City Bank Announces Strong Earnings for the Quarter and Year Ended December 31, 2007

Despite upheavals in credit markets that have adversely affected many banks, City Bank (NASDAQ:CTBK) has announced strong earnings of $41.50 million for the year ended December 31, 2007, reflecting an increase of 12.15% from $37.00 million for the same period in 2006. Net income for the quarter ended December 31, 2007 was $10.19 million, an increase of $509 thousand or 5.26% compared to $9.68 million for the fourth quarter of 2006. For the year ended December 31, 2007, the Bank’s diluted net income per share reflects an increase of 11.97% to $2.62 from $2.34 for the same period in 2006. The Bank’s diluted net income per share for the quarter ended December 31, 2007 was $.65 compared to $.61 in the fourth quarter of 2006. Total assets also grew to $1.24 billion at December 31, 2007, up from $1.08 billion at year end 2006. Net income for the twelve months ended December 31, 2007 was $41.50 million compared to $37.00 million in the prior year. Net interest income after provision for credit losses was $79.97 million for the twelve months ended 2007 compared to $72.64 million for the prior period in 2006, reflecting an increase of 10.09%. The increased net interest income was due to continued growth in average loan balances which increased from $876.17 million in 2006 to $1.08 billion in 2007. Twelve Months Highlights  (In thousands, except per share data)     December 31, 2007   December 31, 2006 Total Assets $ 1,239,033     $ 1,077,689   Total Loans $ 1,161,755     $ 970,237   Net Income $ 41,495     $ 37,000   Nonperforming Assets $ 16,701     $ 8,006   Net Interest Margin   7.27 %     7.80 % Return on Average Assets (ROA)   3.64 %     3.91 % Return on Average Equity (ROE)   19.82 %     19.47 % Average Equity to Average Assets   18.39 %     20.08 % Net income increased from $9.68 million to $10.19 million, an increase of 5.26% for the three months ended December 31, 2007 compared to the fourth quarter of 2006. The Bank’s diluted net income per share reflects an increase of 6.56% to $.65 from $.61 compared to the fourth quarter in the prior year. Net interest income after provision for credit losses was $19.29 million for the fourth quarter of 2007 compared to $19.50 million for the prior period in 2006. This decrease of 1.10% was due to a higher provision for credit losses during the fourth quarter of 2007 compared to no provision in the prior quarter of 2006. Fourth Quarter Highlights  (In thousands, except per share data)     December 31, 2007   December 31, 2006 Net Income $ 10,186     $ 9,677   Net Interest Margin   6.86 %     7.63 % Return on Average Assets (ROA)   3.39 %     3.74 % Return on Average Equity (ROE)   18.53 %     19.84 % Average Equity to Average Assets   18.30 %     18.84 % Result of Operations Interest income for the three and twelve months ended December 31, 2007 was up 11.47% and 21.32%, respectively, from the comparable periods in 2006 due to increased loan balances. Average outstanding loans was up $179.84 million or 18.77% for the three months ended December 31, 2007 and $198.58 million or 22.66% for the twelve months ended December 31, 2007 over the same periods in 2006. The average yield on loans for the three and twelve months ended December 31, 2007 was 10.76% and 11.11%, respectively, compared to 11.36% and 11.20% for the same periods in 2006. For the twelve months ended December 31, 2007, net interest margin reflects a decrease to 7.27% from 7.80% in the prior year due to the higher cost of funding loan growth and lower rate environment. Nonperforming assets at December 31, 2007 were $16.70 million compared to $8.01 million at December 31, 2006. Overall asset quality declined somewhat with the ratio of nonperforming assets to total assets at December 31, 2007 increasing to 1.35% versus .74% at December 31, 2006. The Bank’s efficiency ratio of 19.19% for the quarter ended December 31, 2007 remains among the lowest in the banking industry. A loan loss provision of $1.10 million was added for the quarter ended December 31, 2007 compared to no allowance in the prior year. Net loan charge-offs were $103 thousand for the three months ended December 31, 2007 compared to $63 thousand in the prior year. For the twelve months ended December 31, 2007, net loan charge-offs were $942 thousand compared to $129 thousand in the prior year and total provision for credit loss was $1.93 million compared to no provision in the prior year. Interest expense for the fourth quarter of 2007 was up 27.41% over the comparable period in 2006. Average cost of interest bearing deposits for the fourth quarter of 2007 increased to 4.55%, up from 4.19% for the fourth quarter of 2006. The average time deposits and borrowed funds balances for the fourth quarter of 2007 were $932.09 million, reflecting an increase of 18.90% over the comparable quarter in 2006 of $783.91 million. Non-interest income of $485 thousand reflects a net decrease of $374 thousand or 43.54% for the fourth quarter of 2007 from the prior quarter of 2006. The majority of the decreases were due to a decrease of $114 thousand in net gains from sale of loans and a decrease of $124 thousand in investment products income compared to the same quarter in 2006. SBA loan servicing income also decreased by $27 thousand compared to the same quarter in 2006. Non-interest expense of $4.01 million in the fourth quarter of 2007 reflects a net decrease of 16.98% or $819 thousand compared to the same quarter of 2006. The majority of the decrease relates to the decrease in salaries and benefits expense accruals of $1.10 million for the quarter compared to the same period in 2006. Foreclosed real estate expense and furniture and equipment decreased by $92 thousand and $46 thousand respectively, compared to the same quarter in 2006. Offsetting that decrease was an increase in state and local tax expense of $439 thousand related to Washington State tax examination compared to the same period in 2006. At December 31, 2007, total assets were $1.24 billion, up 14.97% over December 31, 2006. Loans grew 19.74% to $1.16 billion compared to $970.24 million at December 31, 2006. Residential construction loan activity has accounted for the majority of the increased loan volume. Deposits increased 13.23% to $864.49 million at December 31, 2007 compared to $763.49 million at December 31, 2006. City Bank’s returns on average assets for the three and twelve months ended December 31, 2007 were 3.39% and 3.64% respectively compared to 3.74% and 3.91% for the same periods in 2006. Return on average equity was 19.82% for the twelve month period ended December 31, 2007, compared to 19.47% for the same period in 2006. The ratio of average equity to average assets (Tier 1 Capital) for the twelve months ended December 31, 2007 was 18.39% compared to 20.08% for the same period in 2006. The Tier 1 Capital Ratio decreased by 8.42% as the increase in capital was more than offset by the significant increase in the Bank’s total assets for the period ended December 31, 2007. During the fourth quarter, the Board of Directors declared a special cash dividend of $1.00 per share in addition to the regular quarterly cash dividend of $.15 per share. Forward-Looking Statements The previous discussion contains a review of City Bank’s operating results and financial condition for the three and twelve months ended December 31, 2007 and 2006. 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, 2006. 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.