City National Corporation Reports Net Income of $43.7 Million and EPS of $0.87 for the First Quarter of 2003; Total Assets Reach $12 Billion for the First Time.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--April 15, 2003 City National Corporation (NYSE NYSE See: New York Stock Exchange :CYN CYN Canyon ), parent company of wholly owned City National Bank, today reported net income of $43.7 million, or $0.87 per share, for the first quarter of 2003 compared with net income of $44.2 million, or $0.87 per share for the first quarter of 2002 on fewer common shares outstanding this year. FIRST-QUARTER HIGHLIGHTS -- Average deposits were up 18 percent from a year ago and 1 percent from the prior quarter. -- Average loan growth, which was up 7 percent from a year ago, was essentially level compared with the prior quarter due to ongoing economic uncertainties heightened by current world-wide events. -- Net interest income was up 5 percent from the first quarter of 2002. -- Noninterest income continued to increase, up 8 percent from a year ago and 4 percent from last quarter. -- The company strengthened its allowance for credit loss as nonaccrual loans increased. -- Exposure to purchased syndicated media and telecommunication telecommunication Communication between parties at a distance from one another. Modern telecommunication systems—capable of transmitting telephone, fax, data, radio, or television signals—can transmit large volumes of information over long distances. outstanding loan balances declined 30 percent from December December: see month. 31, 2002 to $49.9 million at March 31, 2003.
First Quarter % Fourth Quarter
$ in millions, except per Change
share 2003 2002 2002
Earnings Per Share $0.87 $0.87 - $0.87
Net Income 43.7 44.2 (1) 44.4
Return on Assets 1.54 % 1.73 % (11) 1.56 %
Return on Equity 15.84 18.97 (16) 15.90
Return on average assets declined due to an increase in assets. The lower return on average shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. was due primarily to a higher level of shareholders' equity from retained net income and from the exercise of stock options, net of treasury share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . "Loans, deposits, and noninterest income all grew over the first quarter of last year as the bank reached $12.0 billion in assets for the first time," said Chief Executive Officer Russell Russell, English noble family. It first appeared prominently in the reign of Henry VIII when John Russell, 1st earl of Bedford, 1486?–1555, rose to military and diplomatic importance. Goldsmith. "In light of economic, market and geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. uncertainty in the quarter and our continuing commitment to credit quality, average loans remained near our record level of $8.0 billion set last quarter, and we again strengthened our allowance for credit losses, raising the ratio to 2.16 percent of our total loan portfolio. "Two recent developments underscore The underscore character (_) is often used to make file, field and variable names more readable when blank spaces are not allowed. For example, NOVEL_1A.DOC, FIRST_NAME and Start_Routine. (character) underscore - _, ASCII 95. our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. commitment to prudently pru·dent adj. 1. Wise in handling practical matters; exercising good judgment or common sense. 2. Careful in regard to one's own interests; provident. 3. Careful about one's conduct; circumspect. invest in our capabilities: the April 1, 2003 acquisition of Convergent Capital Management, which increased assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. or administration to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $26 billion, and our sale of $225 million in 10-year senior debt, which was very well received in the marketplace. As California's Premier Private and Business Bank, City National remains well positioned to deliver solid results over the long term, with our compelling business model and resources, our strong client base and banking professionals, and the many opportunities in our markets." ASSETS Average assets reached $11.5 billion for the first quarter of 2003, an increase of 11 percent over the $10.3 billion in average assets for the first quarter of 2002 and 1 percent over the $11.3 billion in average assets for the fourth quarter of 2002. Total assets at March 31, 2003 increased 7 percent to a record $12.0 billion from $11.2 billion at March 31, 2002. REVENUES Revenues (net interest income plus noninterest income) increased 6 percent to $167.2 million in the first quarter of 2003 from $157.6 million in the first quarter of 2002, due in part to the acquisition of Civic BanCorp ("Civic") in February February: see month. 2002. However, they decreased 1 percent from the fourth quarter of 2002, reflecting, in part, the fewer days in the first quarter. NET INTEREST INCOME Net interest income reached $131.9 million on a fully taxable-equivalent basis, up 5 percent from $125.4 million in the first quarter of 2002. Average deposits continued to increase over the prior-year quarter as well as from the prior quarter. Loans grew over the same period last year. However, they were essentially level compared with the prior quarter due to continuing economic uncertainties heightened by current world-wide events. As a result, the net interest margin narrowed as excess funding, including prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. of higher yielding fixed-rate assets, was invested in lower yielding available-for-sale short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. securities.
First Quarter Fourth
% Quarter
$ in millions 2003 2002 Change 2002
Average Loans $7,964.3 $7,465.4 7 $7,970.9
Average Securities Available-
For-Sale 2,441.8 1,924.5 27 2,117.9
Average deposits 9,373.8 7,933.5 18 9,284.3
Fully Taxable-Equivalent Net
Interest Income 131.9 125.4 5 135.2
Net interest Margin 5.07 % 5.34 % (5) 5.17 %
Compared with the prior-year first-quarter averages, commercial loans rose 4 percent, residential first mortgage loans rose 8 percent, real estate mortgage loans rose 11 percent, and real estate construction loans rose 9 percent, reflecting in part the impact of the purchase of Civic. Compared to the prior quarter, average residential first mortgage loans and construction loans increased while commercial loans decreased, partly due to a reduction in purchased syndicated media and telecommunication loan balances. Average securities available-for-sale continued to increase as the demand for loans slowed. As of March 31, 2003 unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on securities available-for-sale were $53.5 million. During the first quarter of 2003, average core deposits -- which include all deposits except time deposits of $100,000 or more -- rose to $8.3 billion, an increase of 26 percent over the $6.6 billion reported for the first quarter of 2002. They rose 2 percent over the fourth quarter of 2002. Average core deposits represented 89 percent of the total average deposit base for the first quarter of 2003, compared with 83 percent for the first quarter of 2002 and 88 percent for the fourth quarter of 2002. New clients and higher client balances maintained as deposits to pay for services contributed to the continued growth of deposits. As part of the company's long-standing long-stand·ing adj. Of long duration or existence: a long-standing friendship. long-standing Adjective existing for a long time asset liability management strategy, its "plain vanilla Refers to the bare minimum of functions that are known to be available in an application or system. Contrast with bells and whistles. " interest rate swaps Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. loans, deposits and borrowings with a notional value Notional Value The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets because in them a very little amount of invested money can control a large position (have a large consequence for the trader). of $1.0 billion added $7.5 million to net interest income in the first quarter of 2003, compared with $7.9 million in the first quarter of 2002 and $7.6 million for the fourth quarter of 2002. These amounts included $4.5 million, $3.2 million and $3.8 million, respectively, for interest swaps qualifying as fair-value hedges. Income from swaps qualifying as cash-flow hedges was $3.0 million for the first quarter of 2003, compared with $4.7 million for the first quarter of 2002 and $3.8 million for the fourth quarter of 2002. Income from existing swaps qualifying as cash flow hedges A cash flow hedge is a hedge of the exposure to the variability of cash flow that
Interest income recovered on nonaccrual and charged-off loans included above was $0.6 million for the first quarter of 2003, compared with $0.4 million for the first quarter of 2002 and $0.9 million for the fourth quarter of 2002, respectively. The Bank's prime rate was 4.25 percent as of March 31, 2003, compared with 4.75 percent a year earlier. NONINTEREST INCOME The company continues to emphasize growth in noninterest income -- which increased 8 percent to $39.0 million for the first quarter of 2003, compared with $35.9 million for the first quarter of 2002. Noninterest income increased 4 percent over the fourth quarter of 2002. Noninterest income for the first quarter of 2003 was 23 percent of total revenues, compared with 23 percent for the first quarter of 2002 and 22 percent for the fourth quarter of 2002.
Trust and Investment Fee Revenue
First Quarter Fourth
% Quarter
$ in millions 2003 2002 Change 2002
Assets Under Administration $19,840.8 $18,786.8 6 $19,513.3
Assets Under Management(a) 6,978.0 7,265.2 (4) 7,407.0
Trust and Investment Fee
Revenue 15.5 14.3 8 16.0
(a) Included above
The reduction in assets under management is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the fact that clients are maintaining lower balances in money-market accounts due to their low interest rates. New business in all other categories, aided by strong relative investment performance, offset the decline in assets caused by lower market values. The year-over-prior-year revenue increase was driven by higher balances under administration while the decrease from the prior quarter is the result of fewer days -- and therefore lower transaction volume -- in the first quarter. Other Noninterest Income Cash management and deposit transaction fees for the first quarter of 2003 increased 5 percent over both the first quarter and the fourth quarter of 2002. Strong growth in deposits, higher sales of cash management products and the impact on fees of a reduction in the earnings credit on analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. deposit accounts contributed to this growth. International services fees were up 14 percent over the prior-year quarter but down 14 percent from the fourth quarter of 2002. Higher foreign exchange and standby letter of credit Standby Letter of Credit A stipulation that states a letter of credit will be called back if the payer defaults. Notes: A letter of credit is typically used in international transactions. revenue fueled the year-over-year revenue growth. Revenue fell from the fourth quarter of 2002, however, as imports and exports declined amid security concerns, higher fuel costs and business uncertainty world-wide. Other income includes $1.2 million of fees received from the sale of certain merchant credit card business. Gains on the sale of loans and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. and gains on the sale of securities for the first quarter of 2003 amounted to $1.3 million compared with $2.4 million for the first quarter of 2002 and $0.1 million for the fourth quarter 2002. NONINTEREST EXPENSE Noninterest expense was $85.9 million in the first quarter of 2003, up 9 percent from $78.8 million for the first quarter of 2002 but down 3 percent from $88.5 million for the fourth quarter of 2002. Expenses grew over the same period last year primarily because of the company's continued growth, including the addition of Civic and costs associated with additional colleagues primarily in Northern California Northern California, sometimes referred to as NorCal, is the northern portion of the U.S. state of California. The region contains the San Francisco Bay Area, the state capital, Sacramento; as well as the substantial natural beauty of the redwood forests, the northern and New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . Fourth-quarter expenses included certain collection activity costs, start-up Start-up The earliest stage of a new business venture. costs of the New York office, and costs to upgrade facilities and technology systems, which did not recur in the current quarter. The company's efficiency ratio for the first quarter of 2003 was 50.28 percent, compared with 48.89 percent for the first quarter of 2002 and 51.28 percent for the fourth quarter of 2002. INCOME TAXES The first-quarter 2003 effective tax rate was 31.6 percent, compared with 30.1 percent for all of 2002. The higher effective tax rate over the prior year reflects the absence of certain tax benefits recorded in 2002. CREDIT QUALITY During the first quarter of 2003, City National's loan portfolio continued to experience the effects of the economy. Net charge-offs came to $12.5 million, up from $7.0 million in the first quarter of 2002, and included $5.3 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the company's purchased syndicated media and telecommunication portfolio. The company's March 31, 2003 purchased syndicated media and telecommunication loan portfolio contained 16 loans with commitment and outstanding balances of $78.8 million and $49.9 million, respectively. At just over one-half of 1 percent of the loan portfolio, these balances were down significantly from the comparable balances of $108.1 million and $71.3 million, respectively, as of December 31, 2002. In addition, two performing media and telecommunication available-for-sale loans with commitment and outstanding balances of $13.8 million and $10.4 million, respectively, as of March 31, 2003 are included in other assets. The sale of one of these loans closed in April at its carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. and the sale of the other loan is expected to close in the second quarter at its carrying value.
First Quarter Fourth
% Quarter
$ in millions 2003 2002 Change 2002
Provision For Credit Losses $17.5 $11.0 59 $17.5
Net Loan Charge-Offs 12.5 7.0 79 12.2
Annualized Percentage of Net
Charge-Offs to Average Loans 0.64 % 0.38 % 68 0.61 %
Nonperforming Assets $99.9 $50.6 97 $72.0
Percentage of Nonaccrual Loans
and ORE to Total Loans and ORE 1.28 % 0.65 % 97 0.90 %
Allowance for Credit Losses $169.5 $155.7 9 $164.5
Percentage of Allowance for
Credit Losses to Outstanding
Loans 2.16 % 2.01 % 7 2.06 %
Percentage of Allowance for
Credit Losses to Nonaccrual
Loans 169.93 310.47 (45) 230.53
Nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. reached $99.9 million at March 31, 2003, up from $50.6 million at the end of the first quarter of 2002. Most of the $27.9 million increase in nonperforming asset balances for the quarter came from 5 nonaccrual commercial loans. Approximately one-third of March 31, 2003 nonperforming assets related to purchased syndicated loans Syndicated Loan A very large loan in which a group of banks work together to provide funds for one borrower. There is usually one lead bank that takes a small percentage of the loan and syndicates the rest to other banks. Notes: Also known as a "syndicated bank facility. , including purchased syndicated media and telecommunication loans. One-third related to loans to Northern California clients, and the remaining one-third related to other borrowers. There were 4 purchased syndicated media and telecommunication loans totaling $11.3 million on nonaccrual status at March 31, 2003, compared with 5 loans totaling $15.9 million at December 31, 2002. The higher provision for credit losses over the first quarter of 2002, which matched the provision for the fourth quarter of 2002, primarily reflects increasing nonaccrual loan levels, charge-offs, management's ongoing assessment of the credit quality of the portfolio and the first-quarter economic environment, most notably including the continuing weakness in Northern California and some of the loans in the company's aircraft lessor One who rents real property or Personal Property to another. A lessor of land is a landlord. Cross-references Landlord and Tenant. lessor n. the owner of real property who rents it to a lessee pursuant to a written lease. portfolio. All aircraft lessor loans are current and none are on nonaccrual as of March 31, 2003. The company increased its allowance for credit losses to $169.5 million, or 2.16 percent of outstanding loans. Management believes the allowance for credit losses is adequate to cover risks in the portfolio at March 31, 2003. OUTLOOK Management has updated its guidance based on the current uncertain economic and geopolitical conditions as of April 15, 2003. In addition, the April 1, 2003 acquisition of Convergent Capital Management impacts the current guidance for noninterest income and noninterest expense. Given the above, management now currently expects net income per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. common share for 2003 to be approximately 5 to 8 percent higher than net income per diluted common share for 2002 based on the business indicators below: -- Average loan growth 2 to 5 percent -- Average deposit growth 6 to 9 percent -- Net interest margin 5.00 to 5.10 percent -- Provision for credit losses $65 million to $75 million -- Noninterest income growth 18 to 21 percent -- Noninterest expense growth 9 to 12 percent -- Effective tax rate 31 to 33 percent CAPITAL LEVELS Total risk-based capital and Tier 1 risk-based capital ratios Risk-based capital ratio Bank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset. at March 31, 2003 were 14.46 percent and 10.30 percent, compared with the minimum "well-capitalized" capital ratios of 10 percent and 6 percent, respectively. The company's Tier 1 leverage ratio at March 31, 2003 of 7.65 percent exceeded the regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. minimum of 4 percent required for a "well-capitalized" institution. Total risk-based capital, Tier 1 risk-based capital and the Tier 1 leverage ratios at December 31, 2002 were 14.26 percent, 9.87 percent and 7.55 percent, respectively. STOCK REPURCHASE Stock repurchase A firm's repurchase of outstanding shares of its common stock. On January January: see month. 22, 2003, the Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: a 1 million-share stock buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. program. During the first quarter of 2003, 212,800 shares were repurchased under this program at an average price of $44.59 per share. The company repurchased an additional 292,500 under its prior stock buyback program bringing the total number of shares repurchased in the quarter to 505,300 shares. The shares purchased under the buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may programs will be reissued for acquisitions, upon the exercise of stock options, and for other general corporate purposes. There were 1,694,129 treasury shares at March 31, 2003. NOTE: City National Corporation will host a conference call this afternoon to discuss results for the first quarter of 2003. The call will begin at 2:00 p.m. PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT . Analysts and investors may dial in and participate in the question/answer session. To access the call, please dial (877) 313-6466. A listen-only live broadcast of the call also will be available on the investor relations Investor relations The process by which the corporation communicates with its investors. page of the company's website at www.cnb.com. There, it will be archived and available for two weeks. ABOUT CITY NATIONAL City National Corporation (NYSE:CYN) is a financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. company with $12.0 billion in total assets. Its wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , City National Bank, is the second largest independent bank headquartered in California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). . As California's Premier Private and Business Bank(SM), City National provides banking, investment and trust services through 54 offices and 12 full-service full-ser·vice adj. Associated with or offering complete service: full-service gasoline pumps; full-service banks. regional centers in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, and the San Francisco Bay Area “Bay Area” redirects here. For other uses, see Bay Area (disambiguation). The San Francisco Bay Area, colloquially known as the Bay Area or The Bay including an office in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . The company has more than $19 billion in investment and trust assets under management or administration at March 31, 2003. For more information about City National, visit the company's Web site at cnb.com, http://www.cnb.com/. This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. about the company for which the company claims the protection of the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions contained in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements are based on management's knowledge and belief as of today and include information concerning the company's possible or assumed future financial condition, and its results of operations, business and earnings outlook. These forward-looking statements are subject to risks and uncertainties. A number of factors, some 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 interest rates, (2) significant changes in banking laws or regulations, (3) increased competition in the company's market, (4) higher-than-expected credit losses, (5) earthquake earthquake, trembling or shaking movement of the earth's surface. Most earthquakes are minor tremors. Larger earthquakes usually begin with slight tremors but rapidly take the form of one or more violent shocks, and end in vibrations of gradually diminishing force or other natural disasters impacting the condition of real estate collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although , (6) the effect of acquisitions and integration of acquired businesses, (7) unanticipated changes in regulatory, judicial, or legislative tax treatment of business transactions, (8) unknown economic impacts caused by the State of California's budget shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. , and (9) economic uncertainty created by worldwide geopolitical unrest Unrest is a sociological phenomenon, for instance:
n. pl. hos·til·i·ties 1. The state of being hostile; antagonism or enmity. See Synonyms at enmity. 2. a. A hostile act. b. hostilities Acts of war; overt warfare. and military action, terrorist attacks and related events. Management cannot predict at this time the severity or duration of the effects of the recent business slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. on our specific business activities and profitability. Weaker or a further decline in capital and consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. , and related recessionary trends could adversely affect our performance in a number of ways including decreased demand for our products and services and increased credit losses. Likewise, changes in deposit interest rates, among other things, could slow the rate of growth or put pressure on current deposit levels. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or 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, see the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year-ended December 31, 2002, and particularly the section of Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial therein titled "Cautionary Statement for Purposes of the `Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995."
CITY NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET (unaudited)
(Dollars in thousands, except per share amount)
March,
2003 2002 % Change
Assets
Cash and due from banks $448,152 $426,846 5
Federal funds sold 615,000 484,000 27
Securities 2,608,072 2,064,949 26
Loans (net of allowance for credit
losses of $169,480 and $155,657) 7,663,343 7,596,367 1
Other assets 677,905 645,187 5
Total assets $12,012,472 $11,217,349 7
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $4,625,439 $3,690,225 25
Interest-bearing deposits 5,238,407 4,966,999 5
Total deposits 9,863,846 8,657,224 14
Federal funds purchased and
securities sold under repurchase
agreements 156,002 179,140 (13)
Other short-term borrowed funds 140,125 793,625 (82)
Subordinated debt 302,573 267,449 13
Other long-term debt 274,001 194,389 41
Other liabilities 154,236 126,519 22
Total liabilities 10,890,783 10,218,346 7
Shareholders' equity 1,121,689 999,003 12
Total liabilities and shareholders'
equity $12,012,472 $11,217,349 7
Book value per share $23.09 $20.11 15
Number of shares at period end 48,588,514 49,681,899 (2)
CONSOLIDATED STATEMENT OF INCOME (unaudited)
(Dollars in thousands, except per share amount)
For the three months ended
March,
2003 2002 % Change
Interest income $145,676 $148,358 (2)
Interest expense (17,459) (26,663) (35)
Net interest income 128,217 121,695 5
Provision for credit losses (17,500) (11,000) 59
Net interest income after provision
for credit losses 110,717 110,695 -
Noninterest income 38,976 35,943 8
Noninterest expense (85,887) (78,773) 9
Income before taxes 63,806 67,865 (6)
Income taxes (20,151) (23,629) (15)
Net income $43,655 $44,236 (1)
Net income per share, basic $0.89 $0.91 (2)
Net income per share, diluted $0.87 $0.87 -
Dividends paid per share $0.21 $0.20 5
Shares used to compute per share
net income, basic 48,778,986 48,690,024
Shares used to compute per share
net income, diluted 50,124,079 50,803,046
CITY NATIONAL CORPORATION
SELECTED FINANCIAL INFORMATION (unaudited) (Dollars in thousands)
Period end March,
2003 2002 % Change
Loans
Commercial $3,401,610 $3,548,545 (4)
Residential first mortgage 1,762,629 1,679,969 5
Real estate mortgage 1,920,209 1,840,060 4
Real estate construction 676,618 606,768 12
Installment 71,757 76,682 (6)
Total loans $7,832,823 $7,752,024 1
Deposits
Noninterest-bearing $4,625,439 $3,690,225 25
Interest-bearing, core 4,182,320 3,628,298 15
Total core deposits 8,807,759 7,318,523 20
Time deposits - $100,000 and over 1,056,087 1,338,701 (21)
Total deposits $9,863,846 $8,657,224 14
Credit Quality
Nonaccrual loans and ORE
Nonaccrual loans $99,738 $50,136 99
ORE 210 505 (58)
Total nonaccrual loans and ORE $99,948 $50,641 97
Total nonaccrual loans and ORE to
total loans and ORE 1.28 0.65 97
Loans past due 90 days or more on
accrual status $1,871 $2,631 (29)
For the three months ended
Allowance for Credit Losses March,
2003 2002 % Change
Beginning balance $164,502 $142,862 15
Additions from acquisition - 8,787 -
Provision for credit losses 17,500 11,000 59
Charge-offs (14,882) (9,296) 60
Recoveries 2,360 2,304 2
Net charge-offs (12,522) (6,992) 79
Ending Balance $169,480 $155,657 9
Total net charge-offs to average
loans (annualized) (0.64) (0.38) 68
Allowance for credit losses to
total loans 2.16 2.01 7
Allowance for credit losses to
nonaccrual loans 169.93 310.47 (45)
CITY NATIONAL CORPORATION
SELECTED FINANCIAL INFORMATION (unaudited) (Dollars in thousands)
For the three months ended
March,
2003 2002 % Change
Average Balances
Loans
Commercial $3,560,411 $3,432,475 4
Residential first mortgage 1,756,838 1,633,024 8
Real estate mortgage 1,908,554 1,717,838 11
Real estate construction 663,956 610,878 9
Installment 74,579 71,215 5
Total loans $7,964,338 $7,465,430 7
Securities $2,441,796 $1,924,543 27
Interest-earning assets 10,539,123 9,519,670 11
Assets 11,480,626 10,344,129 11
Core deposits 8,326,485 6,600,710 26
Deposits 9,373,839 7,933,481 18
Shareholders' equity 1,117,573 945,778 18
Noninterest income
Trust and investment fee revenue $15,480 $14,274 8
Cash management and deposit
transaction fees 10,917 10,369 5
International services 4,328 3,791 14
Bank owned life insurance 714 673 6
Other 6,205 4,469 39
Subtotal - core 37,644 33,576 12
Gain on sale of loans and assets 102 1,679 (94)
Gain on sale of securities 1,230 688 79
Total $38,976 $35,943 8
Total revenue $167,193 $157,638 6
Noninterest expense
Salaries and employee benefits $51,805 $47,470 9
All Other
Net occupancy of premises 6,969 6,180 13
Professional 6,436 5,229 23
Information services 4,253 4,360 (2)
Depreciation 3,119 3,392 (8)
Marketing and advertising 3,112 2,788 12
Office services 2,570 2,098 22
Amortization of core deposit
intangibles 1,976 1,515 30
Equipment 666 482 38
Acquisition integration 164 1,300 (87)
Other operating 4,817 3,959 22
Total all other 34,082 31,303 9
Total $85,887 $78,773 9
Selected Ratios
For the Period
Return on average assets 1.54 % 1.73 % (11)
Return on average shareholders'
equity 15.84 18.97 (16)
Net interest margin 5.07 5.34 (5)
Efficiency ratio (1) 50.28 48.89 3
Dividend payout ratio 22.91 21.27 8
Period End
Tier 1 risk-based capital ratio 10.30 9.05 14
Total risk-based capital ratio 14.46 13.55 7
Tier 1 leverage ratio 7.65 7.31 5
(1) The efficiency ratio is defined as noninterest expense excluding
ORE expense divided by total revenue (net interest income on a
tax-equivalent basis and noninterest income).
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