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

FORM 10-K

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

For the fiscal year ended December 31, 2000
OR

/ /	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. X

Number of shares of common stock outstanding at March 1, 2001: 47,700,330

Aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of March 1, 2001: $1,383,845,480

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 2001 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 Southern California and, as of February 29, 2000, in Northern California. The Bank operates through business and specialty banking units and private banking teams in nine regional centers as well as 48 banking offices in Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Francisco, San Mateo, Santa Clara and Ventura counties. It also has an offshore office in the Cayman Islands, British West Indies which takes deposits.

In the three years ended December 31, 2000, the Company acquired five 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-40 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 December 31, 1998, the Bank acquired North American Trust Company ("NATC"), an independent trust company with $4.0 billion in total client assets under management or administration at that date. On January 9, 1998, the Corporation acquired Harbor Bancorp ("HB"), a one bank holding company which had total assets at December 31, 1997 of $241.8 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 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 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 ("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 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, 2000, the Company had 2,034 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.

The Corporation

The Corporation, as a registered bank holding company, is subject to regulation under the Bank Holding Company Act of 1956, as amended (the "BHCA"). The Corporation is required to file with the Federal Reserve quarterly and annual reports and such additional information as the

Federal Reserve may require pursuant to the BHCA. The Federal Reserve may conduct examinations of the Corporation and its subsidiaries.

The Federal Reserve may require that the Corporation terminate an activity or terminate control of or liquidate or divest certain subsidiaries or affiliates when the Federal Reserve believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness, or stability of any of its banking subsidiaries. The Federal Reserve also has the authority to regulate provisions of certain bank holding company debt, including authority to impose interest ceilings and reserve requirements on such debt. Under certain circumstances, the Corporation must file written notice and obtain approval from the Federal Reserve prior to purchasing or redeeming its equity securities.

Under the BHCA and regulations adopted by the Federal Reserve, a bank holding company and its nonbanking subsidiaries are prohibited from requiring certain tie-in arrangements in connection with any extension of credit, lease or sale of property, or furnishing of services. Further, the Corporation is required by the Federal Reserve to maintain certain levels of capital. See "—Capital Standards."

The Corporation is required to obtain the prior approval of the Federal Reserve for the acquisition of more than 5% of the outstanding shares of any class of voting securities or substantially all of the assets of any bank or bank holding company. Prior approval of the Federal Reserve is also required for the merger or consolidation of the Corporation and another bank holding company.

The Corporation is prohibited by the BHCA, except in certain statutorily prescribed instances, from acquiring direct or indirect ownership or control of more than 5% of the outstanding voting shares of any corporation that is not a bank or bank holding company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or furnishing services to its subsidiaries. However, the Corporation, subject to the prior approval of the Federal Reserve, may engage in, or acquire shares of companies engaged in, 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 Corporation's securities are registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As such, the Corporation is subject to the information, proxy solicitation, insider trading, and other requirements and restrictions of the Exchange Act.

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. 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. 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.

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, 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

On November 12, 1999, the Gramm-Leach-Bliley 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 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" is broadly defined to 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.

Generally, the Financial Services Modernization Act:

•: Repeals historical restrictions on, and eliminates many federal and state law barriers to, affiliations among banks, securities firms, insurance companies, and other financial service providers;
•: Broadens the activities that may be conducted by national banks and their financial subsidiaries;
•: Provides an enhanced framework for protecting the privacy of consumer information;
•: Adopts a number of provisions related to the capitalization, membership, corporate governance, and other measures designed to modernize the Federal Home Loan Bank system;
•: Addresses disclosure issues relating to the CRA; and
•: Addresses a variety of other legal and regulatory issues affecting operations and regulatory oversight of financial institutions.

In December 2000, the Federal Reserve approved an interim rule defining the three categories of activities financial in nature or incidental to a financial activity as:

•: Lending, exchanging, transferring, investing for others, or safeguarding financial assets other than money or securities;

•: Providing any devise or other instrumentality for transferring money or other financial assets; or
•: Arranging, effecting or facilitating financial transactions for the account of third parties.

The interim rule also establishes a mechanism through which financial holding companies or other interested parties may request that the Federal Reserve find that a particular activity falls within one of these three categories. The Federal Reserve has also issued a proposed rule which, if adopted as proposed, would define real estate brokerage and real estate management as activities which are financial in nature or incidental to financial activities.

In order for the Corporation to take advantage of the ability to affiliate with certain other financial services providers, the Corporation must become a "financial holding company". To become a financial holding company, the Corporation would file a declaration with the Federal Reserve, electing to engage in activities permissible for Financial Holding Companies and certifying that it is eligible to do so because its insured depository institution subsidiary, i.e. the Bank, is well-capitalized and well-managed. In addition, the Federal Reserve must also determine that each insured depository institution subsidiary of the bank holding company has at least a "satisfactory" CRA rating. See "—The Bank—Community Reinvestment Act and Fair Lending Developments." 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 is examining 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.

If a depository institution controlled by a financial holding company ceases to be well capitalized or well managed, and the deficiency is not corrected within 180 days or such longer period as the Federal Reserve may permit, the financial holding company may be required to divest ownership or control of any depository institution owned or controlled by it. Alternatively, the financial holding company may comply by discontinuing all activities that are not permissible for a financial holding company.

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 a comparable standard. Under a rule published by the Federal Reserve and the Department of the Treasury on February 2, 2001, a bank meets the comparable standard if it has 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. The latter requirement does not apply to activities engaged in as agent. A national bank must exclude from its assets and equity all equity investments, including retained earnings, in a financial subsidiary. The assets of the subsidiary may not be consolidated with the bank's assets. The bank must also have policies and

procedures to assess financial subsidiary risk and protect the bank from such risks and potential liabilities. 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 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.

Under the Financial Services Modernization Act, federal banking regulators are required to adopt rules that will limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations will require disclosure of privacy policies to consumers and, in some circumstance, will allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. Federal banking regulators issued final rules on May 10, 2000. Pursuant to the rules, financial institutions must provide:

•: Initial notices to customers about their privacy policies, describing the conditions under which they may disclose non-public personal information to nonaffiliated third parties and affiliates;
•: Annual notices of their privacy policies to current customers; and
•: A reasonable method for customers to "opt out" of disclosures to nonaffiliated third parties.

The rules were effective November 13, 2000, but compliance is optional until July 1, 2001. These privacy provisions will affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. It is not possible at this time to assess the impact of the privacy provisions on the Company's financial condition or results of operations. However, since the Company is culturally predisposed to protecting the privacy of its clients, management does not believe that the Company will find compliance with the new privacy law and regulation, in its current form, unduly burdensome.

In December 2000 pursuant to the requirements of the Financial Services Modernization Act, the federal bank and thrift regulatory agencies adopted consumer protection rules for the sale of insurance products by depository institutions. The rule is effective on April 1, 2001. The final rule applies to any depository institution or any person selling, soliciting, advertising, or offering insurance products or annuities to a consumer at an office of the institution or on behalf of the institution. The regulation requires oral and written disclosure before the completion of the sale of an insurance product or annuity that such product:

•: Is not a deposit or other obligation of, or guaranteed by, the depository institution or its affiliates;
•: Is not insured by the FDIC or any other agency of the United States, the depository institution or its affiliates; and
•: Has certain risks of investment, including the possible loss of value.

The depository institution may not condition 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 addresses cross marketing and referral fees.

In January 2000, the banking agencies adopted guidelines requiring financial institutions to establish an information security program to:

•: Identify and assess the risks that may threaten customer information;
•: Develop a written plan containing policies and procedures to manage and control these risks;
•: Implement and test the plan; and
•: Adjust the plan on a continuing basis to account for changes in technology, the sensitivity of customer information and internal or external threats to information security.

Each institution may implement a security program appropriate to its size and complexity and the nature and scope of its operations. The guidelines are effective July 1, 2001. The Company established a Privacy Task Force in May 2000, for the purpose of assessing the implications of the privacy provisions of the Financial Services Modernization Act across the Company and to assure compliance with the published rules. The Privacy Task Force is also responsible to assure that the information security programs of the Company comply with the published guidelines.

Dividends and Other Transfers of Funds

Dividends from the Bank constitute the principal source of income to the Corporation. The Corporation is a legal entity separate and distinct from the Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends to the Corporation. Under such restrictions, the amount available for payment of dividends to the Corporation by the Bank totaled $56.8 million at December 31, 2000. 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.

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. An insured depository institution is prohibited from paying management fees to any controlling persons or, with certain limited exceptions, making capital distributions if after such transaction the institution would be undercapitalized. See "—Prompt Corrective Regulatory Action and Other Enforcement Mechanisms" and "—Capital Standards" for a discussion of these additional restrictions on capital distributions.

The Bank is subject to certain restrictions imposed by federal law on any extensions of credit to, or the issuance of a guarantee or letter of credit on behalf of, the Corporation or other affiliates, the purchase of, or investments in, stock or other securities thereof, the taking of such securities as collateral for loans, and the purchase of assets of the Corporation or other affiliates. Such 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 (as defined by federal regulations), and such secured loans and investments are limited, in the aggregate, to 20.0% of the Bank's capital and surplus (as defined by federal regulations). See "Note 10 to Notes to Consolidated Financial Statements" on page A-51 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 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 "adequately capitalized," the Corporation and the Bank 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%). For the Corporation and the Bank, 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 Corporation and the Bank, 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.

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, the Corporation and the Bank exceeded the required ratios for classification as "well capitalized."

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. See "Management's Discussion and Analysis—Balance Sheet Analysis—Capital" on page A-13 of this report.

The Federal Reserve and the Comptroller have proposed that equity investments in nonfinancial companies be subject to different capital requirements than currently applied to

traditional banking investments, whether such equity investments are made by Financial Holding Companies under the merchant banking authority of the Financial Services Modernization Act, by bank holding companies through small business investment companies ("SBIC"), under Regulation K or in less than 5% of the shares of a nonfinancial company under authority of the BHCA, or by state banks as authorized by the Federal Deposit Insurance Act. Under the proposal, if the aggregate adjusted carrying value of the investments is less than 15% of the Tier 1 capital of the bank holding company, 8% of the adjusted carrying value would be deducted from Tier 1 capital. For investments between 15% and 25% of Tier 1 capital, 12% of the investment would be deducted and for investments of 25% or more, 25% of the investment would be deducted. No additional capital charge would apply to SBIC investments if the carry value of the investments does not exceed 15% of the Tier 1 capital of the depository institution or, for SBIC investments by a bank holding company, of its subsidiary depository institutions. At December 31, 2000, the Company's equity investments in nonfinancial companies was 2.7% of Tier 1 capital. Therefore, management believes that the proposal, if adopted in its current form, would not have a material adverse effect on the Company's financial condition or results of operation.

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 and the Audit Committee determine 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 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, 2000 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. Pursuant to the Economic Growth and Paperwork Reduction Act of 1996 (the "Paperwork Reduction Act"), at January 1, 1997, the Bank began paying, in addition to its normal deposit insurance premium as a member of the BIF, an amount which for 2000 was equal to approximately 2.1 cents per $100 of insured deposits 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.

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.

In January 2001, the federal banking agencies adopted new regulations implementing the CRA "sunshine" provision of the Financial Services Modernization Act. Those provisions require insured depository institutions (or their affiliates) and nongovernmental entities or persons that are parties to certain written agreements made pursuant to, or in connection with, the fulfillment of the CRA to make such agreements available to the public and the relevant federal banking agency. Insured depository institutions (or their affiliates) and nongovernmental entities or persons that are parties to such agreements are also required to file annual reports concerning the agreements with the relevant agency. The Bank is not currently and has never been a party to a written CRA-related agreement with a nongovernmental entity.

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, who manage $25 million or more in client assets or who act as adviser to a registered investment company must register with the Securities and Exchange Commission. Although CNI, a division of the Bank, acts as an investment adviser to the CNI Charter Funds, a registered investment company, banks are currently excluded from the definition of investment advisers for purposes of the Advisers Act. Effective May 12, 2001, the Financial Services Modernization Act amends the Advisers Act to delete that exemption for a bank that acts as adviser to a registered investment company. If the Bank continues to act as adviser to the CNI Charter Funds after that date, the Bank would be required to register with the Securities and Exchange Commission as an investment adviser. However, the Bank is in the process of organizing a wholly-owned subsidiary which would register with the Securities and Exchange Commission as an investment adviser and which would, prior to May 12, 2001, become the adviser to the CNI Charter Funds.

Year 2000 Compliance

Throughout 2000, management monitored all business processes, including interaction with the Company's clients, vendors and other third parties, to ensure that all processes functioned properly. There has been no Y2000 transition issues of any significance.

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 48 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 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, 2000, the Bank owned two unoccupied buildings in North Hollywood and Riverside 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 $18.4 million, with lease expiration dates ranging from 2001 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, 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, 2000.

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	51	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	78	Chairman of the Board, City National Corporation
George H. Benter, Jr.	59	President, City National Corporation since 1993; President and Chief Operating Officer, City National Bank since 1992
Frank P. Pekny	57	Executive Vice President and Treasurer/Chief Financial Officer, City National Corporation since 1992; Vice Chairman and Chief Financial Officer since 1995, City National Bank
Heng W. Chen	48	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
Stephen D. McAvoy	55	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; Executive Vice President, April 1989 to April 1996, First Interstate Bancorp
Robert A. Moore	58	Executive Vice President and Chief Credit Officer, City National Bank since 1992
Barbara S. Polsky	46	Executive Vice President, Secretary and General Counsel, City National Bank and City National Corporation, since November 1999; General Counsel, Executive Vice President and Secretary, Aames Financial Corporation, June 1996 to October 1999; Partner, Manatt, Phelps & Phillips, a law firm, until May 1996

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
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
1999
March 31	$	41.56	$	30.31	$	0.165
June 30		40.88		29.63		0.165
September 30		38.81		30.38		0.165
December 31		41.50		30.31		0.165

As of March 1, 2001, the closing price of the Corporation's stock on the New York Stock Exchange was $36.30 per share. As of that date, there were approximately 1,953 record holders of the Corporation's common stock. On January 24, 2001, the Board of Directors authorized a regular quarterly cash dividend on its common stock at an increased rate of $0.185 per share payable on February 20, 2001.

For a discussion of dividend restrictions on the Corporation's common stock, see "Note 10 to Notes to Consolidated Financial Statements" on page A-51 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-30, 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-17, 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-32 through A-59 and on page A-30, under the captions "2000 Quarterly Operating Results" and "1999 Quarterly Operating Results," and is incorporated herein by reference.

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

None.

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 2001 Annual Meeting of Stockholders (the "2001 Proxy Statement"), and such information either shall be (i) deemed to be incorporated herein by reference from that portion of 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.

Item 11. Executive Compensation

The information required by this item will appear in the 2001 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.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

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-31
Independent Auditors' Report		A-32
Consolidated Balance Sheet at December 31, 2000 and 1999		A-33
Consolidated Statement of Income and Comprehensive Income for each of the years in the three-year period ended December 31, 2000		A-34
Consolidated Statement of Cash Flows for each of the years in the three-year period ended December 31, 2000		A-35
Consolidated Statement of Changes in Shareholders' Equity for each of the years in the three-year period ended December 31, 2000		A-36
Notes to the Consolidated Financial Statements		A-37

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.)
4.2		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	*	Employment Agreement made as of March 18, 1998, by and between Bram Goldsmith, and the Registrant and City National Bank, including Sixth Amendment to Split 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.)
10.2.3	*	First Amendment to Employment Agreement made as of June 1, 1999, by and between Bram Goldsmith, and the Registrant and City National Bank, including 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.)

10.3	*	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
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.)
10.24	*	1995 Omnibus Plan
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.)
10.31	*	2000 City National Bank Executive Deferred Compensation Plan
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
10.34	*	City National Bank Executive Management Bonus Plan
10.35		City National Corporation 2001 Stock Option Plan
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, 2000, on Form 8-K under items 5 and 7 regarding the financial results for the quarter and nine months ended September 30, 2000.

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 14, 2001

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 14, 2001
/s/ FRANK P. PEKNY Frank P. Pekny (Principal Financial Officer)	Executive Vice President and Chief Financial Officer	March 14, 2001
/s/ STEPHEN D. MCAVOY Stephen D. McAvoy (Principal Accounting Officer)	Controller	March 14, 2001
/s/ BRAM GOLDSMITH Bram Goldsmith	Chairman of the Board and Director	March 14, 2001
/s/ GEORGE H. BENTER, JR. George H. Benter, Jr.	President and Director	March 14, 2001
/s/ RICHARD L. BLOCH Richard L. Bloch	Director	March 14, 2001
/s/ STUART D. BUCHALTER Stuart D. Buchalter	Director	March 14, 2001
/s/ EZUNIAL BURTS Ezunial Burts	Director	March 14, 2001
/s/ BARRY M. MEYER Barry M. Meyer	Director	March 14, 2001
Michael L. Meyer	Director

Charles E. Rickershauser, Jr.	Director
/s/ EDWARD SANDERS Edward Sanders	Director	March 14, 2001
Andrea L. Van de Kamp	Director
/s/ KENNETH ZIFFREN Kenneth Ziffren	Director	March 14, 2001

FINANCIAL HIGHLIGHTS

Dollars in thousands, except per share amounts		2000			1999			Increase (Decrease) Amount
FOR THE YEAR
	Net income	$	131,660		$	108,107		$	23,553
	Net income per common share, basic		2.79			2.37			0.42
	Net income per common share, diluted		2.72			2.30			0.42
	Dividends, per common share		0.70			0.66			0.04
AT YEAR END
	Assets	$	9,096,669		$	7,213,619		$	1,883,050
	Deposits		7,408,670			5,669,409			1,739,261
	Loans		6,527,145			5,490,669			1,036,476
	Securities		1,547,844			1,102,092			445,752
	Shareholders' equity		743,648			571,646			172,002
	Book value, per common share		15.61			12.58			3.03
AVERAGE BALANCES
	Assets	$	8,426,129		$	6,488,834		$	1,937,295
	Deposits		6,334,846			4,809,800			1,525,046
	Loans		6,236,334			4,822,254			1,414,080
	Securities		1,350,971			1,050,716			300,255
	Shareholders' equity		667,618			564,091			103,527
SELECTED RATIOS
	Return on average assets		1.56	%		1.67	%		(0.11	)%
	Return on average shareholders' equity		19.72			19.16			0.56
	Tier 1 leverage ratio		6.49			6.73			(0.24	)
	Total risk-based capital ratio		10.85			11.21			(0.36	)
	Dividend payout ratio, per common share		24.95			27.91			(2.96	)
	Net interest margin		5.44			5.56			(0.12	)
	Efficiency ratio		55.76			57.58			(1.82	)
CASH OPERATING BASIS (1) FOR THE YEAR
	Net income	$	145,721		$	115,358		$	30,363
	Net income per common share, basic		3.09			2.53			0.56
	Net income per common share, diluted		3.01			2.46			0.55
	Return on average assets		1.76	%		1.80	%		(0.04	)%
	Return on average shareholders' equity		29.17			23.98			5.19
	Efficiency ratio		52.61			55.37			(2.76	)

(1): Cash operating earnings 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			As of or for the year ended December 31,
Dollars in thousands, except per share data			2000			1999			1998			1997			1996
Statement of Operations Data:
	Interest income		$	646,288		$	470,446		$	423,949		$	357,996		$	282,123
	Interest expense			239,772			148,441			130,278			104,328			82,389

	Net interest income			406,516			322,005			293,671			253,668			199,734
	Provision for credit losses			21,500			—			—			—			—
	Noninterest income			109,484			87,212			67,684			53,418			43,995
	Noninterest expense			294,770			241,803			211,331			181,757			144,595

	Income before taxes			199,730			167,414			150,024			125,329			99,134
	Income taxes			68,070			59,307			53,796			45,196			32,571

		Net income	$	131,660		$	108,107		$	96,228		$	80,133		$	66,563

Per Share Data:
	Net income per share, basic		$	2.79		$	2.37		$	2.08		$	1.74		$	1.52
	Net income per share, diluted			2.72			2.30			2.00			1.68			1.47
	Cash dividends declared			0.70			0.66			0.56			0.44			0.36
	Book value per share			15.61			12.58			12.21			11.03			9.13
	Shares used to compute income per share, basic			47,178			45,683			46,357			46,018			43,888
	Shares used to compute income per share, diluted			48,393			46,938			48,141			47,809			45,146
Balance Sheet Data—At Period End:
	Assets		$	9,096,669		$	7,213,619		$	6,427,781		$	5,252,032		$	4,216,496
	Deposits			7,408,670			5,669,409			4,887,402			4,228,348			3,386,523
	Loans			6,527,145			5,490,669			4,530,427			3,825,224			2,839,435
	Securities			1,547,844			1,102,092			1,012,526			833,122			811,092
	Interest-earning assets			8,286,067			6,677,475			5,982,968			4,838,926			3,844,834
	Shareholders' equity			743,648			571,646			561,803			508,670			400,747
Balance Sheet Data—Average Balances:
	Assets		$	8,426,129		$	6,488,834		$	5,633,829		$	4,703,886		$	3,821,314
	Deposits			6,334,846			4,809,800			4,267,602			3,614,068			2,871,870
	Loans			6,236,334			4,822,254			4,213,853			3,387,784			2,539,323
	Securities			1,350,971			1,050,716			842,346			829,557			839,564
	Interest-earning assets			7,698,884			5,985,018			5,187,897			4,290,453			3,505,422
	Shareholders' equity			667,618			564,091			538,426			472,843			373,491
Asset Quality:
	Nonaccrual loans		$	61,986		$	25,288		$	23,138		$	27,566		$	41,543
	ORE			522			1,413			3,480			2,126			15,116

		Total nonaccrual loans and ORE	$	62,508		$	26,701		$	26,618		$	29,692		$	56,659

Performance Ratios:
	Return on average assets			1.56	%		1.67	%		1.71	%		1.70	%		1.74	%
	Return on average shareholders' equity			19.72			19.16			17.87			16.95			17.82
	Net interest spread			3.81			4.12			4.27			4.64			4.47
	Net interest margin			5.44			5.56			5.86			6.13			5.87
	Average shareholders' equity to average assets			7.92			8.69			9.56			10.05			9.77
	Dividend payout ratio, per share			24.95			27.91			27.06			26.19			24.49
	Efficiency ratio			55.76			57.58			56.87			58.22			58.00
Asset Quality Ratios:
	Nonaccrual loans to total loans			0.95	%		0.46	%		0.51	%		0.72	%		1.46	%
	Nonaccrual loans and ORE to total loans and ORE			0.96			0.49			0.59			0.78			1.98
	Allowance for credit losses to total loans			2.07			2.44			2.99			3.60			4.58
	Allowance for credit losses to nonaccrual loans			218.49			530.20			584.92			499.75			313.14
	Net (charge offs) recoveries to average loans			(0.48	)		(0.10	)		(0.12	)		0.02			(0.06	)

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.

See "Cautionary Statement for Purposes of the "Safe Harbor" Provision of the Private Securities Litigation Reform Act of 1995," on pages A-29 and A-30 in connection with "forward looking" statements included in this report.

Consolidated net income for 2000 was $131.7 million, or $2.72 per diluted common share, compared with $108.1 million, or $2.30 per diluted common share, in 1999. Cash net income, which excludes the amortization of goodwill and core deposit intangibles from acquisitions, for the year ended December 31, 2000 was $145.7 million, or $3.01 per diluted common share, compared with $115.4 million, or $2.46 per diluted common share, for the year ended December 31, 1999. The increase in net income reflects the growth in the Company's loans and deposits during 2000 including the impact from the integration of APSB in August 1999 and Pacific Bank in February 2000. Net interest income on a fully taxable-equivalent basis for 2000 increased $86.4 million over 1999. Noninterest income increased $22.3 million compared with 1999. Partially offsetting these increases was a $53.0 million increase in noninterest expense over the 1999 period and a $21.5 million provision for credit losses in 2000 compared with no provision in 1999.

The return on average assets in 2000 was 1.56%, compared with 1.67% in 1999. The decrease reflects the impact on net income of amortizing a larger amount of goodwill associated with two recent bank acquisitions. The return on average shareholders' equity rose to 19.72%, compared with 19.16% for the prior year. 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 1.76% and the return on average shareholders' equity was 29.17% in 2000, compared with 1.80% and 23.98%, respectively, in 1999. The Company's cash efficiency ratio for 2000 improved to 52.61% from 55.37% in 1999. The 5% improvement is due to increased revenues and management's continued emphasis on enhancing efficiency and productivity.

Management expects net income per diluted common share for 2001 to be approximately 8% to 11% higher than net income per diluted common share for 2000. These expectations do not reflect the potential positive impact to the Company of the tentative decision of the Financial Accounting Standards Board ("FASB") to discontinue goodwill amortization. In 2000, the amortization of goodwill reduced net income per diluted common share by $0.22.

Total assets at December 31, 2000 were $9,096.7 million, compared with $7,213.6 million at December 31, 1999.

Total average assets increased to $8,426.1 million in 2000 from $6,488.8 million in 1999, an increase of $1,937.3 million, or 29.9%, primarily due to increased average loans and the acquisitions of APSB and Pacific Bank. Total 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. All other loan categories also contributed to the increase in average loan growth over the prior year. Average deposits rose during the year 2000 to $6,334.8 million, an increase of 31.7% over $4,809.8 million for 1999.

Total nonperforming assets (nonaccrual loans and ORE) were $62.5 million, or 0.96% of total loans and ORE at December 31, 2000, compared with $26.7 million, or 0.49%, at December 31, 1999. The allowance for credit losses at December 31, 2000 totaled $135.4 million, or 2.07% of outstanding loans. Net loan charge-offs were $30.1 million and $4.7 million for the years 2000 and 1999, respectively. Management believes the increases in nonperforming assets and net loan charge-offs in 2000 was primarily a function of the growth of the loan portfolio and the Bank's

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syndicated non-relationship loans which at December 31, 2000 had been reduced to $191.8 million, or less than 3% of the loan portfolio, from $536.8 million, or 10% of the total loan portfolio, at December 31, 1999. The slowdown in the rate of growth in the economy also affected credit performance. Management believes the allowance for credit losses is adequate to cover risks inherent in the portfolio at December 31, 2000.

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 73%, 71% and 75%, respectively. The growth reflects the successful sales efforts of the Company's colleagues. The growth was augmented substantially, however, by the five financial institution acquisitions closed by the Company over that same period. Most recently 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 December 31, 1998, the Bank completed its acquisition of NATC for $11.5 million in an all cash transaction. NATC had approximately $4.0 billion in total assets under management or administration. The acquisition resulted in goodwill of approximately $11.4 million.

On January 9, 1998, the Corporation completed its acquisition of HB. The total purchase price was approximately $34.5 million. The Corporation issued approximately 540,000 shares, primarily from treasury, with an aggregate market value of $17.9 million and paid the remainder in cash in a transaction accounted as a purchase. HB had total assets, loans, and deposits of $241.8 million, $152.8 million, and $221.3 million, respectively, as of December 31, 1997. The acquisition of HB resulted in goodwill and core deposit intangibles of approximately $23.9 million.

On October 25, 2000, the Corporation completed the one million common shares stock buyback program announced on July 29, 1999 at a cost of $32.1 million, or an average price of $32.11 per share. On October 26, 2000, a new one million-share stock buyback program of the Corporation's common stock was announced. As of December 31, 2000, 201,600 shares have been repurchased under this program at a cost of $6.6 million, or an average price of $32.56 per share.

The Corporation paid dividends of $0.70 per share of common stock in 2000 and $0.66 per share of common stock in 1999. On January 24, 2001, the Board of Directors authorized a regular quarterly cash dividend on common stock at an increased rate of $0.185 per share to shareholders of record on February 7, 2001 payable on February 20, 2001. This reflects a 5.7% increase over the quarterly dividend paid in 2000.

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)
Dollars in thousands, except per share amounts					Increase (Decrease)					Increase (Decrease)
Dollars in thousands, except per share amounts			2000		Amount		%	1999		Amount		%	1998		1997		1996
Interest income (1)			$	658,874	$	177,761	37	$	481,113	$	46,601	11	$	434,512	$	367,505	$	288,049
Interest expense				239,772		91,331	62		148,441		18,163	14		130,278		104,328		82,389

Net interest income				419,102		86,430	26		332,672		28,438	9		304,234		263,177		205,660
Provision for credit losses				21,500		21,500	100		—		—	—		—		—		—
Noninterest income				109,484		22,272	26		87,212		19,528	29		67,684		53,418		43,995
Noninterest expense:
	Staff expense			159,782		25,847	19		133,935		18,970	17		114,965		97,634		77,011
	Other expense			134,988		27,120	25		107,868		11,502	12		96,366		84,123		67,584

		Total		294,770		52,967	22		241,803		30,472	14		211,331		181,757		144,595

Income before income taxes				212,316		34,235	19		178,081		17,494	11		160,587		134,838		105,060
Income taxes				68,070		8,763	15		59,307		5,511	10		53,796		45,196		32,571
Less: adjustments (1)				12,586		1,919	18		10,667		104	1		10,563		9,509		5,926

		Net income	$	131,660	$	23,553	22	$	108,107	$	11,879	12	$	96,228	$	80,133	$	66,563

		Net income per share, diluted	$	2.72	$	0.42	18	$	2.30	$	0.30	15	$	2.00	$	1.68	$	1.47

(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.

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 2000 and 1999 as well as between 1999 and 1998 broken down between volume and rate.

A-5

Changes in Net Interest Income

		2000 vs 1999								1999 vs 1998
		Increase (decrease) due to								Increase (decrease) due to
Dollars in thousands—fully taxable equivlent basis		Increase (decrease) due to						Net increase (decrease)		Increase (decrease) due to						Net increase (decrease)
Dollars in thousands—fully taxable equivlent basis		Volume			Rate			Net increase (decrease)		Volume			Rate			Net increase (decrease)
Interest earned on:
Interest-bearing deposits in other banks		$	11		$	—		$	11	$	(272	)	$	(263	)	$	(535	)
Loans			125,162			25,883			151,045		51,535			(16,141	)		35,394
Securities available-for-sale			20,862			4,871			25,733		13,957			(1,113	)		12,844
Trading account securities			(88	)		632			544		572			(597	)		(25	)
Federal funds sold and securities purchased under resale agreements			91			337			428		(1,155	)		78			(1,077	)

	Total interest-earning assets		146,038			31,723			177,761		64,637			(18,036	)		46,601

Interest paid on:
Interest checking accounts			672			43		$	715		239			(1,925	)		(1,686	)
Money market accounts			10,977			7,042			18,019		2,909			(542	)		2,367
Savings deposits			1,464			1,029			2,493		1,168			212			1,380
Other time deposits			27,804			13,482			41,286		8,371			(4,455	)		3,916
Other borrowings			15,235			13,583			28,818		15,330			(3,144	)		12,186

	Total interest-bearing liabilities		56,152			35,179			91,331		28,017			(9,854	)		18,163

		$	89,886		$	(3,456	)	$	86,430	$	36,620		$	(8,182	)	$	28,438

Taxable-equivalent net interest income totaled $419.1 million in 2000, 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, a higher average prime rate compared to prior years, partially offset by a higher cost of funds.

The fully taxable-equivalent net interest margin in 2000 was 5.44%, compared with 5.56% for 1999. The decrease was attributable to an increase in the cost of funds, and higher levels of nonaccrual loans. This decrease was partially offset by higher yields on earning assets.

Management expects the net interest margin for 2001 to decrease modestly from 2000 as rates on earning assets decline and funding sources include more expensive 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.

Management anticipates average relationship loan growth will be in the 9% to 13% range in 2001, reflecting its expectation that the growth in the California economy will slow from the strong growth experienced in recent years but will still grow at a moderate pace.

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.

Total 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-

A-6

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.

Average deposit growth in 2001, compared with 2000, is expected to be in the 8% to 12% range.

For 1999, taxable-equivalent net interest income totaled $332.7 million, an increase of $28.4 million, or 9.3%, from 1998. The increase in net interest income was due to a $797.1 million, or 15.4%, increase in average total interest-earning assets and a $374.5 million increase in average core deposits, offset by the decrease in the net interest margin.

Average loans increased to $4,822.3 million in 1999 from $4,213.9 million in 1998, an increase of $608.4 million, or 14.4%. This increase is primarily due to higher internal loan origination activity and the acquisition of APSB. Average commercial loans were up $374.3 million, or 17.1%. Average real estate mortgage loans increased $95.6 million, or 12.7%, primarily due to the impact of the APSB acquisition. Average real estate construction loans increased $96.3 million, or 50.2%, due to the Company's emphasis in this area.

Average total securities increased $208.4 million, or 24.7%, between 1998 and 1999 from investing deposits and borrowings that were not yet needed to fund loan growth.

Average interest-bearing core deposits increased to $1,804.2 million in 1999 from $1,648.6 million in 1998, an increase of $155.6 million, or 9.4%. Average time deposits in denominations of $100,000 or more increased $167.6 million or, 22.0%, between 1998 and 1999. Average noninterest-bearing deposits increased to $2,076.9 million in 1999 from $1,858.0 million in 1998, an increase of $218.9 million, or 11.8%. These increases resulted from the Company's increased marketing efforts, the nature of the Company's relationship business, as well as from the acquisition of APSB.

A-7

The following table shows average balances and interest rates for the last five years.

Net Interest Income Summary

				2000							1999
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	$	3,189,457		$	294,598	9.24	%	$	2,560,701		$	219,460	8.57	%
			Real estate mortgage		1,336,443			123,444	9.24			851,396			75,956	8.92
			Residential first mortgage		1,235,106			89,973	7.28			1,069,522			77,330	7.23
			Real estate construction		409,281			42,362	10.35			288,084			27,496	9.54
			Installment		66,047			6,118	9.26			52,551			5,208	9.91

			Total loans (3)		6,236,334			556,495	8.92			4,822,254			405,450	8.41
		State and municipal investment securities			—			—	—			—			—	—
		Taxable investment securities			—			—	—			—			—	—
		Securities available-for-sale			1,350,971			95,950	7.10			1,050,716			70,205	6.68
		Federal funds sold and securities purchased under resale agreements			46,298			2,809	6.07			44,637			2,381	5.33
		Trading account securities			65,281			3,620	5.55			67,411			3,077	4.56

			Total earning assets		7,698,884			658,874	8.56			5,985,018			481,113	8.04

		Allowance for credit losses			(139,701	)						(139,973	)
		Cash and due from banks			341,947							295,432
		Other nonearning assets			524,999							348,357

			Total assets	$	8,426,129						$	6,488,834

Liabilities and Shareholders' Equity
	Interest-bearing deposits:
		Interest checking accounts		$	540,765			2,780	0.51		$	411,350			2,065	0.50
		Money market accounts			1,317,186			47,404	3.60			989,888			29,385	2.97
		Savings deposits			237,024			10,040	4.24			200,579			7,547	3.76
		Time deposits—under $100,000			260,115			14,770	5.68			202,387			9,658	4.77
		Time deposits—$100,000 and over			1,377,406			80,733	5.86			928,692			44,559	4.80

			Total interest—bearing deposits		3,732,496			155,727	4.17			2,732,896			93,214	3.41
		Federal funds purchased and securities sold under repurchase agreements			264,013			16,269	6.16			232,350			11,019	4.74
		Other borrowings			1,047,622			67,776	6.47			818,809			44,208	5.40

			Total interest—bearing liabilities		5,044,131			239,772	4.75			3,784,055			148,441	3.92

	Noninterest—bearing deposits				2,602,350							2,076,904
	Other liabilities				112,030							63,784
	Shareholders' equity				667,618							564,091

			Total liabilities and shareholders' equity	$	8,426,129						$	6,488,834

Net interest spread									3.81	%						4.12	%
Fully taxable equivalent net interest income							$	419,102						$	332,672

Net interest margin									5.44	%						5.56	%

(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 $40,431, $22,676, $32,140, $37,879, and $45,813 for 2000, 1999, 1998, 1997, and 1996, respectively.
(3): Loan income includes loan fees of $20,351, $17,662, $12,185, $8,857, and $7,492 for 2000, 1999, 1998, 1997, and 1996, respectively.

A-8

1998							1997							1996
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
$	2,186,395		$	195,288	8.93	%	$	1,623,851		$	150,528	9.27	%	$	1,123,819		$	101,039	8.99	%
	755,752			71,976	9.52			647,658			63,662	9.83			509,565			49,452	9.70
	1,028,966			76,874	7.47			942,381			73,199	7.77			783,648			62,293	7.95
	191,782			20,874	10.88			127,867			15,004	11.73			88,498			10,295	11.63
	50,958			5,044	9.90			46,027			5,035	10.94			33,793			3,615	10.70

	4,213,853			370,056	8.78			3,387,784			307,428	9.07			2,539,323			226,694	8.93
	103,491			7,044	6.81			105,325			7,400	7.03			57,461			4,061	7.07
	100,350			6,260	6.24			117,874			7,683	6.52			116,970			7,457	6.38
	638,505			44,057	6.90			606,358			40,822	6.73			665,133			42,841	6.44
	66,379			3,458	5.21			23,485			1,301	5.54			64,230			3,562	5.55
	65,319			3,637	5.57			49,627			2,871	5.79			62,305			3,434	5.51

	5,187,897			434,512	8.38			4,290,453			367,505	8.57			3,505,422			288,049	8.22

	(137,257	)						(136,587	)						(129,788	)
	310,201							327,013							284,331
	272,988							223,007							161,349

$	5,633,829						$	4,703,886						$	3,821,314

$	385,075			3,751	0.97		$	366,997			3,677	1.00		$	316,146			2,925	0.93
	892,765			27,018	3.03			797,902			23,995	3.01			726,942			21,589	2.97
	169,606			6,167	3.64			169,030			5,701	3.37			132,591			4,450	3.36
	201,152			10,428	5.18			222,972			11,414	5.12			139,572			7,196	5.16
	761,048			39,873	5.24			534,431			28,502	5.33			363,659			18,596	5.11

	2,409,646			87,237	3.62			2,091,332			73,289	3.50			1,678,910			54,756	3.26
	209,982			10,821	5.15			222,617			11,731	5.27			253,853			12,835	5.06
	553,153			32,220	5.82			338,930			19,308	5.70			265,638			14,798	5.57

	3,172,781			130,278	4.11			2,652,879			104,328	3.93			2,198,401			82,389	3.75

	1,857,956							1,522,736							1,192,960
	64,666							55,428							56,462
	538,426							472,843							373,491

$	5,633,829						$	4,703,886						$	3,821,314

					4.27	%						4.64	%						4.47	%
			$	304,234						$	263,177						$	205,660

					5.86	%						6.13	%						5.87	%

A-9

Provision for Credit Losses

The provision for credit losses charged to earnings reflects, among other things, the level of net loan charge-offs and nonaccrual loans, the growth of the loan portfolio, as well as management's assessment of credit quality of the portfolio. In 2000, 1999 and 1998, net charge-offs totaled $30.1 million, $4.7 million and $5.2 million, respectively. In each of these same years, nonaccrual loans totaled $62.0 million, $25.3 million and $23.1 million, respectively.

The Company recorded a provision for credit losses of $21.5 million in 2000, the first provision since 1994. See "—Balance Sheet Analysis—Asset Quality—Allowance for Credit Losses."

The amount of the provision for credit losses to be taken in 2001 will reflect management's assessment of the above factors, as well as the economic environment at each reporting date. Based on the current assessment of the factors, management anticipates that a provision for credit losses of approximately $30.0 million to $45.0 million may be required in 2001.

Noninterest Income

The Company continues to emphasize fee income growth. Noninterest income in 2000 totaled $109.5 million, an increase of $22.3 million, or 25.6%, from 1999 which increased $19.5 million, or 28.8%, from 1998. Noninterest income represented 21.2% of total revenues in 2000, as compared with 21.3% and 18.7% in 1999 and 1998, respectively.

A breakdown of noninterest income by category is reflected below.

Analysis of Changes in Noninterest Income

					Increase (Decrease)							Increase (Decrease)
Dollars in millions		2000			Amount			%		1999		Amount		%	1998
Investment services		$	26.4		$	6.6		33.3		$	19.8	$	3.5	21.5	$	16.3
Trust fees			20.9			2.8		15.5			18.1		8.7	92.6		9.4
Service charges on deposit accounts			22.9			4.8		26.5			18.1		0.7	4.0		17.4
International services			15.0			5.0		50.6			10.0		1.9	23.5		8.1
Bank owned life insurance			2.6			0.3		13.0			2.3		0.2	9.5		2.1
All other income			18.7			5.6		42.7			13.1		3.6	37.9		9.5

	Total recurring noninterest income		106.5			25.1		30.8			81.4		18.6	29.6		62.8
Gain (loss) on sale of loans and assets			(0.1	)		(2.2	)	(104.8	)		2.1		0.3	16.7		1.8
Gain (loss) on sale of securities			3.1			(0.6	)	(16.2	)		3.7		0.6	19.4		3.1

	Total	$	109.5		$	22.3		25.6		$	87.2	$	19.5	28.8	$	67.7

Investment services income, which includes fees, commissions and markups on securities transactions with clients, and fees on mutual funds, increased in 2000, compared with 1999, by $6.6 million, or 33.3%, primarily due to higher commissions resulting from higher balances in mutual funds and an expanded number of mutual funds available. Trust fees increased by $2.8 million, or 15.5%, from 1999 to 2000 due to new investment products and a higher number of affluent clients. The increase in investment services income and trust fees from 1998 to 1999 was attributable to the acquisition of NATC and new investment products. At December 31, 2000, the Company had $18.0 billion under administration which included $6.7 billion under management, compared with $14.1 billion and $4.4 billion, respectively, at December 31, 1999. Assets under management at December 31, 2000 included $1.1 billion from the purchase of RCB.

Service charges on deposit accounts increased $4.8 million, or 26.5%, compared with a 4.0% increase in 1999. The increase in 2000 was the result of deposits assumed in the acquisitions of APSB and Pacific Bank and strong internal growth in deposits attributable to increased sales of cash management products. The increase in 1999 was the result of strong deposit growth, and in

A-10

part, the acquisition of APSB. Service charges on deposit accounts are lower than for many peers, in part, because of the relatively high level of deposit balances maintained by many of the Bank's clients in lieu of paying fees for banking services.

International services fee income increased $5.0 million, or 50.6%, from 1999 to 2000, and $1.9 million, or 23.5%, from 1998 to 1999, 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. In 2001, the Bank expects to be able to offer online foreign exchange transactions.

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 2000 totaled $3.1 million compared with $3.7 million and $3.1 million for 1999 and 1998, respectively.

Management expects growth in noninterest income to be in the 15% to 20% range during 2001.

Noninterest Expense

Noninterest expense was $294.8 million in 2000, an increase of $53.0 million, or 21.9%, from 1999 which increased $30.5 million, or 14.4%, from 1998. The current year-over-year increase in expense was primarily the result of the Company's growth, including expenses related to acquisitions—additional offices, new colleagues and the amortization of goodwill and core deposit intangibles. A breakdown of noninterest expense by category is reflected below.

Analysis of Changes in Noninterest Expense

						Increase (Decrease)					Increase (Decrease)
Dollars in millions				2000		Amount		%	1999		Amount			%		1998
Salaries and employee benefits				$	159.8	$	25.9	19.3	$	133.9	$	18.9		16.4		$	115.0

All Other:
	Net occupancy of premises			$	24.4	$	5.4	28.4	$	19.0	$	4.8		33.8		$	14.2
	Professional				23.1		2.3	11.1		20.8		(2.6	)	(11.1	)		23.4
	Amortization of goodwill				11.2		6.0	115.4		5.2		1.8		52.9			3.4
	Amortization of core deposit intangibles				5.4		1.3	31.7		4.1		0.6		17.1			3.5
	Information services				14.1		1.8	14.6		12.3		3.5		39.8			8.8
	Depreciation				13.0		1.8	16.1		11.2		2.4		27.3			8.8
	Marketing and advertising				13.0		2.6	25.0		10.4		0.1		1.0			10.3
	Office supplies				9.7		1.5	18.3		8.2		0.9		12.3			7.3
	Equipment				2.5		0.3	13.6		2.2		(0.1	)	(4.3	)		2.3
	Other operating				18.6		4.1	28.3		14.5		0.2		1.4			14.3

		Total all other			135.0		27.1	25.1		107.9		11.6		12.0			96.3

			Total	$	294.8	$	53.0	21.9	$	241.8	$	30.5		14.4		$	211.3

Salaries and employee benefit expense increased 19.3% in 2000 compared with a 16.4% increase in 1999. On a full-time equivalent basis, staff levels have increased to 2,034 at December 31, 2000 from 1,874 at December 31, 1999.

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

A-11

$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.

The remaining expense categories increased $11.6 million, or 12.0%, between 1998 and 1999. The decrease in professional expense resulted primarily from lower consulting expense due to completed productivity and revenue enhancement projects. Marketing and advertising expense increased slightly as the Company continued its marketing and advertising program to increase its visibility. The increase in depreciation expense resulted from the Company's $17.8 million of capital expenditures during 1999 for premises and technology equipment upgrades. The increase in information services in 1999 relates to the growth of the Company and increased expenses relating to Year 2000 readiness. Amortization of goodwill and core deposit intangibles increased $2.4 million due to the acquisition of APSB and NATC. Other expenses in 1999 included $1.2 million of integration expense relating to APSB, of which $0.64 million was paid in 1999.

Throughout 2000, management monitored all business processes, including interactions with clients, vendors and other third parties, to ensure that all processes functioned properly. There has been no Year 2000 transition issues of any significance.

Management currently anticipates that 2001 noninterest expense will increase in the 5% to 8% range, excluding the impact of any change in the accounting rules for goodwill amortization.

In September 1999, the FASB issued an Exposure Draft of a proposed Statement of Financial Accounting Standards ("SFAS"), "Business Combinations and Intangible Assets". In December 2000, the Board tentatively concluded that upon the effective date of the final statement on business combinations and intangible assets, goodwill will no longer be amortized. This conclusion includes existing goodwill as well as goodwill arising subsequent to the effective date of the final statement. Goodwill however, must be reviewed for impairment upon the occurrence of certain triggering events and if appropriate, adjusted for any impairment of value. The FASB has also reached tentative conclusions on the future of the pooling-of-interest method of accounting for business combinations. These tentative decisions include the decision that the pooling-of-interest method of accounting will no longer be an acceptable method to account for business combinations between independent parties. They reached a conclusion that there should be a single method of accounting for all business combinations, and that method is the purchase method. The FASB agreed that the purchase method should be applied prospectively to business combination transactions that are initiated after the final standard is issued. The FASB is currently anticipating issuing a final statement during the second quarter of 2001. Management believes that this change in the treatment of goodwill, if adopted as proposed, will have a positive impact on the Company's future results of operations. In 2000, amortization of goodwill reduced net income per diluted common share by $0.22.

Income Taxes

The 2000 effective tax rate was 34.1% compared with 35.4% in 1999 and 35.9% in 1998. The effective rates 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 lower tax rate in 2000 also reflected the formation of a registered investment company subsidiary. The long-term plan for the registered investment company continues under review. The capital enhancement activities contemplated through private or public offerings of securities of the registered investment company have been postponed until the review is completed. Depending on the outcome of the review and other factors, management anticipates its effective tax rate to be between 35.5% and 37.0% for 2001.

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BALANCE SHEET ANALYSIS

Capital

At December 31, 2000, 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 $555.5 million and $532.6 million, respectively. At December 31, 1999, the Corporation's and the Bank's Tier 1 capital amounted to $471.3 million and $440.6 million, respectively. The increase from December 31, 1999 resulted from retention of 2000 earnings, the issuance of shares for the Pacific Bank and RCB acquisitions 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, 2000, 1999 and 1998.

	Regulatory Well Capitalized Standards		December 31,
	Regulatory Well Capitalized Standards		2000		1999		1998
City National Corporation
Tier 1 leverage	4.00	%	6.49	%	6.73	%	7.99	%
Tier 1 risk-based capital	6.00		7.84		7.88		9.43
Total risk-based capital	10.00		10.85		11.21		13.20
City National Bank
Tier 1 leverage	4.00		6.23		6.30		7.53
Tier 1 risk-based capital	6.00		7.55		7.40		8.90
Total risk-based capital	10.00		10.57		10.75		12.65

Liquidity Management

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 67% and 69% of funding for average total assets in 2000 and 1999, 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 $264.0 million and $232.4 million in 2000 and 1999, respectively. Additionally, the Company increased its funding from other borrowings, primarily Federal Home Loan Bank advances, to $1,047.6 million on average in 2000 from $818.8 million in 1999.

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 $111.6 million during 2000 compared with $112.0 in 1999.

Liquidity is also provided by the portfolio of securities available-for-sale which totaled $1,547.8 million at December 31, 2000. The unpledged portion of securities available-for-sale at December 31, 2000 totaled $950.4 million and could be sold or be available as collateral for borrowing. Maturing loans also provide liquidity, and $2,675.1 million of the Company's loans are scheduled to mature in 2001.

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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. 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.

The Company has established three 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 month forecast horizon. Present value of equity calculations are used to estimate the theoretical price sensitivity of shareholder equity to changes in interest rates. Gap analysis provides insight into structural mismatches of assets 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 balance sheet and off-balance sheet strategies and volumes under different interest rate scenarios over the course of a twelve month period. 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 limits, ALCO sets management guidelines to further limit exposure and to take advantage of movements in rates.

The simulation indicates that net interest income would not be substantially impacted by changes in interest rates. An immediate interest rate decline of two percentage points would result in a decrease in projected net interest income of approximately four percent. A similar increase in rates would cause net interest income to improve by slightly over two percent. The decline is within the ALCO guideline of minus five percent. The Company's asset sensitivity increased during 2000 due to loans acquired in the acquisition of Pacific Bank and a decrease in the Bank's portfolio of off-balance sheet derivatives. The Company continues to use various asset management tools to reduce its asset sensativity.

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 various 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 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 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 2.7% decline in PVE. A two percentage point decrease in interest rates results in a 1.2% appreciation in PVE. These results reflect the slight increase in asset sensitivity experienced over the previous twelve months.

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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 securities or off-balance sheet derivatives transactions. 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 ratio is 108% 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, 2000 and December 31, 1999. 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.

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

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Interest-Sensitive Financial Instrument Maturities
December 31, 1999

Dollars in millions				2000			2001			2002			2003			2004			Thereafter			Total			Fair Value

Interest-sensitive assets:
Available-for-sale securities				$	30.5		$	26.5		$	62.4		$	85.5		$	80.0		$	817.2		$	1,102.1		$	1,102.1
		Average interest rate			6.44	%		6.50	%		6.27	%		6.16	%		6.92	%		6.26	%		6.31	%
Loans
	Commercial				2,455.6			116.6			63.7			63.7			54.2			116.6			2,870.4			2,868.5
		Average interest rate			8.58	%		7.13	%		6.96	%		6.96	%		6.87	%		6.26	%		8.33	%
	Real estate mortgage				526.5			52.7			47.9			47.9			43.5			323.6			1,042.1			1,020.4
		Average interest rate			8.68	%		8.38	%		8.52	%		8.52	%		8.18	%		7.97	%		8.43	%
	Residential first mortgage				262.0			148.7			120.2			98.7			82.4			461.3			1,173.3			1,140.6
		Average interest rate			8.31	%		7.24	%		7.22	%		7.22	%		7.19	%		7.17	%		7.43	%
	Real estate construction				315.4			18.5			1.2			1.2			1.1			7.5			344.9			344.6
		Average interest rate			9.15	%		9.00	%		10.32	%		10.32	%		7.71	%		7.69	%		9.11	%
	Installment				18.3			10.4			6.6			6.6			1.6			16.5			60.0			54.1
		Average interest rate			11.00	%		9.43	%		9.32	%		9.32	%		8.94	%		9.16	%		9.96	%

			Total loans		3,577.8			346.9			239.6			218.1			182.8			925.5			5,490.7			5,428.2

Total interest-sensitive assets				$	3,608.3		$	373.4		$	302.0		$	303.6		$	262.8		$	1,742.7		$	6,592.8		$	6,530.3

Interest-sensitive liabilities:
Deposits
	Interest checking			$	473.0		$	—		$	—		$	—		$	—		$	—		$	473.0		$	473.0
		Average interest rate			0.40	%																	0.40	%
	Savings				221.0			—			—			—			—			—			221.0			221.0
		Average interest rate			3.76	%																	3.76	%
	Money market				1,103.9			—			—			—			—			—			1,103.9			1,103.9
		Average interest rate			3.22	%																	3.22	%
	Time				1,366.8			39.3			7.4			4.7			4.3			0.1			1,422.6			1,419.5
		Average interest rate			4.90	%		5.30	%		5.70	%		5.00	%		4.80	%		—			4.96	%

			Total deposits		3,164.7			39.3			7.4			4.7			4.3			0.1			3,220.5			3,217.4
Total borrowings					592.2			100.0			65.0			—			15.0			123.5			895.7			883.0
		Average interest rate			5.08	%		6.26	%		5.63	%		—	%		5.24	%		6.38	%		5.43	%

Total interest-sensitive liabilities				$	3,756.9		$	139.3		$	72.4		$	4.7		$	19.3		$	123.6		$	4,116.2		$	4,100.4

The use of interest rate swaps to manage interest rate exposure 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, 2000, 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. The Company has not entered into transactions involving any other interest rate derivative financial instruments, such as interest rate floors, caps, and interest rate futures contracts. The Company could consider in the future such financial instruments if they were significantly financially attractive compared to interest rate swaps.

A-16

The table below shows the notional amounts of the Company's interest rate swap maturities and average rates at December 31, 2000 and December 31, 1999:

Interest Rate Swap Maturities and Average Rates
December 31, 2000

	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	%

Interest Rate Swap Maturities and Average Rates
December 31, 1999

	2000			2001			2002			2003			2004			Thereafter			Total			Fair Value

Notional amount	$	545.0		$	90.0		$	190.0		$	—		$	15.0		$	125.0		$	965.0		$	(10.0)	(1)
Weighted average rate received		5.48	%		5.64	%		5.77	%		—	%		5.39	%		6.64	%		5.70	%
Weighted average rate paid		6.26	%		6.26	%		6.29	%		—	%		6.46	%		5.46	%		6.16	%

(1): Estimated net gain or (loss) to settle derivative contracts.

See Recent Accounting Pronouncements under Note 1. Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for the implementation impact on the Corporation's financial statements on January 1, 2001 of the adoption of FASB's SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities".

At December 31, 2000, the Company's outstanding foreign exchange contracts for both those purchased as well as sold totaled $95.5 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 prohibit outright speculation by the Company and its employees. The Company actively manages its foreign exchange exposures within prescribed risk limits and controls. All foreign exchange contracts outstanding at December 31, 2000 had remaining maturities of twelve months or less.

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. 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. At December 31, 1999, the securities available-for-sale portfolio had an unrealized net loss of $46.9 million, comprised of $49.9 million of unrealized losses and $3.0 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).

A-17

Comparative period end security portfolio balances are presented below:

Securities Available-for-Sale

		December 31, 2000				December 31, 1999
Dollars in thousands		Cost		Fair Value		Cost		Fair Value

U.S. Government and Federal agency		$	646,629	$	648,374	$	291,407	$	286,546
Mortgage-backed			438,667		437,221		368,948		351,251
State and Municipal			158,983		160,139		155,736		152,244
Other debt securities			165,489		150,913		166,772		150,913

	Total debt securities		1,409,768		1,396,647		982,863		940,954
Marketable equity securities			157,908		151,197		166,150		161,138

	Total securities	$	1,567,676	$	1,547,844	$	1,149,013	$	1,102,092

At December 31, 2000, the fair value of securities available-for-sale totaled $1,547.8 million, an increase of $445.8 million, or 40.4% from December 31, 1999. The increase was due to investing activities of the registered investment subsidiary. The average duration of total available-for-sale securities at December 31, 2000 was 3.6 years compared with 5.5 years at December 31, 1999.

The following table provides the expected remaining maturities and yields (taxable-equivalent basis) of debt securities within the securities portfolio at December 31, 2000. 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 2000			Total 1999			Total 1998
Dollars in thousands		Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield
U.S. Government and Federal agency		$	364,423	6.43	$	235,491	6.63	$	48,460	6.38	$	—	—	$	648,374	6.49	$	286,546	6.34	$	275,145	6.11
Mortgage-backed			—	—		6,254	5.88		11,554	6.22		419,413	6.83		437,221	6.79		351,251	6.53		351,469	6.61
State and Municipal			14,847	6.75		50,645	6.82		94,145	6.76		502	7.23		160,139	6.79		152,244	6.65		123,845	6.60
Other debt securities			51	7.00		—	—		84,125	7.52		66,737	8.15		150,913	7.80		150,913	7.72		152,692	7.78

	Total debt securities	$	379,321	6.44	$	292,390	6.65	$	238,284	6.92	$	486,652	7.02	$	1,396,647	6.77	$	940,954	6.68	$	903,151	6.65

	Amortized cost	$	379,286		$	290,087		$	248,006		$	492,389		$	1,409,768		$	982,863		$	885,259

Dividend income included in interest income on securities in the consolidated statement of income and comprehensive income was $9.5 million and $5.6 million for 2000 and 1999, respectively.

Loan Portfolio

Total loans were $6,527.1 million, $5,490.7 million, and $4,530.4 million at December 31, 2000, 1999, and 1998, respectively. The increase in total loans of $1,036.4 million during 2000 relates to the overall growth in the Company's loan portfolio and the acquisition of Pacific Bank. 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 where the Company has direct access to the borrower and, therefore, has the opportunity to provide the

A-18

borrower with multiple banking products or services, such as cash management, international, brokerage and trust services. 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. Similar growth occurred in 1999.

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		2000			1999			1998			1997			1996
Commercial
	Relationship	$	3,056,464		$	2,333,627		$	1,950,653		$	1,731,860		$	1,201,547
	Syndicated non-relationship		191,789			536,811			507,293			240,372			133,030

			3,248,253			2,870,438			2,457,946			1,972,232			1,334,577
Real estate mortgage			1,479,862			1,042,123			747,711			686,188			499,377
Residential first mortgage			1,273,711			1,173,334			1,038,229			980,040			882,573
Real estate construction			452,301			344,870			237,015			144,558			92,322
Installment			73,018			59,904			49,526			42,206			30,586

Total loans		$	6,527,145		$	5,490,669		$	4,530,427		$	3,825,224		$	2,839,435

Commercial
	Relationship		46.9	%		42.4	%		43.1	%		45.3	%		42.2	%
	Syndicated non-relationship		2.9			9.8			11.2			6.3			4.7
Real estate mortgage			22.7			19.0			16.5			17.9			17.6
Residential first mortgage			19.5			21.4			22.9			25.6			31.1
Real estate construction			6.9			6.3			5.2			3.8			3.3
Installment			1.1			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 one borrower can amount to $118.9 million at December 31, 2000, 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 2000 was $40.0 million. At December 31, 2000, there were 25 loans with commitments greater than $25.0 million. Of the 25 relationships, 14 had outstandings greater than $25.0 million with the largest outstanding being a $65.0 million security secured loan.

Commercial syndicated non-relationship loans were $191.8 million at December 31, 2000, representing less than 3% of the loan portfolio. At December 31, 1999, syndicated non-relationship loans totaled $536.8 million, or 10% 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 reduction included the transfer of $132.0 million of gross loan balances to loans available-for-sale during the fourth quarter of 2000, of which one credit for $7.2 million remained unsold in other assets as of December 31, 2000. The average outstanding loan balance in the syndicated non-relationship portfolio at December 31, 2000 was $3.1 million, which represents just over half of the average commitment amount. As of February 28, 2001, the balance of syndicated non-relationship loans had been further reduced to $173.7 million.

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Syndicated non-relationship loans at December 31, 2000 included media and communications related credits totaling $86.0 million (average outstandings of $5.1 million) and a group of highly diversified corporate outstandings aggregating $105.8 million (average outstandings of $2.8 million). The Company has identified media and communications as one of its industry specialties and intends to continue building on its expertise in this area as well as its relationship with middle market communications companies located within the California marketplace. An additional $214.3 million of media and communications credits were outstanding in the Company's commercial relationship portfolio. At December 31, 2000, the Company had a total of $10.6 million of syndicated non-relationship media and communications credits on nonaccrual.

Management expects the remaining syndicated non-relationship portfolio of corporate borrowers, which is currently less than 2% of the Company's total loan portfolio, to be eliminated over time through scheduled repayments, as well as future events and market driven activities. Management has aggressively reduced the exposure in this portfolio over the past 15 months and continues to believe that the wholesale marketing of these credits at this time is not appropriate. The corporate syndicated non-relationship portfolio at December 31, 2000 included $12.4 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 does not contain any direct energy-related borrowings and a limited amount of technology-related borrowings—approximately two thirds of one percent of the total commercial loan portfolio. The average outstanding individual note balance in the $3,056.5 million commercial relationship loan portfolio at December 31, 2000 was $340,000. See "—Results of Operations—Net Interest Income."

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

Relationship Commercial Loans By Industry

		December 31,
Dollars in thousands		2000		1999
Services (1)		$	765,120	$	613,380
Entertainment			551,273		455,037
Wholesale Trade			311,762		212,200
Manufacturing			306,668		273,032
Real Estate and Construction			255,180		197,581
Finance and Insurance			219,047		80,324
Media and Communications			214,339		157,258
Retail Trade			95,115		47,735
Other			337,960		297,080

	Total	$	3,056,464	$	2,333,627

(1): Legal, membership organizations, engineering and management services, etc.

Real estate mortgages, representing 22.7% of the loan portfolio, consists of 92.5% commercial and 7.5% residential. The increase during 2000 was due to the acquisition of Pacific Bank and internal loan origination. The average outstanding individual note balance at December 31, 2000 was approximately $600,000.

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Following is a breakdown of real estate mortgage loans by collateral type:

Real Estate Mortgage Loans by Collateral Type

		December 31,
Dollars in thousands		2000		1999
Industrial		$	693,168	$	464,075
Office buildings			150,239		97,221
Shopping centers			100,834		59,673
Equity lines of credit			68,626		52,072
Condominiums/apartments			67,381		43,083
1-4 family (includes undeveloped land)			44,283		29,391
Churches/religious			15,560		13,067
Land, nonresidential			9,884		13,161
Other			329,887		270,380

	Total	$	1,479,862	$	1,042,123

Residential first mortgage loans which comprised 19.5% of total loans at December 31, 2000, continued a seven-year growth trend, increasing $100.4 million, or 8.6%, to $1,273.7 million at December 31, 2000. At December 31, 2000, 86.3% 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 60.0% at origination. The average outstanding individual note balance at December 31, 2000 was approximately $500,000.

The real estate construction portfolio, representing 6.9% of the loan portfolio, consists of 74.2% commercial and 25.8% 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, 2000 was approximately $1,875,000.

Following is a breakdown of real estate construction loans by collateral type:

Real Estate Construction Loans by Collateral Type

	December 31,
Dollars in thousands	2000		1999
Industrial	$	144,136	$	138,131
Condominiums/apartments		82,133		34,409
Office buildings		54,246		23,276
Shopping centers		37,602		64,531
1-4 family (includes undeveloped land)		34,513		23,525
Other		99,671		60,998

Total	$	452,301	$	344,870

Installment loans consist primarily of loans to individuals for personal purchases. The average outstanding individual note balance at December 31, 2000 was approximately $16,000.

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

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California, which in some degree relies on the stability of entertainment and media companies and, to a lesser extent, Northern California. Any strikes by the writers' and actors' guilds, should they occur and continue for an extended period, would negatively impact the entertainment industry and related businesses which rely on it for their livelihood. Management does not believe that the strikes would have a material adverse effect on the Company's business.

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 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 and the increase in its nonperforming and nonaccrual loans, 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. Any exception to these guidelines are approved 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.

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At December 31, 2000, 80.4% of commercial loans and 46.4% of real estate loans outstanding were floating interest rate loans. There were no floating rate installment loans as of December 31, 2000. Floating rate loans comprised 62.8% of the total loan portfolio at December 31, 2000 and 51.2% at December 31, 1999. Total loans at December 31, 2000 consisted of 41.0% due in one year or less, 13.7% due in one to five years and 45.3% 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.

Loan Maturities

			December 31, 2000
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		$	2,055,567	$	183,962	$	—	$	321,161	$	—	$	2,560,690
	Interest rate—fixed			74,733		15,310		—		16,719		7,677		114,439
After one year but within five years
	Interest rate—floating			402,356		118,349		—		91,597		—		612,302
	Interest rate—fixed			211,384		13,569		15,569		9,947		29,213		279,682
After five years
	Interest rate—floating			154,812		471,030		300,123		61		—		926,026
	Interest rate—fixed			349,401		677,642		958,019		12,816		36,128		2,034,006

		Total loans	$	3,248,253	$	1,479,862	$	1,273,711	$	452,301	$	73,018	$	6,527,145

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 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 and potential 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 and reviews the results with the Audit Committee. 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, 2000. 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

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2001, 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, 2000:

Allowance for Credit Losses

			Year ended December 31,
Dollars in thousands			2000			1999			1998			1997			1996
Average amount of loans outstanding			$	6,236,334		$	4,822,254		$	4,213,853		$	3,387,784		$	2,539,323

Balance of allowance for credit losses, beginning of year			$	134,077		$	135,339		$	137,761		$	130,089		$	131,514

Loans charged off:
	Commercial
		Relationship		(22,293	)		(10,672	)		(12,987	)		(12,440	)		(14,647	)
		Syndicated non-relationship		(18,167	)		(8,093	)		(2,032	)		(2,211	)		—

				(40,460	)		(18,765	)		(15,019	)		(14,651	)		(14,647	)
	Real estate mortgage			(905	)		(455	)		(1,382	)		(4,275	)		(5,338	)
	Residential first mortgage			(77	)		(158	)		(1,128	)		(474	)		(253	)
	Installment			(134	)		(150	)		(107	)		(112	)		(104	)

		Total loans charged off		(41,576	)		(19,528	)		(17,636	)		(19,512	)		(20,342	)

Recoveries of loans previously charged off:
	Commercial			7,977			13,403			11,556			11,098			13,325
	Real estate mortgage			1,959			893			397			8,894			5,313
	Residential first mortgage			1,522			527			503			58			—
	Installment			49			28			11			118			279

		Total recoveries		11,507			14,851			12,467			20,168			18,917

Net loans (charged off) recovered				(30,069	)		(4,677	)		(5,169	)		656			(1,425	)
Additions to allowance charged to operating expense				21,500			—			—			—			—
Acquisitions				9,927			3,415			2,747			7,016			—

Balance, end of year			$	135,435		$	134,077		$	135,339		$	137,761		$	130,089

Ratio of net (charge offs) recoveries to average loans				(0.48	)%		(0.10	)%		(0.12	)%		0.02	%		(0.06)	%

Ratio of net relationship (charge offs) recoveries to average relationship loans				(0.21	)%		0.08	%		(0.08	)%		0.09	%		(0.06	)%

Net loan charge-offs were $30.1 million, or 0.48%, of average loans during 2000. Included in this amount was $18.2 million in gross loan charge-offs in syndicated non-relationship loans which represented 60% of net loan charge-offs. Net charge-offs for 1999 and 1998 were $4.7 million, or 0.10%, and $5.2 million, or 0.12%, of average loans, respectively.

The allowance for credit losses as a percentage of total loans was 2.07%, 2.44%, and 2.99% at December 31, 2000, 1999, and 1998, respectively. The allowance for credit losses as a percentage of nonperforming loans was 218.5%, 530.2%, and 584.9% at December 31, 2000, 1999, and 1998, 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.

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Allocation of Allowance for Credit Losses

		Allowance amount										Percent of loans to total loans
Dollars in thousands		2000		1999		1998		1997		1996		2000		1999		1998		1997		1996
Commercial
	Relationship	$	74,920	$	63,082	$	80,275	$	81,101	$	67,695	47	%	42	%	43	%	45	%	42	%
	Syndicated non-relationship		17,717		15,579		20,536		10,813		8,059	3		10		11		6		5
Real estate mortgage			24,517		33,590		16,508		27,378		37,748	23		19		17		18		18
Residential first mortgage			10,453		17,659		15,625		14,750		13,283	19		22		23		26		31
Real estate construction			6,645		2,837		1,950		3,357		2,405	7		6		5		4		3
Installment			1,183		1,330		445		362		899	1		1		1		1		1

	Total	$	135,435	$	134,077	$	135,339	$	137,761	$	130,089	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. An increase in problem loans in the commercial category and a decrease in problem loans in the real estate mortgage category during 2000 resulted in an increased portion of the allowance for credit losses being allocated to the commercial category from that allocated in 1999. In 1999, due to real estate mortgage loan growth, an increased portion of the allowance for credit losses was allocated to the real estate mortgage loan category from that allocated in 1998.

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. At December 31, 1999, there was $16.6 million of impaired loans included in nonaccrual loans, none of which had an allowance for credit losses 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 $62.5 million, or 0.96% of total loans and ORE at December 31, 2000, compared with $26.7 million, or 0.49%, at December 31, 1999.

Total nonperforming relationship assets were $39.5 million, or 0.62%, of total relationship loans and ORE at December 31, 2000, compared with $26.7 million, 0.54% at December 31, 1999. While the Company has experienced a moderate increase in relationship nonaccrual loans, the nonaccrual loan portfolio does not contain any concentration of credits within a specific industry sector. Management believes that the increase reflects the growth in the relationship portfolio and, to a lesser extent, the slowdown in the rate of growth of California's economy. Syndicated non-relationship loans on nonaccrual status represented 37% of the total, or $23.0 million at December 31, 2000. The nonperforming syndicated non-relationship loans consisted of five borrowers, three of which were added in the fourth quarter of 2000.

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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			2000			1999			1998			1997			1996
Nonaccrual loans:
	Commercial
		Relationship	$	30,343		$	13,368		$	4,763		$	6,589		$	7,531
		Syndicated non-relationship		23,012			—			—			—			8,351

				53,355			13,368			4,763			6,589			15,882
	Real estate			8,132			10,380			17,204			19,243			25,661
	Installment			499			1,540			1,171			1,734			—

		Total		61,986			25,288			23,138			27,566			41,543
ORE				522			1,413			3,480			2,126			15,116

Total nonaccrual loans and ORE			$	62,508		$	26,701		$	26,618		$	29,692		$	56,659

Total nonaccrual loans as a percentage of total loans				0.95	%		0.46	%		0.51	%		0.72	%		1.46	%
Total nonaccrual loans and ORE as a percentage of total loans and ORE				0.96			0.49			0.59			0.78			1.98
Total relationship nonaccrual loans and ORE to total relationship loans and ORE				0.62			0.54			0.66			0.83			1.78
Allowance for credit losses to total loans				2.07			2.44			2.99			3.60			4.58
Allowance for credit losses to nonaccrual loans				218.49			530.20			584.92			499.75			313.14
Loans past due 90 days or more on accrual status:
	Commercial		$	1,543		$	2,794		$	7,661		$	9,226		$	8,076
	Real estate			4,361			736			949			13,370			4,076
	Installment			20			503			13			3,596			292

		Total	$	5,924		$	4,033		$	8,623		$	26,192		$	12,444

Restructured loans:
	On accrual status		$	829		$	2,707		$	1,982		$	2,813		$	2,569
	On nonaccrual status			740			368			1,682			1,286			—

		Total	$	1,569		$	3,075		$	3,664		$	4,099		$	2,569

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, 2000, in addition to loans disclosed above as past due, nonaccrual or restructured, management also identified $5.4 million of loans about which the ability of the borrowers 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. This amount was determined based on analysis of information known to management about the borrower's financial condition and current economic conditions. 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

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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, 2000 and 1999.

Changes in Nonaccrual Loans

Dollars in thousands		2000			1999
Balance, beginning of the year		$	25,288		$	23,138
Loans placed on nonaccrual
	Relationship		47,731			29,624
	Syndicated non-relationship		38,789			—
Loans from acquisitions			4,428			647
Charge offs			(22,656	)		(7,953	)
Loans returned to accrual status			(9,010	)		(1,762	)
Repayments (including interest applied to principal)			(22,584	)		(18,354	)
Transfers to ORE			—			(52	)

Balance, end of year		$	61,986		$	25,288

The additional interest income that would have been recorded from nonaccrual loans, if the loans had not been on nonaccrual status was $4.5 million, $0.1 million, and $2.0 million for the years ended December 31, 2000, 1999, and 1998, 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 income includes $5.7 million, $3.7 million, and $2.0 million for the years ended December 31, 2000, 1999, and 1998, respectively, from collection of interest related to nonaccrual loans. Interest income not recognized on nonaccrual loans reduced the net interest margin by 6, 0, and 4 basis points for the years ended December 31, 2000, 1999, and 1998, respectively.

Other Real Estate

The Company's ORE totaled $0.5 million at year end 2000 compared to $1.4 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.

Other Assets

Other assets include the following

		December 31,
(Dollars in thousands)		2000		1999
Accrued interest receivable		$	53,423	$	42,206
Claim in receivership			18,950		—
Income tax refunds			1,342		4,188
Other			34,664		20,408

	Total other assets	$	108,379	$	66,802

The claim in receivership was acquired in the acquisition of Pacific Bank and is expected to be partially realized in 2001.

A-27

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 $2,325.1 million at December 31, 2000. In addition, the Company had $240.4 million outstanding in bankers' acceptances and letters of credit of which $178.2 million relate to standby letters of credit at December 31, 2000. Substantially all of the Company's loan commitments are on a variable rate basis and are comprised of real estate and commercial loan commitments.

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 $4,957.4 million in 2000 compared with $3,881.1 million in 1999. The increase was due primarily to internally generated growth and the acquisition of Pacific Bank.

Certificates of deposit of $100,000 or more totaled $1,676.4 million at December 31, 2000, of which $1,071.5 million mature within three months, $353.4 million mature within four to six months, $139.0 million mature within seven months to one year and $112.5 mature beyond one year.

Short and long-term borrowed funds provided additional funding, albeit at a higher cost, to support loan and securities growth. Average borrowed funds were $1,311.6 million in 2000 compared with $1,051.2 million in 1999.

At December 31, 2000 and 1999, the aggregate amount of deposits by foreign depositors in domestic offices totaled $122.5 million and $42.4 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 $65.2 million at December 31, 2000. Brokered deposits were $666.2 million and $248.8 million, at December 31, 2000 and 1999, respectively.

A-28

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.

An economic slowdown in California could hurt our business. An economic slowdown in California attributable to energy supply issues, a possible strike by writers and actors or any other unforeseen events 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. 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. For example, when interest rates rise, loan originations tend to decrease.

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 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.

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

A-29

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 with 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 we diversify our credit portfolio. Those policies and procedures may still not prevent unexpected losses that could adversely affect our results.

QUARTERLY RESULTS

The following table summarizes quarterly operating results for 2000 and 1999.

2000 Quarterly Operating Results

	Quarter ended
Dollars in thousands	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

1999 Quarterly Operating Results

	Quarter ended
Dollars in thousands	March 31,		June 30,		September 30,		December 31,			Total
Interest income	$	111,492	$	110,370	$	119,149	$	129,435		$	470,446
Interest expense		33,812		34,258		37,847		42,524			148,441

Net interest income		77,680		76,112		81,302		86,911			322,005
Provision for credit losses		—		—		—		—			—

Net interest income after provision for credit losses		77,680		76,112		81,302		86,911			322,005
Noninterest income		17,892		20,495		21,595		23,534			83,516
Gain (loss) on sale of securities		1,253		1,192		1,570		(319	)		3,696
Noninterest expense		55,901		57,834		61,369		66,699			241,803

Income before taxes		40,924		39,965		43,098		43,427			167,414
Income taxes		14,923		13,859		15,015		15,510			59,307

Net income	$	26,001	$	26,106	$	28,083	$	27,917		$	108,107

Net income per share, basic (1)	$	0.57	$	0.57	$	0.61	$	0.61		$	2.37

Net income per share, diluted	$	0.55	$	0.55	$	0.60	$	0.60		$	2.30

(1): Due to rounding, quarterly per share amounts do not add up to total.

A-30

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-31

INDEPENDENT AUDITORS' REPORT

To 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, 2000 and 1999 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, 2000. 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, 2000 and 1999 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.

KPMG LLP

Los Angeles, California
January 17, 2001

A-32

CITY NATIONAL CORPORATION

CONSOLIDATED BALANCE SHEET

			December 31,
Dollars in thousands, except share amounts			2000			1999
Assets
	Cash and due from banks		$	386,814		$	233,178
	Federal funds sold			165,000			57,000
	Securities available-for-sale (cost $1,567,676 and $1,149,013 in 2000 and 1999)			1,547,844			1,102,092
	Trading account securities			46,078			27,714
	Loans			6,527,145			5,490,669
	Less allowance for credit losses			135,435			134,077

		Net loans		6,391,710			5,356,592
	Premises and equipment, net			63,010			62,446
	Customers' acceptance liability			14,736			6,784
	Deferred tax asset			65,986			75,841
	Goodwill			171,559			104,963
	Core deposit intangibles			24,148			22,292
	Bank owned life insurance			52,820			49,981
	Affordable housing investments			58,585			47,934
	Other assets			108,379			66,802

		Total assets	$	9,096,669		$	7,213,619

Liabilities
	Demand deposits		$	3,276,203		$	2,448,916
	Interest checking deposits			619,332			472,996
	Money market deposits			1,344,244			1,103,907
	Savings deposits			244,707			221,002
	Time deposits-under $100,000			247,797			253,894
	Time deposits-$100,000 and over			1,676,387			1,168,694

		Total deposits		7,408,670			5,669,409
	Federal funds purchased and securities sold under repurchase agreements			139,841			95,487
	Other short-term borrowings			315,125			496,724
	Subordinated debt			123,641			123,453
	Long-term debt			208,417			180,000
	Other liabilities			142,591			70,116
	Acceptances outstanding			14,736			6,784

		Total liabilities		8,353,021			6,641,973

Commitments and contingencies
Shareholders' Equity
	Preferred Stock authorized—5,000,000: none outstanding			—			—
	Common Stock-par value-$1.00; authorized—75,000,000; issued—47,785,345 shares in 2000 and 46,885,182 shares in 1999			47,785			46,885
	Additional paid-in capital			292,358			276,464
	Accumulated other comprehensive loss			(11,493	)		(27,193	)
	Retained earnings			420,024			321,210
	Treasury shares, at cost—155,355 shares in 2000 and 1,428,439 shares in 1999			(5,026	)		(45,720	)

		Total shareholders' equity		743,648			571,646

		Total liabilities and shareholders' equity	$	9,096,669		$	7,213,619

See accompanying Notes to the Consolidated Financial Statements.

A-33

CITY NATIONAL CORPORATION

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME

			For the year ended December 31,
In thousands, except per share amounts			2000			1999			1998
Interest Income
	Loans		$	550,361		$	399,891		$	365,352
	Securities available-for-sale			89,588			65,209			40,956
	Investments securities			—			—			11,318
	Trading account			3,530			2,965			2,865
	Federal funds sold and securities purchased under resale agreements			2,809			2,381			3,458

		Total interest income		646,288			470,446			423,949

Interest Expense
	Deposits			155,727			93,214			87,237
	Other short-term borrowings			49,038			9,896			4,591
	Federal funds purchased and securities sold under repurchase agreements			16,269			25,954			21,824
	Other long-term debt			10,614			11,960			8,714
	Subordinated debt			8,124			7,417			7,912

		Total interest expense		239,772			148,441			130,278

	Net interest income			406,516			322,005			293,671
	Provision for credit losses			21,500			—			—

	Net interest income after provision for credit losses			385,016			322,005			293,671

Noninterest Income
	Investment services			26,409			19,763			16,330
	Trust fees			20,870			18,059			9,376
	Service charges on deposit accounts			22,933			18,113			17,386
	International services			14,982			9,950			8,106
	Bank owned life insurance			2,578			2,268			2,146
	Gain (loss) on sale of assets			(71	)		2,117			1,823
	Gain on sale of securities			3,132			3,696			3,072
	Other			18,651			13,246			9,445

		Total noninterest income		109,484			87,212			67,684

Noninterest Expense
	Salaries and other employee benefits			159,782			133,935			114,965
	Net occupancy of premises			24,415			18,955			14,189
	Professional			23,076			20,811			23,445
	Amortization of goodwill			11,223			5,171			3,349
	Amortization of core deposit intangibles			5,444			4,138			3,505
	Information services			14,064			12,267			8,805
	Depreciation			13,037			11,242			8,816
	Marketing and advertising			12,959			10,444			10,313
	Office services			9,724			8,212			7,308
	Equipment			2,462			2,213			2,250
	Acquisition integration			1,309			1,161			1,126
	Other operating			17,275			13,254			13,260

		Total noninterest expense		294,770			241,803			211,331

	Income before income taxes			199,730			167,414			150,024
	Income taxes			68,070			59,307			53,796

	Net income			131,660			108,107			96,228

	Other comprehensive income
		Unrealized gains (losses) on securities available-for-sale		31,293			(66,042	)		16,270
		Less: reclassification adjustment for losses included in income		(4,205	)		(3,252	)		(3,173	)
		Income taxes (benefits)		11,388			(29,200	)		5,545

	Other comprehensive income (loss)			15,700			(40,094	)		7,552

	Comprehensive income		$	147,360		$	68,013		$	103,780

	Net income per share, basic		$	2.79		$	2.37		$	2.08

	Net income per share, diluted		$	2.72		$	2.30		$	2.00

	Shares used to compute income per share, basic			47,178			45,683			46,357

	Shares used to compute income per share, diluted			48,393			46,938			48,141

	Dividends per share		$	0.70		$	0.66		$	0.56

See accompanying Notes to the Consolidated Financial Statements.

A-34

CITY NATIONAL CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

			For the year ended December 31,
Dollars in thousands			2000			1999			1998
Cash Flows From Operating Activities
Net income			$	131,660		$	108,107		$	96,228
Adjustments to net income:
	Provision for credit losses			21,500			—			—
	Amortization of goodwill and core deposit intangibles			16,667			9,309			6,854
	Depreciation			13,037			11,242			8,816
	Deferred income tax (benefit)			3,760			(2,199	)		11,856
	Gain on sales of ORE			(38	)		(399	)		(475	)
	Gain on sales of securities			(3,132	)		(3,696	)		(3,072	)
	Net increase in other (assets) liabilities			5,156			(35,599	)		14,954
	Net (increase) decrease in trading securities			(18,364	)		7,301			(4,212	)
	Other, net			18,024			17,751			3,574

		Net cash provided by operating activities		188,270			111,817			134,523

Cash Flows From Investing Activities
Purchase of securities				(1,727,957	)		(407,722	)		(541,826	)
Sales of securities available-for-sale				518,885			231,570			246,052
Maturities of securities				922,901			96,397			139,174
Purchase of residential mortgage loans				(25,280	)		(83,371	)		(40,646	)
Sales of loans				162,037			41,357			—
Loan originations net of principal collections				(726,238	)		(682,061	)		(534,023	)
Proceeds from sales of ORE				1,260			2,596			2,204
Purchase of premises and equipment				(15,302	)		(17,818	)		(18,034	)
Net cash from acquisitions				79,080			18,905			32,419
Bank owned life insurance premium paid				—			(11	)		(40,399	)
Other, net				11,174			603			658

		Net cash used by investing activities		(799,440	)		(799,555	)		(754,421	)

Cash Flows From Financing Activities
Net increase in deposits				1,037,568			366,329			453,454
Proceeds from issuance of other long-term debt				150,000			80,000			200,000
Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements				44,354			(180,824	)		69,884
Net (decrease) increase in short-term borrowings, net of transfers from long-term debt				(281,614	)		79,738			54,426
Repayment of long-term debt				(25,000	)		—			—
Net proceeds of subordinated debt				—			—			124,081
Proceeds from exercise of stock options				7,286			8,193			12,321
Stock repurchases				(29,411	)		(39,001	)		(59,768	)
Cash dividends paid				(32,846	)		(30,172	)		(26,042	)
Other, net				2,469			2,810			4,987

		Net cash provided by financing activities		872,806			287,073			833,343

Net increase (decrease) in cash and cash equivalents				261,636			(400,665	)		213,445
Cash and cash equivalents at beginning of year				290,178			690,843			477,398

Cash and cash equivalents at end of year			$	551,814		$	290,178		$	690,843

Supplemental Disclosures of Cash Flow Information:
	Cash paid during the period for:
		Interest	$	228,086		$	142,478		$	122,739
		Income taxes		11,621			54,400			37,950
	Non-cash investing activities:
		Transfer from loans to foreclosed assets		605			1,331			4,010
		Transfer from investment securities to securities available-for-sale		—			—			182,557
		Transfer from long-term debt to short-term borrowings		100,000			100,000			50,000

See accompanying Notes to the Consolidated Financial Statements.

A-35

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, 1997	46,700,891	$	46,701	$	297,654		$	5,349		$	173,089		$	(14,123	)	$	508,670
Net income	—		—		—			—			96,228			—			96,228
Issuance of shares for stock options	53,342		53		(22,185	)		—			—			34,453			12,321
Tax benefit from stock options	—		—		4,987			—			—			—			4,987
Cash dividends	—		—		—			—			(26,042	)		—			(26,042	)
Other comprehensive income net of tax	—		—		—			7,552			—			—			7,552
Repurchased shares, net	—		—		—			—			—			(59,768	)		(59,768	)
Issuance of shares for acquisitions	130,949		131		6,907			—			—			10,817			17,855

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	—		—		(13,709	)		—			—			21,902			8,193
Tax benefit from stock options	—		—		2,810			—			—			—			2,810
Cash dividends	—		—		—			—			(30,172	)		—			(30,172	)
Other comprehensive income net of tax	—		—		—			(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	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

See accompanying Notes to Consolidated Financial Statements.

A-36

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 Company seeks 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 multiple services and products offered by the Bank. The Company offers a broad range of loans, deposit, cash management, international banking, and other products and services. The Bank lends, invests, and provides services in accordance with its Community Reinvestment Act commitment. Through City National Investments and Reed, Conner and Birdwell, LLC., 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 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 services income consists of fees, commissions and markups on securities transactions with clients and money market mutual fund fees.

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

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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 cost.

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.

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

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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 and core deposit intangibles is net of accumulated amortization of $36.7 million and $20.0 million at December 31, 2000 and December 31, 1999, respectively.

Interest Rate Risk Management Activities

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 is 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 be 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 "—Recent Accounting Pronouncements."

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 exercise price equals the current market price and there is no compensation expense. Proforma net income and proforma

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net income per share disclosures for employee stock option grants are based on recognition as expense, over the vesting period, of the fair value on the date of grant of all stock-based awards made in 1996 and subsequent years.

Recent Accounting Pronouncements

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). This statement establishes accounting and reporting standards for derivative instruments and for hedging activities. This statement is effective for fiscal years beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No.133" (SFAS 137), which extended the effective date to fiscal years beginning after June 15, 2000. In June 2000, the FASB also issued SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities", which amends SFAS No. 133. To manage interest rate exposure, the Corporation uses interest rate swaps, which are accounted for as hedging activities. As of January 1, 2001, the Corporation 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 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 cash receipts 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. There was no transition adjustment at January 1, 2001 that impacted net income.

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities" as a replacement of SFAS No. 125 effective for transactions entered into after March 31, 2001. Management does not expect adoption of SFAS No. 140 will have a material impact on the Corporation's financial statements.

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 due 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, of which $0.2 million remain unpaid as of December 31, 2000, $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, 2000. The results of Pacific Bank's operations are included in those reported by the Company beginning March 1, 2000.

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CITY NATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Acquisitions (Continued)

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 accrued severance costs of which $0.1 million remains unpaid, $0.5 million of paid transaction-related expenses and $1.5 million of exit costs of which $0.1 million remain unpaid as of December 31, 2000. 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, 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

December 31, 1999
	U.S. Government and Federal agency		$	291,407	$	60	$	4,921	$	286,546
	Mortgage-backed			368,948		66		17,763		351,251
	State and Municipal			155,736		278		3,770		152,244
	Other debt securities			166,772		—		15,859		150,913

		Total debt securities		982,863		404		42,313		940,954
	Marketable equity securities			166,150		2,617		7,629		161,138

		Total securities	$	1,149,013	$	3,021	$	49,942	$	1,102,092

Gross realized gains and losses related to the available-for-sale portfolios were $12,934,000 and $9,802,000 respectively, for the year ended December 31, 2000, $7,965,000 and $4,269,000, respectively, for the year ended December 31, 1999 and $5,299,000 and $2,227,000, respectively, for the year ended December 31, 1998.

In accordance with regulatory requirements, included in marketable equity securities was Federal Reserve stock of $12.9 million and $8.8 million as of December 31, 2000 and December 31, 1999, respectively. Also, in accordance with the requirements of the Federal Home Loan Bank, stock in that institution in the amount of $18.3 million and $48.6 million as of December 31, 2000 and December 31, 1999, 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, 2000, 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 2000			Total 1999			Total 1998
Dollars in thousands			Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield	Amount		% Yield
U.S. Government and
	Federal agency		$	364,423	6.43	$	235,491	6.63	$	48,460	6.38	$	—	—	$	648,374	6.49	$	286,546	6.34	$	275,145	6.11
Mortgage-backed				—	—		6,254	5.88		11,554	6.22		419,413	6.83		437,221	6.79		351,251	6.53		351,469	6.61
State and Municipal				14,847	6.75		50,645	6.82		94,145	6.76		502	7.23		160,139	6.79		152,244	6.65		123,845	6.60
Other debt securities				51	7.00		—	—		84,125	7.52		66,737	8.15		150,913	7.80		150,913	7.72		152,692	7.78

		Total debt securities	$	379,321	6.44	$	292,390	6.65	$	238,284	6.92	$	486,652	7.02	$	1,396,647	6.77	$	940,954	6.68	$	903,151	6.65

		Amortized cost	$	379,286		$	290,087		$	248,006		$	492,389		$	1,409,768		$	982,863		$	885,259

Securities available-for-sale totaling $324.3 million were pledged to secure trust funds, public deposits, or for other purposes required or permitted by law at December 31, 2000.

Note 4. Loans and Allowance for Credit Losses

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

		December 31,
Dollars in thousands		2000		1999
Commercial
	Relationship	$	3,056,464	$	2,333,627
	Syndicated non-relationship		191,789		536,811

			3,248,253		2,870,438
Real estate mortgage			1,479,862		1,042,123
Residential first mortgage			1,273,711		1,173,334
Real estate construction			452,301		344,870
Installment			73,018		59,904

	Total loans (net of unearned income and fees of $12,274 and $10,709)	$	6,527,145	$	5,490,669

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.

At December 31, 2000, the Company had identified $49.1 million in impaired loans included in nonaccrual loans, $3.2 million of which had an allowance for credit losses of $1.2 million allocated to them. At December 31, 1999, there was $16.6 million of impaired loans included in nonaccrual loans, none of which had an allowance for credit losses allocated to them. The

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allowances represent the differences between the value of the collateral supporting the loans and their outstanding balances. For 2000, 1999 and 1998, the average balances of all impaired loans were $32.0 million, $2.5 million, and $0.3 million, respectively. During 2000, 1999 and 1998, no interest income was recognized on impaired loans until the book balances of these loans were paid off.

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 amounts of these loans were $4.1 million and $3.0 million at December 31, 2000 and 1999, respectively. During 2000, new loans and advances totaled $2.6 million and repayments totaled $1.5 million. Interest income recognized on these loans amounted to $0.2 million, $1.4 million and $1.5 million during 2000, 1999 and 1998, respectively. At December 31, 2000, none of these loans were 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 $5.9 million, $4.0 million and $8.6 million at December 31, 2000, 1999 and 1998, respectively. Restructured loans totaled $1.6 million, $3.1 million, and $3.7 million at December 31, 2000, 1999 and 1998, respectively.

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

Dollars in thousands		2000			1999			1998
Balance, January 1		$	134,077		$	135,339		$	137,761
Allowance of acquired institutions			9,927			3,415			2,747
Provision for credit losses			21,500			—			—
Charge-offs
	Relationship loans		(23,409	)		(11,435	)		(15,604	)
	Syndicated non-relationship loans		(18,167	)		(8,093	)		(2,032	)

			(41,576	)		(19,528	)		(17,636	)
Recoveries			11,507			14,851			12,467

Net charge offs			(30,069	)		(4,677	)		(5,169	)

Balance, December 31		$	135,435		$	134,077		$	135,339

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CITY NATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4. Loans and Allowance for Credit Losses (Continued)

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

			December 31,
Dollars in thousands			2000		1999		1998
Nonaccrual loans
	Relationship loans		$	38,974	$	25,288	$	23,138
	Syndicated non-relationship loans			23,012		—		—

			$	61,986	$	25,288	$	23,138

Contractual interest due			$	10,206	$	3,814	$	3,967
Interest recognized				5,749		3,692		1,973

		Net interest foregone	$	4,457	$	122	$	1,994

The Corporation has pledged $880.2 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, 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

December 31, 1999
Premises, including land of $5,433		$	58,348	$	27,861	$	30,487
Furniture, fixtures and equipment			62,839		40,611		22,228
Software			14,393		4,662		9,731

	Total	$	135,580	$	73,134	$	62,446

Depreciation and amortization expense was $13.0 million in 2000, $11.2 million in 1999 and $8.8 million in 1998. Net rental payments on operating leases included in net occupancy of premises in the consolidated statement of income and comprehensive income were $15.4 million in 2000, $12.0 million in 1999, and $8.4 million in 1998.

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The future net minimum rental commitments were as follows at December 31, 2000:

Dollars in thousands	Net Minimum Rental Commitments
2001	$	18,384
2002		16,945
2003		14,614
2004		12,268
2005		10,660
Thereafter		29,788

	$	102,659

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 $1.4 million in 2000, $1.2 million in 1999 and $1.1 million in 1998 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, 2000, the Company is contractually entitled to receive minimum future rentals of $2.6 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
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

1998
	Federal		$	36,594	$	2,544		$	39,138
	State			5,346		9,312			14,658

		Total	$	41,940	$	11,856		$	53,796

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2000 and 1999 are presented below.

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Net deferred tax assets

			December, 31
Dollars in thousands			2000		1999
Deferred tax assets:
	Allowance for credit losses		$	44,948	$	44,461
	Net operating loss carryforwards			13,054		13,643
	Accrued expenses			8,076		6,307
	State income taxes			6,506		8,874
	Purchase accounting fair value adjustment			—		2,940
	Unrealized losses on avaliable for-sale securities			8,338		19,700
	Other			1,935		1,224

		Total gross deferred tax assets		82,857		97,149
	Valuation allowance			—		(5,297	)

				82,857		91,852

Deferred tax liabilities:
	Core deposit and other intangibles			8,523		7,943
	Leveraged leases			2,262		3,105
	Deferred loan origination costs			1,512		1,766
	Other			4,574		3,197

		Total gross deferred tax liabilities		16,871		16,011

Net deferred tax assets			$	65,986	$	75,841

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)
	2000		1999		1998
Statutory rate	35.0	%	35.0	%	35.0	%
Net state income tax	3.3		5.6		6.3
Amortization of goodwill	1.8		0.9		0.8
Tax exempt income	(3.5	)	(3.7	)	(3.9	)
Affordable housing investments	(1.7	)	(1.8	)	(1.1	)
All other net	(0.8	)	(0.6	)	(1.2	)

Effective tax provision	34.1	%	35.4	%	35.9	%

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 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.

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The Company's current tax receivable for refunds was $1.3 million at December 31, 2000 and $4.2 million at December 31, 1999.

At December 31, 2000, federal net operating loss carry forwards acquired in the First Los Angeles Bank acquisition totaled $34.1 million, of which $8.9 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. For 2000, 1999 and 1998, the Company recorded total contributions expense of $11.0 million, $9.1 million and $8.1 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 six percent of covered compensation. For 2000, 1999, and 1998, the Company's matching contribution included in the total contribution above was $1.8 million, $1.7 million and $1.4 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 1999 Omnibus Plan (the "1999 Omnibus Plan"), 1,617,288 shares of the Corporation's common stock that were reserved for grant of stock options were available to be granted as of December 31, 2000. Under the 1995 Omnibus Plan, 350,611 shares of the Corporation's common stock that were reserved for grant of stock options were available to be granted as of December 31, 2000. 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 2000, 1999 and 1998 was $11.36, $14.59 and $15.55 on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: 2000-expected dividend yield of 2.00%, volatility of 34.8%, risk-free interest rate of 6.37% and expected life of 7.5 years; 1999-expected dividend yield of 2.00%, volatility of 37.1%, risk-free interest rate of 5.20% and an expected life of 7.5 years; 1998-expected dividend yield of 2.00%, volatility of 33.6%, risk-free interest rate of 5.58%, and an expected life of 7.5 years.

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CITY NATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8. Stock Option Plans (Continued)

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 net income would have been reduced to the proforma amounts indicated below:

Dollars in thousands, except per share amounts	2000		1999		1998
Net income, as reported	$	131,660	$	108,107	$	96,228
Proforma net income		125,078		101,686		90,689
Net income per share, basic, as reported		2.79		2.37		2.08
Proforma net income per share, basic		2.65		2.23		1.96
Net income per share, diluted, as reported		2.72		2.30		2.00
Proforma net income per share, diluted		2.58		2.17		1.88

Proforma net income reflects only options granted in 2000, 1999, 1998, 1997 and 1996. 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:

	2000				1999				1998
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	4,097		$	26.54	3,849		$	22.07	3,689		$	14.57
Granted	1,151			27.99	965			36.51	1,300			35.68
Converted for acquisitions	—			—	—			—	12			9.83
Exercised	(422	)		16.73	(632	)		12.97	(1,061	)		11.61
Canceled or expired	(197	)		31.81	(85	)		32.02	(91	)		23.40

Options outstanding, December 31	4,629		$	27.52	4,097		$	26.54	3,849		$	22.07

Exercisable	2,405				1,978				1,851

During 2000, the Corporation issued 171,362 treasury shares and 250,787 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. In 1998, the Corporation issued 1,008,079 treasury shares and 53,342 newly issued shares in connection with the exercise of stock options.

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Information concerning currently outstanding and exercisable options at December 31, 2000 is as follows:

	Options Outstanding
	Options Outstanding				Options Exercisable
		Weighted Average Remaining Life (Yrs)			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 $12.00 per share	419	3.36	$	9.23	419	$	9.23
Options issued at prices between $12.00 and $13.99 per share	596	4.90		13.41	596		13.41
Options issued at prices between $14.00 and $29.99 per share	1,486	8.11		26.02	394		24.03
Options issued at prices between $30.00 and $40.00 per share	2,128	7.86		36.12	996		35.42

	4,629				2,405

At December 31, 2000, nonstatutory and incentive stock options covering 1,208,512 and 1,196,405 shares, respectively, of the Corporation's common stock were exercisable under the plans. At December 31, 2000, 1,967,899 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.

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Note 9. Borrowed Funds

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

			December 31,
Dollars in thousands			2000		1999
Other short-term borrowings:
	Term federal funds purchased		$	150,000	$	200,000
	Treasury, tax and loan note			125		21,724
	Federal Home Loan Bank advances			150,000		265,000
	Other Borrowing—Revolving Line of Credit			15,000		10,000

		Total	$	315,125	$	496,724

Subordinated debt			$	123,641	$	123,453

Long-term debt:
	Federal Home Loan Bank advances		$	205,000	$	180,000
	Equity participation notes			3,417		—

		Total	$	208,417	$	180,000

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 $1,004.8 million, $621.4 million and $483.1 million in 2000, 1999 and 1998, respectively. In 1999, the Corporation established a $20.0 million revolving unsecured line of credit with another bank which was reduced to $15.0 million in 2000. As of December 31, 2000, the total short-term funds borrowed on this facility was $15.0 million.

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

	2000						1999						1998
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	$	139,841	$	264,013	6.16	%	$	95,487	$	232,350	4.74	%	$	276,311	$	209,982	5.15	%
Other short-term borrowings		315,125		752,751	6.51	%		496,724		472,341	5.26	%		317,001		280,188	5.57	%

The maximum amount of securities sold under agreements to repurchase outstanding at any month end was $22.2 million, $74.2 million and $47.2 million in 2000, 1999 and 1998, respectively. The average amount of securities sold under agreements to repurchase was $12.2 million, $19.9 million and $17.5 million during 2000, 1999 and 1998, respectively. The securities underlying the agreements to repurchase remain under the Company's control.

On January 12, 1998, the Bank issued $125.0 million of 6³/8% Subordinated Notes, due in 2008, in a private offering. These Subordinated Notes qualify as Tier II capital. The carrying value of the 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%.

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Long-term Federal Home Loan Bank (the FHLB) advances outstanding as of December 31, 2000 (in thousands of dollars) mature as follows:

Borrowings		Maturity	Interest Rate
$	50,000	2002	5.63	%
	50,000	2002	6.37
	50,000	2002	6.66
	25,000	2002	5.99
	15,000	2002	5.14
	15,000	2004	5.24

$	205,000

The Bank had $393.1 million and $267.5 million of unused borrowing capacity from the FHLB at December 31, 2000 and 1999, 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

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 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, 2000, the Bank could have declared dividends of $56.8 million without the approval of the OCC.

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Federal banking law also prohibits the Corporation from borrowing from the Bank on less than a fully secured basis. At December 31, 2000 and 1999, the Corporation had borrowed from the Bank $26.9 million and $19.0 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 2000 and 1999, reserve balances averaged approximately $28.5 million and $6.5 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, 2000, the Corporation and the Bank meet all capital adequacy requirements to which either is subject.

As of December 31, 2000, 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 table:

			Actual				For Capital Adequacy Purposes
Dollars in thousands			Amount		Ratio		Amount		Ratio
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	%
As of December 1999
	Total capital
		(to risk weighted assets)	$	671.1	11.21	%	$	478.7	>8.0	%
	Tier 1 capital
		(to risk weighted assets)		471.3	7.88	%		239.4	>4.0	%
	Tier 1 capital
		(to average assets)		471.3	6.73	%		280.3	>4.0	%

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

			Actual				For Capital Adequacy Purposes
Dollars in thousands			Amount		Ratio		Amount		Ratio
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	%
As of December 1999
	Total capital
		(to risk weighted assets)	$	639.9	10.75	%	$	476.1	>8.0	%
	Tier 1 capital
		(to risk weighted assets)		440.6	7.40	%		238.1	>4.0	%
	Tier 1 capital
		(to average assets)		440.6	6.30	%		279.5	>4.0	%

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CITY NATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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 $2,325.1 million and $2,294.0 million at December 31, 2000 and 1999, respectively compared to outstanding loan balances of $6,527.1 million and $5,490.7 million, respectively. In addition, the Company had $240.4 million and $168.3 million outstanding in bankers' acceptances and letters of credit of which $178.2 million and $141.2 million relate to standby letters of credit at December 31, 2000 and 1999, 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 at December 31, 2000 of which $0.3 million were funded. There were no commitments at December 31, 1999.

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, 2000 and 1999.

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, 2000						December 31, 1999
Dollars in millions		Carrying Amount			Fair Value			Carrying Amount			Fair Value
Financial Assets:
	Cash and due from banks	$	386.8		$	386.8		$	233.2		$	233.2
	Federal funds sold		165.0			165.0			57.0			57.0
	Securities available-for-sale		1,547.8			1,547.8			1,102.1			1,102.1
	Trading account assets		46.1			46.1			27.7			27.7
	Loans, net of allowance for credit losses		6,391.7			6,391.8			5,356.6			5,428.2
Financial Liabilities
	Deposits	$	7,408.7		$	7,410.3		$	5,669.4		$	5,666.3
	Federal funds purchased and securities sold under resale agreements		139.8			139.8			95.5			95.5
	Other short-term borrowings		315.1			315.1			496.7			496.7
	Subordinated and long-term debt		332.1			335.1			303.5			290.8
	Commitments to extend credit		(15.0	)		(15.0	)		(14.8	)		(14.8	)
	Commitments to venture capital funds		—			3.0			—			—
	Derivative contracts		800.0	(1)		7.5	(2)		965.0	(1)		(10.0	) (2)

(1): Notional Amount
(2): Estimated net gains (losses) to settle derivative contracts as of respective period ends

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		2000		1999
Assets
Cash		$	560	$	3,993
Securities available-for-sale			60,748		50,913
Other assets			1,737		440
Investment in City National Bank			706,549		541,251
Investment in non-bank subsidiaries			16,352		4,483

	Total assets	$	785,946	$	601,080

Liabilities
Notes payable to City National Bank		$	26,896	$	19,000
Note payable to other banks			15,000		10,000
Other liabilities			402		434

	Total liabilities		42,298		29,434
Shareholders' equity			743,648		571,646

	Total liabilities and shareholders' equity	$	785,946	$	601,080

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CITY NATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 13. Parent Corporation Only Condensed Financial Statements (Continued)

CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME

			For the year ended December 31,
Dollars in thousands			2000			1999			1998
Income
	Dividends from Bank and non-bank subsidiaries		$	120,558		$	59,044		$	42,238
	Interest and dividend income			2,220			1,296			5,378
	Gain on sale of securities			3,079			3,509			2,142

		Total income		125,857			63,849			49,758

Interest on notes payable to Bank and non-affiliates				3,055			767			2,217
Other expenses				746			634			661

Total expenses				3,801			1,401			2,878

	Income before taxes and equity in undistributed income of Bank and non-bank subsidiaries			122,056			62,448			46,880
	Income taxes (benefit)			(31	)		1,127			490

	Income before equity in undistributed income of Bank and non-bank subsidiaries			122,087			61,321			46,390
	Equity in undistributed income of Bank and non-bank subsidiaries			9,573			46,786			49,838

	Net income			131,660			108,107			96,228
	Other comprehensive income (loss)			15,700			(40,094	)		7,552

Comprehensive income			$	147,360		$	68,013		$	103,780

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CONDENSED STATEMENT OF CASH FLOWS

			For the year ended December 31,
Dollars in thousands			2000			1999			1998
Cash Flows From Operating Activities
Net income			$	131,660		$	108,107		$	96,228
Adjustments to net income:
	Equity in undistributed income of Bank and non-bank subsidiaries			(9,573	)		(46,786	)		(49,838	)
	Other, net			2,068			(131	)		4,040

		Net cash provided by operating activites		124,155			61,190			50,430

Cash Flows From Investing Activities
Maturities of securities available-for-sale				—			—			30,766
Purchase of securities available-for-sale				(38,462	)		(44,447	)		(22,938	)
Sales of securities available-for-sale				25,513			24,685			61,549
Investment in subsidiaries				(72,564	)		—			(16,415	)
Other, net				—			1,535			2,047

	Net cash from (used by) investing activities			(85,513	)		(18,227	)		55,009

Cash Flows For Financing Activities
Cash dividends paid				(32,846	)		(30,172	)		(26,042	)
(Repayments to) borrowings from City National Bank				7,896			5,865			(31,880	)
Other short-term borrowings				5,000			10,000			—
Repurchase of treasury shares				(29,411	)		(39,001	)		(59,768	)
Stock options exercised				7,286			8,193			12,321

	Net cash used for financing activities			(42,075	)		(45,115	)		(105,369	)

Net increase (decrease) in cash and cash equivalents				(3,433	)		(2,152	)		70
Cash and cash equivalents at beginning of year				3,993			6,145			6,075

Cash and cash equivalents at end of year			$	560		$	3,993		$	6,145

Note 14. Derivative Financial Instruments

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

	December 31,
	2000				1999
Dollars in millions	Notional Amount		Fair Value		Notional Amount		Fair Value
Receive fixed/pay variable	$	800.0	$	7.5	$	965.0	$	(10.0	)

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 $7.5 million of credit risk exposure at December 31, 2000 and

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no credit exposure as of December 31, 1999. The credit exposure represents the cost to replace, on a present value basis and at current market rates for all profitable contracts outstanding at year end. The Company's swap agreements require the deposit of collateral to mitigate the amount of credit risk if certain thresholds are exceeded. As of December 31, 2000, the Company had no securities deposited with 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 (decreased) increased net interest income by ($2.8) million, $2.7 million and $1.7 million for 2000, 1999 and 1998, respectively.

Note 15. Net Income Per Common Share

Basic and diluted net income per common share calculations follow:

			For the year ended December 31,
In thousands, except per share amounts			2000		1999		1998
Basic
	Net income		$	131,660	$	108,107	$	96,228

	Average common shares outstanding			47,536		46,885		46,866
	Average treasury shares outstanding			358		1,202		509

		Net average common shares outstanding		47,178		45,683		46,357

	Basic earnings per share		$	2.79	$	2.37	$	2.08

Diluted
	Net income		$	131,660	$	108,107	$	96,228

	Average common shares outstanding			47,536		46,885		46,866
	Average treasury shares outstanding			358		1,202		509

		Net average common shares outstanding		47,178		45,683		46,357
	Stock option dilution adjustment			1,215		1,255		1,784

	Shares outstanding and equivalents			48,393		46,938		48,141

	Diluted earnings per share		$	2.72	$	2.30	$	2.00

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.

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QuickLinks

Documents Incorporated by Reference
Part I
PART II
PART III
PART IV
SIGNATURES
FINANCIAL HIGHLIGHTS
SELECTED FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Changes in Net Interest Income
Net Interest Income Summary
Analysis of Changes in Noninterest Income
Analysis of Changes in Noninterest Expense
Interest-Sensitive Financial Instrument Maturities December 31, 2000
Interest-Sensitive Financial Instrument Maturities December 31, 1999
Interest Rate Swap Maturities and Average Rates December 31, 2000
Interest Rate Swap Maturities and Average Rates December 31, 1999
Securities Available-for-Sale
Debt Available-for-Sale Securities
Loan Portfolio
Relationship Commercial Loans By Industry
Real Estate Mortgage Loans by Collateral Type
Real Estate Construction 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
2000 Quarterly Operating Results
1999 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