Federal government agrees to purchase $395 million in bank preferred stock and warrants from CityNational

Los Angeles-based City National Corp. announced Monday that the federal government has given preliminary approval to buy as much as $395 million in senior preferred shares and warrants as part of the U.S. Treasury's capital purchase program.

The announcement was made just days after a bank spokesman said the bank, which operates nine City National Bank branches in Nevada, would not participate in the program because it was already well-capitalized.

The announcement was made during a special investment luncheon hosted by City National in which current and potential customers were told that the capitalization program will further strengthen the bank's ability to loan money, make acquisitions and weather the current economic downturn.

City National is among the first regional banks of its size to participate in the federal program.

John Guedry, City National's Nevada executive vice president and Nevada manager, said some City National shareholders were apprehensive about taking part in the program because it could dilute the value of the holding company's stock in the short term. However, Guedry said those concerns should be set aside because the additional capitalization would help strengthen the company's opportunity for future growth.

"It will be an insurance policy to get through the struggling times, and we will be ready to take advantage of opportunities that may arise," Guidry said.

Guedry said the government's investment was a profound рvote of confidenceс in the bank and its future.

A total of 25 banks, nine during the first phase and 16, including City National, in the second phase, have agreed to sell shares to the federal government in an effort to unblock clogged credit markets and speed economic recovery.

A third and final round of bank infusions will likely culminate by the middle of November.

It was unclear Monday whether any other banks with large Nevada interests would participate in the government's massive $250 billion capital infusion program, which is part of the Treasury Department's larger $700 billion financial bailout program. City National officials made clear that no bank assets were being sold as part of the capital infusion.

Contact Business Press Editor Matt Ward at mward@lvbusinesspress.com or 702-387-5298.