LYNNWOOD — City Bank lost nearly $40 million in the fourth quarter of 2008, ending the year in the red for the first time in its history, as loan losses in the sagging housing market increased, the company reported Monday.
The Lynnwood-based company took an annual net loss of $35.8 million — or $2.27 per diluted share — for 2008. It’s the first annual loss ever reported by the 34-year-old bank compared with net income of $41.5 million a year ago.
“Very disappointed,” said Conrad Hanson, the bank’s president and chief executive officer. “I’ve never seen the global economy melt down so fast.”
The news sent the bank’s stock into a steep fall. It closed at $1.78 per share on Monday, down $1.37, or 43.49 percent.
The fourth quarter that ended on Dec. 31 marked the sixth consecutive quarter that City Bank’s earnings dropped. The bank has fallen into the red for the last two quarters, as the troubled real estate market battered the bank’s assets.
The problem continued to get worse after the bank took a $10.96 million loss for the third quarter. At the year’s end, City Bank’s nonperforming assets climbed to $680 million, or 50.3 percent of its total assets.
“The fourth quarter of 2008 was the worst housing slump and most adverse economic climate in my 45 years of banking,” Hanson said.
The company reported a $39.9 million loss — or $2.53 per diluted share — for the quarter ended on Dec. 31. That’s down from an income of $10.2 million a year ago.
The downturn in real estate and construction has hit City Bank hard. It relies almost exclusively on real estate lending in various forms such as construction, commercial and residential.
City Bank reported loan losses worth $58 million in the fourth quarter; annual loan losses were $91.1 million for 2008.
Hanson said it remains to be seen when the housing market would start recovering. He hopes that low mortgage rates would accelerate that recovery.
Meanwhile, City bank officials are taking aggressive action to deal with nonperforming assets and reduce the bank’s concentration in residential construction lending to weather the national economic downturn, Hanson said.
“These steps are showing promise, but they will take time to work through and the current environment is highly uncertain,” he said.
City Bank, which operates in Snohomish, King and Pierce counties, is among struggling community banks in Washington.
On Thursday, Frontier Financial Corp. of Everett posted an $89.5 million loss for the fourth quarter, as losses in real estate loans continue to increase.
On Jan. 27, Cascade Financial Corp. of Everett reported a $2.5 million profit for the fourth quarter. The Everett-based firm was able to counter losses in the housing market by increasing lending with government aid. Cascade secured $39 million from the U.S. Treasury’s capital purchase program.
City Bank decided not to use the program because it’s preserved plenty of capital for rainy days. At the end of 2008, the bank’s total capital was $182 million, down from about $221 million a year ago.
The bank is considered well capitalized based on government regulations, Hanson said. It plans to continue to operate efficiently to survive the ongoing recession.
“We are not going to change our format,” he said.
Reporter Yoshiaki Nohara: 425-339-3029 or ynohara@heraldnet.com.
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