Oak Valley Bancorp Reports 3rd Quarter Results

OAKDALE, CA--(Marketwire - October 22, 2008) - Oak Valley Bancorp, the bank holding company for Oak Valley Community Bank, traded as OVLY on the bulletin board, (OTCBB: OVLY), recently reported third quarter results. For the three months ending September 30, 2008, net income was $549,000, or $0.07 per diluted share; a 43.3% decrease from the $969,000 for the same period last year. For the nine month period ending September 30, 2008 net income was $1,878,000, compared to last year's $2,974,000; a decrease of 36.9%. Net interest income growth continues to be strong with the nine months ending September 30, 2008 increasing $1,068,000, or 7.57%, when compared to the same period in 2007. Increased loan loss provisions of $752,000 and OREO writedowns of $765,000 during the first nine months of 2008, compared to the same period in 2007, offset increases in net interest income.

Total assets grew to $490.1 million at September 30, 2008, an increase of $36.4 million, or 8.0%, over September 30, 2007. Gross loans increased by $30.8 million, to $416.7 million as of September 30, 2008, an increase of 8.0% over September 30, 2007. The Bank's total deposits were $365.2 million on September 30, 2008, which is a decrease of $20.9 million, or 5.4% less than September 30, 2007. Certificate of deposit balances decreased by $30.3 million during the twelve month period ending September 30, 2008, while core deposits increased by $13.7 million during the same period.

"Given the recent turmoil that has plagued the financial sector, we continue to monitor the performance of our loan portfolio and to augment our reserves. We are not overjoyed with the decrease in net income compared to last year; however, we believe that we have identified the problem loans in our portfolio and have reserved adequately for potential losses," stated Ron Martin, CEO. "Loan growth for the year has been strong and this will fuel the profits needed to ensure stability during this economic downturn. Loan production for the nine months ending September 30, 2008 was $116 million of new and renewed loans which is a 24% increase over loan production for the same period in 2007. Quality loans still exist in the marketplace today and there are still banks that adhere to strict credit quality who are still willing to lend to solid borrowers," Martin concluded.

President Chris Courtney continued, "We have seen strong year-over-year growth in net interest income, which can be attributed to solid loan growth and deliberate efforts to increase low-cost core deposits through calling efforts focused on full relationships and a willingness to allow single service accounts to run-off. Due to deposit mix improvements, our year-to-date net interest margin has increased to 4.71%, a 17 basis point increase over the 4.54% for the same period last year, despite a 325 basis point decrease in interest rates by the Fed."

The third quarter is marked by continued improvement in credit trends. Non-performing loans to total assets are 1.33%, or $6.54 million, down from 2.16%, or $9.81 million, at December 31, 2007. OREO at September 30, 2008 was $4.36 million, or 0.89% of total assets, consisting of three loans. Non-accrual loans are $2.18 million, or 0.44% of total assets. All OREO property has been written down to current appraised values and non-accrual loans have been reviewed by management for reserve adequacy in light of current market values. The bank's common equity has grown to $44.2 million and the bank remains well capitalized by regulatory standards.

The bank continues to bolster loan loss reserves, in recognition of the weak economic climate. The September 30th provision stands at 1.12% up from 1.08% last quarter. Management remains confident in its underwriting practices and in the adequacy of its loss methodology, but given the current economic outlook, is poised to further provision if positive trends in non-performing loans reverse.

Established in 1991, Oak Valley Community Bank offers a variety of loan and deposit products dedicated to serving the needs of individuals and small businesses. The Bank currently operates through 12 conveniently located branches: Oakdale, Escalon, Sonora, Turlock, Stockton, Patterson, Ripon, two branches in Modesto, and three branches in their Eastern Sierra Division, which include Bridgeport, Mammoth Lakes and Bishop.

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            3rd        2nd        1st        4th        3rd
($ in thousands,       Quarter    Quarter    Quarter    Quarter    Quarter
 except per share)       2008       2008       2008       2007       2007
Selected Quarterly
 Operating Data:
  Net interest
   income            $   5,292  $   5,081  $   4,809  $   4,792  $   4,859
  Provision for loan
   losses                  602        440        145        120        145
  Non-interest
   income                  634        672        614        562        506
  Non-interest
   expense               4,535      4,562      4,057      3,897      3,582
  Income before
   income taxes            789        751      1,221      1,337      1,638
  Provision for
   income taxes            240        198        445        387        668
  Net income               549        553        776        950        969
  Earnings per
   common share -
   basic                  0.07       0.07       0.10       0.12       0.13
  Earnings per
   common share -
   diluted                0.07       0.07       0.10       0.12       0.13
  Dividends declared
   per common share
   (1)                    0.05          -          -          -       0.19
  Return on average
   common equity (2)      4.91%      5.01%      7.16%      8.93%      9.34%
  Return on average
   assets                 0.45%      0.47%      0.68%      0.83%      0.87%
  Net interest
   margin (3)             4.76%      4.77%      4.60%      4.50%      4.67%
  Efficiency Ratio
   (3)                   76.03%     78.04%     73.70%     72.00%     66.02%

Capital - Period End
  Book value per
   share (2)         $    5.77  $    5.71  $    5.70  $    5.57  $    5.41

Credit Quality -
 Period End
  Nonperforming
   assets/assets          1.33%      1.35%      1.60%      2.16%      0.27%
  Loan loss
   reserve/loans (4)      1.12%      1.08%      1.09%      1.16%      1.23%

Period End Balance
 Sheet
($ in thousands)
Total assets         $ 490,111  $ 476,094  $ 463,044  $ 454,259  $ 453,738
  Gross Loans          416,664    400,537    387,647    387,809    385,901
  Nonperforming
   assets                6,538      6,435      7,395      9,808      1,216
  Allowance for
   credit losses (4)     4,650      4,321      4,225      4,507      4,757
  Deposits             365,230    358,159    362,760    377,348    386,158
  Common Equity (2)     44,151     43,735     43,302     42,361     41,184
Non-Financial Data
  Full-time
   equivalent staff        119        128        130        125        119
  Number of banking
   offices, domestic
   and foreign              12         12         12         12         12
Common Shares
 outstanding
  Period end (2)     7,658,252  7,658,252  7,611,377  7,607,780  7,606,068
  Period average -
   basic (2)         7,658,252  7,641,534  7,610,039  7,606,506  7,567,719
  Period average -
   diluted (2)       7,743,091  7,697,681  7,696,308  7,727,570  7,717,768
Market Ratios
  Stock Price        $    6.30  $    7.00  $    8.49  $    8.25  $    9.94
  Price/Earnings         22.14      24.12      20.69      16.64      19.56
  Price/Book (2)          1.09       1.23       1.49       1.48       1.84



Profitability                                             YEAR TO DATE
                                                      --------------------
($ in thousands, except per share)                    9/30/2008  9/30/2007
Selected Quarterly Operating Data:
      Net interest income                             $  15,181  $  14,114
      Provision for loan losses                           1,187        435
      Non-interest income                                 1,920      1,598
      Non-interest expense                               13,153     10,354
      Income before income taxes                          2,761      4,923
      Provision for income taxes                            883      1,948
      Net income                                          1,878      2,974
      Earnings per common share - basic                    0.25       0.41
      Earnings per common share - diluted                  0.24       0.40
      Dividends declared per common share (1)              0.05       0.19
      Return on average common equity (2)                  5.71%     10.56%
      Return on average assets                             0.53%      0.90%
      Net interest margin (3)                              4.71%      4.54%
      Efficiency Ratio (3)                                75.95%     65.10%

Capital - Period End
      Book value per share (2)                        $    5.77  $    5.41

Credit Quality - Period End
      Nonperforming assets/assets                          1.33%      0.27%
      Loan loss reserve/loans (4)                          1.12%      1.23%

Period End Balance Sheet
($ in thousands)
Total assets                                          $ 490,111  $ 453,738
      Gross Loans                                       416,664    385,901
      Nonperforming assets                                6,538      1,216
      Allowance for credit losses (4)                     4,650      4,757
      Deposits                                          365,230    386,158
      Common Equity (2)                                  44,151     41,184
Non-Financial Data
      Full-time equivalent staff                            119        119
      Number of banking offices, domestic
       and foreign                                           12         12
Common Shares outstanding
      Period end (2)                                  7,658,252  7,606,068
      Period average - basic (2)                      7,636,687  7,283,187
      Period average - diluted (2)                    7,737,050  7,443,004
Market Ratios
      Stock Price                                     $    6.30  $    9.94
      Price/Earnings                                      19.23      18.20
      Price/Book (2)                                       1.09       1.84


      (1) Cash dividend of $382,943 and $1,444,697 paid in August 2008 and
          2007, respectively.
      (2) Includes 256,142 shares issued on June 15, 2007 for the Rights
          Subscription stock offering and 200,289 shares issued on July 16,
          2007 for the remaining shares stock offering, totaling $5,020,739
          in additional capital.
      (3) Ratio computed on a fully tax equivalent basis using a marginal
          federal tax rate of 34%.
      (4) 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