Document:

Exhibit
10.34

AMENDMENT
NO. 1 TO THE INTERIM LOAN AGREEMENT

This AMENDMENT NO. 1 TO THE INTERIM LOAN AGREEMENT
(this “Amendment”), dated as of February 26,
2007, by and among Hospitality Properties Trust (the “Borrower”),
the Guarantors, Merrill Lynch Capital Corporation, as Administrative Agent (the
“Agent”), Merrill Lynch, Pierce, Fenner
& Smith Incorporated, as Lead Arranger (the “Lead
Arranger”) and the Lenders listed on the signature pages hereto, to
the INTERIM LOAN AGREEMENT (the “Loan Agreement”),
dated as of January 22, 2007, by and among the Borrower, the Agent, the Lead
Arranger, the Lenders party thereto and Wachovia Bank, National Association,
RBC Capital Markets, UBS Securities LLC and Morgan Stanley Senior Funding Inc.,
as Co-Syndication Agents.  All terms used
and not defined herein shall have the meaning given such terms in the Loan Agreement.

PRELIMINARY
STATEMENTS

WHEREAS, the Borrower has requested that the Requisite
Lenders agree to amend certain provisions of the Loan Agreement;

WHEREAS, the Requisite Lenders have agreed, subject to
the terms and conditions hereinafter set forth, to amend certain provisions of
the Loan Agreement as set forth below; and

NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the sufficiency and receipt of all
of which is hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1.           Amendments.  As of
the Amendment Date (as defined below), the Requisite Lenders hereby agree to
the following amendments of the Loan Agreement:

(a)           Exhibits.  Exhibit D to the Loan Agreement entitled “Form
of Notice of Continuation” and Exhibit E to the Loan Agreement entitled “Form
of Notice of Conversion” are each hereby amended by deleting such exhibits in
their entirety and replacing them with Exhibit D and Exhibit E attached hereto
as Annex I and Annex II, respectively.

(b)           Definitions.  Section 1.1 of the Loan Agreement is hereby
amended by deleting the definition of “Interest Period” in its entirety and
replacing it with the following:

“‘Interest Period’ means

(a)            with respect to any LIBOR Loan made
on or after the Effective Date and prior to June 30, 2007, each period
commencing on the date such LIBOR Loan is made or the last day of the next
preceding Interest Period for such Loan and ending seven days, fourteen days,
one month, two months, three months or six months (or, in the case, of a LIBOR
Loan pursuant to Section 2.9(b), 14 days) thereafter, or

(b)           with respect to any LIBOR Loan made
on or after June 30, 2007, each period commencing on the date such LIBOR Loan
is made or the last day of the next preceding Interest Period for such Loan and
ending one, two, three or six months thereafter,

in each case, as the
Borrower may select in a Notice of Borrowing, Notice of Continuation or Notice
of Conversion, as the case may be, except that each Interest Period (other than
an Interest Period for seven or fourteen days or pursuant to Section 2.9(b))
that commences on the last Business Day of a calendar month shall end on the last
Business Day of the appropriate subsequent calendar month. Notwithstanding the
foregoing: (i) if any Interest Period would otherwise end after the Maturity
Date, such Interest Period shall end on the Maturity Date; and (ii) each
Interest Period that would otherwise end on a day which is not a Business Day
shall end on the immediately following Business Day (or, if such immediately following
Business Day falls in the next calendar month, on the immediately preceding
Business Day).”

SECTION 2.           Conditions to Effectiveness.   This Amendment shall become effective when,
and only when, and as of the date (the “Amendment Date”)
on which (a) the Agent shall have received counterparts of this Amendment
executed by the Borrower and each of the Guarantors and the Requisite Lenders
or, as to any of the Requisite Lenders, evidence satisfactory to the Agent that
such Requisite Lenders has executed this Amendment, (b) the Agent shall have
received payment of all accrued fees and expenses of the Agent (including the
reasonable and accrued fees of counsel to the Agent invoiced on or prior to the
date hereof) and (c) the Agent shall have received a certificate
signed by a duly authorized officer of the Borrower dated the Amendment Date,
to the effect that, after giving effect to this Amendment: (i) the
representations and warranties contained in Article VI of the Loan Agreement
are true and correct in all material respects on and as of the Amendment Date,
as though made on and as of such date, except to the extent that such representations
and warranties expressly relate solely to an earlier date (in which case such
representations and warranties were true and accurate on and as of such earlier
date); and (ii) no Default or Event
of Default has occurred or is continuing at the time of the Amendment Date and
no Default or Event of Default will occur or be continuing immediately after
the Amendment Date.

This Amendment is subject to the
provisions of Section 12.6 of the Loan Agreement.

SECTION 3.           Representations and Warranties.  The Borrower represents and warrants as
follows:

(a)           The
representations and warranties contained in Article VI of the Loan Agreement,
after giving effect to this Amendment, are true and correct in all material
respects on and as of the Amendment Date, as though made on and as of such
date, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such
representations and warranties were true and accurate on and as of such earlier
date).

 S-2
 

(b)           No
Default or Event of Default has occurred or is continuing at the time of the
Amendment Date and no Default or Event of Default will occur or be continuing
immediately after the Amendment Date.

SECTION 4.           Reference to and Effect on the Loan Documents.  (a)  On
and after the Amendment Date, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Loan
Agreement, and each reference in the other Loan Documents to “the Agreement”, “thereunder”, “thereof”, or words of like import referring to the Loan
Agreement shall mean and be a reference to the Loan Agreement, as modified
hereby.

(b)           The
Loan Agreement and each of the other Loan Documents, as specifically modified
by this Amendment, are and shall continue to be in full force and effect and
are hereby in all respects ratified and confirmed.

SECTION 5.           Affirmation of Guarantors.  Each Guarantor hereby consents to the amendments to the Loan Agreement
effected hereby, and hereby confirms and agrees that,
notwithstanding the effectiveness of this Amendment, the obligations of such
Guarantor contained in the Loan Documents to which it is a party are, and shall
remain, in full force and effect and are hereby ratified and confirmed in all
respects, except that, on and after the effectiveness of this Amendment, each
reference in the Loan Agreement and in each of the other Loan Documents to “the Agreement”, “thereunder”, “thereof” or words of like import shall mean and be a reference
to the Loan Agreement, as modified by this Amendment.

SECTION 6.           GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

SECTION 7.           WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY
WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR
NATURE IN ANY COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR
AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING TO THIS AMENDMENT OR BY
REASON OF ANY OTHER SUIT, CAUSE OF ACTION OR DISPUTE WHATSOEVER BETWEEN OR
AMONG THE PARTIES HERETO OF ANY KIND OR NATURE RELATING TO ANY OF THE LOAN
DOCUMENTS.

SECTION 8.           Execution in Counterparts.  This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which counterparts together shall constitute but one and
the same instrument.  Delivery of an executed counterpart of a
signature page to this Amendment by telecopier shall be effective as delivery
of a manually executed counterpart of this Amendment.

SECTION 9.           Costs and Expenses.  The Borrower hereby agrees to pay all reasonable
costs and expenses associated with the preparation, execution, delivery,
administration,

 S-3
 

and
enforcement of this Amendment, including, without limitation, the fees and
expenses of the the Agent’s counsel and other out-of-pocket expenses related
hereto.

 S-4
 

IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed by their authorized officers all as of the day
and year first above written.

	
  

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  HOSPITALITY PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Kleifges

  
	
   

  	
   

  	
  Name:

  	
  Mark Kleifges

  
	
   

  	
   

  	
  Title:

  	
  CFO

  

 

 S-5
 

 

	
  

  	
   

  	
  GUARANTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HH HPT SUITE PROPERTIES LLC

  
	
   

  	
   

  	
  HH HPTCW II PROPERTIES LLC

  
	
   

  	
   

  	
  HH HPTCY PROPERTIES LLC

  
	
   

  	
   

  	
  HH HPTMI III PROPERTIES LLC

  
	
   

  	
   

  	
  HH HPTRI PROPERTIES LLC

  
	
   

  	
   

  	
  HH HPTWN PROPERTIES LLC

  
	
   

  	
   

  	
  HPT CW PROPERTIES TRUST

  
	
   

  	
   

  	
  HPT HSD PROPERTIES TRUST

  
	
   

  	
   

  	
  HPT IHG CANADA PROPERTIES TRUST

  
	
   

  	
   

  	
  HPT IHG GA PROPERTIES LLC

  
	
   

  	
   

  	
  HPT IHG PR, INC.

  
	
   

  	
   

  	
  HPT IHG PROPERTIES TRUST

  
	
   

  	
   

  	
  HPT IHG-2 PROPERTIES TRUST

  
	
   

  	
   

  	
  HPTLA PROPERTIES TRUST

  
	
   

  	
   

  	
  HPT SMOKEY MOUNTAIN LLC

  
	
   

  	
   

  	
  HPT SUITE PROPERTIES TRUST

  
	
   

  	
   

  	
  HPTCY PROPERTIES TRUST

  
	
   

  	
   

  	
  HPTMI HAWAII, INC.

  
	
   

  	
   

  	
  HPTMI II PROPERTIES TRUST

  
	
   

  	
   

  	
  HPTMI PROPERTIES TRUST

  
	
   

  	
   

  	
  HPTRI PROPERTIES TRUST

  
	
   

  	
   

  	
  HPTSHC PROPERTIES TRUST

  
	
   

  	
   

  	
  HPTSY PROPERTIES TRUST

  
	
   

  	
   

  	
  HPTWN PROPERTIES TRUST

  
	
   

  	
   

  	
  HPT IHG-3 PROPERTIES LLC

  
	
   

  	
   

  	
  HPT IHG-3 PROPERTIES TRUST

  
	
   

  	
   

  	
  HPT TA PROPERTIES TRUST

  
	
   

  	
   

  	
  HPT TA PROPERTIES LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Mark Kleifges

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Mark Kleifges

  
	
   

  	
   

  	
   

  	
  Title:

  	
  CFO

  

 

 S-6
 

 

	
  

  	
  MERRILL LYNCH CAPITAL CORPORATION,

  
	
   

  	
  as Agent

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
  /s/ Nancy Meadows

  
	
   

  	
   

  	
  Name:

  	
  Nancy Meadows

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 S-7
 

 

	
  

  	
  MERRILL LYNCH, PIERCE, FENNER & SMITH 

  
	
   

  	
  INCORPORATED, as Lead Arranger

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
  /s/ Nancy Meadows

  
	
   

  	
   

  	
  Name:

  	
  Nancy Meadows

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 S-8
 

 

	
  

  	
  MERRILL LYNCH BANK USA,

  
	
   

  	
  as Lender

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
  /s/ Louis Alder

  
	
   

  	
   

  	
  Name:

  	
  Louis Alder

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

 S-9
 

 

	
  

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION,

  
	
   

  	
  as Lender

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
  /s/ Dean R. Whitehill

  
	
   

  	
   

  	
  Name:

  	
  Dean R. Whitehill

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 S-10
 

 

	
  

  	
  ROYAL BANK OF CANADA, NEW YORK

  
	
   

  	
  BRANCH, as Lender

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
  /s/ Dan LePage

  
	
   

  	
   

  	
  Name:

  	
  Dan LePage

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  

 S-11
 

 

	
  

  	
  UBS LOAN FINANCE LLC,

  
	
   

  	
  as Lender

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
  /s/ Richard L. Tavrow

  
	
   

  	
   

  	
  Name:

  	
  Richard L. Tavrow

  
	
   

  	
   

  	
  Title:

  	
  Director, Banking Product Services, US

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Iria R. Otsa

  
	
   

  	
   

  	
  Name:

  	
  Iria R. Otsa

  
	
   

  	
   

  	
  Title:

  	
  Associate Director, Banking Product Services, US

  

 

 S-12
 

 

	
  

  	
  MORGAN STANLEY SENIOR FUNDING INC.,

  
	
   

  	
  as Lender

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
  /s/ Daniel Twenge

  
	
   

  	
   

  	
  Name:

  	
  Daniel Twenge

  
	
   

  	
   

  	
  Title:

  	
  Vice President, Morgan Stanely Senior Funding, Inc.

  

 

 S-13

Annex I

EXHIBIT D

FORM OF NOTICE OF
CONTINUATION

Annex II

EXHIBIT E

FORM OF NOTICE OF CONVERSIONExhibit 4 ( c )

CONFIDENTIAL OFFERING CIRCULAR

$150,000,000

6  3/4 % Subordinated Notes Due 2011

 

We will pay interest on the subordinated notes each March 1 and
September 1, commencing March 1, 2002. The subordinated notes will mature
on September 1, 2011. The subordinated notes may not be redeemed prior to
maturity and no sinking fund is provided for the subordinated notes.

The subordinated notes will be unsecured and subordinate to the claims
of our depositors and other creditors. Payment of principal of the subordinated
notes may be accelerated only in the case of our insolvency or liquidation. We
may be required to obtain the prior written approval of the Comptroller of the
Currency before we may redeem or repay the subordinated notes upon acceleration
or otherwise. There is no right of
acceleration in the case of default in the payment of interest on or principal
of the subordinated notes or default in the performance of any of our other
obligations under the subordinated notes.

The subordinated notes will not be listed on any securities exchange and
there can be no assurance that a trading market will develop for the
subordinated notes. The subordinated notes will be issued and transferred only
in minimum denominations of $250,000 and integral multiples of $1,000 in excess
thereof.

Each subordinated note will be our direct, unconditional and unsecured
general obligation and will not be an obligation of, or otherwise guaranteed
by, City National Corporation. The subordinated notes will not represent deposits
or savings accounts and will not be insured by the Federal Deposit Insurance
Corporation, the Bank Insurance Fund or any other government agency. The
subordinated notes will be subordinated to the claims of our depositors and
general creditors, will be ineligible as collateral to secure loans from us and
will be unsecured.

The subordinated notes may be offered and sold only to “accredited
investors” within the meaning of Rule 501 of the Securities Act of 1933.

	
  

  	
   

  	
  Offering

  Price (1)

  	
   

  	
  Underwriting

  Discounts and Commissions

  	
   

  	
  Proceeds to

  Bank

  	
   

  
	
  Per subordinated
  note

  	
   

  	
  99.427

  	
  %

  	
  .650

  	
  %

  	
  98.777

  	
  %

  
	
  Total

  	
   

  	
  $

  	
  149,140,500

  	
   

  	
  $

  	
  975,000

  	
   

  	
  $

  	
  148,165,500

  	
   

  
											

(1)

Plus accrued interest,
if any, from August 30, 2001.

Delivery of the subordinated notes in book-entry form only will be made
on or about August 30, 2001.

The subordinated notes have not been, and are not required to be,
registered with the Comptroller of the Currency or the Securities and Exchange
Commission under the Securities Act of 1933. The subordinated notes have not
been approved or disapproved by the Comptroller of the Currency, the Securities
and Exchange Commission or any state securities commission, nor has the
Comptroller of the Currency, the Securities and Exchange Commission or any
state securities commission passed upon the accuracy or adequacy of this
offering circular. Any representation to the contrary is a criminal offense.

	
  Credit Suisse First Boston

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  City National Securities, Inc.

  	
   

  
	
   

  	
   

  	
  Goldman, Sachs & Co.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Lehman Brothrs

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Morgan Stanley

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Salomon Smith Barney

  
												

 

The date of this confidential offering circular is August 23, 2001.

 

 TABLE OF
CONTENTS

	
  FORWARD-LOOKING STATEMENTS

  	
  3

  
	
  NOTICE TO
  INVESTORS

  	
  3

  
	
  CITY NATIONAL
  BANK

  	
  4

  
	
  CITY NATIONAL
  CORPORATION

  	
  4

  
	
  USE OF PROCEEDS

  	
  4

  
	
  SELECTED
  UNAUDITED FINANCIAL DATA FOR CITY NATIONAL BANK

  	
  5

  

 

	
  

  
	
  SELECTED
  CONSOLIDATED FINANCIAL DATA FOR CITY NATIONAL CORPORATION

  	
  6

  
	
  CERTAIN
  REGULATORY CONSIDERATIONS

  	
  8

  
	
  DESCRIPTION OF
  SUBORDINATED NOTES

  	
  12

  
	
  UNDERWRITING

  	
  17

  
	
  VALIDITY OF
  SUBORDINATED NOTES

  	
  18

  
	
  INCORPORATION OF
  CERTAIN DOCUMENTS BY REFERENCE

  	
  18

  

 

You should rely only on the information contained in
this document or to which we have referred you. We have not authorized anyone
to provide you with different information. This document may only be used where
it is legal to sell these securities. The information in this document may only
be accurate on the date of this document.

When this Offering Circular uses the words “the Bank,” “we,” “us,” and “our,”
it refers to City National Bank and its subsidiaries unless otherwise expressly
stated or the context otherwise requires. When this Offering Circular uses the
words “the Corporation,” it refers to City National Corporation and its
subsidiaries unless otherwise expressly stated or the context otherwise
requires.

 2
 

FORWARD-LOOKING
STATEMENTS

This Offering Circular includes and incorporates by reference
forward-looking statements about the Corporation and the Bank that are subject
to risks and uncertainties. These statements are based on the beliefs and
assumptions of the Corporation’s and the Bank’s management, and on information
currently available to their management. Forward-looking statements include
information concerning the Corporation’s and the Bank’s 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.

The Corporation’s and the Bank’s 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 future performance.
They involve risks, uncertainties, and assumptions. The Corporation’s and the
Bank’s future results and shareholder values may differ materially from those
expressed in these forward-looking statements. Many of the factors that will
determine these results and values are beyond the Corporation’s and the Bank’s
ability to control or predict. For those statements, the Corporation and the
Bank claim the protection of the safe harbor contained in the Private
Securities Litigation Reform Act of 1995.

The reports that the Corporation files with the Securities and Exchange
Commission (the “Commission”), including its Annual Report on Form 10-K
for the year ended December 31, 2000 and its exhibits and its Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2001 and
June 30, 2001, describe some of the factors that will determine the
Corporation’s and the Bank’s future results and shareholder values. For
example, these documents describe certain economic risks, interest rate risks,
legal risks, competitive risks and credit risks associated with the business
and operations of the Corporation and the Bank. These and other factors could
cause actual conditions, events or results to differ significantly from those
described in the forward-looking statements or otherwise affect the future
business, results of operations and financial condition of the Corporation and
the Bank.

 NOTICE TO
INVESTORS

The Subordinated Notes offered hereby (the “Subordinated Notes”) have
not been, and are not required to be, registered with the Commission under the
Securities Act of 1933 (the “Securities Act”). The Subordinated Notes are being
offered and sold pursuant to the abbreviated securities registration procedures
of the Office of the Comptroller of the Currency (the “OCC”) set forth in
Section 16.6 of Part 16 of the OCC’s regulations. To qualify for
these abbreviated registration procedures, the Subordinated Notes must, among
other things, be offered and sold only to accredited investors as defined in
the Commission’s Rule 501(a) under the Securities Act and must be sold in
minimum denominations of $250,000 (and not be exchangeable for Subordinated Notes
in smaller denominations). Accordingly, each purchaser of a Subordinated Note,
in making its purchase, will be deemed to have represented to and agreed with
the underwriters and the Bank that it is an “accredited investor” within the
meaning of Rule 501(a) under the Securities Act, and that it is purchasing
the Subordinated Notes for its own account or the account of one or more other
accredited investors and that it, or each of such other accredited investors
owning a beneficial interest in a Subordinated Note, will at all times hold a
beneficial interest therein in a principal amount of not less than $250,000.

In making an investment decision, investors must rely on their own
examination of the Bank and the terms of the Subordinated Notes offered hereby,
including the merits and risks involved.

 3
 

CITY
NATIONAL BANK

We are a national banking association founded in 1953 and are the
primary subsidiary of the Corporation. We operate through business and
specialty banking units and private banking teams in nine California regional
centers as well as 49 banking offices in the following California counties:
Contra Costa, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San
Francisco, San Mateo, Santa Clara and Ventura. We also have an offshore office
in the Cayman Islands, British West Indies which takes deposits. Our principal
client base comprises small-to mid-sized businesses, entrepreneurs,
professionals, and affluent individuals. We typically serve clients through
relationship banking. We seek 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 the multiple services and products
we offer. We offer a broad range of loans, deposits, cash management,
international banking, and other products and services. We lend, invest, and
provide services in accordance with our Community Reinvestment Act commitment.
Through City National Investments (“CNI”), a division of the Bank, and Reed,
Conner & Birdwell, LLC (“RCB”), a subsidiary of the Corporation, we
offer personal and employee benefit trust services, including 401(k) and
defined benefit plans, manage investments for clients, and engage in securities
sales and trading. We also manage and offer mutual funds under the name of CNI
Charter Funds.

As of June 30, 2001, we had total assets of approximately
$9.1 billion, total deposits of approximately $7.1 billion and
shareholders’ equity of approximately $758.2 million. As of June 30,
2001, CNI (including RCB) had assets under administration totaling
$18.5 billion, including $7.2 billion of assets under management.

Our principal executive offices are located at City National Center, 400
North Roxbury Drive, Beverly Hills, California 90210 (telephone
(310) 888-6000).

We are subject to extensive regulation by federal regulators, including
the OCC, the Federal Deposit Insurance Corporation (the “FDIC”) and the Board
of Governors of the Federal Reserve System (the “Federal Reserve”). See “Certain
Regulatory Considerations.” In addition, certain business activities we conduct
are regulated by other federal and state regulators.

Our competitors include commercial banks and other banks focused on
asset management, savings associations, consumer and commercial finance
companies, credit unions and other financial services companies. We believe
that the level of competition will increase in the future as the industry
continues to consolidate and as nonbanking companies continue to offer products
traditionally offered by banks.

CITY NATIONAL CORPORATION

The Corporation is a bank holding company incorporated under the laws of
the State of Delaware and registered with the Federal Reserve under the Bank
Holding Company Act of 1956, as amended. Its primary subsidiary is the Bank. As
of June 30, 2001, the Corporation on a consolidated basis had total assets
of approximately $9.1 billion, total deposits of approximately
$7.1 billion and total shareholders’ equity of approximately
$815.8 million.

The Corporation’s principal executive offices are located at City
National Center, 400 North Roxbury Drive, Beverly Hills, California 90210
(telephone (310) 888-6000).

The Subordinated Notes are solely obligations of the
Bank and are neither obligations of nor guaranteed by the Corporation or its
affiliates other than the Bank.

USE OF PROCEEDS

The net proceeds to be received by the Bank from the sale of the
Subordinated Notes will be used for general corporate purposes in the ordinary
course of its banking business.

 4
 

SELECTED UNAUDITED
FINANCIAL DATA FOR CITY NATIONAL BANK

The following sets forth selected unaudited historical and other
financial data for the Bank and its subsidiaries as of, and for each of the
five years ended, December 31, 2000 through 1996 and as of, and for the
six months ended, June 30, 2001 and 2000. Such data should be read in
conjunction with, and is qualified in its entirety by, the more detailed
information and financial data of the Bank available in the Call Reports as
described under “Incorporation of Certain Documents by Reference.” The
following selected unaudited financial data was prepared in accordance with
regulatory accounting principles, which may differ from accounting principles
generally accepted in the United States of America and used to prepare the
consolidated financial statements of the Corporation. The selected financial
data presented below is derived from unaudited financial statements and
includes, in the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary to present the data fairly. Results for the
six months ended June 30, 2001 may not be indicative of the results that
may be expected for the year ending December 31, 2001 or any future
period.

	
   

  	
   

  	
  As of or for the

  Six Months  Ended

  June 30,

  	
   

  	
  As of or for the Year Ended December 31,

  	
   

  
	
  Dollars in thousands

  	
   

  	
  2001

  	
   

  	
  2000

  	
   

  	
  2000

  	
   

  	
  1999

  	
   

  	
  1998

  	
   

  	
  1997

  	
   

  	
  1996

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Statement
  of Operations Data:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest income

  	
   

  	
  $

  	
  319,884

  	
   

  	
  $

  	
  305,618

  	
   

  	
  $

  	
  645,411

  	
   

  	
  $

  	
  470,006

  	
   

  	
  $

  	
  421,014

  	
   

  	
  $

  	
  354,504

  	
   

  	
  $

  	
  279,726

  	
   

  
	
  Interest expense

  	
   

  	
  110,821

  	
   

  	
  109,153

  	
   

  	
  239,814

  	
   

  	
  149,497

  	
   

  	
  131,456

  	
   

  	
  104,467

  	
   

  	
  82,546

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net interest income

  	
   

  	
  209,063

  	
   

  	
  196,465

  	
   

  	
  405,597

  	
   

  	
  320,509

  	
   

  	
  289,558

  	
   

  	
  250,037

  	
   

  	
  197,180

  	
   

  
	
  Provision for credit losses

  	
   

  	
  14,000

  	
   

  	
  4,000

  	
   

  	
  21,500

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Noninterest income

  	
   

  	
  61,803

  	
   

  	
  50,336

  	
   

  	
  107,074

  	
   

  	
  83,703

  	
   

  	
  65,322

  	
   

  	
  55,158

  	
   

  	
  42,284

  	
   

  
	
  Noninterest expense

  	
   

  	
  153,271

  	
   

  	
  144,891

  	
   

  	
  293,010

  	
   

  	
  240,589

  	
   

  	
  210,034

  	
   

  	
  182,881

  	
   

  	
  142,867

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Income before taxes

  	
   

  	
  103,595

  	
   

  	
  97,910

  	
   

  	
  198,161

  	
   

  	
  163,623

  	
   

  	
  144,846

  	
   

  	
  122,314

  	
   

  	
  96,597

  	
   

  
	
  Income taxes

  	
   

  	
  34,868

  	
   

  	
  34,564

  	
   

  	
  68,101

  	
   

  	
  58,181

  	
   

  	
  53,306

  	
   

  	
  45,656

  	
   

  	
  32,549

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net income

  	
   

  	
  $

  	
  68,727

  	
   

  	
  $

  	
  63,346

  	
   

  	
  $

  	
  130,060

  	
   

  	
  $

  	
  105,442

  	
   

  	
  $

  	
  91,540

  	
   

  	
  $

  	
  76,658

  	
   

  	
  $

  	
  64,048

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Selected Balance Sheet Data:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loans and leases, net of unearned
  income

  	
   

  	
  $

  	
  6,605,843

  	
   

  	
  $

  	
  6,373,667

  	
   

  	
  $

  	
  6,558,789

  	
   

  	
  $

  	
  5,514,449

  	
   

  	
  $

  	
  4,548,540

  	
   

  	
  $

  	
  3,875,695

  	
   

  	
  $

  	
  2,873,082

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Allowance for credit losses

  	
   

  	
  133,883

  	
   

  	
  140,484

  	
   

  	
  135,435

  	
   

  	
  134,077

  	
   

  	
  135,339

  	
   

  	
  137,761

  	
   

  	
  130,089

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loans and leases, net of allowances for credit losses

  	
   

  	
  6,471,960

  	
   

  	
  6,233,183

  	
   

  	
  6,423,354

  	
   

  	
  5,380,372

  	
   

  	
  4,413,201

  	
   

  	
  3,737,934

  	
   

  	
  2,742,993

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Securities

  	
   

  	
  1,562,678

  	
   

  	
  1,342,457

  	
   

  	
  1,487,098

  	
   

  	
  1,051,181

  	
   

  	
  977,645

  	
   

  	
  729,014

  	
   

  	
  743,559

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Goodwill and core deposit intangibles

  	
   

  	
  172,362

  	
   

  	
  188,657

  	
   

  	
  181,426

  	
   

  	
  127,256

  	
   

  	
  73,706

  	
   

  	
  55,582

  	
   

  	
  10,083

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total assets

  	
   

  	
  9,068,240

  	
   

  	
  8,647,277

  	
   

  	
  9,046,315

  	
   

  	
  7,181,749

  	
   

  	
  6,407,491

  	
   

  	
  5,194,285

  	
   

  	
  4,171,837

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deposits

  	
   

  	
  7,087,286

  	
   

  	
  6,395,990

  	
   

  	
  7,412,435

  	
   

  	
  5,673,860

  	
   

  	
  4,893,877

  	
   

  	
  4,238,740

  	
   

  	
  3,410,270

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total equity capital

  	
   

  	
  758,159

  	
   

  	
  651,172

  	
   

  	
  706,549

  	
   

  	
  541,363

  	
   

  	
  532,049

  	
   

  	
  440,382

  	
   

  	
  336,632

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Selected Ratios:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net interest margin (taxable equivalent basis)

  	
   

  	
  5.30

  	
  %

  	
  5.51

  	
  %

  	
  5.44

  	
  %

  	
  5.54

  	
  %

  	
  5.79

  	
  %

  	
  6.07

  	
  %

  	
  5.78

  	
  %

  
	
  Return on average assets

  	
   

  	
  1.54

  	
   

  	
  1.58

  	
   

  	
  1.55

  	
   

  	
  1.63

  	
   

  	
  1.64

  	
   

  	
  1.65

  	
   

  	
  1.69

  	
   

  
	
  Return on average equity

  	
   

  	
  18.99

  	
   

  	
  21.26

  	
   

  	
  20.31

  	
   

  	
  19.49

  	
   

  	
  18.63

  	
   

  	
  18.98

  	
   

  	
  18.78

  	
   

  
	
  Allowance for credit losses to total loans and leases

  	
   

  	
  2.03

  	
   

  	
  2.20

  	
   

  	
  2.06

  	
   

  	
  2.43

  	
   

  	
  2.98

  	
   

  	
  3.55

  	
   

  	
  4.53

  	
   

  
	
  Allowance for credit losses to nonaccrual loans

  	
   

  	
  361.02

  	
   

  	
  400.50

  	
   

  	
  218.49

  	
   

  	
  530.20

  	
   

  	
  584.92

  	
   

  	
  499.75

  	
   

  	
  313.14

  	
   

  
	
  Net (charge-offs) recoveries to average total loans
  (1)

  	
   

  	
  (0.48

  	
  )

  	
  (0.25

  	
  )

  	
  (0.48

  	
  )

  	
  (0.10

  	
  )

  	
  (0.12

  	
  )

  	
  0.02

  	
   

  	
  (0.06

  	
  )

  
	
  Ratio of earnings to fixed charges (2)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Excluding interest on deposits

  	
   

  	
  3.92

  	
   

  	
  3.19

  	
   

  	
  3.24

  	
   

  	
  3.75

  	
   

  	
  4.08

  	
   

  	
  4.63 

  	
   

  	
  4.20

  	
   

  
	
  Including interest on deposits

  	
   

  	
  1.91

  	
   

  	
  1.88

  	
   

  	
  1.81

  	
   

  	
  2.07

  	
   

  	
  2.08

  	
   

  	
  2.14

  	
   

  	
  2.14

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital Ratios:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Risk-based Capital Ratios

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tier I

  	
   

  	
  8.19

  	
  %

  	
  7.22

  	
  %

  	
  7.55

  	
  %

  	
  7.40

  	
  %

  	
  8.90

  	
  %

  	
  9.50

  	
  %

  	
  11.24

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  11.08

  	
   

  	
  10.29

  	
   

  	
  10.57

  	
   

  	
  10.75

  	
   

  	
  12.65

  	
   

  	
  10.78

  	
   

  	
  12.53

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tier I Leverage
  Ratio

  	
   

  	
  6.51

  	
   

  	
  5.96

  	
   

  	
  6.23

  	
   

  	
  6.30

  	
   

  	
  7.53

  	
   

  	
  7.93

  	
   

  	
  8.22

  	
   

  

(1)
 Annualized for the six months ended June
30, 2001 and June 30, 2000.

(2)
 The ratio of earnings to fixed charges
has been computed by dividing income before income taxes plus fixed charges by
fixed charges. Fixed charges, excluding interest on deposits, consist of
interest on indebtedness other than deposits and the portion of rental expense
deemed representative of an interest factor. Fixed charges, including interest
on deposits, consist of both the foregoing items plus interest on deposits.

 5
 

SELECTED CONSOLIDATED FINANCIAL DATA

FOR CITY NATIONAL
CORPORATION

The following sets forth selected consolidated historical and other
financial data for the Corporation and its consolidated subsidiaries as of, and
for each of the five years ended, December 31, 2000 through 1996 and as
of, and for the six months ended, June 30, 2001 and 2000. Such data should
be read in conjunction with, and is qualified in its entirety by, the more
detailed information, Management’s Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated financial statements
and notes thereto in the reports filed by the Corporation with the Commission
as described under the caption “Incorporation of Certain Documents by
Reference.” The selected consolidated balance sheet data for the years ended
December 31, 2000 and 1999 and the consolidated statement of operations
data for the years ended December 31, 1998 through 2000 are derived from
the consolidated financial statements of the Corporation incorporated in this
Offering Circular by reference, which financial statements have been audited by
KPMG LLP, independent auditors. The selected consolidated balance sheet data
presented below as of December 31, 1998, 1997 and 1996 and the
consolidated statement of operations data presented below for the years ended
December 31, 1997 and 1996 are derived from financial statements of the
Corporation not included herein which have been audited by KPMG LLP,
independent auditors. The selected consolidated balance sheet data as of
June 30, 2001 and 2000 have been derived from the Corporation’s unaudited
consolidated financial statements. Results for the six months ended
June 30, 2001 may not be indicative of the results that may be expected
for the year ending December 31, 2001 or any future period.

 6

 

SELECTED CONSOLIDATED FINANCIAL DATA

FOR CITY NATIONAL CORPORATION (Continued)

	
   

  	
   

  	
  As of or for the

  Six Months Ended

  June 30,

  	
   

  	
  As of or for the Year Ended December 31,

  	
   

  
	
  Dollars in thousands, except per share data

  	
   

  	
  2001

  	
   

  	
  2000

  	
   

  	
  2000

  	
   

  	
  1999

  	
   

  	
  1998

  	
   

  	
  1997

  	
   

  	
  1996

  	
   

  
	
   

  	
   

  	
  (unaudited)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Statement of Operations Data:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest
  income

  	
   

  	
  $

  	
  320,682

  	
   

  	
  $

  	
  306,143

  	
   

  	
  $

  	
  646,288

  	
   

  	
  $

  	
  470,446

  	
   

  	
  $

  	
  423,949

  	
   

  	
  $

  	
  357,996

  	
   

  	
  $

  	
  282,123

  	
   

  
	
  Interest
  expense

  	
   

  	
  110,716

  	
   

  	
  109,252

  	
   

  	
  239,772

  	
   

  	
  148,441

  	
   

  	
  130,278

  	
   

  	
  104,328

  	
   

  	
  82,389

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  interest income

  	
   

  	
  209,966

  	
   

  	
  196,891

  	
   

  	
  406,516

  	
   

  	
  322,005

  	
   

  	
  293,671

  	
   

  	
  253,668

  	
   

  	
  199,734

  	
   

  
	
  Provision
  for credit losses

  	
   

  	
  14,000

  	
   

  	
  4,000

  	
   

  	
  21,500

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Noninterest
  income

  	
   

  	
  64,155

  	
   

  	
  51,033

  	
   

  	
  109,484

  	
   

  	
  87,212

  	
   

  	
  67,684

  	
   

  	
  53,418

  	
   

  	
  43,995

  	
   

  
	
  Noninterest
  expense

  	
   

  	
  155,616

  	
   

  	
  145,159

  	
   

  	
  294,770

  	
   

  	
  241,803

  	
   

  	
  211,331

  	
   

  	
  181,757

  	
   

  	
  144,595

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Income
  before taxes

  	
   

  	
  104,505

  	
   

  	
  98,765

  	
   

  	
  199,730

  	
   

  	
  167,414

  	
   

  	
  150,024

  	
   

  	
  125,329

  	
   

  	
  99,134

  	
   

  
	
  Income
  taxes

  	
   

  	
  34,570

  	
   

  	
  34,312

  	
   

  	
  68,070

  	
   

  	
  59,307

  	
   

  	
  53,796

  	
   

  	
  45,196

  	
   

  	
  32,571

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  income

  	
   

  	
  $

  	
  69,935

  	
   

  	
  $

  	
  64,453

  	
   

  	
  $

  	
  131,660

  	
   

  	
  $

  	
  108,107

  	
   

  	
  $

  	
  96,228

  	
   

  	
  $

  	
  80,133

  	
   

  	
  $

  	
  66,563

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Per Share Data:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  income per share, basic

  	
   

  	
  $

  	
  1.47

  	
   

  	
  $

  	
  1.38

  	
   

  	
  $

  	
  2.79

  	
   

  	
  $

  	
  2.37

  	
   

  	
  $

  	
  2.08

  	
   

  	
  $

  	
  1.74

  	
   

  	
  $

  	
  1.52

  	
   

  
	
  Net
  income per share, diluted

  	
   

  	
  1.43

  	
   

  	
  1.34

  	
   

  	
  2.72

  	
   

  	
  2.30

  	
   

  	
  2.00

  	
   

  	
  1.68

  	
   

  	
  1.47

  	
   

  
	
  Cash
  dividends declared

  	
   

  	
  0.37

  	
   

  	
  0.35

  	
   

  	
  0.70

  	
   

  	
  0.66

  	
   

  	
  0.56

  	
   

  	
  0.44

  	
   

  	
  0.36

  	
   

  
	
  Book
  value per share

  	
   

  	
  17.04

  	
   

  	
  14.11

  	
   

  	
  15.61

  	
   

  	
  12.58

  	
   

  	
  12.21

  	
   

  	
  11.03

  	
   

  	
  9.13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shares
  used to compute income per share, basic

  	
   

  	
  47,726

  	
   

  	
  46,792

  	
   

  	
  47,178

  	
   

  	
  45,683

  	
   

  	
  46,357

  	
   

  	
  46,018

  	
   

  	
  43,888

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shares
  used to compute income per share, diluted

  	
   

  	
  49,027

  	
   

  	
  47,986

  	
   

  	
  48,393

  	
   

  	
  46,938

  	
   

  	
  48,141

  	
   

  	
  47,809

  	
   

  	
  45,146

  	
   

  
	
  Balance Sheet Data — At Period
  End:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assets

  	
   

  	
  $

  	
  9,123,593

  	
   

  	
  $

  	
  8,676,768

  	
   

  	
  $

  	
  9,096,669

  	
   

  	
  $

  	
  7,213,619

  	
   

  	
  $

  	
  6,427,781

  	
   

  	
  $

  	
  5,252,032

  	
   

  	
  $

  	
  4,216,496

  	
   

  
	
  Deposits

  	
   

  	
  7,080,634

  	
   

  	
  6,394,854

  	
   

  	
  7,408,670

  	
   

  	
  5,669,409

  	
   

  	
  4,887,402

  	
   

  	
  4,228,348

  	
   

  	
  3,386,523

  	
   

  
	
  Loans

  	
   

  	
  6,567,370

  	
   

  	
  6,345,195

  	
   

  	
  6,527,145

  	
   

  	
  5,490,669

  	
   

  	
  4,530,427

  	
   

  	
  3,825,224

  	
   

  	
  2,839,435

  	
   

  
	
  Securities

  	
   

  	
  1,667,037

  	
   

  	
  1,395,739

  	
   

  	
  1,547,844

  	
   

  	
  1,102,092

  	
   

  	
  1,012,526

  	
   

  	
  833,122

  	
   

  	
  811,092

  	
   

  
	
  Interest-earning
  assets

  	
   

  	
  8,258,603

  	
   

  	
  7,837,303

  	
   

  	
  8,286,067

  	
   

  	
  6,677,475

  	
   

  	
  5,982,968

  	
   

  	
  4,838,926

  	
   

  	
  3,844,834

  	
   

  
	
  Shareholders’
  equity

  	
   

  	
  815,840

  	
   

  	
  672,022

  	
   

  	
  743,648

  	
   

  	
  571,646

  	
   

  	
  561,803

  	
   

  	
  508,670

  	
   

  	
  400,747

  	
   

  
	
  Balance Sheet Data — Average
  Balances:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assets

  	
   

  	
  $

  	
  9,026,738

  	
   

  	
  $

  	
  8,093,736

  	
   

  	
  $

  	
  8,426,129

  	
   

  	
  $

  	
  6,488,834

  	
   

  	
  $

  	
  5,633,829

  	
   

  	
  $

  	
  4,703,886

  	
   

  	
  $

  	
  3,821,314

  	
   

  
	
  Deposits

  	
   

  	
  6,881,386

  	
   

  	
  5,977,097

  	
   

  	
  6,334,846

  	
   

  	
  4,809,800

  	
   

  	
  4,267,602

  	
   

  	
  3,614,068

  	
   

  	
  2,871,870

  	
   

  
	
  Loans

  	
   

  	
  6,529,587

  	
   

  	
  6,036,030

  	
   

  	
  6,236,334

  	
   

  	
  4,822,254

  	
   

  	
  4,213,853

  	
   

  	
  3,387,784

  	
   

  	
  2,539,323

  	
   

  
	
  Securities

  	
   

  	
  1,556,157

  	
   

  	
  1,226,818

  	
   

  	
  1,350,971

  	
   

  	
  1,050,716

  	
   

  	
  842,346

  	
   

  	
  829,557

  	
   

  	
  839,564

  	
   

  
	
  Interest-earning
  assets

  	
   

  	
  8,212,922

  	
   

  	
  7,387,367

  	
   

  	
  7,698,884

  	
   

  	
  5,985,018

  	
   

  	
  5,187,897

  	
   

  	
  4,290,453

  	
   

  	
  3,505,422

  	
   

  
	
  Shareholders’
  equity

  	
   

  	
  781,146

  	
   

  	
  629,246

  	
   

  	
  667,618

  	
   

  	
  564,091

  	
   

  	
  538,426

  	
   

  	
  472,843

  	
   

  	
  373,491

  	
   

  
	
  Asset Quality:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nonaccrual
  loans

  	
   

  	
  $

  	
  37,085

  	
   

  	
  $

  	
  35,077

  	
   

  	
  $

  	
  61,986

  	
   

  	
  $

  	
  25,288

  	
   

  	
  $

  	
  23,138

  	
   

  	
  $

  	
  27,566

  	
   

  	
  $

  	
  41,543

  	
   

  
	
  ORE

  	
   

  	
  1,212

  	
   

  	
  447

  	
   

  	
  522

  	
   

  	
  1,413

  	
   

  	
  3,480

  	
   

  	
  2,126

  	
   

  	
  15,116

  	
   

  
	
  Total
  nonaccrual loans and ORE

  	
   

  	
  $

  	
  38,297

  	
   

  	
  $

  	
  35,524

  	
   

  	
  $

  	
  62,508

  	
   

  	
  $

  	
  26,701

  	
   

  	
  $

  	
  26,618

  	
   

  	
  $

  	
  29,692

  	
   

  	
  $

  	
  56,659

  	
   

  
	
  Performance Ratios:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Return
  on average assets

  	
   

  	
  1.56

  	
  %

  	
  1.60

  	
  %

  	
  1.56

  	
  %

  	
  1.67

  	
  %

  	
  1.71

  	
  %

  	
  1.70

  	
  %

  	
  1.74

  	
  %

  
	
  Return
  on average shareholders’ equity

  	
   

  	
  18.05

  	
   

  	
  20.60

  	
   

  	
  19.72

  	
   

  	
  19.16

  	
   

  	
  17.87

  	
   

  	
  16.95

  	
   

  	
  17.82

  	
   

  
	
  Net
  interest spread

  	
   

  	
  3.80

  	
   

  	
  3.95

  	
   

  	
  3.81

  	
   

  	
  4.12

  	
   

  	
  4.27

  	
   

  	
  4.64

  	
   

  	
  4.47

  	
   

  
	
  Net
  interest margin

  	
   

  	
  5.32

  	
   

  	
  5.53

  	
   

  	
  5.44

  	
   

  	
  5.56

  	
   

  	
  5.86

  	
   

  	
  6.13

  	
   

  	
  5.87

  	
   

  
	
  Average
  shareholders’ equity to average assets

  	
   

  	
  8.65

  	
   

  	
  7.77

  	
   

  	
  7.92

  	
   

  	
  8.69

  	
   

  	
  9.56

  	
   

  	
  10.05

  	
   

  	
  9.77

  	
   

  
	
  Dividend
  payout ratio, per share

  	
   

  	
  25.28

  	
   

  	
  25.18

  	
   

  	
  24.95

  	
   

  	
  27.91

  	
   

  	
  27.06

  	
   

  	
  26.19

  	
   

  	
  24.49

  	
   

  
	
  Efficiency
  ratio

  	
   

  	
  55.60

  	
   

  	
  57.13

  	
   

  	
  55.76

  	
   

  	
  57.58

  	
   

  	
  56.87

  	
   

  	
  58.22

  	
   

  	
  58.00

  	
   

  
	
  Asset Quality Ratios:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nonaccrual
  loans to total loans

  	
   

  	
  0.56

  	
  %

  	
  0.55

  	
  %

  	
  0.95

  	
  %

  	
  0.46

  	
  %

  	
  0.51

  	
  %

  	
  0.72

  	
  %

  	
  1.46

  	
  %

  
	
  Nonaccrual
  loans and ORE to total loans and ORE

  	
   

  	
  0.58

  	
   

  	
  0.56

  	
   

  	
  0.96

  	
   

  	
  0.49

  	
   

  	
  0.59

  	
   

  	
  0.78

  	
   

  	
  1.98

  	
   

  
	
  Allowance
  for credit losses to total loans

  	
   

  	
  2.04

  	
   

  	
  2.21

  	
   

  	
  2.07

  	
   

  	
  2.44

  	
   

  	
  2.99

  	
   

  	
  3.60

  	
   

  	
  4.58

  	
   

  
	
  Allowance
  for credit losses to nonaccrual loans

  	
   

  	
  361.02

  	
   

  	
  400.50

  	
   

  	
  218.49

  	
   

  	
  530.20

  	
   

  	
  584.92

  	
   

  	
  499.75

  	
   

  	
  313.14

  	
   

  
	
  Net
  (charge offs) recoveries to average loans (1)

  	
   

  	
  (0.48

  	
  )

  	
  (0.25

  	
  )

  	
  (0.48

  	
  )

  	
  (0.10

  	
  )

  	
  (0.12

  	
  )

  	
  0.02

  	
   

  	
  (0.06

  	
  )

  
	
  Capital Ratios:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Risk-based
  Captial Ratios

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tier
  1

  	
   

  	
  8.76

  	
  %

  	
  7.49

  	
  %

  	
  7.84

  	
  %

  	
  7.88

  	
  %

  	
  9.43

  	
  %

  	
  10.99

  	
  %

  	
  13.26

  	
  %

  
	
  Total

  	
   

  	
  11.64

  	
   

  	
  10.56

  	
   

  	
  10.85

  	
   

  	
  11.21

  	
   

  	
  13.20

  	
   

  	
  12.27

  	
   

  	
  14.55

  	
   

  
	
  Tier 1 Leverage Ratio

  	
   

  	
  6.97

  	
   

  	
  6.19

  	
   

  	
  6.49

  	
   

  	
  6.73

  	
   

  	
  7.99

  	
   

  	
  9.19

  	
   

  	
  9.75

  	
   

  

(1)

Annualized for the
six months ended June 30, 2001 and June 30, 2000.

 7
 

 

 CERTAIN REGULATORY
CONSIDERATIONS

General

        The
Bank, as a national banking association, is subject to primary supervision,
examination, and regulation by the OCC. To a lesser extent, the Bank is also
subject to certain regulations promulgated by the FDIC and the Federal Reserve.
If, as a result of an examination of a bank, the OCC 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 OCC. 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.

        The
Bank is also subject to various state and federal laws, including those
relating to consumer protection and similar matters, and is affected by the
fiscal and monetary policies of the federal government and its agencies,
including the Federal Reserve. An important purpose of these policies is to
curb inflation and control recessions through control of the supply of money
and credit. The Federal Reserve uses its powers to establish reserve requirements
of insured depository institutions and to conduct open market operations in
United States government securities so as to influence the supply of money and
credit. These policies have a direct effect on the amount of bank loans and
deposits and on interest rates charged on loans and paid on deposits, with the
result that federal policies have a material effect on the earnings of the
Bank. The policies of the Federal Reserve and other governmental authorities,
including the fiscal policy of the federal government, have shifted broadly
over the past decade, and further changes in these policies, as well as changes
in federal and state law and regulations, cannot be predicted nor can their
effect on future earnings of the Bank be predicted.

        The
following references to certain laws and regulations are brief summaries. The
references are not intended to be complete, and are qualified in their entirety
by reference to the statutes and regulations themselves. In addition, there are
numerous other state and federal laws and regulations not summarized below that
are applicable to, and govern many aspects of the operation and business of,
the Bank. Accordingly, investors should understand that a change in applicable
law or regulation may have a material effect on the business of the Bank.
Additional information regarding supervision and regulation is included in the
documents incorporated in this Offering Circular by reference. See “Incorporation
of Certain Documents by Reference.”

Powers of the FDIC in Connection with the Insolvency of an
Insured Depository Institution

        If
any insured depository institution becomes insolvent and the FDIC is appointed
its conservator or receiver, the FDIC may, under the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989, disaffirm or repudiate any
contract or lease to which such institution is a party, the performance of
which is determined by the FDIC to be burdensome, and the disaffirmance or
repudiation of which is determined by the FDIC to promote the orderly
administration of the institution’s affairs. If the FDIC were successfully to
contend that its power to repudiate “contracts” extends to obligations such as
the Subordinated Notes, the effect of any such repudiation should be to
accelerate the maturity of the Subordinated Notes. (For possible limitations on
the ability of the holders of Subordinated Notes to accelerate the maturity of
such Notes, see “Description of Subordinated Notes—Subordination” and “—Events
of Default.”) To the Bank’s knowledge, the FDIC has not taken the position that
such repudiation would impair the right of a holder of obligations such as the
Subordinated Notes to make a claim against the receivership or conservatorship
for principal and interest accrued through the date of the appointment of the
conservator or receiver. The amount paid upon this claim would depend upon,

 8
 

among
other factors, the amount of receivership assets available for the payment of
unsecured claims and the priority of this claim relative to the priority of
other unsecured creditors and depositors. See “—Federal Depositor Preference
Legislation” below. If the maturity of the Subordinated Notes were so
accelerated, and a claim relating to the Subordinated Notes was paid by the
receivership, the holders of the Subordinated Notes might not be able,
depending upon economic conditions, to reinvest any amounts paid on the
Subordinated Notes at a rate of interest comparable to that paid on the
Subordinated Notes. In addition, although the Subordinated Notes permit the
holders of the Subordinated Notes to accelerate the Subordinated Notes in the
event of the appointment of a receiver or liquidator of the Bank, the FDIC as
conservator or receiver may enforce most types of contracts, including the
Subordinated Notes, pursuant to their terms, notwithstanding any such
acceleration provision. The FDIC as conservator or receiver may also transfer
to a new obligor any of the Bank’s assets and liabilities, including the
Subordinated Notes, without the approval or consent of the Bank’s creditors,
including holders of the Subordinated Notes, which obligor shall expressly
assume the obligations under the Subordinated Notes, and the completion of such
transfer and assumption will serve to supersede and void any default,
acceleration or subordination which may have occurred, or which may occur due
to such transfer or assumption; except that any interest and principal
previously due, other than by reason of acceleration, and not paid shall be
deemed to be immediately due and payable, together with interest from its
original due date at the rate provided for in the Subordinated Notes.

        In
its resolution of an insured depository institution in default or in danger of
default, the FDIC is generally obligated to satisfy its obligations to insured
depositors at the least possible cost to the deposit insurance fund. In
addition, the FDIC may not take any action that would have the effect of
increasing the losses to the deposit insurance fund by protecting depositors
for more than the insured portion of deposits (generally $100,000) or creditors
other than depositors (such as holders of the Subordinated Notes). The Federal
Deposit Insurance Corporation Improvement Act of 1991 authorizes the FDIC to
settle all uninsured and unsecured claims in the insolvency of an insured bank
by making a final settlement payment after the declaration of insolvency. Such
a payment would constitute full payment and disposition of the FDIC’s
obligations to claimants. The rate of such final settlement payment is to be a
percentage rate determined by the FDIC reflecting an average of the FDIC’s
receivership recovery experience.

        As
a result of the provisions of law described above, whether or not the FDIC
seeks to repudiate the Subordinated Notes, in an insolvency of the Bank, the
Subordinated Notes would be treated differently from the deposit obligations of
the Bank, and holders of the Subordinated Notes would receive proportionately
less than holders of deposit obligations of the Bank.

Federal Depositor Preference Legislation

        Under
federal law, in the event of the liquidation or other resolution of an insured
depository institution, administrative expenses of the receiver and the claims
of the depositors of such institution (including claims by the FDIC as subrogee
of insured depositors) are entitled to priority in payment over the claims of
any other senior or general unsecured creditors of the institution, including
holders of obligations such as the Subordinated Notes. As a result, claims of a
receiver for administrative expenses and claims of holders of deposit
liabilities of the Bank (including the FDIC as the subrogee of such holders)
would receive priority over claims of holders of the Subordinated Notes in the
event of a liquidation or other resolution of the Bank. A substantial portion
of the Bank’s liabilities consist of deposits.

 9
 

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 “well capitalized,” a banking organization must maintain minimum ratios of
total capital to risk-weighted assets of ten percent (10%) and Tier 1 capital
to risk-weighted assets of six percent (6%). To be “adequately capitalized,” a
banking organization 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%). The three undercapitalized
categories are based upon the amount by which a bank falls below the ratios
applicable to adequately capitalized banking organizations. For the Bank and
the Corporation, 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 Bank and the Corporation, 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.

        Under
the capital regulations, 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 and June 30, 2001, the Bank and the Corporation
each exceeded the required ratios for classification as “well capitalized.” A
banking organization’s capital category, however, is determined solely for the
purposes of applying certain regulatory rules and may not constitute an
accurate representation of that banking organization’s overall financial
condition or prospects.

        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.

        Failure
to meet applicable capital guidelines could subject a banking organization to a
variety of enforcement remedies available to federal banking agencies,
including limitations on the ability to pay dividends, the issuance of a
capital directive to increase capital, the termination of deposit insurance by
the FDIC, and the appointment of a conservator or receiver.

        Federal
banking agencies have proposed regulations that would modify existing rules
related to risk-based capital and leverage ratios. The Bank does not believe
that the aggregate impact of these modifications would have a significant
impact on its capital position. Bank regulators continue to indicate their
desire to raise capital requirements applicable to banking organizations beyond
their

 10
 

 current levels. However, the Bank is unable to
predict whether and when higher capital requirements would be imposed and, if
so, at what level and on what schedule.

        Certain
capital ratios of the Bank and the Corporation are included herein under “Selected
Unaudited Financial Data for City National Bank” and “Selected Consolidated
Financial Data for City National Corporation,” respectively.

Financial Modernization

        On
November 12, 1999, the Gramm-Leach-Blilely 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. Each activity is to be conducted
in a separate subsidiary that is regulated by a functional regulator: a state
insurance regulator in the case of an insurance subsidiary, the Commission in
the case of a broker-dealer or investment advisory subsidiary, or the
appropriate federal banking regulator in the case of a bank or thrift
institution. The Federal Reserve is the “umbrella” supervisor of financial
holding companies. Section 23A of the Federal Reserve Act, which severely
restricts lending by an insured bank subsidiary to nonbank affiliates, remains
in place. The Corporation and the Bank do not believe that the Financial
Services Modernization Act will have a material adverse effect on their
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 have
substantially more financial resources than the Corporation or the Bank.

 11
 

 

DESCRIPTION OF SUBORDINATED NOTES

        The
following description of the terms of the Subordinated Notes offered hereby
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all of the provisions of the Subordinated Notes.
Capitalized terms not defined under this heading have the meanings assigned to
them in the Subordinated Notes.

General

        The
Subordinated Notes are to be issued under an Issuing and Paying Agency
Agreement, dated as of January 7, 1998, as amended (the “IPAA”), between
the Bank, as issuer, and Continental Stock Transfer & Trust Company,
as Issuing and Paying Agent (the “Issuing and Paying Agent”), a copy of which
is available for inspection at the offices of the Issuing and Paying Agent
located at 2 Broadway, New York, New York 10004. The Subordinated Notes will be
represented by one or more global notes (each, a “Global Note”) registered in
the name of The Depository Trust Company, as Depositary, or its nominee, in
denominations of $250,000 or more that are integral multiples of $1,000. See “—Book-Entry
System.”

        The
Subordinated Notes will be direct, unsecured, subordinated obligations of the
Bank and will mature on September 1, 2011 (the “Maturity Date”). The
Subordinated Notes will not be redeemable by the Bank, in whole or in part,
prior to the Maturity Date and do not provide for any sinking fund.

        The
Subordinated Notes are initially being offered in the principal amount of
$150,000,000. The Bank may, without the consent of the Holders, issue
additional subordinated notes and thereby increase that principal amount in the
future, on the same terms and conditions and with the same CUSIP number as the
Subordinated Notes offered by this Offering Circular.

        The
Subordinated Notes will bear interest at the rate per annum shown on the cover
page of this Offering Circular from August 30, 2001, payable semiannually in
arrears on each March 1 and September 1 (each, an “Interest Payment
Date”), commencing March 1, 2002, to the persons in whose names the
Subordinated Notes are registered at the close of business on the
February 15 or August 15, as the case may be, next preceding such
March 1 or September 1 (each, a “Regular Record Date”). Principal of
and interest on the Subordinated Notes will be payable, and the transfer of the
Subordinated Notes will be registered, through the Depositary as described
under “—Book-Entry System.”

        If
any Interest Payment Date or the Maturity Date of the Subordinated Notes falls
on a day that is not a Business Day, the related payment of principal or
interest will be made on the next succeeding Business Day with the same force
and effect as if made on the due date therefor, and no interest will accrue
from such Interest Payment Date or Maturity Date, as the case may be, to such
next succeeding Business Day. “Business Day” means any day that is not a
Saturday or Sunday and that, in the City of New York or the State of
California, is not a day on which banking institutions generally are authorized
or obligated by law or executive order to close.

        The
Subordinated Notes are not being registered with the OCC and are offered
pursuant to the regulations of the OCC and pursuant to an exemption from
registration with the Commission under Section 3(a)(2) of the Securities
Act. The IPAA is not required to be, and is not being, qualified under the
Trust Indenture Act of 1939, as amended.

        Because
the Subordinated Notes will not be issued pursuant to an indenture, and because
the Depositary or its nominee will be the registered Holder of all Subordinated
Notes, the Depositary or its nominee will be the only entity that can enforce
covenants, respond to requests for consents, waivers or amendments, and
exercise other rights of holders of Subordinated Notes. Consequently, a
beneficial owner of Subordinated Notes generally must rely on the procedures of
the Depositary and of those other parties through whom such owner’s interest in
the Subordinated Notes is held to exercise any

 

 12

 

rights
of a holder of the Subordinated Notes. THE BANK WILL TREAT THE DEPOSITARY OR
ITS NOMINEE AS THE SOLE AND ABSOLUTE OWNER OF ALL SUBORDINATED NOTES FOR THE
PURPOSE OF RECEIVING PAYMENT OF INTEREST ON AND PRINCIPAL OF SUCH NOTES, AND
FOR ALL OTHER PURPOSES WHATSOEVER. See “—Book-Entry System”, below.

        Each Subordinated Note will be a direct, unconditional
and unsecured general obligation of the Bank and will not be an obligation of,
or guaranteed by, the Corporation or any affiliate thereof other than the Bank.
In each instance, these Subordinated Notes will not represent deposits and will
not be insured by the FDIC or any other government agency. In a receivership or
other insolvency proceeding with respect to the Bank, the Subordinated Notes could
be treated differently from, and holders of Subordinated Notes could receive
significantly less than holders of, deposit obligations, including deposit
notes, of the Bank. See “Certain Regulatory Considerations” and “—Subordination”
and “—Events of Default” below.

        The
Subordinated Notes will not be eligible to serve as collateral to secure a loan
from the Bank.

Subordination

        The
indebtedness of the Bank evidenced by the Subordinated Notes, including
principal and interest, will be unsecured and subordinate and junior in right
of payment to the Bank’s obligations to its depositors, its obligations under
bankers’ acceptances and letters of credit, and its obligations to its other
creditors (including any obligations to any Federal Reserve Bank, the FDIC and
any rights acquired by the FDIC as a result of loans made by the FDIC to the
Bank or the purchase or guarantee of any of its assets by the FDIC pursuant to
the provisions of Section 1823(c), (d) or (e) of Title 12 of the
United States Code), whether now outstanding or hereafter incurred, other than
any obligations which by their express terms rank on a parity with, or junior
to, the Subordinated Notes. In the event of any insolvency, receivership,
conservatorship, reorganization, readjustment of debt, marshalling of assets
and liabilities or similar proceedings or any liquidation or winding up of the
Bank, whether voluntary or involuntary, all such obligations (except
obligations which rank on a parity with, or junior to, the Subordinated Notes)
shall be entitled to be paid in full before any payment shall be made on
account of the principal of or interest on the Subordinated Notes. In the event
of any such proceedings, after payment in full of all sums owing with respect
to such prior obligations, the holders of the Subordinated Notes, together with
the holders of any obligations of the Bank ranking on a parity with the
Subordinated Notes, shall be entitled to be paid pro rata from the remaining
assets of the Bank, the unpaid principal of, and the unpaid interest on, the
Subordinated Notes or such other obligations before any payment or other
distribution, whether in cash, property or otherwise, shall be made on account
of any capital stock or any obligations of the Bank ranking junior to the
Subordinated Notes. For additional information, see “—Events of Default.”

        The
Subordinated Notes will rank pari passu
among themselves andpari passu,
in the event of a liquidation or similar proceeding with respect to the Bank,
whether voluntary or involuntary, with all other present or future unsecured
subordinated debt of the Bank, except any unsecured subordinated debt which may
be expressly stated to be subordinated to the Subordinated Notes or is
otherwise subordinated as a matter of law. As of June 30, 2001, the Bank
had $116.4 million principal amount of outstanding subordinated debt which
will rank pari passu  with the Subordinated Notes.

        The
Subordinated Notes will not contain any limitation on the amount of senior
debt, deposits or other obligations which rank senior to the Subordinated Notes
or subordinated debt or other obligations of the Bank which rank pari passu  with the Subordinated Notes, that may be
incurred by the Bank after the date of this Offering Circular.

 

 13
 

 

Book-Entry System

        Except
in certain limited circumstances described below, the Subordinated Notes will
be represented by one or more fully registered securities in permanent global
form (each a “Global Note”). Each Global Note representing Subordinated Notes
will be deposited with or on behalf of the Depositary, and will be registered
in the name of the Depositary or a nominee of the Depositary. Such Global Note
will be transferable only as a whole, and only to the Depositary, its
successors and their respective nominees.

        Ownership
of beneficial interests in a Global Note representing Subordinated Notes will
be limited to institutions that have accounts with the Depositary or its
nominee (“participants”) or persons that may hold interests through participants.
The Bank has been advised by the Depositary that, upon the issuance of a Global
Note representing Subordinated Notes, and the deposit of such Global Note with
the Depositary, the Depositary will immediately credit, on its book-entry
registration and transfer system, the respective principal amounts of the
Subordinated Notes represented by such Global Note to the accounts of
participants. The accounts to be credited shall be designated by the
underwriters named herein.

        Principal
and interest payments on the Subordinated Notes registered in the name of the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner and holder of the Global Note or Global
Notes. Such payments to the Depositary or its nominee, as the case may be, will
be made in immediately available funds;
provided  that, in the case of
payments of principal and interest on the Maturity Date, the Global Note or
Global Notes are presented to the Issuing and Paying Agent in time for the
Issuing and Paying Agent to make such payments in such funds in accordance with
its normal procedures. Under the terms of the IPAA, the Bank and the Issuing
and Paying Agent will treat the persons in whose names the Subordinated Notes
are registered as the owners of such Subordinated Notes for the purpose of
receiving payment of principal of and interest on such Subordinated Notes and
for all other purposes whatsoever. Therefore, neither the Bank nor the Issuing
and Paying Agent has any direct responsibility or liability for the payment of
principal or interest on the Subordinated Notes to owners of beneficial
interests in the Global Note.

        The
Bank has been advised by the Depositary that, upon receipt of any payment of
principal of or any premium or interest in respect of a Global Note, the
Depositary will immediately credit, on its book-entry registration and transfer
system, accounts of participants with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Note as shown on the records of the Depositary. Payments by participants to
owners of beneficial interests in a Global Note held through such participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers registered in “street
name,” and will be the sole responsibility of such participants.

        As
long as the Depositary, or its nominee, is the registered holder of a Global
Note, the Depositary or such nominee, as the case may be, will be considered
the sole owner and holder of such Global Note and the Subordinated Notes
represented thereby for all purposes under the Subordinated Notes and the IPAA.
Except in the limited circumstances referred to below, owners of beneficial
interests in a Global Note will not be entitled to have such Global Note or any
Subordinated Notes represented thereby registered in their names, will not
receive or be entitled to receive physical delivery of certificated
Subordinated Notes in exchange therefor and will not be considered to be the
owners or holders of such Global Note or any Subordinated Notes represented
thereby for any purpose under the Subordinated Notes or the IPAA. All payments
of principal of and any premium and interest on a Global Note will be made to
the Depositary or its nominee, as the case may be, as the holder thereof. The
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of

 14
 

 

such
securities in definitive form. These laws may impair the ability to transfer
beneficial interests in a Global Note representing Subordinated Notes.

        If
the Depositary is at any time unwilling or unable to continue as depositary and
a successor depositary is not appointed by the Bank within 90 days after
the effective date of the Depositary’s ceasing to act as depositary for the
Subordinated Notes, the Bank will issue Subordinated Notes in definitive
certificated form in exchange for all of the Global Notes representing
Subordinated Notes. In addition, the Bank, at its option, may elect to cause
the issuance of Subordinated Notes in definitive certificated form. In any such
instance, or if any event shall have happened and be continuing which, after
notice or lapse of time, or both, would constitute an event of default with
respect to the Subordinated Notes, each owner of a beneficial interest in a
Global Note will be entitled to physical delivery in definitive certificated
form of Subordinated Notes represented by such Global Note equal in principal
amount to such beneficial interest and to have such Subordinated Notes
registered in its name. Interest on Subordinated Notes in definitive form
(other than interest payable on the Maturity Date or upon redemption) will be
paid by check mailed to the address of the person entitled thereto as it
appears in the register maintained at the corporate trust office of the Issuing
and Paying Agent as of the applicable Regular Record Date or to such other
address in the United States as any registered Holder shall designate to the
Issuing and Paying Agent in writing not later than the relevant Regular Record
Date.

        The
Bank understands that, under existing industry practices, if the Bank requests
Holders to take any action, or if an owner of a beneficial interest in a Global
Note desires to take any action which a Holder is entitled to take under the
IPAA, the Depositary would authorize the participants holding the relevant
beneficial interests to take that action and those participants would authorize
the beneficial holders owning through those participants to take that action or
would otherwise act upon instructions of the beneficial owners owning through
them.

        The
Depositary has advised the Bank as follows: the Depositary is a limited-purpose
trust company organized under the New York Banking Law, a “banking organization”
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a “clearing corporation” within the meaning of the New York Uniform
Commercial Code, and a “clearing agency” registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934, as amended. The
Depositary holds securities that its participants deposit with the Depositary.
The Depositary also facilitates the settlement among its participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants’ accounts,
thereby eliminating the need for physical movement of securities certificates.
The Depositary’s participants include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. The
Depositary is owned by a number of its participants and by the New York Stock
Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the Depositary’s system
is also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. The rules applicable to the
Depositary and its direct and indirect participants are on file with the
Commission.

Same-Day Settlement and Payment

        Settlement
for the Subordinated Notes will be made in immediately available funds. The
Subordinated Notes will trade in the Depositary’s Same-Day Funds Settlement
System until the Maturity Date, and, therefore, the Depositary will require
secondary trading activity in the Subordinated Notes to be settled in
immediately available funds.

 15
 

 

Events of Default

        Except
as indicated below, the holder of a Subordinated Note may declare the principal
amount of such Subordinated Note due and payable immediately if an Event of
Default with respect to such Subordinated Note shall have occurred and be
continuing at the time of such declaration. Any Event of Default with respect
to such Subordinated Note may be waived by the holder thereof.

        An
“Event of Default” shall occur only if the Bank shall consent to the
appointment of a conservator, receiver, liquidator, trustee or other similar
official in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings of or relating to the Bank or of or relating
to all or substantially all of its property; or a decree or order of a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, liquidator, trustee or other similar
official in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Bank and such decree or order
shall have remained in force undischarged or unstayed for a period of 60
consecutive days; or the Bank shall file a petition to take advantage of
any applicable insolvency or reorganization statute. The Bank will promptly
notify, and provide copies of such notice to, the Issuing and Paying Agent of
the occurrence of any such Event of Default. The Issuing and Paying Agent has
agreed in the IPAA to promptly mail copies of such notice to the holders of the
Subordinated Notes.

        The Subordinated Notes may only be accelerated by the
holder thereof upon the occurrence of one of the Events of Default set forth in
the immediately preceding paragraph. There is no right of acceleration in the
case of a default in the payment of principal of, or interest on, any
Subordinated Note or in the performance of any other obligation of the Bank
under any Subordinated Note or under any other securities issued by the Bank.
The Subordinated Notes provide that no prepayment pursuant to such right of
acceleration shall be made without prior approval of the OCC unless the Bank
remains an “eligible bank” as defined in 12 C.F.R. § 5.3(g) after the
prepayment (which definition requires, among other things, that a bank be “well-capitalized”,
have a composite rating of 1 or 2 under the Uniform Financial Institutions
Rating System and not be subject to cease and desist orders or other regulatory
orders, directives or agreements). In the event that such approval will be
required for any such prepayment, the Bank is obligated to apply to the OCC for
prior written approval of repayment promptly after receiving notice of
acceleration from any holders of the Subordinated Notes.

        Because
the Subordinated Notes will not be issued pursuant to an indenture, each holder
thereof must act independently with respect to certain matters affecting its
Subordinated Notes, including giving written notice of default in the
performance of any covenant contained therein or accelerating the maturity
thereof upon the occurrence of any Event of Default.

Consolidation, Merger and Sale of Assets

        The
Subordinated Notes provide that the Bank may not consolidate with or merge into
any other person or convey, transfer or lease its assets substantially as an
entirety to any person, unless: (i) the successor is a person organized
under the laws of any domestic jurisdiction and expressly assumes the Bank’s
obligations on the Subordinated Notes; and (ii) after giving effect to the
transaction, no Event of Default with respect to the Subordinated Notes, and no
event which, after notice or lapse of time, would become an Event of Default
with respect to the Subordinated Notes, shall have occurred and be continuing.

Governing Law

        The
Subordinated Notes are governed by and construed in accordance with the laws of
the State of New York and, where applicable, the laws of the United States.

 16
 

 

UNDERWRITING

        Under
the terms and subject to the conditions contained in an underwriting agreement
dated August 23, 2001, the Bank has agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation is acting as
representative, the following respective principal amounts of notes:

	
  Underwriter

  	
   

  	
  Principal Amount

  	
   

  
	
  Credit Suisse
  First Boston Corporation

  	
   

  	
  $

  	
  75,000,000

  	
   

  
	
  City National
  Securities, Inc.

  	
   

  	
  15,000,000

  	
   

  
	
  Goldman, Sachs
  & Co.

  	
   

  	
  15,000,000

  	
   

  
	
  Lehman Brothers
  Inc.

  	
   

  	
  15,000,000

  	
   

  
	
  Morgan Stanley
  & Co. Incorporated

  	
   

  	
  15,000,000

  	
   

  
	
  Salomon Smith
  Barney Inc.

  	
   

  	
  15,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  150,000,000

  	
   

  

 

        The
underwriting agreement provides that the underwriters are obligated to purchase
all of the Subordinated Notes if any are purchased. The underwriting agreement
provides that, if an underwriter defaults, the purchase commitments of the
non-defaulting underwriters may be increased or the offering of Subordinated Notes
may be terminated.

        The
underwriters propose to offer the Subordinated Notes initially at the offering
price on the cover page of this Offering Circular and to selling group members
at that price less a concession of 0.400% of the principal amount per
Subordinated Note. The underwriters and selling group members may allow a
discount of 0.250% of such principal amount per Subordinated Note on sales to
other broker/dealers. After the initial offering, the underwriters may change
the offering price and concession and discount to broker/dealers.

        We
estimate that our out-of-pocket expenses for this offering will be
approximately $225,000. The underwriters have agreed to pay certain fees and
expenses we have incurred in connection with the issuance of the Subordinated
Notes. These fees and expenses will not exceed $37,500 in the aggregate.

        We
and the Corporation have agreed to indemnify the underwriters against
liabilities under the Securities Act or contribute to payments which the underwriters
may be required to make in that respect.

        In
connection with the offering, the underwriters, may engage in over-allotment,
stabilizing transactions, syndicate covering transactions and penalty bids in
accordance with Regulation M under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”).

·              

Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position.

·              

Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum.

·              

Syndicate
covering transactions involve purchases of the notes in the open market after
the distribution has been completed in order to cover syndicate short
positions.

·              

Penalty
bids permit the representative to reclaim a selling concession from a syndicate
member when the notes originally sold by that syndicate member are purchased in
a syndicate covering transaction to cover syndicate short positions.

These
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Subordinated Notes to be higher than it would otherwise
be in the absence of these transactions.

 17
 

 

        We
expect that delivery of the Subordinated Notes will be made against payment
therefor on or about the closing date specified on the cover page of this
Offering Circular, which is the fifth business day following the date hereof.
Under Rule 15c6-1 of the Commission under the Exchange Act, trades in the
secondary market generally are required to settle in three business days unless
the parties to any such trade expressly agree otherwise. Accordingly,
purchasers who wish to trade Subordinated Notes on the date hereof or the next
succeeding business day will be required, by virtue of the fact that the
Subordinated Notes initially will settle in T+5, to specify an alternate
settlement cycle at the time of any such trade to prevent a failed settlement
and should consult their own advisor.

        The
Subordinated Notes are a new issue of securities with no established trading
market. One or more of the underwriters intend to make a secondary market for
the Subordinated Notes. However, they are not obligated to do so and may
discontinue making a secondary market for the Subordinated Notes at any time
without notice. No assurance can be given as to how liquid the trading market
for the Subordinated Notes will be.

        City
National Securities, Inc. is an affiliate of the Bank and the
participation of City National Securities, Inc. in the offer and sale of the
Subordinated Notes will comply with the requirements of Rule 2720 of the
Conduct Rules of the National Association of Securities Dealers, Inc. (“NASD”).
City National Securities, Inc. will inform any of its customers that intend to
purchase the Subordinated Notes that City National Securities, Inc. is our
subsidiary. Further, no NASD member participating in offers and sales of
Subordinated Notes may execute a transaction in the Subordinated Notes in a
discretionary account without the prior specific written approval of such
member’s customer.

        This
Offering Circular may be used by City National Securities, Inc. in connection
with offers and sales related to secondary market transactions in the
Subordinated Notes. City National Securities, Inc. may act as principal or
agent in those transactions. Those sales will be made at prices related to
prevailing market prices at the time of sale or otherwise.

        The
underwriters and their affiliates may be customers of, including borrowers
from, engage in transactions with, and perform services for, the Bank and the
Corporation in the ordinary course of business.

VALIDITY OF SUBORDINATED NOTES

        The
validity of the Subordinated Notes will be passed upon for the Bank by Munger,
Tolles & Olson LLP, Los Angeles, California, and for the Underwriters
by Pillsbury Winthrop LLP, San Francisco, California. From time to time,
Pillsbury Winthrop LLP performs legal services for the Corporation and the
Bank.

 

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

        We
hereby incorporate by reference into this Offering Circular our Consolidated
Reports of Condition and Income (the “Call Reports”) on Federal Financial
Institutions Examination Council Form 032, beginning with and including the
Call Report for the period beginning January 1, 1998 to and including
December 31, 1999, and on Federal Financial Institutions Examination
Council Form 031, beginning January 1, 2000 to and including the most
recent Call Report filed or published prior to the date of this Offering
Circular. Each Call Report consists of a balance sheet, income statement,
changes in equity capital and other supporting schedules as of the end of or
for the period to which the report relates. The Call Reports are prepared in accordance
with regulatory instructions issued by the Federal Financial Institutions
Examination Council. Because of the special supervisory, regulatory and
economic policy needs served by Call Reports, those regulatory instructions do
not in all cases follow accounting principles generally accepted in the United
States of America, including the opinions and statements of the Accounting
Principles Board or the Financial Accounting Standards Board. While the Call
Reports are supervisory and regulatory documents, not primarily accounting

 18
 

 

documents,
and do not provide a complete range of financial disclosure about the Bank, the
Call Reports nevertheless provide important information concerning the
financial condition and operating results of the Bank. Each Call Report filed
by the Bank after the date of this Offering Circular and prior to the
termination of the offering covered by this Offering Circular shall be
incorporated by reference into this Offering Circular and deemed to be a part
hereof from the date such document is filed until the information contained in
such document is superseded or updated by any subsequently filed document that
is incorporated by reference into this Offering Circular or by any supplement
or amendment to this Offering Circular. The Call Reports are on file with, and
are publicly available upon written request to, the Federal Deposit Insurance
Corporation, 550 17th Street, N.W., Washington, D.C. 20429, Attention:
Disclosure Group, Room F-518, or by calling the FDIC at (800) 945-2186.

        We
are a wholly owned subsidiary of the Corporation, a bank holding company whose
common stock is registered with the Commission and traded on the New York Stock
Exchange. In addition to the Call Reports referred to above, we also hereby
incorporate by reference into this Offering Circular the following documents as
filed by the Corporation with the Commission pursuant to the Exchange Act.

        (1)
the Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2000;

        (2)
the Corporation’s Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2001 and June 30, 2001; and

        (3)
the Corporation’s Current Reports on Form 8-K, filed April 18, 2001
and July 19, 2001.

        Each
document filed by the Corporation pursuant to Section 13(a), 13(c) or
15(d) of the Exchange Act subsequent to the date of this Offering Circular and
prior to the termination of the offering of the Subordinated Notes shall be
deemed to be incorporated by reference into this Offering Circular from the
date of the filing of such document. This filed material can be inspected and
copied at the Commission’s office at 450 Fifth Street, N.W., Washington, D.C.
20549, and the Commission’s Regional Offices in New York (7 World Trade Center,
13th Floor, New York, New York 10007) and Chicago (500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511), and copies of such materials can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a Web site on the Internet at http://www.sec.gov that contains
certain reports and other documents relating to registrants, such as the
Corporation, that file electronically with the Commission. Such material may
also be inspected and copied at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.

        Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Offering Circular to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Offering Circular.

        We
will provide without charge to each person to whom a copy of this Offering
Circular is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated or deemed to be incorporated by
reference herein, other than any exhibits to such documents. Requests for such
documents should be directed to Mr. Heng W. Chen, Executive Vice
President-Finance, City National Bank, 400 North Roxbury Drive, Beverly Hills,
California 90210. Telephone requests may be directed to Mr. Chen at the
Bank at (213) 347-2646.

 

 19

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