<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ x ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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 October 31, 2000: 47,770,563
<PAGE>
PART 1 - FINANCIAL INFORMATON
ITEM 1. FINANCIAL STATEMENTS
CITY NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 1999
---------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks ........................................ $ 393,669 $ 233,178 $ 307,549
Federal funds sold ............................................. 30,000 57,000 60,000
Securities available-for-sale (cost $1,636,932;
$1,149,013 and $1,090,607 at September 30,
2000, December 31, 1999 and September 30, 1999,
respectively) .............................................. 1,598,277 1,102,092 1,060,431
Trading account securities ..................................... 61,805 27,714 55,082
Loans .......................................................... 6,426,792 5,490,669 5,171,924
Less allowance for credit losses ............................... 139,195 134,077 139,015
---------------- --------------- ---------------
Net loans .................................................. 6,287,597 5,356,592 5,032,909
Premises and equipment, net .................................... 60,458 62,446 62,674
Customers' acceptance liability ................................ 14,972 6,784 2,779
Deferred tax asset ............................................. 66,892 75,841 59,968
Goodwill and core deposit intangibles .......................... 184,434 127,255 130,152
Bank owned life insurance ...................................... 52,166 49,981 49,367
Affordable housing investments ................................. 60,072 47,934 45,769
Other assets ................................................... 103,613 66,802 68,936
---------------- --------------- ---------------
Total assets ............................................... $ 8,913,955 $ 7,213,619 $ 6,935,616
================ =============== ===============
LIABILITIES
Demand deposits ................................................ $ 2,743,717 $ 2,448,916 $ 2,296,288
Interest checking deposits ..................................... 568,178 472,996 419,888
Money market deposits .......................................... 1,446,375 1,103,907 1,014,675
Savings deposits ............................................... 246,146 221,002 218,335
Time deposits-under $100,000 ................................... 253,853 253,894 254,537
Time deposits-$100,000 and over ................................ 1,615,244 1,168,694 1,107,014
---------------- --------------- ---------------
Total deposits ............................................. 6,873,513 5,669,409 5,310,737
Federal funds purchased and securities sold under
repurchase agreements ........................................ 132,750 95,487 347,498
Other short-term borrowings .................................... 740,638 496,724 341,725
Subordinated debt .............................................. 123,594 123,453 123,405
Long-term debt ................................................. 205,000 180,000 180,000
Other liabilities .............................................. 112,830 70,116 69,084
Acceptances outstanding ........................................ 14,972 6,784 2,779
---------------- --------------- ---------------
Total liabilities .......................................... 8,203,297 6,641,973 6,375,228
---------------- --------------- ---------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock authorized - 5,000,000 : none outstanding ......... - - -
Common Stock-par value-$1.00; authorized - 75,000,000;
Issued - 47,765,807; 46,885,182; and 46,885,182 shares at
September 30, 2000, December 31, 1999 and September 30, 1999,
respectively .................................................. 47,766 46,885 46,885
Additional paid-in capital ........................................ 290,009 276,464 276,979
Accumulated other comprehensive loss .............................. (22,402) (27,193) (17,398)
Retained earnings ................................................. 395,285 321,210 300,744
Treasury shares, at cost - 0; 1,428,439 and 1,467,816 shares at
September 30, 2000, December 31, 1999 and September 30, 1999,
respectively .................................................. - (45,720) (46,822)
---------------- --------------- ---------------
Total shareholders' equity .................................... 710,658 571,646 560,388
---------------- --------------- ---------------
Total liabilities and shareholders' equity .................... $ 8,913,955 $ 7,213,619 $ 6,935,616
================ =============== ===============
</TABLE>
See accompanying Notes to the Unaudited Consolidated Financial Statements.
2
<PAGE>
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ended September 30, ENDED SEPTEMBER 30,
---------------------- ----------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 2000 1999
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans ............................................................................ $ 144,371 $ 101,835 $ 406,676 $ 289,502
Federal funds sold and securities purchased under resale agreements .............. 463 432 2,143 1,416
Securities available-for-sale .................................................... 24,935 16,094 65,337 47,967
Trading account .................................................................. 1,158 788 2,914 2,126
----------- ---------- ---------- -----------
Total interest income ........................................................ 170,927 119,149 477,070 341,011
----------- ---------- ---------- -----------
INTEREST EXPENSE
Deposits ......................................................................... 42,609 23,588 109,229 64,412
Federal funds purchased and securities sold under repurchase agreements .......... 3,882 2,953 12,445 8,779
Other short-term borrowings ...................................................... 15,544 6,820 41,226 17,661
Subordinated debt ................................................................ 2,135 1,707 5,952 5,712
Other long-term debt ............................................................. 2,756 2,779 7,326 9,353
----------- ---------- ---------- -----------
Total interest expense ....................................................... 66,926 37,847 176,178 105,917
----------- ---------- ---------- -----------
Net interest income .............................................................. 104,001 81,302 300,892 235,094
PROVISION FOR CREDIT LOSSES ......................................................... 7,000 - 11,000 -
----------- ---------- ---------- -----------
Net interest income after provision for credit losses ............................ 97,001 81,302 289,892 235,094
----------- ---------- ---------- -----------
NONINTEREST INCOME
Service charges on deposit accounts .............................................. 5,888 4,531 17,194 12,696
Investment services .............................................................. 6,831 5,474 19,164 14,413
Trust fees ....................................................................... 5,197 4,442 15,646 13,307
International services ........................................................... 3,967 2,479 11,024 6,865
Bank owned life insurance ........................................................ 646 574 1,924 1,654
Other ............................................................................ 4,256 3,550 12,643 9,323
----------- ---------- ---------- -----------
Total recurring noninterest income ........................................... 26,785 21,050 77,595 58,258
Gain (loss) on sale of assets .................................................... (82) 545 (77) 1,724
Gain on sale of securities ....................................................... 1,819 1,570 2,037 4,015
----------- ---------- ---------- -----------
Total noninterest income ..................................................... 28,522 23,165 79,555 63,997
----------- ---------- ---------- -----------
NONINTEREST EXPENSE
Salaries and other employee benefits ............................................. 40,506 34,191 120,944 99,017
Professional ..................................................................... 5,047 5,107 16,738 14,818
Net occupancy of premises ........................................................ 7,235 4,753 17,783 12,725
Information services ............................................................. 3,369 3,204 10,365 8,663
Marketing and advertising ........................................................ 2,503 2,428 8,827 7,573
Depreciation ..................................................................... 3,203 3,005 9,484 8,154
Office services .................................................................. 2,302 2,118 7,144 5,983
Equipment ........................................................................ 537 422 1,739 1,546
Amortization of goodwill and core deposit intangibles ............................ 4,361 2,286 12,229 6,257
Acquisition integration .......................................................... 1 1,083 1,323 1,109
Other operating .................................................................. 4,859 3,039 12,533 9,438
Other real estate (income)........................................................ 61 (267) 34 (179)
----------- ---------- ---------- -----------
Total noninterest expense .................................................... 73,984 61,369 219,143 175,104
----------- ---------- ---------- -----------
Income before income taxes ....................................................... 51,539 43,098 150,304 123,987
Income taxes ..................................................................... 17,378 15,015 51,690 43,797
----------- ---------- ---------- -----------
Net income ....................................................................... 34,161 28,083 98,614 80,190
----------- ---------- ---------- -----------
Other comprehensive income (loss)
Unrealized gain (loss) on securities available-for-sale ...................... 15,942 (9,253) 8,993 (49,312)
Less: reclassification adjustment for losses included in noninterest income .. (344) (2,204) (729) (3,239)
Income taxes (benefits) ...................................................... 6,559 (4,852) 3,473 (22,252)
----------- ---------- ---------- -----------
Other comprehensive income (loss)................................................. 9,039 (6,605) 4,791 (30,229)
----------- ---------- ---------- -----------
Comprehensive income ............................................................. $ 43,200 $ 21,478 $ 103,405 $ 49,891
=========== ========== ========== ===========
Net income per share, basic ..................................................... $ 0.72 $ 0.61 $ 2.09 $ 1.75
=========== ========== ========== ===========
Net income per share, diluted ................................................... $ 0.70 $ 0.60 $ 2.04 $ 1.70
=========== ========== ========== ===========
Shares used to compute income per share, basic ................................... 47,694 45,664 47,093 45,767
=========== ========== ========== ===========
Shares used to compute income per share, diluted ................................. 49,082 46,690 48,352 47,049
=========== ========== ========== ===========
Dividends per share .............................................................. $ 0.175 $ 0.165 $ 0.525 $ 0.495
=========== ========== ========== ===========
</TABLE>
See accompanying Notes to the Unaudited Consolidated Financial Statements.
3
<PAGE>
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER
---------------------------------------
2000 1999
(DOLLARS IN THOUSANDS) ------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................................. $ 98,614 $ 80,190
Adjustments to net income:
Amortization of goodwill and core deposit intangibles .................. 12,229 6,257
Provision for credit losses............................................. 11,000 -
Depreciation............................................................ 9,484 8,154
Deferred income tax (benefit)........................................... 5,548 (11,250)
Gain on sales of ORE.................................................... (3) (179)
Gain on sales of securities............................................. (2,037) (4,015)
Net increase in other assets ........................................... (17,576) (35,852)
Net increase in trading securities...................................... (34,091) (2,067)
Other, net.............................................................. 13,148 15,079
------------------- ------------------
Net cash provided by operating activites............................ 96,316 56,317
------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities....................................................... (1,101,389) (306,541)
Sales of securities available-for-sale....................................... 223,235 203,738
Maturities of securities..................................................... 518,375 81,509
Purchase of residential mortgage loans....................................... - (47,714)
Sales of residential mortgage loans.......................................... 20,054 41,357
Loan originations net of principal collections............................... (466,938) (392,709)
Proceeds from sales of ORE................................................... 1,260 1,897
Purchase of premises and equipment .......................................... (8,327) (12,846)
Net cash from acquisitions................................................... 78,715 18,905
Other, net................................................................... (6,810) 531
------------------- ------------------
Net cash used by investing activities................................... (741,825) (411,873)
------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in federal funds purchased and securities sold
under repurchase agreements............................................. 37,263 (138,813)
Net increase in deposits..................................................... 502,411 7,657
Net increase in short-term borrowings, net of transfers from long-term debt.. 143,899 214,724
Proceeds from issuance of other long-term debt............................... 150,000 -
Repayment of long-term debt.................................................. (25,000) -
Proceeds from exercise of stock options...................................... 6,807 7,136
Stock repurchases............................................................ (14,229) (37,932)
Cash dividends paid.......................................................... (24,539) (22,721)
Other, net................................................................... 2,388 2,211
------------------- ------------------
Net cash provided by financing activities............................... 779,000 32,262
------------------- ------------------
Net increase (decrease) in cash and cash equivalents........................ 133,491 (323,294)
Cash and cash equivalents at beginning of year............................... 290,178 690,843
------------------- ------------------
Cash and cash equivalents at end of period................................... $ 423,669 $ 367,549
=================== ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ........................................................... $ 171,207 $ 105,472
Income taxes........................................................ 9,321 30,050
Non-cash investing activities:
Transfer from loans to foreclosed assets............................ 156 1,331
Transfer from long-term debt to short-term borrowings .............. 100,000 165,000
</TABLE>
See accompanying Notes to the Unaudited Consolidated Financial Statements.
4
<PAGE>
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------------------
(DOLLARS IN THOUSANDS) 2000 1999
-------------------- -------------------
<S> <C> <C>
Common Stock
Balance, beginning of period ........................................... $ 46,885 $ 46,885
Stock issued for acquisitions .......................................... 650 -
Stock options exercised ................................................ 231 -
-------------------- -------------------
Balance, end of period ................................................. 47,766 46,885
-------------------- -------------------
Additional paid-in capital
Balance, beginning of period ........................................... 276,464 287,363
Tax benefit from stock options ......................................... 2,388 2,211
Stock options exercised................................................. 2,008 -
Excess of cost of treasury shares reissued
over stock option exercise amount ................................. - (12,595)
Excess of market value of shares issued
for acquisitions over historical cost ............................. 9,149 -
-------------------- -------------------
Balance, end of period ................................................. 290,009 276,979
-------------------- -------------------
Accumulated other comprehensive loss
Balance, beginning of period .......................................... (27,193) 12,901
Other comprehensive income (loss) net of income taxes/(benefits) ....... 4,791 (30,299)
-------------------- -------------------
Balance, end of period ................................................. (22,402) (17,398)
-------------------- -------------------
Retained earnings
Balance, beginning of period ........................................... 321,210 243,275
Net income ............................................................. 98,614 80,190
Dividends paid ......................................................... (24,539) (22,721)
-------------------- -------------------
Balance, end of period ................................................. 395,285 300,744
-------------------- -------------------
Treasury shares
Balance, beginning of period .......................................... (45,720) (28,621)
Purchase of shares ..................................................... (14,229) (37,932)
Issuance of shares for acquisitions .................................... 55,381 -
Issuance of shares for stock options ................................... 4,568 19,731
-------------------- -------------------
Balance, end of period ................................................. - (46,822)
-------------------- -------------------
Total shareholders' equity ................................................... $ 710,658 $ 560,388
==================== ===================
</TABLE>
See accompanying Notes to the Unaudited Consolidated Financial Statements.
5
<PAGE>
CITY NATIONAL CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. City National Corporation (the "Corporation") is the holding company for
City National Bank (the "Bank"). In light of the fact that the Bank
comprises substantially all of the business of the Corporation, references
to the "Company" mean the Corporation and the Bank together.
2. 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 the interim period
presented. These unaudited consolidated financial statements should be read
in conjunction with the audited consolidated financial statements included
in the Corporation's Annual Report on Form 10-K for the year ended December
31, 1999.
3. 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 was originally
scheduled to be effective for fiscal years beginning after June 15,
1999. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No.133" (SFAS 137), which extended the
effective date to fiscal years beginning after June 15, 2000. In June
2000, the FASB also issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities", which amends
SFAS No. 133. The Corporation uses interest rate swaps to manage
interest rate exposure, which are accounted for as hedging activities.
Management does not believe that the implementation will have a
significant impact on the Corporation's financial position, net income
or net comprehensive income.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" as a
replacement of SFAS 125 effective for disclosures in financial statements
issued subsequent to December 15, 2000, and for transactions entered
into after March 31, 2001. Management does not expect adoption of SFAS 140
will have a material impact on the Corporation's financial statements.
4. 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, net of taxes are excluded from
net income and are reported as other comprehensive loss included as a
separate component of shareholders' equity.
5. Certain prior periods' data have been reclassified to conform to current
period presentation.
6. On February 29, 2000, the Corporation acquired The Pacific Bank, N.A.
("Pacific Bank"). In that transaction, Pacific Bank merged into the Bank
and the Corporation paid consideration equal to $145.2 million
(including the consideration for stock options), 47.0% of which was paid
in the Corporation's common stock and 53.0% of which was paid in cash.
The transaction was accounted for as a purchase. Pacific Bank had total
assets, loans, and deposits of $782.0 million, $488.0 million, and
$702.0 million, respectively, at the date of acquisition. The
acquisition of Pacific Bank resulted in the recording of goodwill and
intangibles of approximately $69.5 million. Included in goodwill as
purchase price adjustments were $4.3 million of accrued severance and
change of control costs, of which $0.4 million remain unpaid as of
September 30, 2000, $1.3 million of paid transaction-related expenses
and $3.2 million of exit costs of which approximately $2.0 million
remain unpaid as of September 30, 2000. Results reflect the operations
of Pacific Bank from February 29, 2000, the date of acquisition.
7. Reserves established as a purchase price adjustment for the August 27, 1999
acquisition of American Pacific State Bank ("APSB") of $0.2 million for
severance accruals and $0.2 million for exit costs remain as of September
30, 2000. Reserves established as a purchase price adjustment for the
December 31, 1998 acquisition of North American Trust Company of $0.4
million for excess space continue to be amortized over the remaining 5.17
years of a lease.
8. Under the Corporation's stock buyback program of one million shares of the
Corporation's common stock announced on July 29, 1999, 731,100 shares had
been repurchased for a cost of $23.5 million as of September 30, 2000. No
shares were repurchased in the third quarter of 2000. The shares purchased
under the buyback program have been reissued for acquisitions and upon the
exercise of stock options. There were no Treasury shares at September 30,
2000. Subsequent to the end of the third quarter of 2000, the remaining
268,900 shares of the program were repurchased for a cost of $8.6 million.
On October 26, 2000, a new one million share stock buyback program of the
Corporation's common stock was announced.
6
<PAGE>
CITY NATIONAL CORPORATION
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENTAGE CHANGE
AT OR FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 FROM
------------------------------------------ -------------------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 2000 2000 1999 2000 1999
-------------------------------------------- ------------- ---------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C>
FOR THE QUARTER
Net income $ 34,161 $ 33,445 $ 28,083 2 % 22 %
Net income per common share, basic 0.72 0.70 0.61 3 18
Net income per common share, diluted 0.70 0.68 0.60 3 17
Dividends, per common share 0.175 0.175 0.165 - 6
Cash net income 37,853 37,154 29,792 2 27
Cash net income per common share, basic 0.79 0.78 0.65 1 22
Cash net income per common share, diluted 0.77 0.76 0.64 1 20
AT QUARTER END
Assets $ 8,913,955 $ 8,676,768 $ 6,935,616 3 29
Deposits 6,873,513 6,394,854 5,310,737 7 29
Loans 6,426,792 6,345,195 5,171,924 1 24
Securities 1,660,082 1,442,108 1,115,513 15 49
Shareholders' equity 710,658 672,022 560,388 6 27
Book value per share 14.88 14.11 12.34 5 21
AVERAGE BALANCES
Assets $ 8,757,790 $ 8,525,861 $ 6,491,294 3 35
Deposits 6,501,125 6,277,831 4,785,516 4 36
Loans 6,430,471 6,331,721 4,866,016 2 32
Securities 1,558,339 1,381,920 1,083,670 13 44
Shareholders' equity 692,436 660,325 558,693 5 24
SELECTED RATIOS
Return on average assets 1.55 % 1.58 % 1.72 % (2) (10)
Return on average shareholders' equity 19.63 20.37 19.94 (4) (2)
Tier 1 leverage 6.41 6.19 7.09 4 (10)
Tier 1 risk-based capital 7.85 7.49 7.98 5 (2)
Total risk-based capital 10.88 10.56 11.44 3 (5)
Dividend payout ratio, per share 24.33 24.85 26.83 (2) (9)
Net interest margin 5.32 5.58 5.57 (5) (4)
Efficiency ratio 54.44 56.51 57.54 (4) (5)
Cash return on average assets 1.75 1.79 1.83 (2) (4)
Cash return on average shareholders' equity 29.13 31.28 22.88 (7) 27
Cash efficiency ratio 51.23 53.26 55.41 (4) (8)
ASSET QUALITY RATIOS
Nonaccrual loans to total loans 0.73 % 0.55 % 0.37 % 33 97
Nonaccrual loans and ORE to toal loans and ORE 0.73 0.56 0.41 30 78
Allowance for credit losses to total loans 2.17 2.21 2.69 (2) (19)
Allowance for credit losses to non accrual loans 296.90 400.50 719.69 (26) (59)
Net charge-offs to average loans - annualized (0.51) (0.25) (0.37) 104 38
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
See "Cautionary Statement for Purposes of the `Safe Harbor' Provisions
of the Private Securities Litigation Reform Act of 1995", below relating to
"forward-looking" statements included in this report.
RECENT DEVELOPMENT
On October 31, 2000, the Corporation announced that it signed a
definitive agreement to acquire the Los Angeles-based investment management
firm of Reed, Conner & Birdwell for a payment at closing of a combination of
the Corporation's stock and notes. The notes, payable over five years, are
valued on the basis of the firm's future growth and profitability. Reed,
Conner & Birdwell has approximately $1.1 billion in client assets under
management. Upon completion, which management expects to occur prior to
year-end, the transaction will increase to more than $17.8 billion the assets
under management or administration by the Corporation.
RESULTS OF OPERATIONS
OVERVIEW
The Corporation recorded net income of $34.2 million for the third
quarter of 2000, a 21.6% increase from net income of $28.1 million in the third
quarter of 1999, and a 2.1% increase from $33.4 million in the second quarter of
2000. Cash net income, which excludes the amortization of core deposit
intangibles and goodwill from acquisitions, increased 27.1% to $37.9 million for
the third quarter of 2000 from $29.8 million for the third quarter of 1999, and
rose 1.9% from $37.2 million in the second quarter of 2000. These increases
reflected the continued growth in loans and deposits, increases in net interest
income and increases in noninterest income, partially offset by increases in
noninterest expense and a provision for credit losses.
Net income per diluted common share of $0.70 per share for this year's
third quarter increased 16.7%, compared with $0.60 per share in the third
quarter of 1999, and 2.9% above the $0.68 per diluted common share reported for
the 2000 second quarter. Slightly over $0.01 per diluted common share in the
third quarter of 2000 was attributable to the net effect of a non-recurring gain
on the sale of securities and closure costs for two banking offices. Cash net
income per diluted common share for this year's third quarter rose 20.3% to
$0.77, compared with $0.64 per diluted common share for the third quarter of
1999 and $0.76 per diluted common share for the second quarter of 2000.
Management expects earnings per diluted common share for the fourth quarter to
be within the current range of analysts' projections of $0.67 to $0.70 per
diluted common share as reflected in First Call.
The Corporation recorded net income of $98.6 million for the first nine
months of 2000, an increase of 23.0% over net income of $80.2 million for the
first nine months of 1999. Cash net income for the first nine months of 2000
rose 28.2% to $108.9 million from $84.9 million for the 1999 comparable period.
Net income per diluted common share for the first nine months of 2000 increased
by 20.0% to $2.04 per diluted common share, from $1.70 per diluted common share
in the first nine months of 1999. Cash net income per diluted common share rose
to $2.25, compared with $1.81 per diluted common share for the first nine months
of 1999. The nine month increase resulted primarily from an increase of $65.8
million in net interest income and an increase of $15.6 million in noninterest
income, partially offset by a $44.0 million increase in noninterest expense and
an $11.0 million provision for credit losses. These results reflect the
integration of Pacific Bank, acquired in February 2000, and APSB, acquired in
August 1999.
The Corporation's return on average assets in the third quarter of 2000
was 1.55%, compared with 1.72% in the 1999 third quarter and 1.58% in the 2000
second quarter. The quarter's decrease reflects the Corporation's larger asset
base and the impact on net income of amortizing the higher level of goodwill
resulting from recent acquisitions. The return on average shareholders' equity
was 19.63%, compared with 19.94% for the prior year quarter and 20.37% for the
second quarter of this year. The decline is attributable, in part, to an
increase in retained earnings and lower unrealized losses on securities during
the third quarter of 2000. For the first nine months of 2000, the return on
8
<PAGE>
average assets was 1.58% and the return on average shareholders' equity was
20.25%, compared with a 1.71% return on average assets and a 19.08% return on
average shareholders' equity for the first nine months of 1999.
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 third quarter of 2000
was 1.75%, compared with 1.83% in the third quarter of 1999. The return on
average shareholders' equity rose to 29.13%, compared with 22.88% for the
prior year quarter. On a cash basis, for the first nine months of 2000, the
return on average assets was 1.79% and the return on average shareholders'
equity was 30.09%, compared with a 1.83% return on average assets and a 22.47%
return on average shareholders' equity for the first nine months of 1999.
NET INTEREST INCOME
Net interest income is the difference between interest income (which
includes yield-related loan fees) and interest expense. Net interest income on a
taxable-equivalent basis expressed as a percentage of average total earning
assets is referred to as the net interest margin, which represents the average
net effective yield on earning assets.
As a result of the strong loan and core deposit growth and a higher
prime rate compared with the year earlier period, net interest income on a fully
taxable-equivalent basis rose 27.8% to $107.3 million in the third quarter of
2000 compared with $83.9 million for the same quarter of 1999. The negative
impact of the reversal of income on loans moving to nonaccrual status and lower
interest recovered on nonaccrual and charged-off loans, slightly offset by the
benefit of having one more day in this quarter, contributed to the decline in
third quarter results compared with the $107.8 million for the second quarter of
2000. Interest recovered on nonaccrual and charged-off loans was $0.8 million
for the third quarter of 2000, compared with $0.8 million for the third quarter
of 1999 and $1.3 million for the second quarter of 2000.
For the first nine months of 2000, net interest income on a fully
taxable-equivalent basis totaled $310.4 million, an increase of 27.8 % over
$242.8 million for the first nine months of 1999. Interest recovered in the
first nine months of 2000 was $3.1 million, compared with $4.9 million for the
same period of 1999.
The fully taxable-equivalent net interest margin was 5.32% for the
quarter ended September 30, 2000 and 5.46% for the first nine months of 2000
compared with 5.57% and 5.58% for the third quarter and first nine months of
1999, respectively. The net interest margin was 5.58% for the second quarter of
2000. The reduction in average demand deposits between sequential quarters and
the higher level of interest income not recognized on nonaccrual loans
contributed 8 and 7 basis points, respectively, to the reduction of the margin
between the second and third quarters of 2000. In addition, the net interest
margin between the second and third quarters was reduced by 6 basis points by
higher balances on short-term investment securities in the regulated investment
company subsidiary. See "-- Income Taxes." Compared with the prior year periods,
the increase in the cost of funds and unfavorable changes in the funding mix
offset higher yields on earning assets.
The following tables present the components of net interest income on a
fully taxable-equivalent basis for the three and nine months ended September 30,
2000 and 1999. To compare the tax-exempt asset yields to taxable yields, amounts
are adjusted to pre-tax equivalents based on the marginal corporate federal tax
rate of 35%.
9
<PAGE>
<TABLE>
<CAPTION>
NET INTEREST INCOME SUMMARY
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------------------------ ---------------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ INTEREST AVERAGE INCOME/ INTEREST
(DOLLARS IN THOUSANDS) BALANCE EXPENSE (2) RATE BALANCE EXPENSE (2) RATE
------------------------------------ ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Loans
Commercial $ 3,271,184 $ 77,830 9.47% $ 2,575,814 $ 56,213 8.66%
Residential first mortgages 1,245,026 22,799 7.29 1,072,815 19,318 7.14
Real estate construction 430,538 11,348 10.49 304,777 7,270 9.46
Real estate mortgages 1,416,387 32,466 9.12 859,944 19,062 8.79
Installment 67,336 1,566 9.25 52,666 1,376 10.37
------------ ----------- ------------ -----------
Total loans (1) 6,430,471 146,009 9.03 4,866,016 103,239 8.42
Securities available-for-sale 1,481,735 26,547 7.13 1,015,193 17,326 6.77
Federal funds sold and securities
purchased under resale agreements 28,817 463 6.39 32,766 432 5.23
Trading account securities 76,604 1,171 6.08 68,477 799 4.63
------------ ----------- ------------ -----------
Total interest-earning assets 8,017,627 174,190 8.64 5,982,452 121,796 8.08
----------- -----------
Allowance for credit losses (140,990) (141,756)
Cash and due from banks 342,911 283,545
Other nonearning assets 538,242 367,053
------------ ------------
Total assets $ 8,757,790 $ 6,491,294
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits
Interest checking accounts $ 572,731 717 0.50 $ 396,533 445 0.45
Money market accounts 1,353,948 12,656 3.72 967,247 7,206 2.96
Savings deposits 244,837 2,724 4.43 203,404 1,164 2.27
Time deposits - under $100,000 257,536 3,840 5.93 192,038 2,289 4.73
Time deposits - $100,000 and over 1,500,383 22,672 6.01 963,554 12,484 5.14
------------ ----------- ------------ -----------
Total interest - bearing deposits 3,929,435 42,609 4.31 2,722,776 23,588 3.44
Federal funds purchased and securities
sold under repurchase agreements 239,353 3,882 6.45 243,871 2,953 4.80
Other borrowings 1,208,006 20,435 6.73 845,833 11,306 5.30
------------ ----------- ------------ -----------
Total interest - bearing liabilities 5,376,794 66,926 4.95 3,812,480 37,847 3.94
----------- -----------
Noninterest - bearing deposits 2,571,690 2,062,740
Other liabilities 116,870 57,381
Shareholders' equity 692,436 558,693
------------ ------------
Total liabilities and shareholders'
equity $ 8,757,790 $ 6,491,294
============ ============
Net interest spread 3.69% 4.14%
===== ======
Fully taxable-equivalent net interest income $ 107,264 $ 83,949
=========== ===========
Net interest margin 5.32% 5.57%
===== ======
</TABLE>
(1) Includes average nonaccrual loans of $38,022 and $22,791 for 2000 and
1999, respectively.
(2) Loan income includes loan fees of $4,549 and $4,823
for 2000 and 1999, respectively.
10
<PAGE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------------------------ ---------------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ INTEREST AVERAGE INCOME/ INTEREST
(DOLLARS IN THOUSANDS) BALANCE EXPENSE (2) RATE BALANCE EXPENSE (2) RATE
------------------------------------ ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Loans
Commercial $ 3,175,687 $ 218,883 9.21% $2,499,067 $ 160,463 8.58%
Residential first mortgages 1,226,347 66,855 7.28 1,042,781 56,344 7.22
Real estate construction 403,868 31,070 10.28 274,247 19,748 9.63
Real estate mortgages 1,298,368 90,024 9.26 794,976 53,371 8.98
Installment 64,199 4,449 9.26 50,089 3,745 10.00
------------ ---------- ------------ ----------
Total loans (1) 6,168,469 411,281 8.91 4,661,160 293,671 8.42
Securities available-for-sale 1,312,411 70,147 7.14 1,038,691 51,588 6.64
Federal funds sold and securities
purchased under resale agreements 46,831 2,143 6.11 35,836 1,416 5.28
Trading account securities 71,275 2,986 5.60 66,750 2,058 4.12
------------ ---------- ------------ ----------
Total interest-earning assets 7,598,986 486,557 8.55 5,802,437 348,733 8.04
---------- ----------
Allowance for credit losses (139,609) (140,036)
Cash and due from banks 336,820 285,147
Other nonearning assets 520,505 324,281
------------ ------------
Total assets $ 8,316,702 $ 6,271,829
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits
Interest checking accounts $ 527,996 1,960 0.50 $ 401,807 1,602 0.53
Money market accounts 1,287,076 33,999 3.53 951,906 20,799 2.92
Savings deposits 234,181 7,308 4.17 192,458 5,297 3.68
Time deposits - under $100,000 262,751 10,936 5.56 185,294 6,526 4.71
Time deposits - $100,000 and over 1,287,685 55,026 5.71 843,100 30,188 4.79
------------ ---------- ------------ ----------
Total interest - bearing deposits 3,599,689 109,229 4.05 2,574,565 64,412 3.34
Federal funds purchased and securities
sold under repurchase agreements 273,264 12,445 6.08 251,418 8,779 4.67
Other borrowings 1,137,323 54,504 6.40 824,188 32,726 5.31
------------ ---------- ------------ ----------
Total interest - bearing liabilities 5,010,276 176,178 4.70 3,650,171 105,917 3.88
---------- ----------
Noninterest - bearing deposits 2,553,359 1,999,856
Other liabilities 102,603 60,018
Shareholders' equity 650,464 561,784
------------ ------------
Total liabilities and shareholders'
equity $ 8,316,702 $ 6,271,829
============ ============
Net interest spread 3.85% 4.16%
====== =====
Fully taxable-equivalent net interest income $ 310,379 $ 242,816
========== ==========
Net interest margin 5.46% 5.58%
====== =====
</TABLE>
(1) Includes average nonaccrual loans of $33,575 and $23,153 for 2000 and
1999, respectively.
(2) Loan income includes loan fees of $13,508 and
$13,083 for 2000 and 1999, respectively.
11
<PAGE>
Average loans rose to $6.4 billion during the third quarter of 2000, an
increase of 32.2% over the third quarter of 1999. Average loans increased 2.0%
over the 2000 second quarter. Year-over-year loan growth was driven primarily by
increases in commercial loans and real estate mortgages. Compared with the
year-ago quarter, commercial loan average balances rose 27.0% from $2.6 billion
to $3.3 billion and real estate mortgage averages rose 64.8 % from $0.9 billion
to $1.4 billion, largely as a result of loans added through acquisitions. Growth
in all other loan categories contributed to the increase in average loans over
the prior year and sequential quarters. For the first nine months of 2000,
average loans increased 32.3 % to $6.2 billion from $4.7 billion for the first
nine months of 1999.
Average securities increased $474.7 million, or 43.8%, to $1.6 billion
for the third quarter of 2000 compared with the third quarter of 1999 and
increased 12.8% from the second quarter of 2000. For the first nine months of
2000, average securities increased $278.2 million, or 25.2%, to $1.4 billion
compared with the 1999 period.
Average deposits rose during the third quarter of 2000 to $6.5 billion,
an increase of 35.9% over the third quarter of 1999, and an increase of 3.6%
over the 2000 second quarter. During the first nine months of 2000, average
deposits increased 34.5% to $6.2 billion, compared with $4.6 billion for the
same period a year ago. Average core deposits, which excludes time deposits
$100,000 and over, rose during the third quarter of 2000 to $5.0 billion, an
increase of 31.0% over the third quarter of 1999, but decreased 1.0% over the
2000 second quarter. During the first nine months of 2000, average core deposits
increased 30.0% to $4.9 billion, compared with $3.7 billion for the same period
a year ago.
Net interest income is impacted by the volume and rate of
interest-earning assets and interest-bearing liabilities. The following table
shows changes in net interest income on a fully taxable-equivalent basis
between the third quarter and the first nine months of 2000 and the third
quarter and the first nine months of 1999, as well as between the third
quarter and the first nine months of 1999 and the third quarter and the first
nine months of 1998.
<TABLE>
<CAPTION>
CHANGES IN NET INTEREST INCOME
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 2000 VS 1999 1999 VS 1998
---------------------------------- -------------------------------------
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 $ 34,887 $ 7,883 $ 42,770 $ 12,003 $ (3,467) $ 8,536
Securities available-for-sale 8,262 959 9,221 3,366 83 3,449
Trading account securities 102 270 372 (62) (234) (296)
Federal funds sold and
securities purchased
under resale agreements (57) 88 31 22 (10) 12
--------- ---------- ----------- ----------- ----------- -----------
Total interest-earning assets 43,194 9,200 52,394 15,329 (3,628) 11,701
--------- ---------- ----------- ----------- ----------- -----------
Interest paid on:
Interest checking deposits 217 55 272 55 (539) (484)
Money market deposits 3,315 2,135 5,450 370 (292) 78
Savings deposits 274 1,286 1,560 293 (671) (378)
Other time deposits 8,677 3,062 11,739 2,355 (769) 1,586
Other borrowings 5,358 4,700 10,058 4,335 (1,119) 3,216
--------- ---------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities 17,841 11,238 29,079 7,408 (3,390) 4,018
--------- ---------- ----------- ----------- ----------- -----------
$ 25,353 $ (2,038) $ 23,315 $ 7,921 $ (238) $ 7,683
========= ========== =========== =========== =========== ===========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 2000 VS 1999 1999 VS 1998
---------------------------------- -------------------------------------
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 $ 99,687 $ 17,9237 $ 117,610 $ 33,394 $ (16,364) $ 17,030
Securities 14,438 4,121 18,559 11,283 (741) 10,542
Trading account securities 148 780 928 313 (887) (574)
Federal funds sold and
securities purchased
under resale agreements 481 246 727 (320) (91) (411)
--------- ---------- ----------- ----------- ----------- -----------
Total interest-earning assets 114,754 23,070 137,824 44,670 (18,083) 26,587
--------- ---------- ----------- ----------- ----------- -----------
Interest paid on:
Interest checking deposits 456 (98) 358 123 (1,371) (1,248)
Money market deposits 8,288 4,912 13,200 1,805 (871) 934
Savings deposits 1,246 765 2,011 676 101 777
Other time deposits 21,264 7,984 29,248 2,832 (3,994) (1,162)
Other borrowings 14,677 10,767 25,444 14,356 (3,280) 11,076
--------- ---------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities 45,931 24,330 70,261 19,792 (9,415) 10,377
--------- ---------- ----------- ----------- ----------- -----------
$ 68,823 $(1,260) $ 67,563 $ 24,878 $ (8,668) $ 16,210
========= ========== =========== =========== =========== ===========
</TABLE>
Management expects its net interest margin in the fourth quarter to
improve modestly from the third quarter, in part, due to anticipated seasonal
increases in core deposits and a decrease in the level of lower yielding
investment securities.
PROVISION FOR CREDIT LOSSES
The Corporation recorded a provision for credit losses of $7.0
million in the third quarter of 2000. The 2000 year-to-date provision totaled
$11.0 million. The Corporation reported no credit loss provisions in the year
earlier periods. The provision for credit losses during the first nine months
reflects the levels of net charge-offs and nonaccrual loans, management's
ongoing assessment of credit quality of the portfolio and the 24.3%
year-over-year growth of the loan portfolio. The level of provision for
credit losses to be taken in the fourth quarter will reflect management's
assessment of the above factors, as well as the economic environment. Based
on management's current assessment of these factors, the provision could
approximate the amount taken in the third quarter. However, no assurance may
be given that these factors or management's assessment of them will not
change in the future. See "-- Allowance for Credit Losses."
NONINTEREST INCOME
Noninterest income totaled $28.5 million for the third quarter of 2000,
a 23.1% increase over the $23.2 million reported in the third quarter of 1999.
These results reflect a 6.5% increase over the $26.8 million for the second
quarter of 2000. Noninterest income for the first nine months of this year of
$79.6 million increased 24.3% over the $64.0 million for the first nine months
of 1999.
Recurring noninterest income, which excludes gain and loss of
securities and assets, increased 27.2% to $26.8 million for the third quarter
of 2000 over the same quarter of 1999. Recurring noninterest income in the
third quarter was essentially unchanged from the second quarter, largely as a
result of strong levels of other income recorded in the second quarter of
2000. The $77.6 million in recurring noninterest income for the first nine
months of 2000 represented a 33.2% increase over the $58.3 million for the
same period in 1999.
All categories of recurring noninterest income were higher in the
current periods of 2000 compared with the year earlier periods, reflecting the
Corporation's continued emphasis on growing fee income. Investment services and
trust fees rose as a result of a strong cross-selling program to existing
customers, as well as direct-sales activities focused on new customers by City
National Investments (CNI), a division of the Bank.
Assets under administration in CNI were $16.7 billion at September 30,
2000, including $5.3 billion under management, compared with $13.5 billion and
$3.8 billion, respectively, at September 30, 1999, and $15.5 billion
13
<PAGE>
and $5.2 billion at June 30, 2000. The increase in assets under management
over the year-earlier period is primarily attributable to the CNI Charter
Funds introduced in 1999 and 2000. See--"Recent Development."
International services income rose significantly as a result of
increased foreign exchange fees and, to a lesser extent, an increase in fee
income associated with letters of credit and standby letters of credit.
Gains on the sale of assets and securities amounted to $1.7 million and
$2.0 million for the third quarter and first nine months of 2000, respectively,
compared with gains of $2.1 million and $5.7 million for the same periods a year
earlier. Noninterest income was 21.0 % of total revenues for the first nine
months of both 2000 and 1999.
Management expects consistent growth in CNI and international income
and moderate growth in other categories during the 2000 fourth quarter compared
with the year ago period.
NONINTEREST EXPENSE
Third quarter 2000 results benefited from a reduction in noninterest
expense to $74.0 million compared with $76.1 million in the second quarter of
2000. The decline in expenses was, in part due to the completed integration of
Pacific Bank, as well as management's continued emphasis on achieving greater
efficiencies and productivity. Noninterest expense was $61.4 million in the
third quarter of 1999. Noninterest expense for the first nine months of 2000
increased by $44.0 million to $219.1 million, compared with $175.1 million for
the first nine months of 1999.
The year-over-year increase in expenses was primarily the result of the
Corporation's growth, including expenses associated with additional offices and
a substantial number of new colleagues--mostly from acquisitions--as well as the
amortization of goodwill and core deposit intangibles. Third quarter 2000
results included $0.8 million of severance and excess space provisions relating
to the previously announced closure of two banking offices scheduled to be
completed at the end of the year. Salaries and other employee benefits increased
by $6.3 million, or 18.5%, over the third quarter of 1999; they decreased by
$1.1 million, or 2.6 %, compared with the second quarter of 2000. All other
expenses increased $6.3 million, or 23.2 %, from the third quarter of 1999, but
decreased $1.0 million, or 2.9%, from the second quarter of 2000. Reserves of
approximately $0.3 million remain from the $1.3 million integration charge for
Pacific Bank.
Management currently anticipates that fourth quarter noninterest
expenses will increase modestly over the third quarter due to continued growth,
moderated by management's emphasis on enhancing efficiency and productivity.
During 1999, the Corporation completed the process of preparing for the
Year 2000 date change. To date, the Corporation has successfully managed the
transition. Although considered unlikely, unanticipated problems in the
Corporation's business process, including problems associated with non-compliant
third parties and disruptions to the economy in general, could still occur
despite efforts to date to remediate systems problems and develop contingency
plans. Management will continue to monitor all business processes, including
interaction with the Corporation's customers, vendors and other third parties,
throughout 2000 to address any issues and ensure all processes continue to
function properly.
INCOME TAXES
The effective tax rate in the third quarter of 2000 was 33.7% and the
rate for the first nine months of 2000 was 34.4% compared with 35.4% for all of
1999. The lower rate is due primarily to the impact of the formation of a
regulated investment company subsidiary. The long-term plan for the regulated
investment company is currently under review. The effective tax rate is expected
to remain at the current year-to-date rate for the balance of the year.
14
<PAGE>
BALANCE SHEET ANALYSIS
Total average assets reached $8.8 billion in the third quarter of
2000, an increase of 34.9% over the $6.5 billion in average assets in the
third quarter of 1999 and $0.2 billion higher than the second quarter of
2000. For the nine months ended September 30, 2000, total average assets
increased 32.6% to $8.3 billion, compared with $6.3 billion for the same
period a year ago. Increased loan balances due to internally generated loan
growth, as well as the acquisitions of APSB and Pacific Bank contributed to
this growth in average assets.
Total assets at September 30, 2000 were $8.9 billion, compared with
total assets of $6.9 billion at September 30, 1999, and total assets of $7.2
billion at December 31 1999.
SECURITIES
Comparative period-end security portfolio balances are presented below:
<TABLE>
<CAPTION>
SECURITIES AVAILABLE-FOR-SALE
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2000 1999 1999
----------------------------- --------------------------- ----------------------------
(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 $ 734,181 $ 733,642 $ 291,407 $ 286,546 $ 267,101 $ 265,587
Mortgage-backed 421,391 411,330 368,948 351,251 382,612 370,846
State and Municipal 159,894 158,148 155,736 152,244 149,483 147,129
Other debt securities 166,633 147,450 166,772 150,913 166,802 154,656
------------- -------------- ------------- ------------- ------------- -------------
Total debt securities 1,482,099 1,450,570 982,863 940,954 965,998 938,218
Marketable equity securities 154,833 147,707 166,150 161,138 124,609 122,213
------------- -------------- ------------- ------------- ------------- -------------
Total securities $ 1,636,932 $ 1,598,277 $ 1,149,013 $ 1,102,092 $ 1,090,607 $ 1,060,431
============= ============== ============= ============= ============= =============
</TABLE>
At September 30, 2000, securities available-for-sale totaled $1.6
billion, an increase of $537.8 million compared with holdings at September
30, 1999 and an increase of $496.2 million from December 31, 1999. Unrealized
net losses increased $8.5 million from September 30, 1999 but decreased $8.3
million from December 31, 1999. The unrealized gain or loss on securities
available-for-sale is reported on an after-tax basis as a valuation allowance
that is a component of other comprehensive loss.
The following table provides the expected remaining maturities and
yields (taxable-equivalent basis) of debt securities within the securities
portfolio as of September 30, 2000. To compare the tax-exempt assets yields to
taxable yields, amounts are adjusted to pre-tax equivalents based on the
marginal corporate federal tax rate of 35%.
<TABLE>
<CAPTION>
DEBT SECURITIES AVAILABLE-FOR-SALE
ONE YEAR OVER 1 YEAR OVER 5 YEARS
OR LESS THRU 5 YEARS THRU 10 YEARS OVER 10 YEARS TOTAL
------------------- ------------------ ------------------ ------------------ --------------------
(DOLLARS IN THOUSANDS) AMOUNT YIELD(%) AMOUNT YIELD(%) AMOUNT YIELD(%) AMOUNT YIELD(%) AMOUNT YIELD(%)
--------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Gov. and federal agency $ 331,886 6.58 $371,834 6.77 $ 29,922 6.07 $ - - $ 733,642 6.66
Mortgage-backed 1,759 6.18 6,351 5.88 12,826 6.11 390,394 6.82 411,330 6.78
State and Municipal 14,046 6.73 50,878 6.83 92,720 6.72 504 7.23 158,148 6.76
Other debt securities 52 7.00 - - 82,799 7.50 64,599 7.99 147,450 7.71
--------- -------- -------- -------- -------- -------- -------- -------- ---------- --------
Total debt securities $ 347,743 6.58 $429,063 6.77 $218,267 6.89 $455,497 6.99 $1,450,570 6.81
========= ======== ======== ======== ==========
Amortized cost $ 347,753 $428,924 $232,998 $472,424 $1,482,099
========= ======== ======== ======== ==========
</TABLE>
Dividend income included in interest income on securities in the
Unaudited Consolidated Statement of Income and Comprehensive Income for the
third quarter of 2000 and 1999 was $2.3 million and $1.2 million, and $7.4
million and $3.9 million for the first nine months of 2000 and 1999,
respectively.
LOAN PORTFOLIO
A comparative period-end loan table is presented below:
15
<PAGE>
<TABLE>
<CAPTION>
LOANS
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 2000 1999 1999
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Commercial
Relationship $ 2,920,518 $ 2,333,627 $ 2,196,659
Syndicated non-relationship 334,626 536,811 497,243
--------------------- --------------------- ---------------------
3,255,144 2,870,438 2,693,902
Residential first mortgage 1,254,557 1,173,334 1,121,683
Real estate construction 408,749 344,870 328,422
Real estate mortgages 1,438,814 1,042,123 974,867
Installment 69,528 59,904 53,050
--------------------- --------------------- ---------------------
Total loans, gross 6,426,792 5,490,669 5,171,924
Less allowance for credit losses 139,195 134,077 139,015
--------------------- --------------------- ---------------------
Total loans, net $ 6,287,597 $ 5,356,592 $ 5,032,909
===================== ===================== =====================
</TABLE>
Total loans at September 30, 2000 were $6.4 billion, compared with
$5.2 billion at September 30, 1999 and $5.5 billion at December 31, 1999. The
increase from December 31, 1999 was primarily driven by an increase in
commercial relationship loans as well as real estate mortgages. Syndicated
non-relationship loans, which represent loans agented by others where the
Corporation has no direct access to the borrower and provides them with no
other banking products or services have been broken out separately. Due to
recent credit concerns attributable to increased interest rates and a
tightening economy, management has decided to reduce its emphasis on
syndicated non-relationship loans.
Syndicated non-relationship loans declined $202.2 million, or 37.7%,
during the first nine months of 2000, to $334.6 million at September 30, 2000,
and represented approximately 5.0% of the loan portfolio at September 30, 2000,
compared with almost 10.0% at December 31, 1999. The average outstanding loan
balance in the syndicated non-relationship portfolio at September 30, 2000 is
just under $4.0 million, which represents about two-thirds of the average
commitment amount. The decline in syndicated non-relationship lending is
expected to continue as the Corporation emphasizes relationships with clients
who are offered the full array of its products, including loans, deposits, and
fee-based services such as cash management, international, and wealth
management.
During the first half of the fourth quarter of 2000, management
continued its evaluation of the syndicated non-relationship loan portfolio
and has identified approximately $129.0 million of the $334.6 million of
outstanding syndicated non-relationship loans at September 30, 2000 as
available-for-sale and recorded a charge-off of approximately $4.2 million to
reflect these loans at fair value. Of the loan balances reclassified as
available-for-sale, $103.2 million have been sold through November 13, 2000.
Management expects that the continued strength in California's economy
and its plans for continued marketing efforts will result in consistent growth
in relationship loans during the fourth quarter.
The following table presents information concerning nonaccrual loans,
ORE, and restructured loans. Bank policy requires that a loan be placed on
nonaccrual status if either principal or interest payments are ninety days past
due, unless the loan is both well secured and in process of collection; if full
collection of interest or principal becomes
16
<PAGE>
uncertain, regardless of the time period involved; or regulator's ratings of
syndicated credits suggest that the loan be placed on nonaccrual.
<TABLE>
<CAPTION>
NONACCRUAL LOANS, ORE AND RESTRUCTURED LOANS
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 2000 1999 1999
------------------ --------------------- ------------------
<S> <C> <C> <C>
Nonaccrual loans:
Commercial
Relationship $ 19,583 $ 13,368 $ 10,932
Syndicated non-relationship 17,166 - -
------------------ --------------------- ------------------
36,749 13,368 10,932
Real estate 9,032 10,380 7,803
Installment 1,102 1,540 581
------------------ --------------------- ------------------
Total 46,883 25,288 19,316
ORE 133 1,413 2,134
------------------ --------------------- ------------------
Total nonaccrual loans and ORE $ 47,016 $ 26,701 $ 21,450
================== ===================== ==================
Loans past due 90 days or more on accrual status $ 5,375 $ 4,033 $ 5,151
================== ===================== ==================
Restructured loans, accruing $ 2,411 $ 2,707 $ 2,586
================== ===================== ==================
Total nonaccrual loans as a
percentage of total loans .............................. 0.73% 0.46% 0.37%
Total nonaccrual loans and ORE as a
percentage of total loans and ORE ...................... 0.73 0.49 0.41
Allowance for credit losses to total loans ................... 2.17 2.44 2.69
Allowance for credit losses
to nonaccrual loans .................................... 296.90 530.20 719.69
</TABLE>
The table below summarizes the approximate changes in nonaccrual
loans for the three and nine months ended September 30, 2000 and September
30, 1999.
<TABLE>
<CAPTION>
CHANGES IN NONACCRUAL LOANS
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------- ----------------------------------------
(DOLLARS IN THOUSANDS) 2000 1999 2000 1999
----------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Balance, beginning of period $ 35,077 $ 26,533 $ 25,288 $ 23,138
Additions from acquisitions - 647 4,428 647
Loans placed on nonaccrual
Relationship 8,665 3,945 25,885 18,881
Syndicated non-relationship 13,882 - 17,166 -
----------------- ------------------ ----------------- -----------------
22,547 3,945 43,051 18,881
Charge-offs (4,278) (6,994) (9,582) (7,716)
Loans returned to accrual status (563) (1,032) (673) (1,241)
Repayments (including interest
applied to principal) (5,900) (3,783) (15,629) (14,393)
----------------- ------------------ ----------------- -----------------
Balance, end of period $ 46,883 $ 19,316 $ 46,883 $ 19,316
================= ================== ================= =================
</TABLE>
At September 30, 2000, in addition to loans disclosed above as
nonaccrual or restructured, management had also identified $31.4 million of
problem loans about which the ability of the borrowers to comply with the
present loan repayment terms in the future is questionable. Three loans
accounted for $20.5 million of the total with two of the loans totaling $11.5
million being syndicated non-relationship loans. Problem loans were $9.4 million
at September 30, 1999 and $7.3 million at June 30, 2000.
17
<PAGE>
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses at September 30, 2000 totaled $139.2
million, or 2.17% of outstanding loans. This compares with an allowance of
$139.0 million, or 2.69% of outstanding loans at September 30, 1999, and an
allowance of $134.1 million, or 2.44% of outstanding loans at December 31, 1999.
Loan charge-offs for the third quarter of 2000 were $9.8 million,
slightly higher than the $8.9 million in the second quarter of this year and
$2.3 million ahead of the $7.5 million reflected a year ago. For the same
periods, net charge-offs were $8.3 million, $4.0 million and $4.6 million,
respectively, as the benefit from recoveries continued to decline in relation to
past levels. As a percentage of average loans, net charge-offs on an annualized
basis were 0.51%, 0.25% and 0.37% for the three months ended September 30,
2000, June 30, 2000 and September 30, 1999, respectively.
Slightly more than half of the net charge-offs in this quarter and in
the year-to-date period were for syndicated non-relationship loans. As
previously noted, the Corporation's exposure to syndicated non-relationship
loans continues to decline.
Total non-performing assets (nonaccrual loans and ORE) were $47.0
million, or 0.73% of total loans and ORE at September 30, 2000, compared with
$21.5 million, or 0.41%, at September 30, 1999 and $26.7 million, or 0.49%, at
December 31, 1999. Two syndicated non-relationship loans totaling $13.9 million
moved to nonaccrual status this quarter. Total syndicated non-relationship loans
on nonaccrual status were $17.2 million at September 30, 2000 compared with none
a year ago and at December 31, 1999. Relationship loans on nonaccrual were $10.4
million higher than a year ago, but only $4.4 million higher than December 31,
1999 levels. The allowance for credit losses as a percentage of nonaccrual loans
was 296.9% at September 30, 2000 compared with 719.7% at September 30, 1999 and
530.2% at December 31, 1999.
The allowance for credit losses is maintained at a level which
management deems appropriate based on a thorough analysis of numerous
factors, including levels of net charge-offs and nonaccrual loans and
continuing growth in the loan portfolio. The level of the allowance for
credit losses can be expected to change in the fourth quarter of 2000 and
will require additional provision for credit losses but not necessarily equal
to net charge-offs. Credit quality will be influenced by underlying trends in
the economic cycle, particularly in California, and other factors which may
be beyond management's control. No assurances can be given that the
Corporation will not sustain credit losses, in any particular period, that
are sizable in relation to the allowance for credit losses. Based on known
information available to it at the date of this report, management believes
that the Corporation's allowance for credit losses was adequate at September
30, 2000. Subsequent evaluation of the loan portfolio, in light of factors
then prevailing, by the Corporation and its regulators will dictate the level
of provisions required to maintain the adequacy of the allowance for credit
losses.
18
<PAGE>
<TABLE>
<CAPTION>
CHANGES IN ALLOWANCE FOR CREDIT LOSSES
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ----------------------------------
(DOLLARS IN THOUSANDS) 2000 1999 2000 1999
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Average amount of loans outstanding $ 6,430,471 $ 4,866,016 $ 6,168,469 $ 4,661,160
=============== =============== =============== ================
Balance of allowance for credit losses,
beginning of period $ 140,484 $ 140,185 $ 134,077 $ 135,339
Loans charged off:
Commercial
Relationship 4,781 7,265 14,259 9,638
Syndicated non-relationship 4,690 - 8,922 -
--------------- --------------- --------------- ----------------
9,471 7,265 23,181 9,638
Real estate 279 218 982 464
--------------- --------------- --------------- ----------------
Total loans charged off 9,750 7,483 24,163 10,102
--------------- --------------- --------------- ----------------
Less recoveries of loans previously charged off:
Commercial - relationship 994 2,527 6,208 9,697
Real estate 467 371 2,146 666
--------------- --------------- --------------- ----------------
Total recoveries 1,461 2,898 8,354 10,363
--------------- --------------- --------------- ----------------
Net loans (charged off) recovered (8,289) (4,585) (15,809) 261
Additions to allowance charged to operating expense 7,000 - 11,000 -
Additions to allowance from acquisitions - 3,415 9,927 3,415
--------------- --------------- --------------- ----------------
Balance, end of period $ 139,195 139,015 139,195 139,015
=============== =============== =============== ================
Net charge-offs as a percentage of
average loans - annualized (0.51%) (0.37%) (0.34%) N/M
=============== =============== =============== ================
Allowance for credit losses as a percentage of
total period end loans 2.17% 2.69%
=============== ================
</TABLE>
OTHER ASSETS
Other assets included the following:
<TABLE>
<CAPTION>
OTHER ASSETS
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 2000 1999 1999
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Accrued interest receivable ...................... $ 56,101 $ 42,206 $ 46,180
Claim in receivership ............................ 17,200 - -
Income tax refunds ............................... 6,607 4,188 4,679
Other ............................................ 23,705 20,408 18,077
==================== ==================== ====================
Total other assets ........................... $ 103,613 $ 66,802 $ 68,936
==================== ==================== ====================
</TABLE>
The claim in receivership was acquired in the acquisition of
Pacific Bank and is expected to be realized in 2001.
DEPOSITS
Deposits totaled $6.9 billion at September 30, 2000, compared with $5.3
billion at September 30, 1999 and $5.7 billion at December 31, 1999. Demand
deposits accounted for 40.0% of total deposits at September 30, 2000. Core
deposits which continued to provide substantial benefits to the Bank's cost of
funds rose 4.0% during the quarter. The year-over-year increase resulted from
the Corporation's increased marketing efforts, the nature of the Corporation's
relationship business which allows customers to maintain balances as
compensation for banking services, as well as from the acquisitions of APSB and
Pacific Bank. See "-- Net Interest Income."
19
<PAGE>
CAPITAL ADEQUACY REQUIREMENT
The following table presents the regulatory standards for well
capitalized institutions and the capital ratios for the Corporation and the Bank
at September 30, 2000, December 31, 1999 and September 30, 1999.
<TABLE>
<CAPTION>
Regulatory
Well Capitalized September 30, December 31, September 30,
Standards 2000 1999 1999
------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
City National Corporation
Tier 1 leverage 4.00 % 6.41 % 6.73 % 7.09 %
Tier 1 risk-based capital 6.00 7.85 7.88 7.98
Total risk-based capital 10.00 10.88 11.21 11.44
City National Bank
Tier 1 leverage 4.00 % 6.14 % 6.30 % 6.77 %
Tier 1 risk-based capital 6.00 7.53 7.40 7.63
Total risk-based capital 10.00 10.57 10.75 11.09
</TABLE>
The reduction in capital ratios from a year ago was due primarily to the
acquisitions of APSB and Pacific Bank and the Corporation's stock repurchase
program, but remain above the well capitalized standards.
On October 25, 2000, the Corporation declared a regular quarterly cash
dividend on common stock at a rate of $0.175 per share to shareholders of record
on November 8, 2000, payable on November 20, 2000.
LIQUIDITY MANAGEMENT
The Corporation 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 available-for-sale.
Liquidity is also provided by maturing securities and loans.
Average core deposits and shareholders' equity comprised 65.0% of total
funding in the third quarter of 2000, compared with 68.5% in the third quarter
of 1999. This decrease has required that the Corporation increase its use of
more costly alternative funding sources. Despite the decrease in percentage of
funding derived from core deposits and shareholders' equity, the Corporation has
not faced any liquidity constraints. See "-- Net Interest Income."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ASSET/LIABILITY MANAGEMENT
The principal objective of asset/liability management is to maximize
net interest income 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 Corporation'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 Board of Directors to ensure that risk taking is not
excessive and that liquidity is properly managed.
20
<PAGE>
A quantitative and qualitative discussion about market risk is included
on pages A-15 to A-18 of the Corporation's Form 10-K for the year ended December
31, 1999. During the third quarter of 2000, the Corporation remained slightly
more asset sensitive, and at all times remained within the limits set by the
Board of Directors.
As of September 30, 2000, the Corporation had $900.0 million of
notional principal in receive fixed-pay LIBOR interest rate swaps, of which
$510.0 million have maturities greater than one year. The Corporation's
interest-rate risk-management instruments had a fair value of $(3.5) million and
$(10.4) million at September 30, 2000 and June 30, 2000, respectively, with no
exposure to credit risk at September 30, 2000 or at June 30, 2000. 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 Corporation's swap agreements
require the deposit of collateral to mitigate the amount of credit risk if
certain market value exposure thresholds are exceeded. As of September 30, 2000,
the Corporation had deposited $7.3 million par value in securities with
counterparties.
At September 30, 2000, the Corporation's outstanding foreign
exchange contracts for both those purchased as well as sold totaled $72.9
million. The Corporation 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 Corporation's policies prohibit outright speculation by the
Corporation. The Corporation actively manages its foreign exchange exposures
within prescribed risk limits and controls. All foreign exchange contracts
outstanding at September 30, 2000 have remaining maturities of 12 months or
less.
21
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
We have made forward-looking statements in this document that are
subject to risks and uncertainties. These statements are based on the beliefs
and assumptions of our management, and on information currently available to our
management. Forward-looking statements include the information concerning our
possible or assumed future results of operations, and statements preceded by,
followed by or that include the words "will," believes," "expects,"
"anticipates," "intends," "plans," "estimates" or similar expressions.
Our management believes these forward-looking statements are
reasonable; however, you should not place undue reliance on the forward-looking
statements, which are based on current expectations. Future results may differ
materially from those currently expected or anticipated.
Forward-looking statements are not guarantees of performance. They
involve risks, uncertainties and assumptions. Our future results and shareholder
values may differ materially from those expressed in these forward-looking
statements. Many of the factors described below that will determine these
results and values are beyond our ability to control or predict. For those
statements, we claim the protection of the safe harbor contained in the Private
Securities Litigation Reform Act of 1995.
AN ECONOMIC SLOWDOWN IN CALIFORNIA COULD HURT OUR BUSINESS. Prior to
the merger with Pacific Bank, we focused our business in Los Angeles, Orange,
Riverside, San Bernardino, San Diego, and Ventura counties of Southern
California. After the merger, our operations include San Francisco and San
Mateo counties. In addition the opening of a new office in Palo Alto extended
operations to Santa Clara county. An economic slowdown in California could
have the following consequences, any of which could hurt our business:
- Loan delinquencies may increase;
- Problem assets and foreclosures may increase;
- Demand for our products and services may decline; and
- Collateral for loans made by us, especially real estate, may
decline in value, in turn reducing customers' borrowing
power, and reducing the value of assets and collateral
associated with our existing loans.
CHANGES IN INTEREST RATES AFFECT OUR PROFITABILITY. Changes in
prevailing rates may hurt our business. We derive our income mainly from the
difference or "spread" between the interest earned on loans, securities and
other interest-earning assets, and interest paid on deposits, borrowings and
other interest-bearing liabilities. In general, the wider the spread, the more
we earn. When market rates of interest change, the interest we receive on our
assets and the interest we pay on our liabilities will fluctuate. This can cause
decreases in our spread and can affect our income. In addition, interest rates
affect how much money we can lend. For example, when interest rate rise, loan
originations tend to decrease.
SIGNIFICANT CHANGES IN BANKING LAWS OR REGULATIONS COULD MATERIALLY
AFFECT OUR BUSINESS. The banking industry is subject to extensive federal and
state regulations, and significant new laws or changes in, or repeals of,
existing laws may cause results to differ materially. Further, federal monetary
policy, particularly as implemented through the Federal Reserve System,
significantly affects our credit conditions, primarily through open market
operations in U.S. government securities, the discount rate for member bank
borrowing and bank reserve requirements. A material change in these conditions
would have an impact on results.
WE FACE STRONG COMPETITION FROM FINANCIAL SERVICE COMPANIES AND OTHER
COMPANIES THAT OFFER BANKING SERVICES WHICH CAN HURT OUR BUSINESS. Increased
competition in our market may result in reduced loans and deposits. Ultimately,
we may not be able to compete successfully against current and future
competitors. Many competitors offer the banking services that we offer in our
service area. These competitors include national, regional, and community banks.
We also face competition from many other types of financial institutions,
including, without limitation, savings and loans, finance companies, brokerage
firms, insurance companies, credit unions, mortgage banks, and other financial
intermediaries. Recently passed legislation will make it easier for other types
of financial institutions to compete with us.
22
<PAGE>
OUR RESULTS WOULD BE ADVERSELY AFFECTED IF WE SUFFERED HIGHER THAN
EXPECTED LOSSES ON OUR LOANS. We assume risk 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. We have adopted
underwriting and credit policies, including establishing and reviewing the
allowance for credit losses, that we believe are appropriate to minimize this
risk. We assess the likelihood of nonperformance, track loan performance, and
diversify our credit portfolio. Those policies and procedures may not prevent
unexpected losses that could adversely affect our results.
PART 11. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K
On July 14, 2000, the Corporation filed a report on
Form 8-K under item 5 regarding the financial results
for the quarter ended June 30, 2000. Included in the
report were two press releases dated July 13, 2000.
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: November 14, 2000 /s/ Frank P. Pekny
--------------------- ---------------------------------
FRANK P. PEKNY
Executive Vice President and
Chief Financial Officer/Treasurer
(Authorized Officer and
Principal Financial Officer)
23
