×

City National Corporation's 2014 Net Income Grows to $255.8 Million, Up 11 Percent From 2013; Fourth-Quarter 2014 Net Income Totals $66.0 Million, Up 20 Percent

Loan balances exceed $20 billion for the first time, up 18 percent

Deposits grow 9 percent to all-time high of $28.1 billion

Total assets up 10 percent to $32.6 billion

LOS ANGELES, Jan. 22, 2015 (GLOBE NEWSWIRE) -- City National Corporation (NYSE:CYN), the parent company of wholly owned City National Bank, today reported record full-year net income of $255.8 million in 2014, up 11 percent from $230.0 million in 2013. Earnings per share were $4.26, compared to $3.99 per share in 2013.

Fourth-quarter 2014 net income totaled $66.0 million, up 20 percent from $55.1 million in the year-ago period. Earnings per share were $1.10, up 16 percent from $0.95 per share in the fourth quarter of 2013.

City National also announced today that its Board of Directors has increased the company's quarterly common stock cash dividend from $0.33 per share to $0.35 per share, payable on February 18, 2015 to stockholders of record on February 4, 2015.

FOURTH-QUARTER 2014 HIGHLIGHTS

  • Average fourth-quarter loan and lease balances, excluding those covered by City National's acquisition-related loss-sharing agreements with the Federal Deposit Insurance Corporation (FDIC), grew to $19.6 billion, up 17 percent from the fourth 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 $20.3 billion at December 31, 2014.
  • Fourth-quarter deposit balances averaged $28.6 billion, up 10 percent from the fourth quarter of 2013. Average core deposits, which equal 98 percent of total balances, were up 10 percent from the fourth quarter of 2013. Period-end deposit balances totaled $28.1 billion at December 31, 2014.
  • Trust and investment fee income totaled $56.6 million, up 12 percent from the fourth quarter of 2013. For the full year, it was up 13 percent, to $221.3 million. City National's assets under management totaled $48.1 billion, up 7 percent from the fourth quarter of 2013.
  • City National recorded a $5.0 million reversal of its provision for loan and lease losses, excluding FDIC-covered loans, in the fourth quarter of 2014. The reversal reflected loan-loss recoveries, improving credit quality and adherence to the company's allowance methodology. City National remains appropriately reserved at 1.53 percent of total loans excluding those covered by the FDIC.

"City National achieved another year of very strong growth and profitability in 2014," said Chairman and CEO Russell Goldsmith. "Loans, core deposits, wealth management fee income and net income all increased at double-digit rates. Credit quality remained sound, as did our capital ratios. The company has now been profitable for 87 quarters in a row, and in the fourth quarter we continued to invest for future growth, expanding our presence in the San Francisco Bay Area, opening our first office in Santa Barbara and launching new digital initiatives to better serve our clients.

"We begin 2015 encouraged by a strengthening U.S. economy, modestly increasing loan demand, the steady addition of new clients and strong momentum across all our businesses. Of course, 2015 will be a year of transition for City National as we look forward to our merger with Royal Bank of Canada."

For the three months ended For the three
Dollars in millions, December 31, % months ended %
except per share data 2014 2013 Change September 30, 2014 Change
Earnings Per Common Share $ 1.10 $ 0.95 16 $ 1.15 (4)
Net Income Attributable to City National Corporation 66.0 55.1 20 68.7 (4)
Net Income Available to Common Shareholders 61.9 52.7 17 64.6 (4)
Average Assets $ 32,675.2 $ 29,902.4 9 $ 30,910.6 6
Return on Average Assets 0.80% 0.73% 10 0.88% (9)
Return on Average Common Equity 9.19% 8.48% 8 9.80% (6)
Return on Average Tangible Common Equity 12.43% 11.97% 4 13.42% (7)

ASSETS

Total assets at December 31, 2014 grew to a record $32.6 billion, up 10 percent from the fourth quarter of 2013 and 2 percent higher than in the third quarter of 2014. The increases largely reflect higher loan balances.

NET INTEREST INCOME

Fully taxable-equivalent net interest income was $231.3 million in the fourth quarter of 2014, up 10 percent from the same period of 2013 and 4 percent higher than in the third quarter of 2014. The increases were due primarily to higher income on loans and securities, as well as lower cost of funding. Fully taxable-equivalent net interest income for the full-year 2014 was $886.7 million, up 5 percent from $845.9 million in 2013.

Deposits

Average fourth-quarter deposits were $28.6 billion, up 10 percent from the year-ago period and 6 percent higher than in the third quarter of 2014. Average deposits for the full-year 2014 totaled $26.7 billion, up 11 percent from 2013. Period-end deposits were $28.1 billion, up 9 percent from December 31, 2013 and up 1 percent from September 30, 2014.

Fourth-quarter 2014 average noninterest-bearing deposits were up 14 percent from the same period of 2013 and 8 percent higher than in the third quarter of 2014. Average noninterest-bearing deposit balances for the full-year 2014 were up 15 percent from 2013.

Treasury Services deposit balances, which consist primarily of title, escrow and property management deposits, averaged $3.1 billion in the fourth quarter of 2014, up 20 percent from the same period of 2013 and 3 percent than in the third quarter of 2014. Treasury Services deposit balances averaged $2.9 billion for the full-year 2014, up 16 percent from 2013. The increases were due primarily to mortgage transaction activity on higher priced homes.

Loans

Fourth-quarter average loan balances, excluding FDIC-covered loans, were $19.6 billion, up 17 percent from the fourth quarter of 2013 and 4 percent higher than in the third quarter of 2014. Full-year 2014 average loans, excluding FDIC-covered loans, were $18.5 billion, up 17 percent from the prior year. Period-end loan balances grew to a new record $20.3 billion, up 18 percent from December 31, 2013 and up 5 percent from September 30, 2014.

Fourth-quarter average commercial loans were up 20 percent from the same period of 2013 and 5 percent higher than in the third quarter of 2014.

Average balances for commercial real estate mortgages were up 12 percent from the fourth quarter of 2013 and up 2 percent from the third quarter of 2014. Average balances for commercial real estate construction loans were up 67 percent from the fourth quarter of 2013 and 30 percent higher than in the third quarter of 2014.

Average balances for single-family residential mortgage loans were up 13 percent from the year-ago period and 3 percent higher than in the third quarter of 2014. The increase from the year-ago period largely reflects increased home-purchase activity.

Securities

Average securities for the fourth quarter of 2014 totaled $9.4 billion, up 1 percent from the fourth quarter of 2013 and 5 percent higher than in the third quarter of 2014. Total available-for-sale securities amounted to $5.9 billion at December 31, 2014, compared to $6.2 billion at the end of the fourth quarter of 2013 and $5.6 billion at September 30, 2014.

The average duration of available-for-sale securities at December 31, 2014 was 2.0 years, compared to 2.4 years at December 31, 2013 and 2.2 years at September 30, 2014. The decrease from the year-ago period reflects 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 2014 averaged 2.96 percent, compared with 3.03 percent in the third quarter of 2014. Approximately 5 basis points of the 7-basis-point decrease were due to lower income on FDIC-covered loans that were repaid or fully charged off in the fourth quarter and lower covered loan balances. For the full-year 2014, City National's net interest margin averaged 3.05 percent, down from 3.18 percent in the previous year.

Fourth-quarter net interest income included $9.9 million from FDIC-covered loans that were repaid or charged off during the quarter. This compares with $13.7 million in the fourth quarter of 2013 and $11.3 million in the third quarter of 2014.

At December 31, 2014, City National's prime lending rate was 3.25 percent, unchanged from both December 31, 2013 and September 30, 2014.

For the three months ended For the three
December 31, % months ended %
Dollars in millions 2014 2013 Change September 30, 2014 Change
Average Loans and Leases, excluding Covered Loans $ 19,649.8 $ 16,795.6 17 $ 18,837.8 4
Average Covered Loans 530.4 747.6 (29) 580.2 (9)
Average Total Securities 9,354.0 9,306.3 1 8,944.3 5
Average Earning Assets 30,986.2 28,218.6 10 29,239.7 6
Average Deposits 28,551.9 25,942.6 10 26,830.6 6
Average Core Deposits 28,057.1 25,423.1 10 26,393.0 6
Fully Taxable-Equivalent Net Interest Income 231.3 211.2 10 223.1 4
Net Interest Margin 2.96% 2.97% (0) 3.03% (2)

COVERED ASSETS

Loans and other real estate owned (OREO) assets acquired in City National's four FDIC-assisted bank acquisitions totaled $515.1 million at the end of the fourth quarter of 2014, compared to $726.5 million at December 31, 2013 and $557.8 million at September 30, 2014.

In the fourth quarter of 2014, City National recorded a $2.1 million net impairment charge to reflect results of the quarterly update of cash-flow projections for the FDIC-covered loans. In the third quarter of 2014, the company recorded a $0.7 million net impairment. The fourth-quarter charge reflects a small provision for losses on covered loans. In addition to the net impairment charge for the fourth quarter of 2014, the company recognized $1.3 million of other covered assets income, resulting in total net expense of $0.8 million. This compares to total net income of $1.4 million in the third quarter of 2014.

City National updates cash-flow projections for FDIC-covered loans on a quarterly basis. Due to uncertainty about the future performance of these 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 $12.8 million at December 31, 2014, compared to $25.5 million at the end of the fourth quarter of 2013 and $14.5 million at September 30, 2014.

NONINTEREST INCOME

Noninterest income was $101.3 million in the fourth quarter of 2014, up 12 percent from the fourth quarter of 2013 but 6 percent lower than in the third quarter of 2014. The increase from the year-ago period was due largely to higher trust and investment fee income. Fourth-quarter 2014 noninterest income also included a small net securities gain, compared to a $4.6 million net securities loss in the prior-year period. The decrease from the third quarter of 2014 was due primarily to higher FDIC loss-sharing expense and lower gains on the disposal of assets.

City National's noninterest income totaled $411.6 million for the full-year 2014, up 16 percent from 2013. The increase largely reflects higher fee income from the company's wealth management business, as well as lower FDIC loss-sharing expense.

In the fourth quarter of 2014, noninterest income accounted for 31 percent of City National's total revenue, compared to 31 percent in the fourth quarter of 2013 and 33 percent in the third quarter of 2014.

Wealth Management

City National's assets under management or administration totaled $60.8 billion as of December 31, 2014, down 6 percent from December 31, 2013 and 1 percent lower than in the third quarter of 2014. The decrease from the year-ago period largely reflects the sale of City National's San Diego-based retirement services recordkeeping business to OneAmerica® Retirement Services LLC, which closed on September 1, 2014.

Assets under management totaled $48.1 billion as of December 31, 2014, up 7 percent from December 31, 2013 but down 2 percent from September 30, 2014.

Trust and investment fees totaled $56.6 million in the fourth quarter of 2014, up 12 percent from the fourth quarter of 2013 but virtually unchanged from the third quarter of 2014. Full-year 2014 trust and investment fee income was up 13 percent from 2013.

Fourth-quarter 2014 brokerage and mutual fund fees totaled $10.8 million, up 2 percent from the year-earlier period but down 2 percent from the third quarter of 2014. Brokerage and mutual fund fee income was $46.1 million for the full-year 2014, up 35 percent from 2013.

The year-over-year increases in assets under management, trust and investment fees, and brokerage and mutual fund fees were due largely to asset inflows and market appreciation.

At or for the At or for the
three months ended three months
December 31, % ended %
Dollars in millions 2014 2013 Change September 30, 2014 Change
Trust and Investment Fee Revenue $ 56.6 $ 50.6 12 $ 56.8 (0)
Brokerage and Mutual Fund Fees 10.8 10.6 2 11.0 (2)
Assets Under Management (1) 48,062.8 45,001.1 7 49,090.9 (2)
Assets Under Management or Administration (1) 60,818.9 64,691.2 (6) 61,176.6 (1)
(1) Excludes $28.3 billion, $28.6 billion and $27.1 billion of assets under management for asset managers in which City National held a noncontrolling ownership interest as of December 31, 2014, September 30, 2014 and December 31, 2013, respectively.

Other Noninterest Income

Fourth-quarter income from cash management and deposit transaction fees was $12.5 million, up 1 percent from the fourth quarter of 2013 and 2 percent higher than in the third quarter of 2014. Full-year 2014 cash management and deposit transaction fee income was $48.8 million, down 3 percent from 2013. The year-over-year decrease was due largely to higher deposit balances used to offset service charge fees.

Fee income from foreign exchange services and letters of credit totaled $12.0 million in the fourth quarter of 2014, up 13 percent from the fourth quarter of 2013 but 2 percent lower than in the third quarter of 2014. Full-year 2014 foreign exchange services and letters of credit fee income totaled $46.1 million, up 10 percent from 2013. The increases from the year-ago periods were due primarily to increased client activity and the addition of new clients.

Other income was $20.8 million in the fourth quarter of 2014, up 3 percent from the fourth quarter of 2013 but 7 percent lower than in the third quarter of 2014. The decrease from the third quarter of 2014 was due primarily to lower distribution income from investments and reduced lease residual income, which was partially offset by increased income from client swap transactions and higher gain on covered OREO transfers. Other income for the full-year 2014 was $81.6 million, up 2 percent from 2013.

NONINTEREST EXPENSE

City National's fourth-quarter 2014 noninterest expense was $234.5 million, up 7 percent from the fourth quarter of 2013 and 3 percent higher than in the third quarter of 2014. Expense growth from the year-ago period largely reflects increased compensation costs, as well as higher FDIC assessments and card reward program expenses.

The increase in noninterest expense from the third quarter of 2014 was largely due to higher compensation costs for the accrual of performance incentives on higher-than-expected revenue, higher legal and professional fees and increased marketing and advertising expense, reflecting a number of seasonal year-end accruals. The linked-quarter expense increase also reflects higher card reward program expenses.

Noninterest expense for the full-year 2014 amounted to $902.2 million, up 6 percent from 2013. The year-over-year increase was largely due to higher compensation costs, as well as an increase in legal and professional fees and marketing and advertising expense, which were partially offset by lower OREO expense. Full-year 2014 compensation costs included additional incentives paid on higher-than-expected revenue, increased salary expense related to the addition of new colleagues and higher benefit costs.

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 2014 totaled $4.3 million. The company realized net recoveries of $14.7 million in the fourth quarter of 2013 and net recoveries of $10.6 million in the third quarter of 2014. Full-year 2014 net recoveries were $15.4 million, compared to net recoveries of $33.8 million in 2013.

At December 31, 2014, nonperforming assets amounted to $52.9 million, or 0.26 percent of the company's total loans and leases and OREO, compared to $81.3 million, or 0.47 percent, at December 31, 2013 and $46.0 million, or 0.24 percent, at September 30, 2014.

Nonaccrual loans at December 31, 2014 were $42.2 million, compared to $68.7 million at December 31, 2013 and $35.9 million at September 30, 2014. Classified ratios remain at low levels, and overall credit trends remain favorable.

As of As of As of
December 31, 2014 September 30, 2014 December 31, 2013
Period-end Loans (in millions) Total Nonaccrual Total Nonaccrual Total Nonaccrual
Commercial $ 10,010.1 $ 15.1 $ 9,236.3 $ 14.6 $ 8,164.8 $ 14.3
Commercial Real Estate Mortgages 3,539.7 3.6 3,565.2 3.7 3,223.0 18.4
Residential Mortgages 5,106.8 11.9 5,023.2 6.2 4,554.3 11.7
Real Estate Construction 710.2 6.6 585.2 6.6 367.0 19.1
Home Equity Loans and Lines of Credit 785.8 4.9 759.3 4.8 709.3 5.1
Other Loans 184.6 0.1 178.8 0.0 152.0 0.1
Total Loans (1) $ 20,337.2 $ 42.2 $ 19,348.0 $ 35.9 $ 17,170.4 $ 68.7
Other Real Estate Owned (1) 10.7 10.1 12.6
Total Nonperforming Assets, excluding
Covered Assets $ 52.9 $ 46.0 $ 81.3
(1) Excludes covered loans, net of allowance, of $502.4 million, $543.3 million and $701.0 million at December 31, 2014, September 30, 2014 and December 31, 2013, respectively, and covered other real estate owned of $12.8 million, $14.5 million and $25.5 million at December 31, 2014, September 30, 2014 and December 31, 2013, respectively.

City National recorded a $5.0 million reversal of provision for loan and lease losses, excluding FDIC-covered loans, in the fourth quarter of 2014, bringing total reserve releases for the year to $14.0 million. The reserve releases reflect substantial loan-loss recoveries, improving credit quality and adherence to the company's allowance methodology, which takes into account several factors including but not limited to asset quality, credit risk, loan growth and economic conditions. The company recorded no provisions or reserve releases in 2013.

At December 31, 2014, City National's allowance for loan and lease losses totaled $310.1 million, or 1.53 percent of total loans and leases. That compares with $302.6 million, or 1.76 percent, at December 31, 2013 and $312.7 million, or 1.62 percent, at the end of the third quarter of 2014. The company also maintained an additional $27.8 million in reserves for off-balance-sheet credit commitments at December 31, 2014.

Commercial Loans

Fourth-quarter net recoveries in the company's $10.0 billion commercial loan portfolio were $3.5 million. This compares to net recoveries of $9.5 million in the year-earlier period and net recoveries of $2.4 million in the third quarter of 2014. Net recoveries in the full-year 2014 amounted to $0.3 million, compared to net recoveries of $18.9 million in 2013.

Commercial loans on nonaccrual totaled $15.1 million in the fourth quarter of 2014, compared to $14.3 million at December 31, 2013 and $14.6 million at September 30, 2014.

Commercial Real Estate Mortgage Loans

Fourth-quarter net recoveries in the company's $3.5 billion commercial real estate mortgage portfolio were $0.6 million, compared to a small net recovery in the fourth quarter of 2013 and a $0.2 million net recovery in the third quarter of 2014. Full-year 2014 net recoveries amounted to $0.9 million, compared to net recoveries of $0.5 million in 2013.

Commercial real estate mortgage loans on nonaccrual totaled $3.6 million, compared to $18.4 million at December 31, 2013 and $3.7 million at September 30, 2014.

Residential Mortgage Loans and Equity Loans and Lines of Credit

City National's $5.1 billion residential mortgage portfolio and $0.8 billion home equity portfolio continued to perform exceptionally well. Together, they accounted for $0.1 million in net recoveries in the fourth quarter of 2014, compared to net recoveries of $0.2 million at December 31, 2013 and net recoveries of $0.1 million in the third quarter of 2014. Full-year 2014 net charge-offs amounted to $0.1 million, compared to net recoveries of $0.2 million in 2013.

Residential mortgage loans and home equity loans and lines of credit on nonaccrual were $16.8 million in the fourth quarter of 2014, compared to $16.8 million in the fourth quarter of 2013 and $10.9 million in the third quarter of 2014.

Real Estate Construction Loans

City National's $710.2 million commercial real estate construction portfolio includes secured loans to developers of residential and nonresidential properties. This portfolio represents 3 percent of the company's total loans.

Construction loans accounted for a small fourth-quarter 2014 net recovery, compared to net recoveries of $4.7 million in the fourth quarter of 2013 and net recoveries of $7.7 million in the third quarter of 2014. Full-year 2014 net recoveries amounted to $12.9 million, compared to net recoveries of $13.0 million in 2013.

At December 31, 2014, construction loans on nonaccrual totaled $6.6 million, compared to $19.1 million at December 31, 2013 and $6.6 million at September 30, 2014.

INCOME TAXES

City National's effective tax rate for the fourth quarter of 2014 was 30.1 percent, compared to 27.2 percent in the year-earlier period and 33.1 percent in the third quarter of 2014. The company's full-year 2014 effective tax rate was 31.6 percent, compared to 28.9 percent in the prior-year. The higher tax rate is attributable to higher pretax income.

CAPITAL LEVELS

City National remains well-capitalized. Under Basel I capital rules, the company's Tier 1 common shareholders' equity ratio was 8.6 percent at December 31, 2014. The company's Tier 1 common shareholders' equity ratio was 8.8 percent at December 31, 2013 and 8.7 percent at September 30, 2014.1

Under Basel III rules, City National's estimated Tier 1 common equity ratio was 8.4 percent.2 All of the company's pro-forma capital ratios are 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 December 31, 2014 were 11.9 percent and 9.8 percent, respectively. The company's Tier 1 leverage ratio at December 31, 2014 was 7.2 percent.

Basel I total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratios at December 31, 2013 were 13.0 percent, 10.1 percent and 7.2 percent, respectively.

City National's period-end ratio of equity to total assets at December 31, 2014 was 9.1 percent, compared to 9.2 percent at December 31, 2013 and 9.1 percent at September 30, 2014.

CONFERENCE CALL

In light of City National's announcement earlier today regarding its proposed acquisition by Royal Bank of Canada, City National has elected not to conduct an earnings conference call to discuss fourth-quarter and full-year 2014 results. The call was previously scheduled for 2 p.m. PST today.

ABOUT CITY NATIONAL

City National Corporation (NYSE:CYN) has $32.6 billion in assets. The company's wholly owned subsidiary, City National Bank, provides banking, investment and trust services through 75 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 $60.8 billion in client investment assets, including $48.1 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 is uncertain; (6) the impact of revised capital requirements under Basel III; (7) significant changes in applicable laws and regulations, including those concerning taxes, banking and securities; (8) the impact of cyber security attacks or other disruptions to the company's information systems and any resulting compromise of data or disruption 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 Twelve Months
For The Period Ended December 31, 2014 2013 % Change 2014 2013 % Change
Per Common Share
Net income available to common shareholders
Basic $ 1.11 $ 0.96 16 $ 4.31 $ 4.02 7
Diluted 1.10 0.95 16 4.26 3.99 7
Dividends 0.33 0.25 32 1.32 0.75 76
Book value 49.07 45.65 7
Results of Operations: (In millions)
Net interest income $ 224 $ 205 9 $ 858 $ 824 4
Net interest income (Fully taxable-equivalent) 231 211 10 887 846 5
Total revenue 325 296 10 1,270 1,179 8
(Reversal of) provision for credit losses on loans and leases, excluding covered loans (5) -- NM (14) -- NM
Provision for losses on covered loans 0 0 (74) 4 1 503
Net income attributable to City National Corporation 66 55 20 256 230 11
Net income available to common shareholders 62 53 17 239 220 9
Financial Ratios:
Performance Ratios:
Return on average assets 0.80% 0.73% 0.83% 0.81%
Return on average common equity 9.19 8.48 9.24 9.14
Return on average tangible common equity (1) 12.43 11.97 12.70 13.04
Period-end equity to period-end assets 9.06 9.22
Net interest margin 2.96 2.97 3.05 3.18
Expense to revenue ratio 70.32 71.76 69.16 69.61
Capital Adequacy Ratios (Period-end):
Tier 1 common equity 8.62 8.78
Tier 1 risk-based capital 9.76 10.09
Total risk-based capital 11.93 13.00
Tier 1 leverage 7.20 7.17
Asset Quality Ratios:
Allowance for loan and lease losses to:
Total loans and leases, excluding covered loans 1.53% 1.76%
Nonaccrual loans 735.53 440.76
Nonperforming assets, excluding covered assets, to:
Total loans and leases and other real estate owned, excluding covered assets 0.26 0.47
Total assets 0.16 0.27
Net recoveries to average total loans and leases, excluding covered loans (annualized) 0.09% 0.35% 0.08% 0.21%
Average Balances: (In millions)
Loans and leases, excluding covered loans $ 19,650 $16,796 17 $ 18,454 $ 15,776 17
Covered loans 530 747 (29) 612 866 (29)
Securities 9,354 9,306 1 8,890 9,134 (3)
Interest-earning assets 30,986 28,219 10 29,046 26,631 9
Assets 32,675 29,902 9 30,757 28,291 9
Core deposits 28,057 25,423 10 26,209 23,350 12
Deposits 28,552 25,943 10 26,676 23,954 11
Interest-bearing liabilities 11,033 10,682 3 10,777 10,781 (0)
Common shareholders' equity 2,672 2,465 8 2,590 2,411 7
Total shareholders' equity 2,939 2,693 9 2,858 2,595 10
Period-End Balances: (In millions)
Loans and leases, excluding covered loans $ 20,337 $ 17,170 18
Covered loans 511 717 (29)
Securities 9,483 9,281 2
Assets 32,610 29,718 10
Core deposits 27,591 25,167 10
Deposits 28,108 25,679 9
Common shareholders' equity 2,688 2,473 9
Total shareholders' equity 2,956 2,741 8
Wealth Management: (In millions) (2)
Assets under management $ 48,063 $ 45,001 7
Assets under management or administration 60,819 64,691 (6)
(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 $28.3 billion and $27.1 billion of assets under management for asset managers in which City National held a noncontrolling ownership interest as of December 31, 2014 and December 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)
Three Months Ended Twelve Months Ended
(Dollars in thousands December 31, December 31,
except per share data) 2014 2013 % Change 2014 2013 % Change
Interest income $ 234,442 $ 218,773 7 $ 907,446 $ 879,661 3
Interest expense 10,881 13,321 (18) 49,209 55,946 (12)
Net interest income 223,561 205,452 9 858,237 823,715 4
(Reversal of) provision for credit losses on loans and leases, excluding covered loans (5,000) -- NM (14,000) -- NM
Provision for losses on covered loans 46 174 (74) 3,829 635 503
Noninterest income
Trust and investment fees 56,596 50,561 12 221,335 196,474 13
Brokerage and mutual fund fees 10,839 10,621 2 46,142 34,101 35
Cash management and deposit transaction fees 12,461 12,349 1 48,822 50,501 (3)
International services 11,957 10,575 13 46,068 42,037 10
FDIC loss sharing expense, net (12,008) (12,953) (7) (52,858) (64,774) (18)
Gain on disposal of assets 631 3,871 (84) 13,280 9,026 47
Gain (loss) on securities 31 (4,649) 101 7,211 7,649 (6)
Other 20,807 20,174 3 81,578 80,155 2
Total noninterest income 101,314 90,549 12 411,578 355,169 16
Noninterest expense
Salaries and employee benefits 143,383 133,331 8 561,285 517,743 8
Net occupancy of premises 15,722 17,452 (10) 64,273 65,720 (2)
Legal and professional fees 16,264 16,058 1 61,957 52,255 19
Information services 10,576 8,902 19 39,645 37,352 6
Depreciation and amortization 8,432 8,019 5 32,421 32,267 0
Amortization of intangibles 1,424 1,722 (17) 5,791 7,517 (23)
Marketing and advertising 10,343 9,029 15 36,676 33,185 11
Office services and equipment 5,488 4,679 17 20,723 19,480 6
Other real estate owned 1,302 3,296 (60) 7,467 18,127 (59)
FDIC assessments 4,732 2,646 79 13,517 15,566 (13)
Other 16,806 13,847 21 58,434 51,902 13
Total noninterest expense 234,472 218,981 7 902,189 851,114 6
Income before taxes 95,357 76,846 24 377,797 327,135 15
Applicable income taxes 28,687 20,884 37 119,208 94,619 26
Net income $ 66,670 $ 55,962 19 $ 258,589 $ 232,516 11
Less: Net income attributable to noncontrolling interest 714 850 (16) 2,770 2,507 10
Net income attributable to City National Corporation $ 65,956 $ 55,112 20 $ 255,819 $ 230,009 11
Less: Dividends on preferred stock 4,094 2,406 70 16,375 9,625 70
Net income available to common shareholders $ 61,862 $ 52,706 17 $ 239,444 $ 220,384 9
Other Data:
Earnings per common share - basic $ 1.11 $ 0.96 16 $ 4.31 $ 4.02 7
Earnings per common share - diluted $ 1.10 $ 0.95 16 $ 4.26 $ 3.99 7
Dividends paid per common share $ 0.33 $ 0.25 32 $ 1.32 $ 0.75 76
Common dividend payout ratio 29.69% 26.15% 14 30.59% 18.69% 64
Return on average assets 0.80% 0.73% 10 0.83% 0.81% 2
Return on average common equity 9.19% 8.48% 8 9.24% 9.14% 1
Return on average tangible common equity 12.43% 11.97% 4 12.70% 13.04% (3)
Net interest margin (Fully taxable-equivalent) 2.96% 2.97% (0) 3.05% 3.18% (4)
Full-time equivalent employees 3,570 3,566 0
CITY NATIONAL CORPORATION
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(unaudited)
2014
(Dollars in thousands Fourth Third Second First Year to
except per share data) Quarter Quarter Quarter Quarter Date
Interest income $ 234,442 $ 227,594 $ 232,325 $ 213,085 $ 907,446
Interest expense 10,881 11,818 13,223 13,287 49,209
Net interest income 223,561 215,776 219,102 199,798 858,237
(Reversal of) provision for credit losses on loans and leases, excluding covered loans (5,000) (8,000) (1,000) -- (14,000)
(Reversal of) provision for losses on covered loans 46 589 (1,461) 4,655 3,829
Noninterest income
Trust and investment fees 56,596 56,834 54,599 53,306 221,335
Brokerage and mutual fund fees 10,839 11,021 14,240 10,042 46,142
Cash management and deposit transaction fees 12,461 12,200 12,128 12,033 48,822
International services 11,957 12,233 11,483 10,395 46,068
FDIC loss sharing expense, net (12,008) (9,606) (24,161) (7,083) (52,858)
Gain on disposal of assets 631 2,985 6,838 2,826 13,280
Gain (loss) on securities 31 (61) 5,119 2,122 7,211
Other 20,807 22,311 20,853 17,607 81,578
Total noninterest income 101,314 107,917 101,099 101,248 411,578
Noninterest expense
Salaries and employee benefits 143,383 142,210 138,859 136,833 561,285
Net occupancy of premises 15,722 15,862 16,595 16,094 64,273
Legal and professional fees 16,264 14,350 18,393 12,950 61,957
Information services 10,576 10,260 9,463 9,346 39,645
Depreciation and amortization 8,432 8,276 7,885 7,828 32,421
Amortization of intangibles 1,424 1,426 1,454 1,487 5,791
Marketing and advertising 10,343 7,576 8,982 9,775 36,676
Office services and equipment 5,488 5,038 5,287 4,910 20,723
Other real estate owned 1,302 2,360 2,372 1,433 7,467
FDIC assessments 4,732 4,629 2,765 1,391 13,517
Other 16,806 15,215 13,567 12,846 58,434
Total noninterest expense 234,472 227,202 225,622 214,893 902,189
Income before taxes 95,357 103,902 97,040 81,498 377,797
Applicable income taxes 28,687 34,404 29,829 26,288 119,208
Net income $ 66,670 $ 69,498 $ 67,211 $ 55,210 $ 258,589
Less: Net income attributable to noncontrolling interest 714 847 510 699 2,770
Net income attributable to City National Corporation $ 65,956 $ 68,651 $ 66,701 $ 54,511 $ 255,819
Less: Dividends on preferred stock 4,094 4,093 4,094 4,094 16,375
Net income available to common shareholders $ 61,862 $ 64,558 $ 62,607 $ 50,417 $ 239,444
Other Data:
Earnings per common share - basic $ 1.11 $ 1.16 $ 1.13 $ 0.91 $ 4.31
Earnings per common share - diluted $ 1.10 $ 1.15 $ 1.11 $ 0.90 $ 4.26
Dividends paid per common share $ 0.33 $ 0.33 $ 0.33 $ 0.33 $ 1.32
Common dividend payout ratio 29.69% 28.40% 29.26% 36.15% 30.59%
Return on average assets 0.80% 0.88% 0.89% 0.75% 0.83%
Return on average common equity 9.19% 9.80% 9.80% 8.14% 9.24%
Return on average tangible common equity 12.43% 13.42% 13.53% 11.36% 12.70%
Net interest margin (Fully taxable-equivalent) 2.96% 3.03% 3.21% 3.02% 3.05%
Full-time equivalent employees 3,570 3,598 3,638 3,587
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 -- -- -- -- --
(Reversal of) 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
Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter
Assets
Cash and due from banks $ 336,470 $ 503,647 $ 586,273 $ 425,427
Due from banks - interest-bearing 119,981 625,183 554,044 434,297
Federal funds sold and securities purchased under resale agreements 200,000 200,000 200,000 205,000
Securities available-for-sale 5,882,983 5,629,176 5,328,492 5,386,754
Securities held-to-maturity 3,427,031 3,450,551 3,418,353 3,202,997
Trading securities 173,188 125,910 86,097 61,608
Loans and leases:
Commercial 10,010,067 9,236,294 8,837,544 8,557,041
Commercial real estate mortgages 3,539,703 3,565,188 3,464,918 3,280,868
Residential mortgages 5,106,803 5,023,213 4,814,435 4,682,055
Real estate construction 710,224 585,232 457,557 389,188
Home equity loans and lines of credit 785,796 759,258 716,816 691,338
Installment 184,613 178,803 183,518 150,895
Loans and leases, excluding covered loans 20,337,206 19,347,988 18,474,788 17,751,385
Allowance for loan and lease losses (310,149) (312,703) (311,276) (305,790)
Loans and leases, excluding covered loans, net 20,027,057 19,035,285 18,163,512 17,445,595
Covered loans, net (1) 502,371 543,347 596,667 654,855
Net loans and leases 20,529,428 19,578,632 18,760,179 18,100,450
Premises and equipment, net 207,700 208,711 205,168 199,401
Goodwill and other intangibles 670,699 672,123 680,302 681,756
Other real estate owned (2) 23,496 24,602 22,213 34,267
FDIC indemnification asset 50,511 59,917 68,038 84,851
Other assets 988,876 937,148 909,933 921,444
Total assets $ 32,610,363 $ 32,015,600 $ 30,819,092 $ 29,738,252
Liabilities
Deposits:
Noninterest-bearing $ 18,030,021 $ 17,827,649 $ 16,690,688 $ 15,664,029
Interest-bearing 10,078,082 10,128,331 9,960,837 10,067,737
Total deposits 28,108,103 27,955,980 26,651,525 25,731,766
Short-term borrowings 322,861 4,635 160,337 4,107
Long-term debt 638,600 631,434 627,768 733,537
Other liabilities 544,989 476,900 479,760 427,241
Total liabilities 29,614,553 29,068,949 27,919,390 26,896,651
Redeemable noncontrolling interest 39,978 47,222 46,549 45,641
Shareholders' equity
Preferred stock 267,616 267,616 267,616 267,616
Common stock 55,162 55,058 54,957 54,899
Additional paid-in capital 578,046 565,822 556,284 549,989
Accumulated other comprehensive (loss) income (7,074) (7,592) 2,100 (4,363)
Retained earnings 2,084,361 2,040,868 1,994,646 1,950,356
Treasury shares (22,279) (22,343) (22,450) (22,537)
Total common shareholders' equity 2,688,216 2,631,813 2,585,537 2,528,344
Total shareholders' equity 2,955,832 2,899,429 2,853,153 2,795,960
Total liabilities and shareholders' equity $ 32,610,363 $ 32,015,600 $ 30,819,092 $ 29,738,252
(1) Covered loans are net of $8.6 million, $9.4 million, $9.1 million and $18.4 million of allowance for loan losses as of December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively.
(2) Other real estate owned includes $12.8 million, $14.5 million, $17.9 million and $24.9 million covered by FDIC loss share at
December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, 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
Fourth Third Second First Year To Fourth Third Second First Year To
(Dollars in thousands) Quarter Quarter Quarter Quarter Date Quarter Quarter Quarter Quarter Date
Allowance for Loan and Lease Losses, Excluding Covered Loans
Balance at beginning of period $ 312,703 $ 311,276 $ 305,790 $ 302,584 $ 302,584 $ 295,947 $ 289,914 $ 282,328 $ 277,888 $ 277,888
Net recoveries/(charge-offs):
Commercial 3,471 2,429 (5,359) (227) 314 9,515 4,375 2,855 2,173 18,918
Commercial real estate mortgages 588 225 27 95 935 23 (584) 1,034 3 476
Residential mortgages 55 33 190 (447) (169) 32 40 37 (68) 41
Real estate construction 50 7,729 687 4,388 12,854 4,660 2,945 2,682 2,666 12,953
Home equity loans and lines of credit 7 52 (106) 143 96 129 (194) 375 (112) 198
Installment 176 82 926 218 1,402 349 200 522 146 1,217
Total net recoveries/(charge-offs) 4,347 10,550 (3,635) 4,170 15,432 14,708 6,782 7,505 4,808 33,803
(Reversal of) provision for credit losses (5,000) (8,000) (1,000) -- (14,000) -- -- -- -- --
Transfers (to) from reserve for off-balance sheet credit commitments (1,901) (1,123) 10,121 (964) 6,133 (8,071) (749) 81 (368) (9,107)
Balance at end of period $ 310,149 $ 312,703 $ 311,276 $ 305,790 $ 310,149 $ 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 0.15% 0.11% (0.25)% (0.01)% 0.00% 0.48% 0.23% 0.16% 0.13% 0.26%
Commercial real estate mortgages 0.07% 0.03% 0.00% 0.01% 0.03% 0.00% (0.08)% 0.15% 0.00% 0.02%
Residential mortgages 0.00% 0.00% 0.02% (0.04)% (0.00)% 0.00% 0.00% 0.00% (0.01)% 0.00%
Real estate construction 0.03% 6.02% 0.66% 4.73% 2.61% 4.69% 3.32% 3.05% 3.25% 3.62%
Home equity loans and lines of credit 0.00% 0.03% (0.06)% 0.08% 0.01% 0.07% (0.11)% 0.21% (0.06)% 0.03%
Installment 0.38% 0.19% 2.21% 0.58% 0.83% 0.89% 0.54% 1.44% 0.42% 0.82%
Total loans and leases, excluding covered loans 0.09% 0.22% (0.08)% 0.10% 0.08% 0.35% 0.17% 0.20% 0.13% 0.21%
Reserve for Off-Balance Sheet Credit Commitments
Balance at beginning of period $ 25,910 $ 24,787 $ 34,908 $ 33,944 $ 33,944 $ 25,873 $ 25,124 $ 25,205 $ 24,837 $ 24,837
Transfers from (to) allowance 1,901 1,123 (10,121) 964 (6,133) 8,071 749 (81) 368 9,107
Balance at end of period $ 27,811 $ 25,910 $ 24,787 $ 34,908 $ 27,811 $ 33,944 $ 25,873 $ 25,124 $ 25,205 $ 33,944
Allowance for Losses on Covered Loans
Balance at beginning of period $ 9,368 $ 9,103 $ 18,439 $ 15,922 $ 15,922 $ 25,882 $ 24,414 $ 42,354 $ 44,781 $ 44,781
(Reversal of) provision for losses 46 589 (1,461) 4,655 3,829 174 2,496 (11,927) 9,892 635
Net recoveries -- -- -- -- -- 9 -- -- -- 9
Reduction in allowance due to loan removals (806) (324) (7,875) (2,138) (11,143) (10,143) (1,028) (6,013) (12,319) (29,503)
Balance at end of period $ 8,608 $ 9,368 $ 9,103 $ 18,439 $ 8,608 $ 15,922 $ 25,882 $ 24,414 $ 42,354 $ 15,922
CITY NATIONAL CORPORATION
NONPERFORMING ASSETS
(unaudited)
2014 2013
Fourth Third Second First Fourth Third Second First
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Nonperforming assets, excluding covered assets
Nonaccrual loans, excluding covered loans
Commercial $ 15,103 $ 14,644 $ 27,486 $ 19,931 $ 14,298 $ 10,127 $ 11,679 $ 7,292
Commercial real estate mortgages 3,575 3,691 9,216 16,397 18,449 19,020 22,433 23,066
Residential mortgages 11,943 6,168 9,031 9,966 11,661 9,674 10,580 9,136
Real estate construction 6,598 6,598 12,834 18,760 19,067 25,471 25,718 39,608
Home equity loans and lines of credit 4,864 4,776 6,090 6,040 5,144 5,289 6,239 4,103
Installment 84 42 125 151 32 21 24 70
Total nonaccrual loans, excluding covered loans 42,167 35,919 64,782 71,245 68,651 69,602 76,673 83,275
Other real estate owned, excluding covered OREO 10,736 10,115 4,269 9,412 12,611 18,905 19,676 19,786
Total nonperforming assets, excluding covered assets $ 52,903 $ 46,034 $ 69,051 $ 80,657 $ 81,262 $ 88,507 $ 96,349 $ 103,061
Nonperforming covered assets
Other real estate owned $ 12,760 $ 14,487 $ 17,944 $ 24,855 $ 25,481 $ 29,818 $ 41,801 $ 43,751
Loans 90 days or more past due on accrual status, excluding covered loans $ 1,515 $ 6,824 $ 1,801 $ 424 $ 453 $ 383 $ 643 $ 1,688
Covered loans 90 days or more past due on accrual status $ 28,344 $ 38,465 $ 31,011 $ 38,548 $ 45,662 $ 63,071 $ 89,439 $ 102,268
Allowance for loan and lease losses as a percentage of:
Nonaccrual loans 735.53% 870.59% 480.50% 429.21% 440.76% 425.20% 378.12% 339.03%
Total nonperforming assets, excluding covered assets 586.26% 679.29% 450.79% 379.12% 372.36% 334.38% 300.90% 273.94%
Total loans and leases, excluding covered loans 1.53% 1.62% 1.68% 1.72% 1.76% 1.79% 1.83% 1.86%
Nonaccrual loans as a percentage of total loans, excluding covered loans 0.21% 0.19% 0.35% 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 0.26% 0.24% 0.37% 0.45% 0.47% 0.53% 0.61% 0.68%
Total assets 0.16% 0.14% 0.22% 0.27% 0.27% 0.30% 0.35% 0.38%
CITY NATIONAL CORPORATION
AVERAGE BALANCES AND RATES
(unaudited)
2014
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 $ 9,449 3.36% $ 9,042 3.31% $ 8,605 3.49% $ 8,263 3.35% $ 8,844 3.38%
Commercial real estate mortgages 3,537 3.54 3,480 3.52 3,355 3.57 3,255 3.65 3,408 3.57
Residential mortgages 5,054 3.41 4,906 3.46 4,716 3.51 4,596 3.56 4,819 3.48
Real estate construction 660 3.52 510 3.66 418 3.75 376 3.74 492 3.65
Home equity loans and lines of credit 769 3.51 728 3.53 697 3.69 695 3.62 722 3.59
Installment 181 4.35 172 4.41 168 4.34 154 4.48 169 4.39
Total loans and leases, excluding covered loans 19,650 3.42 18,838 3.41 17,959 3.54 17,339 3.50 18,454 3.46
Covered loans 530 15.27 580 15.49 644 19.30 696 12.56 612 15.63
Total loans and leases 20,180 3.73 19,418 3.76 18,603 4.08 18,035 3.86 19,066 3.85
Due from banks - interest-bearing 1,070 0.26 560 0.26 577 0.26 665 0.27 719 0.26
Federal funds sold and securities purchased under resale agreements 311 2.26 247 2.77 356 1.67 279 1.99 298 2.13
Securities 9,354 2.10 8,944 2.13 8,668 2.17 8,585 2.09 8,890 2.12
Other interest-earning assets 71 5.92 71 5.99 72 6.47 77 6.38 73 6.19
Total interest-earning assets 30,986 3.10 29,240 3.19 28,276 3.39 27,641 3.22 29,046 3.22
Allowance for loan and lease losses (324) (328) (328) (323) (326)
Cash and due from banks 177 168 188 248 195
Other non-earning assets 1,836 1,831 1,843 1,860 1,842
Total assets $ 32,675 $ 30,911 $ 29,979 $ 29,426 $ 30,757
Liabilities and Equity
Interest-bearing deposits
Interest checking accounts $ 2,630 0.05% $ 2,396 0.05% $ 2,327 0.06% $ 2,420 0.06% $ 2,444 0.06%
Money market accounts 6,637 0.07 6,538 0.07 6,618 0.07 6,365 0.07 6,540 0.07
Savings deposits 473 0.06 464 0.06 462 0.06 454 0.06 463 0.06
Time deposits - under $100,000 159 0.20 165 0.20 170 0.20 174 0.22 167 0.21
Time deposits -- $100,000 and over 495 0.34 438 0.39 451 0.39 484 0.41 467 0.38
Total interest-bearing deposits 10,394 0.08 10,001 0.08 10,028 0.08 9,897 0.09 10,081 0.08
Federal funds purchased and securities sold under repurchase agreements 3 0.07 1 0.08 1 0.07 -- -- 1 0.07
Other borrowings 636 5.51 667 5.82 737 6.07 739 6.12 695 5.90
Total interest-bearing liabilities 11,033 0.39 10,669 0.44 10,766 0.49 10,636 0.51 10,777 0.46
Noninterest-bearing deposits 18,158 16,830 15,884 15,475 16,595
Other liabilities 545 532 499 535 527
Total equity 2,939 2,880 2,830 2,780 2,858
Total liabilities and equity $ 32,675 $ 30,911 $ 29,979 $ 29,426 $ 30,757
Net interest spread 2.71% 2.75% 2.90% 2.71% 2.76%
Net interest margin 2.96% 3.03% 3.21% 3.02% 3.05%
Average prime rate 3.25% 3.25% 3.25% 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
Fourth Third Second First Year To Fourth Third Second First Year To
Quarter Quarter Quarter Quarter Date Quarter Quarter Quarter Quarter Date
Per Common Share:
Shares outstanding (in thousands):
Average - Basic 55,152 55,031 54,957 54,689 54,959 54,438 54,274 54,105 53,731 54,139
Average - Diluted 55,933 55,765 55,632 55,429 55,691 55,141 54,820 54,477 54,068 54,640
Period-end 54,785 54,679 54,572 54,511 54,184 53,915 53,781 53,638
Book value $ 49.07 $ 48.13 $ 47.38 $ 46.38 $ 45.65 $ 44.85 $ 44.16 $ 44.50
Closing price:
High $ 81.85 $ 79.58 $ 80.49 $ 81.07 $ 81.85 $ 79.33 $ 71.15 $ 63.66 $ 59.61 $ 79.33
Low 69.76 72.48 69.04 68.39 68.39 65.39 64.11 54.36 51.13 51.13
Period-end 80.81 75.67 75.76 78.72 79.22 66.66 63.37 58.91
Capital Ratios (Dollars in millions):
Risk-based capital
Risk-weighted assets (1) $ 23,793 $ 22,847 $ 21,923 $ 21,016 $ 20,766 $ 19,977 $ 19,256 $ 18,872
Tier 1 common equity $ 2,050 $ 1,993 $ 1,919 $ 1,867 $ 1,823 $ 1,761 $ 1,700 $ 1,643
Percentage of risk-weighted assets (2) 8.62% 8.72% 8.75% 8.89% 8.78% 8.82% 8.83% 8.71%
Tier 1 capital $ 2,323 $ 2,266 $ 2,192 $ 2,140 $ 2,096 $ 1,936 $ 1,875 $ 1,818
Percentage of risk-weighted assets 9.76% 9.92% 10.00% 10.18% 10.09% 9.69% 9.74% 9.64%
Total capital $ 2,839 $ 2,775 $ 2,809 $ 2,749 $ 2,699 $ 2,532 $ 2,461 $ 2,399
Percentage of risk-weighted assets 11.93% 12.14% 12.81% 13.08% 13.00% 12.67% 12.78% 12.71%
Tier 1 leverage ratio 7.20% 7.44% 7.43% 7.41% 7.17% 7.07% 7.00% 6.72%
Period-end equity to period-end assets 9.06% 9.06% 9.26% 9.40% 9.22% 8.91% 9.29% 9.32%
Period-end common equity to period-end assets 8.24% 8.22% 8.39% 8.50% 8.32% 8.32% 8.67% 8.70%
Average equity to average assets 9.00% 9.32% 9.44% 9.45% 9.29% 9.01% 9.16% 9.40% 9.14% 9.17%
Average common equity to average assets 8.18% 8.45% 8.55% 8.54% 8.42% 8.24% 8.55% 8.78% 8.53% 8.52%
Period-end tangible common equity to period-end tangible assets (2) 6.32% 6.25% 6.32% 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) 6.34% 6.28% 6.32% 6.37% 6.22% 6.14% 6.30% 6.09%
Average tangible common equity to average tangible assets (2) 6.25% 6.40% 6.42% 6.37% 6.36% 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) 6.25% 6.40% 6.42% 6.38% 6.36% 6.10% 6.30% 6.20% 5.93% 6.13%
Senior Debt Credit Ratings
For The Period Ended December 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
Fourth Third Second First Year to Fourth Third Second First Year to
(Dollars in thousands, except per share amounts) Quarter Quarter Quarter Quarter Date Quarter Quarter Quarter Quarter Date
Basic EPS:
Net income attributable to City National Corporation $ 65,956 $ 68,651 $ 66,701 $ 54,511 $ 255,819 $ 55,112 $ 63,633 $ 59,741 $ 51,523 $ 230,009
Less: Dividends on preferred stock 4,094 4,093 4,094 4,094 16,375 2,406 2,407 2,406 2,406 9,625
Net income available to common shareholders $ 61,862 $ 64,558 $ 62,607 $ 50,417 $ 239,444 $ 52,706 $ 61,226 $ 57,335 $ 49,117 $ 220,384
Less: Earnings allocated to participating securities 594 632 626 543 2,402 585 688 656 637 2,555
Earnings allocated to common shareholders $ 61,268 $ 63,926 $ 61,981 $ 49,874 $ 237,042 $ 52,121 $ 60,538 $ 56,679 $ 48,480 $ 217,829
Weighted average shares outstanding 55,152 55,031 54,957 54,689 54,959 54,438 54,274 54,105 53,731 54,139
Basic earnings per common share $ 1.11 $ 1.16 $ 1.13 $ 0.91 $ 4.31 $ 0.96 $ 1.12 $ 1.05 $ 0.90 $ 4.02
Diluted EPS:
Earnings allocated to shareholders (1) $ 61,274 $ 63,932 $ 61,986 $ 49,879 $ 237,063 $ 52,126 $ 60,543 $ 56,682 $ 48,484 $ 217,848
Weighted average shares outstanding 55,152 55,031 54,957 54,689 54,959 54,438 54,274 54,105 53,731 54,139
Dilutive effect of equity awards 781 734 675 740 732 703 546 372 337 501
Weighted average diluted shares outstanding 55,933 55,765 55,632 55,429 55,691 55,141 54,820 54,477 54,068 54,640
Diluted earnings per common share $ 1.10 $ 1.15 $ 1.11 $ 0.90 $ 4.26 $ 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
Fourth Third Fourth
(In thousands) Quarter Quarter Quarter
Summary Totals
Net impairment expense (Sum of A) $ (2,089) $ (749) $ (185)
Other covered asset income (expense), net 1,253 2,182 (124)
Total (expense) income, net $ (836) $ 1,433 $ (309)
Interest income (1)
Income on loans paid-off or fully charged-off $ 9,925 $ 11,310 $ 13,691
Provision for losses on covered loans
Provision for losses on covered loans A 46 589 174
Noninterest income related to covered assets
FDIC loss sharing expense, net
(Loss) gain on indemnification asset A $ (1,461) $ 285 $ 677
Indemnification asset amortization (2,606) (2,780) (3,142)
Net FDIC reimbursement for OREO and loan expenses 1,442 1,210 2,289
Removal of indemnification asset for loans paid-off or fully charged-off (3,074) (3,584) (6,813)
Removal of indemnification asset for unfunded loan commitments and loans transferred to OREO (942) (645) (1,017)
Removal of indemnification asset for OREO and net reimbursement to FDIC for OREO sales (1,441) (1,264) (680)
Loan recoveries shared with FDIC (3,344) (2,383) (3,579)
Increase in FDIC clawback liability A (582) (445) (688)
Total FDIC loss sharing expense, net (12,008) (9,606) (12,953)
Gain on disposal of assets
Net gain on sale of OREO 1,800 1,252 850
Other income
Net gain on transfers of covered loans to OREO 1,539 616 1,427
Amortization of fair value on acquired unfunded loan commitments 44 146 69
OREO income 67 375 517
Other (128) (255) (276)
Total other income 1,522 882 1,737
Total noninterest income related to covered assets $ (8,686) $ (7,472) $ (10,366)
Noninterest expense related to covered assets (2)
Other real estate owned
Valuation write-downs $ 623 $ 367 $ 241
Holding costs and foreclosure expense 447 800 1,463
Total other real estate owned 1,070 1,167 1,704
Legal and professional fees 949 645 1,749
Other operating expense
Other covered asset expenses 10 4 7
Total noninterest expense related to covered assets (3) $ 2,029 $ 1,816 $ 3,460
Total (expense) income, net $ (836) $ 1,433 $ (309)
(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 fourth quarter of 2011 to the fourth quarter of 2014:
2014 2013 2012 2011
Fourth Third Second First Fourth Third Second First Fourth Third Second First Fourth
(In thousands) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Summary Totals
Net impairment (expense) income (Sum of A) $ (2,089) $ (749) $ (4,080) $ (2,019) $ (185) $ (483) $ (1,463) $ (71) $ 3,517 $ 2,639 $ 3,932 $ 2,756 $ (52)
Other covered asset income (expense), net 1,253 2,182 1,295 (1,561) (124) 3,190 (520) (144) (720) (837) 3,388 (1,893) 394
Total (expense) income, net $ (836) $ 1,433 $ (2,785) $ (3,580) $ (309) $ 2,707 $ (1,983) $ (215) $ 2,797 $ 1,802 $ 7,320 $ 863 $ 342
Interest income
Income on loans paid-off or fully charged-off $ 9,925 $ 11,310 $ 18,682 $ 9,324 $ 13,691 $ 25,849 $ 15,880 $ 15,625 $ 17,536 $ 22,164 $ 27,402 $ 15,699 $ 18,902
(Reversal of) provision for losses on covered loans
(Reversal of) provision for losses on covered loans A 46 589 (1,461) 4,655 174 2,496 (11,927) 9,892 6,498 18,089 13,293 7,466 17,667
Noninterest income related to covered assets
FDIC loss sharing (expense) income, net
(Loss) gain on indemnification asset A $ (1,461) $ 285 $ (4,392) $ 3,599 $ 677 $ 2,239 $ (13,102) $ 10,616 $ 10,070 $ 21,426 $ 17,722 $ 10,839 $ 17,675
Indemnification asset amortization (2,606) (2,780) (3,320) (3,164) (3,142) (4,417) (4,746) (4,899) (4,818) (4,258) (4,133) (4,025) (3,775)
Net FDIC reimbursement for OREO and loan expenses 1,442 1,210 2,160 1,653 2,289 4,582 4,995 5,193 8,020 7,612 6,724 10,441 13,858
Removal of indemnification asset for loans paid-off or fully charged-off (3,074) (3,584) (4,994) (2,999) (6,813) (9,746) (7,650) (6,073) (5,896) (9,731) (10,654) (6,516) (5,955)
Removal of indemnification asset for unfunded loan commitments and loans transferred to OREO (942) (645) (773) (676) (1,017) (1,550) (1,163) (2,569) (1,500) (2,834) (4,773) (2,113) (4,714)
Removal of indemnification asset for OREO and net reimbursement to FDIC for OREO sales (1,441) (1,264) (1,827) (311) (680) (2,451) (428) (844) (2,042) (1,219) (1,189) (2,656) (1,543)
Loan recoveries shared with FDIC (3,344) (2,383) (9,866) (4,222) (3,579) (9,423) (4,095) (4,981) (6,303) (8,631) (9,226) (4,487) (7,853)
Increase in FDIC clawback liability A (582) (445) (1,149) (963) (688) (226) (288) (795) (55) (698) (497) (617) (60)
Total FDIC loss sharing (expense) income, net (12,008) (9,606) (24,161) (7,083) (12,953) (20,992) (26,477) (4,352) (2,524) 1,667 (6,026) 866 7,633
Gain on disposal of assets
Net gain on sale of OREO 1,800 1,252 2,613 389 850 3,064 616 974 2,593 1,524 1,486 2,137 1,927
Other income
Net gain on transfers of covered loans to OREO 1,539 616 867 863 1,427 1,936 1,445 3,506 1,926 4,907 6,864 2,483 6,824
Amortization of fair value on acquired unfunded loan commitments 44 146 218 215 69 48 283 394 408 192 413 559 558
OREO income 67 375 289 435 517 731 456 826 977 428 615 905 406
Other (128) (255) 543 (156) (276) 711 (318) (334) (636) (632) (864) (1,018) (745)
Total other income 1,522 882 1,917 1,357 1,737 3,426 1,866 4,392 2,675 4,895 7,028 2,929 7,043
Total noninterest income related to covered assets $ (8,686) $ (7,472) $ (19,631) $ (5,337) $ (10,366) $ (14,502) $ (23,995) $ 1,014 $ 2,744 $ 8,086 $ 2,488 $ 5,932 $ 16,603
Noninterest expense related to covered assets
Other real estate owned
Valuation write-downs $ 623 $ 367 $ 934 $ 155 $ 241 $ 1,556 $ 2,184 $ 3,035 $ 4,115 $ 4,267 $ 4,250 $ 7,808 $ 9,984
Holding costs and foreclosure expense 447 800 1,366 1,158 1,463 3,607 1,894 1,893 3,878 3,522 2,796 3,207 4,890
Total other real estate owned 1,070 1,167 2,300 1,313 1,704 5,163 4,078 4,928 7,993 7,789 7,046 11,015 14,874
Legal and professional fees 949 645 992 1,580 1,749 969 1,701 2,020 2,977 2,541 2,200 2,278 2,609
Other operating expense
Other covered asset expenses 10 4 5 19 7 12 16 14 15 29 31 9 13
Total noninterest expense related to covered assets $ 2,029 $ 1,816 $ 3,297 $ 2,912 $ 3,460 $ 6,144 $ 5,795 $ 6,962 $ 10,985 $ 10,359 $ 9,277 $ 13,302 $ 17,496
Total (expense) income, net $ (836) $ 1,433 $ (2,785) $ (3,580) $ (309) $ 2,707 $ (1,983) $ (215) $ 2,797 $ 1,802 $ 7,320 $ 863 $ 342
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
Fourth Third Second First Year to Fourth Third Second First Year to
(Dollars in thousands) Quarter Quarter Quarter Quarter Date Quarter Quarter Quarter Quarter Date
Net income available to common shareholders $ 61,862 $ 64,558 $ 62,607 $ 50,417 $ 239,444 $ 52,706 $ 61,226 $ 57,335 $ 49,117 $ 220,384
Add: Amortization of intangibles, net of tax 828 830 846 865 3,369 1,002 1,124 1,123 1,124 4,373
Tangible net income available to common shareholders (A) $ 62,690 $ 65,388 $ 63,453 $ 51,282 $ 242,813 $ 53,708 $ 62,350 $ 58,458 $ 50,241 $ 224,757
Average common equity $ 2,671,824 $ 2,612,652 $ 2,562,555 $ 2,512,775 $ 2,590,450 $ 2,465,056 $ 2,400,624 $ 2,412,148 $ 2,363,507 $ 2,410,585
Less: Goodwill and other intangibles (671,430) (679,278) (681,092) (682,676) (678,590) (684,289) (686,091) (687,997) (689,932) (687,059)
Average tangible common equity (B) $ 2,000,394 $ 1,933,374 $ 1,881,463 $ 1,830,099 $ 1,911,860 $ 1,780,767 $ 1,714,533 $ 1,724,151 $ 1,673,575 $ 1,723,526
Return on average tangible common equity (A)/(B) 12.43% 13.42% 13.53% 11.36% 12.70% 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 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
Fourth Third Second First Fourth Third Second First
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Tier 1 capital $ 2,322,853 $ 2,265,543 $ 2,191,557 $ 2,140,136 $ 2,095,576 $ 1,936,191 $ 1,874,999 $ 1,818,367
Less: Preferred stock (267,616) (267,616) (267,616) (267,616) (267,616) (169,920) (169,920) (169,920)
Less: Trust preferred securities (5,000) (5,000) (5,000) (5,155) (5,155) (5,155) (5,155) (5,155)
Tier 1 common equity (A) $ 2,050,237 $ 1,992,927 $ 1,918,941 $ 1,867,365 $ 1,822,805 $ 1,761,116 $ 1,699,924 $ 1,643,292
Risk-weighted assets (B) $23,792,750 $22,847,497 $21,922,982 $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) 8.62% 8.72% 8.75% 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 8.4 percent at December 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 $2.1 billion and estimated risk-weighted assets were $24.5 billion at December 31, 2014.
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 tangible assets less 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
Fourth Third Second First Year to Fourth Third Second First Year to
(Dollars in thousands) Quarter Quarter Quarter Quarter Date Quarter Quarter Quarter Quarter Date
Period End:
Total common shareholders' equity $ 2,688,216 $ 2,631,813 $ 2,585,537 $ 2,528,344 $ 2,473,370 $ 2,417,968 $ 2,374,848 $ 2,386,969
Less: Goodwill and other intangibles (670,699) (672,123) (680,302) (681,756) (683,243) (684,965) (686,897) (688,829)
Tangible common equity (A) $ 2,017,517 $ 1,959,690 $ 1,905,235 $ 1,846,588 $ 1,790,127 $ 1,733,003 $ 1,687,951 $ 1,698,140
Less: Net unrealized loss/(gain) on AFS securities 7,070 7,592 (2,100) 4,363 15,641 10,355 (6,585) (74,201)
Tangible common equity excluding net unrealized gain/loss on AFS securities (B) $ 2,024,587 $ 1,967,282 $ 1,903,135 $ 1,850,951 $ 1,805,768 $ 1,743,358 $ 1,681,366 $ 1,623,939
Total assets $ 32,610,363 $ 32,015,600 $ 30,819,092 $ 29,738,252 $ 29,717,951 $ 29,059,404 $ 27,379,502 $ 27,433,754
Less: Goodwill and other intangibles (670,699) (672,123) (680,302) (681,756) (683,243) (684,965) (686,897) (688,829)
Tangible assets (C) $ 31,939,664 $ 31,343,477 $ 30,138,790 $ 29,056,496 $ 29,034,708 $ 28,374,439 $ 26,692,605 $ 26,744,925
Less: Net unrealized loss/(gain) on AFS securities 7,070 7,592 (2,100) 4,363 15,641 10,355 (6,585) (74,201)
Tangible assets excluding net unrealized gain/loss on AFS securities (D) $ 31,946,734 $ 31,351,069 $ 30,136,690 $ 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) 6.32% 6.25% 6.32% 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) 6.34% 6.28% 6.32% 6.37% 6.22% 6.14% 6.30% 6.09%
Average Balance:
Total common shareholders' equity $ 2,671,824 $ 2,612,652 $ 2,562,555 $ 2,512,775 $ 2,590,450 $ 2,465,056 $ 2,400,624 $ 2,412,148 $ 2,363,507 $ 2,410,585
Less: Goodwill and other intangibles (671,430) (679,278) (681,092) (682,676) (678,590) (684,289) (686,091) (687,997) (689,932) (687,059)
Tangible common equity (E) $ 2,000,394 $ 1,933,374 $ 1,881,463 $ 1,830,099 $ 1,911,860 $ 1,780,767 $ 1,714,533 $ 1,724,151 $ 1,673,575 $ 1,723,526
Less: Net unrealized loss/(gain) on AFS securities 1,268 1,854 303 3,016 1,606 1,223 10,835 (68,768) (76,916) (33,071)
Tangible common equity excluding net unrealized gain/loss on AFS securities (F) $ 2,001,662 $ 1,935,228 $ 1,881,766 $ 1,833,115 $ 1,913,466 $ 1,781,990 $ 1,725,368 $ 1,655,383 $ 1,596,659 $ 1,690,455
Total assets $ 32,675,217 $ 30,910,614 $ 29,978,947 $ 29,426,360 $ 30,757,132 $ 29,902,443 $ 28,061,134 $ 27,469,581 $ 27,709,159 $ 28,290,973
Less: Goodwill and other intangibles (671,430) (679,278) (681,092) (682,676) (678,590) (684,289) (686,091) (687,997) (689,932) (687,059)
Tangible assets (G) $ 32,003,787 $ 30,231,336 $ 29,297,855 $ 28,743,684 $ 30,078,542 $ 29,218,154 $ 27,375,043 $ 26,781,584 $ 27,019,227 $ 27,603,914
Less: Net unrealized loss/(gain) on AFS securities 1,268 1,854 303 3,016 1,606 1,223 10,835 (68,768) (76,916) (33,071)
Tangible assets excluding net unrealized gain/loss on AFS securities (H) $ 32,005,055 $ 30,233,190 $ 29,298,158 $ 28,746,700 $ 30,080,148 $ 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) 6.25% 6.40% 6.42% 6.37% 6.36% 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) 6.25% 6.40% 6.42% 6.38% 6.36% 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

Source:City National Corporation