City Bank posts Q3 loss on bad loans

(Reuters) - State-chartered commercial bank City Bank posted a huge loss in the third quarter as the provision that the bank set aside for loan losses rose manifold.

The company posted a loss of $11.0 million, or 69 cents a share, compared with a profit of $10.4 million, or 65 cents a share, a year earlier.

Analysts on average had expected the bank to post a profit of 32 cents a share, excluding special items, according to Reuters Estimates.

"...The lack of liquidity and confidence in the credit markets are clearly a drag on the bank's residential real estate loans," Chief Executive Conrad Hanson said in a statement.

City Bank allocated $28 million in the quarter as provision for bad loans.

"Significant increase" in bad loans, reflecting the inability of home builders to sell products in this period of declining demand, contributed to the first loss-making quarter in the company's 34-year history, Hanson said.

Non-performing loans rose 93 percent sequentially to $199.2 million.

Shares of the Lynnwood, Washington-based company closed down 10 percent at $10.14 Friday on Nasdaq.

(Reporting by Anurag Kotoky in Bangalore; Editing by Gopakumar Warrier)