Sauk Valley Bank occupied its new Rock Falls facility during the third quarter. A grand opening was held August 22nd through 25th. We have experienced consistent balance sheet growth and stronger earnings in the Rock Falls market. We expect to continue this trend in the coming years with our new facility. The construction of our Dixon facility continues on schedule, with occupancy anticipated during January 2008. We remain on plan with our intended growth in the Dixon market and thank all our customers who have chosen to work with us in our temporary facility.

From a product perspective, our remote deposit product continues to be our focus. The product was a success in its live testing over the past few months and bankers are in process of contacting interested customers to place the time and expense savings of this product into practice. We have been deliberate in the roll-out of this product, and remain excited by its potential to facilitate the continuing growth of Sauk Valley Bank's core deposit base.

We had expected compression in our interest margin, and unfortunately we were correct. Net interest margin has declined .10% with a corresponding 2% decline in net interest income during the first nine months of 2007. Non interest revenues have increased significantly from 2006, totaling $424,000 through September of 2007, a 43.7% increase from 2006. Excluding the operations of the Dixon office, operating expenses increased roughly 4% year to year. Including Dixon, operating expenses increased 11% in 2007 compared to 2006. We are pleased with our progress in the Dixon marketplace and believe the investment in facilities and start-up expenses will pay significant returns in the future.

For the nine months ending September 30, 2007, net income totaled $696,000, or $.76 per share compared to $867,000 or $.93 per share, for the comparable 2006 period. The challenging interest rate environment and our expansion in the Dixon market will depress current earnings. Sauk Valley Bank remains committed to its mission of providing personal community banking service to the Sterling, Rock Falls and Dixon communities.

Thank you for your continued support of Sauk Valley Bank.

Dirk J. Meminger
President/CEO