FOR RELEASE 5:00 p.m. January 26, 2007


36 Church Avenue, S.W.

Roanoke, Virginia 24011

For Further Information Contact:

Ellis L. Gutshall, President and Chief Executive Officer

Kimberly B. Snyder, Executive Vice President and Chief Financial Officer

(540) 342-2265



ROANOKE, VIRGINIA. January 27, 2007 — Roanoke-based Valley Financial Corporation (NASDAQ Capital Market-VYFC) announced today its consolidated financial results for 2006 and reported that due to an increase in non-performing loans in the fourth quarter of 2006, it had taken several actions that significantly impacted fourth quarter earnings and earnings for the year ended December 31, 2006.

For the quarter ended December 31, 2006 the Company had quarterly net income of $156,000 versus $1,122,000 in the fourth quarter of 2005, an 86% decline quarter over quarter. Return on average total assets was 0.12% for the quarter and return on average shareholders’ equity was 1.92% compared with 0.94% and 13.14% respectively, for the same period in 2005. The provision for loan losses was $1,703,000 for the quarter ended December 31, 2006 as compared to $117,000 for the same period of 2005.

Ellis L. Gutshall, President and Chief Executive Officer of the Company stated “Five loans aggregating an approximate outstanding principal balance of $4.1 million to a commercially oriented enterprise and its majority owner were placed on nonaccrual effective December 1, 2006. The borrowers failed to meet the principal repayment terms of their loans and actions to collect the loans were initiated on December 12, 2006. At this time, we believe the loans are not adequately secured; therefore, a special provision was made to the loan loss reserve in the amount of $776,200 to reflect the potential exposure that we deem exists. Additionally, during the fourth quarter of 2006, we charged off $1.25 million of a previously disclosed commercial credit relationship that had been placed on nonaccrual status during the first quarter of 2006. A successful resolution of this credit situation did not occur as anticipated prior to December 31, 2006, resulting in the charge-off. The Company had reserved $1.2 Million earlier in 2006 in anticipation of this loss. The Company’s total loan provision for the fourth quarter of 2006 amounting to $1.7 Million did include the special loan loss reserves.”

The following information was filed by Valley Financial Corp (VYFC) on Tuesday, January 30, 2007 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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