In the second quarter of 2013, City National recorded a $1.5 million non-cash net expense to reflect results of the quarterly update of cash-flow projections for the FDIC-covered loans, compared to a $0.1 million expense recorded in the first quarter of 2013. Due to improvements in the portfolio's credit quality and general market conditions, the company recorded an $11.9 million reversal of its allowance for covered loans in the second quarter of 2013.  The reversal of the allowance was offset by the expense on the related indemnification asset.

In addition to the $1.5 million non-cash net expense for the quarter, the company recognized $0.5 million of other covered assets expense.

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 FDIC-assisted bank acquisitions and subject to loss-sharing agreements totaled $41.8 million at June 30, 2013, compared to $82.8 million at the end of the second quarter of 2012 and $43.8 million at March 31, 2013.

NONINTEREST INCOME

Noninterest income was $82.2 million in the second quarter of 2013, up 10 percent from the second quarter of 2012 but down 12 percent from the first quarter of 2013. City National's noninterest income for the first half of 2013 was up 17 percent from the same period of 2012.

The increases in noninterest income from the year-earlier periods were due largely to City National's acquisition of Rochdale. The decrease from the first quarter of 2013 was primarily attributable to higher FDIC loss-sharing expense, which was partly offset by increases in lease income and income from client swap transactions.  Results for the second quarter of 2013 also included a $5.6 million net gain on securities, compared with a net loss of $0.5 million in the second quarter of 2012 and a net gain of $1.0 million in the first quarter of this year.

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