These excerpts taken from the CYN 10-K filed Mar 2, 2009.
Comparison of 2008 with 2007
Taxable-equivalent net interest income totaled $612.1 million in 2008, compared with $621.3 million for 2007. A substantial reduction in interest rates from 2007 to 2008 contributed to the decline in net interest income, lowering the yield on earning assets by 102 basis points compared to a 138 basis point decrease in the cost of interest-bearing liabilities. The net effect of these rate changes was a decrease in net interest income of $41.0 million, which was partially offset by the additional net interest income related to the increase in average earning assets and decrease of average interest-bearing liabilities. The impact of changes in interest-earning assets and interest-bearing liabilities caused net interest income to increase by $32.4 million. Net interest income for 2008 also includes $12.8 million in income from the net settlement of interest-rate swaps compared with $5.4 million of expense in 2007. Interest income recovered on charged-off loans included above was $1.2 million in 2008, compared with $1.7 million for 2007. The fully taxable-equivalent net interest margin in 2008 was 4.20 percent, compared with 4.45 percent for 2007.
Average loans and leases for 2008 increased to $12.09 billion, a 9 percent increase from average loans and leases of $11.06 billion for 2007. Loan growth was led by a 9 percent increase in commercial real estate and construction loans to $3.46 billion, and a 9 percent increase in commercial loans to $4.66 billion compared with 2007. In addition, average single-family residential loans increased 9 percent from the prior year.
Average total securities in 2008 were $2.40 billion, a decrease of $435.2 million, or 15 percent, from 2007.
Average core deposits, which continued to provide substantial benefits to the Bank's cost of funds, increased 2 percent to $10.60 billion from $10.36 billion for 2007. Average core deposits, which do not include certificates of deposit of $100,000 or more, represented 89.1 percent of the total average deposit base for the year. Included in core deposits are specialty deposits. Average specialty deposits, primarily from title and escrow companies, were $0.94 billion in 2008, compared with $1.19 billion in 2007, a decrease of 21 percent. Specialty deposit balances declined due to a decline in residential and commercial real estate activity.
Average interest-bearing core deposits increased to $4.97 billion in 2008 from $4.83 billion in 2007, an increase of $142.6 million, or 3 percent. Average noninterest-bearing deposits increased to $5.63 billion in 2008 from $5.53 billion in 2007, an increase of $97.4 million, or 2 percent. Average time deposits in denominations of $100,000 or more decreased by $576.7 million, or 31 percent, to $1.30 billion, between 2007 and 2008.
Comparison of 2008 to 2007
Net income for the Commercial and Private Banking segment decreased by $47.8 million, or 24 percent, to $155.4 million for 2008 from $203.2 million for 2007. The decrease in net income for 2008 compared to the year earlier is primarily due to the higher provision for credit losses. Refer to page 48 of this report for further discussion of the Provision for Credit Losses. Net interest income increased to $639.9 million for 2008 from $623.6 million for 2007. The increase in net interest income compared to the prior year was driven by loan growth across all major loan categories. Loan growth offset the impact of decreases in the prime rate and net interest margin compared to the year earlier. Average loan balances increased by 10 percent to $12.01 billion for 2008 from $10.96 billion for 2007. Average deposits decreased to $10.87 billion for 2008 from $11.05 billion for 2007. The decrease was primarily due to the planned maturity and non-renewal of higher cost promotional certificates of deposits and to a decline in title and escrow deposits resulting from the slowdown in the housing and commercial real estate industries. Noninterest income increased 24 percent to $187.6 million for 2008 from $151.3 million for 2007. The increase is primarily due to higher cash management and deposit transaction fees, and to increases in mutual fund and international services fees. Noninterest expense, including depreciation and amortization, was $41.2 million, or 10 percent, higher for 2008 compared to 2007. Noninterest expense for 2008 includes a full year of expenses for the Business Bank of Nevada acquired in May 2007. Noninterest expense for 2008 also reflects higher staffing and occupancy costs associated with new offices, growth in software costs associated with new data processing systems and an increase in FDIC premiums compared to the year earlier.
Comparison of 2008 to 2007
The Wealth Management segment had net income of $35.9 million for 2008, a decrease of $2.4 million, or 6 percent, from $38.3 million for 2007. Noninterest income increased by $4.8 million to $208.7 million for 2008 from $203.9 million for 2007. Refer to page 51 of this report for a discussion of the factors impacting fee income for the Wealth Management segment. Noninterest expense, including depreciation and amortization, increased by 11 percent to $159.3 million for 2008 compared to $143.4 million for 2007. Noninterest expense for 2008 includes a $9.4 million impairment write down of a contract intangible, a full year of expenses for Convergent Wealth, compared with 8 months for 2007, and expenses related to the opening of the Los Angeles office of Convergent Wealth in 2008.
Comparison of 2008 to 2007
The net loss in the Other segment increased to $86.3 million for 2008 compared to $18.7 million for 2007. The increase in the net loss for the year is largely due to $28.6 million, after tax, of impairment charges recorded on investment securities. Results for the segment were also impacted by higher net funding costs in the Asset Liability Funding Center, reflected as an increase in net interest expense, and an increase in inter-segment revenue, which is eliminated in this segment.