Virginia Commerce Bancorp, Inc. Reports Record Second Quarter and Year-to-Date Earnings and...

ARLINGTON, Va. -- Virginia Commerce Bancorp, Inc. (Nasdaq: VCBI), parent company of Virginia Commerce Bank (the "Bank"), today reported its financial results for the second quarter and six months ended June 30, 2007.

Second Quarter 2007 Highlights:

* Net income of $6.9 million

* Diluted earnings per share up 12.0% to $0.28

* Loans and deposits up 19.7% and 22.2%, respectively, since June 30, 2006,

* Twenty-first branch opened in Ashburn, Virginia (first in Loudoun County)

Peter A. Converse, Chief Executive Officer, commented, "Despite the ongoing challenging banking environment, Virginia Commerce again posted strong performance metrics. We're especially proud of our record earnings resulting in diluted earnings per share of $0.28 for the quarter, a 12.0% increase over the same period last year. Earnings benefited from year-over-year increases of almost 20% and 14% in loans and non-interest income, respectively, as well as a 66% decrease in loan loss provisions. The provision expense declined due to sequential reductions in non-performing and other identified problem loans as well as residential construction loans which require higher reserves. While overall loan growth was robust over the last twelve months, it has slowed sequentially over the last two quarters due to unusually high pay-off levels and the effect of heightened competition on the rate of approved loan closings. Nonetheless, our loan backlog is strong and 20% loan growth for 2007 is attainable depending on the continued constraint of pay-offs and competition."

Converse continued, "Deposit growth continues to benefit from promotions of at least five product lines as well as new branch openings. Our first branch in high income, high growth Loudoun County opened in May and will be followed by three more new branches over the next few months in Fredericksburg, Centreville, and Leesburg (also Loudoun County). We decided to limit our branching for 2007 to four new locations to more readily maintain quality growth in a very competitive market."

SUMMARY REVIEW OF FINANCIAL PERFORMANCE

Net Income

Second quarter earnings of $6.9 million increased $601 thousand, or 9.6%, over 2006 second quarter earnings of $6.3 million. On a diluted per share basis, second quarter 2007 earnings were $0.28 compared to $0.25 for the second quarter of 2006, an increase of 12.0%. For the six months ended June 30, 2007, earnings of $13.4 million represents an 11.3% increase over the $12.0 million earned for the same period in 2006, with diluted earnings per share of $0.54 increasing 12.5%. The increases in net income for both the quarter and year-to-date were due to a 7.5% and 9.1% increase in net interest income, a 13.8% and 11.3% increase in non-interest income, and a 68.6% and 66.3% decline in loan loss provisions.

Net Interest Income

Net interest income for the second quarter of $18.7 million was up 7.5% compared with $17.3 million for the same quarter last year due to strong loan growth, as the net interest margin declined from 4.19% in the second quarter of 2006 to 3.75% for the current three-month period. Year-to-date net interest income of $36.5 million was up 9.1%, compared to $33.5 million in 2006, again due to strong loan growth as the net interest margin for the six-month period declined from 4.23% in 2006, to 3.75%. On a sequential basis, the margin was up one basis point from 3.74% in the first quarter of 2007.

The year-over-year declines in the net interest margin continue to be the result of significantly higher short-term rates on savings, money market and time deposit accounts, a shift of funds in 2006 from lower rate interest-bearing checking accounts to the higher rate accounts, and ongoing strong competition for deposits in the local market. These factors resulted in a 76 basis point increase in the cost of funds year-over-year, compared to a 26 basis point increase in the yield on interest-earning assets. Despite the one basis point increase in the margin quarter-over-quarter, which was due to an eighteen basis point improvement in the yield on investment securities and only a four basis point increase in the cost of funds, management expects net interest margin pressure to continue in the second half of 2007. This is due to continued high short-term interest rates and competitive pressures on deposit and loan rates in the Company's market area. However, the rate of compression continues to decelerate and is expected to bottom out in the second half of the year. As a result, we expect the margin for the remainder of 2007 to remain in the 3.60% to 3.75% range.

Non-Interest Income

Non-interest income of $2.0 million in the second quarter was up 13.8% from the $1.7 million for the same period in 2006 and was up $391 thousand, or 11.3%, on a year-to-date basis with increases in all categories. Compared to the first quarter of 2007, non-interest income is up $113 thousand, due mostly to higher fees and net gains on mortgage loans held-for-sale. Management expects only slight improvement in the non-interest income categories, including fees and net gains from mortgage lending activities, over the rest of 2007.

Non-Interest Expense

Non-interest expense increased $1.5 million, or 16.7%, from $8.5 million in the second quarter of 2006, to $9.9 million, and was up $2.7 million, or 16.2%, from $16.7 million for the six months ended June 30, 2006, to $19.4 million year-to-date. Compared to the first quarter of 2007, non-interest expense is up $408 thousand, or 4.3%. The year-over-year increases were due to the opening of the Bank's twentieth and twenty-first branch locations in August 2006 and May 2007, the hiring of additional loan and business development officers, other staffing and facilities expansion to support loan and deposit growth, and the resumption of FDIC insurance premiums in the second quarter of 2007. As a result of these increases in expenses, the efficiency ratio rose from 44.5% in the second quarter of 2006 to 48.0% in the current period and to 47.9% on a year-to-date basis. Management expects higher levels in all non-interest expense categories for the remainder of 2007 with the opening of three additional branch locations. However, it is expected that the efficiency ratio will continue to remain in the high forties.

Loans

Over the past year, loans, net of allowance for loan losses, increased $286.0 million, or 19.7%, from $1.45 billion at June 30, 2006, to $1.74 billion at June 30, 2007. The majority of loan growth occurred in non-farm, non-residential real estate loans and real estate construction loans, rising 18.9% and 16.8%, respectively, while commercial loans also increased 30.6%. Since December 31, 2006, loans are up $108.0 million, or 6.6%, and are up $48.2 million, or 2.9%, since March 31, 2007. Loan growth in 2007 has been impacted by an unusually higher level of run-off with total run-off of $188.3 million compared to $117.4 million in 2006. Management expects slightly higher levels of loan growth for the remainder of 2007 based on a strong current pipeline.

Deposits

Since June 30, 2006, deposits have increased $317.1 million, or 22.2%, from $1.43 billion to $1.74 billion with savings and interest-bearing demand deposits increasing by $106.4 million, and time deposits growing by $210.6 million. Year-to-date deposits are up $139.5 million, or 8.7%, with demand deposits having increased $18.9 million, savings and interest-bearing demand deposits increasing $44.9 million, and time deposits growing by $75.7 million. Sequentially, deposits rose $34.7 million, with demand deposits increasing $13.7 million, savings and interest-bearing demand deposits increasing $18.3 million and time deposits rising only $2.7 million during the period.

Repurchase Agreements

Repurchase agreements, the majority of which represent funds of significant demand deposit customers, increased $38.8 million, or 31.2% from $124.4 million at June 30, 2006, to $163.0 million at June 30, 2007, and increased $14.2 million, or 9.5%, year-to-date.

Asset Quality and Provisions For Loan Losses

Provisions for loan losses were $300 thousand for the three months ended June 30, 2007, compared to $955 thousand in the same period in 2006. This was due to a sequential decrease in non-performing loans from $3.9 million to $3.2 million, lower net loan growth of $48.2 million for the second quarter of 2007 as compared to growth of $83.2 million for the prior year quarter, and a sequential decrease in other identified potential problem loans, which, although well-secured and currently performing, but requiring higher reserve levels, fell from $4.3 million at March 31, 2007, to $3.6 million at June 30, 2007. In addition, residential construction loans, which require high levels of reserves, fell $26.6 million during the quarter, while residential mortgages, which require lower reserve levels, rose $19.8 million. As a result, the allowance for loan losses to total loans declined from 1.08% at March 31, 2007, to 1.06%.

Stockholders' Equity

Stockholders' equity is up $27.5 million, or 22.0%, from $125.1 million at June 30, 2006, to $152.6 million at June 30, 2007, on earnings of $25.9 million over the twelve month period, a $438 thousand increase in other comprehensive income and $1.2 million from proceeds and tax benefits related to the exercise of stock options by company directors, officers and employees and stock option expense credits. On May 1, 2007, a ten percent stock dividend was paid, increasing the number of shares outstanding by 2.2 million to 23.9 million as of quarter-end. This is the twelfth consecutive year that a stock dividend or split has been paid.

CONFERENCE CALL

Virginia Commerce Bancorp will host a teleconference call for the financial community on July 17, 2007, at 11:00 a.m. Eastern Daylight Time to discuss the second quarter 2007 financial results. The public is invited to listen to this conference call by dialing 866-814-1919 at least 10 minutes prior to the call.

A replay of the conference call will be available from 2:00 p.m. Eastern Daylight Time on July 17, 2007, until 11:59 p.m. Eastern Daylight Time on July 24, 2007. The public is invited to listen to this conference call replay by dialing 888-266-2081 and entering passcode 1112755.

ABOUT VIRGINIA COMMERCE BANCORP

Virginia Commerce Bancorp, Inc. is the parent bank holding company for Virginia Commerce Bank (the "Bank"), a Virginia state chartered bank that commenced operations in May 1988. The Bank pursues a traditional community banking strategy, offering a full range of business and consumer banking services through twenty-one branch offices, two residential mortgage offices and two investment services offices, principally to individuals and small to medium-size businesses in Northern Virginia and the Metropolitan Washington, D.C. area.

NON-GAAP PRESENTATIONS

This press release refers to the efficiency ratio, which is computed by dividing non-interest expense by the sum of net interest income on a tax equivalent basis and non-interest income. This is a non-GAAP financial measure that we believe provides investors with important information regarding our operational efficiency. Comparison of our efficiency ratio with those of other companies may not be possible because other companies may calculate the efficiency ratio differently. The Company, in referring to its net income, is referring to income under accounting principals generally accepted in the United States, or "GAAP".

FORWARD LOOKING STATEMENTS

This press release may contain forward-looking statements within the meaning of the Securities and Exchange Act of 1934, as amended, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. In some cases, forward-looking statements can be identified by use of words such as "may," "will," "anticipates," "believes," "expects," "plans," "estimates," "potential," "continue," "should," and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company's market, interest rates and interest rate policy, competitive factors, and other conditions which by their nature, are not susceptible to accurate forecast, and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results may differ materially from those indicated herein. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company's past results are not necessarily indicative of future performance.

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(1) Computed by dividing non-interest expense by the sum of net interest income on a tax-equivalent basis using a 35% rate and non-interest income.

(2) Adjusted to give effect to a 10% stock dividend in May 2007.

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(1) Adjusted to give effect to a 10% stock dividend in May 2007.

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(1) Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which are reflected as a component of stockholders' equity. Average yields on securities are stated on a tax equivalent basis, using a 35% rate.

(2) Loans placed on non-accrual status are included in the average balances. Net loan fees and late charges included in interest income on loans totaled $1.5 million for both the three months ended June 30, 2007 and 2006.

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(1) Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which are reflected as a component of stockholders' equity. Average yields on securities are stated on a tax equivalent basis, using a 35% rate.

(2) Loans placed on non-accrual status are included in the average balances. Net loan fees and late charges included in interest income on loans totaled $2.8 million and $2.9 million for the six months ended June 30, 2007 and 2006, respectively.