City Holding Company Announces Second Quarter Results

CHARLESTON, W.Va.--()--City Holding Company, “the Company” (NASDAQ:CHCO), a $3.5 billion bank holding company headquartered in Charleston, today announced second quarter net income per diluted share of $0.78 and net income of $12.0 million. For the second quarter of 2015, the Company achieved a return on assets of 1.34%, a return on tangible equity of 14.1%, a net interest margin of 3.82%, and an efficiency ratio of 54.8%. For the six months ended June 30, 2015, the Company achieved net income of $30.0 million, a return on assets of 1.69%, a return on tangible equity of 17.8%, a net interest margin of 3.90%, and an efficiency ratio of 54.5%.

Net Interest Income

The Company’s tax equivalent net interest income declined $0.6 million, or 2.1%, from $29.5 million during the first quarter of 2015 to $28.9 million during the second quarter of 2015. This is primarily due to the anticipated decrease in accretion related to earlier acquisitions of Virginia Savings and Community Bank ($1.6 million for quarter ended June 30, 2015 compared to $2.5 million for the quarter ended March 31, 2015). The Company’s reported net interest margin decreased from 3.99% for the first quarter of 2015 to 3.82% for the second quarter of 2015. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.60% for the quarter ended June 30, 2015 and 3.66% for the quarter ended March 31, 2015. An important factor in this decrease is that City continues to originate a significant portion of its commercial loans based on WSJ Prime or LIBOR. In addition, the Company has elected to keep fixed rate investment security balances at approximately 10% of total assets and allow cash balances to increase. By taking these measures, the Company believes that it has positioned its balance sheet to benefit from a rising rate environment.

Credit Quality - Asset Quality Continues to Improve

The Company’s ratio of nonperforming assets to total loans and other real estate owned improved from 0.96% at March 31, 2015 to 0.84% at June 30, 2015. 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 declined from $10.2 million, or 0.39% of total loans outstanding, at March 31, 2015 to $9.6 million, or 0.36% of total loans outstanding, at June 30, 2015. Acquired past due loans represent approximately 37% of total past due loans at June 30, 2015 and have declined $12.9 million, or 78.5%, 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 $2.8 million in the second quarter of 2015, compared to $0.4 for the comparable period in 2014 and $0.9 million for the first quarter of 2015. The provision for loan losses recorded in the second quarter of 2015 reflects difficulties encountered by a certain commercial borrower of the Company engaged in the mining and energy sectors (per the North American Industry Classification System (NAICS)) during the quarter and a charge-off related to a specific credit of said borrower. In addition, as a result of this loss, the historical loss rates used to compute the allowance not specifically allocated to individual credits for loans in our commercial and industrial mining and energy sector increased which resulted in an increase in the provision for the quarter. City’s portfolio of loans in the mining and energy sector is approximately $20 million and does not include any direct loans to any mine or mining operation. For the six months ended June 30, 2015, the Company recorded provision for loan losses of $3.7 million and net charge offs for the same period were approximately $3.2 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 2015, the Company realized investment gains of $2.1 million from the call of trust preferred securities which represented a partial recovery of impairment charges previously recognized. Excluding investment security transactions, non-interest income decreased $1.0 million to $13.3 million in the second quarter of 2015 as compared to $14.3 million in the second quarter of 2014. The primary reason for this decrease was the sale of CityInsurance effective January 1, 2015, which had insurance commission revenues of $1.3 million in the second quarter of 2014.

Non-interest Expenses

Non-interest expenses decreased $1.1 million, from $24.3 million in the second quarter of 2014 to $23.2 million in the second quarter of 2015. This decline was largely due to a decrease in salaries and employee benefits of $0.8 million as a result of the sale of CityInsurance.

Balance Sheet Trends

Loans increased $52.0 million (2.0%) from March 31, 2015 to $2.68 billion at June 30, 2015. Residential real estate loans increased $22.2 million (1.7%), commercial real estate loans increased $20.6 million (2.0%), and commercial and industrial (“C&I”) loans increased $9.9 million (7.5%).

Total average depository balances increased $24.8 million, or 0.9%, from the quarter ended March 31, 2015 to the quarter ended June 30, 2015. Increases in noninterest-bearing deposits ($14.4 million), savings deposits ($14.3 million) and interest-bearing deposits ($11.2 million), were partially offset by a decrease in time deposits of $15.1 million.

Income Tax Expense

The Company’s effective income tax rate for the second quarter of 2015 was 33.8% compared to 31.4% for the year ended December 31, 2014, and 33.7% for the quarter ended June 30, 2014. The effective rate is based upon the Company’s expected tax rate for the year ending December 31, 2015.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 92.5% and the loan to asset ratio was 76.4% at June 30, 2015. The Company maintained investment securities totaling 10.9% of assets as of this date. Further, the Company’s deposit mix is weighted heavily toward checking and saving accounts that fund 54.2% of assets at June 30, 2015. Time deposits fund 28.4% of assets at June 30, 2015, 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 9.9% at June 30, 2015 compared to 9.4% at December 31, 2014. At June 30, 2015, City National Bank’s Leverage Ratio is 9.26%, its Common Equity Tier I ratio is 12.26%, its Tier I Capital ratio is 13.24%, and its Total Risk-Based Capital ratio is 14.10%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On June 24, 2015, the Board approved a quarterly cash dividend of $0.42 cents per share payable July 31, 2015, to shareholders of record as of July 15, 2015.

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.

On June 1, 2015, the Company announced that City National Bank of West Virginia had executed an agreement to acquire three branches in Lexington, Kentucky, from American Founders Bank, Inc., a wholly-owned subsidiary of Financial Holdings, Inc. The proposed acquisition is expected to be completed in the third quarter of 2015, pending regulatory approval and the completion of other closing conditions. This acquisition is expected to be immediately accretive to earnings per share.

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; (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; (14) the impact of new minimum capital thresholds established as a part of the implementation of Basel III; and (15) other risk factors relating to the banking industry or the Company as detailed from time to time in the Company’s reports filed with the Securities and Exchange Commission, including those risk factors included in the disclosures under the heading “ITEM 1A Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. 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, 2015 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary June 30, 2015 results and will adjust the amounts if necessary.

CITY HOLDING COMPANY AND SUBSIDIARIES  
Financial Highlights
(Unaudited)
 
         
Three Months Ended June 30, Percent
2015 2014   Change
 
Earnings ($000s, except per share data):
Net Interest Income (FTE) $ 28,927 $ 29,006 (0.27 )%
Net Income available to common shareholders 11,983 12,757 (6.07 )%
Earnings per Basic Share 0.78 0.81 (3.35 )%
Earnings per Diluted Share 0.78 0.80 (2.56 )%
         
 
Key Ratios (percent):
Return on Average Assets 1.34 % 1.50 % (10.49 )%
Return on Average Tangible Equity 14.05 % 15.77 % (10.90 )%
Net Interest Margin 3.82 % 3.95 % (3.38 )%
Efficiency Ratio 54.81 % 55.75 % (1.68 )%
Average Shareholders' Equity to Average Assets 11.54 % 11.71 % (1.45 )%
 
Consolidated Risk Based Capital Ratios (a):
CET I 14.17 %

          *

N/A
Tier I 14.82 % 13.69 % 8.25 %
Total 15.70 % 14.54 % 7.98 %
 
Tangible Equity to Tangible Assets 9.89 % 9.80 % 0.89 %
         
 
Common Stock Data:
Cash Dividends Declared per Share $ 0.42 $ 0.40 5.00 %
Book Value per Share 26.92 25.45 5.76 %
Tangible Book Value per Share 22.29 20.67 7.83 %
Market Value per Share:
High 50.22 46.43 8.16 %
Low 45.00 41.74 7.81 %
End of Period 49.25 45.12 9.15 %
 
Price/Earnings Ratio (b) 15.69 13.90 12.93 %
         
Six Months Ended June 30, Percent
2015 2014   Change
 
Earnings ($000s, except per share data):
Net Interest Income (FTE) $ 58,459 $ 59,196 (1.25 )%
Net Income available to common shareholders 29,975 26,560 12.86 %
Earnings per Basic Share 1.97 1.69 16.52 %
Earnings per Diluted Share 1.96 1.67 17.51 %
         
 
Key Ratios (percent):
Return on Average Assets 1.69 % 1.57 % 7.96 %
Return on Average Tangible Equity 17.77 % 16.54 % 7.46 %
Net Interest Margin 3.90 % 4.05 % (3.58 )%
Efficiency Ratio (c) 54.52 % 53.99 % 0.99 %
Average Shareholders' Equity to Average Assets 11.51 % 11.67 % (1.39 )%
         
 
Common Stock Data:
Cash Dividends Declared per Share $ 0.84 $ 0.80 5.00 %
Market Value per Share:
High 50.22 46.69 7.56 %
Low 41.76 41.74 0.05 %
 
Price/Earnings Ratio (b) 12.53 13.37 (6.32 )%
 
(a) June 30, 2015 risk-based capital ratios are estimated.
(b) June 30, 2015 price/earnings ratio computed based on annualized second quarter 2015 earnings.
(c) The June 30, 2015 efficiency ratio calculation excludes the gain on sale of insurance division.
(*) Basel III CET 1 ratio requirements are effective beginning January 1, 2015 and are not required for prior periods.
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
 
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 25.52 25.85 41.20 46.95
2015 26.63 26.92 45.00 50.22
                     
 
Earnings per Basic Share
 
Quarter Ended
March 31 June 30   September 30   December 31   Year-to-Date
 
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 0.76 0.95 3.40
2015 1.18 0.78 1.97
                     
 
Earnings per Diluted Share
 
Quarter Ended
March 31 June 30   September 30   December 31   Year-to-Date
 
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 0.76 0.95 3.38
2015 1.17 0.78 1.96
CITY HOLDING COMPANY AND SUBSIDIARIES  
Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
 
Three Months Ended June 30,
2015   2014
 
Interest Income
Interest and fees on loans $ 28,812 $ 28,621
Interest on investment securities:
Taxable 2,641 2,930
Tax-exempt   267     277  
Total Interest Income 31,720 31,828
 
Interest Expense
Interest on deposits 2,699 2,737
Interest on short-term borrowings 85 85
Interest on long-term debt   153     151  
Total Interest Expense   2,937     2,973  
Net Interest Income 28,783 28,855
Provision for loan losses   2,836     435  
Net Interest Income After Provision for Loan Losses 25,947 28,420
 
Non-Interest Income
Gains on sale of investment securities 2,116 818
Service charges 6,589 6,739
Bankcard revenue 4,002 3,838
Insurance commissions - 1,319
Trust and investment management fee income 1,201 1,111
Bank owned life insurance 783 765
Gain on sale of insurance division - -
Other income   714     549  
Total Non-Interest Income 15,405 15,139
 
Non-Interest Expense
Salaries and employee benefits 12,193 12,977
Occupancy and equipment 2,529 2,395
Depreciation 1,516 1,533
FDIC insurance expense 445 357
Advertising 701 925
Bankcard expenses 797 833
Postage, delivery, and statement mailings 507 530
Office supplies 347 420
Legal and professional fees 542 612
Telecommunications 463 506
Repossessed asset losses, net of expenses 335 142
Merger related expenses 108 -
Other expenses   2,761     3,075  
Total Non-Interest Expense   23,244     24,305  
Income Before Income Taxes 18,108 19,254
Income tax expense   6,125     6,497  
Net Income Available to Common Shareholders $ 11,983   $ 12,757  
 
Distributed earnings allocated to common shareholders $ 6,344 $ 6,178
Undistributed earnings allocated to common shareholders   5,505     6,448  
Net earnings allocated to common shareholders $ 11,849   $ 12,626  
 
Average common shares outstanding 15,104 15,556
Effect of dilutive securities:
Employee stock options and warrants   23     150  
Shares for diluted earnings per share   15,127     15,706  
 
Basic earnings per common share $ 0.78 $ 0.81
Diluted earnings per common share $ 0.78 $ 0.80
Dividends declared per common share $ 0.42 $ 0.40
 

Comprehensive Income

$ 10,344 $ 14,462
CITY HOLDING COMPANY AND SUBSIDIARIES  
Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
 
Six months ended June 30,
2015   2014
 
Interest Income
Interest and fees on loans $ 58,200 $ 58,355
Interest on investment securities:
Taxable 5,353 5,933
Tax-exempt   531   558
Total Interest Income 64,084 64,846
 
Interest Expense
Interest on deposits 5,440 5,490
Interest on short-term borrowings 167 160
Interest on long-term debt   303   301
Total Interest Expense   5,910   5,951
Net Interest Income 58,174 58,895
Provision for loan losses   3,724   1,798
Net Interest Income After Provision for Loan Losses 54,450 57,097
 
Non-Interest Income
Gains on sale of investment securities 2,130 901
Service charges 12,516 12,899
Bankcard revenue 8,076 7,523
Insurance commissions - 3,344
Trust and investment management fee income 2,401 2,148
Bank owned life insurance 1,547 1,521
Gain on sale of insurance division 11,084 -
Other income   1,672   1,108
Total Non-Interest Income 39,426 29,444
 
Non-Interest Expense
Salaries and employee benefits 24,372 26,116
Occupancy and equipment 5,119 5,010
Depreciation 3,027 3,011
FDIC insurance expense 895 767
Advertising 1,405 1,749
Bankcard expenses 1,615 1,639
Postage, delivery, and statement mailings 1,068 1,105
Office supplies 693 830
Legal and professional fees 1,109 1,021
Telecommunications 938 844
Repossessed asset losses, net of expenses 555 521
Merger related expenses 108 -
Other expenses   5,505   5,068
Total Non-Interest Expense   46,409   47,681
Income Before Income Taxes 47,467 38,860
Income tax expense   17,492   12,300
Net Income Available to Common Shareholders $ 29,975 $ 26,560
 
Distributed earnings allocated to common shareholders $ 12,688 $ 12,356
Undistributed earnings allocated to common shareholders   16,950   13,931
Net earnings allocated to common shareholders $ 29,638 $ 26,287
 
Average common shares outstanding 15,079 15,583
Effect of dilutive securities:
Employee stock options and warrants   22   155
Shares for diluted earnings per share   15,101   15,738
 
Basic earnings per common share $ 1.97 $ 1.69
Diluted earnings per common share $ 1.96 $ 1.67
Dividends declared per common share $ 0.84 $ 0.80
 
Comprehensive Income $ 29,242 $ 29,041
CITY HOLDING COMPANY AND SUBSIDIARIES  
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited) ($ in 000s)
 
 
Three Months Ended
June 30, 2015   June 30, 2014
 
Balance at April 1 $ 405,075 $ 393,750
 
Net income 11,983 12,757
Other comprehensive income:

Change in unrealized (loss) gain on securities available-for-sale

(1,639 ) 1,705
Cash dividends declared ($0.42/share) and ($0.40/share), respectively (6,418 ) (6,225 )
Issuance of stock award shares, net 320 316
Exercise of 750 stock options 23 -
Exercise of 12,000 stock options - 355
Exercise of 61,796 warrants 1,896 -
Purchase of 126,506 common shares of treasury   -     (5,427 )
Balance at June 30 $ 411,240   $ 397,231  
 
 
 
Six Months Ended
June 30, 2015   June 30, 2014
 
Balance at January 1 $ 390,853 $ 387,623
 
Net income 29,975 26,560
Other comprehensive income:
Change in unrealized gain (loss) on securities available-for-sale (733 ) 2,481
Cash dividends declared ($0.84/share) and ($0.80/share), respectively (12,807 ) (12,512 )
Issuance of stock award shares, net 1,060 889
Exercise of 29,250 stock options 996 -
Exercise of 19,000 stock options - 553
Exercise of 61,796 warrants 1,896 -
Purchase of 194,651 common shares of treasury   -       (8,363 )
Balance at June 30 $ 411,240     $ 397,231  
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
2015   2015   2014   2014   2014
 
Interest income

 

$ 31,720 $ 32,364 $ 32,282 $ 32,438 $ 31,828
Taxable equivalent adjustment

 

  144       142       164       152       151  
Interest income (FTE) 31,864 32,506 32,446 32,590 31,979
Interest expense

 

  2,937       2,973       3,041       2,968       2,973  
Net interest income

 

28,927 29,533 29,405 29,622 29,006
Provision for loan losses   2,836       888       384       1,872       435  
Net interest income after provision
for loan losses 26,091 28,645 29,021 27,750 28,571
 
Noninterest income 15,405 24,021 14,669 14,609 15,139
Noninterest expense   23,244       23,165       23,035       24,325       24,305  
Income before income taxes 18,252 29,501 20,655 18,034 19,405
Income tax expense 6,125 11,367 5,961 6,010 6,497
Taxable equivalent adjustment   144       142       164       152       151  
Net income $ 11,983     $ 17,992     $ 14,530     $ 11,872     $ 12,757  
 
                       
 
Distributed earnings allocated to common shareholders $ 6,344 $ 6,315 $ 5,996 $ 6,073 $ 6,178
Undistributed earnings allocated to common shareholders   5,505     11,468     8,378     5,673     6,448  
Net earnings allocated to common shareholders $ 11,849     $ 17,783     $ 14,374     $ 11,746     $ 12,626  
 
Average common shares outstanding 15,104 15,067 15,096 15,363 15,556
 
Effect of dilutive securities:
Employee stock options and warrants   23       82       86       82       150  
 
Shares for diluted earnings per share   15,127       15,149       15,182       15,445       15,706  
 
Basic earnings per common share $ 0.78 $ 1.18 $ 0.95 $ 0.76 $ 0.81
Diluted earnings per common share 0.78 1.17 0.95 0.76 0.80
 
Cash dividends declared per share 0.42 0.42 0.40 0.40 0.40
                       
 
Net Interest Margin 3.82 % 3.99 % 3.89 % 3.95 % 3.95 %
 
Interest Income from Accretion Related to Fair Value Adjustments Recorded as a Result of Acquisition $ 1,607 $ 2,450 $ 1,307 $ 1,836 $ 1,494
 
Net Interest Margin (excluding accretion) 3.60 % 3.66 % 3.71 % 3.71 % 3.75 %
       
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
2015   2015   2014   2014   2014
 
Non-Interest Income:
Service charges $ 6,589 $ 5,927 $ 6,750 $ 6,934 $ 6,739
Bankcard revenue 4,002 4,074 3,744 3,796 3,838
Insurance commissions - - 1,238 1,396 1,319
Trust and investment management fee income 1,201 1,200 1,363 1,103 1,111
Bank owned life insurance 783 764 778 771 765
Gain on sale of insurance division - 11,084 - - -
Other income   714     958     612     538     549
Subtotal 13,289 24,007 14,485 14,538 14,321
Gain (loss) on sale of investment securities   2,116     14     184     71     818
Total Non-Interest Income $ 15,405   $ 24,021   $ 14,669   $ 14,609   $ 15,139
 
Non-Interest Expense:
Salaries and employee benefits $ 12,193 $ 12,179 $ 12,489 $ 13,144 $ 12,977
Occupancy and equipment 2,529 2,590 2,449 2,531 2,395
Depreciation 1,516 1,511 1,534 1,542 1,533
FDIC insurance expense 445 450 448 432 357
Advertising 701 704 726 799 925
Bankcard expenses 797 818 891 843 833
Postage, delivery and statement mailings 507 561 549 557 530
Office supplies 347 346 360 405 420
Legal and professional fees 542 567 552 476 612
Telecommunications 463 475 522 510 506
Repossessed asset (gains) losses, net of expenses 335 220 27 31 142
Merger related expenses 108 - - - -
Other expenses   2,761   2,744   2,488   3,055   3,075
Total Non-Interest Expense $ 23,244 $ 23,165 $ 23,035 $ 24,325 $ 24,305
 
 
                   
 
Employees (Full Time Equivalent) 844 845 889 908 912
Branch Locations 82 82 82 82 82
CITY HOLDING COMPANY AND SUBSIDIARIES  
Consolidated Balance Sheets
($ in 000s)
 
June 30, 2015   December 31, 2014
(Unaudited)
Assets
Cash and due from banks $ 142,335 $ 138,503
Interest-bearing deposits in depository institutions 11,089 9,725
Federal funds sold   -       -  
Cash and cash equivalents 153,424 148,228
 
Investment securities available-for-sale, at fair value 287,609 254,043
Investment securities held-to-maturity, at amortized cost 84,082 90,786
Other securities   9,926       9,857  
Total investment securities 381,617 354,686
 
Gross loans 2,684,457 2,652,066
Allowance for loan losses   (20,809 )     (20,150 )
Net loans 2,663,648 2,631,916
 
Bank owned life insurance 96,663 95,116
Premises and equipment, net 75,900 77,988
Accrued interest receivable 7,838 6,826
Net deferred tax assets 32,674 36,766
Intangible assets 70,779 74,198
Other assets   30,080       35,909  
Total Assets $ 3,512,623     $ 3,461,633  
 
Liabilities
Deposits:
Noninterest-bearing $ 563,715 $ 545,465
Interest-bearing:
Demand deposits 646,198 639,932
Savings deposits 695,383 660,727
Time deposits   997,387       1,026,663  
Total deposits 2,902,683 2,872,787
Short-term borrowings
Customer repurchase agreements 153,171 134,931
Long-term debt 16,495 16,495
Other liabilities   29,034       46,567  
Total Liabilities 3,101,383 3,070,780
 
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, 2015 and December 31, 2014
less 3,222,332 and 3,345,590 shares in treasury, respectively 46,249 46,249
Capital surplus 105,891 107,370
Retained earnings 379,379 362,211
Cost of common stock in treasury (115,387 ) (120,818 )
Accumulated other comprehensive loss:
Unrealized gain on securities available-for-sale 457 1,190
Underfunded pension liability   (5,349 )     (5,349 )
Total Accumulated Other Comprehensive Loss   (4,892 )     (4,159 )
Total Stockholders' Equity   411,240       390,853  
Total Liabilities and Stockholders' Equity $ 3,512,623     $ 3,461,633  
CITY HOLDING COMPANY AND SUBSIDIARIES          
Investment Portfolio
(Unaudited) ($ in 000s)
 
Original Cost

Credit-Related

Net Investment

Impairment

Losses through

June 30, 2015

Unrealized Gains

(Losses)

Carrying Value Roll Total
 
US Government Agencies $ 5 $ - $ - $ 5 5
Mortgage Backed Securities 309,159 - 68 309,227 309,227
Municipal Bonds 38,556 - 339 38,895 38,895
Pooled Bank Trust Preferreds 14,517 (11,689 ) (931 ) 1,897 1,897
Single Issuer Bank Trust Preferreds,
Subdebt of Financial Institutions, and
Bank Holding Company Preferred Stocks 16,655 (15 ) 55 16,695 16,695
Money Markets and Mutual Funds 1,525 - (10 ) 1,515 1,515
Federal Reserve Bank and FHLB stock 9,926 - - 9,926 9,926
Community Bank Equity Positions   3,715   (1,584 )   1,326     3,457 3,457
Total Investments $ 394,058 $ (13,288 ) $ 847   $ 381,617 381,617
CITY HOLDING COMPANY AND SUBSIDIARIES        
Loan Portfolio
(Unaudited) ($ in 000s)
 
June 30 March 31 December 31 September 30 June 30
2015   2015   2014   2014   2014
 
Residential real estate (1) $ 1,325,453 $ 1,303,258 $ 1,294,576 $ 1,274,062 $ 1,242,972
Home equity - junior liens 143,772 143,670 145,604 146,965 145,452
Commercial and industrial 142,065 132,127 140,548 139,220 158,164
Commercial real estate (2) 1,032,333 1,011,777 1,028,831 1,025,835 984,830
Consumer 37,555 38,436 39,705 41,042 42,858
DDA overdrafts   3,279     3,203     2,802     3,618     3,501
Gross Loans $ 2,684,457   $ 2,632,471   $ 2,652,066   $ 2,630,742   $ 2,577,777
 
Construction loans included in:
(1) - Residential real estate loans $ 15,412 $ 17,459 $ 22,992 $ 22,426 $ 20,078
(2) - Commercial real estate loans $ 4,043 $ 30,554 $ 28,652 $ 24,875 $ 24,608
CITY HOLDING COMPANY AND SUBSIDIARIES
Acquisition Activity - Accretion
(Unaudited) ($ in 000s)
 
 
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 2015

  $

123

   $

129

   $

2,158

   $

40

2,450
2Q 2015

 

189

 

129

 

1,249

 

40 1,607
Remainder 2015 204 259 1,172 80 1,715
2016 269 497 1,399 48 2,213
2017 140 - 1,047 - 1,187
a - 1Q & 2Q 2015 amounts are based on actual results. Remainder 2015, 2016 and 2017 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,
2015 2014
Average Yield/ Average Yield/
Balance Interest       Rate Balance Interest Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,453,000 $ 14,437 3.99 % $ 1,366,485 $ 13,696 4.02 %
Commercial, financial, and agriculture (2) 1,159,741 12,703 4.39 % 1,143,001 13,260 4.65 %
Installment loans to individuals (2), (3) 45,743 1,170 10.26 % 54,115 1,097 8.13 %
Previously securitized loans (4) ***   502       *** ***   568 ***
Total loans 2,658,484 28,812 4.35 % 2,563,601 28,621 4.48 %
Securities:
Taxable 341,723 2,641 3.10 % 345,419 2,930 3.40 %
Tax-exempt (5)   29,501     411         5.59 %   27,343     428   6.28 %
Total securities 371,224 3,052 3.30 % 372,762 3,358 3.61 %
Deposits in depository institutions 10,468 - - 9,108 - -
Federal funds sold   -     -         -     -     -   0.00 %
Total interest-earning assets 3,040,176 31,864 4.20 % 2,945,471 31,979 4.35 %
Cash and due from banks 229,009 149,111
Bank premises and equipment 76,671 81,061
Other assets 244,661 247,510
Less: Allowance for loan losses   (20,789 )             (21,474 )    
Total assets $ 3,569,728             $ 3,401,679      
 
Liabilities:
Interest-bearing demand deposits 647,991 125 0.08 % 610,489 165 0.11 %
Savings deposits 709,034 174 0.10 % 634,718 198 0.13 %
Time deposits (2) 1,006,376 2,400 0.96 % 1,051,811 2,374 0.91 %
Short-term borrowings 149,785 85 0.23 % 133,282 85 0.26 %
Long-term debt   16,495     153         3.72 %   16,495     151   3.67 %
Total interest-bearing liabilities 2,529,681 2,937 0.47 % 2,446,795 2,973 0.49 %
Noninterest-bearing demand deposits 585,720 527,679
Other liabilities 42,273 28,783
Stockholders' equity   412,054               398,422      
Total liabilities and
stockholders' equity $ 3,569,728             $ 3,401,679      
Net interest income   $ 28,927           $ 29,006  
Net yield on earning assets             3.82 %       3.95 %
 
 
 

(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, 2015 Three Months Ended June 30, 2014
Virginia Savings Community       Total Virginia Savings Community Total
Residential real estate

        $

87

    $

156

    $

243

        $

107

    $

143

    $

250
Commercial, financial, and agriculture 78 1,042 1,120 141 715 856
Installment loans to individuals 25 50 75 36 165 201
Time deposits   129     40         169     135     52   187  

        $

319  

    $

1,288      

    $

1,607  

        $

419  

    $

1,075

    $

1,494  
 
 
(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,
2015 2014
Average Yield/ Average Yield/
Balance Interest       Rate Balance Interest Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,444,904 $ 28,637 4.00 % $ 1,358,564 $ 27,442 4.07 %
Commercial, financial, and agriculture (2) 1,154,797 26,289 4.59 % 1,155,235 27,496 4.80 %
Installment loans to individuals (2), (3) 47,801 2,320 9.79 % 53,340 2,275 8.60 %
Previously securitized loans (4) ***   954       *** ***   1,142 ***
Total loans 2,647,502 58,200 4.43 % 2,567,139 58,355 4.58 %
Securities:
Taxable 334,494 5,353 3.23 % 345,699 5,933 3.46 %
Tax-exempt (5)   28,992     816         5.68 %   27,424     859   6.32 %
Total securities 363,486 6,169 3.42 % 373,123 6,792 3.67 %
Deposits in depository institutions 9,722 - - 8,970 - -
Federal funds sold   -     -         0.00 %   -     -   0.00 %
Total interest-earning assets 3,020,710 64,369 4.30 % 2,949,232 65,147 4.45 %
Cash and due from banks 225,727 137,232
Bank premises and equipment 77,152 81,635
Other assets 244,578 246,804
Less: Allowance for loan losses   (20,724 )             (21,347 )    
Total assets $ 3,547,443             $ 3,393,556      
 
Liabilities:
Interest-bearing demand deposits 642,431 257 0.08 % 611,139 341 0.11 %
Savings deposits 701,907 355 0.10 % 626,610 407 0.13 %
Time deposits (2) 1,013,883 4,828 0.96 % 1,060,887 4,742 0.90 %
Short-term borrowings 139,676 167 0.24 % 126,067 160 0.26 %
Long-term debt   16,495     303         3.70 %   16,495     301   3.68 %
Total interest-bearing liabilities 2,514,392 5,910 0.47 % 2,441,198 5,951 0.49 %
Noninterest-bearing demand deposits 578,570 522,472
Other liabilities 46,112 33,717
Stockholders' equity   408,369               396,169      
Total liabilities and
stockholders' equity $ 3,547,443             $ 3,393,556      
Net interest income   $ 58,459           $ 59,196  
Net yield on earning assets             3.90 %       4.05 %
 

(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, 2015 Six Months Ended June 30, 2014
Virginia Savings Community       Total Virginia Savings Community Total
Residential real estate

        $

151

    $

289

    $

440

         $

258

    $

258

    $

516
Commercial, financial, and agriculture 106 3,000 3,106 255 2,039 2,294
Installment loans to individuals 55 117 172 70 354 424
Time deposits   259     80         339     266     145   411  

        $

571  

    $

3,486      

    $

4,057  

        $

849  

    $

2,796

    $

3,645  
(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
2015 (a) 2015 2014   2014 2014
 
Tier I Capital:
Stockholders' equity $ 411,240 $ 405,075 $ 390,853 $ 391,673 $ 397,231
Goodwill and other intangibles (69,153 ) (69,227 ) (74,011 ) (74,247 ) (74,483 )
Accumulated other comprehensive loss 4,892 3,253 4,159 2,921 2,509
Qualifying trust preferred stock 16,000 16,000 16,000 16,000 16,000
Excess deferred tax assets   -     (1,564 )   (3,838 )     (3,131 )   (4,019 )
Total tier I capital $ 362,979 $ 353,537 $ 333,163 $ 333,216 $ 337,238
Qualifying trust preferred stock   (16,000 ) $ (16,000 ) *   * *
Total CET I capital $ 346,979   $ 337,537   *   * *
           
 
Total Risk-Based Capital:
Tier I capital $ 362,979 $ 353,537 $ 333,163 $ 333,216 $ 337,238
Qualifying allowance for loan losses 20,809 20,179 20,150 20,487 20,536
Unrealized gain on securities   600     704     560     630     605  
Total risk-based capital $ 384,388   $ 374,420   $ 353,873     $ 354,333   $ 358,379  
 
Net risk-weighted assets $ 2,448,848 $ 2,404,331 $ 2,493,078 $ 2,493,938 $ 2,464,081
             
 
Ratios:
Average stockholders' equity to average assets 11.54 % 11.48 % 11.40 % 11.78 % 11.71 %
Tangible capital ratio 9.89 % 9.60 % 9.35 % 9.58 % 9.80 %
Risk-based capital ratios:
CET 1 capital 14.17 % 14.04 %

          *

          *

        *

Tier I capital 14.82 % 14.70 % 13.36 % 13.36 % 13.69 %
Total risk-based capital 15.70 % 15.57 % 14.19 % 14.21 % 14.54 %
Leverage capital 10.38 % 10.23 % 9.89 % 10.07 % 10.15 %
 
 
(a) June 30, 2015 risk-based capital ratios are estimated.
(*) Basel III CET 1 ratio requirements are effective beginning January 1, 2015 and are not required for prior periods.
             
 
 
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
2015 2015 2014   2014 2014
 
Intangibles, net $ 70,779 $ 70,964 $ 74,198 $ 74,434 $ 74,670
Intangibles amortization expense 185 214 236 236 236
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
2015 2015 2014   2014 2014
 
Balance at beginning of period $ 20,179 $ 20,150 $ 20,487 $ 20,536 $ 21,044
 
Charge-offs:
Commercial and industrial (1,898 ) (94 ) 7 (325 ) (1 )
Commercial real estate 61 (337 ) (260 ) (696 ) (587 )
Residential real estate (272 ) (257 ) (414 ) (605 ) (316 )
Home equity (17 ) (91 ) (21 ) (142 ) (38 )
Consumer (69 ) (74 ) (17 ) (49 ) (38 )
DDA overdrafts   (313 )   (311 )   (363 )     (390 )   (321 )
Total charge-offs (2,508 ) (1,164 ) (1,068 ) (2,207 ) (1,301 )
 
Recoveries:
Commercial and industrial 9 18 4 4 18
Commercial real estate 23 8 19 11 53
Residential real estate 54 10 96 28 39
Home equity - - - - -
Consumer 51 28 32 43 53
DDA overdrafts   165     241     196       200     195  
Total recoveries 302 305 347 286 358
         
Net charge-offs (2,206 ) (859 ) (721 ) (1,921 ) (943 )
Provision for (recovery of) acquired loans 299 246 148 (3 ) 150
Provision for loan losses   2,537     642     236       1,875     285  
Balance at end of period $ 20,809   $ 20,179   $ 20,150     $ 20,487   $ 20,536  
 
Loans outstanding

 $

2,684,457

 

 $

2,632,471

 

 $

2,652,066

   

 $

2,630,742

  $ 2,577,777  
Average loans outstanding  

2,658,484

   

2,636,400

   

2,639,106

     

2,600,142

   

2,563,601

 
Allowance as a percent of loans outstanding   0.78 %   0.77 %   0.76 %     0.78 %   0.80 %
Allowance as a percent of non-performing loans   130.98 %   121.81 %   128.10 %     112.61 %   106.86 %
Net charge-offs (annualized) as a
percent of average loans outstanding   0.33 %   0.13 %   0.11 %     0.30 %   0.15 %
Net charge-offs, excluding overdraft deposit
accounts, (annualized) as a percent of average loans outstanding   0.31 %   0.12 %   0.08 %     0.27 %   0.13 %
CITY HOLDING COMPANY AND SUBSIDIARIES    
Summary of Non-Performing Assets
(Unaudited) ($ in 000s)
 
June 30 March 31 December 31 September 30 June 30
2015 2015   2014   2014 2014
 
Nonaccrual loans $ 15,623 $ 16,182 $ 15,307 $ 17,384 $ 18,423
Accruing loans past due 90 days or more   264     384     423     809     794  
Total non-performing loans 15,887 16,566 15,730 18,193 19,217
Other real estate owned   6,729     8,771     8,180     9,162     9,129  
Total non-performing assets $ 22,616   $ 25,337   $ 23,910   $ 27,355   $ 28,346  
 
Non-performing assets as a percent of loans and
other real estate owned 0.84 % 0.96 % 0.90 % 1.04 % 1.10 %
               
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Troubled Debt Restructurings
(Unaudited) ($ in 000s)
 
June 30 March 31 December 31 September 30 June 30
2015 2015   2014   2014 2014
 
Residential real estate $ 19,021 $ 19,067 $ 18,492 $ 18,040 $ 19,212
Home equity - junior liens 2,662 2,741 2,688 2,821 2,858
Commercial and industrial 66 70 73 77 86
Commercial real estate 1,872 1,894 2,263 2,270 2,281
Consumer   -     -       -       -     -  
Total $ 23,621   $ 23,772     $ 23,516     $ 23,208   $ 24,437  
 
               
 
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
2015 2015   2014   2014 2014
 
Residential real estate $ 4,107 $ 4,326 $ 5,164 $ 5,276 $ 5,794
Home equity - junior liens 393 543 746 751 926
Commercial and industrial 600 113 310 188 25
Commercial real estate 536 299 479 938 443
Consumer 82 122 197 58 80
DDA overdrafts   327     215     318     592     281  
Total past due loans $ 6,045   $ 5,618     $ 7,214     $ 7,803   $ 7,549  
 
Acquired
June 30 March 31 December 31 September 30 June 30
2015 2015   2014   2014 2014
 
Residential real estate $ 1,163 $ 1,792 $ 714 $ 500 $ 873
Home equity - junior liens 5 86 2 16 3
Commercial and industrial 14 490 143 96 58
Commercial real estate 2,179 2,018 2,372 2,972 2,110
Consumer 175 150 221 162 374
DDA overdrafts   -     -       -       -     -  
Total past due loans $ 3,536   $ 4,536     $ 3,452     $ 3,746   $ 3,418  
 
Total
June 30 March 31 December 31 September 30 June 30
2015 2015   2014   2014 2014
 
Residential real estate $ 5,270 $ 6,118 $ 5,878 $ 5,776 $ 6,667
Home equity - junior liens 398 629 748 767 929
Commercial and industrial 614 603 453 284 83
Commercial real estate 2,715 2,317 2,851 3,910 2,553
Consumer 257 272 418 220 454
DDA overdrafts   327     215       318       592     281  
Total past due loans $ 9,581   $ 10,154     $ 10,666     $ 11,549   $ 10,967  
 
Total past due loans as a percent of loans outstanding 0.36 % 0.39 % 0.40 % 0.44 % 0.43 %
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
2015   2015   2014   2014   2014
 
Contractual required principal and interest 2,376 2,419 2,407 3,481 3,735
Carrying value 1,984 1,979 1,964 2,987 3,098
 
Community Acquisition
June 30 March 31 December 31 September 30 June 30
2015   2015   2014   2014   2014
 
Contractual required principal and interest 18,546 20,189 23,277 24,147 27,394
Carrying value 13,958 14,627 15,365 15,518 17,902

Contacts

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

Contacts

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