City National Corp.; CU Bancorp both make profitable recoveries from bad times.

City National Corp. announced last week that two banking regulators had lifted operating restrictions against it and that the bank will post a profit for the fourth quarter in a row.

Beverly Hills-based City National reported first quarter net earnings of $8.7 million, or 19 cents a share.

The bank also announced that, because of its improved financial condition, the Office of the Comptroller of the Currency in January and the Federal Reserve Board in February lifted some restrictions that had been in place since late 1992. Agreements with those regulatory agencies had restricted the bank from certain activities, including paying dividends to shareholders without the regulators' consent, Steven Broidy, City National vice chairman, told the Business Journal.

Removal of the agreements "is a big step forward for them," said Charlotte Chamberlain, an analyst with Wedbush Morgan Securities in Los Angeles.

She said that makes City National "a more attractive takeover candidate" for larger institutions, such as L.A.-based First Interstate Bank and San Francisco-based Wells Fargo Bank.

Chamberlain noted banking industry mergers and acquisitions are difficult to accomplish even if the banks are not being closely monitored under regulatory restraints.

Campbell Chaney, a financial institutions analyst with Dakin Securities in San Francisco, said he doesn't see a takeover of City National in the immediate future. "I think they would rather remain independent and get themselves back the way they were before the recession," he said.

Chaney noted the bank has shrunk its assets from $4.7 billion in 1991 to $2.8 billion as of March 31. "Now that their health has been restored -- and they are quite healthy now -- there is a lot of relationship-building that needs to be done," he said.

Chaney said when he looks at City National, "I see a company with too much capital" that is not being used for a specific purpose. He said the bank should use the money to increase assets or give it back to shareholders.

City National, like several banks in California, was forced by banking regulators to increase its capital. But Chaney noted that the worst of the recession is over and City National is so over-capitalized that "in round numbers they could double their size and still be overcapitalized."

Chaney said the bank is in a position to pay a large dividend to shareholders, buy back stock, or expand. But, he added, its officers may want to proceed cautiously since they only just had the regulatory agreements lifted.

Vice Chairman Broidy declined to comment on prospects for declaring a dividend. The bank has not declared a dividend for at least 15 months, he said.

Broidy said a beefed-up sales force is working to restore customer relationships that were lost when the bank was downsizing.

"I think the most significant thing (about the earnings report) was it was the fourth consecutive quarter of profitability for the corporation," Broidy said.

Meanwhile, another once troubled but now healthy L.A. County bank, Encino-based CU Bancorp, announced last week the fifth consecutive quarter of rising profits.

CU Bancorp, parent of California United Bank, reported first quarter net earnings of $578,000, or 13 cents, vs. year-earlier net earnings of $384,000, or 9 cents a share.

The bank also reported bad loans and foreclosed real estate in its portfolio totaled $1.1 million, down $9.9 million or 90 percent from first-quarter 1993.

"Following a full year of rebuilding, which resulted in the return to profitability for our organization in 1993, we began this year in a position of strength and stability," said Stephen J. Carpenter, CU Bancorp chairman and chief executive officer.