City Holding Company Announces Record Quarterly Results

CHARLESTON, W. Va.--()--City Holding Company (“Company” or “City”) (NASDAQ: CHCO):

Filed by City Holding Company
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Poage Bankshares, Inc.
Commission File No.: 001-35295

City Holding Company (“Company” or “City”) (NASDAQ: CHCO), a $4.4 billion bank holding company headquartered in Charleston, today announced record quarterly net income of $21.0 million and diluted earnings of $1.35 per share.

Highlights of the Company’s second quarter performance and results included the following:

  • Return on assets and return on tangible equity of 2.00% and 19.9%, respectively.
  • Reported net interest income increased $2.3 million from the quarter ended June 30, 2017, while net interest income exclusive of accretion from fair value adjustments increased $2.6 million from the quarter ended June 30, 2017.
  • Reported a recovery of loan loss provision of $2.1 million.
  • Received the highest ranking in customer satisfaction in the north central region in J.D. Power’s 2018 U.S. Retail Banking Satisfaction Study.

Net Interest Income

The Company’s net interest income increased from $32.6 million during the first quarter of 2018 to $33.6 million during the second quarter of 2018. The Company’s tax equivalent net interest income increased $0.9 million, or 2.8%, from $32.8 million during the first quarter of 2018 to $33.7 million during the second quarter of 2018. Higher yields on commercial and residential real estate loans increased net interest income $1.3 million from the quarter ended March 31, 2018. This increase was partially offset by increased interest expense as a result of higher interest rates on interest bearing liabilities of $0.5 million. The Company’s reported net interest margin improved from 3.51% for the first quarter of 2018 to 3.56% for the second quarter of 2018. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.48% for the quarter ended March 31, 2018 and 3.52% for the quarter ended June 30, 2018.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned increased from 0.43% at March 31, 2018 to 0.53% at June 30, 2018. Total nonperforming assets increased from $13.6 million at March 31, 2018 to $16.9 million at June 30, 2018. Nonperforming assets increased during the second quarter of 2018 as a direct result of two specific credits that are each secured by high value residential real estate properties. We anticipate no losses on these two credits. Total past due loans remained flat at $8.2 million, or 0.26% of total loans outstanding, at June 30, 2018.

As a result of the Company’s quarterly analysis of the adequacy of the Allowance for Loan Losses (“ALLL”), the Company recorded a recovery of loan losses of $2.1 million in the second quarter of 2018, compared to a provision for loan losses of $0.5 million for the comparable period in 2017 and a provision for loan losses of $0.2 million for the first quarter of 2018. During the second quarter of 2018, City National Bank of WV (“City National”), a subsidiary of the Company, liquidated repossessed assets associated with the Kentucky Fuels Corporation credit. As a result of the proceeds from this liquidation, City National recovered $1.3 million related to this credit. As of June 30, 2018, Kentucky Fuels Corporation’s remaining contractual balance with City National Bank is $1.3 million, but there is no recorded book balance associated with this loan. Additionally, as a result of this recovery, the historical loss rate used to compute the allowance not specifically allocated to individual credits in the Company’s commercial and industrial mining and energy sector (per North American Industry Classification System (NAICS)) improved and an additional release of reserve of $1.7 million was recognized in the second quarter of 2018. Exclusive of these events, the Company recorded a provision for loan losses of $0.9 million in the second quarter of 2018 which reflects changes in the quality of the portfolio. 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 and produces a provision and allowance for loan losses that is directionally consistent with changes in asset quality and loss experience.

Non-interest Income

Non-interest income increased from $14.9 million for the second quarter of 2017 to $15.6 million for the second quarter of 2018. This increase was mainly due to an increase in other income of $0.5 million due to unrealized fair market value gains in equity securities, increased service charges of $0.2 million, or 3.5%, and an increase in bankcard revenues of $0.2 million, or 3.7%. These increases were partially offset by a decrease in bank owned life insurance of $0.2 million.

Non-interest Expenses

Non-interest expenses increased $0.7 million, from $24.2 million in the second quarter of 2017 to $24.9 million in the second quarter of 2018. This increase was primarily due to an increase in salaries and employee benefits of $0.8 million which was largely due to annual salary adjustments, including an adjustment to wages for approximately 50% of the Company’s employees late in the first quarter of 2018 to make salaries more competitive in today’s employment environment. This increase was partially offset by a decrease in occupancy expense of $0.1 million and equipment and software related expenses of $0.1 million.

Balance Sheet Trends

Loan balances have increased $28.1 million (0.9%) from December 31, 2017 to $3.16 billion at June 30, 2018. Commercial real estate loans increased $16.9 million (1.3%), commercial and industrial loans increased $5.2 million (2.5%) and residential real estate loans increased $4.6 million (0.3%).

Total average depository balances increased $71.2 million, or 2.1%, from the quarter ended March 31, 2018 to the quarter ended June 30, 2018. The Company experienced increases in time deposits ($27.1 million), noninterest-bearing demand deposits ($23.4 million), savings deposits ($15.7 million), and interest-bearing deposits ($5.1 million).

Income Tax Expense

The Company’s effective income tax rate for the second quarter of 2018 was 20.3% compared to 40.2% for the year ended December 31, 2017, and 31.7% for the quarter ended June 30, 2017. On December 22, 2017, the President signed the Tax Cuts and Jobs Act (“TCJA”) into law. Among other things, the TCJA reduced the corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of this decrease in the corporate income tax rate, the Company reassessed its deferred tax assets and liabilities, which resulted in a charge to earnings in the fourth quarter of 2017 of $7.1 million. Exclusive of this item, the Company’s tax rate from operations was 32.7% for the year ended December 31, 2017. The effective rate for the second quarter of 2018 is based upon the Company’s expected tax rate for the year ended December 31, 2018.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 92.2% and the loan to asset ratio was 72.1% at June 30, 2018. The Company maintained investment securities totaling 14.7% of assets as of the same date. The Company’s deposit mix is weighted toward checking and saving accounts that fund 52.3% of assets at June 30, 2018. Time deposits fund 25.9% of assets at June 30, 2018, 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 is also strongly capitalized. The Company’s tangible equity ratio decreased from 10.5% at December 31, 2017 to 9.9% at June 30, 2018. At June 30, 2018, City National Bank’s Leverage Ratio was 9.24%, its Common Equity Tier I ratio was 13.26%, its Tier I Capital ratio was 13.26%, and its Total Risk-Based Capital ratio was 13.87%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On June 27, 2018, the Board approved a quarterly cash dividend of $0.46 cents per share payable July 31, 2018, to shareholders of record as of July 13, 2018. During the quarter ended June 30, 2018, the Company repurchased 10,000 common shares at a weighted average price of $69.26 per share as part of a one million share repurchase plan authorized by the Board of Directors in September 2014. As of June 30, 2018, the Company could repurchase approximately 188,000 shares under the current plan.

City Holding Company is the parent company of City National Bank of West Virginia. City National Bank operates 86 branches across West Virginia, Virginia, Kentucky and Ohio.

On July 11, 2018 the Company announced that it had concurrently executed two separate definitive agreements to acquire Poage Bankshares, Inc., (“Poage”), of Ashland, Kentucky and its principal banking subsidiary, Towne Square Bank and Farmers Deposit Bancorp, Inc., (“Farmers Deposit”), of Cynthiana, Kentucky and its principal banking subsidiary, Farmers Deposit Bank. The proposed mergers are expected to close in the fourth quarter of 2018 and the core data system conversions are also targeted to occur in the fourth quarter of 2018. Consummation of the respective mergers is subject to receipt of required regulatory approvals, the approval by the shareholders of Poage and Farmers Deposit, and the completion of other customary closing conditions. Merger expenses are estimated at $18 million (pre-tax) for the Poage transaction and a $6 million (pre-tax) for the Farmers Deposit transaction, while core deposit intangibles are estimated at $4 million for Poage and $1.5 million for Farmers Deposit. Each of the Poage and Farmers Deposit transactions are not conditional upon each other.

During the second quarter of 2018, City National Bank received the highest ranking in customer satisfaction in the north central region in J.D. Power’s 2018 U.S. Retail Banking Satisfaction Study. City National Bank outscored all banks in the north central region, which includes West Virginia, Kentucky, Ohio, Indiana, and Michigan.

Important Information for Investors and Poage Shareholders:

This press release does not constitute an offer to sell or the solicitation of an offer to buy securities of City or a solicitation of any vote or approval. City will file a registration statement on Form S-4 and other documents regarding the proposed transaction referenced in this press release related to the Poage transaction with the Securities and Exchange Commission (“SEC”) to register the shares of City’s common stock to be issued to the shareholders of Poage. The registration statement will include a proxy statement/prospectus, which will be sent to the shareholders of Poage in advance of its special meetings of shareholders to be held to consider the proposed Poage merger. Before making any voting or investment decision investors and security holders are urged to read the proxy statement/prospectus and any other relevant documents to be filed with the SEC in connection with the proposed Poage transaction because they contain important information about the City, Poage and the proposed transaction. Shareholders are also urged to carefully review and consider each of City’s and Poage’s public filings with the SEC, including, but not limited to, their Annual Reports or Form 10-K, their Quarterly Reports or Form 10-Q, their Current Reports or Form 8-K and their proxy statements. Investors and security holders may obtain a free copy of these documents (when available) through the website maintained by the SEC at www.sec.gov. These documents may also be obtained, without charge, from City at www.bankatcity.com under the tab “Investors” or by directing a request to City Holding Company, 25 Gatewater Road P.O. Box 7520, Charleston, West Virginia 25356, Attn.: Investor Relations, or from Poage at www.townsquarebank.com under the tab “Investor Relations” or by directing a request to Poage Bankshares, Inc., 1500 Carter Avenue, Ashland, Kentucky 41101, Attn.: Investor Relations.

Poage and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Poage in connection with the proposed Poage merger. Information about the directors and executive officers of Poage is set forth in the proxy statement for Poage’s 2018 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on April 13, 2018. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the proposed Poage merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.

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) 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; (12) 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; (13) the impact of new minimum capital thresholds established as a part of the implementation of Basel III; and (14) 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, 2017. 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, 2018 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary June 30, 2018 results and will adjust the amounts if necessary.

 
 
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
                               
Three Months Ended Six Months Ended
June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017 June 30, 2018     June 30, 2017
 
Earnings

Net Interest Income (fully taxable equivalent)

$ 33,760 $ 32,834 $ 32,760 $ 32,384 $ 31,632 $ 66,594 $ 62,436
Net Income available to common shareholders 20,979 17,616 9,669 13,932 14,688 38,590 30,714
 
Per Share Data
Earnings per share available to common shareholders:
Basic $ 1.36 $ 1.13 $ 0.62 $ 0.89 $ 0.94 $ 2.49 $ 1.98
Diluted 1.35 1.13 0.62 0.89 0.94 2.48 1.98
Weighted average number of shares (in thousands):
Basic 15,326 15,414 15,472 15,485 15,462 15,370 15,344
Diluted 15,345 15,436 15,497 15,505 15,487 15,390 15,369
Period-end number of shares (in thousands) 15,452 15,439 15,618 15,618 15,617 15,452 15,617
Cash dividends declared $ 0.46 $ 0.46 $ 0.46 $ 0.44 $ 0.44 $ 0.92 $ 0.88
Book value per share (period-end) $ 32.60 $ 31.86 $ 32.17 $ 32.03 $ 31.54 $ 32.60 $ 31.54
Tangible book value per share (period-end) 27.53 26.78 27.14 26.99 26.49 27.53 26.49
Market data:
High closing price $ 78.44 $ 72.87 $ 73.98 $ 71.91 $ 72.78 $ 78.44 $ 72.78
Low closing price 67.95 65.03 65.50 59.94 61.34 65.03 60.86
Period-end closing price 75.23 68.56 67.47 71.91 65.87 75.23 65.87
Average daily volume (in thousands) 60 56 66 54 56 58 56
Treasury share activity:
Treasury shares repurchased (in thousands) 10 204 - - - 214 -
Average treasury share repurchase price $ 69.26 $ 68.50 $ - $ - $ - $ 68.54 $ -
Common share issuance:
Common shares issued (in thousands) - - - - - - 441
Average common share issue price (a) $ - $ - $ - $ - $ - $ - $ 64.48
 
Key Ratios (percent)
Return on average assets 2.00 % 1.69 % 0.94 % 1.37 % 1.43 % 1.85 % 1.51 %
Return on average tangible equity 19.9 % 16.7 % 9.0 % 13.2 % 14.2 % 18.3 % 15.3 %
Yield on interest earning assets 4.15 % 4.05 % 3.95 % 3.92 % 3.90 % 4.10 % 3.89 %
Cost of interest bearing liabilities 0.76 % 0.69 % 0.64 % 0.61 % 0.56 % 0.73 % 0.55 %
Net Interest Margin 3.56 % 3.51 % 3.46 % 3.45 % 3.46 % 3.54 % 3.46 %
Non-interest income as a percent of total revenue 31.7 % 30.7 % 32.2 % 31.3 % 32.3 % 31.3 % 32.1 %
Efficiency Ratio 50.4 % 52.6 % 47.7 % 51.8 % 52.0 % 51.5 % 53.4 %
Price/Earnings Ratio (b) 13.88 15.17 27.30 20.20 17.52 15.13 16.63
 
Capital (period-end)
Average Shareholders' Equity to Average Assets 11.88 % 12.05 % 12.34 % 12.29 % 11.99 %
Tangible equity to tangible assets 9.90 % 10.03 % 10.45 % 10.49 % 10.40 %
Consolidated City Holding Company risk based capital ratios (c):
CET I 15.49 % 15.08 % 15.10 % 15.08 % 14.88 %
Tier I 16.05 % 15.64 % 15.66 % 15.65 % 15.45 %
Total 16.65 % 16.31 % 16.34 % 16.40 % 16.17 %
Leverage 11.13 % 10.90 % 11.00 % 11.05 % 10.79 %
City National Bank risk based capital ratios (c):
CET I 13.26 % 12.59 % 11.93 % 12.74 % 12.27 %
Tier I 13.26 % 12.59 % 11.93 % 12.74 % 12.27 %
Total 13.87 % 13.25 % 12.61 % 13.44 % 12.96 %
Leverage 9.24 % 8.81 % 8.43 % 9.04 % 8.62 %
 
Other
Branches 86 86 86 86 85
FTE 849 832 839 835 839
 
Assets per FTE (in thousands) $ 5,152 $ 5,048 $ 4,925 $ 4,910 $ 4,836
Deposits per FTE (in thousands) 4,030 4,143 3,952 3,900 3,907
 
 
(a) The common share issue price is presented net of commissions and excludes one-time offering costs.
(b) The price/earnings ratio is computed based on annualized quarterly earnings.
(c) June 30, 2018 risk-based capital ratios are estimated.
 
 
 
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
                               
Three Months Ended Six Months Ended
June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017 June 30, 2018     June 30, 2017
 
Interest Income
Interest and fees on loans $ 34,292 $ 32,918 $ 32,529 $ 32,004 $ 31,115 $ 67,210 $ 61,219
Interest on investment securities:
Taxable 4,117 3,981 3,797 3,666 3,480 8,098 6,924
Tax-exempt 710 703 692 665 686 1,413 1,349
Interest on deposits in depository institutions   61         42       35       31       17   103         20
Total Interest Income 39,180 37,644 37,053 36,366 35,298 76,824 69,512
 
Interest Expense
Interest on deposits 4,918 4,326 3,941 3,796 3,660 9,244 7,088
Interest on short-term borrowings 459 460 522 349 187 919 344
Interest on long-term debt   230         211       201       195       189   441         370
Total Interest Expense   5,607         4,997       4,664       4,340       4,036   10,604         7,802
Net Interest Income 33,573 32,647 32,389 32,026 31,262 66,220 61,710
(Recovery of) provision for loan losses   (2,064 )       181       422       1,393       510   (1,882 )       1,191
Net Interest Income After Provision for Loan Losses 35,637 32,466 31,967 30,633 30,752 68,102 60,519
 
Non-Interest Income
Net gains on sale of investment securities - - 200 - - - 4,276
Service charges 7,323 6,862 7,355 7,415 7,074 14,185 13,805
Bankcard revenue 4,532 4,334 4,316 4,291 4,372 8,866 8,512
Trust and investment management fee income 1,645 1,568 1,800 1,471 1,612 3,214 2,998
Bank owned life insurance 722 821 1,241 774 968 1,543 2,197
Other income   1,389         907       655       660       895   2,297         1,642
Total Non-Interest Income 15,611 14,492 15,567 14,611 14,921 30,105 33,430
 
Non-Interest Expense
Salaries and employee benefits 13,551 13,241 11,845 12,580 12,780 26,792 25,948
Occupancy related expense 2,346 2,404 2,195 2,426 2,462 4,750 4,935
Equipment and software related expense 1,895 1,831 1,897 1,940 2,004 3,727 3,895
FDIC insurance expense 313 315 318 328 328 627 703
Advertising 849 787 711 689 781 1,636 1,514
Bankcard expenses 1,064 1,076 960 1,051 970 2,139 1,913
Postage, delivery, and statement mailings 515 578 518 517 504 1,093 1,059
Office supplies 329 313 355 377 345 643 706
Legal and professional fees 475 450 563 504 440 925 889
Telecommunications 441 500 517 494 492 941 976
Repossessed asset losses, net of expenses 112 370 145 107 147 482 482
Other expenses   3,021         3,072       2,869       3,296       2,920   6,099         5,756
Total Non-Interest Expense   24,911         24,937       22,893       24,309       24,173   49,854         48,776
Income Before Income Taxes 26,337 22,021 24,641 20,935 21,500 48,353 45,173
Income tax expense   5,358         4,405       14,972       7,003       6,812   9,763         14,459
Net Income Available to Common Shareholders $ 20,979       $ 17,616     $ 9,669     $ 13,932     $ 14,688 $ 38,590       $ 30,714
 
Distributed earnings allocated to common shareholders $ 7,039 $ 7,023 $ 7,106 $ 6,797 $ 6,797 $ 14,077 $ 13,594
Undistributed earnings allocated to common shareholders   13,729         10,398       2,454       6,981       7,733   24,136         16,787
Net earnings allocated to common shareholders $ 20,768       $ 17,421     $ 9,560     $ 13,778     $ 14,530 $ 38,213       $ 30,381
 
Average common shares outstanding 15,326 15,414 15,472 15,485 15,462 15,370 15,344
Shares for diluted earnings per share 15,345 15,436 15,497 15,505 15,487 15,390 15,369
 
Basic earnings per common share $ 1.36 $ 1.13 $ 0.62 $ 0.89 $ 0.94 $ 2.49 $ 1.98
Diluted earnings per common share $ 1.35 $ 1.13 $ 0.62 $ 0.89 $ 0.94 $ 2.48 $ 1.98
 
 
 
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
 
        (Unaudited)     (Unaudited)         (Unaudited)     (Unaudited)
June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017
 
Assets
Cash and due from banks $ 240,483 $ 97,495 $ 54,450 $ 54,281 $ 54,577
Interest-bearing deposits in depository institutions   25,041         26,283         28,058         28,884         27,783  
Cash and cash equivalents 265,524 123,778 82,508 83,165 82,360
 
Investment securities available-for-sale, at fair value 552,603 545,628 550,389 525,633 504,660
Investment securities held-to-maturity, at amortized cost 60,030 62,277 64,449 66,989 69,798
Other securities   28,920         22,165         14,147         15,988         16,039  
Total investment securities 641,553 630,070 628,985 608,610 590,497
 
Gross loans 3,155,468 3,137,681 3,127,410 3,105,912 3,083,767
Allowance for loan losses   (16,876 )       (18,381 )       (18,836 )       (19,554 )       (19,063 )
Net loans 3,138,592 3,119,300 3,108,574 3,086,358 3,064,704
 
Bank owned life insurance 104,773 104,052 103,440 102,706 101,960
Premises and equipment, net 72,482 72,920 72,682 72,334 72,809
Accrued interest receivable 9,348 9,528 9,223 9,236 8,122
Net deferred tax assets 14,528 14,467 11,913 22,355 22,944
Intangible assets 78,342 78,468 78,595 78,730 78,865
Other assets   49,241         47,432         36,361         36,060         35,138  
Total Assets $ 4,374,383       $ 4,200,015       $ 4,132,281       $ 4,099,554       $ 4,057,399  
 
Liabilities
Deposits:
Noninterest-bearing $ 684,614 $ 703,209 $ 666,639 $ 669,876 $ 688,223
Interest-bearing:
Demand deposits 785,933 816,976 769,245 711,121 722,440
Savings deposits 817,547 816,245 796,275 799,592 797,552
Time deposits   1,133,684         1,110,532         1,083,475         1,075,945         1,069,932  
Total deposits 3,421,778 3,446,962 3,315,634 3,256,534 3,278,147
Short-term borrowings
Federal Funds purchased 181,375 - 54,000 79,800 46,400
Customer repurchase agreements 196,635 195,375 198,219 201,664 177,904
Long-term debt 16,495 16,495 16,495 16,495 16,495
Other liabilities   54,346         49,306         45,426         44,746         45,946  
Total Liabilities 3,870,629 3,708,138 3,629,774 3,599,239 3,564,892
 
Stockholders' Equity
Preferred stock - - - - -
Common stock 47,619 47,619 47,619 47,619 47,619
Capital surplus 140,091 140,547 140,960 140,381 139,972
Retained earnings 471,515 457,650 444,481 441,001 433,944
Cost of common stock in treasury (136,520 ) (137,420 ) (124,909 ) (124,909 ) (124,943 )
Accumulated other comprehensive loss:
Unrealized gain (loss) on securities available-for-sale (13,918 ) (11,486 ) (611 ) 883 575
Underfunded pension liability   (5,033 )       (5,033 )       (5,033 )       (4,660 )       (4,660 )
Total Accumulated Other Comprehensive Loss   (18,951 )       (16,519 )       (5,644 )       (3,777 )       (4,085 )
Total Stockholders' Equity   503,754         491,877         502,507         500,315         492,507  
Total Liabilities and Stockholders' Equity $ 4,374,383       $ 4,200,015       $ 4,132,281       $ 4,099,554       $ 4,057,399  
 
Regulatory Capital
Total CET 1 capital $ 444,869 $ 430,044 $ 430,154 $ 426,057 $ 418,449
Total tier 1 capital 460,869 446,044 446,154 442,057 434,449
Total risk-based capital 478,255 464,936 465,292 463,198 454,832
Total risk-weighted assets 2,871,561 2,851,330 2,842,453 2,824,751 2,812,443
 
 
 
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
                       
June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017
 
Residential real estate (1) $ 1,472,916 $ 1,465,215 $ 1,468,278 $ 1,465,942 $ 1,455,578
Home equity - junior liens 139,245 138,477 139,499 139,702 139,534
Commercial and industrial 213,687 204,592 208,484 204,722 197,429
Commercial real estate (2) 1,294,489 1,296,304 1,277,576 1,260,906 1,256,736
Consumer 31,137 29,570 29,162 30,323 30,860
DDA overdrafts   3,994       3,523       4,411       4,317       3,630
Gross Loans $ 3,155,468     $ 3,137,681     $ 3,127,410     $ 3,105,912     $ 3,083,767
 
Construction loans included in:
(1) - Residential real estate loans $ 21,662 $ 26,610 $ 25,270 $ 19,849 $ 12,056
(2) - Commercial real estate loans 28,567 30,857 28,871 24,318 20,204
 
 
Secondary Mortgage Loan Activity
Mortgage loans originated $ 3,263 $ 2,606 $ 2,593 $ 4,474 $ 5,433
Mortgage loans sold 3,137 2,874 2,975 4,732 5,465
Mortgage loans gain on loans sold 84 79 79 128 142
 
 
 
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information
(Unaudited) ($ in 000s)
                               
Three Months Ended Six Months Ended
June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017 June 30, 2018     June 30, 2017
Allowance for Loan Losses
Balance at beginning of period $ 18,381 $ 18,836 $ 19,554 $ 19,063 $ 19,209 $ 18,836 $ 19,730
 
Charge-offs:
Commercial and industrial (385 ) (339 ) (250 ) (40 ) (57 ) (724 ) (110 )
Commercial real estate (118 ) (157 ) (156 ) (282 ) (102 ) (275 ) (282 )
Residential real estate (96 ) (124 ) (342 ) (411 ) (258 ) (220 ) (884 )
Home equity (33 ) (78 ) (147 ) (17 ) (118 ) (111 ) (239 )
Consumer (255 ) (99 ) (13 ) (18 ) (23 ) (354 ) (29 )
DDA overdrafts   (636 )       (636 )       (725 )       (718 )       (635 )   (1,272 )       (1,271 )
Total charge-offs (1,523 ) (1,433 ) (1,633 ) (1,486 ) (1,193 ) (2,956 ) (2,815 )
 
Recoveries:
Commercial and industrial 1,476 2 1 2 53 1,478 55
Commercial real estate 149 223 20 60 21 372 32
Residential real estate 53 106 8 130 131 159 156
Home equity - - - 45 - - -
Consumer 59 46 17 21 14 105 25
DDA overdrafts   345         420         447         326         319     765         690  
Total recoveries 2,082 797 493 584 538 2,879 958
                                 
Net charge-offs 559 (636 ) (1,140 ) (903 ) (655 ) (77 ) (1,857 )
(Recovery of) provision for acquired loans (13 ) - 122 - 58 (13 ) 39
(Recovery of) provision for loan losses   (2,051 )       181         300         1,393         451     (1,870 )       1,151  
Balance at end of period $ 16,876       $ 18,381       $ 18,836       $ 19,554       $ 19,063   $ 16,876       $ 19,063  
 
Loans outstanding $ 3,155,468 $ 3,137,681 $ 3,127,410 $ 3,105,912 $ 3,083,767
Allowance as a percent of loans outstanding 0.53 % 0.59 % 0.60 % 0.63 % 0.62 %
Allowance as a percent of non-performing loans 127.6 % 189.9 % 178.4 % 182.8 % 177.6 %
 
Average loans outstanding $ 3,138,146 $ 3,133,804 $ 3,110,084 $ 3,089,793 $ 3,073,255 $ 3,135,987 $ 3,064,665
Net (recoveries) charge-offs (annualized) as a percent of average loans outstanding -0.07 % 0.08 % 0.15 % 0.12 % 0.09 % 0.00 % 0.12 %
 
 
 
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, continued
(Unaudited) ($ in 000s)
 
June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017
Nonaccrual Loans
Residential real estate $ 3,783 $ 3,331 $ 2,814 $ 2,556 $ 1,608
Home equity 168 135 168 92 153
Commercial and industrial 863 1,063 1,345 1,325 1,571
Commercial real estate 7,707 5,061 5,970 6,700 7,250
Consumer   557         -         -         -         -  
Total nonaccrual loans 13,078 9,590 10,297 10,673 10,582
Accruing loans past due 90 days or more   145         91         262         22         150  
Total non-performing loans 13,223 9,681 10,559 10,695 10,732
Other real estate owned   3,636         3,912         3,585         3,995         4,204  
Total non-performing assets $ 16,859       $ 13,593       $ 14,144       $ 14,690       $ 14,936  
 
Non-performing assets as a percent of loans and other real estate owned 0.53 % 0.43 % 0.45 % 0.47 % 0.48 %
 
Past Due Loans
Residential real estate $ 5,998 $ 5,641 $ 6,718 $ 5,295 $ 5,648
Home equity 583 616 851 873 628
Commercial and industrial 624 61 692 304 259
Commercial real estate 402 1,520 2,086 520 819
Consumer 34 21 42 26 70
DDA overdrafts   525         432         575         551         527  
Total past due loans $ 8,166       $ 8,291       $ 10,964       $ 7,569       $ 7,951  
 
Total past due loans as a percent of loans outstanding 0.26 % 0.26 % 0.35 % 0.24 % 0.26 %
 
Troubled Debt Restructurings ("TDRs")
Accruing:
Residential real estate $ 20,424 $ 20,786 $ 21,005 $ 20,741 $ 20,647
Home equity

3,156

3,015 3,047 2,947 3,146
Commercial and industrial 119 125 135 31 35
Commercial real estate 8,279 8,324 8,381 8,427 8,483
Consumer   -         -         -         -         -  
Total accruing TDRs $

31,978

      $ 32,250       $ 32,568       $ 32,146       $ 32,311  
 
Non-Accruing
Residential real estate $ 307 $ 256 $ 84 $ 47 $ 154
Home equity

40

40 50 - -
Commercial and industrial - - - - -
Commercial real estate - - - - -
Consumer   -         -         -         -         -  
Total non-accruing TDRs $

347

      $ 296       $ 134       $ 47       $ 154  
 
Total TDRs $

32,325

      $ 32,546       $ 32,702       $ 32,193       $ 32,465  
 
 
 
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
                                       
Three Months Ended
June 30, 2018 March 31, 2018 June 30, 2017
Average Yield/ Average Yield/ Average Yield/
Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,602,103 $ 16,951 4.24 % $ 1,603,911 $ 16,479 4.17 % $ 1,589,748 $ 15,732 3.97 %
Commercial, financial, and agriculture (2) 1,501,618 16,578 4.43 % 1,496,817 15,608 4.23 % 1,448,535 14,562 4.03 %
Installment loans to individuals (2), (3) 34,425 516 6.01 % 33,076 504 6.18 % 34,972 535 6.14 %
Previously securitized loans (4) ***       246     ***     ***       327     ***     ***       285     ***
Total loans 3,138,146 34,291 4.38 % 3,133,804 32,918 4.26 % 3,073,255 31,114 4.06 %
Securities:
Taxable 541,990 4,117 3.05 % 536,714 3,981 3.01 % 478,179 3,480 2.92 %
Tax-exempt (5)   91,135         898     3.95 %       91,722         890     3.94 %       89,320         1,056     4.74 %
Total securities 633,125 5,015 3.18 % 628,436 4,871 3.14 % 567,499 4,536 3.21 %
Deposits in depository institutions   29,164         61     0.84 %       29,648         42     0.57 %       28,961         17     0.24 %
Total interest-earning assets 3,800,435 39,367 4.15 % 3,791,888 37,831 4.05 % 3,669,715 35,667 3.90 %
Cash and due from banks 92,426 71,480 132,331
Premises and equipment, net 72,889 72,716 73,555
Other assets 255,719 245,721 248,716
Less: Allowance for loan losses   (18,215 )                   (19,420 )                   (19,809 )            
Total assets $ 4,203,254                   $ 4,162,385                   $ 4,104,508              
 
Liabilities:
Interest-bearing demand deposits $ 787,554 $ 445 0.23 % $ 782,499 $ 357 0.19 % $ 710,091 $ 160 0.09 %
Savings deposits 817,187 453 0.22 % 801,504 341 0.17 % 879,643 352 0.16 %
Time deposits (2) 1,123,261 4,020 1.44 % 1,096,157 3,628 1.34 % 1,066,047 3,147 1.18 %
Short-term borrowings 208,939 459 0.88 % 236,605 460 0.79 % 199,224 187 0.38 %
Long-term debt   16,495         230     5.59 %       16,495         211     5.19 %       16,495         189     4.60 %
Total interest-bearing liabilities 2,953,436 5,607 0.76 % 2,933,260 4,997 0.69 % 2,871,500 4,035 0.56 %
Noninterest-bearing demand deposits 704,546 681,150 703,259
Other liabilities 45,933 46,426 37,633
Stockholders' equity   499,339                     501,549                     492,116              

Total liabilities and stockholders' equity

$ 4,203,254                   $ 4,162,385                   $ 4,104,508              
Net interest income       $ 33,760                 $ 32,834                 $ 31,632      
Net yield on earning assets             3.56 %                 3.51 %                 3.46 %
 

(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"), Community Financial Corporation ("Community") and American Founders Banks, Inc. ("AFB"):
 
 
Residential real estate $ 130 $ 110 $ 144
Commercial, financial, and agriculture 238 150 496
Installment loans to individuals 4 10 5
$ 372 $ 270 $ 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 21% for the periods ending June 30, 2018 & March 31, 2018 and 35% for the period ending June 30, 2017.
 
 
 
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
                           
Six Months Ended
June 30, 2018 June 30, 2017
Average Yield/ Average Yield/
Balance     Interest     Rate     Balance     Interest     Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,601,554 $ 33,431 4.21 % $ 1,590,528 $ 31,211 3.96 %
Commercial, financial, and agriculture (2) 1,500,698 32,186 4.33 % 1,438,764 28,146 3.94 %
Installment loans to individuals (2), (3) 33,735 1,020 6.10 % 35,374 1,130 6.44 %
Previously securitized loans (4) ***       573     ***     ***       732     ***
Total loans 3,135,987 67,210 4.32 % 3,064,665 61,219 4.03 %
Securities:
Taxable 539,366 8,098 3.03 % 468,292 6,924 2.98 %
Tax-exempt (5)   91,427         1,789     3.95 %       87,065         2,075     4.81 %
Total securities 630,793 9,887 3.16 % 555,357 8,999 3.27 %
Deposits in depository institutions   29,405         102     0.70 %       22,927         20     0.18 %
Total interest-earning assets 3,796,185 77,199 4.10 % 3,642,949 70,238 3.89 %
Cash and due from banks 82,011 107,120
Premises and equipment, net 72,803 74,159
Other assets 250,748 251,034
Less: Allowance for loan losses   (18,814 )                   (19,979 )            
Total assets $ 4,182,933                   $ 4,055,283              
 
Liabilities:
Interest-bearing demand deposits $ 785,041 $ 802 0.21 % $ 709,267 $ 317 0.09 %
Savings deposits 809,389 794 0.20 % 855,774 676 0.16 %
Time deposits (2) 1,109,784 7,649 1.39 % 1,059,171 6,095 1.16 %
Short-term borrowings 222,696 919 0.83 % 197,435 344 0.35 %
Long-term debt   16,495         441     5.39 %       16,495         370     4.52 %
Total interest-bearing liabilities 2,943,405 10,605 0.73 % 2,838,142 7,802 0.55 %
Noninterest-bearing demand deposits 692,912 696,787
Other liabilities 46,178 40,628
Stockholders' equity   500,438                     479,726              

Total liabilities and stockholders' equity

$ 4,182,933                   $ 4,055,283              
Net interest income       $ 66,594                 $ 62,436      
Net yield on earning assets             3.54 %                 3.46 %
 

(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"), Community Financial Corporation ("Community") and American Founders Banks, Inc. ("AFB"):
 
 
 
Residential real estate $ 240 $ 282
Commercial, financial, and agriculture 388 671
Installment loans to individuals 14 14
Time deposits   0   16
$ 642 $ 983
 
(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 21% for the six months ended June 30, 2018 and 35% for the six months ended June 30, 2017.
 
 
 
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Non-GAAP Reconciliations
(Unaudited) ($ in 000s, except per share data)
                               
Three Months Ended Six Months Ended
June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017 June 30, 2018     June 30, 2017
Net Interest Income/Margin
Net interest income ("GAAP") $ 33,573 $ 32,647 $ 32,389 $ 32,026 $ 31,262 $ 66,220 $ 61,710
Taxable equivalent adjustment   187         187         371         358         370     374         726  
Net interest income, fully taxable equivalent $ 33,760       $ 32,834       $ 32,760       $ 32,384       $ 31,632   $ 66,594       $ 62,436  
 
Average interest earning assets $ 3,800,435 $ 3,791,888 $ 3,759,675 $ 3,719,692 $ 3,669,715 $ 3,796,185 $ 3,642,949
 
Net Interest Margin 3.56 % 3.51 % 3.46 % 3.45 % 3.46 % 3.54 % 3.46 %
Accretion related to fair value adjustments   -0.04 %       -0.03 %       -0.06 %       -0.04 %       -0.04 %   -0.03 %       -0.05 %
Net Interest Margin (excluding accretion)   3.52 %       3.48 %       3.39 %       3.42 %       3.42 %   3.50 %       3.40 %
 
Tangible Equity Ratio (period end)
Equity to assets ("GAAP") 11.52 % 11.71 % 12.16 % 12.20 % 12.14 %
Effect of goodwill and other intangibles, net   -1.61 %       -1.68 %       -1.70 %       -1.72 %       -1.74 %
Tangible common equity to tangible assets   9.90 %       10.03 %       10.45 %       10.49 %       10.40 %
 
Return on tangible equity ("GAAP") 19.94 % 16.66 % 8.99 % 13.17 % 14.22 % 18.29 % 15.33 %
Impact of effective tax rate decrease on deferred taxes   0.00 %       0.00 %       6.57 %       0.00 %       0.00 %   0.00 %      

0.00

%

Return on tangible equity, excluding Impact of effective tax rate decrease on deferred taxes

  19.94 %       16.66 %       15.56 %       13.17 %       14.22 %   18.29 %      

15.33

%
 
Return on assets ("GAAP") 2.00 % 1.69 % 0.94 % 1.37 % 1.43 % 1.85 % 1.51 %
Impact of effective tax rate decrease on deferred taxes   0.00 %       0.00 %       0.68 %       0.00 %       0.00 %   0.00 %      

0.00

%
Return on Assets, excluding Impact of effective tax rate decrease on deferred taxes   2.00 %       1.69 %       1.62 %       1.37 %       1.43 %   1.85 %      

1.51

%
 
Effective Income Tax Rate
Effective tax rate ("GAAP") 20.3 % 20.0 % 60.8 % 33.5 % 31.7 % 20.2 % 32.0 %
Impact of FIN 48 adjustments 0.00 % 0.00 % 1.34 % 0.00 % 0.00 % 0.00 % 0.00 %
Impact of effective tax rate decrease on deferred taxes   0.00 %       0.00 %       -28.69 %       0.00 %       0.00 %   0.00 %       0.00 %
Effective tax rate, excluding FIN 48 and impact of effective tax rate decrease on deferred taxes   20.3 %       20.0 %       33.4 %       33.5 %       31.7 %   20.2 %       32.0 %
 
 
 
 

Contacts

City Holding Company
David L Bumgarner, 304-769-1169
Chief Financial Officer and Senior Vice President

Contacts

City Holding Company
David L Bumgarner, 304-769-1169
Chief Financial Officer and Senior Vice President