LYNNWOOD, Wash.--(Business Wire)--
City Bank (NASDAQ:CTBK) today announced earnings of $15.00 million
for the six months ended June 30, 2008, reflecting a decrease of
28.32% from $20.93 million for the same period in 2007. The Bank's
diluted net income per share reflects a decrease of 28.03% to $.95
from $1.32 for the same period in 2007.
City Bank's President and CEO Conrad Hanson noted, "The banking
industry as a whole is in a period of extreme financial stress that
may be the worst period in my 34 years of banking. City Bank, despite
being impacted by these industry wide problems, is well positioned
with one of the highest levels of capital for a bank our size. We are
a bank that has focused on the residential real estate construction
lending market for our entire history, and believe that we do a better
job of underwriting loans and managing the risk during periods like
this where certain of our borrowers are unable to perform under the
terms of their loans."
Net interest income after provision for credit losses was $30.42
million for the six months of 2008 compared to $40.65 million for the
prior period in 2007, reflecting a decrease of 25.17%. Continued
weakness in the housing markets, combined with a general slowdown in
the local economy, has resulted in the decline in City Bank's 2008
earnings. The Bank has experienced increases in nonperforming loans,
charge-offs and loan loss provision. Contributing to the decline in
net interest income was the increase in loans being placed on
non-accrual status for which interest accrued in the amount of $1.84
million had been reversed from income. During the first six months of
2008, the Bank recorded a provision for credit losses of $5.10 million
as compared to $150 thousand for the same period in the prior year.
The increase in the allowance for credit losses was in response to
specific real estate construction loans that were placed on
non-accrual status, as well as declines in the quality of the Bank's
overall portfolio. The Bank's net charge-offs for the six months ended
June 30, 2008 were $1.84 million compared to $157 thousand in the
prior year. In spite of the difficult market conditions, the Bank
maintains an outstanding efficiency ratio of 26.33%.
Conrad Hanson also commented on the banks credit quality, "Over
the five year period from 2003 to 2007, City Bank has managed its loan
portfolio with only $2.82 million of actual net charge-offs or a loss
ratio of .08% while the industry incurred a loss ratio of .62%. We
expect that our net charge-offs coming from the current problems will
be significantly higher than we have experienced in the past, but will
continue to be at levels that are below the industry averages. This is
the City Bank difference that we have demonstrated for 34 years."
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Year-to-Date Highlights (In thousands, except ratios)
----------------------------------------------------------------------
June 30, March 31, June 30,
2008 2008 2007
----------------------------------------------------------------------
Total Assets $1,291,975 $1,309,029 $1,142,300
----------------------------------------------------------------------
Total Loans $1,173,911 $1,213,422 $1,059,129
----------------------------------------------------------------------
Net Income $ 15,004 $ 9,685 $ 20,931
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Non-Performing Assets 103,360 $ 56,589 $ 2,019
----------------------------------------------------------------------
Net Interest Margin 5.67% 6.09% 7.50%
----------------------------------------------------------------------
Return on Average Assets (ROA) 2.37% 3.11% 3.81%
----------------------------------------------------------------------
Return on Average Equity (ROE) 13.79% 18.09% 20.76%
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Average Equity to Average Assets 17.15% 17.21% 18.34%
----------------------------------------------------------------------
Efficiency Ratio 26.33% 24.98% 22.83%
----------------------------------------------------------------------
Total Shareholders' Equity $ 220,256 $ 217,393 $ 209,258
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*T
Net income for the three months ended June 30, 2008 was $5.32
million compared to $10.56 million in the prior year, reflecting a
decrease of $5.24 million primarily due to a higher provision for loan
losses of $4.60 million compared to $150 thousand for the same quarter
of 2007. On a diluted per share basis, net income was down 49.25% to
$.34 from $.67 in the comparable period in 2007. Net interest income
after provision for credit losses was $12.16 million for the three
months ended June 30, 2008 compared to $20.71 million for the same
period in 2007, reflecting a decrease of 41.30%. During this housing
downturn, the Bank is experiencing loan quality issues that are
contributing to the declines in earnings for this quarter as evidenced
by the increase in its non-performing loans. The Bank is working
diligently with its borrowers to collectively address any loan issues
and in some cases foreclosure (or a deed in lieu of foreclosure) is
the ultimate course of action. Despite deterioration in the loan
portfolio, which is not expected to improve in the near term,
profitability is expected to continue albeit at a lower level than the
last several years. In addition, the Bank's unusually high level of
capital provides strong support and flexibility in working through
this economic downturn.
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Quarter-to-Date Highlights (In thousands, except ratios)
----------------------------------------------------------------------
June 30, March 31, June 30,
2008 2008 2007
----------------------------------------------------------------------
Total Assets $1,291,975 $1,309,029 $1,142,300
----------------------------------------------------------------------
Total Loans $1,173,911 $1,213,422 $1,059,129
----------------------------------------------------------------------
Net Income $ 5,319 $ 9,685 $ 10,555
----------------------------------------------------------------------
Non-Performing Assets $ 103,360 $ 56,589 $ 2,019
----------------------------------------------------------------------
Net Interest Margin 5.25% 6.09% 7.49%
----------------------------------------------------------------------
Return on Average Assets (ROA) 1.65% 3.11% 3.75%
----------------------------------------------------------------------
Return on Average Equity (ROE) 9.63% 18.09% 20.50%
----------------------------------------------------------------------
Average Equity to Average Assets 17.09% 17.21% 18.30%
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*T
Result of Operations
Interest income for the first six months of 2008 was down 4.43%
from the comparable period in 2007. As a result of the weakening
residential real estate market, the Bank's nonperforming assets
increased from $2.02 million at June 30, 2007, to $33.77 million at
December 31, 2007, $56.59 million at March 31, 2008 and $103.36
million at June 30, 2008. Also contributing to the decrease in
interest income was the decline in short term interest rates during
the latter part of 2007 (on which the majority of the Bank's
interest-earning assets are priced) as evidenced by the decline in the
yield on the interest earning assets year over year. The average yield
on loans for the six months ended June 30, 2008 was 9.34%, down 194
basis points from 11.28% for the prior period in 2007, and net
interest margin decreased to 5.67% compared to 7.50% in the same
period in the prior year. The slowdown in the housing market will
prove to remain particularly challenging, and the Bank expects higher
loan delinquencies, non-accruals and potential charge-offs to continue
for the remainder of the year. However, given the Bank's loan loss
reserve, strong capital position and its seasoned management team, the
Bank is well positioned to work through problem credits and to
minimize losses.
Interest expense for the six months ended June 30, 2008 was up
14.00% from the comparable period in 2007. Contributing to the
increase were higher total deposits to fund loan growth and a
significant increase in competition for deposits among banks, despite
the rapid drop in the short term interest rates in the latter part of
2007. The average cost of deposits and borrowed funds for the six
months ended June 30, 2008 decreased to 4.27%, down 16 basis points
from 4.43% for the same period in 2007, reflecting a lower rate
environment. Average time deposits and borrowed funds for the six
months ended June 30, 2008 were $1.01 billion, an 18.27% increase from
the $852.29 million average for the comparable period in 2007.
Non-interest income of $2.75 million reflects a net increase of
$1.18 million or 75.80% for the six months ended June 30, 2008 over
the six months ended June 30, 2007. The majority of this increase was
due to a pre-tax gain of $1.22 million on the partial redemption of
the Bank's equity interest in VISA Inc. (NYSE: V). This redemption
reflects 38.66% of the Bank's ownership position in VISA. In addition,
the Bank also reversed $120 thousand of previously recorded
indemnification liabilities related to VISA litigation during first
quarter of 2008. Net gains from sale of loans increased $321 thousand
compared to the same period of 2007. SBA loan servicing income
decreased by $41 thousand compared to the prior period in 2007. There
was also a decrease in non-interest income of $154 thousand due to the
discontinuation of the Bank's Investment Services department.
Non-interest expense of $10.08 million in the six months of 2008
reflects a net increase of 4.15% or $401 thousand compared to the same
period of 2007. The majority of the increase relates FDIC insurance
expense, which increased by $215 thousand as compared to the same
period in 2007. The Bank also recorded a net loss on sale of
foreclosed real estate of $189 thousand for the six months ended June
30, 2008. Foreclosed real estate expense increased by $156 thousand
compared to the same period in 2007. Occupancy expense also increased
by $109 thousand compared to the same period in 2007. Offsetting the
increase was a decrease in state and local tax expense of $349
thousand.
At June 30, 2008, total assets were $1.29 billion, up 13.10% over
June 30, 2007. Asset growth since December 31, 2007 was $52.94 million
or 4.27%. Loans grew 11.32% to $1.18 billion at June 30, 2008 compared
to $1.06 billion at June 30, 2007. Loan growth since December 31, 2007
was $18.53 million or 1.59%. At June 30, 2008, deposits increased
17.93% to $955.18 million compared to $809.98 million at June 30, 2007
and 10.49% since December 31, 2007.
City Bank's return on average assets for the six months ended June
30, 2008 was 2.37% compared to 3.81% for the same period in 2007.
Return on average equity was 13.79% for the six months ended June 30,
2008, compared to 20.76% for the same period in 2007. The ratio of
average equity to average assets (Tier 1 Capital) for the six months
ended June 30, 2008 was 17.15% compared to 18.34% for the same period
in 2007. The Tier 1 Capital Ratio decreased slightly due to the
increase in the Bank's total assets for the period ended June 30,
2008. The Bank also declared a regular quarterly cash dividend of $.15
per share during second quarter of 2008.
Forward-Looking Statements
The previous discussion contains a review of City Bank's operating
results and financial condition for the three and six months ended
June 30, 2008 and 2007. The discussion may contain certain
forward-looking statements, which are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those stated,
including, but not limited to, the Bank's inability to generate
increased earning assets, sustain credit losses, maintain adequate net
interest margin, control fluctuations in operating results, maintain
liquidity to fund assets, retain key personnel, and other risks
detailed from time to time in the Bank's filings with the Federal
Deposit Insurance Corporation, including our Annual Report on Form
10-K for the period ended December 31, 2007. Readers are cautioned not
to place undue reliance on these forward-looking statements.
City Bank is a state-chartered commercial bank founded in 1974 and
headquartered in Lynnwood, Washington. The bank is publicly traded
(NASDAQ: CTBK) and many of the stockholders are local individuals.
Eight banking offices serve both Snohomish and North King counties.
Three mortgage loan offices serve Snohomish, King, Pierce and Clark
counties. City Bank provides a wide range of banking services for
business and individuals, including loans for residential
construction, land development, mortgage, commercial, Small Business
Administration, consumer, and all types of deposits as well as other
general banking services. City Bank has been consistently recognized
as one of the top performing banks in Washington State as well as
nationally.
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City Bank
Selected Financial Highlights (unaudited)
(In thousands, except per share data)
Three months ended June Six months ended June
Income
Statement
Data 2008 2007 % Change 2008 2007 % Change
-------------------------------------------------------
Interest
income $27,318 $30,702 -11.02% $ 57,024 $ 59,665 -4.43%
Interest
expense 10,560 9,839 7.33% 21,505 18,864 14.00%
Net interest
income 16,758 20,863 -19.68% 35,519 40,801 -12.95%
Provision for
credit losses 4,600 150 2966.67% 5,100 150 3300.00%
Net interest
income after
provision for
credit losses 12,158 20,713 -41.30% 30,419 40,651 -25.17%
Other
noninterest
income 934 741 26.05% 2,746 1,562 75.80%
Other
noninterest
expense 5,128 5,048 1.58% 10,075 9,674 4.15%
Income before
income taxes 7,964 16,406 -51.46% 23,090 32,539 -29.04%
Provision for
income taxes 2,645 5,851 -54.79% 8,086 11,608 -30.34%
Net Income $ 5,319 $10,555 -49.61% $ 15,004 $ 20,931 -28.32%
Share Data
Actual shares
outstanding 15,764 15,721 0.27%
Earnings Per
Share:
Basic earnings
per common
share $ 0.34 $ 0.67 -49.25% $ 0.95 $ 1.33 -28.57%
Diluted
earnings per
common share $ 0.34 $ 0.67 -49.25% $ 0.95 $ 1.32 -28.03%
Book value per
common share $ 13.97 $ 13.31 4.97%
Basic average
shares
outstanding 15,764 15,715 0.31% 15,759 15,699 0.38%
Fully diluted
average
shares
outstanding 15,770 15,864 -0.59% 15,780 15,855 -0.47%
Dividends paid
per share $ 0.15 $ 0.15 0.00% $ 0.30 $ 0.30 0.00%
Balance Sheet
Data (at
period end)
Investment
securities $ 14,391 $ 15,377 -6.41%
Loans held for
sale 6,373 4,296 48.35%
Loans, net of
unearned
income 1,173,911 1,059,129 10.84%
Allowance for
credit losses 14,530 10,279 41.36%
Total assets 1,291,975 1,142,300 13.10%
Total deposits 955,179 809,984 17.93%
Liabilities
related to
discontinued
operations 833 1,333 -37.51%
Total
Shareholders'
Equity 220,256 209,258 5.26%
Selected
Ratios
Return on
average
shareholders'
equity 9.63% 20.50% -53.03% 13.79% 20.76% -33.55%
Average
shareholders'
equity to
average
assets 17.09% 18.30% -6.60% 17.15% 18.34% -6.50%
Return on
average total
assets 1.65% 3.75% -56.13% 2.37% 3.81% -37.87%
Net interest
spread 4.46% 6.52% -31.60% 4.83% 6.55% -26.26%
Net interest
margin 5.25% 7.49% -29.91% 5.67% 7.50% -24.40%
Efficiency
ratio 28.62% 23.36% 22.50% 26.33% 22.83% 15.33%
Asset Quality
Ratios
Allowance for
credit losses $ 14,530 $ 10,279 41.36%
Allowance to
ending total
loans 1.24% 0.97% 27.53%
Non-performing
assets:
Non-accrual $ 63,178 $ 1,970 3107.01%
90 days past
due and
still
accruing $ 11 $ 49 -77.55%
Foreclosed
real estate $ 40,171 $ - 100.00%
Non-performing
assets to
total assets 8.00% 0.18% 4426.29%
Net (charge-
offs)
recoveries $ (1,839) $ (157) 1071.34%
Net loan
charge-offs
(annualized)
to average
loans 0.31% 0.03% 906.66%
*T
City Bank
President and CEO
Conrad Hanson, 425-745-5933
investorrelations@citybankwa.com
or
Chief Financial Officer
Chantha Bunphoath, 425-745-5933
investorrelations@citybankwa.com
www.citybankwa.com
Copyright Business Wire 2008
