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

SECOND QUARTER EARNINGS

Murfreesboro, Tennessee—July 29, 2005—Cavalry Bancorp, Inc. (the “Company”) (Nasdaq NMS:CAVB) announced today second quarter and year-to-date consolidated earnings for its wholly-owned subsidiary Cavalry Banking (“Bank”) and the Company.

Net income increased from $1.2 million or $0.17 per share diluted for the quarter ended June 30, 2004 to $1.9 million or $0.25 per share diluted for the quarter ended June 30, 2005. Annualized return on average assets increased from 0.92% for the quarter ended June 30, 2004 to 1.28% for the quarter ended June 30, 2005. Annualized return on average equity increased from 8.48% for the quarter ended June 30, 2004 to 13.17% for the quarter ended June 30, 2005.

Net income increased from $2.2 million or $0.33 per share diluted for the six months ended June 30, 2004 to $4.1 million or $0.56 per share diluted for the six months ended June 30, 2005. Annualized return on average assets increased from 0.86% for the six months ended June 30, 2004 to 1.43% for the six months ended June 30, 2005. Annualized return on average equity increased from 7.94% for the six months ended June 30, 2004 to 14.83% for the six months ended June 30, 2005.

Earnings for the six months ending June 30, 2005 include a tax benefit of $427,000. This tax benefit resulted from the distribution of cash dividends to the participants of the Employee Stock Ownership Plan. Without this item, diluted earnings per share would have been $0.50 for the six month period.

Total assets of the Company increased from $578.7 million at December 31, 2004 to $604.7 million at June 30, 2005. Net loans receivable increased from $430.5 million at December 31, 2004 to $449.9 million at June 30, 2005. Deposits increased from $506.5 million at December 31, 2004 to $539.2 million at June 30, 2005.

Total assets of the Company increased from $523.6 million at June 30, 2004 to $604.7 million at June 30, 2005. Net loans receivable increased from $409.4 million at June 30, 2004 to $449.9 million at June 30, 2005. Deposits increased from $460.9 million at June 30, 2004 to $539.2 million at June 30, 2005.

“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)
	June 30,			December 31,
Assets		2005			2004
Cash and cash equivalents	$	79,331		$	63,135
Time deposits with Federal Home Loan Bank		4,000			-
Investment securities available-for-sale, at fair value		29,927			42,183
Loans held for sale, at estimated fair value		1,019			2,501
Loans receivable, net of allowances for loan losses of $4,903 at June 30, 2005 and $4,863 at December 31, 2004		449,883			430,526
Accrued interest receivable		2,111			1,985
Office properties and equipment, net		17,531			17,607
Required investments in stock of the Federal Home Loan Bank  and Federal Reserve Bank stock, at cost		3,286			3,125
Foreclosed assets		37			16
Bank owned life insurance		11,827			11,604
Goodwill		1,772			1,772
Other assets		3,932			4,216
Total assets		604,656			578,670
Liabilities
Liabilities:
Deposits:
Non-interest-bearing	$	100,900		$	81,719
Interest-bearing		438,272			424,815
		539,172			506,534
Advances from Federal Home Loan Bank of Cincinnati		2,807			2,835
Accrued expenses and other liabilities		5,807			15,468
Total liabilities		547,786			524,837
Shareholders' Equity
Preferred Stock, no par value Authorized - 250,000 shares; none issued or outstanding at June 30, 2005 and December 31, 2004		-			-
Common Stock, no par value Authorized- 49,750,000 shares; issued and outstanding 7,217,565 at June 30, 2005, and December 31, 2004
Retained earnings		37,691			34,598
Accumulated other comprehensive loss, net of tax		(175	)		(119	)
Total shareholders' equity		56,870			53,833
Total Liabilities and Shareholders' Equity		604,656			578,670

Cavalry Bancorp, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
		Three Months Ended			Six Months Ended
		June 30,			June 30,
		2005	2004		2005	2004
Interest income:
Loans	$	6,890	5,572	$	13,370	10,844
Investment securities:
Taxable		287	305		606	647
Non-taxable		26	31		51	38
Other		437	52		783	142
Total interest income		7,640	5,960		14,810	11,671
Interest expense - deposits		2,105	1,245		3,922	2,514
Interest expense - borrowings		24	24		48	48
Total interest expense		2,129	1,269		3,970	2,562
Net interest income		5,511	4,691		10,840	9,109
Provision for loan losses		50	75		111	176
Net interest income after provision for loan losses		5,461	4,616		10,729	8,933
Non-interest income:
Servicing income		53	47		104	93
Gain on sale of loans, net		316	816		664	1,402
Gain on sale of investment securities, net		-	12		-	78
Deposit servicing fees and charges		1,457	1,310		2,786	2,535
Trust service fees		310	274		561	566
Commissions and other non-banking fees		672	594		1,366	1,249
Other operating income		259	198		558	515
Total non-interest income		3,067	3,251		6,039	6,438
Non-interest expenses:
Salaries and employee benefits		3,228	3,659		6,399	7,232
Occupancy expense		313	329		598	655
Supplies, communications, and other office expenses		247	265		474	483
Advertising expense		129	165		219	316
Professional fees		175	210		334	398
Equipment and service bureau expense		943	845		1,837	1,661
Other operating expense		499	473		979	962
Total non-interest expense		5,534	5,946		10,840	11,707
Income before income tax expense		2,994	1,921		5,928	3,664
Income tax expense		1,139	754		1,825	1,481
Net income	$	1,855	1,167	$	4,103	2,183
Basic Earnings Per Share	$	0.26	0.18	$	0.57	0.34
Diluted Earnings Per Share	$	0.25	0.17	$	0.56	0.33
Weighted average shares outstanding - Basic		7,217,565	6,463,543		7,217,565	6,475,265
Weighted average shares outstanding - Diluted		7,328,557	6,691,848		7,327,353	6,713,153

Cavalry Bancorp, Inc.
Consolidated Financial
Highlights
(unaudited)
(dollars in thousands)
	June 30,		December 31,
	2005		2004		% Change
FINANCIAL CONDITION DATA:
Total assets	$	604,656		578,670		4.49	%
Loans receivable, net		449,883		430,526		4.50	%
Loans held-for-sale		1,019		2,501		-59.26	%
Investment securities available-for-sale		29,927		42,183		-29.05	%
Cash and cash equivalents		79,331		63,135		25.65	%
Deposits		539,172		506,534		6.44	%
Borrowings		2,807		2,835		-0.99	%
Shareholders' Equity		56,870		53,833		5.64	%

	For the quarters ending							For the six months ending
	June 30,							June 30,
	2005		2004		% Change			2005		2004		% Change
OPERATING DATA:
Interest income	$	7,640		5,960		28.19	%	$	14,810		11,671		26.90	%
Interest expense		2,129		1,269		67.77	%		3,970		2,562		54.96	%
Net interest income		5,511		4,691		17.48	%		10,840		9,109		19.00	%
Provision for loan losses		50		75		-33.33	%		111		176		-36.93	%
Net interest income
after provision for loan losses		5,461		4,616		18.31	%		10,729		8,933		20.11	%
Gains from sale of loans		316		816		-61.27	%		664		1,402		-52.64	%
Other income		2,751		2,435		12.98	%		5,375		5,036		6.73	%
Other expenses		5,534		5,946		-6.93	%		10,840		11,707		-7.41	%
Income before income taxes		2,994		1,921		55.86	%		5,928		3,664		61.79	%
Income tax expense		1,139		754		51.06	%		1,825		1,481		23.23	%
Net income	$	1,855		1,167		58.95	%	$	4,103		2,183		87.95	%

	For the quarters ending						For the six months ending
	June 30,						June 30,
	2005			2004			2005			2004
KEY FINANCIAL RATIOS
Performance Ratios:
Return on average assets		1.28	%		0.92	%		1.43	%		0.86	%
Return on average shareholders' equity		13.17	%		8.48	%		14.83	%		7.94	%
Interest rate spread (tax equivalent basis)		3.80	%		3.89	%		3.81	%		3.81	%
Net interest margin (tax equivalent basis)		4.18	%		4.13	%		4.16	%		4.03	%
Average interest-earning assets to average interest-
bearing liabilities		123.64	%		121.39	%		123.01	%		119.41	%
Non-interest expense as a percent of average total assets		3.81	%		4.68	%		3.78	%		4.62	%
Efficiency ratio		64.51	%		74.87	%		64.22	%		75.30	%
Asset Quality Ratios:
Nonaccrual and 90 days or more past due loans as a
percent of total loans, net		0.23	%		0.23	%
Nonperforming assets as a percent of total assets		0.18	%		0.18	%
Allowance for loan losses as a percent of total loans receivable		1.09	%		1.11	%
Net charge-offs to average outstanding loans		0.01	%		0.01	%		0.02	%		0.03	%

	For the six months ending			Diluted EPS
	June 30, 2005			Impact
Reconcilation of Net Income to Net Income as Adjusted:
Net income	$	4,103		$	0.56
Adjustment:
Tax benefit of ESOP dividend paid to participants		(427	)		(0.06	)
Total adjustment		(427	)		(0.06	)
Net income as adjusted	$	3,676		$	0.50