City National Corp. on Thursday reported an 86 percent drop in fourth quarter earnings due to increasing bank loan charge-offs and falling net interest income.

The Beverly Hills parent of City National Bank reported earnings of $6.5 million (13 cents per share), compared with $46.9 million (96 cents) a year ago. Earnings were affected by a $15.6 million charge for securities and intangible asset impairments and a $2.4 million preferred dividend payment under the U.S. Treasury Department’s Capital Purchase Plan.

Net interest income fell 4 percent to $149 million. City National doubled its quarterly credit loss provision to $40 million.

“Even in this extremely challenging economy, and with interest rates dropping to record lows, City National completed its 16th consecutive year of profitability with assets and loans at record levels, and deposits strong,” said Chief Executive Russell Goldsmith in a statement. Goldsmith warned 2009 likely will be a tough year as the deepening recession eats away at future earnings, although he expects the company to remain profitable.

City National declared a cash dividend of 25 cents per share, down from 48 cents last year.

For the fiscal year, City National reported net income available to shareholders of nearly $103 million ($2.11 per share), down 54 percent from nearly $223 million ($4.52) in 2007.

Prior to the earnings report City National shares closed down 7.3 percent to $32.76.