TEMECULA, Calif.--(BUSINESS WIRE)--Temecula Valley Bancorp Inc. (NASDAQ:TMCV) today announced a net loss of $2.0 million, or $0.20 per diluted share, for the second quarter ending June 30, 2008 compared with net income of $5.3 million, or $0.47 per diluted share, reported for the second quarter of 2007. Results reflect the combined impact of a lower net interest margin, a substantial increase in the loan loss provision, and lower noninterest income, partially offset by lower noninterest expense.

For the first six months of 2008, Temecula had a loss of $553 thousand, or $0.06 per diluted share, compared with net income of $9.4 million for the first six months of 2007, or $0.85 per diluted share.

Chairman, President, and CEO, Stephen H. Wacknitz stated, “Clearly, we are continuing to work our way through one of the most challenging economic environments we’ve experienced in a long time. We remain confident that our markets will rebound. We have a strong capital base, solid credit and underwriting infrastructure, and a solid business strategy being implemented by a seasoned team of managers and lenders. We are prepared to address the difficult market and anticipate returning to profitability next quarter.”

Mr. Wacknitz commented, “During the second quarter, we took steps to respond to the depressed state of the construction industry by shifting our focus to expanding our SBA lending throughout the country as well as establishing more conservative exposures and limits on certain higher-risk construction loans such as non-owner-occupied projects. While we are optimistic about the long-term health and vitality of our markets, the timing of a turnaround is difficult to predict. While we are seeing some bright spots pointing to stabilization in the real estate market, we are still proceeding cautiously.

“As we indicated in the first quarter, we are de-emphasizing conventional construction lending and lowering our exposure in light of market conditions and risk levels. Our business strategy is to expand our SBA lending activities, mainly in the western United States and for owner-user multi-purpose projects, building upon our expertise and infrastructure already in place. We have targeted experienced SBA business development officers in key markets that have referral contacts specific to multi-purpose properties. Through the first six months of 2008, 13 new seasoned SBA business development officers have been hired. In addition, we have positioned our branch network to capture a greater share of commercial business, giving us the opportunity to cross-sell many of our new deposit and cash management products.”

Total revenue, which consists of net interest income and noninterest income, was $14.8 million for the second quarter of 2008 compared with $23.2 million for the second quarter of 2007, a decrease of 36.1 percent. Net interest income was $12.0 million, down $5.0 million or 29.5 percent from the $17.1 million reported for the prior-year second quarter, due to the unprecedented Federal Reserve Bank rapid rate decreases in late 2007 and early 2008. The net interest margin declined by 185 basis points in the second quarter of 2007 to 3.66 percent in the second quarter of 2008, with 50 basis points of the decline occurring in the linked quarter. The 33.6 percent decline in the net interest margin year over year was only partially offset by an increase in average earning assets of 6.15 percent. The loan yield declined 277 basis points versus a 104 basis point decline in average cost of interest-bearing deposits. “The downward repricing of our time deposits has finally started to catch up with the repricing of our variable rate loans, and we experienced a modest expansion of our net interest margin as we exited the second quarter,” said Mr. Wacknitz. While the net interest margin averaged 3.66 percent for the second quarter, the net interest margin was 3.83 percent for the month of June.

Noninterest income was $2.8 million for the second quarter of 2008, down $3.3 million or 54.4 percent from the $6.1 million reported for the year-ago second quarter. Income from core banking operations such as loan income and service fees on deposit accounts rose modestly from year-ago levels. Combined, they generated $0.8 million of income, up 7.2 percent, from $0.7 million. Gains derived from the sale of loans and other assets declined sharply, from $4.45 million in the 2007 second quarter to $0.55 million for the current quarter. Asset sale gains in the second quarter of 2007 included first trust deed loan sales gain of $1.3 million and $0.5 million of SBA 7a unguaranteed sales gain compared to $0 for both in the same period in 2008. Other asset sale gains have declined as a result of lower volume of loans sales (including SBA 7(a), 504, and USDA B&I loans) this year. In addition, premiums on these loan sales are somewhat depressed due to disruptions in the credit markets that basically started in the third quarter of 2007.

SBA servicing income, the third source of Temecula’s noninterest income, is affected by prepayment speeds and discount rates. These factors reflect market conditions over which Temecula has less control. These factors became more volatile in 2007, reflecting greater uncertainties in the financial markets at that time. More recently, financial market conditions have stabilized, and the mark-to-market adjustment and cash servicing income have become less volatile.

Beginning in the fourth quarter of 2004, less of the SBA loan servicing rights was retained and more SBA 7(a) loans were sold with cash premiums to reduce the volatility associated with early prepayments and volatile discount rates. The SBA requires that the originating lender retain a minimum of one percent in servicing fees, so the current weighted average servicing rate should remain level or reduce to slightly above one percent as remaining loans originated prior to the fourth quarter of 2004 payoff or pay down. For the first quarter of 2008 the net servicing loss was $29,000, due to more than expected prepayments, and the cash servicing income of $1.5 million was offset by the $1.5 million non-cash decline in the valuation of the servicing assets. In the second quarter of 2008, net servicing income improved due to lower prepayment speeds and slightly lower discount rate. The table below provides a breakout of the SBA servicing portfolio calculations for the first and second quarter of 2008 and 2007.

The fourth source of noninterest income is loan broker income on SBA and mortgage loans, which decreased from $1.3 million the second quarter of 2007 to $0.3 million the second quarter of 2008 due to a lower number of mortgage and SBA transactions. Year to date broker income was $2.7 million in 2007 and $1.0 million in 2008.

Noninterest expense for the second quarter of 2008 was $13.2 million, down $1.2 million or 8.1 percent from the $14.3 million reported for the second quarter of 2007. Salary and benefits expenses primarily accounted for the decrease, reflecting lower bonus and commission expense due to lower earnings and broker income for the quarter. In addition, staffing levels have been reduced, with the number of full-time equivalent employees declining by 19 to 299 in the second quarter of this year and declining 17 since year-end 2007. The extent of the staff decreases was offset by increases in the retail SBA division. The full effect of the staff decreases will be recognized in the upcoming quarters. Compared to the linked quarter, noninterest expenses grew $1.5 million, or 13.0 percent, due to an increase in the expenses associated with the administration of problem loans and the management and disposition of foreclosed real estate.

Total assets were $1.46 billion at June 30, 2008, up $155.8 million or 11.9 percent from the $1.31 billion reported at June 30, 2007. Since year-end 2007, assets increased $146.2 million. Loans grew by $175.1 million, or 15.2 percent, over the last twelve months to $1.33 billion at June 30, 2008, driven by non-construction real estate and SBA lending. Construction and development (C&D) loans constitute 46.2 percent of the portfolio, down from 47.4 percent and year end, while commercial loans, at 6.0 percent, are growing as a percent of the total loan portfolio.

Year-over-year loan growth was funded through a reduction of fed funds sold, growth in deposits, borrowings from the Federal Home Loan Bank Board, and a higher level of junior subordinated debt.

The bank has historically been a real estate lender, with approximately 92.4 percent of its loans collateralized by real property. Construction and Development (C&D) loans at the end of the current quarter were $613.1 million, an increase of $32.1 million, or 5.5 percent, from the $581.0 million reported at the end of the second quarter of 2007, but a decrease of $15.2 million from the linked quarter. While current loan application levels have fallen off sharply, advances on current projects have resulted in higher loan outstanding balances compared with a year ago. Some of the void created by the decline in construction lending will be filled by SBA lending.

SBA loans were $328.5 million at second quarter-end, up $68.3 million or 26.3 percent from second quarter 2007 levels. From the linked quarter, SBA loans increased $60.4 million due to expansion in the number of SBA business development officers.

While other real estate, including CRE loans, increased to $299.6 million, or $49.4 million from year-ago levels, loans in this category were virtually unchanged from March 31, 2008 levels.

Commercial loans increased $23.0 million, or 40.3 percent from a year ago, and total $80.0 million at the end of second quarter 2008.

The loan portfolio is diversified geographically and by loan type. Over 24 percent of the Bank’s loans are located outside of California, underwritten through various SBA programs. These loans are all commercial in nature, divided between CRE ($38.0 million) and commercial construction ($76.0 million), SBA 7(a), 504, and USDA B&I ($109.3 million), and unguaranteed purchase program ($103.4 million).

Deposits at June 30, 2008 were $1.23 billion, an increase of $79.1 million or 6.9 percent from $1.15 billion at June 30, 2007 and an increase of $31.5 million from the linked quarter. Declining rates accounted for the 57 basis point improvement in the cost of interest-bearing deposits since first quarter 2008.

Gross nonperforming assets were $74.4 million or 5.08 percent of total assets at June 30, 2008, up from $71.4 million or 5.19 percent of total assets at March 31, 2008, and $27.4 million or 2.09 percent of total assets at June 30, 2007. Nonperforming assets were supported by government guarantees of $10.5 million, $11.3 million and $15.2 million, respectively, for the current quarter, the linked quarter and the year-ago quarter. Net charge-offs were an annualized 0.67 percent of average loans for second quarter 2008, compared with 0.40 percent and 0.06 percent, respectively, of average loans for first quarter 2008 and second quarter 2007. The majority of nonperforming loans are construction loans, which represent $35.8 million of the net exposure and $37.2 million of the gross exposure. This is down $9.3 million and $9.3 million respectively from March 31, 2008. Real estate secured nonperforming loan gross balances increased $1.7 million and net balances increased $3.1 million from March 31, 2008. Other real estate owned increased from $3.1 million at March 31, 2008, to $13.7 million at June 30, 2008, due to three SBA loans totaling $1.4 million and three construction loans totaling $9.2 million being transferred from non-accrual status to other real estate owned.

Shareholders’ equity at the end of second quarter 2008 was $105.3 million compared with $107.8 million at March 31, 2008 and $112.2 million a year ago. The decline reflects the impact of the loss in second quarter 2008 and the impact of repurchases of 577,200 shares for $9.974 million in the third quarter of 2007 and 149,500 shares for $1.680 million in the first quarter of 2008 and 50,000 shares for $0.363 million in the second quarter of 2008. At June 30, 2008, the Company had 10,033,267 shares outstanding. Capital ratios remain strong at June 30, 2008, with the Tier 1 leverage ratio at 9.96 percent, the Tier 1 risk-based capital ratio at 9.22 percent, and the total risk-based capital ratio at 11.80 percent, all above the minimum to qualify as "well capitalized."

Temecula Valley Bank, established in 1996, operates eleven full-service offices in Temecula, Murrieta, Corona, Fallbrook, Escondido, Rancho Bernardo, El Cajon, Carlsbad, Solana Beach, Ontario, and San Marcos. The Bank also operates a number of regional real estate loan production centers in California. As a leading SBA Preferred Lender, the Bank has a network of SBA loan production offices across the United States. Temecula Valley Bancorp was established in June 2002 and operates as a bank holding company for the Bank. For further information, please go to the Bank's website at www.temvalbank.com.

Temecula Valley Bancorp stock is traded on the NASDAQ Global Select Market under the symbol TMCV.

Statements concerning future performance, developments, or events concerning expectations for growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, the effect of interest rate changes, the ability to control costs and expenses, the impact of consolidation in the banking industry, financial policies of the U.S. government, and general economic conditions. Additional information on these and other factors that could affect financial results are included in the filings made with the Securities and Exchange Commission by Temecula Valley Bancorp Inc. The Corporation undertakes no obligation to update forward-looking statements, whether as a result of new information, future events, or otherwise.


TEMECULA VALLEY BANCORP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(in thousands except share and per share information)

			June 30, 2008			June 30, 2007		% Change			December 31, 2007		% Change
ASSETS
	Cash and due from banks	$	13,464		$	13,644		(1	%)	$	13,210		2	%
	Interest-bearing deposits in financial institutions		1,000			1,000		0	%		1,000		0	%
	Federal funds sold		0			76,750		(100	%)		4,220		(100	%)
	Investment securities available-for-sale		39,685			0		0	%		0		0	%
	Investment securities held-to-maturity		2,964			1,012		193	%		2,981		(1	%)
	Loans
	Commercial		80,000			57,019		40	%		68,661		17	%
	Real Estate-Construction		613,074			580,987		6	%		586,906		4	%
	Real Estate-Other		299,648			250,198		20	%		292,153		3	%
	SBA		328,492			260,177		26	%		286,367		15	%
	Consumer and other		5,360			3,134		71	%		3,630		48	%
	Total Gross Loans		1,326,574			1,151,515		15	%		1,237,717		7	%
	Less allowance for loan losses		(19,226	)		(12,268	)	57	%		(16,022	)	20	%
	Total Loans, net		1,307,348			1,139,247		15	%		1,221,695		7	%

	Federal Reserve & Home Loan Bank stock, at cost		4,650			2,833		64	%		2,905		60	%
	Bank premises and equipment, net		5,622			5,400		4	%		5,271		7	%
	Other real estate owned, net		13,724			722		1801	%		0		0	%
	Cash surrender value life insurance		30,426			27,505		11	%		28,034		9	%
	SBA-loan servicing asset		4,993			7,111		(30	%)		5,350		(7	%)
	SBA-loan I/O strip receivable		6,361			9,775		(35	%)		6,599		(4	%)
	Accrued interest		6,042			6,466		(7	%)		6,827		(11	%)
	Other Assets		28,446			17,500		63	%		20,433		39	%
	Total Assets	$	1,464,725		$	1,308,965		12	%	$	1,318,525		11	%
LIABILITIES AND STOCKHOLDER EQUITY
	Deposits
	Non-interest Bearing Deposits		145,193			144,683		0	%		133,867		8	%
	Money Market & NOW		134,945			151,893		(11	%)		146,270		(8	%)
	Savings		26,903			29,487		(9	%)		28,059		(4	%)
	Time Deposits		921,882			823,772		12	%		852,875		8	%
	Total deposits		1,228,923			1,149,835		7	%		1,161,071		6	%
	Junior subordinated debt securities		56,924			34,023		67	%		34,023		67	%
	Borrowings from Federal Home Loan Bank		60,530			0		0	%		0		0	%
	Accrued interest		1,808			2,027		(11	%)		2,329		(22	%)
	Other liabilities		11,244			10,892		3	%		13,143		(14	%)
	Total liabilities		1,359,429			1,196,777		14	%		1,210,566		12	%
	Stockholder's equity		105,296			112,188		(6	%)		107,959		(2	%)
	Total liabilities and Stockholder's equity	$	1,464,725		$	1,308,965		12	%	$	1,318,525		11	%

SELECTED BALANCE SHEET DATA
	Book value per share, end of period		10.49			10.52					10.64
	Tier 1 leverage capital ratio		9.96	%		10.93	%				10.63	%
	Tier 1 risk-based capital ratio		9.22	%		10.58	%				9.65	%
	Total risk-based capital ratio		11.80	%		11.51	%				10.80	%
	Allowance for loan losses as a % of total loans		1.45	%		1.07	%				1.29	%
	Gross nonperforming assets as a % of total assets		5.08	%		2.09	%				2.35	%
	Net nonperforming assets as a % of total assets		4.37	%		0.93	%				1.56	%
	Net chargeoffs (annualized) as a % of total loans		0.65	%		0.06	%				0.09	%

PAST DUE AND NON-ACCRUAL LOANS
June 30, 2008	Gross Balance	Government Guaranty		Net Balance
30 - 89 days past due	32,063	(1,426	)	30,637
90+ days past due and accruing	0	0		0
Non-accrual	60,669	(8,567	)	52,102
Other real estate owned (REO)	13,724	(1,888	)	11,836
Total non-performing assets	74,393	(10,455	)	63,938

March 31, 2008
30 - 89 days past due	19,844	(2,160	)	17,684
90+ days past due and accruing	0	0		0
Non-accrual	68,350	(10,436	)	57,914
Other real estate owned (REO)	3,091	(816	)	2,275
Total non-performing assets	71,441	(11,252	)	60,189

December 31, 2007
30 - 89 days past due	11,547	(2,732	)	8,815
90+ days past due and accruing	0	0		0
Non-accrual	30,936	(10,379	)	20,557
Other real estate owned (REO)	0	0		0
Total non-performing assets	30,936	(10,379	)	20,557

June 30, 2007
30 - 89 days past due	11,471	(405	)	11,066
90+ days past due and accruing	0	0		0
Non-accrual	26,630	(14,611	)	12,019
Other real estate owned (REO)	722	(542	)	180
Total non-performing assets	27,352	(15,153	)	12,199

TEMECULA VALLEY BANCORP INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands except share and per share data)

			3 Mos. Ended June 30,						6 Mos. Ended June 30,
		2008			2007			2008			2007
INTEREST INCOME
	Interest income and fees on loans	$	22,655		$	29,487		$	48,301		$	57,565
	Other Interest income		194			417			477			698
	Total Interest income		22,849			29,904			48,778			58,263
INTEREST EXPENSE
	Interest on deposits		9,631			12,071			21,026			23,347
	Interest on junior subordinated debt and other borrowings		1,201			779			2,239			1,614
	Total Interest expense		10,832			12,850			23,265			24,961
	Net interest income		12,017			17,054			25,513			33,302
	Provision for loan losses		5,300			0			7,500			415
	Net interest income after provision for loan losses		6,717			17,054			18,013			32,887
NON INTEREST INCOME
	Service charges and fees		147			151			299			300
	Gain on sale of loans, fixed assets and OREO		553			4,454			1,435			6,737
	SBA Net Servicing income		552			(855	)		523			(1,710	)
	Loan related income		614			559			1,027			1,017
	Other income		926			1,808			2,259			3,711
	Total Non Interest income		2,792			6,117			5,543			10,055
NON INTEREST EXPENSE
	Salaries and employee benefits		8,214			9,646			15,826			18,283
	Occupancy and equipment		1,313			1,273			2,649			2,537
	Marketing and business promotion		154			257			417			601
	Office expense		592			705			1,174			1,363
	Loan related expense		600			493			1,069			1,115
	Other expense		2,290			1,943			3,673			3,081
	Total Non Interest expense		13,163			14,317			24,808			26,980
	Earnings (Loss) before income taxes		(3,654	)		8,854			(1,252	)		15,962
	Income tax expense (benefit)		(1,643	)		3,603			(699	)		6,532
	Net earnings (loss)	$	(2,011	)	$	5,251		$	(553	)	$	9,430

OTHER SELECTED FINANCIAL DATA
	Actual common shares outstanding at end of period		10,033,267			10,662,772			10,033,267			10,662,772
	Average common shares outstanding		10,038,322			10,661,179			10,069,440			10,631,627
	Average common shares & equivalents outstanding		10,041,183			11,072,471			10,125,895			11,063,223
	Basic earnings (loss) per share		(0.20	)		0.49			(0.06	)		0.89
	Diluted earnings (loss) per share		(0.20	)		0.47			(0.06	)		0.85

	Return on average assets (annualized)		(0.58	)%		1.59	%		(0.08	)%		1.47	%
	Return on average equity (annualized)		(7.59	)%		19.07	%		(1.05	)%		17.56	%
	Investment Yield		3.67	%		5.24	%		3.37	%		5.23	%
	Loan Yield		7.02	%		9.79	%		7.59	%		9.77	%
	Cost of Interest-bearing Deposits		3.74	%		4.78	%		4.04	%		4.77	%
	Cost of Borrowings		4.80	%		7.66	%		5.74	%		7.91	%
	Loan to deposit ratio, end of period		107.95	%		100.15	%		107.95	%		100.15	%
	Net interest margin		3.66	%		5.51	%		3.92	%		5.53	%
	Efficiency ratio		88.89	%		61.79	%		79.88	%		62.23	%

	NET LOAN CHARGEOFFS
	Chargeoffs		3,067			198			4,486			678
	Recoveries		(24	)		(9	)		(190	)		(9	)
	Net Chargeoffs (Recoveries)		3,043			189			4,296			669

TEMECULA VALLEY BANCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
(dollars in thousands except per share information)

	Quarterly
	2008						2007
	2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr			1st Qtr
EARNINGS
Net interest income (fully tax-equivalent)	$	12,017		$	13,496		$	15,813		$	16,517		$	17,054		$	16,250
Provision for loan and lease losses	$	5,300		$	2,200		$	3,130		$	1,055		$	0		$	415
Non Interest income	$	2,792		$	2,751		$	4,813		$	1,521		$	6,117		$	3,938
Non Interest expense	$	13,163		$	11,645		$	12,284		$	12,642		$	14,317		$	12,664
Net income (loss)	$	(2,011	)	$	1,458		$	3,113		$	2,595		$	5,251		$	4,179
Basic earnings (loss) per share	$	(0.20	)	$	0.14		$	0.31		$	0.25		$	0.49		$	0.39
Diluted earnings (loss) per share	$	(0.20	)	$	0.14		$	0.30		$	0.25		$	0.47		$	0.38
Average shares outstanding		10,038,322			10,100,558			10,141,606			10,247,356			10,661,179			10,601,748
Average diluted shares outstanding		10,041,183			10,217,048			10,339,950			10,559,464			11,072,471			11,124,945

PERFORMANCE RATIOS
Return on average assets		(0.58	)%		0.43	%		0.93	%		0.79	%		1.59	%		1.34	%
Return on average common equity		(7.59	)%		5.44	%		11.60	%		9.66	%		19.07	%		16.04	%
Net interest margin (fully tax-equivalent)		3.66	%		4.16	%		5.03	%		5.38	%		5.51	%		5.54	%
Investment Yield		3.67	%		3.37	%		5.02	%		5.16	%		5.24	%		5.23	%
Loan Yield		7.02	%		8.12	%		9.04	%		9.62	%		9.79	%		9.75	%
Cost of Interest-bearing Deposits		3.74	%		4.31	%		4.61	%		4.73	%		4.78	%		4.75	%
Cost of Borrowings		4.80	%		7.87	%		7.08	%		7.51	%		7.66	%		8.14	%
Noninterest income/Operating revenue		18.85	%		16.93	%		23.33	%		8.43	%		26.40	%		19.51	%
Efficiency ratio		88.89	%		71.67	%		59.56	%		70.09	%		61.79	%		62.73	%
Full-time equivalent employees		299			317			316			324			318			313

CAPITAL
Loans/ Deposits		107.95	%		106.08	%		106.60	%		104.60	%		100.15	%		102.43	%
Securities/ Assets		2.91	%		0.21	%		0.23	%		0.23	%		0.08	%		0.08	%
Equity to assets		7.19	%		7.83	%		8.19	%		8.04	%		8.57	%		8.21	%
Regulatory leverage ratio		9.96	%		10.41	%		10.63	%		10.60	%		10.93	%		11.27	%
Tier 1 risk-based capital ratio		9.22	%		9.82	%		9.65	%		9.59	%		10.58	%		10.42	%
Total risk-based capital ratio		11.80	%		12.35	%		10.80	%		10.57	%		11.51	%		11.65	%
Book value per share	$	10.49		$	10.71		$	10.64		$	10.35		$	10.52		$	10.15
Common dividends per share	$	0.04		$	0.04		$	0.04		$	0.04		$	0.04		$	N/A

ASSET QUALITY
Gross loan charge-offs	$	3,067		$	1419		$	510		$	149		$	198		$	479
Net loan charge-offs (recoveries)	$	3,043		$	1,253		$	408		$	24		$	190		$	479
Net loan charge-offs annualized to average loans		0.67	%		0.40	%		0.13	%		0.01	%		0.06	%		0.16	%
Allowance for loan losses	$	19,226		$	16,969		$	16,022		$	13,299		$	12,268		$	12,458
Allowance for losses to total loans		1.45	%		1.34	%		1.29	%		1.10	%		1.07	%		1.06	%
Nonaccrual loans - gross	$	60,669		$	68,350		$	30,936		$	32,034		$	26,629		$	23,813
90-Day Delinquencies still accruing - gross		0			0			0			0			0			0
Other real estate owned - gross	$	13,724		$	3091		$	0		$	152		$	722		$	722
Nonperforming assets (including OREO)		74,393			71,441			30,936			32,186			27,352			24,535
Nonperforming assets to total assets		5.08	%		5.19	%		2.35	%		2.47	%		2.09	%		1.87	%
Nonperforming Assets, Net of Guarantees (NOG)		63,938			60,189			20,558			18,522			12,199			10,420
Nonperforming assets NOG to Total Assets		4.37	%		4.37	%		1.56	%		1.42	%		0.93	%		0.79	%

END OF PERIOD BALANCES
Loans (before allowance)	$	1,326,574		$	1,270,210		$	1,237,717		$	1,204,474		$	1,151,515		$	1,179,789
Total earning assets (before allowance)	$	1,370,223		$	1,301,454		$	1,245,917		$	1,231,510		$	1,230,277		$	1,236,224
Total assets	$	1,464,725		$	1,376,209		$	1,318,525		$	1,304,878		$	1,308,965		$	1,312,448
Deposits
Non Interest-Bearing Demand	$	145,193		$	144,213		$	133,867		$	144,938		$	144,683		$	151,293
Money Market and NOW	$	134,945		$	155,811		$	146,270		$	173,851		$	151,893		$	141,028
Savings	$	26,903		$	28,386		$	28,059		$	27,214		$	29,487		$	32,012
Timed Deposits Under $100,000	$	537,087		$	470,817		$	453,272		$	391,365		$	403,827		$	420,301
Timed Deposits $100,000 and Over	$	384,795		$	398,165		$	399,603		$	414,184		$	419,945		$	407,219
Deposits	$	1,228,923		$	1,197,392		$	1,161,071		$	1,151,552		$	1,149,835		$	1,151,853
Shareholders' equity	$	105,296		$	107,796		$	107,959		$	104,944		$	112,188		$	107,744
Period end common shares outstanding		10,033,267			10,063,267			10,147,910			10,137,910			10,662,772			10,613,659

QUARTERLY AVERAGE BALANCES
Loans (before allowance)	$	1,294,078		$	1,266,788		$	1,234,795		$	1,175,764		$	1,208,928		$	1,167,399
Total earning assets (before allowance)	$	1,317,206		$	1,300,521		$	1,247,838		$	1,218,899		$	1,240,905		$	1,189,218
Total assets	$	1,404,359		$	1,374,297		$	1,321,112		$	1,296,334		$	1,323,088		$	1,266,657
Deposits	$	1,177,204		$	1,195,820		$	1,155,301		$	1,140,412		$	1,158,276		$	1,106,127
Shareholders' equity	$	106,544		$	107,809		$	106,432		$	106,571		$	110,424		$	105,661

LOAN PORTFOLIO (INCLUDING HELD-FOR-SALE)
Residential Construction Loans	6/30/2008		3/31/2008		12/31/2007		9/30/2007		6/30/2007		3/31/2007
10 Owner Occupied Res Const	0.77	%	0.74	%	0.58	%	0.53	%	0.41	%	0.72	%
11 High-End Owner Occupied	2.10	%	2.81	%	2.48	%	2.50	%	2.57	%	2.09	%
20 Spec Residential Construction (1-4 units)	2.90	%	3.18	%	3.66	%	3.69	%	3.89	%	3.56	%
21 High-End Spec Residential Const (1-4 units)	3.84	%	3.84	%	5.10	%	6.10	%	6.38	%	5.97	%
23 High-End Residential Tract Construction (over 4 units)	2.57	%	3.67	%	3.15	%	3.50	%	3.73	%	3.48	%
24 Tract Construction (over 4 Units)	2.93	%	3.32	%	2.18	%	1.97	%	1.83	%	1.84	%
25 Multi-Family Construction	0.78	%	1.51	%	1.45	%	1.25	%	1.43	%	1.15	%
26 Condominium Construction	5.09	%	4.56	%	3.79	%	3.03	%	2.37	%	2.15	%
27 High-End Condominium Construction	6.58	%	7.06	%	6.43	%	7.21	%	6.62	%	6.39	%
28 Condominium Conversion	0.94	%	0.96	%	0.96	%	0.96	%	1.49	%	1.76	%
Sub-Total Residential Construction Loans	28.48	%	31.66	%	29.80	%	30.75	%	30.72	%	29.10	%

Commercial Construction Loans
30 Owner-Occupied Comm Const	2.34	%	3.05	%	3.58	%	4.05	%	4.40	%	4.32	%
31 Restaurant/Bar Construction	0.56	%	0.50	%	0.25	%	0.10	%	0.08	%	0.31	%
32 Hotel/Motel Construction	6.02	%	4.87	%	4.13	%	5.03	%	5.45	%	5.58	%
33 Car Wash Construction	0.42	%	0.53	%	0.46	%	0.45	%	0.55	%	0.69	%
34 Gas Station/C Store Construction	0.61	%	0.74	%	0.67	%	0.66	%	0.63	%	0.48	%
36 Retail Spec Construction	0.67	%	0.61	%	0.50	%	0.26	%	0.20	%	0.76	%
38 Office Spec Construction	1.13	%	1.02	%	1.15	%	1.73	%	1.78	%	2.24	%
40 Industrial/Warehouse Spec Const	1.29	%	1.44	%	1.35	%	1.13	%	1.04	%	1.51	%
42 Healthcare Construction	1.11	%	1.46	%	1.68	%	1.61	%	1.32	%	1.26	%
44 Miscellaneous Comm Const	0.30	%	0.30	%	0.38	%	0.33	%	0.27	%	0.15	%
45 Mini-Storage Construction	0.24	%	0.24	%	0.21	%	0.14	%	0.38	%	0.39	%
50 Residential Land Development	2.32	%	2.33	%	2.68	%	2.56	%	2.98	%	3.22	%
51 Commercial Land Development	0.76	%	0.75	%	0.75	%	0.76	%	0.85	%	0.43	%
Sub-Total Commercial Construction Loans	17.76	%	17.84	%	17.80	%	18.80	%	19.93	%	21.33	%

Non-Construction Real Estate Loans
55 Unimproved Land	6.93	%	6.78	%	7.67	%	7.73	%	6.99	%	5.68	%
59 Multi-Family	0.78	%	0.29	%	0.32	%	0.39	%	0.43	%	0.65	%
60 Owner-Occupied Commercial	15.37	%	13.05	%	13.32	%	13.24	%	13.21	%	14.40	%
61 Restaurant/Bar	1.44	%	1.73	%	2.07	%	1.72	%	1.81	%	1.60	%
62 Hotel/Motel	8.04	%	7.81	%	7.82	%	6.47	%	5.84	%	5.28	%
63 Car Wash	1.07	%	0.99	%	1.06	%	1.11	%	1.11	%	1.25	%
64 Gas Station/C Store	3.55	%	3.86	%	4.16	%	4.39	%	4.56	%	4.34	%
66 Retail Investment	0.81	%	0.65	%	0.57	%	0.63	%	0.76	%	0.83	%
68 Office Investment	1.61	%	1.02	%	1.05	%	0.67	%	0.55	%	0.98	%
70 Industrial/Warehouse Investment	2.17	%	2.40	%	2.47	%	2.74	%	2.65	%	3.49	%
72 Healthcare	1.06	%	0.70	%	0.47	%	0.95	%	0.86	%	0.68	%
74 Miscellaneous Commercial	0.21	%	0.34	%	0.48	%	0.59	%	0.62	%	1.26	%
75 Mini-Storage	0.34	%	0.36	%	0.37	%	0.39	%	0.41	%	0.56	%
80 1st TD 1-4 Residential	1.00	%	1.40	%	1.47	%	1.34	%	1.45	%	1.62	%
82 Junior TD 1-4 Residential	1.78	%	1.98	%	2.04	%	2.17	%	2.04	%	1.80	%
Sub-Total Non-Construction Real Estate Loans	46.17	%	43.37	%	45.33	%	44.52	%	43.28	%	44.40	%
Total Real Estate Secured Loans	92.42	%	92.88	%	92.93	%	94.08	%	93.93	%	94.84	%

Commercial, Consumer, Other	7.58	%	7.12	%	7.07	%	5.92	%	6.07	%	5.16	%
Total Loan Portfolio	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

SBA Servicing Assets

SBA Servicing Assets ($000)	2Q'08			1Q'08			2Q'07			1Q'07
SBA Loans Serviced - EOP	$	353,797		$	362,331		$	384,500		$	383,100
Value of the Servicing Assets - EOP	$	11,354		$	11,185		$	16,886		$	19,020
Net Servicing Income (Loss)	$	552		$	(29	)	$	(855	)	$	(855	)
Fair Value Adjustment to SBA Servicing Assets	$	(877	)	$	(1,475	)	$	(2,578	)	$	(2,771	)
Cash Servicing Income	$	1,499		$	1,539		$	1,785		$	1,999
Weighted Avg. Servicing Rate - EOP		1.70	%		1.67	%		1.82	%		1.95	%