CTY BK LYNNWOOD 
By City Bank (NASDAQ:CTBK) today announced net income from continuing operations was up 74.47% from $15.66 million to $27.32 million for the nine months ended September 30, 2006 compared to the same period in 2005. In addition, assets have surpassed $1 billion for the first time in the Bank's 32 year history. All prior period results have been reclassified to show the operating results of Diligenz and Merchant Cards as discontinued operations with no effect on net income or shareholders' equity. Consolidated net income for the quarter ended September 30, 2006 was $9.90 million, an increase of $3.58 million or 56.55% compared to $6.32 million for the third quarter of 2005. The Bank's diluted net income per share from continuing operations reflects an increase of 54.10% from $.61 to $.94 compared to prior year third quarter.
Consolidated net income for the nine months ended September 30, 2006 was $27.32 million compared to $43.66 million in the prior year which included $27.53 million related to the net gain on sale of discontinued operations of Diligenz. On a diluted per share basis, net income was $2.60 compared to $4.27 in the prior period which included $2.74 per share basis related to the net gain on sale of Diligenz. Income from continuing operations increased from $15.66 million to $27.32 million, an increase of 74.47% for the nine months ended September 30, 2006 compared to the prior year. Net interest income after provision for credit losses was $53.14 million for the nine months ended September 30, 2006 compared to $33.17 million for the same period in 2005, reflecting an increase of 60.22%. The increased net interest income was primarily due to continued growth in average loans outstanding from $658.94 million to $848.50 million and a higher interest rate environment through the first half of 2006. In addition, the Bank has reduced nonperforming assets to .12% of assets and has experienced nominal credit losses in 2006 and 2005. The efficiency ratio for continuing operations for the nine months ended September 30, 2006 was exceptionally low at 25.29% compared to 35.83% in the same period in 2005.
Nine Months Highlights (In thousands, except per share data)
| Sept. 30 2006 | Sept. 30 2005 | ||||
| Total Assets | $ | 1,017,464 | $ | 809,675 | |
| Total Loans | $ | 921,817 | $ | 692,805 | |
| Income from Continuing Operations | $ | 27,323 | $ | 15,661 | |
| Income from Discontinued Operations | $ | -- | $ | 478 | |
| Net Gain on Sale of Discontinued Operations | $ | -- | $ | 27,525 | |
| Net Income | $ | 27,323 | $ | 43,664 | |
| Nonperforming Assets | $ | 1,209 | $ | 4,594 | |
| Provision for Credit Losses | $ | -- | $ | 300 | |
| Total Shareholders' Equity | $ | 199,343 | $ | 198,925 | |
| Net Interest Margin | 7.87% | 6.29% | |||
| Return on Average Assets (ROA) | 3.98% | 2.88% | |||
| Return on Average Equity (ROE) | 19.34% | 12.41% | |||
| Average Equity to Average Assets | 20.56% | 23.20% | |||
| Efficiency Ratio-Continuing Operations | 25.29% | 35.83% | |||
Income (from continuing operations) increased to $9.90 million from $6.33 million, an increase of 56.55% for the quarter ended September 30, 2006 compared to the same quarter in 2005. The Bank's diluted net income per share from continuing operations reflects an increase of 54.10% from $.61 to $.94 compared to third quarter in the prior year. Net interest income after provision for credit losses was $19.07 million for the third quarter of 2006 compared to $12.63 million for the prior period in 2005, reflecting an increase of 50.97%. The increased net interest income was primarily due to continued growth in average loan volume from $693.12 million to $892.16 million. Loan growth was the major factor contributing to the Bank's strong record earnings for the three months ended September 30, 2006.
Third Quarter Highlights (In thousands, except per share data)
| Sept. 30 2006 | Sept. 30 2005 | ||||
| Income from Continuing Operations | $ | 9,902 | $ | 6,325 | |
| Income from Discontinued Operations | $ | -- | $ | 117 | |
| Net Gain of Sale of Discontinued Operations | $ | -- | $ | 27,525 | |
| Net Income | $ | 9,902 | $ | 33,967 | |
| Provision for Credit Losses | $ | -- | $ | 100 | |
| Net Interest Margin | 7.99% | 6.52% | |||
| Return on Average Assets (ROA) | 4.09% | 3.20% | |||
| Return on Average Equity (ROE) | 20.24% | 13.41% | |||
| Average Equity to Average Assets | 20.20% | 23.84% | |||
| Efficiency Ratio-Continuing Operations | 24.10% | 31.39% | |||
Result of Operations
Interest income for the third quarter ended September 30, 2006 was up 59.42% from the comparable period in 2005 due to strong loan volume and a higher interest rate environment. The increase of $199.04 million or 28.72% in average outstanding loans contributed the majority of this increase. The Bank also benefited from twelve prime rate increases since February 2, 2005, totaling 300 basis points, causing the Bank's variable rate loan portfolio to reprice. A higher interest rate environment allowed the average yield on the Bank's loan portfolio (approximately 97.04% of the portfolio are variable rate loans), to increase faster than average cost of funds. The average yield on loans for the third quarter ended September 30, 2006 was 11.14%, up from 8.56% during third quarter of 2005 and the net interest margin increased to 7.99% from 6.52%. Management expects continued growth in loan volume for at least the near term. At the same time, nonperforming assets at September 30, 2006 have been reduced from $4.59 million to $1.21 million, a reduction of 73.64% from September 30, 2005. The ratio of nonperforming assets to total assets at September 30, 2006 decreased to .12% from .57% at September 30, 2005.
Interest expense for the third quarter ended September 30, 2006 was up 90.57% from the comparable period in 2005. Average cost of deposits for the third quarter ended September 30, 2006 increased to 3.85%, up from 2.40% for the third quarter of 2005, reflecting rising interest rates. Average deposits for the third quarter ended September 30, 2006 were $673.18 million resulting in a 37.68% increase over the comparable quarter in 2005 of $488.94 million. Management expects to see an increase in interest expense for the remainder of this year due in part to a rising interest rate environment and increasing deposits at a higher rate to fund loan growth.
Noninterest income of $1.01 million reflects a net decrease of $87 thousand or 7.90% during the third quarter ended September 30, 2006 from the third quarter 2005. Net gain on sale of foreclosed real estate increased $188 thousand compared to the third quarter 2005. Net gains from sale of loans decreased $237 thousand compared to the third quarter 2005. Brokered loan fees and investment products income decreased $24 thousand and $13 thousand respectively, compared to the third quarter of 2005.
Noninterest expense of $4.84 million increased 11.49% or $499 thousand compared to the third quarter of 2005. Salary and benefit expenses, net of amounts deferred, during the third quarter ended September 30, 2006 increased $300 thousand compared to the same period in 2005, due in part to higher benefit accruals for bonus and profit sharing compared to the same period in 2005 because of the Bank's increased level of gross profit year to date. As of September 30, 2006 compared to September 30, 2005, foreclosed real estate expense increased $94 thousand due to the sales of foreclosed property. Occupancy, furniture and equipment expense increased $73 thousand compared to the same period in 2005.
At September 30, 2006, total assets reached a milestone at $1.02 billion, up 25.66% over September 30, 2005. Total assets growth since year-end 2005 was $185.43 million or 22.29%. Loans grew 33.06% to $921.82 million compared to $692.81 million at September 30, 2005. Loan growth since year-end 2005 was $175.15 million or 23.46%. Residential construction loans have accounted for the majority of the increased loan volume. At September 30, 2006, deposits increased 43.96% to $715.46 million compared to $496.99 million at September 30, 2005, and 40.05%, compared to $510.86 million at year-end 2005.
City Bank's return on average assets (continuing operations) for the three and nine months ended September 30, 2006 was 4.09% and 3.98% compared to 3.20% and 2.88% for the same periods in 2005. Return on average equity (continuing operations) was 20.24% and 19.34% for the three and nine month periods, compared to 13.41% and 12.41% for the same periods in 2005. The ratio of average equity to average assets (Tier 1 Capital) for the three and nine months ended September 30, 2006 was 20.20% and 20.56% compared to 23.84% and 23.20% for the same periods in 2005. The Tier 1 Capital Ratio has decreased slightly due to the significant increase in the Bank's total assets for the period ended September 30, 2006.
Forward-Looking Statements
The previous discussion contains a review of City Bank's operating results and financial condition for the three and nine months ended September 30, 2006 and 2005. 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, 2005. 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. Two mortgage loan offices serve Snohomish, King and Pierce 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.
Selected Consolidated Financial Highlights (unaudited) | |||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||||||||||||||||||||||||||||||
| September | September | ||||||||||||||||||||||||||||||||||||||||||
| Income Statement Data - Continuing Operations | 2006 | 2005 | % Change | 2006 | 2005 | % Change | |||||||||||||||||||||||||||||||||||||
| Interest income | $ | 26,570 | $ | 16,667 | 59.42% | $ | 72,527 | $ | 43,398 | 67.12% | |||||||||||||||||||||||||||||||||
| Interest expense | 7,501 | 3,936 | 90.57% | 19,391 | 9,933 | 95.22% | |||||||||||||||||||||||||||||||||||||
| Net interest income | 19,069 | 12,731 | 49.78% | 53,136 | 33,465 | 58.78% | |||||||||||||||||||||||||||||||||||||
| Provision for credit losses | - | 100 | -100.00% | - | 300 | -100.00% | |||||||||||||||||||||||||||||||||||||
| Net interest income after provision for credit losses | 19,069 | 12,631 | 50.97% | 53,136 | 33,165 | 60.22% | |||||||||||||||||||||||||||||||||||||
| Other noninterest income | 1,014 | 1,101 | -7.90% | 3,168 | 3,837 | -17.44% | |||||||||||||||||||||||||||||||||||||
| Other noninterest expense | 4,841 | 4,342 | 11.49% | 14,239 | 12,972 | 9.77% | |||||||||||||||||||||||||||||||||||||
| Income from continuing operations before income taxes | 15,242 | 9,390 | 62.32% | 42,065 | 24,030 | 75.05% | |||||||||||||||||||||||||||||||||||||
| Provision for income taxes | 5,340 | 3,065 | 74.23% | 14,742 | 8,369 | 76.15% | |||||||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | 9,902 | $ | 6,325 | 56.55% | $ | 27,323 | $ | 15,661 | 74.47% | |||||||||||||||||||||||||||||||||
Income from dis- | - | 117 | -100.00% | - | 478 | -100.00% | |||||||||||||||||||||||||||||||||||||
Net gain on sale of dis- | - | 27,525 | - | 27,525 | |||||||||||||||||||||||||||||||||||||||
| Net Income | $ | 9,902 | $ | 33,967 | -70.85% | $ | 27,323 | $ | 43,664 | -37.42% | |||||||||||||||||||||||||||||||||
| Share Data | |||||||||||||||||||||||||||||||||||||||||||
| Actual shares outstanding | 10,413 | 10,223 | 1.86% | ||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share: | |||||||||||||||||||||||||||||||||||||||||||
| Basic earnings per common share | $ | 0.95 | $ | 3.34 | -71.56% | $ | 2.63 | $ | 4.33 | -39.33% | |||||||||||||||||||||||||||||||||
| Diluted earnings per common share | $ | 0.94 | $ | 3.31 | -71.69% | $ | 2.60 | $ | 4.27 | -39.18% | |||||||||||||||||||||||||||||||||
| Earnings Per Share From Continuing Operations: | |||||||||||||||||||||||||||||||||||||||||||
| Basic earnings per common share | $ | 0.95 | $ | 0.62 | 53.23% | $ | 2.63 | $ | 1.55 | 69.47% | |||||||||||||||||||||||||||||||||
| Diluted earnings per common share | $ | 0.94 | $ | 0.61 | 54.10% | $ | 2.60 | $ | 1.53 | 69.75% | |||||||||||||||||||||||||||||||||
| Book value per common share | $ | 19.14 | $ | 19.46 | -1.62% | ||||||||||||||||||||||||||||||||||||||
| Book value per common share from continuing operations | $ | 19.14 | $ | 16.73 | 14.39% | ||||||||||||||||||||||||||||||||||||||
| Basic average shares outstanding | 10,411 | 10,183 | 2.24% | 10,402 | 10,090 | 3.09% | |||||||||||||||||||||||||||||||||||||
| Fully diluted average shares outstanding | 10,540 | 10,278 | 2.55% | 10,521 | 10,215 | 3.00% | |||||||||||||||||||||||||||||||||||||
| Dividends paid per share | $ | 0.20 | $ | 0.20 | 0.00% | $ | 0.60 | $ | 0.60 | 0.00% | |||||||||||||||||||||||||||||||||
| Balance Sheet Data (at period end) | |||||||||||||||||||||||||||||||||||||||||||
| Investment securities | $ | 14,347 | $ | Share
© Business Wire - 2006
City Bank (the Bank) is engaged in general commercial and retail banking, with an emphasis on small and medium-sized businesses, construction lending for single family residences and home mortgage lending. The Bankâs principle business activities are conducted thorough its office located in Lynnwood, Washington, and eight branches throughout Snohomish and King Counties. The Bankâs loan portfolio includes residential construction and development loans secured by real estate amounting to approximately 63% of the total loan portfolio. At December 31, 2008, 55.53% of the Bankâs deposits were in brokered deposits. The Bankâs primary focus has been lending to small and medium-sized businesses, construction lending for single family residences and home mortgage lending. At December 31, 2008, the Bank operated three full service mortgage banking officers in Snohomish, Pierce and Clark Counties whose purpose is to originate loans for sale into the secondary market.
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