In the first quarter of 2013, the company recorded a $0.1 million non-cash net impairment charge to reflect results of the quarterly update of cash-flow projections for the FDIC-covered loans. In the fourth quarter of 2012, the company recorded a $3.5 million net gain. The first-quarter charge reflects a $9.9 million provision for losses on covered loans and an offsetting $9.8 million of noninterest income related to City National's loss-sharing agreements with the FDIC. In addition to the $0.1 million non-cash net impairment charge for the quarter, the company recognized $0.1 million of other covered assets expense. Net expense from FDIC-covered assets, excluding the base yield, totaled $0.2 million in the first quarter of 2013, compared with net income of $2.8 million in the fourth quarter of 2012. (The base yield is the yield on covered assets, excluding income related to covered loans that are repaid or charged off.)
City National will continue to update cash-flow projections for covered loans on a quarterly basis. Due to the uncertainty in the future performance of the covered loans, additional impairments may be recognized in the future.
OREO assets acquired by City National in its four FDIC-assisted bank acquisitions and subject to loss-sharing agreements totaled $43.8 million at March 31, 2013, compared to $78.5 million at the end of the first quarter of 2012 and $58.3 million at December 31, 2012.
NONINTEREST INCOMENoninterest income was $93.5 million in the first quarter of 2013, up 24 percent from the first quarter of 2012 but down 6 percent from the fourth quarter of 2012. The increase from the year-earlier period was due largely to City National's third-quarter 2012 acquisition of Rochdale Investment Management, its second-quarter 2012 acquisition of First American and higher cash management income. The decrease from the fourth quarter of 2012 was primarily attributable to lower distribution income from investments and lower income from client swap transactions and international services fees, as well as higher FDIC loss-sharing expense.