Non - interest expenses 4,535 4,679 18,307
(Loss)/income
attributable to minority
shareholders - (15) (27)
(Benefit)/Provision for
income taxes (308) 541 625
------------- ------------- ------------
Net income $ 25 $ 804 $ 1,729
============= ============= ============
Period End Data
Assets 651,612 662,000 626,640
Loans, gross including
fair value loans 462,412 476,936 474,769
Securities 112,095 83,081 80,276
Deposits 440,579 483,707 451,335
Other borrowed funds 130,619 78,619 91,229
Shareholders' equity 73,814 74,504 74,837
Average Balance Sheet
Assets 644,146 644,567 649,110
Loans 461,313 474,010 478,461
Securities 107,683 87,413 85,306
Deposits 438,462 479,887 492,347
Shareholders' equity 74,236 74,071 74,696

Asset Quality
Non-performing assets
(1) 8,980 968 6,433
Allowance for loan
losses 7,241 5,584 7,276
Net charge-offs 897 152 1,161
Non-performing assets
to total assets 1.38% 0.15% 1.03%
Allowance for loan
losses to loans 1.57% 1.20% 1.53%
Net Charge-offs to
average loans 0.19% 0.03% 0.24%

Per Common Share
Basic income per share 0.00 0.14 0.30
Diluted income per
share 0.00 0.13 0.29
Book value per share 12.66 12.78 12.83
Period end common
shares outstanding 5,830,099 5,831,099 5,831,099
Wtd average shares
outstanding -basic 5,830,117 5,831,099 5,831,099
Wtd average shares
outstanding -diluted 5,833,525 5,994,163 5,968,687

Financial Ratios
Return on average
assets (4) 0.02% 0.50% 0.27%
Return on average
equity (4) 0.14% 4.35% 2.31%
Net interest margin (2) 3.64% 3.94% 3.79%
Tier 1 leverage capital
ratio 10.38% 10.41% 10.39%
----------------------------------------------------------------------
(1) Non-performing assets consists of loans 90 days or more delinquent
and still accruing interest, investments or loans placed on non-
accrual status, and other real estate owned.
(2) Net interest income is divided by average interest-earning assets.
(3) Unaudited.
(4) Annualized.
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Summary Selected Consolidated Financial Data
Quarter Ended Quarter Ended Year Ended
March 31, March 31, December 31,
2008 (3) 2007 (3) 2007
------------- ------------- ------------
(Dollars in thousands, except per share
data)
Condensed Income Statement
Interest income $ 10,308 $ 11,342 $ 45,183
Interest expense 4,983 5,992 22,964
------------- ------------- ------------
Net interest
income 5,325 5,350 22,219
Provision for loan losses 150 180 3,007
Non - interest income (82) 422 1,422
Non - interest expenses 4,586 4,933 18,307
(Loss)/income
attributable to minority
shareholders - (24) (27)
(Benefit)/Provision for
income taxes (2) 226 625
------------- ------------- ------------
Net income $ 509 $ 457 $ 1,729
============= ============= ============
Period End Data
Assets 633,365 647,418 626,640
Loans, gross including
fair value loans 459,464 464,253 474,769
Securities 98,311 90,544 80,276
Deposits 441,607 514,841 451,335
Other borrowed funds 110,619 36,384 91,229
Shareholders' equity 74,222 73,779 74,837
Average Balance Sheet
Assets 628,718 660,874 649,110
Loans 468,431 469,549 478,461
Securities 76,741 92,966 85,306
Deposits 458,686 511,910 492,347
Shareholders' equity 73,617 73,398 74,696

Asset Quality
Non-performing assets
(1) 8,793 913 6,433
Allowance for loan
losses 7,212 5,502 7,276
Net charge-offs 214 108 1,161
Non-performing assets
to total assets 1.39% 0.14% 1.03%
Allowance for loan
losses to loans 1.57% 1.19% 1.53%
Net Charge-offs to
average loans 0.05% 0.02% 0.24%

Per Common Share
Basic income per share 0.09 0.08 0.30
Diluted income per
share 0.09 0.08 0.29
Book value per share 12.73 12.65 12.83
Period end common
shares outstanding 5,831,099 5,831,099 5,831,099
Wtd average shares
outstanding -basic 5,831,099 5,831,099 5,831,099
Wtd average shares
outstanding -diluted 5,835,097 6,002,124 5,968,687

Financial Ratios
Return on average
assets (4) 0.33% 0.28% 0.27%
Return on average
equity (4) 2.78% 2.53% 2.31%
Net interest margin (2) 3.78% 3.69% 3.79%
Tier 1 leverage capital
ratio 10.28% 9.30% 10.39%
----------------------------------------------------------------------
(1) Non-performing assets consists of loans 90 days or more delinquent
and still accruing interest, investments or loans placed on non-
accrual status, and other real estate owned.
(2) Net interest income is divided by average interest-earning assets.
(3) Unaudited.
(4) Annualized.
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The Bank Holdings, Reno
Hal Giomi or Jack Buchold, 775-853-8600
www.thebankholdings.com
www.nevadasecuritybank.com

Copyright Business Wire 2008