Segment Results

12 Months Ended

Dec. 31, 2011

Segment Results

Segment Results

Note 22. Segment Results

        The Company has three reportable segments: Commercial and Private Banking, Wealth Management and Other. The factors considered in determining whether individual operating segments could be aggregated include that the operating segments: (i) offer the same products and services, (ii) offer services to the same types of clients, (iii) provide services in the same manner and (iv) operate in the same regulatory environment. The management accounting process measures the performance of the operating segments based on the Company's management structure and is not necessarily comparable with similar information for other financial services companies. If the management structures and/or the allocation process changes, allocations, transfers and assignments may change.

        The Commercial and Private Banking reportable segment is the aggregation of the Commercial and Private Banking, Real Estate, Entertainment, Corporate Banking and Core Branch Banking operating segments. The Commercial and Private Banking segment provides banking products and services, including commercial and mortgage loans, lines of credit, deposits, cash management services, international trade finance and letters of credit to small and medium-sized businesses, entrepreneurs and affluent individuals. This segment primarily serves clients in California, New York, Nevada, Tennessee and Georgia.

        The Wealth Management segment includes the Corporation's investment advisory affiliates and the Bank's Wealth Management Services. The asset management affiliates and the Wealth Management division of the Bank make the following investment advisory and wealth management resources and expertise available to individual and institutional clients: investment management, wealth advisory services, brokerage, estate and financial planning and personal, business, custodial and employee trust services. The Wealth Management segment also advises and makes available mutual funds under the name of CNI Charter Funds. Both the asset management affiliates and the Bank's Wealth Management division provide proprietary and nonproprietary products to offer a full spectrum of investment solutions in all asset classes and investment styles, including fixed-income instruments, mutual funds, domestic and international equities and alternative investments such as hedge funds. This segment serves clients nationwide.

        The Other segment includes all other subsidiaries of the Company, the corporate departments, including the Treasury Department and the Asset Liability Funding Center, that have not been allocated to the other segments, and inter-segment eliminations for revenue recognized in multiple segments for management reporting purposes. The Company uses traditional matched-maturity funds transfer pricing methodology. However, both positive and negative variances occur over time when transfer pricing non-maturing balance sheet items such as demand deposits. These variances, offset in the Funding Center, are evaluated annually by management and allocated back to the business segments as deemed necessary.

        Business segment earnings are the primary measure of the segment's performance as evaluated by management. Business segment earnings include direct revenue and expenses of the segment as well as corporate and inter-company cost allocations. Allocations of corporate expenses, such as data processing and human resources, are calculated based on estimated activity levels for the fiscal year. Costs associated with intercompany support and services groups, such as Operational Services, are allocated to each business segment based on actual services used. Capital is allocated based on the estimated risk within each business segment. The methodology of allocating capital is based on each business segment's credit, market, and operational risk profile. If applicable, any provision for credit losses is allocated based on various credit factors, including but not limited to, credit risk ratings, credit rating fluctuation, charge-offs and recoveries and loan growth.

        Income taxes are charged to the business segments at the statutory rate. The Other segment includes an adjustment to reconcile to the Company's overall effective tax rate.

        Exposure to market risk is managed in the Company's Treasury department. Interest rate risk is mostly removed from the Commercial and Private Banking segment and transferred to the Funding Center through a fund transfer pricing ("FTP") methodology and allocating model. The FTP model records a cost of funds or credit for funds using a combination of matched maturity funding for fixed term assets and liabilities and a blended rate for the remaining assets and liabilities with varying maturities.

        The Bank's investment portfolio and unallocated equity are included in the Other segment. Amortization expense associated with customer-relationship intangibles is charged to the affected operating segments.

        Selected financial information for each segment is presented in the following tables. Commercial and Private Banking includes all revenue and costs from products and services utilized by clients of Commercial and Private Banking, including both revenue and costs for Wealth Management products and services. The revenues and costs associated with Wealth Management products and services that are allocated to Commercial and Private Banking for management reporting purposes are eliminated in the Other segment. The current year reflects any changes made in the process or methodology for allocations to the reportable segments. Prior period segment results have been revised to conform with current period presentation.

	For the year ended December 31, 2011
(in thousands)	Commercial and Private Banking		Wealth Management		Other			Consolidated Company
Earnings Summary:
Net interest income	$	740,445	$	2,113	$	30,432		$	772,990
Provision for credit losses on loans and leases, excluding covered loans		12,500		—		—			12,500
Provision for losses on covered loans		43,646		—		—			43,646
Noninterest income		222,279		162,238		(42,650	)		341,867
Depreciation and amortization		14,656		5,205		15,462			35,323
Noninterest expense		683,962		147,161		(61,351	)		769,772
Income before income taxes		207,960		11,985		33,671			253,616
Provision (benefit) for income taxes		87,344		4,212		(13,995	)		77,561
Net income		120,616		7,773		47,666			176,055
Less: Net income attributable to noncontrolling interest		—		1,956		1,678			3,634
Net income attributable to City National Corporation	$	120,616	$	5,817	$	45,988		$	172,421
Selected Average Balances:
Loans and leases, excluding covered loans	$	11,641,976	$	—	$	56,412		$	11,698,388
Covered loans		1,699,182		—		—			1,699,182
Total assets		13,820,611		549,917		8,157,222			22,527,750
Deposits		18,862,701		64,919		378,083			19,305,703
Goodwill		324,872		161,630		—			486,502
Customer-relationship intangibles, net		11,713		27,715		—			39,428

	For the year ended December 31, 2010
(in thousands)	Commercial and Private Banking		Wealth Management		Other			Consolidated Company
Earnings Summary:
Net interest income	$	702,794	$	1,694	$	25,837		$	730,325
Provision for credit losses on loans and leases,
excluding covered loans		103,000		—		—			103,000
Provision for losses on covered loans		76,218		—		—			76,218
Noninterest income		277,883		155,724		(72,232	)		361,375
Depreciation and amortization		13,764		6,507		14,610			34,881
Noninterest expense		629,692		145,175		(58,418	)		716,449
Income (loss) before income taxes		158,003		5,736		(2,587	)		161,152
Provision (benefit) for income taxes		66,361		1,662		(41,968	)		26,055
Net income		91,642		4,074		39,381			135,097
Less: Net income attributable to noncontrolling interest		—		1,779		2,141			3,920
Net income attributable to City National Corporation	$	91,642	$	2,295	$	37,240		$	131,177
Selected Average Balances:
Loans and leases, excluding covered loans	$	11,530,140	$	50	$	46,190		$	11,576,380
Covered loans		1,940,316		—		—			1,940,316
Total assets		14,134,625		557,818		6,464,218			21,156,661
Deposits		17,289,288		47,450		531,654			17,868,392
Goodwill		319,376		161,642		—			481,018
Customer-relationship intangibles, net		12,563		30,608		—			43,171

	For the year ended December 31, 2009
(in thousands)	Commercial and Private Banking		Wealth Management			Other			Consolidated Company
Earnings Summary:
Net interest income	$	623,033	$	2,357		$	(1,337	)	$	624,053
Provision for credit losses		285,000		—			—			285,000
Noninterest income		203,896		145,582			(57,281	)		292,197
Depreciation and amortization		12,717		6,050			14,809			33,576
Noninterest expense		464,578		137,309			(54,376	)		547,511
Income (loss) before income taxes		64,634		4,580			(19,051	)		50,163
Provision (benefit) for income taxes		27,146		2,535			(31,567	)		(1,886	)
Net income		37,488		2,045			12,516			52,049
Less: Net income (loss) attributable to noncontrolling interest		—		(1,457	)		2,167			710
Net income attributable to City National Corporation	$	37,488	$	3,502		$	10,349		$	51,339
Selected Average Balances:
Loans and leases, excluding covered loans	$	12,258,766	$	—		$	37,853		$	12,296,619
Covered loans		66,470		—			—			66,470
Total assets		12,502,890		575,546			4,633,059			17,711,495
Deposits		13,224,009		62,726			1,065,163			14,351,898
Goodwill		317,802		151,644			—			469,446
Customer-relationship intangibles, net		9,550		31,234			—			40,784