City National Corporation (CYN)

CYN 
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City National Corporation (CYN)

Q2 2011 Earnings Call

July 21, 2011 5:00 pm ET

Executives

Cary Walker – SVP and Manager of Corporate Communications

Russell Goldsmith – President and CEO

Chris Carey – CFO

Analysts

John Pancari – Evercore Partners

Steven Alexopoulos – JP Morgan

Joe Morford – RBC Capital Markets

Aaron Deer – Sandler O'Neill and Partners

Brian Klock – KBW

Brian Foran – Nomura

Jennifer Demba – SunTrust

Gary Tenner – D.A. Davidson

Lana Chan – BMO Capital Markets

Presentation

Operator

Good afternoon. I would like to welcome everyone to this discussion of City National Corporation's Second Quarter 2011 Financial Results. My name is Missy [ph], and I will be your coordinator for today. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer period for analyst and investors. (Operator instructions) This call is being recorded and will be available shortly after it is completed on City National's website at cnb.com.

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

Cary Walker

Thank you. Good afternoon. Here to discuss City National's second quarter 2011 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, 2010. This afternoon City National issued a news release outlining its second quarter 2011 financial results. To obtain a copy, please visit our website at cnb.com. After comments by management today, we'll open this call to your questions.

Now, I'll turn the call over to our CEO, Russell Goldsmith.

Russell Goldsmith

Good afternoon, and thank you all for joining us again for our quarterly earnings update.

As you know just a little while ago, City National announced its second quarter net income of $47.5 million, which is $0.88 a share, which is up from $0.78 just a year ago.

I am pleased to say this is City National’s best quarter in over three years. Year to date the company has earned $87.2 million on revenue of nearly $558 million.

City National’s second-quarter results improved across the board. Assets grew to a new record of $22.5 billion, our capital levels are strong, credit quality which is a critical factor improved for the seventh consecutive quarter. Revenue increased 3% from the first quarter. We benefited from rising net interest income and an increase in C&I lending. Deposits also grew up to $18.8 billion, and remarkably our percentage of core deposits increased to 96%. All in all it was City National’s best quarter, as I said, in more than three years.

The fundamentals of our business are strong. We also continue to benefit from the fact that we avoided virtually all of the mortgage related pitfalls of the past few years that we read about so much and therefore City National is not burdened by the cost and risk that some other financial institutions are continuing to deal with.

New loan production at City National increased for the second straight quarter and the production growth has been higher than it has been in more than three years as well. Between March 31 and June 30, our loans actually grew across the board. During that time, City National added about $393 million in loans to its balance sheet. The lion’s share of that about $332 million were C&I, and while they did include $170 million of asset based credits that we acquired in May, it also reflects nice net organic growth.

City National has been in the asset base lending business for years and the recently acquired portfolio is a relatively small but positive addition to our $11.5 billion loan portfolio. It brings us further diversification, strong credit quality, and reasonable returns. It consists of positions in syndicated loans and credit lines to larger and quite credit worthy quality companies.

Importantly, we have also added a strong team of experienced lenders to manage and grow this portfolio. This is an approach that is totally consistent with our long-standing and successful philosophy to have a number of discrete specialized lending portfolios run by talented lenders, who are experienced and proven in their sectors. Line utilization among our existing C&I clients is still low by historical standards, and has actually declined. I think that reflects the nation’s modest economic growth rate and some continuing uncertainty and caution by our clients about where the economy is headed and when they will see revenue growth,

In the second quarter, loan commitments actually increased faster than utilization, but that is in its own way modestly (inaudible) because some of our borrowers are clearly getting themselves prepared to expand their usage of credit in the future at some point. We do continue to see some modest signs of increasing confidence and improvements in the economy of the regions that City National is in.

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