River City Bank Reports Strong Asset Growth, Reduced Losses

MECHANICSVIILE, Va., May 11  /PRNewswire-FirstCall/ -- River City Bank (NASDAQ:RCBK), a Virginia state-chartered bank headquartered in Mechanicsville, VA, today reported strong quarterly asset growth with a reduction in comparative quarterly operating losses.

William D. Stegeman, President & CEO, reported March 31, 2006 operating results, stating that the Bank experienced strong deposit and loan growth while recording a significant reduction in quarterly operating losses.

From a review of the Bank's unaudited quarterly financial statements, total assets of the Bank at March 31, 2006 amounted to $66,771,439, compared with $32,665,123 at March 31, 2005 representing an increase of 104.4%.  Asset growth was concentrated in net loans originated and securities purchased.  As of March 31, 2006, net loans outstanding amounted to $44,849,029 compared to $19,549,264 as of March 31, 2005, an increase of 129.7%.  Net securities available-for-sale increased to $13,285,842 as of March 31, 2006 compared to $3,385,000 as of March 31, 2005, an increase of 292.5%.  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 67.8% and 89.3% respectively as of March 31, 2006 compared to 60.5% and 79.9% as of March 31, 2005.

The Bank recorded total deposits at March 31, 2006 of $50,726,110 compared to total deposits of $24,701,351 at March 31, 2005, an increase of 105.4%. Growth occurred consistently across all lines of deposit products and can be attributed to the Bank's continuing marketing initiatives implemented during the past quarter and year, as well as aggressive interest rate pricing on certificates of deposit.

For the quarter ended March 31, 2006, the Bank recorded a comprehensive net operating loss of $(117,218).  For the first quarter ended March 31, 2005, the Bank recorded a comprehensive operating loss of $(290,346).  Excluding net unrealized losses of $(57,104) for securities held-for-sale, the Bank recorded a net operating loss of $(60,114) for the quarter ended March 31, 2006, compared to a three month operating loss of $(234,550) recorded at March 31, 2005.  The Bank's net unrealized losses for securities held-for-sale at March 31, 2005 amounted to $(55,796).

On July 5, 2005, the Bank issued 869,180 shares of its common stock, par value $5.00 per share ("Common Stock").  Of that amount, 767,318 shares of Common Stock were issued in a public offering at $10.50 per share, and 101,862 shares of Common Stock were issued in a rights offering to shareholders at $10.50 per share.  Proceeds from the offering amounted to $9,126,390.  After deducting expenses related to the offering of $608,003, the Bank increased stockholders' equity by $8,518,387 in the third quarter of 2005.  At March 31, 2006, the Bank's total stockholders' equity amounted to $15,745,034, compared to $7,822,217 at March 31, 2005, an increase of 101.3%.  At March 31, 2006, the Bank's recorded loss per share of common stock outstanding amounted to $(0.03), compared to $(0.25) at March 31, 2005.

Interest income increased to $1,006,500 for the quarter ended March 31, 2006 from $348,592 for the first quarter of 2005.  Interest expense increased to $393,476 for the quarter ended March 31, 2006 from $112,606 for the same period in 2005.  Net interest income for the quarter ended March 31, 2006 was $613,024 compared to $235,986 for the same period in 2005, an increase of 159.8%.  The growth in net interest income for the three months ended March 31, 2006 as compared with the comparable three months in 2005 was due to the increase in average earning assets, which resulted from growth in the Bank's loan portfolio and investment securities, both of which were funded by a strong increase in deposits and additional equity capital raised in mid-2005. The Bank's average earning assets for the period ending March 31, 2006 were $60,844,233 compared to $26,848,000 for the same period in 2005.

Total non-interest income for the three month period ended March 31, 2006, was $52,337 compared to $33,717 for the same period in 2005.  This increase was due in large part to an increase in residential mortgage origination volume for the three month period ended March 31, 2006 from the comparable period in 2005.  In addition, the revenues from fees and service charges related to the Bank's deposit accounts increased due to an increased number of transactional deposit accounts.

Mr. Stegeman commented:

"We are pleased to report that River City Bank continues to experience strong balance sheet growth, while materially reducing quarterly net operating losses from 2005.  The Bank has been able to sustain a strong net interest margin and spread, with net interest income increasing by nearly 160% from first quarter 2005 to the first quarter of 2006.  The Bank also benefited from a 55% quarterly increase in non-interest income associated with fee revenue generated from loan servicing, mortgage originations, and transactional deposit growth and fee related activity.  Excluding the Bank's expense for its allowance for loan loss and unrealized losses from securities held-for-sale, the Bank recorded a net operating loss of $(5,114) for the quarter ended March 31, 2006, compared to $(204,550) at March 31, 2005.  To further strengthen our ability to compete, we are diligently preparing for the opening of our third branch office to be located in Highland Springs, Virginia and expect to commence operations prior to June 30, 2006."

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 execution 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, Executive Vice President & Chief Financial

Officer of River City Bank, [phone]



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

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