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 June 30, 2005

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)

 

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   o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

YES   x         NO   o

Number of shares of common stock outstanding at July 31, 2005 49,178,095

PART 1—FINANCIAL INFORMATON

ITEM 1. FINANCIAL STATEMENTS

CITY NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET

				June 30,			December 31,			June 30,
Dollars in thousands, except per share amounts				2005			2004			2004
				(Unaudited)						(Unaudited)
Assets
Cash and due from banks				$	406,709		$	240,492		$	485,208
Federal funds sold				400,000			427,000			595,000
Due from banks - interest-bearing				34,676			236,362			76,890
Securities available-for-sale—cost $4,075,374; $4,114,620 and $3,586,185 at June 30, 2005, December 31, 2004 and June 30, 2004, respectively				4,057,267			4,114,298			3,518,757
Trading account securities				22,337			75,878			28,893
Loans				8,886,266			8,494,187			8,125,496
Less allowance for loan losses				147,930			148,568			153,271
Net loans				8,738,336			8,345,619			7,972,225
Premises and equipment, net				73,169			68,624			60,488
Deferred tax asset				110,443			102,196			127,991
Goodwill				251,494			253,740			253,736
Intangibles				38,181			41,063			44,360
Bank-owned life insurance				66,509			64,969			64,012
Affordable housing investments				68,222			62,864			65,174
Other assets				205,385			193,693			187,296
Customers’ acceptance liability				2,870			4,715			5,716
Total assets				$	14,475,598		$	14,231,513		$	13,485,746
Liabilities
Demand deposits				$	6,468,339		$	6,026,428		$	5,809,241
Interest checking deposits				791,183			889,512			861,987
Money market deposits				3,508,793			3,760,142			3,601,658
Savings deposits				191,959			196,366			199,650
Time deposits-under $100,000				180,819			181,618			191,250
Time deposits-$100,000 and over				1,011,115			932,849			791,133
Total deposits				12,152,208			11,986,915			11,454,919
Federal funds purchased and securities sold under repurchase agreements				204,052			204,654			94,898
Other short-term borrowings				27,678			125			50,125
Subordinated debt				285,771			288,934			286,896
Long-term debt				233,290			230,416			224,488
Reserve for off-balance sheet credit commitments				13,811			11,751			11,846
Other liabilities				129,630			129,106			101,869
Acceptances outstanding				2,870			4,715			5,716
Total liabilities				13,049,310			12,856,616			12,230,757
Minority interest in consolidated subsidiaries				25,400			26,362			27,180
Commitments and contingencies
Shareholders’ Equity
Preferred Stock authorized - 5,000,000; none outstanding				—			—			—
Common Stock-par value-$1.00; authorized—75,000,000;
Issued - 50,639,861; 50,589,408 and 50,578,256 shares at June 30, 2005, December 31, 2004 and June 30, 2004, respectively				50,640			50,589			50,578
Additional paid-in capital				415,802			410,216			408,463
Accumulated other comprehensive loss				(12,948		)	(1,352		)	(38,418		)
Retained earnings				1,035,589			957,987			886,367
Deferred equity compensation				(16,821		)	(12,262		)	(13,343		)
Treasury shares, at cost—1,117,367; 1,042,629; and 1,268,452 shares at June 30, 2005, December 31, 2004 and June 30, 2004, respectively				(71,374)			(56,643)			(65,838)
Total shareholders’ equity				1,400,888			1,348,535			1,227,809
Total liabilities and shareholders’ equity				$	14,475,598		$	14,231,513		$	13,485,746

 

See accompanying Notes to the Unaudited Consolidated Financial Statements.

2

CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

				For the three months ended June 30,						For the six months ended June 30,
In thousands, except per share amounts				2005			2004			2005			2004
Interest Income
Loans				$	132,621		$	106,448		$	257,878		$	212,434
Securities available-for-sale				40,691			37,486			82,441			74,687
Federal funds sold and securities purchased under resale agreements				547			1,116			758			1,548
Due from banks—interest-bearing				114			92			329			232
Trading account				292			36			509			74
Total interest income				174,265			145,178			341,915			288,975
Interest Expense
Deposits				17,382			9,838			32,625			19,590
Subordinated debt				2,444			1,232			4,652			2,449
Other long-term debt				2,427			1,419			4,740			2,858
Federal funds purchased and securities sold under repurchase agreements				2,265			269			3,721			513
Other short-term borrowings				101			145			105			318
Total interest expense				24,619			12,903			45,843			25,728
Net interest income				149,646			132,275			296,072			263,247
Provision for credit losses				—			—			—			—
Net interest income after provision for credit losses				149,646			132,275			296,072			263,247
Noninterest Income
Trust and investment fees				19,632			16,664			39,069			32,252
Brokerage and mutual fund fees				9,928			9,367			19,796			18,093
Service charges on deposit accounts				8,874			10,942			17,884			22,040
International services				5,908			5,042			10,796			10,168
Bank-owned life insurance				652			715			1,516			1,546
Gain on sale of loans and other assets				162			—			185			—
Gain on sale of securities				844			871			1,099			1,500
Other				5,359			4,665			11,372			9,237
Total noninterest income				51,359			48,266			101,717			94,836
Noninterest Expense
Salaries and employee benefits				63,839			59,306			130,471			118,982
Net occupancy of premises				8,727			7,020			16,343			13,663
Legal and professional fees				10,791			7,359			19,505			14,130
Information services				5,010			4,588			10,176			9,110
Depreciation				3,540			3,274			7,155			6,502
Marketing and advertising				3,943			3,812			7,517			7,319
Office services				2,688			2,487			5,177			4,906
Amortization of intangibles				1,441			1,760			2,882			3,519
Equipment				646			636			1,195			1,401
Other operating				6,796			5,413			13,504			10,654
Total noninterest expense				107,421			95,655			213,925			190,186
Minority interest expense				1,532			1,306			3,343			2,906
Income before income taxes				92,052			83,580			180,521			164,991
Income taxes				34,345			31,380			67,353			61,893
Net income				$	57,707		$	52,200		$	113,168		$	103,098
Net income per share, basic				$	1.18		$	1.07		$	2.30		$	2.11
Net income per share, diluted				$	1.13		$	1.03		$	2.22		$	2.03
Shares used to compute income per share, basic				49,090			48,796			49,101			48,764
Shares used to compute income per share, diluted				51,043			50,925			51,037			50,864
Dividends per share				$	0.36		$	0.32		$	0.72		$	0.64

 

 

See accompanying Notes to the Unaudited Consolidated Financial Statements.

3

CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

				For the six months ended June 30,
Dollars in thousands				2005			2004
Cash Flows From Operating Activities
Net income				$	113,168		$	103,098
Adjustments to net income:
Provision for credit losses				—			—
Amortization of restricted stock grants				1,969			1,265
Amortization of intangibles				2,882			3,519
Depreciation and software amortization				9,105			6,502
Tax benefit from exercise of stock options				4,683			2,559
Deferred income tax benefit				(8,247		)	(62,078		)
Gain on sales of securities				(1,099		)	(1,500		)
Net increase in other assets and other liabilities				(7,500		)	(19,240		)
Net decrease in trading securities				53,541			62,642
Amortization of cost and discount on long-term debt				353			—
Mark to market of long-term debt				(610		)	—
Other, net				5,993			10,319
Net cash provided by operating activities				174,238			107,086
Cash Flows From Investing Activities
Purchase of securities				(411,515		)	(704,411		)
Sales of securities available-for-sale				74,321			61,322
Maturities and paydowns of securities				369,875			403,592
Loan originations net of principal collections				(392,079		)	(242,754		)
Purchase of premises and equipment				(13,650		)	(6,183		)
Other, net				—			(5		)
Net cash (used) by investing activities				(373,048		)	(488,439		)
Cash Flows From Financing Activities
Net increase in deposits				165,293			517,856
Net decrease in federal funds purchased and securities sold under repurchase agreements				(602		)	(16,815		)
Net increase (decrease) in short-term borrowings, net of transfers from long-term debt				27,553			(15,010		)
Net (decrease) in equity notes				(32		)	—
Proceeds from exercise of stock options				14,150			20,378
Stock repurchases				(34,455		)	(43,826		)
Cash dividends paid				(35,566		)	(31,322		)
Net cash provided by financing activities				136,341			431,261
Net (decrease) increase in cash and cash equivalents				(62,469		)	49,908
Cash and cash equivalents at beginning of period				903,854			1,107,190
Cash and cash equivalents at end of period				$	841,385		$	1,157,098
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest				$	44,734		$	26,142
Income taxes				48,439			66,500
Non-cash investing activities:
Transfers from long-term debt to short-term borrowings				—			—

 

See accompanying Notes to the Unaudited Consolidated Financial Statements.

4

CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(Unaudited)

Dollars in thousands				Shares issued		Common stock					Additional paid-in capital					Accumulated other comprehensive income					Retained Earnings			Deferred Compensation					Treasury stock			Total shareholders’ equity
Balance, December 31, 2003				50,459,716			$	50,460				$	401,233				$	12,903			$	814,591			$	(6,699	)		$	(53,232	)		$	1,219,256
Net income				—			—					—					—				103,098				—				—				$	103,098
Other comprehensive income net of tax
Net unrealized loss on securities available-for-sale, net of relassification adjustment of $0.8 million of net gains included in net income				—			—					—					(47,789		)		—				—				—				(47,789		)
Net unrealized loss on cash flow hedges, net of reclassification of $2.8 million of net gains included in net income				—			—					—					(3,532		)		—				—				—				(3,532		)
Total other comprehensive income				—			—					—					(51,321		)		103,098				—				—				51,777
Issuance of shares for stock options				—			—					(8,283		)			—				—				—				31,220				22,937
Restricted stock grants				118,540			118					7,791					—				—				(7,909		)		—				—
Amortization of restricted stock grants				—			—					—					—				—				1,265				—				1,265
Tax benefit from stock options				—			—					7,722					—				—				—				—				7,722
Cash dividends				—			—					—					—				(31,322		)		—				—				(31,322		)
Repurchased shares, net				—			—					—					—				—				—				(43,826		)		(43,826		)
Balance, June 30, 2004				50,578,256			$	50,578				$	408,463				$	(38,418	)		$	886,367			$	(13,343	)		$	(65,838	)		$	1,227,809
Balance, December 31, 2004				50,589,408			$	50,589				$	410,216				$	(1,352	)		$	957,987			$	(12,262	)		$	(56,643	)		$	1,348,535
Net income				—			—					—					—				113,168				—				—				113,168
Other comprehensive income net of tax
Net unrealized loss on securities available-for-sale, net of reclassification adjustment of $4.0 million of net loss included in net income				—			—					—					(10,306		)		—				—				—				(10,306		)
Net unrealized loss on cash flow hedges, net of reclassification of $0.9 million of net gains included in net income				—			—					—					(1,290		)		—				—				—				(1,290		)
Total comprehensive income				—			—					—					(11,596		)		113,168				—				—				101,572
Issuance of shares for stock options				—			—					(3,868		)			—				—				—				17,733				13,865
Restricted stock grants / vesting				50,453			51					4,771					—				—				(6,528		)		1,991				285
Amortization of restricted stock grants				—			—					—					—				—				1,969				—				1,969
Tax benefit from stock options				—			—					4,683					—				—				—				—				4,683
Cash dividends				—			—					—					—				(35,566		)		—				—				(35,566		)
Repurchased shares, net				—			—					—					—				—				—				(34,455		)		(34,455		)
Balance, June 30, 2005				50,639,861			$	50,640				$	415,802				$	(12,948	)		$	1,035,589			$	(16,821	)		$	(71,374	)		$	1,400,888

 

See accompanying Notes to Consolidated Financial Statements.

 

 

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). City National Bank delivers banking, trust and investment services through more than 50 offices in Southern California, the San Francisco Bay Area, and New York City. Because the Bank comprises substantially all of the business of the Corporation, references to the “Company” mean the Corporation and the Bank together. As of July 15, 2005, the Corporation was approved to become a financial holding company pursuant to the Gramm-Leach-Bliley Act of 1999 (the ‘GLB Act’). Subject to the GLB Act and related rules and regulations, a financial holding company may engage in activities that are financial in nature or are incidental to financial activity.

2.     Our accounting and reporting policies conform with generally accepted accounting principles (‘GAAP’) and practices in the financial services industry. To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period. The results of operations reflect any 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 periods 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, 2004. The results for the 2005 interim periods are not necessarily indicative of the results expected for the full year.

3.     Trading account securities are stated at fair 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 reported as other comprehensive income, which is shown as a separate component of shareholders’ equity.

4.     Certain prior periods’ data have been reclassified to conform to current period presentation.

5.     The following table provides information about purchases by the Company of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended June 30, 2005.

Period				Total Number of Shares (or Units) Purchased				Average Price Paid per Share (or Unit)				Total number of Shares (or Units) Purchased as Part  of Publicly Announced Plans or Programs				Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
04/01/05 - 04/30/05					604	(3)			69.18				—	(1)			514,000	(2)

(1)          There were no repurchases by the Company of its common stock pursuant to the repurchase program that was publicly  announced on May 24, 2004 (Program).

(2)          Remaining shares available for repurchase pursuant to the program approved on May 24, 2004 by the Company’s Board of Directors. Unless terminated earlier by resolution of our Board of Directors, the program will expire when we have repurchased all shares authorized for repurchase thereunder.

(3)          During the second quarter of 2005, 604 shares were received in payment of the exercise price of stock options.

6

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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 both June 30, 2005 and June 30, 2004, no stock options were antidilutive.

6.     The Company applies APB Opinion No. 25 “Accounting for Stock Issued to Employees” 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 Corporation’s 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 “Share-Based Payment” using the Black-Scholes option-pricing model, the Company’s proforma net income would have been reduced to the proforma amounts indicated below:

				For the three months ended June 30,						For the six months ended June 30,
Dollars in thousands, except for per share amounts				2005			2004			2005			2004
Net Income, as reported				$	57,707		$	52,200		$	113,168		$	103,098
Total stock-based employee compensation expense under the fair-value method for all awards, net of tax				$	(1,240	)	$	(813	)	$	(2,773	)	$	(1,536	)
Proforma Net Income				56,467			51,387			110,395			101,562
Shares basic, as reported				49,090			48,796			49,101			48,764
Shares diluted, as reported				51,043			50,925			51,037			50,864
Net Income per share, basic, as reported				1.18			1.07			2.30			2.11
Proforma Net Income per share, basic				1.15			1.05			2.25			2.08
Net Income per share, diluted, as reported				1.13			1.03			2.22			2.03
Proforma Net Income per share, diluted				1.11			1.01			2.16			2.00
Percentage reduction in net income per share diluted				1.77		%	1.94		%	2.70		%	1.48		%

 

The Company recorded $1.1 million in expense for restricted stock awards in the second quarter of 2005 and $2.0 million for the first six months of 2005 compared with $0.8 million and $1.3 million for the quarter and first six months of 2004, respectively.

The Black-Scholes option-pricing model requires assumptions on the expected life of the options based upon the pattern of exercise of options granted by the Corporation in the past; volatility based on changes in the price of the Corporation’s common stock during the past 10 years, measured weekly; the dividend yield and the risk-free investment rate. Actual dividend payments will depend upon a number of factors, including future financial results, and may differ substantially from the assumption. The risk-free investment rate is based on the yield on 10-year U.S. Treasury Notes on the grant date. The expected term is based on an historical analysis of exercise activity.

The actual pre-tax value, if any, which a grantee may realize will depend upon the difference between the option exercise price and the market price of the Corporation’s common stock on the date of exercise.

On April 14, 2005 the Securities and Exchange Commission announced a new rule delaying the implementation of Statement of Financial Accounting Standards No. 123R, Share-Based Payment. The Commission’s new rule allows companies to implement Statement No. 123R at the start of their next fiscal year, which begins after June 15, 2005. The Company will comply with the requirements of Statement No. 123R as of January 1, 2006. The current estimate of the full-year cost of complying with Statement No. 123R is $0.07 per share.

7.     As part of its asset and liability management strategies, the Company uses interest rate swaps to reduce cash flow variability and to moderate changes in the fair value of long-term financial instruments. In accordance with Statement of Financial Accounting Standards No. 133 “Accounting for Derivative

7

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Instruments and Hedging Activities,” as amended (SFAS No. 133), the Company recognizes derivatives as assets or liabilities on the balance sheet at their fair value. The treatment of changes in the fair value of derivatives depends on the character of the transaction.

In accordance with SFAS No. 133, the Company documents its hedge relationships, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction at the time the derivative contract is executed. This includes designating each derivative contract as either (i) a “fair value hedge” (a hedge of a recognized asset or liability), (ii) a “cash flow hedge” (a hedge of a forecasted transaction or of the variability of the cash flows to be received or paid related to a recognized asset or liability) or (iii) an “undesignated hedge” (a derivative instrument not designated as a hedging instrument whose change in fair value is recognized as a benefit for protection against changing interest rates). All derivatives designated as fair value or cash flow hedges are linked to specific assets and liabilities on the balance sheet. The Company has not had any undesignated hedges during 2005 or 2004.

Both at inception and at least quarterly thereafter, the Company assesses whether the derivatives used in hedging transactions are highly effective (as discussed in SFAS No. 133) in offsetting changes in either the fair value or cash flows of the hedged item. For cash flow hedges, in which derivatives hedge the variability of cash flows related to loans that are indexed to US dollar LIBOR or to the Bank’s prime interest rate, the interest rate payment characteristics of LIBOR or prime based loans are analyzed, and interest rate swaps are executed to match the key terms of the underlying loan transactions, thus ensuring the effectiveness at inception. At least quarterly, the loan portfolio is evaluated and compared to the related interest rate swap transaction to ensure continuing effectiveness. For fair value hedges, in which derivatives hedge the fair value of certain certificates of deposits, subordinated debt and other long-term debt, the interest rate swaps are structured so that all key terms of the swaps match those of the underlying debt transaction, therefore ensuring hedge effectiveness at inception. On a quarterly basis, fair value hedges are analyzed to ensure that the key terms of the hedged item and hedging instrument remain unchanged, therefore ensuring continuing effectiveness.

For effective fair-value hedges, the changes in the fair value of derivatives is reflected in current earnings on the same line in the consolidated statement of income as the hedged item, i.e. included in interest expense on deposits, other long-term debt and subordinated debt. For ineffective fair value hedges, the changes in fair value (the difference between changes in the fair value of the interest rate swap agreement and the hedged item) are recognized in other non-interest income in the consolidated statement of income. Fair values are determined from verifiable third-party sources that have considerable experience with the interest rate swap market.

For effective cash-flow hedges, changes in the derivatives’ fair value are reported in other comprehensive income. When the cash flows associated with the hedged item are realized, the gain or loss included in other comprehensive income is recognized on the same line in the consolidated statement of income as the hedged item, i.e. included in the interest income on loans. To the extent these derivatives are not effective, changes in their fair values will be immediately recognized in other non-interest income in the consolidated statement of income.

For both fair value and cash flow hedges, the periodic accrual of interest receivable or payable on interest rate swaps is recorded as an adjustment to net interest income for the hedged items.

The Company discontinues hedge accounting prospectively when (i) a derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item, (ii) a derivative expires or is sold, terminated, or exercised, (iii) a derivative is de-designated as a hedge, because it is unlikely that a forecasted transaction will occur; (iv) the Company determines that designation of a derivative as a hedge is no longer appropriate.

8

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If a derivative instrument in a fair value hedge is terminated or the hedge designation removed, the previous adjustments to the carrying amount of the hedged asset or liability are subsequently accounted for in the same manner as other components of the carrying amount of that asset or liability. For interest-earning assets and interest-bearing liabilities, such adjustments are amortized into earnings over the remaining life of the respective asset or liability. If a derivative instrument in a cash flow hedge is terminated or the hedge designation is removed, related amounts reported in other comprehensive income are reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings.

8.     As we previously reported, the California Franchise Tax Board has taken the position that certain real estate investment trust (‘REIT’) and registered investment company (‘RIC’) tax deductions shall be disallowed under California law. As of June 30, 2005, the Company continues to reflect a $36.4 million state tax receivable for the years 2000, 2001 and 2002 after giving effect to reserves for loss contingencies on the refund claims, or an equivalent of $23.7 million after giving effect to Federal tax benefits. Management is aggressively pursuing its claims for REIT and RIC refunds for the 2000 to 2002 tax years, however, no outcome can be predicted with certainty and an adverse outcome on the refund claims could result in a loss of all or a portion of the net $23.7 million state tax receivable.

9.     The Corporation has a profit sharing retirement plan covering eligible employees. Contributions are made annually and are allocated to participants based on their salaries. For the second quarter of 2005, the Company recorded profit sharing contributions expense of $3.2 million and $7.8 million for the six-month period ended June 30, 2005, compared to $4.1 million and $8.0 million for the second quarter of 2004 and the six-month period ending June 30, 2004.

The Company has a Supplemental Executive Retirement Plan (‘SERP’) for one of its officers. At June 30, 2005, there was a $2.3 million unfunded pension liability and a $0.8 million intangible asset related to the SERP. The total expense for the second quarter of 2005 was $0.1 million, and $0.3 million for the six-month period ended June 30, 2005, compared to $0.01 million for the second quarter 2004, and $0.3 million for the six-month period ended June 30, 2004, respectively.

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CITY NATIONAL CORPORATION
FINANCIAL HIGHLIGHTS
(Unaudited)

				At or for the three months ended									Percentage change June 30, 2005 from
				June 30,			March 31,			June 30,			March 31,				June 30,
Dollars in thousands, except per share amounts				2005			2005			2004			2005				2004
For The Quarter
Net income				$	57,707		$	55,461		$	52,200			4	%			11	%
Net income per common share, diluted				1.13			1.09			1.03				4				10
Dividends, per common share				0.36			0.36			0.32				0				13
At Quarter End(1)
Assets				$	14,475,598		$	13,918,038		$	13,485,746			4				7
Loans				8,886,266			8,585,463			8,125,496				4				9
Securities				4,079,604			4,056,459			3,547,650				1				15
Deposits				12,152,208			11,762,624			11,454,919				3				6
Shareholders’ equity				1,400,888			1,320,183			1,227,809				6				14
Book value per share				28.51			26.97			25.05				6				14
Average Balance(1)
Assets				$	14,040,591		$	13,873,392		$	13,223,397			1				6
Loans				8,762,411			8,585,201			8,053,916				2				9
Securities				4,071,516			4,115,383			3,600,997				(1	)			13
Deposits				11,678,544			11,572,401			11,121,541				1				5
Shareholders’ equity				1,358,941			1,352,472			1,230,167				0				10
Selected Ratios
Return on average assets (annualized)				1.65		%	1.62		%	1.59		%		2				4
Return on average shareholders’ equity (annualized)				17.03			16.63			17.07				2				(0	)
Corporation’s tier 1 leverage				8.39			8.12			7.68				3				9
Corporation’s tier 1 risk-based capital				11.91			11.69			11.08				2				7
Corporation’s total risk-based capital				15.45			15.27			14.77				1				5
Average shareholders’ equity to average assets				9.68			9.75			9.30				(1	)			4
Dividend payout ratio, per share				30.85			32.02			30.06				(4	)			3
Net interest margin				4.73			4.75			4.49				(0	)			5
Efficiency ratio(2)				53.39			54.10			52.72				(1	)			1
Asset Quality Ratios
Nonaccrual loans to total loans				0.25		%	0.35		%	0.51		%		(29	)			(51	)
Nonaccrual loans and OREO to total loans and OREO				0.25			0.35			0.51				(29	)			(51	)
Allowance for loan losses to total loans				1.66			1.72			1.89				(3	)			(12	)
Allowance for loan losses to nonaccrual loans				667.52			493.37			366.39				35				82
Net charge-offs to average loans—annualized				0.05			0.01			N/M				400				N/M

(1)          Certain prior period balances have been restated to conform to the current period presentation.

(2)          The efficiency ratio is defined as noninterest expense, excluding OREO expense, divided by total revenue (net interest income on a tax-equivalent basis and noninterest income).

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