RCBK River City Bank (MM)

MECHANICSVILLE, Va., Oct. 31 /PRNewswire-FirstCall/ -- River City Bank (NASDAQ:RCBK), a Virginia state-chartered bank headquartered in Mechanicsville, VA, today reported quarterly and year-to-date financial progress for the period ended September 30, 2006. William D. Stegeman, President & CEO, reported September 30, 2006 operating results, stating that the Bank experienced continued strong balance sheet growth while materially reducing year-to-date losses experienced in 2005. From a review of the Bank's unaudited quarterly financial statements, total assets of the Bank at September 30, 2006 amounted to $83,857,697, compared with $47,963,982 at September 30, 2005, representing an increase of 74.8%. Asset growth was concentrated primarily in net loans originated, securities available-for-sale, and federal funds sold to correspondent banks. As of September 30, 2006, net loans outstanding amounted to $53,423,172 compared to $30,017,117 as of September 30, 2005, an increase of 77.9%. Net securities available-for-sale and federal funds sold increased to $27,389,227 as of September 30, 2006 compared to $15,940,158 as of September 30, 2005, an increase of 71.8%. The Bank carried no loans classified as available-for-sale for either reporting periods. Loans held-for-investment as a percentage of assets and deposits were 63.7% and 78.8% respectively as of September 30, 2006 compared to 62.6% and 94.7% as of September 30, 2005. The Bank recorded total deposits at September 30, 2006 of $67,790,595 compared to total deposits of $31,710,989 at September 30, 2005, an increase of 113.8%. Growth in deposits was realized primarily from aggressive rates paid on time certificate of deposits in the past twelve month operating period, but the Bank also experienced exceptional growth in consumer and commercial checking accounts and money market and savings accounts managed. At September 30, 2006, non-interest bearing deposits and fixed-term certificates represented 10.5% and 52.9% respectively of total deposits carried. For the nine months ended September 30, 2006, the Bank recorded a comprehensive net operating loss of $(175,411), compared to $(586,278) for the nine months ended September 30, 2005. Excluding net unrealized losses of $(653) for securities available-for-sale, the Bank recorded a year-to-date net operating loss of $(174,758) for the period ended September 30, 2006, compared to a nine month net operating loss $(564,245) for the period ended September 30, 2005. The noted 2005 nine month net operating loss excludes unrealized losses for securities available-for-sale of $(22,023). For the third quarter ended September 30, 2006, excluding net unrealized gains on securities available-for-sale of $242,586, the Bank recorded a net operating loss of $(130,769). This compares to a three month net operating loss of $(131,224), exclusive of net unrealized losses from securities available-for-sale that amounted to $(24,069) for the quarter ended September 30, 2005. At September 30, 2006, the Bank's quarterly and year-to-date basic and diluted loss per share of common stock outstanding amounted to $(.07) and $(.10) respectively, compared to $(.07) and $(.47) respectively at September 30, 2005. For the nine months ended September 30, 2006, net interest income increased to $3,594,577 from $1,446,021 for the comparable period in 2005, an increase of 79.4%. On a comparative quarterly basis, net interest income amounted to $1,411,799 at September 30, 2006 compared to $650,857 at September 30, 2005, an increase of 116.9%. The significant growth in quarterly and year-to-date net interest income was due to an increase in average earning assets, which resulted from continued growth in the Bank's loan portfolio, investment securities, and federal funds sold to correspondent banks. These were effectively funded by a strong increase in deposits and additional equity capital raised in mid-2005. Total non-interest income for the nine month period ended September 30, 2006 amounted to $200,421, compared to $175,783 for the same period in 2005, an increase of 13.9%. For the quarter ended September 30, 2006, non-interest income amounted to $73,161 compared to $78,170 for the quarter ended September 30, 2005, a slight decrease of 6.8%. Fee income continues to be bolstered by residential mortgage origination activity. Total non-interest expense for the nine month period ended September 30, 2006 amounted to $2,342,614 compared to $1,580,847 in 2005, an increase of 48.1%. For the quarter ended September 30, 2006, non-interest expense amounted to $926,465 compared to $589,502 for the third quarter of 2005, an increase of 57.2%. It should be noted that the Bank opened its second and third branch offices in August 2005 and June 2006 respectively that materially increased non-interest expense in 2006 from 2005. Mr. Stegeman commented: "The Bank's operating performance continues to closely parallel budget expectations and management's forecast for balance sheet growth while progressing forward towards sustainable profitability. The Bank's successful opening of our third branch office late in the second quarter of 2006, with the initial impact in creating a quarterly loss in our third quarter 2006 results due to increased overhead, is expected to be fully absorbed in the fourth quarter of 2006 and give us an exceptional start going into 2007. The Bank's net interest margin through three quarters of operations in 2006 has declined slightly and stood at approximately 3.75% as of September 30, 2006, but remains strong in a highly competitive rate environment. The Bank continues to grow at an aggressive pace, and management anticipates that new deposit and loan activity will continue well into the fourth quarter of 2006. Excluding the Bank's expense for its allowance for potential loan losses, the Bank has experienced nominal operating losses both for the third quarter of 2006 and for the year-to-date period ended September 30, 2006. We will continue to increase reserves to manage future risk, although asset quality remains strong and loan delinquencies remain minimal at the present time." This press release contains forward-looking statements as defined by federal securities laws. These statements may address certain results that are expected or anticipated to occur or otherwise state the company's predictions for the future. These particular forward-looking statements and all other statements that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. Such factors include but are not limited to: general economic conditions; significant fluctuations in interest rates that could reduce the net interest margin; difficulties in executing integration plans; reduction of fee income from existing products due to market conditions; and the amount of growth in the company's general administrative expenses. Consequently, these cautionary statements qualify all forward-looking statements made herein. DATASOURCE: River City Bank CONTACT: Zirkle Blakey, III, EVP & CFO of River City Bank, +1-804-730-4100, Web site: http://www.rivercitybank.org/

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