City National Corporation Grows First-Quarter 2013 Net Income To $51.5 Million, Up 11 Percent From First-Quarter 2012

Loan Balances Exceed $15 Billion for the First Time

Assets and Deposits Grow at Double-Digit Rates Year-Over-Year

LOS ANGELES, April 18, 2013 (GLOBE NEWSWIRE) -- City National Corporation (NYSE:CYN), the parent company of wholly owned City National Bank, today reported first-quarter 2013 net income of $51.5 million, up 11 percent from $46.3 million in the year-ago period. Earnings per share were $0.90, compared with $0.86 per share in the first quarter of 2012.

City National also announced today that its Board of Directors has maintained and approved a quarterly common stock cash dividend of $0.25 per share, payable on May 15, 2013 to stockholders of record on May 1, 2013. The Board has also authorized a quarterly cash dividend of $13.75 per share on the 5.50 percent Non-Cumulative Perpetual Preferred Stock, Series C (equivalent to $0.34375 per related depositary share), payable on May 13, 2013 to shareholders of record on April 29, 2013.

FIRST-QUARTER 2013 HIGHLIGHTS
  • Period-end loans and leases, excluding loans covered by City National's acquisition-related loss-sharing agreements with the Federal Deposit Insurance Corporation (FDIC), reached a record $15.2 billion, up 19 percent from March 31, 2012 and up 3 percent from December 31, 2012. Average first-quarter loan and lease balances, excluding FDIC-covered loans, grew to $14.8 billion, up 19 percent from the first quarter of last year.
  • First-quarter deposit balances averaged $22.4 billion, up 11 percent from the first quarter of 2012. Average core deposits, which equal 97 percent of total balances, were up 12 percent from the first quarter of 2012. 
  • Revenue for the first quarter of 2013 reached $294.6 million, up 7 percent from the year-ago period but down 3 percent from the fourth quarter of 2012.
  • Excluding FDIC-covered loans, first-quarter 2013 results included no provision for loan and lease losses. City National recorded no provision in the first quarter of 2012 and a $7.0 million provision in the fourth quarter of 2012. The company remains appropriately reserved at 1.86 percent of total loans, excluding FDIC-covered loans.
  • City National's assets under management or administration grew to $59.0 billion, up 18 percent from the first quarter of 2012 and 4 percent from the fourth quarter of 2012. Trust and investment fees were $46.7 million, up 39 percent from the first quarter of 2012 and 6 percent higher than the fourth quarter of 2012.

"City National continued to grow revenue and net income in the first quarter, thanks to strong loan production, sound credit quality and the addition of new clients across the bank," said President and CEO Russell Goldsmith. "Earnings increased despite low interest rates pressuring asset yields and a modest seasonal reduction in deposits. The fundamental strength of our business and our organization is evident in the fact that loans, deposits and noninterest income all grew at double-digit rates from the first quarter of 2012. Expenses, excluding two acquisitions, declined slightly even as we continued to invest in the company's future growth with the strategic addition of talented colleagues, innovative products, state-of-the-art technology and five new offices that will open this year.

"City National has now been profitable in every quarter for 20 consecutive years, and the company has more capital, capabilities, talent, resources and opportunities than ever before.  All in all, it was a good quarter."

  For the three months ended   For the three  
Dollars in millions, March 31, % months ended %
except per share data 2013 2012 Change December 31, 2012 Change
Earnings Per Common Share  $ 0.90  $ 0.86 5  $ 0.87 3
Net Income Attributable to CNC  51.5  46.3 11  47.2 9
Net Income Available to Common          
Shareholders  49.1  46.3 6  47.2 4
           
Average Assets  $ 27,709.2  $ 23,644.9 17  $ 27,255.9 2
Return on Average Assets 0.75% 0.79% (5) 0.69% 9
Return on Average Common Equity 8.43% 8.58% (2) 8.03% 5
Return on Average Tangible          
Common Equity 1  12.17% 11.57% 5 11.66% 4

ASSETS

Total assets at March 31, 2013 were $27.4 billion, up 14 percent from the first quarter of 2012, but down 4 percent from the fourth quarter of last year. The change from the fourth quarter reflects a seasonal decline in deposits, which led to lower levels of securities. 

NET INTEREST INCOME

Fully taxable-equivalent net interest income was $206.3 million in the first quarter of 2013, virtually unchanged from the same period of 2012 but down 1 percent from the fourth quarter of last year. 

Average first-quarter deposits were $22.4 billion, up 11 percent from the year-ago period but down 4 percent from the fourth quarter of 2012. Period-end deposits totaled $22.9 billion, up 10 percent from March 31, 2012 but down 2 percent from December 31, 2012. The declines from the fourth quarter of 2012 reflect traditional seasonal business patterns.

First-quarter 2013 average noninterest-bearing deposits were up 21 percent from the same period of 2012, but down 6 percent from the fourth quarter of last year.

Treasury Services deposit balances, which consist primarily of title, escrow and property management deposits, averaged $2.3 billion in the first quarter of 2013, up 15 percent from the same period of last year but down 6 percent from the fourth quarter of 2012.

First-quarter average loan balances, excluding FDIC-covered loans, were $14.8 billion, up 19 percent from the first quarter of 2012 and up 6 percent from the fourth quarter of last year.

First-quarter average commercial loans were up 29 percent from the same period in 2012 and 8 percent higher than the fourth quarter of 2012. The year-over-year increase was primarily due to organic loan growth, as well as the acquisition of First American Equipment Finance in the second quarter of 2012.

Average balances for commercial real estate mortgages were up 32 percent from the first quarter of 2012, and they increased 11 percent from the fourth quarter of last year. Average balances for commercial real estate construction loans declined 25 percent from the first quarter of 2012, but were virtually unchanged from the fourth quarter of last year.

Average balances for single-family residential mortgage loans were up 5 percent from the year-ago period and 1 percent higher than the fourth quarter of 2012.

Average securities for the first quarter of 2013 totaled $9.8 billion, up 24 percent from the first quarter of 2012 and up 1 percent from the fourth quarter of last year. Total available-for-sale securities amounted to $7.7 billion at March 31, 2013, up from $6.8 billion at the end of the first quarter of 2012 but down from $9.2 billion at December 31, 2012. The average duration of available-for-sale securities at March 31, 2013 was 2.8, compared with 2.5 at March 31, 2012 and 2.3 at the end of the fourth quarter of last year, as short-term securities holdings were reduced to fund loan growth in light of stable deposit balances.

City National's net interest margin in the first quarter of 2013 averaged 3.21 percent, compared with 3.74 percent in the first quarter of last year and 3.27 percent in the fourth quarter of 2012. The decline from the fourth quarter of 2012 was due largely to lower income from covered loans due to repayments and expected portfolio run-off.

First-quarter net interest income included $15.6 million from the FDIC-covered loans that were repaid or charged off during the quarter. This compares with $15.7 million in the first quarter of 2012 and $17.5 million in the fourth quarter of last year.

At March 31, 2013, City National's prime lending rate was 3.25 percent, unchanged from both March 31, 2012 and December 31, 2012.
  For the three months ended   For the three  
  March 31, % months ended %
Dollars in millions 2013 2012 Change December 31, 2012 Change
Average Loans and Leases, excluding Covered Loans  $ 14,809.3  $ 12,432.3 19  $ 13,984.2 6
Average Covered Loans  989.5  1,438.7 (31)  1,089.9 (9)
Average Total Securities   9,796.3  7,929.3 24  9,652.7 1
Average Earning Assets  26,046.6  22,102.7 18  25,468.0 2
Average Deposits  22,411.0  20,217.4 11  23,386.3 (4)
Average Core Deposits  21,815.2  19,520.7 12  22,781.3 (4)
Fully Taxable-Equivalent          
Net Interest Income  206.3  205.4 0  209.1 (1)
Net Interest Margin  3.21%   3.74%  (14)  3.27%  (2)

COVERED ASSETS

Loans and other real estate owned (OREO) assets acquired in City National's FDIC‑assisted bank acquisitions totaled $953.3 million at the end of the first quarter of 2013, compared to $1.4 billion at March 31, 2012 and $1.0 billion at December 31, 2012.

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 INCOME

Noninterest 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.

In the first quarter of 2013, noninterest income accounted for 32 percent of City National's total revenue, compared to 27 percent in the first quarter of 2012 and 33 percent in the fourth quarter of 2012.

Wealth Management

City National's assets under management or administration totaled $59.0 billion as of March 31, 2013, up 18 percent from the same period of 2012 and 4 percent higher than the fourth quarter of 2012.

Trust and investment fees were $46.7 million, up 39 percent from the first quarter of 2012 and 6 percent higher than the fourth quarter of 2012. The year-over-year increase was due primarily to the Rochdale acquisition, as well as higher sales and market appreciation.

Brokerage and mutual fund fees totaled $8.1 million, up 60 percent from the year-earlier period but down 4 percent from the fourth quarter of 2012. The year-over-year increase in brokerage and mutual fund fees was due to the acquisition of Rochdale, as well as slightly higher short-term interest rates.
  At or for the    At or for the  
  three months ended   three months  
  March 31, % ended %
Dollars in millions 2013 2012 Change December 31, 2012 Change
Trust and Investment Fee Revenue  $ 46.7  $ 33.7 39  $ 44.0 6
Brokerage and Mutual Fund Fees  8.1  5.0 60  8.4 (4)
Assets Under Management (1)  39,693.5  32,535.0 22  38,239.8 4
Assets Under Management or Administration (1)(2)  59,040.8  50,042.0 18  56,680.3 4
           
(1) Excludes $24.8 billion, $21.7 billion and $18.5 billion of assets under management for asset managers in which City National held a noncontrolling ownership interest as of March 31, 2013, December 31, 2012 and March 31, 2012, respectively.
(2) Assets under administration were revised to exclude City National's investments that were held in custody and serviced by the company's wealth management business. Prior period balances were reclassified to conform to current period presentation. 

Other Noninterest Income

First-quarter income from cash management and deposit transaction fees was $13.0 million, up 16 percent from the first quarter of 2012 and up 13 percent from the fourth quarter of last year. The increases were due to higher sales volume.

Fee income from foreign exchange services and letters of credit totaled $9.6 million in the first quarter of 2013, up 9 percent from the first quarter of 2012, reflecting increased client activity and the addition of new relationships. Fee income was down 15 percent from the fourth quarter of 2012, which included unusually strong year-end foreign exchange activity.

Other income was $18.4 million in the first quarter of 2013, up 36 percent from the first quarter of 2012 but down 24 percent from the fourth quarter of 2012. The increase from the year-ago period was due largely to the First American acquisition, as well as higher gains on transfers of covered loans to OREO. The decrease from the fourth quarter of last year reflects reduced income from client swap transactions, lower distribution income from investments and lower lease residual income. This was partly offset by higher gains on transfers of covered loans to OREO.

NONINTEREST EXPENSE

City National's first-quarter 2013 noninterest expense amounted to $211.3 million, up 5 percent from the first quarter of 2012. Excluding the Rochdale and First American acquisitions, noninterest expense fell 2 percent from the first quarter of last year. 1

Noninterest expense was down 5 percent from the fourth quarter of 2012. The decrease largely reflects lower legal and professional fees and OREO expense, which were partly offset by higher compensation costs, including seasonally higher payroll taxes. Fourth-quarter 2012 results included $4.7 million in legal and professional fees and charges related to the resolution of a legal claim.

CREDIT QUALITY

The following credit quality information excludes loans subject to loss-sharing agreements involving City National's FDIC-assisted transactions:

Net recoveries in the first quarter of 2013 totaled $4.8 million, or 0.13 percent of total loans and leases on an annualized basis. The company realized net recoveries of $4.5 million, or 0.15 percent, in the first quarter of 2012 and net recoveries of $2.0 million, or 0.06 percent, in the fourth quarter of 2012.

At March 31, 2013, nonperforming assets amounted to $103.1 million, or 0.68 percent of the company's total loans and leases and OREO, compared to $141.9 million, or 1.11 percent, at March 31, 2012 and $120.8 million, or 0.81 percent, at December 31, 2012.

Nonaccrual loans at March 31, 2013 were $83.3 million, compared to $112.8 million at March 31, 2012 and $99.8 million at December 31, 2012. Criticized and classified loans declined from the fourth quarter of 2012, and overall credit trends remain favorable.
  As of As of As of
  March 31, 2013 December 31, 2012 March 31, 2012
Period-end Loans (in millions) Total Nonaccrual Total Nonaccrual Total Nonaccrual
Commercial $ 7,170.4 $ 7.3 $ 6,949.1 $ 9.2 $ 5,573.8 $ 19.6
Commercial Real Estate Mortgages  2,937.5  23.1  2,829.7  33.2  2,213.1  21.1
Residential Mortgages  4,027.7  9.1  3,962.2  9.6  3,805.8  13.6
Real Estate Construction  247.1  39.6  222.8  40.9  313.4  49.0
Home Equity Loans and Lines of Credit  696.7  4.1  711.7  6.4  716.0  8.8
Other Loans  137.5  0.1  142.8  0.5  125.8  0.7
 Total Loans (1) $ 15,216.9 $ 83.3 $ 14,818.3 $ 99.8 $ 12,747.9 $ 112.8
             
Other Real Estate Owned (1)    19.8    21.0    29.1
Total Nonperforming Assets, excluding            
 Covered Assets   $ 103.1   $ 120.8   $ 141.9
             
(1) Excludes covered loans, net of allowance, of $0.9 billion, $1.0 billion and $1.3 billion at March 31, 2013, December 31, 2012 and March 31, 2012, respectively, and covered other real estate owned of $43.8 million, $58.3 million and $78.5 million at March 31, 2013, December 31, 2012 and March 31, 2012, respectively.

City National recorded no provision for credit losses in the first quarter of 2013. The company recorded no provision in the first quarter of 2012 and a $7.0 million provision in the fourth quarter of last year.

At March 31, 2013, City National's allowance for loan and lease losses totaled $282.3 million, or 1.86 percent of total loans and leases. That compares with $266.1 million, or 2.09 percent, at March 31, 2012 and $277.9 million, or 1.88 percent, at the end of the fourth quarter of 2012. The company also maintains an additional $25.2 million in reserves for off-balance-sheet credit commitments.

Commercial Loans

Commercial loan net recoveries were $2.2 million in the first quarter of 2013. This compares to net recoveries of $5.3 million in the year-earlier period and $2.0 million in the fourth quarter of 2012.

Commercial loans on nonaccrual totaled $7.3 million in the first quarter of 2013, compared to $19.6 million at March 31, 2012 and $9.2 million at December 31, 2012.

Construction Loans

City National's $247.1 million commercial real estate construction portfolio includes secured loans to developers of residential and nonresidential properties. This portfolio now represents less than 2 percent of the company's total loans.

First-quarter net recoveries of construction loans were $2.7 million, compared to net recoveries of $0.1 million in the first quarter of 2012 and $0.2 million in the fourth quarter of 2012.

At March 31, 2013, construction loans on nonaccrual totaled $39.6 million, compared to $49.0 million at March 31, 2012 and $40.9 million at December 31, 2012.

Commercial Real Estate Mortgage Loans

In the first-quarter of 2013, the company recorded no net charge-offs in its $2.9 billion commercial real estate mortgage portfolio. This compares to net charge-offs of $0.7 million in the first quarter of 2012 and net charge-offs of $0.3 million in the fourth quarter of 2012.

Commercial real estate mortgage loans on nonaccrual totaled $23.1 million, compared to $21.1 million at March 31, 2012 and $33.2 million at December 31, 2012.

Residential Mortgage Loans and Equity Loans and Lines of Credit

City National's $4.0 billion residential mortgage portfolio and $0.7 billion home equity portfolio continued to perform exceptionally well. Together, they accounted for $0.2 million in net charge-offs in the first quarter of 2013, compared to net charge-offs of $0.6 million at March 31, 2012 and net charge-offs of $0.2 million at December 31, 2012.

Residential mortgage loans and home equity loans and lines of credit on nonaccrual were $13.2 million in the first quarter of 2013, compared to $22.5 million in the first quarter of 2012 and $16.0 million in the fourth quarter of 2012.

INCOME TAXES

City National's effective tax rate for the first quarter of 2013 was 29.0 percent, down from 31.8 percent in the year-earlier period. The lower tax rate was due to the recognition of higher tax credits and tax refunds resulting from the closure of ordinary tax audits.

CAPITAL LEVELS

City National remains well-capitalized, ending the first quarter of 2013 with a Tier 1 common shareholders' equity ratio of 8.7 percent, compared to 10.2 percent at March 31, 2012 and 8.5 percent at December 31, 2012. 1 The change from the year-earlier period is a reflection of asset growth and the acquisitions of Rochdale and First American.

Total risk-based capital and Tier 1 risk-based capital ratios at March 31, 2013 were 12.7 percent and 9.6 percent, respectively. City National's Tier 1 leverage ratio at March 31, 2013 was 6.7 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 Tier 1 leverage ratios at December 31, 2012 were 12.5 percent, 9.4 percent and 6.6 percent, respectively.

The period-end ratio of equity to total assets at March 31, 2013 was 9.3 percent, compared to 9.2 percent at March 31, 2012 and 8.8 percent at December 31, 2012.

2013 OUTLOOK

Management continues to expect net income growth in 2013 to be modest. Nonetheless, loan and deposit balances are expected to increase, and credit quality should remain strong, though rising loan balances may require a slightly higher loan-loss provision. Low interest rates and a very flat yield curve will continue to put pressure on the company's net interest margin. This outlook reflects management's expectations for moderate economic growth throughout 2013.

CONFERENCE CALL

City National Corporation will host a conference call this afternoon to discuss first-quarter 2013 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 21764985. A listen-only live broadcast of the call also will be available on the investor relations page of the company's Website at 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 78 offices, including 16 full-service regional centers, in Southern California, the San Francisco Bay Area, Nevada, New York City, Nashville and Atlanta. The corporation and its investment affiliates manage or administer $59 billion in client investment assets, including nearly $40 billion under direct management.

For more information about City National, visit the company's Website at 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.

A number of factors, many 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) changes in general economic, political, or industry conditions and the related credit and market conditions and the impact they have on the company and its customers, including changes in consumer spending, borrowing and savings habits; (2) the impact on financial markets and the economy of the level of U.S. and European debt; (3) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System; (4) continued delay in the pace of economic recovery and continued stagnant or decreasing employment levels; (5) the effect of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations to be promulgated by supervisory and oversight agencies implementing the new legislation, taking into account that the precise timing, extent and nature of such rules and regulations and the impact on the company is uncertain; (6) the impact of revised capital requirements under Basel III; (7) significant changes in applicable laws and regulations, including those concerning taxes, banking and securities; (8) volatility in the municipal bond market; (9) changes in the level of nonperforming assets, charge-offs, other real estate owned and provision expense; (10) 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; (11) changes in inflation, interest rates, and market liquidity which may impact interest margins and impact funding sources; (12) the company's ability to attract new employees and retain and motivate existing employees; (13) increased competition in the company's markets and our ability to increase market share and control expenses; (14) changes in the financial performance and/or condition of the company's borrowers, including adverse impact on loan utilization rates, delinquencies, defaults and customers' ability to meet certain credit obligations, changes in customers' suppliers, and other counterparties' performance and creditworthiness; (15) 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; (16) soundness of other financial institutions which could adversely affect the company; (17) protracted labor disputes in the company's markets; (18) the impact of natural disasters, terrorist activities or international hostilities on the operations of our business or the value of collateral; (19) the effect of acquisitions and integration of acquired businesses and de novo branching efforts; (20) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or regulatory agencies; (21) the impact of cyber security attacks or other disruptions to the company's information systems and any resulting compromise of data or disruptions in service; and (22) the success of the company at managing the risks involved in the foregoing.

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, please refer to the company's Annual Report on Form 10-K for the year ended December 31, 2012. 

1 For notes on non-GAAP measures, see pages 15 and 16 of the Selected Financial Information.
 
CITY NATIONAL CORPORATION
FINANCIAL HIGHLIGHTS
(unaudited)
       
  Three Months
For The Period Ended March 31, 2013 2012 % Change
Per Common Share      
Net income available to common shareholders      
Basic  $ 0.90  $ 0.86  5
Diluted  0.90  0.86  5
Dividends  --   0.25  (100)
Book value  44.50  41.77  7
       
Results of Operations: (In millions)      
Interest income  $ 216  $ 214  1
Interest expense 15 13  14
Net interest income 201 201  0
Net interest income (Fully taxable-equivalent) 206 205  0
Total revenue 295 276  7
Provision for credit losses on loans and leases, excluding covered loans  --  --  --
Provision for losses on covered loans  10  7  32
Net income attributable to City National Corporation 52 46  11
Net income available to common shareholders 49 46  6
       
Financial Ratios:      
Performance Ratios:      
Return on average assets 0.75% 0.79%  
Return on average common equity  8.43  8.58  
Return on average tangible common equity (1)  12.17  11.57  
Period-end equity to period-end assets  9.32  9.15  
Net interest margin  3.21  3.74  
Expense to revenue ratio  68.95  67.27  
Capital Adequacy Ratios (Period-end):      
Tier 1 leverage  6.72  6.98  
Tier 1 risk-based capital  9.64  10.20  
Total risk-based capital  12.72  12.71  
       
Asset Quality Ratios:      
Allowance for loan and lease losses to:      
Total loans and leases, excluding covered loans 1.86% 2.09%  
Nonaccrual loans  339.03  235.87  
Nonperforming assets, excluding covered assets, to:      
Total loans and leases and other real estate owned, excluding covered assets  0.68  1.11  
Total assets  0.38  0.59  
Net recoveries to average total loans and leases, excluding covered loans (annualized) 0.13% 0.15%  
       
Average Balances: (In millions)      
Loans and leases, excluding covered loans  $ 14,809  $ 12,432  19
Covered loans 990 1,439  (31)
Securities 9,796 7,929  24
Interest-earning assets 26,047 22,103  18
Assets 27,709 23,645  17
Core deposits 21,815 19,521  12
Deposits 22,411 20,217  11
Interest-bearing liabilities 11,425 10,130  13
Common shareholders' equity 2,364 2,169  9
Total shareholders' equity 2,533 2,169  17
       
Period-End Balances: (In millions)      
Loans and leases, excluding covered loans  $ 15,217  $ 12,748  19
Covered loans 952 1,397  (32)
Securities 9,192 7,918  16
Assets 27,434 24,038  14
Core deposits 22,296 20,046  11
Deposits 22,938 20,788  10
Common shareholders' equity 2,387 2,200  9
Total shareholders' equity 2,557 2,200  16
       
Wealth Management: (In millions) (2)      
Assets under management  $ 39,694  $ 32,535  22
Assets under management or administration (3) 59,041 50,042  18
       
(1) Return on average tangible common equity is a non-GAAP measure. Refer to page 15 for further discussion of this non-GAAP measure.
(2) Excludes $24.8 billion and $18.5 billion of assets under management for asset managers in which City National held a noncontrolling ownership interest as of March 31, 2013 and March 31, 2012, respectively.
(3) Assets under administration were revised to exclude City National's investments that were held in custody and serviced by the company's wealth management business. Prior period balances were reclassified to conform to current period presentation.
 
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
       
  Three Months Ended
  March 31,
(Dollars in thousands except per share data) 2013 2012 % Change
Interest income  $ 215,800  $ 213,592  1
Interest expense  14,727  12,879  14
Net interest income  201,073  200,713  0
       
Provision for credit losses on loans and leases, excluding covered loans  --  --  --
Provision for losses on covered loans  9,892  7,466  32
       
Noninterest income      
Trust and investment fees  46,653  33,654  39
Brokerage and mutual fund fees  8,066  5,028  60
Cash management and deposit transaction fees  13,009  11,168  16
International services  9,619  8,785  9
FDIC loss sharing (expense) income, net  (4,352)  866  (603)
Gain on disposal of assets  1,114  2,191  (49)
Gain on securities  1,046  449  133
Other  18,373  13,559  36
Total noninterest income  93,528  75,700  24
       
Noninterest expense      
Salaries and employee benefits  128,195  120,245  7
Net occupancy of premises  15,989  13,686  17
Legal and professional fees  11,612  11,880  (2)
Information services  9,391  8,149  15
Depreciation and amortization  8,172  7,428  10
Amortization of intangibles  1,932  1,886  2
Marketing and advertising  8,316  6,816  22
Office services and equipment  4,946  3,948  25
Other real estate owned  5,250  12,094  (57)
FDIC assessments  5,481  4,479  22
Other  12,056  10,109  19
Total noninterest expense  211,340  200,720  5
       
Income before taxes  73,369  68,227  8
       
Applicable income taxes  21,261  21,719  (2)
       
Net income  $ 52,108  $ 46,508  12
       
Less: Net income attributable to noncontrolling interest  585  243  141
       
Net income attributable to City National Corporation  $ 51,523  $ 46,265  11
       
Less: Dividends on preferred stock  2,406  --  NM 
       
Net income available to common shareholders  $ 49,117  $ 46,265  6
       
Other Data:      
Earnings per common share - basic  $ 0.90  $ 0.86  5
Earnings per common share - diluted  $ 0.90  $ 0.86  5
Dividends paid per common share  $ --   $ 0.25  (100)
Common dividend payout ratio  -%  28.91%  (100)
Return on average assets 0.75% 0.79%  (5)
Return on average common equity 8.43% 8.58%  (2)
Return on average tangible common equity 12.17% 11.57%  5
Net interest margin (Fully taxable-equivalent) 3.21% 3.74%  (14)
Full-time equivalent employees  3,496  3,235  8
 
CITY NATIONAL CORPORATION
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(unaudited)
     
  2013 2012
  First Fourth
(Dollars in thousands except per share data) Quarter Quarter
Interest income  $ 215,800  $ 218,302
Interest expense  14,727  14,580
Net interest income  201,073  203,722
     
     
Provision for credit losses on loans and leases, excluding covered loans  --  7,000
Provision for losses on covered loans  9,892  6,498
     
Noninterest income    
Trust and investment fees  46,653  44,026
Brokerage and mutual fund fees  8,066  8,424
Cash management and deposit transaction fees  13,009  11,480
International services  9,619  11,342
FDIC loss sharing expense, net  (4,352)  (2,524)
Gain on disposal of assets  1,114  2,892
Gain on securities  1,046  13
Other  18,373  24,225
Total noninterest income  93,528  99,878
     
Noninterest expense    
Salaries and employee benefits  128,195  123,812
Net occupancy of premises  15,989  17,554
Legal and professional fees  11,612  17,844
Information services  9,391  8,896
Depreciation and amortization  8,172  8,720
Amortization of intangibles  1,932  1,932
Marketing and advertising  8,316  9,111
Office services and equipment  4,946  4,735
Other real estate owned  5,250  9,869
FDIC assessments  5,481  4,499
Other  12,056  15,044
Total noninterest expense  211,340  222,016
     
Income before taxes  73,369  68,086
     
Applicable income taxes  21,261  20,780
     
Net income  $ 52,108  $ 47,306
     
Less: Net income attributable to noncontrolling interest  585  60
     
Net income attributable to City National Corporation  $ 51,523  $ 47,246
     
Less: Dividends on preferred stock  2,406  --
     
Net income available to common shareholders  $ 49,117  $ 47,246
     
Other Data:    
Earnings per common share - basic  $ 0.90  $ 0.87
Earnings per common share - diluted  $ 0.90  $ 0.87
Dividends paid per common share  $ --   $ 0.75
Common dividend payout ratio  -%  86.16%
Return on average assets 0.75% 0.69%
Return on average common equity 8.43% 8.03%
Return on average tangible common equity 12.17% 11.66%
Net interest margin (Fully taxable-equivalent) 3.21% 3.27%
Full-time equivalent employees  3,496  3,472
 
CITY NATIONAL CORPORATION
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(unaudited)
           
  2012
  Fourth Third Second First Year to
(Dollars in thousands except per share data) Quarter Quarter Quarter Quarter Date
Interest income  $ 218,302  $ 224,768  $ 229,889  $ 213,592  $ 886,551
Interest expense  14,580  14,846  13,410  12,879  55,715
Net interest income  203,722  209,922  216,479  200,713  830,836
           
Provision for credit losses on loans and leases, excluding covered loans  7,000  2,000  1,000  --  10,000
Provision for losses on covered loans  6,498  18,089  13,293  7,466  45,346
           
Noninterest income          
Trust and investment fees  44,026  43,477  34,067  33,654  155,224
Brokerage and mutual fund fees  8,424  9,059  5,293  5,028  27,804
Cash management and deposit transaction fees  11,480  11,526  11,475  11,168  45,649
International services  11,342  9,819  10,017  8,785  39,963
FDIC loss sharing (expense) income, net (2,524)  1,667 (6,026)  866 (6,017)
Gain on disposal of assets  2,892  3,199  3,011  2,191  11,293
Gain (loss) on securities  13  817 (457)  449  822
Other  24,225  27,693  17,388  13,559  82,865
Total noninterest income  99,878  107,257  74,768  75,700  357,603
           
Noninterest expense          
Salaries and employee benefits  123,812  120,210  115,035  120,245  479,302
Net occupancy of premises  17,554  16,238  14,056  13,686  61,534
Legal and professional fees  17,844  11,757  11,359  11,880  52,840
Information services  8,896  8,660  8,539  8,149  34,244
Depreciation and amortization  8,720  8,324  8,013  7,428  32,485
Amortization of intangibles  1,932  1,932  1,518  1,886  7,268
Marketing and advertising  9,111  7,141  7,597  6,816  30,665
Office services and equipment  4,735  4,673  4,492  3,948  17,848
Other real estate owned  9,869  8,749  7,541  12,094  38,253
FDIC assessments  4,499  4,616  4,523  4,479  18,117
Other  15,044  15,586  11,843  10,109  52,582
Total noninterest expense  222,016  207,886  194,516  200,720  825,138
           
Income before taxes  68,086  89,204  82,438  68,227  307,955
           
Applicable income taxes  20,780  29,052  27,271  21,719  98,822
           
Net income  $ 47,306  $ 60,152  $ 55,167  $ 46,508  $ 209,133
           
Less: Net income attributable to noncontrolling interest  60  372  409  243  1,084
           
Net income attributable to City National Corporation  $ 47,246  $ 59,780  $ 54,758  $ 46,265  $ 208,049
           
Other Data:          
Earnings per common share - basic  $ 0.87  $ 1.10  $ 1.02  $ 0.86  $ 3.85
Earnings per common share - diluted  $ 0.87  $ 1.10  $ 1.01  $ 0.86  $ 3.83
Dividends paid per common share  $ 0.75  $ 0.25  $ 0.25  $ 0.25  $ 1.50
Common dividend payout ratio 86.16% 22.63% 24.57% 28.91% 38.96%
Return on average assets 0.69% 0.93% 0.90% 0.79% 0.82%
Return on average common equity 8.03% 10.35% 9.86% 8.58% 9.20%
Return on average tangible common equity 11.66% 15.05% 13.42% 11.57% 12.92%
Net interest margin (Fully taxable-equivalent) 3.27% 3.58% 3.91% 3.74% 3.61%
Full-time equivalent employees  3,472  3,439  3,330 3,235  
 
CITY NATIONAL CORPORATION
CONSOLIDATED PERIOD END BALANCE SHEET
(unaudited)
     
  2013 2012
  First Fourth
(In thousands) Quarter Quarter
Assets    
Cash and due from banks  $ 144,290  $ 151,969
Due from banks - interest-bearing 123,146 246,336
Federal funds sold and securities purchased under resale agreements 219,500 17,100
Securities available-for-sale 7,738,051 9,205,989
Securities held-to-maturity 1,400,890 1,398,403
Trading securities 53,526 115,059
Loans and leases:    
Commercial 7,170,370 6,949,073
Commercial real estate mortgages 2,937,457 2,829,694
Residential mortgages 4,027,741 3,962,205
Real estate construction 247,114 222,780
Home equity loans and lines of credit 696,679 711,750
Installment 137,545 142,793
Loans and leases, excluding covered loans 15,216,906 14,818,295
Allowance for loan and lease losses (282,328) (277,888)
Loans and leases, excluding covered loans, net 14,934,578 14,540,407
Covered loans, net (1) 909,563 986,223
Net loans and leases 15,844,141 15,526,630
Premises and equipment, net 152,389 149,433
Goodwill and other intangibles 688,829 690,761
Other real estate owned (2) 63,537 79,303
FDIC indemnification asset 142,906 150,018
Other assets 862,549 887,491
Total assets  $ 27,433,754  $ 28,618,492
     
Liabilities    
Deposits:    
Noninterest-bearing  $ 13,800,017  $ 14,264,797
Interest-bearing 9,137,569 9,237,558
Total deposits 22,937,586 23,502,355
Short-term borrowings 806,760 1,423,798
Long-term debt 702,967 706,051
Other liabilities 388,439 439,858
Total liabilities 24,835,752 26,072,062
     
Redeemable noncontrolling interest 41,113 41,112
     
Shareholders' equity    
Preferred stock 169,920 169,920
Common stock 54,133 53,886
Additional paid-in capital 496,013 490,339
Accumulated other comprehensive income 74,222 86,582
Retained earnings 1,788,041 1,738,957
Treasury shares (25,440) (34,366)
Total common shareholders' equity 2,386,969 2,335,398
Total shareholders' equity 2,556,889 2,505,318
Total liabilities and shareholders' equity  $ 27,433,754  $ 28,618,492
     
(1) Covered loans are net of $42.4 million and $44.8 million of allowance for loan losses as of March 31, 2013 and December 31, 2012, respectively.
(2) Other real estate owned includes $43.8 million and $58.3 million covered by FDIC loss share at March 31, 2013 and December 31, 2012, respectively.
 
CITY NATIONAL CORPORATION
CONSOLIDATED PERIOD END BALANCE SHEET
(unaudited)
         
  2012
  Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter
Assets        
Cash and due from banks  $ 151,969  $ 235,038  $ 162,894  $ 210,799
Due from banks - interest-bearing 246,336 335,300 106,109 101,375
Federal funds sold 17,100 19,500 162,000 156,000
Securities available-for-sale 9,205,989 7,872,064 6,865,881 6,838,710
Securities held-to-maturity 1,398,403 1,174,161 1,100,229 996,613
Trading securities 115,059 64,749 62,585 82,589
Loans and leases:        
Commercial 6,949,073 6,264,562 6,086,947 5,573,782
Commercial real estate mortgages 2,829,694 2,463,664 2,424,333 2,213,114
Residential mortgages 3,962,205 3,897,690 3,822,630 3,805,807
Real estate construction 222,780 242,137 301,829 313,409
Home equity loans and lines of credit 711,750 718,966 741,270 715,997
Installment 142,793 137,632 130,200 125,793
Loans and leases, excluding covered loans 14,818,295 13,724,651 13,507,209 12,747,902
Allowance for loan and lease losses (277,888) (268,440) (269,534) (266,077)
Loans and leases, excluding covered loans, net 14,540,407 13,456,211 13,237,675 12,481,825
Covered loans, net (1) 986,223 1,099,359 1,216,988 1,335,685
Net loans and leases 15,526,630 14,555,570 14,454,663 13,817,510
Premises and equipment, net 149,433 147,621 147,245 143,238
Goodwill and other intangibles 690,761 691,765 589,114 521,717
Other real estate owned (2) 79,303 110,673 117,501 107,530
FDIC indemnification asset 150,018 160,991 170,654 185,392
Other assets 887,491 884,096 863,098 877,016
Total assets  $ 28,618,492  $ 26,251,528  $ 24,801,973  $ 24,038,489
         
Liabilities        
Deposits:        
Noninterest-bearing  $ 14,264,797  $ 13,432,413  $ 12,187,075  $ 11,550,000
Interest-bearing 9,237,558 9,079,903 8,921,977 9,237,737
Total deposits 23,502,355 22,512,316 21,109,052 20,787,737
Short-term borrowings 1,423,798 211,739 322,077 222,776
Long-term debt 706,051 706,035 712,280 482,024
Other liabilities 439,858 449,728 361,300 302,951
Total liabilities 26,072,062 23,879,818 22,504,709 21,795,488
         
Redeemable noncontrolling interest 41,112 41,386 41,899 43,436
         
Shareholders' equity        
Preferred stock 169,920  --   --   -- 
Common stock 53,886 53,886 53,886 53,886
Additional paid-in capital 490,339 485,975 491,439 489,717
Accumulated other comprehensive income 86,582 93,924 82,807 81,342
Retained earnings 1,738,957 1,732,417 1,686,163 1,644,861
Treasury shares (34,366) (35,878) (58,930) (70,241)
Total common shareholders' equity 2,335,398 2,330,324 2,255,365 2,199,565
Total shareholders' equity 2,505,318 2,330,324 2,255,365 2,199,565
Total liabilities and shareholders' equity  $ 28,618,492  $ 26,251,528  $ 24,801,973  $ 24,038,489
         
(1) Covered loans are net of $44.8 million, $45.0 million, $43.1 million and $61.5 million of allowance for loan losses as of December 31, 2012, September 30, 2012, June 30, 2012 and March 31, 2012, respectively.
(2) Other real estate owned includes $58.3 million, $83.6 million, $82.8 million and $78.5 million covered by FDIC loss share at December 31, 2012, September 30, 2012, June 30, 2012 and March 31, 2012, respectively.
 
CITY NATIONAL CORPORATION
CREDIT LOSS EXPERIENCE
(unaudited)
             
  2013 2012
  First Fourth Third Second First Year To
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter Date
             
Allowance for Loan and Lease Losses, Excluding Covered Loans
             
Balance at beginning of period $ 277,888 $ 268,440 $ 269,534 $ 266,077 $ 262,557 $ 262,557
             
Net recoveries/(charge-offs):            
Commercial  2,173  2,002 (4,936)  8,092  5,283  10,441
Commercial real estate mortgages  3 (290) (241)  1,113 (666) (84)
Residential mortgages (68) (7) (535) (543) (494) (1,579)
Real estate construction  2,666  170  3,105 (4,839)  104 (1,460)
Home equity loans and lines of credit (112) (169) (32) (808) (154) (1,163)
Installment  146  319  454 (274)  417  916
Total net recoveries/(charge-offs)  4,808  2,025 (2,185)  2,741  4,490  7,071
             
Provision for credit losses  --  7,000  2,000  1,000  --  10,000
             
Transfers (to) from reserve for off-balance sheet credit commitments (368)  423 (909) (284) (970) (1,740)
             
Balance at end of period $ 282,328 $ 277,888 $ 268,440 $ 269,534 $ 266,077 $ 277,888
             
Net Recoveries/(Charge-offs) to Average Total Loans and Leases, Excluding Covered Loans (annualized):
             
Commercial 0.13% 0.12% (0.32)% 0.56% 0.40% 0.18%
Commercial real estate mortgages 0.00% (0.04)% (0.04)% 0.20% (0.12)% (0.00)%
Residential mortgages (0.01)% (0.00)% (0.06)% (0.06)% (0.05)% (0.04)%
Real estate construction 4.60% 0.29% 4.65% (6.26)% 0.13% (0.52)%
Home equity loans and lines of credit (0.06)% (0.09)% (0.02)% (0.44)% (0.09)% (0.16)%
Installment 0.42% 0.91% 1.34% (0.85)% 1.30% 0.69%
Total loans and leases, excluding covered loans 0.13% 0.06% (0.06)% 0.08% 0.15% 0.05%
             
Reserve for Off-Balance Sheet Credit Commitments            
             
Balance at beginning of period  $ 24,837  $ 25,260  $ 24,351  $ 24,067  $ 23,097  $ 23,097
Transfers from (to) allowance  368 (423)  909  284  970  1,740
Balance at end of period  $ 25,205  $ 24,837  $ 25,260  $ 24,351  $ 24,067  $ 24,837
             
Allowance for Losses on Covered Loans            
             
Balance at beginning of period  $ 44,781  $ 44,978  $ 43,147  $ 61,471  $ 64,565  $ 64,565
Provision for losses  9,892  6,498  18,089  13,293  7,466  45,346
Reduction in allowance due to loan removals (12,319) (6,695) (16,258) (31,617) (10,560) (65,130)
Balance at end of period  $ 42,354  $ 44,781  $ 44,978  $ 43,147  $ 61,471  $ 44,781
 
CITY NATIONAL CORPORATION
NONPERFORMING ASSETS
(unaudited)
           
  2013 2012
  First Fourth Third Second First
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter
           
Nonperforming assets, excluding covered assets          
Nonaccrual loans, excluding covered loans          
Commercial  $ 7,292  $ 9,207  $ 18,848  $ 19,056  $ 19,584
Commercial real estate mortgages  23,066  33,198  36,580  28,780  21,071
Residential mortgages  9,136  9,603  11,680  14,064  13,628
Real estate construction  39,608  40,882  28,963  29,676  48,964
Home equity loans and lines of credit  4,103  6,424  6,946  6,505  8,831
Installment  70  473  477  575  729
Total nonaccrual loans, excluding covered loans  83,275  99,787  103,494  98,656  112,807
           
Other real estate owned, excluding covered OREO  19,786  21,027  27,055  34,667  29,074
           
Total nonperforming assets, excluding covered assets  $ 103,061  $ 120,814  $ 130,549  $ 133,323  $ 141,881
           
Nonperforming covered assets          
Nonaccrual loans  $ --  $ --  $ --  $ 422  $ 422
Other real estate owned  43,751  58,276  83,618  82,834  78,456
Total nonperforming covered assets  $ 43,751  $ 58,276  $ 83,618  $ 83,256  $ 78,878
           
Loans 90 days or more past due on accrual status, excluding covered loans  $ 1,688  $ 981  $ 433  $ 2,065  $ 654
           
Covered loans 90 days or more past due on accrual status  $ 102,268  $ 112,396  $ 140,041  $ 190,005  $ 265,175
           
           
Allowance for loan and lease losses as a percentage of:          
Nonaccrual loans  339.03%   278.48%   259.38%   273.21%   235.87% 
Total nonperforming assets, excluding covered assets  273.94%   230.01%   205.62%   202.17%   187.54% 
Total loans and leases, excluding covered loans  1.86%   1.88%   1.96%   2.00%   2.09% 
           
Nonaccrual loans as a percentage of total loans, excluding covered loans  0.55%   0.67%   0.75%   0.73%   0.88% 
           
Nonperforming assets, excluding covered assets, as a percentage of:          
Total loans and other real estate owned, excluding covered assets  0.68%   0.81%   0.95%   0.98%   1.11% 
Total assets  0.38%   0.42%   0.50%   0.54%   0.59% 
 
CITY NATIONAL CORPORATION
AVERAGE BALANCES AND RATES
(unaudited)
         
         
  2013 2012
  First Quarter Fourth Quarter
  Average Average Average Average
(Dollars in millions) Balance Rate Balance Rate
Assets        
Interest-earning assets         
Loans and leases         
Commercial   $ 6,876  3.71%   $ 6,395  3.89% 
Commercial real estate mortgages  2,865  4.00  2,574  4.34
Residential mortgages  3,981  3.83  3,928  3.95
Real estate construction  235  4.64  236  5.33
Home equity loans and lines of credit  712  3.68  711  3.52
Installment   140  4.22  140  4.48
Total loans and leases, excluding covered loans  14,809  3.83  13,984  4.00
Covered loans  990  12.98  1,090  13.09
Total loans and leases   15,799  4.42  15,074  4.65
Due from banks - interest-bearing  193  0.24  441  0.26
Federal funds sold and securities purchased under resale agreements  154  2.99  191  0.29
Securities  9,796  1.91  9,653  1.91
Other interest-earning assets  105  3.72  109  3.75
Total interest-earning assets  26,047  3.44  25,468  3.49
Allowance for loan and lease losses (328)   (317)  
Cash and due from banks  129    231  
Other non-earning assets  1,861    1,874  
Total assets  $ 27,709    $ 27,256  
         
Liabilities and Equity        
Interest-bearing deposits        
Interest checking accounts  $ 2,217  0.08%   $ 2,098  0.08% 
Money market accounts  5,692  0.11  5,907  0.11
Savings deposits  419  0.11  384  0.12
Time deposits - under $100,000  209  0.35  210  0.41
Time deposits -- $100,000 and over  596  0.43  605  0.44
Total interest-bearing deposits  9,133  0.13  9,204  0.14
         
Federal funds purchased and securities sold under repurchase agreements  840  0.13  15 0.12
Other borrowings  1,452  3.21  917  4.97
Total interest-bearing liabilities  11,425  0.52  10,136  0.57
Noninterest-bearing deposits  13,278    14,182  
Other liabilities  473    506  
Total equity  2,533    2,432  
Total liabilities and equity  $ 27,709    $ 27,256  
         
         
Net interest spread   2.92%   2.92%
Net interest margin    3.21%    3.27%
         
Average prime rate   3.25%   3.25%
 
CITY NATIONAL CORPORATION
AVERAGE BALANCES AND RATES
(unaudited)
                     
                     
  2012
  Fourth Quarter Third Quarter Second Quarter First Quarter Year to Date
  Average Average Average Average Average Average Average Average Average Average
(Dollars in millions) Balance Rate Balance Rate Balance Rate Balance Rate Balance Rate
Assets                    
Interest-earning assets                     
Loans and leases                     
Commercial   $ 6,395  3.89%   $ 6,128  3.97%   $ 5,845  4.16%   $ 5,319  3.94%   $ 5,923  3.99% 
Commercial real estate mortgages  2,574  4.34  2,464  4.45  2,295  4.70  2,166  4.87  2,376  4.57
Residential mortgages  3,928  3.95  3,865  4.11  3,815  4.28  3,777  4.36  3,847  4.17
Real estate construction  236  5.33  265  5.67  311  4.31  314  5.33  281  5.13
Home equity loans and lines of credit  711  3.52  731  3.52  731  3.53  727  3.58  725  3.54
Installment   140  4.48  135  4.51  129  4.60  129  4.67  133  4.56
Total loans and leases, excluding covered loans  13,984  4.00  13,588  4.10  13,126  4.27  12,432  4.26  13,285  4.15
Covered loans  1,090  13.09  1,207  13.92  1,341  14.51  1,439  10.63  1,269  12.97
Total loans and leases  15,074  4.65  14,795  4.90  14,467  5.22  13,871  4.93  14,554  4.92
Due from banks - interest-bearing  441  0.26  247  0.26  293  0.24  167  0.22  287  0.25
Federal funds sold and securities purchased under resale agreements  191  0.29  105  0.28  137  0.28  15  0.28  112  0.28
Securities   9,653  1.91  8,631  2.16  7,755  2.37  7,929  2.40  8,496  2.19
Other interest-earning assets  109  3.75  114  2.40  117  2.39  121  2.30  115  2.69
Total interest-earning assets  25,468  3.49  23,892  3.82  22,769  4.15  22,103  3.97  23,564  3.85
Allowance for loan and lease losses (317)   (319)   (331)   (335)   (326)  
Cash and due from banks  231    184    148    141    176  
Other non-earning assets  1,874    1,898    1,777    1,736    1,822  
Total assets  $ 27,256    $ 25,655    $ 24,363    $ 23,645    $ 25,236  
                     
Liabilities and Equity                    
Interest-bearing deposits                    
Interest checking accounts  $ 2,098  0.08%   $ 1,981  0.09%   $ 1,890  0.10%   $ 1,952  0.11%   $ 1,981  0.10% 
Money market accounts  5,907  0.11  5,838  0.11  5,856  0.13  6,018  0.15  5,904  0.13
Savings deposits  384  0.12  371  0.14  360  0.14  358  0.14  368  0.14
Time deposits - under $100,000  210  0.41  220  0.51  228  0.50  242  0.49  225  0.48
Time deposits -- $100,000 and over  605  0.44  732  0.41  733  0.45  697  0.51  692  0.45
Total interest-bearing deposits  9,204  0.14  9,142  0.14  9,067  0.16  9,267  0.18  9,170  0.15
                     
Federal funds purchased and securities sold under repurchase agreements  15  0.12  24  0.15  4  0.11  166  0.08  52  0.09
Other borrowings  917  4.97  922  4.97  797  4.97  697  5.09  834  4.99
Total interest-bearing liabilities  10,136  0.57  10,088  0.59  9,868  0.55  10,130  0.51  10,056  0.55
Noninterest-bearing deposits  14,182    12,799    11,881    10,950    12,459  
Other liabilities  506    471    380    396    438  
Total equity  2,432    2,297    2,234    2,169    2,283  
Total liabilities and equity  $ 27,256    $ 25,655    $ 24,363    $ 23,645    $ 25,236  
                     
                     
Net interest spread   2.92%   3.23%    3.60%     3.46%     3.30% 
Net interest margin    3.27%    3.58%    3.91%    3.74%    3.61%
                     
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)
             
  2013 2012
  First Fourth Third Second First Year To
  Quarter Quarter Quarter Quarter Quarter Date
Per Common Share:            
Shares Outstanding (in thousands):            
Average - Basic  53,731  53,566  53,425  53,105  52,741  53,211
Average - Diluted  54,068  53,743  53,711  53,373  53,021  53,475
Period-end  53,638  53,216  53,190  52,822  52,661  
Book value for shareholders  $ 44.50  $ 43.89  $ 43.81  $ 42.70  $ 41.77  
Closing price:            
High  $ 59.61  $ 52.60  $ 54.48  $ 54.63  $ 54.44  $ 54.63
Low  51.13  47.27  48.20  46.39  45.39  45.39
Period-end  58.91  49.52  51.51  48.58  52.47  
             
             
Capital Ratios (Dollars in millions):            
Risk-based capital            
Risk-weighted assets (1)  $ 18,868  $ 18,627  $ 17,174  $ 16,723  $ 15,840  
Tier 1 common equity  $ 1,643  $ 1,578  $ 1,566  $ 1,597  $ 1,611  
Percentage of risk-weighted assets (2)  8.71%   8.47%   9.12%   9.55%  10.17%   
Tier 1 capital  $ 1,818  $ 1,753  $ 1,571  $ 1,602  $ 1,616  
Percentage of risk-weighted assets  9.64%  9.41%  9.15%   9.58%  10.20%   
Total capital  $ 2,399  $ 2,332  $ 2,133  $ 2,160  $ 2,013  
Percentage of risk-weighted assets  12.72%  12.52%  12.42%   12.91%  12.71%   
Tier 1 leverage ratio  6.72%  6.60%  6.29%   6.74% 6.98%  
             
Period-end equity to period-end assets  9.32%   8.75%   8.88%   9.09%  9.15%   
Period-end common equity to period-end assets  8.70%   8.16%   8.88%   9.09%  9.15%   
             
Average equity to average assets  9.14%   8.92%   8.95%   9.17%  9.17%   9.05% 
Average common equity to average assets  8.53%   8.59%   8.95%   9.17%  9.17%   8.96% 
             
Period-end tangible equity to period-end tangible assets (2)  6.98%   6.50%   6.41%   6.88%  7.13%   
Period-end tangible common equity to period-end tangible assets (2)  6.35%   5.89%   6.41%   6.88%  7.13%   
             
Average tangible equity to average tangible assets (2)  6.82%   6.55%   6.45%   7.01%  7.12%   6.77% 
Average tangible common equity to average tangible assets (2)  6.19%   6.21%   6.45%   7.01%  7.12%   6.68% 
             
             
Senior Debt Credit Ratings            
For The Period Ended March 31, 2013     Standard &      
  Moody's Fitch Poor's DBRS    
City National Bank A1 A- A- A (high)    
City National Corporation A2 A- BBB+  A     
             
             
(1) In accordance with applicable bank regulatory guidelines, risk-weighted assets are calculated 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 multiplied 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 equity to risk-weighted assets ratio, tangible equity to tangible assets ratio, and tangible common equity to tangible assets ratio are non-GAAP financial measures. See pages 15 and 16 for notes on non-GAAP measures.
 
CITY NATIONAL CORPORATION
COMPUTATION OF BASIC AND DILUTED EARNINGS PER COMMON SHARE
(unaudited)
             
             
City National applies the two-class method of computing basic and diluted earnings per common share ("EPS"). Under the two-class method, EPS is determined for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. The company grants restricted stock and restricted stock units under a share-based compensation plan that qualify as participating securities. The computation of basic and diluted EPS is presented in the following table:
             
  2013 2012
  First Fourth Third Second First Year to
(Dollars in thousands, except per share amounts) Quarter Quarter Quarter Quarter Quarter Date
Basic EPS:            
Net income attributable to City National Corporation  $ 51,523  $ 47,246  $ 59,780  $ 54,758  $ 46,265  $ 208,049
Less: Dividends on preferred stock  2,406  --  --  --  --  --
Net income available to common shareholders  $ 49,117  $ 47,246  $ 59,780  $ 54,758  $ 46,265  $ 208,049
Less: Earnings allocated to participating securities  637  652  842  788  738  3,008
Earnings allocated to common shareholders  $ 48,480  $ 46,594  $ 58,938  $ 53,970  $ 45,527  $ 205,041
             
Weighted average shares outstanding  53,731  53,566  53,425  53,105  52,741  53,211
             
Basic earnings per common share  $ 0.90  $ 0.87  $ 1.10  $ 1.02  $ 0.86  $ 3.85
             
Diluted EPS:            
Earnings allocated to shareholders (1)  $ 48,484  $ 46,594  $ 58,941  $ 53,972  $ 45,530  $ 205,050
             
Weighted average shares outstanding  53,731  53,566  53,425  53,105  52,741  53,211
Dilutive effect of equity awards  337  177  286  268  280  264
Weighted average diluted shares outstanding  54,068  53,743  53,711  53,373  53,021  53,475
             
Diluted earnings per common share  $ 0.90  $ 0.87  $ 1.10  $ 1.01  $ 0.86  $ 3.83
             
(1) Earnings allocated to shareholders for basic and diluted EPS may differ under the two-class method as a result of adding common stock equivalents for options to dilutive shares outstanding, which alters the ratio used to allocate earnings to shareholders and participating securities for the purposes of calculating diluted EPS.
 
CITY NATIONAL CORPORATION
SELECTED FINANCIAL INFORMATION ON COVERED ASSETS
(unaudited)
         
         
The following table provides selected components of income and expense related to covered assets:
         
    2013 2012
    First Fourth First
(In thousands)   Quarter Quarter Quarter
         
Summary Totals        
Net impairment (expense) income (Sum of A)    $ (71)  $ 3,517  $ 2,756
Other covered asset expense, net    (144)  (720)  (1,893)
Total (expense) income, net    $ (215)  $ 2,797  $ 863
         
Interest income (1)        
Income on loans paid-off or fully charged-off    $ 15,625  $ 17,536  $ 15,699
         
Provision for losses on covered loans        
Provision for losses on covered loans A  9,892  6,498  7,466
         
Noninterest income related to covered assets        
         
FDIC loss sharing (expense) income, net        
Gain on indemnification asset A  $ 10,616  $ 10,070  $ 10,839
Indemnification asset accretion    (4,899)  (4,818)  (4,025)
Net FDIC reimbursement for OREO and loan expenses    5,193  8,020  10,441
Removal of indemnification asset for loans paid-off or fully charged-off    (6,073)  (5,896)  (6,516)
Removal of indemnification asset for unfunded loan commitments and loans transferred to OREO    (2,569)  (1,500)  (2,113)
Removal of indemnification asset for OREO and net reimbursement to FDIC for OREO sales    (844)  (2,042)  (2,656)
Loan recoveries shared with FDIC    (4,981)  (6,303)  (4,487)
Increase in FDIC clawback liability A  (795)  (55)  (617)
Total FDIC loss sharing (expense) income, net    (4,352)  (2,524)  866
         
Gain on disposal of assets        
Net gain on sale of OREO    974  2,593  2,137
         
         
Other income        
Net gain on transfers of covered loans to OREO    3,506  1,926  2,483
Amortization of fair value on acquired unfunded loan commitments    394  408  559
OREO income    826  977  905
Other    (334)  (636)  (1,018)
Total other income    4,392  2,675  2,929
         
Total noninterest income related to covered assets    $ 1,014  $ 2,744  $ 5,932
         
Noninterest expense related to covered assets (2)        
         
Other real estate owned        
Valuation write-downs    $ 3,035  $ 4,115  $ 7,808
Holding costs and foreclosure expense    1,893  3,878  3,207
Total other real estate owned    4,928  7,993  11,015
         
Legal and professional fees    2,020  2,977  2,278
         
Other operating expense        
Other covered asset expenses    14  15  9
         
Total noninterest expense related to covered assets (3)    $ 6,962  $ 10,985  $ 13,302
         
Total (expense) income, net    $ (215)  $ 2,797  $ 863
         
(1) Excludes base yield in interest income related to covered loans.
(2) OREO, legal and professional fees, and other expenses related to covered assets must meet certain FDIC criteria in order for the expense amounts to be reimbursed. Certain amounts reflected in these categories may not be reimbursed by the FDIC.
(3) Excludes personnel and other corporate overhead expenses that the company incurs to service covered assets and costs associated with the branches acquired in FDIC-assisted acquisitions.
 
CITY NATIONAL CORPORATION
NON-GAAP FINANCIAL MEASURES
(unaudited)
             
             
(a) Noninterest expense, excluding the operating expenses of First American Equipment Finance and Rochdale Investment Management
             
Noninterest expense for the first quarter of 2013 was $211.3 million, an increase of 5 percent from the first quarter of 2012. Excluding the operating expenses of First American Equipment Finance (acquired in April 2012) and Rochdale Investment Management (acquired in July 2012), noninterest expense for the first quarter of 2013 was $196.1 million, a decrease of 2 percent from the first quarter of 2012. Management believes this non-GAAP financial measure enhances the comparability of the financial results with prior periods.
             
             
(b) Return on average tangible common equity ratio (annualized)
             
Return on average tangible common equity is a non-GAAP financial measure that represents the return on average common equity excluding goodwill and other intangible assets and their related amortization expense. Management reviews this measure in evaluating the company's performance and believes that investors may find it useful to evaluate the return on average common equity without the impact of goodwill and other intangible assets. A reconciliation of the GAAP to non-GAAP measure is set forth below: 
             
  2013 2012
  First Fourth Third Second First Year to
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter Date
Net income available to common shareholders  $ 49,117  $ 47,246  $ 59,780  $ 54,758  $ 46,265  $ 208,049
Add: Amortization of intangibles, net of tax  1,124  1,124  1,124  883  1,097  4,228
Tangible net income available to common shareholders (A)  $ 50,241  $ 48,370  $ 60,904  $ 55,641  $ 47,362  $ 212,277
             
Average common equity  $ 2,363,524  $ 2,341,763  $ 2,296,754  $ 2,234,411  $ 2,168,748  $ 2,260,740
Less: Goodwill and other intangibles  (689,932)  (690,975)  (687,224)  (566,989)  (522,182)  (617,237)
Tangible common equity (B)  $ 1,673,592  $ 1,650,788  $ 1,609,530  $ 1,667,422  $ 1,646,566  $ 1,643,503
             
Return on average tangible common equity (A)/(B) 12.17% 11.66% 15.05% 13.42% 11.57% 12.92%
             
             
(c) Tier 1 common equity to risk-weighted assets
             
Tier 1 common equity to risk-weighted 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 qualifying 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 this ratio in response to market participants' interest in the Tier 1 common equity to risk-weighted assets ratio. 
             
  2013 2012  
  First Fourth Third Second First  
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter  
Tier 1 capital  $ 1,818,367  $ 1,753,312  $ 1,570,778  $ 1,602,398  $ 1,616,099  
Less: Preferred stock  (169,920)  (169,920)  --  --  --  
Less: Trust preferred securities  (5,155)  (5,155)  (5,155)  (5,155)  (5,155)  
Tier 1 common equity (A)  $ 1,643,292  $ 1,578,237  $ 1,565,623  $ 1,597,243  $ 1,610,944  
             
Risk-weighted assets (B)  $ 18,868,193  $ 18,627,165  $ 17,174,382  $ 16,722,999  $ 15,839,944  
             
Tier 1 common equity to risk-weighted assets (A)/(B) 8.71% 8.47% 9.12% 9.55% 10.17%  
 
CITY NATIONAL CORPORATION
NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)
             
             
(d) Tangible equity and tangible common 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 equity to tangible assets is a non-GAAP financial measure that represents tangible equity less preferred stock 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 equity as a measure of capital. A reconciliation of the GAAP to non-GAAP measure is set forth below: 
             
  2013 2012
  First Fourth Third Second First Year to
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter Date
Period End:            
Total equity  $ 2,556,889  $ 2,505,318  $ 2,330,324  $ 2,255,365  $ 2,199,565  
Less: Goodwill and other intangibles  (688,829)  (690,761)  (691,765)  (589,114)  (521,717)  
Tangible equity (A)  1,868,060  1,814,557  1,638,559  1,666,251  1,677,848  
Less: Preferred stock  (169,920)  (169,920)  --  --  --  
Tangible common equity (B)  $ 1,698,140  $ 1,644,637  $ 1,638,559  $ 1,666,251  $ 1,677,848  
             
Total assets  $ 27,433,754  $ 28,618,492  $ 26,251,528  $ 24,801,973  $ 24,038,489  
Less: Goodwill and other intangibles  (688,829)  (690,761)  (691,765)  (589,114)  (521,717)  
Tangible assets (C)  $ 26,744,925  $ 27,927,731  $ 25,559,763  $ 24,212,859  $ 23,516,772  
             
Period-end tangible equity to period-end tangible assets (A)/(C)  6.98% 6.50% 6.41% 6.88% 7.13%  
Period-end tangible common equity to period-end tangible assets (B)/(C)  6.35% 5.89% 6.41% 6.88% 7.13%  
             
Average Balance:            
Total equity  $ 2,533,444  $ 2,432,264  $ 2,296,754  $ 2,234,411  $ 2,168,748  $ 2,283,489
Less: Goodwill and other intangibles  (689,932)  (690,975)  (687,224)  (566,989)  (522,182)  (617,237)
Tangible equity (D)  1,843,512  1,741,289  1,609,530  1,667,422  1,646,566  1,666,252
Less: Preferred stock  (169,920)  (90,501)  --  --  --  (22,749)
Tangible common equity (E)  $ 1,673,592  $ 1,650,788  $ 1,609,530  $ 1,667,422  $ 1,646,566  $ 1,643,503
             
Total assets  $ 27,709,159  $ 27,255,859  $ 25,654,594  $ 24,362,546  $ 23,644,899  $ 25,236,172
Less: Goodwill and other intangibles  (689,932)  (690,975)  (687,224)  (566,989)  (522,182)  (617,237)
Tangible assets (F)  $ 27,019,227  $ 26,564,884  $ 24,967,370  $ 23,795,557  $ 23,122,717  $ 24,618,935
             
Average tangible equity to average tangible assets (D)/(F) 6.82% 6.55% 6.45% 7.01% 7.12% 6.77%
Average tangible common equity to average tangible assets (E)/(F) 6.19% 6.21% 6.45% 7.01% 7.12% 6.68%
CONTACT: Financial/Investors	         Christopher J. Carey, City National, 310.888.6777         Chris.Carey@cnb.com	         Media         Cary Walker, City National, 213.673.7615         Cary.Walker@cnb.com         Conference Call:         Today 2:00 p.m. PDT         (866) 393-6804         Conference ID: 21764985

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