City Bank of Lynnwood has $37M quarterly loss

City Bank of Lynnwood lost $104.6 million last year, including $37 million in the fourth quarter, but the bank asserted it is making progress in recovering from its binge of construction and development loans during the housing boom.

Key to City Bank's strategy: Selling off the completed houses it's taken back from delinquent borrowers, and building its own houses on vacant land rather than selling it on the cheap.

City Bank said it sold 1,180 houses and lots in 2009 and had 55 more sales pending at year's end. On average, it lost nearly 10 percent of the original aggregate $360 million loan amount on those sales.

But chief executive Martin Heimbigner argued that the losses would be much greater if City Bank simply sold the vacant lots at distressed prices.

The bank's fourth-quarter and full-year losses equated to $2.43 and $6.64 per share, respectively.

In the fourth quarter City Bank wrote down the value of nonperforming assets, including real estate, by $22 million, and set aside $46.5 million to cover expected future loan losses.

At year's end, $425.4 million of City Bank's $1.13 billion in assets, or 37.7 percent, were considered nonperforming. However, that was down from $601.1 million at the end of 2008 — nearly half the bank's assets at the time.

The bank charged off a net $112.3 million in bad loans last year. It ended the year with just $11.5 million set aside to cover future loan losses.

However, it does have $277.2 million in cash and cash equivalents, and believes it could raise another $95.3 million within 90 days.

The bank said it has hired investment bankers and is trying to raise new capital before the end of the current quarter.

"We believe that the worst part of the recession is past," Heimbigner said in a written statement.

City Bank reported earnings after the close of regular Nasdaq trading. The shares gained 6 cents to close at $1.91.

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