City Bank Announces Strong Earnings Results for First Nine Months of 2007 and Third Quarter Earnings

City Bank (NASDAQ:CTBK) today announced strong earnings of $31.31 million for the nine months ended September 30, 2007, reflecting an increase of 14.59% from $27.32 million for the same period in 2006. All prior period results have been restated for the 3-for-2 stock split on December 22, 2006, with no effect on net income or shareholders’ equity. Net income for the quarter ended September 30, 2007, was $10.38 million, an increase of $476 thousand or 4.81% compared to $9.90 million for the third quarter of 2006. The Bank’s diluted net income of $.65 per share reflects an increase of 3.17% from $.63 per share for the third quarter of 2006. Net interest income after provision for credit losses was $20.03 million for the third quarter of 2007 compared to $19.07 million for the same period in 2006, reflecting an increase of 5.04%. The increased net interest income for the quarter ended September 30, 2007, was primarily due to continued growth in average loan balances from $892.16 million to $1.09 billion compared to the same period in 2006. Loan growth was the major factor that resulted in the Bank’s solid earnings for the three months ended September 30, 2007. Three Months Highlights (In thousands, except ratios)       September 30, 2007     September 30, 2006 Total Assets $ 1,179,272       $ 1,017,464   Total Loans $ 1,103,690       $ 921,817   Net Income $ 10,378       $ 9,902   Non-Performing Assets $ 9,825       $ 1,209   Net Interest Margin   7.25 %       7.99 % Return on Average Assets (ROA)   3.60 %       4.09 % Return on Average Equity (ROE)   19.38 %       20.24 % Average Equity to Average Assets   18.57 %       20.20 % Net income for the nine months ended September 30, 2007, was $31.31 million compared to $27.32 million in the prior year, reflecting an increase of $3.99 million. On a diluted per share basis, net income was up 13.89% to $1.97 from $1.73 in the comparable period in 2006. Net interest income after provision for credit losses was $60.68 million for the nine months ended September 30, 2007, compared to $53.14 million for the same period in 2006, reflecting an increase of 14.20%. The increase in net interest income for the nine months ended September 30, 2007, was due to continued growth in average loan volume, which increased from $848.50 million in 2006 to $1.05 billion in 2007 compared to the same period in 2006. Nine Months Highlights (In thousands, except ratios)       September 30, 2007     September 30, 2006 Total Assets $ 1,179,272       $ 1,017,464   Total Loans $ 1,103,690       $ 921,817   Net Income $ 31,309       $ 27,323   Non-Performing Assets $ 9,825       $ 1,209   Net Interest Margin   7.42 %       7.87 % Return on Average Assets (ROA)   3.73 %       3.98 % Return on Average Equity (ROE)   20.27 %       19.34 % Average Equity to Average Assets   18.42 %       20.56 % Efficiency Ratio   22.26 %       25.29 % Total Shareholders’ Equity $ 217,408       $ 199,343   Result of Operations Interest income for the three and nine months ended September 30, 2007, was up 16.99% and 25.12%, respectively, from the comparable periods in 2006 due to increased loan volume. Average outstanding loans was up $197.20 million or 22.10% for the three months ended September 30, 2007, and $204.90 million or 24.15% for the nine months ended September 30, 2007, over the same periods in 2006. The average yield on loans for the three and nine months ended September 30, 2007, were 11.18% and 11.24%, respectively, compared to 11.59% and 11.14% during the same periods in 2006. For the nine months ended September 30, 2007, net interest margin reflects a slight decrease of 5.72% to 7.42% from 7.87% in the prior year due to the higher cost of funding loan growth. Nonperforming assets at September 30, 2007, was $9.83 million compared to $1.21 million at September 30, 2006. The ratio of nonperforming assets to total assets at September 30, 2007, increased to .83% over .12% at September 30, 2006. A loan loss provision of $675 thousand was added for the quarter ended September 30, 2007, compared to no allowance in the prior year. Net loan charge-offs were $682 thousand for the three months ended September 30, 2007, compared to $25 thousand in the prior year. For the nine months ended September 30, 2007, net loan charge-offs were $839 thousand compared to $66 thousand in the prior year and total provision for credit loss was $825 thousand compared to no provision in the prior year. Interest expense for the third quarter of 2007 was up 38.37% over the comparable period in 2006. Average cost of deposits for the third quarter of 2007 increased to 4.64%, up from 4.07% for the third quarter of 2006. Average time deposits and borrowed funds for the third quarter of 2007 were $894.75 million, resulting in a 21.37% increase over the comparable quarter in 2006 of $737.18 million. Non-interest income of $607 thousand reflects a net decrease of $407 thousand or 40.14% for the third quarter of 2007 from the prior quarter of 2006. The majority of the decreases were due to a decrease of $152 thousand in net gains from sale of loans and a decrease of $91 thousand in investment products income compared to the same quarter in 2006. SBA loan servicing income also decreased by $26 thousand compared to the same quarter in 2006. Non-interest expense of $4.51 million in the third quarter of 2007 reflects a net decrease of 6.94% or $336 thousand compared to the same quarter of 2006. The majority of the decrease relates to the decrease in salaries and benefits expense of $210 thousand for the quarter compared to the same period in 2006 due to a slight decrease in staffing. Foreclosed real estate expense and furniture and equipment decreased by $70 thousand and $49 thousand, respectively, compared to the same quarter in 2006 At September 30, 2007, total assets were $1.18 billion, up 15.92% over September 30, 2006. Asset growth since December 31, 2006, was $101.78 million or 9.44%. Loans grew 19.73% to $1.10 billion compared to $921.82 million at September 30, 2006. Loan growth since December 31, 2006, was $138.02 million or 14.29%. Deposits increased 15.62% to $827.23 million at September 30, 2007, compared to $715.47 million at September 30, 2006, and 8.35% compared to $763.49 million at December 31, 2006. City Bank’s return on average assets for the nine months ended September 30, 2007, was 3.73% compared to 3.98% for the same period in 2006. Return on average equity was 20.27% for the nine month period, compared to 19.34% for the same period in 2006. The ratio of average equity to average assets (Tier 1 Capital) for the nine months ended September 30, 2007, was 18.42% compared to 20.56% for the same period in 2006. The Tier 1 Capital Ratio decreased slightly due to the significant increase in the Bank’s total assets for the period ended September 30, 2007. Forward-Looking Statements The previous discussion contains a review of City Bank’s operating results and financial condition for the three and nine month ended September 30, 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. City Bank Selected Financial Highlights (unaudited) (In thousands, except per share data)       Three months ended Nine months ended   September September Income Statement Data   2007       2006     % Change     2007       2006     % Change   Interest income $ 31,084   $ 26,570 16.99 % $ 90,749   $ 72,527 25.12 % Interest expense 10,379 7,501 38.37 % 29,243 19,391 50.81 % Net interest income 20,705 19,069 8.58 % 61,506 53,136 15.75 % Provision for credit losses 675 0 100.00 % 825 - 100.00 % Net interest income after provision for credit losses 20,030 19,069 5.04 % 60,681 53,136 14.20 % Other noninterest income 607 1,014 -40.14 % 2,166 3,168 -31.63 % Other noninterest expense 4,505 4,841 -6.94 % 14,176 14,239 -0.44 % Income before income taxes 16,132 15,242 5.84 % 48,671 42,065 15.70 % Provision for income taxes 5,754 5,340 7.75 % 17,362 14,742 17.77 % Net Income $ 10,378 $ 9,902 4.81 % $ 31,309 $ 27,323 14.59 % Share Data Actual shares outstanding 15,727 15,620 0.69 % Earnings Per Share: Basic earnings per common share $ 0.66 $ 0.63 4.75 % $ 1.99 $ 1.75 13.89 % Diluted earnings per common share $ 0.65 $ 0.63 3.17 % $ 1.97 $ 1.73 14.15 % Book value per common share $ 13.82 $ 12.76 8.32 % Basic average shares outstanding 15,726 15,617 0.70 % 15,708 15,603 0.67 % Fully diluted average shares outstanding 15,853 15,810 0.27 % 15,854 15,323 3.47 % Dividends paid per share $ 0.15 $ 0.13 15.38 % $ 0.45 $ 0.40 12.50 %   Balance Sheet Data (at period end) Investment securities $ 14,692 $ 14,347 2.40 % Loans held for sale 3,344 3,528 -5.22 % Loans, net of unearned income 1,103,690 921,817 19.73 % Assets related to discontinued operations -- - Allowance for credit losses 10,272 10,349 -0.74 % Total assets 1,179,272 1,017,464 15.90 % Total deposits 827,231 715,465 15.62 % Liabilities related to discontinued operations 882 1,177 Total Shareholders' Equity 217,408 199,343 9.06 %   Selected Ratios Return on average shareholders' equity 19.38 % 20.24 % -4.27 % 20.27 % 19.34 % 4.82 % Average shareholders' equity to average assets 18.57 % 20.20 % -8.09 % 18.42 % 20.56 % -10.40 % Return on average total assets 3.60 % 4.09 % -12.03 % 3.73 % 3.98 % -6.08 % Net interest spread 6.25 % 6.77 % -7.68 % 6.44 % 6.72 % -4.17 % Net interest margin 7.25 % 7.99 % -9.26 % 7.42 % 7.87 % -5.72 % Efficiency ratio 21.14 % 24.10 % -12.31 % 22.26 % 25.29 % -11.98 %   Asset Quality Ratios Allowance for credit losses $ 10,272 $ 10,349 -0.74 % Allowance to ending total loans 0.93 % 1.12 % -5.44 % Non-performing assets Non-accrual $ 9,678 $ 497 1847.28 % 90 days past due and still accruing $ 147 $ 153 -3.92 % Foreclosed real estate $ - $ 559 -100.00 % Non-performing assets to total assets 0.83 % 0.12 % 601.15 % Net (charge-offs) recoveries $ (839 ) $ (66 ) 1171.21 % Net loan charge-offs (annualized) to average loans   0.06 %   0.01 % 923.95 %