City National Reports Third Consecutive Year of Record Earnings; Results for 1998 Up 20 Percent.LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--Jan. 14, 1999--City National Corp. (NYSE NYSE See: New York Stock Exchange :CYN CYN Canyon ) Thursday Thursday: see week. reported its third consecutive year of record earnings, the highest earnings in the 45-year history of the company. City National Corp., parent company of wholly owned City National Bank, achieved net income of $96.2 million in 1998, a 20 percent increase compared with net income of $80.1 million in 1997. 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 increased 19 percent, to $2, compared with $1.68 per diluted common share in the prior year. "In 1998, City National Bank exceeded the $6 billion plateau plateau, elevated, level or nearly level portion of the earth's surface, larger in summit area than a mountain and bounded on at least one side by steep slopes, occurring on land or in oceans. for the first time, closing the year with $6.4 billion in assets while delivering dynamic earnings growth and improved credit quality for the fifth consecutive year," stated 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, chairman and chief executive officer of City National Bank. "As Southern California's premier private and business bank, we expanded our regional presence in 1998 with several new offices and the completion of two acquisitions. By investing further in our outstanding people, products and systems, we are very well positioned to better serve the financial objectives of our shareholders and clients as we approach the 21st century." Cash earnings for 1998 were $101.7 million, an increase of 21 percent over the $84.1 million earned in 1997. Cash earnings of $2.11 per diluted common share were 20 percent above the $1.76 per diluted common share earned in 1997. Cash earnings excluded the amortization of core deposit intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and goodwill. The company also reported that net income for the fourth quarter rose 14 percent to $24.7 million, compared with net income of $21.7 million in the fourth quarter of 1997, or 52 cents per diluted common share. This represents a 16 percent increase over 45 cents per diluted common share in the same period of the prior year. City National's total average assets rose to $5.6 billion in 1998, an increase of 20 percent over the $4.7 billion reported in 1997. Internally generated growth and the acquisition of Harbor harbor: see port. Bancorp in January January: see month. 1998 contributed to the increase in total assets. Average loans were up $826.1 million, or 24 percent, during the year, led by significant increases in commercial and construction loans. The increase in commercial loans was due primarily to the growth of media-communications loans and participations in domestic bank 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. that added geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. and industry diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. and liquidity to the portfolio. Supporting the increase in loans was a year-over-year increase in total average deposits of $653.5 million, or 18 percent, with average core deposits rising $426.9 million, or 14 percent, for the year. Return on average assets in 1998 was 1.71 percent, essentially the same as 1.70 percent in 1997, while return on average common equity improved to 17.87 percent, compared with 16.95 percent in the prior year. Net interest income on a fully taxable-equivalent basis rose 16 percent to $304.2 million, compared with $263.2 million in 1997. Net interest margin decreased to 5.86 percent from 6.13 percent a year earlier. A number of factors contributed to this decline, including a higher cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. , a change in the mix of earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin and a slightly lower average prime rate in late 1998. Consistent with a stronger economy and overall improvement in the quality of the bank's loan portfolio, interest recovered on nonaccrual and charged-off loans was $7.1 million, or 11 percent higher in 1998 compared with 1997. Noninterest income, excluding sales of securities and assets, increased to $62.8 million for 1998, up 19 percent from $52.9 million a year earlier. Investment services income, trust fees, international service income and service charges on deposit accounts all contributed to the increase. Noninterest income has grown at a compound annual growth rate of 25 percent over the last three years. Noninterest expense was $211.3 million, compared with $181.8 million in 1997, an increase of 16 percent. Contributing to the year-over-year increase were costs associated with the acquisitions of Harbor Bancorp and North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. Trust Co., increased depreciation expense, higher marketing and advertising expenses, and an increase in performance-related bonuses and profit-sharing profit-sharing Noun a system in which a portion of the net profit of a business is shared among its employees profit-sharing n → participación f de empleados en los beneficios payments. The company continues to invest in year 2000 compliance efforts and remains on schedule to meet its June June: see month. 30, 1999, readiness target. Total 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. (nonaccrual loans and OREO) decreased to $26.6 million, or 0.59 percent, of total loans and OREO from the $29.7 million, or 0.78 percent, reported on Dec. 31, 1997. The allowance for credit losses at Dec. 31, 1998, totaled $135.3 million, or 2.99 percent of outstanding loans, compared with an allowance of $137.8 million, or 3.60 percent of outstanding loans, on Dec. 31 of the prior year. The lower percentage is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to an increase in outstanding loans of $705.2 million, or 18 percent, to $4.5 billion. The allowance for credit losses as a percentage of nonaccrual loans was 584.92 percent on Dec. 31, compared with 499.75 percent at the end of 1997. City National recorded no credit loss provisions in 1998 or 1997 based on the combined impact of improved credit quality, strong loan growth, the low level of net credit losses of $5.2 million in 1998 and net credit recoveries of $0.7 million for all of 1997. Total-capital and Tier 1 capital Tier 1 Capital A term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves. Notes: Equity capital includes instruments that can't be redeemed at the option of the holder. ratios of 13.20 percent and 9.43 percent compare very favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. with the capitalization ratios Capitalization ratios Also called financial leverage ratios, these ratios compare debt to total capitalization and thus reflect the extent to which a corporation is trading on its equity. of 10 percent and 6 percent required to be classified as "well-capitalized." The company's leverage ratio was 7.99 percent, almost double 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. During 1998, the company repurchased 1,684,700 shares of its common stock for $58 million, including 128,000 shares purchased under the current 1 million share common 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 that was announced on Sept. 8, 1998. 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 program will be reissued upon the exercise of stock options and for other general corporate purposes. Treasury shares at Dec. 31, 1998, totaled 877,945 shares. On Dec. 31, 1998, City National Bank completed the acquisition of San Diego-based North American Trust Co., an independent trust company with approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $4 billion in total 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. This acquisition increased assets under management or administration of City National Investments, the bank's trust and investment division, to more than $15 billion. City National Corp. is a publicly owned Publicly owned can refer to:
World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol "CYN." The company's 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 Southern California's premier business and private bank. City National Bank has 38 banking offices throughout Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , Orange, Riverside Riverside. 1 City (1990 pop. 226,505), seat of Riverside co., S Calif.; inc. 1883. One of the fastest growing U.S. cities in the late 20th cent., it is famous for its orange industry. , San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. and Ventura Ventura (vĕnt  `rə), city (1990 pop. 92,575), seat of Ventura co., SW Calif., on the Pacific coast in a farm and oil region; inc. 1866. counties.
For more information about City National, call the Fax-On-Demand Information Service at 800/873-5293, or visit City National's Web site at www.cityntl.com. The company wishes to take advantage of the "safe-harbor" provisions of 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 as to "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements in this release that are not historical facts. The reader's attention is drawn to City National Corp.'s Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended Sept. 30, 1998, particularly the section titled "Cautionary Statement for Purposes of the `Safe-Harbor' Provisions of the Private Securities Litigation Reform Act of 1995," for a discussion of factors that could affect the corporation's business and cause actual results to differ materially from those expressed in any forward-looking statement 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. made in this release. -0-
CITY NATIONAL CORP.
CONSOLIDATED BALANCE SHEET (unaudited)
(Dollars in thousands, except per share amounts)
Dec. 31,
1998 1997 % Change
Assets
Cash and due from banks $ 286,367 $ 327,699 (13)
Securities 1,047,017 863,401 21
Federal funds sold 405,000 150,000 170
Loans (net of allowance for credit
losses of $135,339 and $137,761) 4,395,088 3,687,463 19
Other assets 294,309 223,469 32
Total assets $ 6,427,781 $ 5,252,032 22
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 2,382,724 $ 2,027,014 18
Interest-bearing deposits 2,504,678 2,201,334 14
Total deposits 4,887,402 4,228,348 16
Federal funds purchased and
securities sold under
repurchase agreements 451,311 206,427 119
Other short-term borrowed funds 92,001 212,575 (57)
Subordinated debt 123,265 -- N/M
Other long-term debt 250,000 50,000 400
Other liabilities 61,999 46,012 35
Total liabilities 5,865,978 4,743,362 24
Shareholders' equity 561,803 508,670 10
Total liabilities and
shareholders' equity $ 6,427,781 $ 5,252,032 22
Book value per share $ 12.21 $ 11.03 11
Number of shares at period end 46,007,237 46,136,963 --
CONSOLIDATED STATEMENT OF INCOME (unaudited)
(Dollars in thousands, except per share amounts)
For the three months ended
Dec. 31,
1998 1997 % Change
Interest income $ 109,632 $ 93,798 17
Interest expense (34,738) (27,277) 27
Net interest income 74,894 66,521 13
Provision for credit losses -- -- N/M
Net interest income after provision
for credit losses 74,894 66,521 13
Noninterest income 17,175 14,331 20
Noninterest expense (53,133) (47,571) 12
Income before taxes 38,936 33,281 17
Income taxes (14,202) (11,603) 22
Net income $ 24,734 $ 21,678 14
Net income per share, basic $ 0.54 $ 0.47 15
Net income per share, diluted $ 0.52 $ 0.45 16
Dividends paid per share $ 0.14 $ 0.11 27
Shares used to compute per share
net income, basic 45,919 46,047
Shares used to compute per share
net income, diluted 47,506 48,035
(Dollars in thousands, except per share amounts)
For the twelve months ended
Dec. 31,
1998 1997 % Change
Interest income $ 423,949 $ 357,996 18
Interest expense (130,278) (104,328) 25
Net interest income 293,671 253,668 16
Provision for credit losses -- -- N/M
Net interest income after provision
for credit losses 293,671 253,668 16
Noninterest income 67,684 53,418 27
Noninterest expense (211,331) (181,757) 16
Income before taxes 150,024 125,329 20
Income taxes (53,796) (45,196) 19
Net income $ 96,228 $ 80,133 20
Net income per share, basic $ 2.08 $ 1.74 20
Net income per share, diluted $ 2.00 $ 1.68 19
Dividends paid per share $ 0.56 $ 0.44 27
Shares used to compute per share
net income, basic 46,357 46,018
Shares used to compute per share
net income, diluted 48,141 47,809
CITY NATIONAL CORP.
SELECTED FINANCIAL INFORMATION (unaudited) (Dollars in thousands)
Period end Dec. 31,
1998 1997 % Change
Loans
Commercial $ 2,457,946 $ 1,972,232 25
Residential first mortgage 1,038,229 980,040 6
Real estate - commercial mortgage 747,711 686,188 9
Real estate - construction 237,015 144,558 64
Installment 49,526 42,206 17
Total loans $ 4,530,427 $ 3,825,224 18
Nonaccrual loans and ORE
Nonaccrual loans $ 23,138 $ 27,566 (16)
ORE 3,480 2,126 64
Total nonaccrual loans and ORE $ 26,618 $ 29,692 (10)
Loans past due 90 days or more on
accrual status $ 8,623 $ 26,192 (67)
Deposits
Noninterest bearing $ 2,382,724 $ 2,027,014 18
Interest-bearing, core 1,750,963 1,588,206 10
Total core deposits 4,133,687 3,615,220 14
Time deposits - $100,000 and over 753,715 613,128 23
Total deposits $ 4,887,402 $ 4,228,348 16
For the three months ended
Average Balances Dec. 31,
1998 1997 % Change
Loans
Commercial $ 2,358,466 $ 1,781,670 32
Residential first mortgage 1,031,483 964,090 7
Real estate - commercial mortgage 741,382 690,913 7
Real estate - construction 243,566 143,008 70
Installment 49,823 42,916 16
Total loans $ 4,424,720 $ 3,622,597 22
Securities $ 998,741 $ 878,514 14
Earning assets 5,575,436 4,529,462 23
Assets 6,021,957 4,929,031 22
Core deposits 3,695,810 3,233,258 14
Deposits 4,490,460 3,850,390 17
Shareholders' equity 547,967 495,920 10
For the twelve months ended
Average Balances Dec. 31,
1998 1997 % Change
Loans
Commercial $ 2,186,395 $ 1,623,851 35
Residential first mortgage 1,028,966 942,381 9
Real estate - commercial mortgage 755,752 647,658 17
Real estate - construction 191,782 127,867 50
Installment 50,958 46,027 11
Total loans $ 4,213,853 $ 3,387,784 24
Securities $ 898,161 $ 876,946 2
Earning assets 5,187,897 4,290,453 21
Assets 5,633,829 4,703,886 20
Core deposits 3,506,554 3,079,637 14
Deposits 4,267,602 3,614,068 18
Shareholders' equity 538,426 472,843 14
CITY NATIONAL CORP.
SELECTED FINANCIAL INFORMATION (unaudited)
(Dollars in thousands except per share amounts)
For the three months ended
Dec. 31,
Selected Ratios 1998 1997 % Change
Return on average assets 1.63 % 1.74 % (6)
Return on average shareholders'
equity 17.91 17.34 3
Net interest margin 5.52 6.06 (9)
Efficiency ratio 55.97 59.07 (5)
Dividend payout ratio 25.83 23.35 11
Tier 1 risk-based capital ratio -- -- --
Total risk-based capital ratio -- -- --
Tier 1 leverage ratio -- -- --
Nonaccrual loans to total loans -- -- --
Nonaccrual loans and ORE to total
loans and ORE -- -- --
Allowance for credit losses to
total loans -- -- --
Allowance for credit losses to
nonaccrual loans -- -- --
Net core deposit intangible amortization
and balances ("cash" and "tangible")
income and ratios excluding goodwill
and nonqualifying. (a)
Cash net income $ 26,086 $ 22,541 16
Cash net income per share, basic 0.57 0.49 16
Cash net income per share, diluted 0.55 0.47 17
Cash return on average assets 1.73 % 1.83 % (5)
Cash return on average shareholders'
equity 20.98 19.92 6
Cash efficiency ratio 54.14 57.78 (6)
For the twelve months ended
Dec. 31,
Selected Ratios 1998 1997 % Change
Return on average assets 1.71 % 1.70 % 1
Return on average shareholders'
equity 17.87 16.95 5
Net interest margin 5.86 6.13 (4)
Efficiency ratio 56.87 58.22 (2)
Dividend payout ratio 27.06 26.19 3
Tier 1 risk-based capital ratio 9.43 10.99 (14)
Total risk-based capital ratio 13.20 12.27 8
Tier 1 leverage ratio 7.99 9.19 (13)
Nonaccrual loans to total loans 0.51 0.72 (29)
Nonaccrual loans and ORE to total
loans and ORE 0.59 0.78 (24)
Allowance for credit losses to
total loans 2.99 3.60 (17)
Allowance for credit losses to
nonaccrual loans 584.92 499.75 17
Net core deposit intangible amortization
and balances ("cash" and "tangible")
income and ratios excluding goodwill
and nonqualifying. (a)
Cash net income $101,714 $ 84,139 21
Cash net income per share, basic 2.19 1.83 20
Cash net income per share, diluted 2.11 1.76 20
Cash return on average assets 1.82 % 1.80 % 1
Cash return on average shareholders'
equity 20.98 19.53 7
Cash efficiency ratio 55.03 56.45 (3)
(a) Nonqualifying core deposit intangible (CDI) amortization and
average balance excluded from these calculations are, with the
exception of the efficiency ratio, net of applicable taxes. The
after-tax amounts for the amortization and average balance of
nonqualifying CDI were $0.3 million and $13.1 million,
respectively, for the quarter ended December 31, 1998, and $0.3
million and $14.7 million, respectively, for the three months
ended December 31, 1997. For the years, the amortization and
average balance for nonqualifying CDI were $1.9 million and $22.0
million, respectively for 1998 and $2.2 million and $15.7 million
respectively for 1997. Goodwill amortization and average balance
(which are not tax effected) were $0.8 million and $42.4 million,
respectively, for the quarter ended December 31, 1998, and $0.6
million and $31.3 million respectively, for the three months
ended December 31, 1997. For the years, the goodwill amortization
and average balance were $3.6 million and $40.8 million
respectively for 1998 and $1.8 million and $25.0 million,
respectively for 1997. The company's cash earnings per share are
not necessarily comparable to similarly titled measures reported
by other companies.
For the three months ended
Dec. 31,
Noninterest income: 1998 1997 % Change
Service charges on deposit
accounts $ 4,355 $ 4,436 (2)
Investment services 4,430 3,566 24
Trust fees 2,641 1,877 41
International services 2,177 1,992 9
Bank-owned life insurance 557 -- N/M
Other 2,330 2,564 (9)
Subtotal 16,490 14,435 14
Gain (loss) on sale of loans and
assets (58) 181 N/M
Gain (loss) on sale of securities 743 (285) N/M
Total $ 17,175 $ 14,331 20
Noninterest expense:
Salaries and other employee
benefits $ 27,893 $ 24,213 15
Net occupancy of premises 3,693 3,155 17
Information services 1,213 1,853 (35)
Professional 7,347 7,109 3
Office services 1,622 2,393 (32)
Marketing and advertising 3,175 2,312 37
Depreciation 2,447 1,910 28
Equipment 634 781 (19)
Amortization of goodwill and
core deposit intangibles 1,735 1,073 62
Other operating 3,302 4,509 (27)
Operating expense other than
salaries and other employee
benefits 25,168 25,095 --
Subtotal 53,061 49,308 8
ORE operations 72 (1,737) N/M
Total $ 53,133 $ 47,571 12
For the twelve months ended
Dec. 31,
Noninterest income: 1998 1997 % Change
Service charges on deposit
accounts $ 17,386 $ 14,321 21
Investment services 16,330 13,221 24
Trust fees 9,376 8,304 13
International services 8,106 7,271 11
Bank-owned life insurance 2,146 -- N/M
Other 9,445 9,745 (3)
Subtotal 62,789 52,862 19
Gain (loss) on sale of loans and
assets 1,823 1,604 14
Gain (loss) on sale of securities 3,072 (1,048) N/M
Total $ 67,684 $ 53,418 27
Noninterest expense:
Salaries and other employee
benefits $ 114,965 $ 97,634 18
Net occupancy of premises 12,940 10,659 21
Information services 4,667 9,052 (48)
Professional 26,755 21,509 24
Office services 7,308 7,286 --
Marketing and advertising 10,313 7,972 29
Depreciation 8,816 6,144 43
Equipment 2,250 2,460 (9)
Amortization of goodwill and
core deposit intangibles 6,854 5,619 22
Other operating 16,648 15,989 4
Operating expense other than
salaries and other employee
benefits 96,551 86,690 11
Subtotal 211,516 184,324 15
ORE operations (185) (2,567) (93)
Total $ 211,331 $ 181,757 16
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