City Holding Company Announces Second Quarter Results

CHARLESTON, W.Va.--()--City Holding Company, “the Company” (NASDAQ:CHCO), a $3.4 billion bank holding company headquartered in Charleston, today announced second quarter net income per diluted share of $0.80 and net income of $12.8 million. For the second quarter of 2014, the Company achieved a return on assets of 1.50%, a return on tangible equity of 15.8%, a net interest margin of 3.95%, and an efficiency ratio of 55.7%. For the six months ended June 30, 2014, the Company achieved a return on assets of 1.57%, a return on tangible equity of 16.5%, a net interest margin of 4.05%, and an efficiency ratio of 54.0%. In addition, the Company has increased its tangible equity ratio from 9.5% at December 31, 2013 to 9.8% at June 30, 2014.

City’s CEO Charles Hageboeck stated that “Our results for the second quarter of 2014 continue years of strong performance placing City among the top performing banks in the U.S. During 2014, asset quality has continued to improve, capital has increased, and dividends have increased. Like most banks, however, we recognize that the economy remains stalled in a low-growth trajectory with many customers too uncertain about the future to buy homes or invest in growing their businesses."

Net Interest Income

The Company’s tax equivalent net interest income declined $1.2 million, or 3.9%, from $30.2 million during the first quarter of 2014 to $29.0 million during the second quarter of 2014. This is primarily due to the expected decrease in accretion related to the acquisitions of Virginia Savings and Community Bank ($1.5 million for quarter ended June 30, 2014 compared to $2.2 million for the quarter ended March 31, 2014). The Company’s reported net interest margin decreased from 4.15% for the first quarter of 2014 to 3.95% for the second quarter of 2014. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.75% for the quarter ended June 30, 2014 and 3.85% for the quarter ended March 31, 2014. This decrease was primarily due to loan yields compressing from 4.39% for the first quarter of 2014 to 4.27% for the second quarter of 2014 and resulted in net interest income declining $0.4 million.

Credit Quality - Asset Quality Continues to Improve

The Company’s ratio of nonperforming assets to total loans and other real estate owned improved from 1.19% at March 31, 2014 to 1.10% at June 30, 2014. Excluded from this ratio are purchased credit-impaired loans in which the Company estimated cash flows and estimated a credit mark. These loans are considered performing loans provided that the loan is performing in accordance with the estimated expectations. Such loans would be considered nonperforming loans if the loan’s performance deteriorates below the initial expectations. Total past due loans remained at $11.0 million, or 0.43% of total loans outstanding, at both March 31, 2014 and at June 30, 2014. Acquired past due loans represent approximately 31% of total past due loans and have declined $13.0 million, or 79.2%, since March 31, 2013.

As a result of the Company’s quarterly analysis of the adequacy of the Allowance for Loan Losses (“ALLL”), the Company recorded a provision for loan losses of $0.4 million in the second quarter of 2014, compared to $2.0 for the comparable period in 2013 and $1.4 million for the first quarter of 2014. The provision for loan losses recorded in the second quarter of 2014 reflects the modest growth in the loan portfolio, changes in the quality of the portfolio and general improvement in the Company’s historical loss rates used to compute the allowance not specifically allocated to individual credits. Additionally, the improvement in nonperforming assets also contributed to a lower provision for loan losses during the second quarter of 2014. For the six months ended June 30, 2014, the Company recorded provision for loan losses of $1.8 million and net charge offs for the same period were approximately $1.8 million. Changes in the amount of the provision and related allowance are based on the Company’s detailed systematic methodology and are directionally consistent with changes in the composition and quality of the Company’s loan portfolio. The Company believes its methodology for determining the adequacy of its ALLL adequately provides for probable losses inherent in the loan portfolio.

Non-interest Income

During the second quarter of 2014, the Company realized investment gains of $0.8 million from the sale of certain equity positions related to community banks and bank holding companies. Excluding investment security transactions, non-interest income increased $0.1 million to $14.3 million in the second quarter of 2014 as compared to $14.2 million in the second quarter of 2013. Bankcard revenues increased $0.4 million, or 11.2%, to $3.8 million and trust and investment management fee income increased $0.15 million, or 15.1%, to $1.1 million. These increases were partially offset by lower other income ($0.2 million due to a decline in fixed rate mortgage lending activity) and service charges ($0.2 million or 2.3%). The decline in service charges is attributed to a sluggish economy.

Non-interest Expenses

Non-interest expenses increased $0.3 million, from $24.0 million in the second quarter of 2013 to $24.3 million in the second quarter of 2014. This increase was primarily related to higher salaries and employee benefits ($0.3 million), repossessed asset losses ($0.2 million), and advertising ($0.1 million). These expenses were partially offset by a decrease in other expenses ($0.3 million).

Balance Sheet Trends

Loans increased $20.7 million (0.8%) from March 31, 2014 to $2.58 billion at June 30, 2014. Residential real estate loans increased $30.6 million (2.5%), commercial and industrial (“C&I”) loans increased $5.3 million (3.7%) and home equity loans increased $1.1 million (0.8%). These increases were partially offset by a decrease in commercial real estate loans ($16.3 million or 1.6%) that was attributable to a more competitive lending environment.

Total average depository balances increased $7.2 million, or 0.3%, from the quarter ended March 31, 2014 to the quarter ended June 30, 2014. Increases in savings deposits ($16.3 million) and noninterest-bearing deposits ($10.5 million), were partially offset by a decrease in time deposits of $18.3 million.

Income Tax Expense

The Company’s effective income tax rate for the second quarter of 2014 was 33.7% compared to 34.4% for the year ended December 31, 2013, and 33.6% for the quarter ended June 30, 2013. The effective rate is based upon the Company’s expected tax rate for the year ending December 31, 2014.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 92.5% and the loan to asset ratio was 76.6% at June 30, 2014. The Company maintained investment securities totaling 11.0% of assets as of this date. Further, the Company’s deposit mix is weighted heavily toward checking and saving accounts that fund 51.9% of assets at June 30, 2014. Time deposits fund 30.9% of assets at June 30, 2014, but very few of these deposits are in accounts that have balances of more than $250,000, reflecting the core retail orientation of the Company.

The Company continues to be strongly capitalized. The Company’s tangible equity ratio was 9.8% at June 30, 2014 compared to 9.5% at December 31, 2013. The Company was able to increase its tangible capital from December 31, 2013 despite the repurchase of approximately 195,000 shares of its common stock and increasing the quarterly cash dividend by over 8%. At June 30, 2014, City National Bank’s Leverage Ratio is 9.53%, its Tier I Capital ratio is 12.89%, and its Total Risk-Based Capital ratio is 13.73%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On June 25, 2014, the Board approved a quarterly cash dividend of $0.40 cents per share payable July 31, 2014, to shareholders of record as of July 15, 2014. During the quarter ended June 30, 2014, the Company repurchased 126,500 common shares at a weighted average price of $42.90 as part of a one million share repurchase plan authorized by the Board of Directors in July 2011. At June 30, 2014, the Company could repurchase approximately 260,000 shares under the July 2011 authorization.

City Holding Company is the parent company of City National Bank of West Virginia. City National operates 82 branches across West Virginia, Virginia, Kentucky and Ohio. In addition to the Bank, City National offers a full range of insurance products and services through CityInsurance Professionals, which completed an agency acquisition in June 2014.

Forward-Looking Information

This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such information involves risks and uncertainties that could result in the Company's actual results differing materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, (1) the Company may incur additional loan loss provision due to negative credit quality trends in the future that may lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs in the future; (3) the Company could have adverse legal actions of a material nature; (4) the Company may face competitive loss of customers; (5) the Company may be unable to manage its expense levels; (6) the Company may have difficulty retaining key employees; (7) changes in the interest rate environment may have results on the Company’s operations materially different from those anticipated by the Company’s market risk management functions; (8) changes in general economic conditions and increased competition could adversely affect the Company’s operating results; (9) changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company’s operating results; (10) the Company may experience difficulties growing loan and deposit balances; (11) the current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations; (12) deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments; and (13) the effects of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the regulations promulgated and to be promulgated thereunder, which may subject the Company and its subsidiaries to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses. Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made. Further, the Company is required to evaluate subsequent events through the filing of its June 30, 2014 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary June 30, 2014 results and will adjust the amounts if necessary.

CITY HOLDING COMPANY AND SUBSIDIARIES  
Financial Highlights
(Unaudited)
 
         
Three Months Ended June 30, Percent
2014 2013   Change
 
Earnings ($000s, except per share data):
Net Interest Income (FTE) $ 29,006 $ 31,464 (7.81)%
Net Income available to common shareholders 12,757 13,006 (1.91)%
Earnings per Basic Share 0.81 0.83 (1.88)%
Earnings per Diluted Share 0.80 0.82 (1.76)%
         
 
Key Ratios (percent):
Return on Average Assets 1.50% 1.53% (1.89)%
Return on Average Tangible Equity 15.77% 17.59% (10.37)%
Net Interest Margin 3.95% 4.35% (9.14)%
Efficiency Ratio 55.75% 52.04% 7.12%
Average Shareholders' Equity to Average Assets 11.71% 10.94% 7.07%
 
Consolidated Risk Based Capital Ratios (a):
Tier I 13.69% 12.34% 10.94%
Total 14.54% 13.19% 10.24%
 
Tangible Equity to Tangible Assets 9.80% 8.90% 10.21%
         
 
Common Stock Data:
Cash Dividends Declared per Share $ 0.40 $ 0.37 8.11%
Book Value per Share 25.45 23.52 8.21%
Tangible Book Value per Share 20.67 18.76 10.16%
Market Value per Share:
High 46.43 40.43 14.84%
Low 41.74 36.87 13.21%
End of Period 45.12 38.95 15.84%
 
Price/Earnings Ratio (b) 13.90 11.77 18.07%
         
Six Months Ended June 30, Percent
2014 2013   Change
 
Earnings ($000s, except per share data):
Net Interest Income (FTE) $ 59,196 $ 61,210 (3.29)%
Net Income available to common shareholders 26,560 20,993 26.52%
Earnings per Basic Share 1.69 1.34 25.85%
Earnings per Diluted Share 1.67 1.33 25.94%
         
 
Key Ratios (percent):
Return on Average Assets 1.57% 1.25% 25.33%
Return on Average Tangible Equity 16.54% 14.49% 14.12%
Net Interest Margin 4.05% 4.26% (5.06)%
Efficiency Ratio 53.99% 59.14% (8.71)%
Average Shareholders' Equity to Average Assets 11.67% 10.84% 7.69%
         
 
Common Stock Data:
Cash Dividends Declared per Share $ 0.80 $ 0.74 8.11%
Market Value per Share:
High 46.69 40.43 15.48%
Low 41.74 36.07 15.72%
 
Price/Earnings Ratio (b) 13.37 14.53 (7.95)%
 
 
(a) June 30, 2014 risk-based capital ratios are estimated
(b) June 30, 2014 price/earnings ratio computed based on annualized second quarter 2014 earnings
CITY HOLDING COMPANY AND SUBSIDIARIES          
Financial Highlights    
(Unaudited)
 
                           
 
Book Value and Market Price Range per Share
Market Price
Book Value per Share Range per Share
March 31   June 30   September 30   December 31     Low     High
 
2010 19.71 20.02 20.31 20.31 26.87 38.03
2011 20.39 20.58 20.86 21.05 26.06 37.22
2012 21.46 21.63 22.14 22.47 30.96 37.16
2013 23.36 23.52 24.03 24.61 36.07 49.21
2014 25.05 25.45 41.74 46.69
                           
 
Earnings per Basic Share
 
Quarter Ended
March 31   June 30   September 30   December 31     Year-to-Date
 
2010 0.59 0.68 0.58 0.64 2.48
2011 0.62 0.65 0.77 0.65 2.68
2012 0.68 0.50 0.71 0.73 2.63
2013 0.51 0.83 0.89 0.84 3.07
2014 0.87 0.81 1.69
                           
 
Earnings per Diluted Share
 
Quarter Ended
March 31   June 30   September 30   December 31     Year-to-Date
 
2010 0.58 0.68 0.58 0.64 2.47
2011 0.62 0.64 0.76 0.65 2.67
2012 0.67 0.50 0.71 0.73 2.61
2013 0.51 0.82 0.88 0.83 3.04
2014 0.86 0.80 1.67
CITY HOLDING COMPANY AND SUBSIDIARIES    
Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
 
Three Months Ended June 30,
2014   2013  
 
Interest Income
Interest and fees on loans $ 28,621 $ 31,771
Interest on investment securities:
Taxable 2,930 2,632
Tax-exempt 277 312
Interest on federal funds sold   -   9  
Total Interest Income 31,828 34,724
 
Interest Expense
Interest on deposits 2,737 3,195
Interest on short-term borrowings 85 79
Interest on long-term debt   151   153  
Total Interest Expense   2,973   3,427  
Net Interest Income 28,855 31,297
Provision for loan losses   435   2,011  
Net Interest Income After Provision for Loan Losses 28,420 29,286
 
Non-Interest Income
Gains on sale of investment securities 818 9
Service charges 6,739 6,897
Bankcard revenue 3,838 3,450
Insurance commissions 1,319 1,358
Trust and investment management fee income 1,111 964
Bank owned life insurance 765 799
Other income   549   775  
Total Non-Interest Income 15,139 14,252
 
Non-Interest Expense
Salaries and employee benefits 12,977 12,640
Occupancy and equipment 2,395 2,500
Depreciation 1,533 1,453
FDIC insurance expense 357 341
Advertising 925 819
Bankcard expenses 833 766
Postage, delivery, and statement mailings 530 552
Office supplies 420 463
Legal and professional fees 612 535
Telecommunications 506 465
Repossessed asset (gains)/losses, net of expenses 142 (23 )
Merger related expenses - 65
Other expenses   3,075   3,383  
Total Non-Interest Expense   24,305   23,959  
Income Before Income Taxes 19,254 19,579
Income tax expense   6,497   6,573  
Net Income Available to Common Shareholders $ 12,757 $ 13,006  
 
 
Distributed earnings allocated to common shareholders $ 6,178 $ 5,751
Undistributed earnings allocated to common shareholders   6,448   7,139  
Net earnings allocated to common shareholders $ 12,626 $ 12,890  
 
Average common shares outstanding 15,556 15,582
Effect of dilutive securities:
Employee stock options and warrants   150   170  
Shares for diluted earnings per share   15,706   15,752  
 
Basic earnings per common share $ 0.81 $ 0.83
Diluted earnings per common share $ 0.80 $ 0.82
Dividends declared per common share $ 0.40 $ 0.37
 
Comprehensive Income $ 14,462 $ 8,798
CITY HOLDING COMPANY AND SUBSIDIARIES  
Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
 
Six months ended June 30,
2014   2013
 
Interest Income
Interest and fees on loans $ 58,355 $ 61,709
Interest on investment securities:
Taxable 5,933 5,382
Tax-exempt 558 636
Interest on federal funds sold   -   22  
Total Interest Income 64,846 67,749
 
Interest Expense
Interest on deposits 5,490 6,422
Interest on short-term borrowings 160 149
Interest on long-term debt   301   309  
Total Interest Expense   5,951   6,880  
Net Interest Income 58,895 60,869
Provision for loan losses   1,798   3,749  
Net Interest Income After Provision for Loan Losses 57,097 57,120
 
Non-Interest Income
Gains on sale of investment securities 901 93
Service charges 12,899 13,432
Bankcard revenue 7,523 6,649
Insurance commissions 3,344 3,198
Trust and investment management fee income 2,148 1,954
Bank owned life insurance 1,521 1,611
Other income   1,108   1,641  
Total Non-Interest Income 29,444 28,578
 
Non-Interest Expense
Salaries and employee benefits 26,116 25,589
Occupancy and equipment 5,010 4,971
Depreciation 3,011 2,852
FDIC insurance expense 767 853
Advertising 1,749 1,554
Bankcard expenses 1,639 1,493
Postage, delivery, and statement mailings 1,105 1,158
Office supplies 830 904
Legal and professional fees 1,021 971
Telecommunications 844 910
Repossessed asset losses, net of expenses 521 (178 )
Merger related expenses - 5,604
Other expenses   5,068   6,682  
Total Non-Interest Expense   47,681   53,363  
Income Before Income Taxes 38,860 32,335
Income tax expense   12,300   11,342  
Net Income Available to Common Shareholders $ 26,560 $ 20,993  
 
 
Distributed earnings allocated to common shareholders $ 12,356 $ 11,502
 
Undistributed earnings allocated to common shareholders   13,931   9,303  
 
Net earnings allocated to common shareholders $ 26,287 $ 20,805  
 
Average common shares outstanding 15,583 15,521
Effect of dilutive securities:
Employee stock options and warrants   155   166  
Shares for diluted earnings per share   15,738   15,687  
 
Basic earnings per common share $ 1.69 $ 1.34
Diluted earnings per common share $ 1.67 $ 1.33
Dividends declared per common share $ 0.80 $ 0.74
 
Comprehensive Income $ 29,041 $ 16,875
CITY HOLDING COMPANY AND SUBSIDIARIES    
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited) ($ in 000s)
 
 
Three Months Ended
June 30, 2014   June 30, 2013
 
Balance at April 1 $ 393,750 $ 365,848
 
Net income 12,757 13,006
Other comprehensive income:
Change in unrealized gain (loss) on securities available-for-sale 1,705 (4,208 )
Cash dividends declared ($0.40/share) and ($0.37/share), respectively (6,225 ) (5,803 )
Issuance of stock award shares, net 316 246
Acquisition of Community Financial Corporation - (198 )
Exercise of 12,000 stock options 355 -
Purchase of 126,506 common shares of treasury   (5,427 )     -  
Balance at June 30 $ 397,231     $ 368,891  
 
 
 
Six Months Ended
June 30, 2014   June 30, 2013
 
Balance at January 1 $ 387,623 $ 333,274
 
Net income 26,560 20,993
Other comprehensive income:
Change in unrealized gain (loss) on securities available-for-sale 2,481 (4,118 )
Cash dividends declared ($0.80/share) and ($0.74/share), respectively (12,512 ) (11,866 )
Issuance of stock award shares, net 889 703
Acquisition of Community Financial Corporation - 28,508
Exercise of 19,000 stock options 553 -
Exercise of 62,685 stock options - 1,397
Purchase of 194,651 common shares of treasury   (8,363 )     -  
Balance at June 30 $ 397,231     $ 368,891  

CITY HOLDING COMPANY AND SUBSIDIARIES

     
Condensed Consolidated Quarterly Statements of Income
(Unaudited) ($ in 000s, except per share data)  
 
Quarter Ended
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Interest income

 

$ 31,828 $ 33,018 $ 35,116 $ 35,674 $ 34,724
Taxable equivalent adjustment

 

  151     153     158     161     167
Interest income (FTE) 31,979 33,171 35,274 35,835 34,891
Interest expense

 

  2,973     2,978     3,115     3,304     3,427
Net interest income

 

29,006 30,193 32,159 32,531 31,464
Provision for loan losses   435     1,363     1,945     1,154     2,011
Net interest income after provision
for loan losses 28,571 28,830 30,214 31,377 29,453
 
Noninterest income 15,139 14,305 14,948 14,480 14,252
Noninterest expense

 

  24,305     23,376     24,881     24,665     23,959
Income before income taxes 19,405 19,759 20,281 21,192 19,746
Income tax expense 6,497 5,803 6,877 7,056 6,573
Taxable equivalent adjustment   151     153     158     161     167
Net income available to common shareholders $ 12,757   $ 13,803   $ 13,246   $ 13,975   $ 13,006
 
                     
 
Distributed earnings allocated to common shareholders $ 6,178 $ 6,224 $ 5,775 $ 5,767 $ 5,751
Undistributed earnings allocated to common shareholders   6,448     7,439     7,352     8,081     7,139
Net earnings allocated to common shareholders $ 12,626   $ 13,663   $ 13,127   $ 13,848   $ 12,890
 
Average common shares outstanding 15,556 15,631 15,636 15,608 15,582
 
Effect of dilutive securities:
Employee stock options and warrants   150     165     163     182     170
 
Shares for diluted earnings per share   15,706     15,796     15,799     15,790     15,752
 
Basic earnings per common share $ 0.81 $ 0.87 $ 0.84 $ 0.89 $ 0.83
Diluted earnings per common share 0.80 0.86 0.83 0.88 0.82
 
Cash dividends declared per share 0.40 0.40 0.37 0.37 0.37
                     
 
Net Interest Margin 3.95% 4.15% 4.33% 4.47% 4.35%
 

Interest Income from Accretion Related to Fair Value
Adjustments Recorded as a Result of Acquisition

$ 1,494 $ 2,151 $ 3,899 $ 5,046 $ 3,517
 
Net Interest Margin (excluding accretion) 3.75% 3.85% 3.81% 3.78% 3.86%
CITY HOLDING COMPANY AND SUBSIDIARIES        
Non-Interest Income and Non-Interest Expense
(Unaudited) ($ in 000s)
 
Quarter Ended
June 30 March 31 December 31 September 30 June 30
2014   2014   2013     2013     2013  
 
Non-Interest Income:
Service charges $ 6,739 $ 6,160 $ 6,995 $ 7,169 $ 6,897
Bankcard revenue 3,838 3,685 3,403 3,468 3,450
Insurance commissions 1,319 2,025 1,269 1,365 1,358
Trust and investment management fee income 1,111 1,037 1,093 939 964
Bank owned life insurance 765 756 976 805 799
Other income   549     559     541       734       775  
Subtotal 14,321 14,222 14,277 14,480 14,243
Gain (loss) on sale of investment securities   818     83     671       -       9  
Total Non-Interest Income $ 15,139   $ 14,305   $ 14,948     $ 14,480     $ 14,252  
 
Non-Interest Expense:
Salaries and employee benefits $ 12,977 $ 13,139 $ 12,910 $ 12,930 $ 12,640
Occupancy and equipment 2,395 2,615 2,529 2,409 2,500
Depreciation 1,533 1,478 1,468 1,437 1,453
FDIC insurance expense 357 410 500 500 341
Advertising 925 824 408 712 819
Bankcard expenses 833 806 697 680 766
Postage, delivery and statement mailings 530 575 521 541 552
Office supplies 420 410 408 416 463
Legal and professional fees 612 409 1,469 591 535
Telecommunications 506 338 581 721 465
Repossessed asset (gains) losses, net of expenses 142 379 (72 ) 896 (23 )
Merger related expenses - - 72 (150 ) 65
Other expenses   3,075     1,993     3,390       2,982       3,383  
Total Non-Interest Expense $ 24,305   $ 23,376   $ 24,881     $ 24,665     $ 23,959  
 
 
                   
 
Employees (Full Time Equivalent) 912 925 923 924 931
Branch Locations 82 82 83 83 83
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
June 30 December 31
2014   2013  
(Unaudited)
Assets
Cash and due from banks $ 93,962 $ 75,999
Interest-bearing deposits in depository institutions   16,778     9,877  
Cash and cash equivalents 110,740 85,876
 
Investment securities available-for-sale, at fair value 258,761 352,660
Investment securities held-to-maturity, at amortized cost 96,039 4,117
Other securities   14,234     13,343  
Total investment securities 369,034 370,120
 
Gross loans 2,577,777 2,606,197
Allowance for loan losses   (20,536 )   (20,575 )
Net loans 2,557,241 2,585,622
 
Bank owned life insurance 93,567 92,047
Premises and equipment, net 80,171 82,548
Accrued interest receivable 7,727 6,866
Net deferred tax assets 37,793 42,165
Intangible assets 74,670 75,142
Other assets   33,771     27,852  
Total Assets $ 3,364,714   $ 3,368,238  
 
Liabilities
Deposits:
Noninterest-bearing $ 500,391 $ 493,228
Interest-bearing:
Demand deposits 609,584 601,527
Savings deposits 635,293 612,772
Time deposits   1,040,979     1,077,606  
Total deposits 2,786,247 2,785,133
Short-term borrowings
Customer repurchase agreements 133,142 137,798
Long-term debt 16,495 16,495
Other liabilities   31,599     41,189  
Total Liabilities 2,967,483 2,980,615
 
Stockholders' Equity
Preferred stock, par value $25 per share: 500,000 shares authorized; none issued - -
Common stock, par value $2.50 per share: 50,000,000 shares authorized;
18,499,282 shares issued at June 30, 2014 and December 31, 2013
less 2,892,542 and 2,748,922 shares in treasury, respectively 46,249 46,249
Capital surplus 106,830 107,596
Retained earnings 348,018 333,970
Cost of common stock in treasury (101,357 ) (95,202 )
Accumulated other comprehensive loss:
Unrealized gain on securities available-for-sale 371 (2,110 )
Underfunded pension liability   (2,880 )   (2,880 )
Total Accumulated Other Comprehensive Loss   (2,509 )   (4,990 )
Total Stockholders' Equity   397,231     387,623  
Total Liabilities and Stockholders' Equity $ 3,364,714   $ 3,368,238  
CITY HOLDING COMPANY AND SUBSIDIARIES      
Investment Portfolio
(Unaudited) ($ in 000s)
 
Original Cost

Credit-Related
Net Investment
Impairment
Losses through
June 30, 2014

 

Unrealized Gains
(Losses)

Carrying Value
 
US Government Agencies $ 2,049 $ - $ 29 $ 2,078
Mortgage Backed Securities 286,103 - 304 286,407
Municipal Bonds 39,276 - 864 40,140
Pooled Bank Trust Preferreds 23,208 (20,171 ) (1,264 ) 1,773
Single Issuer Bank Trust Preferreds,
Subdebt of Financial Institutions, and

Bank Holding Company Preferred
Stocks

20,569 (1,015 ) (511 ) 19,043
Money Markets and Mutual Funds 1,525 - (12 ) 1,513
Federal Reserve Bank and FHLB stock 14,234 - - 14,234
Community Bank Equity Positions   5,175   (2,638 )   1,309     3,846
Total Investments $ 392,139 $ (23,824 ) $ 719   $ 369,034
CITY HOLDING COMPANY AND SUBSIDIARIES        
Loan Portfolio  
(Unaudited) ($ in 000s)
 
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Residential real estate (1) $ 1,245,393 $ 1,214,785 $ 1,207,150 $ 1,188,841 $ 1,170,123
Home equity - junior liens 143,031 141,929 143,390 140,887 138,367
Commercial and industrial 149,442 144,108 164,484 151,185 138,299
Commercial real estate (2) 993,552 1,009,892 1,040,866 1,022,278 1,023,311
Consumer 42,859 42,320 46,402 50,757 54,242
DDA overdrafts   3,501     4,001     3,905     4,508     3,103
Gross Loans $ 2,577,778   $ 2,557,035   $ 2,606,197   $ 2,558,456   $ 2,527,445
 
Construction loans included in:
(1) - Residential real estate loans $ 20,078 $ 17,697 $ 17,337 $ 14,808 $ 15,889
(2) - Commercial real estate loans $ 24,608 $ 28,894 $ 24,026 $ 17,391 $ 24,726
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Acquisition Activity - Accretion
(Unaudited) ($ in millions)
 
 
The following table presents the actual and forecasted accretion related to the fair value adjustments on net interest income recorded as a result of the Virginia Savings Bancorp ("Virginia Savings") and Community Financial Corporation ("Community") acquisitions.
 
 
Virginia Savings Community
Loan Certificates of Loan Certificates of
Year Ended: Accretion(a)   Deposit(a) Accretion(a)   Deposit(a) Total
 
1Q 2014 $ 299 $ 131 $ 1,628 $ 93 $ 2,151
2Q 2014 $ 284 $ 135 $ 1,023 $ 52 $ 1,494
Remainder 2014 384 270 1,472 105 2,231
2015 492 518 2,276 160 3,446
2016 304 497 1,526 43 2,370
 
a - 1Q & 2Q 2014 amounts are based on actual results. Remainder 2014, 2015 and 2016 amounts are based on estimated amounts.
 
 
Note: The amounts reflected in the table above require management to make significant assumptions based on estimated future default, prepayment, and discount rates. Actual performance could be significantly different from that assumed, which could result in the actual results being materially different from the amounts estimated above.
CITY HOLDING COMPANY AND SUBSIDIARIES        
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
 
Three Months Ended June 30,
2014 2013
Average Yield/ Average Yield/
Balance   Interest Rate   Balance   Interest   Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,366,485 $ 13,696 4.02 % $ 1,290,188 $ 13,564 4.22 %
Commercial, financial, and agriculture (2) 1,143,001 13,260 4.65 % 1,156,269 15,654 5.43 %
Installment loans to individuals (2), (3) 54,115 1,097 8.13 % 67,426 1,839 10.94 %
Previously securitized loans (4) ***     568 ***   ***     714   ***
Total loans 2,563,601 28,621 4.48 % 2,513,883 31,771 5.07 %
Securities:
Taxable 345,419 2,930 3.40 % 327,252 2,632 3.23 %
Tax-exempt (5)   27,343       428 6.28 %     31,789       479   6.04 %
Total securities 372,762 3,358 3.61 % 359,041 3,111 3.48 %
Deposits in depository institutions 9,108 - - 7,451 - -
Federal funds sold   -       - -       22,747       9   0.16 %
Total interest-earning assets 2,945,471 31,979 4.35 % 2,903,122 34,891 4.82 %
Cash and due from banks 149,111 175,837
Bank premises and equipment 81,061 82,243
Other assets 247,510 261,552
Less: Allowance for loan losses   (21,474 )           (20,089 )        
Total assets $ 3,401,679           $ 3,402,665          
 
Liabilities:
Interest-bearing demand deposits 610,489 165 0.11 % 611,334 179 0.12 %
Savings deposits 634,718 198 0.13 % 603,604 216 0.14 %
Time deposits (2) 1,051,811 2,374 0.91 % 1,116,358 2,800 1.01 %
Short-term borrowings 133,282 85 0.26 % 125,729 79 0.25 %
Long-term debt   16,495       151 3.67 %     16,495       153   3.72 %
Total interest-bearing liabilities 2,446,795 2,973 0.49 % 2,473,520 3,427 0.56 %
Noninterest-bearing demand deposits 527,679 519,212
Other liabilities 28,783 37,698
Stockholders' equity   398,422             372,235          
Total liabilities and
stockholders' equity $ 3,401,679           $ 3,402,665          
Net interest income     $ 29,006         $ 31,464    
Net yield on earning assets       3.95 %           4.35 %
 
 
 

(1) For purposes of this table, non-accruing loans have been included in average balances and loan fees, which are immaterial, have been included in interest income.

(2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the acquisitions of Virginia Savings Bancorp ("Virginia Savings") and Community Financial Corporation ("Community"):
 
 
Three Months Ended June 30, 2014 Three Months Ended June 30, 2013
Virginia Savings   Community Total   Virginia Savings   Community   Total
Residential real estate 107 143 250 243 55 298
Commercial, financial, and agriculture 141 715 856 1,047 1,313 2,360
Installment loans to individuals 36 165 201 44 519 563
Time deposits   135       52 187       122       174   296  
  419       1,075 1,494       1,456       2,061   3,517  
 
 
(3) Includes the Company’s consumer and DDA overdrafts loan categories.
(4) Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced to $0.
(5) Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 35%.
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
 
Six Months Ended June 30,
2014 2013
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,358,564 $ 27,442 4.07% $ 1,283,907 $ 27,284 4.29%
Commercial, financial, and agriculture (2) 1,155,235 27,496 4.80% 1,139,187 29,845 5.28%
Installment loans to individuals (2), (3) 53,340 2,275 8.60% 66,649 3,217 9.73%
Previously securitized loans (4) ***   1,142 *** ***   1,363 ***
Total loans 2,567,139 58,355 4.58% 2,489,743 61,709 5.00%
Securities:
Taxable 345,699 5,933 3.46% 338,627 5,382 3.21%
Tax-exempt (5)   27,424   859 6.32%   32,386   978 6.09%

Total securities

373,123 6,792 3.67% 371,013 6,360 3.46%
Deposits in depository institutions 8,970 - - 8,238 - -
Federal funds sold   -   - 0.00%   26,320   21 0.16%
Total interest-earning assets 2,949,232 65,147 4.45% 2,895,314 68,090 4.74%
Cash and due from banks 137,232 144,096
Bank premises and equipment 81,635 81,604
Other assets 246,804 260,449
Less: Allowance for loan losses   (21,347)       (19,782)    
Total assets $ 3,393,556     $ 3,361,681    
 
Liabilities:
Interest-bearing demand deposits 611,139 341 0.11% 607,339 358 0.12%
Savings deposits 626,610 407 0.13% 593,880 430 0.15%
Time deposits (2) 1,060,887 4,742 0.90% 1,111,696 5,634 1.02%
Short-term borrowings 126,067 160 0.26% 118,838 149 0.25%
Long-term debt   16,495   301 3.68%   16,495   309 3.78%
Total interest-bearing liabilities 2,441,198 5,951 0.49% 2,448,248 6,880 0.57%
Noninterest-bearing demand deposits 522,472 508,865
Other liabilities 33,717 40,142
Stockholders' equity   396,169       364,426    
Total liabilities and
stockholders' equity $ 3,393,556     $ 3,361,681    
Net interest income   $ 59,196     $ 61,210  
Net yield on earning assets     4.05%     4.26%
 
(1) For purposes of this table, non-accruing loans have been included in average balances and loan fees, which are immaterial, have been included in interest income.
(2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the acquisitions of Virginia Savings Bancorp ("Virginia Savings") and Community Financial Corporation ("Community"):
 
 
Six Months Ended June 30, 2014 Six Months Ended June 30, 2013
Virginia Savings Community Total Virginia Savings Community Total
Residential real estate 258 258 516 519 243 762
Commercial, financial, and agriculture 255 2,039 2,294 1,720 1,923 3,643
Installment loans to individuals 70 354 424 80 579 659
Time deposits   266   145 411   300   334 634
  849   2,796 3,645   2,619   3,079 5,698
 
 
(3) Includes the Company’s consumer and DDA overdrafts loan categories.
(4) Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced to $0.
(5) Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 35%.
CITY HOLDING COMPANY AND SUBSIDIARIES  
Analysis of Risk-Based Capital
(Unaudited) ($ in 000s)
 
June 30 March 31 December 31 September 30 June 30

2014 (a)

2014   2013     2013   2013  
 
Tier I Capital:
Stockholders' equity $ 397,231 $ 393,750 $ 387,623 $ 378,042 $ 368,891
Goodwill and other intangibles (74,483 ) (74,719 ) (74,955 ) (76,233 ) (74,455 )
Accumulated other comprehensive loss 2,509 4,214 4,990 6,173 5,540
Qualifying trust preferred stock 16,000 16,000 16,000 16,000 16,000
Unrealized loss on AFS securities - - - (18 ) (11 )
Excess deferred tax assets   (4,019 )   (6,508 )   (8,800 )     (12,495 )   (13,572 )
Total tier I capital $ 337,238   $ 332,737   $ 324,859     $ 311,470   $ 302,394  
             
 
Total Risk-Based Capital:
Tier I capital $ 337,238 $ 332,737 $ 324,859 $ 311,470 $ 302,394
Qualifying allowance for loan losses 20,536 21,044 20,575 20,606 20,069
Unrealized gain on securities   605     786     606       722     686  
Total risk-based capital $ 358,379   $ 354,567   $ 346,040     $ 332,798   $ 323,149  
 
Net risk-weighted assets $ 2,464,081 $ 2,450,949 $ 2,499,591 $ 2,460,895 $ 2,450,010
             
 
Ratios:
Average stockholders' equity to average assets 11.71 % 11.64 % 11.35 % 11.14 % 10.94 %
Tangible capital ratio 9.80 % 9.60 % 9.49 % 9.08 % 8.90 %
Risk-based capital ratios:
Tier I capital 13.69 % 13.58 % 13.00 % 12.66 % 12.34 %
Total risk-based capital 14.54 % 14.47 % 13.84 % 13.52 % 13.19 %
Leverage capital 10.15 % 10.07 % 9.80 % 9.43 % 9.12 %
 
 
(a) June 30, 2014 risk-based capital ratios are estimated
 
             
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Intangibles
(Unaudited) ($ in 000s)
 
As of and for the Quarter Ended
June 30 March 31 December 31 September 30 June 30
  2014     2014     2013       2013     2013  
 
Intangibles, net $ 74,670 $ 74,906 $ 75,142 $ 76,420 $ 74,642
Intangibles amortization expense 236 236 260 260 260
CITY HOLDING COMPANY AND SUBSIDIARIES        
Summary of Loan Loss Experience  
(Unaudited) ($ in 000s)
 
Quarter Ended
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Balance at beginning of period $ 21,044 $ 20,575 $ 20,606 $ 20,069 $ 19,721
 
Charge-offs:
Commercial and industrial 1 4 268 380 330
Commercial real estate 587 382 1,384 181 419
Residential real estate 316 427 583 487 520
Home equity 38 108 17 8 154
Consumer 38 84 128 102 221
DDA overdrafts   321     341     381     415     348
Total charge-offs 1,301 1,346 2,761 1,573 1,992
 
Recoveries:
Commercial and industrial 18 63 33 30 20
Commercial real estate 53 30 116 635 16
Residential real estate 39 24 97 69 20
Home equity - - - - -
Consumer 53 76 85 25 70
DDA overdrafts   195     259     454     197     203
Total recoveries 358 452 785 956 329
                 
Net charge-offs 943 894 1,976 617 1,663
Provision for loan losses 285 1,375 1,438 1,241 1,834
Provision for (recovery of) acquired loans   150     (12)     507     (87)     177
Balance at end of period $ 20,536   $ 21,044   $ 20,575   $ 20,606   $ 20,069
 
Loans outstanding $ 2,577,777   $ 2,557,035   $ 2,606,197   $ 2,558,456   $ 2,527,445
Average loans outstanding   2,563,601     2,570,719     2,577,902     2,536,542     2,513,883
Allowance as a percent of loans outstanding   0.80%     0.82%     0.79%     0.81%     0.79%
Allowance as a percent of non-performing loans   106.86%     100.09%     90.25%     93.86%     87.14%
Net charge-offs (annualized) as a
percent of average loans outstanding   0.15%     0.14%     0.31%     0.10%     0.26%
Net charge-offs, excluding overdraft deposit
accounts, (annualized) as a percent of average loans outstanding   0.13%     0.13%     0.32%     0.06%     0.24%
CITY HOLDING COMPANY AND SUBSIDIARIES        
Summary of Non-Performing Assets  
(Unaudited) ($ in 000s)
 
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Nonaccrual loans $ 18,423 $ 20,593 $ 22,363 $ 21,535 $ 21,847
Accruing loans past due 90 days or more   794     432     436     418     1,185
Total non-performing loans 19,217 21,025 22,799 21,953 23,032
Other real estate owned   9,129     9,538     8,470     7,518     10,837
Total non-performing assets $ 28,346   $ 30,563   $ 31,269   $ 29,471   $ 33,869
 
Non-performing assets as a percent of loans and
other real estate owned 1.10% 1.19% 1.20% 1.15% 1.33%
                     
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Total Past Due Loans
(Unaudited) ($ in 000s)
Originated
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Residential real estate $ 5,794 $ 4,118 $ 4,850 $ 5,414 $ 6,525
Home equity - junior liens 926 638 921 732 655
Commercial and industrial 25 77 0 5 234
Commercial real estate 443 789 668 612 2,556
Consumer 80 63 182 96 103
DDA overdrafts   281     196     393     280     290
Total past due loans $ 7,549   $ 5,881   $ 7,014   $ 7,139   $ 10,363
 
Acquired
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Residential real estate $ 873 $ 813 $ 1,014 $ 1,032 $ 951
Home equity - junior liens 3 21 - 23 -
Commercial and industrial 58 127 80 2,166 2,534
Commercial real estate 2,110 3,789 10,689 7,324 8,019
Consumer 374 397 695 703 693
DDA overdrafts   -     -     -     -     -
Total past due loans $ 3,418   $ 5,147   $ 12,478   $ 11,248   $ 12,197
 
Total
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Residential real estate $ 6,667 $ 4,931 $ 5,864 $ 6,446 $ 7,476
Home equity - junior liens 929 659 921 755 655
Commercial and industrial 83 204 80 2,171 2,768
Commercial real estate 2,553 4,578 11,357 7,936 10,575
Consumer 454 460 877 799 796
DDA overdrafts   281     196     393     280     290
Total past due loans $ 10,967   $ 11,028   $ 19,492   $ 18,387   $ 22,560
 
Total past due loans as a percent of loans outstanding 0.43% 0.43% 0.75% 0.72% 0.89%
                     
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Troubled Debt Restructurings
(Unaudited) ($ in 000s)
 
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Residential real estate $ 19,212 $ 18,940 $ 20,345 $ 20,380 $ 21,480
Home equity - junior liens 2,858 2,866 2,873 2,772 2,963
Commercial and industrial 86 84 88 91 95
Commercial real estate 2,281 1,854 1,783 1,567 1,791
Consumer   -     -     -     -     -
Total $ 24,437   $ 23,744   $ 25,089   $ 24,810   $ 26,329
CITY HOLDING COMPANY AND SUBSIDIARIES        
Summary of Purchased Credit Impaired Loans  
(Unaudited) ($ in 000s)
 
Virginia Savings Acquisition
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Contractual required principal and interest 3,735 3,821 3,932 5,253 7,330
Carrying value 3,098 3,102 3,182 4,248 5,421
 
Community Acquisition
June 30 March 31 December 31 September 30 June 30
2014   2014   2013   2013   2013
 
Contractual required principal and interest 27,394 30,476 38,566 40,896 47,850
Carrying value 17,902 19,986 26,330 24,958 27,845

Contacts

City Holding Company
Charles R. Hageboeck, Chief Executive Officer and President
304-769-1102

Release Summary

City Holding Company announces second quarter earnings

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Contacts

City Holding Company
Charles R. Hageboeck, Chief Executive Officer and President
304-769-1102