Cavalry Bancorp (CAVB) 8-K Results of Operations and Financial Condition

Contact:

William S. Jones

Executive Vice President

and Chief Administrative Officer

615/849-2272

CAVALRY BANCORP, INC. REPORTS

THIRD QUARTER EARNINGS

Murfreesboro, Tennessee—October 29, 2004—Cavalry Bancorp, Inc. (the "Company") (Nasdaq NMS:CAVB) announced today third quarter and year-to-date consolidated earnings for its wholly-owned subsidiary Cavalry Banking ("Bank") and the Company.

Net income increased from $1.3 million or $0.19 per share diluted for the quarter ended September 30, 2003 to $1.5 million or $0.22 per share diluted for the quarter ended September 30, 2004. Annualized return on average assets increased from 1.07% for the quarter ended September 30, 2003 to 1.10% for the quarter ended September 30, 2004. Annualized return on average equity increased from 9.60% for the quarter ended September 30, 2003 to 10.51% for the quarter ended September 30, 2004.

Net income was $3.7 million or $0.56 per share diluted for the nine months ended September 30, 2003 and $3.7 million or $0.55 per share diluted for the nine months ended September 30, 2004. Annualized return on average assets decreased from 1.10% for the nine months ended September 30, 2003 to 0.95% for the nine months ended September 30, 2004. Annualized return on average equity decreased from 9.76% for the nine months ended September 30, 2003 to 8.82% for the nine months ended September 30, 2004.

This increase in earnings for the quarter was a result of increased net interest income, increased deposit servicing fees and decreased non-interest expense. These factors were partially offset by increased provision for loan losses and decreased gain on sale of loans. Net interest income increased 23.69% from $4.1 million for the quarter ended September 30, 2003, to $5.1 million for the same period in 2004. Gain on sale of loans decreased 47.90% from $1.7 million for the quarter ended September 30, 2003 to $879,000 for the same period in 2004. Other income increased 7.93% from $2.4 million for the quarter ended September 30, 2003, to $2.6 million for the same period in 2004. Other expenses for the quarter ended September 30, 2004 decreased $179,000 or 2.95% from the quarter ended September 30, 2003 .

This decrease in earnings for the nine months was a result of decreased gain on sale of loans, and increased non-interest expense. These factors were partially offset by increased interest income, increased other non-interest income and a decline in interest expense. Net interest income increased 18.00% from $12.0 million for the nine months ended September 30, 2003, to $14.2 million for the same period in 2004. Gain on sale of loans decreased 51.58% from $4.7 million for the nine months ended September 30, 2003 to $2.3 million for the same period in 2004. Other income increased 9.46% from $7.0 million for the nine months ended September 30, 2003, to $7.6 million for the same period in 2004. Other expenses increased 0.59% from $17.5 million for the nine months ended September 30, 2003, to $17.6 mill ion for the same period in 2004.

Total assets of the Company increased from $515.2 million at December 31, 2003 to $551.9 million at September 30, 2004. Net loans receivable increased from $350.4 million at December 31, 2003 to $413.8 million at September 30, 2004. Loans held-for-sale decreased from $2.6 million at December 31, 2003 to $2.4 million at September 30, 2004. Deposits increased from $454.3 million at December 31, 2003 to $486.3 million at September 30, 2004. The Company has grown assets $76.2 million or 16.02% from September 30, 2003 to September 30, 2004. During this period from September 30, 2003 to September 30, 2004 loans have grown $79.5 million or 23.62% and deposits have grown $72.2 million or 17.44%.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Certain of these statements contained in this release which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including the uncertainties inherent in the process of auditing and making end-of-year adjustments to a corporation’s financial statements. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.

[Selected financial data follows]

Cavalry Bancorp, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share data)
		September 30,			December 31,
Assets		2004			2003
Cash and cash equivalents	$	56,040		$	70,913
Investment securities available-for-sale, at fair value		43,707			55,123
Loans held for sale, at estimated fair value		2,438			2,648
Loans receivable, net of allowances for loan losses of $4,728 at September 30, 2004 and $4,525 at December 31, 2003		413,788			350,412
Accrued interest receivable		1,813			1,668
Office properties and equipment, net		17,822			18,431
Required investments in stock of the Federal Home Loan Bank and Federal Reserve Bank stock, at cost		3,099			2,992
Foreclosed assets		13			-
Bank owned life insurance		8,499			8,308
Goodwill		1,772			1,772
Other assets		2,911			2,905
Total assets		551,902			515,172
Liabilities
Liabilities:
Deposits:
Non-interest-bearing	$	90,212		$	72,443
Interest-bearing		396,134			381,814
		486,346			454,257
Advances from Federal Home Loan Bank of Cincinnati		2,848			2,889
Accrued expenses and other liabilities		6,072			3,599
Total liabilities		495,266			460,745
Shareholders' Equity
Preferred Stock, no par value Authorized - 250,000 shares; none issued or outstanding at September 30, 2004 and December 31, 2003		-			-
Common Stock, no par value Authorized- 49,750,000 shares; issued and outstanding 6,741,752 and 6,834,873 at September 30, 2004, and December 31, 2003		9,439			10,175
Retained earnings		49,142			46,633
Unallocated ESOP shares		(1,839	)		(2,373	)
Accumulated other comprehensive loss, net of tax		(106	)		(8	)
Total Shareholders' equity		56,636			54,427
Total Liabilities and Shareholders' Equity		551,902			515,172

Cavalry Bancorp,Inc
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
		2004		2003		2004		2003
Interest income:
Loans	$	5,994		5,055	$	16,839		15,124
Investment securities		368		307		1,053		896
Other		120		82		261		309
Total interest income		6,482		5,444		18,153		16,329
Interest expense - deposits		1,367		1,303		3,880		4,221
Interest expense - borrowings		24		25		73		74
Total interest expense		1,391		1,328		3,953		4,295
Net interest income		5,091		4,116		14,200		12,034
Provision for loan losses		176		-		352		101
Net interest income after provision for loan losses		4,915		4,116		13,848		11,933
Non-interest income:
Servicing income		47		45		140		176
Gain on sale of loans, net		879		1,687		2,281		4,711
Gain (loss) on sale of investment securities, net		(81	)	-		(3	)	11
Deposit servicing fees and charges		1,457		1,208		3,992		3,455
Trust service fees		266		246		832		740
Commissions and other non-banking fees		649		676		1,899		1,995
Other operating income		221		196		754		579
Total non-interest income		3,438		4,058		9,895		11,667
Non-interest expenses:
Salaries and employee benefits		3,603		3,962		10,834		11,498
Occupancy expense		329		346		984		979
Supplies, communications, and other office expenses		223		286		706		791
Advertising expense		87		107		404		330
Professional fees		257		130		656		365
Equipment and service bureau expense		890		780		2,557		2,211
Other operating expense		491		448		1,464		1,327
Total non-interest expense		5,880		6,059		17,605		17,501
Income before income tax expense		2,473		2,115		6,138		6,099
Income tax expense		994		835		2,475		2,373
Net income	$	1,479		1,280	$	3,663		3,726
Basic Earnings Per Share	$	0.23		0.20	$	0.57		0.58
Diluted Earnings Per Share	$	0.22		0.19	$	0.55		0.56
Weighted average shares outstanding - Basic		6,441,148		6,418,261		6,463,810		6,392,235
Weighted average shares outstanding - Diluted		6,675,920		6,713,772		6,700,546		6,666,276

Cavalry Bancorp, Inc.
Consolidated Financial
Highlights
(unaudited)
(dollars in thousands)
		September 30,	December31,
		2004	2003	%Change
FINANCIAL CONDITION DATA:
Total assets	$	551,902	515,172	7.13	%
Loans receivable, net		413,788	350,412	18.09	%
Loans held-for-sale		2,438	2,648	-7.93	%
Investment securities available-for-sale		43,707	55,123	-20.71	%
Cash and cash equivalents		56,040	70,913	-20.97	%
Deposits		486,346	454,257	7.06	%
Borrowings		2,848	2,889	-1.42	%
Shareholders' Equity		56,636	54,427	4.06	%

	For the quarters ending							For the nine months ending
	September 30,							September 30,
	2004		2003		%Change			2004		2003		%Change
OPERATING DATA:
Interest income	$	6,482		5,444		19.07	%	$	18,153		16,329		11.17	%
Interest expense		1,391		1,328		4.74	%		3,953		4,295		-7.96	%
Net interest income		5,091		4,116		23.69	%		14,200		12,034		18.00	%
Provision for loan losses		176		-		0.00	%		352		101		248.51	%
Net interest income
after provision for loan losses		4,915		4,116		19.41	%		13,848		11,933		16.05	%
Gains from sale of loans		879		1,687		-47.90	%		2,281		4,711		-51.58	%
Other income		2,559		2,371		7.93	%		7,614		6,956		9.46	%
Other expenses		5,880		6,059		-2.95	%		17,605		17,501		0.59	%
Income before income taxes		2,473		2,115		16.93	%		6,138		6,099		0.64	%
Income tax expense		994		835		19.04	%		2,475		2,373		4.30	%
Net income	$	1,479		1,280		15.55	%	$	3,663		3,726		-1.69	%

	For the quarters ending					For the nine months ending
	September 30,					September 30,
		2004		2003			2004		2003
KEY FINANCIAL RATIOS
Performance Ratios:
Return on average assets		1.10	%	1.07	%		0.95	%	1.10	%
Return on average shareholders' equity		10.51	%	9.60	%		8.82	%	9.76	%
Interest rate spread		3.89	%	3.65	%		3.84	%	3.83	%
Net interest margin		4.17	%	3.88	%		4.07	%	4.05	%
Average interest-earning assets to average interest-bearing liabilities		125.35	%	118.57	%		121.43	%	114.70	%
Non-interest expense as a percent of average total assets		4.39	%	5.06	%		4.55	%	5.18	%
Efficiency ratio		68.94	%	74.13	%		73.06	%	73.84	%
Asset Quality Ratios:
Nonaccrual and 90 days or more past due loans as a percent of total loans, net		0.29	%	0.23	%
Nonperforming assets as a percent of total assets		0.22	%	0.18	%
Allowance for loan losses as a percent of total loans receivable		1.14	%	1.38	%
Net charge-offs to average outstanding loans		0.01	%	0.01	%		0.04	%	0.06	%