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City National Corporation (CYN)

Q4 2012 Earnings Conference Call

January 24, 2013 17:00 ET


Cary Walker - Senior Vice President and Manager, Corporate Communications

Russell Goldsmith - President and Chief Executive Officer

Chris Carey - Chief Financial Officer


Steven Alexopoulos - JPMorgan

Steve Scinicariello - UBS

Joe Morford - RBC Capital Markets

John Pancari - Evercore Partners

Dave Rochester - Deutsche Bank

Erika Penala - Bank of America

Jennifer Demba – SunTrust

Ken Zerbe - Morgan Stanley

Casey Haire - Jefferies

Brett Rabatin - Sterne Agee

Gaston Ceron - Morningstar Equity

Herman Chan - Wells Fargo Security

Lana Chan - BMO Capital Markets

Tim Coffey - FIG Partners

Aaron Deer - Sandler O’Neill



Good afternoon. I would like to welcome everyone to this discussion of City National Corporation’s Fourth Quarter and Year End 2012 Financial Results. My name is Nan and I will be your coordinator for today. At this time, all participants are in listen-only mode. After the speakers’ remarks, there will be a question-and-answer period for analysts and investors. (Operator Instructions) This call is being recorded and will be available shortly after it is completed on City National’s website at

Now, I will turn the call over to Cary Walker, Senior Vice President and Manager of Corporate Communications for City National. Please proceed.

Cary Walker - Senior Vice President and Manager, Corporate Communications

Thank you. Good afternoon. Here to discuss City National’s fourth quarter and year end 2012 highlights are Russell Goldsmith, our President and Chief Executive Officer; and Chris Carey, our Chief Financial Officer.

This call will include comments and forward-looking statements based on current plans, expectations, events and financial industry trends that may affect the company’s future operating results and financial position. These statements involve risks and uncertainties and future activities and results may differ materially from these expectations. The speakers on this call claim the protection of the Safe Harbor provisions contained in the Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from expected results, see the company’s Annual Report on Form 10-K for the year ended December 31, 2011. This afternoon, City National issued a news release outlining its fourth quarter and year end 2012 financial results. To obtain a copy, please visit our website at

After comments by management today, we’ll open up this call to your questions. And now, I will turn it over to our CEO, Russell Goldsmith.

Russell Goldsmith - President and Chief Executive Officer

Good afternoon and thank you for joining us today. As you know, City National just announced its very strong financial results both for the fourth quarter and the full year of 2012. As we detailed in that press release, we put out about an hour ago, City National finished 2012 with double-digit growth in loans and deposits and net income was up 21% to $208 million. That also means that City National has now been profitable for just one quarter shy of 20 consecutive years.

In addition for the very first time, City National’s assets exceed $28 billion, a 21% increase as well from the prior year. In the fourth quarter, net income grew to $47.2 million or $0.87 a share. These strong results primarily reflect continuing gains in market share growth across all of our businesses really, the successful addition of new businesses and personnel, a more diversified revenue stream, and continued strong credit quality. As a result of this and more, City National today is obviously bigger and better, safer and stronger, more capable than ever before. Our relationship-driven value proposition is the premier private and business bank, our increasingly broad product and service offerings, our expanding geographic base and the exceptional service and financial solutions that our outstanding team of now 3,400 colleagues provide everyday all of these things and more continue to foster City National’s success and growth.

Our 2012 results point to a number of positive elements, but loan growth certainly has to be the headline. Between September 30 and year end, we added a record $1.1 billion to City National’s loan portfolio. And that comes after very strong loan growth in the earlier quarters of the year. Originations came to $1.4 billion in the quarter, the fourth quarter, bringing our 2012 total to $4 billion, which is also a new record for City National. In the fourth quarter, loans really grew across the board. The increases were especially strong in our entertainment and specialty banking divisions. Certainly some of the increased C&I borrowings reflect year-end tax planning and transactions. As a result, we anticipate that some perhaps 20% of that growth will be repaid in the first quarter of 2013. Much of the loan growth was from new clients, but at the same time it was good to see commercial line utilization increase for the second straight quarter topping 60% for the first time since the end of 2010. We also saw our commercial real estate and residential mortgage lending grow as well.

Deposits grew by nearly $1 billion and at the end of the fourth quarter they stood at $23.5 billion, higher than at any time in the history of City National. Average core deposits grew 15% year-over-year and they still represent 97% of City National’s total deposit base. Of course a portion of this growth was also driven by year-end tax and transaction activities, some of which were tied to changes anticipated in the tax laws as well as some traditional seasonality. So, a portion of this growth in deposits will also run-off in January.

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