10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001
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 incorporation or organization)	(I.R.S. Employer Identification No.)
City National Center 400 North Roxbury Drive, Beverly Hills, California	90210
(Address of principal executive offices)	(Zip code)

Registrant's telephone number, including area code (310) 888-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $1.00 par value Preferred Stock Purchase Rights	New York Stock Exchange New York Stock Exchange

No securities are registered pursuant to Section 12(g) of the Act

        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     

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.        

        Number of shares of common stock outstanding at March 1, 2002: 49,540,891

        Aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of March 1, 2002: $2,041,605,497

Documents Incorporated by Reference

The information required to be disclosed pursuant to Part III of this report either shall be (i) deemed to be incorporated by reference from selected portions of City National Corporation's definitive proxy statement for the 2002 annual meeting of stockholders, if such proxy statement is filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the Corporation's most recently completed fiscal year, or (ii) included in an amendment to this report filed with the Commission on Form 10-K/A not later than the end of such 120 day period.

Part I

Item 1. Business

General

        City National Corporation (the "Corporation") was organized in Delaware in 1968 to acquire the outstanding capital stock of City National Bank (the "Bank"). References to the "Company" reflect all of the activities of the Corporation and its subsidiaries, including the Bank. The Corporation owns all the outstanding shares of the Bank.

        The Bank, which was founded in 1953 and opened for business in January 1954, conducts business in California. The Bank operates through business and specialty banking units and private banking teams in eleven regional centers as well as 53 banking offices in Alameda, Contra Costa, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Francisco, San Mateo, Santa Clara and Ventura counties.

        In the three years ended December 31, 2001, the Company acquired three financial services institutions. On December 29, 2000, the Corporation completed the acquisition of Reed, Conner & Birdwell, Inc. ("RCB"), an investment management firm with $1.1 billion in total client assets under management on the date of acquisition. See "Note 2 to Notes to Consolidated Financial Statements" on page A-46 of this report. On February 29, 2000, the Corporation expanded its operations to Northern California through the acquisition of The Pacific Bank, N.A., ("Pacific Bank") which had total assets at December 31, 1999 of $774.9 million. The total purchase price was $145.2 million (including the consideration for outstanding stock options). On August 27, 1999, the Bank acquired American Pacific State Bank ("APSB"), which had total assets at June 30, 1999 of $442.3 million.

        On February 28, 2002, the Company completed the acquisition of Civic BanCorp ("Civic") headquartered in Oakland, California with total assets at December 31, 2001 of $524.0 million. The total purchase price was approximately $123.3 million. The Corporation issued approximately 1.5 million shares, including 295,080 shares reserved for stock options assumed with an aggregate market value of $70.0 million and paid the remainder in cash. On March 5, 2002, the Corporation announced the sale of two former Civic BanCorp branches with combined deposits of approximately $37.0 million

        The Company is engaged in one operating segment: providing private and business banking, including investment and trust services. The Bank is the second largest independent commercial bank headquartered in California. The Bank's principal client base comprises small-to mid-sized businesses, entrepreneurs, professionals, and affluent individuals. The Bank typically serves clients through relationship banking. The Bank seeks to build client relationships with a high level of personal service and tailored products through private and commercial banking teams, product specialists and investment advisors to facilitate the client, where appropriate for the client, to use multiple services and products offered by the Company. The Company offers a broad range of loans, deposit, cash management, international banking, and other products and services. The Company also lends, invests, and provides services in accordance with its Community Reinvestment Act ("CRA") commitment. Through City National Investments ("CNI"), a division of the Bank, and RCB, a subsidiary of the Corporation, the Company offers personal and employee benefit trust services, including 401(k) and defined benefit plans, manages investments for clients, and engages in securities sales and trading. The Bank also manages and offers mutual funds under the name of CNI Charter Funds.

Competition

        The banking business is highly competitive. The Bank competes with domestic and foreign banks for deposits, loans, and other banking business. In addition, other financial intermediaries, such as savings and loans, money market mutual funds, securities firms, credit unions, insurance companies and

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other financial services companies, compete with the Bank. Furthermore, interstate banking legislation has eroded the geographic constraints on the financial services industry. Recently enacted legislation has facilitated the ability of non-depository institutions to act as financial intermediaries. See "—Supervision and Regulation—Financial Services Modernization Legislation."

Economic Conditions, Government Policies, Legislation, and Regulation

        The Company's profitability, like most financial institutions, is highly dependent on interest rate differentials. In general, the difference between the interest rates paid by the Bank on interest-bearing liabilities, such as deposits and other borrowings, and the interest rates received by the Bank on its interest-earning assets, such as loans extended to its clients and securities held in its investment portfolio, comprise the major portion of the Company's earnings. These rates are highly sensitive to many factors that are beyond the Company's control, such as inflation, recession, and unemployment, and the impact which future changes in domestic and foreign economic conditions might have on the Company cannot be predicted.

        The Company's business is also influenced by the monetary and fiscal policies of the federal government and the policies of regulatory agencies, particularly the Board of Governors of the Federal Reserve System (the "Federal Reserve"). The Federal Reserve implements national monetary policies (with objectives such as curbing inflation and combating recession) through its open-market operations in U.S. Government securities, by adjusting the required level of reserves for depository institutions subject to its reserve requirements, and by varying the target federal funds and discount rates applicable to borrowings by depository institutions. The actions of the Federal Reserve in these areas influence the growth of bank loans, investments, and deposits and also affect interest rates earned on interest-earning assets and paid on interest-bearing liabilities. The nature and impact on the Company of any future changes in monetary and fiscal policies cannot be predicted.

        From time to time, legislative acts, as well as regulations, are enacted which have the effect of increasing the cost of doing business, limiting or expanding permissible activities, or affecting the competitive balance between banks and other financial services providers. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies, and other financial institutions and financial services providers are frequently made in the U.S. Congress, in the state legislatures, and before various regulatory agencies. See "—Supervision and Regulation."

Employees

        At December 31, 2001, the Company had 2,084 full-time equivalent employees. None of the employees are covered by a collective bargaining agreement. The Company considers its employee relations to be satisfactory.

Supervision and Regulation

General

        Bank holding companies and banks are extensively regulated under both federal and state law. This regulation is intended primarily for the protection of depositors, the deposit insurance fund, and other clients of the Company, and not for the benefit of stockholders of the Corporation. Set forth below is a summary description of the material laws and regulations which relate to the operations of the Corporation and the Bank. The description is qualified in its entirety by reference to the applicable laws and regulations.

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The Corporation

        The Corporation, as a registered bank holding company, is subject to regulation by the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the "BHCA"). In exercising its regulatory authority, the Federal Reserve may:

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conduct examinations of the Corporation and its subsidiaries;



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require the Corporation to terminate activities that the Federal Reserve believes constitute a significant risk to the financial safety, soundness, or stability of the Corporation or any of its banking subsidiaries;



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regulate provisions of certain bank holding company debt, including authority to impose interest ceilings and reserve requirements on such debt;



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limit the Corporation's ability to repurchase or redeem its equity securities;



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restrict certain tie-in arrangements in connection with any extension of credit, lease or sale of property, or furnishing of services;



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require the Corporation to obtain the prior approval of the Federal Reserve before acquiring another bank holding company or a bank; and



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prohibit the Corporation, except in certain statutorily prescribed instances, from acquiring or engaging in non-banking activities, other than any activities that are deemed by the Federal Reserve to be so closely related to banking or managing or controlling banks as to be a proper incident thereto (See "—Financial Services Modernization Legislation").

        Under Federal Reserve regulations, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the Federal Reserve's policy that in serving as a source of strength to its subsidiary banks, a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company's failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve's regulations or both.

The Bank

        The Bank, as a national banking association, is subject to primary supervision, examination, and regulation by the Office of the Comptroller of the Currency (the "Comptroller"). To a lesser extent, the Bank is also subject to certain regulations promulgated by the Federal Reserve and the Federal Deposit Insurance Corporation. If, as a result of an examination of a bank, the Comptroller should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the bank's operations are unsatisfactory or that the bank or its management is violating or has violated any law or regulation, various remedies are available to the Comptroller. These remedies include the power to enjoin "unsafe or unsound" practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict the growth of the bank, to assess civil monetary penalties, to remove officers and directors, and ultimately to terminate the bank's deposit insurance.

        Various requirements and restrictions under the laws of the United States affect the operations of the Bank. Statutes and regulations relate to many aspects of the Bank's operations, including reserves against deposits, ownership of deposit accounts, interest rates payable on deposits, loans, investments,

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mergers, and acquisitions, borrowings, dividends, locations of branch offices, and capital requirements. Further, the Bank is required to maintain certain levels of capital. See "—Capital Standards."

Financial Services Modernization Legislation

        The Gramm-Leach-Bliley Act of 1999 (the "Financial Services Modernization Act") has established a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the BHCA framework to permit a holding company system to engage in a full range of financial activities through a new entity known as a financial holding company. "Financial activities" include not only banking, insurance, and securities activities, but also merchant banking (subject to proposed capital requirements) and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. Many provisions of the Financial Services Modernization Act require the adoption of implementing regulations. Some of these regulations have been adopted in final form and are effective, while others have been adopted as interim rules or are not yet effective.

        In order for the Corporation to take advantage of the ability to affiliate with certain other financial services providers, the Corporation must elect to become a "financial holding company". The Corporation currently meets the requirements to make an election to become a financial holding company. The Corporation's management has not determined at this time whether it will seek an election to become a financial holding company. The Corporation continues to examine its strategic business plan to determine whether, based on market conditions, the relative financial conditions of the Corporation and its subsidiaries, regulatory capital requirements, general economic conditions, and other factors, the Corporation desires to use any of the expanded powers provided in the Financial Services Modernization Act.

        The Financial Services Modernization Act also permits national banks to engage in expanded activities through the formation of financial subsidiaries. A national bank may have a subsidiary engage in any activity authorized for national banks directly or any financial activity, except for insurance underwriting, insurance investments, real estate investment or development, or merchant banking, which may only be conducted through a subsidiary of a financial holding company. Financial activities include all other activities permitted under new sections of the BHCA or permitted by regulation.

        A national bank seeking to have a financial subsidiary must be "well-capitalized" and "well-managed." The total assets of all financial subsidiaries may not exceed the lesser of 45% of a bank's total assets, or $50 billion. Further, if the bank is among the 50 largest in the United States, it must have an issue of unsecured long-term debt rated in one of the top three investment grade categories or if the bank is in the next 50 largest banks, as is the Bank, it must meet either the same requirement or have a current long-term issuer credit rating from a nationally recognized statistical rating organization that is within the three highest investment grade rating categories used by the organization. The Bank does not currently qualify to have a financial subsidiary because its credit rating is not in one of the three highest investment grade ratings. National banks, whether qualified to have a financial subsidiary or not, may still conduct activities authorized for national banks directly through operating subsidiaries.

        The Corporation and the Bank do not believe that the Financial Services Modernization Act will have a material adverse effect on operations in the near-term. However, to the extent that it permits banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Financial Services Modernization Act is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this act may have the result of increasing the amount of competition that the

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Corporation and the Bank face from larger institutions and other types of companies offering financial products, many of which may have substantially more financial resources than the Corporation and the Bank.

        Pursuant to the Financial Services Modernization Act, federal banking regulators have adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These rules require disclosure of privacy policies to consumers and, in some circumstance, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party.

        In addition, the Financial Services Modernization Act directed federal banking regulators to adopt consumer protection rules for the sale of insurance products by depository institutions. These rules prohibit depository institutions from conditioning an extension of credit on the consumer's purchase of an insurance product or annuity from the depository institution or from any of its affiliates, or on the consumer's agreement not to obtain, or a prohibition on the consumer from obtaining, an insurance product or annuity from an unaffiliated entity. Furthermore, to the extent practicable, a depository institution must keep insurance and annuity sales activities physically segregated from the areas where retail deposits are routinely accepted from the general public. Finally, the rule contain required disclosures and addresses cross marketing and referral fees.

USA Patriot Act of 2001

        On October 26, 2001 President Bush signed the USA Patriot Act of 2001. Enacted in response to the September 11, 2001 terrorist attacks, the Patriot Act is intended to strengthen the ability of various agencies of the United States to work cohesively to combat terrorism on a variety of fronts. The potential impact of the Act on financial institutions of all kinds is significant and wide ranging. The Act contains sweeping anti-money laundering and financial transparency laws and requires various regulations, including;

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Due diligence requirements for financial institutions that administer, maintain, or manage private banks accounts or correspondent accounts for non-U.S. persons;



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Standards for verifying customer identification at account opening;



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Rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering;



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Reports by nonfinancial trades and business filed with the Treasury Department's Financial Crimes Enforcement Network for transactions exceeding $10,000 and;



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Filing of suspicious activities reports securities by brokers and dealers if they believe a customer may be violating U.S. laws and regulations.

        The Company is not able to predict the impact of such law on its financial condition or results of operations at this time.

Dividends and Other Transfers of Funds

        The Corporation is a legal entity separate and distinct from the Bank. Dividends from the Bank constitute the principal source of income to the Corporation. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends to the Corporation. Under such restrictions, at December 31, 2001 the Bank could have paid dividends of $88.1 million to the Corporation without obtaining prior approval of its banking regulators. In addition, the Federal Reserve has the authority to prohibit the Bank from paying dividends, depending upon the Bank's financial condition, if such payment is deemed to constitute an unsafe or unsound practice.

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        The Comptroller also has the authority to prohibit the Bank from engaging in activities that, in its opinion, constitute unsafe or unsound practices in conducting its business. It is possible, depending upon the financial condition of the Bank and other factors, that the Comptroller could assert that the payment of dividends or other payments might, under some circumstances, be such an unsafe or unsound practice. Further, the bank regulatory agencies have established guidelines with respect to the maintenance of appropriate levels of capital by banks or bank holding companies under their jurisdiction. Compliance with the standards set forth in such guidelines and the restrictions that are or may be imposed under the prompt corrective action provisions of federal law could limit the amount of dividends which the Bank or the Corporation may pay.

        Federal law limits the ability of the Bank to extend credit to the Corporation or its other affiliates, to invest in stock or other securities thereof, to take such securities as collateral for loans, and to purchase assets from the Corporation or other affiliates. These restrictions prevent the Corporation and such other affiliates from borrowing from the Bank unless the loans are secured by marketable obligations of designated amounts. Further, such secured loans and investments by the Bank to or in the Corporation or to or in any other affiliate are limited individually to 10.0% of the Bank's capital and surplus and in the aggregate to 20.0% of the Bank's capital and surplus. See "Note 10 to Notes to Consolidated Financial Statements" on page A-57 of this report. Additional restrictions on transactions with affiliates may be imposed on the Bank under the prompt corrective action provisions of federal law. See "—Prompt Corrective Action and Other Enforcement Mechanisms."

Capital Standards

        Each federal banking agency has adopted risk-based capital regulations under which a banking organization's capital is compared to the risk associated with its operations for both transactions reported on the balance sheet as assets as well as transactions which are off-balance sheet items, such as letters of credit and recourse arrangements. Under the capital regulations, the nominal dollar amounts of assets and the balance sheet equivalent amounts of off-balance sheet items are multiplied by one of several risk adjustment percentages, which range from 0% for assets with low credit risk, such as certain U.S. Treasury securities, to 100% for assets with relatively high credit risk, such as commercial loans.

        In addition to the risk-based capital guidelines, federal banking agencies require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the leverage ratio. For a banking organization rated in the highest of the five categories used by the federal banking agencies to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets is 3%. For all other banking organizations, the minimum ratio of Tier 1 capital to total assets is 4%. Banking organizations with supervisory, financial, operational, or managerial weaknesses, as well as organizations that are anticipating or experiencing significant growth, are expected to maintain capital ratios above the minimum levels. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the federal banking agencies have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

        At December 31, 2001, the Corporation and the Bank each exceeded the required risk-based capital ratios for classification as "well capitalized," the highest of five specified capital tiers, as well as the required minimum leverage ratios. See "Management's Discussion and Analysis—Balance Sheet Analysis—Capital" on page A-13 of this report.

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Prompt Corrective Action and Other Enforcement Mechanisms

        Federal banking agencies possess broad powers to take corrective and other supervisory action to resolve the problems of insured depository institutions, including but not limited to those institutions that fall below one or more prescribed minimum capital ratios.

        An institution that, based upon its capital levels, is classified as well capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment. At each successive lower capital category, an insured depository institution is subject to more restrictions. The federal banking agencies, however, may not treat a significantly undercapitalized institution as critically undercapitalized unless its capital ratio actually warrants such treatment.

        In addition to measures taken under the prompt corrective action provisions, commercial banking organizations may be subject to potential enforcement actions by the federal regulators for unsafe or unsound practices in conducting their businesses or for violations of any law, rule, regulation, or any condition imposed in writing by the agency or any written agreement with the agency.

Safety and Soundness Standards

        As required by the Federal Deposit Insurance Corporation Improvement Act of 1991, as amended, the federal banking agencies have adopted guidelines designed to assist the federal banking agencies in identifying and addressing potential safety and soundness concerns before capital becomes impaired. The guidelines set forth operational and managerial standards relating to: (i) internal controls, information systems, and internal audit systems, (ii) loan documentation, (iii) credit underwriting, (iv) asset growth, (v) earnings, and (vi) compensation, fees, and benefits. In addition, the federal banking agencies have also adopted safety and soundness guidelines with respect to asset quality and earnings standards. These guidelines provide six standards for establishing and maintaining a system to identify problem assets and prevent those assets from deteriorating. Under these standards, an insured depository institution should: (i) conduct periodic asset quality reviews to identify problem assets, (ii) estimate the inherent losses in problem assets and establish allowances that are sufficient to absorb estimated losses, (iii) compare problem asset totals to capital, (iv) take appropriate corrective action to resolve problem assets, (v) consider the size and potential risks of material asset concentrations, and (vi) provide periodic asset quality reports with adequate information for management and the board of directors to assess the level of asset risk. These guidelines also set forth standards for evaluating and monitoring earnings and for ensuring that earnings are sufficient for the maintenance of adequate capital and reserves.

        Federal regulations require banks to maintain adequate valuation allowances for potential credit losses. The Company has an internal risk analysis and review staff that continually reviews loan quality and ultimately reports to the Audit Committee. This analysis includes a detailed review of the classification and categorization of problem loans, assessment of the overall quality and collectibility of the loan portfolio, consideration of loan loss experience, trends in problem loans, concentration of credit risk, and current economic conditions, particularly in California. Based on this analysis, management, with the review and approval of the Audit Committee, determines the adequate level of allowance required. The allowance for credit losses is allocated to different segments of the loan portfolio, but the entire allowance is available for the loan portfolio in its entirety.

Premiums for Deposit Insurance

        The Bank's deposit accounts are insured by the Bank Insurance Fund ("BIF"), as administered by the Federal Deposit Insurance Corporation (the "FDIC"), up to the maximum permitted by law. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged

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in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC or the institution's primary regulator.

        The FDIC charges an annual assessment for the insurance of deposits, which as of December 31, 2001 ranged from 0 to 27 cents per $100 of insured deposits, based on the risk a particular institution poses to its deposit insurance fund. The risk classification is based on an institution's capital group and supervisory subgroup assignment. An institution's capital group is based on the FDIC's determination of whether the institution is well capitalized, adequately capitalized, or less than adequately capitalized. An institution's supervisory subgroup assignment is based on the FDIC's assessment of the financial condition of the institution and the probability that FDIC intervention or other corrective action will be required. In addition to its normal deposit insurance premium as a member of the BIF, the Bank must pay an additional premium toward the retirement of the Financing Corporation bonds ("Fico Bonds") issued in the 1980s to assist in the recovery of the savings and loan industry. In 2001 this premium was approximately 1.9 cents per $100 of insured deposits.

Interstate Banking and Branching

        The BHCA permits bank holding companies from any state to acquire banks and bank holding companies located in any other state, subject to certain conditions, including certain nationwide- and state-imposed concentration limits. The Company has the ability, subject to certain restrictions, to acquire by acquisition or merger branches outside its home state. The establishment of new interstate branches is also possible in those states with laws that expressly permit it. Interstate branches are subject to certain laws of the states in which they are located. Competition may increase further as banks branch across state lines and enter new markets. From time to time, the Company has considered interstate branch acquisitions, and if deemed feasible, it may engage in an interstate branch acquisition.

Community Reinvestment Act and Fair Lending Developments

        The Bank is subject to certain fair lending requirements and reporting obligations involving home mortgage lending operations and CRA activities. The CRA generally requires the federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income neighborhoods. A bank may be subject to substantial penalties and corrective measures for a violation of certain fair lending laws. The federal banking agencies may take compliance with such laws and CRA obligations into account when regulating and supervising other activities.

        A bank's compliance with its CRA obligations is based on a performance-based evaluation system which bases CRA ratings on an institution's lending service and investment performance. When a bank holding company applies for approval to acquire a bank or other bank holding company, the Federal Reserve will review the assessment of each subsidiary bank of the applicant bank holding company, and such records may be the basis for denying the application. In connection with its assessment of CRA performance, the appropriate bank regulatory agency assigns a rating of "outstanding," "satisfactory," "needs to improve," or "substantial noncompliance." A bank's CRA rating will also affect the ability of the bank and its bank holding company to take advantage of the new powers granted by the Financial Services Modernization Act. Based on the most current examination report dated January 10, 2000, the Bank was rated "satisfactory." See "—Financial Services Modernization Legislation."

Investment Advisers Act

        Under the Investment Advisers Act of 1940 ("Advisers Act"), investment advisers, such as RCB and City National Asset Management, Inc., a subsidiary of the Bank, who manage $25 million or more

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in client assets or who act as adviser to a registered investment company must register with the Securities and Exchange Commission.

Item 2. Properties

        The Company has its principal offices in the City National Center, 400 North Roxbury Drive, Beverly Hills, California 90210, which the Company owns and occupies. The Company actively maintains operations in 53 banking offices and certain other properties.

        Since 1967, the Bank's Pershing Square Banking Office and a number of Bank departments have been a tenant of the office building located at 606 South Olive Street in downtown Los Angeles. The building was originally developed and built by a partnership between a wholly-owned subsidiary of the Bank, Citinational Bancorporation, and Buckeye Construction Co., and Buckeye Realty and Management Corporation (two corporations then affiliated with Mr. Bram Goldsmith, then only a director and currently Chairman of the Board of the Corporation). Since its completion, the building has been owned by Citinational-Buckeye Building Co., a limited partnership of which Citinational Bancorporation and Olive-Sixth Buckeye Co. are the only general partners, each with a 29% partnership interest. Citinational Bancorporation has an additional 3% interest as a limited partner of Citinational-Buckeye Building Co.; the remainder is held by other, unaffiliated limited partners. Olive-Sixth Buckeye Co. is a limited partnership of which Mr. Goldsmith is a 49% general partner; therefore, Mr. Goldsmith has an indirect 14% ownership interest in Citinational-Buckeye Building Co. The remaining general partner and all limited partners of Olive-Sixth Buckeye Co. are not affiliated with the Corporation. Since 1990, Citinational-Buckeye Building Co. has managed the building, which is almost fully leased.

        As of December 31, 2001, the Bank owned an unoccupied building in North Hollywood and three other banking office properties: one in Riverside, one in Studio City, and one in Granada Hills.

        The remaining banking offices and other properties are leased by the Bank. Total annual rental payments (exclusive of operating charges and real property taxes) are approximately $19.2 million, with lease expiration dates ranging from 2002 to 2011, exclusive of renewal options.

Item 3. Legal Proceedings

        The Corporation and its subsidiaries are defendants in various pending lawsuits. Based on present knowledge, management, including in-house counsel, is of the opinion that the final outcome of such lawsuits will not have a material adverse effect upon the Company.

        The Corporation is not aware of any material proceedings to which any director, officer, or affiliate of the Corporation, any owner of record or beneficially of more than 5% of the voting securities of the Corporation as of December 31, 2001, or any associate of any such director, officer, or security holder is a party adverse to the Corporation or any of its subsidiaries or has a material interest adverse to the Corporation or any of its subsidiaries.

Item 4. Submission of Matters to a Vote of Security Holders

        There was no submission of matters to a vote of security holders during the fourth quarter of the year ended December 31, 2001.

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Item 4A. Executive Officers of the Registrant

        Shown below are names and ages of all executive officers of the Corporation and officers of the Bank who are deemed to be executive officers of the Corporation, with indication of all positions and offices with the Corporation and the Bank. Mr. Russell Goldsmith is the son of Mr. Bram Goldsmith.

Name	Age	Present principal occupation and principal occupation during the past five years
Russell D. Goldsmith	52	Vice Chairman and Chief Executive Officer, City National Corporation since October 1995; Chairman of the Board and Chief Executive Officer, City National Bank since October 1995
Bram Goldsmith	79	Chairman of the Board, City National Corporation
George H. Benter, Jr.	60	President, City National Corporation since 1993; President and Chief Operating Officer, City National Bank since 1992
Frank P. Pekny	58	Executive Vice President and Treasurer/Chief Financial Officer, City National Corporation since 1992; Vice Chairman and Chief Financial Officer since 1995, City National Bank
Michael B. Cahill	48	Executive Vice President, Secretary and General Counsel, City National Bank and City National Corporation, since June 2001; President and CEO, Avista Ventures, Inc., and Pentzer Corporation, 1999-2001; President and CEO, Imfax, Inc. 1997-1999
Heng W. Chen	49	Assistant Chief Financial Officer and Assistant Treasurer since June 1998, Controller, 1996 to 1998, Assistant Treasurer, 1991 to 1996, City National Corporation; Executive Vice President, Finance since March 2000, Senior Vice President, Finance, June 1998 to March 2000, Senior Vice President-Finance and Controller, 1995 to 1998, City National Bank
Jan R. Cloyde	51	Executive Vice President and Director of Banking Services, City National Bank since October 1998; Executive Vice President Home Savings of America from September 1996 to September 1998
Stephen D. McAvoy	56	Controller, City National Corporation since March 1998; Senior Vice President and Controller, City National Bank since March 1998; Vice President—Controller, Transamerica Home Loan, August 1997 to February 1998; Consultant in the area of the Financial Controller functions, Transamerica Home Loan, June 1997 to August 1997, Transamerica Financial Services, May 1996 to June 1997
Robert A. Moore	59	Executive Vice President and Chief Credit Officer, City National Bank since 1992

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

        The Corporation's common stock is listed and traded principally on the New York Stock Exchange under the symbol "CYN." Information concerning the range of high and low sales prices for the Corporation's common stock, and the dividends declared, for each quarterly period within the past two fiscal years is set forth below.

Quarter ended	High		Low		Dividends Declared
2001
March 31	$	40.31	$	32.97	$	0.185
June 30		45.00		35.50		0.185
September 30		49.75		39.11		0.185
December 31		47.19		37.25		0.185
2000
March 31	$	35.06	$	25.50	$	0.175
June 30		40.25		32.13		0.175
September 30		40.81		35.00		0.175
December 31		39.75		30.75		0.175

        As of March 1, 2002 the closing price of the Corporation's stock on the New York Stock Exchange was $51.09 per share. As of that date, there were approximately 1,959 record holders of the Corporation's common stock. On January 23, 2002, the Board of Directors authorized a regular quarterly cash dividend on its common stock at an increased rate of $0.195 per share payable on February 19, 2002.

        For a discussion of dividend restrictions on the Corporation's common stock, see "Note 10 to Notes to Consolidated Financial Statements" on page A-57 of this report.

Item 6. Selected Financial Data

        The information required by this item appears on page A-2, under the caption "Selected Financial Information," and is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

        The information required by this item appears on pages A-3 through A-34, under the caption "Management's Discussion and Analysis," and is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

        The information required by this item appears on pages A-14 through A-18, under the caption "Management's Discussion and Analysis," and is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

        The information required by this item appears on pages A-36 through A-67 and on page A-34, under the captions "2001 Quarterly Operating Results" and "2000 Quarterly Operating Results," and is incorporated herein by reference.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

        None.

12

PART III

Item 10. Directors and Executive Officers of the Registrant

        The information required by this item, to the extent not included under "Item 4A. Executive Officers of the Registrant" in Part I of this report, will appear in the Corporation's definitive proxy statement for the 2002 Annual Meeting of Stockholders (the "2002 Proxy Statement"), and such information either shall be (i) deemed to be incorporated herein by reference from that portion of the 2002 Proxy Statement, if filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the Corporation's most recently completed fiscal year, or (ii) included in an amendment to this report filed with the Commission on Form 10-K/A not later than the end of such 120 day period.

Item 11. Executive Compensation

        The information required by this item will appear in the 2002 Proxy Statement, and such information either shall be (i) deemed to be incorporated herein by reference from the 2002 Proxy Statement, if filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the Corporation's most recently completed fiscal year, or (ii) included in an amendment to this report filed with the Commission on Form 10-K/A not later than the end of such 120 day period.

Item 12. Security Ownership of Certain Beneficial Owners and Management

        The information required by this item will appear in the 2002 Proxy Statement, and such information either shall be (i) deemed to be incorporated herein by reference from the 2002 Proxy Statement, if filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the Corporation's most recently completed fiscal year, or (ii) included in an amendment to this report filed with the Commission on Form 10-K/A not later than the end of such 120 day period.

Item 13. Certain Relationships and Related Transactions

        The information required by this item will appear in the 2002 Proxy Statement, and such information either shall be (i) deemed to be incorporated herein by reference from the 2001 Proxy Statement, if filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the Corporation's most recently completed fiscal year, or (ii) included in an amendment to this report filed with the Commission on Form 10-K/A not later than the end of such 120 day period. Also see "Note 4 to Notes to Consolidated Financial Statements" on page A-48 of this report.

13

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)

The following documents are filed as part of this report:

1.

Financial Statements:

Management's Responsibility for Financial Statements	A-35
Independent Auditors' Report	A-36
Consolidated Balance Sheet at December 31, 2001 and 2000	A-37
Consolidated Statement of Income and Comprehensive Income for each of the years in the three-year period ended December 31, 2001	A-38
Consolidated Statement of Cash Flows for each of the years in the three-year period ended December 31, 2001	A-39
Consolidated Statement of Changes in Shareholders' Equity for each of the years in the three-year period ended December 31, 2001	A-40
Notes to the Consolidated Financial Statements	A-41

2.

All other schedules and separate financial statements of 50% or less owned companies accounted for by the equity method have been omitted because they are not applicable.

3.

Exhibits

No.
3.1		Restated Certificate of Incorporation (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.)
3.1.1		Certificate of Designations of Series A Junior Participating Cumulative Preferred Stock (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.)
3.2		Bylaws, as amended to date (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.)
4.1		63/8% Subordinated Notes Due 2008 in the principal amount of $125 million (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997.)
4.11		63/4% Subordinated Notes Due 2011 in the principal amount of $150.0 million
4.12		CN Real Estate Investment Corporation Articles of Incorporation
4.13		CN Real Estate Investment Corporation By Laws
4.14		CN Real Estate Investment Corporation Certificate of Determination
4.15		CN Real Estate Investment Corporation Servicing Agreement
4.2		Rights Agreement dated as of February 26, 1997 between the Registrant and Continental Stock Transfer & Trust Company, as Rights Agent (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.)
10.2.2	*	Sixth Amendment to Spit Dollar Life Insurance Agreement Collateral Assignment Plan between City National Bank and the Goldsmith 1980 Insurance Trust, dated March 18, 1998 (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997.)

14

10.2.3	*	Seventh Amendment to Split Dollar Life Insurance Agreement Collateral Assignment Plan between City National Bank and the Goldsmith 1980 Insurance Trust, dated June 1, 1999 (This Exhibit is incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.)
10.2.4	*	Employment Agreement made as of May 15, 2001, by and between Bram Goldsmith, and the Registrant and City National Bank, including Eighth Amendment to Split Dollar Life Insurance Agreement Collateral Assignment Plan between City National Bank and the Goldsmith 1980 Insurance Trust, dated May 15, 2001 (This Exhibit is incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.)
10.3	*	Split Dollar Life Insurance Agreement Collateral Assignment Plan between City National Bank and the Goldsmith 1980 Insurance Trust, dated as of June 13, 1980, and first through fourth amendments thereto (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.)
10.3.1	*	Fifth Amendment to Split Dollar Life Insurance Agreement Collateral Assignment Plan between City National Bank and the Goldsmith 1980 Insurance Trust, dated May 15, 1995 (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997.)
10.10	*	1985 Stock Option Plan, as amended to date (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.)
10.22.1	*	Stock Option Agreement under the Registrant's 1985 Stock Option Plan dated as of October 16, 1995, between the Registrant and Russell Goldsmith (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000.)
10.22.2	*	Employment Agreement made as of July 15, 1998 by and between Russell Goldsmith and the Registrant and City National Bank (This Exhibit is incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.)
10.22.3	*	First Amendment to Employment Agreement made as of July 15, 1998 by and between Russell Goldsmith and the Registrant and City National Bank (This Exhibit is incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.)
10.24	*	1995 Omnibus Plan (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000.)
10.24.1	*	Amended and Restated Section 2.8 of 1995 Omnibus Plan (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997.)
10.28		Lease dated September 30, 1996, between Citinational-Buckeye Building Co. and City National Bank (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997.)
10.29	*	1999 Omnibus Plan (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.)
10.30	*	1999 Variable Bonus Plan (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.)

15

10.30.1	*	First Amendment to 1999 Variable Bonus Plan (This Exhibit is incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.)
10.31	*	2000 City National Bank Executive Deferred Compensation Plan (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000.)
10.32	*	Form of Change of Control Agreement for members of City National Bank executive committee (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.)
10.33	*	2000 City National Bank Director Deferred Compensation Plan (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000.)
10.34	*	City National Bank Executive Management Bonus Plan (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000.)
10.35		City National Corporation 2001 Stock Option Plan (This Exhibit is incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000.)
21		Subsidiaries of the Registrant
23.1		Consent of KPMG LLP

*

Management contract or compensatory plan or arrangement

(b)

The registrant filed a report, dated October 12, 2001, on Form 8-K under items 5 and 7 regarding the financial results for the quarter and nine months ended September 30, 2001.

The registrant filed a report, dated November 19, 2001, on Form 8-K under item 5 regarding entering into a definitive Agreement and Plan of Merger with Civic BanCorp dated as of November 16, 2001.

16

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CITY NATIONAL CORPORATION (Registrant)
By	/s/  RUSSELL D. GOLDSMITH Russell D. Goldsmith, Chief Executive Officer

March 15, 2002

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  RUSSELL D. GOLDSMITH Russell D. Goldsmith (Principal Executive Officer)	Vice Chairman/ Chief Executive Officer and Director	March 15, 2002
/s/  FRANK P. PEKNY Frank P. Pekny (Principal Financial Officer)	Executive Vice President and Chief Financial Officer	March 15, 2002
/s/  STEPHEN D. MCAVOY Stephen D. McAvoy (Principal Accounting Officer)	Controller	March 15, 2002
/s/  BRAM GOLDSMITH Bram Goldsmith	Chairman of the Board and Director	March 15, 2002
/s/  GEORGE H. BENTER, JR. George H. Benter, Jr.	President and Director	March 15, 2002
/s/  RICHARD L. BLOCH Richard L. Bloch	Director	March 15, 2002

17

/s/  STUART D. BUCHALTER Stuart D. Buchalter	Director	March 15, 2002
/s/  MICHAEL L. MEYER Michael L. Meyer	Director	March 15, 2002
/s/  RONALD L. OLSON Ronald L. Olson	Director	March 15, 2002
/s/  WILLIAM B. RICHARDSON William B. Richardson	Director	March 15, 2002
/s/  CHARLES E. RICKERSHAUSER, JR. Charles E. Rickershauser, Jr.	Director	March 15, 2002
/s/  ROBERT H. TUTTLE Robert H. Tuttle	Director	March 15, 2002
/s/  ANDREA L. VAN DE KAMP Andrea L. Van de Kamp	Director	March 15, 2002
/s/  KENNETH ZIFFREN Kenneth Ziffren	Director	March 15, 2002

18

FINANCIAL HIGHLIGHTS

Dollars in thousands, except per share amounts		2001			2000			Increase (Decrease) Amount
FOR THE YEAR
	Net income	$	146,170		$	131,660		$	14,510
	Net income per common share, basic		3.05			2.79			0.26
	Net income per common share, diluted		2.96			2.72			0.24
	Dividends per common share		0.74			0.70			0.04
AT YEAR END
	Assets	$	10,176,316		$	9,096,669		$	1,079,647
	Deposits		8,131,202			7,408,670			722,532
	Loans		7,159,206			6,527,145			632,061
	Securities		1,814,839			1,547,844			266,995
	Shareholders' equity		890,577			743,648			146,929
	Book value per common share		18.50			15.61			2.89
AVERAGE BALANCES
	Assets	$	9,328,512		$	8,426,129		$	902,383
	Deposits		7,067,984			6,334,846			733,138
	Loans		6,713,315			6,236,334			476,981
	Securities		1,656,028			1,350,971			305,057
	Shareholders' equity		825,344			667,618			157,726
SELECTED RATIOS
	Return on average assets		1.57	%		1.56	%		0.01	%
	Return on average shareholders' equity		17.71			19.72			(2.01	)
	Tier 1 leverage ratio		7.26			6.49			0.77
	Total risk-based capital ratio		14.08			10.85			3.23
	Dividend payout ratio per common share		24.26			24.95			(0.69	)
	Net interest margin		5.26			5.44			(0.18	)
	Efficiency ratio		54.08			55.76			(1.68	)
CASH BASIS RESULTS (1)
FOR THE YEAR
	Net income	$	161,978		$	145,721		$	16,257
	Net income per common share, basic		3.38			3.09			0.29
	Net income per common share, diluted		3.28			3.01			0.27
	Return on average assets		1.77	%		1.76	%		0.01	%
	Return on average shareholders' equity		25.01			29.17			(4.16	)
	Efficiency ratio		50.90			52.61			(1.71	)
AT YEAR END
	Assets under management	$	7,651,037		$	6,653,616		$	997,421
	Assets under management or admisitration		18,785,619			18,042,973			742,646

(1)

Cash basis results exclude goodwill and core deposit intangible amortization and balances.

A-1

SELECTED FINANCIAL INFORMATION

			As of or for the year ended December 31,
Dollars in thousands, except per share data
			2001			2000			1999			1998			1997
Statement of Operations Data:
	Interest income		$	625,248		$	646,288		$	470,446		$	423,949		$	357,996
	Interest expense			191,094			239,772			148,441			130,278			104,328
	Net interest income			434,154			406,516			322,005			293,671			253,668
	Provision for credit losses			35,000			21,500			—			—			—
	Noninterest income			132,384			109,484			87,212			67,684			53,418
	Noninterest expense			313,395			294,770			241,803			211,331			181,757
	Income before taxes			218,143			199,730			167,414			150,024			125,329
	Income taxes			71,973			68,070			59,307			53,796			45,196
		Net income	$	146,170		$	131,660		$	108,107		$	96,228		$	80,133
Per Share Data:
	Net income per share, basic		$	3.05		$	2.79		$	2.37		$	2.08		$	1.74
	Net income per share, diluted			2.96			2.72			2.30			2.00			1.68
	Cash dividends declared			0.74			0.70			0.66			0.56			0.44
	Book value per share			18.50			15.61			12.58			12.21			11.03
	Shares used to compute income per share, basic			47,896			47,178			45,683			46,357			46,018
	Shares used to compute income per share, diluted			49,376			48,393			46,938			48,141			47,809
Balance Sheet Data—At Period End:
	Assets		$	10,176,316		$	9,096,669		$	7,213,619		$	6,427,781		$	5,252,032
	Deposits			8,131,202			7,408,670			5,669,409			4,887,402			4,228,348
	Loans			7,159,206			6,527,145			5,490,669			4,530,427			3,825,224
	Securities			1,814,839			1,547,844			1,102,092			1,012,526			833,122
	Interest-earning assets			9,447,311			8,286,067			6,677,475			5,982,968			4,838,926
	Shareholders' equity			890,577			743,648			571,646			561,803			508,670
Balance Sheet Data—Average Balances:
	Assets		$	9,328,512		$	8,426,129		$	6,488,834		$	5,633,829		$	4,703,886
	Deposits			7,067,984			6,334,846			4,809,800			4,267,602			3,614,068
	Loans			6,713,315			6,236,334			4,822,254			4,213,853			3,387,784
	Securities			1,656,028			1,350,971			1,050,716			842,346			829,557
	Interest-earning assets			8,520,242			7,698,884			5,985,018			5,187,897			4,290,453
	Shareholders' equity			825,344			667,618			564,091			538,426			472,843
Asset Quality:
	Nonaccrual loans		$	38,563		$	61,986		$	25,288		$	23,138		$	27,566
	ORE			10			522			1,413			3,480			2,126
		Total nonaccrual loans and ORE	$	38,573		$	62,508		$	26,701		$	26,618		$	29,692
Performance Ratios:
	Return on average assets			1.57	%		1.56	%		1.67	%		1.71	%		1.70	%
	Return on average shareholders' equity			17.71			19.72			19.16			17.87			16.95
	Net interest spread			3.95			3.81			4.12			4.27			4.64
	Net interest margin			5.26			5.44			5.56			5.86			6.13
	Average shareholders' equity to average assets			8.85			7.92			8.69			9.56			10.05
	Dividend payout ratio, per share			24.26			24.95			27.91			27.06			26.19
	Efficiency ratio			54.08			55.76			57.58			56.87			58.22
Asset Quality Ratios:
	Nonaccrual loans to total loans			0.54	%		0.95	%		0.46	%		0.51	%		0.72	%
	Nonaccrual loans and ORE to total loans and ORE			0.54			0.96			0.49			0.59			0.78
	Allowance for credit losses to total loans			2.00			2.07			2.44			2.99			3.60
	Allowance for credit losses to nonaccrual loans			370.46			218.49			530.20			584.92			499.75
	Net (charge offs) recoveries to average loans			(0.41	)		(0.48	)		(0.10	)		(0.12	)		0.02

A-2

MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

        The Corporation is the holding company for the Bank. References to the "Company" mean the Corporation and the Bank together. The financial information presented herein includes the account of the Corporation, its non-bank subsidiaries, the Bank, and the Bank's wholly owned subsidiaries. All material transactions between these entities are eliminated.

        See "Cautionary Statement for Purposes of the "Safe Harbor" Provision of the Private Securities Litigation Reform Act of 1995," on pages A-32 and A-33 in connection with "forward looking" statements included in this report.

        Consolidated net income for 2001 was $146.2 million, or $2.96 per diluted common share, compared with $131.7 million, or $2.72 per diluted common share, in 2000. Cash net income, which excludes the amortization of goodwill and core deposit intangibles from acquisitions, for the year ended December 31, 2001 was $162.0 million, or $3.28 per diluted common share, compared with $145.7 million, or $3.01 per diluted common share, for the year ended December 31, 2000. Eliminating only the impact of the amortization of goodwill, which will take effect in 2002 with the implementation of a new GAAP standard, pro forma net income would have been $159.0 million, or $3.22 per share. The increase in net income reflects the growth in the Company's loans and deposits during 2001 as well as an increase in service fees. Net interest income on a fully taxable-equivalent basis for 2001 increased $28.7 million over 2000. Noninterest income increased $22.9 million compared with 2000. Partially offsetting these increases was an $18.6 million increase in noninterest expense and a $13.5 million increase in the provision for credit losses in 2001 compared with 2000.

        The return on average assets in 2001 was 1.57%, compared with 1.56% in 2000. The return on average shareholders' equity declined to 17.71%, compared with 19.72% for the prior year. The lower return on average shareholders' equity for the year compared with the prior year was due primarily to a higher level of shareholders' equity which resulted from retention of current year earnings, increased unrealized gains on securities and the positive mark-to-market valuation of interest rate swaps treated as cash flow hedges. On a cash basis (which excludes goodwill and the after-tax impact of nonqualifying core deposit intangibles from average assets and average shareholders' equity), the return on average assets was 1.77% and the return on average shareholders' equity was 25.01% in 2001, compared with 1.76% and 29.17%, respectively, in 2000. The Company's cash efficiency ratio for 2001 improved to 50.90% from 52.61% in 2000. The 3% improvement is due to increased revenues and management's continued emphasis on enhancing efficiency and productivity.

        Estimates of business and economic levels and the related effect on earnings during 2002 are subject to a great degree of variability given current world events, California's economy and the effect of changing interest rates. Management is optimistic about continued solid performance going forward and net income per diluted common share for 2002 is currently expected to be approximately 7.0% to 10.0% higher than proforma net income per diluted common share of $3.22 for 2001, which excludes the impact of the amortization of goodwill. This excludes the impact of any acquisitions.

        Total assets at December 31, 2001 were $10,176.3 million, compared with $9,096.7 million at December 31, 2000.

        Total average assets increased to $9,328.5 million in 2001 from $8,426.1 million in 2000, an increase of $902.4 million, or 10.7%, primarily due to increases in average loans and average securities. Total average loans rose to $6,713.3 million for the year 2001, an increase of 7.6% over the prior year. Year-over-year loan growth was driven primarily by increases in real estate mortgages, residential first mortgages, commercial loans and construction loans. Average deposits rose during the year 2001 to $7,068.0 million, an increase of 11.6% over $6,334.8 million for 2000.

A-3

        Total nonperforming assets (nonaccrual loans and ORE) were $38.6 million, or 0.54% of total loans and ORE at December 31, 2001, compared with $62.5 million, or 0.96%, at December 31, 2000. The allowance for credit losses at December 31, 2001 totaled $142.9 million, or 2.00% of outstanding loans. Net loan charge-offs were $27.6 million and $30.1 million for the years 2001 and 2000, respectively. The decreases in nonperforming assets and net loan charge-offs in 2001 was primarily due to the decrease in the Bank's syndicated non-relationship loans. Syndicated non-relationship loans were $86.9 million, or approximately 1% of the loan portfolio at December 31, 2001, compared with $191.8 million, or 3% of the total loan portfolio, at December 31, 2000. Management believes the allowance for credit losses is adequate to cover risks inherent in the portfolio at December 31, 2001.

        The Corporation regularly evaluates, and holds discussions with, various potential acquisition candidates. Over the last three years, the Company's assets, loans and deposits have grown by 58%, 58% and 66%, respectively. The growth reflects the successful sales efforts of the Company's colleagues. The growth was augmented however, by the bank acquisitions closed by the Company over that same period.

        On December 29, 2000, the Corporation acquired RCB, an investment management firm which had $1.1 billion in assets under management. The total consideration was valued at $15.4 million and includes equity participation notes payable to the sellers due in 2003 and 2005. The acquisition was accounted for under the purchase method of accounting and resulted in goodwill of $14.3 million.

        On February 29, 2000, the Corporation completed its acquisition of Pacific Bank. The Corporation paid consideration equal to $145.2 million (including the consideration for stock options), 47.0% of which was paid in the Corporation's common stock and 53.0% of which was paid in cash. The transaction was accounted for as a purchase. Pacific Bank had total assets, loans, and deposits of $782.0 million, $488.0 million, and $702.0 million, respectively, at the date of acquisition. The acquisition resulted in goodwill and core deposit intangibles of $70.9 million.

        On August 27, 1999, the Bank completed its acquisition of APSB. The total purchase price was $90.4 million in an all cash transaction accounted for as a purchase. APSB had total assets, loans, and deposits of $450.0 million, $255.0 million, and $411.0 million, respectively, at the date of acquisition. The acquisition of APSB resulted in goodwill and core deposit intangibles of $62.8 million.

        On October 26, 2000, a one million-share stock buyback program of the Corporation's common stock was announced. As of December 31, 2001, 348,700 shares have been repurchased under this program at a cost of $11.9 million, or an average price of $34.10 per share.

        The Corporation paid dividends of $0.74 per share of common stock in 2001 and $0.70 per share of common stock in 2000. On January 24, 2002, the Board of Directors authorized a regular quarterly cash dividend on common stock at an increased rate of $0.195 per share to shareholders of record on February 6, 2002 payable on February 19, 2002. This reflects a 5.4% increase over the quarterly dividend paid in 2001.

A-4

RESULTS OF OPERATIONS

Operations Summary

        Following is an operations summary on a fully taxable-equivalent basis for the years ended December 31 for each of the last five years.

					Increase (Decrease)							Increase (Decrease)
															Year Ended December 31,
Dollars per thousands, except per share amounts			Year Ended 2001							Year Ended 2000
					Amount			%				Amount		%	1999		1998		1997
Interest income (1)			$	638,914	($	19,960	)	(3	)	$	658,874	$	177,761	37	$	481,113	$	434,512	$	367,505
Interest expense				191,094		(48,678	)	(20	)		239,772		91,331	62		148,441		130,278		104,328
Net interest income				447,820		28,718		7			419,102		86,430	26		332,672		304,234		263,177
Provision for credit losses				35,000		13,500		63			21,500		21,500	NM		—		—		—
Noninterest income				132,384		22,900		21			109,484		22,272	26		87,212		67,684		53,418
Noninterest expense:
	Staff expense			170,364		10,582		7			159,782		25,847	19		133,935		114,965		97,634
	Other expense			143,031		8,043		6			134,988		27,120	25		107,868		96,366		84,123
		Total		313,395		18,625		6			294,770		52,967	22		241,803		211,331		181,757
Income before income taxes				231,809		19,493		9			212,316		34,235	19		178,081		160,587		134,838
Income taxes				71,973		3,903		6			68,070		8,763	15		59,307		53,796		45,196
Less: adjustments (1)				13,666		1,080		9			12,586		1,919	18		10,667		10,563		9,509
		Net income	$	146,170	$	14,510		11		$	131,660	$	23,553	22	$	108,107	$	96,228	$	80,133
		Net income per share, diluted	$	2.96	$	0.24		9		$	2.72	$	0.42	18	$	2.30	$	2.00	$	1.68

(1)

Includes amounts to convert nontaxable income to fully taxable-equivalent yield. To compare tax-exempt asset yields to taxable yields, amounts are adjusted to pre-tax equivalents based on the marginal corporate federal tax rate of 35%.

Net Interest Income

        Net interest income is the difference between interest income (which includes yield-related loan fees) and interest expense. Net interest income on a taxable-equivalent basis expressed as a percentage of average total earning assets is referred to as the net interest margin, which represents the average net effective yield on earning assets.

A-5

        The following table shows average balances, interest income and yields for the last five years.

Net Interest Income Summary

				2001							2000
Dollars in thousands				Average Balance			Interest income/ expense (1)		Average interest rate		Average Balance			Interest income/ expense (1)		Average interest rate
Assets
	Earning assets (2)
		Loans:
			Commercial (3)	$	3,127,252		$	246,332	7.88	%	$	3,189,457		$	294,598	9.24	%
			Real estate mortgage		1,582,853			130,268	8.23			1,336,443			123,444	9.24
			Residential first mortgage		1,417,443			102,036	7.20			1,235,106			89,973	7.28
			Real estate construction		513,184			38,676	7.54			409,281			42,362	10.35
			Installment		72,583			6,844	9.43			66,047			6,118	9.26
			Total loans (4)		6,713,315			524,156	7.81			6,236,334			556,495	8.92
		State and municipal investment securities			—			—	—			—			—	—
		Taxable investment securities			—			—	—			—			—	—
		Securities available-for-sale			1,656,028			109,506	6.61			1,350,971			95,950	7.10
		Federal funds sold and securities purchased under resale agreements			107,247			3,298	3.08			46,298			2,809	6.07
		Trading account securities			43,652			1,954	4.48			65,281			3,620	5.55
			Total earning assets		8,520,242			638,914	7.50			7,698,884			658,874	8.56
		Allowance for credit losses			(136,981	)						(139,701	)
		Cash and due from banks			399,978							341,947
		Other nonearning assets			545,273							524,999
			Total assets	$	9,328,512						$	8,426,129
Liabilities and Shareholders' Equity
	Interest-bearing deposits:
		Interest checking accounts			554,641			2,114	0.38		$	540,765			2,780	0.51
		Money market accounts			1,552,404			44,162	2.84			1,317,186			47,404	3.60
		Savings deposits			247,280			7,064	2.86			237,024			10,040	4.24
		Time deposits—under $100,000			245,350			11,397	4.65			260,115			14,770	5.68
		Time deposit—$100,000 and over			1,469,874			68,513	4.66			1,377,406			80,733	5.86
			Total interest—bearing deposits		4,069,549			133,250	3.27			3,732,496			155,727	4.17
		Federal funds purchased and securities sold under repurchase agreements			326,889			13,218	4.04			264,013			16,269	6.16
		Other borrowings			990,779			44,626	4.50			1,047,622			67,776	6.47
			Total interest—bearing liabilities		5,387,217			191,094	3.55			5,044,131			239,772	4.75
	Noninterest—bearing deposits				2,998,435							2,602,350
	Other liabilities				117,516							112,030
	Shareholders' equity				825,344							667,618
			Total liabilities and shareholders' equity	$	9,328,512						$	8,426,129
Net interest spread									3.95	%						3.81	%
Fully taxable equivalent net interest income							$	447,820						$	419,102
Net interest margin									5.26	%						5.44	%

(1)

Fully taxable-equivalent basis. 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%.

(2)

Includes average nonaccrual loans of $45,167, $40,431, $22,676, $32,140, and $37,879 for 2001, 2000, 1999, 1998, and 1997, respectively.

(3)

Includes syndicated non-relationship loans of $125,575, $431,321, $480,230, $330,654, and $275,652 for 2001, 2000, 1999, 1998 and 1997

(4)

Loan income includes loan fees of $22,753, $20,351, $17,662, $12,185, and $8,857 for 2001, 2000, 1999, 1998, and 1997, respectively.

A-6

1999							1998							1997
Average Balance			Interest income/ expense (1)		Average interest rate		Average Balance			Interest income/ expense (1)		Average interest rate		Average Balance			Interest income/ expense (1)		Average interest rate
$	2,560,701		$	219,460	8.57	%	$	2,186,395		$	195,288	8.93	%	$	1,623,851		$	150,528	9.27	%
	851,396			75,956	8.92			755,752			71,976	9.52			647,658			63,662	9.83
	1,069,522			77,330	7.23			1,028,966			76,874	7.47			942,381			73,199	7.77
	288,084			27,496	9.54			191,782			20,874	10.88			127,867			15,004	11.73
	52,551			5,208	9.91			50,958			5,044	9.90			46,027			5,035	10.94
	4,822,254			405,450	8.41			4,213,853			370,056	8.78			3,387,784			307,428	9.07
	—			—	—			103,491			7,044	6.81			105,325			7,400	7.03
	—			—	—			100,350			6,260	6.24			117,874			7,683	6.52
	1,050,716			70,205	6.68			638,505			44,057	6.90			606,358			40,822	6.73
	44,637			2,381	5.33			66,379			3,458	5.21			23,485			1,301	5.54
	67,411			3,077	4.56			65,319			3,637	5.57			49,627			2,871	5.79
	5,985,018			481,113	8.04			5,187,897			434,512	8.38			4,290,453			367,505	8.57
	(139,973	)						(137,257	)						(136,587	)
	295,432							310,201							327,013
	348,357							272,988							223,007
$	6,488,834						$	5,633,829						$	4,703,886
$	411,350			2,065	0.50		$	385,075			3,751	0.97		$	366,997			3,677	1.00
	989,888			29,385	2.97			892,765			27,018	3.03			797,902			23,995	3.01
	200,579			7,547	3.76			169,606			6,167	3.64			169,030			5,701	3.37
	202,387			9,658	4.77			201,152			10,428	5.18			222,972			11,414	5.12
	928,692			44,559	4.80			761,048			39,873	5.24			534,431			28,502	5.33
	2,732,896			93,214	3.41			2,409,646			87,237	3.62			2,091,332			73,289	3.50
	232,350			11,019	4.74			209,982			10,821	5.15			222,617			11,731	5.27
	818,809			44,208	5.40			553,153			32,220	5.82			338,930			19,308	5.70
	3,784,055			148,441	3.92			3,172,781			130,278	4.11			2,652,879			104,328	3.93
	2,076,904							1,857,956							1,522,736
	63,784							64,666							55,428
	564,091							538,426							472,843
$	6,488,834						$	5,633,829						$	4,703,886
					4.12	%						4.27	%						4.64	%
			$	332,672						$	304,234						$	263,177
					5.56	%						5.86	%						6.13	%

A-7

        Taxable-equivalent net interest income totaled $447.8 million in 2001, an increase of $28.7 million, or 6.9%, from 2000. The increase in net interest income was due to strong average loan and average core deposit growth. Interest income recovered on non accrual and charged-off loans included above was $4.3 million in 2001, compared with $4.0 million for 2000. Also included in 2001 was $15.0 million from the receipt of net settlements of interest rate risk management instruments compared to $2.7 million paid on net settlements of interest rate risk management instruments in 2000.

        The fully taxable-equivalent net interest margin in 2001 was 5.26%, compared with 5.44% for 2000. The decrease of 18 basis points reflects the decline in of the interest rate environment, led by the Federal Reserve Board's rate reduction of 475 basis points since the beginning of 2001.

        Net interest income is impacted by the volume and rate of interest-earning assets and interest-bearing liabilities. The following table shows changes in net interest income between 2001 and 2000 as well as between 2000 and 1999 broken down between volume and rate.

Changes in Net Interest Income

		2000 vs 1999									2001 vs 2000
		Increase (decrease) due to									Increase (decrease) due to
Dollars in thousands fully taxable equivlent basis								Net increase (decrease)									Net increase (decrease)
		Volume			Rate						Volume			Rate
Interest earned on:
Interest-bearing deposits
in other banks		$	399		$	36		$	435		$	11		$	—		$	11
Loans			40,391			(72,730	)		(32,339	)		125,162			25,883			151,045
Securities available-for-sale			19,351			(6,231	)		13,120			20,862			4,871			25,733
Trading account securities			(1,043	)		(622	)		(1,665	)		(88	)		632			544
Federal funds sold and securities purchased under resale agreements			2,370			(1,881	)		489			91			337			428
	Total interest-earning assets		61,468			(81,428	)		(19,960	)		146,038			31,723			177,761
Interest paid on:
Interest checking			(348	)		(318	)	$	(666	)		672			43			715
Money market deposits			7,689			(10,931	)		(3,242	)		10,977			7,042			18,019
Savings deposits			3,098			(6,074	)		(2,976	)		1,464			1,029			2,493
Other time deposits			4,346			(19,939	)		(15,593	)		27,804			13,482			41,286
Other borrowings			386			(26,587	)		(26,201	)		15,235			13,583			28,818
	Total interest-bearing liabilities		15,171			(63,849	)		(48,678	)		56,152			35,179			91,331
		$	46,297		$	(17,579	)	$	28,718		$	89,886		$	(3,456	)	$	86,430

        Based on events during the current quarter and economic forecast for the remainder of this year, management expects the net interest margin for 2002 will approximate the net interest margin of 5.26% reported for 2001, exclusive of any impact of acquisitions.

        Average loans rose to $6,713.3 million in 2001, an increase of 7.6% over the prior year. Average relationship loans increased $782.7 million, or 13.5% compared with $5,805.0 million in 2000. The year-over-year growth in average relationship loans was driven primarily by increases in real estate mortgage, residential first mortgage, commercial and construction loans. Compared with prior year averages, real estate mortgage loans rose 18.4% to $1,582.9 million from $1,336.4 million; residential first mortgage loans rose 14.8% to $1,417.4 million from $1,235.1 million; commercial loans rose 8.8% to $3,001.7 million from $2,758.1 million; and construction loans rose 25.4% to $513.2 million from

A-8

$409.3 million. Conversely, average syndicated non-relationship loans fell to $125.6 million during the year, down significantly from $431.3 million for the prior year. This was consistent with the Corporation's objective of reducing its exposure to syndicated non-relationship loans.

        Management anticipates average loan growth will be in the 8.0% to 13.0% range for 2002, exclusive of any impact of acquisitions.

        Average securities available-for-sale increased $305.1 million, or 22.6%, between 2000 and 2001 due, in part, to the investing activities of the registered investment subsidiary which reinvests principal and interest payments on loans in securities available-for-sale.

        Total average core deposits rose to $5,598.1 million, an increase of 12.9% over 2000. Average core deposits represented 79.2% of the total average deposit base for the year. Average interest-bearing core deposits increased to $2,599.7 million in 2001 from $2,355.1 million in 2000, an increase of $244.6 million, or 10.4%. Average noninterest-bearing deposits increased to $2,998.4 million in 2001 from $2,602.4 million in 2000, an increase of $396.1 million, or 15.2%. These increases resulted from the Company's increased sales of cash management products and a reduction in the earnings credit on analyzed deposit accounts resulting from lower interest rates. Average time deposits in denominations of $100,000 or more increased $92.5 million or, 6.7%, between 2000 and 2001.

        Average deposit growth in 2002, compared with 2001, is expected to be in the 8.0% to 12.0% range, exclusive of any impact of acquisitions.

        For 2000, taxable-equivalent net interest income totaled $419.1 million, an increase of $86.4 million, or 26.0%, from 1999. The increase in net interest income was due to strong average loan and average core deposit growth which included the acquisitions of APSB and Pacific Bank, and a higher average prime rate compared to prior years, partially offset by a higher cost of funds.

        Average loans rose to $6,236.3 million for the year 2000, an increase of 29.3% over the prior year. Year-over-year loan growth was driven primarily by increases in commercial loans and real estate mortgage loans. Compared with 1999, commercial loan average balances rose 24.6% to $3,189.5 million from $2,560.7 million. This average loan growth was achieved despite a $48.9 million decrease in average syndicated non-relationship loans during the year. Real estate mortgage loan averages rose 57.0% to $1,336.4 million from $851.4 million, compared with the prior year. The remaining loan categories also contributed to the increase in average loan growth over the prior year, but to a lesser extent.

        Average securities available-for-sale increased $300.3 million, or 28.6%, between 1999 and 2000 due, in part, to the investing activities of the registered investment subsidiary which reinvests principal and interest payments on loans in securities available-for-sale.

        Average core deposits rose to $4,957.4 million, an increase of 27.7% over 1999. Average core deposits represented 78.3% of the total average deposit base for the year. Average interest-bearing core deposits increased to $2,355.1 million in 2000 from $1,804.2 million in 1999, an increase of $550.9 million, or 30.5%. Average noninterest-bearing deposits increased to $2,602.4 million in 2000 from $2,076.9 million in 1999, an increase of $525.5 million, or 25.3%. These increases resulted from the Company's increased marketing efforts, the nature of the Company's relationship business which encourages clients to maintain balances as compensation for banking services, as well as from the acquisitions of APSB and Pacific Bank. Average time deposits in denominations of $100,000 or more increased $448.7 million or, 48.3%, between 1999 and 2000.

Provision for Credit Losses

        The provision for credit losses primarily reflects the levels of net loan charge-offs and nonaccrual loans, changes in the economic environment during the period, as well as management's ongoing

A-9

assessment of the credit quality and growth of the loan portfolio. In 2001, 2000 and 1999, net charge-offs totaled $27.6 million, $30.1 million and $4.7 million, respectively. In each of these same years, nonaccrual loans totaled $38.6 million, $62.0 million and $25.3 million, respectively.

        The Company recorded a provision for credit losses of $35.0 million in 2001, $21.5 million in 2000 and none in 1999. See "—Balance Sheet Analysis—Asset Quality—Allowance for Credit Losses."

        The provision for credit losses to be taken in 2002 will reflect management's assessment of the above factors, as well as changes in the economic environment during this period. Based on its current assessment, management anticipates that a provision for credit losses for all of 2002 could fall within the $35.0 million to $50.0 million range, exclusive of the impact of any acquisitions.

Noninterest Income

        The Company continues to emphasize fee income growth. Noninterest income in 2001 totaled $132.4 million, an increase of $22.9 million, or 20.9%, from 2000 which increased $22.3 million, or 25.6%, from 1999. Noninterest income represented 23.4% of total revenues in 2001, as compared with 21.2% and 21.3% in 2000 and 1999, respectively.

        A breakdown of noninterest income by category is reflected below.

Analysis of Changes in Noninterest Income

				Increase (Decrease)						Increase (Decrease)
Dollars in millions
		2001		Amount		%	2000			Amount			%		1999
Trust and investment fee revenue		$	58.6	$	11.3	23.9	$	47.3		$	9.4		24.8		$	37.9
Cash management and deposit transaction charges			30.9		8.0	34.9		22.9			4.8		26.5			18.1
International services			15.0		—	—		15.0			5.0		50.6			10.0
Bank owned life insurance			2.9		0.3	11.5		2.6			0.3		13.0			2.3
All other income			20.3		1.6	8.6		18.7			5.6		42.7			13.1
	Total core		127.7		21.2	19.9		106.5			25.1		30.8			81.4
Gain (loss) on sale of loans and assets/debt repurchase			1.4		1.5	N/M		(0.1	)		(2.2	)	(104.8	)		2.1
Gain on sale of securities			3.3		0.2	6.5		3.1			(0.6	)	(16.2	)		3.7
	Total	$	132.4	$	22.9	20.9	$	109.5		$	22.3		25.6		$	87.2

        Trust and Investment services income, which includes trust fees, commissions and markups on securities transactions with clients, and fees on mutual funds, increased in 2001, compared with 2000, by $11.3 million, or 23.9%. The increase was attributable to the acquisition of Reed, Conner & Birdwell, which closed at year-end 2000 and accounted for approximately 46% of the increase, and an increase in new business within City National Investments (CNI). Trust and investment fee revenue increased by $9.4 million, or 24.8% from 1999 to 2000, primarily due to higher commissions resulting from higher balances in mutual funds, and expanded number of mutual funds available, new investment products and a higher number of affluent clients. At December 31, 2001, the Company had $18.8 billion under management or administration which included $7.7 billion under management, compared with $18.0 billion and $6.7 billion, respectively, at December 31, 2000.

        Cash management and deposit transaction fees increased $8.0 million, or 34.9%, compared with a 26.5% increase in 2000. The increase in 2001 was the result of higher sales of new online cash management products and a reduction in the earnings credit on analyzed deposit accounts resulting from lower interest rates which resulted in certain clients paying fees for services rather than paying the bank with deposit balances. The increase in 2000 was the result of deposits assumed in the acquisitions

A-10

of APSB and Pacific Bank and strong internal growth in deposits attributable to increased sales of cash management products.

        Despite the introduction of online foreign exchange and online letters of credit products, international services fee income of $15.0 million for 2001 was unchanged from the prior year due primarily to the decline in the international trade market. For 2000, international services fee income increased $5.0 million, or 50.6%, due to an increased client base and the acquisition of Pacific Bank which resulted in increased foreign exchange fees and, to a lesser extent, an increase in fee income associated with letters of credit and standby letters of credit.

        Other income increased $1.6 million in 2001 over 2000, or 8.6%, primarily as the result of higher loan documentation and appraisal fees. Other income increased $5.6 million in 2000 over 1999, or 42.7%, primarily as the result of higher fee income earned on participating mortgage loans.

        Gains on the sale of securities available-for-sale in 2001 totaled $3.3 million compared with $3.1 million and $3.7 million for 2000 and 1999, respectively.

        Management expects growth in noninterest income to range from 7.0% to 10.0% for 2002, exclusive of any impact of acquisitions such as occurred in 2001 from the Reed, Conner & Birdwell acquisition which accounted for approximately one quarter of the 20.9% increase in noninterest income reported for the year. In addition, management does not anticipate repurchasing debt in 2002 and expects that a more stable interest rate environment will result in a reduction in the growth rate of cash management and deposit transaction fees in 2002. On the other hand, management expects a gain of $2.0 million from the sale of assets in early 2002.

Noninterest Expense

        Noninterest expense was $313.4 million in 2001, an increase of $18.6 million, or 6.3%, from 2000 which increased $53.0 million, or 21.9%, from 1999. The current year-over-year increase in expense was primarily the result of the Company's growth, including expenses resulting from the acquisition of Reed, Conner & Birdwell. A breakdown of noninterest expense by category is reflected below.

Analysis of Changes in Noninterest Expense

						Increase (Decrease)							Increase (Decrease)
Dollars in millions
				2001		Amount			%		2000		Amount		%	1999
Salaries and employee benefits				$	170.4	$	10.6		6.6		$	159.8	$	25.9	19.3	$	133.9
All Other:
	Net occupancy of premises				26.4		2.0		8.2			24.4		5.4	28.4		19.0
	Professional				24.6		1.5		6.5			23.1		2.3	11.1		20.8
	Information services				16.6		2.5		17.7			14.1		1.8	14.6		12.3
	Depreciation				13.7		0.7		5.4			13.0		1.8	16.1		11.2
	Amortization of goodwill				12.9		1.7		15.2			11.2		6.0	115.4		5.2
	Marketing and advertising				12.1		(0.9	)	(6.9	)		13.0		2.6	25.0		10.4
	Office supplies				9.4		(0.3	)	(3.1	)		9.7		1.5	18.3		8.2
	Amortization of core deposit intangibles				5.6		0.2		3.7			5.4		1.3	31.7		4.1
	Equipment				2.2		(0.3	)	(12.0	)		2.5		0.3	13.6		2.2
	Other operating				19.5		0.9		4.8			18.6		4.1	28.3		14.5
		Total all other			143.0		8.0		5.9			135.0		27.1	25.1		107.9
			Total	$	313.4	$	18.6		6.3		$	294.8	$	53.0	21.9		241.8

A-11

        Salaries and employee benefit expense increased 6.6% in 2001 compared with a 19.3% increase in 2000. On a full-time equivalent basis, staff levels have increased to 2,084 at December 31, 2001 from 2,034 at December 31, 2000. As described in "Note 8 of Notes to Consolidated Financial Statements", the Company applies APB Opinion No. 25 in accounting for its stock options plans and, accordingly, no compensation cost has been recognized for its stock options in the financial statements.

        The remaining expense categories increased $8.0 million, or 5.9%, between 2000 and 2001. The remaining expense categories increased $27.1 million, or 25.1%, between 1999 and 2000. Marketing and advertising expense increased as the Company continued its marketing and advertising program to increase its visibility in expanded market areas. Other increases were primarily related to the acquisitions of APSB and Pacific Bank. Other expense in 2000 included $1.3 million of integration expenses relating to Pacific Bank, all of which were paid in 2000. In addition, the remaining integration expenses of APSB from 1999 were paid in 2000.

        On a new GAAP basis, excluding the amortization of goodwill in both 2001 and 2002, management currently anticipates that 2002 noninterest expense will be 3.0% to 5.0% higher than 2001, exclusive of any impact of acquisitions.

Income Taxes

        The 2001 effective tax rate was 33.0% compared with 34.1% in 2000 and 35.4% in 1999. The lower tax rate in 2001 was due primarily to the formation of a real estate investment trust subsidiary for capital-raising activities during the second quarter of the year. The reduced rate in 2000 compared to 1999 resulted primarily from the Company's registered investment company ("RIC") which was formed in 2000. The effective rates during all periods differed from the applicable statutory federal tax rate due to various factors including state taxes, tax benefits from investments in affordable housing partnerships, tax exempt income including interest on bank owned life insurance, and amortization of nondeductible goodwill.

        The Company's RIC has filed Form N8-F seeking de-registration in the first quarter of 2002. Management currently anticipates that the process of de-registration will be completed by the end of the second quarter of 2002. Management believes the Company currently has various alternative capital raising sources available to fund its operations in future periods and does not believe that the impact of the de-registration of the Company's RIC will have a material impact on the Company's financial condition or liquidity.

        In February 2002, a legislative tax bill, SB 1660 was introduced in the State of California Senate to retroactively repeal back to 1993, the tax benefit of dividends paid by a RIC to a California corporate shareholder which is unitary with the RIC. In March 2002, the Franchise Tax Board, when first considering this matter, directed its staff to gather more information concerning this proposal. While staff of the legislative author of SB 1660 indicated that the provisions of the bill applicable to a RIC would be stricken from the bill, such a change to the bill cannot happen without legislative action until at least April 1, 2002 and there is no assurance of such an amendment. The Company believes, based on opinions of independent counsel, that retroactive repeal will not prevail even if the proposal is not excluded from SB 1660.

        The Company's tax returns are open for audits by the Internal Revenue Service back to 1998 and by the Franchise Tax Board of the State of California back to 1996. From time-to-time, there may be differences in opinions with the respect to tax treatment accorded transactions. When, and if, such differences occur and become probable and estimable, a liability will be recognized.

        As indicated above, the effective tax rate continues to be impacted by the nature of the business and applicable tax strategies. Management currently anticipates its effective tax rate may fall within a range of 32.0% to 34.0% for 2002, exclusive of any impact of acquisitions.

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BALANCE SHEET ANALYSIS

Capital

        At December 31, 2001, the Corporation's and the Bank's Tier 1 capital, which is comprised of common shareholders' equity as modified by certain regulatory adjustments, amounted to $700.9 million and $632.4 million, respectively. At December 31, 2000, the Corporation's and the Bank's Tier 1 capital amounted to $555.5 million and $532.6 million, respectively. The increase from December 31, 2000 resulted from retention of 2001 earnings, the issuance by City National Bank of $150.0 million of 6.75%, ten year subordinated notes which qualifies as Tier II capital and the issuance of $3.4 million of preferred stock by a subsidiary of the bank which qualifies as Tier 1 capital and the exercise of stock options, offset by dividends paid and amounts related to shares repurchased. See "—Overview."

        The following table presents the regulatory standards for well capitalized institutions and the capital ratios for the Corporation and the Bank at December 31, 2001, 2000 and 1999.

			December 31,
	Regulatory Well Capitalized Standards
			2001		2000		1999
City National Corporation
Tier 1 leverage	4.00	%	7.26	%	6.49	%	6.73	%
Tier 1 risk-based capital	6.00		9.32		7.84		7.88
Total risk-based capital	10.00		14.08		10.85		11.21
City National Bank
Tier 1 leverage	4.00	%	6.59	%	6.23	%	6.30	%
Tier 1 risk-based capital	6.00		8.48		7.55		7.40
Total risk-based capital	10.00		13.28		10.57		10.75

Liquidity Management

        Liquidity risk results from the mismatching of asset and liability cash flows. Funds for this purpose can be obtained in cash markets, by borrowing, or by selling assets.

        The objective of liquidity management is the ability to maintain cash flow adequate to fund the Company's operations and meet obligations and other commitments on a timely and cost effective basis. The Company achieves this objective through the selection of asset and liability maturity mixes that it believes best meet the needs of the Company. The Company's liquidity position is enhanced by its ability to raise additional funds as needed in the money markets.

        The Company's core deposit base in recent years provided the majority of the Company's funding requirements. This relatively stable and low cost source of funds has, along with shareholders' equity, provided 69% and 67% of funding for average total assets in 2001 and 2000, respectively.

        A significant portion of remaining funding of average total assets is provided by short-term federal fund purchases and sales of securities under repurchase agreements. This funding source, on average, totaled $326.9 million and $264.0 million in 2001 and 2000, respectively. Additionally, the Company decreased its funding from other borrowings, primarily Federal Home Loan Bank advances, to $990.8 million on average in 2001 from $1,047.6 million in 2000.

        Liquidity is also provided by assets such as federal funds sold, securities purchased under resale agreements, and trading account securities which may be immediately converted to cash at minimal cost. The aggregate of these assets averaged $150.9 million during 2001 compared with $111.6 million in 2000. Liquidity is also provided by the portfolio of securities available-for-sale which totaled $1,814.8 million and $1,547.8 million at December 31, 2001 and 2000, respectively.

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        The unpledged portion of securities available-for-sale at December 31, 2001 totaled $1,429.9 million and could be sold or be available as collateral for borrowing. Maturing loans also provide liquidity, and $2,812.3 million, or 39.3% of the Company's loans are scheduled to mature in 2002.

Asset/Liability Management

        The principal objective of asset/liability management is to maximize net interest margin subject to margin volatility and liquidity constraints. Margin volatility results when the rate reset (or repricing) characteristics of assets are materially different from those of the Company's liabilities. Management chooses asset/liability strategies that promote stable earnings and reliable funding. Interest rate risk and funding positions are kept within limits established by the Board of Directors to ensure that risk taking is not excessive and that liquidity is properly managed.

        The Company has established three primary measurement processes to quantify and manage exposure to interest rate risk: net interest income simulation modeling, present value of equity analysis, and gap analysis. Net interest income simulations are used to identify the direction and severity of interest rate risk exposure across a twelve and twenty-four month forecast horizon. Present value of equity calculations are used to estimate the theoretical price sensitivity of shareholders' equity to changes in interest rates. Gap analysis provides insight into structural mismatches of asset and liability repricing characteristics.

        Net Interest Income Simulation:    The Company's net interest margin is affected by the level of interest rates and by the shape of the yield curve. The yield curve depicts market interest rates as a function of maturity. The Company has a large portfolio of rate sensitive commercial loans that are funded in part by rate stable core deposits. As a result, the Company is generally asset sensitive; net interest margin increases when interest rates are increasing and decreases when rates are declining. The Company uses a simulation model to estimate the severity of this risk and to develop mitigation strategies. It captures the dynamic nature of the balance sheet by anticipating probable on-balance sheet and off-balance sheet responses to different interest rate scenarios over the course of twelve and twenty-four month forecasting horizons. Model assumptions are updated periodically and are reviewed by the Asset/Liability Management Committee (ALCO). The Board of Directors has adopted limits within which interest rate exposure must be contained. Within these broader limits, ALCO sets management guidelines to further contain interest rate risk exposure.

        The simulation indicates that net interest income would not be substantially adversely impacted by changes in interest rates. A rapid and sustained two-percentage point decline in interest rates would result in a decrease in projected net interest income of approximately 1.5% over the twenty-four month horizon. This 1.5% at-risk amount at December 31, 2001 is an improvement from the 4.0% at-risk amount at the beginning of 2001. A rapid and sustained two-percentage point increase in rates would cause net interest income to improve by about 4.7% compared to slightly over 2.0% at the beginning of 2001. The changes are within the ALCO management guideline of 5.0%. The Company continues to use a variety of tools to manage its asset sensitivity.

        Present Value of Equity:    The present value of equity ("PVE") model is used to evaluate the vulnerability of the market value of shareholders' equity to changes in interest rates. The PVE model calculates the expected cash flow of all of the Company's assets and liabilities under sharply higher and lower interest rate scenarios. The present value of these cash flows is calculated by discounting them using the interest rates for that scenario. The difference between the present value of assets and the present value of liabilities in each scenario is the PVE. PVE will vary depending on the timing of expected cash flow, the level of interest rates, and the shape of the yield curve. The assumptions governing these relationships are the same as those used in the net interest income simulation. They

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are updated periodically and are reviewed by ALCO. The Board of Directors has adopted limits within which this exposure must be contained.

        The model indicates that PVE is only slightly vulnerable to an increase in interest rates. A two-percentage point increase in interest rates results in a 3.8% decline in PVE. A two percentage point decrease in interest rates results in a 1.2% appreciation in PVE. These results reflect the increase in asset sensitivity experienced over the previous twelve months.

        Gap Analysis:    The gap analysis is based on the contractual cash flows of all asset and liability balances on the Company's books. The contractual life of these balances may differ substantially from their expected lives however. For example, checking accounts are subject to immediate withdrawal. Experience suggests that these accounts will have an average life of several years. Also, certain loans (such as first mortgages) are subject to prepayment. The gap analysis reflects the contractual cash flows adjusted for anticipated client behavior. It may be used to identify periods in which there is a substantial mismatch between assets and liabilities. These mismatches can be moderated by investments or off-balance sheet derivatives transaction strategies. The Board of Directors has adopted limits within which the ratio of rate-sensitive assets to rate-sensitive liabilities must be contained. The most recent gap analysis indicates that the Company's one-year cumulative ratio of rate-sensitive assets to rate-sensitive liabilities is 103% and is within the limits set by the Board of Directors.

        The following table presents in tabular form information about the Company's financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related average interest rates by expected re-pricing or maturity dates and fair values as of December 31, 2001 and December 31, 2000. Expected re-pricing or maturities of assets are contractual. Interest-bearing demand and savings deposits are included in the earliest maturity category, even though withdrawal of these balances is not contractually required and may not actually occur during that period. Average interest rates on variable rate instruments are based upon the Company's interest rate forecast. Actual re-pricing or maturities of interest-sensitive assets and liabilities could vary substantially from expectations if different assumptions are used or if actual experience differs from the assumptions used.

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Interest-Sensitive Financial Instrument Maturities
December 31, 2001

Dollars in millions				2002			2003			2004			2005			2006			Thereafter			Total			Fair Value
Interest-sensitive assets:
Available-for-sale securities				$	334.7		$	94.7		$	151.0		$	188.9		$	130.3		$	915.2		$	1,814.8		$	1,814.8
		Average interest rate			5.98	%		4.79	%		6.39	%		6.15	%		5.86	%		6.19	%		6.06	%
Loans
	Commercial				2,519.3			306.7			97.0			53.3			61.9			209.1			3,247.3			3,160.9
		Average interest rate			5.58	%		5.97	%		6.57	%		6.71	%		6.51	%		5.41	%		5.67	%
	Real estate mortgage				887.7			56.2			67.1			46.6			62.9			547.6			1,668.1			1,665.3
		Average interest rate			6.45	%		7.73	%		8.05	%		7.99	%		8.09	%		7.99	%		7.12	%
	Residential first mortgage				27.2			27.4			29.2			33.3			36.5			1,433.7			1,587.3			1,588.6
		Average interest rate			6.88	%		6.81	%		6.81	%		6.85	%		6.78	%		6.89	%		6.88	%
	Real estate construction				573.3			1.4			0.5			0.5			2.0			8.4			586.1			576.8
		Average interest rate			5.18	%		13.23	%		9.12	%		7.51	%		6.39	%		7.72	%		5.24	%
	Installment				17.2			9.2			6.7			4.6			3.0			29.7			70.4			66.8
		Average interest rate			11.01	%		8.76	%		8.58	%		8.40	%		8.15	%		8.22	%		9.14	%
			Total loans		4,024.7			400.9			200.5			138.3			166.3			2,228.5			7,159.2			7,058.4
	Total interest-sensitive assets			$	4,359.4		$	495.6		$	351.5		$	327.2		$	296.6		$	3,143.7		$	8,974.0		$	8,873.2
Interest-sensitive liabilities:
Deposits
	Interest checking			$	576.7		$	—		$	—		$	—		$	—		$	—		$	576.7		$	576.7
		Average interest rate			0.25	%																	0.25	%
	Savings				240.4			—			—			—			—			—			240.4			240.4
		Average interest rate			0.40	%																	0.40	%
	Money market				1,893.4			—			—			—			—			—			1,893.4			1,893.4
		Average interest rate			1.45	%																	1.45	%
	Time				1,528.3			32.1			5.4			3.7			3.9			0.5			1,573.9			1,579.2
		Average interest rate			3.12	%		4.09	%		4.44	%		5.40	%		4.36	%		6.06	%		3.16	%
			Total deposits		4,238.8			32.1			5.4			3.7			3.9			0.5			4,284.4			4,289.7
Total borrowings					953.0			—			15.0			—			—			85.6			1,053.6			1,086.3
		Average interest rate			3.33	%		—			5.24	%		—			—			7.75	%		3.67	%
	Total interest-sensitive liabilities			$	5,191.8		$	32.1		$	20.4		$	3.7		$	3.9		$	86.1		$	5,338.0		$	5,376.0

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Interest-Sensitive Financial Instrument Maturities
December 31, 2000

Dollars in millions				2001			2002			2003			2004			2005			Thereafter			Total			Fair Value
Interest-sensitive assets:
Available-for-sale securities				$	484.8		$	192.0		$	92.3		$	95.9		$	80.1		$	602.7		$	1,547.8		$	1,547.8
		Average interest rate			6.46	%		6.45	%		5.65	%		6.76	%		6.07	%		6.75	%		6.52	%
Loans
	Commercial				2,833.2			98.4			88.1			61.6			37.1			129.8			3,248.2			3,145.7
		Average interest rate			8.95	%		7.24	%		7.24	%		7.10	%		6.78	%		5.71	%		8.62	%
	Real estate mortgage				915.7			60.0			56.3			60.1			38.0			349.8			1,479.9			1,464.9
		Average interest rate			9.43	%		8.76	%		8.36	%		8.19	%		8.09	%		8.17	%		8.97	%
	Residential first mortgage				34.2			24.3			23.2			24.9			30.1			1,137.0			1,273.7			1,265.8
		Average interest rate			7.58	%		7.48	%		7.27	%		7.27	%		7.42	%		7.35	%		7.36	%
	Real estate construction				436.1			4.9			2.0			0.9			0.9			7.5			452.3			446.6
		Average interest rate			9.87	%		12.38	%		12.37	%		8.10	%		7.74	%		7.74	%		9.86	%
	Installment				19.1			10.7			7.8			5.2			3.3			26.9			73.0			68.8
		Average interest rate			11.14	%		9.35	%		9.21	%		9.08	%		8.97	%		8.99	%		9.71	%
			Total loans		4,238.3			198.3			177.4			152.7			109.4			1,651.0			6,527.1			6,391.8
	Total interest-sensitive assets			$	4,723.1		$	390.3		$	269.7		$	248.6		$	189.5		$	2,253.7		$	8,074.9		$	7,939.6
Interest-sensitive liabilities:
Deposits
	Interest checking			$	619.3		$	—		$	—		$	—		$	—		$	—		$	619.3		$	619.3
		Average interest rate			0.40	%																	0.40	%
	Savings				244.7			—			—			—			—			—			244.7			244.7
		Average interest rate			4.24	%																	4.24	%
	Money market				1,344.2			—			—			—			—			—			1,344.2			1,344.2
		Average interest rate			3.60	%																	3.60	%
	Time				1,786.9			119.7			11.2			3.0			2.9			0.5			1,924.2			1,925.9
		Average interest rate			5.99	%		5.30	%		5.70	%		5.00	%		4.80	%		—	%		6.03	%
			Total deposits		3,995.1			119.7			11.2			3.0			2.9			0.5			4,132.4			4,134.1
Total borrowings					608.4			40.0			—			15.0			—			123.6			787.0			790.0
		Average interest rate			6.44	%		5.67	%		—			5.2	%		—			6.49	%		6.38	%
	Total interest-sensitive liabilities			$	4,603.5		$	159.7		$	11.2		$	18.0		$	2.9		$	124.1		$	4,919.4		$	4,924.1

        The use of simple straight forward interest rate swaps to manage interest rate exposure as hedges of financial instruments results in the difference between fixed and floating rates paid or received being added to or reducing net interest income on an earned basis within a reporting period.

        The use of interest rate swaps involves the risk of dealing with counterparties and their ability to meet contractual terms. These counterparties must receive appropriate credit approval before the Company enters into an interest rate contract. Notional principal amounts express the volume of these transactions, although the amounts potentially subject to credit and market risk are much smaller. At December 31, 2001, the Company's interest rate swaps were entered into as a hedge of the variability in interest cash flows generated from LIBOR based loans due to fluctuations in the LIBOR index or to convert fixed rate deposits and borrowings into floating rate liabilities.. As of January 1, 2001, the Company adopted SFAS No.133, "Accounting for Derivatives and Hedging Activities", as amended. At that date, the Company had $800.0 million of notional amount of interest rate swaps which had a fair value of $7.5 million. Of the $800.0 million of interest rate swaps, $450.0 million were fair value hedges of various fixed rate deposits and borrowings and $350.0 million were cash flow hedges related to periodic future interest payments on specific portions of a $1.2 billion variable rate LIBOR based loan portfolio. The positive mark-to-market on the fair value hedges resulted in the recognition of other assets and an increase in the hedged deposits and borrowings of $5.1 million as of January 1, 2001. The

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positive mark-to-market on the cash flow hedges of variable rate loans resulted in the recognition of other assets and comprehensive income of $2.4 million, before taxes of $1.0 million as of January 1, 2001. There was no transition adjustment at January 1, 2001 or any ineffectiveness gain or loss that impacted net income for 2001.

        As of December 31, 2001, the Company had $706.4 million of interest rate swaps, of which $206.4 million were fair value hedges and $500.0 million were cash flow hedges. The positive mark-to-market on the fair value hedges resulted in the recognition of other assets of $9.6 million, other liabilities of $0.7 million and an increase in hedged deposits and borrowings of $8.9 million. The positive mark-to-market on the cash flow hedges of variable rate loans resulted in the recognition of other assets and comprehensive income of $11.7 million, before taxes of $4.9 million. In addition, deposits and borrowings included $1.8 million and comprehensive income included $2.8 million, before taxes of $1.2 million relating to interest rate swaps terminated with positive benefit during 2001. These amounts are being amortized into income over the designated hedged period. Amounts to be paid or received on the interest rate swaps will be reclassified into earnings upon receipt of interest payments on the underlying hedged loans, including amounts totaling $8.9 million that were reclassified into net interest income during the year ended December 31, 2001. Of the $14.5 million of comprehensive income cash flow hedges, $13.2 million is expected to reclassified into net interest income within the next 12 months.

        The Company has not entered into transactions involving any other more sophisticated interest rate derivative financial instruments, such as interest rate floors, caps, and interest rate futures contracts. The Company could consider using such financial instruments in the future if they offered a significant financial advantage over interest rate swaps.

        The table below shows the notional amounts of the Company's interest rate swap maturities and average rates at December 31, 2001 and December 31, 2000:

Interest Rate Swap Maturities and Average Rates
December 31, 2001

Notional amounts in millions		2002			2003			2004			2005			2006			Thereafter			Total			Fair Value
	Notional amount	$	365.0		$	150.0		$	—		$	—		$	—		$	191.4		$	706.4		$	20.6	(1)
	Weighted average rate received		5.55	%		5.50	%		—	%		—	%		—	%		6.21	%		5.72	%
	Weighted average rate paid		1.92	%		1.90	%		—	%		—	%		—	%		3.12	%		2.24	%

Interest Rate Swap Maturities and Average Rates
December 31, 2000

Notional amounts in millions		2001			2002			2003			2004			2005			Thereafter			Total			Fair Value
	Notional amount	$	315.0		$	295.0		$	50.0		$	15.0		$	—		$	125.0		$	800.0		$	7.5	(1)
	Weighted average rate received		6.55	%		6.24	%		7.28	%		5.39	%		—	%		6.64	%		6.47	%
	Weighted average rate paid		6.74	%		6.71	%		6.76	%		6.71	%		—	%		6.91	%		6.75	%

(1)

Estimated net gain to settle derivative contracts.

        At December 31, 2001, the Company's outstanding foreign exchange contracts for both those purchased as well as sold totaled $110.3 million. The Company enters into foreign exchange contracts with its clients and counterparty banks primarily for the purpose of offsetting or hedging clients' transaction and economic exposures arising out of commercial transactions. The Company's policies also permit limited proprietary currency positioning within certain approved limits. The Company actively manages its foreign exchange exposures within prescribed risk limits and controls. All foreign exchange contracts outstanding at December 31, 2001 had remaining maturities of twelve months or less and the mark-to-market included in other assets totaled $0.2 million.

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Securities

        Securities held to facilitate client trading orders are classified as trading securities. All other securities are classified as available-for-sale. The securities available-for-sale portfolio includes both debt and marketable equity securities. Substantially all of the fair values of securities are determined using publicly traded market quotations. Where there are no other sources for values, some values are determined from third parties that make a market for certain financial instruments. At December 31, 2001, the securities available-for-sale portfolio had an unrealized net gain of $4.0 million, comprised of $20.9 million of unrealized gains and $16.9 million of unrealized losses. At December 31, 2000, the securities available-for-sale portfolio had an unrealized net loss of $19.8 million, comprised of $29.4 million of unrealized losses and $9.6 million of unrealized gains. The unrealized gain or loss on securities available-for-sale is reported on an after-tax basis as a valuation allowance that is a component of other comprehensive income (loss).

        Comparative period end security portfolio balances are presented below:

Securities Available-for-Sale

		December 31, 2001				December 31, 2000
Dollars in thousands
		Cost		Fair Value		Cost		Fair Value
U.S. Government and federal agency		$	300,653	$	306,206	$	646,629	$	648,374
Mortgage-backed			1,070,670		1,075,533		438,667		437,221
State and Municipal			187,519		190,201		158,983		160,139
Other debt securities			31,924		30,266		165,489		150,913
	Total debt securities		1,590,766		1,602,206		1,409,768		1,396,647
Marketable equity securities			220,124		212,633		157,908		151,197
	Total securities	$	1,810,890	$	1,814,839	$	1,567,676	$	1,547,844

        At December 31, 2001, the fair value of securities available-for-sale totaled $1,814.8 million, an increase of $267.0 million, or 17.2% from December 31, 2000. The increase was due to investing activities of the registered investment subsidiary which reinvests principal and interest payments on loans in securities available-for-sale. The average duration of total available-for-sale securities at December 31, 2001 was 3.4 years compared with 3.6 years at December 31, 2000.

        The following table provides the expected remaining maturities and yields (taxable-equivalent basis) of debt securities within the securities portfolio at December 31, 2001. 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%.

Debt Available-for-Sale Securities

		One year or less			Over 1 year thru 5 years			Over 5 years thru 10 years			Over 10 years			Total
Dollars in thousands		Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield
U.S. Government and federal agency		$	14,783	5.89	$	192,029	5.27	$	99,394	6.22	$	—	—	$	306,206	5.61
Mortgage-backed			—	—		553	6.25		4,312	6.32		1,070,668	6.38		1,075,533	6.38
State and Municipal			13,760	6.87		60,106	6.68		103,132	6.75		13,203	6.81		190,201	6.74
Other debt securities			—	—		—	—		16,232	7.60		14,034	8.05		30,266	7.81
	Total debt securities	$	28,543	6.36	$	252,688	5.61	$	223,070	6.57	$	1,097,905	6.41	$	1,602,206	6.30
	Amortized cost	$	28,075		$	247,939		$	220,774		$	1,093,978		$	1,590,766

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        Dividend income included in interest income on securities in the consolidated statement of income and comprehensive income was $9.5 million for 2001 and 2000.

Loan Portfolio

        Total loans were $7,159.2 million, $6,527.1 million, and $5,490.7 million at December 31, 2001, 2000, and 1999, respectively. Management divides the Company's commercial loan portfolio into relationship loans and syndicated non-relationship loans. Syndicated non-relationship loans are loans agented by others where the Company has limited direct access to the borrower and provides no other banking products or services. Relationship commercial loans are all other commercial loans, including some syndicated loans, where the Company has direct access to the borrower and, therefore, has the opportunity to provide the borrower with multiple banking products or services, such as cash management, international, brokerage and trust services.

        Total loans grew $632.1 million during 2001. Residential first mortgages grew $313.6 million in 2001 while real estate mortgage loans grew $188.3 million. Construction loans grew $133.8 million while relationship commercial loans grew $104.0 million.

        The most significant areas of loan growth in 2000 were the $722.8 million increase in commercial relationship loans and the $437.7 million increase in real estate mortgage loans. In addition, real estate construction loans increased by $107.4 million. Residential first mortgage loans increased $100.4 million.

        The following table shows the Company's consolidated loans by type of loan or borrower and their percentage distribution:

Loan Portfolio

		December 31,
Dollars in thousands
		2001			2000			1999			1998			1997
Commercial
	Relationship	$	3,160,418		$	3,056,464		$	2,333,627		$	1,950,653		$	1,731,860
	Syndicated non-relationship		86,902			191,789			536,811			507,293			240,372
			3,247,320			3,248,253			2,870,438			2,457,946			1,972,232
Real estate mortgage			1,668,114			1,479,862			1,042,123			747,711			686,188
Residential first mortgage			1,587,303			1,273,711			1,173,334			1,038,229			980,040
Real estate construction			586,066			452,301			344,870			237,015			144,558
Installment loans			70,403			73,018			59,904			49,526			42,206
Total loans		$	7,159,206		$	6,527,145		$	5,490,669		$	4,530,427		$	3,825,224
Commercial
	Relationship		44.1	%		46.9	%		42.4	%		43.1	%		45.3	%
	Syndicated non-relationship		1.2			2.9			9.8			11.2			6.3
Real estate mortgage			23.3			22.7			19.0			16.5			17.9
Residential first mortgage			22.2			19.5			21.4			22.9			25.6
Real estate construction			8.2			6.9			6.3			5.2			3.8
Installment loans			1.0			1.1			1.1			1.1			1.1
Total loans			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

        The Company's loan portfolio consists primarily of short-term loans for business and real estate purposes. Loans are generally made on the basis of a secure repayment source as the first priority, and collateral is generally a secondary source for loan qualification. Although the legal lending limit for any

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one borrower can amount to $155.9 million at December 31, 2001, the Bank has established "house limits" for individual borrowings which vary by risk rating. The highest amount which can be extended to any one borrower without the approval of the Bank's Audit Committee in 2001 was $40.0 million. At December 31, 2001, there were 20 relationships with commitments greater than $25.0 million. Of the 20 relationships, 9 had outstanding balances greater than $25.0 million with the largest outstanding being a $74.8 million security secured loan.

Commercial

        Commercial syndicated non-relationship loans were $86.9 million at December 31, 2001, representing approximately 1% of the loan portfolio. At December 31, 2000, syndicated non-relationship loans totaled $191.8 million, or 3% of the loan portfolio. The reduction in syndicated non-relationship loans reflects management's decision to reduce the higher credit risk exposure associated with that portfolio. The average outstanding loan balance in the syndicated non-relationship portfolio at December 31, 2001 was $2.8 million, which represents just over half of the average commitment amount.

        Syndicated non-relationship loans at December 31, 2001 included media and communications related credits totaling $33.2 million (average outstandings of $3.0 million) and a group of highly diversified corporate outstandings aggregating $53.7 million (average outstandings of $2.7 million). The Company has identified media and communications as one of its industry specialties. An additional $137.8 million of media and communications credits were outstanding in the Company's commercial relationship portfolio. At December 31, 2001, the Company had a total of $1.4 million of syndicated non-relationship media and communications credits on nonaccrual.

        Management expects the remaining syndicated non-relationship portfolio of corporate borrowers to be reduced over time through scheduled repayments, as well as future events and market driven activities. The corporate syndicated non-relationship portfolio at December 31, 2001 included $4.5 million of nonaccrual loans.

        The commercial relationship loan portfolio primarily consists of loans to middle-market companies, professional and business borrowers, and associated individuals. The commercial loan portfolio at December 31, 2001, does not contain any direct energy-related borrowings and a limited amount of technology-related borrowings—less than one half of one percent of the total commercial loan portfolio. The average outstanding individual note balance in the $3,160.4 million commercial relationship loan portfolio at December 31, 2001 was $428,000. See "—Results of Operations—Net Interest Income."

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        Following is a breakdown of commercial relationship loans to businesses engaged in the industries listed.

Commercial Relationship Loans By Industry

		December 31,
Dollars in thousands
		2001		%	2000		%
Services(1)		$	941,063	29.8	$	765,120	25.0
Entertainment			502,943	15.9		551,273	18.0
Wholesale Trade			357,952	11.3		311,762	10.2
Manufacturing			339,045	10.7		306,668	10.0
Real Estate and Construction			323,735	10.2		255,180	8.3
Finance and Insurance			241,121	7.6		219,047	7.2
Retail Trade			165,009	5.2		95,115	3.1
Media and Communications			137,811	4.4		214,339	7.0
Other			151,739	4.9		337,960	11.2
	Total	$	3,160,418	100.0	$	3,056,464	100.0

(1)

Legal, membership organizations, engineering and management services, etc.

Real Estate Mortgage

        Real estate mortgages, representing 23.3% of the loan portfolio, consists of 85.2% commercial and 14.8% residential (1-4 family including undeveloped land, condominium/apartments and equity lines of credit). The average outstanding individual note balance at December 31, 2001 was approximately $690,000.

        Following is a breakdown of real estate mortgage loans, where over half of the increase is in the office buildings category, by collateral type:

Real Estate Mortgage Loans by Collateral Type

		December 31,
Dollars in thousands
		2001		%	2000		%
Industrial		$	623,417	37.4	$	693,168	46.8
Office buildings			262,089	15.7		150,239	10.2
Shopping centers			174,226	10.4		100,834	6.8
1-4 family (includes undeveloped land)			61,984	3.7		44,283	3.0
Condominiums/apartments			84,813	5.1		67,381	4.6
Land, nonresidential			27,051	1.6		9,884	0.7
Churches/religious			15,635	0.9		15,560	1.1
Equity lines of credit			99,890	6.0		68,626	4.6
Other			319,009	19.2		329,887	22.2
	Total	$	1,668,114	100.0	$	1,479,862	100.0

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Residential First Mortgage

        Residential first mortgage loans which comprised 22.2% of total loans at December 31, 2001, continued an eight-year growth trend, increasing $313.6 million, or 24.6%, to $1,587.3 million at December 31, 2001. At December 31, 2001, 94.0% of the portfolio was originated internally, and the balance was purchased from third parties. The residential first mortgage loans originated internally have a weighted average loan to value ratio of 61.0% at origination. The average outstanding individual note balance at December 31, 2001 was approximately $592,000.

Construction

        The real estate construction portfolio, representing 8.2% of the loan portfolio, consists of 70.8% commercial and 29.2% residential. Such loans are made on the basis of the economic viability for the specific project, the cash flow resources of the developer, the developer's equity in the project, and the underlying financial strength of the borrower. The Company's policy is to monitor each loan with respect to incurred costs, sales price, and sales cycle. The average outstanding individual note balance at December 31, 2001 was approximately $2,402,000.

        Following is a breakdown of real estate construction loans, where over half of the increase is in the 1-4 family category, by collateral type:

Real Estate Construction Loans by Collateral Type

		December 31,
Dollars in thousands
		2001		%	2000		%
Industrial		$	166,241	28.4	$	144,136	31.9
1-4 family (includes undeveloped land)			109,204	18.6		34,513	7.6
Office buildings			108,734	18.6		54,246	12.0
Shopping centers			80,637	13.8		37,602	8.3
Condominiums/apartments			61,987	10.6		82,133	18.2
Other			59,263	10.0		99,671	22.0
	Total	$	586,066	100.0	$	452,301	100.0

Installment

        Installment loans consist primarily of loans to individuals for personal purchases. The average outstanding individual note balance at December 31, 2001 was approximately $23,000.

        Concentrations of credit risk arise when a number of clients are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. Although the Company has a diversified loan portfolio, a substantial portion of the loan portfolio and credit performance depends on the economic stability of Southern California, which in some degree relies on the stability of entertainment and media companies and, to a lesser extent, Northern California.

        The Company's lending activities are predominately in California although it has some loans to domestic clients who are engaged in international trade or film productions.

        Inherent in any loan portfolio are risks associated with certain types of loans. The Company assesses and manages credit risk on an ongoing basis through diversification guidelines, lending limits, credit review and approval policies, and internal monitoring. As part of the control process, an independent loan review and compliance department regularly examines the Company's loan portfolio

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and other credit related products, including unused commitments and letters of credit. In addition to this internal credit process, the Company's loan portfolio is subject to examination by external regulators in the normal course of business. Credit quality is influenced by underlying trends in the economic and business cycle. With the slowdown in the economy, the Company has enhanced its training program for its line officers and implemented additional credit underwriting and monitoring procedures. The Company also seeks to manage and control its risk through diversification of the portfolio by type of loan, industry concentration, and type of borrower as well as specific maximum loan-to-value (LTV) limitations at origination as to various categories of real estate related loans other than residential first mortgage loans. These ratios are as follows:

Maximum LTV Ratios

Category of Real Estate Collateral	Maximum LTV Ratio
1-4 family (includes undeveloped land)	80	%
Condominiums/apartments	80
Equity lines of credit	80
Industrial	80
Shopping centers	80
Churches/religious	75
Office building	75
Other improved property	70
Land, nonresidential	50

        The Company's loan policy provides that any term loan on income-producing properties must have a minimum debt service coverage of at least 1.20 to 1 for non-owner occupied property and at least 1.05 to 1 for owner occupied at origination. Any exception to these guidelines requires approval at higher levels of authority based on the type of exception. All exceptions are reviewed by the Credit Policy Committee of the Bank.

        One of the significant risks associated with real estate lending is the risk associated with the possible existence of environmental risks or hazards on or in property affiliated with the loan. The Company mitigates such risks through the use of an Environmental Risk Questionnaire for all loans secured by real estate. A Phase I environmental report is required if indicated by the questionnaire or if for any other reason it is determined appropriate. Other reasons would include the industrial use of environmentally sensitive substances or the proximity to other known environmental problems. A Phase II report is required in certain cases, depending on the outcome of the Phase I report.

        At December 31, 2001, 74.9% of commercial loans and 47.9% of real estate loans, including residential first mortgages, outstanding were floating interest rate loans. There were no floating rate installment loans as of December 31, 2001. Floating rate loans comprised 59.7% of the total loan portfolio at December 31, 2001 and 62.8% at December 31, 2000. Total loans at December 31, 2001 consisted of 39.3% due in one year or less, 16.6% due in one to five years and 44.1% due after five years.

        The loan maturities shown in the table below are based on contractual maturities. As is customary in the banking industry, loans that meet sound underwriting criteria can be renewed by mutual agreement between the Company and the borrower. Because the Company is unable to estimate the extent to which its borrowers will renew their loans, the table is based on contractual maturities.

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Loan Maturities

			December 31, 2001
Dollars in thousands			Commercial		Real Estate Mortgage		Residential First Mortgage		Real Estate Construction		Installment		Total
Aggregate maturies of loan balances due:
In one year or less
	Interest rate—floating		$	1,923,969	$	296,109	$	1,955	$	497,775	$	—	$	2,719,808
	Interest rate—fixed			67,015		4,947		13		12,580		7,903		92,458
After one year but within five years
	Interest rate—floating			463,207		136,159		38		59,450		—		658,854
	Interest rate—fixed			373,832		67,386		59,067		2,648		29,308		532,241
After five years
	Interest rate—floating			45,085		419,145		427,135		1,460		—		892,825
	Interest rate—fixed			374,212		744,368		1,099,095		12,153		33,192		2,263,020
		Total loans	$	3,247,320	$	1,668,114	$	1,587,303	$	586,066	$	70,403	$	7,159,206

Asset Quality

Allowance for Credit Losses

        A consequence of lending activities is that losses may be experienced. The amount of such losses will vary from time to time depending upon the risk characteristics of the loan portfolio as affected by economic conditions, rising interest rates, and the financial experience of borrowers. The allowance for credit losses which provides for the risk of losses inherent in the credit extension process, is increased by the provision for credit losses charged to operating expense and allowances acquired through acquisitions and is decreased by the amount of charge-offs, net of recoveries. There is no precise method of predicting specific losses or amounts that ultimately may be charged off on particular segments of the loan portfolio.

        The Company has an internal risk analysis and review staff that ultimately reports to the Audit Committee of the Board of Directors and continually reviews loan quality. This analysis includes a detailed review of the classification and categorization of problem, potential problem loans and loans to be charged off, an assessment of the overall quality and collectibility of the portfolio, and consideration of the loan loss experience, trends in problem loans, and concentration of credit risk, as well as current economic conditions particularly in California. Management then evaluates the allowance, determines its desired level, determines appropriate provisions and reviews the results with the Audit Committee.

        The allowance for credit losses is a significant estimate that can and does change based on management's process in analyzing the loan portfolio and on management's assumptions about specific borrowers and the impact on the portfolio of applicable economic and environmental conditions, among other factors. The Company's methodology for determining the allowance for loan losses establishes both a specific and a general component. The specific component of the allowance for commercial and real estate loans is based principally on current loan grades and historical loan loss experience adjusted to reflect current conditions, as well as analyses of other factors that may have affected the collectibilty of loans in the portfolio. The specific component of the allowance for residential first mortgage and installment loans is based principally on loan payment status and historical loss rates adjusted to reflect current conditions. The general component of the allowance for loan losses represents the results of analyses that estimate probable losses inherent in the total portfolio that are not fully captured in the specific allowance analyses. These analyses include industry concentrations, current economic factors, trends in the portfolio and the estimated impact of current economic conditions on certain historical loss rates used. In assessing the impact of current economic factors and the estimated impact of current economic conditions on certain historical loss rates, management continuously monitors trends in loan portfolio qualitative factors, including loan growth,

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past due loans, criticized loans and nonperforming loans. Based on known information available to it at the date of this report, management believes that the Company's allowance for credit losses was adequate for foreseeable losses at December 31, 2001. Examinations of the loan portfolio are also conducted periodically by the Company's regulators.

        Based on expected loan growth, the levels of nonperforming loans and net charge-offs, it is anticipated that the level of the allowance will require additional provisions for credit losses in 2002, but not necessarily equal to the amount of net charge-offs. Credit quality will be influenced by underlying trends in the economic cycle, particularly in California, and other factors which are beyond management's control. Consequently, no assurances can be given that the Company will not sustain loan losses, in any particular period, that are sizable in relation to the allowance for credit losses. Additionally, subsequent evaluation of the loan portfolio, in light of factors then prevailing, by the Company and its regulators may warrant an adjustment to the amount of the projected provision. See "—Provision for Credit Losses."

        The following table summarizes the activity in the allowance for credit losses for the five years ended December 31, 2001:

Allowance for Credit Losses

			Year ended December 31,
Dollars in thousands
			2001			2000			1999			1998			1997
Average amount of loans outstanding			$	6,713,315		$	6,236,334		$	4,822,254		$	4,213,853		$	3,387,784
Balance of allowance for credit losses, beginning of year			$	135,435		$	134,077		$	135,339		$	137,761		$	130,089
Loans charged off:
	Commercial
		Relationship		(29,632	)		(22,293	)		(10,672	)		(12,987	)		(12,440	)
		Syndicated non-relationship		(11,812	)		(18,167	)		(8,093	)		(2,032	)		(2,211	)
				(41,444	)		(40,460	)		(18,765	)		(15,019	)		(14,651	)
	Real estate mortgage			(842	)		(905	)		(455	)		(1,382	)		(4,275	)
	Residential first mortgage			(220	)		(77	)		(158	)		(1,128	)		(474	)
	Installment			(73	)		(134	)		(150	)		(107	)		(112	)
		Total loans charged off		(42,579	)		(41,576	)		(19,528	)		(17,636	)		(19,512	)
Recoveries of loans previously charged off:
	Commercial
		Relationship		11,647			7,977			13,403			11,556			11,098
		Syndicated non-relationship		1,012			—			—			—			—
				12,659			7,977			13,403			11,556			11,098
	Real estate mortgage			2,011			1,959			893			397			8,894
	Residential first mortgage			282			1,522			527			503			58
	Installment			54			49			28			11			118
		Total recoveries		15,006			11,507			14,851			12,467			20,168
Net loans (charged off) recovered				(27,573	)		(30,069	)		(4,677	)		(5,169	)		656
Additions to allowance charged to operating expense				35,000			21,500			—			—			—
Acquisitions				—			9,927			3,415			2,747			7,016
Balance, end of year			$	142,862		$	135,435		$	134,077		$	135,339		$	137,761
Ratio of net (charge offs) recoveries to average loans				(0.41	)%		(0.48	)%		(0.10	)%		(0.12	)%		0.02	%
Ratio of net relationship (charge offs) recoveries to average relationship loans				(0.25	)%		(0.21	)%		0.08	%		(0.08	)%		0.09	%

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        Net loan charge-offs were $27.6 million, or 0.41%, of average loans during 2001. Included in this amount was $10.8 million in net loan charge-offs in syndicated non-relationship loans which represented 39.2% of net loan charge-offs. Net charge-offs for 2000 and 1999 were $30.1 million, or 0.48%, and $4.7 million, or 0.10%, of average loans, respectively.

        The allowance for credit losses as a percentage of total loans was 2.00%, 2.07%, and 2.44% at December 31, 2001, 2000, and 1999, respectively. The allowance for credit losses as a percentage of nonperforming loans was 370.5%, 218.5%, and 530.2% at December 31, 2001, 2000, and 1999, respectively. See "—Nonaccrual, Past Due, and Restructured Loans".

        Based on an evaluation of individual credits, previous loan loss experience, management's evaluation of the current loan portfolio, and current economic conditions, management has allocated the allowance for credit losses as shown for the past five years in the table below.

Allocation of Allowance for Credit Losses

		Allowance amount										Percent of loans to total loans
Dollars in thousands
		2001		2000		1999		1998		1997		2001		2000		1999		1998		1997
Commercial
	Relationship	$	79,195	$	74,920	$	63,082	$	80,275	$	81,101	44	%	47	%	42	%	43	%	45	%
	Syndicated non-relationship		7,747		17,717		15,579		20,536		10,813	1		3		10		11		6
Real estate mortgage			24,686		24,517		33,590		16,508		27,378	23		23		19		17		18
Residential first mortgage			21,998		10,453		17,659		15,625		14,750	23		19		22		23		26
Real estate construction			8,176		6,645		2,837		1,950		3,357	8		7		6		5		4
Installment			1,060		1,183		1,330		445		362	1		1		1		1		1
	Total	$	142,862	$	135,435	$	134,077	$	135,339	$	137,761	100	%	100	%	100	%	100	%	100	%

        While the allowance is allocated to portfolios, the allowance is general in nature and is available for the portfolio in its entirety. In 2001, an increase in problem loans in the commercial loan category and an increase in residential first mortgages resulted in increased allocations while a decrease in syndicated non-relationship loans outstanding resulted in a decreased allocation to this category of loans.

        At December 31, 2001, there was $29.2 million of impaired loans included in nonaccrual loans, $10.2 million of which had an allowance of $2.6 million allocated to them. At December 31, 2000, there was $49.1 million of impaired loans included in nonaccrual loans, $3.2 million of which had an allowance of $1.2 million allocated to them. The allowance represents the difference between the value of the collateral supporting those loans and the outstanding balances of those loans and is included in the allowance for credit losses. A loan is considered impaired when it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Once a loan is determined to be impaired, SFAS No. 114 requires that the impairment be measured based on the present value of the expected future cash flows discounted at the loan's effective interest rate, except that as a practical expedient, the impairment may be measured by using the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The Company's policy is to record cash receipts on impaired loans first as reductions in principal and then as interest income.

Nonaccrual, Past Due, and Restructured Loans

        Total nonperforming assets (nonaccrual loans and ORE) were $38.6 million, or 0.54% of total loans and ORE at December 31, 2001, compared with $62.5 million, or 0.96%, at December 31, 2000, primarily due to a decline in nonperforming syndicated non-relationship loans.

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        Total nonperforming relationship assets were $32.7 million, or 0.46%, of total relationship loans and ORE at December 31, 2001, compared with $39.5 million, 0.62% at December 31, 2000. The nonaccrual loan portfolio does not contain any concentration of credits within a specific industry sector. Syndicated non-relationship loans on nonaccrual status represented 15.2% of the total, or $5.9 million at December 31, 2001. The nonperforming syndicated non-relationship loans consisted of three borrowers at December 31, 2001.

        The following table presents information concerning nonaccrual loans, ORE, accruing loans which are contractually past due 90 days or more as to interest or principal payments and still accruing, and restructured loans:

Nonaccrual, Past Due, and Restructured Loans

			December 31,
Dollars in thousands
			2001			2000			1999			1998			1997
Nonaccrual loans:
	Commercial
		Relationship	$	26,751		$	30,343		$	13,368		$	4,763		$	6,589
		Syndicated non-relationship		5,864			23,012			—			—			—
				32,615			53,355			13,368			4,763			6,589
	Real estate			5,393			8,132			10,380			17,204			19,243
	Installment			555			499			1,540			1,171			1,734
		Total		38,563			61,986			25,288			23,138			27,566
ORE				10			522			1,413			3,480			2,126
Total nonaccrual loans and ORE			$	38,573		$	62,508		$	26,701		$	26,618		$	29,692
Total nonaccrual loans as a percentage of total loans				0.54	%		0.95	%		0.46	%		0.51	%		0.72	%
Total nonaccrual loans and ORE as a percentage of total loans and ORE				0.54			0.96			0.49			0.59			0.78
Total relationship nonaccrual loans and ORE to total relationship loans and ORE				0.46			0.62			0.54			0.66			0.83
Allowance for credit losses to total loans				2.00			2.07			2.44			2.99			3.60
Allowance for credit losses to nonaccrual loans				370.46			218.49			530.20			584.92			499.75
Loans past due 90 days or more on accrual status:
	Commercial		$	1,764		$	1,543		$	2,794		$	7,661		$	9,226
	Real estate			878			4,361			736			949			13,370
	Installment			973			20			503			13			3,596
		Total	$	3,615		$	5,924		$	4,033		$	8,623		$	26,192
Restructured loans:
	On accrual status		$	—		$	829		$	2,707		$	1,982		$	2,813
	On nonaccrual status			—			740			368			1,682			1,286
		Total	$	—		$	1,569		$	3,075		$	3,664		$	4,099

        Company policy requires that a loan be placed on nonaccrual status if either principal or interest payments are ninety days past due, unless the loan is both well secured and in process of collection, or if full collection of interest or principal becomes uncertain, regardless of the time period involved.

        At December 31, 2001, in addition to loans disclosed above as past due, nonaccrual or restructured, management also identified $12.8 million of loans about which the ability of the borrowers

A-28

to comply with the present loan payment terms in the future is questionable. However, the inability of the borrowers to comply with repayment terms was not sufficiently probable to place the loan on nonaccrual status at December 31, 2001. This amount was determined based on analysis of information known to management about the borrower's financial condition and current economic conditions. Included is one loan to a borrower in the telecommunications industry for $9.8 million, which due to events occurring in 2002, will result in a charge-off of between approximately $4.5 and $6.5 million in the first quarter. If economic conditions change, adversely or otherwise, or if additional facts on the borrowers' financial condition come to light, then the amount of potential problem loans may change, possibly significantly. Estimated potential losses from these potential problem loans have been provided for in determining the allowance for credit losses.

        The table below summarizes the approximate changes in nonaccrual loans for the years ended December 31, 2001 and 2000.

Changes in Nonaccrual Loans

Dollars in thousands		2001			2000
Balance, beginning of the year		$	61,986		$	25,288
Loans placed on nonaccrual
	Relationship		36,769			47,731
	Syndicated non-relationship		12,226			38,789
Loans from acquisitions			—			4,428
Charge offs			(26,306	)		(22,656	)
Loans returned to accrual status			(2,092	)		(9,010	)
Repayments (including interest applied to principal)			(43,858	)		(22,584	)
Transfers to ORE			(162	)		—
Balance, end of year		$	38,563		$	61,986

        The additional interest income that would have been recorded from nonaccrual loans, if the loans had not been on nonaccrual status was $7.3 million, $10.2 million, and $3.8 million for the years ended December 31, 2001, 2000, and 1999, respectively. Interest payments received on nonaccrual loans are applied to principal unless there is no doubt as to ultimate full repayment of principal, in which case, the interest payment is recognized as interest income. Interest collected and applied to principal was $6.1 million, $5.7 million, and $3.7 million for the years ended December 31, 2001, 2000, and 1999, respectively, from collection of interest related to nonaccrual loans. Interest income not recognized on nonaccrual loans reduced the net interest margin by 8, 14, and 6 basis points for the years ended December 31, 2001, 2000, and 1999, respectively.

Other Real Estate

        The amount of the Company's ORE was $10 thousand at December 31, 2001 compared to $0.5 million a year ago. The Company's policy is to record these properties at estimated fair value, net of selling expenses, at the time they are transferred into ORE, thereby tying future gains or losses from sale or potential additional write-downs to underlying changes in the market.

A-29

Other Assets

        Other assets include the following:

		December 31,
Dollars in thousands
		2001		2000
Accrued interest receivable		$	44,432	$	53,423
Loans held-for-sale			23,558		7,173
Claim in receivership and other assets			22,242		18,950
Swap mark-to-market			21,254		—
Other			28,577		28,833
	Total other assets	$	140,063	$	108,379

        Loans held-for-sale consisted of four loans at December 31, 2001 and two loans at December 31, 2000. Two loans totaling $14.4 million were sold in the first quarter of 2002 with no further write-down.

        The claim in receivership and other assets was acquired in the acquisition of Pacific Bank. The claim in receivership, which is approximately half of the balance, is expected to be realized in the first half of 2002.

        See—"Asset/Liability Management" for a discussion of interest rate swaps which result in the swap mark-to-market asset of $21.3 million.

Commitments and Lines of Credit

        In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit, letters of credit, and financial guarantees. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount reflected in the consolidated balance sheet. Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each client's creditworthiness on a case-by-case basis.

        The Company had outstanding loan commitments aggregating $2,933.1 million at December 31, 2001. In addition, the Company had $315.4 million outstanding in bankers' acceptances and letters of credit of which $267.5 million relate to standby letters of credit at December 31, 2001. Substantially all of the Company's loan commitments are on a variable rate basis and are comprised of real estate and commercial loan commitments. All are appropriately considered in determining the adequacy of the allowance for credit losses.

Deposits and Borrowed Funds

        Core deposits, which include noninterest-bearing deposits and interest-bearing deposits excluding time deposits of $100,000 and over, provide a stable source of low cost funding. Average core deposits were $5,598.1 million in 2001 compared with $4,957.4 million in 2000. The increase was due primarily to internally generated growth.

        Certificates of deposit of $100,000 or more totaled $1,344.4 million at December 31, 2001, of which $1,035.4 million mature within three months, $188.9 million mature within four to six months, $95.0 million mature within seven months to one year and $25.1 mature beyond one year.

A-30

        Short and long-term borrowed funds provided additional funding, albeit at a higher cost, to support loan and securities growth. Average borrowed funds were $1,317.7 million in 2001 compared with $1,311.6 million in 2000.

        At December 31, 2001 and 2000, the aggregate amount of deposits by foreign depositors in domestic offices totaled $87.0 million and $122.5 million, respectively, the majority of which was interest bearing. As part of the Pacific Bank acquisition, the Bank has a depository office located in the Cayman Islands, British West Indies with deposits totaling $7.9 million at December 31, 2001. The Company expects to close this office in the first half of 2002. Brokered deposits were $236.6 million and $666.2 million, at December 31, 2001 and 2000, respectively.

Critical Accounting Policies

        The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements require management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under difference assumptions or conditions.

        Certain accounting policies involved significant judgements and assumptions by management which have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances.

        The Company believes the following are critical accounting policies that require the most significant judgments and estimates used in the preparation of its consolidated financial statements:

•

Accounting for the allowance for loan losses. See—Balance Sheet Analysis—Asset Quality—Allowance for Loan Losses.



•

Accounting for derivatives and hedging activities. See—Balance Sheet Analysis—Asset/Liability Management.

A-31

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

        We have made forward-looking statements in this document that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our management, and on information currently available to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations, and statements preceded by, followed by, or that include the words "will," believes," "expects," "anticipates," "intends," "plans," "estimates," or similar expressions.

        Our management believes these forward-looking statements are reasonable. However, you should not place undue reliance on the forward-looking statements, since they are based on current expectations. Actual results may differ materially from those currently expected or anticipated.

        Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Many of the factors described below that will determine these results and values are beyond our ability to control or predict. For those statements, we claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995.

A number of factors, some of which are beyond the Corporation's ability to control or predict, could cause future results to differ materially from those contemplated by such forward-looking statements. These factors include (1) a continued economic slowdown in the national and California economies attributable to various ongoing developments such as declining retail sales, declines in consumer confidence, reduced industrial production, declining business inventories, reduced capacity utilization, and declining occupancy in commercial and residential real estate resulting in declines in underlying value of real estate assets, or other unforeseen adverse changes in national and regional economic activity, (2) increased economic uncertainty created by the most recent terrorist attacks on the United States, (3) economic uncertainty created by the military, diplomatic and humanitarian actions of the United States and allied nations in Afghanistan in response to the terrorists acts, (4) the increased prospect of additional terrorist acts within the United States and the uncertain effect of these events on our national and regional economies could have the following consequences, any of which could hurt our business.

•

Loan delinquencies may increase;



•

Problem assets and foreclosures may increase;



•

Demand for our products and services may decline; and



•

Collateral for loans made by us, especially real estate, may decline in value, in turn reducing clients' borrowing power, and reducing the value of assets and collateral associated with our existing loans.

        Changes in interest rates affect our profitability.    The Federal Reserve has lowered interest rates eleven times during 2001, and accordingly, we have lowered our interest rates on some loan and deposit products to maintain a competitive position. Changes in prevailing rates may hurt our business. We derive our income mainly from the difference or "spread" between the interest earned on loans, securities, and other interest-earning assets, and interest paid on deposits, borrowings, and other interest-bearing liabilities. In general, the wider the spread, the more we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities fluctuates. This causes decreases in our spread and affects our net interest income. In addition, interest rates affect how much money we lend.

Significant changes in the provision or applications of laws on regulations affecting our business could materially affect our business. The banking industry is subject to extensive federal and state

A-32

regulations, and significant new laws or changes in, or repeals of, existing laws may cause results to differ materially. Also, federal monetary policy, particularly as implemented through the Federal Reserve System, significantly affects our credit conditions, primarily through open market operations in U.S. government securities, the discount rate for member bank borrowing, and bank reserve requirements. A material change in these conditions would affect our results. Parts of our business are also subject to federal and state securities laws and regulations. Significant changes in these laws and regulations would also affect our business. Recent new laws affecting our business include the implementation of the Gramm-Leach-Bliley Act and the adoption of new regulations by the banking agencies under this new law. The long term impact of compliance with these new laws and other related privacy initiatives is difficult to predict at this time.

We face strong competition from financial service companies and other companies that offer banking services which can hurt our business. Increased competition in our market may result in reduced loans and deposits. Ultimately, we may not be able to compete successfully against current and future competitors. Many competitors offer the banking services that we offer in our service area. These competitors include national, regional, and community banks. We also face competition from many other types of financial institutions, including, without limitation, savings and loans, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks, and other financial intermediaries. Recently passed legislation will make it easier for other types of financial institutions to compete with us.

Our results would be adversely affected if we suffered higher than expected losses on our loans. We assume risk from the possibility that we will suffer losses because borrowers, guarantors, and related parties fail to perform under the terms of their loans. We try to minimize this risk by adopting and implementing what we believe are effective underwriting and credit policies and procedures, including how we establish and review the allowance for credit losses. We assess the likelihood of nonperformance, track loan performance, and diversify our credit portfolio. Those policies and procedures may still not prevent unexpected losses that could adversely affect our results.

Our financial results could be adversely affected by unanticipated changes in regulatory, judicial, or legislative tax treatment of business transactions.

A-33

QUARTERLY RESULTS

        The following table summarizes quarterly operating results for 2001 and 2000.

2001 Quarterly Operating Results

	Quarter ended
Dollars in thousands, except per share amounts
	March 31,		June 30,		September 30,		December 31,		Total
Interest income	$	164,192	$	156,490	$	156,516	$	148,050	$	625,248
Interest expense		59,275		51,441		45,387		34,991		191,094
Net interest income		104,917		105,049		111,129		113,059		434,154
Provision for credit losses		7,500		6,500		10,000		11,000		35,000
Net interest income after provision for credit losses		97,417		98,549		101,129		102,059		399,154
Noninterest income		30,284		32,355		31,366		35,037		129,042
Gain on sale of securities		977		539		916		910		3,342
Noninterest expense		76,604		79,012		77,329		80,450		313,395
Income before taxes		52,074		52,431		56,082		57,556		218,143
Income taxes		18,483		16,087		18,598		18,805		71,973
Net income	$	33,591	$	36,344	$	37,484	$	38,751	$	146,170
Net income per share, basic	$	0.70	$	0.76	$	0.78	$	0.81	$	3.05
Net income per share, diluted	$	0.69	$	0.74	$	0.75	$	0.78	$	2.96

2000 Quarterly Operating Results

	Quarter ended
Dollars in thousands, except per share amounts
	March 31,		June 30,			September 30,		December 31,		Total
Interest income	$	142,067	$	164,076		$	170,927	$	169,218	$	646,288
Interest expense		49,820		59,432			66,926		63,594		239,772
Net interest income		92,247		104,644			104,001		105,624		406,516
Provision for credit losses		—		4,000			7,000		10,500		21,500
Net interest income after provision for credit losses		92,247		100,644			97,001		95,124		385,016
Noninterest income		24,020		26,795			26,703		28,834		106,352
Gain (loss) on sale of securities		223		(5	)		1,819		1,095		3,132
Noninterest expense		69,085		76,074			73,984		75,627		294,770
Income before taxes		47,405		51,360			51,539		49,426		199,730
Income taxes		16,397		17,915			17,378		16,380		68,070
Net income	$	31,008	$	33,445		$	34,161	$	33,046	$	131,660
Net income per share, basic	$	0.67	$	0.70		$	0.72	$	0.70	$	2.79
Net income per share, diluted	$	0.66	$	0.68		$	0.70	$	0.68	$	2.72

A-34

Management's Responsibility for Financial Statements

        Management is responsible for the preparation of the Corporation's consolidated financial statements and related information appearing in this annual report. Management believes that the consolidated financial statements fairly reflect the form and substance of transactions, and that the consolidated financial statements reasonably present the Corporation's financial position and results of operations in conformity with accounting principles generally accepted in the United States of America. Management also has included in the Corporation's consolidated financial statements amounts that are based on estimates and judgments that it believes are reasonable under the circumstances.

        The independent auditors audit the Corporation's consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and provide an objective, independent review of the fairness of reported operating results and financial position.

        The Board of Directors of the Corporation has an Audit Committee composed solely of three non-management directors. The Committee meets periodically with financial management, the internal auditors and the independent auditors to review accounting control, auditing and financial matters.

/s/  RUSSELL D. GOLDSMITH Russell D. Goldsmith
Chief Executive Officer

/s/  BRAM GOLDSMITH Bram Goldsmith
Chairman of the Board

/s/  FRANK P. PEKNY Frank P. Pekny
Executive Vice President and
Chief Financial Officer

A-35

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
City National Corporation:

        We have audited the accompanying consolidated balance sheet of City National Corporation and subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements of income and comprehensive income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2001. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of City National Corporation and subsidiaries as of December 31, 2001 and 2000 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.

        As discussed in Notes 1 and 14 to the consolidated financial statements, the Company changed its accounting for derivative instruments and hedging activities in 2001.

KPMG LLP

Los Angeles, California
January 16, 2002

A-36

CITY NATIONAL CORPORATION

CONSOLIDATED BALANCE SHEET

			December 31,
Dollars in thousands, except share amounts
			2001		2000
Assets
	Cash and due from banks		$	328,018	$	386,814
	Federal funds sold			395,000		165,000
	Securities available-for-sale (cost $1,810,890 and $1,567,676 in 2001 and 2000)			1,814,839		1,547,844
	Trading account securities			78,266		46,078
	Loans			7,159,206		6,527,145
	Less allowance for credit losses			142,862		135,435
		Net loans		7,016,344		6,391,710
	Premises and equipment, net			66,414		63,010
	Customers' acceptance liability			7,924		14,736
	Deferred tax asset			36,230		65,986
	Goodwill			158,769		171,559
	Core deposit intangibles			18,530		24,148
	Bank owned life insurance			55,734		52,820
	Affordable housing investments			60,185		58,585
	Other assets			140,063		108,379
		Total assets	$	10,176,316	$	9,096,669
Liabilities
	Demand deposits		$	3,846,789	$	3,276,203
	Interest checking deposits			576,651		619,332
	Money market deposits			1,893,383		1,344,244
	Savings deposits			240,376		244,707
	Time deposits-under $100,000			229,643		247,797
	Time deposits-$100,000 and over			1,344,360		1,676,387
		Total deposits		8,131,202		7,408,670
	Federal funds purchased and securities sold under repurchase agreements			171,531		139,841
	Other short-term borrowings			415,858		315,125
	Subordinated debt			272,236		123,641
	Long-term debt			193,938		208,417
	Other liabilities			93,050		142,591
	Acceptances outstanding			7,924		14,736
		Total liabilities		9,285,739		8,353,021
Commitments and contingencies
Shareholders' Equity
	Preferred Stock authorized—5,000,000: none outstanding			—		—
	Common Stock-par value-$1.00; authorized—75,000,000; issued—48,149,998 in 2001 and 47,785,345 shares in 2000			48,150		47,785
	Additional paid-in capital			301,022		292,358
	Accumulated other comprehensive income (loss)			10,674		(11,493	)
	Retained earnings			530,731		420,024
	Treasury shares, at cost—0 shares in 2001 and 155,355 shares in 2000			—		(5,026	)
		Total shareholders' equity		890,577		743,648
		Total liabilities and shareholders' equity	$	10,176,316	$	9,096,669

See accompanying Notes to the Consolidated Financial Statements.

A-37

CITY NATIONAL CORPORATION

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME

			For the year ended December 31,
Dollars in thousands, except per share amounts
			2001			2000			1999
Interest Income
	Loans		$	517,891		$	550,361		$	399,891
	Securities available-for-sale			102,141			89,588			65,209
	Trading account			1,918			3,530			2,965
	Federal funds sold and securities purchased under resale agreements			3,298			2,809			2,381
		Total interest income		625,248			646,288			470,446
Interest Expense
	Deposits			133,250			155,727			93,214
	Other short-term borrowings			28,242			49,038			9,896
	Federal funds purchased and securities sold under repurchase agreements			13,218			16,269			25,954
	Other long-term debt			7,460			10,614			11,960
	Subordinated debt			8,924			8,124			7,417
		Total interest expense		191,094			239,772			148,441
	Net interest income			434,154			406,516			322,005
	Provision for credit losses			35,000			21,500			—
	Net interest income after provision for credit losses			399,154			385,016			322,005
Noninterest Income
	Trust fees and investment fee revenue			58,596			47,279			37,822
	Cash management and deposit transaction charges			30,911			22,933			18,113
	International services			15,017			14,982			9,950
	Bank owned life insurance			2,860			2,578			2,268
	Gain (loss) on sale of loans and assets/debt repurchase			1,413			(71	)		2,117
	Gain on sale of securities			3,342			3,132			3,696
	Other			20,245			18,651			13,246
		Total noninterest income		132,384			109,484			87,212
Noninterest Expense
	Salaries and employee benefits			170,364			159,782			133,935
	Net occupancy of premises			26,375			24,415			18,955
	Professional			24,634			23,076			20,811
	Information services			16,623			14,064			12,267
	Depreciation			13,748			13,037			11,242
	Amortization of goodwill			12,868			11,223			5,171
	Marketing and advertising			12,093			12,959			10,444
	Office services			9,396			9,724			8,212
	Amortization of core deposit intangibles			5,618			5,444			4,138
	Equipment			2,245			2,462			2,213
	Acquisition integration			—			1,309			1,161
	Other operating			19,431			17,275			13,254
		Total noninterest expense		313,395			294,770			241,803
	Income before income taxes			218,143			199,730			167,414
	Income taxes			71,973			68,070			59,307
Net income				146,170			131,660			108,107
	Other comprehensive income
		Unrealized gains (losses) on securities available-for-sale		13,496			22,883			(72,546	)
		Initial gain on cash flow hedges from implementation of FAS 133		2,404			—			—
		Additional unrealized gain on cash flow hedges		19,058			—			—
		Less: reclassification adjustment for losses included in income		(3,279	)		(4,205	)		(3,252	)
		Income taxes (benefits)		16,070			11,388			(29,200	)
	Other comprehensive income (loss)			22,167			15,700			(40,094	)
Comprehensive income			$	168,337		$	147,360		$	68,013
	Net income per share, basic		$	3.05		$	2.79		$	2.37
Net income per share, diluted			$	2.96		$	2.72		$	2.30
	Shares used to compute income per share, basic			47,896			47,178			45,683
	Shares used to compute income per share, diluted			49,376			48,393			46,938
	Dividends per share		$	0.74		$	0.70		$	0.66

See accompanying Notes to the Consolidated Financial Statements.

A-38

CITY NATIONAL CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

			For the year ended December 31,
Dollars in thousands
			2001			2000			1999
Cash Flows From Operating Activities
Net income			$	146,170		$	131,660		$	108,107
Adjustments to net income:
	Provision for credit losses			35,000			21,500			—
	Amortization of goodwill and core deposit intangibles			18,486			16,667			9,309
	Depreciation			13,748			13,037			11,242
	Deferred income tax (benefit)			13,700			3,760			(2,199	)
	Gain on sales of ORE			(21	)		(38	)		(399	)
	(Gain) loss on sales of loans and assets / debt repurchase			(1,413	)		71			(2,117	)
	Gain on sales of securities			(3,342	)		(3,132	)		(3,696	)
	Net increase in other (assets) liabilities			(64,433	)		5,156			(35,599	)
	Net (increase) decrease in trading securities			(32,188	)		(18,364	)		7,301
	Other, net			20,696			20,423			22,678
		Net cash provided by operating activities		146,403			190,740			114,627
Cash Flows From Investing Activities
Purchase of securities				(1,403,757	)		(1,727,957	)		(407,722	)
Sales of securities available-for-sale				535,687			518,885			231,570
Maturities of securities				627,054			922,901			96,397
Purchase of residential mortgage loans				(12,266	)		(25,280	)		(83,371	)
Sales of loans				59,690			162,037			41,357
Loan originations net of principal collections				(721,902	)		(726,238	)		(682,061	)
Proceeds from sales of ORE				10			1,260			2,596
Purchase of premises and equipment				(21,261	)		(15,302	)		(17,818	)
Net cash from acquisitions				—			79,080			18,905
Other, net				12			11,174			592
		Net cash used by investing activities		(936,733	)		(799,440	)		(799,555	)
Cash Flows From Financing Activities
Net increase in deposits				722,532			1,037,568			366,329
Proceeds from issuance of other long-term debt				150,000			150,000			80,000
Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements				31,690			44,354			(180,824	)
Net (decrease) increase in short-term borrowings, net of transfers from long-term debt				(56,533	)		(281,614	)		79,738
Repayment of long-term debt				—			(25,000	)		—
Repurchase of subordinated debt				(8,467	)		—			—
Net proceeds of subordinated debt				148,202			—			—
Proceeds from exercise of stock options				14,967			7,285			8,193
Stock repurchases				(5,394	)		(29,411	)		(39,001	)
Cash dividends paid				(35,463	)		(32,846	)		(30,172	)
		Net cash provided by financing activities		961,534			870,336			284,263
Net increase (decrease) in cash and cash equivalents				171,204			261,636			(400,665	)
Cash and cash equivalents at beginning of year				551,814			290,178			690,843
Cash and cash equivalents at end of year			$	723,018		$	551,814		$	290,178
Supplemental Disclosures of Cash Flow Information:
	Cash paid during the period for:
		Interest	$	205,838		$	228,086		$	142,478
		Income taxes		82,700			11,621			54,400
	Non-cash investing activities:
		Transfer from loans to foreclosed assets	$	162		$	605		$	1,331
		Transfer from long-term debt to short-term borrowings		165,000			100,000			100,000

See accompanying Notes to the Consolidated Financial Statements.

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CITY NATIONAL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Dollars in thousands	Shares issued	Common stock		Additional paid-in capital			Accumulated other comprehensive income (loss)			Retained earnings			Treasury shares			Total shareholders' equity
Balances, December 31, 1998	46,885,182	$	46,885	$	287,363		$	12,901		$	243,275		$	(28,621	)	$	561,803
Net income	—		—		—			—			108,107			—			108,107
Issuance of shares for stock options exercised	—		—		(13,709	)		—			—			21,902			8,193
Tax benefit from stock options	—		—		2,810			—			—			—			2,810
Cash dividends	—		—		—			—			(30,172	)		—			(30,172	)
Other comprehensive income (loss) net of tax benefit	—		—		—			(40,094	)		—			—			(40,094	)
Repurchased shares, net	—		—		—			—			—			(39,001	)		(39,001	)
Balances, December 31, 1999	46,885,182		46,885		276,464			(27,193	)		321,210			(45,720	)		571,646
Net income	—		—		—			—			131,660			—			131,660
Issuance of shares for stock options exercised	250,486		250		2,245			—			—			4,790			7,285
Tax benefit from stock options	—		—		2,469			—			—			—			2,469
Cash dividends	—		—		—			—			(32,846	)		—			(32,846	)
Other comprehensive income net of tax	—		—		—			15,700			—			—			15,700
Repurchased shares, net	—		—		—			—			—			(29,411	)		(29,411	)
Issuance of shares for acquisitions	649,677		650		11,180			—			—			65,315			77,145
Balances, December 31, 2000	47,785,345		47,785		292,358			(11,493	)		420,024			(5,026	)		743,648
Net income	—		—		—			—			146,170			—			146,170
Issuance of shares for stock options exercised	364,653		365		4,182			—			—			10,420			14,967
Tax benefit from stock options	—		—		4,482			—			—			—			4,482
Cash dividends	—		—		—			—			(35,463	)		—			(35,463	)
Other comprehensive income net of tax	—		—		—			22,167			—			—			22,167
Repurchased shares, net	—		—		—			—			—			(5,394	)		(5,394	)
Balances, December 31, 2001	48,149,998	$	48,150	$	301,022		$	10,674		$	530,731		$	—		$	890,577

See accompanying Notes to Consolidated Financial Statements.

A-40

CITY NATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

        The accounting and reporting policies of City National Corporation (the Corporation) and of City National Bank (the Bank) and their subsidiaries conform to accounting principles generally accepted in the United States of America and to prevailing practices within the banking industry. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.

        City National Corporation and subsidiaries (the Company), through its primary subsidiary, the Bank, provide private and business banking, including investment and trust services, primarily in the California market. The Bank's principal client base comprises small- to mid-size businesses, entrepreneurs, professionals, and affluent individuals. The Bank typically serves clients through relationship banking. The Bank seeks to build client relationships with a high level of personal service and tailored products through private and commercial banking teams, product specialists and investment advisors to facilitate the client, where appropriate for the client, to use multiple services and products offered by the Company. The Company offers a broad range of loans, deposit, cash management, international banking, and other products and services. The Company lends, invests, and provides services in accordance with its Community Reinvestment Act commitment. Through City National Investments, a division of the Bank and Reed, Conner and Birdwell, LLC., a subsidiary of the Corporation, the Company offers personal and employee benefit trust and estate services, including 401(k) and defined benefit plans, manages investments for clients, and engages in securities sales and trading. The Bank also manages and offers mutual funds under the name of CNI Charter Funds.

Basis of Presentation

        The consolidated financial statements of the Corporation include the accounts of the Corporation, its non-bank subsidiaries, the Bank, and the Bank's wholly owned subsidiaries after elimination of all material inter-company transactions. Certain prior years' data have been reclassified to conform to current year presentation.

        The Corporation is on the accrual basis of accounting for income and expenses. In accordance with the usual practice of banks, assets and liabilities of individual trust, agency and fiduciary funds have not been included in the financial statements.

Securities

        All securities other than trading securities are classified as available-for-sale and are valued at fair value. Trading securities are valued at market value with any unrealized gains or losses included in income. Unrealized gains or losses on securities available-for-sale are excluded from net income but are included in comprehensive income net of taxes. Premiums or discounts on securities available-for-sale are amortized or accreted into income using the interest method. Realized gains or losses on sales of securities available-for-sale are recorded using the specific identification method.

        Investment fee revenue consists of fees, commissions and markups on securities transactions with clients and money market mutual fund fees.

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Loans

        Loans are generally carried at principal amounts less net deferred loan fees. Net deferred loan fees include deferred unamortized fees less direct incremental loan origination costs. Interest income is accrued as earned. Net deferred fees are accreted into interest income using the interest method.

        Loans are placed on nonaccrual status when a loan becomes 90 days past due as to interest or principal unless the loan is both well secured and in process of collection. Loans are also placed on nonaccrual status when the full collection of interest or principal becomes uncertain. When a loan is placed on nonaccrual status, the accrued and unpaid interest receivable is reversed and the accretion of deferred loan fees is ceased. Thereafter, interest collected on the loan is accounted for on the cash collection or cost recovery method until qualifying for return to accrual status. Generally, a loan may be returned to accrual status when all delinquent principal and interest are brought current in accordance with the terms of the loan agreement and certain performance criteria have been met.

        The Corporation considers a loan to be impaired when it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. Once a loan is determined to be impaired, the impairment is measured based on the present value of the expected future cash flows discounted at the loan's effective interest rate, except that as a practical expedient, the impairment is measured by using the loan's observable market price or the fair value of the collateral if the loan is collateral dependent.

        When the measurement of the impaired loan is less than the recorded amount of the loan, an impairment is recognized by creating a valuation allowance with a corresponding charge to the allowance for credit losses or by adjusting an existing valuation allowance for the impaired loan with a corresponding charge or credit to the allowance for credit losses.

        The Corporation's policy is to record cash receipts received on impaired loans first as reductions to principal and then to interest income.

Allowance for Credit Losses

        The provision for credit losses charged to operations reflects management's judgment of the adequacy of the allowance for credit losses and is determined through quarterly analytical reviews of the loan portfolio, problem loans and consideration of such other factors as the Company's loan loss experience, trends in problem loans, concentrations of credit risk, and current economic conditions, as well as the results of the Company's ongoing credit examination process and that of its regulators.

Venture Capital Investments

        Venture capital investments are carried at the lower of cost or market and are included in other assets.

Premises and Equipment

        Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed generally on a straight-line basis over the estimated useful life of each type of asset. Gains and losses on dispositions are reflected in current operations. Maintenance and repairs are charged to operating expenses.

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Other Real Estate (ORE)

        Other real estate is comprised of real estate acquired in satisfaction of loans. Properties acquired by foreclosure or deed in lieu of foreclosure are transferred to ORE and are recorded at fair value less estimated costs to sell, at the date of transfer of the property. The fair value of the ORE property is based upon a current appraisal. Losses that result from the ongoing periodic valuation of these properties are charged against ORE expense in the period in which they are identified. Expenses for holding costs are charged to operations as incurred.

Income Taxes

        The Corporation files a consolidated federal income tax return and a combined state income tax return. Deferred tax assets and liabilities are recognized for the expected future tax consequences of existing differences between financial reporting and tax reporting basis of assets and liabilities, as well as for operating losses and tax credit carry forwards, using enacted tax laws and rates. Deferred tax assets will be reduced through a valuation allowance whenever it becomes more likely than not that all, or some portion, will be realized. Deferred income taxes (benefits) represents the net change in the deferred tax asset or liability balance during the year. This amount, together with income taxes currently payable or refundable in the current year, represents the total income taxes (benefits) for the year.

Net Income Per Share

        Basic earnings per share is based on the weighted average shares of common stock. Diluted earnings per share gives effect to all dilutive potential common shares that were outstanding during part or all of the year.

Goodwill and Core Deposit Intangibles

        Goodwill represents the excess of the purchase price over the estimated fair value of net assets associated with acquisition transactions of the Company accounted for as purchases and is amortized over fifteen years. Core deposit intangibles represent the intangible value of depositor relationships resulting from deposit liabilities assumed in acquisitions and are amortized over seven years. Goodwill and core deposit intangibles are evaluated periodically for other than temporary impairment. Should such an assessment indicate that the undiscounted value of an intangible may be impaired, the net book value of the intangible would be written down to net estimated recoverable value. The carrying value of goodwill is net of accumulated amortization of $34.4 million and $21.5 million at December 31, 2001 and December 31, 2000, respectively. The carrying value of core deposit intangibles is net of accumulated amortization of $20.8 million and $15.2 million at December 31, 2001 and December 31, 2000, respectively.

Interest Rate Risk Management Activities

        On January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities," as amended (SFAS No. 133). SFAS No. 133 requires that all derivatives be recorded 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.

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        For fair value hedges, in which derivatives hedge the fair value of assets and liabilities, changes in the fair value of derivatives will be reflected in current earnings, together with changes in the fair value of the related hedged item. For effective cash flow hedges, in which derivative hedge the variability of cash flows related to floating rate assets, liabilities or forecasted transactions, changes in the derivatives fair value will not be included in current earnings but will be reported as other comprehensive income. These changes in fair value will be included in earnings of future periods when earnings will be affected by the variability of the hedged cash flows. To the extent these derivatives are not effective, changes in their fair values will be immediately included in current earnings.

        Prior to January 1, 2001, for those interest rate instruments that alter the repricing characteristics of assets or liabilities, the net differential to be paid or received on the instrument was treated as an adjustment to the yield on the underlying assets or liabilities (the accrual method). To qualify for the accrual method, the interest rate instrument must have been designated to specific assets or liabilities or pools of assets or liabilities, and must be effective at altering the interest rate characteristics of the related assets or liabilities. See "—Note 14. Derivative Financial Instruments."

Stock Option Plans

        Compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. As a practice, the Corporation's stock option grants are such that the exercise price equals the current market price of the common stock and there is no compensation expense. Proforma net income and proforma net income per share disclosures for employee stock option grants are based on recognizing expense, over the vesting period, the fair value on the date of grant of all stock-based awards made in 1996 and subsequent years.

Recent Accounting Pronouncements

        In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with Statement No. 144, Accounting for the Impairment of and Disposal of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

        The Company was required to adopt the provisions of Statement 141 immediately and Statement 142 effective January 1, 2002. Furthermore, any goodwill and any intangible asset determined to have an indefinite useful life that are acquired in a purchase business combination completed after June 30, 2001 will not be amortized, and continued to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142.

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        Statement 141 will require upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company was required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and will be required to make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

        In connection with the transitional goodwill impairment evaluation, Statement 142 will require the Company to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To accomplish this the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its asset (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with Statement 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in earnings.

        As of the date of adoption, the Company had unamortized goodwill in the amount of $158.8 million and unamortized identifiable intangible assets in the amount of $18.5 million all of which will be subject to the transition provisions of Statements 141 and 142. Amortization expense related to goodwill was $12.9 million and $11.2 million for the years ended December 31, 2001 and December 31, 2000, respectively. Other than the elimination of goodwill amortization, management does not expect that adopting Statement 142 will have an effect on the Company's financial statements.

        In June 2001, the FASB issued Statement No. 143, "Accounting for Asset Retirement Obligations," which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs would be capitalized as part of the carrying amount of the long-lived asset and depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement. The provisions of Statement 143 are effective for fiscal years beginning after June 15, 2002. Management has not yet determined the impact, if any, of adoption of Statement 143.

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        In August 2001, the FASB issued Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." For long-lived assets to be held and used, Statement 144 retains the requirements to (a) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value. Further, Statement 144 eliminates the requirement to allocate goodwill to long-lived assets to be tested for impairment, describes a probability-weighted cash flow estimation approach to deal with situations in which alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range is estimated for the amount of possible future cash flows, and establishes a "primary-asset" approach to determine the cash flow estimation period. For long-lived assets to be disposed of other than by sale (e.g., assets abandoned, exchanged or distributed to owners in a spinoff), Statement No. 144 requires that such assets be considered held and used until disposed of. Further, an impairment loss should be recognized at the date an asset is exchanged for a similar productive asset or distributed to owners in a spinoff if the carrying amount exceeds its fair value. For long-lived assets to be disposed of by sale, Statement 144 retains the requirement to measure a long-lived asset classified as held for sale at the lower of its carrying amount or fair value less cost to sell and to cease depreciation. Discontinued operations would no longer be measured on a net realizable value basis, and future operating losses would no longer be recognized before they occur. Statement 144 broadens the presentation of discontinued operations to include a component of an entity, establishes criteria to determine when a long-lived asset is held for sale, prohibits retroactive reclassification of the asset as held for sale at the balance sheet date if the criteria are met after the balance sheet date but before issuance of the financial statements, and provides accounting guidance for the reclassification of an asset from "held for sale" to "held and used." The provisions of Statement 144 are effective for fiscal years beginning after December 15, 2001. Management has not yet determined the impact, if any, of adoption of Statement 144.

Note 2. Acquisitions

        On December 29, 2000, the Corporation completed the acquisition of Reed, Conner & Birdwell, Inc. ("RCB"), an investment management firm with $1.1 billion in total client assets under management on the date of acquisition. Total consideration was valued at $15.4 million and includes equity participation notes payable to the sellers in 2003 and 2005. This acquisition was accounted for under the purchase method of accounting and resulted in the recording of goodwill of $14.3 million.

        On February 29, 2000, the Corporation completed its acquisition of The Pacific Bank, N..A. (Pacific Bank). The Corporation paid consideration equal to $145.2 million (including the consideration for stock options), 47.0% of which was paid in the Corporation's common stock and 53.0% of which was paid in cash. The transaction was accounted under the purchase method of accounting and resulted in the recording of goodwill and core deposit intangibles of $70.9 million. Included in goodwill as purchase price adjustments were $4.3 million of accrued severance and change of control costs, $1.3 million of paid transaction related expense and $3.2 million of exit costs of which approximately $1.8 million remain unpaid as of December 31, 2001. The results of Pacific Bank's operations are included in those reported by the Company beginning March 1, 2000.

        On August 27, 1999, the Bank completed its acquisition of American Pacific State Bank (APSB). The total price was $90.4 million in an all cash transaction. This acquisition was accounted for under the purchase method of accounting and resulted in the recording of goodwill and core deposit intangibles of $62.8 million. Included in goodwill as purchase price adjustments were $1.2 million of

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accrued severance costs, $0.5 million of paid transaction-related expenses and $1.5 million of exit costs all of which were paid as of December 31, 2001. The results of APSB's operations are included in those reported by the Company beginning on August 28, 1999.

Note 3. Securities Available-for-Sale

        The following is a summary of amortized cost and estimated fair value for the major categories of securities available-for-sale:

Dollars in thousands			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2001
	U.S. Government and Federal agency		$	300,653	$	5,693	$	140	$	306,206
	Mortgage-backed			1,070,670		9,564		4,701		1,075,533
	State and Municipal			187,519		3,199		517		190,201
	Other debt securities			31,924		33		1,691		30,266
		Total debt securities		1,590,766		18,489		7,049		1,602,206
	Marketable equity securities			220,124		2,375		9,866		212,633
		Total securities	$	1,810,890	$	20,864	$	16,915	$	1,814,839
December 31, 2000
	U.S. Government and Federal agency		$	646,629	$	2,326	$	581	$	648,374
	Mortgage-backed			438,667		3,257		4,703		437,221
	State and Municipal			158,983		1,852		696		160,139
	Other debt securities			165,489		30		14,606		150,913
		Total debt securities		1,409,768		7,465		20,586		1,396,647
	Marketable equity securities			157,908		2,077		8,788		151,197
		Total securities	$	1,567,676	$	9,542	$	29,374	$	1,547,844

        Gross realized gains and losses related to the available-for-sale portfolios were $6,892,000 and $3,550,000 respectively, for the year ended December 31, 2001, $12,934,000 and $9,802,000, respectively, for the year ended December 31, 2000 and $7,965,000 and $4,269,000, respectively, for the year ended December 31, 1999.

        In accordance with regulatory requirements, included in marketable equity securities was Federal Reserve stock of $12.9 million as of December 31, 2001 and December 31, 2000. Also, in accordance with the requirements of the Federal Home Loan Bank, stock in that institution in the amount of $26.5 million and $18.3 million as of December 31, 2001 and December 31, 2000, respectively, was included in marketable equity securities. Holdings of these equity securities are valued at cost.

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        The following table provides the expected remaining maturities and yields (taxable-equivalent basis) of debt securities at December 31, 2001, by contractual maturity:

Debt Available-for-Sale Securities

		One year or less			Over 1 year thru 5 years			Over 5 years thru 10 years			Over 10 years			Total
Dollars in thousands		Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield
U.S. Government and federal agency		$	14,783	5.89	$	192,029	5.27	$	99,394	6.22	$	—	—	$	306,206	5.61
Mortgage-backed			—	—		553	6.25		4,312	6.32		1,070,668	6.38		1,075,533	6.38
State and Municipal			13,760	6.87		60,106	6.68		103,132	6.75		13,203	6.81		190,201	6.74
Other debt securities			—	—		—	—		16,232	7.60		14,034	8.05		30,266	7.81
	Total debt securities	$	28,543	6.36	$	252,688	5.61	$	223,070	6.57	$	1,097,905	6.41	$	1,602,206	6.30
	Amortized cost	$	28,075		$	247,939		$	220,774		$	1,093,978		$	1,590,766

        Securities available-for-sale totaling $384.9 million were pledged to secure trust funds, public deposits, or for other purposes required or permitted by law at December 31, 2001.

Note 4. Loans and Allowance for Credit Losses

        The following is a summary of the major categories of loans:

		December 31,
Dollars in thousands
		2001		2000
Commercial
	Relationship	$	3,160,418	$	3,056,464
	Syndicated non-relationship		86,902		191,789
			3,247,320		3,248,253
Real estate mortgage			1,668,114		1,479,862
Residential first mortgage			1,587,303		1,273,711
Real estate construction			586,066		452,301
Installment			70,403		73,018
	Total loans (net of unearned income and fees of $14,473 and $12,274 in 2001 and 2000)	$	7,159,206	$	6,527,145

        Syndicated non-relationship commercial loans are loans agented by others where the Company has limited direct access to the borrower and provides no other banking products or services. Relationship commercial loans are all other commercial loans where the Company has direct access to the borrower and, therefore, has the opportunity to provide the borrower with numerous other banking products or services such as cash management, international, brokerage and trust services.

        In the normal course of business, the Bank has loans to officers and directors as well as loans to companies and individuals affiliated with or guaranteed by officers and directors of the Corporation and the Bank. These loans were made in the ordinary course of business at rates and terms no more favorable than those offered to other clients with a similar credit standing. The aggregate dollar

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amounts of these loans were $4.9 million and $4.1 million at December 31, 2001 and 2000, respectively. During 2001, new loans and advances totaled $3.1 million and repayments totaled $2.3 million. Interest income recognized on these loans amounted to $0.4 million, $0.2 million and $1.4 million during 2001, 2000 and 1999, respectively. At December 31, 2001, none of these loans were past due or on nonaccrual status. Based on analysis of information presently known to management about the loans to officers and directors and their affiliates, management believes all have the ability to comply with the present loan repayment terms.

        Loans past due 90 days or more and still accruing interest totaled $3.6 million, $5.9 million and $4.0 million at December 31, 2001, 2000 and 1999, respectively. There were no restructured loan balances at December 31, 2001. Restructured loans totaled $1.6 million and $3.1 million at December 31, 2000, and December 31, 1999, respectively.

        The allowance for credit losses is a significant estimate that can and does change based on management's process in analyzing the loan portfolio and on management's assumptions about specific borrowers and applicable economic and environmental conditions, among other factors.

        The following is a summary of activity in the allowance for credit losses:

Dollars in thousands		2001			2000			1999
Balance, January 1		$	135,435		$	134,077		$	135,339
Allowance of acquired institutions			—			9,927			3,415
Provision for credit losses			35,000			21,500			—
Charge-offs
	Relationship loans		(30,767	)		(23,409	)		(11,435	)
	Syndicated non-relationship loans		(11,812	)		(18,167	)		(8,093	)
			(42,579	)		(41,576	)		(19,528	)
Recoveries
	Relationship loans		13,994			11,507			14,851
	Syndicated non-relationship loans		1,012			—			—
			15,006			11,507			14,851
Net charge offs			(27,573	)		(30,069	)		(4,677	)
Balance, December 31		$	142,862		$	135,435		$	134,077

        The following is a summary of nonperforming loans and related interest foregone:

			December 31,
Dollars in thousands
			2001		2000		1999
Nonaccrual loans
	Relationship loans		$	32,699	$	38,974	$	25,288
	Syndicated non-relationship loans			5,864		23,012		—
			$	38,563	$	61,986	$	25,288
Contractual interest due			$	7,263	$	10,206	$	3,814
Interest collected and applied to principal				6,132		5,749		3,692
		Net interest foregone	$	1,131	$	4,457	$	122

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        At December 31, 2001, the Company had identified $29.2 million in impaired loans included in nonaccrual loans, $10.2 million of which had an allowance for credit losses of $2.6 million allocated to them. At December 31, 2000, there were $49.1 million of impaired loans included in nonaccrual loans, $3.2 million of which had an allowance for credit losses of $1.2 million allocated to them. The allowances represent the differences between the value of the collateral supporting the loans and their outstanding balances. For 2001, 2000 and 1999, the average balances of all impaired loans were $35.5 million, $32.0 million, and $2.5 million, respectively. During 2001, 2000 and 1999, no interest income was recognized on impaired loans until the book balances of these loans were paid off.

        The Corporation has pledged $809.2 million of eligible residential first mortgages as collateral for its borrowing facility at the Federal Home Loan Bank of San Francisco.

Note 5. Premises and Equipment

        The following is a summary of data for the major categories of premises and equipment:

Dollars in thousands			Cost		Accumulated Depreciation And Amortization		Carrying Value
December 31, 2001
	Premises, including land of $3,587		$	64,509	$	32,095	$	32,414
	Furniture, fixtures and equipment			80,337		57,727		22,610
	Software			24,787		13,397		11,390
		Total	$	169,633	$	103,219	$	66,414
December 31, 2000
	Premises, including land of $3,587		$	56,389	$	26,911	$	29,478
	Furniture, fixtures and equipment			72,667		49,015		23,652
	Software			18,407		8,527		9,880
		Total	$	147,463	$	84,453	$	63,010

        Depreciation and amortization expense was $13.7 million in 2001, $13.0 million in 2000 and $11.2 million in 1999. Net rental payments on operating leases included in net occupancy of premises in the consolidated statement of income and comprehensive income were $19.6 million in 2001, $15.4 million in 2000, and $12.0 million in 1999.

        The future net minimum rental commitments were as follows at December 31, 2001:

Dollars in thousands	Net Minimum Rental Commitments
2002	$	19,175
2003		15,813
2004		13,334
2005		11,294
2006		8,650
Thereafter		19,630
	$	87,896

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        A majority of the leases provide for the payment of taxes, maintenance, insurance and certain other expenses applicable to the leased premises. Many of the leases contain extension provisions and escalation clauses. The Bank paid $1.5 million in 2001, $1.4 million in 2000 and $1.2 million in 1999 for rent and operating expense pass throughs to a real estate partnership in which the Bank owns a 32% interest, and Mr. Bram Goldsmith, Chairman of the Board of the Corporation, indirectly owns a 14% interest.

        The rental commitment amounts in the table above reflect the contractual obligations of the Company under all leases. Lease obligations in acquisitions have been adjusted to current market values through purchase accounting adjustments. The allowance thus created will be accreted over the terms of the leases and reduce the total expense recognized by the Company in its operating expenses. At December 31, 2001, the Company is contractually entitled to receive minimum future rentals of $8.6 million under non-cancelable sub-leases.

Note 6. Income Taxes

        Income taxes (benefits) in the consolidated statement of income and comprehensive income includes the following amounts:

Dollars in thousands			Current		Deferred			Total
2001
	Federal		$	48,208	$	16,600		$	64,808
	State			10,065		(2,900	)		7,165
		Total	$	58,273	$	13,700		$	71,973
2000
	Federal		$	51,760	$	6,060		$	57,820
	State			12,550		(2,300	)		10,250
		Total	$	64,310	$	3,760		$	68,070
1999
	Federal		$	46,649	$	(1,633	)	$	45,016
	State			14,857		(566	)		14,291
		Total	$	61,506	$	(2,199	)	$	59,307

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        The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2001 and 2000 are presented below.

Net deferred tax assets

			December, 31
Dollars in thousands
			2001		2000
Deferred tax assets:
	Allowance for credit losses		$	48,984	$	44,948
	Net operating loss carryforwards			11,121		13,054
	Accrued expenses			6,427		8,076
	State income taxes			6,608		6,506
	Unrealized losses on available-for-sale securities			—		8,338
	Other			7,888		1,935
		Total gross deferred tax assets		81,028		82,857
Deferred tax liabilities:
	Unremitted earnings of subsidiary			23,839		—
	Core deposit and other intangibles			6,481		8,523
	Unrealized gains on cash flow hedges			6,078		—
	Leveraged leases			1,250		2,262
	Unrealized gains on available-for-sale securities			1,661		—
	Deferred loan origination costs			1,484		1,512
	Other			4,005		4,574
		Total gross deferred tax liabilities		44,798		16,871
Net deferred tax assets			$	36,230	$	65,986

        Income taxes resulted in effective tax rates that differ from the statutory federal income tax rate for the following reasons:

	Percent of Pretax Income (Loss)
	2001		2000		1999
Statutory rate	35.0	%	35.0	%	35.0	%
Net state income tax	2.1		3.3		5.6
Amortization of goodwill	1.9		1.8		0.9
Tax exempt income	(4.1	)	(3.5	)	(3.7	)
Affordable housing investments	(1.2	)	(1.7	)	(1.8	)
All other net	(0.7	)	(0.8	)	(0.6	)
Effective tax provision	33.0	%	34.1	%	35.4	%

        The tax benefit of deductible temporary differences and net operating loss carry forwards are recorded as an asset to the extent that management assesses the utilization of such temporary differences and carry forwards to be "more likely than not." The realization of tax benefits of deductible temporary differences and carry forwards depends on whether the Company has sufficient

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taxable income within the carry back and carry forward period permitted by the tax law to allow for utilization of the deductible amounts. As of any period end, the amount of the deferred tax asset that is considered realizable could be reduced if estimates of future taxable income are reduced.

        The Company's current tax receivable was $9.5 million at December 31, 2001 and $1.3 million at December 31, 2000.

        At December 31, 2001, federal net operating loss carry forwards acquired in the First Los Angeles Bank acquisition in 1995 totaled $29.2 million, of which $4.0 million will expire in 2009 and $25.2 million will expire in 2010. During 2000, the Company reversed its remaining valuation allowances of approximately $5.3 million including approximately $3.0 million which arose from the acquisition of First Los Angeles Bank.

Note 7. Retirement Plan

        The Corporation has a profit sharing retirement plan with an Internal Revenue Code Section 401(k) feature covering eligible employees. Contributions are made on an annual basis into a trust fund and are allocated to the participants based on their salaries. The profit sharing contribution requirement is based on a percentage of annual operating income subject to a percentage of salary caps. For 2001, 2000 and 1999, the Company recorded total contributions expense of $11.5 million, $11.0 million and $9.1 million, respectively.

        Eligible employees may contribute up to 15% of their salary, but not more than the maximum allowed under Internal Revenue Service regulations. The Company matched 50% of the first 6% of covered compensation. For 2001, 2000, and 1999, the Company's matching contribution included in the total contribution above was $2.1 million, $1.8 million and $1.7 million, respectively.

        The Company does not provide for any post retirement employee benefits beyond the profit sharing retirement plan.

Note 8. Stock Option Plans

        Under the City National Corporation 2001 Stock Option Plan, 1,058,275 shares of the Corporation's common shares that were reserved for grant of non qualified stock options were available to be granted as of December 31, 2001. Under the 1999 Omnibus Plan (the "1999 Omnibus Plan"), 1,364,255 shares of the Corporation's common stock that were reserved for grant of stock options were available to be granted as of December 31, 2001. Under the 1995 Omnibus Plan, 364,961 shares of the Corporation's common stock that were reserved for grant of stock options were available to be granted as of December 31, 2001. The Corporation's 1983 Stock Option Plan and 1985 Stock Option Plan have expired but options granted thereunder remain outstanding. Grants to employees are at prices at least equal to the market price of the Corporation's common stock on the effective date of the grant. Generally, in each succeeding year following the date of grant, 25% of the options become exercisable. After ten years from grant, all unexercised options will expire.

        The per share weighted-average fair value of stock options granted during 2001, 2000 and 1999 was $14.24, $11.36 and $14.59 on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: 2001-expected dividend yield of 1.50%, volatility of 32.4%, risk-free interest rate of 4.98% and expected life of 7.5 years; 2000-expected dividend yield of 2.00%, volatility of 34.8%, risk-free interest rate of 6.37% and an expected life of 7.5 years; 1999-expected

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dividend yield of 2.00%, volatility of 37.1%, risk-free interest rate of 5.20%, and an expected life of 7.5 years.

        The Company applies APB Opinion No. 25 in accounting for the plans and, accordingly, no compensation cost has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's proforma net income would have been reduced to the proforma amounts indicated below:

Dollars in thousands, except per share amounts	2001		2000		1999
Net income, as reported	$	146,170	$	131,660	$	108,107
Proforma net income		138,537		125,078		101,686
Net income per share, basic, as reported		3.05		2.79		2.37
Proforma net income per share, basic		2.89		2.65		2.23
Net income per share, diluted, as reported		2.96		2.72		2.30
Proforma Net income per share, diluted		2.81		2.58		2.17

        Pro forma net income reflects only options granted from 1996 to 2001. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the proforma net income amounts presented above because compensation cost is reflected over the options' vesting period of generally four years and compensation cost for options granted prior to January 1, 1996 is not considered.

        Following is a summary of the transactions under the stock option plans described above:

	2001				2000				1999
Shares in thousands	Number of shares		Weighted Average Option price		Number of shares		Weighted Average Option price		Number of shares		Weighted Average Option price
Options outstanding, January 1	4,629		$	27.52	4,097		$	26.54	3,849		$	22.07
Granted	1,291			36.87	1,151			27.99	965			36.51
Exercised	(665	)		22.14	(422	)		16.73	(632	)		12.97
Canceled or expired	(124	)		33.86	(197	)		31.81	(85	)		32.02
Options outstanding, December 31	5,131		$	30.38	4,629		$	27.52	4,097		$	26.54
Exercisable	2,558				2,405				1,978

        During 2001, the Corporation issued 300,455 treasury shares and 364,653 newly issued shares in connection with the exercise of stock options. In 2000, the Corporation issued 171,700 treasury shares and 250,486 newly issued shares in connection with the exercise of stock options. In 1999, the Corporation issued 632,065 treasury shares in connection with the exercise of stock options.

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        Information concerning currently outstanding and exercisable options at December 31, 2001 is as follows:

	Options Outstanding				Options Exercisable
Shares in thousands	Number Outstanding	Weighted Average Remaining Life (Yrs)	Weighted Average Outstanding Price		Number Exercisable	Weighted Average Exercise Price
Options issued at prices less than $13.99 per share	752	3.62	$	12.12	752	$	12.12
Options issued at prices between $14.00 and $29.99 per share	1,232	7.11		26.17	544		25.01
Options issued at prices between $30.00 and $49.99 per share	3,147	8.06		36.39	1,262		35.78
	5,131				2,558

        At December 31, 2001, nonqualified and incentive stock options covering 1,370,862 and 1,187,924 shares, respectively, of the Corporation's common stock were exercisable under the plans. At December 31, 2001, 2,787,491 shares were available for future grants.

        In addition to the above, the Corporation's 1999 Omnibus Plan provides for the automatic annual grant, on the date of the Annual Meeting of Stockholders, of a discounted stock option (which is not an Incentive Stock Option) to each non-employee director, including members of the Compensation and Directors Nominating Committee to purchase 500 shares of the Corporation's common stock ("Director Stock Options"). The exercise price of Director Stock Options is $1.00 per share, payable in cash or cash equivalents, by surrender of the Corporation's common stock held by the director for at least a year before exercise, or any combination of the two. Director Stock Options fully vest six months after the date of issuance or upon the termination of the holder's directorship (other than for cause), whichever is earlier, and expire 10 years after the date of grant.

Note 9. Deposits and Borrowed Funds

        The following table sets forth the maturity distribution of time deposits.

Dollars in millions	2002		2003		2004		2005		2006		After 2006		Total
Time deposits, $100,000 and over	$	1,319.3	$	20.0	$	1.5	$	1.2	$	2.2	$	0.2	$	1,344.4
Other Time Deposits		209.1		11.5		4.2		2.2		2.5		0.1		229.6
	$	1,528.4	$	31.5	$	5.7	$	3.4	$	4.7	$	0.3	$	1,574.0

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        Details regarding federal funds purchased and securities sold under repurchase agreements as well as other short-term borrowings follows.

	2001					2000					1999
Dollars in thousands	Balances at year-end		Average balance		Average % rate	Balances at year-end		Average balance		Average % rate	Balances at year-end		Average balance		Average % rate
Federal funds purchased and securities sold under repurchase agreements	$	171,531	$	326,889	4.04	$	139,841	$	264,013	6.16	$	95,487	$	232,350	4.74
Other short-term borrowings		415,858		660,840	4.27		315,125		752,751	6.51		496,724		472,341	5.26

        Following is a summary of short term borrowings and other borrowed funds of the Company excluding overnight federal funds purchased and securities sold under agreements to repurchase.

			December 31,
Dollars in thousands
			2001		2000
Other short-term borrowings:
	Term federal funds purchased		$	75,000	$	150,000
	Treasury, tax and loan note			125		125
	Federal Home Loan Bank advances			340,733		150,000
	Other Borrowing—Revolving Line of Credit			—		15,000
		Total	$	415,858	$	315,125
Subordinated debt			$	272,236	$	123,641
Long-term debt:
	Federal Home Loan Bank advances		$	190,521	$	205,000
	Equity participation notes			3,417		3,417
		Total	$	193,938	$	208,417

        Short-term borrowings consist of funds with remaining maturities of one year or less, and long-term debt consists of borrowings with remaining maturities of greater than one year. The maximum amount of other short-term borrowings at any month-end was $890.1 million, $1,004.8 million and $621.4 million in 2001, 2000 and 1999, respectively. In 1999, the Corporation established a $20.0 million revolving unsecured line of credit with another bank which was increased to $30.0 million in 2001. There were no funds borrowed on this facility as of December 31, 2001.

        The maximum amount of securities sold under agreements to repurchase outstanding at any month-end was $36.0 million, $22.2 million and $74.2 million in 2001, 2000 and 1999, respectively. The average amount of securities sold under agreements to repurchase was $8.7 million, $12.2 million and $19.9 million during 2001, 2000 and 1999, respectively. The securities underlying the agreements to repurchase remain under the Company's control.

        On August 30, 2001, the Bank issued $150.0 million of 6.75%, ten-year, subordinated notes which qualifies as Tier II capital. The carrying value of the subordinated notes is net of market adjustments and issuance costs which are being amortized to interest expense to yield an effective interest rate of 6.92%.

        On January 12, 1998, the Bank issued $125.0 million of 6.375% subordinated notes, due in 2008, in a private offering. These subordinated notes qualify as Tier II capital. The carrying value of the

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subordinated notes is net of discount and issuance costs which are being amortized to interest expense to yield an effective interest rate of 6.62%.

        Long-term Federal Home Loan Bank (the FHLB) advances outstanding as of December 31, 2001 (in thousands of dollars) mature as follows:

Dollars in thousands	2003			2004			Total
Borrowings	$	125,000		$	65,521		$	190,521
Weighted interest rate		2.11	%		2.77	%		2.34	%

        The Bank had $128.3 million and $393.1 million of unused borrowing capacity from the FHLB at December 31, 2001 and 2000, respectively.

        The equity participation notes arose from the acquisition of RCB and mature on December 31, 2003 and December 31, 2005. The notes accrue interest equal to 20% of the operating income of RCB through December 31, 2003 and 10% of the operating income of RCB for 2004 and 2005 as defined in the notes.

Note 10. Availability of Funds from Subsidiaries; Restrictions on Cash Balances; Capital

        During 2001, the Bank formed and funded CN Real Estate Investment Corporation ("CN"), a wholly owned indirect subsidiary of the Bank which provides the Bank with flexibility in raising capital. As of December 31, 2001, the net income and assets of CN are eliminated in consolidation.

        City National Bank contributed participation interest in loans with a book value of $1,555.1 million, net of reserves and $50.0 million in cash in exchange for 100% of the common stock of CN.

        During 2001, CN sold 33,933 shares of 8.50% Series A Preferred Stock to accredited investors for $3.4 million. There were no dividends paid in 2001.

        The Corporation is authorized to issue 5,000,000 shares of preferred stock. The Corporation's Board of Directors has the authority to issue the preferred stock in one or more series, and to fix the designations, rights, preferences, privileges, qualifications and restrictions, including dividend rights, conversion rights, voting rights, rights and terms of redemption, liquidation preferences and sinking fund terms.

        Under a shareholders rights agreement (the "Agreement"), the Corporation distributed preferred stock purchase rights ("Rights") as a Rights dividend on March 13, 1997 at the rate of one Right for each share of the Corporation's common stock held as of the close of business on that date. The existence of the Rights makes it less likely that a person will acquire significant voting control of the Corporation's common stock or otherwise acquire the Corporation without the Board of Directors' consent. Until the Distribution Date, which is defined in the Agreement, (1) the Rights are not exercisable, (2) the Rights are attached to and trade only together with the Corporation's common stock, and (3) the stock certificates representing the Corporation's common stock also represent the attached Rights. Each share of the Corporation's common stock issued after March 13, 1997 and prior to the Distribution Date includes one Right. On the Distribution Date, the Rights will separate from the Corporation's common stock, Rights certificates will be issued, and the Rights will become

A-57

exercisable as described in the Agreement. The Rights expire on March 13, 2007, unless earlier redeemed or exchanged.

        Historically, the majority of the funds for the payment of dividends by the Corporation have been obtained from the Bank. Under federal banking law, dividends declared by national banks in any calendar year may not, without the approval of the Office of the Comptroller of the Currency (OCC), exceed net profits (as defined), for that year combined with its retained net income for the preceding two calendar years. At December 31, 2001, the Bank could have declared dividends of $88.1 million without the approval of the OCC.

        Federal banking law also prohibits the Corporation from borrowing from the Bank on less than a fully secured basis. At December 31, 2001 and 2000, the Corporation had borrowed from the Bank $37.1 million and $26.9 million, respectively, all of which was appropriately secured in compliance with regulatory requirements.

        Federal Reserve Board regulations require that the Bank maintain certain minimum reserve balances. Cash balances maintained to meet reserve requirements are not available for use by the Bank or the Corporation. During 2001 and 2000, reserve balances averaged approximately $32.2 million and $28.5 million, respectively.

        The Corporation and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory-and possibly additional discretionary-actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of the Corporation's and Bank's assets, liabilities and certain off-balance-sheet items as calculated under the regulatory accounting practices. The Corporation's and the Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

        Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined). Management believes, as of December 31, 2001, the Corporation and the Bank meet and exceed all capital adequacy requirements to which either is subject.

        As of December 31, 2001, the most recent notification from the OCC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the institution's category.

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        The Corporation's actual amounts and ratios are presented in the following table:

			Actual				Well Capitalized
Dollars in millions
			Amount		Ratio		Amount		Ratio
As of December 2001
	Total capital
		(to risk weighted assets)	$	1,059.6	14.08	%	$	601.9	>8.0	%
	Tier 1 capital
		(to risk weighted assets)		700.9	9.32	%		301.0	>4.0	%
	Tier 1 capital
		(to average assets)		700.9	7.26	%		386.1	>4.0	%
As of December 2000
	Total capital
		(to risk weighted assets)	$	768.9	10.85	%	$	567.1	>8.0	%
	Tier 1 capital
		(to risk weighted assets)		555.5	7.84	%		283.5	>4.0	%
	Tier 1 capital
		(to average assets)		555.5	6.49	%		342.2	>4.0	%

        The Bank's actual amounts and ratios are presented in the following table:

			Actual				Well Capitalized
Dollars in millions
			Amount		Ratio		Amount		Ratio
As of December 2001
	Total capital
		(to risk weighted assets)	$	990.3	13.28	%	$	596.7	>8.0	%
	Tier 1 capital
		(to risk weighted assets)		632.4	8.48	%		298.3	>4.0	%
	Tier 1 capital
		(to average assets)		632.4	6.59	%		383.8	>4.0	%
As of December 2000
	Total capital
		(to risk weighted assets)	$	745.7	10.57	%	$	564.2	>8.0	%
	Tier 1 capital
		(to risk weighted assets)		532.6	7.55	%		282.1	>4.0	%
	Tier 1 capital
		(to average assets)		532.6	6.23	%		341.7	>4.0	%

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Note 11. Commitments and Contingencies

        In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk. These financial instruments include commitments to extend credit, letters of credit, and financial guarantees; and to invest in venture capital funds. These instruments involve, to varying degrees, elements of credit, foreign exchange, and interest rate risk in excess of the amount reflected in the consolidated balance sheet.

        Exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, letters of credit and financial guarantees written is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

        Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each client's creditworthiness on a case by case basis.

        The Company had outstanding loan commitments aggregating $2,933.1 million and $2,325.1 million at December 31, 2001 and 2000, respectively compared to outstanding loan balances of $7,159.2 million and $6,527.1 million, respectively. In addition, the Company had $315.4 million and $240.4 million outstanding in bankers' acceptances and letters of credit of which $267.5 million and $178.2 million relate to standby letters of credit at December 31, 2001 and 2000, respectively. Substantially all of the Company's loan commitments are on a variable rate basis and are comprised of real estate and commercial loan commitments.

        The Company had venture capital fund commitments of $3.3 million of which $0.6 million and $0.3 million were funded as of December 31, 2001 and December 31, 2000, respectively.

        The Corporation or its subsidiaries are defendants in various pending lawsuits claiming substantial amounts. Based upon present knowledge, management including in-house counsel is of the opinion that the final outcome of such lawsuits will not have a material adverse effect on the Company.

Note 12. Disclosure about Fair Value of Financial Instruments

        The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and due from banks and Federal funds sold (Cash and Cash Equivalents)

        For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities and trading account assets

        For securities held as available-for-sale, fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. For trading account securities, fair values are based on quoted market prices or dealer quotes.

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Loan receivables

        For certain homogeneous categories of loans, such as some residential mortgages, and other consumer loans, fair value is estimated using dealer quotes, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. In establishing the credit risk component of the fair value calculations for loans, the Company concluded that the allowance for credit losses represented a reasonable estimate of the credit risk component of the fair value of loans at December 31, 2001 and 2000.

Deposit liabilities

        The fair value of demand and interest checking deposits, savings deposits, and certain money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Short-term borrowings

        For short-term borrowings, the carrying amount is a reasonable estimate of fair value.

Long-term debt

        The fair value of long-term debt was estimated by discounting the future payments at current interest rates.

Commitments to extend credit, standby letters of credit, and financial guarantees written

        The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter parties. The Company does not make fixed-rate loan commitments. The fair value of letters of guarantee and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counter parties at the reporting date.

Commitments to venture capital funds

        The fair value of commitments to venture capital fund is based on the estimated cost to terminate them or otherwise settle the obligation.

Derivatives

        The fair value of exchange traded derivatives is based on quoted market prices or dealer quotes. The fair value of non-exchange traded derivatives consists of net unrealized gains or losses, accrued interest receivable or payable and any premiums paid or received.

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        The estimated fair values of financial instruments of the Company are as follows:

		December 31, 2001						December 31, 2000
Dollars in millions		Carrying Amount			Fair Value			Carrying Amount			Fair Value
Financial Assets:
	Cash and due from banks	$	328.0		$	328.0		$	386.8		$	386.8
	Federal funds sold		395.0			395.0			165.0			165.0
	Securities available-for-sale		1,814.8			1,814.8			1,547.8			1,547.8
	Trading account assets		78.3			78.3			46.1			46.1
	Loans, net of allowance for credit losses		7,016.3			7,058.4			6,391.7			6,391.8
Financial Liabilities
	Deposits	$	8,131.2		$	8,136.5		$	7,408.7		$	7,410.3
	Federal funds purchased and securities sold under resale agreements		171.5			171.5			139.8			139.8
	Other short-term borrowings		415.9			415.9			315.1			315.1
	Subordinated and long-term debt		466.2			498.9			332.1			335.1
	Commitments to extend credit		(16.8	)		(16.8	)		(15.0	)		(15.0	)
	Commitments to venture capital funds		—			2.7			—			3.0
	Derivative contracts		706.4	(1)		20.6	(2)		800.0	(1)		7.5	(2)

(1)

Notional Amount

(2)

Estimated net gains to settle derivative contracts as of respective period ends

A-62

Note 13. Parent Corporation Only Condensed Financial Statements

        Condensed parent Corporation financial statements, which include transactions with subsidiaries, follow:

CONDENSED BALANCE SHEET

		December 31,
Dollars in thousands
		2001		2000
Assets
Cash		$	1,159	$	560
Securities available-for-sale			97,771		60,748
Other assets			3,203		1,737
Investment in City National Bank			808,365		706,549
Investment in non-bank subsidiaries			17,315		16,352
	Total assets	$	927,813	$	785,946
Liabilities
Notes payable to City National Bank		$	37,057	$	26,896
Note payable to other banks			—		15,000
Other liabilities			179		402
	Total liabilities		37,236		42,298
Shareholders' equity			890,577		743,648
	Total liabilities and shareholders' equity	$	927,813	$	785,946

A-63

CONDENSED CONSOLIDATED STATEMENT OF INCOME AND
COMPREHENSIVE INCOME

			For the year ended December 31,
Dollars in thousands
			2001			2000			1999
Income
	Dividends from Bank and non-bank subsidiaries		$	65,367		$	120,558		$	59,044
	Interest and dividend income			4,188			2,220			1,296
	Gain on sale of securities			188			3,079			3,509
		Total income		69,743			125,857			63,849
Interest on notes payable to Bank and non-affiliates				2,255			3,055			767
Other expenses				895			746			634
Total expenses				3,150			3,801			1,401
	Income before taxes and equity in undistributed income of Bank and non-bank subsidiaries			66,593			122,056			62,448
	Income taxes (benefit)			(503	)		(31	)		1,127
	Income before equity in undistributed income of Bank and non-bank subsidiaries			67,096			122,087			61,321
	Equity in undistributed income of Bank and non-bank subsidiaries			79,074			9,573			46,786
Net income				146,170			131,660			108,107
	Other comprehensive income (loss)			22,167			15,700			(40,094	)
Comprehensive income			$	168,337		$	147,360		$	68,013

A-64

CONDENSED STATEMENT OF CASH FLOWS

			For the year ended December 31,
Dollars in thousands
			2001			2000			1999
Cash Flows From Operating Activities
Net income			$	146,170		$	131,660		$	108,107
Adjustments to net income:
	Equity in undistributed income of Bank and non-bank subsidiaries			(79,074	)		(9,573	)		(46,786	)
	Other, net			3,202			2,068			(131	)
		Net cash provided by operating activities		70,298			124,155			61,190
Cash Flows From Investing Activities
Purchase of securities available-for-sale				(86,143	)		(38,462	)		(44,447	)
Sales of securities available-for-sale				47,279			25,513			24,685
Investment in subsidiaries				—			(72,564	)		—
Other, net				—			—			1,535
		Net cash used by investing activities		(38,864	)		(85,513	)		(18,227	)
Cash Flows For Financing Activities
Cash dividends paid				(35,463	)		(32,846	)		(30,172	)
Borrowings from City National Bank				10,055			7,897			5,865
Other short-term borrowings (repayments)				(15,000	)		5,000			10,000
Repurchase of treasury shares				(5,394	)		(29,411	)		(39,001	)
Stock options exercised				14,967			7,285			8,193
		Net cash used for financing activities		(30,835	)		(42,075	)		(45,115	)
Net increase (decrease) in cash				599			(3,433	)		(2,152	)
Cash at beginning of year				560			3,993			6,145
Cash at end of year			$	1,159		$	560		$	3,993

Note 14. Derivative Financial Instruments

        The following table presents the notional amount and fair value of interest rate risk management instruments:

	December 31,
	2001				2000
Dollars in millions	Notional Amount		Fair Value		Notional Amount		Fair Value
Receive fixed/pay variable	$	706.4	$	20.6	$	800.0	$	7.5

A-65

        The Company uses interest rate swaps to mitigate risks associated with changes 1) to the fair value of certain fixed rate deposits and borrowings and 2) to certain cash flows related to future interest payments on variable rate loans. As of January 1, 2001, the Company had $800.0 million of notional amount of interest rate swaps which had a fair value of $7.5 million. Of the $800.0 million of interest rate swaps, $450.0 million were fair value hedges of various fixed rate deposits and borrowings and $350.0 million were cash flow hedges related to periodic future interest payments on specific portions of a $1.2 billion variable rate LIBOR based loan portfolio. The positive mark-to-market on the fair value hedges resulted in the recognition of other assets and an increase in the hedged deposits and borrowings of $5.1 million as of January 1, 2001. The positive mark-to market on the cash flow hedges of variable rate loans resulted in the recognition of other assets and comprehensive income of $2.4 million, before taxes of $1.0 million as of January 1, 2001. As of December 31, 2001, the Company had $706.4 million notional amount of interest rate swaps, of which $206.4 million were fair value hedges and $500 million were cash flow hedges. The positive mark-to-market on the fair value hedges resulted in the recognition of other assets of $9.6 million, other liabilities of $0.7 million and an increase in hedged deposits and borrowings of $8.9 million. In addition, deposits and borrowings included $1.8 million and comprehensive income included $2.8 million, before taxes of $1.2 million relating to interest rate swaps terminated with positive benefit during 2001. These amounts will be amortized into income over the designated hedged period. The positive mark-to-market on the cash flow hedges of variable rate loans resulted in the recognition of other assets and comprehensive income of $11.7 million, before taxes of $4.9 million. There was no transition adjustment at January 1, 2001 or any ineffectiveness gain or loss that impacted net income for 2001. Amounts to be paid or received on the cash flow hedge interest rate swaps will be reclassified into earnings upon receipt of interest payments on the underlying hedged loans, including amounts totaling $8.9 million, that was reclassified into net interest income during 2001. Comprehensive income expected to be reclassified into net interest income within the next 12 months is $13.2 million.

        Interest rate swap agreements involve the exchange of fixed- and variable-rate interest payments based upon a notional principal amount and maturity date. The Company's interest rate risk management instruments had $20.6 million of credit risk exposure at December 31, 2001 and $7.5 million as of December 31, 2000. The credit exposure represents the cost to replace, on a present value basis and at current market rates, all profitable contracts outstanding at year end plus an "add-on" factor to reflect possible future market value volatility. The Company's swap agreements require the deposit of collateral to mitigate the amount of credit risk if certain market value thresholds are exceeded. As of December 31, 2001, the Company was holding $16.7 million in securities deposited by swap counterparties as collateral.

        The periodic net settlement of interest rate risk management instruments is recorded as an adjustment to net interest income. These interest rate risk management instruments increased or (decreased) net interest income by $15.0 million, $(2.7) million and $3.5 million for 2001, 2000 and 1999, respectively.

A-66

Note 15. Net Income Per Common Share

        Basic and diluted net income per common share calculations follow:

			For the year ended December 31,
Dollars in thousands, except for share amounts
			2001		2000		1999
Basic
	Net Income		$	146,170	$	131,660	$	108,107
	Average Common Shares Outstanding			47,937		47,536		46,885
	Average Treasury Shares Outstanding			41		358		1,202
		Net Average Common Shares Outstanding		47,896		47,178		45,683
	Basic Earnings Per Share		$	3.05	$	2.79	$	2.37
Diluted
	Net Income		$	146,170	$	131,660	$	108,107
	Average Common Shares Outstanding			47,937		47,536		46,885
	Average Treasury Shares Outstanding			41		358		1,202
		Net Average Common Shares Outstanding		47,896		47,178		45,683
	Stock Option Dilution Adjustment			1,480		1,215		1,255
	Shares Outstanding and Equivalents			49,376		48,393		46,938
	Diluted Earnings Per Share		$	2.96	$	2.72	$	2.30

        Basic net income per common share is calculated by dividing net income by the weighted-average number of common shares outstanding for the period.

        Diluted net income per common share takes into consideration the dilution assuming the Corporation's outstanding stock options were converted or exercised into common shares. The average price of the Corporation's common stock for the period is used to determine the dilutive effect of outstanding stock options utilizing the treasury stock method.

A-67

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Documents Incorporated by Reference
Part I
PART II
PART III
PART IV
SIGNATURES
FINANCIAL HIGHLIGHTS
SELECTED FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Net Interest Income Summary
Interest-Sensitive Financial Instrument Maturities December 31, 2001
Interest-Sensitive Financial Instrument Maturities December 31, 2000
Interest Rate Swap Maturities and Average Rates December 31, 2001
Interest Rate Swap Maturities and Average Rates December 31, 2000
Loan Portfolio
Commercial Relationship Loans By Industry
Real Estate Mortgage Loans by Collateral Type
Maximum LTV Ratios
Loan Maturities
Allowance for Credit Losses
Allocation of Allowance for Credit Losses
Nonaccrual, Past Due, and Restructured Loans
Changes in Nonaccrual Loans
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
2001 Quarterly Operating Results
2000 Quarterly Operating Results
Management's Responsibility for Financial Statements
INDEPENDENT AUDITORS' REPORT
CITY NATIONAL CORPORATION CONSOLIDATED BALANCE SHEET
CITY NATIONAL CORPORATION CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
CITY NATIONAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
CITY NATIONAL CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
CITY NATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debt Available-for-Sale Securities
Net deferred tax assets
CONDENSED BALANCE SHEET
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
CONDENSED STATEMENT OF CASH FLOWS

EX-4.11

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Exhibit 4.11

CONFIDENTIAL OFFERING CIRCULAR

$150,000,000

6³/4% Subordinated Notes Due 2011

        We will pay interest on the subordinated notes each March 1 and September 1, commencing March 1, 2002. The subordinated notes will mature on September 1, 2011. The subordinated notes may not be redeemed prior to maturity and no sinking fund is provided for the subordinated notes.

        The subordinated notes will be unsecured and subordinate to the claims of our depositors and other creditors. Payment of principal of the subordinated notes may be accelerated only in the case of our insolvency or liquidation. We may be required to obtain the prior written approval of the Comptroller of the Currency before we may redeem or repay the subordinated notes upon acceleration or otherwise. There is no right of acceleration in the case of default in the payment of interest on or principal of the subordinated notes or default in the performance of any of our other obligations under the subordinated notes.

        The subordinated notes will not be listed on any securities exchange and there can be no assurance that a trading market will develop for the subordinated notes. The subordinated notes will be issued and transferred only in minimum denominations of $250,000 and integral multiples of $1,000 in excess thereof.

        Each subordinated note will be our direct, unconditional and unsecured general obligation and will not be an obligation of, or otherwise guaranteed by, City National Corporation. The subordinated notes will not represent deposits or savings accounts and will not be insured by the Federal Deposit Insurance Corporation, the Bank Insurance Fund or any other government agency. The subordinated notes will be subordinated to the claims of our depositors and general creditors, will be ineligible as collateral to secure loans from us and will be unsecured.

        The subordinated notes may be offered and sold only to "accredited investors" within the meaning of Rule 501 of the Securities Act of 1933.

	Offering Price (1)	Underwriting Discounts and Commissions	Proceeds to Bank
Per subordinated note	99.427%	.650%	98.777%
Total	$149,140,500	$975,000	$148,165,500

(1)

Plus accrued interest, if any, from August 30, 2001.

        Delivery of the subordinated notes in book-entry form only will be made on or about August 30, 2001.

        The subordinated notes have not been, and are not required to be, registered with the Comptroller of the Currency or the Securities and Exchange Commission under the Securities Act of 1933. The subordinated notes have not been approved or disapproved by the Comptroller of the Currency, the Securities and Exchange Commission or any state securities commission, nor has the Comptroller of the Currency, the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this offering circular. Any representation to the contrary is a criminal offense.

Credit Suisse First Boston
	City National Securities, Inc.
		Goldman, Sachs & Co.
			Lehman Brothers
				Morgan Stanley
					Salomon Smith Barney

The date of this confidential offering circular is August 23, 2001.

TABLE OF CONTENTS

	Page
FORWARD-LOOKING STATEMENTS	3
NOTICE TO INVESTORS	3
CITY NATIONAL BANK	4
CITY NATIONAL CORPORATION	4
USE OF PROCEEDS	4
SELECTED UNAUDITED FINANCIAL DATA FOR CITY NATIONAL BANK	5
SELECTED CONSOLIDATED FINANCIAL DATA FOR CITY NATIONAL CORPORATION	6
CERTAIN REGULATORY CONSIDERATIONS	8
DESCRIPTION OF SUBORDINATED NOTES	12
UNDERWRITING	17
VALIDITY OF SUBORDINATED NOTES	18
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE	18

You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with different information. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

        When this Offering Circular uses the words "the Bank," "we," "us," and "our," it refers to City National Bank and its subsidiaries unless otherwise expressly stated or the context otherwise requires. When this Offering Circular uses the words "the Corporation," it refers to City National Corporation and its subsidiaries unless otherwise expressly stated or the context otherwise requires.

2

FORWARD-LOOKING STATEMENTS

        This Offering Circular includes and incorporates by reference forward-looking statements about the Corporation and the Bank that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the Corporation's and the Bank's management, and on information currently available to their management. Forward-looking statements include information concerning the Corporation's and the Bank's possible or assumed future results of operations, and statements preceded by, followed by, or that include the words "will," "believes," "expects," "anticipates," "intends," "plans," "estimates," or similar expressions.

        The Corporation's and the Bank's management believes these forward-looking statements are reasonable. However, you should not place undue reliance on the forward-looking statements, since they are based on current expectations. Actual results may differ materially from those currently expected or anticipated.

        Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions. The Corporation's and the Bank's future results and shareholder values may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond the Corporation's and the Bank's ability to control or predict. For those statements, the Corporation and the Bank claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995.

        The reports that the Corporation files with the Securities and Exchange Commission (the "Commission"), including its Annual Report on Form 10-K for the year ended December 31, 2000 and its exhibits and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and June 30, 2001, describe some of the factors that will determine the Corporation's and the Bank's future results and shareholder values. For example, these documents describe certain economic risks, interest rate risks, legal risks, competitive risks and credit risks associated with the business and operations of the Corporation and the Bank. These and other factors could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements or otherwise affect the future business, results of operations and financial condition of the Corporation and the Bank.

NOTICE TO INVESTORS

        The Subordinated Notes offered hereby (the "Subordinated Notes") have not been, and are not required to be, registered with the Commission under the Securities Act of 1933 (the "Securities Act"). The Subordinated Notes are being offered and sold pursuant to the abbreviated securities registration procedures of the Office of the Comptroller of the Currency (the "OCC") set forth in Section 16.6 of Part 16 of the OCC's regulations. To qualify for these abbreviated registration procedures, the Subordinated Notes must, among other things, be offered and sold only to accredited investors as defined in the Commission's Rule 501(a) under the Securities Act and must be sold in minimum denominations of $250,000 (and not be exchangeable for Subordinated Notes in smaller denominations). Accordingly, each purchaser of a Subordinated Note, in making its purchase, will be deemed to have represented to and agreed with the underwriters and the Bank that it is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act, and that it is purchasing the Subordinated Notes for its own account or the account of one or more other accredited investors and that it, or each of such other accredited investors owning a beneficial interest in a Subordinated Note, will at all times hold a beneficial interest therein in a principal amount of not less than $250,000.

        In making an investment decision, investors must rely on their own examination of the Bank and the terms of the Subordinated Notes offered hereby, including the merits and risks involved.

3

CITY NATIONAL BANK

        We are a national banking association founded in 1953 and are the primary subsidiary of the Corporation. We operate through business and specialty banking units and private banking teams in nine California regional centers as well as 49 banking offices in the following California counties: Contra Costa, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Francisco, San Mateo, Santa Clara and Ventura. We also have an offshore office in the Cayman Islands, British West Indies which takes deposits. Our principal client base comprises small-to mid-sized businesses, entrepreneurs, professionals, and affluent individuals. We typically serve clients through relationship banking. We seek to build a relationship with the client through a high level of personal service, tailored products, and private and commercial banking teams to encourage the client to use the multiple services and products we offer. We offer a broad range of loans, deposits, cash management, international banking, and other products and services. We lend, invest, and provide services in accordance with our Community Reinvestment Act commitment. Through City National Investments ("CNI"), a division of the Bank, and Reed, Conner & Birdwell, LLC ("RCB"), a subsidiary of the Corporation, we offer personal and employee benefit trust services, including 401(k) and defined benefit plans, manage investments for clients, and engage in securities sales and trading. We also manage and offer mutual funds under the name of CNI Charter Funds.

        As of June 30, 2001, we had total assets of approximately $9.1 billion, total deposits of approximately $7.1 billion and shareholders' equity of approximately $758.2 million. As of June 30, 2001, CNI (including RCB) had assets under administration totaling $18.5 billion, including $7.2 billion of assets under management.

        Our principal executive offices are located at City National Center, 400 North Roxbury Drive, Beverly Hills, California 90210 (telephone (310) 888-6000).

        We are subject to extensive regulation by federal regulators, including the OCC, the Federal Deposit Insurance Corporation (the "FDIC") and the Board of Governors of the Federal Reserve System (the "Federal Reserve"). See "Certain Regulatory Considerations." In addition, certain business activities we conduct are regulated by other federal and state regulators.

        Our competitors include commercial banks and other banks focused on asset management, savings associations, consumer and commercial finance companies, credit unions and other financial services companies. We believe that the level of competition will increase in the future as the industry continues to consolidate and as nonbanking companies continue to offer products traditionally offered by banks.

CITY NATIONAL CORPORATION

        The Corporation is a bank holding company incorporated under the laws of the State of Delaware and registered with the Federal Reserve under the Bank Holding Company Act of 1956, as amended. Its primary subsidiary is the Bank. As of June 30, 2001, the Corporation on a consolidated basis had total assets of approximately $9.1 billion, total deposits of approximately $7.1 billion and total shareholders' equity of approximately $815.8 million.

        The Corporation's principal executive offices are located at City National Center, 400 North Roxbury Drive, Beverly Hills, California 90210 (telephone (310) 888-6000).

The Subordinated Notes are solely obligations of the Bank and are neither obligations of nor guaranteed by the Corporation or its affiliates other than the Bank.

USE OF PROCEEDS

        The net proceeds to be received by the Bank from the sale of the Subordinated Notes will be used for general corporate purposes in the ordinary course of its banking business.

4

SELECTED UNAUDITED FINANCIAL DATA FOR CITY NATIONAL BANK

        The following sets forth selected unaudited historical and other financial data for the Bank and its subsidiaries as of, and for each of the five years ended, December 31, 2000 through 1996 and as of, and for the six months ended, June 30, 2001 and 2000. Such data should be read in conjunction with, and is qualified in its entirety by, the more detailed information and financial data of the Bank available in the Call Reports as described under "Incorporation of Certain Documents by Reference." The following selected unaudited financial data was prepared in accordance with regulatory accounting principles, which may differ from accounting principles generally accepted in the United States of America and used to prepare the consolidated financial statements of the Corporation. The selected financial data presented below is derived from unaudited financial statements and includes, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present the data fairly. Results for the six months ended June 30, 2001 may not be indicative of the results that may be expected for the year ending December 31, 2001 or any future period.

			As of or for the Six Months Ended June 30,
									As of or for the Year Ended December 31,
Dollars in thousands
			2001			2000			2000			1999			1998			1997			1996
Statement of Operations Data:
	Interest income		$	319,884		$	305,618		$	645,411		$	470,006		$	421,014		$	354,504		$	279,726
	Interest expense			110,821			109,153			239,814			149,497			131,456			104,467			82,546
	Net interest income			209,063			196,465			405,597			320,509			289,558			250,037			197,180
	Provision for credit losses			14,000			4,000			21,500			—			—			—			—
	Noninterest income			61,803			50,336			107,074			83,703			65,322			55,158			42,284
	Noninterest expense			153,271			144,891			293,010			240,589			210,034			182,881			142,867
	Income before taxes			103,595			97,910			198,161			163,623			144,846			122,314			96,597
	Income taxes			34,868			34,564			68,101			58,181			53,306			45,656			32,549
		Net income	$	68,727		$	63,346		$	130,060		$	105,442		$	91,540		$	76,658		$	64,048
Selected Balance Sheet Data:
	Loans and leases, net of unearned income		$	6,605,843		$	6,373,667		$	6,558,789		$	5,514,449		$	4,548,540		$	3,875,695		$	2,873,082
	Allowance for credit losses			133,883			140,484			135,435			134,077			135,339			137,761			130,089
	Loans and leases, net of allowances for credit losses			6,471,960			6,233,183			6,423,354			5,380,372			4,413,201			3,737,934			2,742,993
	Securities			1,562,678			1,342,457			1,487,098			1,051,181			977,645			729,014			743,559
	Goodwill and core deposit intangibles			172,362			188,657			181,426			127,256			73,706			55,582			10,083
	Total assets			9,068,240			8,647,277			9,046,315			7,181,749			6,407,491			5,194,285			4,171,837
	Deposits			7,087,286			6,395,990			7,412,435			5,673,860			4,893,877			4,238,740			3,410,270
	Total equity capital			758,159			651,172			706,549			541,363			532,049			440,382			336,632
Selected Ratios:
	Net interest margin (taxable equivalent basis)			5.30	%		5.51	%		5.44	%		5.54	%		5.79	%		6.07	%		5.78	%
	Return on average assets			1.54			1.58			1.55			1.63			1.64			1.65			1.69
	Return on average equity			18.99			21.26			20.31			19.49			18.63			18.98			18.78
	Allowance for credit losses to total loans and leases			2.03			2.20			2.06			2.43			2.98			3.55			4.53
	Allowance for credit losses to nonaccrual loans			361.02			400.50			218.49			530.20			584.92			499.75			313.14
	Net (charge-offs) recoveries to average total loans (1)			(0.48	)		(0.25	)		(0.48	)		(0.10	)		(0.12	)		0.02			(0.06	)
	Ratio of earnings to fixed charges (2)
		Excluding interest on deposits		3.92	x		3.19	x		3.24	x		3.75	x		4.08	x		4.63	x		4.20	x
		Including interest on deposits		1.91	x		1.88	x		1.81	x		2.07	x		2.08	x		2.14	x		2.14	x
Capital Ratios:
	Risk-based Capital Ratios
		Tier I		8.19	%		7.22	%		7.55	%		7.40	%		8.90	%		9.50	%		11.24	%
		Total		11.08			10.29			10.57			10.75			12.65			10.78			12.53
	Tier I Leverage Ratio			6.51			5.96			6.23			6.30			7.53			7.93			8.22

(1)

Annualized for the six months ended June 30, 2001 and June 30, 2000.

(2)

The ratio of earnings to fixed charges has been computed by dividing income before income taxes plus fixed charges by fixed charges. Fixed charges, excluding interest on deposits, consist of interest on indebtedness other than deposits and the portion of rental expense deemed representative of an interest factor. Fixed charges, including interest on deposits, consist of both the foregoing items plus interest on deposits.

5

SELECTED CONSOLIDATED FINANCIAL DATA
FOR CITY NATIONAL CORPORATION

        The following sets forth selected consolidated historical and other financial data for the Corporation and its consolidated subsidiaries as of, and for each of the five years ended, December 31, 2000 through 1996 and as of, and for the six months ended, June 30, 2001 and 2000. Such data should be read in conjunction with, and is qualified in its entirety by, the more detailed information, Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto in the reports filed by the Corporation with the Commission as described under the caption "Incorporation of Certain Documents by Reference." The selected consolidated balance sheet data for the years ended December 31, 2000 and 1999 and the consolidated statement of operations data for the years ended December 31, 1998 through 2000 are derived from the consolidated financial statements of the Corporation incorporated in this Offering Circular by reference, which financial statements have been audited by KPMG LLP, independent auditors. The selected consolidated balance sheet data presented below as of December 31, 1998, 1997 and 1996 and the consolidated statement of operations data presented below for the years ended December 31, 1997 and 1996 are derived from financial statements of the Corporation not included herein which have been audited by KPMG LLP, independent auditors. The selected consolidated balance sheet data as of June 30, 2001 and 2000 have been derived from the Corporation's unaudited consolidated financial statements. Results for the six months ended June 30, 2001 may not be indicative of the results that may be expected for the year ending December 31, 2001 or any future period.

6

SELECTED CONSOLIDATED FINANCIAL DATA
FOR CITY NATIONAL CORPORATION (Continued)

			As of or for the Six Months Ended June 30,
									As of or for the Year Ended December 31,
Dollars in thousands, except per share data
			2001			2000			2000			1999			1998			1997			1996
			(unaudited)
Statement of Operations Data:
	Interest income		$	320,682		$	306,143		$	646,288		$	470,446		$	423,949		$	357,996		$	282,123
	Interest expense			110,716			109,252			239,772			148,441			130,278			104,328			82,389
	Net interest income			209,966			196,891			406,516			322,005			293,671			253,668			199,734
	Provision for credit losses			14,000			4,000			21,500			—			—			—			—
	Noninterest income			64,155			51,033			109,484			87,212			67,684			53,418			43,995
	Noninterest expense			155,616			145,159			294,770			241,803			211,331			181,757			144,595
	Income before taxes			104,505			98,765			199,730			167,414			150,024			125,329			99,134
	Income taxes			34,570			34,312			68,070			59,307			53,796			45,196			32,571
		Net income	$	69,935		$	64,453		$	131,660		$	108,107		$	96,228		$	80,133		$	66,563
Per Share Data:
	Net income per share, basic		$	1.47		$	1.38		$	2.79		$	2.37		$	2.08		$	1.74		$	1.52
	Net income per share, diluted			1.43			1.34			2.72			2.30			2.00			1.68			1.47
	Cash dividends declared			0.37			0.35			0.70			0.66			0.56			0.44			0.36
	Book value per share			17.04			14.11			15.61			12.58			12.21			11.03			9.13
	Shares used to compute income per share, basic			47,726			46,792			47,178			45,683			46,357			46,018			43,888
	Shares used to compute income per share, diluted			49,027			47,986			48,393			46,938			48,141			47,809			45,146
Balance Sheet Data — At Period End:
	Assets		$	9,123,593		$	8,676,768		$	9,096,669		$	7,213,619		$	6,427,781		$	5,252,032		$	4,216,496
	Deposits			7,080,634			6,394,854			7,408,670			5,669,409			4,887,402			4,228,348			3,386,523
	Loans			6,567,370			6,345,195			6,527,145			5,490,669			4,530,427			3,825,224			2,839,435
	Securities			1,667,037			1,395,739			1,547,844			1,102,092			1,012,526			833,122			811,092
	Interest-earning assets			8,258,603			7,837,303			8,286,067			6,677,475			5,982,968			4,838,926			3,844,834
	Shareholders' equity			815,840			672,022			743,648			571,646			561,803			508,670			400,747
Balance Sheet Data — Average Balances:
	Assets		$	9,026,738		$	8,093,736		$	8,426,129		$	6,488,834		$	5,633,829		$	4,703,886		$	3,821,314
	Deposits			6,881,386			5,977,097			6,334,846			4,809,800			4,267,602			3,614,068			2,871,870
	Loans			6,529,587			6,036,030			6,236,334			4,822,254			4,213,853			3,387,784			2,539,323
	Securities			1,556,157			1,226,818			1,350,971			1,050,716			842,346			829,557			839,564
	Interest-earning assets			8,212,922			7,387,367			7,698,884			5,985,018			5,187,897			4,290,453			3,505,422
	Shareholders' equity			781,146			629,246			667,618			564,091			538,426			472,843			373,491
Asset Quality:
	Nonaccrual loans		$	37,085		$	35,077		$	61,986		$	25,288		$	23,138		$	27,566		$	41,543
	ORE			1,212			447			522			1,413			3,480			2,126			15,116
		Total nonaccrual loans and ORE	$	38,297		$	35,524		$	62,508		$	26,701		$	26,618		$	29,692		$	56,659
Performance Ratios:
	Return on average assets			1.56	%		1.60	%		1.56	%		1.67	%		1.71	%		1.70	%		1.74	%
	Return on average shareholders' equity			18.05			20.60			19.72			19.16			17.87			16.95			17.82
	Net interest spread			3.80			3.95			3.81			4.12			4.27			4.64			4.47
	Net interest margin			5.32			5.53			5.44			5.56			5.86			6.13			5.87
	Average shareholders' equity to average assets			8.65			7.77			7.92			8.69			9.56			10.05			9.77
	Dividend payout ratio, per share			25.28			25.18			24.95			27.91			27.06			26.19			24.49
	Efficiency ratio			55.60			57.13			55.76			57.58			56.87			58.22			58.00
Asset Quality Ratios:
	Nonaccrual loans to total loans			0.56	%		0.55	%		0.95	%		0.46	%		0.51	%		0.72	%		1.46	%
	Nonaccrual loans and ORE to total loans and ORE			0.58			0.56			0.96			0.49			0.59			0.78			1.98
	Allowance for credit losses to total loans			2.04			2.21			2.07			2.44			2.99			3.60			4.58
	Allowance for credit losses to nonaccrual loans			361.02			400.50			218.49			530.20			584.92			499.75			313.14
	Net (charge offs) recoveries to average loans (1)			(0.48	)		(0.25	)		(0.48	)		(0.10	)		(0.12	)		0.02			(0.06	)
Capital Ratios:
	Risk-based Captial Ratios
		Tier 1		8.76	%		7.49	%		7.84	%		7.88	%		9.43	%		10.99	%		13.26	%
		Total		11.64			10.56			10.85			11.21			13.20			12.27			14.55
	Tier 1 Leverage Ratio			6.97			6.19			6.49			6.73			7.99			9.19			9.75

(1)

Annualized for the six months ended June 30, 2001 and June 30, 2000.

7

CERTAIN REGULATORY CONSIDERATIONS

General

        The Bank, as a national banking association, is subject to primary supervision, examination, and regulation by the OCC. To a lesser extent, the Bank is also subject to certain regulations promulgated by the FDIC and the Federal Reserve. If, as a result of an examination of a bank, the OCC should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the bank's operations are unsatisfactory or that the bank or its management is violating or has violated any law or regulation, various remedies are available to the OCC. Such remedies include the power to enjoin "unsafe or unsound" practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict the growth of the bank, to assess civil monetary penalties, to remove officers and directors, and ultimately to terminate the bank's deposit insurance.

        The Bank is also subject to various state and federal laws, including those relating to consumer protection and similar matters, and is affected by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve. An important purpose of these policies is to curb inflation and control recessions through control of the supply of money and credit. The Federal Reserve uses its powers to establish reserve requirements of insured depository institutions and to conduct open market operations in United States government securities so as to influence the supply of money and credit. These policies have a direct effect on the amount of bank loans and deposits and on interest rates charged on loans and paid on deposits, with the result that federal policies have a material effect on the earnings of the Bank. The policies of the Federal Reserve and other governmental authorities, including the fiscal policy of the federal government, have shifted broadly over the past decade, and further changes in these policies, as well as changes in federal and state law and regulations, cannot be predicted nor can their effect on future earnings of the Bank be predicted.

        The following references to certain laws and regulations are brief summaries. The references are not intended to be complete, and are qualified in their entirety by reference to the statutes and regulations themselves. In addition, there are numerous other state and federal laws and regulations not summarized below that are applicable to, and govern many aspects of the operation and business of, the Bank. Accordingly, investors should understand that a change in applicable law or regulation may have a material effect on the business of the Bank. Additional information regarding supervision and regulation is included in the documents incorporated in this Offering Circular by reference. See "Incorporation of Certain Documents by Reference."

Powers of the FDIC in Connection with the Insolvency of an Insured Depository Institution

        If any insured depository institution becomes insolvent and the FDIC is appointed its conservator or receiver, the FDIC may, under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, disaffirm or repudiate any contract or lease to which such institution is a party, the performance of which is determined by the FDIC to be burdensome, and the disaffirmance or repudiation of which is determined by the FDIC to promote the orderly administration of the institution's affairs. If the FDIC were successfully to contend that its power to repudiate "contracts" extends to obligations such as the Subordinated Notes, the effect of any such repudiation should be to accelerate the maturity of the Subordinated Notes. (For possible limitations on the ability of the holders of Subordinated Notes to accelerate the maturity of such Notes, see "Description of Subordinated Notes—Subordination" and "—Events of Default.") To the Bank's knowledge, the FDIC has not taken the position that such repudiation would impair the right of a holder of obligations such as the Subordinated Notes to make a claim against the receivership or conservatorship for principal and interest accrued through the date of the appointment of the conservator or receiver. The amount paid upon this claim would depend upon,

8

among other factors, the amount of receivership assets available for the payment of unsecured claims and the priority of this claim relative to the priority of other unsecured creditors and depositors. See "—Federal Depositor Preference Legislation" below. If the maturity of the Subordinated Notes were so accelerated, and a claim relating to the Subordinated Notes was paid by the receivership, the holders of the Subordinated Notes might not be able, depending upon economic conditions, to reinvest any amounts paid on the Subordinated Notes at a rate of interest comparable to that paid on the Subordinated Notes. In addition, although the Subordinated Notes permit the holders of the Subordinated Notes to accelerate the Subordinated Notes in the event of the appointment of a receiver or liquidator of the Bank, the FDIC as conservator or receiver may enforce most types of contracts, including the Subordinated Notes, pursuant to their terms, notwithstanding any such acceleration provision. The FDIC as conservator or receiver may also transfer to a new obligor any of the Bank's assets and liabilities, including the Subordinated Notes, without the approval or consent of the Bank's creditors, including holders of the Subordinated Notes, which obligor shall expressly assume the obligations under the Subordinated Notes, and the completion of such transfer and assumption will serve to supersede and void any default, acceleration or subordination which may have occurred, or which may occur due to such transfer or assumption; except that any interest and principal previously due, other than by reason of acceleration, and not paid shall be deemed to be immediately due and payable, together with interest from its original due date at the rate provided for in the Subordinated Notes.

        In its resolution of an insured depository institution in default or in danger of default, the FDIC is generally obligated to satisfy its obligations to insured depositors at the least possible cost to the deposit insurance fund. In addition, the FDIC may not take any action that would have the effect of increasing the losses to the deposit insurance fund by protecting depositors for more than the insured portion of deposits (generally $100,000) or creditors other than depositors (such as holders of the Subordinated Notes). The Federal Deposit Insurance Corporation Improvement Act of 1991 authorizes the FDIC to settle all uninsured and unsecured claims in the insolvency of an insured bank by making a final settlement payment after the declaration of insolvency. Such a payment would constitute full payment and disposition of the FDIC's obligations to claimants. The rate of such final settlement payment is to be a percentage rate determined by the FDIC reflecting an average of the FDIC's receivership recovery experience.

        As a result of the provisions of law described above, whether or not the FDIC seeks to repudiate the Subordinated Notes, in an insolvency of the Bank, the Subordinated Notes would be treated differently from the deposit obligations of the Bank, and holders of the Subordinated Notes would receive proportionately less than holders of deposit obligations of the Bank.

Federal Depositor Preference Legislation

        Under federal law, in the event of the liquidation or other resolution of an insured depository institution, administrative expenses of the receiver and the claims of the depositors of such institution (including claims by the FDIC as subrogee of insured depositors) are entitled to priority in payment over the claims of any other senior or general unsecured creditors of the institution, including holders of obligations such as the Subordinated Notes. As a result, claims of a receiver for administrative expenses and claims of holders of deposit liabilities of the Bank (including the FDIC as the subrogee of such holders) would receive priority over claims of holders of the Subordinated Notes in the event of a liquidation or other resolution of the Bank. A substantial portion of the Bank's liabilities consist of deposits.

9

Capital Standards

        Each federal banking agency has promulgated regulations defining the following five categories in which a banking organization will be placed, based on its capital ratios: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.

        To be "well capitalized," a banking organization must maintain minimum ratios of total capital to risk-weighted assets of ten percent (10%) and Tier 1 capital to risk-weighted assets of six percent (6%). To be "adequately capitalized," a banking organization must maintain minimum ratios of total capital to risk-weighted assets of eight percent (8%) and of Tier 1 capital to risk-weighted assets of four percent (4%). The three undercapitalized categories are based upon the amount by which a bank falls below the ratios applicable to adequately capitalized banking organizations. For the Bank and the Corporation, Tier 1 capital includes common shareholders' equity, less goodwill and certain other deductions, including the unrealized net gains and losses, after applicable taxes, on available-for-sale securities carried at fair value. For the Bank and the Corporation, total capital also includes the allowance for credit losses, subordinated debt, and net unrealized gains on marketable securities, subject to limitations established by the guidelines. At least half of total capital must be in the form of Tier 1 capital.

        Under the capital regulations, capital is compared to the risk associated with a banking organization's operations for both transactions reported on the balance sheet as assets as well as transactions which are off-balance sheet items, such as letters of credit and recourse arrangements. Under the capital regulations, the nominal dollar amounts of assets and the balance sheet equivalent amounts of off-balance sheet items are multiplied by one of several risk adjustment percentages, which range from 0% for assets with low credit risk, such as certain U.S. Treasury securities, to 100% for assets with relatively high credit risk, such as commercial loans.

        At December 31, 2000 and June 30, 2001, the Bank and the Corporation each exceeded the required ratios for classification as "well capitalized." A banking organization's capital category, however, is determined solely for the purposes of applying certain regulatory rules and may not constitute an accurate representation of that banking organization's overall financial condition or prospects.

        In addition to the risk-based capital guidelines, federal banking agencies require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the "leverage ratio". For a banking organization rated in the highest of the five categories used by the federal banking agencies to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets is 3%. For all other banking organizations, the minimum ratio of Tier 1 capital to total assets is 4%. Banking organizations with supervisory, financial, operational, or managerial weaknesses, as well as organizations that are anticipating or experiencing significant growth, are expected to maintain capital ratios above the minimum levels. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the federal banking agencies have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

        Failure to meet applicable capital guidelines could subject a banking organization to a variety of enforcement remedies available to federal banking agencies, including limitations on the ability to pay dividends, the issuance of a capital directive to increase capital, the termination of deposit insurance by the FDIC, and the appointment of a conservator or receiver.

        Federal banking agencies have proposed regulations that would modify existing rules related to risk-based capital and leverage ratios. The Bank does not believe that the aggregate impact of these modifications would have a significant impact on its capital position. Bank regulators continue to indicate their desire to raise capital requirements applicable to banking organizations beyond their

10

current levels. However, the Bank is unable to predict whether and when higher capital requirements would be imposed and, if so, at what level and on what schedule.

        Certain capital ratios of the Bank and the Corporation are included herein under "Selected Unaudited Financial Data for City National Bank" and "Selected Consolidated Financial Data for City National Corporation," respectively.

Financial Modernization

        On November 12, 1999, the Gramm-Leach-Blilely Act of 1999 (the "Financial Services Modernization Act") was signed into law. The general effect of the Financial Services Modernization Act is to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers. Each activity is to be conducted in a separate subsidiary that is regulated by a functional regulator: a state insurance regulator in the case of an insurance subsidiary, the Commission in the case of a broker-dealer or investment advisory subsidiary, or the appropriate federal banking regulator in the case of a bank or thrift institution. The Federal Reserve is the "umbrella" supervisor of financial holding companies. Section 23A of the Federal Reserve Act, which severely restricts lending by an insured bank subsidiary to nonbank affiliates, remains in place. The Corporation and the Bank do not believe that the Financial Services Modernization Act will have a material adverse effect on their operations in the near term. However, to the extent that it permits banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Financial Services Modernization Act is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this Act may have the result of increasing the amount of competition that the Corporation and the Bank face from larger institutions and other types of companies offering financial products, many of which have substantially more financial resources than the Corporation or the Bank.

11

DESCRIPTION OF SUBORDINATED NOTES

        The following description of the terms of the Subordinated Notes offered hereby does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the Subordinated Notes. Capitalized terms not defined under this heading have the meanings assigned to them in the Subordinated Notes.

General

        The Subordinated Notes are to be issued under an Issuing and Paying Agency Agreement, dated as of January 7, 1998, as amended (the "IPAA"), between the Bank, as issuer, and Continental Stock Transfer & Trust Company, as Issuing and Paying Agent (the "Issuing and Paying Agent"), a copy of which is available for inspection at the offices of the Issuing and Paying Agent located at 2 Broadway, New York, New York 10004. The Subordinated Notes will be represented by one or more global notes (each, a "Global Note") registered in the name of The Depository Trust Company, as Depositary, or its nominee, in denominations of $250,000 or more that are integral multiples of $1,000. See "—Book-Entry System."

        The Subordinated Notes will be direct, unsecured, subordinated obligations of the Bank and will mature on September 1, 2011 (the "Maturity Date"). The Subordinated Notes will not be redeemable by the Bank, in whole or in part, prior to the Maturity Date and do not provide for any sinking fund.

        The Subordinated Notes are initially being offered in the principal amount of $150,000,000. The Bank may, without the consent of the Holders, issue additional subordinated notes and thereby increase that principal amount in the future, on the same terms and conditions and with the same CUSIP number as the Subordinated Notes offered by this Offering Circular.

        The Subordinated Notes will bear interest at the rate per annum shown on the cover page of this Offering Circular from August 30, 2001, payable semiannually in arrears on each March 1 and September 1 (each, an "Interest Payment Date"), commencing March 1, 2002, to the persons in whose names the Subordinated Notes are registered at the close of business on the February 15 or August 15, as the case may be, next preceding such March 1 or September 1 (each, a "Regular Record Date"). Principal of and interest on the Subordinated Notes will be payable, and the transfer of the Subordinated Notes will be registered, through the Depositary as described under "—Book-Entry System."

        If any Interest Payment Date or the Maturity Date of the Subordinated Notes falls on a day that is not a Business Day, the related payment of principal or interest will be made on the next succeeding Business Day with the same force and effect as if made on the due date therefor, and no interest will accrue from such Interest Payment Date or Maturity Date, as the case may be, to such next succeeding Business Day. "Business Day" means any day that is not a Saturday or Sunday and that, in the City of New York or the State of California, is not a day on which banking institutions generally are authorized or obligated by law or executive order to close.

        The Subordinated Notes are not being registered with the OCC and are offered pursuant to the regulations of the OCC and pursuant to an exemption from registration with the Commission under Section 3(a)(2) of the Securities Act. The IPAA is not required to be, and is not being, qualified under the Trust Indenture Act of 1939, as amended.

        Because the Subordinated Notes will not be issued pursuant to an indenture, and because the Depositary or its nominee will be the registered Holder of all Subordinated Notes, the Depositary or its nominee will be the only entity that can enforce covenants, respond to requests for consents, waivers or amendments, and exercise other rights of holders of Subordinated Notes. Consequently, a beneficial owner of Subordinated Notes generally must rely on the procedures of the Depositary and of those other parties through whom such owner's interest in the Subordinated Notes is held to exercise any

12

rights of a holder of the Subordinated Notes. THE BANK WILL TREAT THE DEPOSITARY OR ITS NOMINEE AS THE SOLE AND ABSOLUTE OWNER OF ALL SUBORDINATED NOTES FOR THE PURPOSE OF RECEIVING PAYMENT OF INTEREST ON AND PRINCIPAL OF SUCH NOTES, AND FOR ALL OTHER PURPOSES WHATSOEVER. See "—Book-Entry System", below.

Each Subordinated Note will be a direct, unconditional and unsecured general obligation of the Bank and will not be an obligation of, or guaranteed by, the Corporation or any affiliate thereof other than the Bank. In each instance, these Subordinated Notes will not represent deposits and will not be insured by the FDIC or any other government agency. In a receivership or other insolvency proceeding with respect to the Bank, the Subordinated Notes could be treated differently from, and holders of Subordinated Notes could receive significantly less than holders of, deposit obligations, including deposit notes, of the Bank. See "Certain Regulatory Considerations" and "—Subordination" and "—Events of Default" below.

        The Subordinated Notes will not be eligible to serve as collateral to secure a loan from the Bank.

Subordination

        The indebtedness of the Bank evidenced by the Subordinated Notes, including principal and interest, will be unsecured and subordinate and junior in right of payment to the Bank's obligations to its depositors, its obligations under bankers' acceptances and letters of credit, and its obligations to its other creditors (including any obligations to any Federal Reserve Bank, the FDIC and any rights acquired by the FDIC as a result of loans made by the FDIC to the Bank or the purchase or guarantee of any of its assets by the FDIC pursuant to the provisions of Section 1823(c), (d) or (e) of Title 12 of the United States Code), whether now outstanding or hereafter incurred, other than any obligations which by their express terms rank on a parity with, or junior to, the Subordinated Notes. In the event of any insolvency, receivership, conservatorship, reorganization, readjustment of debt, marshalling of assets and liabilities or similar proceedings or any liquidation or winding up of the Bank, whether voluntary or involuntary, all such obligations (except obligations which rank on a parity with, or junior to, the Subordinated Notes) shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on the Subordinated Notes. In the event of any such proceedings, after payment in full of all sums owing with respect to such prior obligations, the holders of the Subordinated Notes, together with the holders of any obligations of the Bank ranking on a parity with the Subordinated Notes, shall be entitled to be paid pro rata from the remaining assets of the Bank, the unpaid principal of, and the unpaid interest on, the Subordinated Notes or such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any obligations of the Bank ranking junior to the Subordinated Notes. For additional information, see "—Events of Default."

        The Subordinated Notes will rank pari passu among themselves and pari passu, in the event of a liquidation or similar proceeding with respect to the Bank, whether voluntary or involuntary, with all other present or future unsecured subordinated debt of the Bank, except any unsecured subordinated debt which may be expressly stated to be subordinated to the Subordinated Notes or is otherwise subordinated as a matter of law. As of June 30, 2001, the Bank had $116.4 million principal amount of outstanding subordinated debt which will rank pari passu with the Subordinated Notes.

        The Subordinated Notes will not contain any limitation on the amount of senior debt, deposits or other obligations which rank senior to the Subordinated Notes or subordinated debt or other obligations of the Bank which rank pari passu with the Subordinated Notes, that may be incurred by the Bank after the date of this Offering Circular.

13

Book-Entry System

        Except in certain limited circumstances described below, the Subordinated Notes will be represented by one or more fully registered securities in permanent global form (each a "Global Note"). Each Global Note representing Subordinated Notes will be deposited with or on behalf of the Depositary, and will be registered in the name of the Depositary or a nominee of the Depositary. Such Global Note will be transferable only as a whole, and only to the Depositary, its successors and their respective nominees.

        Ownership of beneficial interests in a Global Note representing Subordinated Notes will be limited to institutions that have accounts with the Depositary or its nominee ("participants") or persons that may hold interests through participants. The Bank has been advised by the Depositary that, upon the issuance of a Global Note representing Subordinated Notes, and the deposit of such Global Note with the Depositary, the Depositary will immediately credit, on its book-entry registration and transfer system, the respective principal amounts of the Subordinated Notes represented by such Global Note to the accounts of participants. The accounts to be credited shall be designated by the underwriters named herein.

        Principal and interest payments on the Subordinated Notes registered in the name of the Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner and holder of the Global Note or Global Notes. Such payments to the Depositary or its nominee, as the case may be, will be made in immediately available funds; provided that, in the case of payments of principal and interest on the Maturity Date, the Global Note or Global Notes are presented to the Issuing and Paying Agent in time for the Issuing and Paying Agent to make such payments in such funds in accordance with its normal procedures. Under the terms of the IPAA, the Bank and the Issuing and Paying Agent will treat the persons in whose names the Subordinated Notes are registered as the owners of such Subordinated Notes for the purpose of receiving payment of principal of and interest on such Subordinated Notes and for all other purposes whatsoever. Therefore, neither the Bank nor the Issuing and Paying Agent has any direct responsibility or liability for the payment of principal or interest on the Subordinated Notes to owners of beneficial interests in the Global Note.

        The Bank has been advised by the Depositary that, upon receipt of any payment of principal of or any premium or interest in respect of a Global Note, the Depositary will immediately credit, on its book-entry registration and transfer system, accounts of participants with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of the Depositary. Payments by participants to owners of beneficial interests in a Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in "street name," and will be the sole responsibility of such participants.

        As long as the Depositary, or its nominee, is the registered holder of a Global Note, the Depositary or such nominee, as the case may be, will be considered the sole owner and holder of such Global Note and the Subordinated Notes represented thereby for all purposes under the Subordinated Notes and the IPAA. Except in the limited circumstances referred to below, owners of beneficial interests in a Global Note will not be entitled to have such Global Note or any Subordinated Notes represented thereby registered in their names, will not receive or be entitled to receive physical delivery of certificated Subordinated Notes in exchange therefor and will not be considered to be the owners or holders of such Global Note or any Subordinated Notes represented thereby for any purpose under the Subordinated Notes or the IPAA. All payments of principal of and any premium and interest on a Global Note will be made to the Depositary or its nominee, as the case may be, as the holder thereof. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of

14

such securities in definitive form. These laws may impair the ability to transfer beneficial interests in a Global Note representing Subordinated Notes.

        If the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Bank within 90 days after the effective date of the Depositary's ceasing to act as depositary for the Subordinated Notes, the Bank will issue Subordinated Notes in definitive certificated form in exchange for all of the Global Notes representing Subordinated Notes. In addition, the Bank, at its option, may elect to cause the issuance of Subordinated Notes in definitive certificated form. In any such instance, or if any event shall have happened and be continuing which, after notice or lapse of time, or both, would constitute an event of default with respect to the Subordinated Notes, each owner of a beneficial interest in a Global Note will be entitled to physical delivery in definitive certificated form of Subordinated Notes represented by such Global Note equal in principal amount to such beneficial interest and to have such Subordinated Notes registered in its name. Interest on Subordinated Notes in definitive form (other than interest payable on the Maturity Date or upon redemption) will be paid by check mailed to the address of the person entitled thereto as it appears in the register maintained at the corporate trust office of the Issuing and Paying Agent as of the applicable Regular Record Date or to such other address in the United States as any registered Holder shall designate to the Issuing and Paying Agent in writing not later than the relevant Regular Record Date.

        The Bank understands that, under existing industry practices, if the Bank requests Holders to take any action, or if an owner of a beneficial interest in a Global Note desires to take any action which a Holder is entitled to take under the IPAA, the Depositary would authorize the participants holding the relevant beneficial interests to take that action and those participants would authorize the beneficial holders owning through those participants to take that action or would otherwise act upon instructions of the beneficial owners owning through them.

        The Depositary has advised the Bank as follows: the Depositary is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. The Depositary holds securities that its participants deposit with the Depositary. The Depositary also facilitates the settlement among its participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in participants' accounts, thereby eliminating the need for physical movement of securities certificates. The Depositary's participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. The Depositary is owned by a number of its participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the Depositary's system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. The rules applicable to the Depositary and its direct and indirect participants are on file with the Commission.

Same-Day Settlement and Payment

        Settlement for the Subordinated Notes will be made in immediately available funds. The Subordinated Notes will trade in the Depositary's Same-Day Funds Settlement System until the Maturity Date, and, therefore, the Depositary will require secondary trading activity in the Subordinated Notes to be settled in immediately available funds.

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Events of Default

        Except as indicated below, the holder of a Subordinated Note may declare the principal amount of such Subordinated Note due and payable immediately if an Event of Default with respect to such Subordinated Note shall have occurred and be continuing at the time of such declaration. Any Event of Default with respect to such Subordinated Note may be waived by the holder thereof.

        An "Event of Default" shall occur only if the Bank shall consent to the appointment of a conservator, receiver, liquidator, trustee or other similar official in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Bank or of or relating to all or substantially all of its property; or a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver, liquidator, trustee or other similar official in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Bank and such decree or order shall have remained in force undischarged or unstayed for a period of 60 consecutive days; or the Bank shall file a petition to take advantage of any applicable insolvency or reorganization statute. The Bank will promptly notify, and provide copies of such notice to, the Issuing and Paying Agent of the occurrence of any such Event of Default. The Issuing and Paying Agent has agreed in the IPAA to promptly mail copies of such notice to the holders of the Subordinated Notes.

The Subordinated Notes may only be accelerated by the holder thereof upon the occurrence of one of the Events of Default set forth in the immediately preceding paragraph. There is no right of acceleration in the case of a default in the payment of principal of, or interest on, any Subordinated Note or in the performance of any other obligation of the Bank under any Subordinated Note or under any other securities issued by the Bank. The Subordinated Notes provide that no prepayment pursuant to such right of acceleration shall be made without prior approval of the OCC unless the Bank remains an "eligible bank" as defined in 12 C.F.R. § 5.3(g) after the prepayment (which definition requires, among other things, that a bank be "well-capitalized", have a composite rating of 1 or 2 under the Uniform Financial Institutions Rating System and not be subject to cease and desist orders or other regulatory orders, directives or agreements). In the event that such approval will be required for any such prepayment, the Bank is obligated to apply to the OCC for prior written approval of repayment promptly after receiving notice of acceleration from any holders of the Subordinated Notes.

        Because the Subordinated Notes will not be issued pursuant to an indenture, each holder thereof must act independently with respect to certain matters affecting its Subordinated Notes, including giving written notice of default in the performance of any covenant contained therein or accelerating the maturity thereof upon the occurrence of any Event of Default.

Consolidation, Merger and Sale of Assets

        The Subordinated Notes provide that the Bank may not consolidate with or merge into any other person or convey, transfer or lease its assets substantially as an entirety to any person, unless: (i) the successor is a person organized under the laws of any domestic jurisdiction and expressly assumes the Bank's obligations on the Subordinated Notes; and (ii) after giving effect to the transaction, no Event of Default with respect to the Subordinated Notes, and no event which, after notice or lapse of time, would become an Event of Default with respect to the Subordinated Notes, shall have occurred and be continuing.

Governing Law

        The Subordinated Notes are governed by and construed in accordance with the laws of the State of New York and, where applicable, the laws of the United States.

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UNDERWRITING

        Under the terms and subject to the conditions contained in an underwriting agreement dated August 23, 2001, the Bank has agreed to sell to the underwriters named below, for whom Credit Suisse First Boston Corporation is acting as representative, the following respective principal amounts of notes:

Underwriter		Principal Amount
Credit Suisse First Boston Corporation		$	75,000,000
City National Securities, Inc.			15,000,000
Goldman, Sachs & Co.			15,000,000
Lehman Brothers Inc.			15,000,000
Morgan Stanley & Co. Incorporated			15,000,000
Salomon Smith Barney Inc.			15,000,000
	Total	$	150,000,000

        The underwriting agreement provides that the underwriters are obligated to purchase all of the Subordinated Notes if any are purchased. The underwriting agreement provides that, if an underwriter defaults, the purchase commitments of the non-defaulting underwriters may be increased or the offering of Subordinated Notes may be terminated.

        The underwriters propose to offer the Subordinated Notes initially at the offering price on the cover page of this Offering Circular and to selling group members at that price less a concession of 0.400% of the principal amount per Subordinated Note. The underwriters and selling group members may allow a discount of 0.250% of such principal amount per Subordinated Note on sales to other broker/dealers. After the initial offering, the underwriters may change the offering price and concession and discount to broker/dealers.

        We estimate that our out-of-pocket expenses for this offering will be approximately $225,000. The underwriters have agreed to pay certain fees and expenses we have incurred in connection with the issuance of the Subordinated Notes. These fees and expenses will not exceed $37,500 in the aggregate.

        We and the Corporation have agreed to indemnify the underwriters against liabilities under the Securities Act or contribute to payments which the underwriters may be required to make in that respect.

        In connection with the offering, the underwriters, may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

•

Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position.



•

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.



•

Syndicate covering transactions involve purchases of the notes in the open market after the distribution has been completed in order to cover syndicate short positions.



•

Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the notes originally sold by that syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the Subordinated Notes to be higher than it would otherwise be in the absence of these transactions.

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        We expect that delivery of the Subordinated Notes will be made against payment therefor on or about the closing date specified on the cover page of this Offering Circular, which is the fifth business day following the date hereof. Under Rule 15c6-1 of the Commission under the Exchange Act, trades in the secondary market generally are required to settle in three business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Subordinated Notes on the date hereof or the next succeeding business day will be required, by virtue of the fact that the Subordinated Notes initially will settle in T+5, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own advisor.

        The Subordinated Notes are a new issue of securities with no established trading market. One or more of the underwriters intend to make a secondary market for the Subordinated Notes. However, they are not obligated to do so and may discontinue making a secondary market for the Subordinated Notes at any time without notice. No assurance can be given as to how liquid the trading market for the Subordinated Notes will be.

        City National Securities, Inc. is an affiliate of the Bank and the participation of City National Securities, Inc. in the offer and sale of the Subordinated Notes will comply with the requirements of Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc. ("NASD"). City National Securities, Inc. will inform any of its customers that intend to purchase the Subordinated Notes that City National Securities, Inc. is our subsidiary. Further, no NASD member participating in offers and sales of Subordinated Notes may execute a transaction in the Subordinated Notes in a discretionary account without the prior specific written approval of such member's customer.

        This Offering Circular may be used by City National Securities, Inc. in connection with offers and sales related to secondary market transactions in the Subordinated Notes. City National Securities, Inc. may act as principal or agent in those transactions. Those sales will be made at prices related to prevailing market prices at the time of sale or otherwise.

        The underwriters and their affiliates may be customers of, including borrowers from, engage in transactions with, and perform services for, the Bank and the Corporation in the ordinary course of business.

VALIDITY OF SUBORDINATED NOTES

        The validity of the Subordinated Notes will be passed upon for the Bank by Munger, Tolles & Olson LLP, Los Angeles, California, and for the Underwriters by Pillsbury Winthrop LLP, San Francisco, California. From time to time, Pillsbury Winthrop LLP performs legal services for the Corporation and the Bank.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

        We hereby incorporate by reference into this Offering Circular our Consolidated Reports of Condition and Income (the "Call Reports") on Federal Financial Institutions Examination Council Form 032, beginning with and including the Call Report for the period beginning January 1, 1998 to and including December 31, 1999, and on Federal Financial Institutions Examination Council Form 031, beginning January 1, 2000 to and including the most recent Call Report filed or published prior to the date of this Offering Circular. Each Call Report consists of a balance sheet, income statement, changes in equity capital and other supporting schedules as of the end of or for the period to which the report relates. The Call Reports are prepared in accordance with regulatory instructions issued by the Federal Financial Institutions Examination Council. Because of the special supervisory, regulatory and economic policy needs served by Call Reports, those regulatory instructions do not in all cases follow accounting principles generally accepted in the United States of America, including the opinions and statements of the Accounting Principles Board or the Financial Accounting Standards Board. While the Call Reports are supervisory and regulatory documents, not primarily accounting

18

documents, and do not provide a complete range of financial disclosure about the Bank, the Call Reports nevertheless provide important information concerning the financial condition and operating results of the Bank. Each Call Report filed by the Bank after the date of this Offering Circular and prior to the termination of the offering covered by this Offering Circular shall be incorporated by reference into this Offering Circular and deemed to be a part hereof from the date such document is filed until the information contained in such document is superseded or updated by any subsequently filed document that is incorporated by reference into this Offering Circular or by any supplement or amendment to this Offering Circular. The Call Reports are on file with, and are publicly available upon written request to, the Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 20429, Attention: Disclosure Group, Room F-518, or by calling the FDIC at (800) 945-2186.

        We are a wholly owned subsidiary of the Corporation, a bank holding company whose common stock is registered with the Commission and traded on the New York Stock Exchange. In addition to the Call Reports referred to above, we also hereby incorporate by reference into this Offering Circular the following documents as filed by the Corporation with the Commission pursuant to the Exchange Act.

        (1) the Corporation's Annual Report on Form 10-K for the year ended December 31, 2000;

        (2) the Corporation's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and June 30, 2001; and

        (3) the Corporation's Current Reports on Form 8-K, filed April 18, 2001 and July 19, 2001.

        Each document filed by the Corporation pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act subsequent to the date of this Offering Circular and prior to the termination of the offering of the Subordinated Notes shall be deemed to be incorporated by reference into this Offering Circular from the date of the filing of such document. This filed material can be inspected and copied at the Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549, and the Commission's Regional Offices in New York (7 World Trade Center, 13th Floor, New York, New York 10007) and Chicago (500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511), and copies of such materials can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a Web site on the Internet at http://www.sec.gov that contains certain reports and other documents relating to registrants, such as the Corporation, that file electronically with the Commission. Such material may also be inspected and copied at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

        Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Offering Circular to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Offering Circular.

        We will provide without charge to each person to whom a copy of this Offering Circular is delivered, upon the written or oral request of such person, a copy of any or all of the documents incorporated or deemed to be incorporated by reference herein, other than any exhibits to such documents. Requests for such documents should be directed to Mr. Heng W. Chen, Executive Vice President-Finance, City National Bank, 400 North Roxbury Drive, Beverly Hills, California 90210. Telephone requests may be directed to Mr. Chen at the Bank at (213) 347-2646.

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CONFIDENTIAL OFFERING CIRCULAR
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
NOTICE TO INVESTORS
CITY NATIONAL BANK
CITY NATIONAL CORPORATION
USE OF PROCEEDS
SELECTED UNAUDITED FINANCIAL DATA FOR CITY NATIONAL BANK
SELECTED CONSOLIDATED FINANCIAL DATA FOR CITY NATIONAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA FOR CITY NATIONAL CORPORATION (Continued)
CERTAIN REGULATORY CONSIDERATIONS
DESCRIPTION OF SUBORDINATED NOTES
UNDERWRITING
VALIDITY OF SUBORDINATED NOTES
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

EX-4.12

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Exhibit 4.12

ARTICLES OF INCORPORATION

OF

CN REAL ESTATE INVESTMENT CORPORATION

I

The name of this corporation is CN Real Estate Investment Corporation.

II

The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the GENERAL CORPORATION LAW of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

III

The name and address in the State of California of this corporation's initial agent for service of process is:

Heng Chen
400 North Roxbury Drive
Beverly Hills, California 90210

IV

The corporation is authorized to issue two classes of shares of stock, designated Common Stock and Preferred Stock, respectively. The total number of shares of Common Stock which this corporation is authorized to issue is THREE MILLION EIGHT HUNDRED THOUSAND (3,800,000) and the total number of shares of Preferred Stock which this corporation is authorized to issue is TWO HUNDRED THOUSAND (200,000).

Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors is authorized to fix the number of shares of any series of Preferred Stock and to determine the designation of any series. The Board of Directors is also authorized to determine or alter the rights preferences, privileges and restrictions granted to or imposed on any wholly unissued series of Preferred Stock and, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series.

/s/  HENG CHEN Heng Chen, Incorporator

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ARTICLES OF INCORPORATION OF CN REAL ESTATE INVESTMENT CORPORATION

EX-4.13

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Exhibit 4.13

CITY NATIONAL REAL ESTATE INVESTMENT CORPORATION
* * * * *
BYLAWS
* * * * *

Purpose

        The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California (the "California General Corporation Law").

        The Corporation shall possess and may exercise all powers and privileges necessary or convenient to effect the foregoing purposes, and shall have all the powers now or hereafter expressly conferred upon corporations under the laws of the State of California, together with such additional and implied powers as may now or hereafter be provided thereby.

        The clauses set forth in this preamble are to be construed both as purposes and powers; and it is hereby expressly provided that the enumeration herein of specified purposes and powers shall not be held to limit or restrict in any manner the general powers of the Corporation. It is the intention that the purposes, objects, and powers specified in each of the said clauses shall, except as otherwise expressly provided, in no way be limited or restricted by reference to or inference from the terms of any other clause or paragraph of this preamble, or of any article of these bylaws.

ARTICLE I
OFFICES

        Section 1. The principal executive office of City National Real Estate Investment Corporation (the "Corporation") shall be located at 400 North Roxbury, Beverly Hills, California, 90210.

        Section 2. The Corporation may also have offices at such other places both within and without the State of California as the board of directors may from time to time determine or the business of the Corporation may require.

ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS

        Section 1. Annual meetings of shareholders for the election of directors and to transact such other business as may properly be brought before the annual meeting shall be held in Beverly Hills, State of California, at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of California as shall be designated from time to time by the board of directors and stated in the notice of the meeting. If no other place is stated or fixed, the annual meeting of shareholders shall be held at the principal executive office of the Corporation.

        Section 2. Annual meetings of shareholders, commencing with the year 2002, shall be held on June 15, if not a legal holiday, and if a legal holiday, then on the following day that is not a legal holiday at 9:00 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote directors to serve on the board of directors and transact such other business as may properly be brought before the meeting.

        Section 3. Written or printed notice of the annual meeting stating the place, day and hour of the meeting shall be given to each shareholder entitled to vote thereat not less than 10 (or, if sent by third-

Page 1 of 22 pages

class mail, 30) nor more than 60 days before the date of the meeting. Notice may be sent by third-class mail only if the outstanding shares of the Corporation are held of record by 500 or more persons (determined as provided in section 605 of the California General Corporation Law) on the record date for the shareholders' meeting.

ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS

        Section 1. Special meetings of shareholders for any purpose other than the election of directors may be held at such time and place within or without the State of California as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. If no other place is stated or fixed, special meetings of shareholders shall be held at the principal executive office of the Corporation.

        Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called by the president, the board of directors, or the holders of not less than one-fifth of all the shares entitled to vote at the meeting and if the Corporation has a chairman of the board of directors, special meetings of the shareholders may be called by the chairman.

        Section 3. Written or printed notice of a special meeting of shareholders, stating the time, place and purpose or purposes thereof, shall be given to each shareholder entitled to vote thereat not less than 10 (or, if sent by third-class mail, 30) nor more than 60 days before the date of the meeting. Notice may be sent by third-class mail only if the outstanding shares of the Corporation are held of record by 500 or more persons (determined as provided in section 605 of the California General Corporation Law) on the record date for the shareholders' meeting.

        Section 4. The business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice.

        Section 5. Upon notice being given in accordance with the provisions hereof, the failure of any shareholder to receive actual notice of any special meeting shall not in any way invalidate the meeting or proceedings thereat.

        The transactions of any special meeting of shareholders, however called and noticed, and wherever held, are as valid as though had at a special meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the special meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the special meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the special meeting. Attendance of a person at a special meeting shall constitute a waiver of notice of and presence at such special meeting, except when the person objects, at the beginning of the special meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a special meeting is not a waiver of any right to object to the consideration of matters required to be included in the notice, but not so included, if such objection is expressly made at the special meeting.

ARTICLE IV QUORUM AND
VOTING OF STOCK

        Section 1. The holders of a majority of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. If, however, such quorum shall not be present or represented at any meeting of the

Page 2 of 22 pages

shareholders, the shareholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting.

        Section 2. If a quorum is present, the affirmative vote of a majority of the shares of stock represented and voting at the meeting (which shares voting affirmatively also constitute at least a majority of the required quorum), shall be the act of the shareholders unless the vote of a greater or lesser number or voting by classes is required by law, the articles of incorporation or these bylaws.

        Section 3. Each outstanding share of stock, having voting power, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. In all elections for directors, every shareholder entitled to vote shall have the right to vote, in person or by proxy, the number of shares of stock owned by him for as many persons as there are directors to be elected, or, upon satisfaction of the requirements set forth in Section 708(b) of the California General Corporation Law, to cumulate the vote of said shares, and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholder's shares are normally entitled, or to distribute the votes on the same principle among as many candidates as he may see fit. Section 708(b) of the California General Corporation Law provides that no shareholder shall be entitled to cumulate votes for any candidate for the office of director unless such candidates' names have been placed in nomination prior to the voting and at least one shareholder has given notice at the meeting prior to the voting of his intention to cumulate his votes.

        Section 4. Unless otherwise provided in the articles of incorporation, any action, except election of directors, which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares entitled to vote having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

ARTICLE V
DIRECTORS

        Section 1. The number of directors shall be three. Directors need not be residents of the State of California nor shareholders of the Corporation. The directors, other than the first board of directors, shall be elected at the annual meeting of the shareholders, and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. The first board of directors shall hold office until the first annual meeting of shareholders.

        Section 2. Unless otherwise provided in these bylaws or in the articles of incorporation and except for a vacancy created by the removal of a director, vacancies on the board may be filled by approval of a majority of the board of directors or, if the number of directors then in office is less than a quorum, by (1) the unanimous written consent of the directors then in office, (2) the affirmative vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice or (3) a sole remaining director. Unless the articles of incorporation or a bylaw adopted by the shareholders provides that the board of directors may fill vacancies occurring in the board of directors by reason of the removal of directors, such vacancies may be filled only by election by the shareholders.

        The shareholders may elect a director at any time to fill any vacancy not filled by the directors. Any such election by written consent (other than to fill a vacancy created by removal, which requires the unanimous consent of all shares entitled to vote for the election of directors), requires the consent of a majority of the outstanding shares entitled to vote.

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        Section 3. The business affairs of the Corporation shall be managed by its board of directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these bylaws directed or required to be exercised or done by the shareholders.

        Section 4. The directors may keep the books of the Corporation, except such as are required by law to be kept within the State of California, outside of the State of California, at such place or places as they may from time to time determine.

        Section 5. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the Corporation as directors, officers or otherwise.

ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS

        Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of California.

        Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be fixed by the consent in writing of all the directors.

        Section 3. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board of directors.

        Section 4. Special meetings of the board shall be held upon four days' notice by mail or 48 hours' notice delivered personally or by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail, or other electronic means; special meetings may be called by the president or the secretary, and shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case, special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. A meeting may be held on shorter notice if all directors consent.

        Section 5. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.

        Section 6. A majority of the directors shall constitute a quorum for the transaction of business unless a greater number is required by law or by the articles of incorporation. The act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by statute or by the articles of incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

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        Section 7. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof.

        Section 8. The order of business at all meetings of the board of directors shall be as follows:

1.    Roll call and determination of quorum
2.    Reading of the minutes of previous meeting
3.    Reports of officers
4.    Examination of loans and investments and action thereon
5.    Deferred business, if any
6.    New business.

        Section 9. The board of directors shall keep complete records of its proceedings in a minute book kept for that purpose alone.

        Section 10. At any annual or special meeting of shareholders all of the acts and doings of the board of directors may be ratified, confirmed and approved by shareholders and such ratification, confirmation and approval shall be as valid and as binding upon the Corporation and upon all shareholders as though it had been approved, confirmed or ratified by every shareholder.

ARTICLE VII
EXECUTIVE COMMITTEE

        The board of directors, by resolution adopted by a majority of the number of directors fixed by these bylaws or otherwise, may designate two or more directors to constitute an executive committee, which committee, to the extent provided in such resolution, shall have and exercise all of the authority of the board of directors in the management of the Corporation, except as otherwise required by law. Vacancies in the membership of the committee shall be filled by the board of directors at a regular or special meeting of the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board when required. The board of directors may designate one or more directors as alternate members of the executive committee. The executive committee shall not have authority: (1) to approve any action which will also require the shareholders' approval; (2) to fill vacancies on the board of directors or in any committee; (3) to fix the compensation of directors for serving on the board of directors or on any committee; (4) to amend or repeal these bylaws or adopt new bylaws; (5) to amend or repeal any resolution of the board of directors which by its express terms is not so amendable or repealable; (6) to make a distribution to the shareholders except at a rate or in a periodic amount or within a price range determined by the board of directors; or (7) to appoint other committees of the board of directors or the members thereof.

ARTICLE VIII
NOTICES

        Section 1. Whenever, under the provisions of the statutes or of the articles of incorporation or of these bylaws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail.

        Notice to directors may also be given by facsimile telecommunication. Notice to any shareholder shall be given at the address furnished by such shareholder for the purpose of receiving notice. If such address is not given and if no address appears on the records of the Corporation for such shareholder, notice may be given to such shareholder at the place where the principal executive office of the

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Corporation is located or by publication at least once in a newspaper of general circulation in the county in which said principal executive office is located.

        If a notice of a shareholders' meeting is sent by mail it shall be sent by first-class mail, or, in case the Corporation has outstanding shares held of record by 500 or more persons (determined as provided in Section 605 of the California General Corporation Law) on the record date for the shareholders' meeting, notice may be by third-class mail.

        Section 2. Whenever any notice for whatever reason is required to be given under the provisions of the statutes or under the provisions of the articles of incorporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

ARTICLE IX
OFFICERS

        Section 1. The officers of the Corporation, except those elected in accordance with section 210 of the California General Corporation Law, shall be chosen by the board of directors and shall be a president, a vice-president, a secretary and a chief financial officer. The board of directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers.

        Section 2. The board of directors, at its first meeting after each annual meeting of shareholders, shall choose a president, one or more vice-presidents, a secretary and a chief financial officer, none of whom need be a director.

        Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors.

        Section 4. The salaries of all officers and agents of the Corporation shall be fixed by the board of directors.

        Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the Corporation shall be filled by the board of directors.

        The board of directors may, from time to time, designate a chief executive officer of the Corporation, who may also be the chairman of the board of directors, and the president. The chief executive officer shall be responsible for the general supervision of the property, business and affairs of the Corporation. The chief executive officer shall carry out the policies and procedures for the governing and conduct of the affairs of the Corporation as are adopted and directed by the board of directors and prescribed by law. The chief executive officer shall serve at the pleasure of the board of directors, and the office may be terminated at any time at the discretion of the board of directors without any cause.

        A chairman of the board of directors may be elected by a majority of the entire board of directors. If so elected, he shall preside at all meetings of the board of directors and shall perform such other duties and have such other powers as may be delegated by the board of directors.

        Section 6. The officers delineated, or such other officers as may be appointed from time to time, are authorized to do and perform such corporate and official acts as are necessary in the carrying on of the business of the Corporation, subject always to the directions of the board of directors and, if appointed, the executive committee. Subject to like limitation, they are fully empowered to make and execute all deeds, leases, releases, agreements, contracts, bills of sale, assignments, letters of attorney or substitution and other instruments which may be necessary to sell, assign, transfer, convey, release and

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assure or lease to any party entitled thereto, whether purchaser, lessee or transferee, any estate or property, real or personal, stocks, bonds, loans, insurance policies, storage receipts, certificates of deposit, scrip or evidences of debt at any time standing in the name of the Corporation or held or controlled by it in its own right; and to cause the corporate seal to be affixed to any and all such instruments, and attested by the secretary and duly acknowledged.

        Such of the officers as may from time to time be designated by the board of directors or, if appointed, by the executive committee, shall have the power and authority to sign checks, drafts, letters of credit, orders, receipts and acquittances, and to endorse checks, bills of exchange, orders, drafts and vouchers made payable or endorsed to the Corporation.

        The board of directors may, from time to time by resolution, provide for the execution of any corporate instrument or document by a mechanical device or a machine, or by use of facsimile signatures, under such terms as shall be set forth in the resolution of the board of directors.

THE PRESIDENT

        Section 7. The president shall be the chief executive officer of the Corporation, unless a chief executive officer is otherwise designed by the board of directors, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the board of directors are carried into effect.

        Section 8. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the Corporation.

        Section 9. The president shall preside at all meetings of shareholders, and in general shall perform such duties as are incident to his office or are prescribed by the board of directors. If no chairman of the board of directors is elected, the president shall also preside over the meetings of the board of directors.

THE VICE PRESIDENTS

        Section 10. The vice president, or if there shall be more than one, the vice presidents in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

THE SECRETARY AND ASSISTANT SECRETARIES

        Section 11. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the Corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the executive committee when required. The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision the secretary shall be. The secretary shall have custody of the corporate seal of the Corporation and the secretary, or an assistant secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature.

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        Section 12. The assistant secretary, or if there be more than one, the assistant secretaries, in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

THE CHIEF FINANCIAL OFFICER

        Section 13. The chief financial officer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the board of directors.

        Section 14. The chief financial officer shall disburse the funds of the Corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as Chief Financial Officer and of the financial condition of the Corporation.

        Section 15. If required by the board of directors, the chief financial officer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his or her control belonging to the Corporation.

        Section 16. The chief financial officer is, for the purpose of executing any documents requiring the signature of the "Treasurer," deemed to be the treasurer of the Corporation.

THE ASSISTANT TREASURERS

        Section 17. The assistant treasurers, or, if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the chief financial officer, perform the duties and exercise the powers of the chief financial officer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

THE FIRST OFFICERS

        Section 18. The persons who are first officers of the Corporation who shall serve until the Board of Directors designates successors are as follows:

Officers:	Mailing Address:
Frank P. Pekny President	400 North Roxbury Drive, Beverly Hills, California, 90210
Heng W. Chen Chief Financial Officer/Secretary	400 North Roxbury Drive, Beverly Hills, California, 90210
Andy Yang Vice President	400 North Roxbury Drive, Beverly Hills, California, 90210

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ARTICLE X
CERTIFICATES FOR SHARES

        Section 1. Every holder of shares in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the chairman of the board of directors, if elected, or the president or a vice-president and the chief financial officer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation, certifying the number of shares and the class or series of shares owned by the holder in the Corporation. If the shares of the Corporation are classified or if any class of shares has two or more series, there shall appear on the certificate either (1) a statement of the rights, preferences, privileges and restrictions granted to or imposed upon each class or series of shares to be issued and upon the holders thereof; (2) a summary of such rights, preferences, privileges and restrictions with reference to the provisions of the articles of incorporation and any certificates of determination establishing the same; or (3) a statement setting forth the office or agency of the Corporation from which shareholders may obtain, upon request and without charge, a copy of the statement referred to in item (1) hereof. Every certificate shall have noted thereon any information required to be set forth by the California General Corporation Law and such information shall be set forth in the manner provided by such law.

        Section 2. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

LOST CERTIFICATES

        Section 3. The board of directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the Corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed.

TRANSFERS OF SHARES

        Section 4. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate cancelled and the transaction recorded upon the books of the Corporation.

CLOSING OF TRANSFER BOOKS

        Section 5. In order that the Corporation may determine the shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days prior to the date of such meeting nor more than 60 days prior to any other action.

        A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the board of directors fixes a new record date for the adjourned meeting, but the board shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting.

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REGISTERED SHAREHOLDERS

        Section 6. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of California.

ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS

        Section 1. Subject to the provisions of the articles of incorporation relating thereto, if any, dividends may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to any provisions of the articles of incorporation and the California General Corporation Law.

        Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the board of directors from time to time, in its absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the board of directors shall think conducive to the interest of the Corporation, and the board of directors may modify or abolish any such reserve in the manner in which it was created.

CHECKS

        Section 3. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.

FISCAL YEAR

        Section 4. The fiscal year of the Corporation shall begin on the first day of January in each year and end on the thirty-first day of December of each year.

SEAL

        Section 5. The corporate seal shall have inscribed thereon the name of the Corporation, the date of its incorporation and the words "Corporate Seal, California". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.

ARTICLE XII
AMENDMENTS

        Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted (a) at any regular or special meeting of shareholders at which a quorum is present or represented, by the affirmative vote of a majority of the stock entitled to vote, provided notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting, or (b) by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board. The board of directors shall not make or alter any bylaw specifying a fixed number of directors or the maximum or minimum number of directors and the directors shall not change a fixed board to a variable board or vice versa in the bylaws. The board of directors shall not change a bylaw, if any, which requires a

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larger proportion of the vote of directors for approval than is required by the California General Corporation Law.

ARTICLE XIII
DIRECTORS' ANNUAL REPORT

        Section 1. The directors shall cause to be sent to the shareholders not later than 120 days after the close of the fiscal year, an annual report which shall include a balance sheet as of the closing date of the last fiscal year, and an income statement of changes in financial position for said fiscal year. Said annual report shall be accompanied by any report thereon of independent accountants or, if there is no such report, the certificate of an authorized officer of the Corporation that such statements were prepared without audit from the books and records of the Corporation. This annual report is hereby waived whenever the Corporation shall have less than 100 shareholders as defined in Section 605 of the California General Corporation Law. Except when said waiver applies, the annual report shall be sent to the shareholder at least 15 (or if sent by third-class mail, 35) days prior to the date of the annual meeting. The annual report may be sent by third-class mail only if the Corporation has outstanding shares held by 500 or more persons (as determined by the provisions of Section 605 of the California General Corporation Law) on the record date for the shareholders' meeting. In addition to the financial statements included in the annual report, the annual report of the Corporation, if it has more than 100 shareholders as defined in Section 605 of the California General Corporation Law and if it is not subject to the reporting requirements of Section 13 of the Securities Exchange Act of 1934, as amended, or exempt from such registration by Section 12(g)(2) of said act, shall also describe briefly: (1) any transaction (excluding compensation of officers and directors) during the previous fiscal year involving an amount in excess of forty thousand dollars ($40,000) (other than contracts let at competitive bids or services rendered at prices regulated by law) to which the Corporation or its parent or subsidiary was a party and in which any director or officer of the Corporation or of a subsidiary or (if known to the Corporation or its parent or subsidiary) any holder of more than 10 percent of the outstanding voting shares of the Corporation had a direct or indirect material interest, naming such person and stating such person's relationship to the Corporation, the nature of such person's interest in the transaction and, where practicable, the amount of such interest; provided, that in the case of a transaction with a partnership of which such person is a partner, only the interest of the partnership need be stated; and provided further that no such report need be made in the case of transactions approved by the shareholders under subdivision (a) of section 310 of the California General Corporation Law; and (2) the amount and circumstances of any indemnification or advances aggregating more than ten thousand dollars ($10,000) paid during the fiscal year to any officer or director of the Corporation pursuant to section 317 of the California General Corporation Law, provided that no such report need be made in the case of indemnification approved by the shareholders under paragraph (2) of subdivision (e) of section 317 of the California General Corporation Law.

ARTICLE XIV
CAPITAL STOCK

        The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is FOUR MILLION (4,000,000), of which THREE MILLION EIGHT HUNDRED THOUSAND (3,800,000) shares shall be shares of common stock with no par value per share (hereinafter called "Common Stock") AND TWO HUNDRED THOUSAND (200,000) shares shall be shares of preferred stock with no par value per share, a stated value of ONE HUNDRED AND NO/100 DOLLARS ($100.00) per share (hereinafter called "Preferred Stock").

        Any amendment to these bylaws or to the articles of incorporation which shall increase or decrease the authorized capital stock of the Corporation may be adopted by the affirmative vote of the holders

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of capital stock representing not less than a majority of the voting power represented by the outstanding shares of capital stock of the Corporation entitled to vote.

        Whenever an increase of stock shall be authorized, in accordance with law, it shall be the duty of the board of directors to notify all the shareholders of the same, and cause a subscription list to be opened for such increase of capital. Upon such increase each shareholder shall have the privilege of subscribing for new stock in proportion to the amount of stock then owned by him or her. If any shareholder should fail, within the time specified by the board of directors, to subscribe for the amount of stock to which he or she may be entitled, the board of directors may determine what disposition shall be made of the privilege of subscribing for the unsubscribed stock.

        In case any certificate of stock is lost, mutilated or destroyed, the board of directors may issue a new certificate in place thereof upon receipt of a proper bond of indemnification in which the Corporation is named as the beneficiary.

        Transfer of stock shall not be suspended preparatory to the declaration of dividends, and unless an agreement to the contrary shall be expressed in the assignment, dividends shall be paid to the shareholders in whose name the stock shall stand at the date of the declaration of dividends.

        The voting powers and the designations, preferences and relative, participating, optional and other special rights, and qualifications, or restrictions of the Preferred Stock shall be as follows:

        Section 1. The board of directors is expressly authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more class or series, and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, or restrictions thereof, as shall be stated and expressed in these bylaws, or the resolution or resolutions providing for the issuance thereof adopted by the board of directors, or a certificate of designation filed with the Secretary of State of the State of California, including (but without limiting the generality of the foregoing) the following:

        (a)  The designation of such class or series and the number of shares which shall constitute such class or series;

        (b)  Any provisions for dividends on shares of such class or series, including, without limitation, the dividend rate, the conditions upon which and the dates when such dividends shall be payable, whether dividends shall be payable on any other class or classes or of any other series of stock, and whether dividends shall be cumulative and, if so, the date or dates from which dividends shall be cumulative;

        (c)  Whether shares of such class or series may be redeemed and, if redeemable, whether they are redeemable for cash, property or rights (including securities of the Corporation or another corporation), the time or times when shares of such class or series may be redeemed, the price or prices, rate or rates, and adjustments with which shares of such class or series may be redeemed, and the other terms and conditions upon which shares of such class or series may be redeemed;

        (d)  The rights to which holders of shares of such class or series shall be entitled upon any voluntary or involuntary dissolution, liquidation, distribution of assets or winding up the Corporation;

        (e)  The terms and amount of any sinking or purchase fund to be provided for the purchase, redemption or retirement of the shares of such class or series;

        (f)    The rights, if any, of the holders of shares of such class or series or of the Corporation to convert such shares into or exchange such shares for shares of Common Stock or of any other

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class or series of Preferred Stock of the Corporation or other securities of the Corporation or another corporation, and the terms and conditions of such conversion or exchange;

        (g)  Whether the holders of shares of such class or series shall have any voting rights or no voting rights and, if such holders shall have any voting rights, the voting rights of holders of shares of such class or series; and

        Section 2. Except as otherwise required by law and except for such voting powers with respect to the election of directors or other matters as may be stated in the resolutions of the board of directors or any duly authorized executive committee thereof, creating any class or series of Preferred Stock, the holders of any such class or series shall have no voting power whatsoever.

ARTICLE XV
REIT RESTRICTIONS ON TRANSFER

        Section 1. Definitions. The following terms shall have the following meanings for purposes of these Bylaws:

        "Beneficial Ownership" means ownership of shares of any class or series of Common Stock or Preferred Stock by a Person (as defined below) who would be treated as an owner of such shares under Section 542(a)(2) of the Code (as defined below) either directly or constructively through the application of Section 544 of the Code as modified by Section 856(h)(i)(B) of the Code. The terms "Beneficial Owner," "Beneficially Own" and "Own Beneficially" shall have correlative meanings.

        "Beneficiary" means, with respect to the Trust (as defined below), one or more organizations named by the Corporation as beneficiary or beneficiaries of the Trust in accordance with Section (13)(a) of this Article XV. Each such Beneficiary shall be an organization described in Section 501(c)(3) of the Code, that is not an "individual" within the meaning of Section 541 of the Code, contributions to which must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

        "Board of Directors" means the Board of Directors of the Corporation.

        "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor thereto, as interpreted by any applicable regulations or other administrative pronouncements as in effect from time to time.

        "Excess Shares" has the meaning set forth in Section (3) of this Article XV.

        "Market Price", with respect to any class or series of Preferred Stock, on any date means the Closing Price (as defined below) on the Trading Day (as defined below) immediately preceding such date of such class or series of Preferred Stock. The "Closing Price", with respect to any class or series of Preferred Stock, on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE, as reported in the principal, consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such class or series of Preferred Stock is listed or admitted to trading or, if such class or series of Preferred Stock is not listed or admitted to trading on any national securities exchange, the last quoted, price, or if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the NASDAQ or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if such class or series of Preferred Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such class or series of Preferred Stock selected by the Board of Directors of

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the Corporation or, if there is no professional market maker making a market in such class or series of Preferred Stock, the liquidation value of a share of such class or series of Preferred Stock as determined by the Board of Directors in its reasonable discretion. "Trading Day" means a day on which the principal national securities exchange on which the relevant class or series of Preferred Stock is listed or admitted to trading is open for the transaction of business or, if the relevant class or series of Preferred Stock is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of California are authorized or obligated by law or executive order to close.

        "NASDAQ" means the National Association of Securities Dealers, Inc. Automated Quotation System.

        "Non-Transfer Event" means any event other than a purported Transfer that would cause (i) any Person (as defined below) (other than City National Bank and its affiliates) to Own Beneficially (as defined below) shares of Preferred Stock in excess of the Ownership Limit (as defined below), (ii) the Corporation to become "closely held" within the meaning of Section 856(h) of the Code, and/or (iii) the Corporation to otherwise fail to qualify as a REIT (other than as a result of a violation of the "100-shareholder" requirement of Section 856(a)(5) of the Code), in each case including, but not limited to, the granting of any option on entering into any agreement for the sale, transfer or other disposition of shares of Preferred Stock or the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for shares of Preferred Stock.

        "NYSE" means the New York Stock Exchange, Inc.

        "Ownership Limit" means, for any Person (as defined below), other than City National Bank and its affiliates, the Beneficial Ownership of nine and nine-tenths percent (9.9%), in number of shares or value (determined on the basis of the Market Price), of the outstanding shares of any class or series of Preferred Stock of the Corporation.

        "Permitted Transferee" means any Person designated as a Permitted Transferee in accordance with the provisions of Section (13)(e) of this Article XV.

        "Person" means (i) an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company, limited liability company or other entity and (ii) also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

        "Prohibited Owner" means, with respect to any purported Transfer or Non-Transfer Event, any Person whom, but for the provisions of Section (3) of this Article XV, would Beneficially Own shares of Preferred Stock.

        "REIT" means a real estate investment trust as defined under Section 856(a) of the Code.

        "Restriction Termination Date" means the first day on which the Board of Directors determines that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify as a REIT.

        "Transfer" means any sale, transfer, gift, assignment, devise or other disposition of any shares of Common Stock or Preferred Stock (including (i) the granting of any option (including, but not limited to, an option to acquire an option or any series of such options) or entering into any agreement for the sale, transfer or other disposition of Common Stock or Preferred Stock or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Common Stock or Preferred Stock or the exercise of such rights) whether voluntary or involuntary, whether of record or beneficially, and whether by operation of law or otherwise (including, but not limited to, any

Page 14 of 22 pages

transfer of an interest in other entities which results in a change in the Beneficial Ownership of shares of Common Stock or Preferred Stock). The terms "Transfers" and "Transferred" shall have correlative meanings.

        "Trust" means the trust created pursuant to Section (13) of this Article XV.

        "Trustee" means any Person or entity unaffiliated with both the Corporation and any Prohibited Owner who is designated by the Corporation to act as trustee of the Trust, and any successor trustee appointed by the Corporation.

        Section 2. Restriction on Ownership and Transfers.

        (a)  Except as provided in Section (10) of this Article XV, prior to the Restriction Termination Date, no Person (other than City National Bank and its affiliates) shall Beneficially Own shares of any class or series of Preferred Stock in excess of the Ownership Limit.

        (b)  Except as provided in Section (10) of this Article XV, and subject to the provisions of Section (14) of this Article XV and prior to the Restriction Termination Date, any Transfer or other event that, if effective, would result in any Person (other than City National Bank and its affiliates) Beneficially Owning shares of any class or series of Preferred Stock in excess of the Ownership Limit shall be void ab initio as to the Transfer of such shares of Preferred Stock which would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no right or interest in such shares of Preferred Stock.

        (c)  Subject to the provisions of Section (14) of this Article XV and prior to the Restriction Termination Date, any Transfer that, if effective, would result in the outstanding Common Stock and Preferred Stock being Beneficially Owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio, and the intended transferee shall acquire no right or interest in such shares of Common Stock or Preferred Stock.

        (d)  Notwithstanding any other provision herein, subject to the provisions of Section (14) of this Article XV and prior to the Restriction Termination Date, any Transfer that, if effective, would result in the Corporation being "closely held" within the meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer of that number of shares of Common Stock or Preferred Stock, as the case may be, that would cause the Corporation to be "closely held" within the meaning of Section 856(h) of the Code, and the intended transferee shall acquire no right or interest in such shares of Common Stock or Preferred Stock, as the case may be.

        (e)  Notwithstanding any other provision herein, subject to the provisions of Section (14) of this Article XV and prior to the Restriction Termination Date, any Transfer that, if effective, would cause the Corporation to fail to qualify as a REIT under the Code for any reason shall be void ab initio as to the Transfer of that number of shares of Common Stock or Preferred Stock, as the case may be, in excess of the number that could have been Transferred without such result; and the intended transferee shall acquire no right or interest in such shares of Common Stock or Preferred Stock, as the case may be.

        (f)    A Transfer of a share of Common Stock or Preferred Stock which is null and void under paragraphs (b), (c), (d) or (e) of this Section (2) of this Article XV shall not adversely affect the validity of the Transfer of any other share of Common Stock or Preferred Stock in the same or any other related transaction.

        Section 3. Transfer in Trust.

        (a)  If, notwithstanding the other provisions contained in this Article XV, at any time prior to the Restriction Termination Date, there is a purported Transfer or Non-Transfer Event such that any Person (other than City National Bank and its affiliates) would Own Beneficially shares of any

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class or series of Preferred Stock in excess of the Ownership Limit, then (i) except as otherwise provided in Section (10) of this Article XV, the Prohibited Owner shall acquire no right, or interest (or in the case of a Non-Transfer Event, shall cease to own any right or interest) in such number of shares of such class or series of Preferred Stock that would cause such Beneficial Owner to Beneficially Own shares of such class or series of Preferred Stock in excess of the Ownership Limit and (ii) such number of shares of such class or series of Preferred Stock in excess of the Ownership Limit (rounded up to the nearest whole share) shall be designated as excess shares ("Excess Shares") and, in accordance with Section (13) of this Article XV, be transferred automatically and by operation of law to the Trust for the benefit of the Beneficiary. Such transfer to the Trust and the designation of the shares as Excess Shares shall be effective as of the close of business on the business day prior to the date of the purported Transfer or Non-Transfer Event, as the case may be.

        (b)  If, notwithstanding the other provisions contained in this Article XV, at any time prior to the Restriction Termination Date, there is a purported Transfer or Non-Transfer Event that, if effective, would cause the Corporation to become "closely held" within the meaning of Section 856(h) of the Code or to otherwise fail to qualify as a REIT (other than as a result of a violation of the 100-shareholder requirement of Section 856(a)(5)), then (i) except as otherwise provided in Section (10) of this Article XV, the Prohibited Owner shall acquire no right or interest (or, in the case of a Non-Transfer Event, shall cease to own any right or interest) in such number of shares of Preferred Stock, the ownership of which by such purported transferee or record holder would cause the Corporation to be "closely held" within the meaning of Section 856(h) of the Code or to otherwise fail to qualify as a REIT (other than as a result of a violation of the 100-shareholder requirement of Section 856(a)(5)) and (ii) such number of shares of Preferred Stock (rounded up to the nearest whole share) shall be designated as Excess Shares and, in accordance with the provisions of Section (13) of this Article XV, be transferred automatically and by operation of law to the Trust for the benefit of the Beneficiary. Such transfer to the Trust and the designation of shares as Excess Shares shall be effective as of the close of business on the business day prior to the date of the Transfer or Non-Transfer Event, as the case may be.

        Section 4. Remedies for Breach. If the Board of Directors or a committee thereof shall at any time determine in good faith that a Non-Transfer Event has occurred, a Transfer has taken place in violation of Section (2) of this Article XV or that a Person intends to acquire or has attempted to acquire or may acquire Beneficial Ownership of any shares of Common Stock or Preferred Stock in violation of Section (2) of this Article XV (whether or not such violation is intended), the Board of Directors shall be empowered to take any action it deems advisable to refuse to give effect to or to prevent such Transfer or Non-Transfer Event, including but not limited to, refusing to give effect to such Transfer or Non-Transfer Event on the books of the Corporation or instituting proceedings to enjoin or rescind such Transfer or acquisition.

        Section 5. Notice of Restricted Transfer. Any Person who acquires or attempts to acquire shares of Common Stock or Preferred Stock in violation of Section (2) of this Article XV, or any Person who owned shares of Preferred Stock that were transferred to a Trust pursuant to the provisions of Section (3) of this Article XV, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or Non-Transfer Event, as the case may be, on the Corporation's status as a REIT. Failure to give such notice shall not in any way limit the rights and remedies of the Board of Directors provided herein.

        Section 6. Right of First Offer. No holder of the Preferred Stock may Transfer such stock without first having offered such stock proposed to be transferred to the Corporation, whereupon the Corporation shall have the right to elect to purchase, or shall have the right, but not the obligation, to elect to designate a third party to purchase, all (but not less than all) of the shares of Preferred Stock

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proposed to be transferred. The consideration to be paid by the Corporation or third party designee of the Corporation, if the Corporation elects to direct the sale of the Preferred Stock hereunder, shall be: (i) the price offered for the transfer by the proposed transferee; provided that, if the purchase price is not payable solely in cash, the Corporation or its third party designee can provide equivalent consideration or cash having the same value, or (ii) in the absence of a third party offer, the Market Price of such Preferred Stock proposed to be transferred plus any declared and unpaid dividends.

        Section 7. Owners Required to Provide Information. Prior to the Restriction Termination Date:

        (a)  Every Beneficial Owner of more than one-half of one percent (0.5%) (or such lower percentage as required in the applicable regulations adopted under the Code) of any class or series of Preferred Stock of the Corporation outstanding shall, within thirty (30) days after December 31 of each year, give written notice to the Corporation stating the name and address of such Beneficial Owner, the number of shares of such class or series of Preferred Stock Beneficially Owned by such Beneficial Owner, a full description of how shares are held and a statement identifying the actual or constructive owners of such shares. Each such Beneficial Owner shall, upon demand by the Corporation, disclose to the Corporation in writing such additional information with respect to its Beneficial Ownership of such class or series of Preferred Stock as the Corporation, in its sole discretion, deems appropriate or necessary, (i) to comply with the provisions of the Code regarding the qualification of the Corporation as a REIT and (ii) to ensure compliance with the Ownership Limit.

        (b)  At the request of the Corporation, any Person who is a Beneficial Owner of Common Stock or Preferred Stock and any Person (including the shareholder of record) who is holding Common Stock or Preferred Stock for a Beneficial Owner, and any proposed transferee of shares, shall provide (i) such information as the Corporation, in its sole discretion, may request from time to time in order (A) to determine the Corporation's status as a REIT, (B) to ensure compliance with the requirements of any taxing authority or other governmental agency or (C) to ensure compliance with the Ownership Limit and (ii) a statement or affidavit to the Corporation setting forth the number of shares of each class or series of Common Stock or Preferred Stock Beneficially Owned by such shareholder or proposed transferee and any related Persons specified, which statement or affidavit shall be in the form prescribed by the Corporation for that purpose.

        (c)  In addition, every individual who Beneficially Owns any class or series of Preferred Stock of the Corporation shall, upon demand by the Corporation, disclose to the Corporation in writing information for the purpose of determining whether the Corporation is a "pension-held REIT" within the meaning of Section 865(h)(3)(D) of the Code. In this context, "individual" is defined as any natural person and any entity that is included in the definition of "individual" in Section 542(a)(c) of the Code, but does not include a pension trust described in Section 401(a) of the Code that qualifies for "look through treatment" under Section 856(h)(3)(A)(i) of the Code.

        Section 8. Remedies Not Limited. Nothing contained in this Article XV shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable (subject to the provisions of Section (14) of this Article XV) to protect the Corporation and the interests of its shareholders in the preservation of the Corporation's status as a REIT, and to insure compliance with the Ownership Limit.

        Section 9. Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Article XV, including any definition contained in Section (1) of this Article XV, the Board of Directors shall have the power to determine the application of such provisions with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances.

        Section 10. Exceptions.

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        (a)  The Board of Directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of tax counsel satisfactory to it, may waive the application of the Ownership Limit, in whole or in part, to any Person, if such Person is not an individual for purpose of Section 542(a) of the Code and is a corporation, partnership, estate or trust; provided, however, in no event may the Board of Directors grant any such exception if it would, in the Board of Director's judgment, jeopardize the Corporation's status as a REIT. In connection with any such exemption, the Board of Directors may require such representations and undertakings from such Person and may impose such other conditions as the Board of Directors deems necessary in its sole discretion to determine the effect, if any, of the proposed Transfer on the Corporation's status as a REIT.

        (b)  For a period of 90 days following the acquisition of Preferred Stock by an underwriter that (i) is a corporation or a partnership and (ii) participates in an offering of the Preferred Stock, such underwriter shall not be subject to the Ownership Limit with respect to the Preferred Stock purchased by it as a part of such offering.

        Section 11. Legend. Each certificate for Preferred Stock shall bear the following legend (in addition to the legend required by Section 2 of Article XVI):

        "THIS SECURITY (AND THE PREFERRED SHARES EVIDENCED HEREBY) ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER FOR THE PURPOSE OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST (A "REIT') UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE'). NO PERSON MAY (1) BENEFICIALLY OWN PREFERRED SHARES IN EXCESS OF THE APPLICABLE OWNERSHIP LIMIT, EXCEPT AS SET FORTH IN THE CORPORATION'S BYLAWS, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, OR (2) BENEFICIALLY OWN PREFERRED SHARES OF THE SECURITIES THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD' UNDER SECTION 856(H) OF THE CODE OR OTHERWISE TO FAIL TO QUALIFY AS A REIT. ANY PERSON (OTHER THAN CITY NATIONAL BANK AND ITS AFFILIATES) WHO ATTEMPTS TO BENEFICIALLY OWN PREFERRED SHARES IN EXCESS OF THE APPLICABLE LIMITATION MUST IMMEDIATELY NOTIFY THE CORPORATION IN WRITING. NO PERSON MAY TRANSFER THIS SECURITY OR ANY PREFERRED SHARES IF SUCH TRANSFER WOULD RESULT IN THE OUTSTANDING COMMON STOCK AND PREFERRED STOCK OF THE CORPORATION BEING BENEFICIALLY OWNED BY LESS THAN 100 PERSONS (DETERMINED WITHOUT REFERENCE TO ANY RULES OF ATTRIBUTION). NO PERSON MAY TRANSFER THIS SECURITY OR ANY PREFERRED SHARES WITHOUT FIRST HAVING OFFERED THIS SECURITY OR SUCH PREFERRED SHARES PROPOSED TO BE TRANSFERRED TO THE CORPORATION, WHEREUPON THE CORPORATION SHALL HAVE THE RIGHT TO ELECT TO PURCHASE, OR SHALL HAVE THE RIGHT, BUT NOT THE OBLIGATION, TO ELECT TO DESIGNATE A THIRD PARTY TO PURCHASE, THIS SECURITY OR ALL (BUT NOT LESS THAN ALL) OF THE PREFERRED SHARES PROPOSED TO BE TRANSFERRED. IF THE RESTRICTIONS ON TRANSFER ARE VIOLATED, ALL OR A PORTION OF THE PREFERRED SHARES REPRESENTED HEREBY WILL BE TRANSFERRED AUTOMATICALLY AND BY OPERATION OF LAW TO A TRUST AND SHALL BE DESIGNATED "EXCESS SHARES.' THESE RESTRICTIONS ARE SET FORTH IN FULL DETAIL IN THE CORPORATION'S BYLAWS, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS."

        Section 12. Severability. If any provision of this Article XV or any application of any such provision is determined to be void, invalid or unenforceable by any federal or state court having jurisdiction over the issues, the validity and enforceability of the remaining provisions of these bylaws (including without

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limitation this Article XV) shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.

        Section 13. Excess Shares.

        (a)  Ownership in Trust. Upon any purported Transfer, Non-Transfer Event or purported change in Beneficial Ownership that results in shares of Preferred Stock being designated Excess Shares pursuant to Section (3) of this Article XV, such Excess Shares shall be transferred to a Trust for the exclusive benefit of the Beneficiary. The Corporation shall name a Beneficiary that is an organization described in Section 501(c)(3) of the Code that is not an "individual" within the meaning of Section 542 of the Code, if one does not already exist, within five (5) days after the discovery of any Transfer to the Trust. Excess Shares shall remain issued and outstanding stock of the Corporation and shall be entitled to the same rights and privileges on identical terms and conditions as all other issued and outstanding shares of the same class and series. When transferred to a Permitted Transferee in accordance with the provisions of Section (13)(e) of this Article XV, such Excess Shares shall cease to be designated as Excess Shares.

        (b)  Dividend Rights. The Trustee, as record holder of the Excess Shares, shall be entitled to receive all dividends and distributions as may be declared by the Board of Directors of the Corporation on such shares of Preferred Stock designated Excess Shares and shall hold such dividends or distributions in trust for the benefit of the Beneficiary. The Prohibited Owner with respect to Excess Shares shall repay to the Trustee the amount of any dividends or distributions received by it that (i) are attributable to any shares of Preferred Stock designated Excess Shares and (ii) the record date of which is on or after the date that such shares became Excess Shares. The Corporation shall take all measures that it determines reasonably necessary to recover the amount of any such dividend or distribution paid to a Prohibited Owner, including, if necessary, withholding any portion of future dividends or distributions payable on shares of Preferred Stock Beneficially Owned by the Person who, but for the provisions of Section (3) of this Article XV, would Beneficially Own the Excess Shares, and as soon as reasonably practicable following the Corporation's receipt or withholding thereof, shall pay over to the Trustee for the benefit of the Beneficiary the dividends so received or withheld, as the case may be.

        (c)  Rights Upon Liquidation. Subject to the preferential rights of any class or series of Preferred Stock, if any, as may be determined by the Board of Directors pursuant to Article III of these bylaws, in the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Corporation, the Trustee of Excess Shares shall be entitled to receive, ratably with each other holder of Preferred Stock of the same class or series, that portion of the assets of the Corporation available for distribution to the holders of such class and series. The Trustee shall distribute to the Prohibited Owners the amounts received upon such liquidation, dissolution, or winding up, or distribution; provided, however, that no Prohibited Owner paid for Preferred Stock in any purported Transfer that resulted in the Excess Shares or, in the case of a Non-Transfer Event or a Transfer in which the Prohibited Owners did not give value for such shares (e.g., through a gift or devise), shall receive a distribution greater than a price per share equal to the Market Price on the date of any purported Transfer or Non-Transfer Event that resulted in the Excess Shares. Any remaining amount in the Trust shall be distributed ratably to the Beneficiary of the Trust.

        (d)  Voting Rights. The Trustee shall be entitled to vote all Excess Shares. Any vote by a Prohibited Owner as a holder of shares of Preferred Stock subsequent to the discovery of the Corporation that such shares of Preferred Stock are Excess Shares shall, subject to applicable law and only to the extent that no Person other than the applicable Prohibited Owner is materially and adversely affected, be rescinded and shall be void ab initio with respect to such Excess Shares and the applicable Prohibited Owner shall be deemed to have given, as of the close of business on the

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business day prior to the date of the purported Transfer or Non-Transfer Event that results in the transfer to the Trust of the shares of Preferred Stock under Section (3)(a) of this Article XV, an irrevocable proxy to the Trustee to vote the Excess Shares in the manner in which the Trustee, in its sole and absolute discretion, desires.

        (e)  Designation of Permitted Transferee. The Trustee shall have the exclusive and absolute right to designate one or more Permitted Transferees of any and all Excess Shares. As soon as reasonably practicable, in an orderly fashion so as not to materially adversely affect the Market Price of the Excess Shares, the Trustee shall designate any person as a Permitted Transferee; provided, however, that (i) any Permitted Transferee so designated purchases for valuable consideration (whether in a public or private sale) the Excess Shares and (ii) the acquisition of such Excess Shares by any Permitted Transferee so designated will not result in a transfer to a Trust and the redesignation of such shares of Preferred Stock so acquired as Excess Shares under Section (3) of this Article XV. Upon the designation by the Trustee of a Permitted Transferee in accordance with the provisions of this paragraph, the Trustee of the Trust shall (i) cause to be transferred to the Permitted Transferee that number of Excess Shares acquired by the Permitted Transferee, (ii) cause the Permitted Transferee to be recorded as the holder of record of such number of shares of Preferred Stock on the books of the Corporation; and (iii) distribute to the Beneficiary any and all amounts held with respect to the Excess Shares after making payment to the applicable Prohibited Owner pursuant to Section (13)(f) of this Article XV.

        (f)    Compensation to Record Holder of Shares that Become Excess Shares. Any Prohibited Owner shall be entitled (following discovery of the Excess Shares and the subsequent designation of a Permitted Transferee in accordance with Section (13)(e) of this Article XV) to receive from the Trustee the lesser of (i) in the case of (a) a purported Transfer in which the Prohibited Owner gave value for shares of Preferred Stock and which Transfer resulted in the transfer of the shares to the Trust, the price per share, if any, such Prohibited Owner paid for such shares, or in the case of (b) a Non-Transfer Event or Transfer in which the Prohibited Owner did not give value for such shares (e.g., if the shares were received through a gift or devise) and which Non-Transfer Event or Transfer, as the case may be, resulted in the transfer of shares to the Trust, the price per share equal to the Market Price on the date of such Non-Transfer Event or Transfer, and (ii) the price per share received by the Trustee of the Trust from the sale or other disposition of such Excess Shares in accordance with Section (13)(e) of this Article XV. Any amounts received by the Trustee in respect of the Excess Shares in excess of the amounts to be paid to the applicable Prohibited Owner pursuant to this Section (13)(f) of this Article XV shall be distributed to the Beneficiary in accordance with the provisions of Section (13)(e) of this Article XV. Each Beneficiary and Prohibited Owner waives any and all claims that they may have against the Trustee and the Corporation arising out of the disposition of Excess Shares, except for claims arising out of the gross negligence or willful misconduct of, or any failure to make payments in accordance with this Section (13) of this Article XV by, such Trustee or the Corporation.

        (g)  Purchase Right in Excess Shares. Excess Shares shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that created such Excess Shares (or, in the case of a devise or gift, the Market Price on the date of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of ninety days after the later of (i) the date of the Transfer which resulted in such Excess Shares and (ii) the date the Board of Directors determines in good faith that a Transfer resulting in Excess Shares has occurred.

        Section 14. Settlement. Notwithstanding any provision contained herein to the contrary, nothing in these bylaws shall preclude the settlement of any transaction with respect to any class or series of Preferred Stock entered into through facilities of the NYSE or the NASDAQ.

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ARTICLE XVI
OTHER RESTRICTIONS ON TRANSFER

        Section 1. No class of capital stock may be owned (either directly or indirectly) by 500 or more persons (as such term is defined in the Securities Exchange Act of 1934, as amended). If any purported Transfer (as defined in Article XV) or other event would result in any class of Preferred Stock being owned (either directly or indirectly) by 500 or more persons, then the purported transfer or other event shall be null and void ab initio, and the intended transferee shall acquire no right or interest in such shares of Preferred Stock.

        Section 2. Each certificate for Preferred stock shall bear the following legend (in addition to the legend required by Section 11 of Article XV):

        "NO PERSON MAY TRANSFER THIS SECURITY OR ANY PREFERRED SHARES IF SUCH TRANSFER WOULD RESULT IN THE NUMBER OF HOLDERS OF PREFERRED SHARES EQUALING OR EXCEEDING 500 PERSONS (AS DEFINED IN THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED). ANY ATTEMPTED TRANSFER IN VIOLATION OF SUCH RESTRICTIONS SHALL BE VOID AND OF NO FURTHER EFFECT AND SHALL BE SUBJECT TO THE FURTHER PROVISIONS OF THE CORPORATION'S BYLAWS. THESE RESTRICTIONS ARE SET FORTH IN FULL DETAIL IN THE CORPORATION'S BYLAWS, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS."

ARTICLE XVII
INDEMNIFICATION

        Section 1. The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or of any division of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful, as determined in accordance with Section 4 of this Article XVII.

        Section 2. The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or of any division of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for

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negligence or misconduct in the performance of his or her duty to the Corporation, unless, and only to the extent that, the court in which such action or suit was brought or in any other court having jurisdiction in the premises shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

        Section 3. To the extent that a director, officer, employee or agent of the Corporation or of any division of the Corporation, or a person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section (1) or Section (2) of this Article XVII, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith.

        Section 4. Any indemnification under Section (1) or Section (2) of this Article XVII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section (1) or Section (2). Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion to the Corporation or (iii) by a majority vote of the shareholders.

        Section 5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in a particular case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he or she is entitled to be indemnified by the Corporation as authorized in this Article XVII.

        Section 6. Any indemnification pursuant to this Article XVII shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled and shall continue as to the person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

        Section 7. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation or of any division of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article XVII. Any such insurance may be procured from any insurance company designated by the board of directors, including any insurance company in which the Corporation shall have any equity or other interest, through stock ownership or otherwise.

        Section 8. This Article XVII shall be effective with respect to any person who is a director, officer, employee or agent of the Corporation at any time on or after the date of incorporation of the Corporation with respect to any action, suit or proceeding pending on or after that date, by reason of the fact that he or she is or was, before or after that date, a director, officer, employee or agent of the Corporation or is or was serving, before or after that date, at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.

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Exhibit 4.13
CITY NATIONAL REAL ESTATE INVESTMENT CORPORATION * * * * * BYLAWS
ARTICLE I OFFICES
ARTICLE II ANNUAL MEETINGS OF SHAREHOLDERS
ARTICLE III SPECIAL MEETINGS OF SHAREHOLDERS
ARTICLE IV QUORUM AND VOTING OF STOCK
ARTICLE V DIRECTORS
ARTICLE VI MEETINGS OF THE BOARD OF DIRECTORS
ARTICLE VII EXECUTIVE COMMITTEE
ARTICLE VIII NOTICES
ARTICLE IX OFFICERS
ARTICLE X CERTIFICATES FOR SHARES
ARTICLE XI GENERAL PROVISIONS DIVIDENDS
ARTICLE XII AMENDMENTS
ARTICLE XIII DIRECTORS' ANNUAL REPORT
ARTICLE XIV CAPITAL STOCK
ARTICLE XV REIT RESTRICTIONS ON TRANSFER
ARTICLE XVI OTHER RESTRICTIONS ON TRANSFER
ARTICLE XVII INDEMNIFICATION

EX-4.14

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Exhibit 4.14

CERTIFICATE OF DETERMINATION
OF
SERIES A NON-CUMULATIVE PREFERRED SHARES
OF
CN REAL ESTATE INVESTMENT CORPORATION

        The undersigned, Frank Pekny and Heng Chen, hereby certify that:

        A.    They are the duly elected and acting President and Chief Financial Officer/Secretary, respectively, of CN Real Estate Investment Corporation, a California corporation (the "Corporation").

        B.    The authorized number of shares of Preferred Stock of the Corporation is 200,000, none of which have been issued. The authorized number of shares of Preferred Stock of the Corporation designated as Series A Non-Cumulative Preferred Shares is 180,000, none of which have been issued.

        C.    Pursuant to authority given by said Corporation's Articles of Incorporation, the Board of Directors of the Corporation (the "Board of Directors" or the "Board") duly has adopted the following recitals and resolutions:

WHEREAS, the Articles of Incorporation of the Corporation authorized a class of Preferred Stock comprising 200,000 shares issuable from time to time in one or more series; and

WHEREAS, the Board of Directors of the Corporation is authorized to fix or alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock including but not limited to the dividend rights, dividend rates, conversion rights, voting rights, and the liquidation preferences, and the number of shares constituting any such series and the designation thereof, or any of them; and

WHEREAS, the Corporation heretofore has not issued or designated any series of Preferred Stock, and it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to Series A Preferred Stock and the number of shares constituting such series;

NOW, THEREFORE, be it resolved, that the Board of Directors hereby does create a new series of Preferred Stock, no par value consisting of 180,000 shares and does hereby state the designation of such series of Preferred Stock and fix the rights, privileges, preferences, and restrictions and other matters relating to such series of Preferred Stock as follows:

        Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Non-Cumulative Preferred Shares" (the "Series A Preferred Shares") and the number of shares constituting Series A Preferred Shares shall be 180,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of shares designated as Series A Preferred Shares to a number less than the number of Series A Preferred Shares then outstanding plus the number of shares reserved for issuance upon the exercise of any outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Shares.

        Section 2. Dividends and Distributions.

        (a)  Subject to the rights of the holders of any shares of any other series of Preferred Stock (or any similar stock) ranking prior and superior to, or on a par with, the Series A Preferred Shares with respect to dividends, the holders of record of Series A Preferred Shares, in preference to the holders of any other class or series of stock of the Corporation (including shares of common stock, no par value ("Common Stock")), shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available to the extent such funds are available for the purpose, quarterly dividends payable in cash on or prior to the last day of April, July, October and January, as applicable, in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing

on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Shares, in an amount per share (rounded to the nearest cent) equal to $2.125 per share ($8.50 per annum).

        (b)  The Corporation shall declare a dividend or distribution on the Series A Preferred Shares as provided in paragraph (a) of this Section 2 immediately before it declares any dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock) provided, however, that dividends shall be non-cumulative. Accordingly, if the Corporation fails to declare a dividend on the Series A Preferred Shares for a quarterly dividend period, then the holders of the Series A Preferred Shares will have no right to receive a dividend on such shares for that quarter, and the Corporation will have no obligation to pay a dividend for that quarter, whether or not dividends are declared and paid for any future quarter with respect to either the Series A Preferred Shares or the Common Shares of the Corporation. The Board of Directors may fix a record date for the determination of holders of Series A Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

        Section 3. Voting Rights. The holders of Series A Preferred Shares shall have the following voting rights:

        (a)  Subject to the provision for adjustment hereinafter set forth, each Series A Preferred Share shall entitle the holder thereof to one (1) vote on all matters submitted to a vote of the stockholders of the Corporation.

        (b)  Except as otherwise provided herein, in the Articles of Incorporation, in any other Certificate of Determination creating a series of Preferred Shares or any similar stock or by law, the holders of Series A Preferred Shares and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

        (c)  Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Shares shall have no voting rights except as set forth in Section 903 of the California Corporations Code and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

        Section 4. Certain Restrictions.

        (a)  Whenever quarterly dividends or other dividends or distributions that have been declared on the Series A Preferred Shares remain outstanding and payable and until such unpaid dividends and distributions shall have been paid in full, the Corporation shall not, directly or indirectly:

        (i)    declare or pay dividends on, or make any other distributions with respect to, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares;

        (ii)  declare or pay dividends on, or make any other distributions with respect to any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Shares, except dividends paid ratably on the Series A Preferred Shares and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

        (iii)  redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation

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ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Shares; or

        (iv)  redeem or purchase or otherwise acquire for consideration any Series A Preferred Shares, or any shares of stock ranking on a parity with the Series A Preferred Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

        (b)  The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration, directly or indirectly, any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

        Section 5. Reacquired Shares. Any Series A Preferred Shares purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, in any other Certificate of Designation creating a series of Preferred Stock or any similar stock or as otherwise required by law.

        Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made to: (i) the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Shares unless, prior thereto, the holders of Series A Preferred Shares shall have received the sum of $100 per share (the "Liquidation Preference") plus any declared and unpaid dividends; or (ii) the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Shares, except distributions made ratably on the Series A Preferred Shares and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.

        Section 7. Consolidation, Merger or Other. In the event the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, or otherwise changed, then in any such event each share of Series A Preferred Shares shall at the same time be similarly exchanged or changed into an amount per share equal to $100.

        Section 8. Redemption.

        (a)  The Series A Preferred Shares may be redeemed by the Corporation any time after October 31, 2006 upon 30 days written notice, for a redemption price equal to $100 per share plus any declared and unpaid dividends. The notice of redemption for the Series A Preferred Shares shall set forth all the following: (1) the class or series of shares or part of any class or series of shares to be redeemed; (2) the date fixed or redemption; (3) the redemption price; and (4) the place in which the shareholders may obtain payment of the redemption price upon surrender of their share certificates.

        (b)  The Corporation will have the right at any time to redeem the Series A Preferred Shares at a redemption price equal to the Liquidation Preference plus any declared and unpaid dividends thereon after one of the following two events have occurred:

        (i)    The recipient by the Corporation of advice from a nationally recognized law or accounting firm that, as a result of (i) any amendment to, clarification of or change (including any announced prospective change) in the laws or treaties (or any regulation thereunder) of the United

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States or any political subdivision or taxing authority thereof or therein affecting taxation, (ii) any judicial decision, official administrative pronouncement, ruling, regulatory procedure, notice or announcement (including any official administrative notice or announcement of intent to adopt such procedures or regulations) ("Administrative Action") or (iii) any amendment to, clarification of or change in the official position or the interpretation of such Administrative Action or judicial decision or any judicial interpretation or pronouncement that provides for a position with respect to such Administrative Action or judicial decision that differs from the theretofore generally accepted position, in each case, by any legislative body, court, governmental authority or regulatory body, irrespective of the manner in which such amendment, clarification or change is made known, which amendment, clarification or change is effective or such pronouncement or decision is announced on or after the date of issuance of the Series A Preferred Shares, there is more than an insubstantial risk that (a) a dividend paid or to be paid by the Corporation with respect to the capital stock of the Corporation is not, or will not be, fully deductible for United States federal income tax purposes, or (b) the Corporation is, or will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges (a "Tax Event"); or

        (ii)  The receipt by City National Bank, a national banking association (the "Bank") or CN Real Estate Investment Holdings, Inc. (the "Parent Corporation") of an opinion of independent bank regulatory counsel experienced in such matters to the effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any rules, guidelines or policies of an applicable regulatory agency for the Bank, the Parent Corporation or any of their respective affiliates, or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Series A Preferred Shares, the Series A Preferred Shares does not constitute, or within 90 days of the date of such opinion will not constitute, Tier 1 Capital (as defined in Section 2(a)(2) of Appendix A of 12 C.F.R. 3) (or its then equivalent) for purposes of any capital adequacy guidelines as then in effect and applicable to the Bank, the Parent Corporation or any of their respective affiliates.

        Section 9. Automatic Exchange. Each Series A Preferred Share will be exchanged automatically (the "Automatic Exchange") for one newly issued preferred share of Bank stock (each a "Bank Preferred Share") if the Office of the Comptroller of the Currency (the "OCC") directs in writing (a "Directive") an exchange of Series A Preferred Shares for Bank Preferred Shares due to the occurrence of any of the following events (each an "Exchange Event"): (i) the Bank becomes "undercapitalized" under the OCC's then current prompt corrective action regulations, (ii) the Bank is placed into bankruptcy, reorganization, conservatorship or receivership, or (iii) the OCC, in its exercise of supervisory authority over the Bank, requires the Automatic Exchange of Series A Preferred Shares. Upon receipt by the Corporation of a Directive, each holder of Series A Preferred Shares shall be unconditionally obligated to surrender to the Bank the certificates representing such Series A Preferred Shares of such holder in exchange for a certificate representing one Bank Preferred Share for each share of Series A Preferred Shares. Any Series A Preferred Shares purchased or redeemed by the Corporation prior to the Time of Exchange (as defined below) shall not be deemed outstanding and shall not be subject to the Automatic Exchange.

        The Automatic Exchange shall occur as of 9:00 a.m., Los Angeles local time, on the date for such exchange set forth in the Directive, or, if such date is not set forth in the Directive, as of 9:00 a.m., Los Angeles local time, on the earliest possible date such exchange could occur consistent with the Directive (the "Time of Exchange"), as evidenced by the issuance by the Bank of a press release prior to such time. As of the Time of Exchange, all of the Series A Preferred Shares required to be exchanged shall be deemed canceled without any further action by the Corporation, all rights of the holders of such Series A Preferred Shares as stockholders of the Corporation shall cease, and such

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persons shall thereupon and thereafter be deemed to be and shall be for all purposes the holders of Bank Preferred Shares. The Corporation shall mail notice of the occurrence of an Exchange Event to each holder of the Series A Preferred Shares within 30 days of such event, and the Bank shall deliver to each such holder certificates for Bank Preferred Shares upon surrender of certificates for the Series A Preferred Shares required to be exchanged. Until such replacement stock certificates are delivered (or in the event such replacement certificates are not delivered, certificates previously representing the Series A Preferred Shares shall be deemed for all purposes to represent corresponding Bank Preferred Shares.

        Section 10. Rank. The Series A Preferred Shares shall rank, with respect to the payment of dividends and the distribution of assets, senior to shares of Common Stock and no less than pari passu with all series of Preferred Stock whether issued before or after the issuance of the Series A Preferred Shares.

        Section 11. Restricted Transfer. Each certificate representing Series A Preferred Shares shall contain the following legend:

        "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND NONE OF THIS SECURITY, THE SHARES OF PREFERRED STOCK EVIDENCED HEREBY ("PREFERRED SHARES"), OR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH A REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 4(2) OF THE SECURITIES ACT AND RULE 506 THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE CORPORATION THAT: (i) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (ii) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHO THE SELLER REASONABLY BELIEVES, AND WHO REPRESENTS ITSELF TO BE, AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 506, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (iii) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OR ANY PREFERRED SHARES OF THE RESALE RESTRICTIONS SET FORTH IN (ii) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (ii)(D) IS SUBJECT TO THE RIGHT OF THE CORPORATION TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION REASONABLY ACCEPTABLE TO IT IN FORM AND SUBSTANCE.

        THIS SECURITY (AND THE PREFERRED SHARES EVIDENCED HEREBY) ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER FOR THE PURPOSE OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST (A "REIT") UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). NO PERSON MAY (1) BENEFICIALLY OWN PREFERRED SHARES IN EXCESS OF THE APPLICABLE OWNERSHIP LIMIT, EXCEPT AS SET

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FORTH IN THE CORPORATION'S BYLAWS, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, OR (2) BENEFICIALLY OWN PREFERRED SHARES OF THE SECURITIES THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD" UNDER SECTION 856(H) OF THE CODE OR OTHERWISE TO FAIL TO QUALIFY AS A REIT. ANY PERSON (OTHER THAN CITY NATIONAL BANK AND ITS AFFILIATES) WHO ATTEMPTS TO BENEFICIALLY OWN PREFERRED SHARES IN EXCESS OF THE APPLICABLE LIMITATION MUST IMMEDIATELY NOTIFY THE CORPORATION IN WRITING. NO PERSON MAY TRANSFER THIS SECURITY OR ANY PREFERRED SHARES IF SUCH TRANSFER WOULD RESULT IN THE OUTSTANDING COMMON STOCK AND PREFERRED STOCK OF THE CORPORATION BEING BENEFICIALLY OWNED BY LESS THAN 100 PERSONS (DETERMINED WITHOUT REFERENCE TO ANY RULES OF ATTRIBUTION).

        NO PERSON MAY TRANSFER THIS SECURITY OR ANY PREFERRED SHARES WITHOUT FIRST HAVING OFFERED THIS SECURITY OR SUCH PREFERRED SHARES PROPOSED TO BE TRANSFERRED TO THE CORPORATION, WHEREUPON THE CORPORATION SHALL HAVE THE RIGHT TO ELECT TO PURCHASE, OR SHALL HAVE THE RIGHT, BUT NOT THE OBLIGATION, TO ELECT TO DESIGNATE A THIRD PARTY TO PURCHASE, THIS SECURITY OR ALL (BUT NOT LESS THAN ALL) OF THE PREFERRED SHARES PROPOSED TO BE TRANSFERRED. IF THE RESTRICTIONS ON TRANSFER ARE VIOLATED, ALL OR A PORTION OF THE PREFERRED SHARES REPRESENTED HEREBY WILL BE TRANSFERRED AUTOMATICALLY AND BY OPERATION OF LAW TO A TRUST AND SHALL BE DESIGNATED "EXCESS SHARES."

        IN ADDITION, NO PERSON MAY TRANSFER THIS SECURITY OR ANY PREFERRED SHARES IF SUCH TRANSFER WOULD RESULT IN THE NUMBER OF HOLDERS OF PREFERRED SHARES EQUALING OR EXCEEDING 500 PERSONS (AS DEFINED IN THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED). ANY ATTEMPTED TRANSFER IN VIOLATION OF SUCH RESTRICTIONS SHALL BE VOID AND OF NO FURTHER EFFECT AND SHALL BE SUBJECT TO THE FURTHER PROVISIONS OF THE CORPORATION'S BYLAWS.

        THESE RESTRICTIONS ARE SET FORTH IN FULL DETAIL IN THE CORPORATION'S BYLAWS, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS."

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        Section 12. Amendment. The Articles of Incorporation of the Corporation shall not be amended in any manner that would materially alter or change the powers, preferences or special rights of the Series A Preferred Shares without the affirmative vote of the holders of at least a majority of the outstanding Series A Preferred Shares, voting together as a single class.

RESOLVED FURTHER, that the President and the Chief Financial Officer/Secretary are hereby authorized and directed to execute, acknowledge, file and record a Certificate of Determination in accordance with the foregoing resolutions and provisions of California law.

        The undersigned under the laws of the State of California declare under penalty of perjury that the matters set forth in the foregoing Certificate of Determination are true and correct of their own knowledge.

        Executed at Beverly Hills, California on October 29, 2001.

/s/  FRANK PEKNY Frank Pekny, President

/s/  HENG CHEN Heng Chen, Chief Financial Officer/Secretary

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Exhibit 4.14
CERTIFICATE OF DETERMINATION OF SERIES A NON-CUMULATIVE PREFERRED SHARES OF CN REAL ESTATE INVESTMENT CORPORATION

EX-4.15

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Exhibit 4.15

MASTER PARTICIPATION AND SERVICING AGREEMENT

THIS MASTER PARTICIPATION AND SERVICING AGREEMENT (this "Agreement") is entered into as of June 1, 2001 by and among City National Bank, a national banking association ("CNB"), CN Real Estate Investment Holdings, Inc., a California corporation and wholly owned subsidiary of CNB ("Holdings"), and CN Real Estate Investment Corporation, a California corporation organized as a "real estate investment trust" under the Internal Revenue Code of 1986, as amended ("REIT").

Recitals

WHEREAS, CNB desires to transfer to Holdings and Holdings desires to acquire from CNB a participation interest in certain single (1-4) family mortgage loans, construction loans, commercial real estate loans, and other loans secured by real property as listed on Exhibit A attached hereto and incorporated herein, as amended from time to time (the "Affected Loans"), on the terms and subject to the conditions herein stated; and

WHEREAS, immediately after its receipt from CNB of the above-described participation interest in the Affected Loans, Holdings desires to transfer to REIT and REIT desires to acquire from Holdings such participation interest, and CNB desires to grant Holdings a novation of all its obligations with respect to such participation interest; and

WHEREAS, from time to time after the date hereof, CNB may sell to REIT and REIT may purchase from CNB a participation interest in additional loans, which shall also constitute Affected Loans for purposes of the Agreement, and Exhibit B will be added to and amended to reflect such additions; and

WHEREAS, certain of the Affected Loans are lines of credit or revolving credit transactions under which CNB has agreed that it will, from time to time, make loan advances and extend credit to the borrower under the terms of governing loan agreements; and

WHEREAS, as used herein, the term "Security" shall mean any and all collateral and security interests in the assets or other property of any borrower(s) under an Affected Loan or of any guarantor thereof or other person liable with respect thereto, whether such assets or other property constitute real or personal, tangible or intangible assets or other property, and all rights and interests under guaranties and assignments, granted to, received by or assigned to CNB to secure the obligations of the borrower(s) and/or any guarantors thereof or other persons liable with respect to the Affected Loans (collectively, "Obligors"), including, but not limited to, loan agreements, security agreements, guaranty agreements, deeds of trust and other instruments of pledge, mortgage or hypothecation (collectively, the "Affected Loan Documents").

NOW, THEREFORE, incorporating the Recitals set forth above, and in consideration of the promises, mutual covenants and undertakings of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

ARTICLE I
PARTICIPATION IN AFFECTED LOANS

        1.1  Conveyances of Participation Interests in Affected Loans.

        (a)  CNB hereby conveys to Holdings, and Holdings hereby acquires from CNB, on a non-recourse basis, a 100% participation interest in each Affected Loan as to the loan amounts from time to time outstanding under such Affected Loan pursuant to the Affected Loan

Documents with respect thereto and all servicing rights with respect to each Affected Loan (the "Initial Participation Interest"). Immediately after the conveyance described in the immediately preceding sentence, Holdings hereby conveys to REIT, and REIT hereby acquires from Holdings, on a non-recourse basis, the same Initial Participation Interest as was initially conveyed by CNB to Holdings. Upon the conveyance pursuant to the immediately preceding sentence, CNB hereby grants to Holdings a complete novation of all obligations in respect of the Initial Participation Interest.

        Initially Holdings and, after Holdings' conveyance of the Initial Participation Interest to REIT, then REIT shall hereinafter be referred to sometimes as "Participant." After the date hereof, CNB may from time to time sell to Participant and Participant shall purchase from CNB, on a non-recourse basis, a Participation Interest in additional Affected Loans (the "Additional Participation Interest" and, together with the Initial Participation Interest, the "Participation Interest"), and Exhibit B shall be and added to and amended from time to time to denote such purchases and any other changes to the Affected Loans since the time it was last amended. The respective participation interests of Participant and CNB in each Affected Loan are herein called the "Proportionate Shares." Affected Loans in which Participant's Proportionate Share is 100% are herein called "Wholly Owned Loans."

        (b)  The Initial Participation Interest shall be as set forth on Exhibit A hereto.

        (c)  Holdings acknowledges that the conveyance by CNB to Holdings of the Initial Participation Interest is intended to qualify as a tax-free transaction under Section 351 of the Internal Revenue Code of 1986, as amended (the "Code"). REIT acknowledges that the conveyance by Holdings to REIT of the Initial Participation Interest is intended to qualify as a tax-free transaction under Section 351 of the Code.

        (d)  The Participation Interest will confer upon Participant all of CNB's rights against the respective Obligors for repayment of principal and interest and other amounts due and payable in respect of the Affected Loans, and of the Security therefor, and of all rights and benefits under the Affected Loan Documents. Such Participation Interest shall also impose upon Participant all duties and obligations of CNB under the Affected Loan Documents including, without limitation, CNB's obligation to make loan advances and extend credit pursuant thereto.

        1.2  Affected Loan Documents. CNB is and shall, subject to Section 1.4 hereof, remain the named lender and secured party and/or beneficiary under all Affected Loan Documents. CNB shall hold such title and rights, however, as trustee for Participant. Subject to Section 1.4 hereof, CNB will retain custody of all original Affected Loan Documents but, promptly upon Participant's request, shall provide Participant with copies of any and all signed Affected Loan Documents.

        1.3  Sharing of Risks. Participant agrees to bear the risks of the collectibility of the Affected Loans, of each Obligor's financial condition, of any fraud or forgery of any Obligor, of the unenforceability of any of the Affected Loan Documents, of usury or claims of usury, in each case whether valid or invalid, and of the adequacy of the Security for the Affected Loans; and Participant shall bear any losses and expenses sustained or incurred in connection with any Affected Loan.

        1.4  Participant's Right to Acquire Legal Title to Affected Loans. As to any Affected Loan, CNB will, promptly upon Participant's request, subject to any required consent from the applicable Borrowers (as defined below), assign to Participant all of the applicable Affected Loan Documents and otherwise take such actions as are necessary to cause legal title to such Affected Loan to be transferred to Participant. Participant shall pay any out-of-pocket costs in connection with such a transfer to Participant.

        1.5  Sale of Interest in Affected Loans.

        (a)  CNB agrees to sell and REIT agrees to acquire additional loans in the future by mutual agreement. The respective participating interests of REIT and CNB in the Affected Loans are herein called the "Participation Interest." Each party's Proportionate Share in the Affected Loans,

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including the Affected Loan Documents, the Security for each Affected Loan, casualty and title insurance proceeds and condemnation awards (if any), shall be pari passu and coordinated without priority of one over the other.

        (b)  The sale price of each Affected Loans shall be equal to its par value.

        (c)  Each of the Affected Loans shall be identified as listed on Exhibit "B," attached hereto, which shall be amended monthly.

        (d)  REIT's participation in the Affected Loans will confer upon REIT its Proportionate Share of CNB's rights against the respective borrowers (and any guarantors) for repayment of principal and interest, and its Proportionate Share of the Security therefor, and its Proportionate Share of all rights and benefits under the Affected Loan Documents. Such Proportionate Share shall also impose upon REIT its share of all duties and obligations assumed by CNB under the Affected Loan Documents including, without limitation, CNB's obligation to make loan advances and extend credit pursuant thereto.

ARTICLE II
FUNDING OF AFFECTED LOANS

        2.1  Funding. Participant shall control and make all disbursements of loan advances pursuant to the Affected Loan Documents and payments to third persons to protect any Security (such as, by way of example, payment of taxes, assessments, or casualty and hazard insurance premiums). Participant shall promptly notify CNB of any circumstance which may, in the judgment of Participant, necessitate a payment to protect any Security.

        2.2  Reports. CNB shall deliver to Participant, at such intervals as are mutually agreeable (but in any event not less frequently than once each month) statements reflecting the status of each Affected Loan, any advances made by Participant to each borrower under each Affected Loan (a "Borrower") and any repayments thereof.

ARTICLE III
ADMINISTRATION OF AFFECTED LOANS

        Subject always to the limitations of CNB's liability set forth in Section 4.2(c) hereof:

        3.1  Administration. CNB shall be the administrator of the Affected Loans.

        3.2  Records. CNB shall at all times keep and maintain proper books of account and records reflecting all transactions in connection with the Affected Loans, the Security and any advances made under the Affected Loan Documents or to protect any Security. Such books and records shall be accessible for inspection and copying by Participant at all reasonable times during business hours, subject always to applicable federal banking regulations.

        3.3  Expenses. CNB shall bear the normal expenses of administering the Affected Loans, including but not limited to its general overhead expenses and inspection and appraisal fees, to the extent the same are not reimbursed by a Borrower or other Obligor.

        3.4  Treatment of Affected Loans. CNB, as the named lender and servicer of the loans, shall take such actions with respect to Affected Loans and any Security therefor as is necessary, subject to the discretion of the Participant, to allow Participant to service such loans as provided in this Agreement.

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ARTICLE IV
ENFORCEMENT OF AFFECTED LOANS

        4.1  Notice. Each of CNB and Participant shall promptly notify the other if it learns of any of the following:

        (a)  The failure of any Obligor to timely perform any material obligation of such Obligor under any Affected Loan Document;

        (b)  Any state of facts which constitutes or, if not cured within 30 days, would constitute a material default or an "Event of Default" under an Affected Loan Document;

        (c)  The filing of any petition by or against any Obligor under any federal or state law pertaining to bankruptcy or insolvency, or the appointment of a receiver or trustee for any Obligor, for a substantial part of such Obligor's assets or for any Security for such Affected Loan, or the making by such Obligor of an assignment for the benefit of creditors, or such Obligor's admission in writing of his, hers or its inability to pay his, her or its debts generally as they become due, if not cured within 30 days; or

        (d)  The assertion by any Obligor of any substantial claim that any Affected Loan Documents applicable to such Obligor are not valid and enforceable in accordance with their terms, if not withdrawn within 30 days.

        4.2  Enforcement.

        (a)  Should CNB acquire title to any Security, either through foreclosure, sale or acceptance of deed or bill of sale in lieu of foreclosure, CNB shall, despite CNB's record ownership of such Security, actually hold an undivided interest in trust for the benefit Participant at the time of such foreclosure or other action or transaction. The disposition of any such Security acquired by CNB shall be made in such manner as Participant shall, in its sole discretion, determine; but CNB shall exert reasonable efforts, in accordance with the standards it applies to loans of similar size and character solely for its own account, to effect the maximum benefit of Participant.

        (b)  CNB, subject always to the determination of the Participant, shall be entitled to exercise its discretion to determine when and in what manner an Affected Loan shall be enforced, including, without limitation, the right to determine, following a Borrower's default, whether any further loan advances are to be made to such Borrower. The parties hereto agree that, notwithstanding any provision herein to the contrary, CNB shall not be liable to Participant for any action taken or omitted in connection with the administration, enforcement or collection of an Affected Loan, except for such as is taken or omitted as the result of CNB's willful misconduct or bad faith.

        (c)  Participant hereby agrees to indemnify and hold harmless CNB from and against all losses, liabilities, costs, damages and expenses which CNB may incur or sustain as the result of taking any action to enforce any Affected Loan Documents.

ARTICLE V
REPRESENTATIONS AND WARRANTIES

        5.1  Mutual Representations and Warranties. Each party hereby represents and warrants to the other that it has all requisite corporate power and authority to enter into, and perform its obligations under, this Agreement.

        5.2  CNB Representations and Warranties. CNB further represents and warrants to Participant that:

        (a)  CNB has in its possession the original note and, as applicable, the security agreement and all other Affected Loan Documents (except for any of them which are currently in the process of

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being recorded) which, as of the date hereof (or thereof), have been executed and/or delivered in connection with each Affected Loan. The copies of Affected Loan Documents that CNB has provided or made available to Participant for review are substantially identical to those executed and delivered by each Obligor in connection with each Affected Loan.

        (b)  Prior to consummation of the transactions contemplated by Section 1.1 hereof, except as disclosed to Participant, CNB owned a 100% interest in each Affected Loan, and (except as may have been otherwise disclosed to Participant) has not heretofore sold, transferred or otherwise disposed of any portion of its interest in any Affected Loan.

        (c)  CNB may, on the date of this Agreement, have other outstanding loans with or extensions of credit to a Borrower or other Obligor or may make loans or extend additional credit in the future to such Borrower or other Obligor without giving notice to, without any obligation to participate such loans to and without the consent of, Participant.

        (d)  CNB (i) shall not be responsible for the performance or observance of any of the terms, covenants or conditions of any of the Affected Loan Documents on the part of the Borrower or any other Obligor and (ii) makes no warranty or representation concerning (and shall not be responsible to Participant for): (A) the due execution, legality, validity, enforceability, genuineness, sufficiency, value or collectibility of any of the Affected Loan Documents, any of the Security or any document relative thereto; (B) the financial condition of Borrower or any other Obligor; or (C) the merit or viability of the project that Borrower plans to develop in accordance with the terms and conditions of the Affected Loan Documents.

ARTICLE VI
RECOVERY AFTER DEFAULT

        6.1  Offsets. Etc. If, following a default or an Event of Default (as defined in each Affected Loan Document), or following demand by Participant for payment of amounts due under a promissory note evidencing an Affected Loan, CNB at any time receives payment of all or any part of the principal, interest, fees or expenses due with respect to an Affected Loan, whether by set-off or otherwise, CNB shall promptly pay to Participant such portion of the payment as necessary to ensure that Participant shall have received the total amount of principal, interest, fees and expenses owed by the Borrower as existed prior to such action. The costs and expenses incurred by either party hereto in connection with any such legal proceeding shall be borne fully by Participant.

ARTICLE VII
SERVICING AGREEMENT

        7.1  Servicing. Participant hereby appoints CNB, and CNB accepts such appointment to act as servicer and administrator (as appointed under Section 3.10 hereof) of the Affected Loans (the "Servicing Agreement"). As compensation for such services, Participant shall pay to CNB the fees set forth in Section 7.2. hereof CNB shall service and administer the Affected Loans in accordance with the standards it applies from time to time to loans of similar size and character solely for its own account. CNB may subcontract the Servicing Agreement to a third party, provided that such third party meets the standards CNB would apply when selecting a servicer of loans of similar size and character solely for its own account.

        7.2  Servicing Fee. Participant shall pay to CNB, for servicing the Affected Loans, a servicing fee (the "Servicing Fee") which shall be equal to the amount set forth on Exhibit C attached hereto and hereby incorporated into this Agreement. The Servicing Fee shall be payable monthly in arrears on the tenth day of each month (or on such other date as the parties may mutually agree) and may, but is not required to, be deducted by CNB from any payments to which Participant is otherwise entitled from CNB pursuant hereto. The Servicing Fee does not, however, compensate CNB for any services which

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CNB may be required to render outside the normal course of administering the Affected Loans, or as the result of a Borrower's default under any such loan ("CNB Extraordinary Services"). For any such CNB Extraordinary Services, Participant shall pay to CNB such additional reasonable servicing fee or fees as may be appropriate, depending upon the nature and extent of the CNB Extraordinary Services rendered or contemplated to be rendered by CNB.

ARTICLE VIII
MISCELLANEOUS

        8.1  Notices. All notices hereunder may, and (except as otherwise provided herein) if requested by either Participant or CNB shall, be in writing; provided however, that routine informational communications, requests to adjust participations, and similar matters may be made orally. All written notices shall be deemed to be sufficiently given when personally delivered to the party receiving the notice or mailed to such party by certified or registered mail, return receipt requested, postage prepaid, or sent by overnight courier service to the address set forth below:

TO CNB:	City National Bank 400 North Roxbury Drive Beverly Hills, California 90210 Attention: Vice Chairman and Chief Financial Officer
TO HOLDINGS:	CN Real Estate Investment Holdings, Inc. 606 South Olive Street, Sixth Floor Los Angeles, California 90014 Attention: Chief Financial Officer
TO THE REIT:	CN Real Estate Investment Corporation 606 South Olive Street, Sixth Floor Los Angeles, California 90014 Attention: Chief Financial Officer

        Any party hereto may change its address for notice, and designate or change the location and manner in which payments to such party shall he made, by a notice in writing to the other parties, given as above provided. Notices which are mailed or sent by overnight courier service shall be effective only upon receipt.

        8.2  Entire Agreement. This Agreement represents the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all other prior arrangements, representations and covenants with respect thereto, whether oral or written.

        8.3  Headings. Section headings herein are for the purposes of convenience only and should not be used in construing the provisions hereof.

        8.4  Modifications. Participant and CNB may at any time hereafter modify this Agreement by-further agreement in writing signed by them.

        8.5  Covenant of Further Assurances. The parties hereto shall execute such other documents and perform such other acts as may be necessary or desirable to carry out the purposes of this Agreement.

        8.6  Successors and Assigns: Applicable Law.

        (a)  Except as to Participant's right to acquire legal title to Affected Loans, as provided in Section 1.4 hereof, Participant may not assign any of its interest in the Affected Loans, or participate any portion or portions of its interest in such loans, without the prior written consent of CNB, which consent shall not be unreasonably withheld. Participant shall not delegate its obligations with regard to the administration of the Affected Loans without the prior written

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consent of CNB, which consent shall not be unreasonably withheld, except that nothing herein shall be deemed to prohibit Participant from engaging a CNB or a third party as the servicer of the Affected Loans.

        (b)  This Agreement shall be governed and construed according to the laws of the State of California (without regard to its conflict of laws rules), and shall be binding upon and inure to the benefit of Participant and CNB and their respective successors and permitted assigns; and the representations and warranties of each party herein contained shall survive the execution of this Agreement and all advances of funds hereunder. As used herein, the singular includes the plural, the plural includes the singular, and the use of any gender shall be applicable to all genders, as the context may require.

        8.7  Not a Security. Participant agrees that its Participation Interest does not, and will not be claimed by it to, constitute the purchase by it from, or the sale to it by, CNB or any other person of a "security" within the meaning of the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended, or any other similar securities act (state or federal), or regulations issued thereunder; and that under no circumstances whatsoever shall CNB be deemed to be an underwriter or seller of a security; and Participant irrevocably waives any right to claim that its participation in any Affected Loan constitutes the purchase of a security or that CNB or any other person is the seller or underwriter of a security.

        8.8  Intent of Parties. It is the intent and purpose of the parties hereto that this Agreement represents a present conveyance by CNB to Holdings and, thereafter, a present conveyance by Holdings to REIT of an undivided 100% ownership interest in each Affected Loan, all Affected Loan Documents delivered in connection therewith, and the rights, benefits and obligations arising therefrom; and this Agreement shall not be deemed to represent a mere pledge of an interest in any Affected Loan by CNB to Participant or a loan from Participant to CNB.

        8.9  Unenforceability. If any provision hereof is invalid or unenforceable, the remaining provisions shall not be affected by such invalidity or unenforceability. Each provision hereof shall, however, be valid and be enforced to the maximum extent permitted by applicable law.

        8.10 Termination. This Agreement shall have an initial term commencing on the date hereof and ending on December 31, 2003 ("Renewal Date"), and shall automatically continue from year to year after the Renewal Date without the necessity of further action by either party unless sooner terminated as provided hereinafter. Either party may terminate this Agreement on the Renewal Date or on any one year anniversary of the Renewal Date by giving the other party not less than ninety (90) days' prior written notice of such termination; provided, however, that any such termination shall be effective only as to future loan advances, or other extensions of credit, and receipt of Security. All collections on transactions entered into prior to the date that termination is effective shall be accounted for as if the Affected Loan were in liquidation; provided, however, that CNB may enter into subsequent transactions with any Obligor and account separately therefor. If Participant shall give notice of termination, Participant shall have no interest in any Security received or otherwise coming into existence subsequent to the effective date of termination. Notwithstanding the foregoing, Participant may not, under any circumstance, terminate its participation in any Affected Loans as to which, on the date of giving notice of termination or on the effective date of termination, the Borrower is in default or any of the applicable Affected Loan Documents.

        8.11 Termination of Servicing. The Servicing Agreement may be terminated by either CNB or Participant upon providing the other with least 60 days' advance written notice. Notice of termination may be given at any time. Such termination shall be effective as of the last day of the first (1st)

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calendar month following the calendar month in which notice is given. The termination of servicing will be effective as follows:

        (a)  If CNB terminates the servicing portion of this Agreement, Participant will not pay CNB a termination fee;

        (b)  If Participant terminates the servicing portion of this Agreement without cause and with the intention of transferring the servicing to a third party, Participant will be entitled to the proceeds of the sale of such servicing rights and will bear the cost and expenses related to the sale and transfer of such servicing rights. In such event, Participant will not pay CNB a termination fee; and

        (c)  If Participant terminates the Servicing Agreement for cause, including, without limitation, a breach by CNB of any of its representations and warranties as provided in Article V hereof, such termination will be effective fifteen days after giving of notice unless such breach is cured within fifteen days, and no termination fee will be paid by Participant to CNB. Upon such termination, Participant will automatically resume all its rights in and responsibilities for servicing the Affected Loans. Participant will also have the right to designate any person to exercise those powers. The Affected Loan Documents will be delivered to Participant or a party that it designates. CNB will also promptly deliver to Participant any necessary assignment, transfers and documents of authority.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

City National Bank, a national banking association
By:	/s/  FRANK P. PEKNY Its: Vice Chairman and CFO
CN Real Estate Investment Holdings, Inc., a California corporation
By:	/s/  HENG W. CHEN Its: CFO/Secretary
CN Real Estate Investment Corporation, a California corporation
By:	/s/  HENG W. CHEN Its: CFO/Secretary

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Exhibit A
[Initial Participation Interest]

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Exhibit B
[Additional Participation Interest]

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Exhibit C

.01% of principal balance at the beginning of the servicing month.

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Exhibit 4.15
MASTER PARTICIPATION AND SERVICING AGREEMENT
AGREEMENT
ARTICLE II FUNDING OF AFFECTED LOANS
ARTICLE III ADMINISTRATION OF AFFECTED LOANS
ARTICLE IV ENFORCEMENT OF AFFECTED LOANS
ARTICLE V REPRESENTATIONS AND WARRANTIES
ARTICLE VI RECOVERY AFTER DEFAULT
ARTICLE VII SERVICING AGREEMENT
ARTICLE VIII MISCELLANEOUS
Exhibit A [Initial Participation Interest]
Exhibit B [Additional Participation Interest]
Exhibit C

EX-21

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Exhibit 21

Parent and subsidiaries

City National Corporation
        City National Financial Services, Inc. (99.5%)
        CN Acquisition Corporation
                Reed, Conner & Birdwell, LLC (99.0%)
        City National Bank
                BSC Mortgage Corporation (Inactive)
                City National Mortgage Company
                City National Properties, Inc.
                City National Securities, Inc.
                CN Loan Fund, Inc.
                CN Special Holdings, LLC
                PB Capital Management & Insurance Services (Inactive)
                Sterling Capital Placement (Inactive)
                City National Asset Management, Inc.
                City National International Insurance Holdings, Inc.
                        City National Insurance Company, Ltd.
                Citinational Real Estate, Inc.
                        Citinational Bancorporation
                TPB Holdings, Inc.
                        Roxbury Insurance Corporation.
                CN Real Estate Investment Holdings, Inc.
                        CN Real Estate Investment, Inc.

City National Corporation is a corporation organized under the laws of the State of Delaware. City National Financial Services, Inc. is a corporation organized under the laws of the State of California and is 99.5% owned by City National Corporation with the remaining 0.5% owned by City National Bank. CN Acquisition Corporation, a California corporation is 100% owned by City National Corporation. CN Acquisition Corporation owns 99.0% of Reed, Conner and Birdwell, LLC, a limited liability corporation organized under the laws of the State of Delaware. City National Bank is a national banking association organized under the laws of the United States of America. Each of the other above-named subsidiaries is a corporation organized under the laws of the State of California unless otherwise noted. Registrant owns 100% of the outstanding capital stock of City National Bank ("Bank"). The Bank owns 100% of the outstanding common stock of BSC Mortgage Corporation, City National Mortgage Company, City National Properties, Inc., City National Securities, Inc., CN Loan Fund, Inc., a Maryland corporation, CN Special Holdings, LLC, PB Capital Management & Insurance Services Corporation, Sterling Capital Placement Corporation, City National Asset Management, Inc., CN Real Estate Investment Holdings, Inc., City National International Insurance Holdings, Inc., Citinational Real Estate, Inc. and TPB Holdings, Inc. City National International Insurance Holdings, Inc. owns 100% of City National Insurance Company, Ltd., a British Virgin Island corporation, Citinational Real Estate, Inc. owns 100% of Citinational Bancorporation and TPB Holdings, Inc. owns 100% of Roxbury Insurance Corporation, a corporation organized under the laws of the state of Hawaii. CN Real Estate Investment Holdings, Inc. owns 100% of CN Real Estate Investment, Inc.

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Exhibit 21

EX-23.1

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Exhibit 23.1

Independent Auditors' Consent

The Board of Directors
City National Corporation:

We consent to incorporation by reference in the registration statements (Nos. 33-32543, 33-11030, 33-38029, 33-60668, 333-01993, 333-87719 and 333-61854) on Form S-8 and (No. 333-53624) on Form S-3 of City National Corporation of our report dated January 16, 2002 relating to the consolidated balance sheet of City National Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income and comprehensive income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2001, which report appears in the December 31, 2001 Annual Report on Form 10-K of City National Corporation.

Our report refers to a change in accounting for derivative instruments and hedging activities in 2001.

/s/ KPMG LLP

Los Angeles, California
March 21, 2002

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Independent Auditors' Consent