City Bank Announces Record Earnings for Second Quarter 2006.LYNNWOOD Lynnwood, city (1990 pop. 28,695), Snohomish co., W central Wash., a residential and industrial suburb of Seattle; inc. 1959. Aerospace parts, communications and electrical equipment, electronic components, precious metal jewelry, and scales and balances are among , Wash. -- City Bank (Nasdaq:CTBK) today announced record earnings of $17.42 million for the six months ended June June: see month. 30, 2006, reflecting an increase of 79.65% over the $9.70 million for the same period in 2005. All prior period results have been reclassified to show the operating results of Diligenz and Merchant Cards as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. with no effect on net income or shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. . Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net income for the quarter ended June 30, 2006 was $9.21 million, an increase of $4.53 million or 96.81% compared to $4.68 million for the second quarter of 2005. The Bank's diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net income per share from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the reflects an increase of 100.00% from $.44 to $.88 compared to second quarter in the prior year. Consolidated net income for the six months ended June 30, 2006 was $17.42 million compared to $9.70 million in the prior year, reflecting an increase of $7.72 million. On a diluted per share basis, net income was up 74.59% to $1.66 from $.95 in the comparable period in 2005. Income from continuing operations increased from $9.34 million to $17.42 million, an increase of 86.60% for the six months ended June 2006 compared to the prior year. Net interest income after provision for credit losses was $34.07 million for the six months ended June 30, 2006 compared to $20.53 million for the same period in 2005, reflecting an increase of 65.91%. The increased net interest income was primarily due to continued growth in average loans outstanding from $641.57 million to $826.32 million and a higher interest rate environment. In addition, the Bank has reduced nonperforming loans to .25% of assets and has experienced very low credit losses in 2006 and 2005
Six Months Highlights (In thousands, except per share data)
June 30 June 30
2006 2005
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Total Assets $ 944,028 $ 754,662
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Total Loans $ 861,628 $ 666,086
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Net Income $ 17,421 $ 9,697
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Income from Continuing Operations $ 17,421 $ 9,336
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Income from Discontinued Operations $ -0- $ 361
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Nonperforming Assets $ 2,351 $ 5,078
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Provision for Credit Losses $ -0- $ 200
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Net Interest Margin 7.81% 6.11%
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Return on Average Assets (ROA) 3.92% 2.76%
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Return on Average Equity (ROE) 18.87% 12.08%
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Average Equity to Average Assets 20.76% 22.10%
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Efficiency Ratio-Continuing Operations 25.94% 36.76%
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Total Shareholders' Equity $ 191,319 $ 165,341
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Income (from continuing operations) increased to $9.21 million from $4.68 million, an increase of 96.81% for the quarter ended June 30, 2006 compared to the same quarter in 2005. The Bank's diluted net income per share from continuing operations reflects an increase of 100.00% from $.44 to $.88 compared to second quarter in the prior year. Net interest income after provision for credit losses was $17.88 million for the second quarter of 2006 compared to $10.62 million for the prior period in 2005, reflecting an increase of 68.45%. The increased net interest income was primarily due to continued growth in average loan volume from $655.26 million to $845.31 million. Asset growth, primarily in loans, along with prime rate increases, were the major factors that contributed to the Bank's strong record earnings for the three months ended June 30, 2006.
Second Quarter Highlights (In thousands, except per share data)
June 30 June 30
2006 2005
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Net Income $ 9,207 $ 4,678
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Income from Continuing Operations $ 9,207 $ 4,527
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Income from Discontinued Operations $ -0- $ 151
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Net Interest Margin 7.99% 6.14%
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Provision for Credit Losses $ -0- $ 100
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Return on Average Assets (ROA) 4.04% 2.59%
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Return on Average Equity (ROE) 19.56% 11.48%
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Average Equity to Average Assets 20.64% 22.53%
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Efficiency Ratio-Continuing Operations 25.54% 40.00%
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Result of Operations Interest income for the second quarter ended June 30, 2006 was up 72.68% from the comparable period in 2005 due to strong loan volume and an increasing rate environment. The increase of $190.05 million or 29.00% in average outstanding loans contributed the majority of this increase. The Bank also benefited from twelve prime rate increases since February February: see month. 2, 2005, totaling 300 basis points, causing the Bank's variable rate loan portfolio to reprice. A higher interest rate environment allowed the average yield on the Bank's loan portfolio (approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 96.24% of the portfolio are variable rate loans), to increase faster than average cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. . The average yield on loans for the second quarter ended June 30, 2006 was 10.90%, up from 8.20% during second quarter of 2005 and the net interest margin increased to 7.99% from 6.14%. Management expects continued growth in loan volume for at least the near term. At the same time, nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. at June 30, 2006 have been reduced from $5.08 million to $2.35 million, a reduction of 53.70% from June 30, 2005. The ratio of nonperforming assets to total assets at June 30, 2006 decreased to .25% from .67% at June 30, 2005. Interest expense for the second quarter ended June 30, 2006 was up 91.41% from the comparable period in 2005. Average cost of deposits for the second quarter ended June 30, 2006 increased to 3.65%, up from 2.21% for the second quarter of 2005, reflecting rising interest rates. Average deposits for the second quarter ended June 30, 2006 were $630.55 million resulting in a 38.40% increase over the comparable quarter in 2005 of $455.61 million. Management expects to see an increase in interest expense during the coming year due in part to a rising interest rate environment, and increasing deposits at a higher rate to fund loan growth. Noninterest income of $1.15 million reflects a net decrease of $279 thousand or 19.48% during the second quarter ended June 30, 2006 from the second quarter 2005. Net gain on sale of foreclosed real estate decreased $224 thousand compared to the second quarter 2005. Net gains from sale of loans increased $57 thousand compared to the second quarter 2005. Brokered loan fees decreased $74 thousand compared to the second quarter of 2005. Income from investment products also decreased by $30 thousand compared to the second quarter of 2005. Noninterest expense of $4.86 million increased .06% or $3 thousand compared to the second quarter of 2005. Salary and benefit expenses, net of amounts deferred, during the second quarter ended June 30, 2006 increased $572 thousand compared to the same period in 2005, reflecting the Bank's increased level of gross profit. The increase was due in part to higher benefit accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. for bonus and profit sharing profit sharing, arrangement by which employees receive, in addition to their wages, a share of the net profits of a business. The purpose is to give them an incentive to increase their output through enhanced morale, less wasteful use of materials, better care of compared to the same period in 2005. As of June 30, 2006 compared to June 30, 2005, foreclosed real estate expense decreased $23 thousand or 48.94% due to the sales of foreclosed property. Consolidated net income of $17.42 million for the six months ended June 30, 2006 reflected an increase of 79.65% compared to the $9.70 million for the same period in 2005. Consolidated diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of increased 74.59% from $.95 to $1.66. Asset growth, primarily in loans, along with prime rate increases, contributed to the Bank's record earnings for the six months ended June 30, 2006. At June 30, 2006, total assets were $944.03 million, up 25.09% over June 30, 2005. Total assets growth since year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005 was $111.99 million or 13.46%. Loans grew 29.36% to $861.63 million compared to $666.09 million at June 30, 2005. Loan growth since year-end 2005 was $114.96 million or 15.40%. Residential construction loans have accounted for the majority of the increased loan volume. At June 30, 2006, deposits increased 37.17% to $652.20 million compared to $475.47 million at June 30, 2005 and 27.67% since year-end 2005. City Bank's return on average assets (continuing operations) for the three and six months ended June 30, 2006 was 4.04% and 3.92% compared to 2.50% and 2.66% for the same periods in 2005. Return on average equity (continuing operations) was 19.56% and 18.87% for the three and six months period, compared to 11.11% and 11.63% for the same periods in 2005. The ratio of average equity to average assets (Tier 1 Capital Tier 1 Capital A term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves. Notes: Equity capital includes instruments that can't be redeemed at the option of the holder. ) for the three and six months ended June 30, 2006 were 20.64% and 20.76% compared to 22.53% and 22.10% for the same periods in 2005. The Tier 1 Capital Ratio has decreased slightly due to the significant increase in the Bank's total assets for the period ended June 30, 2006. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. The previous discussion contains a review of City Bank's operating results and financial condition for the three and six months ended June 30, 2006 and 2005. The discussion may contain certain forward-looking statements, which are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin , sustain credit losses, maintain adequate net interest margin, control fluctuations in operating results, maintain liquidity to fund assets Fund assets The total value of a portfolio's securities, cash, and other holdings, minus any outstanding debts. , retain key personnel, and other risks detailed from time to time in the Bank's filings with the Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation (FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $100,000. , including our annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the period ended December December: see month. 31, 2005. 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 Lynnwood is a city in Snohomish County, Washington, United States. The population was 33,847 at the 2000 census making it the third largest in Snohomish County and twenty-fourth largest in Washington State. . The bank is publicly traded (NASDAQ:CTBK) and many of the stockholders are local individuals. Eight banking offices serve both Snohomish Snohomish can refer to:
Washington, town (1991 pop. 48,856), Sunderland metropolitan district, NE England. Washington was designated one of the new towns in 1964 to alleviate overpopulation in the Tyneside-Wearside area. State as well as nationally.
Selected Consolidated Financial Highlights(unaudited)
(In thousands, except per share data)
Three months
Income Statement Data - Continuing ended June
Operations 2006 2005 % Change
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Interest income $ 24,234 $14,034 72.68%
Interest expense 6,351 3,318 91.41%
Net interest income 17,883 10,716 66.88%
Provision for credit losses - 100 -100.00%
Net interest income after provision for
credit losses 17,883 10,616 68.45%
Other noninterest income 1,153 1,432 -19.48%
Other noninterest expense 4,863 4,860 0.06%
Income from continuing operations before
income taxes 14,173 7,188 97.18%
Provision for income taxes 4,966 2,661 86.62%
Income from continuing operations $ 9,207 $ 4,527 103.38%
Income from discontinued operations - 286 -100.00%
Provision for income taxes - 135 -100.00%
Income from discontinued operations - 151 -100.00%
Net Income $ 9,207 $ 4,678 96.81%
Share Data
Actual shares outstanding
Earnings Per Share:
Basic earnings per common share $ 0.89 $ 0.47 89.36%
Diluted earnings per common share $ 0.88 $ 0.46 91.30%
Earnings Per Share From Continuing
Operations:
Basic earnings per common share $ 0.89 $ 0.45 97.78%
Diluted earnings per common share $ 0.88 $ 0.44 100.00%
Book value per common share
Basic average shares outstanding 10,406 10,087 3.16%
Fully diluted average shares outstanding 10,520 10,187 3.27%
Dividends paid per share $ 0.20 $ 0.20 0.00%
Balance Sheet Data (at period end)
Investment securities
Loans held for sale
Loans, net of unearned income
Assets related to discontinued
operations
Allowance for credit losses
Total assets
Total deposits
Liabilities related to discontinued
operations
Total Shareholders' Equity
Selected Ratios
Return on average shareholders' equity 19.56% 11.48% 70.38%
Return on average shareholders' equity -
continuing operations. 19.56% 11.11% 76.07%
Average shareholders' equity to average
assets 20.64% 22.53% -8.36%
Return on average total assets 4.04% 2.59% 56.13%
Return on average total assets -
continuing operations 4.04% 2.50% 61.34%
Net interest spread 6.84% 5.30% 29.06%
Net interest margin 7.99% 6.14% 30.13%
Efficiency ratio - continuing
operations 25.54% 40.00% -36.14%
Asset Quality Ratios
Allowance for credit losses
Allowance to ending total loans
Non-performing assets:
Non-accrual
90 days past due and still accruing
Foreclosed real estate
Non-performing assets to total assets
Net (charge-offs) recoveries
Net loan charge-offs (annualized) to
average loans
Six months
Income Statement Data - Continuing ended June
Operations 2006 2005 % Change
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Interest income $ 45,957 $ 26,731 71.92%
Interest expense 11,890 5,997 98.27%
Net interest income 34,067 20,734 64.31%
Provision for credit losses - 200 -100.00%
Net interest income after provision for
credit losses 34,067 20,534 65.91%
Other noninterest income 2,154 2,736 -21.27%
Other noninterest expense 9,398 8,630 8.90%
Income from continuing operations before
income taxes 26,823 14,640 83.22%
Provision for income taxes 9,402 5,304 77.26%
Income from continuing operations $ 17,421 $ 9,336 86.60%
Income from discontinued operations - 608 -100.00%
Provision for income taxes - 247 -100.00%
Income from discontinued operations - 361 -100.00%
Net Income $ 17,421 $ 9,697 79.65%
Share Data
Actual shares outstanding 10,409 10,149 2.56%
Earnings Per Share:
Basic earnings per common share $ 1.68 $ 0.97 72.74%
Diluted earnings per common share $ 1.66 $ 0.95 74.59%
Earnings Per Share From Continuing
Operations:
Basic earnings per common share $ 1.68 $ 0.93 80.17%
Diluted earnings per common share $ 1.66 $ 0.92 80.28%
Book value per common share $ 18.38 $ 16.30 12.77%
Basic average shares outstanding 10,397 10,043 3.52%
Fully diluted average shares outstanding 10,503 10,184 3.13%
Dividends paid per share $ 0.40 $ 0.40 0.00%
Balance Sheet Data (at period end)
Investment securities $ 14,233 $ 10,236 39.05%
Loans held for sale 5,971 8,128 -26.54%
Loans, net of unearned income 861,628 666,086 29.36%
Assets related to discontinued
operations 2 9,202 -99.98%
Allowance for credit losses 10,374 10,468 -0.90%
Total assets 944,028 754,662 25.09%
Total deposits 652,197 475,465 37.17%
Liabilities related to discontinued
operations 1,177 1,290 -8.76%
Total Shareholders' Equity 191,319 165,341 15.71%
Selected Ratios
Return on average shareholders' equity 18.87% 12.08% 56.29%
Return on average shareholders' equity -
continuing operations. 18.87% 11.63% 62.34%
Average shareholders' equity to average
assets 20.76% 22.10% -6.07%
Return on average total assets 3.92% 2.76% 42.05%
Return on average total assets -
continuing operations 3.92% 2.66% 47.54%
Net interest spread 6.69% 5.31% 25.99%
Net interest margin 7.81% 6.11% 27.82%
Efficiency ratio - continuing
operations 25.94% 36.76% -29.43%
Asset Quality Ratios
Allowance for credit losses $ 10,374 $ 10,468 -0.90%
Allowance to ending total loans 1.20% 1.57% -5.44%
Non-performing assets:
Non-accrual $ 777 $ 3,371 -76.95%
90 days past due and still accruing $ - $ 30 -100.00%
Foreclosed real estate $ 1,574 $ 1,677 -6.14%
Non-performing assets to total assets 0.25% 0.67% -62.99%
Net (charge-offs) recoveries $ (41)$ (78) -47.44%
Net loan charge-offs (annualized) to
average loans 0.01% 0.02% -59.19%
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