MECHANICSVILLE, Va., July 27, 2007 (PRIME NEWSWIRE) -- River City Bank (Nasdaq:RCBK) (the "Bank") (quarterly results unaudited) reported today net losses of $(135,393) or $(0.08) per share (basic and diluted) for the quarter ended June 30, 2007, and $(226,359) or $(0.13) per share (basic and diluted) year-to-date compared to net income of $16,031 or $0.01 (basic and diluted) for the quarter ended June 30, 2006 and net losses of $(43,989) or $(0.02) per share (basic and diluted) for the six month period ended June 30, 2006.
The increase in net losses as compared to the same periods a year ago is primarily attributable to increased reserves expensed to the Bank's allowance for possible loan losses. The increased provisions were due to increased loans outstanding, as well as the need to increase reserves for one non-performing loan that the Bank anticipates disposition of in the third quarter of 2007. Management increased the Bank's provision for loan losses by $170,000 in the quarter ended June 30, 2007, compared to $20,000 in the comparable period in 2006. Comparatively, the Bank increased its provision for loan losses to $290,000 for the six months ended June 30, 2007, compared to $75,000 for year-to-date period ended June 30, 2006.
The Bank continues to experience strong balance sheet growth, with net loans increasing $16,638,466, or 28% from December 31, 2006 to June 30, 2007. For the same comparative period, total deposits increased $24,549,093 or 35% in the first half of 2007. Overall, the Bank has realized balance sheet growth of $24.2 million, or 28% in 2007.
William D. Stegeman, the Bank's President and Chief Executive Officer commented, "Balance sheet growth, specifically loan and deposit volumes, remain ahead of our budget projections despite a highly competitive market in which we operate. Our net interest income and non-interest income continues to show strong growth, which we believe we can sustain for the second half of the year. Our decision to increase the Bank's allowance for loan losses this past quarter and through the first six months of 2007 has certainly been a challenge, but we believe prudent in anticipation of our disposing of the Bank's only non-performing loan and to manage credit portfolio growth."
Net interest income amounted to $898,029 for the quarter ended June 30, 2007 and $1,700,559 for the six month period ended June 30, 2007 compared to $706,876 and $1,319,900 for the respective periods in 2006. Non-interest income for the quarter ended June 30, 2007 amounted to $92,717 and for the six months ended June 30, 2007 was $180,277, compared to $74,923 and $127,260 for the respective periods one year ago. The Bank's revenue from mortgage origination fees, a major component of non-interest income, continues to show strong growth, increasing over 45% for the first six months of 2007 compared to the same period in 2006.
2007 second quarter non-interest expense amounted to $956,139, compared to $745,768 for the three months ended June 30, 2006, an increase of 28%. 2007 year-to-date non-interest expense amounted to $1,817,194, compared to $1,416,149 for the first six months of 2006, which also represents an increase of 28%. Within the category, the Bank experienced significant increases to salaries and employee benefits expense, as well as occupancy and equipment expense. The noted increase in both categories of expense was materially impacted due to the opening of the Bank's third branch office late 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 department's long term.
Mr. Stegeman further commented, "A 42% year-to-date growth in non-interest income over the same period last year is exceptional, and a trend we hope to continue. Given the net interest margin compression our industry has and will continue to experience, River City Bank will focus its efforts on enhancing fee revenue to supplement expected growth in net interest income from balance sheet target projections. The ability to realize sustainable growth in non-interest income, along with maintaining effective controls for restraining growth in non-interest expense, will be a focus of our management team as we progress in the second half of 2007."
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 listing under the symbol "RCBK".
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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.