City Bank (NASDAQ:CTBK) today announced a net loss of
$8.02 million for the quarter ended March 31, 2009, or $.51 per
diluted share. The primary causes for the net loss were the reduced
interest income related to nonperforming assets, a provision for
loan losses of $5.63 million, and expenses of $5.00 million
relating to these assets in the first quarter of 2009. This
compared to a reported net income of $9.69 million, or $.61 per
diluted share for the same quarter in the prior year. This also
compares to a loss of $64.88 million, or $4.12 per diluted share
reported in the fourth quarter of 2008.
Three Months Summary (In
thousands, except ratios)
� �
March 31 2009 �
December 31
2008
�
March 31 2008 Total Assets � $ 1,370,683 � � $ 1,325,541 �
� $ 1,309,029 � Total Loans � $ 1,029,959 � � $ 1,064,080 � � $
1,213,422 � Total Cash and Federal Funds � $ 185,116 � � $ 111,632
� � $ 59,461 � Net Income (Loss) � $ (8,024 ) � $ (64,884 ) � $
9,685 � Non-Performing Assets � $ 607,170 � � $ 601,193 � � $
59,307 � Net Interest Margin � � 1.08 % � � 1.87 % � � 6.09 %
Return on Average Assets (ROA) � � -2.41 % � � -19.58 % � � 3.11 %
Return on Average Equity (ROE) � � -22.82 % � � -125.30 % � � 18.09
% Average Equity to Average Assets � � 10.58 % � � 15.63 % � �
17.21 %
During the last two quarters of 2008 and the first quarter of
2009, the Bank experienced a significant increase in nonperforming
assets primarily as a result of the reduced ability of home
builders to sell inventory in this period of declining demand. City
Bank defines nonperforming assets to include �accruing loans past
due ninety days or more, non-accrual loans, including loans where
the borrower is making cash payments of interest that we apply to
principal in accordance with GAAP, loans which have been
restructured to provide a reduction in or deferral of interest or
floor rates or principal for reasons related to the debtors
financial difficulties, potential problem loans and loan
concentrations of related borrowers, and foreclosed real estate.�
During the 4th quarter of 2008 and the 1st quarter of 2009 there
was a significant downturn in local economic conditions due to the
national recession and the banking crisis. These forces coupled
with the Bank�s focus on residential real estate construction
lending have led to significant increases in nonperforming loans
and a higher provision for loan losses of $5.63 million for the
quarter ended March 31, 2009, compared to $85.95 million for the
fourth quarter in 2008 and $500 thousand for the first quarter of
2008. As of March 31, 2009, nonperforming assets totaled $607.17
million, which represented 44.30% of total assets. The total
nonperforming assets reflects partial charge-offs to adjust loan
balances to collateral value. For the quarter ended March 31, 2009,
the allowance for loan losses was $40.56 million, which represents
3.88% of total loans compared to .96% in the prior quarter of
2008.
Summary of Paid Homes Sales
through March 31, 2009 ($ in Thousands)
�
�
Number of Paid
Transaction
�
�
Amount Paid
� � � � �
Total �
286 �
$ 80,062 � � �
� �
Average Balance per transaction � � �
$
280 �
Summary of Paid and Pending
Homes Sales through April 30, 2009 ($ in Thousands)
Assets Categories
�
Number of Paid
Transaction
�
Paid
�
Number of Pending
Transaction
�
Pending
�
Total
� � � � � � � � � � �
Total �
399 �
$
116,003 �
171 �
$ 53,307 �
$
169,310 � � � � � � � � � � �
Average Balance per
transaction � � �
$ 291 � � �
$ 312
� �
Conrad Hanson, President and CEO, commented, �We are encouraged
by sales of homes, both unit and dollar volumes during the first
four months of 2009.� As the tables above indicate that the Bank
has been conducting an orderly and aggressive effort to dispose of
residential properties securing the Bank�s loans, which is already
showing positive results. Since the beginning of January up through
April 30, 2009, over 399 homes representing over $116.00 million
have been sold and paid-off and over 171 properties have pending
sales (signed agreements with earnest money deposits) totaling
$53.31 million for closing dates primarily in May and June. These
570 transactions totaled $169.30 million � averaging approximately
$42.33 million per month in closed or pending agreements.
City Bank, despite being impacted by these industry wide
problems, has always expressly provided for the possibility of such
an economic downturn by historically maintaining capital at
significantly higher than the average levels. The following table
summarizes the Bank�s Shareholders� Equity and Allowance for Credit
Losses, as reported on a GAAP basis:
� �
March 31, 2009 �
December 31, 2008 �
March 31,
2008 � � � � � � � Shareholders� Equity ($000�s) � $ 133,129 �
$ 141,157 � $ 217,393 Allowance for Credit Losses ($000�s) � $
40,560 � $ 34,990 � $ 11,644 � �
$ 173,689 �
$
176,147 �
$ 229,037
The above table indicates that during 2009, the Bank�s
Shareholders� Equity was reduced by the impact of the net loss in
the first quarter of 2009 and an unprecedented loan loss provision
of $119.05 million in 2008. However, at the same time, the Bank
built up the allowance for credit losses to $40.56 million from
$11.64 million for the same period in 2008. The combined total of
Shareholders� Equity and the Allowance for Credit Losses for first
quarter of 2009, December 31, 2008 and March 31, 2008 are $173.69
million, $176.15 million and $229.04 million, respectively. During
the first quarter of 2009, the Bank recorded net loan charge-offs
of $56 thousand compared to $125 thousand for the same quarter in
2008.
The following is the Bank�s Regulatory Capital and Ratios as of
March 31, 2009, December 31, 2008 and March 31, 2008:
� Tier 1 (Core) Capital � Tier 2 (Total) Capital � Leverage Capital
� Amount � Ratio Amount � Ratio Amount � Ratio � Actual at March
31, 2009 $132,978 11.13% $148,222 12.41% $132,978 10.36% Actual at
December 31, 2008 $141,000 11.61% $156,424 12.88% $141,000 10.72%
Actual at March 31, 2008 $217,156 17.45% $228,805 18.36% $217,156
17.42%
At March 31, 2009 the Bank had Cash Equivalents (in the form of
Cash, Cash in Banks, Interest Bearing Accounts in Banks and Federal
Funds Sold) which totaled $185.12 million compared to $111.63
million at December 31, 2008 and $59.46 million at March 31, 2008.
As of April 30, 2009, the Bank has further increased liquidity in
the form of Cash Equivalents to $214 million, which represents
approximately 16% of total assets.
Result of Operations
Interest income for the quarter ended March 31, 2009 was down
55.13% from the comparable period in 2008. As a result of the
weakening residential real estate market, the Bank�s nonperforming
assets increased from $59.31 million at March 31, 2008, to $ 601.19
million at December 31, 2008 and $607.17 million at March 31, 2009.
Accrued interest of $603 thousand was reversed from income for the
quarter ended March 31, 2009 due to the transfer of nonperforming
loans to non-accrual status. Also contributing to the decrease in
interest income was the decline in short term interest rates during
the latter part of 2008 (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 three months ended March 31, 2009
was 4.85%, down from 9.89% for the same period in 2008, and net
interest margin decreased to 1.08% compared to 6.09% in the same
quarter in the prior year.
Interest expense for the quarter ended March 31, 2009 decreased
9.12% to $9.95 million compared to $10.95 million recorded in the
comparable period in 2008. The average cost of deposits and
borrowed funds for the quarter ended March 31, 2009 decreased to
3.33%, down 111 basis points from 4.44% for the same period in
2008, reflecting a lower rate environment. Average interest bearing
deposits and borrowed funds for the quarter ended March 31, 2009
were $1.20 billion, a 21.29% increase over the $986.60 million
average for the comparable period in 2008.
Non-interest income of $1.07 million reflects a net decrease of
$1.04 million or 49.34% for the quarter ended March 31, 2009 over
the quarter ended March 31, 2008. The majority of this decrease was
due to a non recurring pre-tax gain of $1.22 million on the partial
redemption of the Bank�s equity interest in VISA Inc. (NYSE: V) in
the first quarter of 2008. Non-interest income excluding VISA
reflected a net gain of $148 thousand primarily due to the net
gains from sale of loans.
Non-interest expense of $11.00 million for the quarter ended
March 31, 2009 reflects a net increase of 109.81% or $5.76 million
over the same period in 2008. The majority of the increase relates
to losses and expenses on nonperforming loans and foreclosed real
estate, which increased by $5.00 million over the same time frame
in 2008. Audit Expense increased by $707 thousand due to increased
review of nonperforming assets. FDIC insurance expense increased by
$469 thousand compared to the same period in 2008, which is a
function of the Bank�s increased level of deposits and the higher
rate of assessment applied to all banks as a result of the national
banking crisis. Offsetting the increases was a decrease in salary
and employee benefits expense by $1.25 million compared to the same
period in 2008, due to the reduction in the level of incentive
compensation.
At March 31, 2009, total assets were $1.37 billion, up 4.92%
over March 31, 2008. Total loans decreased by 15.12% to $1.03
billion at March 31, 2009 compared to $1.21 billion at March 31,
2008. At March 31, 2009, deposits increased 19.62% to $1.14 billion
compared to $954.62 million at March 31, 2008.
City Bank�s return on average assets for quarter ended March 31,
2009 was negative -2.41% compared to 3.11% for the same period in
2008. Return on average equity was negative -22.82% for the quarter
ended March 31, 2009, compared to 18.09% for the same period in
2008. The ratio of average equity to average assets (Tier 1
Capital) for the quarter ended March 31, 2009 was 10.58% compared
to 17.21% for the same period in 2008.
Forward-Looking Statements
The previous discussion contains a review of City Bank�s
operating results and financial condition for the three months
ended March 31, 2009 and twelve months ended December 31, 2008. 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, 2008. 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.
� � � Selected Financial Highlights(unaudited) (In thousands,
except per share data)
March December March
Annual �
Income Statement Data � 2009 � � � 2008 � �
�
2008 � �
% Change � Interest income $ 13,328 $
16,093 $ 29,706 -55.13 % Interest expense 9,947 10,207 10,945 -9.12
% Net interest income 3,381 5,886 18,761 -81.98 % Provision for
credit losses 5,626 85,951 500 1025.20 % Net interest income (loss)
after provision for credit losses (2,245 ) (80,065 ) 18,261 -112.29
% Other noninterest income 1,067 730 1,902 -43.90 % Expense related
to nonperforming assets 4,998 17,742 174 2772.41 % Other
noninterest expense 5,998 2,727 4,863 23.34 %
Income (loss)
before income taxes (12,174 ) (99,804 ) 15,126 -180.48 %
Provision (benefit) for income taxes (4,150 ) (34,920 ) 5,441
-176.27 %
Net Income ( Loss)
$
(8,024
)
$
(64,884
)
$ 9,685 -182.85 % �
Share Data
Actual shares outstanding 15,764 15,764 15,762 0.01 %
Earnings
Per Share: Basic earnings per common share
$
(0.51
)
$
(4.12
)
$ 0.61 -183.61 % Diluted earnings per common share
$
(0.51
)
$
(4.12
)
$ 0.61 -183.61 % Book value per common share $ 8.45 $ 8.95 $ 13.79
-38.77 % Basic average shares outstanding 15,764 15,764 15,754 0.06
% Fully diluted average shares outstanding 15,764 15,764 15,790
-0.16 % Dividends paid per share $ 0.00 $ 0.06 $ 0.15 -100.00 % �
Balance Sheet Data (at period end) On balance sheet
liquidity Fed Funds Sold and Cash and Due From Bank $ 185,116 $
111,632 $ 59,461 211.32 % Investment securities $ 14,465 $ 14,483 $
14,597 -0.90 % Loans held for sale 16,009 4,744 5,410 195.91 %
Total on balance sheet liquidity $ 215,590
$ 130,859 $ 79,468 171.29
% Loans, net of unearned income 1,029,959 1,064,080
1,213,422 -15.12 % Allowance for credit losses 40,560 34,990 11,644
248.33 % Total assets 1,370,683 1,325,541 1,309,029 4.71 % Total
deposits 1,141,922 1,088,091 954,616 19.62 % Liabilities related to
discontinued operations 854 847 826 3.39 % Total Shareholders'
Equity 133,129 141,157 217,393 -38.76 % �
Selected Ratios
Return on average shareholders' equity -22.83 % -125.30 % 18.09 %
-226.20 % Average shareholders' equity to average assets 10.58 %
15.63 % 17.21 % -38.55 % Return on average total assets -2.41 %
-19.58 % 3.11 % -177.55 % Net interest spread 0.94 % 1.37 % 5.21 %
-81.96 % Net interest margin 1.08 % 1.87 % 6.09 % -82.27 %
Efficiency ratio 247.08 % -309.26 % 24.98 % 889.06 % �
Asset
Quality Ratios Allowance for credit losses $ 40,560 $ 34,990 $
11,644 248.33 % Allowance to ending total loans 3.88 % 3.29 % 0.96
% -5.44 %
Non-performing assets Non-Accrual $ 435,549 $
416,189 $ 50,204 767.56 % Impaired loans still accruing $ 69,565 $
84,733 $ 4,085 1602.94 % 90 days past due and still accruing $
3,826 $ 313 $ 0
-
Foreclosed real estate $ 98,230 $ 99,958 $ 5,018 100.00 %
Total
Nonperforming assets $ 607,170 $
601,193 $ 59,307 100.00 %
Non-performing assets to total assets 44.30 % 45.35 % 4.53 % 877.72
% Net (charge-offs) recoveries
$
(56
)
$ (95,331 )
$
(125
)
-55.49 % Net loan (charge-offs) recoveries (annualized) to average
loans -0.01 % 7.95 % -0.01 % -57.23 %
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