City Bank (NASDAQ:CTBK) announced today that it signed an agreement with the Federal Deposit Insurance Corporation (FDIC) and the State of Washington Department of Financial Institutions (DFI). The Bank has been aggressively dealing with the impact of the recession and the slowdown in residential housing sales in 2008 and has been working with the FDIC and the DFI to address the issues impacting the Bank. The agreement, called a Cease and Desist Order (the Agreement), focuses on the steps the FDIC and DFI have identified as necessary to correct deficiencies identified in the Bank�s most recent regulatory examination conducted as of December 31, 2008.

Conrad Hanson, President and CEO of City Bank, stated, �The Agreement does not reflect any new developments impacting our business. We recognize that these changes are necessary and we have made significant progress on these issues throughout 2009. A copy of the agreement is included in an 8-K that will be filed with the FDIC and will be available through the Bank�s website at www.citybankwa.com.�

The Agreement does not impact the Bank�s deposit customers since the FDIC deposit insurance coverage limits of $250,000 per account have been extended to 2013.

Among other things, the Agreement addresses many organizational and operational issues including the key elements of the Bank�s efforts to deal with a high level of non-performing residential construction loans. The Agreement calls for a plan for the orderly reduction of non-performing loans and foreclosed real estate, which we have been very successfully executing so far this year. Through June 30th, the Bank and builders have sold or have pending sales of 775 homes or $233 million from our portfolio of loans and foreclosed real estate. �On the sales where we have had 'short sales', we have realized an average loss of principal of about 15 percent,� Hanson said.

Because not all sales are short sales, the average loss of principal for the 775 home sales is less than 10 percent. He added that the actual losses on sale are materially within the range of loan loss provisions and direct charge-offs of principal that have been recorded in prior periods as charges against income and Tier 1 capital.

Because of cash generated from the sale of homes, the Bank has increased the level of 90 day liquidity to more than $280 million. Each month, between $30 million and $40 million of homes have been sold, and it is expected that this pace will continue for the rest of the year. These sales will continue to provide additional liquidity as required by the Agreement with the FDIC and DFI.

The Agreement also requires the Bank to reduce the level of brokered deposits, which has occurred as these certificates of deposits mature. Through June 30, the Bank has repaid $162 million in brokered deposits. As part of this plan, the Bank has increased retail deposits by over $45 million this year.

The Bank�s strategy of selling homes to generate cash for repayment of brokered deposits as they mature will reduce the overall size of the Bank. City Bank and builders plan to sell between $300 and $400 million of homes during 2009, and City Bank is expecting to reduce the total assets of the Bank to approximately $1 billion. The Agreement requires the Bank to increase Tier 1 leverage capital ratio to 12 percent of total assets and maintain all risk-based capital requirements. As of March 31, 2009, the Bank had Tier 1 capital of $133 million, for a leverage capital ratio of 10.36 percent; a risk-adjusted ratio of 11.13 percent; and Tier 2 total capital of $148 million, for a ratio of 12.41 percent. We are evaluating options for raising additional capital; however, we believe that our goal of an orderly and aggressive selling of homes will allow the Bank to reduce total assets and thus increase the Tier 1 leverage capital ratio to 12 percent. Under the Agreement, the Bank is prohibited from paying dividends to shareholders without the prior written approval of the FDIC and DFI.

Mr. Hanson indicated, �We are encouraged by the progress we have made in selling homes, increasing liquidity, repaying brokered deposits and working with the FDIC and DFI.�

Forward-Looking Statements

The previous discussion contains partial information about City Bank�s operating results and financial condition as of the quarter ended March 31, 2009 and certain results through June 30, 2009. The reader is encouraged to read the Bank�s Quarterly Report on Form 10-Q for the period ended June 30, 2009 when it is filed with the FDIC. 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 and our Quarterly Report on Form 10-Q for the period ended March 31, 2009. 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. 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.

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