Revenue grows 39 percent from second quarter of 2009
Average deposits rise 26 percent to $17.6 billion
Total assets up 20 percent to $21.2 billion
Credit quality improves for third consecutive quarter
LOS ANGELES, July 22, 2010 (GLOBE NEWSWIRE) -- City National Corporation (NYSE:CYN), the parent corporation of wholly owned City National Bank, today reported second-quarter 2010 net income and net income available to common shareholders of $41.3 million, or $0.78 per share. In the second quarter of 2009, net income was $6.8 million, while net income available to common shareholders was $1.3 million, or $0.02 per share.
Second-quarter 2010 net income included a number of unusual items primarily related to the company's three FDIC-assisted acquisitions and the favorable settlement of tax litigation. Excluding these items, second-quarter net income totaled $30.0 million, or $0.56 per share.1
Year to date, City National's net income totaled $57.0 million. Net income available to common shareholders, which reflects the dividend paid on preferred stock previously held by the U.S. Treasury Department, was $51.3 million, or $0.97 per share. In the first half of 2009, the corporation earned net income of $14.2 million, while net income available to common shareholders was $3.2 million, or $0.06 per share.
"City National's performance improved significantly in the second quarter, thanks in part to continued strong deposit and revenue growth and further improvement in credit quality," said President and Chief Executive Officer Russell Goldsmith. "In this quarter, the company also completed its two FDIC-assisted acquisitions of Sun West Bank of Nevada and 1st Pacific Bank, adding revenue, income, loans, deposits, 13 branch offices, talented colleagues and thousands of new clients, while meaningfully growing our presence in San Diego and Nevada."
City National also announced today that its board of directors has again declared a 2010 quarterly common stock cash dividend of $0.10 per share, payable on August 18, 2010 to stockholders of record on August 4, 2010.
SECOND-QUARTER 2010 HIGHLIGHTS
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Second-quarter revenue totaled $304.5 million, up 39 percent from the second quarter of 2009.
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Fully taxable-equivalent net interest income amounted to $185.3 million, up 17 percent from the same period last year and 4 percent from the first quarter of 2010. City National's net interest margin averaged 3.93 percent in the second quarter of 2010, down from 3.97 percent in the first quarter of 2010 due largely to strong growth in deposits, which were invested in securities.
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Average deposit balances, including those acquired from Sun West Bank and 1st Pacific Bank, grew to a record $17.6 billion, up 26 percent from $14.0 billion in the second quarter of 2009 and 4 percent from $16.9 billion in the first quarter of this year. Average core deposits grew 29 percent from the second quarter of last year, and now amount to approximately 93 percent of total average balances.
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Average loans, excluding loans covered by City National's acquisition-related loss-sharing agreements with the FDIC, were $11.6 billion, down 6 percent from the same period last year and 3 percent from the first quarter of 2010. The declines reflected weak loan demand due to current business and economic conditions.
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Second-quarter 2010 net income included a $32.0 million provision for credit losses on non-FDIC covered loans, 42 percent lower than it was in the first quarter of 2010. Net charge-offs declined 32 percent from the first quarter of 2010, while nonperforming assets, excluding FDIC-covered assets, declined 19 percent.
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Second-quarter 2010 earnings included several unusual items. Among them were pretax gains of $25.2 million, or $0.28 per share after tax, for the acquisitions of Sun West Bank and 1st Pacific Bank. Professional expenses related to these transactions totaled $1.7 million, or $0.02 per share after tax. The company also recorded a non-cash net impairment charge of $24.4 million, or $0.27 per share after tax, for FDIC-covered loans acquired from Imperial Capital Bank in December 2009. Second-quarter net income included net tax benefits of $14.7 million, or $0.28 per share, which are primarily related to a favorable tax litigation settlement. The company recorded a charge of $5.0 million, or $0.05 per share after tax, for the write-off of a Community Reinvestment Act-related receivable. After tax, these items added approximately $11.3 million, or $0.22 per share, to net income. Excluding them, second-quarter net income amounted to $30.0 million, or $0.56 per share.
- City National remains well-capitalized. Its ratio of total capital to risk-based assets at June 30, 2010, improved to 14.7 percent, from 14.2 percent at June 30, 2009, and 14.4 percent at March 31, 2010. Its second-quarter ratio of Tier 1 common shareholders' equity to risk-based assets was 9.7 percent, compared to 9.3 percent at June 30, 2009, and 9.4 percent at March 31, 2010.1
| For the three months ended | For the three | |||||
| Dollars in millions, | June 30, | % | months ended | % | ||
| except per share | 2010 | 2009 | Change | March 31, 2010 | Change | |
| Earnings Per Share | $ 0.78 | $ 0.02 | 3,800 | $ 0.19 | 311 | |
| Net Income Attributable to CNC | $ 41.3 | $ 6.8 | 510 | $ 15.7 | 163 | |
| Less: Dividends and Accretion on Preferred Stock | -- | 5.5 | (100) | 5.7 | (100) | |
| Net Income Available to Common Shareholders | $ 41.3 | $ 1.3 | 3,148 | $ 10.0 | 313 | |
| Average Assets | 20,799.2 | 17,369.3 | 20 | 20,267.2 | 3 | |
| Return on Average Assets | 0.80% | 0.16% | 400 | 0.31% | 158 | |
| Return on Average Common Shareholders' Equity | 8.93% | 0.29% | 2,979 | 2.20% | 306 | |
ASSETS
Total assets at June 30, 2010 were $21.2 billion, up 20 percent from the second quarter of 2009. The increase reflects the company's FDIC-assisted acquisitions of Sun West Bank, 1st Pacific Bank and Imperial Capital Bank.
REVENUE
Revenue for the second quarter of 2010 was $304.5 million, up 39 percent from the second quarter of 2009 and 21 percent from the first quarter of 2010. The increases were due principally to the company's FDIC-assisted acquisitions and its strong deposit growth, which was invested in securities and used to fund loans at the three newly acquired banks. Second-quarter operating revenue (excluding gains on these acquisitions) grew 27 percent from the second quarter of 2009.1
NET INTEREST INCOME
Fully taxable-equivalent net interest income was $185.3 million in the second quarter of 2010, up 17 percent from the same period last year and 4 percent from the first quarter of 2010.
Second-quarter 2010 average deposits grew to a record $17.6 billion, up 26 percent from the same period of 2009 and 4 percent from the first quarter of this year. Average core deposits were $16.5 billion in the second quarter of 2010, up 29 percent from the same period of 2009 and 5 percent from the first quarter of 2010.
Second-quarter 2010 average noninterest-bearing deposits were up 18 percent from the same period of 2009 and 5 percent from the first quarter of 2010.
Treasury Services deposit balances, which consist primarily of title, escrow and property management deposits, averaged $1.4 billion in the second quarter of 2010, up 45 percent from the same period of 2009 and 31 percent from the first quarter of 2010 due to the addition of new clients, an increase in residential real estate activity and modest improvement in commercial real estate and apartment financing in certain markets.
Second-quarter average loan balances, excluding FDIC-covered loans, were $11.6 billion, down 6 percent from the second quarter of 2009 and 3 percent from the first quarter of this year. The declines reflect weak loan demand due to challenging business and economic conditions. Average FDIC-covered loans totaled $2.0 billion for the second quarter of 2010.
Average balances for commercial loans were down 8 percent from the same period last year and 5 percent the first quarter of 2010. Average balances for commercial real estate and construction loans together were down 16 percent from the second quarter of 2009 and 6 percent from the first quarter of this year. Average balances for single-family residential mortgage loans, nearly all of which are made to City National's private banking clients, were up slightly from both the year-ago period and the first quarter of 2010.
Average securities for the second quarter of 2010 totaled $4.2 billion, up 26 percent from the same period last year and 5 percent from the first quarter of 2010. The increases reflect the company's strong deposit growth. The average duration of total available-for-sale securities at June 30, 2010 was 2.3 years, down from 3.0 years at the end of the second quarter of 2009 and 2.9 years at March 31, 2010.
City National's net interest margin in the second quarter of 2010 averaged 3.93 percent, compared with 3.98 percent in second quarter of 2009 and 3.97 percent in the first quarter of this year. The decreases were largely due to strong growth in deposits, which were invested in securities.
At June 30, 2010, City National's prime lending rate was 3.25 percent, unchanged from both June 30, 2009 and March 31, 2010.
| For the three months ended | For the three | ||||
| June 30, | % | months ended | % | ||
| Dollars in millions | 2010 | 2009 | Change | March 31, 2010 | Change |
| Average Loans and Leases, | |||||
| excluding Covered Loans | $ 11,581.9 | $ 12,354.3 | (6) | $ 11,944.3 | (3) |
| Average Covered Loans | 2,002.9 | -- | NM | 1,833.1 | 9 |
| Average Total Securities | 4,243.8 | 3,364.2 | 26 | 4,036.4 | 5 |
| Average Earning Assets | 18,890.9 | 16,003.3 | 18 | 18,281.0 | 3 |
| Average Deposits | 17,600.3 | 14,023.3 | 26 | 16,864.2 | 4 |
| Average Core Deposits | 16,453.5 | 12,711.8 | 29 | 15,625.3 | 5 |
| Fully Taxable-Equivalent | |||||
| Net Interest Income | 185.3 | 158.9 | 17 | 178.8 | 4 |
| Net Interest Margin | 3.93% | 3.98% | (1) | 3.97% | (1) |
NONINTEREST INCOME
Noninterest income was $122.5 million in the second quarter of 2010, up 91 percent from the year-ago period and 59 percent from the first quarter of 2010. The increases were due largely to pretax gains of $25.2 million on the acquisitions of Sun West Bank and 1st Pacific Bank as well as $28.3 million of loss-sharing income for assets covered by the FDIC. Second-quarter noninterest income also reflects a $5.0 million charge for the write-off of a Community Reinvestment Act-related receivable.
In the second quarter of 2010, noninterest income accounted for 40 percent of City National's total revenue.
Wealth Management
City National's assets under management totaled $34.2 billion as of June 30, 2010, up 13 percent from the same period of 2009 but down 5 percent from the first quarter of this year. These changes were caused in large part by fluctuations in equity market values. The increase from the year-ago period also reflects the company's July 21, 2009 acquisition of Lee Munder Capital Group, which was partly offset by the deconsolidation of an affiliate's assets under management during the fourth quarter of 2009.
Trust and investment fees were up 35 percent from the second quarter of 2009 and 1 percent from the first quarter of this year. Money market mutual fund and brokerage fees were down 18 percent from the year-ago period, due to lower balances, historically low interest rates on government and other quality short-term bonds, and reduced spreads and trading activity. Money market mutual fund and brokerage fees were up 4 percent from the first quarter of 2010.
| At or for the | At or for the | ||||
| three months ended | three months | ||||
| June 30, | % | ended | % | ||
| Dollars in millions | 2010 | 2009 | Change | March 31, 2010 | Change |
| Trust and Investment Fee Revenue | $ 34.0 | $ 25.2 | 35 | $ 33.5 | 1 |
| Brokerage and Mutual Fund Fees | 5.5 | 6.6 | (18) | 5.3 | 4 |
| Assets Under Management (1)(2) | 34,172.3 | 30,286.4 | 13 | 35,783.4 | (5) |
| Assets Under Management | |||||
| or Administration (1)(2) | 54,613.8 | 47,838.9 | 14 | 55,844.3 | (2) |
| (1) Excludes $12.9 billion, $12.7 billion, and $7.5 billion of assets under management for an asset manager in which City National held a noncontrolling ownership interest as of June 30, 2010, March 31, 2010, and June 30, 2009, respectively. | |||||
| (2) Excludes $1.9 billion and $2.1 billion of assets under management and administration as of June 30, 2010 and March 31, 2010, respectively, for an asset manager that City National deconsolidated effective November 1, 2009. | |||||
Other Noninterest Income
Income from cash management and deposit transaction fees was down 6 percent from the same period of last year and 5 percent from the first quarter of 2010, primarily due to lower transaction volume.
Fee income from foreign exchange services and letters of credit was up 5 percent from the second quarter of 2009 and 29 percent from the first quarter of this year. The increase from the first quarter was due primarily to increased demand for foreign exchange services from entertainment clients.
Other income was $11.4 million in the second quarter of 2010, up 27 percent from the year-ago period and 71 percent from the first quarter of this year. The changes were due largely to an increase in income from the transfer of covered loans to other real estate owned (OREO).
NONINTEREST EXPENSE
Second-quarter 2010 noninterest expense amounted to $186.6 million, up 29 percent from the second quarter of 2009. This increase was due largely to the acquisitions of Sun West Bank, 1st Pacific Bank and Imperial Capital Bank. It also reflects increased compensation expense and legal and professional fees, as well as a $16.8 million expense for OREO properties. Approximately $9.2 million of the OREO expense is related to the acquisitions of Sun West Bank, 1st Pacific Bank and Imperial Capital Bank. Approximately $7.3 million of this amount is reimbursable to the company and reflected in FDIC loss-sharing income in noninterest income.
Noninterest expense increased 6 percent from the first quarter of this year, due primarily to additional personnel and higher personnel costs, professional fees, FDIC assessments and the acquisitions of Sun West Bank and 1st Pacific Bank.
CREDIT QUALITY
The following credit quality information excludes loans subject to loss-sharing agreements involving City National's FDIC-assisted transactions:
Net loan charge-offs in the second quarter of 2010 totaled $33.5 million, or 1.16 percent of total loans and leases on an annualized basis, down from $49.5 million, or 1.68 percent, in the first quarter of this year. Net charge-offs were $56.7 million, or 1.84 percent of total loans and leases, in the second quarter of 2009.
At June 30, 2010, nonperforming assets amounted to $314.6 million, or 2.73 percent of the company's total loans and leases and OREO, down from $388.0 million, or 3.30 percent, at March 31, 2010 and $396.3 million, or 3.19 percent, at June 30, 2009. Nonaccrual loans at June 30, 2010 were $260.1 million, down from $330.0 million at March 31, 2010 and $378.3 million at June 30, 2009.
| As of | As of | As of | ||||
| June 30, 2010 | March 31, 2010 | June 30, 2009 | ||||
| Period-end Loans (in millions) | Total | Nonaccrual | Total | Nonaccrual | Total | Nonaccrual |
| Commercial Loans | $ 4,286.1 | $ 46.5 | $ 4,424.2 | $ 73.8 | $ 4,764.8 | $ 80.4 |
| Commercial Real Estate Mortgages | 2,078.0 | 57.2 | 2,121.9 | 66.2 | 2,162.3 | 36.1 |
| Residential Mortgages | 3,577.9 | 11.5 | 3,514.2 | 12.0 | 3,511.6 | 17.3 |
| Real Estate Construction Loans | 629.9 | 138.9 | 730.7 | 165.0 | 1,116.1 | 237.8 |
| Equity Lines of Credit | 742.1 | 3.9 | 733.6 | 4.1 | 691.2 | 2.9 |
| Other Loans | 169.0 | 2.1 | 164.9 | 8.9 | 175.3 | 3.8 |
| Total Loans (1) | $ 11,483.0 | $ 260.1 | $ 11,689.5 | $ 330.0 | $ 12,421.3 | $ 378.3 |
| Other Real Estate Owned (1) | 54.5 | 58.0 | 18.0 | |||
| Total Nonperforming Assets, excluding | ||||||
| Covered Assets | $ 314.6 | $ 388.0 | $ 396.3 | |||
| (1) Excludes covered loans of $2.1 billion and $1.8 billion at June 30, 2010 and March 31, 2010, respectively, and covered other real estate owned of $98.8 million and $77.5 million at June 30, 2010 and March 31, 2010, respectively. | ||||||
City National's second-quarter provision for credit losses totaled $32.0 million, down from $55.0 million in the first quarter of 2010 and $70 million in the second quarter of 2009.
At June 30, 2010, City National's allowance for loan and lease losses totaled $290.5 million, or 2.53 percent of total loans and leases. That compares with $292.8 million, or 2.50 percent, at the end of the first quarter of 2010 and $256.0 million, or 2.06 percent, at June 30, 2009. The company also maintains an additional $19.3 million in reserves for off-balance-sheet credit commitments.
City National's provision reflects management's continuing assessment of the loan portfolio's credit quality. This assessment takes into account a broad range of economic factors, including net loan charge-offs, nonaccrual loans, specific reserves, risk-rating migration and changes in the portfolio size and composition.
Commercial Loans
Commercial loans accounted for $21.3 million of City National's net charge-offs, up from $13.5 million in the first quarter of this year, and $17.3 million in the year-earlier period.
Commercial loans on nonaccrual totaled $46.5 million, down from $73.8 million at March 31, 2010 and $80.4 million at June 30, 2009.
Construction Loans
City National's $629.9 million commercial real estate construction portfolio includes loans to developers of residential and nonresidential properties. This portfolio has been reduced 44 percent since June 30, 2009. Although the construction sector remains under stress, there are signs that the level of problem loans in the bank's portfolio is moderating.
Second-quarter net charge-offs of construction loans were $10.9 million, down from $14.2 million in the first quarter of 2010 and $36.2 million in the second quarter of 2009. At June 30, 2010, construction loans on nonaccrual totaled $138.9 million, down from $165.0 million on March 31 of this year and $237.8 million at June 30, 2009.
The company's portfolio of loans to residential developers showed further signs of improvement through the second quarter of this year. At June 30, 2010, loans to homebuilders totaled $194 million, down from $236 million at the end of the first quarter. These loans now equal less than 2 percent of City National's loan portfolio, excluding loans covered by the FDIC loss-sharing agreement. (The company's portfolio of loans to homebuilders includes $61 million of loans in the bank's commercial loan portfolio.) Loans to homebuilders accounted for 35 percent of all construction loans on nonaccrual at June 30, 2010.
The remainder of City National's construction portfolio consists of loans to developers of nonresidential projects. Nonresidential construction loans amounted to $496 million at June 30, 2010, down from $831 million at the same time last year and $565 million at March 31, 2010. Second-quarter 2010 net charge-offs totaled $11 million, down from $18 million at June 30, 2009 and $13 million at March 31, 2010. Those on nonaccrual were $90 million, down from $116 million in the second quarter of 2009 and $105 million in the first quarter of this year.
Commercial Real Estate Mortgage Loans
Second-quarter net charge-offs in the company's $2.1 billion commercial real estate mortgage portfolio were $0.4 million, down from $15.0 million in the first quarter of 2010. The company did not record any net charge-offs in its commercial real estate mortgage portfolio during the second quarter of 2009. Conditions in this sector remain weak, as evidenced by reductions in values and lease and sales activity.
Commercial real estate mortgage loans on nonaccrual totaled $57.2 million, down from $66.2 million at March 31, 2010, but up from $36.1 million at June 30, 2009.
Residential Mortgage Loans and Equity Lines of Credit
City National's $3.6 billion residential mortgage portfolio and $742 million home-equity portfolio continued to perform well. Together, they accounted for $0.9 million in net charge-offs, down from $1.6 million in the first quarter of this year and $1.8 million at June 30, 2009. Residential mortgage loans and lines of credit on nonaccrual were $15.4 million in the second quarter of 2010, down from $16.1 million in the first quarter of this year and $20.2 million in the second quarter of 2009.
COVERED ASSETS
Loans and OREO assets acquired in City National's FDIC-assisted acquisitions of Sun West Bank, 1st Pacific Bank and Imperial Capital Bank totaled $2.1 billion at the end of the second quarter of 2010.
In the second quarter, the company recorded a $24.4 million non-cash net impairment loss related to covered loans. It includes a provision of $46.5 million for covered loans that is partly offset by $22.1 million from City National's acquisition-related loss-sharing agreements with the FDIC. The impairment loss is mainly a result of a decrease in projected interest cash flows due to the company's revised default forecasts, though the principal credit loss projections are expected to be in line with the initial expectations. The second-quarter revisions of the default forecasts are based on the results of management's review of the credit quality of the covered loans and the analysis of the loan performance data since the acquisition. The company will continue updating the cash flow projections on a quarterly basis. Due to the uncertainty in the future performance of the covered loans additional impairments may be recognized in the future, however management does not expect potential future impairments to be of the same magnitude.
Loans acquired in FDIC-assisted acquisitions are accounted for in accordance with ASC Topic 310-30 (Loans and Debt Securities Acquired with Deteriorated Credit Quality). These loans are generally considered accruing and performing as they accrete interest income over the estimated life of the loan when the cash flows are reasonably estimable. Accordingly, acquired impaired loans that are contractually past due are still considered to be accruing and performing loans.
OREO assets acquired by City National from Sun West Bank, 1st Pacific Bank and Imperial Capital Bank and subject to loss-sharing agreements totaled $98.8 million at June 30, 2010, compared to $77.5 million at the end of the first quarter.
INCOME TAXES
City National's second-quarter 2010 results reflect a net tax benefit of $2.9 million, compared to a tax provision of $4.4 million in the first quarter of 2010. The tax benefit for the second quarter of the year is primarily attributable to a tax litigation settlement with the California Franchise Tax Board and revisions to certain deferred tax accounts.
FIRST-HALF 2010 HIGHLIGHTS
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Revenue for the first six months of this year was $556.9 million, up 35 percent from the first half of 2009.
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Fully taxable-equivalent net interest income amounted to $364.1 million, up from $307.3 million in the first six months of 2009. The corporation's net interest margin averaged 3.95 percent in the first half of 2010, down from 3.99 percent during the same period of the prior year.
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Average deposits for the first six months of this year amounted to $17.2 billion, up 28 percent from the same period of 2009. Average core deposit balances totaled $16.0 billion in the first half of 2010, up 33 percent from the first six months of last year.
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In the first half of 2010, average loans, excluding FDIC-covered loans, totaled $11.8 billion, down 5 percent from the first half of 2009.
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Noninterest income was $199.4 million, up from $111.6 million in the first half of 2009 due primarily to gains on FDIC-assisted acquisitions and FDIC loss-sharing income.
- During the first half of 2010, the corporation's provision for credit losses on non-covered loans totaled $87.0 million. The corporation made $120.0 million in provisions in the first six months of 2009. The corporation's provision for losses on covered loans was $46.5 million.
CAPITAL LEVELS
City National remains well-capitalized, ending the second quarter of 2010 with a tangible common shareholders' equity ratio of 6.7 percent, compared to 7.4 percent at June 30, 2009, and 6.7 percent at March 31, 2010.1
Total risk-based capital and Tier 1 risk-based capital ratios at June 30, 2010 were 14.7 percent and 11.7 percent, respectively. City National's Tier 1 leverage ratio at June 30, 2010 was 8.0 percent. All of City National's capital ratios are above minimum regulatory standards for "well-capitalized" institutions.
Total risk-based capital, Tier 1 risk-based capital and the Tier 1 leverage ratios at March 31, 2010 were 14.4 percent, 11.4 percent and 8.0 percent, respectively.
The period-end ratio of shareholders' equity to total assets at June 30, 2010 was 9.1 percent, compared to 12.3 percent at June 30, 2009 and 9.3 percent at March 31, 2010.
2010 OUTLOOK
Management expects significantly increased profitability in 2010 over 2009.
CONFERENCE CALL
City National Corporation will host a conference call this afternoon to discuss second-quarter 2010 financial results. The call will begin at 2:00 p.m. PDT. Analysts and investors may dial in and participate in the question/answer session. To access the call, please dial (866) 393-6804 and enter Conference ID 83752468. A listen-only live broadcast of the call also will be available on the investor relations page of the corporation's Website at www.cnb.com. There, it will be archived and available for 12 months.
ABOUT CITY NATIONAL
City National Corporation's wholly owned subsidiary, City National Bank, provides banking, investment and trust services through 80 offices, including 17 full-service regional centers, in Southern California, the San Francisco Bay Area, Nevada and New York City. The corporation and its seven consolidated investment affiliates manage or administer $54.6 billion in client investment assets, including more than $34 billion under direct management.
For more information about City National, visit the corporation's Website at www.cnb.com.
SAFE-HARBOR LANGUAGE
This news release contains forward-looking statements about the company, for which the company claims the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the company's possible or assumed future financial condition, and its results of operations, business and earnings outlook. These forward-looking statements are subject to risks and uncertainties. A number of factors, some of which are beyond the company's ability to control or predict, could cause future results to differ materially from those contemplated by such forward-looking statements. These factors include (1) local, regional and international business, economic and political conditions, (2) volatility in financial markets, including capital and credit markets, (3) significant changes in banking laws or regulations, including without limitation, broad-based restructuring of financial industry regulation, (4) increases and required prepayments in Federal Deposit Insurance Corporation premiums and special federal assessments on financial institutions due to market developments and regulatory changes, (5) changes in the level of nonperforming assets, charge-offs, other real estate owned and provision expense, (6) incorrect assumptions in the value of the loans acquired in FDIC-assisted acquisitions resulting in greater than anticipated losses in the acquired loan portfolios exceeding the losses covered by the loss-sharing agreements with the FDIC, (7) changes in inflation, interest rates, and market liquidity which may impact interest margins and impact funding sources, (8) adequacy of the company's enterprise risk management framework, (9) company's ability to increase market share and control expenses, (10) company's ability to attract new employees and retain and motivate existing employees, (11) increased competition in the company's markets, (12) changes in the financial performance and/or condition of the company's borrowers, including changes in levels of unemployment, changes in customers' suppliers, and other counterparties' performance and creditworthiness, (13) a substantial and permanent loss of either client accounts and/or assets under management at the company's investment advisory affiliates or its wealth management division, (14) changes in consumer spending, borrowing and savings habits, (15) soundness of other financial institutions which could adversely affect the company, (16) protracted labor disputes in the company's markets, (17) earthquake, fire or other natural disasters affecting the condition of real estate collateral, (18) the effect of acquisitions and integration of acquired businesses and de novo branching efforts, (19) the impact of changes in regulatory, judicial or legislative tax treatment of business transactions, (20) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or regulatory agencies, and (21) the success of the company at managing the risks involved in the foregoing, and (22) the anticipated adoption in mid-2010 of new and wide-ranging federal financial institution restructuring and consumer protection legislation effecting significant reform and restructuring of the financial services industry in the United States in response to the recent global economic crisis, and the new rules and regulations to be promulgated by supervisory and oversight agencies implementing this new legislation.
Forward-looking statements speak only as of the date they are made, and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the statements are made, or to update earnings guidance, including the factors that influence earnings.
For a more complete discussion of these risks and uncertainties, see the company's Annual Report on Form 10-K for the year ended December 31, 2009 and particularly Part I, Item 1A, titled "Risk Factors."
1 For notes on non-GAAP measures, see pages 13 and 14 of the Selected Financial Information.
| CITY NATIONAL CORPORATION | ||||||||||||
| FINANCIAL HIGHLIGHTS | ||||||||||||
| (unaudited) | ||||||||||||
| Three Months | Six Months | |||||||||||
| For The Period Ended June 30, | 2010 | 2009 | % Change | 2010 | 2009 | % Change | ||||||
| Per Common Share | ||||||||||||
| Net income available to common shareholders | ||||||||||||
| Basic | $ 0.78 | $ 0.02 | 3,800 | $ 0.98 | $ 0.06 | 1,533 | ||||||
| Diluted | 0.78 | 0.02 | 3,800 | 0.97 | 0.06 | 1,517 | ||||||
| Dividends | 0.10 | 0.10 | -- | 0.20 | 0.35 | (43) | ||||||
| Book value | 36.51 | 34.14 | 7 | |||||||||
| Results of Operations: (In millions) | ||||||||||||
| Interest income | $ 208 | $ 176 | 18 | $ 410 | $ 345 | 19 | ||||||
| Interest expense | 26 | 20 | 27 | 52 | 45 | 17 | ||||||
| Net interest income | 182 | 156 | 17 | 358 | 300 | 19 | ||||||
| Net interest income (Fully taxable-equivalent) | 185 | 159 | 17 | 364 | 307 | 18 | ||||||
| Total revenue | 305 | 220 | 39 | 557 | 412 | 35 | ||||||
| Provision for credit losses on loans and leases, excluding covered loans | 32 | 70 | (54) | 87 | 120 | (28) | ||||||
| Provision for losses on covered loans | 47 | -- | NM | 47 | -- | NM | ||||||
| Net income attributable to City National Corporation | 41 | 7 | 510 | 57 | 14 | 301 | ||||||
| Net income available to common shareholders | 41 | 1 | 3,148 | 51 | 3 | 1,488 | ||||||
| Financial Ratios: | ||||||||||||
| Performance Ratios: | ||||||||||||
| Return on average assets | 0.80 % | 0.16 % | 0.56 % | 0.17 % | ||||||||
| Return on average common shareholders' equity | 8.93 | 0.29 | 5.59 | 0.39 | ||||||||
| Period-end equity to period-end assets | 9.08 | 12.31 | ||||||||||
| Net interest margin | 3.93 | 3.98 | 3.95 | 3.99 | ||||||||
| Expense to revenue ratio | 55.29 | 63.80 | 58.44 | 65.83 | ||||||||
| Capital Adequacy Ratios (Period-end): | ||||||||||||
| Tier 1 leverage | 7.96 | 10.16 | ||||||||||
| Tier 1 risk-based capital | 11.69 | 12.35 | ||||||||||
| Total risk-based capital | 14.68 | 14.18 | ||||||||||
| Asset Quality Ratios: | ||||||||||||
| Allowance for loan and lease losses to: | ||||||||||||
| Total loans and leases, excluding covered loans | 2.53 % | 2.06 % | ||||||||||
| Nonaccrual loans | 111.68 | 67.68 | ||||||||||
| Nonperforming assets to: | ||||||||||||
| Total loans and leases and other real estate owned, excluding covered assets | 2.73 | 3.19 | ||||||||||
| Total assets | 1.48 | 2.24 | ||||||||||
| Net charge-offs to average total loans and leases, excluding covered loans (annualized) | (1.16) % | (1.84) % | (1.42) % | (1.47) % | ||||||||
| Average Balances: (In millions) | ||||||||||||
| Loans and leases, excluding covered loans | $ 11,582 | $ 12,354 | (6) | $ 11,763 | $ 12,375 | (5) | ||||||
| Covered loans | 2,003 | -- | NM | 1,918 | -- | NM | ||||||
| Securities | 4,244 | 3,364 | 26 | 4,141 | 2,893 | 43 | ||||||
| Interest-earning assets | 18,891 | 16,003 | 18 | 18,588 | 15,521 | 20 | ||||||
| Assets | 20,799 | 17,369 | 20 | 20,535 | 16,893 | 22 | ||||||
| Core deposits | 16,454 | 12,712 | 29 | 16,042 | 12,048 | 33 | ||||||
| Deposits | 17,600 | 14,023 | 26 | 17,234 | 13,435 | 28 | ||||||
| Interest-bearing liabilities | 10,599 | 8,219 | 29 | 10,491 | 8,163 | 29 | ||||||
| Common shareholders' equity | 1,856 | 1,730 | 7 | 1,850 | 1,682 | 10 | ||||||
| Total equity | 1,882 | 2,146 | (12) | 1,942 | 2,098 | (7) | ||||||
| Period-End Balances: (In millions) | ||||||||||||
| Loans and leases, excluding covered loans | $ 11,483 | $ 12,421 | (8) | |||||||||
| Covered loans | 2,035 | -- | NM | |||||||||
| Securities | 4,890 | 3,468 | 41 | |||||||||
| Assets | 21,231 | 17,661 | 20 | |||||||||
| Core deposits | 16,816 | 13,252 | 27 | |||||||||
| Deposits | 17,973 | 14,498 | 24 | |||||||||
| Common shareholders' equity | 1,902 | 1,757 | 8 | |||||||||
| Total equity | 1,927 | 2,174 | (11) | |||||||||
| Wealth Management: (In millions) (1)(2) | ||||||||||||
| Assets under management | $ 34,172 | $ 30,286 | 13 | |||||||||
| Assets under management or administration | 54,614 | 47,839 | 14 | |||||||||
|
(1) Excludes $12.9 billion and $7.5 billion of assets under management for an asset manager in which City National held a noncontrolling ownership interest as of June 30, 2010 and June 30, 2009, respectively. |
||||||||||||
|
(2) Excludes $1.9 billion of assets under management or administration as of June 30, 2010 for an asset manager that City National deconsolidated effective November 1, 2009. |
||||||||||||
| Note: Certain prior period balances have been reclassified to conform to current period presentation. | ||||||||||||
| CITY NATIONAL CORPORATION | ||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||
| (unaudited) | ||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||
| (Dollars in thousands except per share data) | 2010 | 2009 | % Change | 2010 | 2009 | % Change |
| Interest income | $ 207,803 | $ 175,876 | 18 | $ 409,869 | $ 345,367 | 19 |
| Interest expense | 25,805 | 20,300 | 27 | 52,366 | 44,894 | 17 |
| Net Interest Income | 181,998 | 155,576 | 17 | 357,503 | 300,473 | 19 |
| Provision for credit losses on loans and leases, excluding covered loans | 32,000 | 70,000 | (54) | 87,000 | 120,000 | (28) |
| Provision for losses on covered loans | 46,516 | -- | NM | 46,516 | -- | NM |
| Noninterest Income | ||||||
| Trust and investment fees | 33,976 | 25,184 | 35 | 67,485 | 51,053 | 32 |
| Brokerage and mutual fund fees | 5,461 | 6,645 | (18) | 10,742 | 16,402 | (35) |
| Cash management and deposit transaction fees | 12,008 | 12,778 | (6) | 24,584 | 26,001 | (5) |
| International services | 8,374 | 7,996 | 5 | 14,882 | 14,521 | 2 |
| Bank-owned life insurance | 658 | 871 | (24) | 1,336 | 1,734 | (23) |
| FDIC loss sharing income, net | 28,339 | -- | NM | 37,425 | -- | NM |
| (Loss) gain on securities | (151) | 1,744 | (109) | 980 | (13,223) | 107 |
| (Loss) gain on disposal of assets | (2,814) | 43 | (6,644) | (1,423) | 43 | 3,409 |
| Gain on acquisition | 25,228 | -- | NM | 25,228 | -- | NM |
| Other | 11,448 | 8,996 | 27 | 18,161 | 15,021 | 21 |
| Total noninterest income | 122,527 | 64,257 | 91 | 199,400 | 111,552 | 79 |
| Noninterest Expense | ||||||
| Salaries and employee benefits | 99,590 | 75,834 | 31 | 195,251 | 154,086 | 27 |
| Net occupancy of premises | 13,347 | 12,559 | 6 | 26,252 | 24,820 | 6 |
| Legal and professional fees | 13,274 | 7,736 | 72 | 22,255 | 15,469 | 44 |
| Information services | 7,538 | 6,992 | 8 | 15,054 | 13,472 | 12 |
| Depreciation and amortization | 6,363 | 5,953 | 7 | 12,710 | 11,945 | 6 |
| Amortization of intangibles | 2,128 | 1,668 | 28 | 4,575 | 3,511 | 30 |
| Marketing and advertising | 5,798 | 4,743 | 22 | 11,046 | 9,419 | 17 |
| Office services and equipment | 4,272 | 3,922 | 9 | 8,070 | 7,526 | 7 |
| Other real estate owned | 16,783 | 2,155 | 679 | 33,980 | 2,249 | 1,411 |
| FDIC assessments | 7,662 | 13,861 | (45) | 14,183 | 16,929 | (16) |
| Other | 9,823 | 8,711 | 13 | 19,136 | 17,693 | 8 |
| Total noninterest expense | 186,578 | 144,134 | 29 | 362,512 | 277,119 | 31 |
| Income Before Taxes | 39,431 | 5,699 | 592 | 60,875 | 14,906 | 308 |
| Applicable Income Taxes | (2,859) | (986) | 190 | 1,559 | 646 | 141 |
| Net Income | $ 42,290 | $ 6,685 | 533 | $ 59,316 | $ 14,260 | 316 |
| Less: Net income (loss) attributable to noncontrolling interest | 972 | (88) | (1,205) | 2,300 | 27 | 8,419 |
| Net income attributable to City National Corporation | $ 41,318 | $ 6,773 | 510 | $ 57,016 | $ 14,233 | 301 |
| Less: Dividends on preferred stock | -- | 5,501 | (100) | 5,702 | 11,002 | (48) |
| Net income available to common shareholders | $ 41,318 | $ 1,272 | 3,148 | $ 51,314 | $ 3,231 | 1,488 |
| Other Data: | ||||||
| Earnings per common share - basic | $ 0.78 | $ 0.02 | 3,800 | $ 0.98 | $ 0.06 | 1,533 |
| Earnings per common share - diluted | $ 0.78 | $ 0.02 | 3,800 | $ 0.97 | $ 0.06 | 1,517 |
| Dividends paid per common share | $ 0.10 | $ 0.10 | -- | $ 0.20 | $ 0.35 | (43) |
| Common dividend payout ratio | 12.71 % | 383.66 % | (97) | 20.40 % | 526.55 % | (96) |
| Return on average assets | 0.80 % | 0.16 % | 400 | 0.56 % | 0.17 % | 229 |
| Return on average common shareholders' equity | 8.93 % | 0.29 % | 2,979 | 5.59 % | 0.39 % | 1,333 |
| Net interest margin (Fully taxable-equivalent) | 3.93 % | 3.98 % | (1) | 3.95 % | 3.99 % | (1) |
| Full-time equivalent employees | 3,117 | 2,866 | 9 | |||
| Note: Certain prior period balances have been reclassified to conform to current period presentation. | ||||||
| CITY NATIONAL CORPORATION | |||
| CONSOLIDATED QUARTERLY STATEMENTS OF INCOME | |||
| (unaudited) | |||
| 2010 | |||
| (Dollars in thousands except per share data) |
Second Quarter |
First Quarter |
Year to Date |
| Interest income | $ 207,803 | $ 202,066 | $ 409,869 |
| Interest expense | 25,805 | 26,561 | 52,366 |
| Net Interest Income | 181,998 | 175,505 | 357,503 |
| Provision for credit losses on loans and leases, excluding covered loans | 32,000 | 55,000 | 87,000 |
| Provision for losses on covered loans | 46,516 | -- | 46,516 |
| Noninterest Income | |||
| Trust and investment fees | 33,976 | 33,509 | 67,485 |
| Brokerage and mutual fund fees | 5,461 | 5,281 | 10,742 |
| Cash management and deposit transaction fees | 12,008 | 12,576 | 24,584 |
| International services | 8,374 | 6,508 | 14,882 |
| Bank-owned life insurance | 658 | 678 | 1,336 |
| FDIC loss sharing income, net | 28,339 | 9,086 | 37,425 |
| (Loss) gain on securities | (151) | 1,131 | 980 |
| (Loss) gain on disposal of assets | (2,814) | 1,391 | (1,423) |
| Gain on acquisition | 25,228 | -- | 25,228 |
| Other | 11,448 | 6,713 | 18,161 |
| Total noninterest income | 122,527 | 76,873 | 199,400 |
| Noninterest Expense | |||
| Salaries and employee benefits | 99,590 | 95,661 | 195,251 |
| Net occupancy of premises | 13,347 | 12,905 | 26,252 |
| Legal and professional fees | 13,274 | 8,981 | 22,255 |
| Information services | 7,538 | 7,516 | 15,054 |
| Depreciation and amortization | 6,363 | 6,347 | 12,710 |
| Amortization of intangibles | 2,128 | 2,447 | 4,575 |
| Marketing and advertising | 5,798 | 5,248 | 11,046 |
| Office services and equipment | 4,272 | 3,798 | 8,070 |
| Other real estate owned | 16,783 | 17,197 | 33,980 |
| FDIC assessments | 7,662 | 6,521 | 14,183 |
| Other | 9,823 | 9,313 | 19,136 |
| Total noninterest expense | 186,578 | 175,934 | 362,512 |
| Income Before Taxes | 39,431 | 21,444 | 60,875 |
| Applicable Income Taxes | (2,859) | 4,418 | 1,559 |
| Net Income | $ 42,290 | $ 17,026 | $ 59,316 |
| Less: Net income attributable to noncontrolling interest | 972 | 1,328 | 2,300 |
| Net income attributable to City National Corporation | $ 41,318 | $ 15,698 | $ 57,016 |
| Less: Dividends on preferred stock | -- | 5,702 | 5,702 |
| Net income available to common shareholders | $ 41,318 | $ 9,996 | $ 51,314 |
| Other Data: | |||
| Earnings per common share - basic | $ 0.78 | $ 0.19 | $ 0.98 |
| Earnings per common share - diluted | $ 0.78 | $ 0.19 | $ 0.97 |
| Dividends paid per common share | $ 0.10 | $ 0.10 | $ 0.20 |
| Common dividend payout ratio | 12.71 % | 52.16 % | 20.40 % |
| Return on average assets | 0.80 % | 0.31 % | 0.56 % |
| Return on average common shareholders' equity | 8.93 % | 2.20 % | 5.59 % |
| Net interest margin (Fully taxable-equivalent) | 3.93 % | 3.97 % | 3.95 % |
| Full-time equivalent employees | 3,117 | 2,983 | |
| Note: Certain prior period balances have been reclassified to conform to current period presentation. | |||
| CITY NATIONAL CORPORATION | |||||
| CONSOLIDATED QUARTERLY STATEMENTS OF INCOME | |||||
| (unaudited) | |||||
| 2009 | |||||
| (Dollars in thousands except per share data) | Fourth Quarter | Third Quarter | Second Quarter | First Quarter | Year to Date |
| Interest income | $ 183,291 | $ 180,419 | $ 175,876 | $ 169,491 | $ 709,077 |
| Interest expense | 21,052 | 19,078 | 20,300 | 24,594 | 85,024 |
| Net Interest Income | 162,239 | 161,341 | 155,576 | 144,897 | 624,053 |
| Provision for credit losses on loans and leases, excluding covered loans | 80,000 | 85,000 | 70,000 | 50,000 | 285,000 |
| Noninterest Income | |||||
| Trust and investment fees | 33,720 | 32,289 | 25,184 | 25,869 | 117,062 |
| Brokerage and mutual fund fees | 5,489 | 6,041 | 6,645 | 9,757 | 27,932 |
| Cash management and deposit transaction fees | 12,526 | 13,142 | 12,778 | 13,223 | 51,669 |
| International services | 8,591 | 7,895 | 7,996 | 6,525 | 31,007 |
| Bank-owned life insurance | 680 | 639 | 871 | 863 | 3,053 |
| FDIC loss sharing income, net | 723 | -- | -- | -- | 723 |
| Gain (loss) on securities | 8,397 | 2,667 | 1,744 | (14,967) | (2,159) |
| Gain (loss) on disposal of assets | 1,406 | (173) | 43 | -- | 1,276 |
| Gain on acquisition | 38,206 | -- | -- | -- | 38,206 |
| Other | 1,103 | 6,345 | 8,996 | 6,025 | 22,469 |
| Total noninterest income | 110,841 | 68,845 | 64,257 | 47,295 | 291,238 |
| Noninterest Expense | |||||
| Salaries and employee benefits | 85,926 | 80,937 | 75,834 | 78,252 | 320,949 |
| Net occupancy of premises | 12,990 | 12,613 | 12,559 | 12,261 | 50,423 |
| Legal and professional fees | 12,323 | 8,545 | 7,736 | 7,733 | 36,337 |
| Information services | 7,021 | 7,342 | 6,992 | 6,480 | 27,835 |
| Depreciation and amortization | 7,802 | 6,472 | 5,953 | 5,992 | 26,219 |
| Amortization of intangibles | 2,120 | 1,726 | 1,668 | 1,843 | 7,357 |
| Marketing and advertising | 6,092 | 4,615 | 4,743 | 4,676 | 20,126 |
| Office services and equipment | 3,859 | 3,610 | 3,922 | 3,604 | 14,995 |
| Other real estate owned | 3,486 | 2,231 | 2,155 | 94 | 7,966 |
| FDIC assessments | 5,816 | 5,308 | 13,861 | 3,068 | 28,053 |
| Other | 11,809 | 10,366 | 8,711 | 8,982 | 39,868 |
| Total noninterest expense | 159,244 | 143,765 | 144,134 | 132,985 | 580,128 |
| Income Before Taxes | 33,836 | 1,421 | 5,699 | 9,207 | 50,163 |
| Applicable Income Taxes | 4,434 | (6,966) | (986) | 1,632 | (1,886) |
| Net Income | $ 29,402 | $ 8,387 | $ 6,685 | $ 7,575 | $ 52,049 |
| Less: Net income (loss) attributable to noncontrolling interest | 335 | 348 | (88) | 115 | 710 |
| Net income attributable to City National Corporation | $ 29,067 | $ 8,039 | $ 6,773 | $ 7,460 | $ 51,339 |
| Less: Dividends and accretion on preferred stock | 9,399 | 5,502 | 5,501 | 5,501 | 25,903 |
| Net income available to common shareholders | $ 19,668 | $ 2,537 | $ 1,272 | $ 1,959 | $ 25,436 |
| Other Data: | |||||
| Earnings per common share - basic | $ 0.38 | $ 0.05 | $ 0.02 | $ 0.04 | $ 0.50 |
| Earnings per common share - diluted | $ 0.38 | $ 0.05 | $ 0.02 | $ 0.04 | $ 0.50 |
| Dividends paid per common share | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.25 | $ 0.55 |
| Common dividend payout ratio | 26.47 % | 205.08 % | 383.66 % | 619.32 % | 107.80 % |
| Return on average assets | 0.60 % | 0.18 % | 0.16 % | 0.18 % | 0.29 % |
| Return on average common shareholders' equity | 4.27 % | 0.56 % | 0.29 % | 0.49 % | 1.46 % |
| Net interest margin (Fully taxable-equivalent) | 3.74 % | 3.94 % | 3.98 % | 4.00 % | 3.91 % |
| Full-time equivalent employees | 3,017 | 2,891 | 2,866 | 2,933 | |
| Note: Certain prior period balances have been reclassified to conform to current period presentation. | |||||
| CITY NATIONAL CORPORATION | ||
| CONSOLIDATED PERIOD END BALANCE SHEET | ||
| (unaudited) | ||
| 2010 | ||
| (In thousands) |
Second Quarter |
First Quarter |
| Assets | ||
| Cash and due from banks | $ 184,277 | $ 293,855 |
| Federal funds sold | 404,760 | 50,000 |
| Due from banks - interest-bearing | 336,244 | 429,157 |
| Securities-available-for-sale | 4,761,143 | 3,928,481 |
| Trading securities | 129,287 | 68,405 |
| Loans and leases: | ||
| Commercial | 4,286,104 | 4,424,233 |
| Commercial real estate mortgages | 2,078,003 | 2,121,941 |
| Residential mortgages | 3,577,894 | 3,514,149 |
| Real estate construction | 629,902 | 730,734 |
| Equity lines of credit | 742,071 | 733,550 |
| Installment | 169,070 | 164,929 |
| Loans and leases, excluding covered loans | 11,483,044 | 11,689,536 |
| Allowance for loan and lease losses | (290,492) | (292,799) |
| Loans and leases, excluding covered loans, net | 11,192,552 | 11,396,737 |
| Covered loans (1) | 2,034,591 | 1,803,048 |
| Net loans and leases | 13,227,143 | 13,199,785 |
| Premises and equipment, net | 121,960 | 123,178 |
| Goodwill and other intangibles | 524,820 | 523,135 |
| Other real estate owned (2) | 153,292 | 135,551 |
| FDIC indemnification asset | 394,012 | 325,356 |
| Other assets | 994,509 | 989,572 |
| Total assets | $ 21,231,447 | $ 20,066,475 |
| Liabilities | ||
| Deposits: | ||
| Noninterest-bearing | $ 8,173,386 | $ 7,881,959 |
| Interest-bearing | 9,799,527 | 9,081,770 |
| Total deposits | 17,972,913 | 16,963,729 |
| Federal funds purchased and securities sold under repurchase agreements | 177,700 | 183,884 |
| Other short-term borrowed funds | 700 | 730 |
| Subordinated debt | 337,691 | 339,392 |
| Other long-term debt | 473,283 | 472,193 |
| Other liabilities | 294,578 | 196,471 |
| Total liabilities | 19,256,865 | 18,156,399 |
| Redeemable noncontrolling interest | 47,622 | 46,665 |
| Equity | ||
| City National Corporation shareholders' equity: | ||
| Preferred stock | -- | -- |
| Common stock | 53,886 | 53,886 |
| Additional paid-in capital | 483,983 | 505,330 |
| Retained earnings | 1,418,486 | 1,382,421 |
| Accumulated other comprehensive income | 58,050 | 23,927 |
| Treasury shares | (112,634) | (127,342) |
| Total common shareholders' equity | 1,901,771 | 1,838,222 |
| Total shareholders' equity | 1,901,771 | 1,838,222 |
| Noncontrolling interest | 25,189 | 25,189 |
| Total equity | 1,926,960 | 1,863,411 |
| Total liabilities and equity | $ 21,231,447 | $ 20,066,475 |
| (1) Covered loans are net of $46.3 million of allowance for loan losses. | ||
| (2) Other real estate owned includes $98.8 million and $77.5 million covered by FDIC loss share at June 30, 2010 and March 31, 2010, respectively. | ||
| CITY NATIONAL CORPORATION | ||||
| CONSOLIDATED PERIOD END BALANCE SHEET | ||||
| (unaudited) | ||||
| 2009 | ||||
| (In thousands) | Fourth Quarter |
Third Quarter |
Second Quarter |
First Quarter |
| Assets | ||||
| Cash and due from banks | $ 364,483 | $ 348,958 | $ 350,931 | $ 378,289 |
| Federal funds sold | 5,000 | 240,000 | 125,000 | 12,300 |
| Due from banks - interest-bearing | 443,443 | 767,362 | 205,656 | 140,484 |
| Securities-available-for-sale | 4,306,758 | 3,512,072 | 3,330,326 | 2,915,883 |
| Trading securities | 154,302 | 188,904 | 138,137 | 67,582 |
| Loans and leases: | ||||
| Commercial | 4,709,667 | 4,594,683 | 4,764,755 | 4,708,627 |
| Commercial real estate mortgages | 2,161,451 | 2,164,398 | 2,162,294 | 2,173,983 |
| Residential mortgages | 3,533,453 | 3,541,534 | 3,511,598 | 3,413,538 |
| Real estate construction | 835,589 | 999,045 | 1,116,154 | 1,189,594 |
| Equity lines of credit | 734,182 | 694,660 | 691,226 | 651,127 |
| Installment | 172,566 | 174,170 | 175,315 | 168,245 |
| Loans and leases, excluding covered loans | 12,146,908 | 12,168,490 | 12,421,342 | 12,305,114 |
| Allowance for loan and lease losses | (288,493) | (265,005) | (256,018) | (241,586) |
| Loans and leases, excluding covered loans, net | 11,858,415 | 11,903,485 | 12,165,324 | 12,063,528 |
| Covered loans | 1,851,821 | -- | -- | -- |
| Net loans and leases | 13,710,236 | 11,903,485 | 12,165,324 | 12,063,528 |
| Premises and equipment, net | 124,309 | 126,097 | 125,510 | 128,189 |
| Goodwill and other intangibles | 525,583 | 533,367 | 496,562 | 498,194 |
| Other real estate owned (1) | 113,866 | 43,969 | 18,064 | 12,639 |
| FDIC indemnification asset | 380,743 | -- | -- | -- |
| Other assets | 950,034 | 736,390 | 705,275 | 716,442 |
| Total assets | $ 21,078,757 | $ 18,400,604 | $ 17,660,785 | $ 16,933,530 |
| Liabilities | ||||
| Deposits: | ||||
| Noninterest-bearing | $ 7,753,936 | $ 7,441,898 | $ 7,118,660 | $ 6,611,752 |
| Interest-bearing | 9,625,512 | 7,666,545 | 7,379,591 | 7,077,798 |
| Total deposits | 17,379,448 | 15,108,443 | 14,498,251 | 13,689,550 |
| Federal funds purchased and securities sold under repurchase agreements | 626,779 | 231,903 | 316,388 | 519,687 |
| Other short-term borrowed funds | 690 | 720 | 50,000 | 28,405 |
| Subordinated debt | 340,137 | 341,587 | 162,434 | 164,296 |
| Other long-term debt | 471,029 | 233,536 | 233,456 | 242,122 |
| Other liabilities | 196,529 | 216,026 | 189,588 | 199,863 |
| Total liabilities | 19,014,612 | 16,132,215 | 15,450,117 | 14,843,923 |
| Redeemable noncontrolling interest | 51,381 | 49,897 | 36,752 | 40,237 |
| Equity | ||||
| City National Corporation shareholders' equity: | ||||
| Preferred stock | 196,048 | 391,593 | 391,091 | 390,590 |
| Common stock | 53,886 | 53,886 | 53,886 | 50,961 |
| Additional paid-in capital | 513,550 | 514,904 | 511,939 | 393,114 |
| Retained earnings | 1,377,639 | 1,363,176 | 1,365,842 | 1,369,451 |
| Accumulated other comprehensive income (loss) | (3,049) | 24,329 | (18,110) | (23,093) |
| Treasury shares | (151,751) | (154,245) | (156,119) | (157,094) |
| Total common shareholders' equity | 1,790,275 | 1,802,050 | 1,757,438 | 1,633,339 |
| Total shareholders' equity | 1,986,323 | 2,193,643 | 2,148,529 | 2,023,929 |
| Noncontrolling interest | 26,441 | 24,849 | 25,387 | 25,441 |
| Total equity | 2,012,764 | 2,218,492 | 2,173,916 | 2,049,370 |
| Total liabilities and equity | $ 21,078,757 | $ 18,400,604 | $ 17,660,785 | $ 16,933,530 |
| (1) Other real estate owned includes $60.6 million covered by FDIC loss share at December 31, 2009. | ||||
| CITY NATIONAL CORPORATION | ||||||||
| CREDIT LOSS EXPERIENCE | ||||||||
| (unaudited) | ||||||||
| 2010 | 2009 | |||||||
| (Dollars in thousands) | Second Quarter | First Quarter | Year To Date | Fourth Quarter | Third Quarter | Second Quarter | First Quarter | Year To Date |
| Allowance for Loan and Lease Losses (1) | ||||||||
| Balance at beginning of period | $ 292,799 | $ 288,493 | $ 288,493 | $ 265,005 | $ 256,018 | $ 241,586 | $ 224,046 | $ 224,046 |
| Net (charge-offs)/recoveries: | ||||||||
| Commercial | (21,290) | (13,532) | (34,822) | (23,088) | (28,852) | (17,283) | (18,459) | (87,682) |
| Commercial real estate mortgages | (402) | (14,967) | (15,369) | (5,291) | (3,372) | -- | -- | (8,663) |
| Residential mortgages | (610) | (1,391) | (2,001) | (625) | (682) | (731) | (367) | (2,405) |
| Real estate construction | (10,944) | (14,183) | (25,127) | (27,562) | (42,651) | (36,189) | (14,049) | (120,451) |
| Equity lines of credit | (337) | (210) | (547) | (550) | (387) | (1,039) | (38) | (2,014) |
| Installment | 88 | (5,253) | (5,165) | (1,632) | (915) | (1,448) | (706) | (4,701) |
| Total net (charge-offs)/recoveries | (33,495) | (49,536) | (83,031) | (58,748) | (76,859) | (56,690) | (33,619) | (225,916) |
| Provision for credit losses | 32,000 | 55,000 | 87,000 | 80,000 | 85,000 | 70,000 | 50,000 | 285,000 |
| Transfers (to) from reserve for off-balance sheet credit commitments | (812) | (1,158) | (1,970) | 2,236 | 846 | 1,122 | 1,159 | 5,363 |
| Balance at end of period | $ 290,492 | $ 292,799 | $ 290,492 | $ 288,493 | $ 265,005 | $ 256,018 | $ 241,586 | $ 288,493 |
| Net (Charge-Offs)/Recoveries to Average Total Loans and Leases, Excluding Covered Assets (annualized): | ||||||||
| Commercial | (1.97) % | (1.20) % | (1.58) % | (1.99) % | (2.42) % | (1.47) % | (1.57) % | (1.87) % |
| Commercial real estate mortgages | (0.08) % | (2.82) % | (1.46) % | (0.97) % | (0.62) % | 0.00 % | 0.00 % | (0.40) % |
| Residential mortgage | (0.07) % | (0.16) % | (0.11) % | (0.07) % | (0.08) % | (0.08) % | (0.04) % | (0.07) % |
| Real estate construction | (6.36) % | (7.12) % | (6.77) % | (11.92) % | (15.68) % | (12.59) % | (4.63) % | (11.01) % |
| Equity lines of credit | (0.18) % | (0.12) % | (0.15) % | (0.31) % | (0.22) % | (0.62) % | (0.02) % | (0.30) % |
| Installment | 0.21 % | (12.54) % | (6.15) % | (3.74) % | (2.05) % | (3.33) % | (1.67) % | (2.70) % |
| Total loans and leases, excluding covered loans | (1.16) % | (1.68) % | (1.42) % | (1.93) % | (2.47) % | (1.84) % | (1.10) % | (1.84) % |
| Reserve for Off-Balance Sheet Credit Commitments | ||||||||
| Balance at beginning of period | $ 18,498 | $ 17,340 | $ 17,340 | $ 19,576 | $ 20,422 | $ 21,544 | $ 22,703 | $ 22,703 |
| Transfers from (to) allowance | 812 | 1,158 | 1,970 | (2,236) | (846) | (1,122) | (1,159) | (5,363) |
| Balance at end of period | $ 19,310 | $ 18,498 | $ 19,310 | $ 17,340 | $ 19,576 | $ 20,422 | $ 21,544 | $ 17,340 |
| (1) Allowance for loan and lease losses relates to total loans and leases, excluding covered loans. Allowance for loan losses for covered loans was $46.3 million as of June 30, 2010. | ||||||||
| CITY NATIONAL CORPORATION | ||||||
| NONPERFORMING ASSETS | ||||||
| (unaudited) | ||||||
| 2010 | 2009 | |||||
| (Dollars in thousands) | Second Quarter | First Quarter | Fourth Quarter | Third Quarter | Second Quarter | First Quarter |
| Nonaccrual Loans | ||||||
| Commercial | $ 46,530 | $ 73,838 | $ 81,989 | $ 90,744 | $ 80,372 | $ 56,246 |
| Commercial real estate mortgages | 57,155 | 66,194 | 76,027 | 60,833 | 36,112 | 16,923 |
| Residential mortgages | 11,506 | 12,045 | 15,488 | 12,961 | 17,262 | 13,270 |
| Real estate construction | 138,909 | 164,985 | 202,605 | 233,848 | 237,828 | 223,416 |
| Equity lines of credit | 3,909 | 4,089 | 3,422 | 2,507 | 2,919 | 2,432 |
| Installment | 2,109 | 8,865 | 9,176 | 7,373 | 3,768 | 1,354 |
| Total nonaccrual loans | 260,118 | 330,016 | 388,707 | 408,266 | 378,261 | 313,641 |
| Other real estate owned, exluding covered OREO | 54,451 | 58,025 | 53,308 | 43,969 | 18,064 | 12,639 |
| Total nonperforming assets, excluding covered assets | $ 314,569 | $ 388,041 | $ 442,015 | $ 452,235 | $ 396,325 | $ 326,280 |
| Covered assets (other real estate owned) | $ 98,841 | $ 77,526 | $ 60,558 | $ -- | $ -- | $ -- |
| Loans 90 days or more past due on accrual status, excluding covered loans | $ 789 | $ 1,712 | $ 5,689 | $ 10,395 | $ -- | $ 16,261 |
| Covered loans 90 days or more past due on accrual status | $ 362,722 | $ 323,620 | $ 173,309 | $ -- | $ -- | $ -- |
| Allowance for loan and lease losses as a percentage of: | ||||||
| Nonaccrual loans | 111.68 % | 88.72 % | 74.22 % | 64.91 % | 67.68 % | 77.03 % |
| Total nonperforming assets, excluding covered assets | 92.35 % | 75.46 % | 65.27 % | 58.60 % | 64.60 % | 74.04 % |
| Total loans and leases, excluding covered loans | 2.53 % | 2.50 % | 2.38 % | 2.18 % | 2.06 % | 1.96 % |
| Nonaccrual loans as a percentage of total loans, excluding covered loans | 2.27 % | 2.82 % | 3.20 % | 3.36 % | 3.05 % | 2.55 % |
| Nonperforming assets, excluding covered assets, as a percentage of: | ||||||
| Total loans and other real estate owned, excluding covered assets | 2.73 % | 3.30 % | 3.62 % | 3.70 % | 3.19 % | 2.65 % |
| Total assets | 1.48 % | 1.93 % | 2.10 % | 2.46 % | 2.24 % | 1.93 % |
| CITY NATIONAL CORPORATION | ||||||
| AVERAGE BALANCES AND RATES | ||||||
| (unaudited) | ||||||
| 2010 | ||||||
| Second Quarter | First Quarter | Year to Date | ||||
| (Dollars in millions) | Average Balance | Average Rate | Average Balance | Average Rate | Average Balance | Average Rate |
| Assets | ||||||
| Interest-earning assets | ||||||
| Loans and leases | ||||||
| Commercial | $ 4,339 | 4.50 % | $ 4,559 | 4.33 % | $ 4,449 | 4.41 % |
| Commercial real estate mortgages | 2,098 | 5.59 | 2,151 | 5.49 | 2,125 | 5.54 |
| Residential mortgages | 3,542 | 5.36 | 3,522 | 5.39 | 3,532 | 5.38 |
| Real estate construction | 691 | 3.91 | 807 | 3.70 | 749 | 3.80 |
| Equity lines of credit | 743 | 3.58 | 735 | 3.56 | 739 | 3.57 |
| Installment | 169 | 5.16 | 170 | 5.14 | 169 | 5.15 |
| Total loans and leases, excluding covered loans | 11,582 | 4.88 | 11,944 | 4.80 | 11,763 | 4.84 |
| Covered loans | 2,003 | 6.90 | 1,833 | 6.44 | 1,918 | 6.68 |
| Total loans and leases | 13,585 | 5.18 | 13,777 | 5.03 | 13,681 | 5.10 |
| Due from banks - interest-bearing | 701 | 0.24 | 275 | 0.51 | 489 | 0.32 |
| Federal funds sold and securities purchased under resale agreements | 213 | 0.25 | 46 | 0.20 | 130 | 0.24 |
| Securities available-for-sale | 4,190 | 3.28 | 3,974 | 3.39 | 4,083 | 3.33 |
| Trading securities | 54 | 0.18 | 62 | (0.33) | 58 | (0.09) |
| Other interest-earning assets | 148 | 1.80 | 147 | 1.76 | 147 | 1.78 |
| Total interest-earning assets | 18,891 | 4.48 | 18,281 | 4.56 | 18,588 | 4.52 |
| Allowance for loan and lease losses | (308) | (295) | (302) | |||
| Cash and due from banks | 241 | 299 | 270 | |||
| Other non-earning assets | 1,975 | 1,982 | 1,979 | |||
| Total assets | $ 20,799 | $ 20,267 | $ 20,535 | |||
| Liabilities and Equity | ||||||
| Interest-bearing deposits | ||||||
| Interest checking accounts | $ 2,385 | 0.24 % | $ 2,235 | 0.24 % | $ 2,312 | 0.24 % |
| Money market accounts | 5,365 | 0.57 | 4,853 | 0.62 | 5,110 | 0.59 |
| Savings deposits | 301 | 0.45 | 387 | 0.66 | 343 | 0.57 |
| Time deposits - under $100,000 | 414 | 0.83 | 556 | 0.62 | 484 | 0.71 |
| Time deposits -- $100,000 and over | 1,147 | 0.82 | 1,239 | 0.96 | 1,193 | 0.89 |
| Total interest-bearing deposits | 9,612 | 0.53 | 9,270 | 0.58 | 9,442 | 0.55 |
| Federal funds purchased and securities sold under repurchase agreements | 183 | 3.74 | 300 | 2.62 | 241 | 3.04 |
| Other borrowings | 804 | 5.75 | 812 | 5.73 | 808 | 5.74 |
| Total interest-bearing liabilities | 10,599 | 0.98 | 10,382 | 1.04 | 10,491 | 1.01 |
| Noninterest-bearing deposits | 7,988 | 7,594 | 7,792 | |||
| Other liabilities | 330 | 288 | 310 | |||
| Total equity | 1,882 | 2,003 | 1,942 | |||
| Total liabilities and equity | $ 20,799 | $ 20,267 | $ 20,535 | |||
| Net interest spread | 3.50 % | 3.52 % | 3.51 % | |||
| Net interest margin | 3.93 % | 3.97 % | 3.95 % | |||
| Average prime rate | 3.25 % | 3.25 % | 3.25 % | |||
| CITY NATIONAL CORPORATION | |||||||||||||||||
| AVERAGE BALANCES AND RATES | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| 2009 | |||||||||||||||||
| Fourth Quarter | Third Quarter | Second Quarter | First Quarter | Year to Date | |||||||||||||
| (Dollars in millions) | Average Balance | Average Rate | Average Balance | Average Rate | Average Balance | Average Rate | Average Balance | Average Rate | Average Balance | Average Rate | |||||||
| Assets | |||||||||||||||||
| Interest-earning assets | |||||||||||||||||
| Loans and leases | |||||||||||||||||
| Commercial | $ 4,607 | 4.30 % | $ 4,724 | 4.26 % | $ 4,721 | 4.21 % | $ 4,756 | 4.22 % | $ 4,702 | 4.25 % | |||||||
| Commercial real estate mortgages | 2,163 | 5.47 | 2,144 | 5.49 | 2,178 | 5.69 | 2,200 | 5.74 | 2,171 | 5.60 | |||||||
| Residential mortgages | 3,534 | 5.56 | 3,528 | 5.50 | 3,454 | 5.51 | 3,406 | 5.58 | 3,481 | 5.54 | |||||||
| Real estate construction | 917 | 3.88 | 1,079 | 3.58 | 1,153 | 3.04 | 1,232 | 3.20 | 1,094 | 3.40 | |||||||
| Equity lines of credit | 706 | 3.52 | 687 | 3.51 | 674 | 3.46 | 630 | 3.39 | 675 | 3.47 | |||||||
| Installment | 173 | 5.10 | 177 | 5.08 | 174 | 5.05 | 171 | 5.12 | 174 | 5.09 | |||||||
| Total loans and leases, excluding covered loans | 12,100 | 4.80 | 12,339 | 4.72 | 12,354 | 4.70 | 12,395 | 4.75 | 12,297 | 4.74 | |||||||
| Covered loans | 264 | 6.10 | -- | 0.00 | -- | 0.00 | -- | 0.00 | 66 | 6.10 | |||||||
| Total loans and leases | 12,364 | 4.83 | 12,339 | 4.72 | 12,354 | 4.70 | 12,395 | 4.75 | 12,363 | 4.75 | |||||||
| Due from banks - interest-bearing | 906 | 0.34 | 204 | 0.50 | 195 | 0.60 | 134 | 0.47 | 362 | 0.41 | |||||||
| Federal funds sold and securities purchased under resale agreements | 375 | 0.13 | 338 | 0.15 | 15 | 0.23 | 11 | 0.24 | 186 | 0.14 | |||||||
| Securities available-for-sale | 3,804 | 3.62 | 3,560 | 4.03 | 3,252 | 4.08 | 2,302 | 4.65 | 3,234 | 4.03 | |||||||
| Trading securities | 74 | 1.95 | 71 | 0.18 | 112 | 1.36 | 115 | 0.19 | 93 | 0.89 | |||||||
| Other interest-earning assets | 84 | 3.48 | 76 | 3.76 | 75 | 3.45 | 76 | 3.48 | 77 | 3.54 | |||||||
| Total interest-earning assets | 17,607 | 4.21 | 16,588 | 4.40 | 16,003 | 4.49 | 15,033 | 4.67 | 16,315 | 4.43 | |||||||
| Allowance for loan and lease losses | (276) | (260) | (246) | (236) | (255) | ||||||||||||
| Cash and due from banks | 313 | 308 | 324 | 335 | 320 | ||||||||||||
| Other non-earning assets | 1,451 | 1,302 | 1,288 | 1,279 | 1,331 | ||||||||||||
| Total assets | $ 19,095 | $ 17,938 | $ 17,369 | $ 16,411 | $ 17,711 | ||||||||||||
| Liabilities and Equity | |||||||||||||||||
| Interest-bearing deposits | |||||||||||||||||
| Interest checking accounts | $ 2,027 | 0.21 % | $ 1,637 | 0.25 % | $ 1,388 | 0.29 % | $ 1,098 | 0.32 % | $ 1,541 | 0.26 % | |||||||
| Money market accounts | 4,093 | 0.64 | 4,232 | 0.66 | 4,111 | 0.86 | 3,897 | 1.01 | 4,084 | 0.79 | |||||||
| Savings deposits | 306 | 0.63 | 262 | 0.64 | 222 | 0.74 | 166 | 0.65 | 239 | 0.66 | |||||||
| Time deposits - under $100,000 | 293 | 0.81 | 211 | 1.05 | 221 | 1.42 | 234 | 2.22 | 240 | 1.34 | |||||||
| Time deposits -- $100,000 and over | 1,221 | 1.04 | 1,221 | 1.24 | 1,311 | 1.56 | 1,463 | 2.06 | 1,303 | 1.50 | |||||||
| Total interest-bearing deposits | 7,940 | 0.60 | 7,563 | 0.67 | 7,253 | 0.89 | 6,858 | 1.16 | 7,407 | 0.82 | |||||||
| Federal funds purchased and securities sold under repurchase agreements | 236 | 3.38 | 234 | 3.41 | 472 | 1.77 | 723 | 1.22 | 415 | 2.00 | |||||||
| Other borrowings | 639 | 4.41 | 511 | 3.27 | 494 | 1.75 | 526 | 2.20 | 542 | 3.01 | |||||||
| Total interest-bearing liabilities | 8,815 | 0.95 | 8,308 | 0.91 | 8,219 | 0.99 | 8,107 | 1.23 | 8,364 | 1.02 | |||||||
| Noninterest-bearing deposits | 7,790 | 7,214 | 6,770 | 5,983 | 6,945 | ||||||||||||
| Other liabilities | 249 | 212 | 234 | 271 | 241 | ||||||||||||
| Total equity | 2,241 | 2,204 | 2,146 | 2,050 | 2,161 | ||||||||||||
| Total liabilities and equity | $ 19,095 | $ 17,938 | $ 17,369 | $ 16,411 | $ 17,711 | ||||||||||||
| Net interest spread | 3.26 % | 3.49 % | 3.50 % | 3.44 % | 3.41 % | ||||||||||||
| Net interest margin | 3.74 % | 3.94 % | 3.98 % | 4.00 % | 3.91 % | ||||||||||||
| Average prime rate | 3.25 % | 3.25 % | 3.25 % | 3.25 % | 3.25 % | ||||||||||||
| Note: Certain prior period balances have been reclassified to conform to current period presentation. | |||||||||||||||||
| CITY NATIONAL CORPORATION | ||||||||||||
| CAPITAL AND CREDIT RATING DATA | ||||||||||||
| (unaudited) | ||||||||||||
| 2010 | 2009 | |||||||||||
| Second Quarter | First Quarter | Year To Date | Fourth Quarter | Third Quarter | Second Quarter | First Quarter | Year To Date | |||||
| Per Common Share: | ||||||||||||
| Shares Outstanding (in thousands): | ||||||||||||
| Average - Basic | 52,012 | 51,690 | 51,852 | 51,509 | 51,482 | 50,416 | 48,046 | 50,272 | ||||
| Average - Diluted | 52,542 | 52,092 | 52,336 | 51,720 | 51,660 | 50,551 | 48,130 | 50,421 | ||||
| Period-end | 52,089 | 51,888 | 51,536 | 51,499 | 51,471 | 48,224 | ||||||
| Book value for common shareholders | $ 36.51 | $ 35.43 | $ 34.74 | $ 34.99 | $ 34.14 | $ 33.87 | ||||||
| Closing price: | ||||||||||||
| High | $ 64.13 | $ 54.86 | $ 64.13 | $ 47.32 | $ 43.80 | $ 44.14 | $ 47.76 | $ 47.76 | ||||
| Low | 51.23 | 45.81 | 45.81 | 36.59 | 33.13 | 31.87 | 22.83 | 22.83 | ||||
| Period-end | 51.23 | 53.97 | 45.60 | 38.93 | 36.83 | 33.77 | ||||||
| Capital Ratios (Dollars in millions): | ||||||||||||
| Risk-based capital | ||||||||||||
| Risk-weighted assets (1) | $ 13,807 | $ 13,856 | $ 14,431 | $ 13,669 | $ 13,887 | $ 13,619 | ||||||
| Tier 1 common shareholders' equity | $ 1,337 | $ 1,309 | $ 1,286 | $ 1,261 | $ 1,293 | $ 1,173 | ||||||
| Percentage of risk-weighted assets (2) | 9.69 | 9.44 | 8.91 | 9.22 | 9.31 | 8.61 | ||||||
| Tier I capital | $ 1,614 | $ 1,586 | $ 1,760 | $ 1,682 | $ 1,715 | $ 1,594 | ||||||
| Percentage of risk-weighted assets | 11.69 % | 11.44 % | 12.20 % | 12.31 % | 12.35 % | 11.71 % | ||||||
| Total capital | $ 2,027 | $ 1,998 | $ 2,186 | $ 2,099 | $ 1,969 | $ 1,845 | ||||||
| Percentage of risk-weighted assets | 14.68 % | 14.42 % | 15.15 % | 15.35 % | 14.18 % | 13.55 % | ||||||
| Tier I leverage ratio | 7.96 % | 8.03 % | 9.48 % | 9.66 % | 10.16 % | 10.04 % | ||||||
| Period-end equity to period-end assets | 9.08 % | 9.29 % | 9.55 % | 12.06 % | 12.31 % | 12.10 % | ||||||
| Period-end common shareholders' equity to period-end assets | 8.96 % | 9.16 % | 8.49 % | 9.79 % | 9.95 % | 9.65 % | ||||||
| Average equity to average assets | 9.05 % | 9.88 % | 9.46 % | 11.73 % | 12.29 % | 12.35 % | 12.49 % | 12.20 % | ||||
| Average common shareholders' equity to average assets | 8.93 % | 9.10 % | 9.01 % | 9.56 % | 9.96 % | 9.96 % | 9.96 % | 9.85 % | ||||
| Period-end tangible equity to period-end tangible assets (2) | 6.77 % | 6.86 % | 7.24 % | 9.43 % | 9.77 % | 9.44 % | ||||||
| Period-end tangible common shareholders' equity to period-end tangible assets (2) | 6.65 % | 6.73 % | 6.15 % | 7.10 % | 7.35 % | 6.91 % | ||||||
| Average tangible equity to average tangible assets (2) | 6.70 % | 7.49 % | 7.09 % | 9.20 % | 9.72 % | 9.77 % | 9.75 % | 9.60 % | ||||
| Average tangible common shareholders' equity to average tangible assets (2) | 6.58 % | 6.68 % | 6.63 % | 6.96 % | 7.33 % | 7.30 % | 7.14 % | 7.18 % | ||||
| Senior Debt Credit Ratings | ||||||||||||
| For The Period Ended June 30, 2010 | ||||||||||||
| Moody's | Fitch | Standard & Poor's | DBRS | |||||||||
| City National Bank | Aa3 | A-- | A-- | A (high) | ||||||||
| City National Corporation | A1 | A-- | BBB+ | A | ||||||||
| (1) In accordance with applicable bank regulatory guidelines, the Company calculates risk-weighted assets by assigning assets and credit equivalent amounts of derivatives and off-balance sheet items to one of several broad risk categories according to the obligor, or, if relevant, the guarantor or the nature of the collateral. The aggregate dollar amount in each risk category is then mutlipled by the risk weight associated with that category. The resulting weighted values from each of the risk categories are added together for determining risk-weighted assets. | ||||||||||||
| (2) The Tier 1 common shareholders' equity to risk-weighted assets ratio, tangible equity to tangible assets ratio, and tangible common shareholders' equity to tangible assets ratio are non-GAAP financial measures. For notes on non-GAAP measures, see pages 13 and 14 of the Selected Financial Information. | ||||||||||||
| CITY NATIONAL CORPORATION | ||||||||||||
| NON-GAAP FINANCIAL MEASURES | ||||||||||||
| (unaudited) | ||||||||||||
| (a) Net income available to common shareholders, excluding unusual items | ||||||||||||
| A reconciliation of the GAAP to non-GAAP measure is set forth below: | ||||||||||||
| Quarter Ending June 30, 2010 | ||||||||||||
| (Dollars in millions, except per share amounts) | Amount | Per Share | ||||||||||
| Net income available to common shareholders | $ 41.3 | $ 0.78 | ||||||||||
| After tax adjustments: | ||||||||||||
| Less: Gain on acquisitions | (14.7) | (0.28) | ||||||||||
| Add: Acquisition transaction costs | 1.0 | 0.02 | ||||||||||
| Add: Net impairment loss on covered loans | 14.2 | 0.27 | ||||||||||
| Add: Community Reinvestment Act-related receivable write-off | 2.9 | 0.05 | ||||||||||
| Less: Net tax benefits | (14.7) | (0.28) | ||||||||||
| Net income available to common shareholders, excluding unusual items | $ 30.0 | $ 0.56 | ||||||||||
| Management believes these non-GAAP financial measures enhance the comparability of the financial results with prior periods as well as to highlight the effects of unusual charges in the periods presented. The Company believes that investors may find it useful to see these non-GAAP financial measures to analyze the Company's underlying financial performance without the impact of unusual items. | ||||||||||||
| (b) Tier 1 common shareholders' equity to risk-based assets | ||||||||||||
| The Tier 1 common shareholders' equity to risk-based assets ratio, also known as Tier 1 common ratio, is calculated by dividing (a) Tier 1 capital less non-common components including qualifying perpetual preferred stock, qualifying noncontrolling interest in subsidiaries and quaifying trust preferred securities by (b) risk-weighted assets. Tier 1 capital and risk-weighted assets are calculated in accordance with applicable bank regulatory guidelines. This ratio is a non-GAAP measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews this measure in evaluating the Company's capital levels and has included these ratios in response to market participant interest in the Tier 1 common shareholders' equity to risk-based assets ratio. | ||||||||||||
| 2010 | 2009 | |||||||||||
| (Dollars in thousands) | Second Quarter |
First Quarter |
Fourth Quarter |
Third Quarter |
Second Quarter |
First Quarter |
||||||
| Tier 1 capital | $ 1,614,360 | $ 1,585,727 | $ 1,760,136 | $ 1,682,155 | $ 1,714,912 | $ 1,594,371 | ||||||
| Less: Preferred stock | -- | -- | (196,048) | (391,593) | (391,091) | (390,590) | ||||||
| Less: Noncontrolling interest | (25,088) | (25,088) | (26,339) | (24,748) | (25,387) | (25,441) | ||||||
| Less: Trust preferred securities | (252,088) | (252,062) | (252,036) | (5,155) | (5,155) | (5,155) | ||||||
| Tier 1 common shareholders' equity (A) | $ 1,337,184 | $ 1,308,577 | $ 1,285,713 | $ 1,260,659 | $ 1,293,279 | $ 1,173,185 | ||||||
| Risk-weighted assets (B) | $ 13,806,751 | $ 13,856,028 | $ 14,430,857 | $ 13,669,051 | $13,886,674 | $ 13,618,545 | ||||||
| Tier 1 common shareholders' equity to risk-based assets (A)/(B) | 9.69 | 9.44 % | 8.91 % | 9.22 % | 9.31 % | 8.61 % | ||||||
| (c) Operating Revenue | ||||||||||||
| Operating revenue (excluding gain on acquisitions) is a non-GAAP financial measure that represents total revenue less gain on FDIC-assisted acquisitions. Management reviews operating revenue in evaluating the Company's financial performance and believes that it enhances the comparability of the financial results with prior periods. | ||||||||||||
| Total revenue for the second quarter of 2010 was $304.5 million, an increase of 39 percent from $219.8 million of total revenue in the second quarter of 2009. Operating revenue, which excludes gain on acquisitions of $25.2 million for the second quarter of 2010, was $279.3 million compared to operating revenue of $219.8 million for the second quarter of 2009. There was no gain on acquisitions in the second quarter of 2009. Operating revenue increased 27 percent from the second quarter of 2009. | ||||||||||||
| CITY NATIONAL CORPORATION | ||||||||||||||||
| NON-GAAP FINANCIAL MEASURES (continued) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (d) Tangible equity and tangible common shareholders' equity ratios | ||||||||||||||||
| Tangible equity to tangible assets is a non-GAAP financial measure that represents total equity less identifiable intangible assets and goodwill divided by total assets less identifiable intangible assets and goodwill. Tangible common shareholders' equity to tangible assets is a non-GAAP financial measure that represents tangible equity less preferred stock and noncontrolling interest divided by total assets less identifiable intangible assets and goodwill. Management reviews both these measures in evaluating the Company's capital levels and has included these ratios in response to market participant interest in tangible equity and tangible common shareholders' equity as a measure of capital. A reconciliation of the GAAP to non-GAAP measure is set forth below: | ||||||||||||||||
| 2010 | 2009 | |||||||||||||||
| (Dollars in thousands) | Second Quarter | First Quarter | Year To Date | Fourth Quarter | Third Quarter | Second Quarter | First Quarter | Year To Date | ||||||||
| Period End: | ||||||||||||||||
| Total equity | $ 1,926,960 | $ 1,863,411 | $ 2,012,764 | $ 2,218,492 | $ 2,173,916 | $ 2,049,370 | ||||||||||
| Less: Goodwill and other intangibles | (524,820) | (523,135) | (525,583) | (533,367) | (496,562) | (498,194) | ||||||||||
| Tangible equity (A) | 1,402,140 | 1,340,276 | 1,487,181 | 1,685,125 | 1,677,354 | 1,551,176 | ||||||||||
| Less: Noncontrolling interest | (25,189) | (25,189) | (26,441) | (24,849) | (25,387) | (25,441) | ||||||||||
| Less: Preferred stock | -- | -- | (196,048) | (391,593) | (391,091) | (390,590) | ||||||||||
| Tangible common shareholders' equity (B) | $ 1,376,951 | $ 1,315,087 | $ 1,264,692 | $ 1,268,683 | $ 1,260,876 | $ 1,135,145 | ||||||||||
| Total assets | $ 21,231,447 | $ 20,066,475 | $ 21,078,757 | $ 18,400,604 | $ 17,660,785 | $ 16,933,530 | ||||||||||
| Less: Goodwill and other intangibles | (524,820) | (523,135) | (525,583) | (533,367) | (496,562) | (498,194) | ||||||||||
| Tangible assets (C) | $ 20,706,627 | $ 19,543,340 | $ 20,553,174 | $ 17,867,237 | $ 17,164,223 | $ 16,435,336 | ||||||||||
| Period-end tangible equity to period-end tangible assets (A)/(C) | 6.77% | 6.86% | 7.24% | 9.43% | 9.77% | 9.44% | ||||||||||
| Period-end tangible common shareholders' equity to period-end tangible assets (B)/(C) | 6.65% | 6.73% | 6.15% | 7.10% | 7.35% | 6.91% | ||||||||||
| Average Balance: | ||||||||||||||||
| Total equity | $ 1,881,635 | $ 2,003,150 | $ 1,942,057 | $ 2,240,642 | $ 2,204,220 | $ 2,145,859 | $ 2,050,401 | $ 2,160,922 | ||||||||
| Less: Goodwill and other intangibles | (522,311) | (524,838) | (523,567) | (533,314) | (510,514) | (497,487) | (499,229) | (510,230) | ||||||||
| Tangible equity (D) | 1,359,324 | 1,478,312 | 1,418,490 | 1,707,328 | 1,693,706 | 1,648,372 | 1,551,172 | 1,650,692 | ||||||||
| Less: Noncontrolling interest | (25,189) | (26,427) | (25,805) | (24,815) | (25,369) | (25,438) | (25,441) | (25,264) | ||||||||
| Less: Preferred stock | -- | (132,915) | (66,090) | (389,688) | (391,353) | (390,838) | (390,348) | (390,557) | ||||||||
| Tangible common shareholders' equity (E) | $ 1,334,135 | $ 1,318,970 | $ 1,326,595 | $ 1,292,825 | $ 1,276,984 | $ 1,232,096 | $ 1,135,383 | $ 1,234,871 | ||||||||
| Total assets | $ 20,799,187 | $ 20,267,248 | $ 20,534,687 | $ 19,095,212 | $ 17,938,231 | $ 17,369,311 | $ 16,411,240 | $ 17,711,495 | ||||||||
| Less: Goodwill and other intangibles | (522,311) | (524,838) | (523,567) | (533,314) | (510,514) | (497,487) | (499,229) | (510,230) | ||||||||
| Tangible assets (F) | $ 20,276,876 | $ 19,742,410 | $ 20,011,120 | $ 18,561,898 | $ 17,427,717 | $ 16,871,824 | $ 15,912,011 | $ 17,201,264 | ||||||||
| Average tangible equity to average tangible assets (D)/(F) | 6.70% | 7.49% | 7.09% | 9.20% | 9.72% | 9.77% | 9.75% | 9.60% | ||||||||
| Average tangible common shareholders' equity to average tangible assets (E)/(F) | 6.58% | 6.68% | 6.63% | 6.96% | 7.33% | 7.30% | 7.14% | 7.18% | ||||||||