Oak Valley Bancorp Reports 4th Quarter Results

| Source: Oak Valley Bancorp Oak Valley Bancorp

OAKDALE, CA--(Marketwire - January 30, 2009) - Oak Valley Bancorp (NASDAQ: OVLY), the bank holding company for Oak Valley Community Bank and Eastern Sierra Community Bank, recently reported financial results for the fiscal year ended December 31, 2008. Total assets exceeded $500 million, increasing to $508.2 million for the year ended December 31, 2008, an 11.8% increase from the prior year. Net income for 2008 totaled $2.2 million compared to $3.9 million for 2007. Diluted earnings per common share were $0.27 in 2008 compared to $0.53 in 2007. For the three months ended December 31, 2008, net income totaled $283 thousand compared to $950 thousand, for the same period in 2007. Diluted earnings per common share were $0.03 for the quarter ended December 31, 2008, compared to $0.12 in the same quarter of 2007.

"Reaching the $500 million asset mark is a milestone for us, one which we are happy to have achieved in a steady and consistent manner over the Bank's eighteen year history. Although we are not delighted with our net income relative to last year, we are pleased to be in a position to report positive net income; a profit, amidst these turbulent times faced by the financial sector and the country as a whole," stated Ron Martin, CEO. "Despite the decrease in net earnings, operating income remains healthy, non-performing loans remain below peer average and the bank took cautionary measures to fortify the balance sheet by strengthening an already well-capitalized position by injecting additional capital," Martin concluded.

At December 31, 2008 gross loans totaled $428.2 million, an increase of $40.4 million, or 10.4%, during 2008. The Bank's loan loss provision totaled $2.2 million in 2008, including $1.0 million during the fourth quarter of 2008. This compares to $555 thousand in loan loss provision for the year ended December 31, 2007. The increases in loan loss provisions reflect 2008 charge-offs, strong loan growth and increased allocation for economic uncertainty. Net charge-offs totaling $1.1 million for 2008 primarily relate to construction loans secured by real property, where the value of the collateral has declined.

"The bank experienced loan growth of $40 million in 2008, and while growth is part of the general plan, we are definitely pleased with our good fortune under these economic circumstances. Though we are not overly optimistic about 2009 production potential, we believe opportunities continue to exist that will allow us to grow with quality loans," commented Chris Courtney, President. "Careful credit decisions and adherence to a style of relationship lending requires a deeper understanding of the borrower, which has, and will continue to serve the bank well even in hard economic times," Courtney concluded.

The allowance for loan losses as a percentage of loans totaled 1.30% at December 31, 2008, compared to 1.16% at December 31, 2007. The increase represents the increased allocation for economic uncertainty. At December 31, 2008 non-performing assets totaled $6.8 million, or 1.34% of total assets, compared to $9.1 million, or 2.00% of total assets, at December 31, 2007. Write-downs on OREO properties represented $1.3 million of the decrease in non-performing assets during 2008.

Total deposits were $378.2 million at year-end 2008, compared to $377.3 million at December 31, 2007. Despite the nominal growth in total deposits, the number of deposit accounts increased by 2.4 thousand, or 15%, during 2008, to over 18.3 thousand deposits accounts at December 31, 2008. Average balances per account have declined as a result of the impact of the weak economic environment, on both commercial and retail customers.

Net interest income of $20.5 million for the year ended December 31, 2008, increased by $1.7 million, or 8.9%, over the prior year. The increase reflects the growth in earning assets and expansion of the Bank's net interest margin. The Bank's net interest margin was 4.72% for the year ended December 31, 2008, compared to 4.53% for the year ended December 31, 2007. The increase is a result of the Bank's ability to reduce its cost of funds more rapidly than the decline in the yield on earning assets, through the declining rate environment of 2008.

Non-interest expense of $17.9 million for the year ended December 31, 2008, increased by $3.7 million, or 25.7%, over the prior year. The increase includes write-downs and expenses associated with OREO properties, higher personnel and facilities costs associated with expansion, higher FDIC premiums and professional fees associated with the formation of the bank holding company.

In the fourth quarter, Oak Valley Bancorp voluntarily elected to participate in the U.S. Treasury's Capital Purchase Program (TCPP) in which the Company issued $13.5 million in senior preferred shares to the Treasury. With the infusion of these funds, the Company's total risk-based capital ratio expanded to over 13.2% as of December 31, 2008, from 11.1% at December 31, 2007. Further details about the TCPP participation are available at www.ovcb.com in the Investor Relations section on the About Us tab. "In taking part in the TCPP, we enhance our ability to support the communities we call home and simultaneously strengthen our financial footing by expanding our capital base," noted Rick McCarty, CFO.

Oak Valley Bancorp operates Oak Valley & Eastern Sierra Community Bank, through which it offers a variety of loan and deposit products to individuals and small businesses. The Company currently operates through 12 conveniently located branches: Oakdale, Sonora, Turlock, Stockton, Patterson, Ripon, Escalon, two branches in Modesto, and three branches in their Eastern Sierra Division, which includes Bridgeport, Mammoth Lakes and Bishop.

For more information call 1-866-844-7500 or visit us online at www.ovcb.com.

This press release includes forward-looking statements about the corporation for which the corporation claims the protection of safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the corporation's possible or assumed future financial condition, and its results of operations and business. Forward-looking statements are subject to risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include fluctuations in interest rates, government policies and regulations (including monetary and fiscal policies), legislation, economic conditions, including increased energy costs in California, credit quality of borrowers, operational factors and competition in the geographic and business areas in which the company conducts its operations. All forward-looking statements included in this press release are based on information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement. 

                        Oak Valley Community Bank
                    Statement of Condition (unaudited)


Profitability           4th        3rd        2nd        1st        4th
($ in thousands,      Quarter    Quarter    Quarter    Quarter    Quarter
 except per share)      2008       2008       2008       2008       2007

Selected Quarterly
 Operating Data:

 Net interest income $   5,333  $   5,292  $   5,081  $   4,809  $   4,792
 Provision for loan
  losses                 1,001        602        440        145        120
 Non-interest income       602        634        672        614        562
 Non-interest expense    4,712      4,535      4,562      4,057      3,897
 Income before income
  taxes                    222        789        751      1,221      1,337
 Provision for income
  taxes                    (61)       240        198        445        387
 Net income                283        549        553        776        950
 Preferred stock
  dividends and
  accretion                (64)         -          -          -          -
 Net income available
  to common shareholders   219        549        553        776        950

 Earnings per common
  share - basic           0.03       0.07       0.07       0.10       0.12
 Earnings per common
  share - diluted         0.03       0.07       0.07       0.10       0.12
 Dividends declared
  per common share (1)    0.03       0.05          -          -          -
 Return on average
  common equity           2.31%      4.91%      5.01%      7.16%      8.93%
 Return on average assets 0.23%      0.45%      0.47%      0.68%      0.83%
 Net interest margin (2)  4.72%      4.76%      4.77%      4.60%      4.50%
 Efficiency Ratio (2)    78.30%     76.03%     78.04%     73.70%     72.00%

Capital - Period End
 Book value per share  $  7.57  $    5.77  $    5.71  $    5.69  $    5.57

Credit Quality -
 Period End
 Nonperforming
  assets/assets           1.34%      1.33%      1.35%      1.60%      2.16%
 Loan loss
  reserve/loans (3)       1.30%      1.12%      1.08%      1.09%      1.16%

Period End Balance Sheet
($ in thousands)
Total assets         $ 508,203  $ 490,111  $ 476,094  $ 463,044  $ 454,259
 Gross Loans           428,177    416,664    400,537    387,647    387,809
 Nonperforming assets    6,824      6,538      6,435      7,395      9,808
 Allowance for credit
  losses (3)             5,569      4,650      4,321      4,225      4,507
 Deposits              378,248    365,230    358,159    362,760    377,348
 Common Equity          57,986     44,151     43,735     43,302     42,361
Non-Financial Data
 Full-time equivalent
  staff                    117        119        128        130        125
 Number of banking
  offices, domestic         12         12         12         12         12
  and foreign
Common Shares outstanding
 Period end          7,661,627  7,658,252  7,658,252  7,611,377  7,607,780
 Period average -
  basic              7,660,526  7,658,252  7,641,534  7,610,039  7,606,506
 Period average -
  diluted            7,723,711  7,743,091  7,697,681  7,696,308  7,727,570
Market Ratios
 Stock Price         $    6.00  $    6.30  $    7.00  $    8.49  $    8.25
 Price/Earnings          52.82      22.14      24.12      20.69      16.64
 Price/Book               0.79       1.09       1.23       1.49       1.48



                         YEAR TO DATE
Profitability        ---------------------
($ in thousands,     12/31/2008 12/31/2007
 except per share)
Selected Quarterly
 Operating Data:
   Net interest
    income           $  20,515  $  18,831
   Provision for
    loan losses          2,188        555
   Non-interest
    income               2,522      2,198
   Non-interest
    expense             17,865     14,213
   Income before
    income taxes         2,984      6,260
   Provision for
    income taxes           822      2,335
   Net income            2,162      3,925
   Preferred stock
    dividends and
    accretion              (64)         -
   Net income
    available to
    common
    shareholders         2,098      3,925

   Earnings per
    common share -
    basic                 0.27       0.53
   Earnings per
    common share -
    diluted               0.27       0.52
   Dividends
    declared per
    common share (1)      0.08       0.19
   Return on average
    common equity         4.80%     10.11%
   Return on average
    assets                0.46%      0.88%
   Net interest
    margin (2)            4.72%      4.53%
   Efficiency Ratio (2)  76.55%     66.79%

Capital - Period End
   Book value per
    share            $    7.57  $    5.57

Credit Quality -
 Period End
   Nonperforming
    assets/assets         1.34%      2.16%
   Loan loss
    reserve/loans (3)     1.30%      1.16%

Period End Balance Sheet
($ in thousands)
Total assets         $ 508,203  $ 454,259
   Gross Loans         428,177    387,809
   Nonperforming
    assets               6,824      9,808
   Allowance for
    credit losses (3)    5,569      4,507
   Deposits            378,248    377,348
   Common Equity        57,986     42,361
Non-Financial Data
   Full-time
    equivalent staff       117        125
   Number of banking
    offices,
    domestic                12         12
    and foreign
Common Shares
 outstanding
   Period end        7,661,627  7,607,780
   Period average -
    basic            7,642,775  7,364,681
   Period average -
    diluted          7,733,881  7,524,505
Market Ratios
   Stock Price       $    6.00  $    8.25
   Price/Earnings        21.86      15.48
   Price/Book             0.79       1.48


   (1) Cash dividends of $382,943 and $191,542 paid in the 3rd and 4th
       quarter of 2008, respectively.
   (2) Ratio computed on a fully tax equivalent basis using a marginal
       federal tax rate of 34%.
   (3) Adjusted for Allowance for Off-Balance Sheet Credit Exposure.

Contact Information: Contact: Ron Martin/Chris Courtney/Rick McCarty Phone: (209) 848-2265 www.ovcb.com