LYNNWOOD — City Bank’s second-quarter losses totalled $22.76 million, more than double the loss suffered in the first three months of this year.
That brings the bank’s losses to more than $30 million in the first half of 2009, and leaves it jockeying to unload a mountain of foreclosed real estate holdings in an under-nourished housing market.
Like other community banks focused on residential lending, City Bank’s loan portfolio was decimated by the housing market slump. Bad loans and foreclosed real estate made up roughly $17.19 million in the last quarter’s net loss, according to the bank’s earnings report released Tuesday.
“The bank is executing on our plan to reduce nonperforming assets and build liquidity as we reduce the total asset size of our balance sheet,” City Bank CEO Conrad Hanson said in a statement.
During the last year, City Bank accumulated a hefty number of bad loans as home builders saw sales plummet. As of the end of June, the bank’s nonperforming assets totaled $611.11 million — 47.38 percent of total assets.
In order to turn a profit — or at least minimize losses — the bank is choosing to finance the construction of homes on vacant lots before selling.
“We are prudently financing the construction of homes in housing developments where sales are actively occurring,” Hanson said. “We are not planning on selling building lots where the appraised value is significantly below the value of the land with a completed house.”
City Bank board member Marty Heimbigner said developing holdings is a key component of the bank’s survival strategy.
“The appraised value of building lots are primarily what’s requiring us to increase our loan-loss provision,” he said. “There really (aren’t) many sales of building lots.”
Bank officials said Tuesday they’re working to sell distressed properties in an “orderly and aggressive” way. From January through late June, 739 homes worth a total of $220 million were sold, and 108 properties worth $34.6 million had sales pending.
“We have sold a lot of completed houses, and that’s our strategy,” Heimbigner said.
City Bank was the third Snohomish County bank to be reprimanded by federal and state agencies this year. Early last month, the bank revealed it received a cease-and-desist order from the Federal Deposit Insurance Corp. and the state Department of Financial Institutions.
The order requires City Bank to reduce its non- performing loans, increase the amount of cash on hand and commission an independent study of its management and personnel structure.
City Bank’s stock fell 3.4 percent Tuesday to end the day at $2.27.