RWCB Redwood Capital Bancorp (QX)

REDWOOD CAPITAL BANCORP (RWCB.OB), the only locally owned and operated community bank holding company in Humboldt County, announced unaudited financial results for the three month periods ended June 30, 2008 and 2009 respectively. The Company reported strong balance sheet and net interest income growth but aggressively increased loan loss reserves as a hedge against future loan deteriorations.

“Our operating results for the second quarter of 2009 reflect the overall economic changes within the Humboldt County marketplace and throughout the State of California,” stated John Dalby, President and CEO. “Recognizing that it may be some time before we begin to see an economic recovery, we will continue to pro-actively focus on our credit portfolio while working with our customers to ensure their continued success during these difficult economic times. Our strong capital position allows us to take this defensive posture, but we remain receptive to local opportunities as they arise.”

The Company again posted robust double-digit growth in the major balance sheet categories of assets, loans, and deposits. Total assets as of June 30, 2009 were $176.3 million, an increase of 26% from the same period last year. Total loans as of June 30, 2009, net of unearned income, increased to $138 million, an increase of 17% over the over the quarter ended June 30, 2008. Likewise, total deposits rose to $161.5 million as of June 30, 2009, an increase of 28% over the June 30, 2008 figures.

Net interest income for the quarter ended June 30, 2009 totaled $1,638,000, up a sharp 17% from the $1,406,000 for the three months ended June 30, 2008. Net income before loan loss provisions and loan related expenses for the quarter ended June 30, 2009 was $554,000, up 26% from the $440,000 reported for the three month ended June 30, 2008.

Also during the second quarter of 2009, the Company continued its thorough review of all borrowing relationships. During the review, several credits were identified that required the Company to take a conservative position and increase loan loss reserves. Accordingly, the Company reported provisions for loan losses for the quarter ended June 30, 2009 of $798,000, up $558,000, or 233% from the $240,000 reported for the three months ended June 30, 2008. Additionally, the Company recognized $444,000 in expenses related to the re-evaluation of other real estate owned (OREO) assets. The increase in provision and OREO expenses for the quarter totaled $1,242,000 which resulted in the Company posting a net loss of $688,000 for the quarter, down $888,000 from the $200,000 in net income reported for the three months ended June 30, 2008.

CEO Dalby commented, “The Board and Management firmly believe that aggressive credit management is paramount and our strong capital position allows us to take this fiscally conservative action during these challenging times. The economic downturn and the general distrust of national money center banks continue to present Redwood Capital Bank with exceptional opportunities to develop new relationships and enhance existing ones. With strong liquidity, stable sources of capital, and expanded FDIC insurance coverage, we will continue to support our customers and the community in good times and bad.”

Since the formation of the bank in 2004, the Company has exceeded regulatory guidelines for “well capitalized” status.

For more information regarding Redwood Capital Bancorp, please visit our website at www.redwoodcapitalbank.com, contact Fred Moore, CFO, at (707) 444-9840, or stop by our headquarters and main office at 402 “G” Street, Eureka, CA 95501.

This press release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, and competition within the business areas in which the bank is conducting its operations, including the real estate market in California and other factors beyond the bank’s control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. Readers should not place undue reliance on the forward-looking statements, which reflect management’s view only as of the date hereof. The bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

Redwood Capital Bancorp Selected Consolidated Financial Results - Unaudited (In Thousands)           Period Ended %   6/30/2009       3/31/2009   Change   Balance Sheet Data (at period end) Total assets $ 176,320 $ 165,071 7 % Total deposits 161,545 149,714 8 % Total loans (net) 137,991 134,893 2 %   Summary of Operations (Current Quarter) Interest income 2,189 2,129 3 % Interest expense 551 609 -10 % Net Interest Income 1,638 1,520 8 % Non-interest income 227 220 3 % Non-interest expense 1,311 1,300 1 % OREO expense 444 0 0 % Net Income (Loss) before provision 110 440 -75 % Provision for loan losses 798 240 233 % Income before taxes (688 ) 200 444 %     Period Ended %   6/30/2009       6/30/2008   Change   Balance Sheet Data (at period end) Total assets $ 176,320 $ 139,792 26 % Total deposits 161,545 126,040 28 % Total loans (net) 137,991 117,465 17 %   Summary of Operations (Current Quarter) Interest income 2,189 2,084 5 % Interest expense 551 678 -19 % Net Interest Income 1,638 1,406 17 % Non-interest income 227 178 28 % Non-interest expense 1,311 1,277 3 % OREO expense 444 0 0 % Net Income (Loss) before provision 110 307 -64 % Provision for loan losses 798 121 560 % Income before taxes (688 ) 186 -470 %