City Holding Company Announces Third Quarter Results

Oct 18, 2017 07:30 am
CHARLESTON, W. Va. -- 

City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $4.1 billion bank holding company headquartered in Charleston, today announced quarterly net income of $13.9 million and diluted earnings of $0.89 per share.

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

  • Return on assets and return on tangible equity of 1.37% and 13.2%, respectively.
  • Reported net interest income increased $2.2 million, or 7.5%, from the quarter ended September 30, 2016, while net interest income exclusive of accretion from fair value adjustments increased $2.5 million, or 8.6%, from the quarter ended September 30, 2016.
  • Total loan growth of $59.7 million, or 2.0%, from December 31, 2016 to September 30, 2017.
  • Asset quality continues to remain strong with nonperforming assets declining to $14.7 million or 0.47% of total loans and other real estate owned. Past due loans remained steady at just 0.24% of total loans outstanding.

Net Interest Income

The Company’s net interest income increased from $31.3 million during the second quarter of 2017 to $32.0 million during the third quarter of 2017. The Company’s tax equivalent net interest income increased $0.8 million, or 2.4%, from $31.6 million during the second quarter of 2017 to $32.4 million during the third quarter of 2017. Higher yields on commercial and residential real estate loans increased net interest income $0.6 million from the quarter ended June 30, 2017. In addition, higher average investment balances ($30.9 million) and higher average loan balances ($16.5 million) increased net interest income by $0.2 million and $0.2 million, respectively. These increases were partially offset by increased interest expense as a result of higher interest rates on interest bearing liabilities of $0.3 million. The Company’s reported net interest margin remained stable at 3.45% for the third quarter of 2017 compared to 3.46% for the second quarter of 2017. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.39% for the quarter ended June 30, 2017 and 3.41% for the quarter ended September 30, 2017.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned improved modestly from 0.48% at June 30, 2017 to 0.47% at September 30, 2017. Total nonperforming assets decreased from $14.9 million at June 30, 2017 to $14.7 million at September 30, 2017. Total past due loans decreased from $8.0 million, or 0.26% of total loans outstanding, at June 30, 2017 to $7.6 million, or 0.24% of total loans outstanding, at September 30, 2017.

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 $1.4 million in the third quarter of 2017, compared to $1.4 million for the comparable period in 2016 and $0.5 million for the second quarter of 2017. The provision for loan losses recorded in the third quarter of 2017 reflects revisions to the regulatory rating of a shared national credit (“SNC”) in which the Company is a participant, 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. The Company recorded a provision for loan losses of $1.1 million, or 77.1% of the quarterly provision for loan losses, during the quarter ended September 30, 2017 for a SNC. SNCs are credit facilities greater than $20 million that are shared by three or more federally supervised financial institutions and are reviewed annually by regulatory authorities at the agent bank level. The SNC that the Company is a participant is for a local customer that outgrew the lending limit of the Company and involves three banks. The reserve recorded in the quarter ended September 30, 2017, related to this SNC reflects the loss factors associated with the rating assigned to this SNC as a result of the current year review by the Office of the Comptroller of the Currency (“OCC”). The Company’s balance outstanding at September 30, 2017, associated with this SNC is $25.8 million, with an additional commitment of $6.4 million related to a line of credit to the borrower. As of September 30, 2017, the SNC is performing in accordance to terms and debt service coverage ratios are acceptable. 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 was $14.6 million during the third quarter of 2017. During the third quarter of 2016, the Company realized investment gains of $2.7 million, which represented partial recoveries of impairment charges previously recognized on pools of trust preferred securities. Exclusive of this gain, non-interest income increased from $14.1 million for the third quarter of 2016 to $14.6 million for the third quarter of 2017. This increase was mainly due to an increase in service charges of $0.6 million, or 8.4%, from the third quarter of 2016 and an increase in trust and investment management fee income of $0.1 million, or 10.7%. These increases were partially offset by a decrease in other income of $0.2 million.

Non-interest Expenses

Non-interest expenses decreased $1.0 million, from $25.3 million in the third quarter of 2016 to $24.3 million in the third quarter of 2017. This decrease was primarily due to a decrease in legal and professional fees of $0.4 million, a decrease in repossessed asset losses of $0.2 million, and a decrease in FDIC insurance expense of $0.2 million.

Balance Sheet Trends

Loan balances have increased $59.7 million (2.0%) from December 31, 2016 to $3.11 billion at September 30, 2017. Commercial real estate loans increased $31.4 million (2.6%), commercial and industrial loans increased $19.1 million (10.3%) and residential real estate loans increased $14.5 million (1.0%). These increases were partially offset by a decrease in home equity junior lien loans ($2.3 million) and consumer loans ($2.2 million).

Total average depository balances decreased $67.4 million, or 2.0%, from the quarter ended June 30, 2017 to the quarter ended September 30, 2017. The Company experienced decreases in savings deposits ($57.7 million), interest-bearing deposits ($9.5 million), and noninterest-bearing demand deposits ($5.2 million). Over the last year, one of the Company’s customers accumulated over $100 million in deposits. During June 2017, this particular customer made a significant distribution which returned their depository balance to its normal level.

Income Tax Expense

The Company’s effective income tax rate for the third quarter of 2017 was 33.5% compared to 32.5% for the year ended December 31, 2016, and 33.2% for the quarter ended September 30, 2016. The effective rate is based upon the Company’s expected tax rate for the year ended December 31, 2017.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 95.4% and the loan to asset ratio was 75.8% at September 30, 2017. The Company maintained investment securities totaling 14.8% of assets as of the same date. The Company’s deposit mix is weighted toward checking and saving accounts that fund 53.2% of assets at September 30, 2017. Time deposits fund 26.2% of assets at September 30, 2017, with time deposits of more than $250,000 funding only 2.8% of assets, reflecting the core retail orientation of the Company.

The Company is also strongly capitalized. The Company’s tangible equity ratio increased from 9.3% at December 31, 2016 to 10.5% at September 30, 2017. In the first quarter of 2017, the Company sold 441,000 common shares at a weighted average price of $64.48 per share, net of broker fees pursuant to an at-the-market common stock offering. No additional common shares have been sold after the first quarter of 2017. At September 30, 2017, City National Bank’s Leverage Ratio was 9.04%, its Common Equity Tier I ratio was 12.74%, its Tier I Capital ratio was 12.74%, and its Total Risk-Based Capital ratio was 13.44%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On September 27, 2017, the Board approved a quarterly cash dividend of $0.44 cents per share payable October 31, 2017, to shareholders of record as of October 13, 2017.

On September 12, 2017 the Company opened a new banking office in the King’s Daughters Medical Center in Ashland, Kentucky. On October 16, 2017 the Company announced plans to construct a new banking office in Morgantown, West Virginia, one of the state’s fastest growing cities and the third largest MSA. Morgantown is home to West Virginia University, the state’s largest university.

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.

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, 2016. 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 September 30, 2017 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary September 30, 2017 results and will adjust the amounts if necessary.

 
CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
             
Three Months Ended Nine Months Ended
September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016 September 30, 2017   September 30, 2016
 
Earnings
Net Interest Income (FTE) $ 32,384 $ 31,632 $ 30,804 $ 30,638 $ 30,002 $ 94,822 $ 89,179
Net Income available to common shareholders 13,932 14,688 16,026 14,656 13,232 44,646 37,476
 
Per Share Data
Earnings per share available to common shareholders:
Basic $ 0.89 $ 0.94 $ 1.04 $ 0.97 $ 0.88 $ 2.87 $ 2.48
Diluted 0.89 0.94 1.04 0.97 0.88 2.86 2.48
Weighted average number of shares (in thousands):
Basic 15,485 15,462 15,252 14,894 14,899 15,391 14,902
Diluted 15,505 15,487 15,277 14,914 14,910 15,415 14,913
Period-end number of shares (in thousands) 15,618 15,617 15,586 15,128 15,007 15,618 15,007
Cash dividends declared $ 0.44 $ 0.44 $ 0.44 $ 0.43 $ 0.43 $ 1.32 $ 1.29
Book value per share (period-end) $ 32.03 $ 31.54 $ 30.90 $ 29.25 $ 28.97 $ 32.03 $ 28.97
Tangible book value per share (period-end) 26.99 26.49 25.83 24.01 23.69 26.99 23.69
Market data:
High closing price $ 71.91 $ 72.78 $ 67.93 $ 68.29 $ 50.60 $ 72.78 $ 50.60
Low closing price 59.94 61.34 60.86 48.49 44.53 59.94 40.82
Period-end closing price 71.91 65.87 64.48 67.60 50.29 71.91 50.29
Average daily volume (in thousands) 54 56 57 57 61 55 65
Treasury share activity:
Treasury shares repurchased (in thousands) - - - - - - 231
Average treasury share repurchase price $ - $ - $ - $ - $ - $ - $ 43.34
Common share issuance:
Common shares issued (in thousands) - - 441 108 - 441 -
Average common share issue price (a) $ - $ - $ 64.48 $ 66.21 $ - $ 64.48 $ -
 
Key Ratios (percent)
Return on average assets 1.37 % 1.43 % 1.60 % 1.49 % 1.38 % 1.46 % 1.31 %
Return on average tangible equity 13.2 % 14.2 % 16.5 % 16.1 % 14.9 % 14.6 % 14.4 %
Yield on interest earning assets 3.92 % 3.90 % 3.88 % 3.81 % 3.85 % 3.90 % 3.91 %
Cost of interest bearing liabilities 0.61 % 0.56 % 0.54 % 0.50 % 0.49 % 0.57 % 0.49 %
Net Interest Margin 3.45 % 3.46 % 3.45 % 3.42 % 3.48 % 3.46 % 3.52 %
Non-interest income as a percent of total revenue 31.3 % 32.3 % 31.9 % 32.1 % 32.1 % 31.8 % 31.6 %
Efficiency Ratio 51.8 % 52.0 % 53.8 % 48.9 % 56.3 % 52.9 % 56.6 %
Price/Earnings Ratio (b) 20.20 17.52 15.51 17.38 14.33 18.80 15.18
 
Capital (period-end)
Average Shareholders' Equity to Average Assets 12.29 % 11.99 % 11.66 % 11.25 % 11.35 %
Tangible equity to tangible assets 10.49 % 10.40 % 9.95 % 9.30 % 9.39 %
Consolidated City Holding Company risk based capital ratios (c):
CET I 15.08 % 14.88 % 14.61 % 13.41 % 13.00 %
Tier I 15.65 % 15.45 % 15.18 % 13.98 % 13.59 %
Total 16.40 % 16.17 % 15.91 % 14.73 % 14.33 %
Leverage 11.05 % 10.79 % 10.83 % 10.08 % 9.92 %
City National Bank risk based capital ratios (c):
CET I 12.74 % 12.27 % 11.74 % 11.23 % 11.14 %
Tier I 12.74 % 12.27 % 11.74 % 11.52 % 11.73 %
Total 13.44 % 12.96 % 12.44 % 12.24 % 12.45 %
Leverage 9.04 % 8.62 % 8.40 % 8.33 % 8.55 %
 
Other
Branches 86 85 85 85 85
FTE 835 839 833 847 834
 
Assets per FTE (in thousands) $ 4,910 $ 4,836 $ 4,951 $ 4,704 $ 4,636
Deposits per FTE (in thousands) 3,900 3,907 4,073 3,815 3,812
 
 
(a) The common share issue price is presented net of commissions and excludes one-time offering costs of approximately $265,000.
(b) The price/earnings ratio is computed based on annualized quarterly earnings.
(c) September 30, 2017 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 Nine Months Ended
September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016 September 30, 2017   September 30, 2016
 
Interest Income
Interest and fees on loans $ 32,004 $ 31,115 $ 30,104 $ 30,126 $ 29,444 $ 93,223 $ 88,011
Interest on investment securities:
Taxable 3,666 3,480 3,444 3,277 3,183 10,591 9,115
Tax-exempt 665 686 663 481 419 2,014 1,141
Interest on deposits in depository institutions   31     17     3     -     -   51     -
Total Interest Income 36,366 35,298 34,214 33,884 33,046 105,879 98,267
 
Interest Expense
Interest on deposits 3,796 3,660 3,429 3,137 3,006 10,885 8,915
Interest on short-term borrowings 349 187 157 188 90 693 283
Interest on long-term debt   195     189     181     179     172   565     503
Total Interest Expense   4,340     4,036     3,767     3,504     3,268   12,143     9,701
Net Interest Income 32,026 31,262 30,447 30,380 29,778 93,736 88,566
Provision for loan losses   1,393     510     681     1,301     1,432   2,584     3,093
Net Interest Income After Provision for Loan Losses 30,633 30,752 29,766 29,079 28,346 91,152 85,473
 
Non-Interest Income
Net gains on sale of investment securities - - 4,276 - 2,668 4,276 3,513
Service charges 7,415 7,074 6,730 6,995 6,842 21,219 19,709
Bankcard revenue 4,291 4,372 4,140 4,142 4,216 12,804 12,373
Trust and investment management fee income 1,471 1,612 1,386 1,597 1,329 4,469 3,976
Bank owned life insurance 774 968 1,229 952 846 2,972 2,374
Other income   660     895     746     685     846   2,303     2,510
Total Non-Interest Income 14,611 14,921 18,507 14,371 16,747 48,043 44,455
 
Non-Interest Expense
Salaries and employee benefits 12,876 12,945 13,078 12,427 12,993 38,899 38,456
Occupancy and equipment 2,916 2,956 2,838 2,792 2,759 8,710 8,303
Depreciation 1,450 1,510 1,525 1,516 1,585 4,486 4,719
FDIC insurance expense 328 328 375 137 508 1,031 1,485
Advertising 689 781 733 445 667 2,203 2,161
Bankcard expenses 1,051 970 943 1,011 1,188 2,964 3,143
Postage, delivery, and statement mailings 517 504 555 492 517 1,576 1,588
Office supplies 377 345 361 320 325 1,082 1,044
Legal and professional fees 504 440 449 515 869 1,393 1,671
Telecommunications 494 492 484 494 459 1,470 1,318
Repossessed asset losses, net of expenses 107 147 336 244 305 589 646
Other expenses   3,000     2,755     2,923     2,063     3,109   8,683     9,173
Total Non-Interest Expense   24,309     24,173     24,600     22,456     25,284   73,086     73,707
Income Before Income Taxes 20,935 21,500 23,673 20,994 19,809 66,109 56,221
Income tax expense   7,003     6,812     7,647     6,338     6,577   21,463     18,745
Net Income Available to Common Shareholders $ 13,932   $ 14,688   $ 16,026   $ 14,656   $ 13,232 $ 44,646   $ 37,476
 
Distributed earnings allocated to common shareholders $ 6,797 $ 6,797 $ 6,782 $ 6,428 $ 6,376 $ 20,391 $ 19,128
Undistributed earnings allocated to common shareholders   6,981     7,733     9,067     8,051     6,699   23,767     17,901
Net earnings allocated to common shareholders $ 13,778   $ 14,530   $ 15,849   $ 14,479   $ 13,075 $ 44,158   $ 37,029
 
Average common shares outstanding 15,485 15,462 15,252 14,894 14,899 15,391 14,902
Shares for diluted earnings per share 15,505 15,487 15,277 14,914 14,910 15,415 14,913
 
Basic earnings per common share $ 0.89 $ 0.94 $ 1.04 $ 0.97 $ 0.88 $ 2.87 $ 2.48
Diluted earnings per common share $ 0.89 $ 0.94 $ 1.04 $ 0.97 $ 0.88 $ 2.86 $ 2.48
 
         
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016
 
Assets
Cash and due from banks $ 54,281 $ 54,577 $ 164,887 $ 62,263 $ 57,233
Interest-bearing deposits in depository institutions   28,884       27,783       25,925       25,876       7,576  
Cash and cash equivalents 83,165 82,360 190,812 88,139 64,809
 
Investment securities available-for-sale, at fair value 525,633 504,660 470,098 450,083 434,717
Investment securities held-to-maturity, at amortized cost 66,989 69,798 72,308 75,169 79,499
Other securities   15,988       16,039       10,240       14,352       11,895  
Total investment securities 608,610 590,497 552,646 539,604 526,111
 
Gross loans 3,105,912 3,083,767 3,074,173 3,046,226 2,957,912
Allowance for loan losses   (19,554 )     (19,063 )     (19,209 )     (19,730 )     (19,550 )
Net loans 3,086,358 3,064,704 3,054,964 3,026,496 2,938,362
 
Bank owned life insurance 102,706 101,960 101,481 100,732 100,293
Premises and equipment, net 72,334 72,809 73,805 75,165 75,589
Accrued interest receivable 9,236 8,122 8,644 8,408 7,986
Net deferred tax assets 22,355 22,944 24,606 28,043 23,179
Intangible assets 78,730 78,865 79,000 79,135 79,284
Other assets   36,060       35,138       38,029       38,681       50,748  
Total Assets $ 4,099,554     $ 4,057,399     $ 4,123,987     $ 3,984,403     $ 3,866,361  
 
Liabilities
Deposits:
Noninterest-bearing $ 669,876 $ 688,223 $ 714,791 $ 672,286 $ 669,865
Interest-bearing:
Demand deposits 711,121 722,440 743,246 695,891 713,642
Savings deposits 799,592 797,552 874,031 822,057 765,195
Time deposits   1,075,945       1,069,932       1,060,690       1,041,419       1,030,584  
Total deposits 3,256,534 3,278,147 3,392,758 3,231,653 3,179,286
Short-term borrowings
Federal Funds purchased 79,800 46,400 - 64,100 6,000
Customer repurchase agreements 201,664 177,904 186,686 184,205 173,384
Long-term debt 16,495 16,495 16,495 16,495 16,495
Other liabilities   44,746       45,946       46,402       45,512       56,412  
Total Liabilities 3,599,239 3,564,892 3,642,341 3,541,965 3,431,577
 
Stockholders' Equity
Preferred stock - - - - -
Common stock 47,619 47,619 47,619 46,518 46,249
Capital surplus 140,381 139,972 140,305 112,873 105,996
Retained earnings 441,001 433,944 426,126 417,017 408,823
Cost of common stock in treasury (124,909 ) (124,943 ) (126,265 ) (126,958 ) (127,538 )
Accumulated other comprehensive loss:
Unrealized gain (loss) on securities available-for-sale 883 575 (1,479 ) (2,352 ) 6,013
Underfunded pension liability   (4,660 )     (4,660 )     (4,660 )     (4,660 )     (4,759 )
Total Accumulated Other Comprehensive Loss   (3,777 )     (4,085 )     (6,139 )     (7,012 )     1,254  
Total Stockholders' Equity   500,315       492,507       481,646       442,438       434,784  
Total Liabilities and Stockholders' Equity $ 4,099,554     $ 4,057,399     $ 4,123,987     $ 3,984,403     $ 3,866,361  
 
Regulatory Capital
Total CET 1 capital $ 426,057 $ 418,449 $ 409,533 $ 371,677 $ 355,934
Total tier 1 capital 442,057 434,449 425,533 387,677 371,934
Total risk-based capital 463,198 454,832 445,938 408,406 392,258
Total risk-weighted assets 2,824,751 2,812,443 2,807,347 2,772,456 2,737,721
 
         
CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
 
 
September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016
 
Residential real estate (1) $ 1,465,942 $ 1,455,578 $ 1,444,795 $ 1,451,462 $ 1,445,242
Home equity - junior liens 139,702 139,534 139,165 141,965 141,616
Commercial and industrial 204,722 197,429 205,011 185,667 176,387
Commercial real estate (2) 1,260,906 1,256,736 1,250,106 1,229,516 1,158,088
Consumer 30,323 30,860 32,043 32,545 33,614
DDA overdrafts   4,317     3,630     3,053     5,071     2,965
Gross Loans $ 3,105,912   $ 3,083,767   $ 3,074,173   $ 3,046,226   $ 2,957,912
 
Construction loans included in:
(1) - Residential real estate loans $ 19,849 $ 12,056 $ 9,777 $ 14,182 $ 12,284
(2) - Commercial real estate loans 24,318 20,204 18,499 12,840 7,309
 
 
Secondary Mortgage Loan Activity
Mortgage loans originated $ 4,474 $ 5,433 $ 3,951 $ 6,444 $ 5,624
Mortgage loans sold 4,732 5,465 6,118 4,936 5,836
Mortgage loans gain on loans sold 128 142 167 107 129
 
             
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information
(Unaudited) ($ in 000s)
 
Three Months Ended Nine Months Ended
September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016 September 30, 2017   September 30, 2016
Allowance for Loan Losses
Balance at beginning of period $ 19,063 $ 19,209 $ 19,730 $ 19,550 $ 19,139 $ 19,730 $ 19,251
 
Charge-offs:
Commercial and industrial (40 ) (57 ) (53 ) - (103 ) (150 ) (148 )
Commercial real estate (282 ) (102 ) (180 ) (463 ) (142 ) (564 ) (1,213 )
Residential real estate (411 ) (258 ) (626 ) (453 ) (539 ) (1,295 ) (1,281 )
Home equity (17 ) (118 ) (121 ) (90 ) (125 ) (256 ) (300 )
Consumer (18 ) (23 ) (6 ) (24 ) (20 ) (47 ) (102 )
DDA overdrafts   (718 )     (635 )     (636 )     (395 )     (378 )   (1,989 )     (1,017 )
Total charge-offs (1,486 ) (1,193 ) (1,622 ) (1,425 ) (1,307 ) (4,301 ) (4,061 )
 
Recoveries:
Commercial and industrial 2 53 2 1 9 57 13
Commercial real estate 60 21 11 40 43 92 447
Residential real estate 130 131 25 74 23 286 113
Home equity 45 - - - - 45 -
Consumer 21 14 11 9 28 46 109
DDA overdrafts   326       319       371       180       183     1,016       585  
Total recoveries 584 538 420 304 286 1,542 1,267
                       

Net charge-offs

(903 ) (655 ) (1,202 ) (1,121 ) (1,021 ) (2,760 ) (2,794 )
Provision for (recovery of) acquired loans - 58 (19 ) (1 ) (4 ) 39 164
Provision for loan losses   1,393       451       700       1,302       1,436     2,545       2,929  
Balance at end of period $ 19,554     $ 19,063     $ 19,209     $ 19,730     $ 19,550   $ 19,554     $ 19,550  
 
Loans outstanding $ 3,105,912 $ 3,083,767 $ 3,074,173 $ 3,046,226 $ 2,957,912
Allowance as a percent of loans outstanding 0.63 % 0.62 % 0.62 % 0.65 % 0.66 %
Allowance as a percent of non-performing loans 182.8 % 177.6 % 167.7 % 140.1 % 129.0 %
 
Average loans outstanding $ 3,089,793 $ 3,073,255 $ 3,055,979 $ 3,006,426 $ 2,919,756 $ 3,073,133 $ 2,892,098
Net charge-offs (annualized) as a percent of average loans outstanding 0.12 % 0.09 % 0.16 % 0.15 % 0.14 % 0.12 % 0.13 %
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, continued
(Unaudited) ($ in 000s)
 
September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016
Nonaccrual Loans
Residential real estate $ 2,556 $ 1,608 $ 2,810 $ 4,302 $ 3,919
Home equity 92 153 114 100 154
Commercial and industrial 1,325 1,571 1,353 1,958 2,441
Commercial real estate 6,700 7,250 7,141 7,341 8,077
Consumer   -       -       -       -       -  
Total nonaccrual loans 10,673 10,582 11,418 13,701 14,591
Accruing loans past due 90 days or more   22       150       35       382       569  
Total non-performing loans 10,695 10,732 11,453 14,083 15,160
Other real estate owned   3,995       4,204       4,405       4,588       5,435  
Total non-performing assets $ 14,690     $ 14,936     $ 15,858     $ 18,671     $ 20,595  
 
Non-performing assets as a percent of loans and other real estate owned 0.47 % 0.48 % 0.52 % 0.61 % 0.69 %
 
Past Due Loans
Residential real estate $ 5,295 $ 5,648 $ 3,876 $ 6,074 $ 5,713
Home equity 873 628 301 673 925
Commercial and industrial 304 259 611 94 399
Commercial real estate 520 819 1,014 1,115 1,275
Consumer 26 70 38 39 104
DDA overdrafts   551       527       330       599       554  
Total past due loans $ 7,569     $ 7,951     $ 6,170     $ 8,594     $ 8,970  
 
Total past due loans as a percent of loans outstanding 0.24 % 0.26 % 0.20 % 0.28 % 0.30 %
 
Troubled Debt Restructurings ("TDRs")
Accruing:
Residential real estate $ 20,741 $ 20,647 $ 20,294 $ 20,643 $ 19,944
Home equity 2,947 3,146 3,104 3,105 3,159
Commercial and industrial 31 35 38 42 46
Commercial real estate 8,427 8,483 8,513 5,525 2,718
Consumer   -       -       -       -       -  
Total accruing TDRs $ 32,146     $ 32,311     $ 31,949     $ 29,315     $ 25,867  
 
Non-Accruing
Residential real estate $ 47 $ 154 $ 100 $ 172 $ 452
Home equity - - 30 30 85
Commercial and industrial - - - - -
Commercial real estate - - - - -
Consumer   -       -       -       -       -  
Total non-accruing TDRs $ 47     $ 154     $ 130     $ 202     $ 537  
 
Total TDRs $ 32,193     $ 32,465     $ 32,079     $ 29,517     $ 26,404  
 
                 
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
 
Three Months Ended
September 30, 2017 June 30, 2017 September 30, 2016
Average Yield/ Average Yield/ Average Yield/
Balance   Interest   Rate   Balance   Interest   Rate   Balance   Interest   Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,598,037 $ 16,117 4.00 % $ 1,589,748 $ 15,732 3.97 % $ 1,570,787 $ 15,309 3.88 %
Commercial, financial, and agriculture (2) 1,457,821 14,903 4.06 % 1,448,535 14,473 4.01 % 1,311,819 13,066 3.96 %
Installment loans to individuals (2), (3) 33,935 630 7.37 % 34,972 624 7.16 % 37,150 690 7.39 %
Previously securitized loans (4) ***     353   ***   ***     285   ***   ***     378   ***
Total loans 3,089,793 32,003 4.11 % 3,073,255 31,114 4.06 % 2,919,756 29,443 4.01 %
Securities:
Taxable 507,106 3,666 2.87 % 478,179 3,480 2.92 % 449,977 3,183 2.81 %
Tax-exempt (5)   91,276       1,024   4.45 %     89,320       1,056   4.74 %     54,317       644   4.72 %
Total securities 598,382 4,690 3.11 % 567,499 4,536 3.21 % 504,294 3,827 3.02 %
Deposits in depository institutions   31,517       31   0.39 %     28,961       17   0.24 %     9,623       -   -  
Total interest-earning assets 3,719,692 36,724 3.92 % 3,669,715 35,667 3.90 % 3,433,673 33,270 3.85 %
Cash and due from banks 62,723 132,331 87,219
Premises and equipment, net 72,756 73,555 75,743
Other assets 247,076 248,716 263,258
Less: Allowance for loan losses   (20,038 )             (19,809 )             (19,517 )        
Total assets $ 4,082,209             $ 4,104,508             $ 3,840,376          
 
Liabilities:
Interest-bearing demand deposits $ 700,625 $ 159 0.09 % $ 710,091 $ 160 0.09 % $ 687,487 $ 138 0.08 %
Savings deposits 821,949 321 0.15 % 879,643 352 0.16 % 761,734 234 0.12 %
Time deposits (2) 1,070,941 3,316 1.23 % 1,066,047 3,147 1.18 % 1,030,731 2,634 1.02 %
Short-term borrowings 230,030 349 0.60 % 199,224 187 0.38 % 154,585 90 0.23 %
Long-term debt   16,495       195   4.69 %     16,495       189   4.60 %     16,495       172   4.15 %
Total interest-bearing liabilities 2,840,040 4,340 0.61 % 2,871,500 4,035 0.56 % 2,651,032 3,268 0.49 %
Noninterest-bearing demand deposits 698,106 703,259 700,932
Other liabilities 42,202 37,633 52,641
Stockholders' equity   501,861               492,116               435,771          

Total liabilities and stockholders' equity

$ 4,082,209             $ 4,104,508             $ 3,840,376          
Net interest income     $ 32,384           $ 31,632           $ 30,002    
Net yield on earning assets         3.45 %           3.46 %           3.48 %
 

(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 $ 122 145 $ 166
Commercial, financial, and agriculture $ 267 464 311
Installment loans to individuals $ 3 5 16
Time deposits $ -   -   148
$ 392 $ 614 $ 641
 
(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)
 
Nine Months Ended
September 30, 2017 September 30, 2016
Average Yield/ Average Yield/
Balance   Interest   Rate   Balance   Interest   Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,591,403 $ 47,329 3.98 % $ 1,549,465 $ 45,267 3.90 %
Commercial, financial, and agriculture (2) 1,446,849 42,974 3.97 % 1,304,467 39,294 4.02 %
Installment loans to individuals (2), (3) 34,881 1,835 7.03 % 38,166 2,220 7.77 %
Previously securitized loans (4) ***     1,086   ***   ***     1,230   ***
Total loans 3,073,133 93,224 4.06 % 2,892,098 88,011 4.06 %
Securities:
Taxable 481,372 10,591 2.94 % 432,303 9,115 2.82 %
Tax-exempt (5)   88,484       3,099   4.68 %     46,646       1,754   5.02 %
Total securities 569,856 13,690 3.21 % 478,949 10,869 3.03 %
Deposits in depository institutions   25,822       51   0.26 %     9,779       -   -  
Total interest-earning assets 3,668,811 106,965 3.90 % 3,380,826 98,880 3.91 %
Cash and due from banks 92,159 104,287
Premises and equipment, net 73,686 76,161
Other assets 249,700 260,297
Less: Allowance for loan losses   (19,999 )             (19,930 )        
Total assets $ 4,064,357             $ 3,801,641          
 
Liabilities:
Interest-bearing demand deposits $ 706,355 $ 476 0.09 % $ 683,926 $ 458 0.09 %
Savings deposits 844,375 998 0.16 % 765,222 699 0.12 %
Time deposits (2) 1,063,137 9,411 1.18 % 1,026,845 7,757 1.01 %
Short-term borrowings 208,419 693 0.44 % 156,884 283 0.24 %
Long-term debt   16,495       565   4.58 %     16,495       504   4.08 %
Total interest-bearing liabilities 2,838,781 12,143 0.57 % 2,649,372 9,701 0.49 %
Noninterest-bearing demand deposits 697,231 679,730
Other liabilities 41,159 45,452
Stockholders' equity   487,186               427,087          

Total liabilities and stockholders' equity

$ 4,064,357             $ 3,801,641          
Net interest income     $ 94,822           $ 89,179    
Net yield on earning assets         3.46 %           3.52 %
 

(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 $ 404 $ 538
Commercial, financial, and agriculture 907 1,360
Installment loans to individuals 17 98
Time deposits   16   444
$ 1,344 $ 2,440
 
(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
Non-GAAP Reconciliations
(Unaudited) ($ in 000s, except per share data)
 
Three Months Ended Nine Months Ended
September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016 September 30, 2017   September 30, 2016
Net Interest Income/Margin
 
Net interest income ("GAAP") $ 32,026 $ 31,262 $ 30,447 $ 30,380 $ 29,778 $ 93,736 $ 88,566
Taxable equivalent adjustment   358       370       357       258       224     1,086       613  
Net interest income, fully taxable equivalent $ 32,384     $ 31,632     $ 30,804     $ 30,638     $ 30,002   $ 94,822     $ 89,179  
 
Average interest earning assets $ 3,719,692 $ 3,669,715 $ 3,615,884 $ 3,561,166 $ 3,433,673 $ 3,668,811 $ 3,380,826
Net Interest Margin 3.45 % 3.46 % 3.45 % 3.42 % 3.48 % 3.46 % 3.52 %
 
Net interest income ("GAAP") $ 32,026 $ 31,262 $ 30,447 $ 30,380 $ 29,778 $ 93,736 $ 88,566
Taxable equivalent adjustment 358 370 357 258 224 1,086 613
Accretion related to fair value adjustments   (392 )     (614 )     (338 )     (466 )     (641 )   (1,344 )     (2,441 )
Net interest income, fully taxable equivalent, excluding accretion $ 31,992     $ 31,018     $ 30,466     $ 30,172     $ 29,361   $ 93,478     $ 86,738  
 
Net Interest Margin (excluding accretion) 3.41 % 3.39 % 3.42 % 3.37 % 3.40 % 3.41 % 3.43 %
 
Tangible Equity Ratio (period end)
Tangible common equity to tangible assets 10.49 % 10.40 % 9.95 % 9.30 % 9.39 %
Effect of goodwill and other intangibles, net   1.72 %     1.74 %     1.72 %     1.80 %     1.86 %
Equity to assets ("GAAP")   12.20 %     12.14 %     11.68 %     11.10 %     11.25 %
 
Income tax expense ("GAAP") $ 7,003 $ 6,812 $ 7,647 $ 6,338 $ 6,577 $ 21,463 $ 18,745
FIN 48   -       -       -       554       -     -       -  
Income tax expense, excluding FIN 48 $ 7,003     $ 6,812     $ 7,647     $ 6,892     $ 6,577   $ 21,463     $ 18,745  
 
Income before income taxes $ 20,935 $ 21,500 $ 23,673 $ 20,994 $ 19,809 $ 66,109 $ 56,221
 
Effective tax rate, excluding FIN 48 33.5 % 31.7 % 32.3 % 32.8 % 33.2 % 32.5 % 33.3 %
Effective tax rate ("GAAP") 33.5 % 31.7 % 32.3 % 30.2 % 33.2 % 32.5 % 33.3 %
 

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