American River Bankshares’ Diluted EPS Increases for the Third Consecutive Quarter

Sacramento, CA, January 17, 2008 – American River Bankshares (NASDAQ-GS: AMRB) today reported diluted earnings per share for the fourth quarter of 2007 of $0.38, a 2.7% increase from $0.37 recorded in the third quarter of 2007 and a 5.0% decrease from $0.40 for the fourth quarter of 2006.  Diluted EPS has been adjusted for the 5% stock dividend distributed in December 2007.  This is the third consecutive quarter that diluted EPS has increased.  Net income for the fourth quarter of 2007 decreased slightly to $2,142,000 from $2,152,000 during the third quarter of 2007 and decreased 11.0% from $2,407,000 for the fourth quarter of 2006.  Diluted earnings per share for the year ended December 31, 2007 remained constant at $1.46 and net income decreased 6.4% to $8,478,000 from $9,062,000 for the year ended December 31, 2006. 

“Regardless of the challenges in the market we’ve faced over the last year and that we expect to face into the next, we know where we’re going as a Company,” said David T. Taber, President and CEO of American River Bankshares. “We’ve set forth a strategic plan that focuses on business banking, effective management of our expenses and smart deposit growth – and we intend to stick to our plan.”

Net interest income for the fourth quarter of 2007 decreased 1.7% to 6,566,000 from $6,680,000 for the third quarter of 2007 and decreased 3.1% from $6,777,000 for the fourth quarter of 2006.  Interest income for the fourth quarter of 2007 decreased 4.1% to $9,062,000 from $9,454,000 for the third quarter of 2007 and decreased 6.0% from $9,637,000 for the fourth quarter of 2006.  During the fourth quarter, the Company placed 5 credits on non-accrual status – forgone interest on those credits represented $244,000 during the quarter.  For the year ended December 31, 2007, net interest income decreased 2.5% to $26,402,000 from $27,066,000 for the year ended December 31, 2006 and interest income decreased 1.3% to $37,478,000 from $37,954,000 during the same period. 

Interest expense for the fourth quarter of 2007 decreased 10.0% to $2,496,000 from $2,774,000 for the third quarter of 2007 and decreased 12.7% from $2,860,000 for the fourth quarter of 2006.  For the year ended December 31, 2007, interest expense increased 1.7% to $11,076,000 from $10,888,000 for the year ended December 31, 2006. 

Net interest margin as a percentage was 5.10% for the fourth quarter of 2007 compared to 5.17% for the third quarter of 2007 and 5.03% for the fourth quarter of 2006.  For the year ended December 31, 2007, net interest margin as a percentage was 5.10% up from 5.03% for the year ended December 31, 2006. 

Noninterest income for the fourth quarter of 2007 decreased 15.5% to $565,000 from $669,000 for the third quarter of 2007 and decreased 6.9% from $607,000 for the fourth quarter of 2006.  For the year ended December 31, 2007, noninterest income increased 6.4% to $2,599,000 from $2,443,000.  Noninterest expense decreased 6.1% to $3,556,000 from $3,796,000 in the third quarter of 2007 and increased 1.1% from $3,526,000 for the fourth quarter of 2006.  For the year ended December 31, 2007, noninterest expense increased 3.1% to $14,833,000 from $14,388,000. 

Net loans as of December 31, 2007 increased $9,799,000 (2.5%) from September 30, 2007 and increased $11,982,000 (3.1%) to $394,975,000 from $382,993,000 as of December 31, 2006.  The largest factor was in commercial loans, which increased $5,508,000 (5.5%) to $105,467,000 as of December 31, 2007 from $99,959,000 as of September 30, 2007 and increased $19,608,000 (22.8%) from $85,859,000 as of December 31, 2006. 

“Back to the business of executing our strategic plan,” said Taber.  “Shifting our loan portfolio mix towards commercial loans remains an important part of that plan and year over year, commercial loans are up 23% and now comprise 26% of our entire loan portfolio.”

Total deposits as of December 31, 2007 decreased $16,429,000 (3.5%) to $455,645,000 from $472,074,000 as of September 30, 2007 and decreased $38,230,000 (7.7%) from $493,875,000 as of December 31, 2006.  Total borrowings increased 84.8%% to $51,603,000 at December 31, 2007 from $27,921,000 at September 30, 2007.  Total borrowings are up 22.1% from $42,270,000 at December 31, 2006.  The Company experienced a spike up in borrowings in the fourth quarter to provide funding for loans while deposit balances decreased.  The reduction in the deposit balances is related to the overall lower balances maintained in the individual accounts and not the result of the loss of any significant relationships.  Average borrowings in 2007 were $29,680,000 down $17,010,000 (36.4%) from the average balance in 2006. 

At December 31, 2007, the allowance for loan and lease losses totaled $5,883,000 consistent with $5,889,000 at September 30, 2007 and $5,874,000 at December 31, 2006.  The provision for loan and lease losses was $135,000 for the fourth quarter of 2007, compared to $50,000 for the third quarter of 2007 and $50,000 for the fourth quarter of 2006.  The allowance as a percentage of loans and leases was 1.47% at December 31, 2007, compared to 1.51% at September 30, 2007 and 1.51% at December 31, 2006.  Net chargeoffs for the fourth quarter were $141,000 and for the year 2007 were $441,000.  Nonperforming loans and leases as of December 31, 2007 were at 1.86% of total loans and leases compared to 0.79% last quarter and 0.02% one year ago.  Nonperforming assets were $7,501,000 at December 31, 2007 up from $3,100,000 at September 30, 2007.  As of September 30, 2007, there were three loans totaling $2,761,000 that comprised 89.1% of the total nonperforming assets.  Of these three loans, two were brought current in the fourth quarter of 2007 including payment of the previously forgone interest and both are currently performing. The third loan that remained from last quarter currently has a balance of $1,352,000 and is a development loan for residential lots that has been evaluated for impairment and assigned a specific reserve.  During the fourth quarter, a loan in the amount of $5,286,000 for a mini storage facility was added to the nonperforming list.  This loan has also been evaluated for impairment and assigned a specific reserve. 

Performance measures for the fourth quarter of 2007 (annualized): the Return on Average Assets (ROAA) was 1.50%, Return on Average Equity (ROAE) was 14.10%, Return on Average Tangible Equity (ROATE) was 19.89% and the efficiency ratio was 48.37%.  For the quarter ended September 30, 2007, the Company had a ROAA of 1.50%, ROAE of 13.99%, ROATE of 19.68% and an efficiency ratio of 50.02%.  For the year ended December 31, 2007, the Company had a ROAA of 1.47%, ROAE of 14.01%, ROATE of 19.78% and an efficiency ratio of 49.49%.

Fourth Quarter Highlights

  • American River Bankshares continues a long history of enhancing shareholder value with its 96th consecutive profitable quarter.  During the fourth quarter, the Company repurchased 155,400 shares of its common stock (adjusted for the 5% stock dividend) for a total of $3,244,000. In addition to a 5% stock dividend distributed in the fourth quarter, American River Bankshares declared a quarterly cash dividend of $0.15 per share, which was paid on January 17, 2008.
  • Net interest margin for the fourth quarter of 2007 was 5.10% up from 5.03% for the fourth quarter of 2006. 
  • American River Bank’s offices in the Greater Sacramento Area and Placer County experienced a decrease in total deposits of 11.8% to $281,705,000 at December 31, 2007 from $319,286,000 at December 31, 2006.  Year over year, net loans increased 10.7% to $246,742,000 from $222,851,000. 
  • North Coast Bank, a division of American River Bank with three offices in Sonoma County, experienced a decrease in total deposits of 6.7% to $64,856,000 at December 31, 2007 from $69,521,000 at December 31, 2006.  Year over year, net loans increased 5.1% to $87,559,000 from $83,302,000. 
  • Bank of Amador, a division of American River Bank with three offices in Amador County, experienced a decrease in total deposits of 16.3% to $88,194,000 at December 31, 2007 from $105,375,000 at December 31, 2006.  Year over year, net loans decreased 21.0% to $60,674,000 from $76,840,000. 
  • The American River Bankshares Foundation awarded a total of $65,000 to five non-profit organizations that serve the needs of the most vulnerable women & children in Amador, Sacramento, Sonoma and South Placer.  The Foundation sought to fund organizations and programs that provide assistance to those in crisis situations or that can intervene with at-risk populations before they head down the road toward crisis. 

2007 Year in Review Highlights

  • During 2007, American River Bankshares repurchased 406,350 shares of its common stock  (adjusted for the 5% stock dividend) totaling $9,187,000, declared four quarterly cash dividends totaling $0.58 (adjusted for the 5% stock dividend) and declared one 5% stock dividend.
  • During 2007, the Company expanded its stock repurchase plan beyond its original 5% target by repurchasing additional shares of the Company’s common stock.  The expanded repurchase plan allowed the Company to purchase additional shares with a value of up to $2 million of its common stock.
  • Diluted EPS has increased for three consecutive quarters - $0.38 for the fourth quarter, $0.37 for the third quarter and $0.36 for the second quarter.  For the year ended December 31, 2007, diluted EPS was $1.46, consistent with the prior year.
  • Net interest margin for the year ended December 31, 2007 was 5.10% up from 5.03% for the year ended December 31, 2006.
  • American River Bankshares continues to shift its loan portfolio mix towards commercial loans.  Commercial loans as of December 31, 2007 increased 5.5% to $105,467,000 from $99,959,000 as of September 30, 2007 and increased 22.8% from $85,859,000 as of December 31, 2006.  Construction loans as of December 31, 2007 decreased slightly to $66,022,000 from $66,402,000 as of September 30, 2007 and decreased 26.9% from $90,314,000 as of December 31, 2006.  
  • The Board of Directors of American River Bankshares appointed Dorene C. Dominguez to the Company’s Board of Directors and increased the number of members of the Board from eight to nine.  Ms. Dominguez is President of Vanir Group of Companies, a leader in the fields of real estate development, construction and construction management.

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About American River Bankshares

American River Bankshares is the parent company of American River Bank (“ARB”), a community business bank serving the Greater Sacramento Area in California that operates a family of financial services providers, including North Coast Bank [a division of “ARB”] in Sonoma County and Bank of Amador [a division of “ARB”] in Amador County.  For more information, please call (916) 851-0123 or visit www.amrb.com; www.americanriverbank.com; www.northcoastbank.com; www.bankofamador.com.

Forward-Looking Statements

Certain statements contained herein are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, Section 27A of the Securities Act of 1933, as amended, and subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.   Actual results may differ materially from the results in these forward-looking statements.  Factors that might cause such a difference include, among other matters, changes in interest rates, economic conditions, governmental regulation and legislation, credit quality, and competition affecting the Company’s businesses generally; the risk of natural disasters and future catastrophic events including terrorist related incidents; and other factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, and in reports filed on Forms 10-Q and 8-K.  The Company does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or otherwise, except as may be required by law.

Investor Contact:
Mitchell A. Derenzo
Chief Financial Officer
American River Bankshares
916-231-6723

Media Contact:
Diana Walery
Corporate Communications
American River Bankshares
916-231-6717

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