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City National Corp. Reports Operating Results (10-Q)

August 08, 2012 | About:
10qk

10qk

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City National Corp. (CYN) filed Quarterly Report for the period ended 2012-06-30.

City National Corp has a market cap of $2.69 billion; its shares were traded at around $50.66 with a P/E ratio of 14.6 and P/S ratio of 2.3. The dividend yield of City National Corp stocks is 2%.

Highlight of Business Operations:

Through the impairment assessment process, the Company determined that certain non-agency CMOs were other-than-temporarily impaired at June 30, 2012. See Non-Agency CMOs below. The Company recorded impairment losses in earnings on securities available-for-sale of $0.2 million for the three and six months ended June 30, 2012. Impairment losses recognized in earnings on securities available-for-sale during the three and six months ended June 30, 2011 were $0.3 million and $0.5 million, respectively. The Company recognized $4.0 million and $3.8 million of non-credit-related other-than-temporary impairment in AOCI on securities available-for-sale at June 30, 2012 and 2011, respectively. There were no impairment losses recognized in earnings or AOCI for securities held-to-maturity during the three and six months ended June 30, 2012.

The Company held $44.3 million of variable rate non-agency CMOs at June 30, 2012, of which $19.3 million of these securities were other-than-temporarily impaired because the present value of expected cash flows was less than cost. These CMOs have a fixed interest rate for an initial period after which they become variable-rate instruments with annual rate resets. For purposes of projecting future cash flows, the current fixed coupon was used through the reset date for each security. The prevailing LIBOR/Treasury forward curve as of the measurement date was used to project all future floating-rate cash flows based on the characteristics of each security. Other factors considered in the projection of future cash flows include the current level of subordination from other CMO classes, anticipated prepayment rates, cumulative defaults and loss given default. The Company recognized credit-related impairment losses in earnings on its investments in certain variable rate non-agency CMOs totaling $0.2 million for the three and six months ended June 30, 2012. The Company recognized credit-related impairment losses of $0.3 million and $0.5 million in earnings for the three and six months ended June 30, 2011, respectively. The non-credit portion of other-than-temporary impairment for these securities at June 30, 2012 and 2011 was recognized in AOCI and is attributed to external market conditions, primarily the lack of liquidity in these securities, resulting in an increase in interest rate spreads for these securities. The Company also holds $21.2 million in fixed rate non-agency CMOs at June 30, 2012, none of which have experienced any other-than-temporary impairment.

The fully taxable net interest margin was 3.91 percent for the second quarter of 2012, up from 3.74 percent for the first quarter of 2012 and 3.85 percent for the second quarter of 2011. The average yield on earning assets for the second quarter of 2012 was 4.15 percent, up 18 basis points from 3.97 percent for the first quarter of 2012 and down 8 basis points from 4.23 percent for the year-earlier quarter. The average cost of interest-bearing liabilities was 0.55 percent, up 4 basis points from 0.51 percent for the first quarter of 2012, but down 17 basis points from 0.72 percent for the same period in 2011. Fully taxable-equivalent net interest income, which includes amounts to convert nontaxable income to fully taxable-equivalent amounts, was $220.7 million for the second quarter of 2012 compared to $204.7 million for the first quarter of 2012 and $194.4 million for the second quarter of 2011. Fully taxable-equivalent net interest income and dividend income was $221.4 million for the second quarter of 2012 compared with $205.4 million for the first quarter of 2012 and $195.1 million for the same period in 2011. The $26.3 million increase in fully taxable-equivalent net interest and dividend income from the year-ago quarter was primarily generated through income from the payoff and full charge off of covered loans, loans and securities growth (volume variance), and lower rates on interest-bearing deposits, partially offset by lower yields on securities (rate variance).

The Company recognized a net gain on sales of covered OREO of $1.5 million in the second quarter of 2012 compared to $2.1 million in the first quarter of 2012 and $9.1 million in the first quarter of 2011. Other income related to covered assets was $7.0 million in the current quarter and consists primarily of net gain on transfers of covered loans to OREO, the amortization of fair value on acquired unfunded loan commitments and OREO income. Total other income increased from $2.9 million in the first quarter of 2012 primarily because of higher net gains on the transfers of covered loans to OREO, but decreased from $13.5 million in the year-earlier quarter because of lower net gains on transfers of covered loans to OREO. Refer to the above table for additional information on the components of other income related to covered assets for the three and six months ending June 30, 2012, and 2011.

Through the impairment assessment process, the Company determined that certain non-agency CMOs were other-than-temporarily impaired at June 30, 2012. The Company recorded impairment losses in earnings on securities available-for-sale of $0.2 million for the three and six months ended June 30, 2012. Impairment losses recognized in earnings on securities available-for-sale during the three and six months ended June 30, 2011 were $0.3 million and $0.5 million, respectively. The Company recognized $4.0 million and $3.8 million of non-credit-related other-than-temporary impairment in AOCI on securities available-for-sale at June 30, 2012 and 2011, respectively. There were no impairment losses recognized in earnings or AOCI for securities held-to-maturity during the three and six months ended June 30, 2012.

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