Note 23. 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, Core Branch Banking and FAEF operating segments. The Commercial and Private Banking segment provides banking products and services, including commercial and mortgage lending, lines of credit, equipment lease financing, 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. FAEF serves clients nationwide.

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, retirement, 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 City National Rochdale Funds. Both the asset management affiliates and the Bank's Wealth Management division provide proprietary and nonproprietary products and offer a full spectrum of investment solutions in multiple 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 administration 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 or usage 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.

Effective with second quarter 2013 reporting, the methodology for allocating the provision for income taxes to the segments was revised to base the allocation on the Company's effective tax rate. The allocation was previously based on the statutory tax rate. Prior period segment results have been revised to reflect this change in methodology.

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 period reflects any changes made in the process or methodology for allocations to the reportable segments. Prior period segment results have been revised to conform to current period presentation.

	For the year ended December 31, 2013

(in thousands)	Commercial and Private Banking		Wealth Management		Other			Consolidated Company
Earnings Summary:
Net interest income	$	757,472	$	995	$	65,248		$	823,715
Provision for losses on covered loans		635		—		—			635
Noninterest income		161,330		232,948		(39,109	)		355,169
Depreciation and amortization		13,687		7,362		18,735			39,784
Noninterest expense		687,895		196,668		(73,233	)		811,330


Income before income taxes		216,585		29,913		80,637			327,135
Provision for income taxes		63,128		7,988		23,503			94,619


Net income		153,457		21,925		57,134			232,516
Less: Net income attributable to noncontrolling interest		—		2,507		—			2,507


Net income attributable to City National Corporation	$	153,457	$	19,418	$	57,134		$	230,009




Selected Average Balances:
Loans and leases, excluding covered loans	$	15,721,881	$	—	$	53,999		$	15,775,880
Covered loans		865,640		—		—			865,640
Total assets		16,810,571		649,775		10,830,627			28,290,973
Deposits		23,423,943		97,866		432,354			23,954,163
Goodwill		393,176		249,446		—			642,622
Customer-relationship intangibles, net		4,812		39,625		—			44,437

	For the year ended December 31, 2012

(in thousands)	Commercial and Private Banking		Wealth Management		Other			Consolidated Company
Earnings Summary:
Net interest income	$	724,377	$	3,668	$	102,791		$	830,836
Provision for credit losses on loans and leases, excluding covered loans		10,000		—		—			10,000
Provision for losses on covered loans		45,346		—		—			45,346
Noninterest income		214,195		187,838		(44,430	)		357,603
Depreciation and amortization		14,207		7,289		18,257			39,753
Noninterest expense		684,932		168,309		(67,856	)		785,385


Income before income taxes		184,087		15,908		107,960			307,955
Provision for income taxes		59,281		4,774		34,767			98,822


Net income		124,806		11,134		73,193			209,133
Less: Net income attributable to noncontrolling interest		—		1,084		—			1,084


Net income attributable to City National Corporation	$	124,806	$	10,050	$	73,193		$	208,049




Selected Average Balances:
Loans and leases, excluding covered loans	$	13,223,860	$	—	$	61,360		$	13,285,220
Covered loans		1,268,513		—		—			1,268,513
Total assets		14,836,148		589,959		9,810,065			25,236,172
Deposits		21,063,846		102,144		462,878			21,628,868
Goodwill		370,487		203,362		—			573,849
Customer-relationship intangibles, net		7,790		35,598		—			43,388

	For the year ended December 31, 2011

(in thousands)	Commercial and Private Banking		Wealth Management		Other			Consolidated Company
Earnings Summary:
Net interest income	$	740,426	$	2,111	$	30,453		$	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		682,288		147,157		(59,673	)		769,772


Income before income taxes		209,615		11,987		32,014			253,616
Provision for income taxes		65,037		3,112		9,412			77,561


Net income		144,578		8,875		22,602			176,055
Less: Net income attributable to noncontrolling interest		—		1,956		1,678			3,634


Net income attributable to City National Corporation	$	144,578	$	6,919	$	20,924		$	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