UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
ý QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
or
o 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 |
City National Center |
400 North Roxbury Drive, Beverly Hills, California 90210 |
(Address of principal executive offices) (Zip Code) |
Registrants 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 ý NO o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
YES ý NO o
Number of shares of common stock outstanding at July 31, 2003: 48,482,668
PART 1 - FINANCIAL INFORMATON
ITEM 1. FINANCIAL STATEMENTS
CITY NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
Dollars in thousands, except per share amounts |
|
June 30, |
|
December 31, |
|
June 30, |
|
|||
Assets |
|
|
|
|
|
|
|
|||
Cash and due from banks |
|
$ |
451,291 |
|
$ |
497,273 |
|
$ |
442,343 |
|
Federal funds sold |
|
650,000 |
|
460,000 |
|
165,000 |
|
|||
Securities available-for-sale - cost $2,935,401; $2,169,444 and $1,886,817 at June 30, 2003, December 31, 2002 and June 30, 2002, respectively |
|
2,992,686 |
|
2,226,656 |
|
1,919,985 |
|
|||
Trading account securities |
|
88,035 |
|
172,211 |
|
68,832 |
|
|||
Loans |
|
7,590,226 |
|
7,999,470 |
|
7,854,530 |
|
|||
Less allowance for credit losses |
|
170,927 |
|
164,502 |
|
157,647 |
|
|||
Net loans |
|
7,419,299 |
|
7,834,968 |
|
7,696,883 |
|
|||
|
|
|
|
|
|
|
|
|||
Premises and equipment, net |
|
64,966 |
|
61,208 |
|
60,016 |
|
|||
Deferred tax asset |
|
50,488 |
|
36,578 |
|
39,186 |
|
|||
Goodwill |
|
254,627 |
|
229,834 |
|
230,161 |
|
|||
Intangibles |
|
48,597 |
|
27,007 |
|
30,959 |
|
|||
Bank owned life insurance |
|
61,554 |
|
60,119 |
|
60,505 |
|
|||
Affordable housing investments |
|
66,532 |
|
68,848 |
|
55,761 |
|
|||
Other assets |
|
200,613 |
|
186,766 |
|
201,393 |
|
|||
Customers acceptance liability |
|
6,145 |
|
8,924 |
|
11,396 |
|
|||
Total assets |
|
$ |
12,354,833 |
|
$ |
11,870,392 |
|
$ |
10,982,420 |
|
|
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|
|||
Demand deposits |
|
$ |
4,916,678 |
|
$ |
4,764,234 |
|
$ |
3,973,435 |
|
Interest checking deposits |
|
689,658 |
|
692,261 |
|
610,217 |
|
|||
Money market deposits |
|
3,140,203 |
|
2,929,501 |
|
2,472,224 |
|
|||
Savings deposits |
|
211,010 |
|
198,288 |
|
222,241 |
|
|||
Time deposits-under $100,000 |
|
210,333 |
|
218,447 |
|
226,116 |
|
|||
Time deposits-$100,000 and over |
|
998,924 |
|
1,036,967 |
|
1,292,934 |
|
|||
Total deposits |
|
10,166,806 |
|
9,839,698 |
|
8,797,167 |
|
|||
Federal funds purchased and securities sold under repurchase agreements |
|
167,084 |
|
266,727 |
|
110,665 |
|
|||
Other short-term borrowings |
|
115,125 |
|
125,125 |
|
421,125 |
|
|||
Subordinated debt |
|
318,282 |
|
303,795 |
|
282,043 |
|
|||
Long-term debt |
|
283,954 |
|
68,682 |
|
169,144 |
|
|||
Other liabilities |
|
126,703 |
|
126,303 |
|
110,804 |
|
|||
Acceptances outstanding |
|
6,145 |
|
8,924 |
|
11,396 |
|
|||
|
|
|
|
|
|
|
|
|||
Total liabilities |
|
11,184,099 |
|
10,739,254 |
|
9,902,344 |
|
|||
|
|
|
|
|
|
|
|
|||
Minority interest in consolidated subsidiaries |
|
26,044 |
|
21,179 |
|
6,738 |
|
|||
|
|
|
|
|
|
|
|
|||
Commitments and contingencies |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
Shareholders Equity |
|
|
|
|
|
|
|
|||
Preferred Stock authorized - 5,000,000 : none outstanding |
|
|
|
|
|
|
|
|||
Common Stock-par value-$1.00; authorized - 75,000,000; Issued - 50,455,363; 50,282,743 and 50,122,921 shares at June 30, 2003, December 31, 2002 and June 30, 2002, respectively |
|
50,455 |
|
50,283 |
|
50,123 |
|
|||
Additional paid-in capital |
|
404,741 |
|
400,866 |
|
396,058 |
|
|||
Accumulated other comprehensive income |
|
39,781 |
|
40,400 |
|
25,673 |
|
|||
Retained earnings |
|
745,017 |
|
675,195 |
|
601,484 |
|
|||
Deferred equity compensation |
|
(7,595 |
) |
|
|
|
|
|||
Treasury shares, at cost - 2,027,574; 1,299,312; and 0 shares at June 30, 2003, December, 31, 2002 and June 30, 2002, respectively |
|
(87,709 |
) |
(56,785 |
) |
|
|
|||
|
|
|
|
|
|
|
|
|||
Total shareholders equity |
|
1,144,690 |
|
1,109,959 |
|
1,073,338 |
|
|||
|
|
|
|
|
|
|
|
|||
Total liabilities and shareholders equity |
|
$ |
12,354,833 |
|
$ |
11,870,392 |
|
$ |
10,982,420 |
|
See accompanying Notes to the Unaudited Consolidated Financial Statements.
2
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
|
|
For the
three months ended |
|
For the
six months ended |
|
||||||||
In thousands, except per share amounts |
|
2003 |
|
2002 |
|
2003 |
|
2002 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Interest Income |
|
|
|
|
|
|
|
|
|
||||
Loans |
|
$ |
111,176 |
|
$ |
126,704 |
|
$ |
226,912 |
|
$ |
247,322 |
|
Securities available-for-sale |
|
32,292 |
|
27,923 |
|
61,723 |
|
54,951 |
|
||||
Federal funds sold and securities purchased under resale agreements |
|
771 |
|
704 |
|
1,182 |
|
1,211 |
|
||||
Trading account |
|
94 |
|
180 |
|
192 |
|
385 |
|
||||
Total interest income |
|
144,333 |
|
155,511 |
|
290,009 |
|
303,869 |
|
||||
Interest Expense |
|
|
|
|
|
|
|
|
|
||||
Deposits |
|
12,548 |
|
18,168 |
|
26,022 |
|
37,111 |
|
||||
Subordinated debt |
|
1,349 |
|
1,732 |
|
2,763 |
|
3,927 |
|
||||
Other long-term debt |
|
2,342 |
|
1,080 |
|
3,694 |
|
2,221 |
|
||||
Federal funds purchased and securities sold under repurchase agreements |
|
414 |
|
805 |
|
1,039 |
|
1,585 |
|
||||
Other short-term borrowings |
|
556 |
|
3,152 |
|
1,150 |
|
6,756 |
|
||||
Total interest expense |
|
17,209 |
|
24,937 |
|
34,668 |
|
51,600 |
|
||||
Net interest income |
|
127,124 |
|
130,574 |
|
255,341 |
|
252,269 |
|
||||
Provision for credit losses |
|
11,500 |
|
18,000 |
|
29,000 |
|
29,000 |
|
||||
Net interest income after provision for credit losses |
|
115,624 |
|
112,574 |
|
226,341 |
|
223,269 |
|
||||
Noninterest Income |
|
|
|
|
|
|
|
|
|
||||
Trust fees and investment fee revenue |
|
21,505 |
|
15,736 |
|
36,985 |
|
30,010 |
|
||||
Cash management and deposit transaction charges |
|
10,660 |
|
10,025 |
|
21,577 |
|
20,394 |
|
||||
International services |
|
5,019 |
|
4,719 |
|
9,347 |
|
8,510 |
|
||||
Bank owned life insurance |
|
731 |
|
719 |
|
1,445 |
|
1,392 |
|
||||
Gain on sale of loans and assets |
|
|
|
1,320 |
|
102 |
|
2,999 |
|
||||
Gain on sale of securities |
|
1,272 |
|
184 |
|
2,502 |
|
872 |
|
||||
Other |
|
5,865 |
|
6,035 |
|
12,070 |
|
10,504 |
|
||||
Total noninterest income |
|
45,052 |
|
38,738 |
|
84,028 |
|
74,681 |
|
||||
Noninterest Expense |
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
54,516 |
|
49,642 |
|
106,321 |
|
97,112 |
|
||||
Net occupancy of premises |
|
7,862 |
|
6,495 |
|
14,831 |
|
12,675 |
|
||||
Professional |
|
6,769 |
|
5,182 |
|
13,205 |
|
10,411 |
|
||||
Information services |
|
4,302 |
|
4,661 |
|
8,555 |
|
9,021 |
|
||||
Depreciation |
|
3,019 |
|
3,336 |
|
6,138 |
|
6,728 |
|
||||
Marketing and advertising |
|
3,553 |
|
3,311 |
|
6,665 |
|
6,099 |
|
||||
Office services |
|
2,398 |
|
2,731 |
|
4,968 |
|
4,829 |
|
||||
Amortization of intangibles |
|
2,227 |
|
2,056 |
|
4,203 |
|
3,571 |
|
||||
Equipment |
|
638 |
|
789 |
|
1,304 |
|
1,271 |
|
||||
Other operating |
|
6,032 |
|
4,671 |
|
10,538 |
|
9,858 |
|
||||
Total noninterest expense |
|
91,316 |
|
82,874 |
|
176,728 |
|
161,575 |
|
||||
Minority interest in net income of consolidated subisidiaries |
|
1,065 |
|
85 |
|
1,540 |
|
157 |
|
||||
Income before income taxes |
|
68,295 |
|
68,353 |
|
132,101 |
|
136,218 |
|
||||
Income taxes |
|
22,214 |
|
22,593 |
|
42,365 |
|
46,222 |
|
||||
Net income |
|
46,081 |
|
45,760 |
|
89,736 |
|
89,996 |
|
||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
||||
Unrealized gain (loss) on securities available-for-sale |
|
414 |
|
38,496 |
|
(2,434 |
) |
28,244 |
|
||||
Unrealized gain (loss) on cash flow hedges |
|
(43 |
) |
1,342 |
|
485 |
|
(1,935 |
) |
||||
Less reclassification adjustment for (gain) loss included in net income |
|
(3,341 |
) |
232 |
|
(886 |
) |
425 |
|
||||
Income taxes (benefit) |
|
1,562 |
|
16,652 |
|
(444 |
) |
10,885 |
|
||||
Other comprehensive gain (loss) |
|
2,150 |
|
22,954 |
|
(619 |
) |
14,999 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Comprehensive income |
|
$ |
48,231 |
|
$ |
68,714 |
|
$ |
89,117 |
|
$ |
104,995 |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per share, basic |
|
$ |
0.95 |
|
$ |
0.92 |
|
$ |
1.85 |
|
$ |
1.82 |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per share, diluted |
|
$ |
0.93 |
|
$ |
0.88 |
|
$ |
1.80 |
|
$ |
1.75 |
|
|
|
|
|
|
|
|
|
|
|
||||
Shares used to compute income per share, basic |
|
48,308 |
|
49,963 |
|
48,543 |
|
49,327 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Shares used to compute income per share, diluted |
|
49,524 |
|
52,083 |
|
49,824 |
|
51,443 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Dividends per share |
|
$ |
0.205 |
|
$ |
0.195 |
|
$ |
0.410 |
|
$ |
0.390 |
|
See accompanying Notes to the Unaudited Consolidated Financial Statements.
3
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
For the six months ended |
|
||||
Dollars in thousands |
|
2003 |
|
2002 |
|
||
|
|
|
|
|
|
||
Cash Flows From Operating Activities |
|
|
|
|
|
||
Net income |
|
$ |
89,736 |
|
$ |
89,996 |
|
Adjustments to net income: |
|
|
|
|
|
||
Provision for credit losses |
|
29,000 |
|
29,000 |
|
||
Amortization of intangibles |
|
4,203 |
|
3,571 |
|
||
Depreciation |
|
6,138 |
|
6,728 |
|
||
Deferred income tax benefit |
|
(13,434 |
) |
(7,929 |
) |
||
Gain on sales of loans and assets |
|
(102 |
) |
(2,999 |
) |
||
Gain on sales of securities |
|
(2,502 |
) |
(872 |
) |
||
Net decrease (increase) in other assets |
|
10,399 |
|
(24,889 |
) |
||
Net decrease in trading securities |
|
84,176 |
|
9,434 |
|
||
Other, net |
|
9,108 |
|
(893 |
) |
||
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
216,722 |
|
101,147 |
|
||
|
|
|
|
|
|
||
Cash Flows From Investing Activities |
|
|
|
|
|
||
Purchase of securities |
|
(1,602,880 |
) |
(450,710 |
) |
||
Sales of securities available-for-sale |
|
111,240 |
|
88,529 |
|
||
Maturities and paydowns of securities |
|
722,869 |
|
318,116 |
|
||
Loan principal collections (originations), net |
|
380,151 |
|
(353,518 |
) |
||
Purchase of premises and equipment |
|
(10,906 |
) |
(2,455 |
) |
||
Net cash from (for) acquisitions |
|
(39,907 |
) |
35,633 |
|
||
Other, net |
|
(3 |
) |
3 |
|
||
|
|
|
|
|
|
||
Net cash used by investing activities |
|
(439,436 |
) |
(364,402 |
) |
||
|
|
|
|
|
|
||
Cash Flows From Financing Activities |
|
|
|
|
|
||
Net increase in deposits |
|
327,108 |
|
227,502 |
|
||
Net decrease in federal funds purchased and securities sold under repurchase agreements |
|
(99,643 |
) |
(60,866 |
) |
||
Net decrease in short-term borrowings, net of transfers from long-term debt |
|
(25,000 |
) |
(19,000 |
) |
||
Repayment of long-term debt |
|
(1,367 |
) |
|
|
||
Net proceeds of issuance of senior debt |
|
221,749 |
|
|
|
||
Proceeds from exercise of stock options |
|
9,016 |
|
19,187 |
|
||
Stock repurchases |
|
(45,217 |
) |
|
|
||
Cash dividends paid |
|
(19,914 |
) |
(19,243 |
) |
||
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
366,732 |
|
147,580 |
|
||
|
|
|
|
|
|
||
Net increase (decrease) in cash and cash equivalents |
|
144,018 |
|
(115,675 |
) |
||
Cash and cash equivalents at beginning of year |
|
957,273 |
|
723,018 |
|
||
Cash and cash equivalents at end of period |
|
$ |
1,101,291 |
|
$ |
607,343 |
|
|
|
|
|
|
|
||
Supplemental Disclosures of Cash Flow Information: |
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
||
Interest |
|
$ |
31,309 |
|
$ |
51,029 |
|
Income taxes |
|
44,000 |
|
28,500 |
|
||
|
|
|
|
|
|
||
Non-cash investing activities: |
|
|
|
|
|
||
Transfer from loans to foreclosed assets |
|
$ |
|
|
$ |
530 |
|
Transfer from long-term debt to short-term borrowings |
|
15,000 |
|
25,000 |
|
See accompanying Notes to the Unaudited Consolidated Financial Statements.
4
CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
(Unaudited)
|
|
For the six
months ended |
|
||||
Dollars in thousands |
|
2003 |
|
2002 |
|
||
|
|
|
|
|
|
||
Common Stock |
|
|
|
|
|
||
Balance, beginning of period |
|
$ |
50,283 |
|
$ |
48,150 |
|
Stock issued for acquisitions |
|
|
|
1,208 |
|
||
Stock options exercised |
|
2 |
|
765 |
|
||
Restricted stock and units issued |
|
170 |
|
|
|
||
Balance, end of period |
|
50,455 |
|
50,123 |
|
||
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
||
Balance, beginning of period |
|
400,866 |
|
301,022 |
|
||
Tax benefit from stock options |
|
1,601 |
|
7,836 |
|
||
Stock options exercised |
|
(5,279 |
) |
18,422 |
|
||
Restricted stock and units issued |
|
7,553 |
|
|
|
||
Excess of market value of shares issued for acquisitions over historical cost |
|
|
|
68,778 |
|
||
Balance, end of period |
|
404,741 |
|
396,058 |
|
||
|
|
|
|
|
|
||
Accumulated other comprehensive income |
|
|
|
|
|
||
Balance, beginning of period |
|
40,400 |
|
10,674 |
|
||
Other comprehensive income (loss) net of income taxes |
|
(619 |
) |
14,999 |
|
||
Balance, end of period |
|
39,781 |
|
25,673 |
|
||
|
|
|
|
|
|
||
Retained earnings |
|
|
|
|
|
||
Balance, beginning of period |
|
675,195 |
|
530,731 |
|
||
Net income |
|
89,736 |
|
89,996 |
|
||
Dividends paid |
|
(19,914 |
) |
(19,243 |
) |
||
Balance, end of period |
|
745,017 |
|
601,484 |
|
||
|
|
|
|
|
|
||
Deferred equity compensation |
|
|
|
|
|
||
Balance, beginning of period |
|
|
|
|
|
||
Unamortized cost of restricted stock and units |
|
(7,595 |
) |
|
|
||
Balance, end of period |
|
(7,595 |
) |
|
|
||
|
|
|
|
|
|
||
Treasury shares |
|
|
|
|
|
||
Balance, beginning of period |
|
(56,785 |
) |
|
|
||
Purchase of shares |
|
(45,217 |
) |
|
|
||
Issuance of shares for stock options |
|
14,293 |
|
|
|
||
Balance, end of period |
|
(87,709 |
) |
|
|
||
|
|
|
|
|
|
||
Total shareholders equity |
|
$ |
1,144,690 |
|
$ |
1,073,338 |
|
See accompanying Notes to the Unaudited Consolidated Financial Statements.
5
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 Corporations Annual Report on Form 10-K for the year ended December 31, 2002. The results for the 2003 interim periods are not necessarily indicative of the results expected for the full year.
3. Trading account securities are stated at market value. Investments not classified as trading securities are classified as securities available-for-sale and recorded at fair value. Unrealized holding gains or losses for securities available-for-sale, net of taxes are excluded from net income and are reported as other comprehensive income included as a separate component of shareholders equity.
4. Certain prior periods data have been reclassified to conform to current period presentation.
5. Reserves established as a purchase price adjustment for the February 29, 2000 acquisition of The Pacific Bank N.A. of $0.9 million for exit costs relating to surplus space remain as of June 30, 2003. Reserves established as a purchase price adjustment for the February 28, 2002 acquisition of Civic BanCorp of $0.8 million for exit costs relating to surplus space remain as of June 30, 2003.
6. On February 13, 2003, the Corporation issued $225 million of 5.125 percent Senior Notes due 2013 in a private placement. A like amount of exchange notes were subsequently registered pursuant to the Securities Act of 1933 in April 2003 and 100 percent of the Senior Notes were exchanged for the registered notes in an exchange offering with the Senior Notes which closed on May 29, 2003.
7. On January 22, 2003, the Board of Directors authorized a 1 million-share stock buyback program. During the second quarter of 2003, 537,300 shares were repurchased under this program at an average price of $41.64 per share. A total number of 750,100 shares have been repurchased under this program at an average price of $42.47 per share leaving 249,900 shares available for repurchase. Shares will be repurchased on a selective basis from time to time in open market transactions. The shares purchased under the buyback programs may be reissued for acquisitions, upon the exercise of stock options, or for other general corporate purposes. There were 2,027,574 treasury shares at June 30, 2003.
On July 15, 2003, the Board of Directors authorized the repurchase of 500,000 additional shares of City National Corporation stock, following completion of the Companys current buyback initiative.
Basic earnings per share is based on the weighted average shares of common stock outstanding less unvested restricted shares and units. Diluted earnings per share gives effect to all dilutive potential common shares which consists of stock options and restricted shares and units that were outstanding during the period. At June 30, 2003, 1,189,835 stock options were antidilutive.
8. The Company applies APB Opinion No. 25 in accounting for stock option plans and, accordingly, no compensation cost has been recognized for its plans in the financial statements. As a practice, the Corporations stock option grants are such that the exercise price equals the current market price of the common stock. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123 using the Black Scholes option-pricing model, the Companys proforma net income would have been reduced to the proforma amounts indicated below:
6
|
|
For the
three months ended |
|
For the six
months ended |
|
||||||||
Dollars in thousands, except for per share amounts |
|
2003 |
|
2002 |
|
2003 |
|
2002 |
|
||||
Net income, as reported |
|
$ |
46,081 |
|
$ |
45,760 |
|
$ |
89,736 |
|
$ |
89,996 |
|
Proforma net income |
|
44,529 |
|
43,219 |
|
86,717 |
|
84,914 |
|
||||
Net income per share, basic, as reported |
|
0.95 |
|
0.92 |
|
1.85 |
|
1.82 |
|
||||
Proforma net income per share, basic |
|
0.92 |
|
0.86 |
|
1.79 |
|
1.72 |
|
||||
Net income per share, diluted, as reported |
|
0.93 |
|
0.88 |
|
1.80 |
|
1.75 |
|
||||
Proforma net income per share, diluted |
|
0.90 |
|
0.83 |
|
1.74 |
|
1.65 |
|
||||
Percentage reduction in net income per share, diluted |
|
3.32 |
% |
5.68 |
% |
3.33 |
% |
5.71 |
% |
||||
During the latter part of the quarter, stock-based compensation performance awards for 2002 were granted to colleagues of the Company. These performance awards for the first time included restricted stock grants with fewer stock options, which reduced the total number of shares awarded but better aligned the interests of shareholders and colleagues. The Company recorded $129,000 in expense for restricted stock awards in the second quarter, and going forward expects to expense $387,000 quarterly for this stock award.
9. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities. Interpretation 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The recognition and measurement provisions of Interpretation 46 are effective for newly created variable interest entities formed after January 31, 2003, and for existing variable interest entities, on the first interim or annual reporting period beginning after June 15, 2003. The Company will adopt the provisions of Interpretation 46 for existing variable interest entities on July 1, 2003, which are not expected to have a material effect on the Companys financial statements.
In April 2003, the FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. Statement 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. In particular, this Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative and when a derivative contains a financing component that warrants special reporting in the statement of cash flows. This Statement is generally effective for contracts entered into or modified after June 30, 2003 and is not expected to have a material impact on the Companys financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (SFAS No. 150). SFAS No. 150 requires issuers to classify as liabilities (or assets in some circumstances) three classes of freestanding financial instruments that embody obligations for the issuer. Generally, SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. SFAS No. 150 is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before May 15, 2003 and still existing at the beginning of the interim period of adoption. The adoption of SFAS No. 150 is not expected to have a material effect on the Companys financial statements, as the preferred securities of our subsidiary trusts will continue to be reported as a liability on the consolidated statements of financial condition.
10. On April 1, 2003, the Corporation acquired Convergent Capital Management LLC, a privately held Chicago-based company, and substantially all of its asset management holdings, including its majority ownership interests in eight asset management firms and minority interests in two additional firms. Combined, these 10 firms manage assets of approximately $6.9 billion as of June 30, 2003. The purchase price was $49.0 million, comprised of cash and the assumption of approximately $7.5 million of debt. The acquisition preliminarily resulted in $25.8 million in customer contract intangibles, which is being amortized over 20 years, and $25.1 million in goodwill.
11. On July 15, 2003, the Board of Directors approved a 37 percent increase in the Companys quarterly common stock cash dividend. The new quarterly dividend of $0.28 per share is up from the $0.205 per share previously paid.
7
CITY NATIONAL CORPORATION
FINANCIAL HIGHLIGHTS
(Unaudited)
|
|
At or for the three months ended |
|
Percentage
change |
|
|||||||||
Dollars in thousands, except per share amounts |
|
June
30, |
|
March
31, |
|
June
30, |
|
March
31, |
|
June
30, |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
For The Quarter |
|
|
|
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
46,081 |
|
$ |
43,655 |
|
$ |
45,760 |
|
6 |
% |
1 |
% |
Net income per common share, basic |
|
0.95 |
|
0.89 |
|
0.92 |
|
7 |
|
3 |
|
|||
Net income per common share, diluted |
|
0.93 |
|
0.87 |
|
0.88 |
|
7 |
|
6 |
|
|||
Dividends, per common share |
|
0.205 |
|
0.205 |
|
0.195 |
|
0 |
|
5 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
At Quarter End |
|
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
$ |
12,354,833 |
|
$ |
12,012,472 |
|
$ |
10,982,420 |
|
3 |
|
12 |
|
Deposits |
|
10,166,806 |
|
9,863,846 |
|
8,797,167 |
|
3 |
|
16 |
|
|||
Loans |
|
7,590,226 |
|
7,832,823 |
|
7,854,530 |
|
(3 |
) |
(3 |
) |
|||
Securities |
|
2,992,686 |
|
2,531,809 |
|
1,919,985 |
|
18 |
|
56 |
|
|||
Shareholders equity |
|
1,144,690 |
|
1,121,689 |
|
1,073,338 |
|
2 |
|
7 |
|
|||
Book value per share |
|
23.77 |
|
23.09 |
|
21.41 |
|
3 |
|
11 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Average Balances |
|
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
$ |
11,914,869 |
|
$ |
11,480,626 |
|
$ |
10,934,265 |
|
4 |
|
9 |
|
Deposits |
|
9,774,905 |
|
9,373,839 |
|
8,551,230 |
|
4 |
|
14 |
|
|||
Loans |
|
7,793,863 |
|
7,964,338 |
|
7,889,005 |
|
(2 |
) |
(1 |
) |
|||
Securities |
|
2,900,785 |
|
2,441,796 |
|
2,029,742 |
|
19 |
|
43 |
|
|||
Shareholders equity |
|
1,131,682 |
|
1,117,573 |
|
1,047,042 |
|
1 |
|
8 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Selected Ratios |
|
|
|
|
|
|
|
|
|
|
|
|||
Return on average assets |
|
1.55 |
% |
1.54 |
% |
1.68 |
% |
1 |
|
(8 |
) |
|||
Return on average shareholders equity |
|
16.33 |
|
15.84 |
|
17.53 |
|
3 |
|
(7 |
) |
|||
Corporations tier 1 leverage |
|
7.17 |
|
7.65 |
|
7.44 |
|
(6 |
) |
(4 |
) |
|||
Corporations tier 1 risk-based capital |
|
10.21 |
|
10.30 |
|
9.74 |
|
(1 |
) |
5 |
|
|||
Corporations total risk-based capital |
|
14.45 |
|
14.46 |
|
14.24 |
|
0 |
|
1 |
|
|||
Dividend payout ratio, per share |
|
21.51 |
|
22.91 |
|
21.34 |
|
(6 |
) |
1 |
|
|||
Net interest margin |
|
4.79 |
|
5.07 |
|
5.35 |
|
(6 |
) |
(10 |
) |
|||
Efficiency ratio * |
|
52.53 |
|
50.28 |
|
47.95 |
|
4 |
|
10 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Asset Quality Ratios |
|
|
|
|
|
|
|
|
|
|
|
|||
Nonaccrual loans to total loans |
|
0.91 |
% |
1.27 |
% |
0.82 |
% |
(28 |
) |
11 |
|
|||
Nonaccrual loans and ORE to toal loans and ORE |
|
0.92 |
|
1.28 |
|
0.83 |
|
(28 |
) |
11 |
|
|||
Allowance for credit losses to total loans |
|
2.25 |
|
2.16 |
|
2.01 |
|
4 |
|
12 |
|
|||
Allowance for credit losses to non accrual loans |
|
246.37 |
|
169.93 |
|
244.67 |
|
45 |
|
1 |
|
|||
Net charge-offs to average loans - annualized |
|
(0.52 |
) |
(0.64 |
) |
(0.81 |
) |
(19 |
) |
(36 |
) |
* The efficiency ratio is defined as noninterest expense excluding ORE expense divided by total revenue (net interest income on a tax-equivalent basis and noninterest income).
8
ITEM 2. MANAGEMENTS 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.
RESULTS OF OPERATIONS
Critical Accounting Policies
The Companys accounting policies are fundamental to understanding managements discussion and analysis of results of operations and financial condition. The Company has identified four policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the accounting for securities, the allowance for credit losses, derivatives and hedging activities and stock based performance plans. The Company, in consultation with the Audit Committee, has reviewed and approved these critical accounting policies, which are further described in Managements Discussion and Analysis and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in the Companys 2002 Form 10-K.
Overview
The Corporation recorded net income of $46.1 million, or $0.93 per common share, for the second quarter of 2003, compared with net income of $45.8 million, or $0.88 per share, for the second quarter of 2002 on fewer common shares outstanding this year.
For the first half of 2003, City National Corporation recorded net income of $89.7 million, or $1.80 per share, compared with net income of $90.0 million, or $1.75 per share, reported for the first half of 2002.
HIGHLIGHTS
Average core deposits for the second quarter were up 21 percent from a year ago, up 5 percent from the prior quarter and up 23 percent for the first six months from the same period last year.
Average loans for the first six months were up 3 percent from the same period last year. However, average loans for the second quarter declined 1 percent from a year ago and were 2 percent lower than the prior quarter. These declines reflect the continued slow demand for commercial loans and the Companys continuing attention to credit quality.
Net interest income for the first half of 2003 increased 1 percent over the first half of 2002 but fell 3 percent in the second quarter compared with the year ago quarter. This decline is consistent with the compression in the net interest margin to 4.79 percent during the period.
Nonaccrual loans fell by $30.4 million, or 30 percent, from March 31, 2003 to $69.4 million, contributing to a lower provision for credit losses of $11.5 million for the second quarter of 2003.
Exposure to syndicated non-relationship commercial and purchased media and telecommunication loans declined 40 percent from March 31, 2003 to $52.2 million at June 30, 2003.
Fueled by the acquisition of Convergent Capital Management (CCM) in April 2003, noninterest income continued to increase. It rose 16 percent over both the second quarter of 2002 and the first quarter of this year. For the first six months, noninterest income was up 13 percent from the same period last year.
9
$ in millions, |
|
For the
three months ended |
|
% |
|
For the
three |
|
For the
six months ended |
|
% |
|
|||||||||
|
2003 |
|
2002 |
|
|
|
2003 |
|
2002 |
|
|
|||||||||
Earnings Per Share |
|
$ |
0.93 |
|
$ |
0.88 |
|
6 |
|
$ |
0.87 |
|
$ |
1.80 |
|
$ |
1.75 |
|
3 |
|
Net Income |
|
46.1 |
|
45.8 |
|
1 |
|
43.7 |
|
89.7 |
|
90.0 |
|
(0 |
) |
|||||
Average Assets |
|
11,914.9 |
|
10,934.3 |
|
9 |
|
11,480.6 |
|
11,698.9 |
|
10,640.8 |
|
10 |
|
|||||
Return on Average Assets |
|
1.55 |
% |
1.68 |
% |
(8 |
) |
1.54 |
% |
1.55 |
% |
1.71 |
% |
(9 |
) |
|||||
Return on Average Equity |
|
16.33 |
|
17.53 |
|
(7 |
) |
15.84 |
|
16.09 |
|
18.21 |
|
(12 |
) |
|||||
Return on average assets for the second quarter and the first six months of 2003 declined due to an increase in average assets, primarily lower-yielding securities. The lower return on average shareholders equity was due primarily to a higher level of shareholders equity from retained net income, issuance of restricted shares to colleagues, and from the exercise of stock options, net of treasury share repurchases.
Outlook
Consistent with its July 15, 2003 second quarter earnings release, management currently expects net income per diluted common share for 2003 to be approximately 4 to 6 percent higher than net income per diluted common share for 2002 based on the business indicators below:
Average loan growth flat to 2 percent
Average deposit growth 10 to 13 percent
Net interest margin 4.75 to 4.90 percent
Provision for credit losses $50 million to $65 million
Noninterest income growth 18 to 21 percent
Noninterest expense growth 9 to 12 percent
Effective tax rate 31 to 33 percent
Revenues
Revenues (net interest income plus noninterest income) increased 2 percent to $172.2 million in the second quarter of 2003 from $169.3 million in the second quarter of 2002 and increased 3 percent from the first quarter of 2003 due in part to the acquisition of CCM in April 2003. For the first half of 2003, revenues increased 4 percent to $339.4 million compared with $327.0 million for the first half of 2002.
Net Interest Income
Net interest income for the second quarter of 2003 was $130.8 million on a fully taxable-equivalent basis, a 3 percent decrease from $134.3 million in the second quarter of 2002 due to lower interest rates and lower commercial loan demand. Fully taxable-equivalent net interest income for the first six months of 2003 was $262.6 million compared with $259.7 million for the first six months of 2002.
|
|
For the
three months ended |
|
% |
|
For the
three |
|
For the
six months ended |
|
% |
|
|||||||||
$ in millions |
|
2003 |
|
2002 |
|
|
|
2003 |
|
2002 |
|
|
||||||||
Average Loans |
|
$ |
7,793.9 |
|
$ |
7,889.0 |
|
(1 |
) |
$ |
7,964.3 |
|
$ |
7,878.6 |
|
$ |
7,678.4 |
|
3 |
|
Average Securities |
|
2,900.8 |
|
2,029.7 |
|
43 |
|
2,441.8 |
|
2,672.6 |
|
1,977.4 |
|
35 |
|
|||||
Average Deposits |
|
9,774.9 |
|
8,551.2 |
|
14 |
|
9,373.8 |
|
9,575.5 |
|
8,244.1 |
|
16 |
|
|||||
Average Core Deposits |
|
8,763.1 |
|
7,238.8 |
|
21 |
|
8,326.5 |
|
8,546.0 |
|
6,921.5 |
|
23 |
|
|||||
Fully Taxable-Equivalent Net Interest Income |
|
130.8 |
|
134.3 |
|
(3 |
) |
131.9 |
|
262.6 |
|
259.7 |
|
1 |
|
|||||
Net Interest Margin |
|
4.79 |
% |
5.35 |
% |
(10 |
) |
5.07 |
% |
4.93 |
% |
5.35 |
% |
(8 |
) |
|||||
Second-quarter and year-to-date 2003 average deposits continued to increase over the prior-year periods as well as from the prior quarter.
Average loans for the second quarter of 2003 declined compared with the same period last year and the prior quarter due to economic uncertainties and the emphasis on credit quality. However, average loans for the first six months of 2003 increased over the same period last year.
The net interest margin narrowed due to a flattening yield curve, mortgage prepayment activity and low interest rates.
10
Compared with the prior-year second-quarter averages, commercial loans declined 8 percent, residential first mortgage loans rose 1 percent, real estate mortgage loans rose 6 percent, and real estate construction loans rose 9 percent. Compared with the prior quarter, average real estate construction loans increased while all other loan categories fell. Compared with the first six months of 2002, commercial loans decreased 2 percent, residential first mortgage loans rose 4 percent, real estate mortgage loans rose 9 percent, and real estate construction loans rose 9 percent.
Average securities, principally with lower yields and shorter durations, continued to increase as deposits grew strongly. As of June 30, 2003 unrealized gains on securities available-for-sale were $57.3 million.
During the second quarter of 2003, average core deposits ¾ which include all deposits except time deposits of $100,000 or more ¾ rose to $8.8 billion, an increase of 21 percent over the $7.2 billion reported for the second quarter of 2002. They rose 5 percent over the first quarter of 2003. For the first half of 2003, average core deposits increased 23 percent over the same period last year. Average core deposits represented 90 percent of the total average deposit base for the second quarter of 2003, compared with 85 percent for the second quarter of 2002 and 89 percent for the first quarter of 2003. For the first half of 2003, average core deposits were 89 percent of total average deposits compared with 84 percent for the first half of 2002. New clients, additional trust and escrow deposits and higher client balances maintained as deposits to pay for services contributed to the continued growth of deposits.
The Banks prime rate was 4.00 percent as of June 30, 2003 compared with 4.75 percent a year earlier.
As part of the Companys long-standing asset liability management strategy, its plain vanilla interest rate swaps hedging loans, deposits and borrowings, with a notional value of $976.4 million, added $7.5 million to net interest income in the second quarter of 2003. That compared with $8.5 million in the second quarter of 2002 and $7.5 million for the first quarter of 2003. These amounts included $5.2 million, $3.7 million and $4.5 million, respectively, for interest swaps qualifying as fair-value hedges. Income from swaps qualifying as cash-flow hedges was $2.3 million for the second quarter of 2003, compared with $4.8 million for the second quarter of 2002 and $3.0 million for the first quarter of 2003. For the first half of 2003, interest rate swaps added $15.0 million to net interest income, compared with $16.4 million for the first half of 2002. These amounts include $9.7 million and $6.9 million, respectively, for interest swaps qualifying as fair value hedges. Income from existing swaps qualifying as cash flow hedges of loans expected to be recorded in net interest income within the next 12 months is $8.5 million.
Interest income recovered on nonaccrual and charged-off loans included above was $0.4 million for the second quarter of 2003, compared with $0.6 million for the second quarter of 2002 and $0.6 million for the first quarter of 2003, respectively.
The following tables present the components of net interest income on a fully taxable-equivalent basis for the three and six months ended June 30, 2003 and 2002. 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 percent.
11
Net Interest Income Summary
|
|
For the
three months ended |
|
For the
three months ended |
|
||||||||||||
Dollars in thousands |
|
Average |
|
Interest |
|
Average |
|
Average |
|
Interest |
|
Average |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
3,402,342 |
|
$ |
44,309 |
|
5.22 |
% |
$ |
3,687,873 |
|
$ |
55,856 |
|
6.07 |
% |
Real estate mortgages |
|
1,906,995 |
|
31,297 |
|
6.58 |
|
1,791,314 |
|
32,651 |
|
7.31 |
|
||||
Residential first mortgages |
|
1,733,015 |
|
26,737 |
|
6.19 |
|
1,718,680 |
|
29,468 |
|
6.88 |
|
||||
Real estate construction |
|
679,541 |
|
8,903 |
|
5.25 |
|
622,223 |
|
8,780 |
|
5.66 |
|
||||
Installment |
|
71,970 |
|
1,409 |
|
7.85 |
|
68,915 |
|
1,558 |
|
9.07 |
|
||||
Total loans (1) |
|
7,793,863 |
|
112,655 |
|
5.80 |
|
7,889,005 |
|
128,313 |
|
6.52 |
|
||||
Securities available-for-sale |
|
2,844,001 |
|
34,440 |
|
4.86 |
|
1,980,089 |
|
30,079 |
|
6.09 |
|
||||
Federal funds sold and securities purchased under resale agreements |
|
246,559 |
|
771 |
|
1.25 |
|
149,255 |
|
704 |
|
1.89 |
|
||||
Trading account securities |
|
56,784 |
|
97 |
|
0.69 |
|
49,653 |
|
184 |
|
1.49 |
|
||||
Total interest-earning assets |
|
10,941,207 |
|
147,963 |
|
5.42 |
|
10,068,002 |
|
159,280 |
|
6.35 |
|
||||
Allowance for credit losses |
|
(174,270 |
) |
|
|
|
|
(160,779 |
) |
|
|
|
|
||||
Cash and due from banks |
|
429,788 |
|
|
|
|
|
414,851 |
|
|
|
|
|
||||
Other nonearning assets |
|
718,144 |
|
|
|
|
|
612,191 |
|
|
|
|
|
||||
Total assets |
|
$ |
11,914,869 |
|
|
|
|
|
$ |
10,934,265 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest checking accounts |
|
$ |
711,609 |
|
304 |
|
0.17 |
|
$ |
627,118 |
|
405 |
|
0.26 |
|
||
Money market accounts |
|
3,097,697 |
|
7,257 |
|
0.94 |
|
2,388,757 |
|
8,512 |
|
1.43 |
|
||||
Savings deposits |
|
205,378 |
|
239 |
|
0.47 |
|
229,726 |
|
504 |
|
0.88 |
|
||||
Time deposits - under $100,000 |
|
212,060 |
|
931 |
|
1.76 |
|
226,137 |
|
1,339 |
|
2.37 |
|
||||
Time deposits - $100,000 and over |
|
1,011,850 |
|
3,817 |
|
1.51 |
|
1,312,423 |
|
7,408 |
|
2.26 |
|
||||
Total interest - bearing deposits |
|
5,238,594 |
|
12,548 |
|
0.96 |
|
4,784,161 |
|
18,168 |
|
1.52 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal funds purchased and securities sold under repurchase agreements |
|
146,000 |
|
414 |
|
1.14 |
|
201,489 |
|
805 |
|
1.60 |
|
||||
Other borrowings |
|
709,391 |
|
4,247 |
|
2.40 |
|
1,021,421 |
|
5,964 |
|
2.34 |
|
||||
Total interest - bearing liabilities |
|
6,093,985 |
|
17,209 |
|
1.13 |
|
6,007,071 |
|
24,937 |
|
1.67 |
|
||||
Noninterest - bearing deposits |
|
4,536,311 |
|
|
|
|
|
3,767,069 |
|
|
|
|
|
||||
Other liabilities |
|
152,891 |
|
|
|
|
|
113,083 |
|
|
|
|
|
||||
Shareholders equity |
|
1,131,682 |
|
|
|
|
|
1,047,042 |
|
|
|
|
|
||||
Total liabilities and shareholders equity |
|
$ |
11,914,869 |
|
|
|
|
|
$ |
10,934,265 |
|
|
|
|
|
||
Net interest spread |
|
|
|
|
|
4.29 |
% |
|
|
|
|
4.68 |
% |
||||
Fully taxable-equivalent net interest income |
|
|
|
$ |
130,754 |
|
|
|
|
|
$ |
134,343 |
|
|
|
||
Net interest margin |
|
|
|
|
|
4.79 |
% |
|
|
|
|
5.35 |
% |
(1) Includes average nonaccrual loans of $79,818 and $58,210 for 2003 and 2002, respectively.
(2) Loan income includes loan fees of $5,620 and $5,574 for 2003 and 2002, respectively.
12
Net Interest Income Summary
|
|
For the
six months ended |
|
For the
six months ended |
|
||||||||||||
Dollars in thousands |
|
Average |
|
Interest |
|
Average |
|
Average |
|
Interest |
|
Average |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
3,480,938 |
|
$ |
91,499 |
|
5.30 |
% |
$ |
3,560,880 |
|
$ |
108,865 |
|
6.17 |
% |
Real estate mortgages |
|
1,907,770 |
|
62,949 |
|
6.65 |
|
1,754,779 |
|
63,548 |
|
7.30 |
|
||||
Residential first mortgages |
|
1,744,861 |
|
54,901 |
|
6.35 |
|
1,676,088 |
|
57,747 |
|
6.95 |
|
||||
Real estate construction |
|
671,791 |
|
17,743 |
|
5.33 |
|
616,582 |
|
17,174 |
|
5.62 |
|
||||
Installment |
|
73,267 |
|
2,909 |
|
8.01 |
|
70,059 |
|
3,165 |
|
9.11 |
|
||||
Total loans (1) |
|
7,878,627 |
|
230,001 |
|
5.89 |
|
7,678,388 |
|
250,499 |
|
6.58 |
|
||||
Securities available-for-sale |
|
2,616,060 |
|
65,900 |
|
5.08 |
|
1,922,114 |
|
59,233 |
|
6.21 |
|
||||
Federal funds sold and securities purchased under resale agreements |
|
190,088 |
|
1,182 |
|
1.25 |
|
139,530 |
|
1,211 |
|
1.75 |
|
||||
Trading account securities |
|
56,501 |
|
198 |
|
0.71 |
|
55,319 |
|
392 |
|
1.43 |
|
||||
Total interest-earning assets |
|
10,741,276 |
|
297,281 |
|
5.58 |
|
9,795,351 |
|
311,335 |
|
6.41 |
|
||||
Allowance for credit losses |
|
(171,860 |
) |
|
|
|
|
(155,494 |
) |
|
|
|
|
||||
Cash and due from banks |
|
435,402 |
|
|
|
|
|
419,075 |
|
|
|
|
|
||||
Other nonearning assets |
|
694,130 |
|
|
|
|
|
581,894 |
|
|
|
|
|
||||
Total assets |
|
$ |
11,698,948 |
|
|
|
|
|
$ |
10,640,826 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest checking accounts |
|
$ |
693,311 |
|
641 |
|
0.19 |
|
$ |
596,087 |
|
758 |
|
0.26 |
|
||
Money market accounts |
|
3,043,562 |
|
14,830 |
|
0.98 |
|
2,261,972 |
|
16,259 |
|
1.45 |
|
||||
Savings deposits |
|
201,856 |
|
501 |
|
0.50 |
|
236,291 |
|
1,231 |
|
1.05 |
|
||||
Time deposits - under $100,000 |
|
213,865 |
|
1,941 |
|
1.83 |
|
230,197 |
|
2,937 |
|
2.57 |
|
||||
Time deposits - $100,000 and over |
|
1,029,504 |
|
8,109 |
|
1.59 |
|
1,322,541 |
|
15,926 |
|
2.43 |
|
||||
Total interest - bearing deposits |
|
5,182,098 |
|
26,022 |
|
1.01 |
|
4,647,088 |
|
37,111 |
|
1.61 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal funds purchased and securities sold under repurchase agreements |
|
182,556 |
|
1,039 |
|
1.15 |
|
201,352 |
|
1,585 |
|
1.59 |
|
||||
Other borrowings |
|
662,676 |
|
7,607 |
|
2.31 |
|
1,088,880 |
|
12,904 |
|
2.39 |
|
||||
Total interest - bearing liabilities |
|
6,027,330 |
|
34,668 |
|
1.16 |
|
5,937,320 |
|
51,600 |
|
1.75 |
|
||||
Noninterest - bearing deposits |
|
4,393,383 |
|
|
|
|
|
3,596,974 |
|
|
|
|
|
||||
Other liabilities |
|
153,568 |
|
|
|
|
|
109,842 |
|
|
|
|
|
||||
Shareholders equity |
|
1,124,667 |
|
|
|
|
|
996,690 |
|
|
|
|
|
||||
Total liabilities and shareholders equity |
|
$ |
11,698,948 |
|
|
|
|
|
$ |
10,640,826 |
|
|
|
|
|
||
Net interest spread |
|
|
|
|
|
4.42 |
% |
|
|
|
|
4.66 |
% |
||||
Fully taxable-equivalent net interest income |
|
|
|
$ |
262,613 |
|
|
|
|
|
$ |
259,735 |
|
|
|
||
Net interest margin |
|
|
|
|
|
4.93 |
% |
|
|
|
|
5.35 |
% |
(1) Includes average nonaccrual loans of $81,428 and $50,901 for 2003 and 2002, respectively.
(2) Loan income includes loan fees of $11,048 and $11,891 for 2003 and 2002, respectively.
13
Net interest income is impacted by the volume, mix 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 second quarter and the first six months of 2003 and the second quarter and the first six months of 2002, as well as between the second quarter and the first six months of 2002 and the second quarter and the first six months of 2001.
Changes In Net Interest Income
Dollars in thousands |
|
For the
three months ended June 30, |
|
For the
three months ended June 30, |
|
||||||||||||||
|
|
Increase
(decrease) |
|
Net |
|
Increase
(decrease) |
|
Net |
|
||||||||||
|
|
Volume |
|
Rate |
|
|
Volume |
|
Rate |
|
|
||||||||
Interest earned on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans |
|
$ |
(1,542 |
) |
$ |
(14,116 |
) |
$ |
(15,658 |
) |
$ |
24,465 |
|
$ |
(26,972 |
) |
$ |
(2,507 |
) |
Securities available-for-sale |
|
11,282 |
|
(6,921 |
) |
4,361 |
|
5,697 |
|
(3,114 |
) |
2,583 |
|
||||||
Federal funds sold and securities pruchased under resale agreements |
|
358 |
|
(291 |
) |
67 |
|
494 |
|
(658 |
) |
(164 |
) |
||||||
Trading account securities |
|
23 |
|
(110 |
) |
(87 |
) |
(164 |
) |
(310 |
) |
(474 |
) |
||||||
Total interest-earning assets |
|
10,121 |
|
(21,438 |
) |
(11,317 |
) |
30,492 |
|
(31,054 |
) |
(562 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest paid on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest checking deposits |
|
51 |
|
(152 |
) |
(101 |
) |
42 |
|
(122 |
) |
(80 |
) |
||||||
Money market deposits |
|
2,126 |
|
(3,381 |
) |
(1,255 |
) |
5,234 |
|
(9,365 |
) |
(4,131 |
) |
||||||
Savings deposits |
|
(49 |
) |
(216 |
) |
(265 |
) |
(120 |
) |
(1,382 |
) |
(1,502 |
) |
||||||
Other time deposits |
|
(1,572 |
) |
(2,427 |
) |
(3,999 |
) |
(2,002 |
) |
(10,789 |
) |
(12,791 |
) |
||||||
Other borrowings |
|
(2,018 |
) |
(90 |
) |
(2,108 |
) |
(404 |
) |
(7,596 |
) |
(8,000 |
) |
||||||
Total interest-bearing liabilities |
|
(1,462 |
) |
(6,266 |
) |
(7,728 |
) |
2,750 |
|
(29,254 |
) |
(26,504 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
$ |
11,583 |
|
$ |
(15,172 |
) |
$ |
(3,589 |
) |
$ |
27,742 |
|
$ |
(1,800 |
) |
$ |
25,942 |
|
Dollars in thousands |
|
For the
six months ended June 30, |
|
For the
six months ended June 30, |
|
||||||||||||||
|
|
Increase
(decrease) |
|
Net |
|
Increase
(decrease) |
|
Net |
|
||||||||||
|
|
Volume |
|
Rate |
|
|
Volume |
|
Rate |
|
|
||||||||
Interest earned on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans |
|
$ |
6,383 |
|
$ |
(26,881 |
) |
$ |
(20,498 |
) |
$ |
43,159 |
|
$ |
(63,875 |
) |
$ |
(20,716 |
) |
Securities |
|
18,756 |
|
(12,089 |
) |
6,667 |
|
11,637 |
|
(5,611 |
) |
6,026 |
|
||||||
Federal funds sold and securities purchased under resale agreements |
|
371 |
|
(400 |
) |
(29 |
) |
1,120 |
|
(1,380 |
) |
(260 |
) |
||||||
Trading account securities |
|
8 |
|
(202 |
) |
(194 |
) |
(220 |
) |
(753 |
) |
(973 |
) |
||||||
Total interest-earning assets |
|
25,518 |
|
(39,572 |
) |
(14,054 |
) |
55,696 |
|
(71,619 |
) |
(15,923 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest paid on: |
|
|
|