<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1999 Commission File Number 1-10521
CITY NATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-2568550
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
City National Center
400 North Roxbury Drive, Beverly Hills, California 90210
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 888-6000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- --------
Number of shares of common stock outstanding at April 30, 1999: 45,683,113
<PAGE>
PART 1 - FINANCIAL INFORMATON
ITEM 1. FINANCIAL STATEMENTS
CITY NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
Dollars in thousands, except share amounts 1999 1998 1998
- ------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Assets
Cash and due from banks ........................................................ $ 287,911 $ 285,843 $ 374,309
Federal funds sold ............................................................. 210,000 405,000 280,000
Investment securities (fair value $220,785 at March 31, 1998) .................. -- -- 219,395
Securities available-for-sale (cost $1,074,666; $990,152 and $595,603 at
March 31, 1999, December 31, 1998 and March 31, 1998, respectively) ........ 1,078,633 1,012,526 606,313
Trading account securities ..................................................... 29,403 35,015 29,759
Loans .......................................................................... 4,518,276 4,530,427 4,052,046
Less allowance for credit losses ............................................... 138,710 135,339 137,043
----------- ----------- -----------
Net loans .................................................................. 4,379,566 4,395,088 3,915,003
Premises and equipment, net .................................................... 57,164 55,766 44,839
Customers' acceptance liability ................................................ 1,943 1,759 2,110
Deferred tax asset ............................................................. 46,925 45,738 54,109
Goodwill and core deposit intangibles .......................................... 71,864 73,706 73,012
Bank owned life insurance ...................................................... 43,084 42,545 40,457
Other assets ................................................................... 77,826 74,795 62,816
----------- ----------- -----------
Total assets ............................................................... $ 6,284,319 $ 6,427,781 $ 5,702,122
=========== =========== ===========
Liabilities
Demand deposits ................................................................ $ 2,101,752 $ 2,382,724 $ 1,999,820
Interest checking deposits ..................................................... 385,719 452,249 384,642
Money market deposits .......................................................... 945,123 927,651 851,413
Savings deposits ............................................................... 190,207 183,353 167,592
Time deposits-under $100,000 ................................................... 180,223 187,710 210,971
Time deposits-$100,000 and over ................................................ 800,706 753,715 755,645
----------- ----------- -----------
Total deposits ............................................................. 4,603,730 4,887,402 4,370,083
Federal funds purchased and securities sold under repurchase agreements ........ 552,583 276,311 374,275
Other short-term borrowings .................................................... 107,326 317,001 162,969
Subordinated debt .............................................................. 123,311 123,265 124,004
Long-term debt ................................................................. 280,000 200,000 75,000
Other liabilities .............................................................. 56,401 60,240 55,642
Acceptances outstanding......................................................... 1,943 1,759 2,110
----------- ----------- -----------
Total liabilities .......................................................... 5,725,294 5,865,978 5,164,083
----------- ----------- -----------
Commitments and Contingencies
SHAREHOLDERS' EQUITY
Preferred Stock authorized - 5,000,000; none outstanding ....................... -- -- --
Common Stock-par value-$1.00; authorized - 75,000,000
Issued- 46,885,182; 46,885,182 and 46,831,840 shares at March 31, 1999,
December 31, 1998 and March 31, 1998,
respectively ............................................................... 46,885 46,885 46,832
Additional paid-in capital ..................................................... 281,911 287,363 296,067
Comprehensive income ........................................................... 2,286 12,901 6,143
Retained earnings .............................................................. 261,646 243,275 189,000
Treasury shares, at cost - 1,056,189; 877,945 and 1,305 shares at March 31,
1999, December 31, 1998 and March 31, 1998,
respectively ............................................................... (33,703) (28,621) (3)
----------- ----------- -----------
Total shareholders' equity ................................................. 559,025 561,803 538,039
----------- ----------- -----------
Total liabilities and shareholders' equity ................................. $ 6,284,319 $ 6,427,781 $ 5,702,122
=========== =========== ===========
See accompanying Notes to the Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
-----------------------------
In thousands, except per share amounts 1999 1998
- -------------------------------------- --------- ---------
<S> <C> <C>
Interest Income
Loans .......................................................................... $ 94,799 $ 90,074
Securities ..................................................................... 15,686 12,259
Trading account securities ..................................................... 502 605
Federal funds sold and securities purchased under resale agreements ............ 505 510
--------- ---------
Total interest income ...................................................... 111,492 103,448
--------- ---------
Interest Expense
Deposits ....................................................................... 19,741 20,832
Federal funds purchased and securities sold under repurchase agreements ........ 7,570 4,892
Other short-term borrowings .................................................... 1,285 1,999
Subordinated debt .............................................................. 2,040 1,776
Other long-term debt ........................................................... 3,176 1,125
--------- ---------
Total interest expense ..................................................... 33,812 30,624
--------- ---------
Net interest income ............................................................ 77,680 72,824
Provision for credit losses .................................................... -- --
--------- ---------
Net interest income after provision for credit losses .......................... 77,680 72,824
--------- ---------
Noninterest Income
Service charges on deposit accounts ............................................ 4,075 5,032
Investment services ............................................................ 4,320 3,691
Trust fees ..................................................................... 4,391 2,242
International services ......................................................... 1,991 1,686
Bank owned life insurance ...................................................... 539 457
Gain on sale of assets ......................................................... 58 13
Gain on sale of securities ..................................................... 1,253 974
Other .......................................................................... 2,518 2,270
--------- ---------
Total noninterest income ................................................... 19,145 16,365
--------- ---------
Noninterest Expense
Salaries and other employee benefits ........................................... 32,513 29,742
Professional ................................................................... 4,785 5,910
Net occupancy of premises ...................................................... 3,486 2,949
Information services ........................................................... 2,521 2,608
Marketing and advertising ...................................................... 2,564 2,437
Depreciation ................................................................... 2,444 2,030
Office services ................................................................ 1,836 2,111
Equipment ...................................................................... 651 508
Amortization of goodwill and core deposit intangibles .......................... 2,060 1,635
Other operating ................................................................ 3,006 4,391
Other real estate .............................................................. 35 45
--------- ---------
Total noninterest expense .................................................. 55,901 54,366
--------- ---------
Income before income taxes ..................................................... 40,924 34,823
Income taxes ................................................................... 14,923 12,354
--------- ---------
Net income ..................................................................... 26,001 22,469
--------- ---------
Other comprehensive income
Unrealized gains (losses) on securities available-for-sale ................. (17,885) 2,015
Reclassification adjustment for gains included in noninterest income ....... (524) (583)
Income taxes (benefits) .................................................... (7,794) 638
--------- ---------
Other comprehensive income ..................................................... (10,615) 794
--------- ---------
Comprehensive income ........................................................... $ 15,386 $ 23,263
========= =========
Net income per share, basic .................................................... $ 0.57 $ 0.48
========= =========
Net income per share, diluted ................................................. $ 0.55 $ 0.46
========= =========
Shares used to compute income per share, basic ................................. 45,990 46,677
========= =========
Shares used to compute income per share, diluted ............................... 47,336 48,841
========= =========
See accompanying Notes to the Unaudited Consolidated Financial Statements
</TABLE>
3
<PAGE>
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
-----------------------------
Dollars in thousands 1999 1998
- -------------------- --------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net income ........................................................ $ 26,001 $ 22,469
Adjustments to net income:
Gain on sales of ORE ......................................... 23 58
Depreciation ................................................. 2,444 2,030
Amortization of goodwill and core deposit intangibles ........ 2,060 1,869
Net decrease in trading securities ........................... 5,612 821
Deferred income tax benefit .................................. (693) (6,177)
Gain on sale of securities ................................... 1,253 974
Net increase in other liabilities (assets) ................... (8,356) 10,165
Other, net ................................................... 11,520 14,344
--------- ---------
Net cash provided by operating activites ................. 39,864 46,553
--------- ---------
Cash Flows From Investing Activities
Purchase of securities available-for-sale ......................... (124,288) (88,993)
Sales of securities available-for-sale ............................ 8,050 80,341
Maturities of securities available-for-sale ....................... 31,552 21,017
Maturities of investment securities ............................... -- 9,429
Purchase of investment securities ................................. -- (2,528)
Purchase of residential mortgage loans ............................ -- (32,396)
(Loan originations) and principal collections, net ................ 11,053 (51,442)
Proceeds from sales of ORE ........................................ 176 647
Purchase of premises and equipment ................................ (4,273) (1,143)
Net cash from acquisitions ........................................ -- 43,622
Bank owned life insurance premium paid ............................ -- (40,000)
Other, net ........................................................ 173 171
--------- ---------
Net cash used by investing activities ........................ (77,557) (61,275)
--------- ---------
Cash Flows From Financing Activities
Net increase in federal funds purchased and securities sold
under repurchase agreements .................................. 276,272 167,848
Net decrease in deposits .......................................... (283,672) (63,865)
Net decrease in short-term borrowings ............................. (209,675) (49,606)
Net increase in other long-term debt .............................. 80,000 25,000
Net proceeds of subordinated debt ................................. -- 124,004
Proceeds from exercise of stock options ........................... 3,302 6,034
Stock repurchases ................................................. (14,477) (13,025)
Cash dividends paid ............................................... (7,630) (6,558)
Other, net ........................................................ 641 1,801
--------- ---------
Net cash provided by financing activities .................... (155,239) 191,633
--------- ---------
Net increase (decrease) in cash and cash equivalents .............. (192,932) 176,911
Cash and cash equivalents at beginning of year .................... 690,843 477,398
--------- ---------
Cash and cash equivalents at end of period ........................ $ 497,911 $ 654,309
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest ................................................. $ 35,338 $ 28,686
Income taxes ............................................. 2,000 --
Non-cash investing activities:
Transfer from loans to foreclosed assets ................. -- 1,436
See accompanying Notes to the Unaudited Consolidated Financial Statements
</TABLE>
4
<PAGE>
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
-----------------------------
Dollars in thousands 1999 1998
- --------------------
--------- ---------
<S> <C> <C>
Common Stock
Balance, beginning of period ........................ $ 46,885 $ 46,701
Stock issued for acquisitions ....................... -- 131
--------- ---------
Balance, end of period .............................. 46,885 46,832
--------- ---------
Additional paid-in capital
Balance, beginning of period ........................ 287,363 297,654
Tax benefit from stock options ...................... 641 1,801
Excess of cost of treasury shares reissued
over stock option exercise amounts ............. (6,093) (10,295)
Excess of market value of shares issued
for acquisitions over historical cost .......... -- 6,907
--------- ---------
Balance, end of period .............................. 281,911 296,067
--------- ---------
Treasury shares
Balance, beginning of period ........................ (28,621) (14,123)
Purchase of shares .................................. (14,477) (13,026)
Issuance of shares for acquisitions ................. -- 10,817
Issuance of shares for stock options ................ 9,395 16,329
--------- ---------
Balance, end of period .............................. (33,703) (3)
--------- ---------
Accumulated other comprehensive income
Balance, beginning of period ........................ 12,901 5,349
Other comprehensive income (loss) net of taxes ...... (10,615) 794
--------- ---------
Balance, end of period .............................. 2,286 6,143
--------- ---------
Retained earnings
Balance, beginning of period ........................ 243,275 173,089
Net income .......................................... 26,001 22,469
Dividends paid ...................................... (7,630) (6,558)
--------- ---------
Balance, end of period .............................. 261,646 189,000
--------- ---------
Total shareholders' equity ................................ $ 559,025 $ 538,039
========= =========
</TABLE>
See accompanying Notes to the Unaudited Consolidated Financial Statements
5
<PAGE>
CITY NATIONAL CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The results of operations reflect the interim adjustments, all of which are
of a normal recurring nature and which, in the opinion of management, are
necessary for a fair presentation of the results for such interim periods.
These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1998.
2. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). This Statement establishes
accounting and reporting standards for derivative instruments and for
hedging activities. This Statement is effective for fiscal years beginning
after June 15, 1999. The Company uses interest rate swaps to manage interest
rate exposure, which are accounted for as hedging activities and does not
believe that the implementation will have a significant impact on the
Company's financial position, net income or net comprehensive income.
3. Trading account securities are stated at market value. Investments not
classified as trading securities are classified as securities
available-for-sale and recorded at fair value. Unrealized holding gains or
losses for securities available-for-sale are excluded from net income and
are reported as comprehensive income included as a separate component of
shareholders' equity net of taxes.
4. Certain prior periods' data have been reclassified to conform to current
period presentation.
5. Under the Company's current 1.0 million-share common stock buyback program,
which was announced on September 8, 1998, a total of 430,700 shares were
repurchased during the first quarter of 1999 at a cost of $14.1 million. As
of April 30, 1999, a total of 753,800 shares were repurchased under this
program at a cost of $23.7 million. Shares purchased under the buyback
program will be reissued upon the exercise of stock options and for other
general corporate purposes.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
City National Corporation (the Corporation) is the holding Company for City
National Bank (the Bank). Because the Bank comprises substantially all of the
business of the Corporation, references to the "Company" in this Item 2 reflect
the consolidated activities of the Corporation and the Bank.
See "Cautionary Statement for Purposes of the `Safe Harbor' Provision of the
Private Securities Litigation Reform Act of 1995", on page 17 in connection with
"forward looking" statements included in the Overview section of Results of
Operations and in the Loan Portfolio section of the Balance Sheet Analysis.
The Company regularly evaluates, and holds discussions with, various potential
acquisition candidates. As a general rule the Company does not publicly announce
such acquisitions until after a definitive agreement has been reached. Also as a
matter of policy, the Company generally does not make any specific projections
as to future earnings nor does it endorse any projections regarding future
performance which may be made by others.
RESULTS OF OPERATIONS
Overview
The Company recorded consolidated net income of $26.0 million, or $0.55 per
diluted common share, in the first quarter of 1999, compared to $22.5 million,
or $0.46 per diluted common share, in the first quarter of 1998. Increased net
income was primarily due to $4.9 million higher net interest income, and $2.8
million higher noninterest income, partially offset by $1.5 million in higher
noninterest expense. First quarter results benefited from higher than normal
levels of interest collected on nonaccural and charged-off loans, as well as
gains on the sale of securities. The benefit of these items net of the effect
of integration expenses related to North American Trust Company was
approximately $0.03 per diluted share.
Return on average assets for the first quarter of 1999 was 1.73% compared with
1.70% for the corresponding period of 1998. Return on average equity for the
first quarter of 1999 increased to 18.69% from 17.19% in 1998.
Earnings before the amortization of goodwill and core deposits intangibles (net
of applicable taxes) ("cash" earnings) for the quarter ended March 31, 1999 were
$27.6 million or $0.58 per diluted common share compared to $24.0 million or
$0.49 per diluted common share in the corresponding period of 1998. On the same
basis, the returns on average assets were 1.85% for the quarter ended March 31,
1999, compared to 1.84% in 1998. Cash return on average common equity was
22.19% for the quarter ended March 31, 1999, compared to 20.87% for the year ago
period. "Cash" earnings are presented because they measure the Company's
ability to support growth, pay dividends and repurchase stock. The Company's
"cash" earnings per share and other ratios are not necessarily comparable to
similarly titled measures reported by other companies.
Taxable equivalent net interest income was $80.1 million in the first quarter of
1999, up 6.0% from the year ago quarter. The increase resulted from the 14.9%
increase in average interest earning assets between quarters. The net interest
spread and the net interest margin decreased to 4.31% and 5.60%, respectively
for the first quarter from 4.67% and 6.11%, for the comparable period a year
ago. The combination of growth in earning assets, which outpaced growth in
lower cost core deposits, and the slightly lower prime rate that took effect in
the fourth quarter of 1998, contributed to a decrease in net interest margins.
Consistent with a strong economy and continued improvement in the quality of the
bank's loan portfolio, interest recovered on nonaccrual and charged-off loans
remained strong. Interest recovered was $3.5 million in the first quarter of
1999 compared with $4.3 million for the first quarter of 1998. Management
expects modest growth in quarterly net interest income for the remainder of 1999
from first quarter 1999 levels, assuming, among other things, that loan balances
will continue to grow. Actual results may vary if the assumption proves to be
incorrect.
Average loans increased $500.0 million (12.5%) between first quarters to
$4,510.9 million at March 31, 1999. This increase reflected higher average
commercial loans, construction loans, and residential first mortgage loans, up
$403.7 million (20.0%), $92.2 million (60.0%), and $29.1 million (2.9%),
respectively, offset by lower real estate
7
<PAGE>
commercial mortgage loans of $23.1 million (3.0%). The increase in
commercial loans includes expanded participations in domestic bank
non-relationship syndicated loans originated by others. These add geographic
and industry diversification and liquidity to the loan portfolio. The
increases in construction loans and residential first mortgage loans resulted
from the Bank's internal loan generation.
Total loans at March 31, 1999 and December 31, 1998 were $4.5 billion. However,
during the quarter, relationship-originated loans increased $84.1 million while
purchased residential first mortgages and non-relationship syndicated loans fell
$96.3 million due to payoffs.
Total average deposits increased $302.5 million (7.4%) between first quarters
due primarily to increased deposit levels generated by the Bank's specialty
deposit department and banking offices. Total average securities increased
$226.0 million (27.8%).
Total deposits as of March 31, 1999 increased $233.6 million (5.3%) compared to
March 31, 1998 but were $283.7 million (5.8%) lower than December 31, 1998
reflecting a higher than usual seasonal increase in deposits at year end.
The provision for credit losses was zero for the quarters ended March 31, 1999
and 1998. Loans charged off in the first quarter of 1999 were $1.1 million,
compared to $7.8 million in the first quarter of 1998. Recoveries were $4.5
million and $4.3 million in the quarters ended March 31, 1999 and 1998,
respectively. The allowance for credit losses was 3.07% of total loans at March
31, 1999 compared to 3.38% at March 31, 1998 and 2.99% at December 31, 1998.
The provision for credit losses is expected to remain at reduced levels but not
necessarily at zero for the remainder of 1999. This assumes that general
economic conditions in Southern California will not deteriorate materially
during the balance of 1999, and if this assumption proves to be inaccurate, a
higher provision for credit losses may be required. The provision levels for
1999 will depend on numerous factors including the general economic conditions
that impact borrowers.
Noninterest income excluding gains and losses on the sale of securities and
assets totaled $17.8 million for the first quarter of 1999, up $2.5 million
(16.0%) from a year earlier. This increase reflects higher investment services
income of $0.6 million (17.0%) and trust fees of $2.1 million (95.9%) primarily
due to the acquisition of North American Trust Company ("NATC"). Service
charges on deposit accounts decreased $1.0 million compared to the same period
for 1998 due to changes in the mix and balances of deposit accounts.
Noninterest income is expected to continue to grow during the remainder of 1999,
continuing to benefit from the acquisition of NATC.
Noninterest expense totaled $55.9 million in the first quarter of 1999, an
increase of $1.5 million (2.8%) from the first quarter of 1998. Salaries and
other employee benefits increased $2.8 million (9.3%) for the quarter ended
March 31, 1999 from the comparable period in 1998, due primarily to the
additional personnel added as a result of the acquisition of NATC, the hiring of
additional personnel to pursue other opportunities, and a more performance based
compensation structure. The expense categories other than staff decreased $1.2
million (5.0%) for the quarter ended March 31, 1999 from the comparable period
in 1998. Lower professional fees, and other operating expense more than offset
higher net occupancy of premises, depreciation and amortization of goodwill and
core deposit intangible expenses. Noninterest expense levels for the remainder
of 1999 are expected to be higher than in 1998 reflecting the growth of the
Company and the acquisition of NATC.
The Year 2000 issue is the result of computer programs written using two digits
(rather than four) to define years. Computers or other equipment with
date-sensitive software may recognize "00" as 1900 rather than 2000. This could
result in system failure or miscalculations. If the Company or significant
customers, suppliers or other third parties fail to correct Year 2000 issues,
the Company's ability to operate could be affected. The Company's Year 2000
Readiness discussion follows:
During the first quarter of 1999, efforts continued to address Year 2000 matters
in accordance with the Company's five-phase project plan, which covers
information technology as well as embedded systems. The five phases are
awareness, assessment, renovation, validation and implementation with
contingency planning as a part of the validation phase. As previously reported,
the first two phases of awareness and assessment have been completed. The
Company completed approximately 95% of its renovation phase. The renovation
phase pertains only to internal programs and applications as there are no
mission critical systems requiring renovation. As part of the validation phase,
the Company has certified 100% of its internal mission critical hardware and
software applications and
8
<PAGE>
approximately 93% of all non-mission critical hardware and software
applications as Year 2000 ready. Final Year 2000 certification was completed
and made available to the Company by 90% of the Company's mission critical
vendors by March 31, 1999. In accordance with the Federal Financial
Institution Examination Council's guidances, the Company expects to complete
the implementation phase for mission critical internal and external systems
and applications by June 30, 1999. As an additional precaution the Company
has developed a contingency plan for each of its mission critical business
units which establishes trigger dates for implementation of the plan for each
software application that may ultimately not be Year 2000 compliant. The
contingency plans will provide for field testing to validate the contingency
plans. However, these plans do not guarantee that circumstances beyond the
Company's control will not adversely impact operations. At this time, based
on assessments and testing to date, the Company does not foresee any Year
2000 issues that would materially impair the Bank's ability to conduct
business.
The Company is engaged in the ongoing process of considering and examining
whether or not there would be a material effect on its business, net income or
balance sheet if its vendors, suppliers and customers do not become Year 2000
compliant in a timely manner. With regard to customer readiness, the Company
has queried and continues to query all commercial borrowers with loans of $1.0
million and over. For those customers having responded, it has been determined
that their compliance efforts at this time appear satisfactory or their business
would have no significant impact by Year 2000 matters. In addition, there is a
group of customers who have indicated their compliance will be in the future and
the Company continues to monitor their progress. The Company is also
considering customized action plans and disengagement strategies for any high
risk borrowers. The Company in its review of the adequacy of its allowance for
credit losses has considered the potential for Year 2000 risks to its borrowers.
Where the Company is a third party vendor to customers, as in the area of cash
management, the Company has reached year 2000 readiness. The Company is
continuing to evaluate its risk and responsibilities with respect to the
premises it occupies. The Company's analysis of the corporate counterparties
for its investments and current hedging position was also completed in the first
quarter of 1999. This analysis reviewed the year 2000 readiness of these
counterparties, and the impact that year 2000 failures might have on bank
liquidity and profitability. No materially adverse circumstances were
identified.
In the first quarter of 1999, approximately $0.4 million was directly and
indirectly expensed on Year 2000 matters. This amount excludes hardware and
software that was replaced in the normal course of business. Total direct and
indirect expenses are expected to be approximately $1.7 million for all of 1999.
The Company's effective tax rate of 36.5% in the first quarter of 1999 was
slightly higher than the previous year's first quarter and for all of 1998.
9
<PAGE>
The following table presents the components of net interest income on a fully
taxable equivalent basis for the three months ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
Net Interest income Summary
March 31, 1999 March 31, 1998
------------------------------------ ------------------------------------
Interest Average Interest Average
Average income/ interest Average income/ interest
Dollars in thousands Balance expense rate Balance expense rate
- -------------------- ------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A s s e t s
Earning assets (1)
Loans:
Commercial $2,433,188 $52,809 8.80% $2,029,445 $47,816 9.56%
Residential first mortgages 1,036,771 18,713 7.32 1,007,686 19,317 7.77
Real estate - construction 245,509 5,961 9.85 153,352 4,123 10.90
Real estate - commercial mortgage 747,037 17,563 9.53 770,175 18,471 9.73
Installment 48,436 1,130 9.46 50,330 1,434 11.56
----------- -------- ---------- -------
Total loans (2) 4,510,941 96,176 8.65 4,010,988 91,161 9.22
Securities 1,040,180 16,834 6.56 814,173 13,866 6.91
Federal funds sold and securities
purchased under resale agreements 36,863 505 5.56 39,370 510 5.25
Trading account securities 51,593 426 3.35 43,798 673 6.23
----------- -------- ---------- --------
Total earning assets 5,639,577 113,941 8.19 4,908,329 106,210 8.78
-------- --------
Allowance for credit losses (138,484) (140,789)
Cash and due from banks 296,318 312,983
Other nonearning assets 303,388 270,086
----------- -----------
Total assets $6,100,799 $5,350,609
=========== ===========
L i a b i l i t i e s a n d S h a r e h o l d e r s' E q u i t y
Interest-bearing deposits:
Interest checking deposits $ 401,821 599 0.60 $ 386,152 949 1.00
Money market deposits 939,328 6,735 2.91 832,527 6,164 3.00
Savings deposits 183,204 1,976 4.37 176,323 1,511 3.48
Time deposits - under $100,000 185,774 2,181 4.76 230,187 2,789 4.91
Time deposits - $100,000 and over 724,557 8,250 4.62 708,469 9,419 5.39
----------- --------- ---------- ------
Total interest-bearing deposits 2,434,684 19,741 3.29 2,333,658 20,832 3.62
Federal funds purchased and securities
sold under repurchase agreements 633,087 7,570 4.85 363,954 4,892 5.45
Other borrowings 467,990 6,501 5.63 327,799 4,900 6.06
----------- --------- ---------- ------
Total interest-bearing liabilities 3,535,761 33,812 3.88 3,025,411 30,624 4.11
--------- ------
Noninterest-bearing deposits 1,934,251 1,732,799
Other liabilities 66,493 62,305
Shareholders' equity 564,294 530,094
---------- ----------
Total liabilities and shareholders'
equity $6,100,799 $5,350,609
=========== ==========
Net interest spread 4.31% 4.67%
====== =====
Fully taxable equivalent net interest income $ 80,129 $75,586
========= =======
Net interest margin 5.60% 6.11%
====== =====
</TABLE>
(1) Includes average nonaccrual loans of $24,082 and $35,621 for 1999 and
1998, respectively.
(2) Loan income includes loan fees of $4,591 and $2,519 for 1999 and 1998,
respectively.
<PAGE>
The following tables set forth the changes in net interest income on a
fully taxable equivalent basis broken down by volume and rates. The change
in interest due to both volume and in rate has been allocated to change due
to volume and rate in proportion to the relationship of the absolute dollar
amounts of the change in each.
<TABLE>
<CAPTION>
Changes In Net Interest Income
For the three For the three
months ended March 31, months ended March 31,
Dollars in thousands 1999 vs 1998 1998 vs 1997
- --------------------------------- --------------------------------------- ----------------------------------------
Increase (decrease) Increase (decrease)
due to Net due to Net
------------------------- increase -------------------------- increase
Volume Rate (decrease) Volume Rate (decrease)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans $ 10,889 $ (5,874) $ 5,015 $ 20,179 $ 309 $ 20,488
Securities 3,699 (731) 2,968 (392) 491 99
Trading account securities 104 (351) (247) (70) 209 139
Federal funds sold and
securities purchased
under resale agreements (34) 29 (5) 185 14 199
------------ ------------ ------------ ------------ ------------ ------------
Total interest-earning assets 14,658 (6,927) 7,731 19,902 1,023 20,925
------------ ------------ ------------ ------------ ------------ ------------
Interest paid on:
Interest checking deposits 39 (48) (9) 41 - 41
Money market deposits 762 (191) 571 427 (18) 409
Savings deposits 61 63 124 77 67 144
Other time deposits (363) (1,414) (1,777) 3,525 219 3,744
Other borrowings 5,313 (1,034) 4,279 2,129 622 2,751
------------ ------------ ------------ ------------ ------------ ------------
Total interest-bearing liabilities 5,812 (2,624) 3,188 6,199 890 7,089
------------ ------------ ------------ ------------ ------------ ------------
$ 8,846 $ (4,303) $ 4,543 $ 13,703 $ 133 $ 13,836
============ ============ ============ ============ ============ ============
</TABLE>
11
<PAGE>
BALANCE SHEET ANALYSIS
Available-for-Sale Security Portfolio
Comparative period-end available-for-sale security portfolio balances are
presented below:
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
------------------------------ ------------------------------ ------------------------------
Dollars in thousands Cost Fair Value Cost Fair Value Cost Fair Value
- ----------------------------- -------------- -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Gov. and federal agency $ 294,087 $ 297,396 $ 268,838 $ 275,145 $ 271,680 $ 273,067
Mortgage-backed 387,273 384,530 348,826 351,469 129,339 130,156
State and Municipal 143,874 144,938 121,743 123,845 2,180 2,183
Other debt 142,802 142,346 145,852 152,692 43,345 44,882
-------------- -------------- -------------- ------------- -------------- -------------
Total debt securities 968,036 969,210 885,259 903,151 446,544 450,288
Marketable equity securities 106,630 109,423 104,893 109,375 149,059 156,025
-------------- -------------- -------------- ------------- -------------- -------------
Total securities $ 1,074,666 $ 1,078,633 $ 990,152 $ 1,012,526 $ 595,603 $ 606,313
============== ============== ============== ============= ============== =============
</TABLE>
The following table provides the expected remaining maturities and yields
(taxable-equivalent basis) of debt securities within the available-for-sale
portfolio as of March 31, 1999.
<TABLE>
<CAPTION>
One year Over 1 year Over 5 years
or less thru 5 years thru 10 years
------------------------------- ------------------------------ -----------------------------
Dollars in thousands Amount Yield (%) Amount Yield (%) Amount Yield (%)
- ----------------------------- -------------- -------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Gov. and federal agency $ 50,345 6.11 $ 195,810 6.01 $ 51,241 6.11
Mortgage-backed 424 6.98 - - 15,916 6.14
State and Municipal 20,731 6.33 58,986 6.81 60,595 6.35
Other debt - - 103 7.00 93,818 7.50
-------------- -------------- -------------- -------------- ------------- --------------
Total debt securities $ 71,500 6.18 $ 254,899 6.20 $221,570 6.77
============== ============== =============
Amortized cost $ 70,971 $ 251,055 $222,625
============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
Over 10 years Total
------------------------------ ------------------------------
Dollars in thousands Amount Yield (%) Amount Yield (%)
- ----------------------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
U.S. Gov. and federal agency $ - - $ 297,396 6.05
Mortgage-backed 368,190 6.58 384,530 6.56
State and Municipal 4,626 6.49 144,938 6.54
Other debt 48,425 7.80 142,346 7.60
------------- -------------- ------------- --------------
Total debt securities $421,241 6.72 $ 969,210 6.55
============= =============
Amortized cost $423,385 $ 968,036
============= =============
</TABLE>
Dividend income included in interest income on securities in the Consolidated
Statement of Income and Comprehensive Income in the first quarter of 1999 and
1998 was $1.3 million and $2.4 million, respectively.
12
<PAGE>
Loan Portfolio
A comparative period-end loan table is presented below:
<TABLE>
<CAPTION>
LOANS
March 31, December 31, March 31,
Dollars in thousands 1999 1998 1998
- ------------------------------------------ -------------------- --------------------- --------------------
<S> <C> <C> <C>
Commercial $ 2,427,843 $ 2,457,946 $ 2,076,271
Residential first mortgage 1,032,383 1,038,229 1,008,592
Real estate - construction 246,760 237,015 149,886
Real estate - mortgage 763,772 747,711 765,198
Installment 47,518 49,526 52,099
-------------------- --------------------- --------------------
Total loans, gross 4,518,276 4,530,427 4,052,046
Less: Allowance for credit losses (138,710) (135,339) (137,043)
-------------------- --------------------- --------------------
Total loans, net $ 4,379,566 $ 4,395,088 $ 3,915,003
==================== ===================== ====================
</TABLE>
Gross loans at March 31, 1999 amounted to $4,518.3 million, up $466.2 million
(11.5%) from March 31, 1998 but down $12.2 million (0.3%) from December 31,
1998. During the quarter, relationship-originated loans increased $84.1
million while purchased residential first mortgages and non-relationsip
syndicated loans fell $96.3 million due to payoffs. Contributing to the
$351.6 million increase in commercial loans from March 31, 1998 were loan
originations and the purchase of syndicated corporate loans. Construction
loans also increased by $96.9 million from March 31, 1998 as the Company
continued to expand its lending for residential construction development. The
$23.8 million increase in residential first mortgage loans from the year ago
quarter resulted from the Bank's own originations. The Company expects that
the Bank's loan portfolio will increase from first quarter 1999 levels due
primarily to its own internal loan generation activities.
The following table presents information concerning nonaccrual loans,
ORE, and restructured loans.
<TABLE>
<CAPTION>
NONACCRUAL LOANS, ORE AND RESTRUCTURED LOANS
March 31, December 31, March 31,
Dollars in thousands 1999 1998 1998
- --------------------------------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C>
Nonaccrual loans:
Commercial $ 5,430 $ 4,763 $ 13,894
Real estate 16,959 17,204 22,881
Installment 875 1,171 -
-------------------- --------------------- --------------------
Total 23,264 23,138 36,775
ORE: 2,390 3,480 2,900
-------------------- --------------------- --------------------
Total nonaccrual loans and ORE $ 25,654 $ 26,618 $ 39,675
==================== ===================== ====================
Restructured loans, accruing $ 1,881 $ 1,982 $ 2,899
==================== ===================== ====================
Total non accrual loans as a
percentage of total loans 0.51% 0.51% 0.91%
Total non accrual loans and ORE as a
percentage of total loans and ORE 0.57 0.59 0.98
Allowance for credit losses to total loans 3.07 2.99 3.38
Allowance for credit losses
to nonaccrual loans 596.24 584.92 372.65
</TABLE>
13
<PAGE>
The table below summarizes the approximate changes in nonaccrual loans for
the quarters and nine months ended March 31, 1999 and March 31, 1998.
<TABLE>
<CAPTION>
Changes in Nonaccrual Loans
For the three months ended
March 31,
------------------------------------------------
Dollars in millions 1999 1998
- ------------------------------------- -------------------- -----------------
<S> <C> <C>
Balance, beginning of period $ 23.1 $ 27.6
Additions from acquisitions - 3.1
Loans placed on nonaccrual 4.0 20.4
Charge offs (0.4) (5.3)
Loans returned to accrual status (0.1) -
Repayments (including interest
applied to principal) (3.3) (9.0)
-------------------- -----------------
Balance, end of period $ 23.3 $ 36.8
==================== =================
</TABLE>
At March 31, 1999, in addition to loans disclosed above as nonaccrual or
restructured, management had also identified $4.4 million of problem loans about
which the ability of the borrowers to comply with the present loan repayment
terms in the future is questionable.
Allowance for Credit Losses
The following table summarizes average loans outstanding and changes in the
allowance for credit losses for the periods presented:
<TABLE>
<CAPTION>
Changes in Allowance for Credit Losses
For the three months ended
March 31,
------------------------------------------------
Dollars in millions 1999 1998
- ------------------------------------- -------------------- -----------------
<S> <C> <C>
Average amount of loans outstanding $ 4,510.9 $ 4,011.0
==================== =================
Balance of allowance for credit losses,
beginning of period $ 135.3 $ 137.8
Loans charged off:
Commercial 1.0 7.4
Real estate 0.1 0.4
-------------------- -----------------
Total loans charged off 1.1 7.8
-------------------- -----------------
Less recoveries of loans previously
charged off:
Commercial 4.4 4.3
Real estate 0.1 -
-------------------- -----------------
Total recoveries 4.5 4.3
-------------------- -----------------
Net loans (charged off)/recovered 3.4 (3.5)
Additions to allowance from acquisitions - 2.7
-------------------- -----------------
Balance, end of period $ 138.7 $ 137.0
==================== =================
Ratio of net charge-offs
to average loans N/M 0.09%
==================== =================
Ratio of allowance for credit losses
to total period end loans 3.07% 3.38%
==================== =================
</TABLE>
14
<PAGE>
CAPITAL ADEQUACY REQUIREMENT
The following table presents the regulatory standards for "well capitalized"
institutions and the capital ratios for the Company and the Bank at March 31,
1999, December 31, 1998 and March 31, 1998.
<TABLE>
<CAPTION>
Regulatory
Well Capitalized March 31, December 31, March 31,
Standards 1999 1998 1998
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
City National Corporation
- ---------------------------
Tier 1 leverage 4.00% 8.06% 7.99% 8.79%
Tier 1 risk-based capital 6.00 9.76 9.43 10.54
Total risk-based capital 10.00 13.54 13.20 14.63
City National Bank
- ---------------------------
Tier 1 leverage 4.00 7.78 7.53 7.70
Tier 1 risk-based capital 6.00 9.40 9.40 9.26
Total risk-based capital 10.00 13.18 13.18 13.38
</TABLE>
Under the Company's current 1.0 million-share common stock buyback program,
which was announced on September 8, 1998, a total of 430,700 shares were
repurchased during the first quarter of 1999 at a cost of $14.1 million. As of
April 30, 1999, a total of 753,800 shares were repurchased under this program at
a cost of $23.7 million. Shares purchased under the buyback program will be
reissued upon the exercise of stock options and for other general corporate
purposes.
On April 21, 1999, the Company declared a regular quarterly dividend of $0.165
per share, payable May 17, 1999 to shareholders of record as of May 5, 1999.
ASSET/LIABILITY MANAGEMENT
The principal objectives of asset/liability management are to maximize net
interest margin subject to margin volatility and liquidity constraints. Margin
volatility results when the rate reset (or repricing) characteristics of assets
are materially different from those of the Company's liabilities. Liquidity
risk results from the mismatching of asset and liability cash flows. Management
chooses asset/liability strategies that promote stable earnings and reliable
funding. Interest rate risk and funding positions are kept within limits
established by the Company's board of directors to ensure that risk-taking is
not excessive and that liquidity is properly managed.
The Company has established three measurement processes to quantify and manage
exposure to interest rate risk: net interest income simulation modeling, gap
analysis, and present value of equity analysis. Net interest income simulations
are used to identify the direction and severity of interest rate risk exposure
across a twelve month forecast horizon. Gap analysis provides insight into
structural mismatches of assets and liability repricing characteristics and
reflects the attrition and prepayment behavior of deposit and loan customers.
Present value of equity calculations are used to estimate the theoretical price
sensitivity of shareholder equity to changes in interest rates.
Generally, an asset sensitive gap indicates that net interest income will
improve during a period of rising interest rates. The gap report is based on
the contractual cash flows of all asset and liability balances on the Company's
books. The contractual life of those balances may differ substantially from
their expected lives however. For example, checking accounts are all subject to
immediate withdrawal. Experience suggests that these accounts will have an
average life of several years. Also, certain loans (such as first mortgages)
are subject to prepayment. The
15
<PAGE>
cash flows shown in the gap report are adjusted to reflect these behaviors.
The gap report also shows the effects that interest rate swaps have had on
the repricing profile of the Company.
The use of interest rate swaps to manage interest rate exposure involves the
risk of dealing with counterparties and their ability to meet contractual terms.
These counterparties must receive appropriate credit approval before the Company
enters into an interest rate contract. Notional principal amounts express the
volume of these transactions, although the amounts potentially subject to credit
and market risks are much smaller. At March 31, 1999, almost all of the
Company's interest rate swaps were entered into as hedges against a decrease in
interest income generated from prime based loans if the prime decreased. The
Company has not entered into transactions involving any other interest rate
derivative financial instruments, such as interest rate floors, caps and
interest rate futures contracts.
At March 31, 1999, the one-year cumulative gap was a net liability position of
$(367.2) million (6% of total assets) compared with $(407.0) million (6% of
total assets) at December 31, 1998. The decrease resulted from continuing
interest rate risk mitigation activities, relatively low holdings of short-term
rate-sensitive assets, and an in-flow of noninterest-bearing deposit balances at
quarter end. As of March 31, 1999, the Company has $845.0 million of notional
principal in receive fixed-pay LIBOR interest rate swaps, of which $440.0
million have maturities greater than one year. The Company's interest-rate
risk-management instruments had a fair value of $3.4 million and $6.4 million
and an exposure to credit risk of $3.4 million and $6.4 million at March 31,
1999 and December 31, 1998, respectively. The credit exposure represents the
cost to replace, on a present value basis and at current market rates, the net
positive value of all contracts for each counterparty that were outstanding at
the end of the period. The Company's swap agreements require the deposit of
collateral to mitigate the amount of credit risk if certain credit exposure
thresholds are exceeded. No amounts were required to be deposited by the
Company or its counterparties as of March 31, 1999.
Since interest rate changes do not affect all categories of assets and
liabilities equally or simultaneously, a cumulative gap analysis alone cannot be
used to evaluate the Company's interest rate sensitivity position. To
supplement traditional gap analysis, the Company uses simulation modeling to
estimate the potential effects of changing interest rates. This process allows
the Company to fully explore the complex relationships within the gap over time
and various interest rate scenarios.
At March 31, 1999, the Company's outstanding foreign exchange contracts totaled
$21.0 million. The Company enters into foreign exchange contracts with its
customers and counterparty banks solely for the purpose of offsetting or hedging
transaction and economic exposures arising out of commercial transactions. The
Company's policies prohibit outright speculation by the Company and its
employees. The Company actively manages its foreign exchange exposures within
prescribed risk limits and controls. All foreign exchange contracts outstanding
at March 31, 1999 had remaining maturities of six months or less.
LIQUIDITY MANAGEMENT
The Company continues to manage its liquidity through the combination of core
deposits, federal funds purchased, repurchase agreements, collateralized
borrowing lines at the Federal Reserve Bank and the Federal Home Loan Bank of
San Francisco, and a portfolio of securities availabie-for-sale. Liquidity is
also provided by maturing investment securities and loans.
Average core deposits and shareholders' equity comprised 69.0% of total funding
in the first quarter of 1999, compared to 72.7% in the first quarter of 1998.
This decrease has required that the Company increase its use of more costly
alternative funding sources. Despite the decrease in percentage of funding
derived from core deposits and shareholders' equity, the Company has not faced
any liquidity constraints.
16
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company wishes to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 as to "forward looking"
statements in this Quarterly Report which are not historical facts. The Company
cautions readers that the following important factors could affect the Company's
business and cause actual results to differ materially from those expressed in
any forward looking statement made by, or on behalf of, the Company.
- --Economic conditions. The Company's results are strongly influenced by general
economic conditions in its market area, Southern California, and a deterioration
in these conditions could have a material adverse impact on the quality of the
Bank's loan portfolio and the demand for its products and services. In
particular, changes in economic conditions in the real estate and entertainment
industries may affect the Company's performance.
- --Interest rates. Management anticipates that interest rates will remain flat
or slightly higher. If interest rates vary substantially from present levels,
this may cause the Company's results to differ materially.
- --Government regulation and monetary policy. All forward looking statements
presume a continuation of the existing regulatory environment and U.S.
Government monetary policies. The banking industry is subject to extensive
federal and state regulations, and significant new laws or changes in, or repeal
of, existing laws may cause results to differ materially. Further, federal
monetary policy, particularly as implemented through the Federal Reserve System,
significantly affects credit conditions for the Bank, primarily through open
market operations in U.S. Government securities, the discount rate for member
bank borrowing and bank reserve requirements, and a material change in these
policies would be likely to have an impact on results.
- --Competition. The Bank competes with numerous other domestic and foreign
financial institutions and non-depository financial intermediaries. Results may
differ if circumstances affecting the nature or level of competition change,
such as the merger of competing financial institutions.
- --Credit quality. A significant source of risk arises from the possibility that
losses will be sustained because borrowers, guarantors and related parties may
fail to perform in accordance with the terms of their loans. The Bank has
adopted underwriting and credit monitoring procedures and credit policies,
including the establishment and review of the allowance for credit losses, that
management believes are appropriate to minimize this risk by assessing the
likelihood of nonperformance, tracking loan performance and diversifying the
Bank's credit portfolio, but such policies and procedures may not prevent
unexpected losses that could adversely affect the Company's results.
- --Other risks. From time to time, the Company details other risks to its
business and/or its financial results in its filings with the Securities and
Exchange Commission.
While management believes that its assumptions regarding these and other factors
on which forward looking statements are based are reasonable, such assumptions
are necessarily speculative in nature, and actual outcomes can be expected to
differ to some degree. Consequently, there can be no assurance that the results
described in such forward looking statements will, in fact, be achieved.
17
<PAGE>
PART 11. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITY NATIONAL CORPORATION
-------------------------
(Registrant)
DATE: May 14, 1999
------------ --------------------------
FRANK P. PEKNY
Executive Vice President
and Chief Financial Officer
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 287,911
<INT-BEARING-DEPOSITS> 0 <F1>
<FED-FUNDS-SOLD> 210,000
<TRADING-ASSETS> 29,403
<INVESTMENTS-HELD-FOR-SALE> 1,078,633
<INVESTMENTS-CARRYING> 0 <F2>
<INVESTMENTS-MARKET> 0
<LOANS> 4,518,276
<ALLOWANCE> 138,710
<TOTAL-ASSETS> 6,284,319
<DEPOSITS> 4,603,730
<SHORT-TERM> 659,909
<LIABILITIES-OTHER> 58,344
<LONG-TERM> 403,311
0
0
<COMMON> 46,885
<OTHER-SE> 512,140
<TOTAL-LIABILITIES-AND-EQUITY> 6,284,319
<INTEREST-LOAN> 94,799
<INTEREST-INVEST> 15,686
<INTEREST-OTHER> 1,007
<INTEREST-TOTAL> 111,492
<INTEREST-DEPOSIT> 19,741
<INTEREST-EXPENSE> 33,812
<INTEREST-INCOME-NET> 77,680
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 1,253
<EXPENSE-OTHER> 55,901
<INCOME-PRETAX> 40,924
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,001
<EPS-PRIMARY> .57
<EPS-DILUTED> .55
<YIELD-ACTUAL> 8.19
<LOANS-NON> 23,264
<LOANS-PAST> 16,704
<LOANS-TROUBLED> 3,219
<LOANS-PROBLEM> 4,431
<ALLOWANCE-OPEN> 135,339
<CHARGE-OFFS> 1,098
<RECOVERIES> 4,469
<ALLOWANCE-CLOSE> 138,710
<ALLOWANCE-DOMESTIC> 139,710
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Consolidated with trading assets, tag 14
<F2>Reclassified and transferred to Held-For-Sale, tag 15
</FN>
</TABLE>
