City Bank’s third-quarter loss: $11 million

Published 7:53 pm Saturday, October 25, 2008

LYNNWOOD — City Bank reported a third quarter loss of nearly $11 million Friday, citing its focus on real estate lending and a national upheaval in the economy.

“The banking industry as a whole is in a period of severe financial distress, which is unprecedented in the bank’s 34-year history,” said Conrad Hanson, president and CEO. “The 2008 housing slump is the worst this country has ever experienced and the lack of liquidity and confidence in the credit markets are clearly a drag on the bank’s residential real estate loans.”

City Bank, based in Lynnwood, reported a quarterly loss of $10.96 million, or 69 cents per diluted share. That compares with earnings of $10.38 million from the third quarter of 2007, or 65 cents a share, a drop of 206 percent.

Hanson said the loss was due to the fact that the bank had to set aside $28 million for expected loan losses in comparison to $675,000 for the comparable period of a year ago.

He noted that his bank focuses on residential construction lending. Home builders have been unable to sell homes because of declining demand and a lack of mortgage financing, Hanson said.

The major loss was the third announced this week by a local bank. Earlier, Everett-based Frontier Bank had announced losing $17.8 million during the quarter and Cascade Bank, also based in Everett, reported a loss of $6.6 million.

Frontier’s losses were also based on nonperforming loans related to construction. Cascade’s were primarily due to the government bailout of Fannie Mae and Freddie Mac, which made Cascade’s preferred stock in the mortgage giants essentially worthless.

Hanson said that despite the loss, the bank has almost double the amount it needs to be considered well capitalized by federal banking regulations. He said City Bank has $222.98 million in “total risk-based capital,” while its regulatory requirement is $127.05 million.