River City Bank Announces Over 20% Increase in Net Loans for the First Quarter of 2007

MECHANICSVILLE, Va., April 26  /PRNewswire-FirstCall/ -- River City Bank (NASDAQ:RCBK) (the "Bank") (results unaudited) announced today 20% asset and loan growth for the first quarter of 2007.  The Bank's President and Chief Executive Officer William D. Stegeman stated "The Bank's overall growth for the first quarter of 2007 exceeded management's projections, primarily due to strong loan demand that required aggressive funding throughout the first quarter of 2007.  We are very pleased with the progression of the Bank and believe that continued growth will be realized across all lines of business in 2007."

The Banks assets increased 20.2% to $103,945,343 at March 31, 2007 over recorded assets of $86,451,891 at December 31, 2006.  Net loans at March 31, 2007 amounted to $71,609,032, an increase of $12,351,696 or 20.8% over net loans of $59,257,336 at December 31, 2006.  Mr. Stegeman commented "The increase in loan's outstanding realized during the 1st quarter of 2007 is beyond expectations, and management is diligently pursuing opportunities to continue the growth to increase the Bank's overall net interest income for the year."

To manage loan funding pressures, the Bank also generated significant deposit growth during the first quarter of 2007.  Total deposits at March 31, 2007 were $88,430,438, an increase of $17,402,338 or 24.7% over total deposits of $70,505,923 at December 31, 2006.  Mr. Stegeman further commented "In particular, the Bank experienced strong growth in time and savings deposits that in the short-term will have a negative impact to the Bank's net interest margin.  Management is developing certain initiatives to alleviate the stress to future margins and we believe that overall balance sheet growth will improve the Bank's ability to record a profit for the year."

The Bank reported a net loss of $(90,966), or $(0.05) per share basic and diluted for the three months ended March 31, 2007, compared to a net loss of $(60,209) or $(0.03) per share basic and diluted for the same period in 2006. Due to strong credit growth, the Bank's earnings were materially impacted by the Bank's need to increase its allowance for possible loan loss.  The Bank's provision for loan losses totaled $120,000 for the first quarter of 2007, compared to $55,000 expensed for the same quarter one year ago.  As a percentage of total loans outstanding, the reserve stood at 1% at March 31, 2007.  Mr. Stegeman stated "The Bank's significant loan growth, and the resulting need to increase loan loss reserves in excess of quarterly projections, had a negative impact to the Bank's bottom line.  While this is a timing issue, management's goal is to prudently grow the Bank's loan loss reserve to manage future credit exposure and risk.  Asset quality overall remains strong, and we have created a strong foundation to build upon in the coming quarters of 2007."

The noted growth in loans and deposits impacted net interest income favorably.  For the quarter ended March 31, 2007, net interest income amounted to $682,530, which represents an increase of 22.9% over net interest income of $555,158 for the three months ended March 31, 2006.

The Bank continues to experience increased earnings from residential mortgage origination fees.  For the first quarter of 2007, the Bank produced mortgage fee revenue of $50,941.  This represents a 111.6% increase over mortgage fee revenue of $24,076 earned during the first quarter of 2006.

Non-interest expense increased by $197,996 to $861,056 for the first quarter of 2007, compared to non-interest expense of $663,060 realized in the first quarter of 2006, an overall increase of 37.7%.  Within the category, the Bank experienced significant increases to salaries and employee benefits expense, as well as occupancy and equipment expense.  Salaries and benefit expense amounted to $405,979 for the first quarter of 2007 compared to $294,818 for the first quarter of 2006, an increase of 37.7%.  Occupancy and equipment expense was $155,348 for the first quarter of 2007, compared to $114,386 for the first quarter of 2006, an increase of 35.8%.  The noted increase in both categories of expense was primarily due to the opening of our third branch office in the second quarter of 2006, and the hiring of key officer and staff positions to both manage our third office and strengthen our internal support departments long-term.

River City Bank currently operates three banking locations, two located in Mechanicsville, Virginia and the third office in Highland Springs, Virginia. The Bank's mortgage division operates within the Bank's administrative office also located in Mechanicsville.  Shares of the Bank's Common Stock trade on the Nasdaq Capital Market (formerly known as the Nasdaq SmallCap Market) under the symbol "RCBK".

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.

                              RIVER CITY BANK
                               Balance Sheets

                                                 March 31    December 31
                                                   2007          2006
                                 Assets

  Cash and cash equivalents
    Cash and due from banks                     $1,544,072     $1,009,353
    Federal funds sold                           8,797,781      4,193,998
      Total cash and cash equivalents           10,341,853      5,203,351

  Securities available-for-sale,
   at fair value                                17,824,616     17,824,532
  Certificates of deposit                        2,082,000      2,082,000
  Loans, net of allowance for
   loan losses of $725,000 for
   March 31, 2007 and
   $605,000 for December 31, 2006               71,609,032     59,257,336
  Bank premises and equipment, net                 962,469      1,038,443
  Accrued interest receivable                      540,728        486,275
  Restricted Federal Reserve Bank stock,
   at cost                                         470,650        470,650
  Other assets                                     113,995         89,304
      Total assets                            $103,945,343    $86,451,891

                   Liabilities and Stockholders' Equity

  Deposits
    Demand                                      $6,850,793     $8,090,229
    NOW and money market                        10,062,464      8,445,302
    Savings                                     27,908,491     21,398,358
    Time                                        43,086,513     32,572,034
      Total deposits                            87,908,261     70,505,923

  Accrued interest payable                         349,529        294,557
  Other liabilities                                172,648        106,036
      Total liabilities                         88,430,438     70,906,516

  Stockholders' equity
    Preferred stock, $5 par value.
     Authorized 10,000,000 shares;
     none issued and outstanding                         -              -
    Common stock, $5 par value.
     Authorized 17,000,000 shares;
     issued and outstanding 1,801,178
     shares at March 31, 2007 and
     1,800,178 shares at
     December 31, 2006.                            9,005,890    9,000,890
    Additional paid-in-capital                     8,832,927    8,827,477
    Accumulated deficit                           (2,164,945)  (2,073,979)
    Accumulated other comprehensive loss            (158,967)    (209,013)
      Total stockholders' equity                  15,514,905   15,545,375

      Total liabilities
       and stockholders' equity                 $103,945,343  $86,451,891


            Statements of Operations and Comprehensive Losses

                                             Three months ending March 31,
                                                    2007          2006
  Interest income
    Interest and fees on loans                    $1,328,624     $780,081
    Interest on securities:
      U.S. Government agencies                       201,470      116,972
      Mortgage-backed securities                      26,985       24,058
    Interest on certificates of deposit               21,181       30,524
    Interest on federal funds sold                    49,263       51,999
      Total interest income                        1,628,223    1,003,634

  Interest expense
    Interest on deposits                             630,635      283,872
    Interest on time certificates of
     $100,000 and over                               167,127      109,604
    Interest on federal funds purchased               27,931            -
      Total interest expense                         825,693       93,476

      Net interest income                            802,530      610,158

  Provision for loan losses                          120,000       55,000
      Net interest income after
       provision for loan losses                     682,530      555,158

  Noninterest income
    Mortgage fee income                               50,941       24,076
    Other                                             36,619       23,617
      Total noninterest income                        87,560       47,693

  Noninterest expense
    Salaries and employee benefits                   405,978      294,818
    Occupancy expense and depreciation               155,348      114,386
    Advertising and shareholder communications        24,513       35,841
    Office supplies and telecommunications            34,689       32,283
    Professional fees                                 99,763       84,331
    Data processing fees                              84,217       64,965
    Credit expense                                    12,922       14,826
    Education and training expense                     6,154        3,445
    Other operating expenses                          37,472       18,165
      Total noninterest expense                      861,056      663,060
      Loss before income tax expense                 (90,966)     (60,209)

  Income tax expense                                     -              -
      Net loss                                       (90,966)     (60,209)

  Other comprehensive gain (loss):
    Net unrealized gain (loss) on
     securities available-for-sale                    50,046      (57,104)
      Comprehensive loss                            $(40,920)   $(117,313)

  Per share data:
    Loss per share, basic and diluted                 $(0.05)      $(0.03)


DATASOURCE: River City Bank



CONTACT:  Zirkle Blakey, III, EVP & CFO of River City Bank,

[phone],  



Web site:  http://www.rivercitybank.org/ 

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