Financial Services Company City National ( CYN) second quarter earnings increased 1.8% due to strong loan growth and fee income, offset by decline in net interest margin.

The company earned $58.74 million, or $1.16 a share in the quarter, compared with $57.71 million, or $1.13 a share, a year ago. Analysts surveyed by Thomson First Call were expecting earnings of $1.15 a share in the most recent quarter.

Second-quarter revenue rose 5.8% from a year ago to $212.6 million.

As previously disclosed, the Beverly Hills, Calif.-based company expects earnings a share to grow 1% to 4% for the full year 2006 compared with a year ago. Analysts were forecasting earnings of $4.7 a share.

In the second quarter, net interest income rose 2.9% to $154 million and net interest margin declined 8 basis points to 4.65% from second quarter 2005.

Non interest income rose 14.1% to $58.59 million due to the growth of City National's wealth management and international services fee revenue.

Average loans rose 13.2% to $9.9 billion from the second quarter of 2005 led by increases in commercial loans and residential mortgages. Average deposits of $11.93 billion were 2.2% higher than the same period, a year ago.

During the quarter the company repurchased 1.5 million shares at an average cost of $70.34 a share.

"City National made good progress in the second quarter, continuing to add clients, invest for the future and build shareholder value," said the company. "We're pleased that both average loans and fee income grew at double-digit rates and that credit quality was excellent.

Shares rose $1.91 Thursday to $66.91.
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