City Bank Announces Record Results for Third Quarter 2006 with Assets Exceeding $1 Billion.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 NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CTBK) today announced net income 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 was up 74.47% from $15.66 million to $27.32 million for the nine months ended September September: see month. 30, 2006 compared to the same period in 2005. In addition, assets have surpassed $1 billion for the first time in the Bank's 32 year history. 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 net income for the quarter ended September 30, 2006 was $9.90 million, an increase of $3.58 million or 56.55% compared to $6.32 million for the third 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 reflects an increase of 54.10% from $.61 to $.94 compared to prior year third quarter. Consolidated net income for the nine months ended September 30, 2006 was $27.32 million compared to $43.66 million in the prior year which included $27.53 million related to the net gain on sale of discontinued operations of Diligenz. On a diluted per share basis, net income was $2.60 compared to $4.27 in the prior period which included $2.74 per share basis related to the net gain on sale of Diligenz. Income from continuing operations increased from $15.66 million to $27.32 million, an increase of 74.47% for the nine months ended September 30, 2006 compared to the prior year. Net interest income after provision for credit losses was $53.14 million for the nine months ended September 30, 2006 compared to $33.17 million for the same period in 2005, reflecting an increase of 60.22%. The increased net interest income was primarily due to continued growth in average loans outstanding from $658.94 million to $848.50 million and a higher interest rate environment through the first half of 2006. In addition, the Bank has reduced 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. to .12% of assets and has experienced nominal credit losses in 2006 and 2005. The efficiency ratio for continuing operations for the nine months ended September 30, 2006 was exceptionally low at 25.29% compared to 35.83% in the same period in 2005. Nine Months Highlights (In thousands, except per share data) [TABLE OMITTED] Income (from continuing operations) increased to $9.90 million from $6.33 million, an increase of 56.55% for the quarter ended September 30, 2006 compared to the same quarter in 2005. The Bank's diluted net income per share from continuing operations reflects an increase of 54.10% from $.61 to $.94 compared to third quarter in the prior year. Net interest income after provision for credit losses was $19.07 million for the third quarter of 2006 compared to $12.63 million for the prior period in 2005, reflecting an increase of 50.97%. The increased net interest income was primarily due to continued growth in average loan volume from $693.12 million to $892.16 million. Loan growth was the major factor contributing to the Bank's strong record earnings for the three months ended September 30, 2006. Third Quarter Highlights (In thousands, except per share data) [TABLE OMITTED] Result of Operations Interest income for the third quarter ended September 30, 2006 was up 59.42% from the comparable period in 2005 due to strong loan volume and a higher interest rate environment. The increase of $199.04 million or 28.72% 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 97.04% 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 third quarter ended September 30, 2006 was 11.14%, up from 8.56% during third quarter of 2005 and the net interest margin increased to 7.99% from 6.52%. Management expects continued growth in loan volume for at least the near term. At the same time, nonperforming assets at September 30, 2006 have been reduced from $4.59 million to $1.21 million, a reduction of 73.64% from September 30, 2005. The ratio of nonperforming assets to total assets at September 30, 2006 decreased to .12% from .57% at September 30, 2005. Interest expense for the third quarter ended September 30, 2006 was up 90.57% from the comparable period in 2005. Average cost of deposits for the third quarter ended September 30, 2006 increased to 3.85%, up from 2.40% for the third quarter of 2005, reflecting rising interest rates. Average deposits for the third quarter ended September 30, 2006 were $673.18 million resulting in a 37.68% increase over the comparable quarter in 2005 of $488.94 million. Management expects to see an increase in interest expense for the remainder of this year due in part to a rising interest rate environment and increasing deposits at a higher rate to fund loan growth. Noninterest income of $1.01 million reflects a net decrease of $87 thousand or 7.90% during the third quarter ended September 30, 2006 from the third quarter 2005. Net gain on sale of foreclosed real estate increased $188 thousand compared to the third quarter 2005. Net gains from sale of loans decreased $237 thousand compared to the third quarter 2005. Brokered loan fees and investment products income decreased $24 thousand and $13 thousand respectively, compared to the third quarter of 2005. Noninterest expense of $4.84 million increased 11.49% or $499 thousand compared to the third quarter of 2005. Salary and benefit expenses, net of amounts deferred, during the third quarter ended September 30, 2006 increased $300 thousand compared to the same period in 2005, 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 because of the Bank's increased level of gross profit year to date. As of September 30, 2006 compared to September 30, 2005, foreclosed real estate expense increased $94 thousand due to the sales of foreclosed property. Occupancy, furniture and equipment expense increased $73 thousand compared to the same period in 2005. At September 30, 2006, total assets reached a milestone at $1.02 billion, up 25.66% over September 30, 2005. Total assets growth since year-end 2005 was $185.43 million or 22.29%. Loans grew 33.06% to $921.82 million compared to $692.81 million at September 30, 2005. Loan growth since year-end 2005 was $175.15 million or 23.46%. Residential construction loans have accounted for the majority of the increased loan volume. At September 30, 2006, deposits increased 43.96% to $715.46 million compared to $496.99 million at September 30, 2005, and 40.05%, compared to $510.86 million at year-end 2005. City Bank's return on average assets (continuing operations) for the three and nine months ended September 30, 2006 was 4.09% and 3.98% compared to 3.20% and 2.88% for the same periods in 2005. Return on average equity (continuing operations) was 20.24% and 19.34% for the three and nine month periods, compared to 13.41% and 12.41% 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 nine months ended September 30, 2006 was 20.20% and 20.56% compared to 23.84% and 23.20% 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 September 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 nine months ended September 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 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 and North King counties. Two mortgage loan offices serve Snohomish, King and Pierce counties Pierce County is the name of five counties in the United States:
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