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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 13, 2000
CITY NATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C> <C>
Delaware 1-10521 95-2568550
- ------------------------------------ ---------------------- -------------------------------
(State or other jurisdiction of (Commission file (IRS employer identification
incorporation) number) no.)
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City National Center
400 North Roxbury Drive, Beverly Hills, California 90210
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (310) 888-6000
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Not applicable
--------------------------------------------
(former name or former address, if changed since last report)
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Item 5. OTHER EVENTS.
On April 13, 2000, City National Corporation issued a press release
reporting its financial results for the quarter ended March 31, 2000.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 Press release dated April 13, 2000 reporting financial results for the
quarter ended March 31, 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 hereunto duly authorized.
CITY NATIONAL CORPORATION
April 17, 2000 /s/ Barbara S. Polsky
---------------------------------
Barbara S. Polsky
Executive Vice President,
General Counsel and Secretary
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[CITY NATIONAL LETTERHEAD]
NEWS RELEASE
Contacts:
FINANCIAL/INVESTORS:
Frank Pekny (City National), (310) 888-6700
Ian Campbell (Abernathy MacGregor Frank), (213) 630-6550
MEDIA:
Jim Dunnigan (City National), (310) 888-6636
Denis Wolcott (Stoorza, Ziegaus & Metzger), (213) 891-2822
City National Corporation Reports Record Net Income of $31 Million For
First Quarter
19% Rise Marks 23rd Consecutive Quarter of Double-Digit Income Growth
LOS ANGELES, APRIL 13, 2000 -- City National Corporation (NYSE: CYN) today
reported record net income of $31.0 million for the first quarter of 2000, a 19
percent increase from net income of $26.0 million in the first quarter of 1999,
and an 11 percent increase from the fourth quarter of 1999. Net income per
diluted common share of $0.66 per share increased 20 percent compared with $0.55
per share in the first quarter of 1999, and was 10 percent higher than the $0.60
per share reported for the 1999 fourth quarter. Results reflect the operations
of The Pacific Bank, N.A. from February 29, 2000, the date of acquisition.
Cash earnings, which exclude the amortization of core deposit intangibles and
goodwill from acquisitions, increased 23 percent to $33.9 million, or $0.72 per
diluted common share, for the first quarter of 2000 from $27.6 million, or $0.58
per diluted common share, for the first quarter of 1999. They also increased 12
percent from $30.4 million, or $0.65 per diluted common share, for the fourth
quarter of 1999.
"These solid earnings were driven by strong loan demand, a growing client base
and the resulting strong growth in revenue -- both net interest income and
noninterest income. Our earnings rose 19 percent year-over-year, our 23rd
consecutive quarter of double-digit earnings growth," said Russell Goldsmith,
CEO of City National Corporation.
"For the first time in our 46 year history, City National's total assets
exceeded the $8 billion level, and total loans and deposits each crossed the $6
billion threshold," Goldsmith said. "These results come just one quarter after
City National first grew to $7 billion in assets and more than $5 billion in
both loans and deposits."
Goldsmith added, "The first quarter was also highlighted by the addition on
February 29 of the colleagues and clients of The Pacific Bank to our team. With
over 50 offices in California today, City National now has a new, strategically
positioned platform for growth in the remarkably robust Northern California
economy -- as well as added strength in Southern California."
RETURN ON ASSETS/RETURN ON EQUITY
The Corporation's return on average assets in the first quarter of 2000 was 1.63
percent compared with 1.73 percent in the 1999 first quarter and 1.55 percent in
the fourth quarter of 1999. The return on average common equity rose to 20.85
percent compared with 18.69 percent for the prior-year quarter and 19.40 percent
for the fourth quarter of 1999. The cash return on equity was 28.3 percent.
1
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Total average assets rose to a record $7.7 billion in the first quarter of 2000,
an increase of 26 percent over the $6.1 billion in average assets for the first
quarter of 1999 and $0.5 billion higher than the fourth quarter of 1999. Both
internally generated growth and acquisitions contributed to the increase in
total average assets. The Pacific Bank added $248.3 million of additional
average assets for the first quarter of 2000. Total assets at March 31, 2000
were $8.4 billion compared with total assets of $6.3 billion at March 31, 1999
and total assets of $7.2 billion at December 31, 1999.
LOANS
Average loans rose 27 percent during the first quarter of 2000 to $5.7 billion
compared with the first quarter of 1999. Average loans increased 8 percent from
the 1999 fourth quarter; approximately 3 percent of the loan growth since
December 31, 1999 is attributable to the acquisition of The Pacific Bank. Loan
growth was driven primarily by increases in commercial loans and real estate
commercial mortgages. Compared with the year-ago quarter, commercial loan
average balances rose 21 percent from $2.4 billion to $3.0 billion. Real estate
commercial mortgage averages rose 53 percent from $0.7 billion to $1.1 billion.
Growth in all other loan categories also contributed to the increase in average
loans over the prior-year quarter.
Total loans at March 31, 2000 were $6.2 billion compared with $4.5 billion at
March 31, 1999 and $5.5 billion at December 31, 1999. During the quarter, total
loans increased $673.3 million, or 12 percent. The acquisition of The Pacific
Bank added $497.7 million of the increase with other growth primarily driven by
loans originated as part of a client relationship. Purchased residential first
mortgages rose $21.1 million or 10 percent, and non-relationship, syndicated
loans rose $3.2 million or less than 1 percent. Non-relationship syndicated
loans continue to account for less than 10 percent of the loan portfolio.
DEPOSITS
Average deposits rose 30 percent during the first quarter of 2000 to $5.7
billion compared with the first quarter of 1999 and increased 3 percent from the
1999 fourth quarter. Deposits totaled $6.4 billion at March 31, 2000 compared
with $4.6 billion at March 31, 1999 and $5.7 billion at December 31, 1999.
Deposit growth also benefited from the acquisition of The Pacific Bank, which
added $699 million to deposits at March 31, 2000. Core deposits -- which
continued to provide substantial benefits to the Bank's cost of funds -- rose 16
percent, making a significant contribution to the total increase from December
31, 1999.
NET INTEREST INCOME
Net interest income on a fully taxable-equivalent basis rose 19 percent to $95.3
million compared with $80.1 million for the first quarter of 1999, and increased
6 percent from $89.9 million in the fourth quarter of last year. Interest
recovered on nonaccrual and charged-off loans was $1.0 million for the first
quarter of 2000 compared with $3.4 million for the first quarter and $0.4
million for the fourth quarter of 1999.
The fully taxable-equivalent net interest margin was 5.47 percent for the
quarter ended March 31, 2000 compared with 5.60 percent for the year-earlier
period and 5.46 percent for the fourth quarter of 1999. The lower net interest
margin compared with the year-ago quarter is primarily attributable to lower
interest recovered on nonaccrual and charged-off loans.
NONINTEREST INCOME
Noninterest income continued its strong growth, totaling $24.2 million for the
first quarter 2000, a 27 percent increase over the $19.1 million reported in the
first quarter of 1999. These results reflect a 4 percent increase over the $23.2
million for the fourth quarter of 1999. Noninterest income was 20.8 percent of
total revenues in the first quarter of 2000 compared with 19.8 percent for the
year-earlier period and 21.1 percent for the fourth quarter of 1999.
2
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All categories of recurring noninterest income increased over the prior-year
period. Investment services and trust fees rose as a result of strong,
internally generated new business, and a growing client base. International
services income rose as a result of increased foreign exchange fees. Growth in
noninterest income also reflects the acquisition of The Pacific Bank. Gains on
the sale of assets and securities amounted to $0.2 million for the quarter
compared with $1.3 million in the prior-year quarter.
City National Investments (CNI), a division of the Bank, had assets under
administration and management of $14.9 billion as of March 31, 2000 compared
with $14.1 billion at December 31, 1999. The increase is primarily attributable
to the acquisition of The Pacific Bank. During the quarter, CNI also rolled out
the CNI Charter Funds, a new suite of proprietary money market, private equity,
and fixed income investment funds.
NONINTEREST EXPENSE
Noninterest expense was $69.1 million for the first quarter of 2000 compared
with $55.9 million in the first quarter and $66.7 million in the fourth quarter
of 1999. This year-over-year increase in expenses is primarily the result of
additional offices and employees, including those resulting from the acquisition
of The Pacific Bank. Salaries and other employee benefits increased by $6.3
million, or 19 percent, compared with the first quarter of 1999; they increased
by $3.9 million, or 11 percent, compared with the fourth quarter of 1999. All
other expenses increased $6.8 million, or 29 percent, from the first quarter of
1999, and decreased $1.5 million, or 5 percent, from the fourth quarter of 1999.
First quarter noninterest expense included $1.3 million relating to the
integration of The Pacific Bank and included system conversion charges, the cost
of new client checks, and facility consolidation expenses.
INCOME TAXES
The effective tax rate in the first quarter of 2000 declined to 34.6 percent
compared with 36.5 percent in the first quarter and 35.7 percent in the fourth
quarter of 1999. The decline is due primarily to the impact of the formation of
a regulated investment company subsidiary that provides flexibility to raise
additional capital in a tax efficient manner.
CREDIT QUALITY
The Corporation recorded no credit loss provisions for the first quarter of
2000, as credit quality remained strong. There were also no credit loss
provisions in the year-earlier period. Net credit losses for the first quarter
of 2000 were ($3.6 million) compared with net credit recoveries of $3.4 million
in the year-earlier period and net credit losses of ($4.9 million) for the
fourth quarter of 1999.
The allowance for credit losses at March 31, 2000, totaled $140.5 million, or
2.28 percent of outstanding loans, which included an allowance of $9.9 million
related to the acquisition of The Pacific Bank. This compares with an allowance
of $138.7 million, or 3.07 percent of outstanding loans at March 31, 1999, and
an allowance of $134.1 million, or 2.44 percent of outstanding loans at December
31, 1999. The allowance for credit losses as a percentage of nonaccrual loans
was 434 percent at March 31, 2000 compared with 596 percent at March 31, 1999
and 530 percent at December 31, 1999. Total non-performing assets (nonaccrual
loans and ORE) were $32.8 million, or 0.53 percent of total loans and ORE at
March 31, 2000, compared with $25.7 million, or 0.57 percent, at March 31, 1999
and $26.7 million, or 0.49 percent, at December 31, 1999.
CAPITAL LEVELS
Total risk-based capital and Tier 1 risk-based capital ratios at March 31, 2000
were 10.32 percent and 7.21 percent compared with the capitalization ratios of
10.00 percent and 6.00 percent required for an institution to be classified as
"well-capitalized". The Corporation's Tier 1 leverage ratio of 6.46 percent
exceeded the regulatory minimum of 4.00 percent required for a
"well-capitalized" institution. Total risk-based capital, Tier 1 risk-based
capital, and the Tier 1 leverage ratio were 11.21 percent, 7.88 percent, and
6.73 percent, respectively as of December 31, 1999. The change in capital ratios
was due primarily to the acquisition of The Pacific Bank.
3
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During the first quarter of 2000, the Corporation increased its quarterly
dividend by 6 percent to $0.175 per share.
STOCK REPURCHASE
Under the current stock buyback program of one million common shares announced
on July 29, 1999, 731,100 shares, including 450,300 shares in the first quarter
of 2000, were repurchased for a cost of $23.5 million. Shares purchased under
the buyback program have been -- and will continue to be -- reissued for
acquisitions, upon the exercise of stock options, and for other general
corporate purposes. Treasury shares at March 31, 2000 totaled 81,473 shares,
reflecting the use of 1,715,127 shares for the acquisition of The Pacific Bank.
ABOUT CITY NATIONAL
City National Corporation is a publicly owned corporation with $8.4 billion in
total assets whose stock is traded on the New York Stock Exchange under the
symbol "CYN". The Corporation's wholly owned subsidiary, City National Bank, is
the premier business and private bank headquartered in California. City National
Bank has over 50 offices in California throughout Los Angeles, Orange,
Riverside, San Bernardino, San Diego, Ventura, San Mateo and San Francisco
counties, as well as a loan production office in Sacramento and an office in the
Cayman Islands.
For more information about the Corporation, our Fax-On-Demand Information
Service is at 1.800.873.5293, and the Corporation's web page is at
http://www.cnb.com.
This press release contains forward looking statements about the Corporation for
which the Corporation claims the protection of the safe harbor contained in the
Private Securities Litigation Reform Act of 1995. Forward looking statements
include information concerning the Corporation's possible or assumed future
financial condition, results of operations and business, and statements preceded
by, followed by, or that include the words "will," "may," "believes," "expects,"
"anticipates," "intends," "plans," "estimates," or similar expressions.
Forward looking statements are subject to risks and uncertainties. A number of
factors, some of which are beyond the Corporation's ability to control or
predict, could cause actual results to differ materially from those contemplated
by such forward looking statements. These factors include (1) an economic
slowdown in California, (2) changes in interest rates, (3) significant changes
in banking laws or regulations, (4) increased competition in the Corporation's
market, and (5) higher than expected credit losses.
For a more complete discussion of these risks and uncertainties, please see the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1999
and particularly the section of Management's Discussion and Analysis therein
entitled "Cautionary Statement for Purposes of the 'Safe Harbor' Provisions of
the Private Securities Litigation Reform Act of 1995."
4
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CITY NATIONAL CORPORATION
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CONSOLIDATED BALANCE SHEET (UNAUDITED)
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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) MARCH 31,
------------------------------------------------
2000 1999 % CHANGE
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<S> <C> <C> <C>
Assets
Cash and due from banks $ 381,763 $ 287,911 33
Securities 1,196,531 1,108,036 8
Federal funds sold 285,000 210,000 36
Loans (net of allowance for credit
losses of $140,450 and $138,710) 6,023,566 4,379,566 38
Other assets 536,645 298,806 80
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Total assets $ 8,423,505 $ 6,284,319 34
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Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 2,705,431 $ 2,101,752 29
Interest-bearing deposits 3,672,029 2,501,978 47
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Total deposits 6,377,460 4,603,730 39
Federal funds purchased and securities sold
under repurchase agreements 231,404 152,583 52
Other short term borrowed funds 829,549 507,326 64
Subordinated debt 123,500 123,311 -
Other long-term debt 130,000 280,000 (54)
Other liabilities 84,140 58,344 44
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Total liabilities 7,776,053 5,725,294 36
Shareholders' equity 647,452 559,025 16
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Total liabilities and shareholders' equity $ 8,423,505 $ 6,284,319 34
=========== ===========
Book value per share $ 13.64 $ 12.20 12
Number of shares at period end 47,453,386 45,828,993 4
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CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
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FOR THE THREE MONTHS ENDED
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) MARCH 31,
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2000 1999 % CHANGE
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Interest income $ 142,067 $ 111,492 27
Interest expense (49,820) (33,812) 47
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Net interest income 92,247 77,680 19
Provision for credit losses - - -
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Net interest income after provision for credit losses 92,247 77,680 19
Noninterest income 24,243 19,145 27
Noninterest expense (69,085) (55,901) 24
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Income before taxes 47,405 40,924 16
Income taxes (16,397) (14,923) 10
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Net income $ 31,008 $ 26,001 19
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Net income per share, basic $ 0.68 $ 0.57 19
============= ============
Net income per share, diluted $ 0.66 $ 0.55 20
============= ============
Dividends paid per share $ 0.18 $ 0.17 6
============= ============
Shares used to compute per share net income, basic 45,903,093 45,989,544
Shares used to compute per share net income, diluted 46,895,543 47,336,455
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CITY NATIONAL CORPORATION
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SELECTED FINANCIAL INFORMATION (UNAUDITED) (DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
PERIOD END MARCH 31,
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2000 1999 % CHANGE
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<S> <C> <C> <C>
Loans
Commercial $3,141,456 $2,427,843 29
Residential first mortgage 1,224,343 1,032,383 19
Real estate commercial mortgage 1,307,961 763,772 71
Real estate construction 421,639 246,760 71
Installment 68,617 47,518 44
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Total loans $6,164,016 $4,518,276 36
========== ==========
Nonaccrual loans and ORE
Nonaccrual loans $ 32,330 $ 23,264 39
ORE 429 2,390 (82)
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Total nonaccrual loans and ORE $ 32,759 $ 25,654 28
========== ==========
Loans past due 90 days or more on accrual status,
including credits in the process of being paid or
renewed and not anticipated to move to nonaccrual
status $ 28,358 $ 16,704 70
========== ==========
Restructured loans on accrual status $ 2,647 $ 1,881 41
========== ==========
Deposits
Noninterest bearing $2,705,431 $2,101,752 29
Interest-bearing, core 2,511,399 1,701,272 48
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Total core deposits 5,216,830 3,803,024 37
Time deposits - $100,000 and over 1,160,630 800,706 45
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Total deposits $6,377,460 $4,603,730 39
========== ==========
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FOR THE THREE MONTHS ENDED
AVERAGE BALANCES MARCH 31,
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2000 1999 % CHANGE
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<S> <C> <C> <C>
Loans
Commercial $2,950,902 $2,433,188 21
Residential first mortgage 1,207,907 1,036,771 17
Real estate commercial mortgage 1,141,315 747,037 53
Real estate construction 377,433 245,509 54
Installment 62,786 48,436 30
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Total loans $5,740,343 $4,510,941 27
========== ==========
Securities $1,208,883 $1,091,773 11
Interest-earning assets 7,006,420 5,639,577 24
Assets 7,661,611 6,100,799 26
Core deposits 4,521,759 3,644,378 24
Deposits 5,676,364 4,368,935 30
Shareholders' equity 598,166 564,294 6
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CITY NATIONAL CORPORATION
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SELECTED FINANCIAL INFORMATION (UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
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FOR THE THREE MONTHS ENDED
MARCH 31,
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2000 1999 % CHANGE
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<S> <C> <C> <C>
SELECTED RATIOS
FOR THE PERIOD
Return on average assets 1.63 % 1.73 % (6)
Return on average shareholders' equity 20.85 18.69 12
Net interest margin 5.47 5.60 (2)
Efficiency ratio 57.82 56.27 3
Dividend payout ratio 25.53 29.34 (13)
PERIOD END
Tier 1 risk-based capital ratio 7.21 9.76 (26)
Total risk-based capital ratio 10.32 13.54 (24)
Tier 1 leverage ratio 6.46 8.06 (20)
Nonaccrual loans to total loans 0.52 0.51 2
Nonaccrual loans and ORE to total loans and ORE 0.53 0.57 (7)
Allowance for credit losses to total loans 2.28 3.07 (26)
Allowance for credit losses to nonaccrual loans 434.20 596.24 (27)
Cash earnings and ratios (reported earnings net of goodwill and nonqualifying
core deposit intangibles) (1)
Cash net income $ 33,900 $ 27,599 23
Cash net income per share, basic 0.74 0.60 23
Cash net income per share, diluted 0.72 0.58 24
Cash return on average assets 1.81 % 1.85 % (2)
Cash return on average shareholders' equity 28.31 22.19 28
Cash efficiency ratio 54.90 54.20 1
(1) Nonqualifying core deposit intangible (CDI) amortization and average
balance excluded from these calculations are, with the exception of the
efficiency ratio, net of applicable taxes. The after-tax amounts for the
amortization and average balance of nonqualifying CDI were $0.8 million and
$12.6 million, respectively, for the quarter ended March 31, 2000 and $0.6
million and $17.7 million, respectively, for the three months ended March 31,
1999. Goodwill amortization and average balance (which are not tax effected)
were $2.1 million and $104.0 million, respectively, for the quarter ended March
31, 2000 and $0.8 million and $42.3 million respectively, for the three months
ended March 31, 1999. The Company's cash earnings per shares are not
necessarily comparable to similary titled measures reported by other companies.
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
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2000 1999 % CHANGE
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<S> <C> <C> <C>
NONINTEREST INCOME:
Service charges on deposit accounts $ 5,557 $ 4,075 36
Investment services 5,897 4,320 37
Trust fees 5,060 4,391 15
International services 3,308 1,991 66
Bank owned life insurance 621 539 15
Other 3,572 2,518 42
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Subtotal 24,015 17,834 35
Gain on sale of loans and assets 5 58 (91)
Gain on sale of securities 223 1,253 (82)
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Total $ 24,243 $ 19,145 27
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NONINTEREST EXPENSE:
Salaries and other employee benefits $ 38,851 $ 32,513 19
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All other
Professional 5,385 4,785 13
Net occupancy of premises 4,805 3,486 38
Information services 3,587 2,521 42
Marketing and advertising 2,703 2,564 5
Depreciation 3,040 2,444 24
Office services 2,066 1,836 13
Amortization of goodwill and core deposit intangibles 3,489 2,060 69
Equipment 465 651 (29)
Acquisition integration 1,309 - -
Other operating 3,385 3,041 11
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Total other 30,234 23,388 29
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Total $ 69,085 $ 55,901 24
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(Released to Business Wire this date)
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