City Holding Company Announces Second Quarter Results

City Holding Company ("Company" or "City") (NASDAQ:CHCO), a $3.8 billion bank holding company headquartered in Charleston, today announced quarterly net income of $12.5 million and diluted earnings of $0.83 per share.

Highlights of the Company's second quarter performance and results included the following:
  • Return on assets and return on tangible equity of 1.31% and 14.5%, respectively.
  • Reported net interest income increased $0.9 million from the quarter ended June 30, 2015, while net interest income exclusive of accretion from fair value adjustments increased $1.5 million from the quarter ended June 30, 2015.
  • Total net loan growth of $26.3 million from March 31, 2016 to June 30, 2016.
  • Average total deposit balances grew $95.9 million from the quarter ended March 31, 2016 to the quarter ended June 30, 2016.
  • Asset quality continues to remain strong with nonperforming assets declining to $21.3 million, or 0.73% of total loans and other real estate owned. Past due loans remained steady at just 0.30% of total loans outstanding.

Charles R. ("Skip") Hageboeck, the President and Chief Executive Officer of City Holding Company, commented: "Our results for the second quarter of 2016 once again continue to be very positive despite the headwinds of a sustained low interest environment and weak economic conditions. Our net interest margin improved modestly compared to the first quarter of 2016 and we continued to achieve steady loan growth. Credit quality continues to be a source of strength for City and our credit metrics remain very strong at June 30, 2016. City's tangible capital grew 35 basis points during the second quarter of 2016 and is now above our reported tangible capital level at December 31, 2015 even though we increased our dividend to shareholders over 2% and have repurchased in excess of 230,000 shares of our common stock in 2016."

"I would be remiss not to address the devastating and tragic flooding that occurred in parts of West Virginia in June. Sadly, the state sustained more than 20 deaths and substantial property damage was incurred. Areas served by City that were hardest hit were Greenbrier County West Virginia (and most particularly the community of White Sulphur Springs) and the Elkview/Clendenin communities within Kanawha County. Our personnel responded by organizing collection drives for flood victims and volunteering as part of flood relief teams. City has established special loan programs for flood victims and has donated to flood relief efforts. Further, upon review of our loan balances in those communities impacted, we estimate that we have approximately $40 million of loans outstanding, with 90% being residential real estate loans located out of floodplains. Within zip codes where the flooding occurred, we have approximately 900 loans - mostly residential mortgages - with an average balance of under $43,000. It is still early in the recovery process, and while we did not recognize any losses related to the flooding in the second quarter of 2016, the exact extent of any future loan losses remains unknown. However, with the limited information currently available, we do not expect to incur significant loan losses associated with the recent flooding in West Virginia- but will need several additional months to ascertain what the impact to our loan portfolio might be. We will work closely with our customers to help ensure the best possible outcomes for all parties. Although it will take years to fully rebuild the personal and public infrastructure that was damaged or destroyed during this flood, all West Virginian's are thankful for the quick and generous response to the devastation."

Net Interest Income

The Company's tax equivalent net interest income increased $0.6 million, or 7.6% on an annualized basis, from $29.3 million during the first quarter of 2016 to $29.9 million during the second quarter of 2016. Higher outstanding balances of commercial and residential real estate loans increased net interest income $0.4 million and increased accretion from fair value adjustments on recent acquisitions increased net interest income $0.2 million ($1.0 million for the quarter ended June 30, 2016 compared to $0.8 million for the quarter ended March 31, 2016). The Company's reported net interest margin increased from 3.53% for the first quarter of 2016 to 3.56% for the second quarter of 2016. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.44% for both the quarter ended June 30, 2016 and for the quarter ended March 31, 2016.

Credit Quality

The Company's ratio of nonperforming assets to total loans and other real estate owned improved from 0.77% at March 31, 2016 to 0.73% at June 30, 2016. Total nonperforming assets decreased from $22.1 million at March 31, 2016 to $21.3 million at June 30, 2016. Excluded from this ratio are purchased credit-impaired loans in which the Company estimated cash flows and estimated a credit mark. Such loans would be considered nonperforming loans if the loan's performance deteriorates below the initial expectations. Total past due loans improved modestly from $8.7 million, or 0.30% of total loans outstanding, at March 31, 2016 to $8.6 million, or 0.30% of total loans outstanding, at June 30, 2016.

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 $1.1 million in the second quarter of 2016, compared to $2.8 for the comparable period in 2015 and $0.5 million for the first quarter of 2016. The provision for loan losses recorded in the second quarter of 2016 reflects the growth in the loan portfolio, changes in the quality of the portfolio, and general improvement in the Company's historical loss rates used to compute the allowance not specifically allocated to individual credits. 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

During the second quarter of 2016, the Company realized investment gains of $0.85 million compared to $2.1 million of realized investment gains during the second quarter of 2015. These gains represented partial recoveries of impairment charges previously recognized on pools of trust preferred securities. Exclusive of these gains, non-interest income increased from $13.3 million for the second quarter of 2015 to $13.7 million for the second quarter of 2016. This increase was mainly due to an increase in bankcard revenues of $0.2 million, or 4.7%, from the second quarter of 2015 to $4.2 million and an increase in trust and investment management fee income of $0.2 million, or 14.2%, to $1.4 million.

Non-interest Expenses

Non-interest expenses increased $1.1 million, from $23.2 million in the second quarter of 2015 to $24.3 million in the second quarter of 2016. This increase was due to the acquisition of three Lexington Kentucky branches from AFB ($0.5 million) in November 2015, an increase in other expenses of $0.4 million, and an increase in salaries and employee benefits of $0.3 million. The increase in other expenses is primarily related to the fair value adjustment for a $5.0 million notional interest rate swap to protect against changes in long-term fixed interest rates related to commercial loans.

Balance Sheet Trends

Loans increased $40.9 million (1.4%) from December 31, 2015 to $2.90 billion at June 30, 2016. Residential real estate loans increased $34.0 million (2.4%) and commercial loans increased $13.9 million (1.1%), despite the unanticipated repayment of a $16.1 million loan late in the second quarter of 2016. This repayment is significant in that it was one of City's largest individual loans. These increases were partially offset by decreases in home equity junior lien loans of ($4.1 million) and consumer loans ($2.3 million).

Total average depository balances increased $95.9 million, or 3.1%, from the quarter ended March 31, 2016 to the quarter ended June 30, 2016. The Company experienced increases in noninterest-bearing demand deposits ($77.0 million), time deposits ($10.9 million), and interest-bearing deposits ($8.6 million).

Income Tax Expense

The Company's effective income tax rate for the second quarter of 2016 was 33.5% compared to 34.4% for the year ended December 31, 2015, and 33.8% for the quarter ended June 30, 2015. The effective rate is based upon the Company's expected tax rate for the year ended December 31, 2016.

Capitalization and Liquidity

The Company's loan to deposit ratio was 92.4% and the loan to asset ratio was 76.3% at June 30, 2016. The Company maintained investment securities totaling 13.2% of assets as of the same date. Further, the Company's deposit mix is weighted heavily toward checking and saving accounts that fund 55.5% of assets at June 30, 2016. Time deposits fund 27.1% of assets at June 30, 2016, 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 increased from 9.3% at December 31, 2015 to 9.4% at June 30, 2016. At June 30, 2016, City National Bank's Leverage Ratio is 8.18%, its Common Equity Tier I ratio is 11.01%, its Tier I Capital ratio is 11.62%, and its Total Risk-Based Capital ratio is 12.35%. These regulatory capital ratios are significantly above levels required to be considered "well capitalized," which is the highest possible regulatory designation.

On June 29, 2016, the Board approved a quarterly cash dividend of $0.43 cents per share payable July 29, 2016, to shareholders of record as of July 15, 2016.

City Holding Company is the parent company of City National Bank of West Virginia. City National Bank operates 85 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, 2015. 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, 2016 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary June 30, 2016 results and will adjust the amounts if necessary.
                             
CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
 
Three Months Ended Six Months Ended
June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015 June 30, 2016     June 30, 2015
 
Earnings
Net Interest Income (FTE) $ 29,863 $ 29,312 $ 29,391 $ 28,005 $ 28,927 $ 59,177 $ 58,459
Net Income available to common shareholders 12,541 11,702 13,515 10,607 11,983 24,244 29,975
 
Per Share Data
Earnings per share available to common shareholders:
Basic $ 0.83 $ 0.78 $ 0.88 $ 0.69 $ 0.78 $ 1.61 $ 1.97
Diluted 0.83 0.78 0.88 0.69 0.78 1.61 1.96
Weighted average number of shares:
Basic 14,889,438 14,915,792 15,157,598 15,177,947 15,103,976 14,903,177 15,078,968
Diluted 14,901,697 14,926,941 15,174,103 15,198,007 15,127,238 14,914,882 15,156,272
Period-end number of shares 15,005,321 14,971,171 15,180,215 15,319,450 15,276,950 15,005,321 15,276,950
Cash dividends declared $ 0.43 $ 0.43 $ 0.42 $ 0.42 $ 0.42

$
0.86

$
0.84
Book value per share (period-end) 28.60 27.93 27.62 27.34 26.92 28.60 26.92
Tangible book value per share (period-end) 23.30 22.61 22.36 22.72 22.29 23.30 22.29
Market data:
High closing price $ 50.14 $ 47.78 $ 51.12 $ 51.73 $ 50.22

$
50.14

$
50.22
Low closing price 43.06 40.82 43.85 45.56 45.00 40.82 41.76
Period-end closing price 45.47 47.78 45.64 49.30 49.25 45.47 49.25
Average daily volume 63,000 71,000 55,000 58,000 51,000 67,000 50,000
Treasury share activity:
Treasury shares repurchased 2,000 229,132 150,385 - - 231,132 -
Average treasury share repurchase price $ 46.65 $ 43.31 $ 46.91 $ - $ - $ 43.34 $ -
 
Key Ratios (percent)
Return on average assets 1.31 % 1.25 % 1.48 % 1.21 % 1.34 % 1.28 % 1.69 %
Return on average tangible equity 14.5 % 13.8 % 15.5 % 12.2 % 14.0 % 14.1 % 17.8 %
Yield on interest earning assets 3.95 % 3.91 % 3.99 % 3.99 % 4.20 % 3.93 % 4.30 %
Cost of interest bearing liabilities 0.49 % 0.48 % 0.46 % 0.47 % 0.47 % 0.49 % 0.47 %
Net Interest Margin 3.56 % 3.53 % 3.62 % 3.62 % 3.82 % 3.55 % 3.90 %
Non-interest income as a percent of total revenue 31.6 % 31.1 % 32.5 % 33.0 % 31.6 % 31.4 % 39.1 %
Efficiency Ratio (a) 55.6 % 56.8 % 48.5 % 57.3 % 54.8 % 56.2 %

54.5
%
Price/Earnings Ratio (b) 13.66 15.40 12.94 17.84 15.69 14.15 12.53
 

Capital (period-end)
Average Shareholders' Equity to Average Assets 11.13 % 11.23 % 11.65 % 11.90 % 11.54 %
Tangible equity to tangible assets 9.38 % 9.03 % 9.34 % 10.14 % 9.89 %
Consolidated risk based capital ratios (c):
CET I 13.21 % 13.38 % 13.65 % 14.42 % 14.17 %
Tier I 13.82 % 14.00 % 14.28 % 15.08 % 14.82 %
Total 14.57 % 14.78 % 15.10 % 15.95 % 15.70 %
Leverage 9.74 % 9.78 % 10.15 % 10.71 % 10.38 %
 
Other
Branches 85 85 85 82 82
FTE 852 854 853 828 844
 
Assets per FTE $ 4,468 $ 4,484 $ 4,354 $ 4,233 $ 4,162
Deposits per FTE 3,688 3,732 3,615 3,461 3,439
 
 

(a) The June 30, 2015 YTD efficiency ratio calculation excludes the gain on sale of insurance division.
(b) The price/earnings ratio is computed based on annualized quarterly earnings.
(c) June 30, 2016 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, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015 June 30, 2016     June 30, 2015
 
Interest Income
Interest and fees on loans $ 29,640 $ 28,927 $ 29,032 $ 27,875 $ 28,812 $ 58,567 $ 58,200
Interest on investment securities:
Taxable 2,927 3,005 2,856 2,621 2,641 5,933 5,353
Tax-exempt   365       357       334       272       267   722       531
Total Interest Income 32,932 32,289 32,222 30,768 31,720 65,222 64,084
 
Interest Expense
Interest on deposits 3,011 2,898 2,760 2,686 2,699 5,909 5,440
Interest on short-term borrowings 86 107 91 69 85 193 167
Interest on long-term debt   167       164       159       155       153   331       303
Total Interest Expense   3,264       3,169       3,010       2,910       2,937   6,433       5,910
Net Interest Income 29,668 29,120 29,212 27,858 28,783 58,789 58,174
Provision for loan losses   1,122       539       2,813       451       2,836   1,661       3,724
Net Interest Income After Provision for Loan Losses 28,546 28,581 26,399 27,407 25,947 57,128 54,450
 
Non-Interest Income
Net gains on sale of investment securities 845 - - - 2,116 845 2,130
Service charges 6,564 6,303 6,893 6,907 6,589 12,867 12,516
Bankcard revenue 4,190 3,967 3,923 3,895 4,002 8,157 8,076
Trust and investment management fee income 1,371 1,276 1,547 1,176 1,201 2,647 2,401
Bank owned life insurance 768 760 898 929 783 1,528 1,547
Gain on sale of insurance division - - - - - - 11,084
Other income   843       821       813       799       714   1,664       1,672
Total Non-Interest Income 14,581 13,127 14,074 13,706 15,405 27,708 39,426
 
Non-Interest Expense

Salaries and employee benefits
12,790 12,673 11,296 12,179 12,193 25,463 24,372
Occupancy and equipment 2,708 2,836 2,583 2,575 2,529 5,544 5,119
Depreciation 1,567 1,567 1,539 1,522 1,516 3,134 3,027
FDIC insurance expense 512 465 443 456 445 977 895
Advertising 778 716 264 777 701 1,494 1,405
Bankcard expenses 925 833 778 785 829 1,758 1,615
Postage, delivery, and statement mailings 506 565 532 523 507 1,071 1,068
Office supplies 366 353 273 384 347 719 693
Legal and professional fees 528 471 662 620 542 999 1,109
Telecommunications 431 428 409 418 463 859 938
Repossessed asset losses, net of expenses 53 288 217 492 335 341 555
Merger related expenses - - 315 175 108 - 108
Other expenses   3,119       2,945       1,854       4,471       2,729   6,064       5,505
Total Non-Interest Expense   24,283       24,140       21,165       25,377       23,244   48,423       46,409
Income Before Income Taxes 18,844 17,568 19,308 15,736 18,108 36,413 47,467
Income tax expense   6,303       5,866       5,793       5,129       6,125   12,169       17,492
Net Income Available to Common Shareholders $ 12,541     $ 11,702     $ 13,515     $ 10,607     $ 11,983 $ 24,244     $ 29,975
 
Distributed earnings allocated to common shareholders $ 6,375 $ 6,365 $ 6,303 $ 6,362 $ 6,344 $ 12,750 $ 12,688
Undistributed earnings allocated to common shareholders   6,016       5,206       7,059       4,125       5,505   11,202       16,950
Net earnings allocated to common shareholders $ 12,391     $ 11,571     $ 13,362     $ 10,487     $ 11,849 $ 23,952     $ 29,638
 
Average common shares outstanding 14,889 14,916 15,158 15,178 15,104 14,903 15,079
Shares for diluted earnings per share 14,902 14,927 15,175 15,198 15,127 14,915 15,156
 
Basic earnings per common share $ 0.83 $ 0.78 $ 0.88 $ 0.69 $ 0.78 $ 1.61 $ 1.97
Diluted earnings per common share $ 0.83 $ 0.78 $ 0.88 $ 0.69 $ 0.78 $ 1.61 $ 1.96
 
                   
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
(Unaudited)

(Unaudited)
(Unaudited) (Unaudited)
June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015
 
Assets
Cash and due from banks $ 69,933 $ 165,134 $ 58,829 $ 109,627 $ 142,335
Interest-bearing deposits in depository institutions   8,643         10,031         11,284         9,081         11,089  
Cash and cash equivalents 78,576 175,165 70,113 118,708 153,424
 
Investment securities available-for-sale, at fair value 409,039 362,282 369,466 300,865 287,609
Investment securities held-to-maturity, at amortized cost 83,208 86,518 88,937 81,095 84,082
Other securities   10,203         9,960         12,915         9,926         9,926  
Total investment securities 502,450 458,760 471,318 391,886 381,617
 
Gross loans 2,903,398 2,877,117 2,862,534 2,695,645 2,683,835
Allowance for loan losses   (19,139 )       (19,315 )       (19,251 )       (20,148 )       (20,187 )
Net loans 2,884,259 2,857,802 2,843,283 2,675,497 2,663,648
 
Bank owned life insurance 99,446 98,679 97,919 97,157 96,663
Premises and equipment, net 75,040 75,965 77,271 73,419 75,900
Accrued interest receivable 8,428 8,517 7,432 7,690 7,838
Net deferred tax assets 23,995 27,541 29,974 33,342 32,674
Intangible assets 79,433 79,581 79,792 70,653 70,779
Other assets   55,234         47,656         36,957         36,266         30,080  
Total Assets $ 3,806,861       $ 3,829,666       $ 3,714,059       $ 3,504,618       $ 3,512,623  
 
Liabilities
Deposits:
Noninterest-bearing $ 651,867 $ 666,523 $ 621,073 $ 542,177 $ 563,715
Interest-bearing:
Demand deposits 701,248 711,366 679,735 647,792 646,198
Savings deposits 758,323 780,982 765,611 693,184 695,383
Time deposits   1,030,841         1,028,400         1,017,556         982,349         997,387  
Total deposits 3,142,279 3,187,271 3,083,975 2,865,502 2,902,683
Short-term borrowings
Federal Funds purchased - - 13,000 - -
Customer repurchase agreements 153,674 156,714 141,869 147,036 153,171
Long-term debt 16,495 16,495 16,495 16,495 16,495
Other liabilities   65,324         51,068         39,448         56,818         29,034  
Total Liabilities 3,377,772 3,411,548 3,294,787 3,085,851 3,101,383
 
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 46,249 46,249 46,249 46,249 46,249
Capital surplus 106,378 106,137 106,269 106,108 105,891
Retained earnings 402,044 395,963 390,690 383,551 379,379
Cost of common stock in treasury (127,619 ) (129,142 ) (120,104 ) (113,581 ) (115,387 )
Accumulated other comprehensive loss:
Unrealized gain on securities available-for-sale 6,796 3,670 927 1,789 457
Underfunded pension liability   (4,759 )       (4,759 )       (4,759 )       (5,349 )       (5,349 )
Total Accumulated Other Comprehensive Loss   2,037         (1,089 )       (3,832 )       (3,560 )       (4,892 )
Total Stockholders' Equity   429,089         418,118         419,272         418,767         411,240  
Total Liabilities and Stockholders' Equity $ 3,806,861       $ 3,829,666       $ 3,714,059       $ 3,504,618       $ 3,512,623  
 
Regulatory Capital
Total CET 1 capital $ 349,100 $ 341,165 $ 345,620 $ 353,224 $ 346,979
Total tier 1 capital 365,100 357,165 361,620 369,224 362,979
Total risk-based capital 384,855 377,003 382,180 390,612 384,388
Total risk-weighted assets 2,642,040 2,550,739 2,531,647 2,449,191 2,448,848
 
               
CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
   
 
June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015
 
Residential real estate (1) $ 1,417,137 $ 1,395,670 $ 1,383,133 $ 1,358,083 $ 1,325,453
Home equity - junior liens 142,827 142,694 147,036 144,748 143,772
Commercial and industrial 171,362 165,549 165,340 123,948 141,518
Commercial real estate (2) 1,135,493 1,135,625 1,127,581 1,028,857 1,032,258
Consumer 33,799 34,754 36,083 36,751 37,555
DDA overdrafts   2,780       2,825       3,361       3,258       3,279
Gross Loans $ 2,903,398     $ 2,877,117     $ 2,862,534     $ 2,695,645     $ 2,683,835
 
Construction loans included in:
(1) - Residential real estate loans $ 12,344 $ 13,966 $ 13,135 $ 14,765 $ 15,412
(2) - Commercial real estate loans 2,237 15,172 12,599 11,970 4,043
 
 
Secondary Mortgage Loan Activity
Mortgage loans originated $ 3,103 $ 2,809 $ 3,855 $ 4,803 $ 3,900
Mortgage loans sold 3,183 3,073 4,135 4,206 4,006
Mortgage loans gain on loans sold 80 24 88 112 106
 
                         
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information
(Unaudited) ($ in 000s)
   
Three Months Ended Six Months Ended
June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015 June 30, 2016     June 30, 2015
Allowance for Loan Losses
Balance at beginning of period $ 19,315 $ 19,251 $ 20,148 $ 20,187 $ 20,103 $ 19,251 $ 20,074
 
Charge-offs:
Commercial and industrial (44 ) (1 ) (3,148 ) (82 ) (2,444 ) (45 ) (2,538 )
Commercial real estate (769 ) (302 ) (303 ) (1 ) 61 (1,071 ) (276 )
Residential real estate (337 ) (405 ) (386 ) (229 ) (272 ) (742 ) (529 )
Home equity (69 ) (106 ) (76 ) (128 ) (17 ) (175 ) (108 )
Consumer (44 ) (38 ) (39 ) (28 ) (69 ) (82 ) (143 )
DDA overdrafts   (321 )       (318 )       (376 )       (414 )       (313 )   (639 )       (624 )
Total charge-offs (1,584 ) (1,170 ) (4,328 ) (882 ) (3,054 ) (2,754 ) (4,218 )
 
Recoveries:
Commercial and industrial 3 1 2 45 9 4 27
Commercial real estate 20 384 317 18 23 404 31
Residential real estate 51 39 69 66 54 90 64
Home equity - - - - - - -
Consumer 52 29 32 76 51 81 79
DDA overdrafts   160         242         198         187         165     402         406  
Total recoveries 286 695 618 392 302 981 607
                                 
Net charge-offs (1,298 ) (475 ) (3,710 ) (490 ) (2,752 ) (1,773 ) (3,611 )
Provision for (recovery of) acquired loans 128 40 32 (24 ) 299 168 545
Provision for loan losses   994         499         2,781         475         2,537     1,493         3,179  
Balance at end of period $ 19,139       $ 19,315       $ 19,251       $ 20,148       $ 20,187   $ 19,139       $ 20,187  
 
Loans outstanding $ 2,903,398 $ 2,877,117 $ 2,862,534 $ 2,695,645 $ 2,683,835
Allowance as a percent of loans outstanding 0.7 % 0.7 % 0.7 % 0.7 % 0.8 %
Allowance as a percent of non-performing loans 124.0 % 120.4 % 110.4 % 92.2 % 127.1 %
 
Average loans outstanding $ 2,891,292 $ 2,864,943 $ 2,789,354 $ 2,679,429 $ 2,658,484 $ 2,878,119 $ 2,647,502
Net charge-offs (annualized) as a percent of average loans outstanding 0.18 % 0.07 % 0.53 % 0.07 % 0.41 % 0.12 % 0.27 %
 
               
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, continued
(Unaudited) ($ in 000s)
   

 
June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015

Nonaccrual Loans
Residential real estate $ 2,531 $ 2,977 $ 2,918 $ 3,012 $ 2,693
Home equity 165 152 136 159 141
Commercial and industrial 2,724 2,967 2,745 6,430 1,271
Commercial real estate 9,779 9,718 11,149 11,806 11,518
Consumer   -         -         -         -         -  
Total nonaccrual loans 15,199 15,814 16,948 21,407 15,623
Accruing loans past due 90 days or more   241         225         495         449         264  
Total non-performing loans 15,440 16,039 17,443 21,856 15,887
Other real estate owned   5,868         6,054         6,519         6,026         6,729  
Total non-performing assets $ 21,308       $ 22,093       $ 23,962       $ 27,882       $ 22,616  
 
Non-performing assets as a percent of loans and other real estate owned 0.73 % 0.77 % 0.84 % 1.03 % 0.84 %
 

Past Due Loans
Residential real estate $ 5,490 $ 5,045 $ 6,610 $ 5,522 $ 5,270
Home equity 595 595 406 558 398
Commercial and industrial 304 343 159 355 614
Commercial real estate 1,746 2,138 1,480 3,622 2,715
Consumer 150 82 196 218 257
DDA overdrafts   290         514         313         330         327  
Total past due loans $ 8,575       $ 8,717       $ 9,164       $ 10,605       $ 9,581  
 
Total past due loans as a percent of loans outstanding 0.30 % 0.30 % 0.32 % 0.39 % 0.36 %
 
Troubled Debt Restructurings ("TDRs") (period-end)
Accruing:
Residential real estate $ 19,685 $ 18,306 $ 17,796 $ 18,154 $ 18,624
Home equity 2,873 2,878 2,659 2,730 2,647
Commercial and industrial 50 54 58 62 66
Commercial real estate 2,743 523 1,746 1,921 1,872
Consumer   -         -         -         -         -  
Total accruing TDRs $ 25,351       $ 21,761       $ 22,259       $ 22,867       $ 23,209  
 
Non-Accruing
Residential real estate $ 390 $ 36 $ 191 $ - $ 397
Home equity 44 - 34 16 15
Commercial and industrial - - - - -
Commercial real estate - - - - -
Consumer   -         -         -         -         -  
Total non-accruing TDRs $ 434       $ 36       $ 225       $ 16       $ 412  
 
Total TDRs $ 25,785       $ 21,797       $ 22,484       $ 22,883       $ 23,621  
 
                           
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
       
Three Months Ended
June 30, 2016     March 31, 2016     June 30, 2015
Average Yield/ Average Yield/ Average Yield/
Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,545,550 $ 15,038 3.91 % $ 1,531,966 $ 14,918 3.92 % $ 1,456,820 $ 14,291 3.93 %
Commercial, financial, and agriculture (2) 1,306,931 13,310 4.10 % 1,294,345 12,919 4.01 % 1,160,219 12,993 4.49 %
Installment loans to individuals (2), (3) 38,811 809 8.38 % 38,632 721 7.51 % 41,445 1,026 9.93 %
Previously securitized loans (4) ***       483     ***     ***       369     ***     ***       502     ***
Total loans 2,891,292 29,640 4.12 % 2,864,943 28,927 4.06 % 2,658,484 28,812 4.35 %
Securities:
Taxable 425,450 2,927 2.77 % 421,289 3,005 2.87 % 341,723 2,641 3.10 %
Tax-exempt (5)   43,637         561     5.17 %       41,898         549     5.27 %       29,501         411     5.59 %
Total securities 469,087 3,488 2.99 % 463,187 3,554 3.09 % 371,224 3,052 3.30 %
Deposits in depository institutions   9,186         -     -         10,529         -     -         10,468         -     -  
Total interest-earning assets 3,369,565 33,128 3.95 % 3,338,659 32,481 3.91 % 3,040,176 31,864 4.20 %
Cash and due from banks 144,260 81,569 229,009
Premises and equipment, net 75,798 76,945 76,671
Other assets 261,271 256,329 244,661
Less: Allowance for loan losses   (19,686 )                   (20,591 )                   (20,789 )            
Total assets $ 3,831,208                   $ 3,732,911                   $ 3,569,728              
 
Liabilities:
Interest-bearing demand deposits $ 686,403 $ 176 0.10 % $ 677,849 $ 145 0.09 % $ 647,991 $ 125 0.08 %
Savings deposits 766,708 238 0.12 % 767,262 228 0.12 % 709,034 174 0.10 %
Time deposits (2) 1,030,346 2,598 1.01 % 1,019,416 2,525 1.00 % 1,006,376 2,400 0.96 %
Short-term borrowings 154,047 86 0.22 % 162,046 107 0.27 % 149,785 85 0.23 %
Long-term debt   16,495         167     4.07 %       16,495         164     4.00 %       16,495         153     3.72 %
Total interest-bearing liabilities 2,653,999 3,265 0.49 % 2,643,068 3,169 0.48 % 2,529,681 2,937 0.47 %
Noninterest-bearing demand deposits 707,501 630,524 585,720
Other liabilities 43,435 40,198 42,273
Stockholders' equity   426,273                     419,121                     412,054              

Total liabilities and stockholders' equity
$ 3,831,208                   $ 3,732,911                   $ 3,569,728              
Net interest income       $ 29,863                 $ 29,312                 $ 28,927      
Net yield on earning assets             3.56 %                 3.53 %                 3.82 %
 

(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 $ 190 $ 181 $ 243
Commercial, financial, and agriculture 656 394 1,120
Installment loans to individuals 29 54 75
Time deposits   148   148   169
$ 1,022 $ 777 $ 1,607
 
(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, 2016 June 30, 2015
Average Yield/ Average Yield/
Balance     Interest     Rate     Balance     Interest     Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,538,095 $ 29,957 3.92 % $ 1,450,386 $ 28,410 3.95 %
Commercial, financial, and agriculture (2) 1,301,380 26,228 4.05 % 1,155,483 27,019 4.72 %
Installment loans to individuals (2), (3) 38,644 1,530 7.96 % 41,633 1,816 8.80 %
Previously securitized loans (4) ***       852     ***     ***       954     ***
Total loans 2,878,119 58,567 4.09 % 2,647,502 58,199 4.43 %
Securities:
Taxable 423,369 5,933 2.82 % 334,494 5,353 3.23 %
Tax-exempt (5)   42,768         1,110     5.22 %       28,992         816     5.68 %
Total securities 466,137 7,043 3.04 % 363,486 6,169 3.42 %
Deposits in depository institutions   9,858         -     -         9,722         -     -  
Total interest-earning assets 3,354,114 65,610 3.93 % 3,020,710 64,368 4.30 %
Cash and due from banks 112,915 225,727
Premises and equipment, net 76,372 77,152
Other assets 258,800 244,578
Less: Allowance for loan losses   (20,138 )                   (20,724 )            
Total assets $ 3,782,063                   $ 3,547,443              
 
Liabilities:
Interest-bearing demand deposits $ 682,126 $ 321 0.09 % $ 642,431 $ 257 0.08 %
Savings deposits 766,985 465 0.12 % 701,907 355 0.10 %
Time deposits (2) 1,024,881 5,123 1.01 % 1,013,883 4,828 0.96 %
Short-term borrowings 158,046 193 0.25 % 139,676 166 0.24 %
Long-term debt   16,495         331     4.04 %       16,495         303     3.70 %
Total interest-bearing liabilities 2,648,533 6,433 0.49 % 2,514,392 5,909 0.47 %
Noninterest-bearing demand deposits 669,013 578,570
Other liabilities 41,820 46,112
Stockholders' equity   422,697                     408,369              

Total liabilities and stockholders' equity
$ 3,782,063                   $ 3,547,443              
Net interest income       $ 59,177                 $ 58,459      
Net yield on earning assets             3.55 %                 3.90 %
 

(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

$
371

$
440
Commercial, financial, and agriculture 1,050 3,106
Installment loans to individuals 82 172
Time deposits   296   339

$
1,799

$
4,057
 
(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
Acquisition Activity
(Unaudited) ($ in 000s)
   
Three Months Ended
June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015

Purchased Credit Impaired Loans (period-end)
Virginia Savings Acquisition
Contractual required principal and interest $ 1,924 $ 1,942 $ 1,965 $ 2,149 $ 2,376
Carrying value 1,714 1,715 1,707 1,861 1,984
 
Community Acquisition
Contractual required principal and interest $ 14,042 $ 14,415 $ 16,362 $ 17,834 $ 18,546
Carrying value 11,160 11,219 12,899 13,400 13,958
 
Accretion
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"), Community Financial Corporation ("Community") and American Founders Bank, Inc. ("AFB") acquisitions.
 
 

Virginia Savings Acquisition
Loans $ 67 $ 104 $ 138 $ 245 $ 190
Certificates of deposit   124       124       129       129       129
$ 191     $ 228     $ 267     $ 374     $ 319
 
Community Acquisition
Loans $ 698 $ 408 $ 1,226 $ 642 $ 1,248
Certificates of deposit   11       11       40       40       40
$ 709     $ 419     $ 1,266     $ 682     $ 1,288
 
AFB Acquisition
Loans $ 109 $ 117 $ 28 $ - $ -
Certificates of deposit   13       13       11       -       -
$ 122     $ 130     $ 39     $ -     $ -
 
All Acquisitions
Loans $ 874 $ 629 $ 1,392 $ 887 $ 1,438
Certificates of deposit   148       148       180       169       169
$ 1,022     $ 777     $ 1,572     $ 1,056     $ 1,607
 
Accretion Forecast
Remainder of 2016 $ 1,058
Year Ended December 31, 2017 1,316
Year Ended December 31, 2018 988
 
Note: The amounts reflected 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
Non-GAAP Reconciliations
(Unaudited) ($ in 000s, except per share data)
   
Three Months Ended Six Months Ended
June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015 June 30, 2016     June 30, 2015
Net Interest Income/Margin
 
Net interest income, fully taxable equivalent $ 29,863 $ 29,312 $ 29,391 $ 28,005 $ 28,927 $ 59,177 $ 58,459
Taxable equivalent adjustment   (195 )       (192 )       (179 )       (147 )       (144 )   (388 )       (285 )
Net interest income ("GAAP")   29,668         29,120         29,212         27,858         28,783     58,789         58,174  
 
Average interest earning assets 3,369,565 3,338,659 3,223,782 3,071,595 3,040,176 3,354,114 3,020,710
Net Interest Margin 3.56 % 3.53 % 3.62 % 3.62 % 3.82 % 3.55 % 3.90 %
 
Net interest income, fully taxable equivalent, excluding accretion $ 28,841 $ 28,535 $ 27,819 $ 26,949 $ 27,320 $ 57,378 $ 54,402
Taxable equivalent adjustment (195 ) (192 ) (179 ) (147 ) (144 ) $ (388 ) $ (285 )
Accretion related to fair value adjustments   1,022         777         1,572         1,056         1,607     1,799         4,057  
Net interest income ("GAAP") $ 29,668       $ 29,120       $ 29,212       $ 27,858       $ 28,783     58,789         58,174  
 
Average interest earning assets $ 3,369,565 $ 3,338,659 $ 3,223,782 $ 3,071,595 $ 3,040,176 3,354,114 3,020,710
Net Interest Margin (excluding accretion) 3.44 % 3.44 % 3.42 % 3.48 % 3.60 % 3.44 % 3.63 %
 
Tangible Equity Ratio (period end)
Tangible common equity to tangible assets 9.38 % 9.03 % 9.34 % 10.14 % 9.89 %
Effect of goodwill and other intangibles, net   1.89 %       1.89 %       1.95 %       1.81 %       1.82 %
Equity to assets ("GAAP")   11.27 %       10.92 %       11.29 %       11.95 %       11.71 %
 

View source version on businesswire.com: http://www.businesswire.com/news/home/20160726005251/en/

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX