Naugatuck Valley Financial Corporation Reports Increased Net Income for the Fourth...

Naugatuck Valley Financial Corporation Reports Increased Net Income for the
Fourth Quarter of 2007

NAUGATUCK, Conn., Jan. 22, 2008 (PRIME NEWSWIRE) -- Naugatuck Valley Financial
Corporation (the "Company") (Nasdaq:NVSL), the parent company of Naugatuck
Valley Savings and Loan (the "Bank"), announced net income of $479,000 for the
quarter ended December 31, 2007 versus net income of $150,000 for the quarter
ended December 31, 2006, an increase of $329,000 or 219.3%. In addition, for the
year ended December 31, 2007, the Company announced net income of $1.42 million
compared to net income of $1.45 million for the year ended December 31, 2006.
Earnings per share for the quarter and year ended December 31, 2007 were $.07
and $.20, respectively. Earnings per share for the quarter and year ended
December 31, 2006 were $.02 and $.20, respectively.

John C. Roman, President and CEO, commented: "Our growth strategy combined with
expense controls and increased non-interest income has produced improved
financial results. Our strong capital position, good asset quality and the
stability of our local economy positions us well for continued success in the
face of a challenging economic environment."

Net interest income for the quarter ended December 31, 2007 totaled $3.1 million
compared to $2.8 million for the quarter ended December 31, 2006, an increase of
$342,000 or 12.2%. For the twelve month period ended December 31, 2007, net
interest income totaled $11.9 million compared to $11.4 million for the twelve
months ended December 31, 2006, an increase of $456,000 or 4.0%. Net interest
income increased slightly in both the three and twelve month periods due to an
increase in the average balances of interest earning assets of 12.0% in the
three month period and an increase of 15.1% in the twelve month period, combined
with an increase in the average rate earned on these assets of 29 basis points
during the both periods over the 2006 rates. The increase in interest earning
assets for the three and twelve month periods is attributed primarily to an
increase in the loan portfolio. The average balances in the loan portfolio
increased by 17.9% in the three month period and increased by 19.3% in the
twelve month period. The largest increases were in the commercial mortgage
portfolio followed by the residential mortgage portfolio. The increase in
interest income was partially offset by an increase in interest expense.
Interest expense increased by $646,000, or 22.7% in the three month period and
increased by $3.8 million, or 40.9% in the twelve month period due to rising
rates on deposits and borrowings along with increases in the average balances of
deposits and borrowings. The average balances of deposits increased by 11.1% and
16.5% in the three and twelve month periods, respectively. The average balance
of borrowings increased by 21.5% and 17.7% over the same periods due to
increased loan demand. The Company experienced increases of 28 basis points and
60 basis points in the average rates paid on deposits and borrowings in the
three and twelve month periods respectively. For the year, the largest increases
in deposits were in certificates of deposit, followed by smaller increases in
money market accounts and checking accounts, partially offset by a decrease in
savings accounts. The increase in certificates of deposit was due to our three
new offices which were opened in the third quarter of 2006, combined with
promotional rate accounts.

Noninterest income was $647,000 for the quarter ended December 31, 2007 compared
to $502,000 for the quarter ended December 31, 2006, an increase of 28.9%. For
the twelve months ended December 31, 2007, the increase was 22.7% to $2.4
million compared to $1.9 million for the period ended December 31, 2006. The
largest increases in noninterest income in both periods were in income from
investment advisory services, fees for services related to deposit accounts and
fees for other services, as a result of product growth in these areas. In 2007,
the Company also experienced an increase in gains on the sale of investments
over both 2006 periods.

Noninterest expense was $3.1 million for the quarter ended December 31, 2007
compared to $3.0 million for the quarter ended December 31, 2006. For the twelve
months ended December 31, 2007 noninterest expense was $12.4 million compared to
$11.5 million for the twelve months ended December 31, 2006. The increases in
both periods were primarily the result of increases in compensation costs, and
computer processing costs over the 2006 periods. Office occupancy expenses also
contributed to the increase in the twelve month period. All of the increases
were primarily related to the opening of three new branch offices and were
partially offset by a decrease in advertising expense in the twelve month period

Total assets were $462.5 million at December 31, 2007 compared to $413.9 million
at December 31, 2006, an increase of $48.6 million or 11.8%. Total liabilities
were $412.1 million at December 31, 2007 compared to $362.8 million at December
31, 2006. Deposits at December 31, 2007 were $325.3 million, an increase of
$32.6 million or 11.1% over December 31, 2006. The increase in deposits was
primarily due to the opening of the three new branch offices. Borrowed funds
increased from $68.5 million at December 31, 2006 to $85.1 million at December
31, 2007. The increases in deposits and borrowings were primarily used to fund
growth in loans.

The Bank consistently strives to maintain a strong credit culture by using what
it believes are conservative loan underwriting standards. Residential mortgages
with loan-to-value ratios in excess of 80% require private mortgage insurance.
The Bank has not originated or purchased any no-income/no-asset verified
mortgages nor any mortgages that do not meet our full underwriting standards
(low doc loans). Nonperforming loans decreased to $970,000, or 0.27% of total
loans at December 31, 2007 compared to $2.0 million, or 0.65% of total loans at
December 31, 2006. The Bank increased the provision for loan losses from $62,000
for the three months ended December 31, 2006 to $100,000 for the three months
ended December 31, 2007 due to the increasing size of the loan portfolio and a
change in the mix of the portfolio towards commercial loans which are generally
riskier than one-to-four family loans.

Total stockholders' equity was $50.5 million at December 31, 2007 compared to
$51.1 million at December 31, 2006, due to net income of $1.4 million for the
twelve month period, dividends of $588,000 paid to stockholders, stock
repurchases of $2.4 million, a net decrease to the unrealized loss on available
for sale securities of $210,000 and $696,000 in capital adjustments related to
the Company's 2005 Equity Incentive Plan. At December 30, 2007, the Bank's
regulatory capital exceeded the levels required to be categorized as "well
capitalized" under applicable regulatory capital guidelines.

Naugatuck Valley Savings and Loan is headquartered in Naugatuck, Connecticut
with eight other branches in Southwest Connecticut. The Bank is a
community-oriented financial institution dedicated to serving the financial
service needs of consumers and businesses within its market area.

The Naugatuck Valley Financial Corporation logo is available at
http://www.primenewswire.com/newsroom/prs/?pkgid=3632

This news release may contain forward-looking statements, which can be
identified by the use of words such as "believes," "expects," "anticipates,"
"estimates" or similar expressions. Such forward-looking statements and all
other statements that are not historic facts are subject to risks and
uncertainties which could cause actual results to differ materially from those
currently anticipated due to a number of factors. These factors include, but are
not limited to, general economic conditions, changes in the interest rate
environment, legislative or regulatory changes that may adversely affect our
business, changes in accounting policies and practices, changes in competition
and demand for financial services, adverse changes in the securities markets,
changes in deposit flows and changes in the quality or composition of the
Company's loan or investment portfolios. Additionally, other risks and
uncertainties may be described in the Company's annual report on Form 10-K, its
quarterly reports on Form 10-Q or its other reports as filed with the Securities
and Exchange Commission which are available through the SEC's website at
www.sec.gov. Should one or more of these risks materialize, actual results may
vary from those anticipated, estimated or projected. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date of this press release. Except as may be required by applicable law
or regulation, the Company assumes no obligation to update any forward-looking
statements.

SELECTED FINANCIAL CONDITION DATA
-----------------------------------

December 31, December 31,
2007 2006
------------ ------------
(Unaudited)
(In thousands)
ASSETS
Cash and due from depository institutions $ 7,873 $ 7,911
Investment in federal funds 497 31
Investment securities 66,454 70,267
Loans receivable, net 359,831 308,376
Deferred income taxes 1,332 1,450
Other assets 26,540 25,820
------------ ------------
Total assets $ 462,527 $ 413,855
------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 325,269 $ 292,693
Borrowed funds 85,107 68,488
Other liabilities 1,694 1,590
------------ ------------
Total liabilities 412,070 362,771
------------ ------------
Total stockholders' equity 50,457 51,084
------------ ------------
Total liabilities and stockholders'
equity $ 462,527 $ 413,855
------------ ------------

SELECTED OPERATIONS DATA
--------------------------

Three Months Ended For the Year Ended
December 31, December 31,
---------------- -----------------
2007 2006 2007 2006
------- ------- ------- -------
(Unaudited)
(In thousands, except per share data)

Total interest income $ 6,633 $ 5,645 $25,030 $20,750
Total interest expense 3,495 2,849 13,174 9,350
------- ------- ------- -------
Net interest income 3,138 2,796 11,856 11,400
------- ------- ------- -------
Provision for loan
losses 100 62 151 192
------- ------- ------- -------
Net interest income
after provision for
loan losses 3,038 2,734 11,705 11,208
------- ------- ------- -------
Noninterest income 647 502 2,354 1,919
Noninterest expense 3,104 3,032 12,422 11,475
------- ------- ------- -------
Income before provision
for income taxes 581 204 1,637 1,652
Provision for income
taxes 102 54 217 204
------- ------- ------- -------
Net Income $ 479 $ 150 $ 1,420 $ 1,448
------- ------- ------- -------
Earnings per common
share - basic and
diluted $ 0.07 $ 0.02 $ 0.20 $ 0.20
------- ------- ------- -------

SELECTED FINANCIAL RATIOS
---------------------------

SELECTED PERFORMANCE
RATIOS: (1)
For the Three Months For the Year
Ended December 31, Ended December 31,
------------------ -----------------
2007 2006 2007 2006
------- ------- ------- -------
(Unaudited)
Return on average
assets 0.42% 0.15% 0.33% 0.38%
Return on average
equity 3.76 1.16 2.77 2.79
Interest rate spread 2.81 2.79 2.76 3.07
Net interest margin 2.99 2.98 2.95 3.26
Efficiency ratio (2) 81.80 91.69 87.18 85.90
------- ------- ------- -------

ASSET QUALITY
RATIOS: At December 31,
-----------------------
2007 2006
-------- --------
(Unaudited)
(Dollars in thousands)

Allowance for loan losses $ 2,163 $ 2,071
Allowance for loan losses as a percent
of total loans 0.60% 0.67%
Allowance for loan losses as a percent of
nonperforming loans 222.99% 103.03%
Net charge-offs to average loans
outstanding during the period -- --
Nonperforming loans $ 970 $ 2,010
Nonperforming loans as a percent of
total loans 0.27% 0.65%
Nonperforming assets $ 970 $ 2,010
Nonperforming assets as a percent of
total assets 0.21% 0.49%
-------- --------

(1) All applicable quarterly ratios reflect annualized figures.
(2) Represents non interest expense (less intangible amortization)
divided by the sum of net interest income and noninterest income.
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CONTACT: Naugatuck Valley Financial Corporation
John C. Roman or Lee R. Schlesinger
1-203-720-5000