Community Bank of Northern Virginia Announces First Quarter 2005 Resul

Community Bank of Northern Virginia Announces First Quarter 2005 Results

    Business Editors/Banking Writers

    STERLING, Va.--(BUSINESS WIRE)--April 22, 2005--Community Bank of Northern Virginia (Nasdaq:CBNV) today announced first quarter 2005 net income of $1.299 million, or $0.13 per diluted common share, compared to $2.437 million, or $0.24 per diluted common share for the same period last year. Return on average equity for the first quarter 2005 was 8.68% compared to 17.24% for the same period last year. Return on average assets for the first quarter 2005 was 0.60% compared to 1.26% for the same period last year. The decline in net income in the first quarter 2005 compared to the same period last year is attributable in large measure to nonrecurring expenses of $991,000 paid in 2005 related to the previously announced planned merger of Community Bank with and into Mercantile-Safe Deposit and Trust Company, a subsidiary of Mercantile Bankshares Corporation (Nasdaq:MRBK). Income before merger-related expenses in the first quarter 2005 was $2.290 million, or $0.22 per diluted common share, compared to $2.437 million, or $0.24 per diluted common share for the same period last year. Merger-related expenses include professional fees paid to investment bankers, attorneys and accountants.
    David P. Summers, President and Chief Executive Officer, stated, "Our partnership with Mercantile-Safe Deposit and Trust Company continues to move forward as planned with completion of the transaction expected during the second quarter 2005. I am excited about the great opportunities this partnership will provide for further growth in the Northern Virginia market as we combine efforts to provide the best value for our customers."

    Key highlights of First Quarter 2005 vs. First Quarter 2004

--	Average assets increased $100 million, or 13%; average loans increased $93 million, or 16%; average deposits increased $26 million, or 4%; and average borrowings increased $73 million, or 69%. Loan growth was concentrated primarily in two sectors: business loans secured by real estate and indirect consumer loans. Deposit growth has not kept pace with loan growth, due to competitive pressures, thus much of the loan growth was funded by wholesale borrowings from the Federal Home Loan Bank of Atlanta. Net interest margin declined 26 basis points to 3.76% from 4.02% as the cost of funds increased in greater magnitude than earning asset yield. Wholesale borrowings, while readily available, are more costly than deposit products and the increase in this funding source was the key factor in the overall net interest margin decline.
--	The nonperfoming assets to total assets ratio declined to 0.28% at March 31, 2005 from 0.38% at March 31, 2004 but was up slightly from 0.23% at December 31, 2004. Annualized net charge-offs to average loans held for investment was 0.33% at March 31, 2005, up from 0.14% at March 31, 2004 as net charge-offs in the first three months of 2005 were $531,000 compared to $191,000 for the same period last year. Approximately half of the total charge-offs in 2005 were absorbed by specific reserves established in 2004.
--	Dividends per share increased from $0.09 to $0.10, an increase of 11% compared with the same period last year.
--	Income before merger-related expenses, or core income, decreased $147,000, or 6%, in the first quarter 2005 compared to the same period last year. Comparing the first quarter 2005 with the first quarter 2004, net interest income increased $315,000, or 4.3%, as increases in average earning assets offset, in part, the decline in net interest margin. The provision for loan losses increased $120,000 due to a higher level of net charge-offs. After excluding the effects of investment security sales and OREO sales, other income in the first quarter 2005 increased $149,000 compared with the same period last year with increases in overdraft fees, SBA fees and bank owned life insurance income driving the increase. Operating expenses increased $499,000, or 13%, due primarily to increases in personnel costs.

    Community Bank of Northern Virginia (http://www.cbnv.com/) was organized in 1991 under the name Northern Virginia Banking Company to acquire Community Bank and Trust Company in Sterling, Virginia. Community Bank commenced operations in February 22, 1992, and subsequently changed its name to Community Bank of Northern Virginia in 1993. Community Bank is a full-service banking institution that operates fourteen branch offices and sixteen automated teller machines. The primary services offered by its 137 full-time equivalent employees include retail, mortgage, commercial, and home banking.

    This press release contains certain forward-looking statements with respect to the plans, objectives, future performance and business of Community Bank of Northern Virginia. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) competitive pressure in the banking industry increases significantly; (2) changes in the interest rate environment reduce margins or favorable changes in interest rates do not occur; (3) general economic conditions either nationally or regionally are less favorable than expected, resulting in, among other things, a deterioration in credit quality; (4) changes occur in the regulatory environment; (5) changes occur in business conditions; (6) changes occur in the securities markets; (7) the Bank's loan loss reserve to address credit quality concerns may be inadequate, and additional reserves are necessary; (8) strategies to enhance earnings and/or shareholder value are not implemented or fail to have the effects anticipated; (9) recent bank merger activity may not result in the Bank's realizing its goals of increased market share and additional branch expansion; (10) litigation relating to the Bank's second mortgage lending does not have the effects anticipated and liabilities resulting from the litigation are greater than expected; (11) the businesses of Mercantile Bankshares Corporation ("Bankshares") and Community Bank may not be combined successfully in the merger (the "Merger"), or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; (12) the regulatory approvals required for the Merger may not be obtained on the proposed terms or on the anticipated schedule; (13) the shareholders of Community Bank may fail to approve the Merger; (14) deposit attrition, operating costs, customer losses and business disruption following the Merger, including adverse effects on relationships with employees, may be greater than expected; and (15) the expected growth opportunities or cost savings from the Merger may not be fully realized or may take longer to realize than expected. Additional factors that could cause actual results to differ materially from those contemplated by such forward-looking statements are discussed in the reports filed by Community Bank with the Federal Deposit Insurance Corporation and available on Community Bank's Internet website at http://www.cbnv.com.

COMMUNITY BANK OF NORTHERN VIRGINIA FINANCIAL HIGHLIGHTS (Unaudited) ---------------------------------------------------------------------- Quarter Ended (000's except share data) ----------------------- 3/31/05 3/31/04 % Change ----------- ----------- ----------- Operations ---------- Interest income $12,030 $10,715 12.3 Interest expense 4,328 3,328 30.0 ----------- ----------- ----------- Net interest income 7,702 7,387 4.3 Provision for loan losses 600 480 25.0 ----------- ----------- ----------- Net interest income after provision for loan losses 7,102 6,907 2.8 Other income 562 585 -3.9 Operating expenses 4,504 4,005 12.5 ----------- ----------- ----------- Income before income taxes and merger-related expenses 3,160 3,487 -9.4 Income taxes 870 1,050 -17.1 ----------- ----------- ----------- Income before merger-related expenses 2,290 2,437 -6.0 Merger-related expenses 991 ---- -- ----------- ----------- ----------- Net income $1,299 $2,437 -46.7 =========== =========== ===========

Per Share Data -------------- Basic earnings per share before merger-related expenses $0.23 $0.24 -4.2 Basic earnings per share $0.13 $0.24 -45.8 Diluted earnings per share before merger-related expenses $0.22 $0.24 -8.3 Diluted earnings per share $0.13 $0.24 -45.8 Dividends per share $0.10 $0.09 11.1 Book value per share $5.88 $5.73 2.6 Closing stock price $20.14 $17.00 18.5 Weighted average shares - Basic 10,170,194 10,139,659 Weighted average shares - Diluted 10,365,131 10,335,374

Selected Balance Sheet Data --------------------------- Investments $183,907 $215,269 -14.6 Gross Loans $668,966 $572,927 16.8 Total Assets $888,487 $826,532 7.5 Deposits $650,427 $645,273 0.8 Borrowings $169,889 $113,836 49.2 Stockholders' Equity $59,808 $58,140 2.9

Ratios ------ Return on average assets before merger-related expenses 1.06% 1.26% Return on average assets 0.60% 1.26% Return on average equity before merger-related expenses 15.31% 17.24% Return on average equity 8.68% 17.24% Gross loans to deposits 102.85% 88.79% Net interest margin (tax equivalent) 3.76% 4.02% Overhead ratio before merger- related expenses 1.82% 1.76% Operating efficiency before merger-related expenses (1) 53.28% 50.32% Non-performing assets to total assets 0.28% 0.38% Net charge-offs to average loans held for investment (annualized) 0.33% 0.14% Allowance for possible loan losses to loans held for investment 1.03% 1.15%

Regulatory Capital Ratios ------------------------- Tier 1 risk-based capital ratio 8.35% 9.15% Total risk-based capital ratio 10.69% 11.95% Leverage ratio 6.92% 7.27%

Balance Sheet (averages) ------------------------ Investments $189,152 $187,845 0.7 Gross Loans $658,340 $565,358 16.4 Total Assets $880,666 $780,250 12.9 Deposits $636,983 $611,360 4.2 Borrowings $178,758 $105,734 69.1 Stockholders' Equity $60,684 $56,852 6.7

(1) Excludes securities gains and OREO gains (losses).

--30--JO/ph*

CONTACT: Community Bank of Northern Virginia Dale G. Phelps, 703-444-7634 Fax: 703-421-0316 dphelps@cbnv.com or B. Lisa Benjamin, 703-762-7385 Fax: 703-356-7672 lbenjamin@cbnv.com

KEYWORD: VIRGINIA GEORGIA DISTRICT OF COLUMBIA INDUSTRY KEYWORD: REAL ESTATE BUILDING/CONSTRUCTION BANKING EARNINGS SOURCE: Community Bank of Northern Virginia

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