EXHIBIT 99.1
[LETTER HEAD OF CITY NATIONAL CORPORATION]
CONTACTS
FINANCIAL/INVESTORS
Frank Pekny (City National) 310-888-6700
Ian Campbell (Abernathy MacGregor Group) 213-630-6550
MEDIA
Mary Schaubert (City National) 213-833-4710
FOR IMMEDIATE RELEASE
CITY NATIONAL CORPORATION NET INCOME RISES 9 PERCENT TO
$36.3 MILLION FOR 2001 SECOND QUARTER
DILUTED EARNINGS PER SHARE GROW TO $0.74
FIRST HALF NET INCOME UP 9 PERCENT TO A RECORD $69.9 MILLION
LOS ANGELES, JULY 17, 2001 -- City National Corporation (NYSE: CYN), parent
corporation of wholly owned City National Bank, today reported record net income
of $36.3 million for the second quarter of 2001, up 9 percent from $33.4 million
for the second quarter of 2000 and 8 percent from the first quarter of 2001. Net
income per diluted common share of $0.74 increased 9 percent from $0.68 per
share in the second quarter of 2000 and 7 percent from $0.69 per share in the
first quarter of 2001, and includes approximately $0.025 related to the
reduction in the expected full year effective income tax rate attributable to
first quarter 2001 pre-tax income.
For the first half of 2001, City National Corporation also achieved record net
income of $69.9 million, an increase of 9 percent over net income of $64.5
million for the first half of 2000. Net income per diluted common share was
$1.43 per share, an increase of 7 percent compared with $1.34 per share in the
first half of 2000.
Cash net income per diluted common share, which excludes the amortization of
core deposit intangibles and goodwill from acquisitions, rose 8 percent to
$0.82, compared with $0.76 per share in the second quarter of 2000 and was up 6
percent compared with $0.77 per share in the first quarter of 2001. For the
first half of 2001, cash net income per diluted common share was $1.59 per
share, an increase of 7 percent from $1.48 per share for the first half of 2000.
"City National continued to grow its revenue, income, loans and deposits," said
Russell Goldsmith, CEO of City National Corporation. "It is particularly
noteworthy that in the first half of this year we increased noninterest income
26 percent versus one year ago and have grown average deposits 15 percent. We
achieved this even while we reduced both nonperforming assets and syndicated
non-relationship loans.
"Going forward, we remain very focused on striking the right balance among
delivering performance growth while investing in our businesses and our people,
controlling expenses, achieving productivity gains, serving our clients well,
and sustaining good credit quality. The first half of the year has been
highlighted by our highly successful introduction of a number of new products,
such as Online Cash Management, as well as the recent deployment of a proven
banking team to open our new East Bay commercial banking center, expanding our
reach in the San Francisco Bay Area," Goldsmith added.
RETURN ON ASSETS/RETURN ON EQUITY
The corporation's return on average assets in the second quarter of 2001 was
1.60 percent, compared with 1.58 percent in the second quarter of 2000 and 1.53
percent in the first quarter of 2001. The return on average shareholders' equity
was 18.28 percent for the second quarter of 2001, compared with 20.37 percent
for the prior-year second quarter and 17.81 percent for the first quarter of
2001. For the first half of 2001, the return on average assets was 1.56 percent
and the return on average shareholders' equity was 18.05 percent compared with a
1.60 percent return on average assets and a 20.60 percent return on average
shareholders' equity for the first half of 2000. The lower return on average
shareholders' equity in the current period compared with a year ago is due
primarily to a higher level of shareholders' equity from increased unrealized
securities gains and the positive mark-to-market valuation of interest rate
swaps treated as cash flow hedges.
On a cash basis (which excludes goodwill and the after-tax impact of
nonqualifying core deposit intangibles from average assets and average
shareholders' equity), the return on average assets in the second quarter of
2001 was 1.81 percent, compared with 1.79 percent in the second quarter of 2000,
and 1.74 percent for the first quarter of 2001. The return on average
shareholders' equity on a cash basis was 26.40 percent for the second quarter of
2001, compared with 31.28 percent for the prior-year second quarter and 26.21
percent for the first quarter of 2001. On a cash basis, for the first half of
2001, the return on average assets was 1.78 percent and the return on average
shareholders' equity was 26.19 percent, compared with a 1.80 percent return on
average assets and 29.00 percent return on average shareholder's equity for the
first half of 2000.
ASSETS
Total average assets reached $9.1 billion in the second quarter of 2001, an
increase of 7 percent over the $8.5 billion in average assets for the second
quarter of 2000 and an increase of 2 percent over the $8.9 billion in average
assets for the first quarter of 2001. Total assets at June 30, 2001 were $9.1
billion, compared with $8.7 billion at June 30, 2000 and $8.9 billion at March
31, 2001. Securities and, to a lesser extent, loans accounted for the increase
in assets from last year and the first quarter of 2001.
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LOANS
Average loans rose to $6.5 billion for the second quarter of 2001, an
increase of 3 percent over the prior-year second quarter. Average
relationship loans increased $560.3 million, or 10 percent, this quarter over
the year-ago quarter. Conversely, average syndicated non-relationship loans
fell to $133.8 million for the second quarter of 2001, down significantly
from both the second quarter of 2000, as well as the first quarter of 2001.
For the first half of 2001, average relationship loans increased 16 percent
to $6.4 billion from $5.5 billion for the first half of 2000. The growth in
average relationship loans over the year-ago quarter was driven primarily by
increases in real estate mortgage, commercial and residential first mortgage
loans. Compared with the prior-year second quarter, real estate mortgage loan
average balances rose 19 percent to $1.6 billion from $1.3 billion,
commercial loan averages rose 5 percent to $2.9 billion from $2.8 billion and
residential first mortgage loans rose 9 percent to $1.3 billion, from $1.2
billion. Other relationship loan categories also contributed to loan growth
over the prior-year second quarter.
Total loans at June 30, 2001 were $6.6 billion, compared with $6.3 billion at
June 30, 2000, and $6.5 billion at March 31, 2001. At June 30, 2001, the
commercial loan portfolio contained no direct energy-related borrowings, and
technology-related borrowings accounted for less than 1 percent of the
commercial loan portfolio.
At June 30, 2001, syndicated non-relationship loans were $110.5 million, or 1.7
percent of the loan portfolio, compared with $148.3 million at March 31, 2001,
$191.8 million at December 31, 2000, and $442.3 million at June 30, 2000. The
average outstanding loan balance in the syndicated non-relationship portfolio at
June 30, 2001 was $2.6 million, which represents just under half the average
commitment amount.
Management anticipates average relationship loan growth in 2001 will range from
9 percent to 13 percent, reflecting its expectation that the California economy
will continue to grow, but at a slower pace than experienced in recent years.
DEPOSITS
Average deposits during the second quarter of 2001 increased 11 percent to $7.0
billion over the second quarter of 2000, and were $188.4 million higher than the
first quarter of 2001. During the first half of 2001, average deposits increased
15 percent to $6.9 billion, compared with $6.0 billion for the first half of
2000.
During the second quarter of 2001, average core deposits, which provide a stable
source of low cost funding, were $5.5 billion, an increase of 9 percent over the
$5.1 billion in the second quarter of 2000, and 7 percent higher than the $5.1
billion for the first quarter of 2001. Average core deposits represented 79
percent of the total average deposit base for the quarter. For the first half of
2001, average core deposits were $5.3 billion compared with $4.8 billion for the
first
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half of 2000, an increase of 11 percent. Internal growth, increased sales of
cash management products and a reduction in the earnings credit on analyzed
deposit accounts resulting from lower interest rates, all contributed to the
growth in deposits.
Deposits totaled $7.1 billion at June 30, 2001, compared with $6.4 billion at
June 30, 2000, and $6.9 billion at March 31, 2001.
Management expects average deposit growth in 2001, compared with 2000, to be in
the range of 8 percent to 12 percent.
NET INTEREST INCOME
Net interest income on a fully taxable-equivalent basis rose 1 percent to $108.4
million in the second quarter of 2001, compared with $107.8 million for the
second quarter of 2000. Second quarter 2001 net interest income was slightly
higher than the $108.1 million for the first quarter of 2001. Fully
taxable-equivalent net interest income for the first half of 2001 was $216.5
million, an increase of 7 percent over $203.1 million for the first half of
2000. Interest income recovered on nonaccrual and charged-off loans included
above was $0.6 million in the second quarter of 2001, compared with $1.3 million
for the second quarter a year ago and $1.6 million for the first quarter of
2001. Interest recovered in the first half of 2001 was $2.2 million compared
with $2.3 million for the first half of 2000.
The fully taxable-equivalent net interest margin in the second quarter of 2001
was 5.23 percent, compared with 5.58 percent for the second quarter of 2000 and
5.40 percent for the first quarter of 2001. The net interest margin for the
first half of 2001 was 5.32 percent compared with 5.53 percent for the first
half of 2000. The decrease from prior periods was primarily due to a lower prime
rate, and a lag in the re-pricing of time deposits and interest rate swaps. The
Bank's prime rate was 6.75 percent at June 30, 2001, compared with 9.50 percent
a year earlier, and 8.00 percent at March 31, 2001.
Management expects the net interest margin for all of 2001 will be modestly
lower than the 5.44 percent reported for 2000, but slightly above the current
quarterly level of 5.23 percent, as time deposits and interest rate swaps
re-price on a lagged basis. This expectation is contingent on rates remaining
stable for the rest of the year; further modest reductions in rates would not be
anticipated to materially alter that margin.
NONINTEREST INCOME
Reflecting the success of strategic initiatives to grow fee income, noninterest
income continued its strong, across-the-board growth, increasing 23 percent to
$32.9 million in the second quarter of 2001, from $26.8 million in the second
quarter of 2000, and 5 percent from the $31.3 million for the first quarter of
2001. Noninterest income of $64.2 million for the first half of 2001
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increased 26 percent over the $51.0 million for the first half of 2000.
Noninterest income for the second quarter and first half of 2001 was 24 percent
and 23 percent of total revenues, compared with 20 percent and 21 percent,
respectively, for the second quarter and first half of 2000.
Trust and investment fee revenue was helped by the acquisition of Reed, Conner &
Birdwell, which closed at year-end 2000, and an increase in new business within
City National Investments (CNI). Assets under administration totaled $18.5
billion at June 30, 2001, including $7.2 billion under management, compared with
$15.5 billion and $5.4 billion, respectively, at June 30, 2000, and $17.9
billion and $6.6 billion, respectively, at March 31, 2001. Assets under
management at June 30, 2001 and March 31, 2001 included $1.2 billion and $1.1
billion, respectively, of assets managed by Reed, Conner & Birdwell. The
remaining year-over-year increase in assets under management is primarily
attributable to increased participation in the CNI Charter Funds, City
National's family of mutual funds.
The other key component in the growth of noninterest income is cash management
and deposit transaction fees. These increased as the result of strong internal
growth in deposits, in many cases attributable to higher sales of new online
cash management products.
International services income rose primarily as a result of an increase in fee
income associated with standby letters of credit and foreign exchange.
Gains on the sale of assets and the repurchase of debt and gains (losses) on the
sale of securities amounted to $1.4 million for the second quarter of 2001,
compared with no material gain or loss for the same period a year earlier, and
gains of $1.7 million for the first quarter of 2001. The repurchase of $8.7
million of subordinated debt along with the cancellation of the related interest
rate swaps resulted in a $0.9 million gain in the second quarter of 2001. For
the first half of 2001, $3.2 million in gains on the sale of assets and the
repurchase of debt and gains on the sale of securities were realized, compared
with $0.2 million for the first half of 2000.
Management expects growth in noninterest income to range from 15 percent to 20
percent for 2001.
NONINTEREST EXPENSE
Noninterest expense was $79.0 million in the second quarter of 2001, up 4
percent from $76.1 million for the second quarter of 2000, and 3 percent from
$76.6 million for the first quarter of 2001. The increase over the year-ago
quarter was primarily the result of the corporation's growth, including expenses
related to Reed, Conner & Birdwell, new offices and additional colleagues.
Noninterest expense for the first half of 2001 was $155.6 million, an increase
of 7 percent compared with $145.2 million for the first half of 2000.
Amortization of goodwill reduced net income by $3.2 million for the second
quarter and $6.4 million for the first half of 2001.
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The corporation's cash efficiency ratio for the second quarter of 2001 improved
to 52.60 percent, from 53.26 percent for the second quarter of 2000. The 1
percent improvement is due to both increased revenues and the corporation's
ongoing efforts to improve efficiency and productivity. The cash efficiency
ratio for the current quarter rose slightly from the 52.01 percent for the first
quarter of 2001. For the first half of 2001, the cash efficiency ratio was 52.31
percent compared with 54.03 percent for the first half of 2000.
Management currently anticipates that 2001 noninterest expense will increase
between 5 percent and 8 percent from 2000.
INCOME TAXES
The effective tax rate, including the impact of the reduction in the expected
full-year effective income tax rate attributable to first quarter 2001
pre-tax income, was 30.7 percent for the second quarter, and 33.1 percent for
the first half of 2001. This compares with 34.9 percent for the second
quarter and 34.7 percent for the first half of 2000. The lower tax rates,
compared with prior periods, are due primarily to the formation of a special
purpose subsidiary for capital-raising activities during the second quarter
of 2001. The corporation continues to evaluate its long-term plan for its
registered investment company subsidiary. Management currently anticipates
its effective tax rate may approximate the 32.5 percent to 33.5 percent range
for 2001.
CREDIT QUALITY
Net loan charge-offs were $7.3 million and $4.0 million for the second quarters
of 2001 and 2000, respectively. Net loan charge-offs for the first quarter of
2001 were $8.2 million. For the first six months of 2001 and 2000, net loan
charge-offs were $15.6 million and $7.5 million, respectively.
Relationship loan net charge-offs were $4.3 million for the second quarter of
2001, compared with $0.8 million for the second quarter of 2000 and $6.3 million
for the first quarter of 2001. Second quarter 2001 syndicated non-relationship
loan net charge-offs were $3.0 million, compared with $3.2 million in the second
quarter of 2000, and $1.9 million for the first quarter of 2001.
As a percentage of average loans, annualized net charge-offs were 0.45 percent,
0.25 percent and 0.51 percent for the second quarters of 2001 and 2000, and the
first quarter of 2001, respectively. Relationship loan annualized net
charge-offs were 0.27 percent of average relationship loans outstanding for the
second quarter of 2001, compared with 0.06 percent for the second quarter of
2000, and 0.40 percent for the first quarter of 2001.
Total nonperforming assets (nonaccrual loans and ORE) were $38.3 million, or
0.58 percent of total loans and ORE, at June 30, 2001, compared with $35.5
million, or 0.56 percent, at June 30,
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2000, and $53.8 million, or 0.83 percent, at March 31, 2001. Nonperforming
assets decreased 29 percent from the first quarter 2001, and 39 percent from
year-end 2000.
Total nonperforming relationship assets were $30.2 million, or 0.47 percent of
total relationship loans and ORE, at June 30, 2001, compared with $32.2 million,
or 0.55 percent, at June 30, 2000, and $37.1 million, or 0.58 percent, at March
31, 2001, and do not contain any concentration of credits within a specific
industry sector. Total syndicated non-relationship loans on nonaccrual status
totaled $8.1 million at June 30, 2001 and consisted of two loans, compared with
four loans totaling $16.7 million that were outstanding at March 31, 2001.
City National recorded a provision for credit losses of $6.5 million and $14.0
million for the second quarter and first half of 2001, respectively, compared
with $4.0 million for both the second quarter and first half of 2000. The
provision for credit losses in the first quarter of 2001 was $7.5 million. The
provision for credit losses primarily reflects the levels of net loan
charge-offs and nonaccrual loans, as well as management's ongoing assessment of
the credit quality of the portfolio and the year-over-year growth of the loan
portfolio.
The allowance for credit losses at June 30, 2001 totaled $133.9 million, or 2.04
percent of outstanding loans. This compares with an allowance of $140.5 million,
or 2.21 percent of outstanding loans, at June 30, 2000, and an allowance of
$134.7 million, or 2.07 percent of outstanding loans at March 31, 2001. The
allowance for credit losses as a percentage of nonaccrual loans was 361 percent
at June 30, 2001, compared with 401 percent at June 30, 2000, and 256 percent at
March 31, 2001. Management believes the allowance for credit losses is adequate
to cover risks inherent in the portfolio at June 30, 2001.
The provision for credit losses to be taken in the balance of 2001 will reflect
management's assessment of the above factors, as well as the economic
environment at each reporting date. Based on its current assessment of these
factors, management anticipates that a provision for credit losses for all of
2001 could fall within the $28 million to $38 million range.
OUTLOOK
Management currently expects that net income per diluted common share for 2001
will be approximately 8 percent to 11 percent higher than 2000.
CAPITAL LEVELS
Total risk-based capital and Tier 1 risk-based capital ratios at June 30, 2001
were 11.64 percent and 8.76 percent, compared with the minimum
"well-capitalized" capital ratios of 10 percent and 6 percent, respectively. The
corporation's Tier 1 leverage ratio of 6.97 percent exceeded the regulatory
minimum of 4 percent required for a "well-capitalized" institution. Total
risk-based
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capital, Tier 1 risk-based capital and the Tier 1 leverage ratios at March 31,
2001 were 11.35 percent, 8.33 percent and 6.71 percent, respectively.
STOCK REPURCHASE
Under the October 26, 2000 stock buyback program of one million shares, 291,700
shares have been repurchased at an average price of $33.02 per share. No
treasury shares were purchased in the second quarter of 2001. The shares
purchased under the buyback program have been reissued for acquisitions, upon
the exercise of stock options, and for other general corporate purposes. There
were no treasury shares at June 30, 2001.
ABOUT CITY NATIONAL
City National Corporation is a publicly owned corporation with $9.1 billion
in total assets whose stock is traded on the New York Stock Exchange under
the symbol "CYN." The corporation's wholly owned subsidiary, City National
Bank, is California's Premier Private and Business Bank(SM). City National
Bank, which provides banking, trust and investment services, has 49
California offices located in Contra Costa, Los Angeles, Orange, Riverside,
San Bernardino, San Diego, San Francisco, San Mateo, Santa Clara and Ventura
counties.
This news release contains forward-looking statements about the corporation for
which the corporation claims the protection of the safe harbor provisions
contained in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management's knowledge and belief as of
today and include information concerning the corporation's possible or assumed
future financial condition, and its results of operations and business.
Forward-looking statements are subject to risks and uncertainties. A number of
factors, some of which are beyond the corporation'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) a continued
economic slowdown in California attributable to energy supply issues or any
other unforeseen events, (2) changes in interest rates, (3) significant changes
in banking laws or regulations, (4) increased competition in the corporation's
market, (5) higher-than-expected credit losses, and (6) possible changes in the
plans for its registered investment company subsidiary.
For a more complete discussion of these risks and uncertainties, see the
corporation's Quarterly Report on Form 10-Q for the quarter-ended March 31,
2001, and particularly the section of Management's Discussion and Analysis
therein titled "Cautionary Statement for Purposes of the 'Safe Harbor'
Provisions of the Private Securities Litigation Reform Act of 1995."
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