City National Corporation's 2013 Net Income Grows To $230.0 Million, Up 11 Percent From 2012; Fourth-Quarter 2013 Net Income Totals $55.1 Million, Up 17 Percent

Loan balances exceed $17 billion for the first time

Deposits grow to all-time high of $25.7 billion

Total assets reach a record $29.7 billion

LOS ANGELES, Jan. 23, 2014 (GLOBE NEWSWIRE) -- City National Corporation (NYSE:CYN), the parent company of wholly owned City National Bank, today reported full-year 2013 net income of $230.0 million, up 11 percent from $208.0 million in 2012. Earnings per share were $3.99, compared with $3.83 per share in 2012.

Fourth-quarter 2013 net income totaled $55.1 million, up 17 percent from $47.2 million in the fourth quarter of 2012. Earnings per share were $0.95, up 9 percent from $0.87 per share in the year-ago period. Fourth-quarter results included net securities losses of $2.7 million after tax, or $0.05 per share.

City National also announced today that its Board of Directors has increased the company's quarterly common stock cash dividend from $0.25 per share to $0.33 per share, payable on February 19, 2014 to stockholders of record on February 5, 2014.

FOURTH-QUARTER 2013 HIGHLIGHTS
  • Average fourth-quarter loans and leases, excluding those covered by City National's acquisition-related loss-sharing agreements with the Federal Deposit Insurance Corporation (FDIC), grew to $16.8 billion, up 20 percent from the fourth quarter of 2012. Average commercial loans were up 24 percent from the year-ago period. Period-end loan balances grew to a new record of $17.2 billion at December 31, 2013.  
  • Fourth-quarter deposit balances averaged $25.9 billion, up 11 percent from the fourth quarter of 2012. Average core deposits, which equal 98 percent of total balances, were up 12 percent from the fourth quarter of 2012. Period-end deposit balances grew to a new record of $25.7 billion at December 31, 2013.  
  • Trust and investment fee income grew to $50.6 million, up 15 percent from the fourth quarter of 2012.  For the full year, it was up 27 percent, to $196.5 million. City National's assets under management or administration grew to $64.7 billion, up 13 percent from December 31, 2012.  
  • Net loan recoveries in the fourth quarter of 2013 totaled $14.7 million, compared to net recoveries of $6.8 million in the third quarter of 2013. Excluding FDIC-covered loans, fourth-quarter 2013 results included no provision for loan and lease losses. City National recorded a $7.0 million provision in the fourth quarter of 2012. The company remains appropriately reserved at 1.76 percent of total loans, excluding FDIC-covered loans.  
  • On November 7, 2013, City National issued $100 million of 6.75 percent fixed-to-floating rate non-cumulative preferred stock, Series D, which qualifies as Tier 1 capital.

"2013 was another very good year of robust growth across the company for City National, which has now been profitable for 83 consecutive quarters – almost 21 years," said Chairman and CEO Russell Goldsmith. "Since this month marks the 60 th anniversary of City National Bank, it is fitting that it also marks new record levels of assets, loans, deposits, and investment assets under management as well as a market value in excess of $4 billion for the first time. The company also increased its dividend and maintained its long-standing guideline of paying between 30 percent and 35 percent of prior-year earnings.

"In spite of continuing margin pressure, as expected, from the runoff of covered assets, competitive pressures and the low-rate environment, the strong increase in net income reflects, in part, City National's continuing addition of new clients, a modest increase in loan demand across all sectors of the bank, and very sound and improving credit quality. This income growth occurred even as the company continued to invest significantly in the addition of people, products, technology and new bank branches in New York City and the San Francisco Bay Area, while still keeping expense levels well contained for the year. The successful integration of City National Rochdale also contributed to the growth and the strong investment performance of City National's expanding wealth management business. 

"With its asset-sensitive loan portfolio, low-cost deposit base, shorter-duration securities portfolio, strong growth in its client base, and continuing investments in the company's future, City National continued to improve its strong position as the economy improves, loan demand increases and interest rates rise," Goldsmith concluded.

  For the three months ended   For the three  
Dollars in millions, December 31, % months ended %
except per share data 2013 2012 Change September 30, 2013 Change
Earnings Per Common Share  $ 0.95  $ 0.87 9  $ 1.10 (14)
Net Income Attributable to CNC  55.1  47.2 17  63.6 (13)
Net Income Available to Common Shareholders  52.7  47.2 12  61.2 (14)
           
Average Assets  $ 29,902.4  $ 27,255.9 10  $ 28,061.1 7
Return on Average Assets 0.73% 0.69% 6 0.90% (19)
Return on Average Common Equity 8.48% 8.03% 6 10.12% (16)
Return on Average Tangible Common Equity 11.97% 11.66% 3 14.43% (17)

ASSETS

Total assets reached a record $29.7 billion at December 31, 2013, up 4 percent from the fourth quarter of 2012 and 2 percent higher than the third quarter of 2013. The increases primarily reflect higher loan balances.

NET INTEREST INCOME

Fully taxable-equivalent net interest income was $211.2 million in the fourth quarter of 2013, up 1 percent from the same period of 2012, but down 4 percent from the third quarter of 2013. Fully taxable-equivalent net interest income for the full-year 2013 was $845.9 million, down 1 percent from $850.7 million in 2012.

Deposits

Average fourth-quarter deposits were $25.9 billion, up 11 percent from the year-ago period and 7 percent higher than the third quarter of 2013. Average deposits for the full-year 2013 totaled $24.0 billion, up 11 percent from 2012. Period-end deposits totaled $25.7 billion, up 9 percent from December 31, 2012 and up 2 percent from September 30, 2013.

Average core deposits were $25.4 billion in the fourth quarter of 2013, up 12 percent from the same period of 2012 and up 7 percent from the third quarter of 2013. Full-year 2013 average core deposits grew 12 percent from 2012 to $23.4 billion.

Fourth-quarter 2013 average noninterest-bearing deposits were up 13 percent from the same period of 2012 and 10 percent higher than the third quarter of 2013. Average noninterest-bearing balances for the full-year 2013 were up 16 percent from 2012.

Treasury Services deposit balances, which consist primarily of title, escrow and property management deposits, averaged $2.6 billion in the fourth quarter of 2013, up 7 percent from the same period of 2012 but 1 percent lower than the third quarter of 2013. Treasury Services deposit balances averaged $2.5 billion for the full-year 2013, up 14 percent from 2012. The year-over-year increases were due primarily to an increase in residential refinance activity, as well as existing home sales.

Loans

Fourth-quarter average loan balances, excluding FDIC-covered loans, were $16.8 billion, up 20 percent from the fourth quarter of 2012 and up 5 percent from the third quarter of 2013. Full-year 2013 average loans, excluding FDIC-covered loans, were $15.8 billion, up 19 percent from the prior year.

Fourth-quarter average commercial loans were up 24 percent from the same period of 2012 and 5 percent higher than the third quarter of 2013.

Average balances for commercial real estate mortgages were up 26 percent from the fourth quarter of 2012, and they increased 4 percent from the third quarter of 2013. Average balances for commercial real estate construction loans were up 34 percent from the fourth quarter of 2012 and up 12 percent from the third quarter of 2013.

Average balances for single-family residential mortgage loans were up 14 percent from the year-ago period and 5 percent higher than the third quarter of 2013.

Securities

Average securities for the fourth quarter of 2013 totaled $9.3 billion, down 4 percent from the fourth quarter of 2012 but 9 percent higher than the third quarter of 2013. Total available-for-sale securities amounted to $6.2 billion at December 31, 2013, down from $9.2 billion at the end of the fourth quarter of 2012 and $6.9 billion at September 30, 2013.

On November 5, 2013, City National transferred approximately $1.0 billion of debt securities from the available-for-sale category to the held-to-maturity category.

The average duration of available-for-sale securities at December 31, 2013 was 2.4 years, up from 2.3 years at December 31, 2012 but down from 2.9 years at the end of the third quarter of 2013. The decrease from the third quarter of 2013 reflects both the $1 billion transfer and a rotation from longer-duration to shorter-duration securities in the available-for-sale portfolio.

Net Interest Margin

City National's net interest margin in the fourth quarter of 2013 averaged 2.97 percent, compared with 3.30 percent in the third quarter of 2013. FDIC-covered loan prepayments and portfolio run-off accounted for 25 basis points of the 33-basis-point decline from September 30, 2013. Also contributing to the lower fourth-quarter margin were lower loan yields and an increase in the company's securities portfolio due to strong deposit growth. For the full-year 2013, City National's net interest margin averaged 3.18 percent, down from 3.61 percent in the previous year.

Fourth-quarter net interest income included $13.7 million from FDIC-covered loans that were repaid or charged off. This compares with $17.5 million in the fourth quarter of 2012 and $25.8 million in the third quarter of 2013.

At December 31, 2013, City National's prime lending rate was 3.25 percent, unchanged from both December 31, 2012 and September 30, 2013.
  For the three months ended   For the three  
  December 31, % months ended %
Dollars in millions 2013 2012 Change September 30, 2013 Change
Average Loans and Leases,          
 excluding Covered Loans  $ 16,795.6  $ 13,984.2 20  $ 16,039.8 5
Average Covered Loans  747.6  1,089.9 (31)  818.9 (9)
Average Total Securities   9,306.3  9,652.7 (4)  8,576.5 9
Average Earning Assets  28,218.6  25,468.0 11  26,417.7 7
Average Deposits  25,942.6  23,386.3 11  24,301.6 7
Average Core Deposits  25,423.1  22,781.3 12  23,716.0 7
Fully Taxable-Equivalent          
Net Interest Income  211.2  209.1 1  220.0 (4)
Net Interest Margin  2.97%  3.27% (9)  3.30% (10)

COVERED ASSETS

Loans and other real estate owned (OREO) assets acquired in City National's FDIC‑assisted bank acquisitions totaled $726.5 million at the end of the fourth quarter of 2013, compared to $1.0 billion at December 31, 2012 and $784.0 million at September 30, 2013.

In the fourth quarter of 2013, City National recorded a $0.2 million non-cash net expense to reflect results of the quarterly update of cash-flow projections for the FDIC-covered loans, compared to a $0.5 million expense recorded in the third quarter of 2013. The fourth-quarter expense reflects a $0.2 million provision for losses on covered loans. In addition to the $0.2 million non-cash net expense for the quarter, the company recognized $0.1 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 $25.5 million at December 31, 2013, compared to $58.3 million at the end of the fourth quarter of 2012 and $29.8 million at September 30, 2013.

NONINTEREST INCOME

Noninterest income was $90.5 million in the fourth quarter of 2013, down 9 percent from the fourth quarter of 2012 but up 2 percent from the third quarter of 2013. City National's noninterest income totaled $355.2 million for the full year of 2013, down 1 percent from 2012.

The decrease in noninterest income from the fourth quarter of 2012 was due largely to higher FDIC loss-sharing expense, which was partly offset by higher wealth management fee income. The increase from the third quarter of 2013 largely reflects lower FDIC loss-sharing expense and higher wealth management fee income. Results for the fourth quarter of 2013 also included a $4.6 million net loss on securities, compared with a small net gain in the fourth quarter of 2012 and a net gain of $5.6 million in the third quarter of 2013.

In the fourth quarter of 2013, noninterest income accounted for 31 percent of City National's total revenue, compared to 33 percent in the fourth quarter of 2012 and 29 percent in the third quarter of 2013.

Wealth Management

City National's assets under management or administration grew to $64.7 billion as of December 31, 2013, up 13 percent from December 31, 2012 and 5 percent higher than the third quarter of 2013.

Trust and investment fees were $50.6 million in the fourth quarter of 2013, up 15 percent from the fourth quarter of 2012 and 2 percent higher than the third quarter of 2013. The increase from the year-ago period was due primarily to the growth in assets from sales and market appreciation.

Fourth-quarter 2013 brokerage and mutual fund fees totaled $10.6 million, up 26 percent from the year-earlier period and 45 percent higher than the third quarter of 2013, due to increased fund assets from sales and market appreciation, and the recognition of annual performance fees.

Full-year trust and investment fee income was $196.5 million, up 27 percent from 2012.  Brokerage and mutual fund fee income was $34.1 million for the full-year 2013, up 23 percent from 2012. These increases reflect not only the company's July 2012 acquisition of Rochdale Investment Management, but also the addition of client assets and market appreciation across all of City National's wealth management companies.
  At or for the    At or for the  
  three months ended   three months  
  December 31, % ended %
Dollars in millions 2013 2012 Change September 30, 2013 Change
Trust and Investment Fee Revenue  $ 50.6  $ 44.0 15  $ 49.4 2
Brokerage and Mutual Fund Fees  10.6  8.4 26  7.3 45
Assets Under Management (1)  45,001.1  38,808.2 16  42,811.8 5
Assets Under Management          
or Administration (1)  64,691.2  57,248.7 13  61,476.0 5
           
(1) Excludes $27.1 billion, $26.3 billion and $21.7 billion of assets under management for asset managers in which City National 
 held a noncontrolling ownership interest as of December 31, 2013, September 30, 2013 and December 31, 2012, respectively.

Other Noninterest Income

Fourth-quarter income from cash management and deposit transaction fees was $12.3 million, up 8 percent from the fourth quarter of 2012 and up 1 percent from the third quarter of 2013. Full-year 2013 cash management and deposit transaction fee income was $50.5 million, up 11 percent from 2012. The year-over-year increases were due largely to higher sales volume and growth in transaction volumes among existing clients.

Fee income from foreign exchange services and letters of credit totaled $10.6 million in the fourth quarter of 2013, down 7 percent from the fourth quarter of 2012 and 3 percent lower than the third quarter of 2013.  Full-year 2013 foreign exchange services and letters of credit fee income totaled $42.0 million, up 5 percent from 2012.

Other income was $20.2 million in the fourth quarter of 2013, down 17 percent from the fourth quarter of 2012 and 5 percent lower than the third quarter of 2013.  The decrease from the fourth quarter of 2012 was due primarily to lower income from client swap transactions. Other income for the full-year 2013 was $80.2 million, down 3 percent from 2012.

NONINTEREST EXPENSE

City National's fourth-quarter 2013 noninterest expense amounted to $219.0 million, down 1 percent from the fourth quarter of 2012 but up 5 percent from the third quarter of 2013. The increase from the third quarter was due largely to higher legal and professional fees from collection and defense matters that came to a conclusion in the fourth quarter as well as additional compensation expense for the accrual of performance incentives. Fourth-quarter expenses also included a number of other seasonal year-end accruals.

Noninterest expense for the full-year 2013 amounted to $851.1 million, up 3 percent from 2012.  Excluding the company's 2012 acquisitions of Rochdale and First American Equipment Finance, noninterest expense was down 1 percent from 2012. 1

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 fourth quarter of 2013 totaled $14.7 million, or 0.35 percent of total loans and leases on an annualized basis. The company realized net recoveries of $2.0 million, or 0.06 percent, in the fourth quarter of 2012 and net recoveries of $6.8 million, or 0.17 percent, in the third quarter of 2013. Net recoveries for the full-year 2013 were $33.8 million, or 0.21 percent of total loans and leases. This compares with net recoveries of $7.1 million, or 0.05 percent, in 2012.

At December 31, 2013, nonperforming assets decreased to $81.3 million, or 0.47 percent of the company's total loans and leases and OREO, compared to $120.8 million, or 0.81 percent, at December 31, 2012 and $88.5 million, or 0.53 percent, at September 30, 2013.

Nonaccrual loans at December 31, 2013 were $68.7 million, compared to $99.8 million at December 31, 2012 and $69.6 million at September 30, 2013. Classified loans declined from the third quarter of 2013, and overall credit trends remained favorable.
  As of As of As of
  December 31, 2013 September 30, 2013 December 31, 2012
Period-end Loans (in millions) Total Nonaccrual Total Nonaccrual Total Nonaccrual
Commercial $ 8,164.8 $ 14.3 $ 7,856.2 $ 10.1 $ 6,949.1 $ 9.2
Commercial Real Estate Mortgages  3,223.0  18.4  3,077.2  19.0  2,739.3  33.2
Residential Mortgages  4,554.3  11.7  4,418.2  9.7  3,962.2  9.6
Real Estate Construction  367.0  19.1  380.5  25.5  313.2  40.9
Home Equity Loans and Lines of Credit  709.3  5.1  681.9  5.3  711.7  6.4
Other Loans  152.0  0.1  152.1  0.0  142.8  0.5
 Total Loans (1) $ 17,170.4 $ 68.7 $ 16,566.1 $ 69.6 $ 14,818.3 $ 99.8
             
Other Real Estate Owned (1)    12.6    18.9    21.0
Total Nonperforming Assets, excluding            
 Covered Assets   $ 81.3   $ 88.5   $ 120.8
             
(1) Excludes covered loans, net of allowance, of $701.0 million, $754.2 million and $1.0 billion at December 31, 2013, September 30, 2013
 and December 31, 2012, respectively, and covered other real estate owned of $25.5 million, $29.8 million and $58.3 million at
 December 31, 2013, September 30, 2013 and December 31, 2012, respectively.

In light of strong and improving credit quality, significant recoveries, and a growing loan portfolio, the company did not record any provisions for credit losses or reserve releases in 2013. The company recorded $10.0 million in provisions in 2012, including $7.0 million in the fourth quarter.

At December 31, 2013, City National's allowance for loan and lease losses totaled $302.6 million, or 1.76 percent of total loans and leases. That compares with $277.9 million, or 1.88 percent, at December 31, 2012 and $295.9 million, or 1.79 percent, at the end of the third quarter of 2013. The company also maintains an additional $33.9 million in reserves for off-balance-sheet credit commitments.

Commercial Loans

Commercial loan net recoveries were $9.5 million in the fourth quarter of 2013. This compares to net recoveries of $2.0 million in the year-earlier period and net recoveries of $4.4 million in the third quarter of 2013. Net recoveries in the full year of 2013 amounted to $18.9 million, compared to net recoveries of $10.4 million in 2012.

Commercial loans on nonaccrual totaled $14.3 million in the fourth quarter of 2013, compared to $9.2 million at December 31, 2012 and $10.1 million at September 30, 2013.

Real Estate Construction Loans

City National's $367.0 million commercial real estate construction portfolio includes secured loans to developers of residential and nonresidential properties. This portfolio represents 2 percent of the company's total loans.

Fourth-quarter net recoveries of construction loans were $4.7 million, compared to net recoveries of $0.2 million in the fourth quarter of 2012 and net recoveries of $2.9 million in the third quarter of 2013. Full-year net recoveries amounted to $13.0 million, compared with net charge-offs of $1.5 million in 2012.

At December 31, 2013, construction loans on nonaccrual totaled $19.1 million, compared to $40.9 million at December 31, 2012 and $25.5 million at September 30, 2013.

Commercial Real Estate Mortgage Loans

In the fourth quarter of 2013, the company recorded a small net recovery in its $3.2 billion commercial real estate mortgage portfolio.  This compares with net charge-offs of $0.3 million in the fourth quarter of 2012 and net charge-offs of $0.6 million in the third quarter of 2013. Full-year net recoveries amounted to $0.5 million, compared with net charge-offs of $0.1 million in 2012.

Commercial real estate mortgage loans on nonaccrual totaled $18.4 million, compared to $33.2 million at December 31, 2012 and $19.0 million at September 30, 2013.

Residential Mortgage Loans and Equity Loans and Lines of Credit

City National's period-end $4.6 billion residential mortgage portfolio, which grew 15 percent from the fourth quarter of 2012, and its $0.7 billion home equity portfolio both continued to perform exceptionally well.  Together, they accounted for $0.2 million in net recoveries in the fourth quarter of 2013, compared to net charge-offs of $0.2 million in both the fourth quarter of 2012 and the third quarter of 2013. Full-year 2013 net recoveries amounted to $0.2 million, compared to net charge-offs of $2.7 million in 2012.

Residential mortgage loans and home equity loans and lines of credit on nonaccrual were $16.8 million in the fourth quarter of 2013, compared to $16.0 million in the fourth quarter of 2012 and $15.0 million in the third quarter of 2013.

INCOME TAXES

City National's effective tax rate for the fourth quarter of 2013 was 27.2 percent, compared to 30.5 percent in the year-earlier period. The company's full-year 2013 effective tax rate was 28.9 percent, compared to 32.1 percent in the prior-year.

CAPITAL LEVELS

City National remains well-capitalized. Under Basel I capital rules, the company's Tier 1 common shareholders' equity ratio was 8.8 percent at December 31, 2013. 1  The company's Tier 1 common shareholders' equity ratio was 8.5 percent at December 31, 2012 and 8.8 percent at September 30, 2013. 1

Under Basel III rules, City National's estimated Tier 1 common equity ratio was 8.5 percent. 2 All of the company's pro-forma capital ratios are comfortably above the Basel III rules, which were approved by the Federal Reserve on July 2, 2013. The new rules will begin a phase-in period for banks with less than $250 billion in assets, including City National, on January 1, 2015 and are expected to be fully implemented by January 1, 2019.

City National's Basel I total risk-based capital and Tier 1 risk-based capital ratios at December 31, 2013 were 13.0 percent and 10.1 percent, respectively. The company's Tier 1 leverage ratio at December 31, 2013 was 7.2 percent.

Basel I 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 increase in Total and Tier 1 capital ratios from December 31, 2012, was due primarily to the company's issuance of $100 million of preferred stock on November 7, 2013.

Period-end ratio of equity to total assets at December 31, 2013 was 9.2 percent, compared to 8.8 percent at December 31, 2012 and 8.9 percent at September 30, 2013.

2014 OUTLOOK

Management expects modest net income growth in 2014, even as low short-term interest rates continue to put pressure on the company's net interest margin.  The company anticipates continued solid growth in loans, deposits, and wealth management assets. Rising loan balances are expected to require some loan-loss provisions, but credit quality should remain stable.  This outlook reflects management's expectations for continued moderate U.S. economic growth in 2014. 

CONFERENCE CALL

City National Corporation will host a conference call this afternoon to discuss fourth-quarter and year-end 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 21178194.  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 77 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 $64.7 billion in client investment assets, including $45.0 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 are 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) 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; (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 customers, or changes in the performance or creditworthiness of our customers' suppliers or other counterparties, which could lead to decreased loan utilization rates, delinquencies, or defaults and could negatively affect our customers' ability to meet certain credit obligations; (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; and (21) 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.

2 Estimated based on management's interpretation of final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. See page 15 of the Selected Financial Information.

Note: Certain prior period balances have been reclassified to conform to current period presentation.
CITY NATIONAL CORPORATION            
FINANCIAL HIGHLIGHTS            
(unaudited)            
             
  Three Months Twelve Months
For The Period Ended December 31, 2013 2012 % Change 2013 2012 % Change
Per Common Share            
Net income available to common shareholders            
Basic  $ 0.96  $ 0.87  10  $ 4.02  $ 3.85  4
Diluted  0.95  0.87  9  3.99  3.83  4
Dividends  0.25  0.75  (67)  0.75  1.50  (50)
Book value        45.65  43.89  4
             
Results of Operations: (In millions)            
Interest income  $ 219  $ 218  0  $ 880  $ 887  (1)
Interest expense 14 14  (9) 56 56  0
Net interest income 205 204  1 824 831  (1)
Net interest income (Fully taxable-equivalent) 211 209  1 846 851  (1)
Total revenue 296 304  (3) 1,179 1,188  (1)
Provision for credit losses on loans and leases, excluding covered loans  -- 7  (100)  -- 10  (100)
Provision for losses on covered loans 0 6  (97) 1  45  (99)
Net income attributable to City National Corporation 55 47  17 230 208  11
Net income available to common shareholders 53 47  12 220 208  6
             
Financial Ratios:            
Performance Ratios:            
Return on average assets   0.73 %  0.69 %    0.81 %  0.82 %  
Return on average common equity  8.48  8.03    9.14  9.20  
Return on average tangible common equity (1)  11.97  11.66    13.04  12.92  
Period-end equity to period-end assets        9.22  8.75  
Net interest margin  2.97  3.27    3.18  3.61  
Expense to revenue ratio  71.76  68.90    69.61  65.29  
Capital Adequacy Ratios (Period-end):            
Tier 1 leverage        7.17  6.60  
Tier 1 risk-based capital        10.09  9.41  
Total risk-based capital        13.00  12.52  
             
Asset Quality Ratios:            
Allowance for loan and lease losses to:            
Total loans and leases, excluding covered loans        1.76 %  1.88 %  
Nonaccrual loans        440.76  278.48  
Nonperforming assets, excluding covered assets, to:            
Total loans and leases and other real estate owned, excluding covered assets        0.47  0.81  
Total assets        0.27  0.42  
Net recoveries to average total loans and leases, excluding covered loans (annualized)  0.35 %  0.06 %    0.21 % 0.05 %  
             
Average Balances: (In millions)            
Loans and leases, excluding covered loans  $ 16,796  $ 13,984  20  $ 15,776  $ 13,285  19
Covered loans 747 1,090  (31) 866 1,269  (32)
Securities 9,306 9,653  (4) 9,134 8,496  8
Interest-earning assets 28,219 25,468  11 26,631 23,564  13
Assets 29,902 27,256  10 28,291 25,236  12
Core deposits 25,423 22,781  12 23,350 20,937  12
Deposits 25,943 23,386  11 23,954 21,629  11
Interest-bearing liabilities 10,682 10,136  5 10,781 10,056  7
Common shareholders' equity 2,465 2,342  5 2,411 2,261  7
Total shareholders' equity 2,693 2,432  11 2,595 2,283  14
             
Period-End Balances: (In millions)            
Loans and leases, excluding covered loans        $ 17,170  $ 14,818  16
Covered loans       717 1,031  (30)
Securities       9,281 10,719  (13)
Assets       29,718 28,618  4
Core deposits       25,167 22,938  10
Deposits       25,679 23,502  9
Common shareholders' equity       2,473 2,335  6
Total shareholders' equity       2,741 2,505  9
             
Wealth Management: (In millions) (2)            
Assets under management        $ 45,001  $ 38,808  16
Assets under management or administration        64,691 57,249  13
             
(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 $27.1 billion and $21.7 billion of assets under management for asset managers in which City National held a noncontrolling ownership interest as of December 31, 2013 and December 31, 2012, respectively.
             
Note: Certain prior period balances in the Selected Financial Information have been reclassified to conform to current period presentation.    
             
CITY NATIONAL CORPORATION            
CONSOLIDATED STATEMENTS OF INCOME            
(unaudited)            
             
(Dollars in thousands Three Months Ended December 31, Twelve Months Ended December 31,
except per share data) 2013 2012 % Change 2013 2012 % Change
Interest income  $ 218,773  $ 218,302  0  $ 879,661  $ 886,551  (1)
Interest expense  13,321  14,580  (9)  55,946  55,715  0
Net interest income  205,452  203,722  1  823,715  830,836  (1)
             
Provision for credit losses on loans and leases, excluding covered loans  --  7,000  (100)  --  10,000  (100)
Provision for losses on covered loans  174  6,498  (97)  635  45,346  (99)
             
Noninterest income            
Trust and investment fees  50,561  44,026  15  196,474  155,224  27
Brokerage and mutual fund fees  10,621  8,424  26  34,101  27,804  23
Cash management and deposit transaction fees  12,349  11,480  8  50,501  45,649  11
International services  10,575  11,342  (7)  42,037  39,963  5
FDIC loss sharing expense, net  (12,953)  (2,524)  413  (64,774)  (6,017)  977
Gain on disposal of assets  3,871  2,892  34  9,026  11,293  (20)
(Loss) gain on securities  (4,649)  13  (35,862)  7,649  822  831
Other  20,174  24,225  (17)  80,155  82,865  (3)
Total noninterest income  90,549  99,878  (9)  355,169  357,603  (1)
             
Noninterest expense            
Salaries and employee benefits  133,331  123,812  8  517,743  479,302  8
Net occupancy of premises  17,452  17,554  (1)  65,720  61,534  7
Legal and professional fees  16,058  18,147  (12)  52,255  53,995  (3)
Information services  8,902  8,896  0  37,352  34,244  9
Depreciation and amortization  8,019  8,720  (8)  32,267  32,485  (1)
Amortization of intangibles  1,722  1,932  (11)  7,517  7,268  3
Marketing and advertising  9,029  8,808  3  33,185  29,510  12
Office services and equipment  4,679  4,735  (1)  19,480  17,848  9
Other real estate owned  3,296  9,869  (67)  18,127  38,253  (53)
FDIC assessments  2,646  4,499  (41)  15,566  18,117  (14)
Other  13,847  15,044  (8)  51,902  52,582  (1)
Total noninterest expense  218,981  222,016  (1)  851,114  825,138  3
             
Income before taxes  76,846  68,086  13  327,135  307,955  6
             
Applicable income taxes  20,884  20,780  1  94,619  98,822  (4)
             
Net income  $ 55,962  $ 47,306  18  $ 232,516  $ 209,133  11
             
Less: Net income attributable to noncontrolling interest  850  60  1,317  2,507  1,084  131
             
Net income attributable to City National Corporation  $ 55,112  $ 47,246  17  $ 230,009  $ 208,049  11
             
Less: Dividends on preferred stock  2,406  --  NM   9,625  --  NM 
             
Net income available to common shareholders  $ 52,706  $ 47,246  12  $ 220,384  $ 208,049  6
             
Other Data:            
Earnings per common share - basic  $ 0.96  $ 0.87  10  $ 4.02  $ 3.85  4
Earnings per common share - diluted  $ 0.95  $ 0.87  9  $ 3.99  $ 3.83  4
Dividends paid per common share  $ 0.25  $ 0.75  (67)  $ 0.75  $ 1.50  (50)
Common dividend payout ratio  26.15 %  86.16 %  (70)  18.69 %  38.96 %  (52)
Return on average assets  0.73 %  0.69 %  6  0.81 %  0.82 %  (1)
Return on average common equity  8.48 %  8.03 %  6  9.14 %  9.20 %  (1)
Return on average tangible common equity  11.97 %  11.66 %  3  13.04 %  12.92 %  1
Net interest margin (Fully taxable-equivalent)  2.97 %  3.27 %  (9)  3.18 %  3.61 %  (12)
Full-time equivalent employees  3,566  3,472  3      
           
CITY NATIONAL CORPORATION          
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME        
(unaudited)          
           
  2013
(Dollars in thousands Fourth Third Second First Year to
except per share data) Quarter Quarter Quarter Quarter Date
Interest income  $ 218,773  $ 228,093  $ 216,995  $ 215,800  $ 879,661
Interest expense  13,321  13,822  14,076  14,727  55,946
Net interest income  205,452  214,271  202,919  201,073  823,715
           
Provision for credit losses on loans and leases, excluding covered loans  --  --  --  --  --
Provision for losses on covered loans  174  2,496  (11,927)  9,892  635
           
Noninterest income          
Trust and investment fees  50,561  49,430  49,830  46,653  196,474
Brokerage and mutual fund fees  10,621  7,307  8,107  8,066  34,101
Cash management and deposit transaction fees  12,349  12,263  12,880  13,009  50,501
International services  10,575  10,932  10,911  9,619  42,037
FDIC loss sharing expense, net  (12,953)  (20,992)  (26,477)  (4,352)  (64,774)
Gain on disposal of assets  3,871  3,092  949  1,114  9,026
(Loss) gain on securities  (4,649)  5,644  5,608  1,046  7,649
Other  20,174  21,207  20,401  18,373  80,155
Total noninterest income  90,549  88,883  82,209  93,528  355,169
           
Noninterest expense          
Salaries and employee benefits  133,331  129,049  127,168  128,195  517,743
Net occupancy of premises  17,452  16,074  16,205  15,989  65,720
Legal and professional fees  16,058  10,731  13,514  11,952  52,255
Information services  8,902  9,876  9,183  9,391  37,352
Depreciation and amortization  8,019  7,827  8,249  8,172  32,267
Amortization of intangibles  1,722  1,932  1,931  1,932  7,517
Marketing and advertising  9,029  7,887  8,293  7,976  33,185
Office services and equipment  4,679  4,821  5,034  4,946  19,480
Other real estate owned  3,296  5,196  4,385  5,250  18,127
FDIC assessments  2,646  3,776  3,663  5,481  15,566
Other  13,847  12,195  13,804  12,056  51,902
Total noninterest expense  218,981  209,364  211,429  211,340  851,114
           
Income before taxes  76,846  91,294  85,626  73,369  327,135
           
Applicable income taxes  20,884  27,052  25,422  21,261  94,619
           
Net income  $ 55,962  $ 64,242  $ 60,204  $ 52,108  $ 232,516
           
Less: Net income attributable to noncontrolling interest  850  609  463  585  2,507
           
Net income attributable to City National Corporation  $ 55,112  $ 63,633  $ 59,741  $ 51,523  $ 230,009
           
Less: Dividends on preferred stock  2,406  2,407  2,406  2,406  9,625
           
Net income available to common shareholders  $ 52,706  $ 61,226  $ 57,335  $ 49,117  $ 220,384
           
Other Data:          
Earnings per common share - basic  $ 0.96  $ 1.12  $ 1.05  $ 0.90  $ 4.02
Earnings per common share - diluted  $ 0.95  $ 1.10  $ 1.04  $ 0.90  $ 3.99
Dividends paid per common share  $ 0.25  $ 0.25  $ 0.25  $ --   $ 0.75
Common dividend payout ratio  26.15 %  22.40 %  23.81 %  -- %   18.69 %
Return on average assets  0.73 %  0.90 %  0.87 %  0.75 %  0.81 %
Return on average common equity  8.48 %  10.12 %  9.53 %  8.43 %  9.14 %
Return on average tangible common equity  11.97 %  14.43 %  13.60 %  12.17 %  13.04 %
Net interest margin (Fully taxable-equivalent)  2.97 %  3.30 %  3.24 %  3.21 %  3.18 %
Full-time equivalent employees  3,566  3,541  3,551  3,496  
           
CITY NATIONAL CORPORATION          
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME          
(unaudited)          
           
  2012
(Dollars in thousands Fourth Third Second First Year to
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  18,147  12,031  11,639  12,178  53,995
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  8,808  6,867  7,317  6,518  29,510
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 SHEETS        
(unaudited)        
         
  2013
(In thousands) Fourth Quarter Third Quarter Second Quarter First Quarter
Assets        
Cash and due from banks  $ 183,227  $ 301,106  $ 146,338  $ 144,290
Due from banks - interest-bearing 552,719 1,045,608 156,221 123,146
Federal funds sold and securities purchased under resale agreements 200,000 200,000 200,000 219,500
Securities available-for-sale 6,241,117 6,895,130 7,044,571 7,738,051
Securities held-to-maturity 2,957,843 1,649,520 1,503,973 1,400,890
Trading securities 82,357 51,451 48,655 53,526
Loans and leases:        
Commercial 8,164,823 7,856,244 7,497,105 7,170,370
Commercial real estate mortgages 3,223,001 3,077,183 2,978,975 2,832,107
Residential mortgages 4,554,311 4,418,231 4,153,051 4,027,741
Real estate construction 367,004 380,489 340,002 352,464
Home equity loans and lines of credit 709,344 681,879 700,681 696,679
Installment 151,955 152,107 149,438 137,545
Loans and leases, excluding covered loans 17,170,438 16,566,133 15,819,252 15,216,906
Allowance for loan and lease losses (302,584) (295,947) (289,914) (282,328)
Loans and leases, excluding covered loans, net 16,867,854 16,270,186 15,529,338 14,934,578
Covered loans, net (1) 700,989 754,190 843,582 909,563
Net loans and leases 17,568,843 17,024,376 16,372,920 15,844,141
Premises and equipment, net 198,398 168,600 162,535 152,389
Goodwill and other intangibles 683,243 684,965 686,897 688,829
Other real estate owned (2) 38,092 48,723 61,477 63,537
FDIC indemnification asset 89,227 101,124 117,295 142,906
Other assets 922,885 888,801 878,620 862,549
Total assets  $ 29,717,951  $ 29,059,404  $ 27,379,502  $ 27,433,754
         
Liabilities        
Deposits:        
Noninterest-bearing  $ 16,058,968  $ 15,205,973  $ 14,288,001  $ 13,800,017
Interest-bearing 9,620,469 10,030,896 9,363,756 9,137,569
Total deposits 25,679,437 25,236,869 23,651,757 22,937,586
Short-term borrowings 3,889 2,588 2,675 806,760
Long-term debt 735,968 719,326 706,537 702,967
Other liabilities 517,903 472,893 433,822 388,439
Total liabilities 26,937,197 26,431,676 24,794,791 24,835,752
         
Redeemable noncontrolling interest 39,768 39,840 39,943 41,113
         
Shareholders' equity        
Preferred stock 267,616 169,920 169,920 169,920
Common stock 54,667 54,400 54,274 54,133
Additional paid-in capital 541,210 519,760 507,560 496,013
Accumulated other comprehensive (loss) income (15,641) (10,355) 6,585 74,222
Retained earnings 1,918,163 1,879,240 1,831,725 1,788,041
Treasury shares (25,029) (25,077) (25,296) (25,440)
Total common shareholders' equity 2,473,370 2,417,968 2,374,848 2,386,969
Total shareholders' equity 2,740,986 2,587,888 2,544,768 2,556,889
Total liabilities and shareholders' equity  $ 29,717,951  $ 29,059,404  $ 27,379,502  $ 27,433,754
         
(1) Covered loans are net of $15.9 million, $25.9 million, $24.4 million and $42.4 million of allowance for loan losses as of December 31, 2013, September 30, 2013, June 30, 2013 and March 31, 2013, respectively.
(2) Other real estate owned includes $25.5 million, $29.8 million, $41.8 million and $43.8 million covered by FDIC loss share at December 31, 2013, September 30, 2013, June 30, 2013 and March 31, 2013, respectively.
         
CITY NATIONAL CORPORATION        
CONSOLIDATED PERIOD END BALANCE SHEETS        
(unaudited)        
         
  2012
(In thousands) Fourth Quarter Third Quarter Second Quarter First 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 2,739,284 2,436,218 2,416,962 2,228,708
Residential mortgages 3,962,205 3,897,690 3,822,630 3,805,807
Real estate construction 313,190 269,583 309,200 297,815
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
(Dollars in thousands) Fourth Quarter Third Quarter Second Quarter First Quarter Year To Date Fourth Quarter Third Quarter Second Quarter First Quarter Year To Date
                     
Allowance for Loan and Lease Losses, Excluding Covered Loans                    
                     
Balance at beginning of period  $ 295,947  $ 289,914  $ 282,328  $ 277,888  $ 277,888  $ 268,440  $ 269,534  $ 266,077  $ 262,557  $ 262,557
                     
Net recoveries/(charge-offs):                    
Commercial  9,515  4,375  2,855  2,173  18,918  2,002  (4,936)  8,092  5,283  10,441
Commercial real estate mortgages  23  (584)  1,034  3  476  (290)  (241)  1,113  (666) (84)
Residential mortgages  32  40  37  (68)  41  (7)  (535)  (543)  (494) (1,579)
Real estate construction  4,660  2,945  2,682  2,666  12,953  170  3,105  (4,839)  104 (1,460)
Home equity loans and lines of credit  129  (194)  375  (112)  198  (169)  (32)  (808)  (154) (1,163)
Installment  349  200  522  146  1,217  319  454  (274)  417  916
Total net recoveries/(charge-offs)  14,708  6,782  7,505  4,808  33,803  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  (8,071)  (749)  81  (368)  (9,107)  423  (909)  (284)  (970)  (1,740)
                     
Balance at end of period  $ 302,584  $ 295,947  $ 289,914  $ 282,328  $ 302,584  $ 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 0.48 % 0.23 % 0.16 % 0.13 % 0.26 % 0.12 % (0.32) % 0.56 % 0.40 % 0.18 %
Commercial real estate mortgages 0.00 % (0.08) % 0.15 % 0.00 % 0.02 % (0.05) % (0.04) % 0.19 %  (0.12) %  (0.00) %
Residential mortgages 0.00 % 0.00 % 0.00 %  (0.01) % 0.00 % (0.00) % (0.06) %  (0.06) %  (0.05) %  (0.04) %
Real estate construction 4.69 % 3.32 % 3.05 % 3.25 % 3.62 % 0.23 % 4.37 %  (6.35) % 0.15 %  (0.50) %
Home equity loans and lines of credit 0.07 % (0.11) % 0.21 %  (0.06) % 0.03 % (0.09) % (0.02) %  (0.44) %  (0.09) %  (0.16) %
Installment 0.89 % 0.54 % 1.44 % 0.42 % 0.82 % 0.91 % 1.34 %  (0.85) % 1.30 % 0.69 %
Total loans and leases, excluding covered loans 0.35 % 0.17 % 0.20 % 0.13 % 0.21 % 0.06 % (0.06) % 0.08 % 0.15 % 0.05 %
                     
Reserve for Off-Balance Sheet Credit Commitments                    
                     
Balance at beginning of period  $ 25,873  $ 25,124  $ 25,205  $ 24,837  $ 24,837  $ 25,260  $ 24,351  $ 24,067  $ 23,097  $ 23,097
Transfers from (to) allowance  8,071  749  (81)  368  9,107  (423)  909  284  970  1,740
Balance at end of period  $ 33,944  $ 25,873  $ 25,124  $ 25,205  $ 33,944  $ 24,837  $ 25,260  $ 24,351  $ 24,067  $ 24,837
                     
Allowance for Losses on Covered Loans                    
                     
Balance at beginning of period  $ 25,882  $ 24,414  $ 42,354  $ 44,781  $ 44,781  $ 44,978  $ 43,147  $ 61,471  $ 64,565  $ 64,565
Provision for losses  174  2,496  (11,927)  9,892  635  6,498  18,089  13,293  7,466  45,346
Net recoveries  9  --  --  --  9  --  --  --  --  --
Reduction in allowance due to loan removals  (10,143)  (1,028)  (6,013)  (12,319)  (29,503)  (6,695) (16,258) (31,617) (10,560) (65,130)
Balance at end of period  $ 15,922  $ 25,882  $ 24,414  $ 42,354  $ 15,922  $ 44,781  $ 44,978  $ 43,147  $ 61,471  $ 44,781
                 
CITY NATIONAL CORPORATION                
NONPERFORMING ASSETS                
(unaudited)                
                 
  2013 2012
(Dollars in thousands) Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
                 
Nonperforming assets, excluding covered assets                
Nonaccrual loans, excluding covered loans                
Commercial  $ 14,298  $ 10,127  $ 11,679  $ 7,292  $ 9,207  $ 18,848  $ 19,056  $ 19,584
Commercial real estate mortgages  18,449  19,020  22,433  23,066  33,198  36,580  28,780  21,071
Residential mortgages  11,661  9,674  10,580  9,136  9,603  11,680  14,064  13,628
Real estate construction  19,067  25,471  25,718  39,608  40,882  28,963  29,676  48,964
Home equity loans and lines of credit  5,144  5,289  6,239  4,103  6,424  6,946  6,505  8,831
Installment  32  21  24  70  473  477  575  729
Total nonaccrual loans, excluding covered loans  68,651  69,602  76,673  83,275  99,787  103,494  98,656  112,807
                 
Other real estate owned, excluding covered OREO  12,611  18,905  19,676  19,786  21,027  27,055  34,667  29,074
                 
Total nonperforming assets, excluding covered assets  $ 81,262  $ 88,507  $ 96,349  $ 103,061  $ 120,814  $ 130,549  $ 133,323  $ 141,881
                 
Nonperforming covered assets                
Nonaccrual loans  $ --  $ --  $ --  $ --  $ --  $ --  $ 422  $ 422
Other real estate owned  25,481  29,818  41,801  43,751  58,276  83,618  82,834  78,456
Total nonperforming covered assets  $ 25,481  $ 29,818  $ 41,801  $ 43,751  $ 58,276  $ 83,618  $ 83,256  $ 78,878
                 
Loans 90 days or more past due on accrual status, excluding covered loans  $ 453  $ 383  $ 643  $ 1,688  $ 981  $ 433  $ 2,065  $ 654
                 
Covered loans 90 days or more past due on accrual status  $ 45,662  $ 63,071  $ 89,439  $ 102,268  $ 112,396  $ 140,041  $ 190,005  $ 265,175
                 
                 
Allowance for loan and lease losses as a percentage of:                
Nonaccrual loans  440.76 %  425.20 %  378.12 %  339.03 %  278.48 %  259.38 %  273.21 %  235.87 %
Total nonperforming assets, excluding covered assets  372.36 %  334.38 %  300.90 %  273.94 %  230.01 %  205.62 %  202.17 %  187.54 %
Total loans and leases, excluding covered loans  1.76 %  1.79 %  1.83 %  1.86 %  1.88 %  1.96 %  2.00 %  2.09 %
                 
Nonaccrual loans as a percentage of total loans, excluding covered loans  0.40 %  0.42 %  0.48 %  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  0.47 %  0.53 %  0.61 %  0.68 %  0.81 %  0.95 %  0.98 %  1.11 %
Total assets  0.27 %  0.30 %  0.35 %  0.38 %  0.42 %  0.50 %  0.54 %  0.59 %
                     
CITY NATIONAL CORPORATION                    
AVERAGE BALANCES AND RATES                    
(unaudited)                    
                     
  2013
  Fourth Quarter Third Quarter Second Quarter First Quarter Year to Date
(Dollars in millions) Average Balance Average Rate Average Balance Average Rate Average Balance Average Rate Average Balance Average Rate Average Balance Average Rate
Assets                    
Interest-earning assets                     
Loans and leases                     
Commercial   $ 7,905  3.40 %  $ 7,540  3.53 %  $ 7,301  3.58 %  $ 6,876  3.71 %  $ 7,409  3.55 %
Commercial real estate mortgages  3,171  3.57  3,062  3.71  2,848  4.00  2,767  3.97  2,963  3.80
Residential mortgages  4,481  3.58  4,254  3.61  4,083  3.72  3,981  3.83  4,201  3.68
Real estate construction  394  4.61  351  4.53  353  4.24  333  4.64  358  4.51
Home equity loans and lines of credit  689  3.62  684  3.56  704  3.60  712  3.68  697  3.62
Installment   156  4.43  149  4.30  145  4.69  140  4.22  148  4.41
Total loans and leases, excluding covered loans  16,796  3.52  16,040  3.61  15,434  3.72  14,809  3.83  15,776  3.66
Covered loans  747  14.50  819  20.53  910  14.34  990  12.98  866  15.46
 Total loans and leases   17,543  3.98  16,859  4.42  16,344  4.32  15,799  4.42  16,642  4.28
Due from banks - interest-bearing  970  0.25  611  0.26  236  0.27  193  0.24  504  0.25
Federal funds sold and securities purchased under resale agreements  317  1.99  283  2.19  277  2.25  154  2.99  258  2.26
Securities  9,306  1.93  8,576  1.99  8,867  1.98  9,796  1.91  9,134  1.95
Other interest-earning assets  83  5.87  89  5.51  96  4.48  105  3.72  93  4.83
Total interest-earning assets  28,219  3.16  26,418  3.51  25,820  3.46  26,047  3.44  26,631  3.39
Allowance for loan and lease losses (327)   (319)   (325)   (328)   (325)  
Cash and due from banks  196    138    129    129    148  
Other non-earning assets  1,814    1,824    1,846    1,861    1,837  
Total assets  $ 29,902    $ 28,061    $ 27,470    $ 27,709    $ 28,291  
                     
Liabilities and Equity                    
Interest-bearing deposits                    
Interest checking accounts  $ 2,359  0.06 %  $ 2,289  0.07 %   $ 2,173  0.07 %  $ 2,217  0.08 %  $ 2,260  0.07 %
Money market accounts  6,459  0.07  6,286  0.11  5,759  0.11  5,692  0.11  6,052  0.10
Savings deposits  437  0.06  420  0.09  415  0.10  419  0.11  423  0.09
Time deposits - under $100,000  179  0.23  185  0.29  192  0.37  201  0.37  189  0.32
Time deposits -- $100,000 and over  520  0.40  586  0.39  708  0.38  604  0.42  604  0.40
Total interest-bearing deposits  9,954  0.09  9,766  0.12  9,247  0.13  9,133  0.13  9,528  0.12
                     
Federal funds purchased and securities sold under repurchase agreements  --  --   2  0.08  374  0.13  840  0.13  301  0.13
Other borrowings  728  6.03  712  6.07  928  4.74  1,452  3.21  952  4.66
Total interest-bearing liabilities  10,682  0.49  10,480  0.52  10,549  0.54  11,425  0.52  10,781  0.52
Noninterest-bearing deposits  15,989    14,536    13,872    13,278    14,426  
Other liabilities  538    474    466    473    489  
Total equity  2,693    2,571    2,582    2,533    2,595  
Total liabilities and equity  $ 29,902    $ 28,061    $ 27,470    $ 27,709    $ 28,291  
                     
                     
Net interest spread    2.67 %    2.99 %    2.92 %    2.92 %    2.87 %
Net interest margin    2.97 %    3.30 %    3.24 %    3.21 %    3.18 %
                     
Average prime rate    3.25 %    3.25 %    3.25 %    3.25 %    3.25 %
                     
CITY NATIONAL CORPORATION                    
AVERAGE BALANCES AND RATES                    
(unaudited)                    
                     
  2012
  Fourth Quarter Third Quarter Second Quarter First Quarter Year to Date
(Dollars in millions) Average Balance Average Rate Average Balance Average Rate Average Balance Average Rate Average Balance Average Rate Average Balance Average 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  2,515  4.31  2,446  4.44  2,299  4.70  2,197  4.88  2,363  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  295  5.33  283  5.67  307  4.31  283  5.33  294  5.11
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 %
                     
CITY NATIONAL CORPORATION                    
CAPITAL AND CREDIT RATING DATA                    
(unaudited)                    
                     
  2013 2012
  Fourth Quarter Third Quarter Second Quarter First  Quarter Year To Date Fourth Quarter Third Quarter Second Quarter First Quarter Year To Date
Per Common Share:                    
Shares outstanding (in thousands):                    
Average - Basic  54,438  54,274  54,105  53,731  54,139  53,566  53,425  53,105  52,741  53,211
Average - Diluted  55,141  54,820  54,477  54,068  54,640  53,743  53,711  53,373  53,021  53,475
Period-end  54,184  53,915  53,781  53,638    53,216  53,190  52,822  52,661  
Book value for shareholders  $ 45.65  $ 44.85  $ 44.16  $ 44.50    $ 43.89  $ 43.81  $ 42.70  $ 41.77  
Closing price:                    
High  $ 79.33  $ 71.15  $ 63.66  $ 59.61  $ 79.33  $ 52.60  $ 54.48  $ 54.63  $ 54.44  $ 54.63
Low  65.39  64.11  54.36  51.13  51.13  47.27  48.20  46.39  45.39  45.39
Period-end  79.22  66.66  63.37  58.91    49.52  51.51  48.58  52.47  
                     
                     
Capital Ratios (Dollars in millions):                    
Risk-based capital                    
Risk-weighted assets (1)  $ 20,766  $ 19,977  $ 19,256  $ 18,872    $ 18,627  $ 17,174  $ 16,723  $ 15,840  
Tier 1 common equity  $ 1,823  $ 1,761  $ 1,700  $ 1,643    $ 1,578  $ 1,566  $ 1,597  $ 1,611  
Percentage of risk-weighted assets (2)  8.78 %  8.82 %  8.83 %  8.71 %    8.47 %  9.12 %  9.55 %  10.17 %  
Tier 1 capital  $ 2,096  $ 1,936  $ 1,875  $ 1,818    $ 1,753  $ 1,571  $ 1,602  $ 1,616  
Percentage of risk-weighted assets  10.09%  9.69%  9.74%  9.64%    9.41%  9.15%  9.58%  10.20%  
Total capital  $ 2,699  $ 2,532  $ 2,461  $ 2,399    $ 2,332  $ 2,133  $ 2,160  $ 2,013  
Percentage of risk-weighted assets  13.00 %  12.67 %  12.78 %  12.71 %    12.52 %  12.42 %  12.91 %  12.71 %  
Tier 1 leverage ratio  7.17 %  7.07 %  7.00 %  6.72 %    6.60 %  6.29 %  6.74 %  6.98 %  
                     
Period-end equity to period-end assets  9.22 %  8.91 %  9.29 %  9.32 %    8.75 %  8.88 %  9.09 %  9.15 %  
Period-end common equity to period-end assets  8.32 %  8.32 %  8.67 %  8.70 %    8.16 %  8.88 %  9.09 %  9.15 %  
                     
Average equity to average assets  9.01 %  9.16 %  9.40 %  9.14 %  9.17 %  8.92 %  8.95 %  9.17 %  9.17 %  9.05 %
Average common equity to average assets  8.24 %  8.55 %  8.78 %  8.53 %  8.52 %  8.59 %  8.95 %  9.17 %  9.17 %  8.96 %
                     
Period-end tangible common equity to period-end tangible assets (2)  6.17 %  6.11 %  6.32 %  6.35 %    5.89 %  6.41 %  6.88 %  7.13 %  
Period-end tangible common equity to period-end tangible assets excluding net unrealized gain/loss on AFS securities (2)  6.22 %  6.14 %  6.30 %  6.09 %    5.60 %  6.07 %  6.56 %  6.81 %  
                     
Average tangible common equity to average tangible assets (2)  6.09 %  6.26 %  6.44 %  6.19 %  6.24 %  6.21 %  6.45 %  7.01 %  7.12 %  6.68 %
Average tangible common equity to average tangible assets excluding net unrealized gain/loss on AFS securities (2)  6.10 %  6.30 %  6.20 %  5.93 %  6.13 %  5.91 %  6.12 %  6.67 %  6.80 %  6.36 %
                     
                     
Senior Debt Credit Ratings                    
For The Period Ended December 31, 2013                    
    Moody's Fitch Standard & 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 common equity to tangible assets ratio, and tangible common equity to tangible assets ratio excluding net unrealized gain/loss on AFS (available-for-sale) securities 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
(Dollars in thousands, except per share amounts) Fourth  Quarter Third Quarter Second Quarter First Quarter Year to Date Fourth Quarter Third Quarter Second Quarter First Quarter Year to Date
Basic EPS:                    
Net income attributable to City National Corporation  $ 55,112  $ 63,633  $ 59,741  $ 51,523  $ 230,009  $ 47,246  $ 59,780  $ 54,758  $ 46,265  $ 208,049
Less: Dividends on preferred stock  2,406  2,407  2,406  2,406  9,625  --  --  --  --  --
Net income available to common shareholders  $ 52,706  $ 61,226  $ 57,335  $ 49,117  $ 220,384  $ 47,246  $ 59,780  $ 54,758  $ 46,265  $ 208,049
Less: Earnings allocated to participating securities  585  688  656  637  2,555  652  842  788  738  3,008
Earnings allocated to common shareholders  $ 52,121  $ 60,538  $ 56,679  $ 48,480  $ 217,829  $ 46,594  $ 58,938  $ 53,970  $ 45,527  $ 205,041
                     
Weighted average shares outstanding  54,438  54,274  54,105  53,731  54,139  53,566  53,425  53,105  52,741  53,211
                     
Basic earnings per common share  $ 0.96  $ 1.12  $ 1.05  $ 0.90  $ 4.02  $ 0.87  $ 1.10  $ 1.02  $ 0.86  $ 3.85
                     
Diluted EPS:                    
Earnings allocated to shareholders (1)  $ 52,126  $ 60,543  $ 56,682  $ 48,484  $ 217,848  $ 46,594  $ 58,941  $ 53,972  $ 45,530  $ 205,050
                     
Weighted average shares outstanding  54,438  54,274  54,105  53,731  54,139  53,566  53,425  53,105  52,741  53,211
Dilutive effect of equity awards  703  546  372  337  501  177  286  268  280  264
Weighted average diluted shares outstanding  55,141  54,820  54,477  54,068  54,640  53,743  53,711  53,373  53,021  53,475
                     
Diluted earnings per common share  $ 0.95  $ 1.10  $ 1.04  $ 0.90  $ 3.99  $ 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
(In thousands)   Fourth Quarter Third Quarter Fourth Quarter
         
Summary Totals        
Net impairment (expense) income (Sum of A)    $ (185)  $ (483)  $ 3,517
Other covered asset (expense) income, net    (124)  3,190  (720)
Total (expense) income, net    $ (309)  $ 2,707  $ 2,797
         
Interest income (1)        
Income on loans paid-off or fully charged-off    $ 13,691  $ 25,849  $ 17,536
         
Provision for losses on covered loans        
Provision for losses on covered loans A  174  2,496  6,498
         
Noninterest income related to covered assets        
         
FDIC loss sharing expense, net        
Gain on indemnification asset A  $ 677  $ 2,239  $ 10,070
Indemnification asset amortization    (3,142)  (4,417)  (4,818)
Net FDIC reimbursement for OREO and loan expenses    2,289  4,582  8,020
Removal of indemnification asset for loans paid-off or fully charged-off    (6,813)  (9,746)  (5,896)
Removal of indemnification asset for unfunded loan commitments and loans transferred to OREO    (1,017)  (1,550)  (1,500)
Removal of indemnification asset for OREO and net reimbursement to FDIC for OREO sales    (680)  (2,451)  (2,042)
Loan recoveries shared with FDIC    (3,579)  (9,423)  (6,303)
Increase in FDIC clawback liability A  (688)  (226)  (55)
Total FDIC loss sharing expense, net    (12,953)  (20,992)  (2,524)
         
Gain on disposal of assets        
Net gain on sale of OREO    850  3,064  2,593
         
Other income        
Net gain on transfers of covered loans to OREO    1,427  1,936  1,926
Amortization of fair value on acquired unfunded loan commitments    69  48  408
OREO income    517  731  977
Other    (276)  711  (636)
Total other income    1,737  3,426  2,675
         
Total noninterest income related to covered assets    $ (10,366)  $ (14,502)  $ 2,744
         
Noninterest expense related to covered assets (2)        
         
Other real estate owned        
Valuation write-downs    $ 241  $ 1,556  $ 4,115
Holding costs and foreclosure expense    1,463  3,607  3,878
Total other real estate owned    1,704  5,163  7,993
         
Legal and professional fees    1,749  969  2,977
         
Other operating expense        
Other covered asset expenses    7  12  15
         
Total noninterest expense related to covered assets (3)    $ 3,460  $ 6,144  $ 10,985
         
Total (expense) income, net    $ (309)  $ 2,707  $ 2,797
         
(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 year ended December 31, 2013 was $851.1 million, an increase of 3 percent from $825.1 million for the year ended December 31, 2012. Excluding the operating expenses of First American Equipment Finance (acquired at the end of April 2012) and Rochdale Investment Management (acquired in July 2012), noninterest expense was $785.3 million for the year ended December 31, 2013, down 1 percent from $795.8 million for the year ended December 31, 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
(Dollars in thousands) Fourth Quarter Third Quarter Second Quarter First Quarter Year to Date Fourth Quarter Third Quarter Second Quarter First Quarter Year to Date
Net income available to common shareholders  $ 52,706  $ 61,226  $ 57,335  $ 49,117  $ 220,384  $ 47,246  $ 59,780  $ 54,758  $ 46,265  $ 208,049
Add: Amortization of intangibles, net of tax  1,002  1,124  1,123  1,124  4,373  1,124  1,124  883  1,097  4,228
Tangible net income available to common shareholders (A)  $ 53,708  $ 62,350  $ 58,458  $ 50,241  $ 224,757  $ 48,370  $ 60,904  $ 55,641  $ 47,362  $ 212,277
                     
Average common equity  $ 2,465,056  $ 2,400,624  $ 2,412,148  $ 2,363,507  $ 2,410,585  $ 2,341,763  $ 2,296,754  $ 2,234,411  $ 2,168,748  $ 2,260,740
Less: Goodwill and other intangibles  (684,289)  (686,091)  (687,997)  (689,932)  (687,059)  (690,975)  (687,224)  (566,989)  (522,182)  (617,237)
Tangible common equity (B)  $ 1,780,767  $ 1,714,533  $ 1,724,151  $ 1,673,575  $ 1,723,526  $ 1,650,788  $ 1,609,530  $ 1,667,422  $ 1,646,566  $ 1,643,503
                     
Return on average tangible common equity (A)/(B) 11.97% 14.43% 13.60% 12.17% 13.04% 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    
(Dollars in thousands) Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter    
Tier 1 capital  $ 2,095,576  $ 1,936,191  $ 1,874,999  $ 1,818,367  $ 1,753,312  $ 1,570,778  $ 1,602,398  $ 1,616,099    
Less: Preferred stock  (267,616)  (169,920)  (169,920)  (169,920)  (169,920)  --  --  --    
Less: Trust preferred securities  (5,155)  (5,155)  (5,155)  (5,155)  (5,155)  (5,155)  (5,155)  (5,155)    
Tier 1 common equity (A)  $ 1,822,805  $ 1,761,116  $ 1,699,924  $ 1,643,292  $ 1,578,237  $ 1,565,623  $ 1,597,243  $ 1,610,944    
                     
Risk-weighted assets (B)  $20,766,237  $19,977,106  $19,255,862  $18,872,451  $18,627,165  $17,174,382  $16,722,999  $15,839,944    
                     
Tier 1 common equity to risk-weighted assets (A)/(B) 8.78% 8.82% 8.83% 8.71% 8.47% 9.12% 9.55% 10.17%    
                     
                     
Under Basel III capital rules, the Company's estimated Tier 1 common equity ratio was 8.5 percent at December 31, 2013. This ratio was estimated based on management's interpretation of final rules adopted July 2, 2013, by the Federal Reserve Board establishing a new comprehensive capital framework for U.S. banking organizations that would implement the Basel III capital framework and certain provisions of the Dodd-Frank Act. Under management's interpretation of Basel III, estimated Tier 1 common equity was $1.8 billion and estimated risk-weighted assets were $21.5 billion.
                     
CITY NATIONAL CORPORATION                    
NON-GAAP FINANCIAL MEASURES (continued)                    
(unaudited)                    
                     
(d) Ratios for tangible common equity and tangible common equity excluding net unrealized gain/loss on AFS securities              
                     
Ratios for tangible common equity and tangible common equity excluding net unrealized gain/loss on AFS securities are non-GAAP financial measures. Tangible common equity to tangible assets represents total common shareholders' equity less identifiable intangible assets and goodwill divided by total assets less identifiable intangible assets and goodwill. Tangible common equity to tangible assets excluding unrealized gain/loss on AFS securities represents tangible common equity less net unrealized gain/loss on AFS securities divided by total assets less identifiable intangible assets, goodwill and net unrealized gain/loss on AFS securities. Management reviews these measures in evaluating the company's capital levels and has included these ratios in response to market participant and regulatory interest in tangible common equity as a measure of capital. A reconciliation of the GAAP to non-GAAP measure is set forth below: 
                     
  2013 2012
(Dollars in thousands) Fourth Quarter Third  Quarter Second Quarter First Quarter Year to Date Fourth Quarter Third Quarter Second Quarter First Quarter Year to Date
Period End:                    
Total common shareholders' equity  $ 2,473,370  $ 2,417,968  $ 2,374,848  $ 2,386,969    $ 2,335,398  $ 2,330,324  $ 2,255,365  $ 2,199,565  
Less: Goodwill and other intangibles  (683,243)  (684,965)  (686,897)  (688,829)    (690,761)  (691,765)  (589,114)  (521,717)  
Tangible common equity (A)  $ 1,790,127  $ 1,733,003  $ 1,687,951  $ 1,698,140    $ 1,644,637  $ 1,638,559  $ 1,666,251  $ 1,677,848  
Less: Net unrealized (gain)/loss on AFS securities  15,641  10,355  (6,585)  (74,201)    (86,526)  (93,827)  (82,668)  (81,162)  
Tangible common equity excluding net unrealized gain/loss on AFS securities (B)  $ 1,805,768  $ 1,743,358  $ 1,681,366  $ 1,623,939    $ 1,558,111  $ 1,544,732  $ 1,583,583  $ 1,596,686  
                     
Total assets  $ 29,717,951  $ 29,059,404  $ 27,379,502  $ 27,433,754    $ 28,618,492  $ 26,251,528  $ 24,801,973  $ 24,038,489  
Less: Goodwill and other intangibles  (683,243)  (684,965)  (686,897)  (688,829)    (690,761)  (691,765)  (589,114)  (521,717)  
Tangible assets (C)  $ 29,034,708  $ 28,374,439  $ 26,692,605  $ 26,744,925    $ 27,927,731  $ 25,559,763  $ 24,212,859  $ 23,516,772  
Less: Net unrealized (gain)/loss on AFS securities  15,641  10,355  (6,585)  (74,201)    (86,526)  (93,827)  (82,668)  (81,162)  
Tangible assets excluding net unrealized gain/loss on AFS securities (D)  $ 29,050,349  $ 28,384,794  $ 26,686,020  $ 26,670,724    $ 27,841,205  $ 25,465,936  $ 24,130,191  $ 23,435,610  
                     
Period-end tangible common equity to period-end tangible assets (A)/(C)  6.17% 6.11% 6.32% 6.35%   5.89% 6.41% 6.88% 7.13%  
Period-end tangible common equity to period-end tangible assets excluding net unrealized gain/loss on AFS securities (B)/(D) 6.22% 6.14% 6.30% 6.09%   5.60% 6.07% 6.56% 6.81%  
                     
Average Balance:                    
Total common shareholders' equity  $ 2,465,056  $ 2,400,624  $ 2,412,148  $ 2,363,507  $ 2,410,585  $ 2,341,763  $ 2,296,754  $ 2,234,411  $ 2,168,748  $ 2,260,740
Less: Goodwill and other intangibles  (684,289)  (686,091)  (687,997)  (689,932)  (687,059)  (690,975)  (687,224)  (566,989)  (522,182)  (617,237)
Tangible common equity (E)  $ 1,780,767  $ 1,714,533  $ 1,724,151  $ 1,673,575  $ 1,723,526  $ 1,650,788  $ 1,609,530  $ 1,667,422  $ 1,646,566  $ 1,643,503
Less: Net unrealized (gain)/loss on AFS securities  1,223  10,835  (68,768)  (76,916)  (33,071)  (84,845)  (85,746)  (85,367)  (80,333)  (84,079)
Tangible common equity excluding net unrealized gain/loss on AFS securities (F)  $ 1,781,990  $ 1,725,368  $ 1,655,383  $ 1,596,659  $ 1,690,455  $ 1,565,943  $ 1,523,784  $ 1,582,055  $ 1,566,233  $ 1,559,424
                     
Total assets  $ 29,902,443  $ 28,061,134  $ 27,469,581  $ 27,709,159  $ 28,290,973  $ 27,255,859  $ 25,654,594  $ 24,362,546  $ 23,644,899  $ 25,236,172
Less: Goodwill and other intangibles  (684,289)  (686,091)  (687,997)  (689,932)  (687,059)  (690,975)  (687,224)  (566,989)  (522,182)  (617,237)
Tangible assets (G)  $ 29,218,154  $ 27,375,043  $ 26,781,584  $ 27,019,227  $ 27,603,914  $ 26,564,884  $ 24,967,370  $ 23,795,557  $ 23,122,717  $ 24,618,935
Less: Net unrealized (gain)/loss on AFS securities  1,223  10,835  (68,768)  (76,916)  (33,071)  (84,845)  (85,746)  (85,367)  (80,333)  (84,079)
Tangible assets excluding net unrealized gain/loss on AFS securities (H)  $ 29,219,377  $ 27,385,878  $ 26,712,816  $ 26,942,311  $ 27,570,843  $ 26,480,039  $ 24,881,624  $ 23,710,190  $ 23,042,384  $ 24,534,856
                     
Average tangible common equity to average tangible assets (E)/(G) 6.09% 6.26% 6.44% 6.19% 6.24% 6.21% 6.45% 7.01% 7.12% 6.68%
Average tangible common equity to average tangible assets excluding net unrealized gain/loss on AFS securities (F)/(H) 6.10% 6.30% 6.20% 5.93% 6.13% 5.91% 6.12% 6.67% 6.80% 6.36%
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         Linda Mueller, City National, 213.673.7619         Linda.Mueller@cnb.com         Conference Call:         Today 2:00 p.m. PDT         (866) 393-6804         Conference ID: 21178194

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