LOS ANGELES--(BUSINESS WIRE)--April 17, 2001--Syndicated Non-Relationship Loans Reduced 23 Percent From Year-End 2000
City National Corporation (NYSE:CYN), parent corporation of whollyowned City National Bank, today reported net income of $33.6 millionfor the first quarter of 2001, an 8 percent increase from net incomeof $31.0 million for the first quarter of 2000 and a modest increasefrom the fourth quarter of 2000. Cash net income, which excludes theamortization of core deposit intangibles and goodwill fromacquisitions, increased 11 percent to $37.5 million in the firstquarter of 2001 from $33.9 million in the first quarter of 2000.
Net income per diluted common share of $0.69 increased 5 percent,compared with $0.66 per share in the first quarter of 2000 and was upmodestly from $0.68 per share in the fourth quarter of 2000 on aslightly higher number of shares outstanding in the first quarter of2001. Cash net income per diluted common share rose 7 percent to$0.77, compared with $0.72 per diluted common share in the firstquarter of 2000 and rose just slightly compared with $0.76 per dilutedcommon share in the fourth quarter of 2000. These results include theintegration of Reed, Conner & Birdwell, Inc. ("Reed, Conner &Birdwell") acquired at the end of December 2000 and The Pacific Bank,N.A. ("Pacific Bank"), acquired at the end of February 2000, both inpurchase transactions.
"This quarter, City National again generated solid, year-over-yeargrowth in loans and deposits, as well as revenues, noninterest incomeand net income," said Russell Goldsmith, CEO of City NationalCorporation. "It is significant that we produced this growth in thisquarter, while also reducing our syndicated non-relationship loans andnonperforming assets," he added.
"This underlying growth across our business indicates that, evenwith a few, short-range challenges, California continues to be adiverse and entrepreneurial economy that is growing and presentingreal opportunities for City National, both in the near term and thelong term.
"We believe City National is well-positioned as California'sPremier Private and Business Bank(SM) to continue to produce qualityearnings growth through our client-driven, relationship-focusedorganization and our expanding capabilities to deliver financialsolutions," Goldsmith added.
Return on Assets/Return on Equity
The corporation's return on average assets in the first quarter of2001 was 1.53 percent, compared with 1.63 percent in the first quarterof 2000 and 1.50 percent in the fourth quarter of 2000. The return onaverage shareholders' equity declined to 17.81 percent for the firstquarter of 2001, compared with 20.85 percent for the prior-year firstquarter and 18.29 percent for the fourth quarter of 2000, dueprimarily to higher equity from increased unrealized securities gainsand to the positive mark-to-market valuation of interest rate swapstreated as cash flow hedges.
On a cash basis (which excludes goodwill and the after-tax impactof nonqualifying core deposit intangibles from average assets andaverage shareholders' equity), the return on average assets in thefirst quarter of 2001 was 1.74 percent, compared with 1.81 percent infirst quarter of 2000 and 1.71 percent for the fourth quarter of 2000.The return on average shareholders' equity on a cash basis declined to
26.21 percent for the first quarter of 2001, compared with 28.31percent for the prior-year first quarter and 26.75 percent for thefourth quarter of 2000.
Management continues to expect that net income per diluted commonshare for 2001 will be within a range of approximately 8 percent to 11percent higher than net income per diluted common share for 2000.These expectations do not reflect the potential positive impact of thetentative decision of the Financial Accounting Standards Board todiscontinue goodwill amortization. In the first quarter of 2001, theamortization of goodwill reduced net income per diluted common shareby $0.06.
Total average assets reached $8.9 billion in the first quarter of2001, an increase of 16 percent over the $7.7 billion in averageassets for the first quarter of 2000 and an increase of 2 percent overthe $8.8 billion in average assets for the fourth quarter of 2000.Total assets at March 31, 2001 were $8.9 billion, compared with $8.4billion at March 31, 2000 and $9.1 billion at December 31, 2000. Thedecline from year-end 2000 was due primarily to the effect ofseasonally higher deposits at December 31, 2000.
Average loans rose to $6.5 billion for the first quarter of 2001,an increase of 14 percent over the prior-year first quarter. Averagerelationship loans increased $1.2 billion, or 22 percent, this quarterover the year-ago quarter. The first quarter of 2001 average balancewas $180.8 million higher than the fourth quarter of 2000, or 13percent on an annualized basis.
Conversely and consistent with management's ongoing plan, averagesyndicated non-relationship loans fell to $174.1 million for the firstquarter of 2001, down significantly from both the first quarter, aswell as the fourth quarter of 2000.
The increase in average relationship loans over the year-agoquarter was driven primarily by increases in commercial loans and realestate mortgage loans. Compared with the prior-year first quarter,commercial loan averages rose 24 percent to $3.0 billion from $2.4billion, and real estate mortgage loan average balances rose 33percent to $1.5 billion from $1.1 billion. The other relationship loancategories also contributed to the increase in average loan growthover the prior-year first quarter. The increase over the year-agoquarter was due in part to the acquisition of Pacific Bank.
Total loans at March 31, 2001 were $6.5 billion, compared with$6.2 billion at March 31, 2000 and $6.5 billion at December 31, 2000.At March 31, 2001, the commercial loan portfolio contained no directenergy-related borrowings. Technology-related borrowings accounted forapproximately 1 percent of the commercial loan portfolio.
At March 31, 2001, syndicated non-relationship loans were $148.3million, or 2.3 percent of the loan portfolio, compared with $191.8million at December 31, 2000. The $43.5 million reduction in the firstquarter of 2001 included the transfer of four performing loanstotaling $14.2 million to available-for-sale. During April 2001, threeof these loans totaling $9.7 million were sold at the quarter-endcarrying value, leaving two performing loans for $13.1 million asavailable-for-sale. The average outstanding loan balance in thesyndicated non-relationship portfolio at March 31, 2001 was $2.9million, which represents just over half of the average commitmentamount.
Management anticipates average relationship loan growth in 2001will be in the range of 9 percent to 13 percent, reflecting itsexpectation that the California economy will continue to grow but at aslower pace than experienced in recent years.
Average deposits during the first quarter of 2001 were $6.8billion, an increase of 20 percent over the first quarter of 2000 andmarginally less than the seasonally higher level in the fourth quarterof 2000. The increase over the year-ago quarter was due in part to theacquisition of Pacific Bank.
During the first quarter of 2001, average core deposits, whichprovide a stable source of low cost funding, were $5.1 billion, anincrease of 13 percent over the $4.5 billion in the first quarter of2000, and 2 percent lower than the $5.2 billion for the fourth quarterof 2000. Core deposits represented 76 percent of the total averagedeposit base for the quarter.
Deposits totaled $6.9 billion at March 31, 2001, compared with$6.4 billion at March 31, 2000 and $7.4 billion at December 31, 2000.The decline from year-end 2000 was primarily due to seasonal increasesin demand deposits at year-end.
Management expects average deposit growth in 2001, compared with2000, to be in the range of 8 percent to 12 percent.
Net Interest Income
Net interest income on a fully taxable-equivalent basis rose 13percent to $108.1 million in the first quarter of 2001, compared with$95.3 million for the first quarter of 2000. First quarter 2001 netinterest income was slightly lower than the $108.7 million for thefourth quarter of 2000. Interest income recovered on nonaccrual andcharged-off loans included above was $1.6 million in the first quarterof 2001, compared with $1.1 million for the first quarter a year agoand $0.9 million for the fourth quarter of 2000.
The fully taxable-equivalent net interest margin in the firstquarter of 2001 was 5.40 percent, compared with 5.47 percent for thefirst quarter of 2000 and 5.41 percent for the fourth quarter of 2000.The decrease from a year ago was attributable to an increase in thecost of funds.
Management expects the net interest margin for 2001 to decreasemodestly from 2000.
Noninterest income continued its strong, across-the-board growth,increasing 29 percent to $31.3 million in the first quarter of 2001from $24.2 million in the first quarter of 2000 and 4 percent higherthan the $29.9 million for the fourth quarter of 2000.
All categories of recurring noninterest income were higher thisquarter compared with the year-ago quarter, reflecting City National'scontinued emphasis on growing fee income. Trust and investment feerevenue rose through the Reed, Conner & Birdwell acquisition, and anincrease in new business within City National Investments (CNI).
Assets under administration totaled $17.9 billion at March 31,2001, including $6.6 billion under management, compared with $14.9billion and $4.8 billion, respectively, at March 31, 2000, and $18.0billion and $6.7 billion at December 31, 2000. Assets under managementat March 31, 2001 and December 31, 2000 included $1.1 billion from thepurchase of Reed, Conner & Birdwell, which closed on December 29,2000. The remaining year-over-year increase in assets under managementis primarily attributable to increased participation in the CNICharter Funds.
The slight decline in assets under administration from December31, 2000 reflects recent volatility in the financial markets, whichwas moderated by additional new business and prudent asset management.
Cash management and deposit transaction charges increased as theresult of deposits assumed in the acquisition of Pacific Bank andstrong internal growth in deposits attributable to increased sales ofcash management products.
International services income rose as a result of an increase infee income associated with letters of credit and standby letters ofcredit. However, compared with the fourth quarter of 2000, the levelof international services income declined due to lower foreignexchange income as well as seasonal declines relating to theimport/export business.
Gains on the sale of assets and securities amounted to $1.7million for the first quarter of 2001, compared with gains of $0.2million for the same period a year-earlier and gains of $1.1 millionfor the fourth quarter of 2000.
Management expects growth in noninterest income to range from 15percent to 20 percent for 2001.
Noninterest expense was $76.6 million in the first quarter of2001, an increase of 11 percent from $69.1 million for the firstquarter of 2000 and an increase of 1 percent from $75.6 million forthe fourth quarter of 2000.
The increase in expenses this quarter compared with the year-agoquarter was primarily the result of the corporation's growth,including expenses related to the acquisition of Reed Conner &Birdwell and Pacific Bank - additional offices, new colleagues andthe amortization of goodwill and core deposit intangibles. Firstquarter 2001 noninterest expense also included a non-recurring $0.7million transactional expense.
The corporation's cash efficiency ratio for the first quarter of2001 improved to 52.01 percent from 54.90 percent in the first quarterof 2000. The 5 percent improvement is due to increased revenues andtangible results from the corporation's ongoing efforts to improveefficiency and productivity. The cash efficiency ratio for the currentquarter rose slightly from the 51.36 percent for the fourth quarter of2000.
Management currently anticipates that 2001 noninterest expensewill increase between 5 percent to 8 percent, excluding the impact ofany change in the accounting rules for goodwill amortization.
The first quarter 2001 effective tax rate was 35.5 percent,compared with 34.1 percent for all of 2000. The higher tax rate is dueprimarily to a decreasing benefit from a registered investment companysubsidiary. The long-term plan for the registered investment companyremains under review. Depending on the outcome of the review and otherfactors, management anticipates its effective tax rate may be between
35.0 percent and 36.0 percent for 2001.
Net loan charge-offs were $8.2 million and $3.6 million for thefirst quarters of 2001 and 2000, respectively. Net loan charge-offsfor the fourth quarter of 2000 were $14.3 million.
Relationship loan net charge-offs were $6.3 million for the firstquarter of 2001, compared with $2.5 million for the first quarter of2000 and $5.0 million for the fourth quarter of 2000. First quartersyndicated non-relationship loan net charge-offs were $1.9 million,slightly higher than $1.1 million in the first quarter of 2000 anddown significantly from $9.2 million for the fourth quarter of 2000.
As a percentage of average loans, annualized net charge-offs were
0.51 percent, 0.25 percent and 0.88 percent for the first quarters of2001 and 2000 and the fourth quarter of 2000, respectively.Relationship loan net charge-offs were 0.40 percent of averagerelationship loans outstanding for the first quarter of 2001, comparedwith 0.19 percent for the first quarter of 2000 and 0.32 percent forthe fourth quarter of 2000.
Total nonperforming assets (nonaccrual loans and ORE) were $53.8million, or 0.83 percent of total loans and ORE, at March 31, 2001,compared with $32.8 million, or 0.53 percent, at March 31, 2000 and$62.5 million, or 0.96 percent, at December 31, 2000. From year-end2000, nonperforming assets decreased 14 percent.
Total nonperforming relationship assets were $37.1 million, or
0.58 percent of total relationship loans and ORE, at March 31, 2001,compared with $29.4 million, or 0.52 percent, at March 31, 2000 and$39.5 million, or 0.62 percent, at December 31, 2000. While thecorporation has experienced a moderate increase in relationshipnonaccrual loans year-over-year, the level has dropped slightly sinceDecember 31, 2000 and does not contain any concentration of creditswithin a specific industry sector. Total syndicated non-relationshiploans on nonaccrual status totaled $16.7 million at March 31, 2001 andconsisted of four loans, one less than the five loans totaling $23.0million at December 31, 2000.
City National recorded a provision for credit losses of $7.5million for the first quarter of 2001, compared with no provision inthe prior year quarter. The provision for credit losses in the fourthquarter of 2000 was $10.5 million. The provision for credit lossesprimarily reflects the levels of net loan charge-offs and nonaccrualloans, as well as management's ongoing assessment of the creditquality of the portfolio and the year-over-year growth of the loanportfolio.
The allowance for credit losses at March 31, 2001 totaled $134.7million, or 2.07 percent of outstanding loans. This compares with anallowance of $140.5 million, or 2.28 percent of outstanding loans, atMarch 31, 2000 and an allowance of $135.4 million, or 2.07 percent ofoutstanding loans, at December 31, 2000. The allowance for creditlosses as a percentage of nonaccrual loans was 256 percent at March31, 2001, compared with 434 percent at March 31, 2000 and 218 percentat December 31, 2000. Management believes the allowance for creditlosses is adequate to cover risks inherent in the portfolio at March31, 2001.
The provision for credit losses to be taken in the balance of 2001will reflect management's assessment of the above factors, as well asthe economic environment at each reporting date. Based on its currentassessment of these factors, management anticipates that a provisionfor credit losses of approximately $30 million to $45 million may berequired for all of 2001.
Total risk-based capital and Tier 1 risk-based capital ratios atMarch 31, 2001 were 11.35 percent and 8.33 percent, compared with theminimum "well-capitalized" capital ratios of 10 percent and 6 percent,respectively. The corporation's Tier 1 leverage ratio of 6.71 percentexceeded the regulatory minimum of 4 percent required for a"well-capitalized" institution. Total risk-based capital, Tier 1risk-based capital and the Tier 1 leverage ratios were 10.85 percent,
7.84 percent and 6.49 percent, respectively, at December 31, 2000.
Under the October 26, 2000 stock buyback program of one millionshares, 291,700 shares, including 90,100 shares in the first quarterof 2001, have been repurchased at an average price of $33.02 pershare. The shares purchased under the buyback program will be reissuedfor acquisitions, upon the exercise of stock options, and for othergeneral corporate purposes. Treasury shares at March 31, 2001 totaled111,175 shares.
About City National
City National Corporation is a publicly owned corporation with$8.9 billion in total assets whose stock is traded on the New YorkStock Exchange under the symbol "CYN." The corporation's wholly ownedsubsidiary, City National Bank, is California's Premier Private andBusiness Bank(SM). City National Bank, which provides banking, trustand investment services, has 48 California offices located throughoutLos Angeles, Orange, Riverside, San Bernardino, San Diego, SanFrancisco, San Mateo, Santa Clara and Ventura counties.
This news release contains forward-looking statements about thecorporation for which the corporation claims the protection of thesafe harbor provisions contained in the Private Securities LitigationReform Act of 1995.
Forward-looking statements are based on management's knowledge andbelief as of today and include information concerning thecorporation's possible or assumed future financial condition, and itsresults of operations and business. Forward-looking statements aresubject to risks and uncertainties. A number of factors, some of whichare beyond the corporation's ability to control or predict, couldcause future results to differ materially from those contemplated bysuch forward-looking statements. These factors include (1) an economicslowdown in California attributable to energy supply issues, apossible strike by writers and actors, or any other unforeseen events,(2) changes in interest rates, (3) significant changes in banking lawsor regulations, (4) increased competition in the corporation's market,(5) higher-than-expected credit losses and (6) possible changes in theplans for the registered investment company subsidiary.
For a more complete discussion of these risks and uncertainties,see the corporation's Annual Report on Form 10-K for the year endedDecember 31, 2000, and particularly the section of Management'sDiscussion and Analysis therein titled "Cautionary Statement forPurposes of the 'Safe Harbor' Provisions of the Private SecuritiesLitigation Reform Act of 1995."
CITY NATIONAL CORPORATION CONSOLIDATED BALANCE SHEET (unaudited) (Dollars in thousands, except per share amount) March 31, 2001 2000 % ChangeAssetsCash and due from banks $ 423,366 $ 381,763 11Securities 1,567,734 1,196,531 31Federal funds sold - 285,000 N/MLoans (net of allowance for credit losses of $134,727 and $140,450) 6,370,363 6,023,566 6Other assets 572,340 536,645 7 Total assets $ 8,933,803 $ 8,423,505 6Liabilities and Shareholders' Equity Noninterest-bearing deposits $ 2,956,454 $ 2,705,431 9 Interest-bearing deposits 3,914,363 3,672,029 7 Total deposits 6,870,817 6,377,460 8 Federal funds purchased and securities sold under repurchase agreements 230,844 231,404 - Other short-term borrowed funds 663,125 829,549 (20) Subordinated debt 130,879 123,500 6 Other long-term debt 144,177 130,000 11 Other liabilities 109,178 84,140 30 Total liabilities 8,149,020 7,776,053 5 Shareholders' equity 784,783 647,452 21 Total liabilities and shareholders' equity $ 8,933,803 $ 8,423,505 6Book value per share $ 16.46 $ 13.64 21Number of shares at period end 47,674,170 47,453,386 - CONSOLIDATED STATEMENT OF INCOME (unaudited) (Dollars in thousands, except per share amount) For the three months ended March 31, 2001 2000 % ChangeInterest income $ 164,192 $ 142,067 16Interest expense (59,275) (49,820) 19Net interest income 104,917 92,247 14Provision for credit losses (7,500) - N/MNet interest income after provision for credit losses 97,417 92,247 6Noninterest income 31,261 24,243 29Noninterest expense (76,604) (69,085) 11Income before taxes 52,074 47,405 10Income taxes (18,483) (16,397) 13Net income $ 33,591 $ 31,008 8Net income per share, basic $ 0.70 $ 0.68 3Net income per share, diluted $ 0.69 $ 0.66 5Dividends paid per share $ 0.19 $ 0.18 6Cash net income $ 37,532 $ 33,900 11Cash net income per share, basic $ 0.79 $ 0.74 7Cash net income per share, diluted $ 0.77 $ 0.72 7Shares used to compute per share net income, basic 47,683,205 45,903,093Shares used to compute per share net income, diluted 48,834,775 46,895,543 CITY NATIONAL CORPORATION SELECTED FINANCIAL INFORMATION (unaudited) (Dollars in thousands)Period end March 31, 2001 2000 % ChangeLoans Commercial (a) $ 2,939,893 $ 2,601,440 13 Residential first mortgage 1,288,132 1,224,343 5 Real estate mortgage 1,616,188 1,307,961 24 Real estate construction 437,431 421,639 4 Installment 75,128 68,617 9 Total relationship loans 6,356,772 5,624,000 13 Syndicated non-relationship (a) 148,318 540,016 (73) Total loans $ 6,505,090 $ 6,164,016 6 (a) Commercial loans were $3,056,464 and syndicated non-relationship loans were $191,789 at December 31, 2000Deposits Noninterest bearing $ 2,956,454 $ 2,705,431 9 Interest-bearing, core 2,361,811 2,511,399 (6) Total core deposits 5,318,265 5,216,830 2 Time deposits - $100,000 and over 1,552,552 1,160,630 34 Total deposits $ 6,870,817 $ 6,377,460 8Credit Quality Nonaccrual loans and ORE (b) Relationship loans $ 35,986 $ 28,988 24 Syndicated non-relationship loans 16,743 3,342 401 52,729 32,330 63ORE 1,094 429 155 Total nonaccrual loans and ORE $ 53,823 $ 32,759 64Relationship nonaccrual loans and ORE to total relationship loan and ORE 0.58 0.52 12Total nonaccrual loans and ORE to total loans and ORE 0.83 0.53 57Loans past due 90 days or more on accrual status $ 8,847 $ 28,358 (69)Restructured loans on accrual status $ 1,358 $ 2,647 (49) (b) Nonaccrual loans were $61,986 at December 31, 2000 including $38,974 of relationship loans and $23,012 of syndicated non-relationship loans For the three months endedAllowance for Credit Losses March 31, 2001 2000 % ChangeBeginning balance $ 135,435 $ 134,077 1 Additions from acquisitions - 9,927 N/M Provision for credit losses 7,500 - N/M Charge-offs (c) Relationship loans (9,983) (4,493) 122 Syndicated non-relationship loans (2,101) (1,066) 97 (12,084) (5,559) 117Recoveries, including $231 syndicated non-relationship loans in 2001 3,876 2,005 93 Net charge-offs (8,208) (3,554) 131Ending Balance $ 134,727 $ 140,450 (4)Net relationship charge-offs to average relationship loans (annualized) (0.40)% (0.19)% 111Total net charge-offs to average loans (annualized) (0.51) (0.25) 105Allowance for credit losses to total loans 2.07 2.28 (9)Allowance for credit losses to nonaccrual loans 255.51 434.43 (41) (c) Charge-offs in the fourth quarter 2000 were $8,168 in relationship loans and $9,245 in syndicated non-relationship loans CITY NATIONAL CORPORATION SELECTED FINANCIAL INFORMATION (unaudited) (Dollars in thousands except per share amounts) For the three months ended March 31, 2001 2000 % ChangeAverage BalancesLoans Commercial $ 2,993,047 $ 2,406,776 24 Residential first mortgage 1,291,176 1,207,907 7 Real estate mortgage 1,521,113 1,141,315 33 Real estate construction 469,052 377,433 24 Installment 73,223 62,786 17 Total relationship loans 6,347,611 5,196,217 22 Syndicated non-relationship 174,103 544,126 (68) Total loans $ 6,521,714 $ 5,740,343 14Securities $ 1,557,039 $ 1,208,883 29Interest-earning assets 8,116,541 7,006,420 16Assets 8,920,281 7,661,611 16Core deposits 5,131,990 4,521,759 13Deposits 6,786,666 5,676,364 20Shareholders' equity 764,712 598,166 28Noninterest income Trust and investment fee revenue $ 13,673 $ 10,957 25 Cash management and deposit transaction charges 6,548 5,557 18 International services 3,559 3,308 8 Bank owned life insurance 724 621 17 Other 5,023 3,572 41 Subtotal - recurring 15,854 13,058 23 Gain (loss) on sale of loans and assets 757 5 N/M Gain (loss) on sale of securities 977 223 338 Total $ 31,261 $ 24,243 29Noninterest expense Salaries and other employee benefits $ 42,774 $ 38,851 10All Other Professional 5,764 5,385 7 Net occupancy of premises 6,344 4,805 32 Information services 3,829 3,587 7 Marketing and advertising 2,581 2,703 (5) Depreciation 3,337 3,040 10 Office services 2,210 2,066 7 Amortization of goodwill 3,206 2,258 42 Amortization of core deposit intangibles 1,405 1,231 14 Equipment 496 465 7 Acquisition integration - 1,309 N/M Other operating 4,658 3,385 38 Total all other 33,830 30,234 12 Total $ 76,604 $ 69,085 11Selected RatiosFor the Period Return on average assets 1.53 % 1.63 % (6) Return on average shareholders' equity 17.81 20.85 (15) Net interest margin 5.40 5.47 (1) Efficiency ratio 55.32 57.82 (4) Dividend payout ratio 26.22 25.53 3 Cash return on average assets 1.74 1.81 (4) Cash return on average shareholders' equity 26.21 28.31 (7) Cash efficiency ratio 52.01 54.90 (5)Period End Tier 1 risk-based capital ratio 8.33 7.21 16 Total risk-based capital ratio 11.35 10.32 10 Tier 1 leverage ratio 6.71 6.46 4
|CONTACT:||City National Corporation|
|Frank Pekny, 310/888-6700 (Financial/Investors)|
|Kim George, 213/833-4715 (Media)|
|Abernathy MacGregor Group|
|Ian Campbell, 213/630-6550 (Financial/Investors)|