Home Valley Bancorp Reports 1st Quarter, 2008 Results

GRANTS PASS, Ore. — Home Valley Bancorp (Company) (OTCBB:HVYB), the parent company of Home Valley Bank, announced today that it will take an additional provision for loan losses in the 1st-quarter for the impairment of a group of loans that is part of a $2.8 million relationship. As of this press release the loans in question for this relationship are listed as performing with no delinquency at this time. This relationship includes loans collateralized by commercial real estate, three improved residential building lots, and three residential properties. Home Valley Bank is also increasing its reserve allocation for possible changing conditions in the Bank's local market.

The Company recorded 1st-quarter provision for loan losses of $657,000. This provision provides for an allocation of $616,000 related to the impairment of the previously-mentioned relationship. Additionally, the Company has increased allocation of its general reserves in regards to management's assessment of the elevated risks within current economic conditions. Some of these risks include, possible borrower liquidity and declining real property values, and the weakening economic environment.

The increased provision lowered earnings by $406,000 or $0.20 per diluted share for the 1st-quarter of 2008.

"Conditions in the market necessitate this increased provision. The prolonged slowdown in the economy has raised concerns about borrower liquidity and the future ability of borrowers to service debt," said President and CEO Robert J. Ward. "At the present time, we believe we are adequately reserved. We continue to actively monitor our loan portfolio and respond to changes in our local economy."

-- NET INCOME OF $0.19 PER DILUTED SHARE (EXCLUDING LOAN IMPAIRMENT) AND A NET LOSS OF $0.01 PER DILUTED SHARE INCLUDING THE CHARGE

-- NET INTEREST INCOME UP 12% FROM SAME PERIOD IN 2007

-- ASSETS GROW 9% - TOP $218 MILLION FROM ONE YEAR AGO

-- LOAN QUALITY CONTINUES STRONG - IMPAIRMENT IS PRIMARILY ISOLATED TO ONE BORROWER

-- LOANS UP 4.9% OR $8.6 MILLION IN THE FIRST QUARTER OF 2008

For further information on the Company or to access Internet banking, please visit our web site at http://www.homevalleybank.com.

FINANCIAL PERFORMANCE:

Home Valley Bancorp (Company) today reported a first-quarter loss of $12,000. or -$.01 per diluted share, a decrease of $384,000 from $372,000, or $.19 per share for the same period one year ago. Net interest income was up 12% to $1.8 million for the first quarter 2008 compared to $1.6 million in 2007. Return on Equity (ROAE) -- (excluding impairment) was down 10% to 11.51% from 12.72% in the same period one year ago. Return on Equity (ROAE) -- (including impairment) was down 103% to -.35% from 12.72% in the same period one year ago. Return on Assets (ROAA) (excluding impairment) decreased 3% to .74% at March 31, 2008, vs. the corresponding period in 2007. Return on Assets (ROAA) (including impairment) decreased 103% to .74% at March 31, 2008, vs. the corresponding period in 2007.

LOAN GROWTH AND CREDIT QUALITY:

The Company experienced strong loan demand in the first quarter of 2008. During the first quarter of 2008 the loan portfolio increased 4.9% to $185 million, an increase of $8.6 million from year-end 2007. First quarter 2008 vs. first quarter 2007 increased of 13%, or $21.3 million. Loan Fee income increased $34,000 from the same period one year ago. The Company's underlying loan credit quality excluding the one borrower related impairment remained sound. A notable factor in regards to the impaired borrower is that the loans in question continue to perform and are not currently delinquent or in a non-accrual status. At March 31, 2008 the Company had non-accrual loans of $81K. The only charge-off in the 1st-quarter was the impairment write-down discussed above. The Allowance for Loan Losses at March 31, 2008 is up 3% from one year ago. As a percentage of outstanding loans the allowance at March 31, 2008, stood at .64% vs. .70% for the corresponding period of 2007. Based upon Management's analytical and evaluative assessment of loan quality, the Company believes that its Reserve for Loan Losses is at an appropriate level under current circumstances and prevailing economic conditions in our area.

DEPOSIT GROWTH:

Deposits outstanding in the first-quarter of 2008 decreased $750K or .4%. As discussed in the previous press release, this decrease can be explained as a repositioning of the CD deposit portfolio. Due to decreasing rates the company intended on replacing higher yielding maturing CDs with either FHLB borrowings or lower yielding CDs. This objective was primarily met in the first quarter and the Company intends on continuing this trend throughout the second quarter. In the first quarter of 2008 the Bank's CD portfolio has decreased $5.7 million with the weighted average rate decreasing from 5.246% to 4.417%. Second quarter maturities currently stand at $11.1 million with a weighted average rate of 4.87%. Traditional core deposits still account for 87% of the current deposit portfolio. As of March 31, 2008 the Bank had $20.5 million of CD's over $100,000.

BORROWINGS:

The Company at March 31, 2008 had total borrowings of $30.2 million (excluding trust preferred). Borrowings increased $5.3 million in the first quarter of 2008, and were used primarily to fund strong first-quarter loan growth. These borrowings were all FHLB advances. The weighted average rate on FHLB advances dropped from 5.05% to 4.32% in the first quarter -2008.

CAPITAL RATIOS (Bank):

Leverage, Tier-1, and Total Risk Based at March 31, 2008 stood at 8.56%, 10.31%, and 10.97% respectively, compared to 8.74%, 10.71% and 11.38% for December 31, 2007.

NON-INTEREST INCOME:

Non-Interest Income for the first quarter of 2008 was up 10% to $253,000 vs. $230,000 for the same period in 2007. This increase vs. prior quarter was primarily the impact of the Company's overdraft privilege program and loan related fee income.

NON-INTEREST EXPENSE:

For the first quarter ending March 2008 non-interest expense increased 15% to $1.4 million, up from $1.2 million for the same period in 2007; this increase was primarily due to the opening of a new branch in Merlin, Oregon and new hires at the administrative level. Salary and benefit expense as a percentage of average assets (annualized) were 1.47% at March 31, 2008, a 2% improvement compared to 1.50% one year ago.

                         Home Valley Bancorp
                Selected Financial Results - Unaudited
                (in thousands, except per share data)

    	
                                              Quarter Ended       %
                                           3/31/2008 3/31/2007 Change
                                           --------- --------- -------
    	
Summary of Operations
  Interest income                              3,411     3,198      7%
  Interest expense                             1,545     1,525      1%
  Interest expense - trust preferred              81        81      0%
  Net Interest Income                          1,785     1,592     12%
  Provision for loan losses                      657         0    100%
  Net Interest Income after provision          1,128     1,592    -29%
  Non-interest income                            253       230     10%
  Non-interest expense                         1,402     1,218     15%
  Income before taxes                            -21       604   -103%
  Income taxes                                    -9       232   -104%
  Net Income                                     -12       372   -103%
    	
Share Data
  Basic earnings per share                     -0.01      0.19   -103%
  Diluted earnings per share                   -0.01      0.19   -103%
  Book value per share                          6.66      6.22      7%
  Basic shares outstanding                 2,032,984 2,010,023    1.1%
  Diluted shares outstanding               2,049,948 2,049,016    0.0%
  Share Price                                   9.45     13.10    -28%
  Price Earnings Ratio                       -406.90     17.76  -2391%
    	
Balance Sheet Data (at period end)
  Investment securities                       19,167    21,090     -9%
  Total loans (net)                          184,756   163,440     13%
  Total assets                               218,297   201,052      9%
  Total deposits                             168,901   161,457      5%
  Borrowings                                  30,161    26,882     12%
  Trust Preferred Securities                   5,000     5,000      0%
  Total shareholders' equity                  13,555    11,918     14%
    	
Average Balances
  Investment securities                       19,538    18,657      5%
  Total loans (net)                          180,503   165,216      9%
  Total assets                               213,799   197,909      8%
  Total deposits                             165,386   153,682      8%
  Borrowings                                  28,998    26,937      8%
  Trust Preferred Securities                   5,000     5,000      0%
  Total shareholders' equity                  13,729    11,859     16%
    	
Selected Ratios
  Return on average assets (ROA)              -0.02%     0.76%   -103%
  Return on average equity (ROE)              -0.35%    12.72%   -103%
  Net interest margin                          3.58%     3.51%      2%
  Net interest margin (1)                      3.74%     3.69%      1%
  Efficiency ratio                            68.79%    64.00%      7%
  Tier-One leverage ratio -Bank                8.56%     8.54%      0%
  Tier-One risk based ratio - Bank            10.31%    10.70%     -4%
  Total risk based capital ratio - Bank       10.97%    11.42%     -4%
  (1) Adjusted for trust preferred.
    	
Asset Quality Data
  Allowance for loan losses                    1,180     1,151      3%
  Allowance to ending loans                    0.64%     0.70%     -9%
  Net charge offs                                626        -1 -62700%
  Net charge offs to average loans             0.35%   -0.001% -57398%
  Non performing assets                           81         0      0%
  Non performing assets to total assets        0.04%     0.00%      0%

Home Valley Bancorp VP, Chief Financial Officer Steven D. Haight, 541-955-7082, ext. 3135 or Home Valley Bancorp President & Chief Executive Officer Robert J. Ward, 541-955-7082, ext. 3122 or Wedbush Morgan Securities Market Maker Joey J. Warmenhoven, 800

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