To Our Shareholders:

Believe it. The instability of the financial markets continues at all levels, with expectations of more turbulence for at least the balance of 2008. Margin pressures, capital shortfalls, liquidity squeezes and credit quality concerns seem to dominate the financial news these days, with most leading economic indicators pointing in a negative direction. Against this type of backdrop, all financial institutions tend to be painted with the same brush. However, it is important at times like these to remember that your Bank is very well capitalized, enjoys a fortress-like balance sheet with high-quality loan and deposit portfolios, and has a proven record of sustainable earnings generation.

Net income for the second quarter of 2008 totaled $.88 million ($.07 per share), a 14% decrease compared to $1.02 million ($.09 per share) for the first quarter of 2008 and a 33% decrease when compared to the $1.32 million ($.11 per share) for the quarter ended June 30, 2007. For the first half of 2008, net income was $1.89 million ($.16 per share) compared to $2.75 million ($.23 per share) reported for the first half of 2007. At June 30, 2008, total assets stood at $492 million, up from $469 million at December 31, 2007 and from $448 million at June 30, 2007. As of June 30, 2008, deposits totaled $428 million, an 11% increase during the last twelve months, while loans outstanding were $350 million, a 13% improvement over June 30, 2007. Shareholders’ equity at June 30, 2008 was in excess of $58 million, reflecting a very strong capital ratio of approximately 12% of total assets.

Your Board of Directors and management team are well aware of the opportunities available to Premier Valley Bank and the challenges along the road to success. The long term prospects are encouraging, including the proven ability to build PVB’s franchise as evidenced by healthy loan and deposit growth, increased market share and the formation of a bank holding company. In addition, a very strong capital base supports the Bank’s historical dividend pattern and allows other shareholder-friendly initiatives, such as stock repurchase programs and dividend reinvestment plans, with resulting excellent capital ratios. The challenges, many of which are considered short term in nature, include lower margins during this business cycle as well as additional provisioning for potential loan losses, reflecting current local economic conditions as well as specific reserves related to isolated situations. Speaking on behalf of all of us at Premier Valley Bank, and just like in the song recorded by many, including “The King” Elvis Presley, “I Believe”.

We always encourage our Shareholders to direct their business to Premier Valley Bank to take advantage of our high - touch, personal service - and to promote your Bank. Visit any of our convenient locations, review our website at www.premiervalleybank.com or call anytime to discuss your banking needs. We truly appreciate your support.


J. Mike McGowan
President & Chief Executive Officer