City National Corporation Reports First-Quarter 2014 Net Income of $54.5 Million, Up 6 Percent From First-Quarter 2013

City National Corporation Logo

LOS ANGELES, April 24, 2014 (GLOBE NEWSWIRE) -- City National Corporation (NYSE:CYN), the parent company of wholly owned City National Bank, today reported first-quarter 2014 net income of $54.5 million, up 6 percent from $51.5 million in the year-ago period. Earnings per share were $0.90, compared to $0.90 per share in the first quarter of 2013. First-quarter 2014 earnings per share reflect dividend payments for preferred stock that was issued in November, 2013, as well as a higher share count than the same period a year ago.

City National also announced today that its Board of Directors has maintained and approved a quarterly common stock cash dividend of $0.33 per share, payable on May 21, 2014 to stockholders of record on May 7, 2014.

FIRST-QUARTER 2014 HIGHLIGHTS

  • Average first-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 $17.3 billion, up 17 percent from the first quarter of 2013. Average commercial loans were up 20 percent from the year-ago period. Period-end loan balances grew to a new record of $17.8 billion at March 31, 2014.
  • First-quarter deposit balances averaged $25.4 billion, up 13 percent from the first quarter of 2013. Average core deposits, which equal 98 percent of total balances, were up 14 percent from the first quarter of 2013. Period-end deposit balances totaled $25.7 billion at March 31, 2014.
  • Trust and investment fee income grew to $53.3 million, up 14 percent from the first quarter of 2013. City National's assets under management or administration grew to $66.4 billion, up 11 percent from the first quarter of 2013.
  • Net loan recoveries in the first quarter of 2014 totaled $4.2 million, compared to net recoveries of $14.7 million in the fourth quarter of 2013. Excluding FDIC-covered loans, first-quarter 2014 results included no provision for loan and lease losses. City National recorded no provisions in 2013. The company remains appropriately reserved at 1.72 percent of total loans, excluding FDIC-covered loans.

"This year is off to a good start, as City National celebrates its 60th anniversary and the company continues to strengthen its capabilities, reputation, and client and colleague base in some of the nation's most dynamic communities," said Chairman and CEO Russell Goldsmith. "Loans, deposits, and investment fee income increased at double-digit rates from the first quarter of last year, and expenses remained in check even as the company continued to invest in additional people, products, and technology.

"I'm pleased that first-quarter net income grew 6 percent despite low interest rates and the run-off of covered assets. This growth underscores the fact that the fundamentals and momentum of our businesses remain positive."

For the three months ended For the three
Dollars in millions, March 31, % months ended %
except per share data 2014 2013 Change December 31, 2013 Change
Earnings Per Common Share $ 0.90 $ 0.90 -- $ 0.95 (5)
Net Income Attributable to City National Corporation 54.5 51.5 6 55.1 (1)
Net Income Available to Common Shareholders 50.4 49.1 3 52.7 (4)
Average Assets $ 29,426.4 $ 27,709.2 6 $ 29,902.4 (2)
Return on Average Assets 0.75% 0.75% -- 0.73% 3
Return on Average Common Equity 8.14% 8.43% (3) 8.48% (4)
Return on Average Tangible Common Equity 11.36% 12.17% (7) 11.97% (5)

ASSETS

Total assets were $29.7 billion at March 31, 2014, up 8 percent from the first quarter of 2013, but virtually unchanged from the fourth quarter of last year. The increase from the year-ago period primarily reflects higher loan balances.

NET INTEREST INCOME

Fully taxable-equivalent net interest income was $206.1 million in the first quarter of 2014, virtually unchanged from the same period of 2013 and 2 percent lower than in the fourth quarter of last year.

Deposits

First-quarter deposit balances averaged $25.4 billion, up 13 percent from the year-ago period. Average deposit balances were down 2 percent from the fourth quarter of 2013, reflecting traditional seasonal business patterns. Period-end deposits totaled $25.7 billion at March 31, 2014, up 12 percent from March 31, 2013 but virtually unchanged from December 31, 2013.

First-quarter 2014 average noninterest-bearing deposits were up 17 percent from the same period of 2013, but down 3 percent from the fourth quarter of last year.

Treasury Services deposit balances, which consist primarily of title, escrow and property management deposits, averaged $2.7 billion in the first quarter of 2014, up 17 percent from the same period of last year and 2 percent higher than in the fourth quarter of 2013. The increases were due primarily to increased Section 1031 Exchange activity and higher home sales prices.

Loans

First-quarter average loan balances, excluding FDIC-covered loans, were $17.3 billion, up 17 percent from the same period in 2013 and 3 percent higher than the fourth quarter of 2013. Period-end loan balances grew to a new record of $17.8 billion, up 17 percent from March 31, 2013 and up 3 percent from December 31, 2013.

First-quarter average commercial loans were up 20 percent from the same period of 2013 and 5 percent higher than the fourth quarter of last year.

Average balances for commercial real estate mortgages were up 18 percent from the first quarter of 2013, and they increased 3 percent from the fourth quarter of last year. Average balances for commercial real estate construction loans were up 13 percent from the first quarter of 2013, but down 5 percent from the fourth quarter of last year.

Average balances for single-family residential mortgage loans were up 15 percent from the year-ago period and 3 percent higher than the fourth quarter of 2013.

Securities

Average securities for the first quarter of 2014 totaled $8.6 billion, down 12 percent from the first quarter of 2013 and 8 percent lower than in the fourth quarter of last year. Total available-for-sale securities amounted to $5.4 billion at March 31, 2014, down from $7.7 billion at the end of the first quarter of 2013 and down from $6.2 billion at December 31, 2013.

The average duration of available-for-sale securities at March 31, 2014 was 2.3 years, compared to 2.8 years at March 31, 2013 and 2.4 years at the end of the fourth quarter of last year. The decrease from the year-ago period reflects the November 5, 2013 transfer of $1.0 billion of debt securities from the available-for-sale category to the held-to-maturity category and a rotation from longer-duration to shorter-duration securities in the available-for-sale portfolio.

City National's net interest margin in the first quarter of 2014 averaged 3.02 percent, compared to 2.97 percent in the fourth quarter of 2013. The modest increase was due to the redeployment of securities to fund loan growth. It was partially offset by lower income on covered loans that were paid off or fully charged off in the first quarter.

First-quarter net interest income included $9.3 million from the FDIC-covered loans that were repaid or charged off during the quarter. This compares with $15.6 million in the first quarter of 2013 and $13.7 million in the fourth quarter of last year.

At March 31, 2014, City National's prime lending rate was 3.25 percent, unchanged from both March 31, 2013 and December 31, 2013.

For the three months ended For the three
March 31, % months ended %
Dollars in millions 2014 2013 Change December 31, 2013 Change
Average Loans and Leases, excluding Covered Loans $ 17,338.4 $ 14,809.3 17 $ 16,795.6 3
Average Covered Loans 696.2 989.5 (30) 747.6 (7)
Average Total Securities 8,585.2 9,796.3 (12) 9,306.3 (8)
Average Earning Assets 27,640.9 26,046.6 6 28,218.6 (2)
Average Deposits 25,371.6 22,411.0 13 25,942.6 (2)
Average Core Deposits 24,888.2 21,806.7 14 25,423.1 (2)
Fully Taxable-Equivalent Net Interest Income 206.1 206.3 (0) 211.2 (2)
Net Interest Margin 3.02% 3.21% (6) 2.97% 2

COVERED ASSETS

Loans and other real estate owned (OREO) assets acquired in City National's FDIC‑assisted bank acquisitions totaled $679.7 million at the end of the first quarter of 2014, compared to $953.3 million at March 31, 2013 and $726.5 million at December 31, 2013.

In the first quarter of 2014, the company recorded a $2.0 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 2013, the company recorded a $0.2 million net impairment. The first-quarter charge reflects a $4.7 million provision for losses on covered loans. In addition to the $2.0 million non-cash net impairment charge for the first quarter of 2014, the company recognized $1.6 million of other covered assets expense, bringing total net expense to $3.6 million. This compares to total net expense of $0.3 million in the fourth quarter of last year.

City National updates 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 $24.9 million at March 31, 2014, compared to $43.8 million at the end of the first quarter of 2013 and $25.5 million at December 31, 2013.

NONINTEREST INCOME

Noninterest income was $101.2 million in the first quarter of 2014, up 8 percent from the first quarter of 2013 and 12 percent higher than in the fourth quarter of 2013. The increase from the fourth quarter was due largely to lower FDIC loss-sharing expense and higher wealth management fee income. Results for the first quarter of 2014 also included a $2.1 million net gain on securities, compared to a net gain of $1.0 million in the first quarter of 2013 and a net loss of $4.6 million in the fourth quarter of last year.

In the first quarter of 2014, noninterest income accounted for 34 percent of City National's total revenue, compared to 32 percent in the first quarter of 2013 and 31 percent in the fourth quarter of 2013.

Wealth Management

City National's assets under management or administration totaled $66.4 billion as of March 31, 2014, up 11 percent from the same period of 2013 and 3 percent higher than in the fourth quarter of 2013.

Trust and investment fees were $53.3 million in the first quarter of 2014, up 14 percent from the first quarter of 2013 and 5 percent higher than the fourth quarter of 2013. The increases were due primarily to asset inflows and market appreciation.

First-quarter 2014 brokerage and mutual fund fees totaled $10.0 million, up 24 percent from the year-earlier period but down 5 percent from the fourth quarter of 2013. Fourth-quarter 2013 brokerage and mutual fund fees included the recognition of annual performance fees.

At or for the At or for the
three months ended three months
March 31, % ended %
Dollars in millions 2014 2013 Change December 31, 2013 Change
Trust and Investment Fee Revenue $ 53.3 $ 46.7 14 $ 50.6 5
Brokerage and Mutual Fund Fees 10.0 8.1 24 10.6 (5)
Assets Under Management (1) 46,374.2 40,264.8 15 45,001.1 3
Assets Under Management or Administration (1) 66,399.8 59,612.0 11 64,691.2 3
(1) Excludes $26.1 billion, $27.1 billion and $24.8 billion of assets under management for asset managers in which City National held a noncontrolling ownership interest as of March 31, 2014, December 31, 2013 and March 31, 2013, respectively.

Other Noninterest Income

First-quarter income from cash management and deposit transaction fees was $12.0 million, down 8 percent from the first quarter of 2013 and 3 percent lower than in the fourth quarter of last year. The decreases were due largely to higher deposit balances used to offset service charge fees.

Fee income from foreign exchange services and letters of credit totaled $10.4 million in the first quarter of 2014, up 8 percent from the first quarter of 2013, reflecting increased client activity and the addition of new relationships. Fee income was down 2 percent from the fourth quarter of 2013.

Other income was $17.6 million in the first quarter of 2014, down 4 percent from the first quarter of 2013 and 13 percent lower than in the fourth quarter of 2013. The decreases were due to lower gains on transfers of covered loans to OREO, reduced income from client swap transactions, and lower lease residual income.

NONINTEREST EXPENSE

City National's first-quarter 2014 noninterest expense amounted to $214.9 million, up 2 percent from the first quarter of 2013 but down 2 percent from the fourth quarter of 2013. The increase from the year-ago period largely reflects higher costs for compensation, legal and professional services, regulatory and compliance requirements, and marketing and advertising. These costs were offset in part by lower OREO expense and FDIC assessments.

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 2014 totaled $4.2 million, or 0.10 percent of total loans and leases on an annualized basis. The company realized net recoveries of $4.8 million, or 0.13 percent, in the first quarter of 2013 and net recoveries of $14.7 million, or 0.35 percent, in the fourth quarter of 2013.

At March 31, 2014, nonperforming assets decreased to $80.7 million, or 0.45 percent of the company's total loans and leases and OREO, compared to $103.1 million, or 0.68 percent, at March 31, 2013 and $81.3 million, or 0.47 percent, at December 31, 2013.

Nonaccrual loans at March 31, 2014 were $71.3 million, compared to $83.3 million at March 31, 2013 and $68.7 million at December 31, 2013. Classified ratios remain at low levels, and overall credit trends are stable.

As of As of As of
March 31, 2014 December 31, 2013 March 31, 2013
Period-end Loans (in millions) Total Nonaccrual Total Nonaccrual Total Nonaccrual
Commercial $ 8,557.0 $ 19.9 $ 8,164.8 $ 14.3 $ 7,170.4 $ 7.3
Commercial Real Estate Mortgages 3,280.9 16.4 3,223.0 18.4 2,832.1 23.1
Residential Mortgages 4,682.1 10.0 4,554.3 11.7 4,027.7 9.1
Real Estate Construction 389.2 18.8 367.0 19.1 352.5 39.6
Home Equity Loans and Lines of Credit 691.3 6.0 709.3 5.1 696.7 4.1
Other Loans 150.9 0.2 152.0 0.1 137.5 0.1
Total Loans (1) $ 17,751.4 $ 71.3 $ 17,170.4 $ 68.7 $ 15,216.9 $ 83.3
Other Real Estate Owned (1) 9.4 12.6 19.8
Total Nonperforming Assets, excluding Covered Assets $ 80.7 $ 81.3 $ 103.1
(1) Excludes covered loans, net of allowance, of $654.9 million, $701.0 million and $909.6 million at March 31, 2014, December 31, 2013 and March 31, 2013, respectively, and covered other real estate owned of $24.9 million, $25.5 million and $43.8 million at March 31, 2014, December 31, 2013 and March 31, 2013, respectively.

In light of strong and stable credit quality, continued net recoveries, and a growing loan portfolio, the company did not record a provision for credit losses or reserve release in the first quarter of 2014. The company recorded no provisions or reserve releases in 2013.

At March 31, 2014, City National's allowance for loan and lease losses totaled $305.8 million, or 1.72 percent of total loans and leases. That compares with $282.3 million, or 1.86 percent, at March 31, 2013 and $302.6 million, or 1.76 percent, at the end of the fourth quarter of 2013. The company also maintains an additional $34.9 million in reserves for off-balance-sheet credit commitments.

Commercial Loans

Commercial loan net charge-offs were $0.2 million in the first quarter of 2014. This compares to net recoveries of $2.2 million in the year-earlier period and net recoveries of $9.5 million in the fourth quarter of 2013.

Commercial loans on nonaccrual totaled $19.9 million in the first quarter of 2014, compared to $7.3 million at March 31, 2013 and $14.3 million at December 31, 2013.

Real Estate Construction Loans

City National's $389.2 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.

First-quarter net recoveries of construction loans were $4.4 million, compared to net recoveries of $2.7 million in the first quarter of 2013 and net recoveries of $4.7 million in the fourth quarter of 2013.

At March 31, 2014, construction loans on nonaccrual totaled $18.8 million, compared to $39.6 million at March 31, 2013 and $19.1 million at December 31, 2013.

Commercial Real Estate Mortgage Loans

In the first quarter of 2014, the company recorded net recoveries of $0.1 million in its $3.3 billion commercial real estate mortgage portfolio. This compares to small net recoveries in both the first quarter and the fourth quarter of 2013.

Commercial real estate mortgage loans on nonaccrual totaled $16.4 million, compared to $23.1 million at March 31, 2013 and $18.4 million at December 31, 2013.

Residential Mortgage Loans and Home Equity Loans and Lines of Credit

City National's period-end $4.7 billion residential mortgage portfolio and $0.7 billion home equity portfolio continued to perform exceptionally well. Together, they accounted for $0.3 million in net charge-offs in the first quarter of 2014, compared to net charge-offs of $0.2 million in the first quarter of 2013 and net recoveries of $0.2 million in the fourth quarter of last year.

Residential mortgage loans and home equity loans and lines of credit on nonaccrual were $16.0 million in the first quarter of 2014, compared to $13.2 million in the first quarter of 2013 and $16.8 million in the fourth quarter of 2013.

INCOME TAXES

City National's effective tax rate for the first quarter of 2014 was 32.3 percent, compared to 29.0 percent in the year-earlier period.

CAPITAL LEVELS

City National remains well-capitalized. Under Basel I capital rules, the company's Tier 1 common shareholders' equity ratio was 8.9 percent at March 31, 2014. The company's Tier 1 common shareholders' equity ratio was 8.7 percent at March 31, 2013 and 8.8 percent at December 31, 2013.1

Under Basel III rules, City National's estimated Tier 1 common equity ratio was 8.6 percent.2 All of the company's pro-forma capital ratios are already comfortably above the Basel III rules that 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 March 31, 2014 were 13.1 percent and 10.2 percent, respectively. City National's Tier 1 leverage ratio at March 31, 2014 was 7.4 percent.

Basel I total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratios at March 31, 2013 were 12.7 percent, 9.6 percent and 6.7 percent, respectively.

The increase in Total and Tier 1 capital ratios from March 31, 2013, was due largely to the company's issuance of $100 million of preferred stock on November 7, 2013.

City National's period-end ratio of equity to total assets at March 31, 2014 was 9.4 percent, compared to 9.3 percent at March 31, 2013 and 9.2 percent at December 31, 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 first-quarter 2014 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 (877) 359-9508 and enter Conference ID 13387727. 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 has $29.7 billion in assets. The company'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. City National and its investment affiliates manage or administer $66.4 billion in client investment assets, including $46.4 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) limited economic growth and elevated levels of unemployment; (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, 2013.

1 For notes on non-GAAP measures, see pages 16 and 17 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 16 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
For The Period Ended March 31, 2014 2013 % Change
Per Common Share
Net income available to common shareholders
Basic $ 0.91 $ 0.90 1
Diluted 0.90 0.90 --
Dividends 0.33 -- NM
Book value 46.38 44.50 4
Results of Operations: (In millions)
Net interest income $ 200 $ 201 (1)
Net interest income (Fully taxable-equivalent) 206 206 (0)
Total revenue 301 295 2
Provision for credit losses on loans and leases, excluding covered loans -- -- --
Provision for losses on covered loans 5 10 (53)
Net income attributable to City National Corporation 55 52 6
Net income available to common shareholders 50 49 3
Financial Ratios:
Performance Ratios:
Return on average assets 0.75% 0.75%
Return on average common equity 8.14 8.43
Return on average tangible common equity (1) 11.36 12.17
Period-end equity to period-end assets 9.40 9.32
Net interest margin 3.02 3.21
Expense to revenue ratio 69.73 68.95
Capital Adequacy Ratios (Period-end):
Tier 1 common equity 8.89 8.71
Tier 1 risk-based capital 10.18 9.64
Total risk-based capital 13.08 12.71
Tier 1 leverage 7.41 6.72
Asset Quality Ratios:
Allowance for loan and lease losses to:
Total loans and leases, excluding covered loans 1.72% 1.86%
Nonaccrual loans 429.21 339.03
Nonperforming assets, excluding covered assets, to:
Total loans and leases and other real estate owned, excluding covered assets 0.45 0.68
Total assets 0.27 0.38
Net recoveries to average total loans and leases, excluding covered loans (annualized) 0.10% 0.13%
Average Balances: (In millions)
Loans and leases, excluding covered loans $ 17,339 $ 14,809 17
Covered loans 696 990 (30)
Securities 8,585 9,796 (12)
Interest-earning assets 27,641 26,047 6
Assets 29,426 27,709 6
Core deposits 24,888 21,807 14
Deposits 25,372 22,411 13
Interest-bearing liabilities 10,636 11,425 (7)
Common shareholders' equity 2,513 2,364 6
Total shareholders' equity 2,780 2,533 10
Period-End Balances: (In millions)
Loans and leases, excluding covered loans $ 17,751 $ 15,217 17
Covered loans 673 952 (29)
Securities 8,651 9,192 (6)
Assets 29,738 27,434 8
Core deposits 25,276 22,259 14
Deposits 25,732 22,938 12
Common shareholders' equity 2,528 2,387 6
Total shareholders' equity 2,796 2,557 9
Wealth Management: (In millions) (2)
Assets under management $ 46,374 $ 40,265 15
Assets under management or administration 66,400 59,612 11
(1) Return on average tangible common equity is a non-GAAP measure. Refer to page 16 for further discussion of this non-GAAP measure.
(2) Excludes $26.1 billion and $24.8 billion of assets under management for asset managers in which City National held a noncontrolling ownership interest as of March 31, 2014 and March 31, 2013, 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
March 31,
except per share data) 2014 2013 % Change
Interest income $ 213,085 $ 215,800 (1)
Interest expense 13,287 14,727 (10)
Net interest income 199,798 201,073 (1)
Provision for credit losses on loans and leases, excluding covered loans -- -- --
Provision for losses on covered loans 4,655 9,892 (53)
Noninterest income
Trust and investment fees 53,306 46,653 14
Brokerage and mutual fund fees 10,042 8,066 24
Cash management and deposit transaction fees 12,033 13,009 (8)
International services 10,395 9,619 8
FDIC loss sharing expense, net (7,083) (4,352) 63
Gain on disposal of assets 2,826 1,114 154
Gain on securities 2,122 1,046 103
Other 17,607 18,373 (4)
Total noninterest income 101,248 93,528 8
Noninterest expense
Salaries and employee benefits 136,833 128,195 7
Net occupancy of premises 16,094 15,989 1
Legal and professional fees 12,950 11,952 8
Information services 9,346 9,391 (0)
Depreciation and amortization 7,828 8,172 (4)
Amortization of intangibles 1,487 1,932 (23)
Marketing and advertising 9,775 7,976 23
Office services and equipment 4,910 4,946 (1)
Other real estate owned 1,433 5,250 (73)
FDIC assessments 1,391 5,481 (75)
Other 12,846 12,056 7
Total noninterest expense 214,893 211,340 2
Income before taxes 81,498 73,369 11
Applicable income taxes 26,288 21,261 24
Net income $ 55,210 $ 52,108 6
Less: Net income attributable to noncontrolling interest 699 585 19
Net income attributable to City National Corporation $ 54,511 $ 51,523 6
Less: Dividends on preferred stock 4,094 2,406 70
Net income available to common shareholders $ 50,417 $ 49,117 3
Other Data:
Earnings per common share - basic $ 0.91 $ 0.90 1
Earnings per common share - diluted $ 0.90 $ 0.90 --
Dividends paid per common share $ 0.33 $ -- NM
Common dividend payout ratio 36.15% --% NM
Return on average assets 0.75% 0.75% --
Return on average common equity 8.14% 8.43% (3)
Return on average tangible common equity 11.36% 12.17% (7)
Net interest margin (Fully taxable-equivalent) 3.02% 3.21% (6)
Full-time equivalent employees 3,587 3,496 3
CITY NATIONAL CORPORATION
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(unaudited)
2014 2013
(Dollars in thousands First Fourth
except per share data) Quarter Quarter
Interest income $ 213,085 $ 218,773
Interest expense 13,287 13,321
Net interest income 199,798 205,452
Provision for credit losses on loans and leases, excluding covered loans -- --
Provision for losses on covered loans 4,655 174
Noninterest income
Trust and investment fees 53,306 50,561
Brokerage and mutual fund fees 10,042 10,621
Cash management and deposit transaction fees 12,033 12,349
International services 10,395 10,575
FDIC loss sharing expense, net (7,083) (12,953)
Gain on disposal of assets 2,826 3,871
Gain (loss) on securities 2,122 (4,649)
Other 17,607 20,174
Total noninterest income 101,248 90,549
Noninterest expense
Salaries and employee benefits 136,833 133,331
Net occupancy of premises 16,094 17,452
Legal and professional fees 12,950 16,058
Information services 9,346 8,902
Depreciation and amortization 7,828 8,019
Amortization of intangibles 1,487 1,722
Marketing and advertising 9,775 9,029
Office services and equipment 4,910 4,679
Other real estate owned 1,433 3,296
FDIC assessments 1,391 2,646
Other 12,846 13,847
Total noninterest expense 214,893 218,981
Income before taxes 81,498 76,846
Applicable income taxes 26,288 20,884
Net income $ 55,210 $ 55,962
Less: Net income attributable to noncontrolling interest 699 850
Net income attributable to City National Corporation $ 54,511 $ 55,112
Less: Dividends on preferred stock 4,094 2,406
Net income available to common shareholders $ 50,417 $ 52,706
Other Data:
Earnings per common share - basic $ 0.91 $ 0.96
Earnings per common share - diluted $ 0.90 $ 0.95
Dividends paid per common share $ 0.33 $ 0.25
Common dividend payout ratio 36.15% 26.15%
Return on average assets 0.75% 0.73%
Return on average common equity 8.14% 8.48%
Return on average tangible common equity 11.36% 11.97%
Net interest margin (Fully taxable-equivalent) 3.02% 2.97%
Full-time equivalent employees 3,587 3,566
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 PERIOD END BALANCE SHEETS
(unaudited)
2014 2013
First Fourth
(In thousands) Quarter Quarter
Assets
Cash and due from banks $ 425,427 $ 183,227
Due from banks - interest-bearing 434,297 552,719
Federal funds sold and securities purchased under resale agreements 205,000 200,000
Securities available-for-sale 5,386,754 6,241,117
Securities held-to-maturity 3,202,997 2,957,843
Trading securities 61,608 82,357
Loans and leases:
Commercial 8,557,041 8,164,823
Commercial real estate mortgages 3,280,868 3,223,001
Residential mortgages 4,682,055 4,554,311
Real estate construction 389,188 367,004
Home equity loans and lines of credit 691,338 709,344
Installment 150,895 151,955
Loans and leases, excluding covered loans 17,751,385 17,170,438
Allowance for loan and lease losses (305,790) (302,584)
Loans and leases, excluding covered loans, net 17,445,595 16,867,854
Covered loans, net (1) 654,855 700,989
Net loans and leases 18,100,450 17,568,843
Premises and equipment, net 199,401 198,398
Goodwill and other intangibles 681,756 683,243
Other real estate owned (2) 34,267 38,092
FDIC indemnification asset 84,851 89,227
Other assets 921,444 922,885
Total assets $ 29,738,252 $ 29,717,951
Liabilities
Deposits:
Noninterest-bearing $ 15,664,029 $ 16,058,968
Interest-bearing 10,067,737 9,620,469
Total deposits 25,731,766 25,679,437
Short-term borrowings 4,107 3,889
Long-term debt 733,537 735,968
Other liabilities 427,241 517,903
Total liabilities 26,896,651 26,937,197
Redeemable noncontrolling interest 45,641 39,768
Shareholders' equity
Preferred stock 267,616 267,616
Common stock 54,899 54,667
Additional paid-in capital 549,989 541,210
Accumulated other comprehensive loss (4,363) (15,641)
Retained earnings 1,950,356 1,918,163
Treasury shares (22,537) (25,029)
Total common shareholders' equity 2,528,344 2,473,370
Total shareholders' equity 2,795,960 2,740,986
Total liabilities and shareholders' equity $ 29,738,252 $ 29,717,951
(1) Covered loans are net of $18.4 million and $15.9 million of allowance for loan losses as of March 31, 2014 and December 31, 2013, respectively.
(2) Other real estate owned includes $24.9 million and $25.5 million covered by FDIC loss share at March 31, 2014 and December 31, 2013, respectively.
CITY NATIONAL CORPORATION
CONSOLIDATED PERIOD END BALANCE SHEETS
(unaudited)
2013
Fourth Third Second First
(In thousands) Quarter Quarter Quarter 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
CREDIT LOSS EXPERIENCE
(unaudited)
2014 2013
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 $ 302,584 $ 295,947 $ 289,914 $ 282,328 $ 277,888 $ 277,888
Net recoveries/(charge-offs):
Commercial (227) 9,515 4,375 2,855 2,173 18,918
Commercial real estate mortgages 95 23 (584) 1,034 3 476
Residential mortgages (447) 32 40 37 (68) 41
Real estate construction 4,388 4,660 2,945 2,682 2,666 12,953
Home equity loans and lines of credit 143 129 (194) 375 (112) 198
Installment 218 349 200 522 146 1,217
Total net recoveries 4,170 14,708 6,782 7,505 4,808 33,803
Provision for credit losses -- -- -- -- -- --
Transfers (to) from reserve for off-balance sheet credit commitments (964) (8,071) (749) 81 (368) (9,107)
Balance at end of period $ 305,790 $ 302,584 $ 295,947 $ 289,914 $ 282,328 $ 302,584
Net Recoveries/(Charge-offs) to Average Total Loans and Leases, Excluding Covered Loans (annualized):
Commercial (0.01)% 0.48% 0.23% 0.16% 0.13% 0.26%
Commercial real estate mortgages 0.01% 0.00% (0.08)% 0.15% 0.00% 0.02%
Residential mortgages (0.04)% 0.00% 0.00% 0.00% (0.01)% 0.00%
Real estate construction 4.73% 4.69% 3.32% 3.05% 3.25% 3.62%
Home equity loans and lines of credit 0.08% 0.07% (0.11)% 0.21% (0.06)% 0.03%
Installment 0.58% 0.89% 0.54% 1.44% 0.42% 0.82%
Total loans and leases, excluding covered loans 0.10% 0.35% 0.17% 0.20% 0.13% 0.21%
Reserve for Off-Balance Sheet Credit Commitments
Balance at beginning of period $ 33,944 $ 25,873 $ 25,124 $ 25,205 $ 24,837 $ 24,837
Transfers from (to) allowance 964 8,071 749 (81) 368 9,107
Balance at end of period $ 34,908 $ 33,944 $ 25,873 $ 25,124 $ 25,205 $ 33,944
Allowance for Losses on Covered Loans
Balance at beginning of period $ 15,922 $ 25,882 $ 24,414 $ 42,354 $ 44,781 $ 44,781
Provision for losses 4,655 174 2,496 (11,927) 9,892 635
Net recoveries -- 9 -- -- -- 9
Reduction in allowance due to loan removals (2,138) (10,143) (1,028) (6,013) (12,319) (29,503)
Balance at end of period $ 18,439 $ 15,922 $ 25,882 $ 24,414 $ 42,354 $ 15,922
CITY NATIONAL CORPORATION
NONPERFORMING ASSETS
(unaudited)
2014 2013
First Fourth Third Second First
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter
Nonperforming assets, excluding covered assets
Nonaccrual loans, excluding covered loans
Commercial $ 19,931 $ 14,298 $ 10,127 $ 11,679 $ 7,292
Commercial real estate mortgages 16,397 18,449 19,020 22,433 23,066
Residential mortgages 9,966 11,661 9,674 10,580 9,136
Real estate construction 18,760 19,067 25,471 25,718 39,608
Home equity loans and lines of credit 6,040 5,144 5,289 6,239 4,103
Installment 151 32 21 24 70
Total nonaccrual loans, excluding covered loans 71,245 68,651 69,602 76,673 83,275
Other real estate owned, excluding covered OREO 9,412 12,611 18,905 19,676 19,786
Total nonperforming assets, excluding covered assets $ 80,657 $ 81,262 $ 88,507 $ 96,349 $ 103,061
Nonperforming covered assets
Other real estate owned $ 24,855 $ 25,481 $ 29,818 $ 41,801 $ 43,751
Loans 90 days or more past due on accrual status, excluding covered loans $ 424 $ 453 $ 383 $ 643 $ 1,688
Covered loans 90 days or more past due on accrual status $ 38,548 $ 45,662 $ 63,071 $ 89,439 $ 102,268
Allowance for loan and lease losses as a percentage of:
Nonaccrual loans 429.21% 440.76% 425.20% 378.12% 339.03%
Total nonperforming assets, excluding covered assets 379.12% 372.36% 334.38% 300.90% 273.94%
Total loans and leases, excluding covered loans 1.72% 1.76% 1.79% 1.83% 1.86%
Nonaccrual loans as a percentage of total loans, excluding covered loans 0.40% 0.40% 0.42% 0.48% 0.55%
Nonperforming assets, excluding covered assets, as a percentage of:
Total loans and other real estate owned, excluding covered assets 0.45% 0.47% 0.53% 0.61% 0.68%
Total assets 0.27% 0.27% 0.30% 0.35% 0.38%
CITY NATIONAL CORPORATION
AVERAGE BALANCES AND RATES
(unaudited)
2014 2013
First Quarter Fourth Quarter
Average Average Average Average
(Dollars in millions) Balance Rate Balance Rate
Assets
Interest-earning assets
Loans and leases
Commercial $ 8,263 3.35% $ 7,905 3.40%
Commercial real estate mortgages 3,255 3.65 3,171 3.57
Residential mortgages 4,596 3.56 4,481 3.58
Real estate construction 376 3.74 394 4.61
Home equity loans and lines of credit 695 3.62 689 3.62
Installment 154 4.48 156 4.43
Total loans and leases, excluding covered loans 17,339 3.50 16,796 3.52
Covered loans 696 12.56 747 14.50
Total loans and leases 18,035 3.86 17,543 3.98
Due from banks - interest-bearing 665 0.27 970 0.25
Federal funds sold and securities purchased under resale agreements 279 1.99 317 1.99
Securities 8,585 2.09 9,306 1.93
Other interest-earning assets 77 6.38 83 5.87
Total interest-earning assets 27,641 3.22 28,219 3.16
Allowance for loan and lease losses (323) (327)
Cash and due from banks 248 196
Other non-earning assets 1,860 1,814
Total assets $ 29,426 $ 29,902
Liabilities and Equity
Interest-bearing deposits
Interest checking accounts $ 2,420 0.06% $ 2,359 0.06%
Money market accounts 6,365 0.07 6,459 0.07
Savings deposits 454 0.06 437 0.06
Time deposits - under $100,000 174 0.22 179 0.23
Time deposits -- $100,000 and over 484 0.41 520 0.40
Total interest-bearing deposits 9,897 0.09 9,954 0.09
Federal funds purchased and securities sold under repurchase agreements -- -- -- --
Other borrowings 739 6.12 728 6.03
Total interest-bearing liabilities 10,636 0.51 10,682 0.49
Noninterest-bearing deposits 15,475 15,989
Other liabilities 535 538
Total equity 2,780 2,693
Total liabilities and equity $ 29,426 $ 29,902
Net interest spread 2.71% 2.67%
Net interest margin 3.02% 2.97%
Average prime rate 3.25% 3.25%
CITY NATIONAL CORPORATION
AVERAGE BALANCES AND RATES
(unaudited)
2013
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 $ 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
CAPITAL AND CREDIT RATING DATA
(unaudited)
2014 2013
First Fourth Third Second First Year To
Quarter Quarter Quarter Quarter Quarter Date
Per Common Share:
Shares outstanding (in thousands):
Average - Basic 54,689 54,438 54,274 54,105 53,731 54,139
Average - Diluted 55,429 55,141 54,820 54,477 54,068 54,640
Period-end 54,511 54,184 53,915 53,781 53,638
Book value for shareholders $ 46.38 $ 45.65 $ 44.85 $ 44.16 $ 44.50
Closing price:
High $ 81.07 $ 79.33 $ 71.15 $ 63.66 $ 59.61 $ 79.33
Low 68.39 65.39 64.11 54.36 51.13 51.13
Period-end 78.72 79.22 66.66 63.37 58.91
Capital Ratios (Dollars in millions):
Risk-based capital
Risk-weighted assets (1) $ 21,016 $ 20,766 $ 19,977 $ 19,256 $ 18,872
Tier 1 common equity $ 1,867 $ 1,823 $ 1,761 $ 1,700 $ 1,643
Percentage of risk-weighted assets (2) 8.89% 8.78% 8.82% 8.83% 8.71%
Tier 1 capital $ 2,140 $ 2,096 $ 1,936 $ 1,875 $ 1,818
Percentage of risk-weighted assets 10.18% 10.09% 9.69% 9.74% 9.64%
Total capital $ 2,749 $ 2,699 $ 2,532 $ 2,461 $ 2,399
Percentage of risk-weighted assets 13.08% 13.00% 12.67% 12.78% 12.71%
Tier 1 leverage ratio 7.41% 7.17% 7.07% 7.00% 6.72%
Period-end equity to period-end assets 9.40% 9.22% 8.91% 9.29% 9.32%
Period-end common equity to period-end assets 8.50% 8.32% 8.32% 8.67% 8.70%
Average equity to average assets 9.45% 9.01% 9.16% 9.40% 9.14% 9.17%
Average common equity to average assets 8.54% 8.24% 8.55% 8.78% 8.53% 8.52%
Period-end tangible common equity to period-end tangible assets (2) 6.36% 6.17% 6.11% 6.32% 6.35%
Period-end tangible common equity to period-end tangible assets excluding net unrealized gain/loss on AFS securities (2) 6.37% 6.22% 6.14% 6.30% 6.09%
Average tangible common equity to average tangible assets (2) 6.37% 6.09% 6.26% 6.44% 6.19% 6.24%
Average tangible common equity to average tangible assets excluding net unrealized gain/loss on AFS securities (2) 6.38% 6.10% 6.30% 6.20% 5.93% 6.13%
Senior Debt Credit Ratings
For The Period Ended March 31, 2014 Standard &
Moody's Fitch Poor's DBRS
City National Bank A2 A-- A-- A (high)
City National Corporation A3 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 16 and 17 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:
2014 2013
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 $ 54,511 $ 55,112 $ 63,633 $ 59,741 $ 51,523 $ 230,009
Less: Dividends on preferred stock 4,094 2,406 2,407 2,406 2,406 9,625
Net income available to common shareholders $ 50,417 $ 52,706 $ 61,226 $ 57,335 $ 49,117 $ 220,384
Less: Earnings allocated to participating securities 543 585 688 656 637 2,555
Earnings allocated to common shareholders $ 49,874 $ 52,121 $ 60,538 $ 56,679 $ 48,480 $ 217,829
Weighted average shares outstanding 54,689 54,438 54,274 54,105 53,731 54,139
Basic earnings per common share $ 0.91 $ 0.96 $ 1.12 $ 1.05 $ 0.90 $ 4.02
Diluted EPS:
Earnings allocated to shareholders (1) $ 49,879 $ 52,126 $ 60,543 $ 56,682 $ 48,484 $ 217,848
Weighted average shares outstanding 54,689 54,438 54,274 54,105 53,731 54,139
Dilutive effect of equity awards 740 703 546 372 337 501
Weighted average diluted shares outstanding 55,429 55,141 54,820 54,477 54,068 54,640
Diluted earnings per common share $ 0.90 $ 0.95 $ 1.10 $ 1.04 $ 0.90 $ 3.99
(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:
2014 2013
First Fourth First
(In thousands) Quarter Quarter Quarter
Summary Totals
Net impairment expense (Sum of A) $ (2,019) $ (185) $ (71)
Other covered asset expense, net (1,561) (124) (144)
Total expense, net $ (3,580) $ (309) $ (215)
Interest income (1)
Income on loans paid-off or fully charged-off $ 9,324 $ 13,691 $ 15,625
Provision for losses on covered loans
Provision for losses on covered loans A 4,655 174 9,892
Noninterest income related to covered assets
FDIC loss sharing expense, net
Gain on indemnification asset A $ 3,599 $ 677 $ 10,616
Indemnification asset amortization (3,164) (3,142) (4,899)
Net FDIC reimbursement for OREO and loan expenses 1,653 2,289 5,193
Removal of indemnification asset for loans paid-off or fully charged-off (2,999) (6,813) (6,073)
Removal of indemnification asset for unfunded loan commitments and loans transferred to OREO (676) (1,017) (2,569)
Removal of indemnification asset for OREO and net reimbursement to FDIC for OREO sales (311) (680) (844)
Loan recoveries shared with FDIC (4,222) (3,579) (4,981)
Increase in FDIC clawback liability A (963) (688) (795)
Total FDIC loss sharing expense, net (7,083) (12,953) (4,352)
Gain on disposal of assets
Net gain on sale of OREO 389 850 974
Other income
Net gain on transfers of covered loans to OREO 863 1,427 3,506
Amortization of fair value on acquired unfunded loan commitments 215 69 394
OREO income 435 517 826
Other (156) (276) (334)
Total other income 1,357 1,737 4,392
Total noninterest income related to covered assets $ (5,337) $ (10,366) $ 1,014
Noninterest expense related to covered assets (2)
Other real estate owned
Valuation write-downs $ 155 $ 241 $ 3,035
Holding costs and foreclosure expense 1,158 1,463 1,893
Total other real estate owned 1,313 1,704 4,928
Legal and professional fees 1,580 1,749 2,020
Other operating expense
Other covered asset expenses 19 7 14
Total noninterest expense related to covered assets (3) $ 2,912 $ 3,460 $ 6,962
Total expense, net $ (3,580) $ (309) $ (215)
(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
SELECTED FINANCIAL INFORMATION ON COVERED ASSETS (continued)
(unaudited)
The following table provides selected components of income and expense related to covered assets from the first quarter of 2011 to the first quarter of 2014:
2014 2013 2012 2011
First Fourth Third Second First Fourth Third Second First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Summary Totals
Net impairment (expense) income (Sum of A) $ (2,019) $ (185) $ (483) $ (1,463) $ (71) $ 3,517 $ 2,639 $ 3,932 $ 2,756 $ (52) $ (5,884) $ (532) $ (4,344)
Other covered asset (expense) income, net (1,561) (124) 3,190 (520) (144) (720) (837) 3,388 (1,893) 394 (589) (1,095) (147)
Total (expense) income, net $ (3,580) $ (309) $ 2,707 $ (1,983) $ (215) $ 2,797 $ 1,802 $ 7,320 $ 863 $ 342 $ (6,473) $ (1,627) $ (4,491)
Interest income
Income on loans paid-off or fully charged-off $ 9,324 $ 13,691 $ 25,849 $ 15,880 $ 15,625 $ 17,536 $ 22,164 $ 27,402 $ 15,699 $ 18,902 $ 18,343 $ 11,105 $ 7,389
Provision for losses on covered loans
Provision for losses on covered loans A 4,655 174 2,496 (11,927) 9,892 6,498 18,089 13,293 7,466 17,667 5,147 1,716 19,116
Noninterest income related to covered assets
FDIC loss sharing (expense) income, net
Gain (loss) on indemnification asset A $ 3,599 $ 677 $ 2,239 $ (13,102) $ 10,616 $ 10,070 $ 21,426 $ 17,722 $ 10,839 $ 17,675 $ (384) $ 1,687 $ 15,048
Indemnification asset amortization (3,164) (3,142) (4,417) (4,746) (4,899) (4,818) (4,258) (4,133) (4,025) (3,775) (4,043) (4,126) (3,624)
Net FDIC reimbursement for OREO and loan expenses 1,653 2,289 4,582 4,995 5,193 8,020 7,612 6,724 10,441 13,858 10,496 17,852 11,118
Removal of indemnification asset for loans paid-off or fully charged-off (2,999) (6,813) (9,746) (7,650) (6,073) (5,896) (9,731) (10,654) (6,516) (5,955) (10,228) (6,306) (3,513)
Removal of indemnification asset for unfunded loan commitments and loans transferred to OREO (676) (1,017) (1,550) (1,163) (2,569) (1,500) (2,834) (4,773) (2,113) (4,714) (3,703) (8,855) (7,673)
Removal of indemnification asset for OREO and net reimbursement to FDIC for OREO sales (311) (680) (2,451) (428) (844) (2,042) (1,219) (1,189) (2,656) (1,543) (2,823) (7,219) (1,282)
Loan recoveries shared with FDIC (4,222) (3,579) (9,423) (4,095) (4,981) (6,303) (8,631) (9,226) (4,487) (7,853) (3,153) (3,197) (1,971)
Increase in FDIC clawback liability A (963) (688) (226) (288) (795) (55) (698) (497) (617) (60) (353) (503) (276)
Other -- -- -- -- -- -- -- -- -- -- -- (17) 778
Total FDIC loss sharing (expense) income, net (7,083) (12,953) (20,992) (26,477) (4,352) (2,524) 1,667 (6,026) 866 7,633 (14,191) (10,684) 8,605
Gain on disposal of assets
Net gain on sale of OREO 389 850 3,064 616 974 2,593 1,524 1,486 2,137 1,927 3,625 9,092 1,628
Other income
Net gain on transfers of covered loans to OREO 863 1,427 1,936 1,445 3,506 1,926 4,907 6,864 2,483 6,824 3,887 12,817 10,330
Amortization of fair value on acquired unfunded loan commitments 215 69 48 283 394 408 192 413 559 558 1,088 766 692
OREO income 435 517 731 456 826 977 428 615 905 406 379 637 661
Other (156) (276) 711 (318) (334) (636) (632) (864) (1,018) (745) (503) (690) 29
Total other income 1,357 1,737 3,426 1,866 4,392 2,675 4,895 7,028 2,929 7,043 4,851 13,530 11,712
Total noninterest income related to covered assets $ (5,337) $ (10,366) $ (14,502) $ (23,995) $ 1,014 $ 2,744 $ 8,086 $ 2,488 $ 5,932 $ 16,603 $ (5,715) $ 11,938 $ 21,945
Noninterest expense related to covered assets
Other real estate owned
Valuation write-downs $ 155 $ 241 $ 1,556 $ 2,184 $ 3,035 $ 4,115 $ 4,267 $ 4,250 $ 7,808 $ 9,984 $ 7,526 $ 15,628 $ 8,305
Holding costs and foreclosure expense 1,158 1,463 3,607 1,894 1,893 3,878 3,522 2,796 3,207 4,890 3,449 4,564 4,493
Total other real estate owned 1,313 1,704 5,163 4,078 4,928 7,993 7,789 7,046 11,015 14,874 10,975 20,192 12,798
Legal and professional fees 1,580 1,749 969 1,701 2,020 2,977 2,541 2,200 2,278 2,609 2,961 2,832 1,819
Other operating expense
Other covered asset expenses 19 7 12 16 14 15 29 31 9 13 18 (70) 92
Total noninterest expense related to covered assets $ 2,912 $ 3,460 $ 6,144 $ 5,795 $ 6,962 $ 10,985 $ 10,359 $ 9,277 $ 13,302 $ 17,496 $ 13,954 $ 22,954 $ 14,709
Total (expense) income, net $ (3,580) $ (309) $ 2,707 $ (1,983) $ (215) $ 2,797 $ 1,802 $ 7,320 $ 863 $ 342 $ (6,473) $ (1,627) $ (4,491)
CITY NATIONAL CORPORATION
NON-GAAP FINANCIAL MEASURES
(unaudited)
(a) 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:
2014 2013
First Fourth Third Second First Year to
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter Date
Net income available to common shareholders $ 50,417 $ 52,706 $ 61,226 $ 57,335 $ 49,117 $ 220,384
Add: Amortization of intangibles, net of tax 865 1,002 1,124 1,123 1,124 4,373
Tangible net income available to common shareholders (A) $ 51,282 $ 53,708 $ 62,350 $ 58,458 $ 50,241 $ 224,757
Average common equity $ 2,512,775 $ 2,465,056 $ 2,400,624 $ 2,412,148 $ 2,363,507 $ 2,410,585
Less: Goodwill and other intangibles (682,676) (684,289) (686,091) (687,997) (689,932) (687,059)
Tangible common equity (B) $ 1,830,099 $ 1,780,767 $ 1,714,533 $ 1,724,151 $ 1,673,575 $ 1,723,526
Return on average tangible common equity (A)/(B) 11.36% 11.97% 14.43% 13.60% 12.17% 13.04%
(b) 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.
2014 2013
First Fourth Third Second First
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter
Tier 1 capital $ 2,140,136 $ 2,095,576 $ 1,936,191 $ 1,874,999 $ 1,818,367
Less: Preferred stock (267,616) (267,616) (169,920) (169,920) (169,920)
Less: Trust preferred securities (5,155) (5,155) (5,155) (5,155) (5,155)
Tier 1 common equity (A) $ 1,867,365 $ 1,822,805 $ 1,761,116 $ 1,699,924 $ 1,643,292
Risk-weighted assets (B) $21,015,948 $20,766,237 $19,977,106 $19,255,862 $18,872,451
Tier 1 common equity to risk-weighted assets (A)/(B) 8.89% 8.78% 8.82% 8.83% 8.71%
Under Basel III capital rules, the Company's estimated Tier 1 common equity ratio was 8.6 percent at March 31, 2014. 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 $1.9 billion and estimated risk-weighted assets were $21.8 billion.
CITY NATIONAL CORPORATION
NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)
(c) 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:
2014 2013
First Fourth Third Second First Year to
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter Date
Period End:
Total common shareholders' equity $ 2,528,344 $ 2,473,370 $ 2,417,968 $ 2,374,848 $ 2,386,969
Less: Goodwill and other intangibles (681,756) (683,243) (684,965) (686,897) (688,829)
Tangible common equity (A) $ 1,846,588 $ 1,790,127 $ 1,733,003 $ 1,687,951 $ 1,698,140
Less: Net unrealized loss/(gain) on AFS securities 4,363 15,641 10,355 (6,585) (74,201)
Tangible common equity excluding net unrealized gain/loss on AFS securities (B) $ 1,850,951 $ 1,805,768 $ 1,743,358 $ 1,681,366 $ 1,623,939
Total assets $ 29,738,252 $ 29,717,951 $ 29,059,404 $ 27,379,502 $ 27,433,754
Less: Goodwill and other intangibles (681,756) (683,243) (684,965) (686,897) (688,829)
Tangible assets (C) $ 29,056,496 $ 29,034,708 $ 28,374,439 $ 26,692,605 $ 26,744,925
Less: Net unrealized loss/(gain) on AFS securities 4,363 15,641 10,355 (6,585) (74,201)
Tangible assets excluding net unrealized gain/loss on AFS securities (D) $ 29,060,859 $ 29,050,349 $ 28,384,794 $ 26,686,020 $ 26,670,724
Period-end tangible common equity to period-end tangible assets (A)/(C) 6.36% 6.17% 6.11% 6.32% 6.35%
Period-end tangible common equity to period-end tangible assets excluding net unrealized gain/loss on AFS securities (B)/(D) 6.37% 6.22% 6.14% 6.30% 6.09%
Average Balance:
Total common shareholders' equity $ 2,512,775 $ 2,465,056 $ 2,400,624 $ 2,412,148 $ 2,363,507 $ 2,410,585
Less: Goodwill and other intangibles (682,676) (684,289) (686,091) (687,997) (689,932) (687,059)
Tangible common equity (E) $ 1,830,099 $ 1,780,767 $ 1,714,533 $ 1,724,151 $ 1,673,575 $ 1,723,526
Less: Net unrealized loss/(gain) on AFS securities 3,016 1,223 10,835 (68,768) (76,916) (33,071)
Tangible common equity excluding net unrealized gain/loss on AFS securities (F) $ 1,833,115 $ 1,781,990 $ 1,725,368 $ 1,655,383 $ 1,596,659 $ 1,690,455
Total assets $ 29,426,360 $ 29,902,443 $ 28,061,134 $ 27,469,581 $ 27,709,159 $ 28,290,973
Less: Goodwill and other intangibles (682,676) (684,289) (686,091) (687,997) (689,932) (687,059)
Tangible assets (G) $ 28,743,684 $ 29,218,154 $ 27,375,043 $ 26,781,584 $ 27,019,227 $ 27,603,914
Less: Net unrealized loss/(gain) on AFS securities 3,016 1,223 10,835 (68,768) (76,916) (33,071)
Tangible assets excluding net unrealized gain/loss on AFS securities (H) $ 28,746,700 $ 29,219,377 $ 27,385,878 $ 26,712,816 $ 26,942,311 $ 27,570,843
Average tangible common equity to average tangible assets (E)/(G) 6.37% 6.09% 6.26% 6.44% 6.19% 6.24%
Average tangible common equity to average tangible assets excluding net unrealized gain/loss on AFS securities (F)/(H) 6.38% 6.10% 6.30% 6.20% 5.93% 6.13%

CONTACT: Financial/Investors Christopher J. Carey, 310.888.6777 Chris.Carey@cnb.com Media Cary Walker, 213.673.7615 Cary.Walker@cnb.com Linda Mueller, 213.673.7619 Linda.Mueller@cnb.com Conference Call: Today 2:00 p.m. PDT (877) 359-9508 Conference ID: 13387727

Source:City National Corporation