City National's CEO Discusses Q1 2012 Results - Earnings Call Transcript

City National Corporation (CYN)

Q1 2012 Earnings Call

April 19, 2012 5:00 pm ET

Executives

Cary Walker – Senior Vice President and Manager of Corporate Communications

Russell Goldsmith – Chairman and Chief Executive Officer

Christopher J. Carey – Executive Vice President and Chief Financial Officer

Analysts

Steven Alexopoulos – J.P. Morgan Securities LLC

Aaron James Deer – Sandler O'Neill & Partners L.P.

Joseph Morford – RBC Capital Markets

Brian Paul Klock – Keefe, Bruyette & Woods, Inc.

Stephen E Scinicariello – UBS Securities LLC

L. Erika Penala – Bank of America Merrill Lynch

Jennifer Haskew Demba – SunTrust Robinson Humphrey, Inc.

Ken A. Zerbe – Morgan Stanley

Jeff King Davis – Guggenheim Securities, LLC

Casey Haire – Jefferies & Co.

John G. Pancari – Evercore Partners Inc.

Presentation

Operator

Good afternoon. I would like to welcome everyone to this discussion of City National Corporation’s first quarter 2012 financial results. My name is Christie and I will be your coordinator for today. At this time, all participants are in listen-only mode. After the speakers’ remarks, there will be a question-and-answer period for analysts and investors (Operator Instructions).

This call is being recorded and will be available shortly after it is completed on City National’s website at cnb.com. Now I will turn this call over to Cary Walker, Senior Vice President and Manager of Corporate Communications for City National, please proceed.

Cary Walker

Thank you and good afternoon. Here to discuss City National’s first quarter 2012 highlights are Russell Goldsmith, our President and Chief Executive Officer and Chris Carey, our Chief Financial Officer.

This call will include comments and forward-looking statements based on current plans, expectations, events and financial industry trends that may affect the company’s future operating results and financial position. Such statements involve risks and uncertainties and future activities and results may differ materially from these expectations.

The speakers on this call claim the protection of the Safe Harbor provisions contained in the Securities Litigation Reform Act of 1995. For a complete discussion of the risks and uncertainties that may cause actual results to differ materially from expected results, see the company’s Annual Report on Form 10-K for the year ended December 31, 2010. This afternoon, City National issued a news release outlining its first quarter 2012 financial results, to obtain a copy, please visit our website at cnb.com.

Now I'll turn the call over to our CEO, Russell Goldsmith.

Russell Goldsmith

Good afternoon and thank you all for joining us again. I'm pleased to report to you today that City National announced this afternoon that its first quarter net income was $46.3 million, a 17% increase from the first quarter of 2011. This is $0.86 a share, up from $0.74 last year.

The first quarter was quite solid. Assets grew 11% from the first quarter of last year reaching a new City National record of $24 billion in assets. Loans and deposits both grew at double-digit rates and credit quality continued to improve. Of course, City National still faces the challenges of extremely low interest rates and a modestly recovering economy, like the rest of the banking industry and that impacts our performance. At the same time we are also investing selectively as we always do in a number of good opportunities and additional capabilities that will build long-term value for our shareholders and our clients.

In a few minutes Chris Carey and I will be happy to take your questions. First though, we’d both like to briefly discuss some of the first quarter highlights. Let me start with loan growth. Average loans excluding of course our covered loans were $12.4 billion which is an increase of 10% from the first quarter of last year.

I'm happy to say that loans increased for the fourth consecutive quarter and period end balances grew $439 million from year-end 2011. That’s a quarterly increase of 4%. In part it reflected kind of an order of importance for stronger gains in C&I lending. Second, a modest pick up in commercial real estate lending and third, new and refinanced home loans to private client borrowers. So I think there are some positive trends in those numbers in where we’re seeing the growth.

Loan production actually reached a new record for City National in the first quarter. At $741 million, it was up 15% from the fourth quarter and 51% from a year ago. Line utilization actually ticked up slightly, but at the same time, it’s still well below our historical levels. We have seen a steady rise in both loan outstandings and loan commitments through last year and now into the first quarter of 2012. And I’m happy to say that our loan pipeline, looking forward, remains healthy.

Credit quality, I’m also happy to say remains very solid and improved noticeably in our criticized and classified assets. Excluding the covered loan portfolio, non-performing assets declined slightly and we had net recoveries of about $4.5 million in the quarter as opposed to net charge-offs in the last quarter. Excluding those covered loans, City National recorded no loan loss provision in the first quarter of 2012 as compared to a modest provision in the last quarter of last year.

Given the improving strength and increased size of our loan portfolio today, City national remains quite well reserved at 2.09% of total loans. Nonetheless, we still expect to have some loan loss provisions during the remainder of this year provided we have the loan growth that we’re anticipating.

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