Lynnwood's troubled City Bank names new chief

City Bank of Lynnwood, a former high-flyer that has become one of the state's most troubled banks, is getting new top leadership for the first time in its 35-year history.

Conrad Hanson, City Bank's co-founder, chairman, president, chief executive and largest shareholder, will hand over day-to-day control of the bank to lead independent director Martin Heimbigner at the end of this month, the bank announced Tuesday.

Hanson, 67, will stay on as chairman until City Bank's next annual meeting, currently set for May 2010.

In addition to naming Heimbigner president and CEO, the bank's board of directors chose executive vice president James Carroll to serve as chief credit officer.

Like many other Washington banks, City Bank has been hammered by its heavy concentration of loans to home builders and developers — the same focus that helped it shine during the housing boom.

Through the first nine months of this year, City Bank has posted losses of $66.3 million, compared with a $4 million profit in the same period in 2008.

Nonaccrual loans — those for which the bank no longer assumes it will receive all the principal and interest it's owed — soared from $16 million at the end of 2007 to $394.5 million as of Sept. 30. It owned $126.2 million of repossessed real estate as of that date, up from $705,000 at the end of 2007.

The bank has been working hard to reduce that pile of properties, or at least slow the growth.

In Tuesday's statement announcing his retirement, Hanson said that so far this year, City Bank has sold 1,145 homes and lots, valued at more than $334 million. It plans to build entry-level homes, priced between $250,000 and $350,000, on the 2,800 vacant lots it owns.

When those homes are sold, Hanson said, "they will generate much higher rate of return for the bank than selling the lots at current market prices."

In the same statement, Heimbigner said his goals for 2010 include diversifying City Bank's loan portfolio away from construction toward small business loans and residential mortgages, and investing in the bank's eight-branch network.

Since June the bank has been operating under a cease-and-desist order from the Federal Deposit Insurance Corp. Along with reducing the volume of nonperforming assets it's carrying on its books, City Bank must lessen its dependence on brokered deposits, increase capital levels and make other operational and organizational changes.

Since peaking at $34.67 nearly three years ago, City Bank's shares have fallen to $1.79, their Tuesday closing price.

No one has been hurt more by that decline than Hanson, whose 1.77 million shares give him a nearly 11 percent stake in the company.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com