10-Q

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

FORM 10-Q

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

For the quarterly period ended June 30, 2002

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
(State or other jurisdiction of
incorporation or organization) 95-2568550
(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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ý                NO____

Number of shares of common stock outstanding at July 31, 2002: 50,017,575

PART 1—FINANCIAL INFORMATON

ITEM 1. FINANCIAL STATEMENTS

CITY NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)

Dollars in thousands, except per share amounts			June 30, 2002		December 31, 2001		June 30, 2001
Assets
	Cash and due from banks		$	442,343	$	328,018	$	441,665
	Federal funds sold			165,000		395,000		10,000
	Securities available-for-sale: cost $1,886,817; $1,810,890 and $1,672,423 at June 30, 2002, December 31, 2001 and June 30, 2001, respectively			1,919,985		1,814,839		1,667,037
	Trading account securities			68,832		78,266		14,196
	Loans			7,854,530		7,159,206		6,567,370
	Less allowance for credit losses			157,647		142,862		133,883
		Net loans		7,696,883		7,016,344		6,433,487
	Premises and equipment, net			60,016		66,414		64,508
	Customers' acceptance liability			11,396		7,924		7,348
	Deferred tax asset			39,186		36,230		52,571
	Goodwill			230,161		158,769		165,202
	Core deposit intangibles			30,959		18,530		21,341
	Bank owned life insurance			60,505		55,734		54,275
	Affordable housing investments			55,761		60,185		55,644
	Other assets			201,393		140,063		136,319
		Total assets	$	10,982,420	$	10,176,316	$	9,123,593
Liabilities
	Demand deposits		$	3,973,435	$	3,846,789	$	3,134,792
	Interest checking deposits			610,217		576,651		522,480
	Money market deposits			2,472,224		1,893,383		1,576,758
	Savings deposits			222,241		240,376		242,219
	Time deposits—under $100,000			226,116		229,643		245,724
	Time deposits—$100,000 and over			1,292,934		1,344,360		1,358,661
		Total deposits		8,797,167		8,131,202		7,080,634
	Federal funds purchased and securities sold under repurchase agreements			110,665		171,531		261,849
	Other short-term borrowings			421,125		415,858		653,125
	Subordinated debt			282,043		272,236		118,939
	Long-term debt			169,144		193,938		94,255
	Other liabilities			117,542		93,050		91,603
	Acceptances outstanding			11,396		7,924		7,348
		Total liabilities		9,909,082		9,285,739		8,307,753
Commitments and contingencies
Shareholders' Equity
	Preferred Stock authorized—5,000,000: none outstanding			—		—		—
	Common Stock—par value-$1.00; authorized—75,000,000;
		Issued—50,122,921; 48,149,998; and 47,888,923 shares at June 30, 2002, December 31, 2001 and June 30, 2001, respectively		50,123		48,150		47,889
	Additional paid-in capital			396,058		301,022		293,412
	Accumulated other comprehensive income			25,673		10,674		2,256
	Retained earnings			601,484		530,731		472,283
		Total shareholders' equity		1,073,338		890,577		815,840
		Total liabilities and shareholders' equity	$	10,982,420	$	10,176,316	$	9,123,593

See accompanying Notes to the Unaudited Consolidated Financial Statements.

2

CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

			For the three months ended June 30,					For the six months ended June 30,
In thousands, except per share amounts
			2002		2001			2002			2001
Interest Income
	Loans		$	126,704	$	129,266		$	247,322		$	268,110
	Securities available-for-sale			27,923		25,742			54,951			49,758
	Federal funds sold and securities purchased under resale agreements			704		868			1,211			1,471
	Trading account			180		614			385			1,343
		Total interest income		155,511		156,490			303,869			320,682
Interest Expense
	Deposits			18,168		36,672			37,111			78,574
	Other short-term borrowings			3,152		8,415			6,756			16,040
	Subordinated debt			1,732		1,633			3,927			3,392
	Other long-term debt			1,080		1,666			2,221			4,419
	Federal funds purchased and securities sold under repurchase agreements			805		3,055			1,585			8,291
		Total interest expense		24,937		51,441			51,600			110,716
	Net interest income			130,574		105,049			252,269			209,966
	Provision for credit losses			18,000		6,500			29,000			14,000
	Net interest income after provision for credit losses			112,574		98,549			223,269			195,966
Noninterest Income
	Trust fees and investment fee revenue			15,736		14,779			30,010			28,452
	Cash management and deposit transaction charges			10,025		7,583			20,394			14,131
	International services			4,719		3,840			8,510			7,399
	Bank owned life insurance			719		697			1,392			1,421
	Gain on sale of loans and assets/debt repurchase			1,320		891			2,999			1,648
	Gain on sale of securities			184		539			872			1,516
	Other			6,035		4,565			10,504			9,588
		Total noninterest income		38,738		32,894			74,681			64,155
Noninterest Expense
	Salaries and employee benefits			49,642		42,711			97,112			85,485
	Net occupancy of premises			6,495		6,628			12,675			12,972
	Professional			5,182		6,358			10,411			12,122
	Information services			4,661		4,088			9,021			7,917
	Depreciation			3,336		3,413			6,728			6,750
	Amortization of goodwill			—		3,220			—			6,427
	Marketing and advertising			3,311		3,316			6,099			5,897
	Office services			2,731		2,424			4,829			4,634
	Amortization of core deposit intangibles			2,056		1,405			3,571			2,809
	Acquistion integration			—		—			1,300			—
	Equipment			789		603			1,271			1,099
	Other operating			4,756		4,846			8,715			9,504
		Total noninterest expense		82,959		79,012			161,732			155,616
	Income before income taxes			68,353		52,431			136,218			104,505
	Income taxes			22,593		16,087			46,222			34,570
	Net income			45,760		36,344			89,996			69,935
	Other comprehensive income
		Unrealized gain (loss) on securities available-for-sale		38,496		(6,103	)		28,244			13,932
		Initial gain on cash flow hedges from implementation of FAS 133		—		—			—			2,404
		Additional unrealized gain (loss) on cash flow hedges		1,342		3,043			(1,935	)		8,325
		Less reclassification adjustment for gain included in net income		232		2,097			425			944
		Income taxes (benefit)		16,652		(2,084	)		10,885			9,968
	Other comprehensive gain (loss)			22,954		(3,073	)		14,999			13,749
	Comprehensive income		$	68,714	$	33,271		$	104,995		$	83,684
	Net income per share, basic		$	0.92	$	0.76		$	1.82		$	1.47
	Net income per share, diluted		$	0.88	$	0.74		$	1.75		$	1.43
	Shares used to compute income per share, basic			49,963		47,768			49,327			47,726
	Shares used to compute income per share, diluted			52,083		49,219			51,443			49,027
	Dividends per share		$	0.195	$	0.185		$	0.390		$	0.370

See accompanying Notes to the Unaudited Consolidated Financial Statements.

3

CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

			For the six months ended June 30,
Dollars in thousands
			2002			2001
Cash Flows From Operating Activities
Net income			$	89,996		$	69,935
Adjustments to net income:
	Provision for credit losses			29,000			14,000
	Amortization of core deposit intangibles			3,571			2,809
	Amortization of goodwill			—			6,427
	Depreciation			6,728			6,750
	Deferred income tax (benefit)			(7,929	)		7,342
	Gain on sales of loans and assets/debt repurchase			(2,999	)		(1,648	)
	Gain on sale of securities			(872	)		(1,516	)
	Net increase in other assets			(24,889	)		(61,270	)
	Net decrease in trading securities			9,434			31,882
	Other, net			(893	)		5,618
		Net cash provided by operating activities		101,147			80,329
Cash Flows From Investing Activities
Purchase of securities				(450,710	)		(758,781	)
Sales of securities available-for-sale				88,529			231,491
Maturities of securities				318,116			424,776
Purchase of residential mortgage loans				—			(3,813	)
Sales of loans				—			53,701
Loan originations net of principal collections				(353,518	)		(112,873	)
Purchase of premises and equipment				(2,455	)		(10,160	)
Net cash from acquisitions				35,633			—
Other, net				3			2
		Net cash used by investing activities		(364,402	)		(175,657	)
Cash Flows From Financing Activities
Net increase (decrease) in deposits				227,502			(328,036	)
Net (decrease) increase in federal funds purchased and securities sold under repurchase agreements				(60,866	)		122,008
Net increase (decrease) in short-term borrowings, net of transfers from long-term debt				(19,000	)		223,000
Repurchase of subordinated debt				—			(8,467	)
Proceeds from exercise of stock options				19,187			7,429
Stock repurchases				—			(3,079	)
Cash dividends paid				(19,243	)		(17,676	)
		Net cash provided (used) by financing activities		147,580			(4,821	)
Net decrease in cash and cash equivalents				(115,675	)		(100,149	)
Cash and cash equivalents at beginning of year				723,018			551,814
Cash and cash equivalents at end of period			$	607,343		$	451,665
Supplemental Disclosures of Cash Flow Information:
	Cash paid during the period for:
		Interest	$	51,029		$	119,782
		Income taxes		28,500			58,200
	Non-cash investing activities:
		Transfer from loans to foreclosed assets	$	530		$	162
		Transfer from long-term debt to short-term borrowings		25,000			115,000

See accompanying Notes to the Unaudited Consolidated Financial Statements

4

CITY NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)

		For the six months ended June 30,
Dollars in thousands
		2002			2001
Common Stock
	Balance, beginning of period	$	48,150		$	47,785
	Stock issued for acquisitions		1,208			—
	Stock options exercised		765			104
	Balance, end of period		50,123			47,889
Additional paid-in capital
	Balance, beginning of period		301,022			292,358
	Tax benefit from stock options		7,836			1,834
	Stock options exercised		18,422			—
	Excess of cost of treasury shares reissued over stock option exercise amounts		—			(780	)
	Excess of market value of shares issued for acquisitions over historical cost		68,778			—
	Balance, end of period		396,058			293,412
Accumulated other comprehensive income (loss)
	Balance, beginning of period		10,674			(11,493	)
	Other comprehensive income net of income taxes		14,999			13,749
	Balance, end of period		25,673			2,256
Retained earnings
	Balance, beginning of period		530,731			420,024
	Net income		89,996			69,935
	Dividends paid		(19,243	)		(17,676	)
	Balance, end of period		601,484			472,283
Treasury shares
	Balance, beginning of period		—			(5,026	)
	Purchase of shares		—			(3,079	)
	Issuance of shares for stock options		—			8,105
	Balance, end of period		—			—
Total shareholders' equity		$	1,073,338		$	815,840

See accompanying Notes to the Unaudited Consolidated Financial Statements.

5

CITY NATIONAL CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.

City National Corporation (the "Corporation") is the holding company for City National Bank (the "Bank"). In light of the fact that the Bank comprises substantially all of the business of the Corporation, references to the "Company" mean the Corporation and the Bank together.

2.

The results of operations reflect the interim adjustments, all of which are of a normal recurring nature and which, in the opinion of management, are necessary for a fair presentation of the results for the interim period presented. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2001. The results for the 2002 interim period are not necessarily indicative of the results expected for the full year.

3.

Acquisition, Goodwill and Other Intangible Assets.

The Company adopted the FASB's Statement No. 142, Goodwill and Other Intangible Assets effective January 1, 2002. The Company evaluated its existing intangible assets and goodwill and determined that no reclassifications were necessary to separate any intangible assets apart from goodwill. The Company also reassessed the useful lives of all intangible assets acquired in purchase business combinations, which consisted only of core deposit intangibles, and determined that no amortization period adjustments were necessary. The Company assessed whether there was an indication that goodwill was impaired and determined that there were no indications of impairment.

The following table summarizes the Company's goodwill and other intangible assets as of January 1, 2002 and June 30, 2002.

Dollars in thousands		January 1, 2002			Additions		Reductions		June 30, 2002
Goodwill		$	193,155		$	71,558	$	166	$	264,547
Accumulated Amortization			(34,386	)		—		—		(34,386	)
	Net	$	158,769		$	71,558	$	166	$	230,161
Core Deposit Intangibles		$	39,326		$	16,000	$	—	$	55,326
Accumulated Amortization			(20,796	)		—		3,571		(24,367	)
	Net	$	18,530		$	16,000	$	3,571	$	30,959

On February 28, 2002, the Corporation acquired Civic BanCorp ("Civic"). In that transaction, Civic merged into the Bank and the Corporation paid consideration equal to $123.5 million (including the consideration for stock options), 53.5 percent of which was paid in the Corporation's common stock and 46.5 percent of which was paid in cash. Civic had total assets, loans and deposits of $502.8 million, $368.4 million, and $438.5 million, respectively, at the date of acquisition. At May 31, 2002, the Bank sold two branches acquired from Civic at a premium which reduced goodwill for the Civic acquisition. The acquisition of Civic resulted in the recording of goodwill of $71.6 million and core deposit intangibles of $16.0 million. Included in goodwill as purchase price adjustments were $1.3 million of accrued severance, of which $0.8 million remains unpaid as of June 30, 2002, $0.8 million of paid transaction-related expenses and $1.4 million of exit costs of which $1.3 million relating to excess space reserves remains unpaid as of June 30, 2002. Results reflect the operations of Civic from February 28, 2002, the date that the acquisition was completed.

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At June 30, 2002, the estimated aggregate amortization, in thousands of dollars, for the remainder of 2002 and annually through 2007 is $3,952, $7,904, $5,739, $4,291, $3,947, and $2,460, respectively.

The reduction in goodwill related to the sale of a small minority ownership position in one of the Corporation's non-bank subsidiaries.

Following is a reconciliation of net income to adjusted net income to reflect all periods on a comparable basis for the impact of adopting Statement 142:

	For the three months ended June 30,				For the six months ended June 30,
Dollars in thousands except for earnings per share amounts
	2002		2001		2002		2001
Net income	$	45,760	$	36,344	$	89,996	$	69,935
Add back: Goodwill amortization		—		3,220		—		6,427
Adjusted net income	$	45,760	$	39,564	$	89,996	$	76,362
Basic net income per share:
Net income	$	0.92	$	0.76	$	1.82	$	1.47
Goodwill amortization		—		0.07		—		0.13
Adjusted net income	$	0.92	$	0.83	$	1.82	$	1.60
Diluted net income per share:
Net income	$	0.88	$	0.74	$	1.75	$	1.43
Goodwill amortization		—		0.06		—		0.13
Adjusted net income	$	0.88	$	0.80	$	1.75	$	1.56

4.

Trading account securities are stated at market value. Investments not classified as trading securities are classified as securities available-for-sale and recorded at fair value. Unrealized holding gains or losses for securities available-for-sale, net of taxes are excluded from net income and are reported as other comprehensive income included as a separate component of shareholders' equity.

5.

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

6.

Reserves established as a purchase price adjustment for the February 29, 2000 acquisition of The Pacific Bank N.A. of $1.4 million for exit costs relating to surplus space remain as of June 30, 2002.

7.

During the quarter, the Company decided to reduce its media and telecommunication exposure and identified for sale seven syndicated loans with individual commitment levels above $7.5 million. These totaled approximately $60.0 million in outstanding balances and were transferred to assets available-for-sale which is a component of other assets on the Company's balance sheet.

8.

Under the October 26, 2000 stock buyback program of 1 million shares, 348,700 shares had been repurchased at an average price of $34.10 per share through the end of the second quarter of 2002. There were no shares repurchased during the second quarter of 2002. The shares purchased under the buyback program were reissued for acquisitions, upon the exercise of stock options, and for other general corporate purposes. There were no treasury shares at June 30, 2002. From July 1, 2002 to August 9, 2002, 145,300 shares were repurchased at an average price of $45.62 per share.

9.

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

7

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 does not expect that the adoption of Statement 143 will have an effect on the Company's financial statements.

In July 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which revises accounting for specified employee and contract terminations that are part of restructuring activities. Statement 146 applies to costs associated with an exit activity (including restructuring) or with a disposal of long-lived assets. Those activities can include eliminating or reducing product lines, terminating employees and contracts, and relocating plant facilities or personnel. Under Statement 146, a company will record a liability for a cost associated with an exit or disposal activity when that liability is incurred and can be measured at fair value. The new requirement can shift expense recognition from one quarter or fiscal year to another. The provisions of Statement 146 are effective prospectively for exit or disposal activities initiated after December 31, 2002. Management does not expect that the adoption of Statement 146 will have an effect on the Company's financial statements.

8

CITY NATIONAL CORPORATION
FINANCIAL HIGHLIGHTS
(Unaudited)

		At or for the three months ended									Percentage change June 30, 2002 from
Dollars in thousands, except per share amounts		June 30, 2002			March 31, 2002			June 30, 2001			March 31, 2002		June 30, 2001
For The Quarter
	Net income	$	45,760		$	44,236		$	36,344		3	%	26	%
	Net income per common share, basic		0.92			0.91			0.76		1		21
	Net income per common share, diluted		0.88			0.87			0.74		1		19
	Dividends, per common share		0.195			0.195			0.185		0		5
	Adjusted net income*		45,760			44,236			39,564		3		16
	Adjusted net income per share, basic*		0.92			0.91			0.83		1		11
	Adjusted net income per share, diluted*		0.88			0.87			0.80		1		10
	Cash net income		46,952			45,115			40,300		4		17
	Cash net income per common share, basic		0.94			0.93			0.84		1		12
	Cash net income per common share, diluted		0.90			0.89			0.82		1		10
At Quarter End
	Assets	$	10,982,420		$	11,217,379		$	9,123,593		(2	)	20
	Deposits		8,797,167			8,657,224			7,080,634		2		24
	Loans		7,854,530			7,752,024			6,567,370		1		20
	Securities		1,988,817			2,064,949			1,681,233		(4	)	18
	Shareholders' equity		1,073,338			999,003			815,840		7		32
	Book value per share		21.41			20.11			17.04		6		26
Average Balances
	Assets	$	10,934,265		$	10,344,129		$	9,132,024		6		20
	Deposits		8,551,230			7,933,481			6,975,066		8		23
	Loans		7,889,005			7,465,430			6,537,375		6		21
	Securities		2,029,742			1,924,543			1,690,786		5		20
	Shareholders' equity		1,047,042			945,778			797,398		11		31
Selected Ratios
	Return on average assets		1.68	%		1.73	%		1.60	%	(3	)	5
	Return on average shareholders' equity		17.53			18.97			18.28		(8	)	(4	)
	Adjusted return on average assets*		1.68			1.73			1.74		(3	)	(3	)
	Adjusted return on average shareholders' equity*		17.53			18.97			19.90		(8	)	(12	)
	Corporation's tier 1 leverage		7.44			7.31			6.97		2		7
	Corporation's tier 1 risk-based capital		9.74			9.05			8.76		8		11
	Corporation's total risk-based capital		14.24			13.55			11.64		5		22
	Dividend payout ratio, per share		21.34			21.27			24.39		0		(13	)
	Net interest margin		5.35			5.34			5.23		0		2
	Efficiency ratio		47.95			48.89			55.87		(2	)	(14	)
	Adjusted efficiency ratio*		47.95			48.89			53.59		(2	)	(11	)
	Cash return on average assets		1.76			1.80			1.81		(2	)	(3	)
	Cash return on average shareholders' equity		23.05			23.60			26.40		(2	)	(13	)
	Cash efficiency ratio		46.76			47.95			52.60		(2	)	(11	)
Asset Quality Ratios
	Nonaccrual loans to total loans		0.82	%		0.65	%		0.56	%	26		46
	Nonaccrual loans and ORE to toal loans and ORE		0.83			0.65			0.58		28		43
	Allowance for credit losses to total loans		2.01			2.01			2.04		0		(1	)
	Allowance for credit losses to non accrual loans		244.67			310.47			361.02		(21	)	(32	)
	Net charge-offs to average loans—annualized		(0.81	)		(0.38	)		(0.45	)	113		80

*

See Note 3 to Notes to Unaudited Consolidated Financial Statements.

9

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        See "Cautionary Statement for Purposes of the 'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995", below relating to "forward-looking" statements included in this report.

RESULTS OF OPERATIONS

Overview

        The Corporation recorded net income of $45.8 million for the second quarter of 2002, compared with reported net income of $36.3 million for the second quarter of 2001 and $44.2 million for the first quarter of 2002. Net income per diluted common share was $0.88, compared with $0.74 reported for the second quarter of 2001 and $0.87 for the first quarter of 2002. Results for 2002 include the operations of Civic BanCorp ("Civic") from February 28, 2002, the date that the acquisition was completed, and the new accounting standards for goodwill ("New GAAP").

        For the first half of 2002, City National Corporation achieved net income of $90.0 million, compared with reported net income of $69.9 million for the first half of 2001. For the first half of 2002, net income per diluted common share was $1.75, compared with $1.43 per share reported in the first half of 2001.

        The Company's second-quarter 2002 net income of $45.8 million was up 16 percent from $39.6 million a year earlier, this latter amount having been adjusted to exclude the amortization of goodwill from the prior reported period to reflect New GAAP. As a result, net income per diluted common share of $0.88 rose 10 percent from $0.80 in the second quarter a year ago on a comparable basis.

        Net income for the first half of 2002 of $90.0 million was up 18 percent from $76.4 million for the first half of 2001, the latter amount adjusted to reflect New GAAP. Accordingly, net income per diluted common share was $1.75, an increase of 12 percent from $1.56 in the first half of 2001 on a comparable basis.

        Cash net income, which in 2002 excludes only the amortization of core deposit intangibles, was $47.0 million, or $0.90 per diluted common share in the second quarter of 2002, compared with $40.3 million, or $0.82 per share, in the second quarter of 2001, and $45.1 million, or $0.89 per share in the first quarter of 2002. For the first half of 2002, cash net income was $92.1 million, or $1.79 per diluted common share, compared with $77.8 million, or $1.59 per share for the first half of 2001.

        The Company's return on average assets for the second quarter of 2002 was 1.68 percent, compared with, on an adjusted basis, 1.74 percent for the second quarter of 2001 and 1.73 percent for the first quarter of 2002. The return on average shareholders' equity was 17.53 percent, compared with, on an adjusted basis, 19.90 percent for the prior-year second quarter and 18.97 percent for the first quarter of 2002. For the first half of 2002, the return on average assets was 1.71 percent, and the return on average shareholders' equity was 18.21 percent compared with, on an adjusted basis, 1.71 percent and 19.71 percent for the first half of 2001. The adjustment makes the 2001 data comparable with New GAAP. The lower return on average shareholders' equity in the current period compared with a year ago is due primarily to a higher level of shareholders' equity from increased unrealized securities gains, retained net income, the shares issued for the Civic acquisition and from the exercise of stock options.

        On a cash basis (which in 2002 excludes only the after-tax impact of nonqualifying core deposit intangibles from average assets and average shareholders' equity), the return on average assets was 1.76 percent and the return on average shareholders' equity was 23.05 percent for the second quarter of 2002, compared with 1.81 percent and 26.40 percent, respectively, for the second quarter of 2001 and 1.80 percent and 23.60 percent, respectively, for the first quarter of 2002. For the first half of 2002, the

10

return on average assets was 1.78 percent and the return on average shareholders' equity was 23.23 percent, compared with 1.78 percent and 26.19 percent for the first half of 2001.

        All guidance in this discussion is consistent with the Corporation's press release of July 16, 2002. Management continues to believe net income per diluted common share for 2002 will be approximately 8 percent to 11 percent higher than adjusted net income per diluted common share for 2001.

        As previously reported, the Company had an active recruitment program in process to select a new Chief Credit Officer. During the second quarter, it was announced that Christopher J. Warmuth had joined the Company as Executive Vice President and Chief Credit Officer. Mr. Warmuth joined the Company from United California Bank (UCB) where he was chief credit officer since 1998 after heading its special assets division for four years. During his 21 year banking career, Mr. Warmuth has held a variety of positions in risk management business and real estate lending, corporate banking and consumer credit.

Net Interest Income

        Fully taxable-equivalent net interest income for the second quarter of 2002 was $134.3 million, an increase of 24 percent over $108.4 million for the second quarter of 2001. Second-quarter net interest income was 7 percent higher than the $125.4 million recorded for the first quarter of 2002. Fully taxable-equivalent net interest income for the first half of 2002 was $259.7 million, an increase of 20 percent over $216.5 million for the first half of 2001. Interest income recovered on nonaccrual and charged-off loans included above was $0.6 million for the second quarter of 2002, compared with $0.6 million for the second quarter of 2001 and $0.4 million for the first quarter of 2002.

        The fully taxable-equivalent net interest margin for the second quarter of 2002 was 5.35 percent, compared with 5.23 percent for the second quarter of 2001 and 5.34 percent for the first quarter of 2002. The net interest margin for the first half of 2002 was 5.35 percent compared with 5.32 percent for the first half of 2001. The increases over the same periods last year are primarily due to this year's more stable interest rate environment. The Bank's prime rate was 4.75 percent as of June 30, 2002, compared with 6.75 percent a year earlier and 4.75 percent at March 31, 2002.

        The Company is naturally asset sensitive and 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. In a falling interest rate environment, such as the case in 2001 and during this current lower rate cycle, the Company's interest rate swaps make a positive contribution to net interest income.

        As of June 30, 2002, the Company had $881.4 million of notional amount of interest rate swaps, of which $381.4 million were fair value hedges and $500.0 million were cash flow hedges. The mark-to-market on the fair value hedges resulted in the recognition of other assets and an increase in hedged deposits and borrowings of $20.8 million. Net interest income was positively impacted in the second quarter and first half of 2002 by $3.7 million and $6.9 million, respectively, relating to interest rate swaps qualifying as fair value hedges.

        The mark-to-market on the cash flow hedges of variable rate loans resulted in the recognition of other assets and comprehensive income of $8.7 million, before taxes of $3.6 million. In addition, comprehensive income included $2.4 million, before taxes of $1.0 million relating to remaining balances of interest rate swaps terminated with positive benefit during prior periods. These amounts are being amortized into income over the designated hedged period. Amounts 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 $4.8 million and $9.5 million that were reclassified into net interest income during the three months and six months ended June 30, 2002, respectively.

11

Comprehensive income expected to be reclassified into net interest income within the next twelve months is $7.5 million.

        In total, the Company's "plain vanilla" interest rate swaps hedging loans, deposits and borrowings added $8.5 million to net interest income in the second quarter of 2002 compared with $3.1 million in the second quarter of 2001 and $7.9 million for the first quarter of 2002. For the first half of 2002, interest rate swaps added $16.4 million to net interest income, compared with $4.1 million for the first half of 2001.

        The following tables present the components of net interest income on a fully taxable-equivalent basis for the three and six months ended June 30, 2002 and 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 percent.

12

Net Interest Income Summary

				For the three months ended June 30, 2002							For the three months ended June 30, 2001
Dollars in thousands				Average Balance			Interest income/ expense(2)		Average interest rate		Average Balance			Interest income/ expense(2)		Average interest rate
Assets
	Interest-earning assets
		Loans
			Commercial	$	3,687,873		$	55,856	6.07	%	$	3,082,786		$	62,470	8.13	%
			Residential first mortgages		1,718,680			29,468	6.88			1,338,909			23,813	7.13
			Real estate mortgages		1,791,314			32,651	7.31			1,594,040			33,694	8.48
			Real estate construction		622,223			8,780	5.66			446,949			9,036	8.11
			Installment		68,915			1,558	9.07			74,691			1,807	9.70
			Total loans(1)		7,889,005			128,313	6.52			6,537,375			130,820	8.03
		Securities available-for-sale			1,980,089			30,079	6.09			1,618,582			27,526	6.82
		Federal funds sold and securities purchased under resale agreements			149,255			704	1.89			80,083			868	4.35
		Trading account securities			49,653			184	1.49			72,204			628	3.49
			Total interest-earning assets		10,068,002			159,280	6.35			8,308,244			159,842	7.72
		Allowance for credit losses			(160,779	)						(136,115	)
		Cash and due from banks			414,851							402,822
		Other nonearning assets			612,191							557,073
			Total assets	$	10,934,265						$	9,132,024
Liabilities and Shareholders' Equity
	Interest-bearing deposits
		Interest checking accounts		$	627,118			405	0.26		$	574,476			485	0.34
		Money market accounts			2,388,757			8,512	1.43			1,510,340			12,643	3.36
		Savings deposits			229,726			504	0.88			245,213			2,006	3.28
		Time deposits—under $100,000			226,137			1,339	2.37			247,594			3,141	5.09
		Time deposits—$100,000 and over			1,312,423			7,408	2.26			1,464,960			18,397	5.04
			Total interest-bearing deposits		4,784,161			18,168	1.52			4,042,583			36,672	3.64
		Federal funds purchased and securities sold under repurchase agreements			201,489			805	1.60			292,735			3,055	4.19
		Other borrowings			1,021,421			5,964	2.34			965,523			11,714	4.87
			Total interest-bearing liabilities		6,007,071			24,937	1.67			5,300,841			51,441	3.89
	Noninterest-bearing deposits				3,767,069							2,932,483
	Other liabilities				113,083							101,302
	Shareholders' equity				1,047,042							797,398
			Total liabilities and shareholders' equity	$	10,934,265						$	9,132,024
Net interest spread									4.68	%						3.83	%
Fully taxable-equivalent net interest income							$	134,343						$	108,401
Net interest margin									5.35	%						5.23	%

(1)

Includes average nonaccrual loans of $58,210 and $45,176 for 2002 and 2001, respectively.

(2)

Loan income includes loan fees of $5,574 and $5,688 for 2002 and 2001, respectively.

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Net Interest Income Summary

				For the six months ended June 30, 2002							For the six months ended June 30, 2001
Dollars in thousands				Average Balance			Interest income/ expense(2)		Average interest rate		Average Balance			Interest income/ expense(2)		Average interest rate
Assets
	Interest-earning assets
		Loans
			Commercial	$	3,560,880		$	108,865	6.17	%	$	3,124,734		$	132,982	8.58	%
			Residential first mortgages		1,676,088			57,747	6.95			1,315,175			48,134	7.38
			Real estate mortgages		1,754,779			63,548	7.30			1,557,778			66,693	8.63
			Real estate construction		616,582			17,174	5.62			457,939			19,869	8.75
			Installment		70,059			3,165	9.11			73,961			3,537	9.64
			Total loans(1)		7,678,388			250,499	6.58			6,529,587			271,215	8.38
		Securities available-for-sale			1,922,114			59,233	6.21			1,556,157			53,207	6.89
		Federal funds sold and securities purchased under resale agreements			139,530			1,211	1.75			59,053			1,471	5.02
		Trading account securities			55,319			392	1.43			68,125			1,365	4.04
			Total interest-earning assets		9,795,351			311,335	6.41			8,212,922			327,258	8.04
		Allowance for credit losses			(155,494	)						(136,457	)
		Cash and due from banks			419,075							395,604
		Other nonearning assets			581,894							554,669
			Total assets	$	10,640,826						$	9,026,738
Liabilities and Shareholders' Equity
	Interest-bearing deposits
		Interest checking accounts		$	596,087			758	0.26		$	571,307			1,182	0.42
		Money market accounts			2,261,972			16,259	1.45			1,406,865			23,928	3.43
		Savings deposits			236,291			1,231	1.05			246,314			4,151	3.40
		Time deposits—under $100,000			230,197			2,937	2.57			248,240			6,765	5.50
		Time deposits—$100,000 and over			1,322,541			15,926	2.43			1,559,294			42,548	5.50
			Total interest-bearing deposits		4,647,088			37,111	1.61			4,032,020			78,574	3.93
		Federal funds purchased and securities sold under repurchase agreements			201,352			1,585	1.59			334,719			8,291	5.00
		Other borrowings			1,088,880			12,904	2.39			903,276			23,851	5.32
			Total interest-bearing liabilities		5,937,320			51,600	1.75			5,270,015			110,716	4.24
	Noninterest-bearing deposits				3,596,974							2,849,366
	Other liabilities				109,842							126,211
	Shareholders' equity				996,690							781,146
			Total liabilities and shareholders' equity	$	10,640,826						$	9,026,738
Net interest spread									4.66	%						3.80	%
Fully taxable-equivalent net interest income							$	259,735						$	216,542
Net interest margin									5.35	%						5.32	%

(1)

Includes average nonaccrual loans of $50,901 and $51,710 for 2002 and 2001, respectively.

(2)

Loan income includes loan fees of $11,891 and $11,250 for 2002 and 2001, respectively.

14

        Average loans for the second quarter of 2002 rose to $7.9 billion, an increase of 21 percent over the second quarter of 2001, reflecting the acquisition of Civic and continuing solid internally generated loan growth, albeit at a rate somewhat less than achieved in the first quarter of 2002. Compared with the prior-year quarter, commercial loans rose 20 percent to $3.7 billion from $3.1 billion. Residential first mortgage loans rose 28 percent to $1.7 billion from $1.3 billion. Real estate mortgage loans rose 12 percent to $1.8 billion from $1.6 billion and real estate construction loans rose 39 percent to $0.6 billion from $0.4 billion. Average loans increased 6 percent from the first quarter of 2002.

        Average loans for the first half of 2002 increased 18 percent to $7.7 billion from $6.5 billion for the same period last year. Commercial loans rose 14 percent to $3.6 billion from $3.1 billion. Residential first mortgage loans rose 27 percent to $1.7 billion from $1.3 billion. Real estate mortgage loans rose 13 percent to $1.8 billion from $1.6 billion and real estate construction loans rose 35 percent to $0.6 billion from $0.5 billion.

        Average securities increased $339.0 million, or 20 percent, to $2.0 billion for the second quarter of 2002 compared with the second quarter of 2001 and increased 5 percent from the first quarter of 2002. For the second half of 2002, average securities increased $353.2 million, or 22 percent to $2.0 billion from the first half of 2001.

        Average deposits during the second quarter of 2002 were $8.6 billion, an increase of 23 percent over the second quarter of 2001 and 8 percent over the first quarter of 2002. During the first half of 2002, average deposits increased 20 percent to $8.2 billion, compared with $6.9 billion for the first half of 2001.

        During the second quarter of 2002, average core deposits, which provide a stable source of low-cost funding, rose $1.7 billion to $7.2 billion, an increase of 31 percent over the $5.5 billion in the second quarter of 2001 and 10 percent higher than the $6.6 billion for the first quarter of 2002. Average core deposits represented 85 percent of the total average deposit base for the second quarter, up from 79 percent for the prior-year quarter and up from 83 percent for the first quarter of 2002. For the first half of 2002, average core deposits were $6.9 billion, up 30 percent from $5.3 billion for the first half of 2001. New clients, the acquisition of Civic, and a lower earnings credit on analyzed deposit accounts resulting from lower interest rates, contributed to the growth of deposits.

        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 on a fully taxable-equivalent basis between the second quarter and the first six months of 2002 and the second quarter and first six months of 2001, as well as between the second quarter and first six months of 2001 and the second quarter and first six months of 2000.

15

Changes In Net Interest Income

		For the three months ended June 30, 2002 vs 2001									For the three months ended June 30, 2001 vs 2000
		Increase (decrease) due to									Increase (decrease) due to
Dollars in thousands								Net increase (decrease)									Net increase (decrease)
		Volume			Rate						Volume			Rate
Interest earned on:
Loans		$	24,465		$	(26,972	)	$	(2,507	)	$	4,572		$	(15,587	)	$	(11,015	)
Securities available-for-sale			5,697			(3,114	)		2,583			5,173			(1,323	)		3,850
Trading account securities			(164	)		(310	)		(474	)		134			(322	)		(188	)
Federal funds sold and securities pruchased under resale agreements			494			(658	)		(164	)		334			(358	)		(24	)
	Total interest-earning assets		30,492			(31,054	)		(562	)		10,213			(17,590	)		(7,377	)
Interest paid on:
Interest checking deposits			42			(122	)		(80	)		35			(247	)		(212	)
Money market deposits			5,234			(9,365	)		(4,131	)		1,594			(1,033	)		561
Savings deposits			(120	)		(1,382	)		(1,502	)		124			(464	)		(340	)
Other time deposits			(2,002	)		(10,789	)		(12,791	)		3,259			(2,467	)		792
Other borrowings			(404	)		(7,596	)		(8,000	)		(3,266	)		(5,526	)		(8,792	)
	Total interest-bearing liabilities		2,750			(29,254	)		(26,504	)		1,746			(9,737	)		(7,991	)
		$	27,742		$	(1,800	)	$	25,942		$	8,467		$	(7,853	)	$	614
		For the six months ended June 30, 2002 vs 2001									For the six months ended June 30, 2001 vs 2000
		Increase (decrease) due to									Increase (decrease) due to
Dollars in thousands								Net increase (decrease)									Net increase (decrease)
		Volume			Rate						Volume			Rate
Interest earned on:
Loans		$	43,159		$	(63,875	)	$	(20,716	)	$	20,485		$	(14,542	)	$	5,943
Securities			11,637			(5,611	)		6,026			11,251			(1,644	)		9,607
Trading account securities			(220	)		(753	)		(973	)		(12	)		(438	)		(450	)
Federal funds sold and securities purchased under resale agreements			1,120			(1,380	)		(260	)		89			(298	)		(209	)
	Total interest-earning assets		55,696			(71,619	)		(15,923	)		31,813			(16,922	)		14,891
Interest paid on:
Interest checking deposits			50			(474	)		(424	)		139			(200	)		(61	)
Money market deposits			10,236			(17,905	)		(7,669	)		2,525			60			2,585
Savings deposits			(162	)		(2,758	)		(2,920	)		328			(761	)		(433	)
Other time deposits			(6,171	)		(24,279	)		(30,450	)		9,791			72			9,863
Other borrowings			1,308			(18,961	)		(17,653	)		(4,457	)		(6,033	)		(10,490	)
	Total interest-bearing liabilities		5,261			(64,377	)		(59,116	)		8,326			(6,862	)		1,464
		$	50,435		$	(7,242	)	$	43,193		$	23,487		$	(10,060	)	$	13,427

        The impact of interest rate swaps which increases loan interest income and reduces deposit and borrowing interest expense is included in rate changes.

        Management currently expects the net interest margin for 2002 will be slightly higher than the net interest margin of 5.26 percent reported for 2001.

16

Provision for Credit Losses

        The Company recorded a provision for credit losses of $18.0 million and $29.0 million for the second quarter and first half of 2002, respectively, compared with $6.5 million and $14.0 million for the same periods in 2001. The provision for credit losses in the first quarter of 2002 was $11.0 million. The provision for credit losses this quarter primarily reflects the levels of net loan charge-offs and nonaccrual loans. Additional factors affecting the provision include management's ongoing assessment of the credit quality of the portfolio as well as its growth and the economic environment during this period.

        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, including the amount required by its decision to reduce its media and telecommunication exposure during the second quarter of 2002, could fall within the $40.0 million to $55.0 million range. See "—Allowance for Credit Losses."

Noninterest Income

        Noninterest income increased 18 percent to $38.7 million for the second quarter of 2002, compared with $32.9 million for the second quarter of 2001, and 8 percent over the $35.9 million for the first quarter of 2002. For the first half of 2002, noninterest income increased 16 percent to $74.7 million compared with $64.2 million for the first half of 2001.

        Assets under administration at June 30, 2002 totaled $18.3 billion, including $6.9 billion under management, down slightly compared with $18.5 billion and $7.2 billion, respectively, at June 30, 2001, and $18.8 billion and $7.3 billion, respectively, at March 31, 2002. The quarter-over-quarter decrease in assets under management was attributable largely to a decline in money-market fund balances as some clients rebalanced asset allocations of portfolios, extended maturities from money-market accounts to achieve higher yields, or maintained funds as bank deposits to pay for services. Trust and investment fee revenues for the second quarter and first half of 2002 were higher compared with the prior-year periods, primarily due to transaction volume.

        Cash management and deposit transaction fees for the second quarter and first half of 2002 increased over the same periods last year as the result of strong growth in deposits, including those added by the Civic acquisition, higher sales of online cash management products, and reductions in the earnings credit on analyzed deposit accounts resulting from lower interest rates. Cash management and deposit transaction fees for the second quarter of 2002 were slightly lower than the first quarter due to the absence of prior-year annual fees recognized in the first quarter.

        Increases in international services and other income were partially attributable to additional entertainment and middle-market commercial international business and higher participating mortgage loan income.

        Gains on the sale of assets and the repurchase for debt and gains on the sale of securities for the second quarter of 2002 were $1.5 million. The total for the same period last year was $1.4 million, which included a $0.9 million gain on repurchase of subordinated debt. The first quarter of 2002 included $2.4 million in gains. During the second quarter of 2002, a $1.2 million gain was realized from the sale of a bank property. For the first half of 2002, $3.9 million in gains, including a $2.0 million gain on the sale of ORE during the first quarter, were realized compared with $3.2 million in gains for the first half of 2001.

        Noninterest income for both the second quarter and first half of 2002 was 23 percent of total revenues, compared with 24 percent and 23 percent, respectively, for the second quarter and first half of 2001.

17

        Management continues to expect growth in noninterest income to range from 7 percent to 10 percent for 2002. Last year, the acquisition of Reed, Conner & Birdwell accounted for approximately one-quarter of the 21 percent increase in noninterest income reported for the year. In addition, management expects that a more stable interest rate environment will contribute to a reduction in the growth rate of cash management and deposit transaction fees for the remainder of 2002.

Noninterest Expense

        After excluding amortization of goodwill from prior year reported periods, noninterest expense of $83.0 million for the second quarter of 2002 was up 9 percent from $75.8 million for the second quarter of 2001 and 5 percent from $78.8 million for the first quarter of 2002. The increases were primarily the result of the Company's growth, including the acquisition of Civic, and costs associated with additional colleagues. Noninterest expense for the first half of 2002 increased 8 percent to $161.7 million compared with $149.2 million for the first half of 2001 on a comparable basis.

        The Company's cash efficiency ratio for the second quarter of 2002 improved to 46.76 percent from 52.60 percent for the second quarter of 2001 and 47.95 percent for the first quarter of 2002. The improvement over the prior year was driven by both increased revenues and the Company's ongoing efforts to improve efficiency and productivity. For the first half of 2002, the cash efficiency ratio was 47.34 percent compared with 52.31 percent for the first half of 2001.

        Excluding the amortization of goodwill in 2001, management continues to anticipate that 2002 noninterest expense will increase 7 percent to 10 percent over the prior year, with the acquisition of Civic accounting for a significant amount of the increase.

Income Taxes

        The effective tax rate for the second quarter was 33.1 percent and 33.9 percent for the first half of 2002, compared with, as reported, 30.7 percent for the second quarter and 33.1 percent for the first half of 2001. The effective tax rate for the first quarter of 2002 was 34.8 percent. The higher effective tax rates in 2002 are partially due to the elimination of the tax benefit resulting from the de-registration of the Company's registered investment company, offset by the realization of a capital loss resulting from the issuance and subsequent sale of an additional series of preferred stock by the Company's real estate investment trust subsidiary. See "—Capital Adequacy Requirement."

        The effective tax rates differ from the applicable statutory federal tax rate due to various factors including state taxes and the impact of the Company's real estate investment trust subsidiary on state taxes, tax exempt income including interest on bank owned life insurance, affordable housing investments and the capital loss described above.

        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.

        Management continues to anticipate the Company's effective tax rate for 2002 will fall within a range of 32 percent to 34 percent.

Balance Sheet Analysis

        Total average assets reached $10.9 billion for the second quarter of 2002, an increase of 20 percent over $9.1 billion for the second quarter of 2001 and 6 percent over the $10.3 billion in average assets for the first quarter of 2002. Total assets at June 30, 2002 were $11.0 billion, compared with $9.1 billion at June 30, 2001 and $10.2 billion at December 31, 2001.

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        Total average interest-earning assets were $10.1 billion for the second quarter of 2002, an increase of 21 percent over the $8.3 billion in average interest-earning assets for the second quarter of 2001 and 6 percent over the $9.5 billion in average interest-earning assets for the first quarter of 2002.

Securities

        Comparative period-end security portfolio balances are presented below:

Securities Available-for-Sale

		June 30, 2002				December 31, 2001				June 30, 2001
Dollars in thousands
		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
U.S. Government and federal agency		$	320,348	$	326,968	$	300,653	$	306,206	$	357,155	$	360,190
Mortgage-backed			1,121,904		1,146,818		1,070,670		1,075,533		795,577		796,184
State and Municipal			218,921		227,204		187,519		190,201		177,704		180,757
Other			31,899		31,872		31,924		30,266		167,537		163,175
	Total debt securities		1,693,072		1,732,862		1,590,766		1,602,206		1,497,973		1,500,306
Marketable equities			193,745		187,123		220,124		212,633		174,450		166,731
	Total securities	$	1,886,817	$	1,919,985	$	1,810,890	$	1,814,839	$	1,672,423	$	1,667,037

        At June 30 2002, securities available-for-sale totaled $1.9 billion, an increase of $252.9 million compared with holdings at June 30, 2001 and an increase of $105.1 million from December 31, 2001. At June 30, 2002 the portfolio had an unrealized net gain of $33.2 million compared with a net loss of $5.4 million and a net gain of $4.0 million at June 30, 2001 and December 31, 2001, respectively.

        The following table provides the expected remaining maturities and yields (taxable-equivalent basis) of debt securities within the securities portfolio as of June 30, 2002. To compare the tax-exempt asset yields to taxable yields, amounts are adjusted to pre-tax equivalents based on the marginal corporate federal tax rate of 35 percent.

Debt Securities Available-for-Sale

		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		$	23,271	4.16	$	203,478	4.71	$	100,219	6.22	$	—	—	$	326,968	5.14
Mortgage-backed			—	—		911	5.80		7,785	6.94		1,138,122	6.20		1,146,818	6.20
State and Municipal			14,939	6.93		75,958	6.66		111,797	6.78		24,510	6.94		227,204	6.77
Other			—	—		4,958	7.22		12,107	7.78		14,807	8.04		31,872	7.81
	Total debt securities	$	38,210	5.24	$	285,305	5.28	$	231,908	6.60	$	1,177,439	6.24	$	1,732,862	6.11
	Amortized cost	$	37,757		$	279,078		$	223,768		$	1,152,469		$	1,693,072

        Dividend income included in interest income on securities in the Unaudited Consolidated Statement of Income and Comprehensive Income for both second quarters of 2002 and 2001 was $2.4 million and $5.1 million and $4.6 million for the first half of 2002 and 2001, respectively.

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Loan Portfolio

        A comparative period-end loan table is presented below:

Loans

Dollars in thousands		June 30, 2002		December 31, 2001		June 30, 2001
Commercial		$	3,552,800	$	3,247,320	$	3,013,343
Residential first mortgages			1,730,589		1,587,303		1,407,621
Real estate mortgages			1,866,086		1,668,114		1,582,691
Real estate construction			635,218		586,066		490,146
Installment			69,837		70,403		73,569
	Total loans, gross		7,854,530		7,159,206		6,567,370
Less: allowance for credit losses			157,647		142,862		133,883
	Total loans, net	$	7,696,883	$	7,016,344	$	6,433,487

        Total loans at June 30, 2002 reached $7.9 billion, compared with $6.6 billion at June 30, 2001, and $7.2 billion at December 31, 2001, increases of 20 percent and 10 percent, respectively. During the quarter, the Company decided to reduce its media and telecommunication exposure and identified for sale seven syndicated loans with individual commitment levels above $7.5 million. These loans totaled approximately $60.0 million in outstanding balances and were transferred to assets available-for-sale. As of June 30, 2002, following the transfer of these loans to available-for-sale, the Company's media and telecommunication portfolio contains 23 loans with commitment and outstanding balances of $138.3 million and $94.8 million, respectively, or just slightly more than 1 percent of the loan portfolio. All but one of these loans are syndicated.

        Syndicated non-relationship loans were $47.5 million, less than 1 percent of the loan portfolio, at June 30, 2002, compared with $110.5 million at June 30, 2001 and $86.9 million at December 31, 2001. Five media and telecommunication loans with commitment and outstanding balances of $22.3 million and $12.9 million, respectively, as of June 30, 2002 are included among these syndicated non-relationship loans and in the total media and telecommunication loan portfolio discussed above.

        The Company had outstanding loan commitments aggregating $2,967.8 million at June 30, 2002. In addition, the Company had $339.6 million outstanding in bankers' acceptances and letters of credit of which $291.1 million relate to standby letters of credit at June 30, 2002. 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.

        Management continues to expect that average loan growth for 2002 will be in the range of 11 percent to 15 percent.

        The following table presents information concerning nonaccrual loans, ORE, and restructured loans. Bank 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; if full collection of interest or principal becomes uncertain, regardless of the time period involved; or regulators' ratings of credits suggest that the loan be placed on nonaccrual.

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Nonaccrual Loans, ORE and Restructured Loans

Dollars in thousands			June 30, 2002			December 31, 2001			June 30, 2001
Nonaccrual loans:
	Commercial		$	49,249		$	32,615		$	27,918
	Real estate			12,703			5,393			7,362
	Installment			2,480			555			1,805
		Total		64,432			38,563			37,085
ORE				460			10			1,212
	Total nonaccrual loans and ORE		$	64,892		$	38,573		$	38,297
Total non accrual loans as a percentage of total loans				0.82	%		0.54	%		0.56	%
Total non accrual loans and ORE as a percentage of total loans and ORE				0.83			0.54			0.58
Allowance for credit losses to total loans				2.01			2.00			2.04
Allowance for credit losses to nonaccrual loans				244.67			370.46			361.02
Loans past due 90 days or more on accrual status:
	Commercial		$	1,517		$	1,764		$	12,120
	Real estate			589			878			800
	Installment			1,151			973			187
		Total	$	3,257		$	3,615		$	13,107
Restructured loans:
	On accrual status		$	—		$	—		$	659
	On nonaccrual status			—			—			804
			$	—		$	—		$	1,463

        Total nonperforming assets (nonaccrual loans and ORE) were $64.9 million, or 0.83 percent of total loans and ORE, at June 30, 2002, compared with $38.3 million, or 0.58 percent, at June 30, 2001 and $38.6 million, or 0.54 percent, at December 31, 2001 and do not contain any concentration of credits within a specific industry sector. Nonperforming assets increased $14.3 million from March 31, 2002, of which $12.7 million is related to 5 loans that are either fully collateralized or have been written down to their current estimated recoverable values. Three syndicated non-relationship loans on nonaccrual status totaled $6.4 million at June 30, 2002 and $6.5 million at March 31, 2002. See "—Allowance for Credit Losses."

        At June 30, 2002, there was $58.2 million of impaired loans included in nonaccrual loans, $42.2 million of which had an allowance of $9.1 million allocated to them. 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. 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.

21

        The following table summarizes the changes in nonaccrual loans for the three and six months ended June 30, 2002 and 2001.

Changes in Nonaccrual Loans

		For the three months ended June 30,						For the six months ended June 30,
Dollars in thousands
		2002			2001			2002			2001
Balance, beginning of period		$	50,136		$	52,729		$	38,563		$	61,986
	Additions from acquisitions		—			—			3,510			—
	Loans placed on nonaccrual		31,262			10,269			52,927			21,871
	Charge offs		(11,444	)		(7,578	)		(19,646	)		(16,529	)
	Loans returned to accrual status		(60	)		—			(1,219	)		(956	)
	Repayments (including interest applied to principal)		(5,462	)		(18,173	)		(9,172	)		(29,125	)
	Transferred to ORE		—			(162	)		(531	)		(162	)
Balance, end of period		$	64,432		$	37,085		$	64,432		$	37,085

        In addition to loans disclosed above as nonaccrual or restructured, management has also identified $4.1 million of potential problem loans to 14 borrowers about which the ability of the borrowers to comply with the present loan repayment terms in the future is questionable. Potential problem loans were $14.6 million at June 30, 2001 and $12.8 million at December 31, 2001. Management has also identified an $8.5 million commitment as a potential problem. Estimated potential losses from these potential problem loans have been provided for in determining the adequacy of the allowance for credit losses.

        Management's classification of credits as a nonaccrual, restructured or problems does not necessarily indicate that the principal of the credit is uncollectable in whole or in part.

Allowance for Credit Losses

        The allowance for credit losses at June 30, 2002 totaled $157.6 million, or 2.01 percent of outstanding loans. This compares with an allowance of $133.9 million, or 2.04 percent at June 30, 2001 and an allowance of $142.9 million, or 2.00 percent at December 31, 2001. The allowance for credit losses as a percentage of nonaccrual loans was 245 percent at June 30, 2002, compared with 361 percent at June 30, 2001 and 370 percent at December 31, 2001.

        Net loan charge-offs were $16.0 million and $7.3 million for the second quarters of 2002 and 2001, respectively, and $7.0 million for the first quarter of 2002. For the first six months of 2002 and 2001, net loan charge-offs were $23.0 million and $15.6 million, respectively. As an annualized percentage of average loans, net charge-offs were 0.81 percent, 0.45 percent and 0.38 percent for the second quarters of 2002 and 2001 and the first quarter of 2002, respectively. Second-quarter loan charge-offs reflected $9.7 million for nine media and telecommunication syndicated loans, including the impact of the loans transferred to available-for-sale.

        The allowance for credit losses is maintained at a level which management deems appropriate based on a thorough analysis of numerous factors, including levels of net charge-offs and nonaccrual loans and continuing growth in the loan portfolio. Credit quality will be influenced by underlying trends in the economic cycle, particularly in California, and other factors which may be beyond management's control. No assurances can be given that the Company will not sustain credit losses, in any particular period, that are sizable in relation to the allowance for credit losses. Based on known information available to it at the date of this report, management believes the allowance for credit losses is adequate to cover risks inherent in the portfolio at June 30, 2002. Subsequent evaluation of the loan

22

portfolio, in light of factors then prevailing, by the Company and its regulators will dictate the level of provisions required to maintain the adequacy of the allowance for credit losses.

        The table below summarizes the changes in the allowance for credit losses for the three months and six months ended June 30, 2002 and 2001.

Changes in Allowance for Credit Losses

			For the three months ended June 30,						For the six months ended June 30,
Dollars in thousands
			2002			2001			2002			2001
Average amount of loans outstanding			$	7,889,005		$	6,537,375		$	7,678,388		$	6,529,587
Balance of allowance for credit losses, beginning of period			$	155,657		$	134,727		$	142,862		$	135,435
Loans charged off:
	Commercial			15,999			10,348			24,383			21,544
	Real estate and other			1,862			490			2,774			1,378
		Total loans charged off		17,861			10,838			27,157			22,922
Less recoveries of loans previously charged off:
	Commercial			1,009			3,349			2,036			3,373
	Real estate and other			842			145			2,119			3,997
		Total recoveries		1,851			3,494			4,155			7,370
Net loans charged off				(16,010	)		(7,344	)		(23,002	)		(15,552	)
Additions to allowance charged to operating expense				18,000			6,500			29,000			14,000
Additions to allowance from acquisition				—			—			8,787			—
		Balance, end of period	$	157,647		$	133,883		$	157,647		$	133,883
Total net charge-offs to average loans (annualized)				(0.81	)%		(0.45	)%		(0.60	)%		(0.48	)%
Ratio of allowance for credit losses to total period end loans										2.01	%		2.04	%

Other Assets

        Other assets included the following:

Other Assets

Dollars in thousands		June 30, 2002		December 31, 2001		June 30, 2001
Accrued interest receivable		$	49,386	$	44,432	$	53,633
Claim in receivership and other assets			22,987		22,242		21,771
Interest rate swap mark-to-market			29,472		21,254		16,150
Loans available-for-sale			54,516		23,558		11,910
Other			45,032		28,577		32,855
	Total other assets	$	201,393	$	140,063	$	136,319

        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 by the end of 2002.

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        See —"Net Interest Income" for a discussion of interest rate swaps which result in the swap mark-to-market asset of $29.5 million.

Deposits

        Deposits totaled $8.8 billion at June 30, 2002, compared with $7.1 billion at June 30, 2001 and $8.1 billion at December 31, 2001, increases of 24 percent and 8 percent, respectively. New clients, the acquisition of Civic, and a lower earnings credit on analyzed deposit accounts resulting from lower interest rates, contributed to the growth of deposits.

        Demand deposits accounted for 45 percent of total deposits at June 30, 2002. Core deposits which continued to provide substantial benefits to the Bank's cost of funds were 85 percent of total deposits at June 30, 2002. See "—Net Interest Income."

        Management currently expects average year-over-year deposit growth to be in the range of 14 percent to 16 percent for 2002.

CAPITAL ADEQUACY REQUIREMENT

        The following table presents the regulatory standards for well capitalized institutions and the capital ratios for the Corporation and the Bank at June 30, 2002, December 31, 2001 and June 30, 2001.

		Regulatory Well Capitalized Standards		June 30, 2002		December 31, 2001		June 30, 2001
City National Corporation
	Tier 1 leverage	4.00	%	7.44	%	7.26	%	6.97	%
	Tier 1 risk-based capital	6.00		9.74		9.32		8.76
	Total risk-based capital	10.00		14.24		14.08		11.64
City National Bank
	Tier 1 leverage	4.00		6.98		6.59		6.51
	Tier 1 risk-based capital	6.00		9.14		8.48		8.19
	Total risk-based capital	10.00		13.65		13.28		11.08

        The capital ratios benefited from the issuance of $2.8 million of Series B preferred stock in the second quarter by an indirect fully consolidated subsidiary of the Bank. Subsequent to the close of the second quarter, the subsidiary has issued an additional $1.8 million of Series B preferred stock through August 9, 2002. In addition, during the second half of 2002, the Company's former registered investment company expects to issue preferred stock in order to qualify as a real estate investment company. Both preferred stock issues are expected to qualify as Tier I capital.

        On July 24, 2002, the Corporation declared a regular quarterly cash dividend on common stock at a rate of $0.195 per share to shareholders of record on August 7, 2002, payable on August 19, 2002.

        From July 1, 2002 to August 9, 2002, 145,300 shares of the Corporation's common stock were repurchased at an average price of $45.62 per share.

LIQUIDITY MANAGEMENT

        The Company continues to manage its liquidity through the combination of core deposits, federal funds purchased, repurchase agreements, collateralized borrowing lines at the Federal Reserve Bank and the Federal Home Loan Bank of San Francisco and a portfolio of securities available-for-sale. Liquidity is also provided by maturing securities and loans.

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        Average core deposits and shareholders' equity comprised 76 percent of total funding in the second quarter of 2002, compared with 69 percent in the second quarter of 2001. This increase allowed the Company to decrease its use of more costly alternative funding sources. See "—Net Interest Income."

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 different 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 credit losses. See —Balance Sheet Analysis—Allowance for Credit Losses.



•

Accounting for derivatives and hedging activities. See —Results of Operations—Net Interest Income and Quantitative and Qualitative Disclosures About Market Risk—Asset/Liability Management.

        As described in its Form 10-K for the year ended December 31, 2001, the Company applies APB Opinion No. 25 in accounting for its stock option plans, and accordingly, no compensation cost has been recognized for its stock options in determination of net income. Diluted net income per share does take into consideration the estimated impact of the future exercise of stock options. In addition, in Note 8 on page A-54 of Form 10-K for the year ended December 31, 2001, the Company has disclosed on a pro-forma basis what its annual results would be had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123. Management is currently studying and monitoring the issue of accounting for stock options which is currently under consideration by the Financial Accounting Standards Board.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET/LIABILITY MANAGEMENT

        The principal objective of asset/liability management is to maximize net interest income 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. Liquidity risk results from the mismatching of asset and liability cash flows. 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.

        A quantitative and qualitative discussion about market risk is included on pages A-14 to A-18 of the Corporation's Form 10-K for the year ended December 31, 2001. During the second quarter of

25

2002, the Company maintained a slight asset sensitive interest rate position. The Company's simulation model indicates that at June 30, 2002, a 25 basis point increase in interest rates each quarter for a cumulative increase of 100 basis points over the twelve month horizon would increase projected net interest income by 1.3 percent. A 25 basis point decrease in interest rates each quarter over the twelve month horizon would decrease projected net interest income by 2.1 percent. At December 31, 2001, using the same assumption, the model indicated an increase in net interest income of 0.7 percent and a decrease in net interest income of 1.4 percent over the twelve month horizon. The increase in the impact is primarily attributable to the increase in core deposits during the first six months of 2002.

        As of June 30, 2002, the Company had $881.4 million of notional principal in receive fixed-pay LIBOR interest rate swaps, of which $601.4 million have maturities greater than one year. The Company's interest-rate risk-management instruments had a fair value and credit exposure risk of $29.5 million and $9.5 million at June 30, 2002 and March 31, 2002, respectively taking into consideration legal right of offset. The credit exposure represents the cost to replace, on a present value basis and at current market rates, the net positive value of all contracts for each counterparty that were outstanding at the end of the period. The Company's swap agreements require collateral to mitigate the amount of credit risk if certain market value exposure thresholds are exceeded. As of June 30, 2002, collateral securing swap agreements consisted of securities with a total market value of $13.1 million to reduce counterparty exposure.

        At June 30, 2002, the Company's outstanding foreign exchange contracts for both those purchased as well as sold totaled $137.9 million. The Company enters into foreign exchange contracts with its clients and counterparty banks primarily for the purpose of offsetting or hedging for clients' transaction and economic exposures arising out of commercial transactions. The Company's policies also permit limited proprietary currency positioning. The Company actively manages its foreign exchange exposures within prescribed risk limits and controls. All foreign exchange contracts outstanding at June 30, 2002 have remaining maturities of 12 months or less.

26

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, business and earnings outlook 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.

        Forward-looking statements speak only as of the date they are made and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur of the date the statements are made or to update earnings guidance including the factors that influence earnings.

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) economic uncertainty created by unrest in other parts of the world, (2) 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 on the United States, (3) the 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 lowered interest rates eleven times last year, 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 income. In addition, interest rates affect how much money we lend.

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

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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.

PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

On April 24, 2002, the Registrant held its annual meeting of stockholders. Proxies for the meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934. There was no solicitation in opposition to management's nominees as listed in the proxy statement, and all of such nominees were elected. The following table sets forth the number of votes cast for, or withheld with respect to, each director nominated for election.

Directors	For	Withheld
Richard L. Bloch	43,219,208	1,031,386
Bram Goldsmith	43,049,942	1,200,652
Bob Tuttle	43,661,202	589,392
Kenneth Ziffren	43,074,068	1,176,526

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits

No.
10.22.21	Employment agreement by and between Russell Goldsmith and the Registrant and City National Bank
99.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

(b)

Reports on Form 8-K

On April 17, 2002, the Corporation filed a report on Form 8-K under item 5 regarding the financial results for the quarter ended March 31, 2002. Included in the report was a press releases dated April 16, 2002.

SIGNATURES

        Pursuant to the requirements 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)
DATE: August 14, 2002	/s/  FRANK P. PEKNYFRANK P. PEKNY Executive Vice President and Chief Financial Officer/Treasurer (Authorized Officer and Principal Financial Officer)

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PART 1—FINANCIAL INFORMATON
ITEM 1. FINANCIAL STATEMENTS

CITY NATIONAL CORPORATION CONSOLIDATED BALANCE SHEET (Unaudited)
CITY NATIONAL CORPORATION CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
CITY NATIONAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
CITY NATIONAL CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
CITY NATIONAL CORPORATION NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
CITY NATIONAL CORPORATION FINANCIAL HIGHLIGHTS (Unaudited)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES

EX-10.22-21

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Exhibit 10.22.21

RUSSELL GOLDSMITH
EMPLOYMENT AGREEMENT

The Employment Agreement dated July 15, 1998 (as amended on March 5, 2001) between Russell Goldsmith, Chief Executive Officer, and the Registrant and City National Bank expired in accordance with its terms on July 15, 2002. A new Employment Agreement is currently under negotiation, and is expected to be completed in the third quarter of 2002. In anticipation of completing the ongoing employment agreement negotiations, by action of the Compensation Committee of the Board of Directors of the Corporation on July 24, 2002, Russell Goldsmith received a grant of 250,000 non-qualified stock options under the terms of the Corporation's 2002 Omnibus Plan. The 2002 Omnibus Plan was approved by the shareholders of the Corporation on April 24, 2002.

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Exhibit 10.22.21

EX-99.2

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Exhibit 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of City National Corporation (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Russell Goldsmith, Chief Executive Officer of the Company, and Frank P. Pekny, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge, based on a review of the Report of the Company, and except as corrected or supplemented in a subsequent report:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

DATE: August 14, 2002	/s/  RUSSELL GOLDSMITHRUSSELL GOLDSMITH Chief Executive Officer
DATE: August 14, 2002	/s/  FRANK P. PEKNYFRANK P. PEKNY Chief Financial Officer

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Exhibit 99.2