CTBK City Bank (MM)

City Bank (NASDAQ:CTBK) announced today that its loss for 2008 will total $60.8 million, an increase of $25.0 million from the $35.8 million originally reported on February 3rd. In light of economic conditions affecting the Bank�s borrowers and the collateral for its loans, the Bank�s management re-examined the amounts of the loan loss allowance at December 31, 2008. These new appraisals reflected a deteriorating real estate market, and as a result, the Bank reported a higher loss than initially reported.

On March 16th, City Bank announced it would delay filing its final Form 10-K report for 2008 pending completion of the new appraisals. Today, the Bank filed its Form 10-K Annual Report for the period ended December 31, 2008.

The net loss of $60.8 million amounts to ($3.86) per share for 2008 and $64.9 million or ($4.12) per share for the fourth quarter. The revised 2008 results are compared to net income of $41.50 million, or $2.62 per diluted share for the prior year end and $10.19 million or $0.65 per diluted share in the prior year quarter. The primary cause for the net loss for the quarter and for the year was a provision for loan losses of $85.9 million in the fourth quarter and $119.1 million for the year. The declining valuations of the housing market, including building lots, resulted in an increase in the annual loan loss provision to $119.1 million from the original reported amount of $91.1 million and reduction in the carrying value of foreclosed real estate to $100.0 million from the original reported amount of $114.9 million. In addition to the increase in loan and foreclosed real estate losses, the Bank adjusted its income tax provision to claim these increased losses as current tax deductions for confirmed charge-offs. As such, the Bank is reflecting an income tax receivable of $26 million as of December 31, 2008.

�This has been a difficult process for us to go through, but we believe the new appraisals reflect the significant decline in the number of monthly home sales in King, Snohomish and Pierce counties since June 2008 levels. As such, there has been a measurable decline in the value of comparable residential real estate sales in our local market the last few months. Our real estate collateral for impaired loans has been valued at distressed market levels, less estimated selling costs, and discounted to present value for the estimated holding period, based on these new appraisals and the selling prices we have been able to achieve and that we have seen in March 2009,� according to Conrad Hanson, President and CEO.

The Bank�s capital position has allowed an aggressive effort to dispose of these properties, which is already showing results. Since the beginning of January, over 245 properties representing over $65 million have been sold and over 175 sales totaling $54 million are pending (signed agreements with earnest money deposits) for closing in April and May. These 420 transactions, totaling $119 million, is an average of almost $40 million per month in closed or signed agreements. The Bank has added a Featured Properties link on its website www.citybankwa.com where buyers can view available homes by location and price range and contact the Realtor listing them.

�Most of these homes are in very desirable areas of King, Snohomish and Pierce counties in the price range of entry level and second time home buyers,� Mr. Hanson said. �With interest rates at historic low levels, we expect traffic to increase as we move into the spring home buying season.�

Mr. Hanson said despite the significant provisions for loan losses set aside, the Bank continues to have over $141 million in equity capital. �Our capital position and our loan loss provisions provide the Bank the flexibility to aggressively address our nonperforming assets. Our problem assets are centered in our residential real estate inventory, which we believe continues to have inherent value over the long term, are currently marked to distressed market levels, and will benefit from the government�s economic stimulus actions.� The Bank�s current Tier 1 capital ratio of 10.72 percent as impacted by the Bank�s level of nonperforming assets is at a level where the Bank is considered to be adequately capitalized under FDIC guidelines. As of March 31, 2009, the Bank has cash and federal funds of approximately $180 million for liquidity purposes. Mr. Hanson also emphasized that customer deposit accounts, including non interest bearing checking accounts as well as savings accounts are protected by FDIC insurance to the full extent of the allowable limits.

On March 31, 2009, the Bank filed its Form 10-K Annual Report with the Federal Deposit Insurance Corporation (FDIC). This document is available on the Bank�s website, www.citybankwa.com. The Report of Independent Registered Public Accounting Firm contains an explanatory paragraph expressing substantial doubt as to the Bank�s ability to continue as a going concern primarily due to the significant maturity of brokered deposits during 2009 and the restrictions by the FDIC on the Bank�s ability to replace these deposits with new brokered deposits as they mature. The Bank�s auditors are required by Generally Accepted Auditing Standards to address going concern matters in their opinion. The Bank�s management, in the footnotes to the financial statements, discusses the plan to deal with the Bank�s liquidity situation. As noted above, the Bank is aggressively reducing assets through the sale of nonperforming assets to generate cash for the purpose of refunding brokered deposits as they mature. In addition, the Bank is conserving cash by controlling expenses, eliminating dividends and reducing new lending to existing loan commitments that allow residential construction builders to prudently complete housing stock for immediate sale. Management believes that its business plan effectively uses the Bank�s capital position, and the results to date are positive indications regarding the Bank�s ability to manage the liquidity situation. However, there can be no assurance that these efforts will be successful.

City Bank is a state-chartered commercial bank founded in 1974 and headquartered in Lynnwood, Washington. It has been in operation for 35 years and its 2008 operating loss is the first it has incurred. The Bank is publicly traded (CTBK) and many of the shareholders are local. Eight banking offices serve Snohomish and North King counties and three mortgage loan offices serve Snohomish, King, Pierce and Clark 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.

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, 2008 and 2007. 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, 2008. Readers are cautioned not to place undue reliance on these forward-looking statements.

Selected Financial Highlights (unaudited) (In thousands, except per share data) � Three months ended December � Twelve months ended December Income Statement Data 2008 � 2007 � % Change � 2008 � 2007 � % Change Interest income $ 16,093 � $ 31,181 � -48.39 % $ 98,353 � $ 121,930 � -19.34 % Interest expense 10,207 10,793 -5.43 % 41,781 40,036 4.36 % Net interest income 5,886 20,388 -71.13 % 56,572 81,894 -30.92 % Provision for credit losses 85,951 1,100 7713.73 % 119,051 1,925 6084.47 % Net interest income (loss) after provision for credit losses (80,065 ) 19,288 -515.10 % (62,479 ) 79,969 -178.13 % Other noninterest income 730 485 50.52 % 4,621 2,651 74.31 % Other noninterest expense 20,469 4,005 411.09 % 35,691 18,181 96.31 % Income (loss) before income taxes (99,804 ) 15,768 -732.95 % (93,549 ) 64,439 -245.17 % Provision (benefit) for income taxes (34,920 ) 5,582 -725.58 % (32,706 ) 22,944 -242.55 % Net Income (Loss) $ (64,884 ) $ 10,186 -736.99 % $ (60,843 ) $ 41,495 -246.63 % � Share Data Actual shares outstanding 15,764 15,741 0.15 % Earnings (Loss) Per Share: Basic earnings (loss) per common share ($4.12 ) $ 0.65 -733.85 % ($3.86 ) $ 2.64 -246.21 % Diluted earnings (loss) per common share ($4.12 ) $ 0.65 -733.85 % ($3.86 ) $ 2.62 -247.33 % Book value per common share $ 8.95 $ 13.32 -32.78 % Basic average shares outstanding 15,764 15,732 0.20 % 15,761 15,714 0.30 % Fully diluted average shares outstanding 15,764 15,809 -0.28 % 15,772 15,843 -0.45 % Dividends paid per share $ 0.06 $ 1.15 -94.78 % $ 0.51 $ 1.60 -68.13 % � Balance Sheet Data (at period end) Investment securities $ 14,483 $ 14,487 -0.03 % Loans held for sale 7,190 3,274 119.61 % Loans, net of unearned income 1,064,080 1,158,481 -8.15 % Allowance for credit losses 34,990 11,269 210.50 % Total assets 1,325,541 1,239,033 6.98 % Total deposits 1,088,091 864,490 25.87 % Liabilities related to discontinued operations 847 819 3.42 % Total Shareholders' Equity 141,157 209,684 -32.68 % Tier 1 Capital Ratio 10.72 % 17.44 % -38.53 % � Selected Ratios Return on average shareholders' equity -125.304 % 18.53 % -776.04 % -28.15 % 19.82 % -242.05 % Average shareholders' equity to average assets 15.63 % 18.30 % -14.60 % 16.76 % 18.39 % -8.85 % Return on average total assets -19.58 % 3.39 % -677.37 % -4.72 % 3.64 % -229.48 % Net interest spread 1.37 % 5.85 % -76.58 % 3.82 % 6.29 % -39.27 % Net interest margin 1.87 % 6.86 % -72.74 % 4.52 % 7.27 % -37.83 % Efficiency ratio 309.26 % 19.19 % 1511.21 % 58.32 % 21.50 % 171.22 % � Asset Quality Ratios Allowance for credit losses $ 34,990 $ 11,269 210.50 % Allowance to ending total loans 3.29 % 0.97 % 238.04 % Non-performing assets: Non-accrual $ 416,189 $ 15,977 2504.93 % Impaired loans still accruing $ 84,732 $ 17,791 376.26 % 90 days past due and still accruing $ 313 $ 19 1547.37 % Foreclosed real estate $ 99,958 $ 705 100.00 % Nonperforming assets to total assets 45.35 % 2.78 % 1529.24 % Net (charge-offs) recoveries $ (95,331 ) $ (942 ) 10020.06 % Net loan charge-offs (annualized) to average loans 7.95 % 0.09 % 8970.25 %