##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
 For the quarterly period ended: March 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
 For the transition period from  to
 Commission File Number: 333-112960
 MOUNTAIN VALLEY BANCSHARES, INC.
  Georgia
    
    02-0714526(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 
 
 
  þ o
  o þ
   o þ




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##### 



INDEX
 PagePart I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006
    
    
    1Consolidated Statements of Income for the Three Months
Ended March 31, 2007 and 2006 (Unaudited)
    
    
    3Consolidated Statements of Comprehensive Income for the Three Months
Ended March 31, 2007 and 2006 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2007 and 2006 (Unaudited)
    
    
    6Consolidated Statements of Stockholders Equity for the Three Months
Ended March 31, 2007 (Unaudited)
    
    
    8Notes to Consolidated Financial Statements (Unaudited)
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Controls and Procedures
    
    
    15Part II. OTHER INFORMATION
    
    
    15Item 1. Legal Proceedings
    
    
    15Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 3. Defaults Upon Senior Securities
    
    
    16Item 4. Submission of Matters to a Vote of Security Holders
    
    
    16Item 5. Other Information
    
    
    16Item 6. Exhibits
    
    
    16SIGNATURES
    
    
    16EX-31.1 SECTION 302, CERTIFICATION OF THE CEOEX-31.2 SECTION 302, CERTIFICATION OF THE CFOEX-32.1 SECTION 906, CERTIFICATION OF THE CEO




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 MOUNTAIN VALLEY BANCSHARES, INC.
 CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 2007 AND DECEMBER 31, 2006
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)AssetsCash and due from banks
    
    $
    1,556,473
    
    
    $
    1,745,107Federal funds sold
    
    
    2,306,000
    
    
    
    467,000Securities available-for-sale, at fair value
    
    
    15,139,895
    
    
    
    15,672,761Securities held-to-maturity
    
    
    997,300
    
    
    
    996,913Federal Home Loan Bank stock, at cost
    
    
    304,400
    
    
    
    217,600Loans, net
    
    
    95,585,062
    
    
    
    83,615,031Premises and equipment, net
    
    
    2,284,893
    
    
    
    2,272,925Accrued interest receivable
    
    
    892,511
    
    
    
    788,527Other assets
    
    
    444,205
    
    
    
    427,316$
    119,510,739
    
    
    $
    106,203,180Liabilities and Stockholders EquityDepositsNoninterest-bearing
    
    $
    6,690,416
    
    
    $
    5,450,394Interest-bearing
    
    
    86,740,137
    
    
    
    76,984,500Total deposits
    
    
    93,430,553
    
    
    
    82,434,894Other borrowings
    
    
    9,486,769
    
    
    
    9,074,875Other liabilities
    
    
    428,766
    
    
    
    337,555Total liabilities
    
    
    103,346,088
    
    
    
    91,847,324Shareholders equity1Common stock, par value $0.00; 6,250,000 shares authorized;
1,721,212 and 1,602,627 shares issued and outstanding
    
    
    
    
    
    
    Paid-in capital
    
    
    16,470,336
    
    
    
    14,797,474Retained earnings
    
    
    (309,409
    )
    
    
    (421,731
    )Accumulated other comprehensive income (loss)
    
    
    3,724
    
    
    
    (19,887
    )Total stockholders equity
    
    
    16,164,651
    
    
    
    14,355,856
 
 1
    
    Adjusted to reflect the 5-for-4 common stock
split effected December 16, 2005.




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March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Audited)$
    119,510,739
    
    
    $
    106,203,180
 See Notes to Consolidated Financial Statements.
 
 1
    
    Adjusted to reflect the 5-for-4 common stock split effected December 16, 2005. 2




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MOUNTAIN VALLEY BANCSHARES, INC.
 CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS
ENDED MARCH 31, 2007 AND 2006
(UNAUDITED)
 Three Months Ended March 31,2007
    
    
    2006Interest incomeInterest and fees on loans
    
    $
    1,967,187
    
    
    $
    1,362,624Interest on taxable securities
    
    
    204,048
    
    
    
    86,924Interest on federal funds sold
    
    
    8,980
    
    
    
    5,454Interest on deposits in other banks
    
    
    2,184
    
    
    
    2,3872,182,399
    
    
    
    1,457,389Interest expenseInterest on deposits
    
    
    957,225
    
    
    
    582,515Interest on other borrowings
    
    
    141,536
    
    
    
    43,8811,098,761
    
    
    
    626,396Net interest income
    
    
    1,083,638
    
    
    
    830,993Provision for loan losses
    
    
    94,300
    
    
    
    41,000Net interest income after provision for
loan losses
    
    
    989,338
    
    
    
    789,993Noninterest incomeService charges on deposit accounts
    
    
    3,344
    
    
    
    4,213Other service charges, commissions and fees
    
    
    41,471
    
    
    
    35,890Mortgage origination fees
    
    
    49,005
    
    
    
    35,501Other
    
    
    116
    
    
    
    9093,936
    
    
    
    75,694Noninterest expenseSalaries and employee benefits
    
    
    555,272
    
    
    
    344,895Equipment
    
    
    53,114
    
    
    
    43,460Occupancy
    
    
    42,300
    
    
    
    36,893Advertising and marketing
    
    
    31,682
    
    
    
    35,815Legal and accounting
    
    
    45,555
    
    
    
    30,132
 3




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Three Months Ended March 31,2007
    
    
    2006Telephone
    
    
    8,238
    
    
    
    6,666Supplies
    
    
    18,915
    
    
    
    17,613Data processing fees
    
    
    78,025
    
    
    
    57,499Other operating
    
    
    70,391
    
    
    
    45,488903,492
    
    
    
    618,461Income before income taxes
    
    
    179,782
    
    
    
    247,226Applicable income taxes
    
    
    67,460
    
    
    
    Net income
    
    $
    112,322
    
    
    $
    247,226Basic earnings per share
    
    $
    0.07
    
    
    $
    0.19Diluted earnings per share
    
    $
    0.06
    
    
    $
    0.16
 See Notes to Consolidated Financial Statements.
 4




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MOUNTAIN VALLEY BANCSHARES, INC.
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS
ENDED MARCH 31, 2007 AND 2006
(UNAUDITED)
 Three Months Ended March 31,2007
    
    
    2006Net income
    
    $
    112,322
    
    
    $
    247,226Other comprehensive income (loss):Net unrealized holding gains (losses) arising during period, net
of tax (benefit) of $14,471 and ($12,535)
    
    
    23,611
    
    
    
    (20,452
    )Total other comprehensive income (loss)
    
    
    23,611
    
    
    
    (20,452
    )Comprehensive income
    
    $
    135,933
    
    
    $
    226,774
 See Notes to Consolidated Financial Statements.
 5




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MOUNTAIN VALLEY BANCSHARES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS
ENDED MARCH 31, 2007 AND 2006
(UNAUDITED)
 Three Months Ended March 31,2007
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    112,322
    
    
    $
    247,226Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    53,793
    
    
    
    49,895Provision for loan losses
    
    
    94,300
    
    
    
    41,000Stock-based compensation expense
    
    
    6,612
    
    
    
    (Increase) in interest receivable
    
    
    (103,984
    )
    
    
    (77,713
    )Increase (decrease) in interest payable
    
    
    26,303
    
    
    
    (21,439
    )Net other operating activities
    
    
    47,632
    
    
    
    (569,092
    )Total adjustments
    
    
    124,656
    
    
    
    (577,349
    )Net cash provided by (used in) operating activities
    
    
    236,978
    
    
    
    (330,123
    )INVESTING ACTIVITIESPurchases of securities available for sale
    
    
    (802,179
    )
    
    
    (263,981
    )Proceeds from maturities of securities available for sale
    
    
    1,358,656
    
    
    
    169,996Purchase of Federal home loan bank stock, net
    
    
    (86,800
    )
    
    
    (85,500
    )(Increase) decrease in federal funds sold
    
    
    (1,839,000
    )
    
    
    1,609,000(Increase) in loans, net
    
    
    (12,064,331
    )
    
    
    (10,387,521
    )Purchase of premises and equipment
    
    
    (65,761
    )
    
    
    (5,176
    )Net cash (used in) investing activities
    
    
    (13,499,415
    )
    
    
    (8,963,182
    )FINANCING ACTIVITIESIncrease in deposits
    
    
    10,995,659
    
    
    
    8,894,095Increase (decrease) in repurchase agreements
    
    
    793,136
    
    
    
    (831,897
    )Proceeds from other borrowings
    
    
    
    
    
    
    1,656,563Repayment of other borrowings
    
    
    (381,242
    )
    
    
    Issuance of common stock, net
    
    
    1,666,250
    
    
    
    96,824Net cash provided by financing activities
    
    
    13,073,803
    
    
    
    9,815,585Net increase (decrease) in cash and due from banks
    
    
    (188,634
    )
    
    
    522,280Cash and due from banks at beginning of year
    
    
    1,745,107
    
    
    
    1,175,092
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Three Months Ended March 31,2007
    
    
    2006Cash and due from banks at end of period
    
    $
    1,556,473
    
    
    $
    1,697,372
 See Notes to Consolidated Financial Statements.
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MOUNTAIN VALLEY BANCSHARES, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE THREE MONTHS
ENDED MARCH 31, 2007
(UNAUDITED)
 AccumulatedCommon Stock
    
    
    
    
    
    
    
    
    
    
    OtherPar
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Value
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalBalance, December 31, 2006
    
    
    1,602,627
    
    
    $
    0
    
    
    $
    14,797,474
    
    
    $
    (421,731
    )
    
    $
    (19,887
    )
    
    $
    14,355,856Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,322
    
    
    
    
    
    
    
    112,322Change in fair value of
available for sale securities,
net of tax of $14,471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,611
    
    
    
    23,611Stock Option Expense
    
    
    
    
    
    
    
    
    
    
    6,612
    
    
    
    
    
    
    
    
    
    
    
    6,612Issuance of common stock for
for exercise of warrants
    
    
    16,075
    
    
    
    
    
    
    
    128,600
    
    
    
    
    
    
    
    
    
    
    
    128,600Issuance of common stock
Secondary offering
    
    
    102,510
    
    
    
    
    
    
    
    1,537,650
    
    
    
    
    
    
    
    
    
    
    
    1,537,650Balance, March 31, 2007
    
    
    1,721,212
    
    
    $
    0
    
    
    $
    16,470,336
    
    
    $
    (309,409
    )
    
    $
    3,724
    
    
    $
    16,164,651
 See Notes to Consolidated Financial Statements.
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MOUNTAIN VALLEY BANCSHARES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Note 1  Basis of Presentation and Accounting Estimates
    Note 2  Stock-based Compensation
 Accounting for Share-Based Payment
  Note 3  Earnings per share
   9




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For the Three Months Ended March 31, 2007WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountNet income
    
    $
    112,322Basic EPSIncome available to common
shareholders
    
    
    112,322
    
    
    
    1,659,983
    
    
    $
    0.07Effect of dilutive securitiesOptions and Warrants
    
    
    
    
    
    
    284,033
    
    
    
    (0.01
    )Diluted EPSIncome available to common
shareholders and assumed
conversions
    
    $
    112,322
    
    
    
    1,944,016
    
    
    $
    0.06
 For the Three Months Ended March 31, 2006WeightedAverage Shares-
    
    
    Per-ShareNumerator
    
    
    Denominator
    
    
    AmountNet income
    
    $
    247,226Basic EPSIncome available to common
shareholders
    
    
    247,226
    
    
    
    1,287,623
    
    
    $
    0.19Effect of dilutive securitiesOptions and Warrants
    
    
    
    
    
    
    294,811
    
    
    
    (0.03
    )Diluted EPSIncome available to common
shareholders and assumed
conversions
    
    $
    280,826
    
    
    
    1,582,434
    
    
    $
    0.16
 Note 4  Impact of Recently Adopted or Issued Accounting Standards
 , Accounting for Certain Hybrid Financial
Instruments, an amendment of FASB Statements No. 133 and 140. Accounting for Derivative Instruments and Hedging Activities Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities Application of Statement 133 to Beneficial
Interests in Securitized Financial Assets
 , Accounting for Servicing of Financial Assets, an
amendment of FASB Statement No. 140. Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB
Statement 125
 10




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Accounting for Uncertainty in Income Taxes
 an interpretation of FASB Statement 109, Accounting for Income Taxes.
 Fair Value Measurements.
  The Fair Value Option for Financial Assets and
Financial Liabilities Fair Value Measurements
 Note 5  Commitments and Contingencies
    11




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
   Critical Accounting Policies. .
 Results of operations
  Financial condition
   Liquidity
   12




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ActualRegulatoryMinimumConsolidated
    
    Bank
    
    RequirementLeverage capital ratios
    
    
    14.20
    %
    
    
    8.68
    %
    
    
    4.00
    %Risk-based capital ratios:Tier one capital
    
    
    16.18
    %
    
    
    9.88
    %
    
    
    4.00
    %Total capital
    
    
    17.31
    %
    
    
    11.02
    %
    
    
    8.00
    %
  Net interest income
  Provision for loan losses
   March 31,2007
    
    2006(Dollars in thousands)Total non-accruing loans
    
    $
    1,227
    
    
    $
    159Loans contractually past due ninety days or more as to interest or
principal payments and still accruing
    
    $
    0
    
    
    $
    0Loans, the terms of which have been renegotiated to provide a reduction
or deferral of interest or principal because of deterioration in the
financial position of the borrower
    
    $
    0
    
    
    $
    0Loans now current about which there are serious doubts as to the
ability of the borrower to comply with present loan repayment terms
    
    $
    0
    
    
    $
    0
 13




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Three Months EndedMarch 31,2007
    
    
    2006(Dollars in thousands)Average amount of loans outstanding
    
    $
    90,712
    
    
    $
    64,776Balance of allowance for loan losses at beginning of period
    
    
    1,024
    
    
    
    864Loans charged offCommercial and financial
    
    
    2
    
    
    
    30Real estateInstallment
    
    
    
    
    
    
    352
    
    
    
    65Loans recoveredCommercial and financial
    
    
    6Real estateInstallment
    
    
    10
    
    
    
    716
    
    
    
    7Net (charge-offs) recoveries
    
    
    14
    
    
    
    (58
    )Additions to allowance charged to operating expense
during Period
    
    
    94
    
    
    
    41Balance of allowance for loan losses at end of period
    
    
    1,132
    
    
    
    847Ratio of net loan (charge-offs) recoveries during the
period to average loans outstanding
    
    
    0.02
    %
    
    
    (0.08
    )%
 Non-interest income
  14




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Non-interest expense
  Net income
  Forward-Looking Statements
  
 Item 3. Controls and Procedures
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  15




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Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  31.1
    
    Certificate of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certificate of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certificate of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 SIGNATURES
  MOUNTAIN VALLEY BANCSHARES, INC.Date: May 14, 2007
    /s/ Marc J. GreeneMarc J. GreenePresident and CEODate: May 14, 2007
    /s/ Rachel MarshallRachel MarshallChief Financial Officer 16