April, 2008

Dear Shareholders,

On behalf of your Board of Directors, I am pleased to provide you with the 2007 report on Desert Hills Capital Corp, along with its sole subsidiary, Desert Hills Bank. Due largely to the continued implementation of our strategic plan, solid growth generated an 18% increase in our consolidated assets to approximately $496.9 million, compared to the $420 million reported in 2006. Total loans (net of loan loss allowance) increased to $431.6 million, a 16% increase over the $372.3 million reported the previous year.

Corporate earnings for the year ending December 31, 2007 totaled $1,105,000, down 38% from the $1,786,000 reported for 2006. Last year presented a number of unique challenges ranging from an inverted yield curve for the first three quarters, to the degradation of the financial markets, and stress in asset quality experienced during the fourth quarter.

Your board and management have elected to proactively reserve for stressed assets, while at the same time aggressively pursuing strategies to maximize loan values. We anticipate 2008 to reflect relatively minimal growth as we focus on enhancing our balance sheet and maximizing profitability. This strategy, we believe, will provide the best long term value enhancement for Desert Hills Capital Corp.

Desert Hills Bank has not purchased nor will we purchase so called "SIVs" - the instruments that have caused much of the massive write-downs in the financial markets over the past few months.

We successfully opened our Scottsdale location on January 2, 2008. The addition of this location solidifies our footprint while providing six full service banking offices for our customers.

Starting earlier this year the Federal Reserve implemented a variety of unprecedented activities, efforts directed at reducing liquidity stress on the financial markets as well as attempting to improve the negatively affected housing markets. This, in turn, has made managing our interest rate risk (GAP) particularly active. Our position continues to remain fundamentally neutral at the one year mark, a position we believe to be the most prudent.

Our forecasts indicate that 2008 will again provide a uniquely challenging environment for our industry. Your board and management team are fully committed to remain focused on our mutual goals, weathering through this stormy time in our country's financial markets.

As always, we value your trust and confidence.

Regards,

John E. Fahrendorf, Jr.

President and CEO